text,label
"The Czech capital market, roundly criticised for a lack of transparency, needs an independent regulator, but it is not a panacea for all of the market's woes, a senior Finance Ministry official said on Tuesday.
""Let's not be seduced by the illusion that as soon as an independent securities committee is created that the Czech capital market will become more refined overnight,"" Jan Veverka of the ministry's capital markets supervisory department told a conference in the Czech capital.
""All it (the body) will do is create better conditions for the changes which can contribute to the market's gradual refinement,"" he added.
Both foreign and domestic investors have complained that poor legislation and a lack of enforcement of rules that do exist make the Czech capital market one of Eastern Europe's most opaque.
The soured outlook by investors has helped pull the Prague Stock Exchange down some 16 percent over the past two months, with predictions of further losses if rules do not change quickly.
One of the biggest problems is that legislation allows for near complete secrecy of off-market deals -- where an estimated 70 percent of trading takes place -- making it difficult for investors to determine fairly-valued shares prices.
Veverka said when the laws governing securities trading here were devised ""parliament...discarded the concept of regulation which would have given broad powers to the embryonic supervisory system out of fear that it might have abused these powers and impeded the process of creating a market economy"".
Coupled with this, he said, was the need to allow for a flood of ownership changes in the market as the mass voucher privatisation put shares in nearly 2,000 firms onto the market in a matter of months.
Now, he said, rules must be put in place to shift trading toward the main markets to bring about more transparency.
""Where trading takes place can be changed most effectively by ensuring an increase in the quality of the market's services and an end to the conditions which enable the kind of trading which is characterised by large price discrepancies,"" he said.
Veverka called for a raising of the debate on creating a U.S.-style SEC oversight body ""to a much higher level and preparations should be made for the creation of this body"".
But he added: ""Monitoring deals and indentifying suspicious prices or other phenomena indisputably belongs to the work of the stock market, and the market must act as a strong support to the supervisory work of the independent committee"".
-- Prague Newsroom, 42-2-2423-0003
",1
"Sweden beat the Czech Republic 3-0 in a World Cup ice hockey game on Thursday, setting up a showdown for European group supremacy against Finland and leaving the reigning world champions searching for answers.
The fast-skating Swedes seized control of the game from the opening faceoff, forcing the Czechs to take several early penalties and keeping its vaunted offense in check.
Toronto Maple Leaf winger Mats Sundin opened the scoring midway through the first period when he sped around the Czech defense and pulled Dallas Stars' goalie Roman Turek across the crease before sliding the puck between the netminder's legs.
The Swedish National Hockey League (NHL) connection struck again early in the second frame when Washington Capital defenseman Calle Johansson blasted a slapshot from the blue line past a screened Turek with only 57 seconds gone.
Turek, voted best goalie at the world championships for the past two years, was once again screened when a weak shot from Jonas Bergqvist found the bottom corner of the net to close out the scoring for the undefeated Swedes.
The Czechs came into the tournament riding high after capturing the world title in Vienna in May, but have lost the first two games of the tournament and are in danger of crashing out despite having their version of the ""Dream Team"".
With the addition of Pittsburgh Penguins duo Jaromir Jagr and Petr Nedved, Montreal Canadiens sharpshooter Martin Rucinsky and the core of the world championship team in tact, the Czechs were looking to prove they belonged at the pinnacle of the hockey world.
The match at Prague's Sports Hall was to be a homecoming of sorts for the Czechs, their first home game since beating Canada 3-2 in a thrilling world championship final on a last minute goal.
But after a demoralising loss to Finland in its tournament opener on Tuesday, and another listless effort on Thursday, Czech fans had had enough, pelting the Czech bench with beer cans near the end of the game.
Even Czech coach Ludek Bukac, a veteran coach with almost 30 years behind the bench, was left searching for an answer to his sputtering offense and the team's lack of dynamism.
""The Swedes played well, you've got to hand it to them. But the fact that we didn't score at home is not a very good showing,"" he said.
Added Jagr: ""We aren't that bad, but our performance is not showing it.""
Bukac, who has often expressed his disdain for bringing in players who have talent but not team spirit refused to comment on whether he would invite the same team back if he could do it all again.
But with nine players on the roster with seven or less of national team games under their belts, the Czech players know they must come together quickly, or face the embarassment of failing to win in what is touted as the true battle for hockey supremacy.
""We've got to concentrate on winning against Germany and moving on to the next round, nothing else,"" added Robert Reichel, who recently re-signed with the Calgary Flames after playing one year in Germany.
The win allows Sweden to keep pace with group leaders Finland, who have also won both their games so far but have a better goal difference.
The two teams meet on Sunday in Stockholm while the Czechs must regroup and beat winless Germany in Garmisch-Partenkirchen on Saturday to move into the quarterfinals next week in North America.
",1
"The fall in the Czech trade deficit to 10.5 billion crowns in September from 14.5 billion in August buoyed market sentiment, and the goods imported show industrial restructuring is on track, analysts said on Thursday.
Czech Statistical Bureau (CSU) data released earlier showed the January-September trade shortfall hit an all-time high of 110.7 billion crowns, far surpassing the full 1995 deficit of 95.7 billion crowns.
But the September shortfall, the smallest one-month deficit this year, surprised analysts, who had forecast on average a gap of 13 to 15 billion crowns.
""I'm happily surprised. I think it's a relatively optimistic figure, though not so good as to make us revise our full year forecast,"" said Martin Kupka, an economist at Patria Finance, which has forecast a 150-160 billion crown deficit at year-end.
The CSU said September imports rose 15.2 percent year-on-year, the same as in August, while exports rose 5.9 percent after a 6.4 percent increase in August.
It added that strong growth in machinery and transport equipment imports continued, accounting for 38.3 percent of total imports.
Analysts said they were encouraged by the rise in this sector as these imports are needed to restructure industry, allowing it to produce more competitive goods for export.
The crown also reacted positively, dipping slightly on the release of the figures but quickly regaining its losses as the market digested the statistics.
The crown was trading at 26.939 to the dollar at 0840 GMT after opening at 26.945. The rate implies a deviation from the midpoint of the currency basket of +2.87 percent, after the central bank's Wednesday fixing at +2.80 percent.
""The market is pleased with the figures for sure, they seem to bear out estimates that slowly, the structure and size of the deficit is getting better,"" said one local forex dealer.
"" don't think the crown itself will benefit too much from the numbers, but it certainly should not weaken,"" he added.
-- Prague Newsroom, 42-2-2423-0003
",1
"Czech paper concern Sepap Group a.s. on Friday said its nine-month net profit fell as a shutdown of its main paper mill, coupled with a downturn in the paper cycle bit into its bottom line.
Sepap said its nine-month net profit, calculated according to international accounting standards, fell to 188.4 million crowns from 520.4 million over the same period in 1995, while revenues slumped to 3.94 billion crowns from 5.34 billion.
The firm said results from the third quarter only had stabilised after a first half industry downtrend, though ""the planned annual shutdown of the Steti mill lowered earnings by virtue of the expected higher maintenance costs associated with the stoppage"".
""Overall, Sepap year-end ernings are expected to rise and show a slight improvement over third quarter levels,"" a company statement said.
The Steti mill, which accounts for some three-quarters of the group's revenues and profits, saw its pre-tax profits plummet to seven million crowns.
Comparative figures were not immediately available, but the mill's nine-month 1995 gross profit was some 95 million crowns.
""The market place is sending mixed signals for the fourth quarter. Anticipated price increases have not taken hold at the anticipated levels in all of the pulp and paper grades,"" the statement said.
It added that the group's second biggest subsidiary, newsprint maker ROTO, ""continued to produce good results in a market that is weakening"".
ROTO showed a nine-month pre-tax profit of 149 million crowns on sales of 1.25 billion crowns.
Last year, Sepap was the center of a heated battle for control between Bahamas-based investor Michael Dingman and Swedish forestry concern Assidoman.
Dingman, who controls 48 percent of Sepap through his Daventree Ltd investment company, won the battle, but later accepted Assidoman's role as a strategic partner in the paper industry. The Swedish firm holds a 39 percent stake in Sepap.
-- Prague Newsroom, 42-2-2423-0003
",1
"Czech shares rallied on Monday following the coalition government's win in weekend Senate elections, but analysts said the rise was due more to a technical correction than to a change in investor sentiment.
The Prague Stock Exchange's PX50 index rose 0.82 percent on the day, spurred by gains to seven of the eight most-capitalised shares.
Brokers, however, were muted in their optimism that the rally would last more than a few days, saying the centre-right government's strong showing was expected and already built into the market last week.
""Basically, this is a technically-led rally, I don't think it has a basis to do with Senate elections,"" said Jay King of the brokerage Wood and Company.
Added another local trader: ""You're not seeing real volumes here you're just seeing prices being pushed up in anticipation of year-end, and without a doubt it is domestically driven. Foreigner investors are still on the sidelines.""
The minority coalition of Prime Minister Vaclav Klaus took 52 of 81 seats in the newly-created upper house of parliament, following the second round of voting, well ahead of the centre-left opposition Social Democrats which took 25 seats.
The Senate is a mostly advisory body with limited legislative powers, but the election was the first test at the polls for Klaus since his coalition lost its lower house majority in general elections in June.
But a thin turnout -- just over 30 percent of the electorate cast their ballots -- made it hard for the three-party coalition government, which lost its lower house majority in June, to claim it had recaptured voters' hearts.
The Prague bourse has been hard hit in recent months -- falling some 17 percent since September -- with most investors shying away from the a market characterised as opaque at best, and little regard for minority shareholder rights.
And analysts said that the election would probably not bring about a new push for changes to securities laws within the coalition, a condition that is necessary to lure back participants.
""I'm a little sceptical about the possibility that the Senate will help bring in changes,"" 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.""
Analysts said that the market should take some heart however, in statements made by Klaus following the vote when he said he saw no reason to call early elections for the lower house, which should keep the market stable in the near future.
",1
"Markets across Eastern Europe
remained mired in an autumn slump this week, with analysts
saying they see little impetus on the horizon to break the
bearish trend.
Stock Exchanges in Warsaw, Prague, Bratislava, Bucharest,
Zagreb and Ljubljana all lost ground on the week, while
Budapest bucked the trend, rising slightly though it appeared
to lose steam by week's end.
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 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 are still 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 regualtion 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 horizontal
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.
But others saw the generally positive economic climate as
an impulse strong enough that it could help the bourse climb
above 14,000 points next week.
Analysts said a senior central bank official's comment on
Tuesday on 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, triggered by last Thursday's government
decision to hike energy prices, started off the weekend
strongly, but ran out of steam by mid-week.
Oil and gas company MOL led the charge, but dealers said
its weakening on Thursday could be a harbinger for the bourse.
""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 over the
course of the week, in a rampant bear market that has seen the
Bratislava Stock Exchange lose 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, 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 November
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
"The three-party coalition of right-wing Czech Prime Minister Vaclav Klaus won a majority of seats on Saturday in run-off elections to parliament's new upper house, the Senate.
But the premier's own party won fewer seats than expected after dominating the first round last week and voter turnout was dismal despite an appeal for Czechs to cast their ballots from President Vaclav Havel.
With all 81 constituencies declared, the coalition parties secured 52 seats in the Senate, the very existence of which many Czechs have questioned.
The result marked a turnaround for the coalition, central Europe's last centre-right government, which lost its majority in the more powerful lower house, the Chamber of Deputies, six months ago.
Klaus's own Civic Democratic Party (ODS) won 32 seats ahead of the strongest opposition party, the Social Democrats, with 25.
The Christian Democrats, a junior coalition partner, took take 13 seats while the third party in the government, the Civic Democratic Alliance, won seven.
The little-reformed Communists clinched two seats and two went to independents.
""I welcome the fact that the governing coalition took two-thirds of the senatorial seats, and that's a huge victory over the opposition,"" said Klaus, who sits in the lower house along with all other government ministers.
""The result in the second round isn't any surprising victory, but on the other hand the real fact that ODS has about 40 percent of the senators I would have to mark as successful.""
The Central Election Commission reported that second round turnout was around 30 percent, lower even than the 35 percent registered in the first round held on November 15-16.
The centre-left Social Democrats, whose strong gains in June lower house elections stripped the coalition's majority, were saved the embarassment of a Senate dominated solely by their arch-rivals from Klaus's party.
""I am pleased that Senate will be a place of democratic discussion, and never the place of arrogant domination of one or another political party,"" Milos Zeman, the chairman of the Social Democrats and the lower house, told reporters.
Zeman's party has been beset by internal bickering since June, but the results of the run-offs -- between the top two first-round candidates in constituencies where nobody won more than half the vote -- could have been worse for the opposition.
""Most importantly the Senate won't be one-coloured or two-coloured as was expected, but multi-coloured,"" said analyst Jiri Pehe of Prague's Open Media Research Institute.
Before the second round, Havel appealed to Czechs to turn out in far greater numbers for the sake of the credibility of the new upper house but opinion surveys showed many had no interest.
The Senate elections had been billed as key to the future of Klaus's coalition. But analysts say that with turnout so low, the Senate results have little significance.
Klaus, an architect of economic reform, repeatedly accused the Social Democrats of conspiring with the Communists to turn back the clock on reform, and his supporters were galvanised by the coalition's June setback.
",1
"Britain's Tim Henman emerged on Friday as the only seed to advance to the semifinals of the $475,000 Czech Indoor Open.
In the day's opening match, seventh seeded Henman downed second seed Wayne Ferreira 6-4 6-3, while fifth seed Todd Martin was edged out by Germany's David Prinosil 7-6 7-6 and sixth seed Michael Stich lost to Czech Martin Damm 5-7 6-4 6-4.
Czech Petr Korda rounded out the final four with his win over Davis Cup team mate Jiri Novak 6-1 6-0. Korda now faces another Davis Cupper in Damm. Henman will square off against Prinosil in the other semifinal on Saturday.
Reigning Ostrava champion Ferreira, ranked seventh in the world, never looked comfortable against Henman, the more aggressive of the two for most of the match.
He failed to gain a single break point all match while the 22-year-old Briton broke serve late in both sets.
Henman's win avenged his loss to the South African in Toronto earlier this year, and he said he had taken notes from that match on to court on Friday.
""In Toronto, Ferreira was dictating the points -- serving very well and hitting forehands very well -- so today I tried to be very aggressive and, when I had an opportunity, move forward,"" said Henman, ranked 26th in the world.
Local favourite Damm, a finalist at the Beijing Open last week showed little signs of jet lag in spoiling Stich's 28th birthday. After losing the first set, Damm scored crucial breaks in the ninth game of the final two sets to take the match.
For Martin, defeat was especially painful as he could have gained valuable ground on Ferreira in the race for the final spot at the ATP Tour championship in Hanover at the end of the season.
The American currently sits 199 points behind the South African. A semifinal berth would have eaten 37 points out of that lead while a place in the finals would have almost halved Ferreira's advantage.
Prinosil, ranked 58th in the world, profited from a Martin double fault at 5-5 in the first set tiebreak and took a 4-0 lead in the second set tiebreak on the way to sealing victory.
Martin said: ""I realise I didn't help my cause at all but we've got two of the biggest tournaments coming up and I think whoever does really well in those events should probably play themselves into a position at Hanover.
Martin, Stich and Ferreira both play next week in Stuttgart, where the winner gains 370 tour points, 200 more than the winner here.
The tournament's organisers said on Friday that they expect Becker will also be fit to play. In a move to accomodate the Australian Open champion, his first round match has been put back until Wednesday.
",1
"Czech telephone operator SPT Telecom a.s. on Thursday said its nine-month gross profit hit 6.0 billion crowns, in line with analysts predictions and likely to have little effect on the firm's share price.
SPT said in a statement that revenues for the first three quarters totalled 23.3 billion crowns, nearly equal to the 26.4 billion crowns in total revenues for 1995.
SPT's 1995 full year gross profit was 7.0 billion crowns. All figures are calculated according to International Accounting Standards (IAS).
SPT shares closed down six crowns at 2,879 on the Prague Stock Exchange on Thursday, though dealers said the results came out after trading ended for the day.
""The figures were basically in line with our estimates. Margins are pretty much the same as they were in the first half so I think the company is in a good position for future growth,"" said Alex Marcek an analyst at Patria Finance.
The statement added the number of lines installed accelerated in the third quarter, putting the year-to-date figure at 272,000 lines and the overall installed base at 2.67 million lines.
""The company is confident that it will achieve its 1996 target of over 400,000 new set lines,"" the statement said.
SPT, of which a Dutch-Swiss consortium comprised of PTT Netherlands and Swiss Telecom bought a 27 percent stake last summer, is aiming to increase the network by another 500,000 lines in 1997, and 650,000 in 1998.
The statement said that investment expenditures for the first nine months totalled more than 20 billion crowns, ""more than the full year 1995 capital expenditure.
""If they hit the target of 400,000 new lines it would be a pretty good base as far as revenues are concerned,"" said one local telecom analyst.
Analysts said that the figures would probably not have an immediate effect on SPT's share price, since the entire Czech capital market is in a downturn as investors avoid a market they characterise as plagued with a lack of transparency.
Company officials have been adamant that SPT would not pay a dividend before 1998, as profits would still have to be ploughed back into the network's modernisation.
-- Prague Newsroom, 42-2-2423-0003
",1
"Czech telephone operator SPT Telecom a.s. on Thursday reported a nine-month gross profit of 6.0 billion crowns, in line with forecasts, and said outlays for investment rose significantly in the period.
""The figures were basically in line with our estimates. Margins are pretty much the same as they were in the first half so I think the company is in a good position for future growth,"" said Alex Marcek an analyst at Patria Finance.
The company's gross profit for all of 1995 was 7.0 billion crowns. SPT used International Accounting Standards in calculating its profit.
In a statement, the company said revenues  totalled 23.3 billion crowns, nearly equal to the 26.4 billion crowns for 1995.
SPT said outlays for investment in the nine-month period exceeded 20 billion crowns or more than the total for 1995.
A Dutch-Swiss consortium of PTT Netherlands and Swiss Telecom, which bought a 27 percent stake in SPT from the government last summer, has effective day-to-day control of the firm. The consortium paid $1.32 billion for its stake.
SPT said it installed more telephone lines in the Czech Republic in the third quarter, bringing the year-to-date figure to 272,000 lines. SPT now has a total of 2.67 million lines.
""The company is confident that it will achieve its 1996 target of over 400,000 new set lines,"" the statement said. The company is aiming to increase its network by another 500,000 lines in 1997, and 650,000 in 1998.
SPT is the only telephone line operator in the country. There are also two GSM mobile phone operators, but they do not install hard lines.
""If they hit the target of 400,000 new lines it would be a pretty good base as far as revenues are concerned,"" said one local telecom analyst.
SPT shares closed down six crowns at 2,879 in after-bourse trading in Prague.
The company didn't comment on its dividend policy. SPT has said in the past that it doesn't plan to pay a dividend before 1998.
-- Prague Newsroom, 42-2-2423-0003
",1
"Germany's David Prinosil ended rising British star Tim Henman's bid for his first ATP Tour victory on Saturday, while Czech Petr Korda halted compatriot Martin Damm's quest for his second final appearance in two weeks.
Prinosil beat Henman 6-4 6-3 in the semifinals of the $475,000 Czech Indoor Open and Korda followed with a hard-fought 4-6 6-3 7-5 victory against his Davis Cup team mate.
Seventh seed Henman, who had not lost a set all week, looked shaky on his groundstrokes early, but stayed in contention with his strong serve, firing seven of his 11 aces in the first set.
But in the 10th game of the match, Henman's serve failed him, his double fault giving the German triple break point.
Henman, who has now reached seven semifinals but never gone further, fought back with a service winner and then an ace, but as he has done all week, Prinosil blasted a brilliant return to take the point and set.
The British number one recovered to gain two break points of his own in the third game, but failed to come up big when he needed to.
Prinosil, who was born near here in Olomouc before emigrating to Germany, then took control.
Henman said: ""I didn't serve well at the right times. I felt confident coming into the match, (but) I just didn't really make anything happen today. It was just a case of not really having a good day at the office.
""I'm disappointed to have lost because I thought it was a good opportunity to make my first final. Bar this match, I've played very well this week and am confident going into Stuttgart and Paris.""
Prinosil said: ""I served very strongly today and just tried to play within myself, not get too excited and lose my concentration. No matter what happens tomorrow, this tournament has been a great success for me.""
Damm also looked on the bright side, viewing his appearance in the final last Sunday in the Beijing Open and this week's march to the semifinals as two of the best weeks of tennis he has ever played.
Victimns on the way have included world number three Michael Chang and ex-Wimbledon champion Michael Stich.
For Korda the win came as a relief following claims in the local media that he could no longer hold his nerve in big matches.
The former world number five has suffered several injuries in the past two years, dropping to 49th in the rankings.
""I felt a lot of pressure at the beginning of the match and I've never seen Martin play that well, but I think I also showed that I am still capable of playing tennis at the highest level,"" said Korda, who won his first tournament in two seasons at the Qatar Open earlier this year.
",1
"The Czech September trade deficit is expected to grow by between 13 and 15 billion crowns after a 14.7 billion crown monthly deficit in August, a Reuters poll of Czech economists showed on Wednesday.
Czech trade figures for the first nine months are scheduled to be released by the Czech Statistical Bureau (CSU) at 0900 local time (0700 GMT) on Thursday.
Most economists surveyed said they expect steady growth in the deficit and few surprises.
""It's still too early to talk about a period of stabilisation in the deficit, I think that will come in 1997 when imports level off and exports strengthen,"" Boris Gomez, an analyst at ING Barings told Reuters.
Whatever the deficit in September, the nine-month trade gap is sure to be a record, after the January-August figure reached 100.9 billion crowns, more than all of the 1995's total shortfall of 95.7 billion crowns.
The January-September 1995 trade deficit was 62.3 billion crowns.
Most analysts agreed a 13-15 billion September gap would be in-line with prevailing trends, and on target for the estimated deficit of 150-160 billion crowns.
Analysts say the trade balance has been hurt by a downturn in the economies of western Europe earlier in the year, and a the effects of a recovery of demand in western Europe have yet to make an impact.
The government and central bank, however, has 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.
Economists said the deficit could be financed this year, but might pose problems in the second half of 1997.
-- Prague Newsroom, 42-2-2423-0003
",1
"The Prague Stock Exchange suffered one of its biggest one-day falls on Friday as foreign interest waned because of a lack of market transparency.
Four of the PSE's five largest issues fell sharply in active trading, pulling the Reuters RPIX index down nearly three percent to 1,052.
Long-criticised for its lack of transparency and regulation, analysts say Friday's loss was yet another sign that investors, especially foreigners, are pulling out of the market having grown tired of failed promises of reform.
""There's just a total lack of interest in this market,"" said Jan Sykora of Wood and Company.
""Fundamentally, companies look pretty cheap, but the lack of foreign interest and Czechs fearing the possibility of a devaluation and looking abroad (mean) you don't have that much buying interest.""
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, where the market has a capitalisation of just $3 billion.
""Unambiguously, a notable portion of foreign investors are not satisified with the current state of the Czech capital market,"" said Miroslav Nosal of Patria Finance.
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 has taken several steps to brings more transparency to the market, but some analysts say that the process is taking too long.
In mid-September, the Prague Stock Exchange pledged to improve the state of the market, stressing in particular the need for the early creation of an independent watchdog.
But many analysts were disappointed by the lack of strong enforcement requirements, as market supervision is still kept in the hands of a small, under-resourced Finance Ministry department.
And some question whether there is even the political will here to change the market, or if a few regulations will be enough to change the attitude of many market participants.
""The problem isn't only with market regulations. I don't feel the political will which can bring change and prevent frauds.,"" Markus Winkler, manager of the Discover Europe Investment Fund was quoted in the daily Mlada Fronta Dnes as saying on Friday.
",1
"Senate runoff elections on Friday and Saturday should have little impact on Czech capital markets, as investors focus on macroeconomic fundamentals, not political influences.
Analysts said last weekend's first round of voting gave a mild boost to the Czech crown and the Prague Stock Exchange, and unless results from the second round of voting on Friday and Saturday vary greatly, little further boost should be seen.
""Provided that nothing drastic happens, it's pretty much a non-starter from a foreign investor point of view. I think that for the markets, it will be pretty much a non-event,"" Jay King, of Wood and Company, told Reuters.
In the first round of voting last weekend, Prime Minister Vaclav Klaus's right-wing Civic Democratic Party (ODS) posted a strong result, capturing over 36.5 percent of the national vote, an increase of some six percent from June lower house elections where his coalition lost its majority.
The opposition Social Democrats were second with 20.3 percent. The rest of the vote was thinly split among coalition parties and the Communists but only 35 percent of the electorate voted.
Of the 81 Senate seats, the ODS won three outright in the first round and 76 of their candidates go into the runoff, compared with 48 for the CSSD. In 47 constituencies, the runoff is a straight fight between the two main parties.
Analysts said that with the two main parties assured of dominating the Senate, a body which will have limited powers anyway, little change appears imminent for the country's economic, or political course.
""Our expectation is ODS gaining somewhere around half of the total, and including the rest of the coalition it might be well over 50 seats. I don't think there should be any surprises,"" said Radek Maly, an economist at Citibank Prague.
Following last weekend's vote, the PSE, mired in a two month long slump began to edge higher, gaining some four percent over the week.
But dealers said the gains were based more on weak local buying than a change in sentiment from key foreign investors.
The crown too, ratcheted up slightly after the first round of voting, but has since steadied at 2.9 percent stronger than its dollar/mark basket midpoint.
Some analysts said foreign investors might be tempted, as they were the previous week, to play on a strong Klaus victory early on Monday, but any gain based on the political situation would be short lived.
""There may be some bias toward a stronger Czech crown,"" said Petr Korous, a dealer at Ceskoslovenska Obchodni Banka. ""There's no other factor, more or less the basic impulse for that (a stronger crown) was really because of the elections, and then the subsequent recovery of the capital markets.""
Citibank's Maly added: ""I wouldn't foresee any major changes in the fixed income market. The fixed income market is rather less sensitive to these political events than is the FX (foreign exchange) market.""
-- Prague newsroom (42 2) 24 23 0003
",1
"East European bourses were mostly higher this week with the Warsaw Stock Exchange leading the way, hitting a 30-month high before easing slightly on profit-taking.
Budapest, Zagreb, Bratislava, Ljubljana and Sofia also posted gains, while markets in Prague and Bucharest lost ground in listless trading.
The Central European Share Index (CESI), which measures the performance of Prague, Budapest and Warsaw blue-chip stocks, dipped 0.29 percent to 1,486.55 points.
WARSAW
Polish shares on Friday extended Thursday's falls due to profit-taking, after a four-session, 2.7-percent rise on the back of gains on western bourses.
Analysts said the market could slip below 14,800 points before picking up toward the middle of next week as firms release their September earnings reports.
""It looks like we'll have falls for a few sessions, with the first support line at 14,800 points possibly broken,"" said Grzegorz Pindur, an analyst at Bank Staropolski brokerage.
The main market's all-share WIG index closed at 14,920.4 points, up 244.5 points or 1.7 percent from Friday's close.
PRAGUE
The Prague Stock Exchange continued to limp through October, yet to record an advancing session, with little hope in sight for a turnaround as investors shun a market plagued by a lack of transparency.
The PX50 index closed at 542.4 on Friday, down 13.1 points, or 2.36 percent.
""I think the budget first reading passing is too weak a signal but it is definitely positive. There are still structural problems to be solved before investors get more confident in this market,"" said Karel Ruzicka of ING Barings.
Foreign investors have long-complained that Czech capital markets are plagued by weak securities legislation that allows for secretive transactions. An estimated 70 percent of all market activity takes place off-market.
BUDAPEST
The Budapest Stock Exchange closed the week at an all-time high, boosted by the release of some positive macroeconomic figures. On Friday the BUX index closed at 3,639.68 points, up 31.67 from last Friday's close.
""Price rises were not very significant but they may mark the beginning of a modestly bullish trend,"" said Robert Agoston of Daewoo Securities. ""These macroeconomic data triggered price increases.""
Hungary released wide range of macroeconomic data this week, including the central bank's preliminary current account, trade gap, reserve and inflation data, in addition.
BRATISLAVA
The Bratislava Stock Exchange (BSE) also suffered through another week of sluggish trading, though a jump on Friday appeared to bear out broker predictions of signs that activity was gradually reviving.
The 12-share SAX index fell through the 200 level at mid-week, but then rebounded slightly to close at 203.82 points on Friday, up from Monday's open at 200.32 points.
""We have witnessed some fresh players on our market over the past few days, and the good thing is that the ratio between foreign and domestic investor seems to be well-balanced,"" said Libor Briska of Creditanstalt.
BUCHAREST
Thin interest from retail investors, who dominate the bourse, drove most share prices down this week.
Two independent indices fell to year-lows at both weekly sessions as investors awaited fresh listings to the currently traded 13 stocks.
Last week, the bourse said 11 companies had applied for listing but did not say when they would join trading.
The VAB index fell 1.5 percent to 291.7 points on Thursday and the BIG index dipped 1.6 percent to 289.98 points.
SOFIA
Two corporate issues traded higher on the Bulgarian stock market this week amid low investor interest.
The 13-share Reuter All Bulgaria Stock Index (RABSI) closed at 41.28 points, up 0.26 from last Thursday due to the rise of RIF' third issue and TBS Hotels second issue.
TIRANA
Tirana's Stock Exchange this week recorded a 100 million leks transaction in 364-day treasury bills on Monday but no bonds changed hands on Thursday.
The Savings Bank sold 100 million leks worth of 364-day T-Bills to the National Commercial Bank on Monday, the first of Tirana's Stock Exchange (TSE) two weekly sessions.
The finance ministry on Thursday offered 800 million leks worth of 91-day t-bills, 400 million leks of 182-day t-bills and one billion leks in 364-day t-bills.
ZAGREB
Croatian stocks forged ahead throughout the week, ending mixed on Friday as selected hoteliers closed slightly lower after recording new highs during the week. Traders said growing supply will stabilise prices next week.
LJUBLJANA
Slovenian shares jumped 18.5 percent this week, pushing the index up 202.6 points to 1,299.70 as investors snapped up shares of newly-privatised companies. Traders said the market was likely to continue its recent bull run.
		   OCT 11    WEEK'S CHANGE    1996 HIGH   1996 LOW
		    CLOSE    pts	pct
  CESI	   1,486.55   -4.18  -0.29     1,544.70     959.24
  WARSAW	14,920.4  +244.5    +1.7    15,078.7    7,725.2
  PRAGUE	   542.4   -13.1    -2.36	582.0	425.9
  BUDAPEST     3,639.68  +31.67   +0.87    3,639.68   1,557.91
  BULGARIA	  41.28  + 0.26   +0.63	 55.48	40.61
  BRATISLAVA     203.82   +3.50   +1.75	226.34     150.4
  LJUBLJANA    1,299.70 +202.6   +18.5     1,589.18     891.93
All-time highs: WIG 20,760.3 (March 8/1994); BUX 3,639.68 (Oct 4); RABSI 112.2 (April 27/1994); PX50 1,002.4 (April 7/1994); SAX 402.3 (Feb/1994); SBI 1,598.02 (June 28/1994), CESI 3,634.80 (Oct 7/1996).
",1
"Shares on most central and eastern European bourses gained ground this week though there were some indications the upturn may be short-lived.
Exchanges in Prague, Warsaw, Budapest, Bratislava and Bucharest all rose, while Zagreb and Sofia traded mixed. Ljubljana was the one gray cloud, posting slight losses.
The Central European Share Index (CESI) which reflects the price movements of 50 selected Czech, Polish and Hungarian shares, firmed 66.11 points.
PRAGUE
Czech share prices were mostly steady on the Prague Stock Exchange throughout the week, with little movement expected soon as the holiday season slowly winds up.
The PX50 index edged up 3.6 points from Monday to close at 568.6 on Thursday.
Leading trading were SPT Telecom and Komercni Banka, though SPT's movements were largely characterised as ""accounting procedures"" that saw the issue gain as much as 102 crowns one session, only to lose the same amount the following day.
""The final price (of SPT) was not the real market price, but because average prices are not used for the close, it gives an artificial final number,"" said Jan Sykora of Wood and Company. SPT closed on Thursday at 3,340 crowns.
Dealers have long-complained that some market participants consistently manipulate prices on the bourse, a fact that to cloud foreign investor perceptions of the Czech market.
WARSAW
Polish shares on Thursday rose for the sixth consecutive session but analysts said stronger selling after price-fixing showed the market was losing steam and made it unclear if the growth trend would continue.
""It seems we now have a tug-of-war between buyers and sellers,"" said Krzysztof Rogalski, an analyst at Bank Staropolski SA brokerage.
But some analysts said a real growth trend had already begun, sparked by firms releasing better July earnings at the start of the week. The WIG index closed at 13,597.4 points, up 892.7 points or 7.0 percent from last Friday's close.
Analysts said recent systematic gains in higher turnovers by several large-cap stocks was a good sign that could help return the market toward this year's July 5, 14,282.2-point high next week.
BUDAPEST
Prices rose at both of this week's sessions as market participants returned after holidays on Monday and Tuesday.
The rest of the market strengthened as investors were cheered because the U.S. Federal Reserve had left interest rates steady.
""It's certainly due to the fact the U.S. investors put money into the east European emerging markets,"" Peter Haas of Postabank Securities said. ""Optimism seems to have spread over investors after the danger of a rate hike was eliminated.""
The BUX index closed on Thursday at 3,370.23, up 198.79 points over last Friday.
BRATISLAVA
The Bratislava Stock Exchange (BSE) saw a week of listless holiday trading, with the ongoing struggle for strategic control over the country's largest investment fund, VUB Kupon, dominating floor trading.
The 12-share SAX index posted several year-highs over the week, peaking at 226.34 points on Tuesday, and closing at 223.75 points on Thursday, slightly firmer from Monday's open.
""This week was a transparent example, showing how the index is often far off from real trends on the market,"" Dusan Sykora of ING Barings said. ""The SAX has been reaching top levels, while only a few trades were concluded on the bourse on low volumes,"" he added.
SOFIA
No corporate issues traded for a third week in a row on the Bulgarian stock market as investors turnede their attention to treasuries and foreign currency.
Only the Sofia Stock Exchange (SSE) operated this week after the Bulgarian Stock Exchange (BSE) went into a summer recess on August 5. The BSE will resume trading on September 2.
The 13-share Reuter All Bulgaria Stock Exchange Index (RABSI) closed at 41.31 points, unchanged from last Thursday.
BUCHAREST
Romanian share prices posted gains this week on the back of healthy half-year earnings reports by several firms but trading, dominated by retail investors, was modest in volume.
Overall turnover fell by almost 30 million lei to 68.5 million on Thursday.
The unofficial VAB Index -- a value-weighted index of all stocks computed by Vanguard SA securities -- closed at 371 points, 8.20 points or 3.5 percent up on the week. Its base was 1,000 points when it was created last November.
ZAGREB
Croatian stocks were mixed though the summer lull seemed to be nearing an end as big buyers became more active, boosting prices and prompting broker predictions of a steady rise in the weeks to come.
Most active was Zagrebacka Banka which gained 130 kuna since last Tuesday, but other companies including foodprocessor Podravka also registered an increase of prices.
LJUBLJANA
In Ljubljana, share prices, eased 0.4 percent as the SBI index fell 4.31 points to 980.60.
Financial consultancy Finmedia was the leading decliner, falling 4.9 percent, while the biggest gainer were prefered shares of bank Dolenjska banka, firming 10.4 percent.
		    CLOSE     WEEK'S  CHANGE    1996 HIGH  1996 LOW
		    AUG 22	NET     PCT
 CESI	   1,495.58    +66.11   +4.62    1,483.76     959.24
 PRAGUE	   568.6	+3.6    +0.64	586.6	425.9
 WARSAW	13,597.4    +892.7    +7.0    14,282.2    7,725.2
 BUDAPEST     3,370.23   +198.79   +6.27    3,380.53   1,557.91
 BRATISLAVA     223.75     +0.51   +0.23	226.34     150.4
 SOFIA	     41.31	0.00   +0.00	 55.48	41.05
 LJUBLJANA	910.74     -4.31   -0.47    1,589.18     910.74
All-time high: CESI 1,483.76 (July 5/1996); SBI 1,598.02 (June 28/1994); WIG 20,760.3 (March 8/1994); BUX 3,380.53 (July 8/1996); PX50 1,002.4 (April 7/1994); RABSI 112.2 (April 27/1994); SAX 402.3 (Feb/1994).
",1
"Top seed Goran Ivanisevic cruised to a 7-6 6-4 win over Romania's Adrian Voinea in the first round of the Czech Indoor Open on Monday.
In the only other match involving a seeded player on the opening day, Britain's Tim Henman overpowered Sweden's Nicklas Kulti 7-6 6-4.
Both players took advantage of the fast carpet court, blasting service winner after service winner to demoralise their opponents.
Ivanisevic, ranked fifth in the world, started slowly against world number 42 Voinea, before pulling away in the middle of the tie break and never looked back.
""It's always tough to play in a new hall and the carpet here is much faster than last week in Vienna,"" said Ivanisevic who hit 14 aces.
""But this was good preparation though because the tournament has so many top players. To win it will take at least one win over a top 10 player.""
Ivanisevic's is scheduled to play the winner of Tuesday's match between Czech Petr Korda and Ecuardor's Nicolas Lapentti and could also have to get past third seed Boris Becker and eighth seeded Czech Bohdan Ulihrach it he is to reach Sunday's final.
Henman also used his dominating serve to wear down Kulti.
""It was a tough match but I think I should have taken the first set before the tiebreak,"" said Henman. ""He fought back well but I felt more comfortable in the second set.
""I enjoy playing a tough match right from the start, it focuses you very quickly.""
",1
"The Prague Stock Exchange hit a new year-high on Thursday as major banking issues broke out of a recent slump to spur the bourse higher.
Komercni Banka and Ceska Sporitelna, the country's two largest banks both posted strong gains to help push the PX50 index up 3.3 points, or 0.58 percent, to a 1996 high of 574.9.
Overall, advancing issues narrowly outpaced decliners by 320 to 298, with 192 holding steady. Total volume remained steady at 916,194 shares on turnover of 648.3 million crowns.
Komercni, a likely recipient of attention from investors looking to enter the Czech market after an announcement of its inclusion into the Morgan Stanley index, jumped 99 crowns to close at 2,439.
Meanwhile, savings bank Ceska Sporitelna also posted a strong gain of 16 crowns to 351.
""The inclusion of the Czech Republic in the Morgan Stanley index should help boost issues like Komercni,"" said Jan Sykora of the brokerage Wood and Company.
Earlier in the day, Sporitelna CEO Jaroslav Klapal announced the bank expects 1996 net profit to total 2.1 billion crowns, while gross profit will hit at least 6.1 billion.
Klapal added that he expected the bank would pay a higher dividend in 1996 than its five crown per share dividend for last year.
""Gross profit, before the creation of reserves and payment of taxes could be slightly above 6.1 billion crowns,"" Klapal said. ""We are counting on dividends for this year will be higher than that of last year.""
Sporitelna's 1995 after-tax profit, calculated according to Czech accounting standards, plummetted to 263 million crowns from a previous 980 million crowns after the bank provisioned heavily for risky loans.
The bank's 1995 gross profit was 9.17 billion crowns but the bank assigned almost an identical sum, 9.13 billion, to its reserves covering ""classified"" loans -- those whose likelihood of recovery ranges from doubtful to hopeless.
Klapal did not say whether his forecasts were calculated according to Czech or international accounting standards, which vary mainly in terms of allowable write-offs and depreciation costs.
Even though analysts agreed that the financial situation of the bank was markedly better this year than it was last year, they said shares of the bank were overvalued.
Analysts say they are closely watching what appears to be a strong acquisition of shares in Sporitelna by the usually secretive Czech investment group Motoinvest and the rival bank Investicni a Postovni Banka a.s.
""The attractiveness of (Sporitelna) could greatly drop if Motoinvest took a more significant share in management,"" said Richard Podpiera analyst at the investment house Atlantk FT.
",1
"Czech paper concern Sepap Group a.s. on Friday said its nine-month net profit fell as a shutdown of its main paper mill, coupled with a downturn in the paper cycle bit into its bottom line.
Sepap said its nine-month net profit, calculated according to international accounting standards, fell to 188.4 million crowns ($7 million) from 520.4 million over the same period in 1995, while revenues slumped to 3.94 billion crowns from 5.34 billion.
The firm said results from the third quarter only had stabilised after a first half industry downtrend, though ""the planned annual shutdown of the Steti mill lowered earnings by virtue of the expected higher maintenance costs associated with the stoppage"".
""Overall, Sepap year-end earnings are expected to rise and show a slight improvement over third quarter levels,"" a company statement said.
The Steti mill, which accounts for some three-quarters of the group's revenues and profits, saw its pre-tax profits plummet to seven million crowns.
Comparative figures were not immediately available, but the mill's nine-month 1995 gross profit was some 95 million crowns.
""The market place is sending mixed signals for the fourth quarter. Anticipated price increases have not taken hold at the anticipated levels in all of the pulp and paper grades,"" the statement said.
It added that the group's second biggest subsidiary, newsprint maker ROTO, ""continued to produce good results in a market that is weakening"".
ROTO showed a nine-month pre-tax profit of 149 million crowns on sales of 1.25 billion crowns.
Last year, Sepap was the centre of a heated battle for control between Bahamas-based investor Michael Dingman and Swedish forestry concern Assidoman.
Dingman, who controls 48 percent of Sepap through his Daventree Ltd investment company, won the battle, but later accepted Assidoman's role as a strategic partner in the paper industry. The Swedish firm holds a 39 percent stake in Sepap.
-- Prague Newsroom, 42-2-2423-0003 ($ = 26.86 Czech Crowns)
",1
"The Prague Stock Exchange suffered one of its biggest one-day falls ever on Friday, as waning foreign interest due to a lack of market transparency continues to run roughshod over the beleaguered bourse.
Four of the PSE's five largest issues fell sharply in active trading, pulling the Reuters RPIX index down nearly three percent to 1,052.
Long-criticised for its lack of transparency and regulation, analysts say Friday's loss was yet another sign that investors, especially foreigners, are pulling out of the market having grown tired of failed promises of reform.
""There's just a total lack of interest in this market,"" said Jan Sykora of Wood and Company.
""Fundamentally, companies look pretty cheap, but the lack of foreign interest and Czechs fearing the possibility of a devaluation and looking abroad (mean) you don't have tha much buying interest.""
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, where the market has a capitalisation of just $3 billion.
""Unambiguously, a notable portion of foreign investors are not satisified with the current state of the Czech capital market,"" said Miroslav Nosal of Patria Finance.
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 has taken several steps to brings more transparency to the market, but some analysts say that the process is taking too long.
In mid-September, the Prague Stock Exchange pledged to improve the state of the market, stressing in particular the need for the early creation of an independent watchdog.
But many analysts were disappointed by the lack of strong enforcement requirements, as market supervision is still kept in the hands of a small, under-resourced Finance Ministry department.
And some question whether there is even the political will here to change the market, or if a few regulations will be enough to change the attitude of many market participants.
""The problem isn't only with market regulations. I don't feel the political will which can bring change and prevent frauds.,"" Markus Winkler, manager of the Discover Europe Investment Fund was quoted in the dsaily Mlada Fronta Dnes as saying on Friday.
-- Prague Newsroom, 42-2-2423-0003
",1
"Czechs cold-shouldered their newly-created Senate on Saturday, turning out in record low numbers for elections which were supposed to be a key test for the minority government of Prime Minister Vaclav Klaus.
The apathy suggested that the real winners might not be Klaus's Civic Democratic Party (ODS) or the opposition Social Democrats, but the far-right Republicans who boycotted the Senate elections and told fellow Czechs to follow suit.
Unofficial figures from the two-day first round, which ended on Saturday, indicated that turnout would be well under 40 percent, by far the lowest in the four parliamentary elections held since the 1989 fall of communism.
Opposition Social Democrat leader Milos Zeman bewailed Czechs' apathy towards the upper house, but predicted that turnout would improve in the second round on November 22-23.
""I think that no party can be happy with the low election turnout, because people that don't turn out for the Senate elections are giving up their civic rights, the right to vote, the right to decide,"" Zeman told reporters.
No national figures were available immediately after the polls closed at 2.00 p.m. (1300 GMT).
But preliminary, unofficial data from some of the 81 constituencies showed Klaus's centre-right ODS doing well against a bleak background on turnout.
In the Western city of Plzen, turnout was just 36 percent with the ODS candidate expected to face a Social Democrat in the second round, the Czech news agency CTK reported.
If no candidate wins more than half the vote in the first round, the top two candidates go through to the runoff.
In the northern mining town of Most, turnout was 26 percent with the ODS candidate leading trade union leader Richard Falbr, who is running for the Social Democrats.
Pundits have billed the Senate elections as an indicator of whether the Czech Republic can break out of a political impasse following inconclusive lower house polls which stripped Klaus's conservative coalition of its majority last June.
But the apparent low turnout, which compares with 76.4 percent in June, seems a vindication of the Republicans and their leader Miroslav Sladek.
Sladek regards the Senate as a waste of time and money. ""They had nowhere to dump the political zombies so they established the Senate,"" he told a recent anti-election rally, adding that it ""would be lazy, useless and expensive"".
Conventional wisdom has been that if ODS did well in the Senate Klaus might provoke early lower house polls to regain the coalition's majority. If ODS lost to the Social Democrats, however, he could be forced to resign after seven years leading economic reform as finance minister and since 1992 as premier.
",1
"Czech share prices rallied following the coalition government's win in weekend Senate elections, but analysts said the rise is due more to a technical correction than a change in investor sentiment.
The Prague Stock Exchange's PX50 index rose 0.86 percent at the bourse's daily price fixing, spurred by gains to seven of the eight most-capitalised shares.
Brokers, however, were muted in their optimism that the rally would last more than a few days, saying the centre-right government's strong showing was expected and already built into the market last week.
""Basically, this is a technically-led rally, I don't think it has a basis to do with Senate elections,"" said Jay King of the brokerage Wood and Company.
Added another local trader: ""You're not seeing real volumes here you're just seeing prices being pushed up in anticipation of year-end, and without a doubt it is domestically driven. Foreigner investors are still on the sidelines.""
The minority coalition of Prime Minister Vaclav Klaus took 52 of 81 seats in the newly-created upper house of parliament, following the second round of voting, well ahead of the centre-left opposition Social Democrats which took 25 seats.
The Senate is a mostly advisory body with limited legislative powers, but the election was the first test at the polls for Klaus since his coalition lost its lower house majority in general elections in June.
But a thin turnout -- just over 30 percent of the electorate cast their ballots -- made it hard for the three-party coalition government, which lost its lower house majority in June, to claim it had recaptured voters' hearts.
The Prague bourse has been hard hit in recent months -- falling some 17 percent since September -- with most investors shying away from the a market characterised as opaque at best, and little regard for minority shareholder rights.
And analysts said that the election would probably not bring about a new push for changes to securities laws within the coalition, a condition that is necessary to lure back participants.
""I'm a little sceptical about the possibility that the Senate will help bring in changes,"" 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.""
Analysts said that the market should take some heart however, in statements made by Klaus following the vote when he said he saw no reason to call early elections for the lower house, which should keep the market stable in the near future.
-- Prague Newsroom, 42-2-2423-0003
",1
"Third seed Boris Becker withdrew from the $475,000 Czech Indoor Open on Thursday because of a recurring wrist injury.
Becker, who tore a ligament in his right wrist during the third round at this year's Wimbledon, was in pain after training and dropped out of his scheduled second round match against Czech Martin Damm.
""Boris said his wrist was too sore and that he would not be able to play this evening,"" ATP Tour Supervisor Gayle Bradshaw said.
On Wednesday evening, Becker cruised to a 6-3 6-4 victory over Denmark's Frederik Fetterlein. During the match he held his wrist several times.
The world number six tried to return to the circuit last month but the injury forced him to retire from the first round in Bucharest, lose in the second round in Basle and withdraw from Lyon two weeks ago.
Becker's absence has set back his plan to qualify for a record 12th appearance at the season-ending ATP Tour championship. He currently trails South African Wayne Ferreira for the eighth and final spot in Hannover.
Second seed Ferreira scraped through to the quarter-finals in Ostrava with a 7-6 5-7 7-5 victory over Dutch qualifier Joost Winnink.
Ferreira, ranked seventh in the world, was stretched to the limit by Winnink. Their absorbing baseline battle ended in the 12th game of the deciding set when Winnink's backhand let him down on three successive occasions.
Although Becker was ranked only third for Ostrava behind Goran Ivanisevic and Ferreira, it was clear most fans wanted to watch him.
Barely 1,000 saw Ivanisevic's first round against world number 42 Adrian Voinea. A tournament record 10,000 watched Becker defeat Fetterlein, ranked 156.
Seventh seed Tim Henman reached the last eight with a 7-6 7-5 victory over British Davis Cup team mate Greg Rusedski.
",1
"The Czech trade deficit jumped sharply in October, rising nearly 16 billion crowns ($600 million), but analysts were not alarmed by the rise, which was in line with their full year forecasts.
The Czech Statistical Bureau (CSU) said on Tuesday the trade gap for the first 10 months of the year hit a record 125.5 billion crowns, up from a revised 109.6 billion crown shortfall for January-September.
The CSU, the Ministry of Industry and Trade and some analysts have predicted the deficit -- inflated by economic slowdown with the country's main trading partner, Germany -- will finish the year at a record 150-160 billion crowns.
""The figures are developing according to forecasts. It's clear that the year-end deficit will be 150-160 billion crowns,"" said Kamil Janacek, chief economist at Komercni Banka.
""I'm not surprised by the jump since the economic revival of Germany will only show up in export growth in the first half of next year, not in one or two months,"" he added.
The CSU said in a statement that imports in the first ten months of the year rose by 14.4 percent year-on-year, down from 15.2 percent in the first nine months, while exports rose by 5.2 percent after a 5.9 percent increase in January-September.
It added that strong growth in machinery and transport equipment imports continued, growing by 19.1 percent year- on-year and accounting for 38.3 percent of total imports.
Analysts said they were encouraged by the rise in this sector because the imports were needed to restructure industry, allowing it to produce more competitive goods for exporting.
""The trend seems unchanged. The financing of future economic growth is being done with imports, especially in the heavy machinery sector,"" Boris Gomez, an analyst at ING Barings said.
Martin Kupka of Patria Finance added -- ""The country is still clamouring for machinery and raw materials which are necessary for industrial restructuring.""
Prime Minister Vaclav Klaus, a monetarist-economist, has said the record trade deficit is ""not tragic"", adding it has come partly from a temporary foreign investment wave.
The Czech crown reacted indifferently to the trade figures on Tuesday, hovering around three percent above its dollar/mark basket parity, where it was for most of Monday.
The crown was trading at 26.919 to the dollar at 1230 local time (1130 GMT).
The rate implies a deviation from the midpoint of the currency basket of +3.09 percent, after the central bank's fixing earlier on Tuesday at +3.00 percent.
""The market is neither alarmed nor pleased with the figure. If the deficit hits the forecast level, I doubt we will see any significant change in the currency's value,"" said one local forex dealer.
-- Prague newsroom, 42-2-2423-0003 ($1=26.78 Czech Crown)
",1
"The Czech Republic and Spain played out a scoreless draw in their World Cup group six qualifier on Wednesday, in a match that never lived up to expectations.
The Czechs were facing their first big test since they reached the Euro 96 final, while Real Madrid's teenage striker Raul was looking to spark a depleted Spanish attack in his first full international.
Both sides opened their World Cup campaigns last month with high-scoring victories over the two weakest teams in the group, Spain winning 6-2 in the Faroe Islands and the Czechs thrashing Malta 6-0.
But Yugoslavia have already collected three wins and Slovakia two against the same two hapless victims and neither team could afford to give ground in Prague.
Like two heavyweights feeling each other out in the early rounds, both teams started tentatively, waiting to pounce on the other's mistakes.
The Spaniard's were the first to flinch when Kaiserslautern striker Pavel Kuka's cross found an unmarked Karel Poborsky just outside the crease. But the Manchester United midfielder failed to control the ball, wasting what would turn out be one of the game's few good scoring chances.
Next it was the Czechs turn to falter. Newcastle United goalkeeper Pavel Srnicek, winning his first cap in over a year, tried to clear the ball, but hit attacker Alfonso Perez and watched helplessly as it rolled just wide of the net.
The Czechs picked up their play in the second half, putting Spain on their heels for the rest of the game.
""I don't think we lost points tonight because they are such an excellent team. They played strongly in the defence and its too bad we missed out on the two great chances we had,"" said Czech striker Patrik Berger.
Teams:
Czech Republic: 1-Pavel Srnicek, 2-Radoslav Latal, 3-Jan Suchoparek, 4-Pavel Nedved (15-Martin Frydek, 86th), 5-Miroslav Kadlec, 6-Michal Hornak, 7-Jiri Nemec, 8-Karel Poborsky (17-Vladimir Smicer, 58th), 9-Pavel Kuka, 10-Patrik Berger, 11-Radek Bejbl
Spain: 1-Andoni Zubizarreta, 2-Abelardo Fernandez, 3-Sergi Barjuan, 4-Rafael Alkorta, 5-Miguel Angel Nadal, 6-Fernando Hierro, 7-Raul Gonzalez, 8-Luis Enrique Martinez, 9-Guillermo Amor (18-Ismael Urzaiz, 76th), 10-Julen Guerrero (14-Josep Guardiola, 52nd), 11-Alfonso Perez (15-Roberto Rios, 73rd)
",1
"It's a Snip, bidding to become the ninth horse to win two years in succession in the 106-year history of the Pardubice steeplechase, leads a British raid to this city east of Prague on Sunday.
Last year's winner, one of a trio of British horses expected for the controversial four-and-a-quarter mile event (6.9 km), has the considerable advantage from the saddle of Richard Dunwoody, one of the world's most accomplished jump jockeys.
The Pardubice, a unique test of man and horse, includes a series of demanding obstacles and has been compared to the Grand National at Aintree, a race Dunwoody has won twice.
Race organisers have made the course easier in recent years, including modifying the daunting Taxis jump with its tough, high, wide fence and deep ditch. 
This and various other changes among the other 30 jumps followed massive protests and the embarassing 1993 outcome when only one horse managed to finish.
A total of 21 horses have died in the Pardubice over the years.
Rounding out the trio of British challengers looking to win part of the 2.5 million crown ($92,000) purse are Irish Stamp and Veleda II.
Irish Stamp, to be ridden by Norman Williamson, has a clear chance and is rated considerably higher in England than It's a Snip, although the latter's proven ability over the course will be a major factor.
Of the others, Polish-trained Scater is also expected to make a bold show.
Despite its long history, the Pardubice has only recently regained its former status.
""In the past everyone in Britain knew of the enormously difficult course but they didn't have much interest,"" said Nigel Miller, one of the organisers who has worked to bring the British contingent here.
""But this year, one of the biggest hits of the season is to come here for a two-day trip to one of the most historic races around.""
",1
"The Czech trade deficit jumped sharply in October, rising nearly 16 billion crowns, but analysts said they were not alarmed by the rise which is inline with their full year forecasts.
The Czech Statistical Bureau (CSU) said on Tuesday the trade gap for the first 10 months of the year hit a record 125.5 billion crowns, up from a revised 109.6 billion crown shortfall for January-September.
The CSU, the Ministry of Industry and Trade, and most analysts, however, have predicted the deficit -- accelerated by an economic slowdown with the country's main trading partner, Germany -- will finish at a record 150-160 billion crowns.
""The figures are developing according to forecasts. It's clear that the year-end deficit will be 150-160 billion crowns,"" said Kamil Janacek, chief economist at Komercni Banka.
""I'm not surprised by the jump since the economic revival of Germany will only show up in export growth in the first half of next year, not in one or two months,"" he added.
The CSU in a statement said that imports rose by 14.4 percent year-on-year for the 10-month period, down from 15.2 percent for January to September, while exports rose by 5.2 percent, down from 5.9 percent for the first nine months.
It added that strong growth in machinery and transport equipment imports continued, growing by 19.1 percent year- on-year and accounting for 38.3 percent of total imports.
Analysts said they were encouraged by the rise in this sector, saying that imports of this nature are needed to restructure industry, allowing it to produce more competitive goods for exporting.
""The trend seems unchanged. The financing of future economic growth is being done with imports, especially in the heavy machinery sector,"" Boris Gomez, an analyst at ING Barings told Reuters.
Added Martin Kupka of Patria Finance:""The country is still clamoring for machinery and raw materials which are necessary for industrial restructuring.""
Prime Minister Vaclav Klaus, a monetarist-economist, has said the record trade deficit is ""not tragic"" saying it has come in part from a temporary foreign investment wave.
The Czech crown reacted indifferently to the trade figures, hovering around three percent above its dollar/mark basket parity, where it was for most of Monday.
The crown was trading at 26.919 to the dollar at 1230 local time (1130 GMT).
The rate implies a deviation from the midpoint of the currency basket of +3.09 percent, after the central bank's fixing on earlier on Tuesday at +3.00 percent.
""The market is neither alarmed nor pleased with the figure. If the deficit hits the forecast level, I doubt we will see any significant change in the currency's value,"" said one local forex dealer.
-- Prague newsroom, 42-2-2423-0003
",1
"Third seed Boris Becker, fresh from his first title since injuring his wrist at Wimbledon, cruised to a 6-3 6-4 victory over Denmark's Frederik Fetterlein in the Czech Indoor Open on Wednesday.
Fifth seed Todd Martin also had an easy time in his second round match, downing Italian Cristiano Caratti 6-4 6-1, while eighth seeded Czech Bohdan Ulihrach was not as fortunate, falling 6-4 6-2 to Davis Cup team mate Jiri Novak.
A slightly tired-looking Becker, who won the CA Trophy in Vienna on Sunday, looked rusty at times, missing easy volleys. But his booming serve and crisp groundstrokes kept Fetterlein, ranked 129th in the world, permanently on the back foot.
""I have good days and bad days with my hand...it was sore in the match but I managed to fight through it and hopefully it will be alright tomorrow,"" said Becker who needed just over an hour to defeat his opponent.
The world number six tried to return to the circuit last month, but recurring problems with the ligament he tore in a third round match at Wimbledon forced him to retire from the first round in Bucharest, lose in the second round in Basle and withdraw from Lyon two weeks ago.
His return to form may be just enough to earn the 28-year-old a record 12th appearance at the ATP Tour Championships at the end of the year. Becker currently trails South African Wayne Ferreira, seeded second in Ostrava, by only 46 points for the eighth and final spot in Hanover.
Martin, ranked 11th in the world, also had little trouble disposing of Caratti, needing just 49 minutes for his straight sets win.
For Ulihrach, meeting a Davis Cup team mate for the second consecutive day proved too much, as he put up little resistance to Novak.
The previous day Ulihrach beat Daniel Vacek, ranked one spot below him at 36th, but could not recapture the service return which propelled him into the second round against Novak, ranked 40th.
",1
"Wimbledon champion and fourth seed Richard Krajicek crashed out of the first round of the Czech Indoor Open on Tuesday, losing 6-4 6-3 to Germany's David Prinosil.
Second seed Wayne Ferreira of South Africa also had a rough ride but eventually overcame Italy's Renzo Furlan 7-5 4-6 6-3 while sixth seed Michael Stich of Germany cruised past Australian Sandon Stolle 7-6 6-2.
Krajicek, whose parents emigrated from then Czechoslovakia to the Netherlands when he was a child, struggled to bring his booming serve under control from the outset, failing to mount a sustained attack against Prinosil, ranked number 58 in the world.
""I'm not very happy with the way I played, and David returned my serve very well, and my second serve was off,"" said Krajicek who served up only seven aces and six double faults.
Former Wimbledon champion Michael Stich found the going much easier, taking a close first set before overpowering world number 71 Stolle in the second set.
After crashing out of the first round in each of his last two tournaments, world number seven Ferreira looked shaky at times, committing a rash of unforced errors that left the match even after two sets.
But another early exit for the South African would have seriously jeopardised his chances of qualifying for the ATP Tour World Championship in Hanover, Germany at the end of the year.
""It's always a tough match against Renzo, he has a game that is suited well against mine,"" said Ferreira, who currently holds the eighth and final spot for Hanover with Boris Becker, scheduled to play in Ostrava on Wednesday, just 46 points behind.
Fifth seed Todd Martin easily disposed of Slovakia's Jan Kroslak 6-3 6-4 and eighth seed Bohdan Ulihrach fought back in the last set to defeat his Czech Davis Cup team mate Daniel Vacek 6-2 3-6 7-5.
",1
"Germany's David Prinosil, in a homecoming of sorts, overwhelmed Czech Petr Korda 6-1 6-2 in the final of the $475,000 Czech Indoor Open on Sunday.
The 23-year-old German, who was born near here in Olomouc and emigrated to Germany when he was 14, took control of the match from the beginning, keeping Korda off balance with his booming serve and crisp groundstrokes.
As was the case all week, Prinosil used his deft return of service as an offensive weapon, seizing on both break points he had to take the first set in just 22 minutes.
It was more of the same in the second set, with world number 49 Korda taking more chances, but failing to unsettle the German, who was playing in only his second final on the tour after he won in Newport last year.
Korda was on the verge of breaking Prinosil in the fourth game, but the world number 58 blasted four straight service winners to take the game, and then ripped two crosscourt forehands to break in the fifth and seventh games in a match that lasted just 50 minutes.  
""If someone told me I wouldn't lose a set all week, I would have said they were crazy. I don't think I have ever played this well,"" said Prinosil, who enjoyed straight set victories over Wimbledon champion Richard Krajicek, American Todd Martin and Briton Tim Henman on his way to the final and a prize of $64,000.
Korda said: ""I was a little drained from yesterday's match and he hit the ball well. The points were short, which gave me little chance to take control of the match.""
Korda needed two hours late on Saturday to defeat Davis Cup team mate Martin Damm in three sets while Prinosil beat Henman in just 56 minutes.
",1
"The party of right-wing Czech Prime Minister Vaclav Klaus took a solid lead in Senate election run-offs on Saturday, but turnout was dismal despite an appeal to vote from President Vaclav Havel.
With almost half the 81 constituencies declared, Klaus's Civic Democratic Party (ODS) had won 19 seats in the new upper house, ahead of the opposition Social Democrats with eight.
The Christian Democrats, a junior partner in Klaus's centre-right coalition, put in a strong perfomance to take seven while the third party in the government, the Civic Democratic Alliance (ODA) won two.
Turnout was just 30.5 percent, lower even than the 35 percent recorded in the first round of the Senate polls on November 15 and 16, the Central Election Commission said.
Before the second round, Havel appealed to Czechs to turn out in far greater numbers for the sake of the credibility of the new upper house.
The Senate elections had been billed as key to the future of Klaus's coalition, which lost its lower house majority in elections six months ago. But analysts say that with turnout so low, the Senate results have little significance.
Finance Minister Ivan Kocarnik, an ODS member, forecast that the government parties would take control of the Senate.
""It is clear that the coalition is leading at the moment and I think they still will be after the final results are out,"" Kocarnik told reporters, predicting that the ODS would win between 33 and 40 seats.
Analysts had forecast that voter apathy would benefit the ODS which is well-organised and well-funded by big business.
Its supporters, largely more affluent Czechs who have benefited from Klaus's free market reforms since the 1989 fall of communism, have been galvanised by the coalition's loss of its majority in the lower Chamber of Deputies in June.
Klaus, an architect of economic reform, repeatedly accused the Social Democrats of conspiring with the little-reformed communists to turn back the clock on reform.
Scepticism is widespread among Czechs and Klaus himself has questioned the need for the Senate, which was written into the Czech Republic's new constitution when Czechoslovakia split at the end of 1992, but is only now being elected.
The Social Democrats have said they would scrap the Senate if they ever achieved the three-fifths majority in the lower Chamber of Deputies needed to change the constitution.
Klaus toned down his scepticism as voting neared but only Havel has appeared enthusiastic about the idea.
Before the run-offs -- for the top two first round candidates in constituencies where no one won more than half the vote -- Havel appealed to citizens to turn out in much greater numbers for the sake of the Senate's legitimacy.
-- Prague newsroom (42 2) 24 23 0003
",1
"The Prague Stock Exchange on Tuesday, buoyed by financial sector share gains, continued to rebounds from its recent slump, closing higher for the third consecutive session.
Komercni Banka, IPB, Ceska Sporitelna and Zivnostenska Banka all gained ground as the PX50 index edged up 2.5 points, or 0.47 percent, to 537.1.
The Reuters RPIX index, measuring the seven continuously- traded equity issues on the bourse, climbed five points to 1,095.
Overall, 188 shares rose on the day, while 121 lost and 74 held steady. Total volume was 701,356 shares on turnover of 721.14 million crowns.
For IPB, which rose 15 crowns to 331, it was the second consecutive five percent gain, the maximum allowed by the bourse in a session, after the government said it would be the first of the big four banks to undergo privatisation.
On Friday, Finance Minister Ivan Kocarnik gave investors the signal they had been looking for when he said that a strong foreign strategic partner would be the most likely beneficiary of any sell off.
Since the announcement, Nomura and ING Bank have been rumoured as the frontrunners in any bid to participate in the selloff. The government holds about a 30 percent stake in IPB.
""If you were to bring in a foreign partner such as the caliber of the two banks mentioned, that addresses questions that have been hovering around IPB on its perceived lack of corporate structure and transparency,"" said Jay King of Wood and Company.
The bank has been widely-criticsed for being the least transparent of the four major Czech banks in its dealings, especially a recent spending spree that has seen it quietly buy large stakes in several firms.
Several utilities also fared well at the fixing, with Stredoceska Energetika, Prazska Teplarenska, Severomoravksa Energetika, Jihomoravska Energetika and Elektrarny Opatovice all rising.
",1
"A Czech central bank scheme to buy doubtful debts of smaller banks and restore stability to the banking sector has attracted interest from about 10 banks, the Czech news agency reported on Wednesday.
CTK, quoting central bank spokesman Martin Svehla, said that of the 13 banks allowed to participate in the plan, the number that had expressed an interest in joining ""is nearing 10"".
Central bank officials were not immediately available for comment.
The Czech National Bank (CNB) outlined the programme in mid-October followed the failure of Kreditni Banka in August -- the 11th bank in which the CNB had intervened -- and the politicisation of the case which had undermined confidence especially in small banks.
Under the plan, participating banks must follow strict conditions and allow the central bank to make management changes where needed. CNB officials said the programme was not aimed at resolving a problem at any one bank.
The plan will be open to all small private banks with total paid-in capital of 12.5 billion crowns ($458.5 million) and total assets of not more than 30 billion crowns.
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.
Banks also must maintain cost controls, profitability and liquidity as well as agreeing to frequent reviews by the central bank.
The maximum purchase of debt by Konsolidacni can total up to 110 percent of a single bank's paid-in capital, meaning a maximum exposure for the state of 13.7 billion crowns in total if all eligible banks participated.
The programme is voluntary based on a contract with the CNB, and the central bank said it would not reveal which banks elected to participate.
Banks eligible include Ekoagrobanka, Union Banka, Evrobanka, Prvni Mestska Banka, COOP Banka, Pragobanka, Plzenska Banka, Foresbank, Bankovni Dum Skala, Moravia Banka, Universal Banka, Zemska Banka, and Banka Hana.
Money for the scheme is to come primarily from state- controlled Konsolidacni Banka and if necessary from the CNB itself. A newly created unit of Konsolidacni, Ceska Financni s.r.o., will administer the programme.
Any losses from the programme are to be covered by the National Property Fund (NPF), the state privatisation agency.
-- Prague Newsroom, 42-2-2423-0003
",1
"Boris Becker withdrew from the Czech Indoor Open on Thursday because of a recurring wrist injury, while top seed Goran Ivanisevic crashed out to Czech Petr Korda 7-6 6-2.
Becker, who tore a ligament in his right wrist at the Wimbledon championships this year, was in pain after training and dropped out of his scheduled second round match against Czech Martin Damm.
""Boris said his wrist was too sore and that he would not be able to play this evening,"" ATP Tour Supervisor Gayle Bradshaw said.
On Wednesday Becker had held his wrist several times during his 6-3 6-4 victory over Denmark's Frederik Fetterlein.
The world number six tried to return to the circuit last month but the injury forced him to retire from the first round in Bucharest, lose in the second round in Basle and withdraw from Lyon two weeks ago.
Becker's absence has set back his bid for a record 12th appearance at the season-ending ATP Tour championship. He currently trails South African Wayne Ferreira for the eighth and final spot.
Ivanisevic, who has already qualified for the tour finale, lives and dies by the serve. 
But he was outgunned by Korda who served 10 aces and only one double fault, while Ivanisevic managed only nine aces along with five double faults.
""He surprised me the way he played, he served well and returned very well. I double-faulted at 5-5 in the tie break which hurt,"" said Ivanisevic.
""I didn't return well, I didn't take any chances on his second serve. I didn't know whether to stay back or come in and when you're not sure what to do then it's no good.""
Second seed Ferreira scraped through to the quarter-finals with a 7-6 5-7 7-5 victory over Dutch qualifier Joost Winnink.
Ferreira, ranked seventh in the world, was stretched to the limit by Winnink. Their absorbing baseline battle ended in the 12th game of the deciding set when Winnink's backhand let him down on three successive occasions.
",1
"The Czech September trade deficit should hold steady at around 14 billion crowns after a 14.7 billion crown monthly deficit in August, a Reuters poll of Czech economists showed on Wednesday.
Czech trade figures for the first nine months are scheduled to be released by the Czech Statistical Bureau (CSU) at 0900 local time (0700 GMT) on Thursday.
Most economists surveyed said they expect steady growth in the deficit and few surprises.
""It's still too early to talk about a period of stabilisation in the deficit, I think that will come in 1997 when imports level off and exports strengthen,"" Boris Gomez, an analyst at ING Barings told Reuters.
Whatever the deficit in September, the nine-month trade gap is sure to be a record, after the January-August figure reached 100.9 billion crowns, more than all of the 1995's total shortfall of 95.7 billion crowns.
The January-September 1995 trade deficit was 62.3 billion crowns.
Most analysts agreed a 13-15 September gap would be in-line with prevailing trends, and on target for the estimated deficit of 150-160 billion crowns.
The foreign exchange and money markets are expected to show little reaction over the figures, as long as they do not vary greatly from the estimates.
Analysts say the trade balance has been hurt by a downturn in the economies of western Europe earlier in the year, and a the effects of a recovery of demand in western Europe have yet to make an impact.
CSU figures show import growth was exceeding export growth by about 15 percent versus just over two percent over the last three months.
The government and central bank, however, has 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.
Economists said the deficit could be financed this year, but might pose problems in the second half of 1997.
-- Prague Newsroom, 42-2-2423-0003
",1
"Second seed Wayne Ferreira and fifth seed Todd Martin both went down to straight set defeats in the $475,000 Czech Indoor Open quarterfinals on Friday.
In the day's opening match, Ferreira lost 6-4 6-3 to Britain's Tim Henman, seeded seventh in the tournament, while Martin was edged out by Germany's David Prinosil 7-6 7-6.
Ferreira, ranked seventh in the world, never looked comfortable against Henman, who was the aggressor for most of the match.
The 22 year-old Brit avenged his loss to Ferreira in the round of 16 in Toronto earlier this year, and said he took notes from that match onto the court on Friday.
Henman managed to break Ferreira late in both sets, while the South African failed to gain a single break point in the macth.
""In Toronto Ferreira was dictating the points, serving very well and hitting forehands very well so today I tried to be very aggressive and when I had an opportunity, move forward,"" said Henman, ranked 26th in the world.
For Martin, the loss was especially painful since he could have gained valuable ground on Ferreira in the race for the final spot at the ATP Tour Championships in Hannover at the end of the season.
The American currently sits 199 points behind the South African, and a semifinal berth would have eaten 37 points out of the lead, while a place in the finals would have cut Ferreira's advantage by almost half.
Prinosil, ranked 58th in the world, took advantage of a Martin double fault at 5-5 in the first set tiebreak, and then jumped out to a 4-0 lead in the second set tiebreak, a hole the American could not pull himself out of.
""I realise I didn't help my cause by at all, but we've got two of the biggest tournaments coming up and I think whoever does really well in those events should probably play themselves into a position at Hannover,"" Martin said.
Martin was helped this week by Boris Becker's recurring wrist injury which forced him out of the Ostrava tournament after the first round.
All three players will compete next week at Stutgart, where the winner will receive 370 tour points, more than double the 170 points to be awarded to the winner at Ostrava.
",1
"Third seed Boris Becker on Thursday withdrew from the $475,000 Czech Indoor Open due to a recurring injury to his right wrist.
Becker, who tore a ligament in the wrist during a third round match at this year's Wimbledon, trained on Thursday morning, but afterward complained of pain in his wrist.
He later told ATP officials that he would not play his second round match against Czech Martin Damm later on Thursday.
""Boris said his wrist was too sore and that he would not be able to play this evening,"" ATP Tour Supervisor Gayle Bradshaw told Reuters. He did not elaborate.
On Wednesday evening, Becker cruised to an easy 6-3 6-4 victory over Denmark's Frederik Fetterlein.
During the match he held his wrist several times, and appeared to be favouring it again at practice on Thursday morning. Becker immediately left the training court for his hotel. He was not available for comment
""I have good days and bad days with my hand...it was sore in the match but I managed to fight through it and hopefully it will be alright tomorrow,"" Becker said after the match on Wednesday.
The world number six tried to return to the circuit last month, but recurring problems with the wrist forced him to retire from the first round in Bucharest, lose in the second round in Basle and withdraw from Lyon two weeks ago.
Becker's withdrawal puts a serious dent in the 28 year old's plans to qualify for a record 12th appearance at the ATP Tour Championships at the end of the year. He currently trails South African Wayne Ferreira, seeded second in Ostrava, by only 46 points for the eighth and final spot in Hannover.
It also comes as a blow to tournament organisers. Though he was only ranked third in the tournament behind top seed Goran Ivanisevic and Ferreira, it was clear most of the tickets sold were by fans hoping to catch a glimpse of the German.
Barely 1,000 fans came out to watch Ivanisevic's first round match against world number 42 Adrian Voinea. In contrast, a tournament record crowd of some 10,000 watched Becker defeat the Fetterlien, ranked 156 in the world.
",1
"Investors, fed up with a lack of transparency and the poor performance of the Czech equity market, are turning to the country's less opaque debt market, buoyed by favourable interest rates and economic data.
The Prague bourse has been caught in a downward spiral -- the official PX50 index has lost almost 18 percent in the past two months -- that analysts say won't end before the New Year.
But while bears maul the equities market, they say bulls are quietly finding greener pastures in Czech debt.
""The bond market is pretty bullish and the outlook is good. Rates have been tending down and people are positive especially in the longer maturities which are looking more attractive,"" said Michael Gartner, a debt analyst at ING Capital Markets.
Estimated daily bond turnover has grown to 900 million to one billion crowns, equal to turnover on the Prague stock exchange, from 500 million a year ago.
""The bond market is becoming even more important for foreign investors because they can get reasonable prices,"" said Alojz Lacko, a bond trader at Patria Finance.
Reasonable prices are something investors, foreign and domestic, have long complained they cannot find on the equities market where insufficient legislation has pushed an estimated 70 percent of trading into murky off-market dealing, and trampled minority shareholder rights.
Many strategic and speculative investors have taken advantage of the opaque system to buy up large stakes in firms without prices or counter-parties being made public until long after the deal has been made.
Bourse and Finance Ministry officials have stepped up their campaign in recent months to assure investors tighter, more stringent rules for trading will be introduced. But analysts say the moves appear to be too little, too late for investors who are turning away from Czech equities.
""Investors are really put off by the (trading) practices here and frankly, it will be hard to lure some back. But we don't have these problems in the debt market, and a lot are turning their attentions there,"" said one local trader.
ING's Gartner said investor motivation for entering the debt market is in many ways different from equity investments. Investor fears of having the carpet pulled out from under them by an off-market takeover deal are non-existent.
""The bond market is completely transparent because prices are transparent. It's a good market: it works, it's liquid, foreign investors, domestic investors, pension funds, investment funds all participate on an even field,"" he said.
A recent spate of positive economic indicators has further buoyed the market.
Inflation, one of the lowest in the region, eased further in October with the year-on-year rate standing at 8.7 percent.
The central bank's war on a burgeoning money supply has also borne fruit recently, with the expansion of the key M2 year-on-year rate falling to 13.2 percent at the end of August, just below its 14-17 percent target.
Although investor sentiment has traditionally been bearish on East European bonds because of currency risks, high taxation and political and economic instability, analysts say these factors are less significant in the Czech Republic.
While rates may be higher in neghbouring Poland and Hungary, the markets are very illiquid, especially in local currency corporate issues.
But with the strength and stability of the crown the Czech market is attractive because an investor can add a play on the local currency, and have little fear of currency risk since it is tied closely to the mark.
Traders say the government has also helped by easing currency exchange laws to help foreign investors repatriate their holdings. Foreigners may repatriate interest income on bonds as well as income from selling or redeeming them.
-- Prague newsroom (42 2) 24 23 0003
",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 Bratislava, Bucharest, and Zagreb all lost ground on the week, while Prague and Warsaw held steady. Budapest and Ljubljana bucked the trend, rising slightly, although it appeared neither would see a sustained upturn in the near future.
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 malaise, as the PX50 index inched up 0.3 points on the week to close at 510.4.
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 said it could extend its three-and-a-half-week horizontal trend next week 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.
But other analysts saw the generally positive economic climate as an impulse strong enough to help the bourse climb next week above 14,000 points.
Analysts said the central bank deputy head's Tuesday comment on 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 Friday at 3,700.99, up 2.12 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 10.33 points on the week to close at 163.98 on Friday.
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.
Still, the SBI index rallied on Friday to close at 1,160.1, up 0.7 percent on the week.
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 29	NET     PCT
 CESI	  1,395.46     -6.36  -0.45   1,544.70     959.24
 BUDAPEST    3,700.99    +76.89  +2.12   3,728.58   1,557.91
 PRAGUE	  510.4	+0.3   +0.01     582.0	425.9
 WARSAW     13,789.9    +119.4   +0.9   15,078.7    7,725.2
 BRATISLAVA    163.98    -10.33  -5.93     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   1,160.1	+7.91  +0.7    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
"A strong showing in runoff Senate elections at the weekend may breathe new life into the Czech governing coalition, but it will do little to resuscitate the country's dormant capital market, analysts said on Sunday.
The minority coalition of Prime Minister Vaclav Klaus took 52 of 81 seats in the newly-created upper house of parliament, following the second round of voting, well ahead of the centre-left opposition Social Democrats which took 25 seats.
The Senate is a mostly advisory body with limited legislative powers, but the election was the first test at the polls for Klaus since his coalition lost its lower house majority in general elections in June.
But analysts said that while the news could have been worse for investors, the strong centre-right showing does nothing to solve the maladies which continue to plague the market.
""I think the market's reaction will be fairly positive, but in a few weeks time it will probably have settled down into acknowledging that this has not changed the situation of the past four or five months at all,"" Charles Robinson of the research house HILFE told Reuters.
""It has just not made it worse,"" he added.
The coalition's strong showing in the first round of voting last week helped spur domestic investor interest, pushing the market up in its wake.
Analysts said, however, that with this fillip already built into prices, stocks will probably not rise too much further in the near future.
The Czech crown also gained some ground against its dollar/mark basket on the back of the first round results, but it too should not rise significantly on the final outcome of the vote, they added.
""It seems that the final results of the elections reflect the current structure of the political situation here so I don't expect any significant changes or amy development as a result of it,"" said Miroslav Nosal of Patria Finance.
Analysts said that until legislation is tightened to bring about more market transparency and stronger minority shareholder protection, key foreign investor interest will remain low.
""I think there has been a result built into the market from the good Senate results last week, and everyone expected that the coalition would win this second round,"" said one analyst.
""There are still other difficulties that will keep the market relatively depressed such as a lack of regulation that will keep foreign investors away. This is a more important issue over the medium-term than the Senate elections.""
",1
"Czech equity and forex markets pushed higher on Monday, buoyed by a strong showing by Prime Minister Vaclav Klaus's rightwing Civic Democratic Party (ODS) in the first round of Senate elections at the weekend.
But analysts warned profit taking and uncertainty leading up to a second round of voting this weekend will temper gains.
The Prague Stock Exchange, mired in a two-month long slump that has felled the bourse by some 16 percent, jumped 10.1 points, or 2.08 percent, at its daily price fixing to 496.8.
Brokers expressed muted optimism at the prospect that the rise was long-term, saying that domestic investors looking for a quick rise to profit from, and not key foreign investors were at the heart of the gain.
""There is very little foreign institutional buying as a result of the elections. It's mainly domestic buying. This was just the first round and the (vote) isn't won yet,"" said Jan Sykora of the brokerage Wood and Co.
Lubomir Vystavel of ING Barings added: ""We had expected some speculation on the outcome of the elections.
Vystavel said the upsurge could continue into next week and beyond if ODS sustains its strong position in the second and final round next weekend, adding that the results may give cause for the long awaited rebound in Czech equities. ""It is quite likely that this is the start of a trend,"" he said.
The crown also strengthened on the back of the election result, gaining around 0.3 percentage points to three percent above its dollar/mark basket in early trading, before settling at around +2.9 percent.
""Some of those who pushed the crown up in early dealing took profits, so its dropped slightly on the index,"" said Petr Korous, a trader at Ceskoslovenska Obchodni Banka.
""There will be some bias toward a stronger crown in the coming days but I don't think there will be any major move -- the majority of the move was seen already today,"" he added.
The central bank fixed the crown at 2.96 percent above the basket midpoint on Monday, after fixing it at +2.45 percent on Friday.
In what was billed as a key test of the minority coalition government, Klaus's ODS party took a commanding 36.47 percent of the first round vote, with the opposition Social Democrats (CSSD) trailing on 20.27 percent.
The result was a major improvement for the ODS, which won only 29.6 percent in elections to the lower house in June when a strong Social Democrat performance of 26.4 percent stripped Klaus's three-party coalition of its majority.
The rest of the vote was thinly split among coalition parties and the Communists.
The strong ODS showing was tempered though by poor turnout as only 35 percent of the electorate voted.
Of the 81 Senate seats, Civic Democrats won three outright in the first round and 76 of their candidates go into next weekend's runoff.
The CSSD meanwhile, will send only 48 candidates into the second round of voting slated for Friday afternoon and Saturday morning.
",1
"Britain's Tim Henman emerged on Friday as the only seed in the $475,000 Czech Indoor Open semifinals.
Seventh-ranked Henman overcame second seed Wayne Ferreira 6-4 6-3.
But fifth seed Todd Martin was edged out by Germany's David Prinosil 7-6 7-6 and sixth seed Michael Stich lost to Czech Martin Damm 5-7 6-4 6-4.
Czech Petr Korda completed the final four with his 6-1 6-0 demolition of Davis Cup team mate Jiri Novak and now faces another Davis Cup player in Damm. Henman plays Prinosil in Saturday's other semifinal.
Reigning Ostrava champion Ferreira, ranked seventh in the world, never looked comfortable against Henman, the more aggressive of the two for most of the match.
He failed to gain a single break point all match while the Briton broke serve late in both sets.
Henman's win avenged his loss to the South African in Toronto earlier this year, and he said he had taken notes from that match on to court on Friday.
""In Toronto, Ferreira was dictating the points -- serving very well and hitting forehands very well -- so today I tried to be very aggressive and, when I had an opportunity, move forward,"" said Henman, ranked 26 in the world.
Local favourite Damm, a finalist at the Beijing Open last week, spoiled Stich's 28th birthday. After losing the first set the Czech scored crucial breaks in the ninth game of the final two sets.
For Martin, defeat was especially painful as he could have gained valuable ground on Ferreira in the race for the final spot at the ATP Tour championship in Hanover at the end of the season.
The American currently sits 199 points behind the South African. A semifinal berth would have eaten 37 points out of that lead while a place in the finals would have almost halved Ferreira's advantage.
Prinosil, ranked 58th in the world, profited from a Martin double fault at 5-5 in the first set tiebreak and took a 4-0 lead in the second set tiebreak on the way to sealing victory.
Martin said: ""I realise I didn't help my cause at all but we've got two of the biggest tournaments coming up and I think whoever does really well in those events should probably play themselves into a position at Hanover.""
Martin, Stich and Ferreira both appear next week in Stuttgart, where the winner gains 370 Tour points, 200 more than the winner here.
The German tournament's organisers said on Friday they expect Boris Becker will be fit to play, despite a wrist injury which forced him to retire here.
In a move to accommodate Becker, his first round match has been put back to Wednesday.
",1
"The Czech monthly trade deficit eased in September to 10.5 billion crowns from 14.5 billion in August, buoying market sentiment which had not expected the lowest single month total since January.
The Czech Statistical Bureau (CSU) on Thursday said the January-September trade shortfall hit an all-time high of 110.7 billion crowns, far surpassing 1995's full year deficit of 95.7 billion crowns.
Despite the fact that the overall deficit continues to break records, analysts said they were surprised by September's development. A Reuters survey of local analysts conducted on Wednesday had forecast a 13-15 billion crown monthly trade gap.
""I'm happily surprised. I think it's a relatively optimistic figure though it is not so good to make us revise our full year forecast,"" said Martin Kupka, an economist at Patria Finance, which has forecast a 150-160 billion crown deficit at year-end.
The CSU in a statement said that imports rose by 15.2 percent year-on-year, the same as in the previous month, while exports rose by 5.9 percent, after a 6.4 percent increase in August.
It added that strong growth in machinery and transport equipment imports continued, accounting for 38.3 percent of total imports.
Analysts said they were encouraged by the rise in this sector, saying that imports of this nature are needed to restructure industry, allowing it to produce more competitive goods for exporting.
The crown also reacted positively, dipping slightly following the release of the figures, before quickly regaining its losses as the market digested the statistics.
The crown was trading at 26.939 to the dollar at 1040 local time (0840 GMT) after opening at 26.945.
The rate implies a deviation from the midpoint of the currency basket of +2.87 percent, after the central bank's fixing on Wednesday at +2.80 percent.
""The market is pleased with the figures for sure, they seem to bear out estimates that slowly, the structure and size of the deficit is getting better,"" said one local forex dealer.
But, he added: ""I don't think the crown itself will benefit too much from the numbers, but it certainly should not weaken.""
-- Prague Newsroom, 42-2-2423-0003
",1
"It may be only the second qualifier on the long road leading to the 1998 World Cup but the Czech Republic and Spain are approaching Wednesday night's European group six match as though it were a battle for the final.
For the Czechs it will be the first big test since they reached the Euro 96 final, while Spain are expected to give Real Madrid's teenage striker Raul Gonzalez his first cap in the hope that he will give them badly-needed scoring power.
Both sides opened their campaigns last month with high-scoring victories over the two weakest teams in the group, Spain winning 6-2 in the Faroe Islands and the Czechs thrashing Malta 6-0.
But Yugoslavia have already collected three wins and Slovakia two against the same two hapless victims and neither the Czechs nor Spain can afford to give ground in Prague.
""(The Spanish) are explosive and technically very sound. This game's made all the more important because a loss will make it a difficult trip for either side,"" Czech midfielder Karel Poborsky of English premier league Manchester United said.
Victory alone will satisfy Spain's veteran goalkeeper Andoni Zubizarreta. ""I would not be happy with a draw, we want three points,"" he said.
Czech coach Dusan Uhrin has named 16 of the 19-strong squad which caused a surprise by reaching the final of June's European championship in which they lost to Germany.
They include in-form midfielder Patrik Berger, who scored six goals in 10 days for English premier league Liverpool last month.
""Spain is obviously a strong team but we showed in London that we can play anybody,"" Berger said.
While the Czechs are looking to build on recent success, Spain are rebuilding and plugging holes where necessary.
Raul, 19, who scored twice against the Czechs in the quarter-finals of last season's European under-21 competition, is Real Madrid's top scorer even after being moved into a supporting role by new coach Fabio Capello.
""There are some players absent...It's the right moment to pick Raul,"" Spain manager Javier Clemente said.
Clemente had been strongly criticised for sticking by veteran forward Julio Salinas instead of choosing Raul.
Neither Salinas nor injured striker Kiko Narvaez are on the trip but Kiko's Atletico Madrid team mate Jose Luis Caminero is fit and is expected to be given the role of playmaker in the starting line-up.
With Spain likely to face problems in the air, tall defender Roberto Rios and striker Ismael Urzaiz have been called into the squad for the first time.
Of the seven players chosen from the multi-billion peseta Barcelona line-up, midfielder Guillermo Amor, defender Abelardo Fernandez and striker Juan Pizzi have not played regularly this season under new coach Bobby Robson, a former England manager.
By contrast utility man Luis Enrique Martinez has blossomed since moving to Barcelona from Real Madrid.  
Teams (from):
Czech Republic - Petr Kouba, Pavel Srnicek; Miroslav Kadlec, Lubos Kubik, Tomas Repka, Michal Hornak, Jan Suchoparek; Radoslav Latal, Jiri Nemec, Karel Poborsky, Pavel Nedved, Patrik Berger, Radek Bejbl, Pavel Novotny, Martin Frydek, Richard Dostalek; Pavel Kuka, Vladimir Smicer, Radovan Hromadko.
Spain - Andoni Zubizarreta, Santiago Canizares; Roberto Rios, Alberto Belsue, Rafael Alkorta, Fernando Hierro, Miguel Angel Nadal, Agustin Aranzabal, Sergi Barjuan, Abelardo Fernandez; Guillermo Amor, Josep Guardiola, Luis Enrique Martinez, Julen Guerrero, Jose Luis Caminero, Juan Pizzi, Raul Gonzalez, Alfonso Perez, Ismael Urzaiz.
",1
"The Prague Stock Exchange on Tuesday, buoyed by financial sector share gains, continued to rebound from its recent slump, closing higher for the third consecutive session.
Komercni Banka, IPB, Ceska Sporitelna and Zivnostenska Banka all gained ground as the PX50 index edged up 2.5 points, or 0.47 percent, to 537.1.
The Reuters RPIX index, measuring the seven continuously- traded equity issues on the bourse, climbed five points to 1,095.
Overall, 188 shares rose on the day, while 121 lost and 74 held steady. Total volume was 701,356 shares on turnover of 721.14 million crowns.
For IPB, which rose 15 crowns to 331, it was the second consecutive five percent gain, the maximum allowed by the bourse in a session, after the government said it would be the first of the big four banks to undergo privatisation.
On Friday, Finance Minister Ivan Kocarnik gave investors the signal they had been looking for when he said that a strong foreign strategic partner would be the most likely beneficiary of any sell off.
Since the announcement, Nomura and ING Bank have been rumoured as the frontrunners in any bid to participate in the selloff. The government holds about a 30 percent stake in IPB.
""If you were to bring in a foreign partner such as the caliber of the two banks mentioned, that addresses questions that have been hovering around IPB on its perceived lack of corporate structure and transparency,"" said Jay King of Wood and Company.
The bank has been widely-criticsed for being the least transparent of the four major Czech banks in its dealings, especially a recent spending spree that has seen it quietly buy large stakes in several firms.
Several utilities also fared well at the fixing, with Stredoceska Energetika, Prazska Teplarenska, Severomoravksa Energetika, Jihomoravska Energetika and Elektrarny Opatovice all rising.
-- Prague Newsroom, 42-2-2423-0003
",1
"Senate runoff elections on Friday and Saturday should have little impact on Czech capital markets, as investors focus on macroeconomic fundamentals rather than political influences.
Analysts said last weekend's first round of voting gave a mild boost to the Czech crown and the Prague Stock Exchange, and unless results from the second round of voting on Friday and Saturday vary greatly, little further movement should be seen.
""Provided that nothing drastic happens, it's pretty much a non-starter from a foreign investor point of view. I think that for the markets, it will be pretty much a non-event,"" Jay King, of Wood and Company, said on Thursday.
In last weekend's voting, Prime Minister Vaclav Klaus's right-wing Civic Democratic Party (ODS) posted a strong result, capturing over 36.5 percent of the national vote, an increase of some six percent from June lower house elections where his coalition lost its majority.
The opposition Social Democrats (CSSD) were second with 20.3 percent. The rest of the vote was thinly split among coalition parties and the Communists.
Only 35 percent of the electorate voted in the elections.
Of the 81 Senate seats, the ODS won three outright in the first round and 76 of their candidates were to go into the runoff, compared with 48 for the CSSD. In 47 constituencies, the runoff is a straight fight between the two main parties.
Analysts said that with the two main parties assured of dominating the Senate, a body which will have limited powers anyway, little change appears imminent for the country's economic, or political course.
""Our expectation is ODS gaining somewhere around half of the total, and including the rest of the coalition it might be well over 50 seats. I don't think there should be any surprises,"" said Radek Maly, an economist at Citibank Prague.
Following last weekend's vote, the PSE, mired in a two month long slump began to edge higher, gaining some four percent over the week.
But dealers said the gains were based more on weak local buying than a change in sentiment from key foreign investors.
The crown too, ratcheted up slightly after the first round of voting, but has since steadied at 2.9 percent stronger than its dollar/mark basket midpoint.
Some analysts said foreign investors might be tempted, as they were the previous week, to play on a strong Klaus victory early on Monday, but any gain based on the political situation would be short lived.
""There may be some bias toward a stronger Czech crown,"" said Petr Korous, a dealer at Ceskoslovenska Obchodni Banka. ""There's no other factor, more or less the basic impulse for that (a stronger crown) was really because of the elections, and then the subsequent recovery of the capital markets.""
Citibank's Maly added: ""I wouldn't foresee any major changes in the fixed income market. The fixed income market is rather less sensitive to these political events than is the FX (foreign exchange) market.""
",1
"Czechs cold-shouldered their newly-created Senate on Saturday, turning out in record low numbers for elections which were supposed to be a key test for the minority government of Prime Minister Vaclav Klaus.
Early results showed candidates of Klaus's Civic Democratic Party (ODS) ahead in the few constituencies declared so far but without the majority of the vote needed to win outright, meaning they will face the runner-up in a second round.
Foreign Minister Josef Zieleniec, an ODS vice chairman, welcomed the results but warned supporters against overconfidence. ""I'm very happy that several of our candidates have moved into the next round,"" he told reporters.
But he added: ""I warn you, add up all the votes for all of the candidates and think how they will go in the second round. The situation is not as rosy as it may appear from the numbers of ODS candidates that are moving into the next round.""
With three of the 81 constitunecies officially declared, the striking statistic was the turnout figure which ranged from 26.36 percent in the northern mining town of Most to 29.78 in one constituency in the industrial city of Ostrava.
One official of the Central Electoral Commission, Ales Kaspar, forecast that turnout nationwide would be by far the lowest in the four parliamentary elections held since the 1989 fall of communism. ""According to optimistic expectations, the turnout could be between 30 and 40 percent,"" he told Reuters.
This suggested the real winners might not be ODS or the opposition Social Democrats, but the far-right Republicans who boycotted the Senate polls and told Czechs to follow suit.
Opposition Social Democrat leader Milos Zeman bewailed Czechs' apathy towards the upper house, but predicted turnout would improve in the second round on November 22-23.
""I would like to remind all voters who criticise our country that by not voting they do not have the right to criticise the government. They have only the right to criticise themselves,"" said Zeman, who is speaker of the lower house.
But he added: ""I firmly believe that in the second round, participation will be markedly higher because then it is a choice between the two strongest candidates,"" he said.
Share dealers welcomed signs that ODS, which has led free-market reform in recent years, would do well.
""The early results appear pleasantly good for ODS. To me, if these continue, it could be a good result for the market,"" said Jan Sykora of Prgaue brokerage Wood and Co.
Pundits have billed the Senate elections as an indicator of whether the Czech Republic can break out of a political impasse following inconclusive lower house polls which stripped Klaus's conservative coalition of its majority last June.
But the apparent low turnout, which compares with 76.4 percent in June, seems a vindication of the Republicans and their leader Miroslav Sladek.
Sladek regards the Senate as a waste of time and money. ""They had nowhere to dump the political zombies so they established the Senate,"" he told a recent anti-election rally, adding that it ""would be lazy, useless and expensive"".
One complaint among voters was that many of the Senate candidates were unknown as government and opposition leaders all sit in the lower Chamber of Deputies. Few Czechs have much idea of what the Senate will do.
Conventional wisdom has been that if ODS did well in the Senate Klaus might provoke early lower house polls to regain the coalition's majority. If ODS lost to the Social Democrats, however, he could be forced to resign after seven years leading economic reform as finance minister and since 1992 as premier.
But Jiri Pehe, research director at the Open Media Research Institute (OMRI), said these theories may not be valid.
ODS is better at mobilising its supporters than the Social Democrats when interest is low. A big ODS win on a low turnout might therefore not be representative for lower house polls.
""If there is a low turnout, even if Klaus wins, I think that it would be very difficult for the ODS to know the real mood of the country,"" he said.
-- Prague newsroom (42 2) 24 23 0003
",1
"The Czech Republic and Spain played to a scoreless draw in their World Cup group six qualifier on Wednesday, in a lacklustre match that failed to live up to its marquee billing.
The Czechs were facing their first big test since they reached the Euro 96 final, while Real Madrid's teenage striker Raul Gonzalez was looking to spark a depleted Spanish attack in his first cap.
Both sides opened their World Cup campaigns last month with high-scoring victories over the two weakest teams in the group, Spain winning 6-2 in the Faroe Islands and the Czechs thrashing Malta 6-0.
But Yugoslavia have already collected three wins and Slovakia two against the same two hapless victims and neither team could afford to give ground in Prague.
Like two heavyweights feeling each other out in the early rounds, both teams started tentatively, waiting to pounce on the other's mistakes.
The Spaniard's were the first to flinch when Kaiserslautern striker Pavel Kuka's cross found an unmarked Karel Poborsky just outside the crease. But the Manchester United midfielder failed to control the ball, wasting what would turn out be one of the game's few good scoring chances.
Next it was the Czechs turn to falter. Newcastle United goalkeeper Pavel Srnicek, making his first cap in over a year, tried to clear the ball, but hit attacker Alfonso Perez and watched helplessly as it rolled just wide of the net.
The Czechs picked up their play in the second half, putting Spain on its heels for the rest of the game.
But veteran Valencia goalkeeper Andoni Zubizarreta held his ground on Pavel Kuka's dangerous turnaround blast from just outside the penalty spot, and then robbed Jan Suchoparek in the dying minutes of the game, stopping the midfielder's drive from three metres away to keep the game scoreless.
""I don't think we lost points tonight because they are such an excellent team. They played strongly in the backfield and its too bad we missed out on the two great chances we had,"" said Liverpool sensation Patrik Berger.
Added Spanish coach :""Raul played very well and I'm pleased with our team. Both teams could have one this match, and I'm content with the result though we would have liked to have taken three points.""
Teams:
Czech Republic - 1-Pavel Srnicek, 2-Radoslav Latal, 3-Jan Suchoparek, 4-Pavel Nedved (15-Martin Frydek, 86th), 5-Miroslav Kadlec, 6-Michal Hornak, 7-Jiri Nemec, 8-Karel Poborsky (17-Vladimir Smicer, 58th), 9-Pavel Kuka, 10-Patrik Berger, 11-Radek Bejbl
Spain - 1-Andoni Zubizarreta, 2-Abelardo Fernandez, 3-Sergi Barjuan, 4-Rafael Alkorta, 5-Miguel Angel Nadal, 6-Fernando Hierro, 7-Raul Gonzalez, 8-Luis Enrique Martinez, 9-Guillermo Amor (18-Ismael Urzaiz, 76th), 10-Julen Guerrero (14-Josep Guardiola, 52nd), 11-Alfonso Perez (15-Roberto Rios, 73rd)
",1
"Czech shares rallied on Monday following the coalition government's win in weekend Senate elections, but analysts said the rise was due more to a technical correction than to a change in investor sentiment.
The Prague Stock Exchange's PX50 index rose 0.86 percent at the bourse's daily price fixing, spurred by gains to seven of the eight most-capitalised shares.
Brokers, however, were muted in their optimism that the rally would last more than a few days, saying the centre-right government's strong showing was expected and already built into the market last week.
""Basically, this is a technically-led rally, I don't think it has a basis to do with Senate elections,"" said Jay King of the brokerage Wood and Company.
Added another local trader: ""You're not seeing real volumes here you're just seeing prices being pushed up in anticipation of year-end, and without a doubt it is domestically driven. Foreigner investors are still on the sidelines.""
The minority coalition of Prime Minister Vaclav Klaus took 52 of 81 seats in the newly-created upper house of parliament, following the second round of voting, well ahead of the centre-left opposition Social Democrats which took 25 seats.
The Senate is a mostly advisory body with limited legislative powers, but the election was the first test at the polls for Klaus since his coalition lost its lower house majority in general elections in June.
But a thin turnout -- just over 30 percent of the electorate cast their ballots -- made it hard for the three-party coalition government, which lost its lower house majority in June, to claim it had recaptured voters' hearts.
The Prague bourse has been hard hit in recent months -- falling some 17 percent since September -- with most investors shying away from the a market characterised as opaque at best, and little regard for minority shareholder rights.
And analysts said that the election would probably not bring about a new push for changes to securities laws within the coalition, a condition that is necessary to lure back participants.
""I'm a little sceptical about the possibility that the Senate will help bring in changes,"" 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.""
Analysts said that the market should take some heart however, in statements made by Klaus following the vote when he said he saw no reason to call early elections for the lower house, which should keep the market stable in the near future.
",1
"Investors smiled on the bourses of central and eastern Europe as brightly as the summer sun this week, though there were some indications these may by little more than fair-weather friends to the markets.
Exchanges in Prague, Warsaw, Budapest, Bratislava and Bucharest all gained ground, while Zagreb and Sofia traded mixed. Ljubljana was the one gray cloud, posting slight losses.
The Central European Share Index (CESI) which reflects the price movements of 50 selected Czech, Polish and Hungarian shares, firmed 66.11 points.
PRAGUE
Czech share prices were mostly steady on the Prague Stock Exchange throughout the week, with little movement expected soon as the holiday season slowly winds up.
The PX50 index edged up 3.6 points from Monday to close at 568.6 on Thursday.
Leading trading were SPT Telecom and Komercni Banka, though SPT's movements were largely characterised as ""accounting procedures"" that saw the issue gain as much as 102 crowns one session, only to lose the same amount the following day.
""The final price (of SPT) was not the real market price, but because average prices are not used for the close, it gives an artificial final number,"" said Jan Sykora of Wood and Company. SPT closed on Thursday at 3,340 crowns.
Dealers have long-complained that some market participants consistently manipulate prices on the bourse, a fact that to cloud foreign investor perceptions of the Czech market.
WARSAW
Polish shares on Thursday rose for the sixth consecutive session but analysts said stronger selling after price-fixing showed the market was losing steam and made it unclear if the growth trend would continue.
""It seems we now have a tug-of-war between buyers and sellers,"" said Krzysztof Rogalski, an analyst at Bank Staropolski SA brokerage.
But some analysts said a real growth trend had already begun, sparked by firms releasing better July earnings at the start of the week. The WIG index closed at 13,597.4 points, up 892.7 points or 7.0 percent from last Friday's close.
Analysts said recent systematic gains in higher turnovers by several large-cap stocks was a good sign that could help return the market toward this year's July 5, 14,282.2-point high next week.
BUDAPEST
Prices rose at both of this week's sessions as market participants returned after holidays on Monday and Tuesday.
The rest of the market strengthened as investors were cheered because the U.S. Federal Reserve had left interest rates steady.
""It's certainly due to the fact the U.S. investors put money into the east European emerging markets,"" Peter Haas of Postabank Securities said. ""Optimism seems to have spread over investors after the danger of a rate hike was eliminated.""
The BUX index closed on Thursday at 3,370.23, up 198.79 points over last Friday.
BRATISLAVA
The Bratislava Stock Exchange (BSE) saw a week of listless holiday trading, with the ongoing struggle for strategic control over the country's largest investment fund, VUB Kupon, dominating floor trading.
The 12-share SAX index posted several year-highs over the week, peaking at 226.34 points on Tuesday, and closing at 223.75 points on Thursday, slightly firmer from Monday's open.
""This week was a transparent example, showing how the index is often far off from real trends on the market,"" Dusan Sykora of ING Barings said. ""The SAX has been reaching top levels, while only a few trades were concluded on the bourse on low volumes,"" he added.
SOFIA
No corporate issues traded for a third week in a row on the Bulgarian stock market as investors turnede their attention to treasuries and foreign currency.
Only the Sofia Stock Exchange (SSE) operated this week after the Bulgarian Stock Exchange (BSE) went into a summer recess on August 5. The BSE will resume trading on September 2.
The 13-share Reuter All Bulgaria Stock Exchange Index (RABSI) closed at 41.31 points, unchanged from last Thursday.
BUCHAREST
Romanian share prices posted gains this week on the back of healthy half-year earnings reports by several firms but trading, dominated by retail investors, was modest in volume.
Overall turnover fell by almost 30 million lei to 68.5 million on Thursday.
The unofficial VAB Index -- a value-weighted index of all stocks computed by Vanguard SA securities -- closed at 371 points, 8.20 points or 3.5 percent up on the week. Its base was 1,000 points when it was created last November.
ZAGREB
Croatian stocks were mixed though the summer lull seemed to be nearing an end as big buyers became more active, boosting prices and prompting broker predictions of a steady rise in the weeks to come.
Most active was Zagrebacka Banka which gained 130 kuna since last Tuesday, but other companies including foodprocessor Podravka also registered an increase of prices.
LJUBLJANA
In Ljubljana, share prices, eased 0.4 percent as the SBI index fell 4.31 points to 980.60.
Financial consultancy Finmedia was the leading decliner, falling 4.9 percent, while the biggest gainer were prefered shares of bank Dolenjska banka, firming 10.4 percent.
		    CLOSE     WEEK'S  CHANGE    1996 HIGH  1996 LOW
		    AUG 22	NET     PCT
 CESI	   1,495.58    +66.11   +4.62    1,483.76     959.24
 PRAGUE	   568.6	+3.6    +0.64	586.6	425.9
 WARSAW	13,597.4    +892.7    +7.0    14,282.2    7,725.2
 BUDAPEST     3,370.23   +198.79   +6.27    3,380.53   1,557.91
 BRATISLAVA     223.75     +0.51   +0.23	226.34     150.4
 SOFIA	     41.31	0.00   +0.00	 55.48	41.05
 LJUBLJANA	910.74     -4.31   -0.47    1,589.18     910.74
All-time high: CESI 1,483.76 (July 5/1996); SBI 1,598.02 (June 28/1994); WIG 20,760.3 (March 8/1994); BUX 3,380.53 (July 8/1996); PX50 1,002.4 (April 7/1994); RABSI 112.2 (April 27/1994); SAX 402.3 (Feb/1994).
",1
"The three-year-old partnership between British Airways Plc. and USAir Group Inc., already severely damaged by a potential competing alliance, moved closer toward collapse on Thursday when USAir said it was cancelling a key marketing agreement between the two carriers.
Arlington, Va.-based USAir said it will end the carriers' code-sharing agreement and sever the link between their frequent flier programmes as of March 29, 1997.
Code-sharing is a marketing agreement in which airlines share passengers and extend their reach to destinations they do not typically serve. Over the past several years, dozens of airlines have entered into such pacts.
In announcing the move, USAir cited the British carrier's proposed alliance with American Airlines, a unit of AMR Corp., that would link cargo and passenger services of the two powerhouse carriers.
USAir, which is 24.6 percent owned by British Airways, has fiercely opposed the British Airways-American partnership and sued both carriers, saying that they would dominate the trans-Atlantic market. A hearing on the suit is scheduled for Friday in the U.S. District Court for the Southern District of New York.
""Clearly, it's difficult to simultaneously sue a partner and cooperate with a partner,"" said Samuel Buttrick of PaineWebber.
British Airways had no immediate comment on the action taken by USAir.
Although the relationship had certainly turned rocky, most analysts had expected USAir not to sever its relationship with the British carrier until the proposed British Airways-American pact was finalised.
The proposed alliance has raised antitrust concerns, awaits regulatory approvals and is tied to other aviation issues between the United States and Britain.
British Airways and American have argued that the deal would lead to greater competition on the routes because it would only go ahead if Britain and the United States agreed to a so-called ""open skies"" pact.
Although surprised by the move, industry analysts said it will have little impact on USAir, which received far less revenue from the alliance than did British Airways.
At the time the partnership began in 1993, USAir was a money-losing airline that desperately needed to reduce costs and expand its global presence.
British Airways invested $400 million under the partnership, but refused to pump any more money in the carrier because of its poor financial performance.
Since then, USAir's financial position has improved amid healthier times for the airline industry, but its costs are still higher than other major U.S. carriers.
""At the time the alliance was made, USAir received the cash which it needed, but today, it doesn't need it,"" said Glenn Engel of Goldman Sachs.
USAir's future plans are now more uncertain with the decision to sever ties with British Airways, especially because chief executive officer Stephen Wolf has stressed that he wants to expand USAir's transatlantic presence.
""I'm a little mystified. They don't have anything to replace it with yet,"" said Donaldson Lufkin & Jenrette analyst James Higgins.
",39
"The U.S. food industry, besieged by years of slow growth, wants to whip up new business from people who don't cook.
Armed with a new study that predicts consumer spending on ready-made foods will accelerate in the next 10 years, food firms are reaching out to a generation that doesn't know the difference between baking powder and baking soda.  
""Consumers aren't looking anymore for a cake mix.  They want the slice of cake,"" said John Gray, executive director of the International Foodservice Distributors Association, which helped fund the study released this week.
Industry executives this week said they are developing fresh strategies to feed 18-to-24 year olds -- a generation that grew up with working mothers and microwave ovens.
""Cooking from scratch is diminishing: many consumers in 2005 will never have cooked a meal from basic ingredients,"" said the study by consulting firm McKinsey & Co Inc titled ""Foodservice 2005: Satisfying America's Changing Appetite.""  
The study confirms trends that food manufacturers and food distributors already are seeing: harried consumers bypass the fresh meat and spice aisles of a supermarket in favor of sections selling barbecued chicken and ready-made salad.
The study projects the food industry will grow 1.6 percent per year to nearly $800 billion a year by 2005.  The foodservice sector is expected to capture nearly all of the anticipated incremental sales, pegged at $100 billion.  
""There is going to be a whole new plethora of different foodservice opportunities,"" said William Eacho, president and chief executive officer of  Atlantic Food Services, a Virginia-based foodservice distribution company.
Tomorrow's supermarkets are expected to have drive-up windows where consumers can buy ready-made meals.
Executives also envision stores that group food by meal categories so that shoppers can head right to the breakfast aisle instead of wandering throughout the store.  
The changes are expected to be especially challenging for food manufacturers, who may see shelf space for their products shrink as stores provide more ready-made products.
Nabisco Holdings Corp already is experimenting with ways to ensure its products are not lost in the shuffle.  The maker of items such as Oreo cookies and Grey Poupon mustard wants to leverage its brand popularity into ready-made meals.
""As a major food manufacturer, we ought to have our fair share of that growth,"" said Henry Lambert, president of Nabisco's food service company.  
That may mean developing a Grey Poupon-based sandwich spread for supermarket sandwiches or working with a dessert manufacturer to sell individual slices of cheesecake that contain Oreo cookies, Lambert said.
And demand for those kinds of products is expected to grow as consumers spend less time preparing meals.  Industry experts estimate people now spend about 20 minutes preparing a meal versus two hours of preparation time about 50 years ago.
""The meal is not the social setting of the evening anymore. It's a nuisance,"" said Robert Stauth, chairman and chief executive officer of food distributor Fleming Cos Inc.
",39
"One day after rival bidders sent its stock on a rollercoaster ride, Conrail Inc was set Tuesday to formally consider a $9 billion takeover offer from Norfolk Southern Corp.
The company's board of directors was widely expected to reject the unsolicited Norfolk Southern offer in favor of a friendly $8.4 billion deal with CSX Corp.
""My guess is, at this point, that they stick with the CSX proposal,"" said Brian Routledge of Prudential Securities .  
Conrail's board was slated to meet Tuesday ahead of a Wednesday deadline to respond to the Norfolk Southern offer.
A Conrail spokesman declined to comment on the timing of its decision, but Wall Street experts expected the company to issue an announcement on Wednesday.
Conrail agreed on Oct. 15 to be bought by CSX in a cash and stock transaction valued at $8.4 billion, or $92.50 per share. Norfolk launched its $100-per-share bid on Oct. 23.
Since then, Norfolk Southern and CSX have vehemently attacked each other's offers and landed in court.  
The CSX-Norfolk Southern relationship between took a new twist Monday when the companies announced they were holding discussions about their bids, but offered conflicting accounts about the talks. Uncertainty about those talks prompted sharp stock declines on Monday.
Industry experts said Conrail is likely to defend the lower CSX bid by citing the strategic benefits of the transaction and the lack of potential legal problems associated with the friendly deal. Legal expoerts have said that Pennsylvania takeover law could impede a Norfolk Southern acquisition of Conrail.  
Experts also speculated that Conrail may try to convince CSX to sweeten its offer in an attempt to appease shareholders who may be upset by the rejection of a higher bid.
Railroad industry experts have said that CSX likely cannot afford to match Norfolk Southern's $100 cash offer, but may be able to restructure the bid to increase the cash portion of the transaction.
""I think it is a strong likelihood that any positive reaction from Conrail's bid toward the Norfok Southern bid will force CSX to sweeten their bid,"" said Carole Neely of Brown Brothers Harriman.
",39
"An independent shareholder advisory firm recommended Thursday that investors of Conrail Inc. reject a key provision in the railroad's proposed acquisition by CSX Corp.
Maryland-based Institutional Shareholder Services, which provides corporate analyses to institutional clients, suggested that shareholders defeat a proposal that would permit CSX to pursue its proposed $8.5 billion stock and cash transaction.
In making the recommendation, senior analyst Peter Gleason noted Norfolk Southern Corp.'s rival $10 billion cash bid that has been rejected by Conrail.
""We believe that all shareholders should be treated equally in any merger transaction, and because of NS's higher offer currently outstanding, we do not believe it would be in shareholders' best interest to opt out of the fair price provision at this time,"" Gleason wrote in a 16-page report.
Conrail investors are being asked to waive a Pennsylvania law that requires an all-cash payment by CSX, which already has bought 19.9 percent of Conrail in a cash tender offer.
In October, CSX and Conrail announced a merger that calls for CSX to buy Conrail in a cash-and-stock deal.
CSX is offering to pay $110 in cash for 40 percent of Conrail's outstanding shares. Based on Thursday's closing stock prices, the remaining 60 percent would be bought for about $83 per share.
Although Norfolk Southern has submitted a higher all-cash bid, Conrail contends the CSX offer is a better fit.
Institutional Shareholder Services disputed that argument, saying that both potential combinations would create an East Coast railroad powerhouse.
""However, CSX's front-end loaded, two-tiered takeover does not treat all Conrail shareholders fairly, and the lock-ups provided in the agreement have denied Conrail shareholders the possibility of accepting a higher payment for their shares,"" Gleason wrote.
Under the agreement between Conrail and CSX, Conrail would be prohibited from entering a pact with another company before July 1997.
""The only thing prohibiting the higher offer from being presented to sharheolders are the barriers erected by Conrail to ensure the company merges with CSX,"" Gleason wrote.
CSX declined to comment on the report. Conrail also did not have any immediate comment.
Conrail has scheduled a special shareholder meeting for Dec. 23 to consider a waiver of the Pennsylvania law.
Institutional Shareholder Services, which held meetings with Conrail and Norfolk Southern, also recommended that shareholders reject a Conrail request to adjourn the meeting if more votes are needed to ensure passage of the waiver.
""In this case, shareholders already have the information they need to make their voting decisions. Once their votes have been cast, there is no justification to spend extra money to continue pressing shareholders for more votes,"" Gleason wrote.
The shareholder advisory firm also said the Conrail-CSX union could run into trouble from the Surface Transportation Board, the federal regulatory agency overseeing railroads.
""Although Conrail and CSX believe STB approval and/or concessions will not create significant problems, we see the competitive issues as a major concern, and do not share Conrail's belief that STB approval of the transaction is assured,"" Gleason wrote.
He also noted that many shareholders expect CSX and Conrail to amend their pact to sweeten the stock portion of their proposed transaction.
""Conrail has indicated that it has had discussions with CSX about raising the back end of the consideration to make the offer more equitable to shareholders, but no decisions have been made to date,"" Gleason wrote.
He also noted that Norfolk Southern would likely raise its rival offer if CSX sweetened its deal.
Separately on Thursday, the Port Authority of New York and New Jersey said it planned to intervene in any Conrail merger and would hire a consultant to analyse the impact of any transaction.
",39
"A financial agreement between Barney's Inc. and Hong Kong-based Dickson Concepts International Ltd. will open the door to potential bidders for the famed New York luxury retailer.
Speculation about interested buyers has been rampant ever since Barney's filed for bankruptcy nearly a year ago.
Under a pact announced Tuesday, Barney's will pay Dickson up to $1 million to complete its financial review of Barney's and Dickson will submit a recapitalization proposal for the retailer.
In return, Barney's, which has been operating under bankruptcy protection since January, will make the financial information available to other prospective investors.
""We have the basis by which another investor can look at the information from that due diligence,"" said Barney's spokeswoman Sandra Sternberg.
Dickson and Saks Holdings Inc. previously have expressed interest in privately held Barney's. Neiman Marcus Group Inc. and Canada's Holt Renfrew also have been cited by industry experts as potential bidders.
Barney's has repeatedly said that it is not for sale but wants to talk with potential investors.
The pact with Dickson must be approved by the bankruptcy court, which may consider the issue as early as next week.
Officials at Saks, Neiman Marcus and privately held Holt Renfrew could not be reached for comment.
But Japanese retailer Isetan Co. Ltd., which is tangled in court with Barney's over a soured business arrangement, said it was not interested in buying Barney's.
""I don't think we're considering it right now. We're sitting on the sidelines,"" said spokesman Yasuo Okamoto.
Saks and Isetan joined forces in July to explore a plan for Barney's, but they never reached terms on a proposal.
Although Barney's has shuffled management to help turn around the troubled retailer, it is still viewed as weak in the luxury retail sector even as other companies are performing well.
Analysts, however, think a new owner or partner can breathe new life into the company.
""It can be viable going forward. It needs to be trimmed down and it needs merchandising talent,"" said Howard Eilenberg of Johnson Redbook Service.
Founded in 1923 by Barney Pressman and operated under the leadership of his grandsons Robert and Gene, Barney's has long been plagued by a reputation for weak management.
",39
"Mattel Inc president Jill Barad said the proposed acquisition of Tyco Toys Inc is not expected to face antitrust problems and should fuel earnings in the first year of the transaction.
""The market shares are still low even when you look at the category breakdowns,"" she said in a telephone interview.
Mattel, the nation's largest toymaker, earlier announced plans to buy third-place Tyco in a stock transaction valued at about $755 million. The combined market share of the companies would be less than 20 percent of the overall toy market.  
Barad said the deal includes a topping fee of $40 million, which would payable to Mattel if another company lured Tyco with a higher bid.  It also calls for a break-up fee of $15 million if the transaction were not completed within a year.
The transaction is expected to be completed in the first half of 1997.
Barad declined to specify anticipated cost savings associated with the transaction, saying ""there are a lot and they cover many categories.""  She also said it was too early to assess the potential impact of the deal on Tyco's workforce.  
Barad said she approached Tyco about a transaction on Sept. 29 in a solitary meeting with Tyco chief executive officer Gary Baughman.  Representatives of both companies met again on Oct. 14.
The proposed transaction would significantly boost Mattel's position in the boys' toy market - an area that it sought to expand earlier this year with an unsolicited bid for number two toymaker Hasbro.  However, Mattel was forced to withdraw that offer after its proposal ran into fierce opposition on antitrust grounds.
""We really believe that the boys' toy business is a very important one.  We have never had big market share in that category,"" Barad said.
Any overlap in specific markets is not expected to be large enough to create antitrust concerns, Barad said.
For example, she noted Mattel's Hot Wheels holds a nine percent market share position in the ""wheels"" toy category and Tyco holds a 10 percent stake with Matchbox.
""It's very fragmented,"" Barad said, adding that the wheels category will become even more crowded as Hasbro emerges with a new product line.
",39
"The next stop for railroad industry consolidation is likely to be a Philadelphia courtroom, where a judge next week may decide if Norfolk Southern Corp can block a proposed union between Conrail Inc and CSX Corp.
Wall Street's attention turned to the Nov. 18 hearing after Conrail on Wednesday rejected a $10 billion offer from Norfolk Southern and reaffirmed its commitment to the CSX transaction, without revising terms of the $8.5 billion pact.  
It was the second time that Conrail rebuffed an offer from Norfolk Southern that topped the CSX transaction.
Although Conrail shares rose earlier this week on the view that CSX would sweeten terms of the pact for a second time, analysts and traders expressed little surprise that the deal was not revised.
""I think that CSX is probably awaiting the outcome of the court challenge next week,"" said Brian Routledge of Prudential Securities.  
In rejecting the Norfolk Southern bid, Conrail and CSX also dangled the prospect of a sweeter deal in front of shareholders, but made no promises. The two companies said they are pursuing talks about increasing the value of the transaction once the deal is consummated.
Shareholders have expressed unhappiness with the Conrail-CSX deal, which is a cash and stock transaction that values Conrail at about $93 per share. Norfolk Southern has offered to buy Conrail for $110 per share in cash.  
According to Pennsylvania corporate law, Philadelphia-based Conrail is permitted to act in the interest of groups other than shareholders in determining the best partner. Conrail has contended that a union with CSX is a better strategic fit despite Norfolk Southern's higher offer.
""They have an iron-clad contract and they're just waiting to get into court,"" one arbitrager said about CSX and Conrail.
U.S. District Court Judge Donald Van Artsdalen has scheduled a hearing for next Monday to consider Norfolk Southern's suit to block the Conrail-CSX merger.  
Meanwhile, Norfolk Southern said it was not surprised by the latest rejection of its offer and accused Conrail's board of ignoring its fiduciary responsibility.
Norfolk Southern ran a full-page advertisement in the New York Times and Wall Street Journal on Wednesday, urging shareholders to support its bid.
",39
"Conrail Inc. Wednesday revised its takeover agreement with CSX Corp. to give shareholders more cash in the proposed railroad merger valued at nearly $8.5 billion.
The new terms immediately drew fire from investors who said the value of the cash-and-stock deal remained well below that of the rejected offer from unwelcome bidder, Norfolk Southern Corp.
Philadelphia-based Conrail, which announced its original offer on Oct. 15, said its board had considered the merits of the rival bids and reaffirmed that a merger with CSX was a superior strategic combination, despite the higher offer from Norfolk Southern.
""Our two companies have now agreed to significantly increase the value to be received by the Conrail shareholders, and Conrail's other constituencies will continue to get tremendous benefits resulting from the CSX merger,"" Conrail Chairman David LeVan said in a statement.
A source close to the companies said the Conrail board met until late Tuesday night and the two companies then hammered out the new agreement in the early morning hours of Wednesday.
A merger of CSX and Conrail would create one of the largest transportation companies in the world, including a rail system with some 29,000 miles (47,000 km) of track in 22 eastern states.
Under the revised offer, Richmond, Va.-based CSX will pay $110 cash per share for 40 percent of Conrail shares instead of the previous amount of $92.50. The remaining 60 percent will be exchanged at the original ratio of 1.85619 CSX shares for each Conrail share.
Based on CSX's current stock price, the deal values Conrail shares at about $93 each, or $8.46 billion compared with the original pact of $8.42 billion, market sources said.
Norfolk Southern has offered to pay $100 a share in cash, or $9.1 billion, for all of Conrail's outstanding shares.
CSX Chairman John Snow said the company's decision to raise its cash offer followed an analysis that identified at least $730 million in cost savings in a CSX-Conrail combination -- $180 million more than originally anticipated.
""Clearly, the combination of CSX and Conrail provides the best overall package of benefits to our constituencies, including customers, the communities we serve, and the public-at-large,"" Snow said.
But Conrail stockholders expressed opposition to the deal in a conference call with investors and Wall Street analysts. They said the new terms effectively offset recent erosion in CSX's stock price and do not significantly raise the value of the transaction.
""Some of the shareholders were really angry and said this was being crammed down their throats,"" said one expert on takeovers who listened to the conference call.
Other sources who participated in the call said several investors threatened to tender their shares for $110 and then vote against the proposed merger.
In addition to the price of the CSX deal, investors were also unhappy with a three-month extension of the time in which Conrail is locked into the deal. The revised pact says Conrail cannot withdraw or agree to a competing bid before July 12.
""It's an outrage. This thing is now locked up tighter than ever,"" said another participant.
Norfolk Southern, meanwhile, reaffirmed its offer and said it was reviewing its options.
Wall Street analysts said they expect Norfolk to raise its bid for Conrail in an effort to ignite more shareholder unrest with the proposed Conrail-CSX merger.
They speculated that Norfolk Southern could raise its $100 per share bid by as much as 10 percent without hurting its balance sheet or the benefits of a merger.
""If they raise their bid, it will be the icing on the cake. It will take a bid that is superior and widen the gap further,"" said Carole Neely of Brown Brothers Harriman & Co.
""I think the price is getting rich, but I think there is at least a 50-50 chance they come back at least one more time,"" said Brian Routledge of Prudential Securities.
In addition to the new terms, Conrail also cancelled its shareholders' meeting scheduled for Nov. 14 and said a new meeting would be held in mid-December.
It also said that, under the amended terms, CSX's tender offer's expiration date and withdrawal and proration rights were extended until midnight Nov. 20.
",39
"Loewen Group Inc., the target of a $2.9 billion hostile bid by rival Service Corp. International is letting state authorities help mount its takeover defense.
So far, seven states, stretching from Hawaii to Pennsylvania, have launched antitrust investigations into the proposed transaction that would unite the two largest funeral service companies in North America, and Loewen has been quick to publicize their probes.
It is a defense strategy that has helped thwart other takeovers and mergers as states grow more more aggressive in challenging large transactions.
""The states are serious. Many of them have become quite knowledgable,"" said Dennis Yao, a former member of the Federal Trade Commission and now an antitrust expert at the Wharton School of the University of Pennsylvania.
But while state probes can certainly cause trouble for a friendly or hostile takeover, merger and antitrust experts said those investigations have rarely killed a deal.
""As a defense, it's got limited usage. It's hard to guarantee"" that it will be effective, said Steven Wolitzer, co-head of mergers and acquisitions at Lehman Brothers.
Instead, the probes tend to be most successful when the states team up with federal agencies to fight a deal. In the Loewen case, the proposed transaction also is being investigated by a Canadian agency.
Early this year, state authorities were credited with helping to scuttle toymaker Mattel Inc.'s unsolicited bid for rival Hasbro Inc.
And, in April, state and federal complaints about antitrust implications of a friendly merger between drugstore giants Rite Aid Corp. and Revco D.S. Inc. led to the collapse of that deal.
States typically become involved in mergers that would impact consumers, such as in the retail or banking sectors.
Since rejecting Service Corp.'s bid, Loewen has used the state probes as part of its defense against the unwanted bid. Last Monday, Vancouver-based funeral services company announced that Pennsylvania was the latest state to launch an investigation of the proposed deal.
Pennsylvania officials said they had been unaware that Loewen had issued a news release about its probe.
""Loewen believes that the genie is out of the bottle in terms of government interest and there certainly is a precedent of attorney generals' looking at the situation and raising concerns, which ultimately derail those kinds of offers,"" said a spokesman for Loewen, adding that the company has been surprised by the level of state interest.
Loewen also has filed a federal antitrust lawsuit against Service Corp.
For its part, Service Corp. has rejected the antitrust argument and said that any potential problem could be resolved by divesting controversial properties.
Industry experts estimate a combined Service Corp-Loewen would hold a 10 percent market share in the highly fragmented industry.
Pennyslvania, California and New York are considered the most aggressive states in challenging mergers.
Pennsylvania has stepped up its merger probes since 1994 and so far has investigated 17 transactions this year compared with 13 in 1995 and far fewer in the merger boom of the 1980s, said Carl Hisiro, head of the antitrust section at the Pennsylvania attorney general's office.
Merger experts also said that state attention to big mergers typically intensifies in an election year, when officials are trying to convince voters that they are committed to protecting public interest.
",39
"Mobil Corp, widely credited with the most aggressive cost-cutting program of all U.S. oil companies, is not resting on its laurels.
The Fairfax, Va-based oil giant told analysts on Monday that it has implemented $760 million of cost savings so far this year as part of a $1.3 billion plan and expects the remaining $540 million to fall into place soon.
Furthermore, Mobil also expects to save at least another $300 million on an annualized basis by 1999 by streamlining purchases of everything from raw materials to computers.  
Mobil discussed cost-savings details after it posted a 10 percent decline in third quarter operating income due to a host of unfavorable conditions, including weak refining and marketing profits. A company spokesman confirmed the figures.
Industry analysts dismissed the earnings drop, saying Mobil's stock price had already reflected the poor industry fundamentals. Instead, Wall Street appeared more intrigued with the company's future cost-cutting plans.
""They have done an excellent job and I think they are determined to maintain the cost cutting,"" said Jack Aydin of McDonald & Co Securities Inc.  
Some investors already have expressed concern about Mobil's ability to keep up its aggressive pace.
""People are wondering if they have squeezed everything out of the cost structure that they can and if their magic touch is over,"" said Smith Barney analyst James Falvey, who upgraded Mobil to a buy rating from outperform on Monday.
Chairman Lucio Noto sought to allay any concerns.
""Since we are in a very competitive industry that has significant price volatility, changes in the way we run our business are essential if we are to compete in the long term,"" Noto said in a news release about the company's earnings.  
Although Mobil is not expected to announce a major restructuring plan anytime soon, future savings are anticipated from purchasing and technology.
""Everybody has cut a lot of the fat and even some of the muscle,"" said John Parry, analyst at energy consulting firm John S. Herold Inc.
And Mobil is likely to soon start reaping benefits of its joint venture with British Petroleum Co Plc that calls for the merger of their downstream  operations in Europe.
The success of the joint venture will likely impact Mobil's plans for future savings as other firms also pursue similar pacts. Texaco Inc, Royal Dutch Shell Group and Star Enterprise are now exploring joining downstream operations. Star is a venture of Texaco and Saudi Arabia's state oil firm.
If other companies pursue such ventures and the BP pact is successful, analysts said Mobil eventually may seek a downstream partner in other parts of the world.
""I think the easy part of the cost cutting and restructuring has been announced. The key is going to be to remain on top of it,"" Aydin said.
",39
"Conrail Inc. and CSX Corp. so far have convinced the courts that their $8.6 billion merger plan should proceed, but they still need to win over unhappy shareholders who favour Norfolk Southern Corp.'s higher rival bid.
Lawyers and financial advisers were expected in the next few days to consider several plans aimed at persuading investors to approve a crucial measure needed for the deal.
Meanwhile, CSX said Thursday that its $110 cash tender offer for 19.9 percent of Conrail shares, which represents the first part of its plan to buy Conrail, was oversubscribed.
The proposed stock and cash transaction has angered many investors, who prefer an all-cash $10 billion offer by Norfolk Southern, based in Norfolk, Va.
Philadelphia-based Conrail has rejected the Norfolk Southern offer of $110 a share, saying the union with CSX provides more strategic benefits.
But Norfolk Southern refused to give up, on Thursday extending its tender offer through midnight EST on Dec. 16. The offer had been set to expire Friday.
Norfolk Southern said earlier it would also continue to pursue its legal case seeking to block the planned merger.
CSX said that as of Thursday afternoon about 1.4 million Conrail shares had been tendered and not withdrawn pursuant to Norfolk Southern's offer.
Sources close to the companies said no final decision has been made about how to woo Conrail shareholders, but options include sweetening the stock portion of the deal or setting a ""collar"" to guard against price volatility.
They will also consider revising the deal's terms to accelerate payment to investors, according to the sources, who did not want to be identified.
The two companies could also decide to keep the terms unchanged, betting that shareholders will ultimately choose the CSX offer over Norfolk Southern's bid, which cannot be formally considered by Conrail until July.
""There's only one thing they can do and that's to sweeten the offer. I don't know how they're going to get enough votes if they don't,"" said Thom Brown, managing director at investment firm Rutherford, Brown & Catherwood Inc., which holds some 50,000 shares of Conrail.
Richmond, Va.-based CSX and Conrail declined to comment on their plans but acknowledged last week they were discussing increasing the value of the pact upon its consummation.
Sources close to the companies said there is no rush to make a decision, noting that Conrail can easily postpone the shareholder vote that is now slated for mid-December.
CSX and Conrail won a significant victory this week when a U.S. District Court judge denied a request by Norfolk Southern to block the CSX-Conrail deal. An appeals panel also declined to block the first step of the deal.
Norfolk Southern, meanwhile, withdrew its motion for an expedited appeal of the federal court ruling that allowed CSX to buy the 19.9 percent stake in Conrail since the tender offer expired at midnight Wednesday.
But a Norfolk Southern attorney said the company will continue to pursue its legal case seeking to block the Conrail-CSX merger.
""We will continue with the litigation,"" attorney Steven Rothschild said.
A group of Conrail shareholders pursuing a lawsuit and appeal similar to Norfolk Southern's did not withdraw their motion for expedited appeal. The group urged the court Wednesday to hear an expedited appeal and ""sterilize"" the 19.9 percent Conrail stake by preventing CSX from voting it at a shareholders meeting needed for the merger to occur.
Because Pennsylvania corporate law prohibits a company from buying more than 20 percent of another company in a cash tender offer, shareholders will be asked in mid-December to approve a measure that would permit CSX to buy 40 percent.
The CSX-Conrail transaction calls for CSX to buy 40 percent of Conrail shares for $110 per share in cash and exchange the remaining 60 percent for CSX stock.
Sources close to the company said Conrail and CSX were well aware of the potential difficulties in winning the necessary votes.
Industry experts believe shareholders may be more willing to approve the 40 percent measure if they were guaranteed more favourable terms for the stock portion of the deal.
""They can't get the vote until they improve the back end of the deal and they know that,"" one takeover specialist said.
Meanwhile, Conrail stock tumbled, reflecting the expiration of CSX's tender offer. The stock fell $2.25 to $94.625 on the New York Stock Exchange.
Based on Thursday's stock price, the Conrail-CSX transaction values shares of Conrail at about $95.10 each. The stock portion of the deal would be exchanged at a value of about $85.15 for each Conrail share.
",39
"A financial agreement between Barney's Inc and Hong Kong-based Dickson Concepts International Ltd will open the door to potential bidders for the famed New York luxury retailer.
Speculation about interested buyers has been rampant ever since Barney's filed for bankruptcy nearly a year ago.
Dickson and Saks Holdings Inc previously have expressed interest in privately held Barney's. Neiman Marcus Group Inc and Canada's Holt Renfrew also have been cited by industry experts as potential bidders.  
Barney's has repeatedly said that it is not for sale but only wants to talk with potential investors.
Under the pact announced Tuesday, Barney's will pay Dickson up to $1 million to complete its financial review of Barney's and Dickson will submit a recapitalization proposal.
In return, Barney's, which has been operating under bankruptcy protection since January, will make the financial information available to other prospective investors.
""We have the basis by which another investor can look at the information from that due diligence,"" said Barney's spokeswoman Sandra Sternberg.  
The pact with Dickson must be approved by the bankruptcy court, which may consider the issue as early as next week.
Officials at Saks, Neiman Marcus and privately held Holt Renfrew could not be reached for comment.
But Japanese retailer Isetan Co Ltd, which is tangled in court with Barney's over a soured business arrangement, said it was not interested in buying Barney's.
""I don't think we're considering it right now. We're sitting on the sidelines,"" said spokesman Yasuo Okamoto.
Saks and Isetan joined forces in July to explore a plan for Barney's, but they never reached terms on a proposal.  
Although Barney's has shuffled management to help turn around the business, the troubled retailer is still viewed as weak in the luxury retail sector even as other companies are performing well.
However, analysts think a new owner or partner can breathe new life into the company.
""It can be viable going forward. It needs to be trimmed down and it needs merchandising talent,"" said Howard Eilenberg of Johnson Redbook Service.
Founded in 1923 by Barney Pressman and operated under the leadership of his grandsons Robert and Gene, Barney's has long been plagued by a reputation for weak management.
",39
"The three-year-old partnership between British Airways and USAir Group Inc, already severely damaged by a potential competing alliance, moved closer toward collapse on Thursday when USAir said it was cancelling a key marketing agreement between the two carriers.
Although surprised by the move, industry analysts said it will have little impact on USAir, which received far less revenue from the alliance than did British Airways.
British Airways still retains a 24.6 percent stake in Arlington, Va-based USAir.  
USAir said it would end its code-sharing pact and frequent flier programs with British Airways on March 29, 1997.
Code-sharing is a marketing agreement in which airlines share passengers and extend their reach to destinations they do not typically serve. Over the past several years, dozens of world airlines have entered into such pacts.
The USAir move cames amid increasing hostility between it and its British partner. British Airways earlier this year announced plans to form a massive alliance with powerhouse AMR, parent of American Airlines Inc.  
The move infuriated USAir, which promptly sued the two carriers and contended that their planned pact would undermine the USAir-British Airways partnership.
Although the relationship had certainly turned rocky, most analysts had not expected USAir to sever the tie until the proposed British Airways-AMR pact was finalized. That proposed alliance has raised antitrust concerns, awaits regulatory approvals and is linked to other aviation issues.
""Clearly, it's difficult to simultaneously sue a partner and cooperate with a partner,"" said Samuel Buttrick of PaineWebber.  
British Airways said in London that it would continue to work with USAir until the pact is terminated.
At the time the partnership began in 1993, USAir was a money-losing airline that desperately needed to reduce costs and expand its global presence. British Airways invested $400 million under the partnership, but refused to pump any more money in the carrier because of its poor financial performance.
Since then, USAir's financial position has improved amid healthier times for the airline industry, but its costs are still higher than other major U.S. carriers.
""At the time the alliance was made, USAir received the cash which it needed, but today, it doesn't need it,"" said Glenn Engel of Goldman Sachs.
USAir's future plans are now more uncertain with the decision to sever ties with British Airways, especially because chief executive officer Stephen Wolf has stressed that he wants to expand USAir's transatlantic presence.
""I'm a little mystified. They don't have anything to replace it with yet,"" said Donaldson Lufkin & Jenrette analyst James Higgins.
",39
"The proposed union of Boeing Co and McDonnell Douglas Corp dramatically raises the stakes for survival in the defense industry, which already has experienced intense consolidation.
Global players, including Northrop Grumman Corp, Raytheon Co and Hughes Electronics Corp, are expected to seek partners in a new cycle of mergers.
""This has broken an uneasy truce in the defense industry,"" said Jon Kutler, president of Quarterdeck Investment Partners Inc, which specializes in aerospace and defense.  
Although the pace of defense mergers recently has slowed from the booming levels of early 1996, the Boeing-McDonnell Douglas combination is expected to trigger a resurgence of activity, industry experts said.
""This transaction establishes a level of scale that is going to urge additional consolidation. It's clearly going to drive us toward, instead of eight or 10 large firms, three or four mega-corporations,"" said James Schwendinger, director of Deloitte & Touche's aerospace and defense practice.  
Northrop Grumman is viewed as a leading buyer of defense electronics properties. Shares of the company jumped 1-3/4 to 81-1/8 on views that the Boeing-McDonnell Douglas transaction may speed up its acquisition plans.
""All of a sudden, the scale of Northrop Grumman has been diminished by this merger,"" said one defense industry source who did not want to be identified.
Formed in 1994 from a union between Northrop and Grumman Corp, the company earlier this year bought Westinghouse Electric Corp's defense business for $3.6 billion in one of the biggest defense deals of 1996.  
A spokesman for Northrop Grumman declined to comment on merger activites, but noted that electronics is a growing part of the company's business.
""We have clearly embarked on a strategy of transforming the company from primarily an airplane builder to electronics,"" said Tony Cantafio.
Meanwhile, current defense industry leader Lockheed Martin Corp, which early this year bought Loral Corp for $9.1 billion, is viewed as well-positioned to compete against the new and larger Boeing. Lockheed Martin said in a statement on Monday that ongoing industry consolidation is vital.  
""They've gone from being king of the hill to having to share it. They're in an extremely strong position,"" Kutler said of Lockheed Martin.
The defense sector already has seen several consolidation cycles due to declines in federal spending. But those deals were dwarfed by the latest $13.9 billion merger announced on Sunday.
Industry experts said prices and bidding is expected to intensify for attractive properties, noting that reported seller Hughes Electronics is likely to benefit. Industry sources previously targeted McDonnell Douglas as a potential buyer of Hughes.  
A spokesman for Hughes could not be reached for comment, but the company previously has said in an SEC filing that it would consider acquisitions and consolidation.
Hughes is a unit of General Motors Corp.
The Boeing-McDonnell Douglas combination also is expected to trigger consolidation around the globe.
""This may set the stage for a whole new set of (buyers) from Europe,"" said Thomas Gallagher, head of the aerospace division at CIBC Woody Gundy, who expects cross-border consolidation in Europe to intensify.  
""The key dimension of defense today is scale. This business takes a huge amount of investment,"" Gallagher said.
",39
"Raising the stakes in the escalating battle for Conrail Inc., Norfolk Southern Corp. on Friday sweetened its hostile bid for the railroad to $10 billion in cash.
Norfolk Southern's original offer of $9.1 billion was already higher than a proposed $8.5 billion transaction planned between Conrail and CSX Corp., but the new bid of $110 per share further widened the gap.
""Our increased offer demonstrates our total commitment to this combination,"" Norfolk Southern Chairman David Goode said in a statement.
Philadelphia-based Conrail said it would review the new offer, but noted that it previously had determined the union with CSX was a better fit.
On Wednesday, Richmond, Va.-based CSX and Conrail revised the terms of their planned cash and stock transaction to give shareholders more cash. The Conrail-CSX union values Conrail shares at about $93.
Shares of Conrail jumped $3.375 to $96.375 on the New York Stock Exchange.
Wall Street earlier this week had speculated that Norfolk Southern would raise its bid to as much as $110 per share in the hope of igniting unrest with Conrail shareholders, some of whom already have expressed dissatisfaction with the CSX deal.
Industry sources also said Conrail was unlikely to be swayed from its planned merger with CSX.
Instead, they said the outcome of the bidding war was increasingly likely to be decided by Conrail's shareholders, who will ultimately determine if the railroad should strike the $8.5 billion deal with CSX when there is a $10 billion offer on the table.
""Nothing has changed. I think a lot will depend on what happens with the shareholder vote,"" said Jeff Medford of William Blair & Co.
Shareholders are considered key to the Conrail-CSX transaction because Pennsylvania corporate law prohibits CSX from buying more than 20 percent of Conrail shares in a tender offer without their approval. CSX is seeking to acquire 40 percent of Conrail shares in a cash tender offer, with the remaining 60 percent to be exchanged for stock.
A shareholder meeting is scheduled for mid-December.
Takeover experts, who have been among the most vocal opponents of the Conrail-CSX deal, said that Norfolk Southern would further strengthen its position by aggressively urging Conrail shareholders to defeat the CSX transaction.
""It's got to be like Bob Dole's marathon, but with a more successful conclusion,"" said one, referring to the 96-hour campaign blitz launched by the losing U.S. presidential candidate in the days before this week's election.
Goode declined to be specific about Norfolk Southern's plans to woo Conrail shareholders.
""The numbers in our bid speak for themselves. It should be readily apparent that it's a superior offer. We're willing to talk to all of the constituencies involved, including shareholders and others who are interested in this and we are doing that,"" he said in a telephone interview.
Norfolk Southern said its latest offer of $110 a share was superior to CSX's bid because it was not contingent on regulatory approval and would provide immediate cash payment to Conrail shareholders.
Wall Street experts said Conrail and CSX, which already revised the terms of their transaction once, may feel pressured to again increase the portion of cash in their deal. However, most industry experts do not expect a revised bid to top the offer made by Norfolk Southern.
",39
"Revco D.S. Inc is expected to leverage its size and experience to overcome the host of problems that pushed regional drugstore chain Big B Inc into a deal with the Ohio-based drugstore giant.
Industry experts said Revco is well-placed to capture profits in the southeast by taking advantage of Big B's underused distribution center and closing overlapping stores in Georgia.
""Revco will be able to integrate Big B really quickly,"" said Eric Bosshard of Midwest Research-Maxus Group.  
The two companies on Monday said that Big B had accepted a sweetened acquisition offer from Revco in a cash transaction valued at $380 million, or $17.25 per share.
It is the latest in a string of recent acquisitions in the drugstore industry. Just two weeks ago, Rite Aid Corp agreed to buy West Coast-based Thrifty PayLess Inc for $1.4 billion.
Big B initially fought a takeover by Revco, rejecting its unsolicited bid of $15 per share last month and inviting interested parties to submit formal offers.  
Like many other regional drugstores, Big B was burdened by problems that have accompanied the burgeoning clout of managed health care and huge discount retailers.
Big B's profit margins began to tumble last year due to difficulty in calculating the impact of lower prescription prices paid by managed care providers. Although it invested heaviliy in a new computer system to better track profit margins, people familiar with the company have said its newly-expanded distribution center is operating at only 60 percent of capacity.  
One of its first steps will be to assess store overlap, especially in Georgia where Revco operates 180 stores and Big B has 160 stores.
""Once they get the distribution and the stores together, it will be a real profit center for Revco,"" said John Strauss of investment advisory firm Strauss Financial Group.
Revco has said that the acquisition will boost its earnings in the first year of the combination.
After some haggling about terms, Revco signed a confidentiality agreement, took a peek at Big B's books and apparently liked what it saw.  
The Big B board met over the weekend and accepted the new and higher offer from Revco. Details of other offers were not immediately known, although Eckerd Corp was viewed as a potential bidder.
Eckerd declined to comment.
Revco's expanded southeast presence is expected to lead to heightened competition with Eckerd, CVS, a unit of Melville Corp, and Thrift Drugs, a unit of J.C. Penney Co .
The deal with Big B was seen as a significant acquisition for Revco which earlier this year was involved in a failed transaction with Rite Aid. The two companies had signed a pact for Rite Aid to buy Revco for $1.8 billion, but the deal collapsed after regulators expressed concern that the union would raise consumer prices.
",39
"CSX Corp. and Norfolk Southern Corp. said Monday they had entered discussions about their rival offers to buy Conrail Inc.
The two railroads did not disclose the specific nature of their talks, but Conrail's stock fell on views that the discussions would dampen the prospects of a bidding war for the Philadelphia-based railroad.
A source familiar with the companies said the discussions began late last week, continued through the weekend and into Monday.
Richmond, Va.-based CSX last month struck an agreement to buy Conrail in a $8.4 billion cash and stock transaction that valued Conrail at $92.50 per share. Norfolk Southern soon launched its own bid of $100 cash per share, or about $9 billion.
Since then, the two companies have been locked in a fight over their rival offers and taken the matter to court.
CSX, which said Norfolk Southern initiated the talks, said the discussions concerned ""a possible sale by the post-merger CSX/Conrail of certain material assets.""
Meanwhile, Norfolk Southern sought to quell speculation that it would abandon its bid for Conrail, saying that it was committed to its offer and has secured more than $15 billion to finance the proposed acquisition.
Norfolk Southern said the talks were started by CSX, adding that they were aimed at promoting competition.
""Our willingness to talk to CSX at its suggestion is consistent with my previously announced position that Conrail cannot be acquired by either CSX or NS without a plan to maintain a balanced competitive structure for Eastern railroad service. While I am heartened by CSX's willingness to discuss these matters, we have no reason to believe that Conrail is prepared to accept that reality,"" said Norfolk Southern Chief Executive Officer David Goode (corrects from Dean Goode).
A battle for Conrail is viewed as being rife with difficulties for all the companies. Although Norfolk Southern has a higher offer on the table, analysts have said that Pennsylvania's corporate takeover law could be an obstacle to its proposed acquisition.
""This is not a good time to be having a long, drawn-out fight. The quicker they get to this, the better,"" said analyst Anthony Hatch of NatWest Securities.
Conrail shares had partly recovered from the early steep fall by afternoon, trading down $2 per share at $92.25 on NYSE. CSX rose $1.625 to $44.625 and Norfolk Southern gained $1.125 to $90.50, also on the NYSE.
",39
"Conrail Inc. and CSX Corp. so far have convinced the courts that their $8.65 billion merger plan should proceed, but they still need to win over unhappy shareholders who favour Norfolk Southern Corp.'s larger bid.
Lawyers and financial advisors were expected in the next few days to consider several plans aimed at persuading investors to approve a crucial measure needed for the deal.
Meanwhile, CSX said Thursday that its $110 cash tender offer for 19.9 percent of Conrail shares, which represents the first part of its plan to buy Conrail, was oversubscribed.
The proposed stock and cash transaction has angered many investors, who prefer an all-cash $10 billion offer by Norfolk Southern, based in Norfolk, Va.
Philadelphia-based Conrail has rejected the Norfolk Southern offer of $110 a share, saying the union with CSX provides more strategic benefits.
Sources close to the companies said no final decision has been made about how to woo Conrail shareholders, but options include sweetening the stock portion of the deal or setting a ""collar"" to guard against price volatility.
They will also consider revising the deal's terms to accelerate payment to investors, according to the sources, who did not want to be identified.
The two companies could also decide to keep the terms unchanged, betting that shareholders will ultimately choose the CSX offer over Norfolk Southern's offer, which cannot be formally considered by Conrail until July.
""There's only one thing they can do and that's to sweeten the offer. I don't know how they're going to get enough votes if they don't,"" said Thom Brown, managing director at investment firm Rutherford, Brown & Catherwood Inc., which holds some 50,000 shares of Conrail.
Richmond, Va.-based CSX and Conrail declined to comment on their plans, but acknowledged last week that they are discussing increasing the value of the pact upon its consummation.
Sources close to the companies said there is no rush to make a decision, noting that Conrail can easily postpone the shareholder vote that is now slated for mid-December.
CSX and Conrail won a significant victory this week when a U.S. district court judge denied a request by Norfolk Southern to block the CSX-Conrail proposal. An appeals panel also declined to block the deal's first step, but will consider Norfolk Southern's request for an expedited appeal.
Because Pennsylvania corporate law prohibits a company from buying more than 20 percent of another company in a cash tender offer, shareholders will be asked in mid-December to approve a measure that would permit CSX to buy 40 percent.
The CSX-Conrail transaction calls for CSX to buy 40 percent of Conrail shares for $110 per share in cash and exchange the remaining 60 percent for CSX stock.
Sources close to the company said Conrail and CSX were well aware of the potential difficulties in winning the necessary votes.
Industry experts believe shareholders may be more willing to approve the 40 percent measure if they are guaranteed more favourable terms for the stock portion of the deal.
""They can't get the vote until they improve the back-end of the deal and they know that,"" one takeover specialist said.
Meanwhile, Conrail stock fell sharply on the New York Stock Exchange, reflecting the expiration of CSX's cash tender offer for the first 20 percent of Conrail's shares at $110 per share. Shares of Conrail fell $2.375 to $94.50.
Based on Thursday's stock price, the Conrail-CSX transaction values shares of Conrail at about $95.10 each. The stock portion of the deal would be exchanged at a value of about $85.15 for each Conrail share.
",39
"CSX Corp. and Norfolk Southern Corp. said Monday they had entered discussions about their rival offers to buy Conrail Inc.
The two railroads did not disclose the specific nature of their talks, but Conrail's stock fell on views that the discussions would dampen the prospects of a bidding war for the Philadelphia-based railroad.
A source familiar with the companies said the discussions began late last week, continued through the weekend and into Monday.
Richmond, Va.-based CSX last month struck an agreement to buy Conrail in a $8.4 billion cash and stock transaction that valued Conrail at $92.50 per share. Norfolk Southern soon launched its own bid of $100 cash per share, or about $9 billion.
Since then, the two companies have been locked in a fight over their rival offers and taken the matter to court.
CSX, which said Norfolk Southern initiated the talks, said the discussions concerned ""a possible sale by the post-merger CSX/Conrail of certain material assets.""
Meanwhile, Norfolk Southern sought to quell speculation that it would abandon its bid for Conrail, saying that it was committed to its offer and has secured more than $15 billion to finance the proposed acquisition.
Norfolk Southern said the talks were started by CSX, adding that they were aimed at promoting competition.
""Our willingness to talk to CSX at its suggestion is consistent with my previously announced position that Conrail cannot be acquired by either CSX or NS without a plan to maintain a balanced competitive structure for Eastern railroad service. While I am heartened by CSX's willingness to discuss these matters, we have no reason to believe that Conrail is prepared to accept that reality,"" said Norfolk Southern Chief Executive Officer David Goode.
A battle for Conrail is viewed as being rife with difficulties for all the companies. Although Norfolk Southern has a higher offer on the table, analysts have said that Pennsylvania's corporate takeover law could be an obstacle to its proposed acquisition.
""This is not a good time to be having a long, drawn-out fight. The quicker they get to this, the better,"" said analyst Anthony Hatch of NatWest Securities.
Conrail shares had partly recovered from the early steep fall by late afternoon, trading down $1.50 per share at $93.75 on NYSE. CSX rose $1.50 to $44.50 and Norfolk Southern gained $1.375 to $90.75, also on the NYSE.
",39
"Shares of food and beverage giant PepsiCo Inc rose sharply Thursday on rumors that it could be a takeover target of Philip Morris Cos Inc.
Industry experts flatly dismissed the rumor, saying a pricetag on any potential transaction would be an astounding $60 to $80 billion.
Instead, they said the rumor, just the latest to surface about PepsiCo in recent months, underscores widespread dissatisfaction about the company's outlook.  
""I don't ever say no to anything, but I think this is a farfetched rumor,"" said Martin Romm of CS First Boston.
Officials from PepsiCo and Philip Morris declined to comment on the rumor, citing company policy.
But shares of PepsiCo, which have been active recently, jumped 1-3/8 to 30-1/2 and Philip Morris gained 1-1/8 to 97. Wall Street rumblings began earlier this week and the rumor picked up steam after a Thursday report in the New York Post.  
The New York Post cited a rumor on Wall Street that Philip Morris would offer $50 a share for PepsiCo.
The speculation of a deal with Philip Morris comes less than one month after PepsiCo announced a major plan to pull out of weak international beverage markets.
The restructuring, which called for a charge of more than $500 million against earnings, also included cost-cutting targets and continued focus on its Frito-Lay snack food unit.  
But Wall Street is disappointed with the company's indecision about its casual restaurant business, which has performed below expectations. PepsiCo said it is reviewing those operations and analysts widely expect the company to eventually sell the business.
In the meantime, earnings growth will rest heavily on the strong Frito-Lay division.  
""In 1997, a large (part of PepsiCo earnings) is going to be riding on the shoulders of Frito-Lay. Frito-Lay, in my opinion, has to deliver next year,"" said Skip Carpenter of Donaldson Lufkin & Jenrette, who does not anticipate a major turnaround for the international beverage business until 1998 or 1999.
Analysts said PepsiCo reported third quarter earnings on Tuesday that met expectations, but failed to excite investors.
If PepsiCo sells the restaurant business as expected, the company may pour some of those proceeds into acquisitions to further beef up the solid snack food business, analysts said.  
Analysts also have dismissed recent rumors that PepsiCo would be interested in buying Starbucks Corp. They said a transaction between the two would likely dilute PepsiCo earnings and disappoint investors who want the company to exit the casual dining business.
Both companies declined to comment on the PepsiCo-Starbucks speculation. The two companies are in a joint venture for the production and sale of a cold coffee beverage called Frappucino.  
Philip Morris' huge product line includes Post breakfast cereals, Marlboro cigarettes and Kraft cheese.
",39
"The stock of American Medical Response Inc. fell sharply for the second consecutive session Wednesday on concern that the Aurora, Colo.-based ambulance company is straying from its successful acquisition strategy.
The steep decline came after American Medical Response announced Tuesday an agreement to buy STAT Healthcare Inc. in a stock transaction valued at $145 million.
The planned acquisition moves American Medical Response, which has bought 69 ambulance companies since 1992, into hospital emergency rooms and disease management.
The stock of American Medical Response tumbled $4 on the New York Stock Exchange to $30.50. The stock dropped $3 after the transaction was announced on Tuesday.
Wall Street analysts said the deal was strategically sound from a long-term perspective, but noted that investors were wary of the company's shift into a new area.
""The scepticism, which we don't share, is related to the company's going into a business outside their consolidation within the ambulance industry,"" said Randall Huyser of Furman Selz.
Houston-based STAT Healthcare provides staffing for hospital emergency rooms. It also offers outpatient medical services such as kidney dialysis.
Industry sources also cited the company's prediction the deal will slightly dilute earnings this year.
In a conference call with investors and analysts on Tuesday, American Medical Response said the transaction will add to earnings in 1997. It also anticipated cost savings of $2.5 million from the merger.
Industry analysts noted that the acquisition marked a logical extension of its existing services by branching out into the hospital emergency room and providing more services for clients.
""They're taking it beyond just driving you to the hospital,"" said Clifford Hewitt of Sanford C. Bernstein & Co Inc.
Industry sources also noted that shareholders of STAT Healthcare were likely to be concerned about the steep stock decline because the transaction was not based on any fixed price for American Medical Response shares. The deal calls for each share of STAT common stock to be converted into one-quarter share of American Medical Response.
Officials from both companies could not be reached for comment.
STAT stock fell 87.5 cents to $7.375 on Nasdaq.
Analysts expect American Medical Response to continue its tradition of buying ambulance companies as it works to integrate the STAT acquisition.
""I think the outlook for this company is very good. There are 12,000 ambulance companies in the U.S. and they aren't geared to the needs of medical care as it is evolving,"" said Hewitt.
",39
"Norfolk Southern Corp is widely expected to raise its $9.1 billion offer for Conrail Inc in an attempt to ignite shareholder unrest over the company's acceptance of a lower offer from CSX Corp.
Industry analysts speculate that Norfolk Southern could raise its $100 per share bid by as much 10 percent without diluting its balance sheet or the benefits of a merger.
""If they raise their bid, it will put the icing on the cake. It will take a bid that is superior and widen the gap further,"" said Carole Neely of Brown Brothers Harriman & Co.  
Conrail and CSX earlier revised their October merger pact to increase the amount of cash in the transaction.
Shareholders reacted angrily to the new transaction, which effectively offsets recent stock erosion and does not significantly raise the value of the transaction.
Based on the new terms, the Conrail-CSX transaction values shares of Conrail at about $8.463 billion, or $93 per share, versus an original value of $8.418 billion, or $92.50.
Wall Street analysts said Norfolk Southern, which has long pursued Conrail, will likely seek to capitalize on the shareholder dissatisfaction.  
""I do believe we will, in very short order, hear something from Norfolk Southern,"" said Renee Johansen of Wheat First Butch Singer.
In addition to revising its pact with CSX, Conrail formally rejected Norfolk Southern's cash bid. The CSX-Conrail agreement calls for a cash and stock transaction.
Norfolk Southern could not immediately be reached for comment on the speculation it will raise the bid. However, the company said it plans to review its options and called the CSX-Conrail pact inferior to its offer.  
""I think the price is getting rich, but I think there is at least a 50-50 chance (Norfolk Southern) comes back at least one more time,"" said Brian Routledge of Prudential Securities.
They also said the dissatisfaction with the new deal was not limited to traders of takeover stocks.
""I've heard similar complaints from everybody,"" said one analyst who did not want to be identified, referring to large institutional holders of Conrail shares.
But experts also noted a higher bid from Norfolk Southern may still not be enough to wrest the railraod from the grasp of CSX.  
Instead, Conrail's future track may be determined by a federal judge in Philadelphia who is slated to hold a November 12 hearing on a Norfolk Southern lawsuit that contends the Conrail-CSX pact is illegal.
Pennsylvania corporate law, which allows a company's board to act in the interests of groups other than shareholders, is viewed as an obstacle to Norfolk Southern's efforts to buy Conrail.
""I think the court is going to play a big role,"" Johansen said.
Indeed, concern about the Pennsylvania law were viewed as contributing to a decline in Norfolk Southern shares on Wendesday. The company's stock fell two to 87-1/8.
""People know it's the higher bid, but historically speaking, in most of the cases, hostile deals in the rail sector don't make it,"" Neely said.
",39
"Forget about the pink Porsche. Barbie soon may have a whole fleet of cars at her disposal.
Seeking to expand in the market for boys toys, Mattel Inc said Monday it will buy third-ranked Tyco Toys Inc in a $755 million union that will wed the makers of Barbie dolls and Matchbox cars.
The move is considered hugely significant for top toymaker Mattel, which earlier this year pursued Hasbro Inc for similar reasons. Mattel was forced to drop its unsolicited Hasbro offer due to concerns about antitrust implications associated with joining the nation's top two toymakers.
Industry experts said the proposed acquisition will accomplish many of the same goals as the failed Hasbro transaction.
""Its been something they have been trying to do for years and years,"" said Smith Barney analyst Jill Krutick of Mattel's desire to boost its presence in boys' markets.
The proposed union will combine Mattel's highly successful product line, which includes Barbie, Hot Wheels and Fisher-Price, with Tyco's Matchbox, Sesame Street toys and radio control vehicles.
Shares of Tyco jumped 4-3/8 to 11-3/8 in afternoon trading. The stock transaction values shares of Tyco at about $12.50 each.
For money-losing Tyco, the acquisition will represent the culmination of its turnaround efforts. The toymaker last year cut 10 percent of its work force as part of a restructuring aimed at returning to profitability.
With its deep pockets, leading market presence and long global reach, Mattel is likely to easily capitalize on Tyco's products, analysts said.
""Mattel clearly has ways to enhance the revenue growth of Tyco and expand it internationally. Mattel is getting into a fairly cleaned-up situation,"" Krutick said.
But some analysts cited concern about potential antitrust implications, even though Tyco holds a far smaller market presence than Hasbro. They specifically cited potential market overlap of Mattel's Hot Wheels and Tyco's Matchbox units.
""I think it's going to be a long process in getting the OK of regulators. After the Hasbro debacle, anything Mattel does at this point will be looked at by the regulators,"" said one analyst who did not want to be identified.
In a telephone interview with Reuters, Mattel president Jill Barad said antitrust concerns are not expected to be an overwhelming issue in the transaction. She noted that the combined companies will still hold less than 20 percent market share in the highly-fragmented industry.
The proposed combination will also strengthen Mattel's position in plush toys, where Tyco is a market leader.
",39
"Ashland Inc. Monday announced a wide-ranging restructuring programme aimed at pumping up profitability in an era of weak refining margins and widespread energy industry consolidation.
The move by the Ashland, Ky.-based energy company appeased a New York investment firm, which withdrew its plan for a proxy fight at the company's annual shareholder meeting next month.
""Ashland's No. 1 priority is to improve returns in its refining and marketing segment,"" Chief Executive Officer Paul Chellgren said in a statement. ""Many of the elements in the plan announced today focus on that priority and are aimed at continuing to build a basis for the long-term competitiveness of this business.""
Under the plan, Ashland will restructure its business units to form a petroleum group consisting of its refining businesses, SuperAmerica retail convenience stores and Valvoline motor oil. The group will be led by Ashland executive Fred Brothers, who has run the company's chemicals business.
Ashland also said it will reduce 1997 capital expenditures for Ashland Petroleum to $150 million from $175 million and limit capital expenditures for refining to $100 million. It said the remaining $50 million in Ashland Petroleum's 1997 capital budget will be earmarked for petrochemical and branded marketing expansions.
The company will evaluate alternatives for its exploration unit, with the target of completing an evaluation and any resulting business transaction before the end of 1997.
It will review other options for strategic alliances amid widespread developments in the refining and marketing sector.
Ashland said it will authorise the repurchase of up to 1 million shares of its common stock annually in an attempt to eliminate dilution of its stock.
It also said it was halting a programme to offer up to $100 million in Ashland common stock. To date, about $50 million in common stock has been sold under the programme.
The company said it would evaluate corporate general and administrative expenses.
The actions were viewed as a significant step to convince investors that management will not stand by and watch profits erode.
""The question now is whether they can deliver. I think there will be more to come,"" said Smith Barney analyst James Falvey.
Ashland recently was pressured by Providence Capital Inc., a New York-based investment firm that nominated a three-person slate for election to the company's board of directors at the Jan. 30 annual meeting.
Providence President Herbert Denton said in an interview that he was satisfied by the plan. Representatives of Ashland met with Providence last week.
""They have addressed all the major issues we raised. We feel the plan is genuine and that they are sincere about defining a new era at Ashland,"" he said in a telephone interview.
Ashland stock rose 12.5 cents to $46.75 in afternoon trading on the New York Stock Exchange. Analysts noted the stock has risen about $10 per share since September on views that a restructuring would be forthcoming.
They said the restructuring was a good reflection on CEO Chellgren, a company veteran who is set to replace retiring Chairman John Hall.
""I think this is positive. This is a quicker-than-expected start on restructuring,"" said Fred Leuffer of Bear Stearns & Co.
",39
"Less than six weeks after the collpase of his deal to buy security firm ADT Ltd, Wayne Huizenga on Thursday shifted gears to rental cars.
The founder of Blockbuster Entertainment and owner of the Florida Marlins baseball team announced earlier that his Republic Industries Inc had signed a definitive pact to buy privately-held Alamo Rent-A-Car for $625 million.
The move is expected to catapult Republic's growing automotive business, which is rooted in used-car company AutoNation USA.
",39
"Billionaire investor Marvin Davis on Wednesday announced an $835 million bid for closely-held Carter-Wallace Inc., maker of Trojan condoms and Arrid deodorant.
Davis offered to buy outstanding stock of Carter-Wallace for $18 a share, reflecting a 50 percent premium over its recent trading price.
Carter-Wallace confirmed in a three-paragrpah statement that it received the offer, saying it would refer the bid to majority sharheolder The CPI Development Corp.
Shares of Carter-Wallace jumped $3.875 to $15.625 on NYSE, but remained below the $18 offer level due to market speculation that Carter-Wallace might be reluctant to sell.
""I think the board is going to be completely unreceptive to this,"" said one trader who specialises in takeover situations and spoke on condition he not be identified.
Based on Carter-Wallace's 46.39 million shares outstanding, the offer from the financier's Los Angeles-based Davis Companies was valued at $835 million.
Most traders gave the bid slim chance of succeeding because Carter-Wallace has previously expressed little interest in selling the company. Furthermore, insiders control about 82 percent of Carter-Wallace via common stock and a special class of shares.
""With all of that control, they can do a 'just say no defence',"" said another stock arbitrager.
Carter-Wallace is dominated by members of the Hoyt family. Chief Executive Officer and Chairman Henry Hoyt Jr. is the son of the executive who took over management of the Carter Medicine Company in 1929. Family members hold other key positions.
Davis urged the company to consider its bid.
""While we recognise that controlling interest in the company's stock is held by the Hoyt family, we believe the company's board of directors will act responsibly and in the best interests of all the shareholders in considering our offer,"" Davis said in a news release.
Market sources speculated that Davis has been buying up shares of Carter-Wallace in recent weeks. A spokeswoman for Davis said he had a ""material interest"" in the company, but she declined to be specific.
The 70-year-old Davis is well-known on Wall Street for his corporate investments.
A former chairman of Paramount, he recently was one of several dissident shareholders of Mesa Inc. who tried to wrest control from oilman T. Boone Pickens. Pickens has since passed the baton to financier Richard Rainwater. The Davis spokeswoman said he is no longer involved with Mesa.
Davis also is developing a riverboat casino and entertainment centre in Boonville, Mo.
Carter-Wallace has long been viewed on Wall Street as an acquisition candidate. At the company's meeting in July, some shareholders criticised its low stock price but a shareholder proposal to consider a merger was rejected.
Just last month, Carter-Wallace named Ralph Levine to the position of president and chief operating officer of the company. Levine, who had been vice president, secretary and general counsel, was named to replace a retiring executive.
In 1994, the company ran into trouble when the federal Food and Drug Administration advised physicians to stop prescribing its Felbatol epilepsy drug due to links with a bone marrow disorder.
",39
"USAir Group Inc, determined to expand overseas, soon will be flying solo at a time when most of its competitors are entrenched in international alliances.
Industry experts said the Arlington, Va.-based airline will have a hard time finding a new partner to replace its passenger-sharing pact with British Airways Plc.
""USAir wants to duplicate something like the other major carriers have in Europe, but all the dance cards are already full,"" said one analyst who did not want to be identified.  
Over the past five years, cost-conscious airlines have struck marketing agreements with other carriers in order to extend their reach to new destinations that would be too expensive to serve on their own. Examples include links between Northwest Airlines Corp and KLM Royal Dutch Airlines NV and between UAL Corp and Deutsche Lufthansa AG.
On Thursday, USAir said it would terminate in March its passenger-sharing and frequent flier pact with British Airways due to the British carrier's proposed alliance with powerhouse AMR Corp.  
The move is expected to have little financial impact on USAir, which received far less revenue from the alliance than did British Airways.
Because most of the big carriers already have partners, analysts said USAir is likely to pursue international growth on its own for now.  It already is seeking the right to fly to London's coveted and restricted Heathrow Airport from several U.S. cities.
The desire for an expanded overseas role is also likely to prompt USAir to re-enter old markets, analysts said. It is best-known for its short-haul routes on the U.S. East Coast.  
""It may be that USAir may return to some of those areas,"" said John Steltzer, executive of airline consulting firm Worldwide Transportation Group Inc.
Although USAir has the highest cost structure of all major U.S. carriers, industry analysts said strong profit margins on long-haul flights would likely offset the expense associated with resuming service in some of those areas.
It also is likely to strike alliances with smaller European carriers that could transport passengers beyond any USAir destination.
""That would provide feed for their transatlantic operations, which they would need on that side of the ocean,"" said Raymond Neidl of Furman Selz.
In the longer term, however, many analysts remain convinced that USAir will need an extensive alliance or merger with another carrier.
",39
"Mattel Inc., seeking to expand in the market for boys' toys, agreed to buy third-ranked Tyco Toys Inc. for $755 million, the companies said Monday.
The proposed union will combine Mattel's Barbie dolls, Hot Wheels miniature cars and Fisher-Price toys with Tyco's Matchbox cars, Sesame Street toys and radio-controlled vehicles.
""We really believe that the boys' toy business is a very important one. We have never had big market share in that category,"" Mattel President Jill Barad said in a telephone interview.
Under the agreement, Tyco shareholders will receive Mattel stock valued at $12.50 per Tyco share, representing a 78 percent premium above Friday's closing price for Tyco stock.
Shares of Tyco jumped $4.50 to $11.50, while Mattel fell 75 cents to $29.875, both on the New York Stock Exchange.
The proposed transaction follows Mattel's unsuccessful effort earlier this year to acquire No. 2 rival Hasbro Inc. Mattel, the nation's largest toymaker, was forced to withdraw its unwelcome bid due to widespread concern about its effect on competition.
Mattel said the Tyco transaction was expected to be completed in the fist half of 1997 and would add to its earnings in the first year. The boards of both companies have approved the merger.
The proposed transaction followed discussions that began with a Sept. 29 meeting between Barad and Tyco Chief Executive Officer Gary Baughman. Representatives of both companies met again on Oct. 14.
Industry experts said the proposed acquisition will accomplish many of the same goals for Mattel as the failed Hasbro transaction.
""It's been something they have been trying to do for years and years,"" said Smith Barney analyst Jill Krutick of Mattel's desire to boost its presence in boys' markets.
""The outstanding worldwide potential for Tyco's well-known brands will be fully realised through this merger with Mattel,"" Mattel Chairman John Amerman said in a statement.
Although the union will combine two of the nation's biggest toymakers, Barad said antitrust issues were not expected to be significant. She noted that the combined companies will hold less than 20 percent market share in the highly fragmented industry.
""The market shares are still low even when you look at the category breakdowns,"" she said in a telephone interview.
Tyco, based in Mt. Laurel, N.J., had 1995 revenues of $709 million. Mattel, based in El Segundo, Calif., had 1995 sales $3.6 billion. No. 2 toy maker Hasbro had 1995 sales of $2.8 billion.
But some analysts cited concern about antitrust implications, citing potential market overlap of Mattel's Hot Wheels and Tyco's Matchbox units, two leading miniature car brands.
""I think it's going to be a long process in getting the OK of regulators. After the Hasbro debacle, anything Mattel does at this point will be looked at by the regulators,"" said one analyst who did not want to be identified.
For money-losing Tyco, the acquisition will represent the culmination of its turnaround efforts. The toymaker last year cut 10 percent of its work force as part of a restructuring aimed at returning to profitability.
With its deep pockets, leading market presence and long global reach, Mattel would easily capitalise on Tyco's products, analysts said.
""Mattel clearly has ways to enhance the revenue growth of Tyco and expand it internationally. Mattel is getting into a fairly cleaned-up situation,"" Smith Barney's Krutick said.
The proposed combination will also strengthen Mattel's position in plush toys, where Tyco is a market leader.
Barad said the deal includes a fee of $40 million that would be payable to Mattel if another company lured Tyco with a higher bid. It also calls for a break-up fee of $15 million if the transaction is not completed within a year.
Barad declined to specify anticipated cost savings associated with the deal, saying, ""There are a lot and they cover many categories."" She also said it was too early to assess the potential impact of the deal on Tyco's work force.
",39
"Investor Carl Icahn resumed his campaign to break up RJR Nabisco Holdings Corp. Monday by moninating a slate of directors he wants to replace the existing board members.
Icahn, who holds a 7.3 percent stake in RJR, named his intended nominees to RJR's board in a filing with the Securities and Exchange Commission.
In a letter to RJR Chairman Steven Goldstone that was attached to the SEC filing, Icahn reiterated his request that RJR spin off its Nabisco Holdings Corp. unit immediately.
Icahn, who began a campaign to split up RJR last year, said in his letter that the company's stock price had lost more than 20 percent recently while the company has lost market share to rival Philip Morris Cos. Inc.
RJR Nabisco Holdings said in response to Icahn that the slate of directors he submitted was weaker than the one assembled last year by Icahn and fellow investor Bennett LeBow, who had teamed up for a while in an effort to separate RJR's tobacco operations from its food businesses.
""Mr. Icahn's slate appears for the most part to be a group of lawyers, consultants and retired people with records that will not withstand scrutiny,"" RJR said in a statement.
RJR, which owns 80.5 percent of Nabisco, repeated that it favored a spin-off of the food unit but said this is not the right time to split up the company.
""We plan to do it when a spinoff will not endanger the company,"" RJR said. ""But an attempt to spin off Nabisco in the current political and legal environment could do serious damage to the company, the tobacco industry and our shareholders,"" it added.
Icahn said in his letter that his proposed slate of directors will be headed by Thomas Rattigan, former chief executive officer of PepsiCo Bottling International and former chairman of G. Heileman Brewing Co.
""The management hasn't demonstrated that they're doing anything better than they were doing last year, so why not try again?"" Rattigan said in a telephone interview.
Rattigan said the nominated directors intend to pursue a global settlement of tobacco litigation claims. He was not specific about those plans, but said any global settlement must be an industrywide effort.
""It's in the interest of everybody that some sort of global settlement be undertaken to permit these companies to get on with their corporate existence and do what they should be doing,"" Rattigan said.
In the letter to Goldstone, Icahn also said that the board nominees would raise the company's annual dividend to $2 per share and maintain that rate after the spin-off of Nabisco.
RJR raised its annual dividend last March to $1.85 per share from $1.50.
According to a filing with the Securities and Exchange Commission, Rattigan was hired by Icahn as a consultant on Nov. 1 for $2 million.
Icahn and LeBow failed earlier this year in a similar attempt to force a spin-off of the tobacco unit.
Icahn and LeBow split up after their defeat last year, although both said they would continue to individually press for an immediate spinoff.
Shares of RJR closed up 25 cents at $29.25 on the New York Stock Exchange.
",39
"The proposed union of Boeing Co. and McDonnell Douglas Corp. dramatically raises the stakes for survival in the defence industry, which already has experienced intense consolidation.
Global players, including Northrop Grumman Corp., Raytheon Co. and Hughes Electronics Corp., are expected to seek partners in a new merger cycle.
""This has broken an uneasy truce in the defence industry,"" said Jon Kutler, president of Quarterdeck Investment Partners Inc., which specialises in aerospace and defence.
Although the pace of defence mergers recently has slowed from the booming levels of early 1996, the Boeing-McDonnell Douglas combination is expected to trigger a resurgence of deals, industry experts said.
""This transaction establishes a level of scale that is going to urge additional consolidation. It's clearly going to drive us toward, instead of eight or 10 large firms, three or four mega-corporations,"" said James Schwendinger, director of consulting firm Deloitte & Touche's aerospace and defence practice.
Northrop Grumman is viewed as a leading buyer of defence electronics properties. Shares of the company jumped $1.125 to $80.50 on views that the Boeing-McDonnell Douglas transaction may speed up its acquisition plans.
""All of a sudden, the scale of Northrop Grumman has been diminished by this merger,"" said one defence industry source who did not want to be identified.
Formed in 1994 from a union between Northrop and Grumman Corp., the company earlier this year bought the defence business owned by Westinghouse Electric Corp. for $3.6 billion in one of the biggest defence deals of 1996.
A spokesman for Northrop Grumman declined to comment on merger activites, but noted that electronics was a growing part of the company's business.
""We have clearly embarked on a strategy of transforming the company from primarily an airplane builder to electronics,"" said Tony Cantafio.
Meanwhile, current defence leader Lockheed Martin Corp., which early this year bought Loral Corp for $9.1 billion, is viewed as well-positioned to compete against the new and larger Boeing. Lockheed Martin said in a statement Monday that ongoing industry consolidation was vital.
""They've gone from being king of the hill to having to share it. They're in an extremely strong position,"" Kutler said of Lockheed Martin.
The defence sector already has seen several consolidation cycles due to declines in federal spending. But those deals are dwarfed by the latest $13.9 billion merger announced Sunday.
Industry experts bidding was expected to intensify for attractive properties, noting that reported seller Hughes Electronics was likely to benefit. Industry sources previously targeted McDonnell Douglas as a potential buyer of Hughes.
A spokesman for Hughes could not be reached for comment, but the company previously has said that it would consider acquisitions and consolidation. Hughes is a unit of General Motors Corp.
The Boeing-McDonnell Douglas combination also was expected to trigger consolidation around the globe.
""This may set the stage for a whole new set of (buyers) from Europe,"" said Thomas Gallagher, head of the aerospace division at CIBC Woody Gundy, who expects cross-border consolidation in Europe to intensify.
""The key dimension of defence today is scale. This business takes a huge amount of investment,"" Gallagher said.
",39
"Republic Industries Inc., the aggressive Florida company run by businessman Wayne Huizenga, on Friday defended its plans to buy security firm ADT Ltd. after a New York newspaper reported that the transaction would be called off.
""The deal has not been killed. It is still moving forward,"" spokesman Ronald Castell said.
Huizenga, founder of Blockbuster Entertainment, owns the Florida Marlins baseball, Dolphins football and Panthers hockey professional sports teams. Republic has three major areas of business: electronic security, solid waste and used cars.
Originally valued at $5 billion when the stock transaction was announced in July, the deal has lost about 20 percent of its value due to a steep decline in Republic's share price. At the time the deal was first announced, Republic shares were trading at about $29.
Citing unnamed industry sources, the New York Post reported that ADT was expected to call off the deal because of the drop in value.
Shares of Republic closed up 62.5 cents at $25.125 on Nasdaq after trading as high as $26.125 as takeover traders rushed to cover short positions. ADT stock traded on the New York Stock Exchange closed up 50 cents at $19.125.
Boca Raton, Florida-based ADT declined to comment on the report, but Wall Street analysts said both companies were dismissing the article.
""What ADT has told me is that nothing has changed,"" said Andrew Jeffrey of Robertson Stephens & Co., referring to the report that the deal was dead.
Some Wall Street traders have speculated that Republic may be forced to sweeten the terms of the deal to make up for the lost value in its stock price.
Republic's Castell declined to discuss details of the deal's value.
The transaction also has been clouded by concerns that Western Resources Inc., which owns 23.1 percent of ADT, may oppose the acquisition. Western has said it was not consulted about the merger, but has not yet determined if it will seek to block the deal.
The ADT acquisition represents a huge step for Republic, which has acquired 19 security companies since it entered the industry 10 months ago.
",39
"A threatened proxy fight at Ashland Inc, coming at a time of widespread oil industry consolidation, may force the Kentucky-based energy company to restructure its diverse holdings.
Sources close to Ashland said the company is considering strategic alternatives, although it has not yet determined whether major action is necessary.
Meanwhile, Providence Capital Inc, which has been involved in similar efforts at other firms, is expected to pressure Ashland to enhance its value by breaking up its operations.  
Widely considered a regional oil refiner, Ashland owns 56 percent of Ashland Coal Inc, a substantial chemicals business and a highway construction unit. It makes Valvoline motor oils and owns SuperAmerica convenience stores.
Some industry analysts have said that Ashland, which is trading at around $46 per share, would be worth more than $60 per share if its businesses were separated.
Providence has formally told Ashland that it has nominated a three-man slate for election to the board at the January 30 annual shareholders' meeting. Shareholders will be asked to fill six slots on the 16-member board.  
Ashland spokesman Dan Lacey said the company has hired First Boston Corp to advise it on the proxy issue. A source familiar with the situation said Ashland also may discuss strategeic alternatives with investment firm Wasserstein Perella & Co, which has worked with Ashland in the past.
Sources said New York-based Providence is not seeking control of Ashland, but instead wants to push a restructuring. Founded in 1991 by a group of merger experts at Jefferies & Co, previous investments have included California Microwave, Duplex Products Inc and Ideon Group Inc It also has invested in Russia.  
Ashland earlier this month acknowledged Providence's interest, noting that it holds 100 shares of Ashland's 64 million outstanding common shares.
Ashland has declined to comment further on Providence, noting that it is prohibited from discussing the issue until it files documents with the U.S. Securities and Exchange Commission, a move that is expected by mid-December.
Providence and Wasserstein also declined comment. Sources said both Ashland and Providence recently have held meetings with institutional investors to discuss shareholder value.  
Industry experts think Ashland is primed to participate in industrywide consolidation, especially as Ashland veteran and Chief Executive Paul Chellgren moves into the role as chairman. He is replacing retiring longtime Chairman and former Chief Executive John Hall.
""Under his leadership, Ashland could be restructured along individual lines of business. If done correctly, we think it could lead to an increase in shareholder value of 25 percent or more,"" Bear Stearns & Co analyst Fred Leuffer said in a report issued Monday.
The push for a restructuring comes as giant oil firms join forces to combat poor refining profits. Texaco Inc and Shell Oil Co are mulling an alliance of U.S. refining and marketing operations, while Mobil Corp and British Petroleum Co Plc have a similar venture in Europe.
And smaller refiners also are seeking partners. Diamond Shamrock Inc has proposed a merger with Ultramar Corp, Tosco Corp is buying Unocal Corp's West Coast refining assets and just last week refiner Valero Energy Corp said it was seeking an alliance for its natural gas services unit.
",39
"Conrail Inc. Wednesday revised its takeover agreement with CSX Corp. to give shareholders more cash in the proposed railroad merger valued at nearly $8.5 billion.
The new terms immediately drew fire from investors who said the value of the cash-and-stock deal remained well below that of the rejected offer from unwelcome bidder, Norfolk Southern Corp.
Philadelphia-based Conrail, which announced its original offer on Oct. 15, said its board had considered the merits of the rival bids and reaffirmed that a merger with CSX was a superior strategic combination, despite the higher offer from Norfolk Southern.
""Our two companies have now agreed to significantly increase the value to be received by the Conrail shareholders, and Conrail's other constituencies will continue to get tremendous benefits resulting from the CSX merger,"" Conrail Chairman David LeVan said in a statement.
A source close to the companies said the Conrail board met until late Tuesday night and the two companies then hammered out the new agreement in the early morning hours of Wednesday.
A merger of CSX and Conrail would create one of the largest transportation companies in the world, including a rail system with some 29,000 miles (47,000 km) of track in 22 eastern states.
Under the revised offer, Richmond, Va.-based CSX will pay $110 cash per share for 40 percent of Conrail shares instead of the previous amount of $92.50. The remaining 60 percent will be exchanged at the original ratio of 1.85619 CSX shares for each Conrail share.
Based on CSX's current stock price, the deal values Conrail shares at about $93 each, or $8.46 billion compared with the original pact of $8.42 billion, market sources said.
Norfolk Southern has offered to pay $100 a share in cash, or $9.1 billion, for all of Conrail's outstanding shares.
CSX Chairman John Snow said the company's decision to raise its cash offer followed an analysis that identified at least $730 million in cost savings in a CSX-Conrail combination -- $180 million more than originally anticipated.
""Clearly, the combination of CSX and Conrail provides the best overall package of benefits to our constituencies, including customers, the communities we serve, and the public-at-large,"" Snow said.
But Conrail stockholders expressed opposition to the deal in a conference call with investors and Wall Street analysts. They said the new terms effectively offset recent erosion in CSX's stock price and do not significantly raise the value of the transaction.
""Some of the shareholders were really angry and said this was being crammed down their throats,"" said one expert on takeovers who listened to the conference call.
Other sources who participated in the call said several investors threatened to tender their shares for $110 and then vote against the proposed merger.
In addition to the price of the CSX deal, investors were also unhappy with a three-month extension of the time in which Conrail is locked into the deal. The revised pact says Conrail cannot withdraw or agree to a competing bid before July 12.
""It's an outrage. This thing is now locked up tighter than ever,"" said another participant.
Norfolk Southern, meanwhile, reaffirmed its offer and said it was reviewing its options.
Wall Street analysts said they expect Norfolk to raise its bid for Conrail in an effort to ignite more shareholder unrest with the proposed Conrail-CSX merger.
They speculated that Norfolk Southern could raise its $100 per share bid by as much as 10 percent without hurting its balance sheet or the benefits of a merger.
""If they raise their bid, it will be the icing on the cake. It will take a bid that is superior and widen the gap further,"" said Carole Neely of Brown Brothers Harriman & Co.
""I think the price is getting rich, but I think there is at least a 50-50 chance they come back at least one more time,"" said Brian Routledge of Prudential Securities.
In addition to the new terms, Conrail also canceled its shareholders' meeting scheduled for Nov. 14 and said a new meeting would be held in mid-December.
It also said that, under the amended terms, CSX's tender offer's expiration date and withdrawal and proration rights were extended until midnight Nov. 20.
",39
"CSX Corp may be hard-pressed to top an aggressive and pricey bid for Conrail Inc. unleashed Wednesday by rival Norfolk Southern Corp.
The Norfolk Southern $100-per-share offer came just eight days after CSX agreed to acquire Conrail in a cash and stock transaction valued at $8.4 billion, or about $92.50 per share.
""This (Norfolk Southern) bid comes without any regulatory risk, is all cash and is higher. So it's one-two-three - a knockout punch versus the old bid,"" said Anthony Hatch of NatWest Securities.  
At the very least, CSX will likely be forced to change its cash-and-stock offer to an all-cash bid if it wants to stay in the game, railroad and merger experts said.
""The Norfolk Southern bid is a very high bid. It's a rich premium and an attractive deal for Conrail shareholders. I don't know if CSX will be able to come up with an all-cash bid,"" said Carole Neely of Brown Brothers Harriman.
Norfolk Southern's bid did not completely surprise Wall Street because the Virginia-based railroad last week had expressed concern about the proposed CSX-Conrail transaction.
But some were startled by the nature of its offer.  
Norfolk Southern's bid aims to lure Conrail investors by offering immediate payment for their stock. It would then place the shares in a voting trust until the deal closes.
""The Norfolk Southern offer takes the risk away from (Conrail) shareholders. You've got to be impressed with that,"" said one takeover stock trader.
Under last week's Conrail-CSX agreement, Conrail shareholders would be required to authorize the tender of 40 percent of Conrail shares for placement in a voting trust. The rest of the shares would be exchanged for stock at a later date and would be subject to market fluctuations.  
Shares of Conrail, which said it will review the Norfolk Southern offer, soared 11-1/4 to 96.
The bid by Norfolk Southern represents its second attempt to buy the railroad that was formed by Congress in 1976 out of the remains of six bankrupt entities. Rumors about Norfolk Southern's interest in Conrail have surfaced on Wall Street periodically ever since it unsuccessfully tried to buy the railroad from the government in the 1980s.
""They're not usually very aggreesive from a financial point of view, but they've been keeping their balance sheet clean for a long time,"" Hatch said about Norfolk Southern.  
CSX and Norfolk Southern are eager to capture Conrail's valuable Northeast presence amid widespread industry consolidation.
Earlier this year, Union Pacific Corp bought Southern Pacific Rail Corp  for $3.9 billion after losing a fight for Santa Fe Pacific Corp, which was won by Burlington Northern Inc for $2.5 billion in 1995.
But unlike those acquisitions in which the target was viewed as a weak market player, Conrail is considered to be a much stronger railroad - a factor that could limit any potential cost savings or benefits to the successful bidder.
""Southern Pacific and Santa Fe were both not doing well and there was a lot of turnaround opportunity. Conrail is not sick. It's not a big turnaround situation and this is not a cheap price,"" said Cornelius Sewell of Argus Research.
",39
"Shares of American Medical Response Inc fell sharply Wednesday for a second consecutive session amid concern that the ambulance company was straying from its successful acquisition strategy.
The steep decline came after American Medical Response announced Tuesday an agreement to buy STAT Healthcare Inc in a stock transaction valued at $145 million.
The planned acquisition moves American Medical Response, which has bought 69 ambulance companies since 1992, into hospital emergency rooms and disease management.  
Shares of American Medical Response tumbled 2-5/8 to 31-7/8 by midafternoon Wednesday. The stock dropped three points after the transaction was announced on Tuesday.
Wall Street analysts said the deal was strategically sound from a long-term perspective, but noted that investors were wary of the company's shift into a new area.
""The skepticism, which we don't share, is related to the company's going into a business outside their consolidation within the ambulance industry,"" said Randall Huyser of Furman Selz.  
STAT Healthcare provides staffing for hospital emergency rooms. It also offers outpatient medical services such as kidney dialysis.
""Although the transaction makes sense to us conceptually, this new direction for the company may elicit a wait-and-see attitude from some investors who want to see success first in the new venture. Others may question how the disease management division will fit into the puzzle,"" Lehman Brothers analyst Jeffrey Kessler wrote in a report issued Wednesday.
Industry sources also cited the company's prediction the deal will slightly dilute earnings this year.  
In a conference call with investors and analysts on Tuesday, American Medical Response said the transaction would be accretive in 1997. It also expects cost savings of $2.5 million from the merger.
Industry analysts also noted that the acquisition would mark a logical extension of the company's existing services.
""They're taking it beyond just driving you to the hospital,"" said Clifford Hewitt of Sanford C. Bernstein & Co Inc.
",39
"Drugstore giant Revco D.S. Inc. said Monday it agreed to buy regional chain Big B Inc. in a sweetened takeover valued at $380 million.
The transaction calls for Twinsburg, Ohio-based Revco to buy all outstanding shares of Big B common stock for $17.25 per share, up from Revco's unsolicited offer of $15 per share, which Big B rejected last month.
""We are very excited about the combination of Revco and Big B. I am pleased we were able to bring this process to a fast and successful conclusion,"" said Dwayne Hoven, president and chief executive officer of Revco.
The deal will combine the nation's second- and 10th-largest drug store chains.
The companies said Big B's board of directors unanimously approved the latest offer and recommended that Big B shareholders tender their shares.
The sale of Bessemer, Ala.-based Big B marks the latest acquisition in the rapidly consolidating drugstore industry. Rite Aid Corp. signed an agreement this month to buy West Coast chain Thrifty PayLess Inc. for $1.4 billion, and Thrift Drug Inc., a unit of J.C. Penney Co. Inc., agreed in August to buy Fay's Inc. for about $285 million.
Although Big B rejected the initial offer, its stock recently had been trading at about $16 per share on views that the company would be sold for more than Revco's original $15 per share offer.
Revco's stock traded up 12.5 cents at $29.50 a share on the New York Stock Exchange. Big B's shares were at $17, up 43.75 cents, in afternoon trading on Nasdaq.
""With Revco's financial resources, technological expertise and marketing and sales capability, we can together grow our combined company's customer base and increase our sales potential. Among other efficiencies, this combination will allow the combined company to spread costs over a larger base of stores,"" Hoven said.
Big B said it will work with Revco to ensure a smooth transition.
Like many other regional drugstore chains, Big B has been fighting problems that have accompanied the burgeoning clout of managed health care companies and huge discount retailers. It has been hurt by deteriorating profit margins and sales and its earnings have disappointed Wall Street.
Industry experts say Revco is well-placed to capture profits in the Southeast by taking advantage of Big B's underused distribution centre and closing overlapping stores in Georgia.
""Revco will be able to integrate Big B really quickly,"" said Eric Bosshard of Midwest Research-Maxus Group.
Big B's profit margins began to tumble last year due to difficulty in calculating the impact of lower prescription prices paid by managed care providers. Although it invested heaviliy in a new computer system to better track profit margins, people familiar with the company have said its newly expanded distribution centre is operating at only 60 percent of capacity.
Analysts said one of Revco's first steps will be to assess store overlap, especially in Georgia, where Revco operates 180 stores and Big B has 160 stores.
""Once they get the distribution and the stores together, it will be a real profit centre for Revco,"" said John Strauss, of investment advisory firm Strauss Financial Group.
Revco also said it will revise and extend its tender offer for Big B shares until Nov 15. The offer had been set to expire Monday.
The two companies also said all litigation between them will be withdrawn.
After some haggling about terms, Revco earlier this month signed a confidentiality agreement with Big B, took a peek at its books and apparently liked what it saw.
The Big B board met over the weekend and accepted the new and higher offer from Revco. Details of other offers were not immediately known, although Eckerd Corp. was viewed as a potential bidder.
Eckerd declined to comment.
Big B, Inc. operates 397 units throughout the Southeastern United States.
Revco operates 2,202 stores in 14 contiguous Midwestern, Southeastern and Eastern states.
The deal with Big B was seen as a significant acquisition for Revco, which earlier this year was involved in a failed transaction with Rite Aid. The two companies had signed a pact for Rite Aid to buy Revco for $1.8 billion, but the deal collapsed after regulators expressed concern that the union would raise consumer prices.
",39
"The executive tapped to lead a a dissident slate of directors in a proxy fight against RJR Nabisco Holdings Corp said the current management has shown little progress in solving the company's problems.
""The management hasn't demonstrated that they're doing anything better than they were doing last year, so why not try again?"" said Tom Rattigan, who was nominated to the slate Monday by investor Carl Icahn.
Last year's similar effort by Icahn and investor Bennett LeBow was overwhelmingly defeated by shareholders.  
As of October 25, Icahn held a 7.3 percent stake in RJR.
The dissident slate supports an immediate spinoff of RJR's 80.5 percent owned Nabisco Holdings Corp food business.
RJR insists it also wants to spin off Nabisco, but says this is not an appropriate time to split up the company.
Rattigan told Reuters in a telephone interview that he began speaking with Icahn several months ago about a potential role and signed up with the investor on November 1.
""It appears to be an opportunity to get in and play a role at a company that seems to be having some major league problems,"" he said. Shares of RJR closed up 1/4 at 29-1/4.  
A former top executive at PepsiCo Bottling International and G. Heileman Brewing Co, Rattigan dismissed RJR's criticism that the slate does not contain any tobacco industry experts.
""Based on (RJR's) performance to date, I think that's good news,"" Rattigan said.
Rattigan said the slate intends to pursue a global settlement of tobacoo litigation claims. He was not specific about those plans, but said any global settlement must be an industry-wide effort.  
""It's in the interest of everybody that some sort of global settlement be undertaken to permit these companies to get on with their corporate existence and do what they should be doing,"" Rattigan said.
In a letter to RJR chief executive officer Steven Goldstone, Icahn also said the board nominees would raise the company's annual dividend to $2 per share and maintain that rate after the spinoff of Nabisco. RJR raised its annual dividend last March to $1.85 per share from $1.50.
According to a filing with the U.S. Securities and Exchange Commission, Rattigan was hired by Icahn's as a consultant on November 1 for $2 million.
Icahn noted in the letter to Goldstone that he will pay the expenses of the proxy fight and vowed not to enter into any agreement, merger or understanding at the company if the new board takes control.
",39
"Conrail Inc. and CSX Corp. so far have convinced the courts that their $8.6 billion merger plan should proceed, but they still need to win over unhappy shareholders who favour Norfolk Southern Corp.'s higher bid.
Lawyers and financial advisors were expected in the next few days to consider several plans aimed at persuading investors to approve a crucial measure needed for the deal.
Meanwhile, CSX said Thursday that its $110 cash tender offer for 19.9 percent of Conrail shares, which represents the first part of its plan to buy Conrail, was oversubscribed.
The proposed stock and cash transaction has angered many investors, who prefer an all-cash $10 billion offer by Norfolk Southern, based in Norfolk, Va.
Philadelphia-based Conrail has rejected the Norfolk Southern offer of $110 a share, saying the union with CSX provides more strategic benefits.
Sources close to the companies said no final decision has been made about how to woo Conrail shareholders, but options include sweetening the stock portion of the deal or setting a ""collar"" to guard against price volatility.
They will also consider revising the deal's terms to accelerate payment to investors, according to the sources, who did not want to be identified.
The two companies could also decide to keep the terms unchanged, betting that shareholders will ultimately choose the CSX offer over Norfolk Southern's offer, which cannot be formally considered by Conrail until July.
""There's only one thing they can do and that's to sweeten the offer. I don't know how they're going to get enough votes if they don't,"" said Thom Brown, managing director at investment firm Rutherford, Brown & Catherwood Inc., which holds some 50,000 shares of Conrail.
Richmond, Va.-based CSX and Conrail declined to comment on their plans, but acknowledged last week they were discussing increasing the value of the pact upon its consummation.
Sources close to the companies said there is no rush to make a decision, noting that Conrail can easily postpone the shareholder vote that is now slated for mid-December.
CSX and Conrail won a significant victory this week when a U.S. district court judge denied a request by Norfolk Southern to block the CSX-Conrail deal. An appeals panel also declined to block the first step of the deal.
Norfolk Southern, meanwhile, withdrew its motion for an expedited appeal of the federal court ruling that allowed CSX to buy the 19.9 percent stake in Conrail, since the tender offer expired at midnight on Wednesday.
But a group of Conrail shareholders pursuing a lawsuit and appeal similar to Norfolk Southern's did not withdraw their motion for expedited appeal. The group urged the court on Wednesday to hear an expedited appeal and ""sterlize"" the 19.9 percent Conrail stake by preventing CSX from voting it at a shareholders meeting needed for the merger to occur.
Because Pennsylvania corporate law prohibits a company from buying more than 20 percent of another company in a cash tender offer, shareholders will be asked in mid-December to approve a measure that would permit CSX to buy 40 percent.
The CSX-Conrail transaction calls for CSX to buy 40 percent of Conrail shares for $110 per share in cash and exchange the remaining 60 percent for CSX stock.
Sources close to the company said Conrail and CSX were well aware of the potential difficulties in winning the necessary votes.
Industry experts believe shareholders may be more willing to approve the 40 percent measure if they were guaranteed more favourable terms for the stock portion of the deal.
""They can't get the vote until they improve the back-end of the deal and they know that,"" one takeover specialist said.
Meanwhile, Conrail stock tumbled, reflecting the expiration of CSX's tender offer. The stock fell $2.25 to $94.625 on the New York Stock Exchange.
Based on Thursday's stock price, the Conrail-CSX transaction values shares of Conrail at about $95.10 each. The stock portion of the deal would be exchanged at a value of about $85.15 for each Conrail share.
",39
"Western Resources Inc. Wednesday offered to buy the rest of ADT Ltd. for $3.5 billion in cash and stock in a deal 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 telecommunications companies.
Topeka, Kan.-based Western Resources, which already owns 27 percent of ADT, said it would take its unsolicited bid for the rest of ADT directly to that company's 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 the offer in a letter in which he noted that ADT previously said it was not interested in a transaction with Western Resources.
""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,"" Hayes wrote to ADT Chairman Michael Ashcroft.
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 the New York Stock Exchange.
Industry experts said the bid was deliberately low and merely reflected 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.
ADT shares climbed $3.125 to close at $23.25 on the New York Stock Exchange on views that a transaction will take place at a higher price. Western Resources' stock rose 12.5 cents to close at $31.375, also on NYSE.
""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.
Boca Raton, Fla.-based ADT said it would review the offer and advised shareholders to await a recommendation from its board.
Long considered a leader in the electronic security industry, ADT earlier this year was to be acquired by Republic Industries Inc. for $5 billion in a deal valued by ADT at $29 a share. But the deal collapsed in September after months of uncertainty due to volatility in Republic's stock price.
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 spent much of 1996 laying the groundwork to buy the rest of ADT. It opposed Republic's bid for ADT and has agreed to buy six security properties this year, including Westinghouse Electric Corp.'s security business for $368 in a deal announced on Monday.
Last week, Western Resources announced plans to sell its natural gas assets to focus on its electricity and security businesses.
Although Western Resources has long been considered a potential buyer of ADT, the company was not yet expected to pursue a transaction.
Wittig said Western Resources did not pursue an offer for ADT while Republic was bidding because Western was consumed with its hostile $1.9 billion bid for Kansas City Power and Light. That transaction is still not resolved, but Western Resources is holding merger talks with the Kansas City, Mo.-based utility.
""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 in homes and businesses.
",39
"The outcome of a bidding war for Conrail Inc is increasingly likely to be decided by its investors, who will ultimately determine if the railroad should strike an $8.5 billion deal with CSX Corp when a $10 billion offer is also on the table.
Wall Street experts said Conrail was unlikely to be swayed from its planned merger with CSX despite a higher bid lobbed Friday by Norfolk Southern. ""Nothing has changed. I think a lot will depend on what happens with the shareholder vote,"" said Jeff Medford of William Blair & Co.  
Conrail has agreed to a stock and cash transaction with CSX valued at about $8.5 billion. Norfolk Southern, which had already outbid CSX, earlier Friday sweetened its all-cash offer to $10 billion.
Shareholders are considered key to the Conrail-CSX transaction because Pennsylvania corporate law prohibits CSX from buying more than 20 percent of Conrail in a tender offer without their approval. A shareholder meeting is slated for mid-December.  
Some shareholders have expressed unhappiness with the proposed CSX transaction. Conrail ""won't win the shareholder vote,"" predicted one arbitrager.
Arbitragers, who have been among the most vocal opponents of the Conrail-CSX deal, said that Norfolk Southern would further strengthen its position by aggressively urging  Conrail shareholders to defeat the CSX proposal.
""It's got to be like Bob Dole's marathon, but with a more successful conclusion,"" said one, referring to the 96-hour campaign blitz launched by the losing U.S. presidential candidate in the days before this week's election.  
Norfolk Southern chairman David Goode declined to be specific about the company's plans to woo shareholders.
""The numbers in our bid speak for themselves. It should be readily apparent that it's a superior offer. We're willing to talk to all of the constituencies involved, including shareholders and others who are interested in this, and we are doing that,"" he told Reuters in a telephone interview.
Conrail has said it will review the new Norfolk Southern offer, but the Philaelphia-based railroad also has defended the CSX transaction as a better strategic match.  
""We have high regard for Norfolk Southern and its board, but we simply do not believe that a sale of Conrail to Norfolk Southern is in the best interest of Conrail and its constituencies,"" Conrail wrote Norfolk Southern on Thursday before the bid was raised.
The new Norfolk Southern bid reflects an 18 percent premium over CSX's plan, which values Conrail at about $93 per share. Norfolk Southern has raised its bid to $110 per share.
Shares of Conrail rose 2-1/4 to 95-1/4 after the new bid.
Wall Street experts said Conrail and CSX, which already revised the terms of their transaction once, may feel pressured again to increase the portion of cash in their deal. However, most industry experts do not expect a revised bid to top the offer made by Norfolk Southern.
",39
"- Supermarket chain Food Lion Inc. said Thursday it will buy Tampa, Fla.-based Kash n' Karry Food Stores Inc. in a transaction valued at $341 million.
The two companies had been in talks for a transaction earlier this year, but dropped those discussions in August. It was not immediately known when talks resumed.
Under the agreement, Kash n' Karry shareholders will receive $26 per share in cash. The companies also said Food Lion will refinance $221 million of Kash n' Karry debt.
Supermarket chains have been gobbling each other up rapidly in a wave of industrywide consolidation.
The deal came one day after California-based grocery giant Safeway Inc. offered $2.3 billion for the 65.5 percent of supermarket chain Vons Cos. Inc  that it doesn't already own.
Earlier this year, Dutch group Ahold NV bought Massachusetts-based grocer Stop & Shop Cos. for $1.8 billion.
Salisbury, N.C.-based Food Lion is a unit of Belgian retailer Delhaize.
Food Lion is one of the 10 largest U.S. supermarket chains with more than 1,100 stores in 14 states. Kash n' Karry has 100 food stores and other facilities in west central Florida.
Shares of both companies were halted for trading shortly before the market closed. Earlier, Food Lion shares were up 6.25 cents to $8.56 on Nasdaq and Kash n' Karry stock rose 25 cents to $24, also on Nasdaq.
""This agreement will enhance competition in west central Florida by putting the financial resources of Food Lion behind the Kash n' Karry name, enabling Kash n' Karry to position itself more effectively as a viable competitor with the area's major supermarket chains,"" said Tom Smith, chief executive officer of Food Lion.
Food Lion said it planned to invest up to $150 million to improve Kash n' Karry stores in the next four years, with funding expected to come from Kash n' Karry cash flow from operations.
""While allowing us to continue operating our stores under the Kash n' Karry banner, it gives us access to the capital we need to accelerate our store remodeling programme and grow our business,"" said Kash n' Karry Chairman Ronald Johnson.
The companies said the transaction will increase earnings per share for Food Lion and result in cost savings. They were not specific.
They also said the deal, which is expected to close by early 1997, has been been approved by Kash n' Karry's board of directors. The board will also recommend that Kash n' Karry shareholders support the merger.
Institutional investors who together own more than 51 percent of Kash n' Karry common stock also support the deal, the companies said.
Food Lion said it has received a commitment from Chase Manhattan Bank to arrange and syndicate a new credit facility that will replace Food Lion's current borrowing facility and provide financing for the deal.
PaineWebber Inc. submitted a fairness opinion to Kash n' Karry's board and is acting as financial advisor to Kash n' Karry in connection with the transaction.
",39
"An independent shareholder advisory firm recommended Thursday that investors of Conrail Inc reject a key provision in the railroad's proposed acquisition by CSX Inc.
Maryland-based Institutional Shareholder Services (ISS), which provides corporate analyses to institutional clients, suggested that shareholders defeat a proposal that would permit CSX to pursue its proposed $8.5 billion stock and cash transaction.  
In making the recommendation, senior analyst Peter Gleason noted Norfolk Southern Corp's rival $10 billion cash bid that has been rejected by Conrail.
""We believe that all shareholders should be treated equally in any merger transaction, and because of NS's higher offer currently outstanding, we do not believe it would be in shareholders' best interest to opt out of the fair price provision at this time,"" Gleason wrote in a 16-page report.
Conrail investors are being asked to waive a Pennsylvania law that requires an all-cash payment by CSX, which already has bought 19.9 percent of Conrail in a cash tender offer.  
In October, CSX and Conrail announced a merger that calls for CSX to buy 40 percent of Conrail in cash and the rest in stock. Although Norfolk Southern has submitted a higher all-cash bid, Conrail contends the CSX offer is a better fit.
ISS disputed that argument, saying that both potential combinations would create an East Coast railroad powerhouse.
""However, CSX's front-end loaded, two-tiered takeover does not treat all Conrail shareholders fairly, and the lock-ups provided in the agreement have denied Conrail shareholders the possibility of accepting a higher payment for their shares,"" Gleason wrote.  
Under the agreement between Conrail and CSX, Conrail would be prohibited from entering a pact with another company before July 1997.
""The only thing prohibiting the higher offer from being presented to sharheolders are the barriers erected by Conrail to ensure the company merges with CSX,"" Gleason wrote.
CSX declined to comment on the report. Conrail also did not have any immediate comment.
Conrail has scheduled a special shareholder meeting for December 23 to consider a waiver of the Pennsylvania law.  
ISS, which held meetings with Conrail and Norfolk Southern, also recommended that shareholders reject a Conrail request to adjourn the meeting if more votes are needed to ensure passage of the waiver.
""In this case, shareholders already have the information they need to make their voting decisions. Once their votes have been cast, there is no justification to spend extra money to continue pressing shareholders for more votes,"" Gleason wrote.  
ISS also said the Conrail-CSX union could run into trouble from the Surface Transportation Board (STB), the federal regulatory agency overseeing railroads.
""Although Conrail and CSX believe STB approval and/or concessions will not create significant problems, we see the competitive issues as a major concern, and do not share Conrail's belief that STB approval of the transaction is assured,"" Gleason wrote.
He also noted that many shareholders expected CSX and Conrail to amend their pact to sweeten the stock portion of their proposed transaction.
""Conrail has indicated that it has had discussions with CSX about raising the back end of the consideration to make the offer more equitable to shareholders, but no decisions have been made to date,"" Gleason wrote.
He also said that Norfolk Southern would likely raise its rival offer if CSX sweetened the deal.
",39
"French holding company CGIP said on Friday it could strike a deal in the next few weeks to acquire a 28 percent stake in automotive parts firm Valeo SA from Italian businessman Carlo De Benedetti.
In a meeting with reporters, CGIP chairman Ernest-Antoine Seilliere described negotiations as nearing a ""momentum.""
""In the coming weeks, we could come to a conclusion,"" he said. He said it would be a longterm investment for CGIP.
Seilliere declined to discuss a potential price for the stake owned by De Benedetti's holding company Cerus.  
CGIP's efforts to buy a piece of Valeo moved a step closer late Thursday, when it sold half of its 20 percent stake in Crown Cork & Seal Co Inc for $560.6 million.
CGIP has said that profits from the sale would be used to finace the stake in Valeo.
""Now we have sold part of our assets, obviously we are seen as serious to buy Valeo, but we still have a way to go. We are serious about what we are doing,"" Seilliere said.
CGIP is a holding company with industrial and information technology investments.
Seilliere said the purchase of a stake in Valeo would fit its strategy to invest in firms that have a global presence. Seventy percent of Valeo's business is outside of France, he said.
He also dismissed the potential of Valeo falling prey to the cyclical nature of the autmotive business, saying that opportunities abound in growing economies around the world.
He noted that CGIP previously held a stake in Valeo and sold it in 1993. He also said that the company does not need any significant productivity or organizational changes.  
Although Seilliere appeared hopeful that a deal for the Valeo stake will be struck, he also said that CGIP would certainly consider another investment if the Valeo acquisition falls apart. He did not name any potential companies.
Regarding its stake in Crown Cork, which now totals 10.1 percent, Seilliere said CGIP's relationship with company had not been affected by the partial sale of its investment.
""Our team is still there. Nothing has changed,"" he said, noting that CGIP still has more than $600 million invested in the company.
CGIP decided to sell a portion of its Crown Cork & Seal holdings after investors and analysts expressed concern that packaging had grown to 50 percent of CGIP's assets, up from about 21 percent in 1986, Seilliere said.
",39
"Ashland Inc has quashed a threatened proxy fight by restucturing its core business, but the independent refiner must still prove its ability to prosper in an industry plagued by poor profit margins.
A series of actions unveiled Monday by Ashland was viewed as a significant step to convince investors that management will not stand by and watch profits erode.
""The question now is whether they can deliver. I think there will be more to come,"" said James Falvey, analyst at Smith Barney.  
Ashland earlier announced a series of steps aimed at enhancing profitability. They included a restructuring of business units, a share buyback program, the evaluation of strategic alternatives for its non-core exploration unit, and a program to evaluate and cut costs.
The Kentucky-based refiner has recently been pressured by a New York investment firm that had nominated a three-person slate for election to the company's board of directors at the January 30 annual meeting.
In announcing the restructuring on Monday, Ashland also announced Providence Capital Inc had withdrawn its slate.  
""They have addressed all the major issues we raised. We feel the plan is genuine and that they are sincere about defining a new era at Ashland,"" Herbert Denton, president of Providence Capital, told Reuters in a telephone interview.
Denton said representatives of Ashland met with Providence last week. Ashland also recently has met with institutional investors.
Although shares of Ashland showed little reaction to Monday's plan, analysts noted the stock has risen about $10 per share since September on views of a restructuring. The stock was trading unchanged at 46-5/8 in afternoon trading.  
Analysts widely expect Ashland to sell the exploration unit and participate in widespread consolidation taking place throughout the industry. The company did not disclose any cost-cutting targets or timeframe to implement the actions.
But analysts said the restructuring is a solid reflection on company veteran and chief executive officer Paul Chellgren, who is set to move into the role of chairman to replace retiring John Hall.
""I think this is positive. This is a quicker-than-expected start on restructuring,"" said Fred Leuffer of Bear Stearns & Co, who values the exploration unit at $425 to $450 million.
Analysts also said that the restructuring is likely to be an evolutionary process.
""It's not going to happen tomorrow. The results will prove themselves over time and if they don't, there will be further initiatives,"" said Barry Sahgal of Ladenburg, Thalmann & Co.
Meanwhile, Denton said his group will continue to monitor the company's progress.
",39
"Rite Aid Corp said it plans to swiftly integrate Thrifty PayLess Inc into its already-powerful company by attacking weaknesses in the regional drugstore chain's distribution and technology.
""To make this acquisition work, we have to reduce costs and we have to reduce costs rapidly,"" Rite Aid chief executive officer Martin Grass told more than 250 investors and analysts in a conference call.
In the latest drugstore merger to sweep the industry, Rite Aid announced plans to buy Thrifty PayLess for $1.4 billion.  
U.S. drugstores are consolidating at a feverish pace as the result of pricing pressures and costly computer upgrades that are essential in today's world of managed healthcare.
Industry analysts said Thrifty PayLess has been plagued by a weak distribution system and inefficient technology.
""It is our belief that our technology is a lot more sophisticated than what is being used at Thrifty PayLess and that there are significant benefits that we can bring -- not only to the store operations, but also to the customers,"" Grass said.  
Analysts expect Rite Aid to make significant progress reducing the Thrifty PayLess cost structure even though savings will not come from geographic overlap.  Rite Aid does not have any stores in Thirfty PayLess' West Coast markets.
""No one is as lean as Rite Aid,"" said Eric Bosshard of Midwest Research-Maxus Group.
But the proposed acquisition may create some new difficulties for Rite Aid, which typically has smaller stores and less varied merchandise than Thrifty PayLess.  Unlike Rite Aid, Thrifty PayLess sell plants, ice cream and shoes as well as traditional drugstore items.  
Concerns about Rite Aid's move into these new areas sent the company's stock down two to 33-7/8 in afternoon trade.
""This is something that is entirely outside their realm of experience.  That is a major question mark,"" said Joseph Ronning of Brown Brothers Harriman.
""These are completely different businesses.  These guys are general merchandisers,"" said Gary Vineberg of Merrill Lynch.
Grass addressed those issues in the conference call, saying that Rite Aid may add more merchandise experts to assess the different products.  
""There are certain lines of merchandise that we will continue to carry out West that we don't carry back East,"" Grass said.
Shares of Thrifty PayLess, which made its initial public offering in April at 14 per share, gained three to 21-3/8. Takeover stock traders said the deal values Thrifty PayLess at $23.32 per share.
The proposed acquisition of Thrifty PayLess seems to eliminate Rite Aid as a potential bidder for southeast drugstore chain Big B Inc.  Rite Aid has been viewed as a possible bidder for Big B, which is fighting a hostile takeover from Revco D.S. Inc.
But in announcing the Thrifty PayLess acquisition, Rite Aid also said that it is pulling out of Florida, Alabama and Georgia, which are Big B's key markets.
",39
"In yet another sign that U.S. utilities are branching out far beyond their traditional markets, PacifiCorp and Protection One Inc on Friday announced a marketing alliance aimed at boosting customer loyalty in an increasingly competitive industry.
Under the venture, customers of PacifiCorp subsidiaries Pacific Power and Utah Power will be offered a security system from regional alarm company Protection One.
The unusual alliance is viewed as the first of many creative ventures in an uncertain era of deregulation.  
""This is the start of what is going to happen all over the place.  It's a whole new business that will coattail on the aggressive nature utilities are starting to take.  One-stop shopping is becoming key from a marketing position,"" said Ron Chebra, manager of utilities and energy industries at AT&T Solutions.
Utilities are becoming increasingly attracted to security companies as they prepare to enter new markets that previously had been off-limits due to federal regulations.  In recent months, utilities have bought security firms or made large investments in them.  
""We're looking for new products and services that we can bring to our customer base as a way to build loyalty and ultimately build preference with our residential customers,"" said Rene Carroll, consumer products manager at PacifCorp.
""We've been looking at different ways of entering the home security business for over a year,"" she added.
The alliance will give Protection One instant access to the 1.4 million customers served by the PacifiCorp subsidiaries and extend its reach to Utah.  Previously, the regional security firm served six western states.  
At a recent conference on mergers in the security industry, Protection One officials declined to discuss potential revenue from the alliance but noted that capturing even five percent of PacifiCorp customers would be significant.  Customers accepting the offer will receive free installation of a home security system with the purchase of a two-year agreement for monitoring services.
The security system's alarm panel also will hold thermostat and lighting controls and remote access.
The alliance is expected to be just the first step for Protection One, which is trying to take advantage of new opportunities that are emerging from deregulation of the utilities and telecommunications industries.  ""We think this is the first of quite a few announcements we'll be making in the next 12 months or so,"" Protection One chief financial officer John Hesse told Reuters at the security conference.
The alliance re-establishes a link between the two companies that was dissolved several years ago.  Protection One began as a subsidiary of PacifiCorp in 1988, but the alarm company split off in a management buyout three years later. Protection One then became a publicly-traded alarm company in 1994.
",39
"Diamond Shamrock Inc said it plans to close its merger with Ultramar Corp on December 3 and announce a new organizational structure shortly thereafter.
In a meeting with security analysts, chief executive officer Roger Hemminghaus said Diamond Shamrock is close to the sale of its telecommunications business and its natural gas exploration and production operations in Bolivia.
Hemminghaus also said that the new Ultramar Diamond Shamrock Corp will eagerly scour the industry for refining and marketing acquisitions and joint ventures.  
""There are bound to be some opportunities that are out there for us,"" Hemminghaus said.
Diamond Shamrock and Ultramar announced in September a merger that will create a new company with a combined equity value of more than $2.3 billion.  Hemminghaus, who will become chairman and chief executive of the new company, noted that opportunities will come from consolidation occuring elsewhere in the energy industry.  He noted a combination being discussed by Texaco Inc and Royal Dutch/Shell Group's Shell Oil Co ""means there are going to be some quality assets that become available in certain markets.""
Asked whether his new company would be interested in a joint venture similar to others taking place in the industry, Hemminghaus said ""You bet we would"".
He flatly dismissed speculation that Diamond Shamrock entered the pact with Ultramar because it was being targeted as an acquisition candidate.
""This was in no way a defensive move on our part,"" he said, adding Diamond Shamrock was not approached by another firm.  He also said Diamond Shamrock had considered a transaction with Unocal Corp, which on Monday announced the sale of downstream assets to Tosco Corp.
""Had this deal (Ultramar) not gone through, we would have been looking very seriously at this (Unocal) opportunity.  If the timing had been a little bit different, we would have been out there looking at it,"" he said.
Diamond Shamrock anticipates the union with Ultramar will result in cost savings and synergies that will add $0.20 per share to earnings in 1997 and $0.60 per share in 1998.
The merger with Ultramar marks the second major transaction for Diamond Shamrock since last December, when it bought National Convenience Stores Inc.
Hemminghaus said cost savings of that transaction have exceeded preliminary estimates.  Savings this year are expected to be $31.5 million compared with earlier estimates of $20 million and estimated savings for 1997 are now set at $46.5 million, he said.
",39
"In yet another sign that utilities are branching out far beyond their traditional markets, PacifiCorp and Protection One Inc. on Friday announced a marketing alliance aimed at boosting customer loyalty in an increasingly competitive industry.
Under the venture, customers of PacifiCorp subsidiaries Pacific Power and Utah Power will be offered a security system from regional alarm company Protection One.
The unusual alliance is viewed as the first of many creative ventures in an uncertain era of utility deregulation.
""This is the start of what is going to happen all over the place. It's a whole new business that will coattail on the aggressive nature utilities are starting to take. One-stop shopping is becoming key from a marketing position,"" said Ron Chebra, manager of utilities and energy industries at AT&T Solutions.
Utilities are becoming increasingly attracted to security companies as they prepare to enter new markets that previously had been off-limits due to federal regulations. In recent months, utilities have bought security firms or made large investments in them.
""We're looking for new products and services that we can bring to our customer base as a way to build loyalty and ultimately build preference with our residential customers,"" said Rene Carroll, consumer products manager at PacifCorp.
""We've been looking at different ways of entering the home security business for over a year,"" she added.
The alliance will give Protection One instant access to the 1.4 million customers served by the PacifiCorp subsidiaries and extends its reach to Utah. Previously, the regional security firm served six western states.
At a recent conference on mergers in the security industry, Protection One officials declined to discuss potential revenue from the alliance, but noted that capturing even 5 percent of PacifiCorp customers would be significant.
Customers accepting the offer will receive free installation of a home security system with the purchase of a two-year agreement for monitoring services.
The security system's alarm panel also will hold thermostat and lighting controls and remote access.
The alliance is expected to be just the first step for Protection One, which is trying to take advantage of new opportunities that are emerging from deregulation of the utilities and telecommunications industries.
""We think this is the first of quite a few announcements we'll be making in the next 12 months or so,"" Protection One Chief Financial Officer John Hesse told Reuters at the recent security conference.
The alliance re-establishes a link between the two companies that was dissolved several years ago. Protection One began as a subsidiary of PacifiCorp in 1988, but the alarm company split off in a management buyout three years later. Protection One then became a publicly-traded alarm company in 1994.
",39
"Fast-growing Republic Industries Inc., which is led by Florida entrepreneur Wayne Huizenga, said Thursday it would buy Alamo-Rent-A-Car Inc. for $625 million in a move to sharply expand its automobile business.
The deal comes less than six weeks after the collapse of Huizenga's $4.3 billion plan to buy security firm ADT Ltd.
""Leisure travel is a fast growing segment of the automobile rental industry and Alamo's innovative leadership in this growth sector of the automobile rental marketplace is consistent with our strategy of building consumer-oriented, service related businesses with recognised brand names and strong management,"" Huizenga said in a statement.
Republic is expected to use Alamo to expand its burgeoning auto business rooted in used-car company AutoNation USA.
Huizenga ""wants to be the largest used-car sales, leasing and rental provider. It makes sense to have the Alamo fleet as a warehouse for his vehicles,"" said Andrew Jeffrey, analyst at Robertson Stephens & Co.
Alamo is the fourth-largest rental car company in the United States, with a fleet of about 130,000 vehicles. Alamo operates in 42 states in the United States and has operations in 10 European countries and Canada.
Alamo founder and Chairman Michael Egan, who owns about 94 percent of the company, will continue as chairman of Alamo.
Huizenga said Republic's AutoNation USA car business will benefit from Alamo's strong relationships with manufacturers and other automotive suppliers.
""The combination of Alamo with Republic's 'like-new' automobile retailing concept is an exceptional fit that will enable AutoNation USA to accelerate its business plan and create a unique, dedicated and predictable source of inventory for our megastore distribution system,"" he said.
Republic bought used-car company AutoNation earlier this year and opened its first superstore about two weeks ago in Florida. It plans to open three or four more AutoNation stores this year and quickly expand the chain so there are some 80 stores around the nation by the end of the decade.
AutoNation will be supplemented by Republic's recent $95 million purchase of used-car superstore firm CarChoice Inc.
Investors praised the latest acquisition by Republic, bidding the company's stock up $2.875 to $33.625 on Nasdaq. The deal will be accounted for as a pooling of interests.
In addition to the automotive industry, Republic specialises in electronic security and solid waste companies. Huizenga also owns the professional Florida Marlins baseball, Panthers hockey and Dolphins football teams.
Huizenga suffered a setback in late September when his plan to buy security firm ADT was called off after weeks of uncertainty. Although the stock deal was viewed positively from a strategic standpoint, it fell apart due to volatility in Republic's stock and the inability of the companies to revise terms of the transaction.
Analysts saw little chance of that happening with Alamo.
""I think Alamo provides Republic everything that ADT did, plus more, from the auto side,"" said Jordan Hymowitz of Montgomery Securities, who rates Republic shares as a buy.
Republic also said it will pursue more car deals.
""We're interested in growing in virtually every segment of the automobile industry,"" spokesman Ronald Castell said, citing rental, used cars, repairs and financing.
The acquisition of Alamo marks the latest in a flurry of transactions in the rental car industry.
On Wednesday, ADT said it planned to sell its U.S. auto-auction business, ADT Automotive. The unit is the nation's second-largest automobile auction company, and its sale would mark ADT's complete exit from that business after it sold its European auto-auction unit last year.
Last month, hotel and real estate operator HFS Inc. bought Avis Inc., the world's second largest car rental company, for about $800 million. HFS has said it will pursue another similar acquisition and launch an initial public offering for part of its rental car subsidiary next year.
Ford Motor Co., which owns Hertz, in July announced it was expanding its rental car business with the acquisition of Budget Rent-a-Car. Ford already had owned part of Budget.
Meanwhile, Chrysler Corp. wants to sell subsidiaries Dollar Rent-A-Car and Thrifty Rent-A-Car.
",39
"Shareholders of Conrail Inc blasted the company's revised merger pact with CSX Corp, charging that the new terms fall short of a rival bid launched by Norfolk Southern Corp.
In a conference call with Conrail, several investors also threatened to tender their shares for $110 and then vote against the proposed merger, according to market sources who participated in the call.
""Some of the shareholders were really angry and said this was being crammed down their throats,"" said an arbitrager.  
Conrail earlier announced that it was amending the proposed merger agreement with CSX to reflect a premium in the cash portion of the transaction. Under the new terms, CSX will pay $110 cash per share for 40 percent of Conrail shares instead of the previous amount of $92.50.
The remaining 60 percent will be exchanged at the original ratio of 1.85619 CSX shares for each Conrail share.
Based on CSX's current stock price, the deal values Conrail shares at about $93, market sources said.
Norfolk Southern has offered to pay $100 cash per share for all of Conrail's outstanding shares.  
Investors also were unhappy with a three-month extension of the time in which Conrail is locked into the deal. The revised pact says the Conrail board cannot withdraw from the pact or agree to a competing transaction before July 12, 1997.
""It's an outrage. This thing is now locked up tighter than ever,"" said another arbitrager.
Conrail defended the revised transaction by saying it provides more strategic benefits than the offer proposed by Norfolk Southern, said people who listened to the call.
In a move that had been widely expected, Conrail also earlier formally rejected the Norfolk Southern offer.  
A source familiar with the companies involved said the Conrail board met until late Tuesday night and then hammered out the revised pact with CSX in the early morning hours of Wednesday.
Shares of CSX fell 1 to 43 amid broad market gains. Conrail stock rose 1-3/4 to 94 and Norfolk Southern shares fell 7/8 to 88-1/4.
Meanwhile, Norfolk Southern described the new CSX offer as ""significantly inferior"" to its proposal and reaffirmed its bid of $100 per share.
",39
"International Business Machines Corp. said Wednesday it agreed to buy Edmark Corp., a publisher of children's education software, for $80 million in cash in a move to focus its consumer business on learning at home.
The world's largest computer maker said it would launch a tender offer for all of Edmark at $15.50 a share. The company, based in Redmond, Wash., where software giant Microsoft Corp. is based, makes software aimed at students in kindergarten through 12th grade.
Analysts said the move will strengthen IBM's effort to market personal computers and software to consumers.
""Edmark has some very valuable properties. This acquisition should be seen as one in a series of major moves that will help IBM achieve some of its goals in the consumer market,"" said Richard Zwetchkenbaum, director of consumer research at International Data Corp., a market research firm.
Analysts said many of Edmark's titles, including its newly released Mighty Math Series, Stanley's Stickers Stories and its Thinkin' Things Series, were gaining popularity.
Some of IBM's consumer software titles, such as its recent CD-ROM based on the Pinnochio movie, and other CD-ROMS with movie tie-ins, have not fared well.
""They have had mixed results,"" Zwetchkenbaum said, referring to IBM.
The deal will also give Edmark access to IBM's worldwide distribution network, which it needs to compete in the cut-throat consumer retail market, where the fight for shelf space can sometimes make or break a software company.
Following the news, Edmark's stock jumped $3.8125 to $15.25 on Nasdaq and IBM rose $1.50 to $134.75 on the New York Stock Exchange.
IBM said the directors and executive officers of Edmark have agreed to sell their shares.
IBM said it plans to operate the unit under the Edmark name in Redmond, with Jim Firestone, the head of its consumer business, overseeing and directing operations. Edmark will be the core of its plans to focus more on educational computers.
""This gives us a very strong foundation,"" said Firestone, general manager, IBM Consumer Division, in an interview. ""We are working with a handful of other firms, but I expect Edmark to be the real core of this activity. It is a base upon which we expect to grow.""
Firestone, formerly an American Express Co. executive, was named to head IBM's newly created consumer business in July 1995. He faced the daunting task of overhauling IBM's previous forays into the home PC market, which have not gone well. Nor is it well known for its consumer software.
As part of refocusing IBM in the consumer arena, Firestone said IBM will only choose a few places to compete, and one of those areas will be the family educational market.
""I am not interested in the entertainment side of consumer software,"" Firestone said. He also said IBM's latest Aptiva home PC models introduced in September were gaining market share. The machines are being marketed as a family learning tool and Edmark software will fit with that focus.
Analysts also said more deals in educational software could be coming since stock prices have fallen. Edmark's shares have traded as as $43.50.
The low price that IBM paid for Edmark, ""reflects the distress of the industry,"" said Scott McAdams, of Ragen Mackenzie. ""The whole sector's fortunes have changed.""
",46
"One of the hottest topics this week at an Internet show is so-called ""push technology,"" which directly broadcasts customized news to a networked PC, but it is also already seen as the next area ripe for a shakeout.
Internet broadcasters are lead by companies like PointCast Inc., a privately-held firm in Santa Clara, Calif., which announced a major deal with Microsoft Corp on Tuesday.
PointCast of Cupertino, Calif., and several other start-up companies deliver customized news, or specific Web sites, depending on the service, to consumer or corporate users, several times a day, so that a user doesn't have to go to the Internet and wait, the content is delivered.
""Making the Internet a broadcast medium is a direction that a lot of companies are going in, but that's already really crowded,"" said Ted Julian, an analyst with IDC Corp.
At Internet World, there are several privately-held push technology companies that are exhibiting and demonstrating their service, and trying to differentiate themselves amid all the hype about Internet broadcasting.
PointCast was the first company to develop these systems, called personalized broadcast systems, and it now has 1.7 million subscribers. It delivers news from the New York Times, the Boston Globe, Reuters Holdings Plc, and now, MSNBC, the online venture of Microsoft and General Electric's NBC.
PointCast and most of the other startup companies all operate on the same model, which is an advertising-based model. These companies sell advertising space on their service and offer the service for free to subscribers. By building up lots of subscribers, they can gain more advertising revenue.
The deal PointCast signed Tuesday with Microsoft has the potential to significantly expand its subscriber base, because PointCast will become part of its next generation desktop software.
The Boston-based Yankee Group said in a study to be soon released that the Internet broadcasting market will significantly affect the way companies collect advertising dollars on the World Wide Web.
Yankee is predicting that by 2000, Internet broadcasting will be worth $5.7 billion in revenues.
But with many more companies arriving on the scene and Microsoft and Netscape Communications Corp getting into this market, consolidation in on the horizon, because media companies will not want to develop a channel for each delivery system, most of which for now are proprietary.
""There is no way I am going to download all four of these, and I am in the industry,"" said Jerry Yang, one of the founders of Yahoo! Corp. ""This is a huge issue.""
Even the players themselves are also predicting a shakeout, but each company predicts it will be one of the winners.
Some of the other players include Freeloader, which was recently purchased by Individual Inc. Freeloader lets subcribers customize whatever Web sites they want delivered to their desktop, plus the news that is available on Individual.
""Clearly there will be a big shakeout,"" said Sunil Paul, president of Freeloader. ""PointCast clearly stands out and we will be one of them (survivors).""
Another talked about startup, called IFusion, is offering television-like content with video and audio in its service which will be introduced early next year, called Arrive. The company also offers development for media companies.
""Ultimately there will be some sort of shakeout and we will be left standing,"" said Candice Meyers, director of content development at IFusion, based in New York.
",46
"A top executive at Compaq Computer Corp. said Thursday he was leaving the world's biggest personal computer maker and joining an Internet startup, giving credibility to the startup and setting in motion a realignment of Compaq's sales managers.
The executive, Ross Cooley, is leaving a position where he was in charge of Compaq's $7 billion North American computer business for a job at a four-month-old company with the high-tech name of pcOrder.com
At pcOrder.com, Cooley, 55, will fill the as-yet unfilled positions of chairman and chief executive officer and have a salary of $1 a year, plus stock options.
His move from an executive suite at a Fortune 500 company to a technology startup mirrors that of several other executives over the past few years, notably, the departure of Alex Mandl from AT&T earlier this year.
Cooley's move provides instant credibility to pcOrder.com, which provides a marketplace on the Internet for buying and selling personal computers and related equipment.
Cooley's retirement had been rumored in the industry for several months, and Compaq announced that James Schraith, formerly president of The Cerplex Group Inc. and president of AST Research Inc., is replacing Cooley.
""Ross's plan to retire has been in discussion for awhile and there were some rumors flying,"" Eckhard Pfeiffer, president and CEO of Compaq, said in an interview. ""The time has come and obviously as you can see the succession is already in place ... Ross has been a great leader.""
At the same time, Compaq created a new sales infrastructure, hiring Richard Snyder, a Dell Computer Corp. executive, for a newly-created position of general manager, worldwide sales. All the heads of Compaq's five geographical sales regions -- Asia Pacific, Europe, Middle East and Africa, Japan, Latin America and North America -- will report to him.
Previously, these regions all reported directly to Pfeiffer. But as Compaq has quickly grown to an almost $18 billion company in recent years, Pfeiffer said he needs another executive to stay in touch with the day-to-day activities of its worldwide sales and support organization.
""Fifteen people have been reporting to me up until this morning when we announced this change,"" Pfeiffer said. ""That is a huge top management organization. As the company grows, my tasks change.""
Compaq has grown from its origins as one of the first companies to successfully clone the IBM PC in the early 1980s to become the leading PC maker in the world. Cooley is known for his strong relationships with the PC sales channel and his role in building Compaq's massive distribution.
""My feelings in joining pcOrder are similar to those I had in joining Compaq almost 13 years ago,"" Cooley said in a statement. ""Back then, I saw the irrefutable logic of the PC as a new paradigm in computing. Today, I believe pcOrder's technology and vision represent an irrefutable value proposition.""
Before joining Compaq in 1984, Cooley held several sales and marketing positions at International Business Machines Corp., where he worked for 18 years.
""Getting Cooley is really a coup for pcOrder,"" said John McCarthy, a Forrester Research analyst, adding that Cooley's connections in PC distrubution will give pcOrder more credibility as it builds its system. Cooley's acceptance of $1 a year for salary, plus stock options, is also a ""big bet on the company's upside (potential),"" McCarthy said.
pcOrder for now is still private, but the company is contemplating a public offering eventually.
""We do not have a set plan or a set timetable, but we are seriously considering it,"" said founder and President Christina Jones. Jones will continue as president of pcOrder. The post of chairman and CEO had been vacant since the start-up was founded in June.
pcOrder.com is a marketplace on the Internet, where PC makers, components makers and distributors list information and receive orders.
Currently, sales representatives and customers user pcOrder to configure build-to-order PCs, compare prices, and place orders over the Internet. The system contains information on over 150,000 products in the PC industry from over 800 manufacturers.
",46
"Upstart satellite company EchoStar Communications Corp -- in the business only since March -- gave the nascent industry a major jolt this month when it cut prices sharply.
Then on Monday, Thomson, which dominates the satellite TV dish market, matched EchoStar's $199 price.
Thomson executives said the new price will surely shake up the industry and fuel sales for what is the said to be the fastest growing consumer electronics product ever -- one that even now is taking market share from the cable industry.  
""It will completely change the nature of the business,"" said Joe Clayton, an executive vice president at Thomson, the U.S. unit of Thomson-CSF in France.
The move by Thomson cut the price of the RCA brand digital satellite system by as much as $200 a unit. Combined with a $200 cash back offer by programming providers DirecTV -- a unit of Hughes Electronics Corp -- and U.S. Satellite Broadcasting Co, it cuts the total price to $199 for consumers who pre-pay for one year of programming.
The lower price will make it harder for new entrants in the industry to make money.  
""We know the telcos and the cable companies are getting more involved,"" Clayton said. ""We are going to capitalize on our strengths now.""
He added that the $199 price will make the ""awareness base explode.""
Thomson has an estimated 45 percent of the digital satellite system dish market, which amounted to 3.4 million units at the end of July, according to the Carmel Group.
""It's been a real winner for them,"" said Jimmy Schaeffler, an analyst at Carmel, a market research firm in Carmel, Calif. ""Plus it has launched them into the international marketplace.""  
Schaeffler said that, outside the United States, satellite television is gaining markets where there is no cable because it can leapfrog installing massive cable systems.
""Most of the rest of the world is not very cable wired, so there is a clear opportunity for direct broadcast satellite,"" Schaeffler said. Satellite TV is also becoming big in the U.S., as vaunted digital cable systems undergo trials.
New competitors see an opportunity in digital satellites -- a technology that is here now and working. MCI Communications, aligned with Rupert Murdoch's New Corp Ltd, already has a valuable U.S. satellite slot.  
When asked how low prices of the satellite dishes could go, Clayton joked he had never seen prices in consumer electronics go up. Analysts expects prices to keep falling.
""Maybe Charlie will take it to zero, but I don't think we will,"" Clayton said of EchoStar chairman Charles Ergen.
A spokeswoman said Englewood, Colo.-based EchoStar, which launched its satellite network in March, already has 125,000 subscribers for its programming, which has 40 TV channels and 30 of music, compared with 175 channels offered by DirecTV. The launch next month of a second satellite will increase its offerings to up to 200 channels, EchoStar said.
",46
"International Business Machines Corp. unveiled its Internet strategy Tuesday and announced partnerships with retailers, oil companies and other companies to boost business over the global computer network and corporate ""intranets.""
""We feel very, very good about the Internet as a business and about where we are going,"" Irving Wladwasky-Berger, the general manager of IBM's Internet division, said at a news conference.
The Internet unit was formed less than a year ago and has become a key strategic business for the world's largest computer maker.
IBM is helping customers develop a wide range of electronic commerce applications, including an electronic trading system, an Internet retailing outlet, and a service for buying electrical power over networks. Revenues, however, will come from the usual sources of hardware, software and services as it fuels demand for its products and services.
""We will continue to make money the 'old-fashioned' way, by selling a lot more systems, software, services and solutions,"" Wladawsky-Berger said. ""By leveraging our core businesses, we can sell more of what we are good at.""
He was not more specific about what kind of financial opportunity the corporate networks known as intranets and the Internet represent for IBM.
But IBM expects the worldwide information technology industry to grow to $1.2 trillion, from $800 billion, in the next four years, with 60 percent of that growth driven by network computing, he said.
One novel partnership IBM announced Tuesday was with Siemens AG, the German conglomerate, for the electric utility industry.
IBM and Siemens Power Systems Control announced a service to let electric utilities use computer networks, including the Internet, to sell excess power transmission capacity. Pacific Gas and Electric Co. is the first customer.
IBM also announced 13 additional new retailers which are joining its Internet shopping mall, called World Avenue, such as Gottschalk's, Hudson Bay, Avante Jewelry and others. Consumers can purchase goods quickly and securely via the World Avenue service on the World Wide Web, the graphical portion.
IBM also announced PetroConnect, a network-based service for the petroleum industry, with digital databases, maps, surveys, well logs, seismic data and other geographical and geological data, for all segments of the industry.
In another industry-specific application, IBM and partner Charles Schwab Inc. demonstrated its electronic trading system, called e.schwab, which lets customers request quotes, check account balances and execute trades on their Internet Web site, which runs on IBM's SP2 supercomputers.
IBM also touted Lotus' Domino software, which is the next version of Lotus Notes designed using Internet technology.
IBM said that Domino is one of the ""jewels in its crown,"" that will be targeting the Web server software market, which market research company Forrester Research predicts will reach $9 billion by 1999.
Lotus Development President Jeff Papows made several jabs at both Microsoft Corp. and Netscape Communications Corp. and their initial emphasis on the browser wars, but said the battle was moving to group-oriented software.
Papows quoted Netscape's co-founder Marc Andreessen as saying that in 1997 the big war will be over groupware and e-mail. ""We think Marc is right,"" Papows said, adding that whether they can take those markets by storm is the question.
",46
"America Online Inc., responding to the competion posed by the Internet, said Tuesday it would reorganize its business and unveiled a flat-rate $19.95-a-month pricing plan.
The world's biggest online services company said it was taking $460 million in charges this year as it restructures its operations.
As part of its reorganization, AOL plans to separate into three operating units -- AOL Networks, to oversee its flagship Internet online service; AOL Studios, for creating online programming; and ANS Communications, its network arm, the Dulles, Va.-based company said.
AOL said it would begin offering a number of new pricing options, including a flat monthly rate of $19.95 for unlimited access. The pricing action, which was widely expected, matches the recent pricing by Microsoft Corp. when it re-launched the Microsoft Network and the rates of Internet access providers.
As part of its restructuring, AOL named Robert Pittman, former chief exectutive of MTV Networks, to oversee AOL Networks. Pittman, most recently chief executive of Century 21 Real Estate Corp., had forged MTV into the first profitable basic cable network company.
Pittman also headed Time Warner's Inc.'s Six Flags amusement park chain, where he oversaw four straight years of record growth in attendance, revenues and earnings, AOL said.
The company said it was taking a $385 million charge in its fiscal first quarter, which ended Sept. 30, to account for deferred subscriber acquisition costs, an accounting method for which it has been heavily criticised by Wall Street.
AOL also said it plans to take a one-time charge of up to $75 million in the current quarter for costs it expects to incur as it reorganizes.
AOL's stock, which recently moved to the New York Stock Exchange from the Nasdaq market, jumped $1 to $25.675 and it was among the most active issues on the NYSE, as Wall Street applauded its rejigging of its accounting methods.
""We are moving to remove this distraction from earnings,"" AOL Chairman Steve Case told reporters on a conference call. ""The focus here is to simplify how people really look at this business. We are confident that people will see the underlying momentum.""
Analysts do expect some pressure on the company's gross profits as a result of the new pricing, but they said the moves were necessary to compete with the growing pressures from Internet access providers and to keep its subscribers.
AOL expects to report a second fiscal quarter loss, break-even in the March quarter and return to profitability in the quarter ending in June, its fourth fiscal quarter.
""It's a very bold, clever and necessary set of moves by America Online to get their financial house in order and reposition themselves as a diversified media company,"" said Adam Schoenfeld, a vice president at Jupiter Communications.
""AOL was for a long time able to ignore the going rate and market vicissitudes because of its pre-eminent position, but those positions only last so long,"" Schoenfeld added.
AOL said the company added nearly 250,000 net new subscribers in October as it began to address some of the customer retention problems it encountered during the traditionally slower summer months.
Case said the company was still on target for reaching its 10 million subscribers sometime during calendar 1997.
""The phones have been ringing off the hook today from people who are eager to subscribe to the new AOL,"" Case said. ""We now believe we have the strategy in place and a team in place to take AOL to the next level.""
Ted Leonsis, who currently heads AOL Services Co., was named to head the newly formed AOL Studios, and Bruce Bond, hired this year to lead ANS Communications, will continue in his current role with that unit.
AOL said its new, more competitive pricing structure would take effect immediately.
The plans calls for two unlimited pricing tiers to provide a ""comfort factor"" for heavy and medium users, and a $4.95 plan for light users. AOL said it will offer a standard monthly plan for unlimited AOL use, including Internet access, for $19.95.
It will also offer advance-payment rates of $14.95 a month for customers who pay for two years, and $17.95 per month for those who pay in advance for one year.
The company also said it will charge a ""bring-your-own-access"" rate of $9.95 per month, offering unlimited access to the proprietary content available only on AOL to people who already have a separate Internet access connection.
AOL will also offer a light-usage programme providing three hours of AOL a month for $4.95, with additional time priced at $2.50 per hour.
",46
"International Business Machines Corp said its $80 million acquisition of Edmark Corp will serve as the core for the computer giant's plans to focus on education in its fledgling consumer products unit.
The deal will also give Edmark access to IBM's worldwide distribution tentacles, which it needs to compete in the cut-throat consumer retail market, where the brutal fight for shelf space can sometimes make or break a software company.
""This gives us a very strong foundation,"" said Jim Firestone, general manager, IBM Consumer Division.  
""We are working with a handful of other firms, but I expect Edmark to be the real core of this activity,"" Firestone added. ""It is a base upon which we expect to grow.""
Firestone, formerly of American Express Co, was appointed to head up IBM's newly-created consumer business in July, 1995. He was faced with a daunting task because IBM's previous forays into the home PC market have not met with much success and it is not well known for its consumer software.
As part of his refocusing of IBM in the consumer arena, Firestone said IBM will only choose a few places to compete, and one of those areas will be the family educational market.  
""I am not interested in the entertainment side of consumer software,"" Firestone said. He also said IBM's latest models of its Aptiva home PC that it introduced in September, is gaining market share, where it is being marketed as a family learning tool. Software from Edmark will fit in with that focus.
""IBM is focused on learning as the magic bullet that will elevate their position and raise their profile,"" said Richard Zwetchkenbaum, director of consumer research at IDC/Link. ""Edmark has some very valuable properties...This acquisition should be seen as one in a series of major moves that will help IBM achieve some of its goals in the consumer market.""  
Analysts said that many of Edmark's software titles, such as its newly-released Mighty Math Series, Stanley's Stickers Stories and its Thinkin' Things Series are very popular in the industry. IBM's consumer software titles, such as its recent CD-ROM based on the Pinocchio movie, have not fared well.
""They have had mixed results,"" said Zwetchkenbaum.
Analysts also that there could be more deals in the educational software market, because some of the stock prices have fallen so low and the competition is fierce. Edmark's shares once traded at a 52-week high of 43-1/2.
",46
"International Business Machines Corp is expected to report solid third quarter earnings Monday, but because its new mainframes did not ship in big volumes until the end of the quarter, analysts said they do not expect any big upside surprises.
According to First Call, the computer giant is expected to report earnings in the range of $2.17 to $2.60 a share, with a consensus estimate of $2.43 a share, versus $2.30 a year ago.
IBM is also expected to have a negative impact from currency moves, but not as big as its hit in second quarter.
",46
"Compaq Computer Corp., the world's largest personal computer maker, will launch its first computer workstations this week with low-cost entrants that already have at least one workstation maker scrambling.
""They have a fighting chance to really threaten some of the traditional vendors,"" said Keren Seymour, an analyst with International Data Corp., a market research firm.
On Tuesday Compaq will unveil three systems in the ""personal workstation"" area, the faster-growing segment of the $15.1 billion market for workstations -- high-powered computers used by engineers and designers to perform complex calculations requiring enormous power.
Traditional workstations run on the UNIX operating system and the market has been dominated by Sun Microsystems Inc., Digital Equipment Corp., International Business Machines Corp. and Hewlett-Packard Co.
But in the past two years, Microsoft Corp's Windows NT operating system has been making major inroads and a host of companies now develop lower-cost workstations running NT.
According to IDC, the personal workstation market -- workstations selling at prices from $4,500 to $10,000 -- is growing at a faster pace than traditional, UNIX-based arena, where systems cost from $17,000 up to $100,000.
While Windows NT cannot yet handle some of the memory-intensive, highly technical applications, Seymour said, NT-based workstations are widely used for financial modeling, animation, and computer-aided design.
Engineers can also run their desktop applications, such as spreadsheets, word processing, and electronic mail, on the same system, instead of having two separate computer systems.
""It's growing at an average rate of 44 percent a year,"" Seymour said of the personal workstation area, compared with traditional workstation growth of 7.5 percent, on a compounded annual growth rate, through the year 2000.
Already, Houston-based Compaq's expected entry in the market has at least one major vendor nervous.
Last week, IBM held a hastily-arranged conference call for analysts to discuss the formation of a new business unit that will develop Intel-based workstations running NT.
""It was an answer to Compaq's initiative,"" said Sam Albert, an industry consultant in Scarsdale, N.Y. Otherwise, he asked, ""Why would IBM give a heads up for a product that isn't ready until March?""
IBM's current line of workstations, the RS/6000 family, are designed around IBM's PowerPC chip and run on the UNIX operating system. In its third-quarter earnings report, however, IBM said its workstation business was flat, another indicator of the increasingly popularity of the lower-cost NT-based machines.
Compaq is expected to introduce three models in the $5,000 to $10,000 range, IDC's Seymour said. A Compaq spokeswoman declined to comment on the products to be unveiled Tuesday.
PC Week, an industry trade magazine, reported last week that Compaq will price its entry-level workstation at $5,000, targeted to molecular modeling and computer-aided design.
Two other models, for the animation creation business, are priced from $8,000 to $10,000, PC Week said.
As part of its recent product revamp, Silicon Graphics Inc., long a leader in the animiation workstation area, also recently introduced a less-expensive model called the O2, which runs on UNIX, in response to the growth in the NT-based machines.
But analysts said SGI and Sun Micro will not likely embrace the Microsoft operating system NT anytime soon, even though it is poised to become the faster-growing workstation segment.
""Sun and SGI would rather die than do NT,"" said Seymour. ""That's the unfortunate thing ... At some point, the NT market share is going to be bigger than theirs.""
",46
"A subsidiary of construction and engineering giant Bechtel Corp. said Monday it will unveil a new Internet gateway Tuesday as it seeks to break what it says is an oligopoly consisting of the phone companies that manage most of the world's Net hubs.
Genuity Inc. said the gateway, known as a network access point, and a new service dubbed Hopscotch would relieve the traffic jams now bedeviling the Internet, resulting in faster, more reliable Internet service for consumers and corporations.
The network access point, which will be based in Phoenix, and Hopscotch, will be formally announced at the Internet World trade show in New York, San Francisco-based Genuity said.
There are now about eight major network access points, which funnel and route most of the world's Internet traffic. Network access points also allow smaller Internet access providers to gain access to the Net and have recently suffered heavy congestion.
Six major network access points are in the United States: San Jose, Calif.; Washington; Chicago; Los Angeles; Palo Alto, Calif.; and the New York area.
Until mid-1995, the National Science Foundation funded four of the biggest U.S. access points. But, with the NSF no longer funding the Internet, these gateways are operated by ""Baby Bell"" regional phone companies or long-distance phone companies.
""That's why we believe tomorrow will be a new day for the Internet,"" Rodney Joffe, chief technology officer of Genuity, said in an interview.
Joffe said that both the Baby Bells and the long-distance providers make money by charging the big Internet service providers $2,500 to $5,000 monthly for acess to the Net.
However, he said the phone companies were not making the investments needed to support the growth of the Internet.
Genuity said it will make its new network access point a not-for-profit operation in the hopes that it will gain many customers for its network hosting services. Genuity said it was not charging Internet service providers rent or connection fees at its Phoenix center.
Genuity said it hoped to build more facilities like the one in Phoenix.
""We will invest whatever it takes,"" Joffe said. ""We are not making any friends among the telcos (phone companies), but we are making friends among corporations and government users.""
A spokesman for MCI Communications Corp., one of the three main providers of the core Internet backbone, said MCI always welcomes more companies adding to the Internet. MCI does not manage a network access point.
Pacific Telesis Group, which manages a network access point, recently said its local telephone service was suffering due to massive Internet usage in California, which was experiencing heavy congestion at its network access point.
PacTel officials were not immediately available to comment on Genuity's statement.
""The story that Joffe tells is quite exciting and quite responsive to the problems on the Internet,"" said Bob Metcalfe, founder of computer network power 3Com Corp. and most recently an outspoken columnist on the subject of Internet congestion. ""The things they are proposing to do for the Internet are badly needed.""
Genuity hopes to sell its network services, including its Hopscotch service -- a Web site hosting service with advanced features -- to businesses. It is aimed at companies selling over the Internet, news services and major corporate Internet sites. Already, Genuity said it has 35 customers, including C/Net Inc., the Internet-based news service that focuses on technology.
Genuity said its Hopscotch service was available immediately, starting at $5,000 per month, for customers who want to design and start up large-scale Web sites.
Bechtel, the engineering and construction giant also based in San Francisco, purchased a majority interest in Genuity in November for undisclosed terms.
",46
"Home use of the Internet's World Wide Web has more than doubled in the last year, with about 11 percent of U.S. households claiming to have used the Web in the last month, according to a study by PC-Meter.
The market research company said 11 percent of all 98.7 million U.S. households was equivalent to about 11 million homes and was up from 4.4 percent (or 4.3 million) a year ago.
In addition, 13.9 percent of households claimed to have used some type of Internet access service in the last month.
Twenty-five percent of these home Web users now visit shopping sites, PC-Meter's audience rating reports show.
According to PC-Meter's audience rating report, of the cybershoppers, men represented the highest percentage of users. In September, for example, 62.8 percent of Web surfers were men and 37.2 percent were women.
Four basic types of shopping are represented in the top 10 shopping sites; free software downloads, interactive auctions, clubs that sell to members and retail operations.
""These cybershopping statistics suggest that home surfers are increasingly finding value in electronic commerce opportunities offered on the Web,"" Pamela Smith, a vice president of PC-Meter, said in a statement. ""With the holiday season upon us, the greatest growth to date at these sites may well occur during the coming weeks.""
Shareware.com, a software service of online publisher C/NET Inc., was the top consumer shopping site on the Web, PC-Meter said, followed by Columbia House Co., which sells music CDs, computer CD-ROMs, videotapes and laser disks; and ZDNet's Software Library of shareware.
Columbia House and ZD Net were tied for the second most popular consumer shopping site. CUC International Inc., which offers discounts on a wide range of consumer goods and services, is the third most popular site and has the highest percentage of women among the top shopping sites.
Other top shopping sites included Amazon.com, at No. 5, which is a cyber-book store with more than 1 million titles to choose from. Surplus Direct was No. 6, with sales of computer hardware and software.
Coming in as the 10th most popular shopping site was Onsale, an auction site for computer hardware, software and consumer electronics. Onsale also led the category in minutes of usage per month, averaging 41.99 minutes per person per month.
PC-Meter said its results on home Internet use came from an October survey of 9,928 personal computer-owning and non-PC-owning homes. The survey is conducted on a quarterly basis. Its audience rating report is done monthly.
PC-Meter LP is a subsidiary of the NPD Group Inc., a privately held company based in Port Washington, N.Y.
",46
"Sun Microsystems Inc said it will announce on Wednesday an initiative with several industry leaders to standardize its popular Java programming language, which is widely used to develop Internet software.
Sun said International Business Machines Corp, Apple Computer Inc, Netscape Communications Corp, Oracle Corp and others support its initiative, which will guarantee a program is ""pure Java.""
The move comes amid recent industry talk that the Java language could become fragmented with multiple versions.  
Recently, there have been a spate of reports in the computer industry trade press about fears that Java -- which enables software developers to write an application in the Java language and it will run on any computer system -- will become fragmented like the UNIX operating system.
There are now at least twenty different versions of UNIX, which was developed by AT&T Corp as a high-performance operating system for networked computers, and these multiple versions prevented its widespread industry adoption.
""There has been a great deal of concern about Java splintering,"" said Jon Kannegaard, vice president of software.  
The brouhaha started at Comdex, the industry's biggest trade show, when Microsoft Corp announced plans to develop several programming interfaces and tools for the Java language. The resulting programs developed with their software programming tools would run only on its Windows software.
""There really will be a tug and we are making sure that you don't give anything up by going with the 100 percent pure solution,"" Kannegaard said.
Wednesday, Sun will unveil what the ""100 Percent Pure Java"" initiative, which will provide education for the industry, developer assistance and program certification.  
In the first quarter of 1997, Sun will introduce testing, certification and branding for applications that pass its criteria. Sun, IBM, and Netscape will launch a worldwide educational tour aimed at training software developers to write and test Pure Java applications.
Sun said that it hopes its initiative will help contribute to the momentum that has been building all year around Java, a language it originally developed for interactive television.
""If we think of 1996 as 'the year of Java, the platform,' then we should think of 1997 as 'the year of Java deployment,'"" Kannegaard said.  
Sun said that a recent survey by Morgan Stanley indicated that 75 percent of the corporations interviewed were developing, or had plans to develop applications using Java.
Java - which is widely used to develop World Wide Web sites and content on the Internet - lets developers write a program once that will run on any system compatible with Java. Developers can also easily add animation and other features.
Over 200,000 software developers are now writing applications in Java. Sun said it will spend millions of dollars on its 100 Percent Pure Java program. Sun's JavaSoft unit is leading the initiative to standardize Java.
",46
"EchoStar Communications Corp. -- the upstart in the direct broadcast satellite television business -- gave the nascent industry a major jolt this month with a sharp price cut.
The jolt reverberated earlier this week when Thomson, the U.S. unit of France's Thomson-CS, which dominates the satellite TV dish market, matched EchoStar's new price at $199 for a satellite dish.
Thomson executives said the new price will surely shake up the industry and fuel sales for what is said to be the fastest growing consumer electronics product ever -- one that even now is taking market share from the cable industry.
""It will completely change the nature of the business,"" said Joe Clayton, an executive vice president at Thomson.
Thomson's move cut the price of the RCA brand digital satellite system by as much as $200 a unit. Combined with a $200 cash back offer by programming providers DirecTV, a unit of Hughes Electronics Corp., and U.S. Satellite Broadcasting Co., it cut the total price to $199 for consumers who pre-pay for one year of programming.
Programming costs from $29.95 a month for 70 channels on DirecTV to $44.95 a month for all 175 channels on DirecTV.
The lower price -- while welcome for consumers -- will make it harder for new entrants to break into the market and make a profit.
Other consumer electronics giants, Uniden America Corp., Toshiba America Consumer Products Inc., Samsung Electronics Co. Ltd. and Matsushita Electric Corp of America have announced plans to introduce new DSS systems later this year.
Thomson will make the dishes for Toshiba and Panasonic.
""We know the telcos and the cable companies are getting more involved,"" Clayton said. ""We are going to capitalise on our strengths now.""
He added that the $199 price will make the ""awareness base explode.""
Thomson has an estimated 45 percent of the total digital satellite dish market, which amounted to 3.4 million units worldwide at the end of July, according to the Carmel Group.
""It's been a real winner for them,"" said Jimmy Schaeffler, an analyst at the market research firm in Carmel, Calif. ""Plus it has launched them into the international marketplace.""
Schaeffler said satellite television is gaining markets outside the United States where there is no cable service because it does not require installing massive cable systems.
""Most of the rest of the world is not very cable wired, so there is a clear opportunity for direct broadcast satellite,"" Schaeffler said. Satellite TV is also becoming big in this country while vaunted digital cable systems undergo trials.
New competitors see an opportunity in digital satellites -- a technology that is already here and working. MCI Communications, aligned with Rupert Murdoch's News Corp. Ltd, already has a valuable U.S. satellite slot.
The move to cut prices to gain market share is changing the industry, which Clayton said is moving more toward a cellular telephone model, where the hardware is the lowest cost -- sometimes practically nothing -- and revenues come from services and programming.
""They have to fight within the industry and competitors from outside the industry,"" Schaeffler said. ""They are doing the rebates because of the market share. It's a combination of EchoStar pushing everyone to a lower price point nationally and the effort to maintain and acquire future markets.""
Asked how low prices of satellite dishes could go, Clayton joked that he had never seen prices in consumer electronics products go up. Other analysts also expect prices to keep falling.
""Maybe Charlie will take it to zero, but I don't think we will,"" Clayton said of EchoStar Chairman Charles Ergen.
A spokeswoman said Englewood, Colo.-based EchoStar, which launched its satellite network in March, already has 125,000 subscribers for its programming, which has 40 TV channels and 30 channels of music, compared with 175 channels offered by DirecTV.
The launch next month of a second satellite will increase its offerings to up to 200 channels, EchoStar said.
",46
"CompuServe Corp is expected to announce on Thursday that it is dissolving its Wow! consumer online service as it gives up on the consumer market and refocuses on the corporate market, industry sources said.
A spokesman for the Columbus, Ohio based company declined to comment, saying he could not comment in advance of a ""strategic announcement"" CompuServe plans early Thursday.
The struggling online services company has been under more pressure in recent months from America Online Inc, the Microsoft Corp Network and Internet access providers.
The company plans to halt its marketing aimed at consumers and it will expand its emphasis on corporate customers in the U.S. and Europe. CompuServe will try to convert its 100,000 Wow! users to its core CompuServe Information Service and it will not abandon its current consumer users, sources said.
But it will not make the consumer business a key focus, as it cedes to the dominant America Online, which is growing its subscriber base again, after a hiccup in growth this summer.
Wall Street analysts said that such a move could entail some layoffs at CompuServe, and possibly a restructuring charge to cover Wow! employees who cannot be reassigned.  
CompuServe's move comes on the heels of some recent aggressive actions by AOL to stay on top with its plans to shut down its GNN direct Internet access and its announcement to cut its workforce by 300 employees and take a $75 million charge in its second fiscal quarter.
AOL also announced flat-rate pricing of $19.95 a month for unlimited access, bowing to the competition from Internet access providers and their flat monthly rates of $19.95.
CompuServe's Wow! service is a flat-rate service, for $17.95 a month, but it could not be learned if CompuServe will change the pricing of its core CIS service as it dissolves Wow.  
CompuServe hopes to move all its Wow! subscribers over to its core service by the end of January.
""They have a separate productions staff, separate marketing, etc,"" said Abhishek Gami, an analyst at Nesbitt Burns Securities, adding however that CompuServe has tried to keep Wow! extremely lean and some employees will likely be moved to the main service or to SPRYNET, its Internet service.
Since CompuServe went public in April, its prospects have dimmed, with its stock tumbling from its initial offering price of $30 a share. Its shares now trade at around $11-5/8, since it has announced losses and a drop in subscribers.  
""They have had a whole lot of problems since they went public,"" said one industry source. ""They need to reposition the company.""
CompuServe is the second largest online service after America Online.
",46
"International Business Machines Corp unveiled several new partnerships as part of an all-encompassing strategy unveiled at a session on electronic commerce, but said it will make money from these ventures the ""old fashioned"" way - through hardware, software, and services.
IBM announced a wide array of partnerships, ranging from retailers to petroleum companies to insurance companies to a utility, all developing applications for conducting business over corporate computer networks and the Internet.  
""We feel very, very good about the Internet as a business and about where we are going,"" said Irving Wladwasky-Berger, the general manager of IBM's Internet division, at a press conference. The Internet unit was formed less than one year ago and has become one of the key focal points at IBM.
IBM is helping customers develop a wide range of electronic commerce applications, including an electronic trading system, an Internet retailing outlet, and a service for buying electrical power over networks. Revenues, however, will come from the usual sources of hardware, software and services as it fuels demand for its products and services.  
""We will continue to make money the 'old-fashioned' way, by selling a lot more systems, software, services and solutions,"" Wladawsky-Berger said. ""By leveraging our core businesses, we can sell more of what we are good at.""
He was not more specific about what kind of financial opportunity corporate networks and the Internet represent for IBM.
But IBM expects the worldwide information technology industry to grow to $1.2 trillion, from $800 billion, in the next four years, with 60 percent of that growth driven by network computing, he said.  
One novel partnership IBM announced Tuesday was a project with Siemens AG for the electric utility industry.
IBM and Siemens Power Systems Control announced a service to let electric utilities use computer networks, including the Internet, to sell excess power transmission capacity. Pacific Gas and Electric Co is the first customer.
IBM also announced 13 additional new retailers who are joining its Internet shopping mall, called World Avenue, such as Gottschalk's and Hudson Bay, Avante Jewelry and others. Consumers can purchase goods quickly and securely via the World Avenue service on the World Wide Web.  
IBM also announced PetroConnect, a network-based service for the petroleum industry, with digital databases, maps, surveys, well logs, seismic data and other geographical and geological data, for all segments of the industry.
In another industry-specific application, IBM and partner Charles Schwab Inc demonstrated its electronic trading system, called e.schwab, which lets customers request quotes, check account balances and execute trades on their Internet Web site, which runs on IBM's SP2 supercomputers.
IBM also touted Lotus's Domino software, which is the next version of Lotus Notes designed using Internet technology.  
IBM said that Domino is one of the ""jewels in its crown,"" that will be targeting the Web server software market, which Forrester Research predicts will be $9 billion by 1999.
Jeff Papows, the president of Lotus Development, made several jabs at both Microsoft Corp and Netscape Communications Corp and their initial emphasis on the browser wars, but said the battle is moving to groupware.
Papows quoted Netscape's co-founder Marc Andreessen as saying that in 1997 the big war will be over groupware and e-mail. ""We think Marc is right,"" Papows said, adding that whether they can take those markets by storm is the question.
",46
"Prodigy Inc. said Wednesday that on Monday it will launch its Internet-based version of the Prodigy online service, called Prodigy Internet, with two pricing models, including a flat-rate plan of $19.95 a month for unlimited service.
The company said its introduction of Prodigy Internet makes it the first of the original three commercial online service companies to offer its rebuilt service, embracing the open technological and content standards of the Internet, the global computer network.
Prodigy also said its Internet focus will form the basis of its international expansion plans, and that it will offer a Spanish-language version of Prodigy Internet in Mexico early next year.
Sources close to the White Plains, N.Y.-based company said the online service plans to spend about $100 million in 1997 to market the new service, through advertising in newspapers, magazines, trade journals and radio, but for now it has no plans for television, because it feels it has an established brand name.
Prodigy Internet is targeted at the ""New to the Net"" market and the 90 percent of American homes that have yet to sign up for an online or Internet service provider.
""The focus of the new offering is certainly not focused at our existing subscriber base,"" company President Paul Delacey, said in a telephone interview. ""It's focused at the very broad market out there who are not current users or who are users of bare-bones ISPs (Internet service providers), who are looking for more for their money.""
Prodigy Internet is designed to overcome current limitations in navigating the Internet while also addressing the fears and anxieties that many Internet novices experience.
Prodigy Internet would offer two pricing schemes -- a low-cost, entry-level plan for low-volume users and a flat-rate plan for Internet enthusiasts.
The company said its basic plan costs $9.95 a month for 10 hours usage of both regular Prodigy and Internet content, with additional hours at $2.50 each.
The other plan costs $19.95 a month and provides unlimited access to Prodigy, Prodigy Internet and add-on features not available elsewhere, the company said .
Prodigy will still offer its current proprietary online service, which it is calling Prodigy Classic, but it will offer incentives for its current members to migrate to Prodigy Internet, such as two months free, with 20 hours of usage.
""We expect that it's going to be a long, protracted service,"" Delacey said. ""I wouldn't be surprised if we are still offering Prodigy Classic a few years from now.""
Prodigy will be the first to deliver an Internet-based service of the three major online service providers.
One rival, CompuServe Inc. of Columbus, Ohio, has announced plans to rebuild its service around Internet protocols and standards, but it has not yet begun offering its Internet-based service.
The leading online service provider, America Online Inc., says it brings more users to the Internet via its proprietary service, but it does not have any immediate plans to move its service to the Internet.
And indeed, AOL and other industry pundits, some of whom have predicted the demise of online services because of the growth of the Internet, are seeeing a blurring of distrinctions between online services and the Net.
AOL says it is the Internet and a whole lot more.
Last week, the fourth major entrant in online services, Microsoft Corp., rolled out a hybrid Internet online service as it relaunched the Microsoft Network.
Since its August 1995 rollout, Microsoft has become the third-largest online service, as Prodigy membership has declined. Prodigy says it currently has 1 million households, or about 1.6 million total members. But some analysts dispute these figures, saying it has fewer members.
Prodigy also announced a licensing deal with privately held Progressive Networks to provide Real Audio technology to be integrated with Prodigy Internet. Real Audio software enables users to listen to music and other audio material on the Net.
Prodigy also said that its Africa Online unit is now providing Internet access in Ivory Coast as well as in Kenya.
Prodigy said its Internet service is designed to work with two leading Web browsers, Microsoft Corp.'s Internet Explorer and Netscape Communications Corp.'s Navigator, but Internet Explorer is its preferred browser through a cross-distribution pact announced last week.
The online service, formerly a joint venture owned by International Business Machines Corp. and Sears Roebuck Corp., is now owned by a group of private investors, including Grupo Carso, a leading Mexican industrial company.
In July, the privately held investor group, called International Wireless, merged with Prodigy. The group's founders, Greg Carr and Delacey, are now at the helm of Prodigy. Carr is chairman of Prodigy Inc.
",46
"Sun Microsystems Inc. Tuesday introduced its first network computer, the JavaStation, in a direct challenge to Microsoft and Intel, the dominant players in the industry.
Saying the company was ushering in a new era of computing, Sun Chief Executive Officer Scott McNealy unveiled a sleek, charcoal-grey device, about nine inches by 12 inches, with no disk drives or slots or floppy disks, to allow access to networks of computers and the Internet, at a cost of $742.
Sun, Oracle Corp., and International Business Machines Corp. are challenging the computer industry's dominant ""Wintel"" architecture from Microsoft Corp. and Intel Corp. with the new low-cost, low-maintenance network computers, or ""NCs.""
""Today you'll see why the network is the computer and has been since 1984,"" McNealy said, reiterating Sun's mantra.
The JavaStation is targeted at businesses. Sun said the machines might eventually be offered into the consumer market by cable TV and telecommunications firms as Internet access devices, but it declined to say when that might happen.
With Java, software applications can be written in one language and distributed across networks and diverse computers and computing environments, from mainframes to minicomputers to personal computers and now to the new NCs.
""Java computing is going to be as powerful as the mainframe in the '60s, the minicomputer in the '70s and the PC environment of the '80s,"" said Ed Zander, president of Sun Micro's Computer Co.
Sun introduced three versions of the JavaStation. The lowest cost, $742 version does not include a monitor or a keyboard. The systems are aimed at corporate users of Sun workstations and host computers, but can also access Microsoft PC applications from a host computer running Windows NT.
At a news conference in New York, Sun executives said they did not expect the new machines to take the place of personal computers, but they also professed amazement at the news conference Microsoft held Monday.
Microsoft, with several major players in the PC industry, unveiled its own ""NetPC"" strategy aimed at driving down the cost of PC ownership, with new features in Windows for network management, calling it ""Zero Administration.""
""I have never seen such totally reactive vapour,"" Zander told reporters. ""We must really have touched a nerve.""
McNealy said it was simply a move by the ""old-line legacy Wintel"" trying to hold onto its position in the world. Wintel refers to the combination of Microsoft operating systems and Intel chips.
""People call it a PC on a diet, I call it a PC in a corset, with the strings pulled too tight and a bright red face,"" McNealy said, referring to the Microsoft initiative.
But even with all the hype surrounding the industry's latest infatuation, Sun executives and analysts were not expecting big sales of the NC, nor will the JavaStation become a big percentage of Sun's hardware sales.
""This thing is a small percentage of the total product environment, it will help sell more servers,"" Zander told Reuters.
""Maybe a couple of years from now it will begin competing with low-end PCs,"" said Evan Quinn at International Data Corp., noting Sun's network computing strategy is tied to future expansion of its Java technology.
Sun said the entry level model, containing eight megabytes of memory, will ship beginning in December. A fully configured system, which includes memory, keyboard, a mouse and 14-inch monitor, will cost $995.
The company also said it will offer a JavaStation with 16 megabytes of memory, a mouse, keyboard and a 17-inch monitor for $1,565. The JavaStation also has a small operating system, the Java OS, taking up less than three megabytes of memory.
While the devices are lower cost than the typical PC, which can range in cost from $1,500 to $3,000, Sun executives said their customers will save money as the costs of PC ownership for businesses escalate and are now estimated at anywhere from $6,000 to $12,000 a year, per PC.
Sun said a JavaStation costs about $2,500 a year to maintain, or about $7,500 for three years, potentially saving corporations millions of dollars.
",46
"Several U.S. computer retailers reported a sluggish start to the big holiday season, with November sales showing ongoing weakness and heavy promotions, which may bode poorly for sales of consumer PCs this quarter.
But retailers also noted in their monthly reports that the November holiday shopping season was shorter this month, because of the late Thanksgiving holiday weekend in the U.S.
""Bad would be a better word than sluggish,"" said Stephen Baker, a retail channel analyst at International Data Corp. ""Promotional is a code word for lower profits.""  
Circuit City Stores Inc, the largest retailer of brand-name consumer electronics and a leading retailer of personal computers, said that industry sales remained weak.
The Richmond, Va.-based company reported an eight percent increase over total November 1995 sales, but its comparable store sales fell eight percent in November.
""Industry sales trends remained weak and promotional activity intensified,"" said Richard Sharp, Circuit City's chairman and CEO, in a statement.
Best Buy Co Inc, based in Minneapolis, said that the PC category ""became more promotional in November.""  
""Third quarter sales were well below earlier expectations,"" said Allen Lenzmeier, Best Buy chief financial officer. Third quarter sales were up four percent.
But for the four-week period ending November, Best Buy's comparable store sales in the month of November fell eight percent, versus an increase of 15 percent last November.
""The numbers in general in computer retailing were pretty weak,"" said Tom Courtney, a Montgomery Securities analyst. He estimates that in the computer category at Circuit City, for example, November sales fell 20-25 percent. ""Those data points suggest that it's pretty weak out there.""  
""We think that what's happening is there is a big shift to the direct channel,"" Courtney added, referring to direct resellers such as Dell Computer Corp and Gateway 2000 Inc, which sell PCs through phone and mail order.
Analysts said that the big surge in PC sales this fourth quarter is expected to come from sales to the corporate sector instead of the typcially money-losing consumer arena. And there are no major innovations this quarter driving consumers into the stores for a ""must have"" purchase of a PC.
""The market of first-time buyers seems to be shrinking,"" said Baker of IDC, which is based in Framingham, Mass.  
""You've already gotten a PC into the homes that can afford a decent quality PC.  The rest of the households say it's either too much or what am I going to do with it,"" Baker said.
""This is the first Christmas in a few years when there hasn't been a really compelling new reason to buy a PC,"" said Nick Donatiello, president of Odyssey LP, a market research firm in San Francisco. ""Last Christmas and the year before you had CD-ROMs, fast modems, the Internet and new Pentium chips.""
Tandy Corp was lukewarm about the start of the season.  ""Traffic in our stores was very good the first few days after Thanksgiving,"" CEO John Roach said in a statement.  
Tandy's comparable store sales in November at its RadioShack outlets were down five percent, Computer City was up three percent and its Incredible Universe superstore sales were flat.  Total comparable store sales in November were down two percent from the prior year.
But some analysts who follow personal computer hardware makers are not terribly worried by the sluggish retail environment, because they are looking to corporate sales for the bigger profits this quarter.  The consumer sector, fraught with price cuts, is still barely profitable for some.  
Even before Thanksgiving, industry leader Compaq Computer Corp cut prices on its Presario home PCs by up to 21 percent. Analysts said Sony cut prices on new PCs.
""I don't think it means a lot,"" said Andrew Neff, a Bear Stearns analyst, of the sluggish start to the holiday season. ""People are in no hurry to buy.""
Neff added that this year, PC makers are expecting corporate sales to be the driver of PC growth, not consumer sales. Dataquest Inc has predicted that the PC market will grow at about 19.7 percent worldwide in 1996, which is still strong but is a slower growth rate than the record growth of 24.7 percent growth in 1995.
""I just view anything that happens in retail as icing on the cake,"" Neff said.
",46
"International Business Machines Corp. said Friday it was reorganizing its global sales and services businesses under a single brand, IBM Global Services.
IBM's services business has operated under various names outside the United States and the move should help clarify the IBM brand as well as boost efficiency, the company said.
The Armonk, N.Y.-based computer giant also named Lucio Stanca, general manager, global marketing operations.
Stanca, who has headed IBM operations in Europe, the Middle East and Africa since the autumn of 1994, will continue as chairman of that operation, based in Paris. In his new role, he will head a new direct-marketing effort around the world using the new structure and single brand name.
Previously, IBM's direct marketing efforts have been in various regions without a consistent focus, analysts said. The efforts include direct mail, telemarketing and electronic marketing via the Internet in 159 countries.
Separately, IBM said it and its partners will discontinue development of Microsoft Corp.'s Windows NT software to run on systems using the PowerPC chip IBM developed with Motorola Inc. and Apple Computer Inc.
IBM was working with Microsoft and Motorola to develop a version of Windows NT for the PowerPC chip, but an IBM spokesman said that they will no longer develop the product.
Analysts said the Power-PC-based systems running Windows NT were not very successful for IBM.
Succeeding Stanca as general manager of Europe, Middle East and Africa is William Etherington, who was general manager of IBM Industries, which manages 11 industry-specific business units.
The industry units will now be managed by David Thomas, who was general manager, IBM North America. In his new role, Thomas will be responsible for IBM's industry-specific strategies and performance.
He will be succeeded in North America by John Thompson, who had been general manager of IBM's personal software products including the beleaguered operating system OS/2. No successor was named.
An IBM spokesman said a replacement will be named for Thompson.
""Some people are saying, what does this mean for OS/2?"" said the IBM spokesman. ""It means no change whatsoever in strategy. We have not selected anyone yet.""
While the OS/2 software has made inroads with about 13 million users, according to IBM, it is still a small share of the world personal computer market, dominated by Microsoft Corp.'s Windows operating system.
IBM stock rose $1.25 to $152.875 on the New York Stock Exchange in late trading after falling on profit-taking in recent sessions.
",46
"Many personal computer makers this week will roll out flashy multimedia PCs designed around a new chip by Intel Corp. -- a development that is expected to give the consumer sector of the industry a much-needed boost.
Intel will officially launch its much-anticipated P55C microprocessor using its so-called MMX (multimedia extension) technology Wednesday and a slew of companies will unveil new consumer PCs, notebooks and desktops using the new chip, which will offer much faster performance.
The company said the new chip will offer more than just faster speeds on the new PCs, but a spokesman declined to give any further details.
""Instead of just raw performance ... you get a richer experience,"" said an Intel spokesman in Santa Clara, Calif.
International Business Machines Corp., Compaq Computer Corp., Dell Computer Corp., Gateway 2000 Inc., Toshiba America Corp., Sony Corp. and many other firms are expected to unveil new high-end PCs simultaneously with Intel's announcment.
Most machines are expected to be priced over $3,000.
Intel said that an MMX-based PC would be more like a television, with sharper images, three-dimensional graphics, faster audio and television-like video. Other benefits include faster video teleconferencing and Internet access.
""As more and more people use PCs, the expectations are higher and higher, from what they see in movies and television,"" the Intel spokesman said.
""This moves the PC platform a little further along to media-rich applications. Our goal is to surpass the TV in terms of audio and video.""
For example, he said, a user playing a video game on an MMX-based PC will feel as if he or she is in a video arcade.
""It's a tremendous kickoff to 1997,"" said Rod Schrock, a vice president of Compaq's Presario division.
""We are so excited about the new MMX processor that we redesigned the entire line of Presarios from the ground up. Customers are going to get a pretty dazzling experience.""
Schrock declined to give any product specifics, but he said that Compaq will launch its new Presario consumer PCs with MMX in the same timeframe as Intel's announcement.
""It should provide an added boost to the demand for the new generation of PCs,"" Schrock added. ""There was no major industry event in 1996, this year you have a new processor.""
",46
"Netscape and Microsoft and others agreed on Tuesday that the so-called Internet browser wars were silly, although that did not stop some sparks from flying between the two battling CEOs at a computer conference here.
Microsoft Corp. and Netscape Communications Corp. are locked in a few battles over Internet software, with the most attention being paid to the fight for share in the Internet browser market, where Microsoft is an underdog.
""I do think there is a certain silliness about these browser wars,"" said Steve Case, chairman and CEO of America Online Inc, on a panel at a Gartner Group technology symposium here. Case's AOL was one of the first online services to embrace Internet Explorer as its preferred browser software, in exchange for a spot on Microsoft's Windows 95 desktop.
Case said that he believes Microsoft and Netscape will end up with comparable market share and he likened the battle to the set-top box war in the early days of the cable television industry during the 1980s.
Netscape still dominates the Internet browser market with its Navigator software, which has an approximate 70 to 80 percent share of the market.
But Microsoft recently said that its Internet Explorer is gaining momentum, as it continues to sign on more deals to have Internet Explorer bundled as the primary browser with more online services and Internet access providers.
Just last week, Internet Explorer became the preferred browser on AT&T's WorldNet Internet access service, fueling some analysts to say the deal was another blow to Netscape's dominance of the browser market.
James Barksdale, president and CEO of Netscape, pointed out that while the feud between Navigator and Internet Explorer is the ""current blood sport in the popular press,"" he pointed out that 80 percent of Netscape's revenues are from sales to the corporate network or ""intranet"" market.
In that market, Netscape is aiming to hold onto its dominance of the server that runs internal corporate networks and is competing with Microsoft's BackOffice and with International Business Machines Corp's Lotus Notes.
Bill Gates, chairman and CEO of the software behemoth Microsoft, said that the competition between Netscape and Microsoft is good for the market.
""We compete with Netscape and there is a lot of value there,"" he said, adding that Microsoft has many developers working pretty much at ""full speed"" to develop new Internet software. He conceded that in part, the fast-moving competition from Netscape has fueled this intensity.
One area where the sparring companies did agree was on the Internet itself, which both Gates and Barksdale said should remain free of government intervention.
""No one will come to dominate standards on the Internet, that's why it works,"" said Barksdale.
Gates drew laughter when he said that Microsoft, which dominates the operating system arena with Windows software, will still make ""some percent"" of the operating systems. But he also said that ""no one will control the printing presses"" of the Internet.
One Gartner Group analyst asked Barksdale if that view was contradictory with Netscape's recent request to the Department of Justice to investigate Microsoft's Internet marketing tactics.
""In that matter...all we've asked is 'let's stay with the consent decree,'"" Barskdale said, referring to the 1994 consent decree between Microsoft and the U.S. Department of Justice, which set restrictions on Microsoft's behavior.
""We don't believe they are doing that,"" said Barksdale, in an interview with Reuters after the panel. But he declined to speak further on the DOJ's latest request for information from Microsoft, saying that he is having his lawyers do the talking.
Gates was mum on the DOJ during the panel and he shook Barksdale's hand after the session. The two also pointed out that they are working together to develop industry standards for credit card transactions over the Internet, after being on opposing sides of that battle.
""I don't want this to sound like a love-in, but Bill's company and my company work together with Carl's company (Carl Pascarella, president and CEO of Visa U.S.A.) to make (credit card transaction) standards,"" Barksdale said. ""Otherwise we would all be dead.""
But the two CEOs collided on their views of the future. Gates, who is known for being an industry visionary, forecast that within five years many things on the Internet will change and be easier to use, such as the use of URLs (universal resource locators) to find World Wide Wed sites.
""In five years I am quite optimistic that there will be some radical breakthroughs,"" Gates said, adding that users will look at things like URLs and see how silly they were.
Barksdale, however, pointed out that such predictions are impossible to make.
""We have to be honest, despite my learned colleague Mr. Gates's comments,"" Barksdale said. ""It's very hard to predict five years. How many of you would have predicted two and a half years ago that we would have a panel on this topic or that Netscape would be on this panel?"" he asked, pointing out that Netscape did not even exist two and a half years ago.
",46
"International Business Machines Corp. Chairman Louis Gerstner on Wednesday warned the computer industry of a backlash against the Internet as confusion and feuding reigns among corporate rivals.
""A lot of what has gone on is just plain confusing,"" Gerstner said in a keynote speech at the Internet World trade show in New York. ""I wouldn't be surprised to see an Internet backlash soon.""
He said industry wars over Internet browser software, programming languages, hardware and continuing hype may contribute to corporate and consumer disillusionment about the Internet.
""As an industry, we are not shy about telling people how beautiful our babies are, long before they are born,"" Gerstner said, adding that customers have to sort out the hype and ""food fights"" by sparring companies.
Gerstner said many were wondering where money is to be made on the Internet amid what he characterised as hype that seems to be leaving out customers and their needs.
""People ask 'Is there real money to be made on the Internet?' and I say, 'Yes there is,'"" Gerstner said, adding that money will be made by companies that can solve customers' problems and make it easy to do things like banking on the Internet.
Gerstner said IBM's approach to the Internet was to work closely with customers and develop the products they need, such as its work with the discount brokerage Charles Schwab, which now offers stock trading over the Internet.
""Schwab expects to capture as many customers with the Internet over the next year as they have over the past 13 years,"" Gerstner said.
One of the industry ""food fights"" that Gerstner singled out was Microsoft Corp.s effort to develop software based on Sun Microsystems Inc.'s Java language to design programmes that only run on Microsoft's Windows operating system.
The Java language has been much heralded in the computer industry because of its ""write-once, run-anywhere"" capability, which lets programmes written in Java run on any computer system. Because of this feature, Java has become a popular programming language for the Internet and networked computers.
""Let's not blow this,"" Gerstner said. ""Let's not do to Java what the industry did to Unix,"" the high-performance operating system which splintered off into more than 20 versions.
At Internet World on Wednesday, Sun Microsystems unveiled an alliance with IBM and other major companies, which are all backing a move to standardise and certify one version of the Java language.
""Gerstner is taking his guidance from customers and not from industry conflicts,"" said Sam Albert, an industry consultant based in Scarsdale, N.Y. ""He did a lot to de-hype the industry.""
Gerstner also reiterated his plea that the industry make things easier for users. He showed a video of IBM's voice recognition technology, which enables computer users to give simple commands to surf the World Wide Web.
He said IBM's voice recognition software for the Internet is now available in beta, or experimental form, and that users could download it for free, starting Wednesday, from IBM's Web site, http://www.ibm.com.
",46
"America Online Inc, the world's largest online service, said with the changes it implemented earlier this fall and its major restructuring announced this week, it is seeing a renewed momentum.
Steve Case, AOL chairman and CEO, told the company's annual meeting that with the reoganization of AOL, its new flat-rate pricing, and its big accounting changes, ""the pieces are now in place"" for growth, not only in new subscribers, but with major new sources of revenue, such as advertising.  
""Now we have a new structure in place...and the momentum is stronger than ever,"" Case told shareholders, adding that in the month of October alone, AOL added 250,000 new subscribers, a sign of its ""renewed momentum.""
The company, which has seen its stock decline, has been under pressure from the lower-cost Internet access services and has seen its subscriber growth slow this summer.  
AOL, based in Dulles, Va., was further pressured when Microsoft Corp relaunched the Microsoft Network this month at a flat price of $19.95 for unlimited access, on par with most direct Internet access services.
Previously, AOL had added a 20/20 pricing plan to combat the growing competition, with 20 hours for $19.95 a month, in addition to its $9.95 for 10 hours plan.  But on Monday, it succumbed with its own flat rate $19.95 a month, and it will discontinue its direct Internet access, called GNN.  
Case and other AOL executives highlighted to shareholders how the company will see new sources of revenue from advertising and merchandising and how one area of its new business will be running on a cable industry model, with more revenues from advertising than subscriber fees.
""Increasingly, we are evolving where we depend less on subscriber revenue and increasingly on advertising and other sources,"" said Lennert Leader, the company's chief financial officer.  
One of the areas from which the company expects this growth to come is its new unit AOL Networks, headed by former MTV executive Bob Pittman, to oversee AOL's flagship online service.  The other two units in AOL's reorganization are its AOL Studios, to create content for its service and ANS Communications, to manage the core network infrastructure.
Pittman said he expects that in the future, over 50 percent of AOL's revenues will come from advertising and other revenue sources, such as merchandising the AOL brand name, through books, television, etc.  
""To me, it looks very similar to the cable network business,"" Pittman said, adding that in the early days of Viacom Inc's MTV network, subscriber revenue was greater than advertising revenue.  ""Our growth curve looks very similar to the cable business.  Ad revenue is growing faster than subsciber revenues.""
Pittman said he plans to ""ride the tremendous wave"" of AOL's brand recognition for new sources of revenue growth, for which he said there are multi-levels of possibilities. One area, he mentioned after his second day on the job, is the catalog business, which can move to electronic shopping.  
Shareholders, some of whom said the stock has been a very good investment because of its many stock splits, said they were pleased with AOL's recent actions, in particular the measure to restructure accounting methods.
""The fact that they are getting a more straightforward accounting system is a step in the right direction,"" said David Ryan, a retired shareholder from the Washington, D.C. area. ""Their financial statements were hard to understand. It's more straightforward now.""  Ryan said the stock has split three times since he has owned it in the past four or five years.  
AOL said on Monday that it will now expense all its marketing costs, which includes the hefty subscriber acquisition costs, as they are incurred, instead of deferring those costs over time.
To reflect those immediate changes, AOL is taking a $385 million restructuring charge in the September quarter, to account for the balance of its deferred subscriber acquisition costs.  AOL CFO Leader also told the meeting that the cost to acquire new subscribers will be lower in the future, as AOL depends less on sending out floppy disks, and as AOL comes with more new PCs.
""The good news is the growth is accelerating,"" Case said. ""We have taken the step of expensing the marketing and we can avoid some of the debates about the earnings.""
",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 due late on Wednesday.
Earlier this month, Cupertino, California-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.
Chip-maker Intel Corp, powered by surging demand for its Pentium and Pentium Pro microprocessors, reported on Tuesday its fourth quarter profits more than doubled to $1.9 billion, exceeding even Wall Street's most optimistic estimates.
""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
"IBM reports earnings on Monday and analysts expect growth of about 5 percent for the third quarter, boosted by sales of personal computers, other hardware and its fast-growing service business.
Industry analysts expect the improvement after a difficult second quarter for International Business Machines Corp., the nation's biggest computer company, and despite a product transition that depressed results in its mainframe business.
The strong dollar will also constrain IBM's results, though not as much as in the second quarter, analysts said.
""I don't hear any whispers that it's a blowout or any whispers that it's going to be soft,"" said John Jones at Salomon Brothers. ""I think it's going to be modestly above consensus.""
According to First Call, which tracks forecasts, IBM is expected to earn $2.43 a share, on average, up from $2.30 a share, in the 1995 quarter. Estimates range from $2.17 a share to $2.60 a share.
In the third quarter of 1995 IBM earned $1.3 billion excluding a one-time charge of $1.8 billion associated with its aquisition of Lotus Development Corp. Including the Lotus charge, IBM lost $538 million, or 96 cents a share.
IBM stock rose $3.75 to $129.375 on the New York Stock Exchange, as some investors were apparently betting on solid results.
Sales grew in all of IBM's hardware businesses except mainframes, where tough pricing by competitors and IBM's transition to a new line of low-cost CMOS machines constrained results, analysts said. CMOS, or complimentary metal oxide semicondutor, mainframes are cheaper to manfacture and use less power.
""This quarter is not all that important a quarter,"" said Daniel Ries at Nomura Equity Research. ""It was still a transition for the mainframe products. They started shipping them in volume on Sept. 30,"" right when the quarter ended.
Bill Milton at Brown Brothers Harriman said IBM most likely benefited from the sharp drop in memory chip prices that hurt its semiconductor operations in the second quarter. IBM's Microelectronics unit makes the dynamic random access memory (DRAM) chips that are the brains of many PCs.
""In the second quarter, the company felt the pain as a producer,"" Milton said. ""But in the third quarter, many of those low-priced DRAMs were incorporated in IBM PCs and they saw a net benefit as a consumer,"" he said.
Analysts said they expect the rest of IBM's hardware businesses to show growth, including personal computers, AS/400 minicomputers, which are used in corporations and are the company's second most profitable computers, and RS/6000 workstations, used by engineers and designers.
PC sales growth will not match the second quarter's 30 percent rate, analysts said. Compaq Computer Corp. was upgrading products in the second quarter, which helped IBM's PC sales.
""Last quarter they had the strongest quarter in years (in PCs),"" said Nomura's Ries. ""The significant contributing factor to that was that Compaq was refreshing their product line.""
But Ries said PC demand was very strong now, especially with corporate customers, one of IBM's strengths.
Analysts also said they expect continued strong growth in IBM's computer services, the stellar performer last quarter with growth of 23 percent.
""Services will continue to grow at more than 20 percent,"" Brown Brothers' Milton said.
IBM Chief Financial Officer G. Richard Thoman and other executives will discuss the results with analysts on Monday morning in New York.
",46
"International Business Machines Corp is discontinuing some unspecified research and development projects as part of a wider effort to cut costs, Louis Gerstner, the company's chairman and chief executive, said on Wednesday.
Gerstner, speaking on a panel of top IBM executives at a Gartner Group technology symposium, said IBM would cut projects for products and services it thought customers would not  want. The move is part of a reallocation of the company's $6.0 billion research budget for 1996, he said.  
""Are the dogs eating the dog food,"" Gerstner asked. ""Is the customer liking this stuff?""
Previously, he said, IBM cut overhead expenses from its research projects. He said that on Monday he sat down with several top IBM executives and painstakingly reviewed the company's entire research and development program.
""We have been able to cut overhead,"" Gerstner said. ""A lot of what has been done in the past was cutting duplication....We are now at the point where we are cutting projects.""  
Gerstner took over IBM in April 1993 and quickly embarked on a massive cost-cutting program.
""We spend $6 billion in research. That just happens to be equal to Microsoft's revenues,"" Gerstner said.
He said the company had moved about 20 percent of the R&D budget to its networked computing research.
In 1995, IBM spent a total of $6.01 billion on research.
Gerstner declined to be more specific about what projects IBM decided to halt. But he stressed that IBM was discontinuing ""projects"" -- not products that IBM's customers depend on. ""I don't want to start any rumors here,"" he said.  
Analysts said Gerstner was likely trying to prevent any possible misinterpretation of his comments and stop any speculation that IBM was cutting research on products already on the market, such as its much-maligned OS/2 Warp operating system.
""Some industry solutions will go away,"" said Gary Helmig, a SoundView Financial analyst, referring to projects aimed at specific industries, such as travel. He declined to speculate any further on what projects IBM was cutting.
""We used to develop solutions country by country,"" said Nick Donofrio, an IBM senior vice president, who was on the Gartner conference panel.  
When asked why IBM remained in the unprofitable home PC business, executives said the potential of the $60 billion market -- which may grow to $100 billion by 2000 -- was too rich to ignore. A second reason is that IBM is able to leverage its development and manufacturing of corporate PCs, they said.
""We are not doing this just so we can put a box in the home,"" said Robert Stephenson, a senior IBM vice president in charge of the PC business. ""I hope that we will (eventually) have a server in every home.""  
""We can make a profit,"" Stephenson added.
Industry analysts have said the home PC business is the least profitable segment of the market. Indeed, many companies are losing money, they say.
",46
"U.S. computer hardware makers are expected to report mixed results for the third quarter starting this week, as some companies are still in the throes of product transitions, but a few will have solid earnings.
Among the large system makers, International Business Machines Corp is expected to have good results, but Digital Equipment Corp is expected to report a loss.
""Product transitions and U.S. strength, those are some issues for the third quarter,"" said Gary Helmig, a SoundView Financial Group analyst.  
Currency will play less of a role than it has in the past two quarters, when it has had a negative impact on earnings, especially at multi-national giants like IBM.
""The negative impact from currency exchange rates is much reduced from June-quarter results,"" said John Jones, a Salomon Brothers analyst, referring to large computer systems makers.
Europe is still an issue for some companies, such as Digital, and this quarter will include the sluggish summer month of August, when many Europeans are on vacation.
""They (Digital) have significant exposure to Europe,"" said Steve Milunovich, a Morgan Stanley analyst.  
Milunovich said that Digital has more exposure in Europe, which has been ""a bit under water,"" than IBM. Digital recently revamped its sales force in Europe and made changes in its distribution channel there, to help sluggish European sales.
Product transitions are still ongoing at some companies, such as Unisys Corp and Silicon Graphics Inc.
IBM has now completed a refresh of most of its hardware products, including its lower-cost mainframe line, the CMOS vesions of its System 390 mainframes and analysts are awaiting results of the first quarter to include any impact from the much-anticipated systems.  
""We expect IBM to highlight the success of its CMOS mainframes,"" Jones of Salomon said.
In the personal computer arena, analysts expect Compaq Computer Corp to again be the leader of the sector, but they do not expect a record quarter for the world's largest PC maker. Its strongest sales are in fourth quarter.
""I think the company had a good quarter and they probably gained market share,"" said Bill Milton of Brown Brothers Harriman, adding that it was a ""so-so quarter"" for the rest of the PC industry. Compaq has the highest profit margins in the industry and Milton said its margins should be up slightly.  
Among the weaker players in PCs, Apple Computer Inc is expected to report a loss, but analysts said they are more focused on the company's comments going forward. The troubled PC maker has previously forecast that it would return to profitability in its second fiscal quarter, ending March.
""Their first order of priority is to eliminate the losses,"" Milton said. ""Can they reach break-even by December or March? Once we get to that point, we will look to see if they can begin to grow their revenues.""
Milton is forecasting Apple's revenues will fall about 17 percent, versus the year ago period.  
The following is a list of consensus earnings estimates for some major U.S. computer makers, as compiled by First Call.
COMPANY	    CONSENSUS	  DATE	  YEAR-AGO
Amdahl	     loss $0.17	 Oct. 29     profit $0.17
Apple Computer   loss $0.30	 Oct. 16     profit $0.48
Compaq Computer  profit $1.07     Oct. 16     profit $0.89
Digital	    loss $0.14	 Oct. 22     profit $0.26
IBM Corp	   profit $2.43     Oct. 21     profit $2.30
Sun Micro	  profit $0.61     Oct. 15     profit $0.43
Tandem	     profit $0.30     Oct. 24     profit $0.17
",46
"Personal computer makers next week will simultaneously roll out flashy multimedia PCs designed around a new chip by Intel Corp, a move that is expected to give the consumer sector of the industry a much-needed boost.
On Wednesday Intel will officially launch its P55C microprocessor, with its so-called MMX (multimedia extension) technology. A slew of companies will roll out consumer PCs, notebooks and desktops using the new chip, which offers much faster performance than earlier designs.  
""(The impact of MMX) will be significant in the second half,"" said David Wu, a Chicago Corp analyst. ""I should hope it helps -- the corporate world is strong and the retail world is very weak.""
He said there was currently nothing new and sexy to drive sales in the consumer market other than better price performance.
CompUSA Inc on Thursday became the latest retailer to report disappointing sales of PCs during the holiday shopping season, normally the industry's strongest.  
To be sure, analysts said that PC makers with a strong presence in the corporate market would not be hurt very much by the disappointing consumer sales.  
Consumer anticipation of the new PCs was one reason that retailers were showing weaker-than-expected sales, as savvy computer buyers waited for next ""big thing"" to hit the market, analysts said.
In tandem with Intel's announcement, Compaq Computer Corp , Dell Computer Corp, Gateway 2000 Inc, Toshiba America Corp, Sony Corp, International Business Machines Corp and other companies are expected to unveil new high-end PCs, priced at more than $3,000.
On Friday, Intel shares jumped eight to 138-3/8 after two analysts made bullish comments about the company.  
""It's a tremendous kickoff to 1997,"" said Rod Schrock, a vice president of Compaq's Presario division. ""We are so excited about the new MMX processor that we redesigned the entire line of Presarios from the ground up. Customers are going to get a pretty dazzling experience.""
Schrock declined to give any product specifics, but he said that Compaq will launch its Presario consumer PCs with MMX at about the same time as Intel's announcement.
""It should provide an added boost to the demand for the new generation of PCs,"" Schrock added. ""There was no major industry event in 1996. This year you have a new processor.""
",46
"America Online Inc., the world's largest online service, Thursday reported a first quarter net loss of $353.7 million due to its widely-expected restructuring charges to change its accounting practices.
The Dulles, Va.-based company said its loss, of $3.80 a share, in the first quarter ended Sept. 30, included a write-off of $385.2 million in marketing costs it had originally planned to defer for up to two years.
The company announced its write-off plans last week when it also unveiled a flat-rate pricing plan of $19.95 a month, and a corporate realignment into three business units. Wall Street has largely applauded the changes in its accounting, because some investors said the practice inflated earnings.
AOL also said its total revenues jumped 77 percent in the quarter, including a boost from advertisers and electronic commerce. Revenues climbed to $349.9 million from $197.9 million a year ago.
AOL said its other revenues, from sources such as advertising and electronic commerce, rose to a record of $38.8 million, roughly 24 percent above the June quarter levels.
AOL said eight advertisers have committed to spend $1 million or more this fiscal year, as it moves to seek more revenues beyond its base subscriber fees, which still make up the lion's share of its revenues.
Before the big accounting charge, AOL said it earned $19 million, or 17 cents a share, exactly in line with the mean estimate on First Call, which compiles analysts' estimates.
Revenues fell slightly short of some expectations because of the one-day outage of its service in August, analysts said.
Abhishek Gami, an analyst with Nesbitt Burns Securities, estimates the almost 19-hour outage on Aug. 7 cost AOL about $6.5 million in lost revenues and to pay subscriber credits.
However, AOL said its customer retention rate improved as the quarter progressed, reaching its best levels in September since mid-1995. Customer churn rate, or the drop-off in new customers, has been an issue at AOL, particularly this summer when subscriber growth slowed.
AOL also said it saw strong subscriber growth following the September launch of its new marketing campaigns. It added 400,000 new subscribers in the first quarter.
With the addition of nearly 275,000 new members in October, AOL said its total subscriber count reached 6.9 million worldwide. Analysts said 35,000 of those subscribers were from its online service in England, France and Germany.
AOL also said average hourly usage improved to 6.95 hours per member in the recent period, and in October, hit its highest level in the company's history.
""In the spring we indicated that member growth would slow in the summer, but would likely pick back up in the fall as we rolled out our 3.0 software and increased our marketing expenditures,"" said AOL CEO Steve Case, in a statement. ""We're pleased to report that growth has indeed accelerated, and now....we believe we are poised for continued strong growth.""
Last week, AOL said it would write off $385 million in the September quarter to account for the balance of its hefty subscriber acquisition costs, such as its mass mailing of floppy disks. It had been deferring certain marketing costs and amortizing some costs over a period of 24 months.
Analysts said they are now waiting to see how the new flat-rate pricing policy will effect the company's profit margins, which are expected to decline from the plan. The heavier users of AOL will now simply pay an all-you-can-eat rate of $19.95 instead of the heavier bills they incurred.
Th company acknowledged in a statement that its new pricing plan will result in lower-margins but that it is also expecting benefits from new revenue sources in the future, as it seeks to generate new higher-growth revenue streams.
""These are all issues that will clear up over time,"" said Jamie Kiggen, a Cowen & Co. analyst. ""Clearly the response to the new pricing plan has been very positive,"" Kiggen added, referring to the positive feedback AOL has received from customers. Analysts said AOL still expects to lose money in its second quarter ending Dec. 31, which will be the first period that the company expenses its quarterly marketing costs.
AOL's stock fell 50 cents to $24.75 on the New York Stock Exchange.
",46
"One of the hottest topics at a recent Internet trade show was so-called ""push technology,"" which directly broadcasts customised news to computer users hooked up to the Net -- but is also seen as the next area ripe for a shakeout     Internet broadcasters are led by companies
like privately held PointCast Inc., which announced a major deal with software giant Microsoft Corp. early last month.
Cupertino, Calif.-based PointCast and several other start-up companies deliver customised news -- or specific Web sites, depending on the service -- to consumer or corporate computer users, up to several times a day.
In other words, instead of searching the Web for the information they want, computer users have it sent directly to them.
The Yankee Group, a Boston research firm, predicts that by the year 2000 Internet broadcasting will be worth $5.7 billion in revenues. It now represents about $10 million in revenues a year.
""Making the Internet a broadcast medium is a direction that a lot of companies are going in, but that's already really crowded,"" said Ted Julian, an analyst with IDC Corp.
At the Internet World trade show, four of the best-known push technology companies exhibited and demonstrated their services, trying to differentiate themselves amid all the hype about direct Internet broadcasting.
But analysts said there are anywhere from 20 to 30 start-ups in this burgeoning area, as many companies are betting the concept will further change the World Wide Web and gain new advertiser interest.
""This is the new Web,"" said Steve Harmon, senior investment analyst at MecklerMedia Corp., host of the Internet World show.
PointCast was the first company to develop what are called personalized broadcast systems, and it now has 1.7 million subscribers. It delivers news from The New York Times, Boston Globe, Reuters Holdings Plc., and now MSNBC, the cable television-online news venture of Microsoft and General Electric Co.'s NBC.
PointCast and most of the other start-up companies operate on the same advertising-based model. They sell advertising space on their service and offer the service for free to subscribers.
By building up lots of subscribers, they can gain more advertising revenue.
The deal PointCast signed with Microsoft has the potential to significantly expand its subscriber base because PointCast will become part of Microsoft's next-generation computer desktop. Microsoft plans to incorporate its Internet Explorer Web browser in its next version of its Windows operating system, which dominates its market.
In a study last month, the Yankee Group said the Internet broadcasting market will significantly affect the way companies collect advertising dollars on the Web.
""The Web is hitting a wall"" in terms of people signing up for paid subscriptions for information, said analyst Melissa Bain of the Yankee Group. ""The Wall Street Journal (Interactive Edition) is successful, but not every content provider has had success. Users can get the information elsewhere for free.""
Bain said that, according to her report, 51 percent of all online users surveyed said that they typically access or use the same Web sites on a daily basis, making the ""push"" model attractive.
But with many more companies arriving on the scene and Microsoft and Netscape Communications Corp. getting into the market, consolidation is on the horizon, because media companies will not want to develop a channel for each delivery system, most of which, for now, are proprietary.
""There is no way I am going to download all four of these, and I am in the industry,"" said Jerry Yang, one of the founders of search engine power Yahoo! Corp. ""This is a huge issue.""
But Yang said that Yahoo! and other Internet search engines are looking at push technology because it will enhance a user's experience with the Web.
""Look for Yahoo to do a lot of development with one of these companies, or a Yahoo!-branded push channel,"" Yang said in a recent interview. ""We will all experiment.""
At Internet World, StarWave Corp., one of Microsoft co-founder Paul Allen's many investments, demonstrated a service it plans to introduce sometime next year. Patrick Naughton, StarWave's chief technology officer, said the service will be free and demonstrated a television-like advertisement for Levi's on ""StarWave TV.""
Even the players themselves are predicting a shakeout.
Harmon of Meckler predicts that push technology will fuel a hot new wave of Internet initial public offerings. But unlike the search engine fever, when a bevvy of small, unprofitable companies went public -- only to see their stock prices sharply decline -- consolidation will come first, he said.
Another player, Freeloader, was purchased last year by Individual Inc. of Burlington, Mass. Freeloader lets subcribers choose what Web sites they want delivered to their computers and obtain news via Individual.
""Clearly, there will be a big shakeout,"" said Freeloader President Sunil Paul, adding that there is a lot of chaos right now. ""PointCast clearly stands out, and we will be one of them (the survivors).
Another much-talked-about start-up, IFusion, is offering television-like content with video and audio in its service, which will be introduced early this year and called Arrive.
The company that created some of the recent frenzy about ""push"" technology is Marimba Inc., founded by several former Sun Microsystems Inc. employees.
Marimba did not exhibit at Internet World, but the Palo Alto, Calif.-based company, which develops software tools to create these ""channels"" using Sun's Java programming language, was mentioned by everyone. Marimba, along with PointCast, were seen as the potential early IPO candidates of this sector.
",46
"International Business Machines Corp. Monday reported a third-quarter profit that came in a shade better than Wall Street had expected, boosted by strong sales of personal computers and services.
The world's largest computer maker said net earnings were $1.29 billion, or $2.45 a share, for the quarter, compared with a loss of $538 million, or 96 cents a share, in the year-ago quarter.
Excluding a one-time charge of $1.8 billion related to its Lotus Development Corp. acquisition from the year-ago period, IBM's earnings were $1.3 billion in the 1995 quarter.
Sales grew 8 percent to $18.06 billion from $16.75 billion on the strength of PCs, minicomputers and computer services, IBM said. As expected, sales of mainframe computers declined.
Wall Street took IBM shares for a rollercoast ride after the report. They fell initially, then rallied on comments by the chief financial officer, and closed a fraction higher.
The midday rally took IBM to a new high for the year of $135.375. The stock closed at $130, up 75 cents.
The rally followed remarks by Chief Financial Officer G. Richard Thoman, who said in a meeting with analysts that he was ""very comfortable"" with the computer giant's prospects for the rest of 1996.
""I feel very good about the quarter and very good about the year,"" Thoman said.
But analysts still were concerned about company warnings that currency exchange rates, low prices for memory chips and higher-than-expected restructuring costs would hurt fourth quarter results.
""There were some cautionary comments about the fourth quarter,"" said Jay Stevens, a Dean Witter analyst who was among several who lowered their fourth quarter profit estimates.
Analysts said they generally were pleased with IBM's ongoing cost-cutting, its successful transition to new products in all its hardware areas and its investments in its growth. Revenue growth was also better than expected.
""I think the most impressive was the revenue growth,"" said Stephen Dube, an analyst with Wasserstein Perrella.
While mainframe computers no longer generate sales growth for Armonk, N.Y.-based IBM, they remain one of the company's important profit centres.
Thoman told analysts that more of IBM's mainframes sales were coming through its computer services business, and that IBM will not see the full impact of sales in one quarter for its new machines.
""If you sell a mainframe for $100,000 and you lease it or it's on a services contract ... rather than $100,000 at once, you have $8,000 a quarter,"" Thoman said in an interview, citing an example.
The company said revenues were higher in North America, Asia and Latin America but were flat in Europe. Revenue at its services division grew 26 percent to $3.9 billion, IBM said.
Total hardware sales rose 8 percent to $8.4 billion. PC sales, AS/400 minicomputers, and storage systems were up, while RS/6000 work stations, mainframes, and semiconductors fell.
IBM said pricing pressures hurt its semiconductor business.
Software revenues were off 1 percent to $3.1 billion, largely due to a decline in host-based software, which runs on mainframes. Distributed software revenues grew significantly from the 1995 period. Maintenance revenues fell 7 percent to $1.8 billion.
",46
"International Business Machines Corp will provide an update on its strategy for electronic commerce on Tuesday and will also unveil new partners and show examples of projects already in the works.
Electronic commerce is a now widely-used buzz word in the computer industry that refers to buying and selling goods and services or conducting transactions over computer networks.
For IBM, the world's largest computer maker, electronic commerce is a potentially huge opportunity to provide products and services to help its customers do business online.  
An IBM spokesman declined to provide any details on what IBM would be discussing, except to say IBM will provide an update on where it is now and where it is going in electronic commerce.
Top executives from IBM's Lotus Development Corp unit, its Internet division and its just-announced Network Computer unit will be hosting a press conference.
Analysts said IBM plans to announce several new partners for various applications it has developed, targeted at specific industries, such as an automotive company that is co-developing an auto-loan application on the Internet.  
IBM will also unveil and demonstrate an application targeted to the petroleum industry, a Web site called PetroConnect, that will let energy companies share geographical information over the Internet, to aid in their oil exploration searches.
The computer giant is also expected to add 10 new retailers to its World Mall, its online shopping site on the Internet.
IBM will also officially roll out its Network Computer division and possibly some new models of the Network Station, its first network computer, aimed at a specific industries.  
Earlier on Monday, IBM announced that it had formed a unit to focus all its development and marketing efforts in the embryonic market for these scaled-down computer devices.
Analysts said that, while electronic commerce represents a big opportunity for IBM and the rest of the computer industry, the market is still so young that it is hard to estimate what revenues will be, where they will come from and how long it will take for these ventures to be profitable.
""I think IBM is very well poised to make money from all of these things, but it will be a year or two before anything happens,"" said Stan Dolberg, a Forrester Research analyst.  
""The Internet commerce offerings, whether they are services or products, have to be really focused on a specific industry to be complete,"" Dolberg added.
Indeed, IBM is developing many industry-specific services, such as its petroleum industry Web service, and the automotive industry application. IBM will also announce a partnership with Charles Schwab Corp, the discount brokerage firm that has already been very active in developing online brokerage and trading services. But it is not yet clear whether or not IBM will make much money from services and transactions, of which it will get a piece.  
For example, in its World Avenue consumer retailing site on the Internet, IBM receives a start-up fee from its vendors and it gets a five percent commission from its retailing partners on sales and a monthly maintentance charge.
""What they are trying to do is build a recurring revenue stream,"" said John Jones of Salomon Brothers. ""They are trying to get into as many aspects of network computing as they can.""
Some analysts said that, of all IBM's electronic commerce ventures, the World Avenue site is the least likely to succeed, because it does not add a great deal of value, other than the convenience of not leaving your home to shop.
""Malls on the Internet are not what people want,"" said Forrester's Dolberg. ""If they want a mall, they want products grouped together by categories, say like shoes, so they can comparison shop...The Internet itself is like a whole mall, where a lot of different things are already grouped together.""
Other recent Internet shopping mall efforts have failed, such as MCI Communications Corp's MCI Marketplace.
IBM is hoping its technology such as Net.Commerce and Net.Commerce Payment software, will provide an easy-to-use and secure way of conducting credit card transactions and help end consumer fears about using credit cards over the Internet.
",46
"Netscape Communications Corp. and five regional Bell phone companies said Tuesday that the five ""Baby Bells"" will use Netscape's Navigator software as the main browser for their Internet access businesses.
Participating in the deal with Netscape were the Internet access units of Ameritech Corp., Bell Atlantic Corp., BellSouth Corp., Pacific Telesis Group and SBC Communications Inc..
The move was seen as a much-needed boost for Mountain View, Calif.-based Netscape, which has seen its popular Navigator software become the secondary browser to Microsoft Corp.'s Internet Explorer as the software behemoth made big inroads with the biggest online services.
""A few months ago, they (Netscape) announced a focus on the corporate marketplace,"" said Abhishek Gami, an analyst at Nesbitt Burns Securities. ""This is a little reminder from them that they are still a big player in the consumer marketplace.""
This year, America Online Inc, and CompuServe Inc. have forged deals with Microsoft to make Internet Explorer their primary Internet browser, and in return the online services have gained a spot on the Windows 95 desktop.
""It's a very good boost of confidence for Netscape, which has seen a very large defection from the online services,"" said Peter Krasilovsky, an analyst at Arlen Communications Inc. in Bethesda, Md.
Netscape shares jumped $3 to $63 in heavy trading on Nasdaq.
Together, the five Bell companies represent a potential market of 72 million consumers and businesses in 26 states, including Washington, D.C., and 15 of the nation's 20 largest markets.
Bell Atlantic said it also has an agreement with Microsoft and that it will begin offering Internet Explorer as an option to its customers in the first quarter of 1997.
Robert Beran, president of Bell Atlantic's Internet unit, told reporters in a conference call that the arrangement gives the phone companies a new way to market their Internet services via Netscape's Web site. He also said it gives new Net users a way to find another Internet service provider.
But analysts also pointed out that the five Baby Bells combined represent under 100,000 Internet users. Ameritech of Chicago still has not yet introduced its Internet service, but said it will do so ""reasonably soon.""
Pacific Bell, has the biggest Internet access business of the five, with 51,000 members at last count.
The agreement includes a feature to simplify how computer users select an Internet service provider, or ISP.
Users running Netscape Navigator would be able to contact their telephone company's Internet service provider through the new Netscape ISP Select feature on Netscape's Web site, the companies said. After users enter their area code and phone number, they will be presented with a list of service providers with coverage in their particular area.
Netscape said the ISP Select service will allow people to set up a personal Internet account and establish an Internet connection easily and quickly. In addition, phone company customers would have free access to newspaper and magazine content from the Netscape In-Box Direct service, in which personalized publications arrive via e-mail.
Netscape In-Box is a service recently introduced by Netscape to provide information from 40 selected content providers. The company said that since it was launched just a few months ago, its In-Box service has obtained more than 1.5 million subscriptions.
The ISP Select feature will be available on Netscape's Web site, with its Personal Navigator edition that is sold in stores, and will be bundled with some PCs.
They said future plans include offering the ability for ISP Select users who choose their local telephone company's Internet access service to have their Internet fees billed directly to their phone bills.
",46
"International Business Machines Corp. will update its strategy for electronic commerce Tuesday, and will unveil new partners and show examples of projects already in the works.
Electronic commerce is a widely used buzz word in the computer industry which refers to buying and selling goods and services or conducting transactions over computer networks, including the globe-spanning Internet.
For IBM, the world's largest computer maker, electronic commerce is a potentially huge opportunity to provide products and services to help its customers do business online.
An IBM spokesman declined to provide any details, except to say that IBM will provide an update on where it is now and where it is going in electronic commerce.
Top executives from IBM's Lotus Development Corp. subsidiary, its Internet division and its just-announced Network Computer unit will hold a news conference.
Analysts said IBM plans to announce several new partners for various applications it has developed, targeted at specific industries, such as an automotive company which is co-developing an auto-loan application on the Internet.
IBM will also unveil and demonstrate an application targeted at the petroleum industry, a Web site called PetroConnect that will let energy companies share geological information over the Internet to aid in their oil-exploration searches.
Analysts also expect the computer giant to add 10 new retailers to its World Mall, its shopping site on the Internet targeted at consumers.
IBM will also officially roll out its Network Computer division and possibly some new models of the Network Station, its first network computer, aimed at a specific industries.
Earlier Monday, IBM announced that it had formed a unit to focus all its development and marketing efforts in the embryonic market for these scaled-down computer devices.
Analysts said that, while electronic commerce represents a big opportunity for IBM and the rest of the computer industry, the market is still so young that it is hard to estimate what revenues will be, where they will come from and how long it will take for these ventures to be profitable.
""I think IBM is very well poised to make money from all of these things, but it will be a year or two before anything happens,"" said Stan Dolberg, a Forrester Research analyst.
""The Internet commerce offerings, whether they are services or products, have to be really focused on a specific industry to be complete,"" Dolberg added.
Indeed, IBM is developing many industry-specific services, such as its petroleum industry Web service, and the automotive industry application. IBM will also announce a partnership with Charles Schwab Corp., the discount brokerage firm that has already been very active in developing online brokerage and trading services.
But it is not yet clear whether IBM will make much money from services and transactions, of which it will get a piece.
",46
"EchoStar Communications Corp. -- the upstart in the direct broadcast satellite television business -- gave the nascent industry a major jolt this month with a sharp price cut.
The jolt reverberated earlier this week when Thomson, the U.S. unit of France's Thomson-CSF, which dominates the satellite TV dish market, matched EchoStar's new price at $199 for a satellite dish.
Thomson executives said the new price will surely shake up the industry and fuel sales for what is said to be the fastest growing consumer electronics product ever -- one that even now is taking market share from the cable industry.
""It will completely change the nature of the business,"" said Joe Clayton, an executive vice president at Thomson.
Thomson's move cut the price of the RCA brand digital satellite system by as much as $200 a unit. Combined with a $200 cash back offer by programming providers DirecTV, a unit of Hughes Electronics Corp., and U.S. Satellite Broadcasting Co., it cut the total price to $199 for consumers who pre-pay for one year of programming.
Programming costs from $29.95 a month for 70 channels on DirecTV to $44.95 a month for all 175 channels on DirecTV.
The lower price -- while welcome for consumers -- will make it harder for new entrants to break into the market and make a profit.
Other consumer electronics giants, Uniden America Corp., Toshiba America Consumer Products Inc., Samsung Electronics Co. Ltd. and Matsushita Electric Corp of America have announced plans to introduce new DSS systems later this year.
Thomson will make the dishes for Toshiba and Panasonic.
""We know the telcos and the cable companies are getting more involved,"" Clayton said. ""We are going to capitalise on our strengths now.""
He added that the $199 price will make the ""awareness base explode.""
Thomson has an estimated 45 percent of the digital satellite system dish market, which amounted to 3.4 million units worldwide at the end of July, according to the Carmel Group.
""It's been a real winner for them,"" said Jimmy Schaeffler, an analyst at the market research firm in Carmel, Calif. ""Plus it has launched them into the international marketplace.""
Schaeffler said satellite television is gaining markets outside the United States where there is no cable service because it does not require installing massive cable systems.
""Most of the rest of the world is not very cable wired, so there is a clear opportunity for direct broadcast satellite,"" Schaeffler said. Satellite TV is also becoming big in this country while vaunted digital cable systems undergo trials.
New competitors see an opportunity in digital satellites -- a technology that is already here and working. MCI Communications, aligned with Rupert Murdoch's News Corp. Ltd, already has a valuable U.S. satellite slot.
The move to cut prices to gain market share is changing the industry, which Clayton said is moving more toward a cellular telephone model, where the hardware is the lowest cost -- sometimes practically nothing -- and revenues come from services and programming.
""They have to fight within the industry and competitors from outside the industry,"" Schaeffler said. ""They are doing the rebates because of the market share. It's a combination of EchoStar pushing everyone to a lower price point nationally and the effort to maintain and acquire future markets.""
Asked how low prices of satellite dishes could go, Clayton joked that he had never seen prices in consumer electronics products go up. Other analysts also expect prices to keep falling.
""Maybe Charlie will take it to zero, but I don't think we will,"" Clayton said of EchoStar Chairman Charles Ergen.
A spokeswoman said Englewood, Colo.-based EchoStar, which launched its satellite network in March, already has 125,000 subscribers for its programming, which has 40 TV channels and 30 channels of music, compared with 175 channels offered by DirecTV.
The launch next month of a second satellite will increase its offerings to up to 200 channels, EchoStar said.
",46
"After a turbulent first year on the Internet, Rupert Murdoch's News Corp. will launch a revamped Web site on Monday with a new strategy more tightly focused on its well-known TV Guide.
The company's entertainment Web site will remain free on the Internet but will be renamed The TV Guide Entertainment Network with a new address (www.tvguide.com). The former name for the site was iGuide.
The new site will feature four areas including movies, music and sports in addition to television. Fox Sports and other Murdoch properties will also provide content, News Corp. said.
News Corp. expects money generated through advertising sales and eventual online transactions will allow it to turn a profit from the site in three to five years.
""Three to five years is the time frame,"" James Murdoch, Rupert Murdoch's youngest son who is vice president of music and new media at News Corp., said when asked about the goals for the site.
News Corp. is also embracing the WebTV Internet access device, which turns a standard television into an Internet access tool. Through an agreement with WebTV Networks Inc. in Palo Alto, Calif., it will develop customised TV-oriented content for WebTV.
Murdoch dismissed any suggestion that News Corp.'s foray on the Internet so far has been less than successful, even after the its partner MCI Communications Corp. pulled out of their joint online venture, the Internet directory service known as iGuide, last February.
""When something is at the very beginning in a new medium, it changes very quickly,"" Murdoch said. ""Like everyone else in new media, we've been evolving. A year ago, we redirected it. It's been a well-kept secret on the Internet. Now it's a question of reaching users and telling them it's there.""
Peter Krasilovksy, an analyst with Arlen Communications Inc in Bethesda, Md., said he believed ""iGuide is one of the overlooked sites on the Web,"" adding, ""it got lost in the corporate brouhaha between MCI and News Corp.""
Murdoch pointed to data from market research firm PC Meter, which counts the current iGuide site, before the new format being announced this week, as number 96 out of 3,000 Web sites surveyed, up from about 500th or so a year ago.
News Corp. hopes to gain repeat visitors who will check the site for TV listings. It can then build up demographic profiles to enhance the site for advertisers, including ways to target local TV audiences.
A big Web ""chat room"" with celebrities, specialised bulletin boards, entertainment facts, trivia and games are a few of the features News Corp. hopes will draw Internet users to the site.
",46
"Compaq Computer Corp., the world's biggest personal computer maker, said Wednesday that profits jumped 43 percent in the third quarter on higher sales of PCs and accessories, as well as streamlined operations.
The results exceeded published estimates on Wall Street, but Compaq's stock fell $1.125 to $73.625 on the New York Stock Exchange after it had risen sharply in recent weeks ahead of the earnings report.
Houston-based Compaq said net income for the three months ended Sept. 30 rose to $350 million, or $1.26 a share, from $245 million, or 89 cents a share, in the 1995 period.
Analysts had forecast earnings of $1.07 a share, according to First Call, which tracks profit estimates.
Sales grew 25 percent to $4.5 billion from $3.6 billion.
Compaq said its accessories business, which includes monitors, hard drives, keyboards and compact disc drives, grew significantly in the third quarter and remained one of its most profitable segments.
""We're very pleased with Compaq's continuing solid financial performance and especially with improvements in earnings and the growth of gross margins to 23.8 percent (of revenues),"" Compaq President Eckhard Pfeiffer said.
Compaq said it now has the strongest line-up of products and alliances in its history. At the end of October it plans to launch powerful computer workstations that run Microsoft Corp.'s Windows NT operating system, priced 50 percent below other workstations, for engineers and other users.
The company said it still expected a good fourth quarter, which is traditionally its strongest, driven by Christmas sales of PCs.
""Demand is strong,"" said John Dean, a Salomon Brothers analyst. ""In June, they rolled out their best product line they have ever had and their competition has not done a great job in some international markets, such as Europe.""
Compaq Chief Financial Officer Earl Mason said in an interview that he was comfortable with analysts' estimates of $1.40 a share for the fourth quarter, but many analysts said he was being cautious.
""He is clearly conservative,"" said Eugene Glazer, a Dean Witter analyst. ""This is the same man who said on the second-quarter conference call that he was comfortable with $1.03 a share and they came in at $1.25 a share.""
In the quarter, Compaq generated almost three times as much cash as in the year-earlier period, $3.2 billion, through improved inventory, asset and receivables management.
""As the team continues to work on the balance sheet as a major focus and as we continue to focus on operations, cash ought to increase,"" Mason said.
He said Compaq plans to expand its international sales operations and may also make selective acquisitions in the computer networking and corporate-wide computing areas.
Net income for the first nine months of 1996 grew 20 percent to $851 million, or $3.07 a share, from $707 million, or $2.59 a share. Revenues rose to $12.7 billion from $10.1 billion.
",46
"A top executive at Compaq Computer Corp. said Thursday he was leaving the world's biggest personal computer maker and joining an Internet startup, giving credibility to the startup and setting in motion a realignment of Compaq's sales managers.
The executive, Ross Cooley, is leaving a position where he was in charge of Compaq's $7 billion North American computer business for a job at a four-month-old company with the high-tech name of pcOrder.com
At pcOrder.com, Cooley, 55, will fill the as-yet unfilled positions of chairman and chief executive officer and have a salary of $1 a year, plus stock options.
His move from an executive suite at a Fortune 500 company to a technology startup mirrors that of several other executives over the past few years, notably, the departure of Alex Mandl from AT&T earlier this year.
Cooley's move provides instant credibility to pcOrder.com, which provides a marketplace on the Internet for buying and selling personal computers and related equipment.
Cooley's retirement had been rumoured in the industry for several months, and Compaq announced that James Schraith, formerly president of The Cerplex Group Inc. and president of AST Research Inc., is replacing Cooley.
""Ross's plan to retire has been in discussion for awhile and there were some rumours flying,"" Eckhard Pfeiffer, president and CEO of Compaq, said in an interview. ""The time has come and obviously as you can see the succession is already in place ... Ross has been a great leader.""
At the same time, Compaq created a new sales infrastructure, hiring Richard Snyder, a Dell Computer Corp. executive, for a newly-created position of general manager, worldwide sales. All the heads of Compaq's five geographical sales regions -- Asia Pacific, Europe, Middle East and Africa, Japan, Latin America and North America -- will report to him.
Previously, these regions all reported directly to Pfeiffer. But as Compaq has quickly grown to an almost $18 billion company in recent years, Pfeiffer said he needs another executive to stay in touch with the day-to-day activities of its worldwide sales and support organisation.
""Fifteen people have been reporting to me up until this morning when we announced this change,"" Pfeiffer said. ""That is a huge top management organisation. As the company grows, my tasks change.""
Compaq has grown from its origins as one of the first companies to successfully clone the IBM PC in the early 1980s to become the leading PC maker in the world. Cooley is known for his strong relationships with the PC sales channel and his role in building Compaq's massive distribution.
""My feelings in joining pcOrder are similar to those I had in joining Compaq almost 13 years ago,"" Cooley said in a statement. ""Back then, I saw the irrefutable logic of the PC as a new paradigm in computing. Today, I believe pcOrder's technology and vision represent an irrefutable value proposition.""
Before joining Compaq in 1984, Cooley held several sales and marketing positions at International Business Machines Corp., where he worked for 18 years.
""Getting Cooley is really a coup for pcOrder,"" said John McCarthy, a Forrester Research analyst, adding that Cooley's connections in PC distrubution will give pcOrder more credibility as it builds its system. Cooley's acceptance of $1 a year for salary, plus stock options, is also a ""big bet on the company's upside (potential),"" McCarthy said.
pcOrder for now is still private, but the company is contemplating a public offering eventually.
""We do not have a set plan or a set timetable, but we are seriously considering it,"" said founder and President Christina Jones. Jones will continue as president of pcOrder. The post of chairman and CEO had been vacant since the start-up was founded in June.
pcOrder.com is a marketplace on the Internet, where PC makers, components makers and distributors list information and receive orders.
Currently, sales representatives and customers user pcOrder to configure build-to-order PCs, compare prices, and place orders over the Internet. The system contains information on over 150,000 products in the PC industry from over 800 manufacturers.
",46
"The battle between Bill Gates and Larry Ellison over the ballyhooed network computer is getting rougher.
For the past year, Oracle Corp. Chairman Larry Ellison has been evangelizing his vision of a low-cost, diskless PC to access corporate networks and the Internet, a PC without a hefty operating system like Windows.
Ellison's vision has captivated many in the industry, who are weary of the domination by the Wintel combination of Microsoft Corp.'s Windows operating systems and Intel Corp. processors in PCs.
Sun Microsystems Inc. has jumped on the network computer bandwagon with Oracle and on Tuesday it will introduce its much-anticipated JavaStation.
But Monday, in a blatant move to steal Sun's thunder, Microsoft Chairman Bill Gates struck back.
Microsoft gathered together a Who's Who list of the PC industry and announced its own low-cost solution to the growing interest in the network computer.
""Obviously, Microsoft is feeling the heat from all the hype that Oracle and Sun are getting,"" said Eileen O'Brien, an analyst at International Data Corp., in Framingham, Mass. Microsoft's initiative left many industry analysts underwhelmed. The software behemoth unveiled a ""new"" PC design, a standard PC design with an Intel processor, memory, a hard disk drive, and of course, the Windows operating systems, with features to automate software upgrades.
But Microsoft zoomed in on the key point of the pro-network computer argument that is striking a nerve with many corporate information technology managers: the high cost of owning large numbers of PCs.
Some industry analysts estimate that a PC, which can range from $1,500 to $3,000 to purchase, can cost anywhere from $6,000 to $12,000 and more annually to maintain.
Redmond, Wash.-based Microsoft unveiled ""Zero Administration"" features in its roadmap for its NetPC, which will be built into future versions of its Windows 95 and Windows NT operating systems.
""That's the biggest advantage of the NC, is the lower cost of ownership"" said Tom Rhinelander, an analyst with Forrester Research, in Cambridge, Mass. ""They are trying to get to that and say, 'we can create something that is just as low-cost.'""
The concept behind the network computer, which ""rents"" software such as a word processing package, or a spreadsheet, from a main computer, or server, is that it does not need continuous upgrades for the operating system or applications.
""PCs have two huge liabilities, high cost and high complexity,"" Marc Andreessen, the co-founder and senior vice president of Netscape Communications Corp., told reporters on a conference call.
As Microsoft was holding a press conference in the backyard of its Silicon Valley foes on Monday, Mountain View, Calif.-based Netscape and Oracle, headquartered in Redwood Shores, Calif., unveiled their own alliance.
Oracle agreed to use the Netscape Navigator as the main browser on the Intel version of its network computer, which is expected to ship early next year, and Netscape will offer Oracle database software in its server packages for corporate intranets, or internal networks modeled on the Internet.
""The rise of the NC ... it's a profound shift in the industry,"" Andreessen said.
While Netscape has much to gain with the adoption of devices that access the Internet and corporate networks -- its browser holds about an 80 percent share of the Internet market -- analysts said the current Navigator is a bit too bulky and has limited functionality on a network computer.
Netscape has a subsidiary, called Navio, which is developing a ""thinner"" version of Navigator that will be more tailored to NC-like devices, mostly aimed at the home market.
For now, the hype is surrounding the corporate market, where analysts expect the network computer to have an impact.
""I am skeptical about the NC as a consumer device,"" said Josh Bernoff, another Forrester analyst. ""In corporations, there is a lot more hope for it.""
Even International Business Machines Corp. has jumped into the fray. The world's largest computer maker was the first company to begin shipping its version of a network computer, which it calls the Network Station, to a limited number of customers, last month.
""To us, it's not about network computers replacing PCs, it is the right technology for the right problem,"" said Phil Hester, vice president, network computing, at IBM. ""We have been through three phases of computing, from the mainframe to the minicomputer to the PC and none of them have replaced the ones that came before them.""
Indeed, most market researchers do not believe that the NC will replace the PC, but it will make a dent in the market.
International Data predicts that by the year 2000, there will be about 5.5 million to 6 million NCs shipped, or ""non-PC type devices"" vs. 80 million PCs.
But when asked which companies will dominate the burgeoning NC sector, analysts hedge.
""Who knows who is going to be around that long,"" said International Data's O'Brien.
",46
"Electronic commerce over the Internet - buying airplane tickets, music CDs, or clothes with a credit card - is not fiction anymore.
But security and other concerns hampered the Internet from becoming an international shopping mall in 1996, and security remains an issue for 1997.
Electronic commerce in 1996 was not quite as robust as some firms had anticipated, as delays in developing the software to secure credit card transactions on the Net kept merchants and consumers at bay. E-commerce is still in its infancy and likely to explode toward the end of the century.
""This was kind of a building year,"" said Scott Smith, a Jupiter Communications analyst. ""Many consumers are just starting to get online, merchants are trying to still figure out how to present themselves online.""
According to Jupiter, total revenues generated from all consumer shopping over the Internet and online services will reach about $1.2 billion in 1996. The revenues are expected to almost double next year, to $2.3 billion.
Jupiter, a New York market research firm, forecasts 1999 revenues to jump to $5.5 billion and to $7.3 billion in 2000.
Travel and the direct distribution of electronic products, such as PCs, software, etc., are the two biggest categories of electronic commerce right now, Smith said, with travel making up about half of the $1.2 billion in 1996 commerce revenues.
Most of the giant retailers are sitting by the sidelines, watching and waiting for the security to be in place and to see what some of the catalog merchants and other more daring retailers are doing on the Internet, where there are many opportunities to save costs, keep inventories low and target customers with specific products aimed at their profiles.
""It's inventing whole new ways of selling stuff,"" said Irving Wladawsky-Berger, the head of International Business Machines Corp.'s Internet division.
IBM has developed a shopping mall called World Avenue, where mostly speciality retailers have storefronts.It also includes Express, the popular unit of Limited Inc.
But still, Internet shopping is not viewed by consumers as completely safe. A recent study by O'Reilly & Associates of Sebastopol, Calif., reported that fewer than 1 percent of all public World Wide Web sites are fully able to host secure transactions.
""It's easy enough to know that if you get a warning from your browser that what you are about to do is dangerous...that this is a deterrant,"" said Richard Peck, a vice president at O'Reilly ""Commerce readiness is an issue of consumer trust, confidence.""
Credit card companies MasterCard International and Visa International have been working together since last February on software to secure credit card transactions, using data encryption (scrambling) techniques and authentication software to ensure identities of the consumer, the merchant and the Web site.
But the software development is behind, analysts and industry executives said, even though the protocols (the roadmap for software developers) called the SET (secure electronic transaction) specification have been published.
The companies had said in February they expected banks to be able to offer secure bankcard services via the Internet to their cardholders in the fourth quarter 1996.
""They have totally blown that deadline out of the water,"" Smith of Jupiter said. ""There was a bit of hype about it originally that made people think it would be done really fast."" Smith said the development has many diverse layers.
""There are issues that have to be sorted out. It probably won't be until 1998 when it is fully implemented,"" Smith said.
Visa did not return a call seeking comment. A spokesman for MasterCard in Purchase, N.Y. said that the companies remain ""on track"" with their original timeframes, but that MasterCard had no news since a recent announcement.
Last month, MasterCard purchased 51 percent of Mondex International Inc., a leading electronic payment system using a payment card called a smart card, which are like electronic wallets. A group of banks and AT&T endorsed the electronic cash card, with pilot testing already going on in some cities.
Smart cards will likely become one of the many ways consumers pay for purchases online. PCs will have built-in smart card readers, specifically designed for online buys.
So while the SET software is still in development, companies are finding other ways to do transactions.
CyberCash, which is also a partner working on the SET transaction system, is providing encryption software for America Online Inc's Web hosting service, so that small or large companies selling goods can have a secure credit card payment system, based on data encryption software currently available.
""SET isn't really all there yet,"" said Doug McKee, manager of Web server development at AOL. ""Cybercash has a system that is like a proprietary version of SET...I don't think there is a reason to wait.""
Some companies are not waiting. While the big retail giants slowly enter cyberspace, a new breed of Internet retailers and brands are being born, like Amazon.com, the popular site bookseller and Onsale.com, an auction house for computers and consumer electronics goods.
",46
"International Business Machines Corp reported strong third quarter results on Monday but raised concern about the fourth quarter, sending shares on a roller-coaster ride.
IBM's third quarter earnings of $2.45 a share was just two cents above the Wall Street consensus estimate of $2.43. IBM opened off, then climbed to 135-3/8 during its analysts' call.
But analysts said comments by its chief financial officer about continuing negative impact from currency, memory prices and higher expenses dampened his otherwise bullish outlook.  
""There were some cautionary comments about fourth quarter,"" said Jay Stevens, a Dean Witter analyst, adding that he was revising his fourth quarter estimates.
Some analysts started cutting fourth quarter numbers after the conference call, reflecting the company's comments about a bigger currency impact, continued drop in memory chip prices and higher-than-expected fourth quarter restructuring costs.
In general, analysts said they were pleased with IBM's ongoing cost-cutting, its successful transition to new products in all its hardware areas and its investments in its future growth. Revenue growth was also better than expected.  
""I think the most impressive was the revenue growth,"" said Stephen Dube, a Wasserstein Perrella analyst. ""It's coming from all other products except for mainframes."" As expected, IBM said its mainframe revenues fell in the quarter.
Previously, IBM had expected that currency and memory chip prices would have a diminished impact on the second half.
But Monday, IBM said it could have a slightly bigger negative impact from currency rates than the $0.08 a share it saw in the third quarter and memory prices would continue to hurt its semiconductor business, comments that had a dampening effect on analysts hoping for a very strong fourth quarter.  
Analysts still expect IBM to report a strong fourth quarter, because many other products are doing well and it will also begin to see sales of its recently shipped models of its lower-cost mainframes. But they also need to account for IBM's comments that it will begin spreading out some of its mainframes sales over several quarters.
G. Richard Thoman, IBM's chief financial officer, told Wall Street that a ""growing proportion"" of IBM's mainframes sales are going through its computer services business, and therefore, IBM will not see the full sales in a quarter for all its machines.  
""If you sell a mainframe for $100,000 and you lease it or it's on a services contract ... rather than $100,000 at once, you have $8,000 a quarter,"" Thoman said in an interview, adding that this is ""just an example.""
Thoman buoyed analysts with news that IBM's mainframe installations, which grew 25 perent, are growing ""almost back to 1980s"" levels. But even with such strong customer interest, IBM's prices are still so low that revenues are still expected to decline, while mainframe profits are forecast to be hefty.
""This quarter it did not come from mainframes,"" said Stephen Dube, a Wasserstein Perella Securities analyst.
""Mainframes are not a growth area for them,"" he said. But mainframes are still IBM's second most profitable hardware product, after its AS/400 minicomputers.
The fourth quarter was also marred by a prediction that IBM will take a bigger-than-expected restructuring cost. Originally, IBM had predicted about $200 million per quarter this year, but said on Monday that it will spend an additional $100 million to $200 million in the fourth quarter.
IBM said the increase resulted from more employees taking its voluntary buyout plan in Europe in the fourth quarter.
",46
"America Online Inc. said Monday it was starting a major expansion of its online network and planned to spend $250 million through the end of its fiscal year in June to build capacity and improve service.
The nation's largest online service provider said it was upgrading its network to meet the surge in demand generated by its new pricing and recent marketing initiatives. As of Sunday, AOL began offering a new flat-rate pricing plan to its 7 million subscribers.
AOL said it will double its system hardware over the next six months, which would grow large enough to cover nearly two football fields.
Since September, AOL has doubled its electronic mail capacity and its capability to connect users to the Internet's popular World Wide Web.
An America Online spokesman said that despite heavy usage over the Thanksgiving holiday weekend, there were no serious problems with its online network.
The Dulles, Va.-based company said that since July 1, it has added tens of thousands of new modems to AOLnet, which it said was the world's largest dial-in network. The expansion is to accelerate through the spring with tens of thousands of new modems being installed monthly, it added.
AOL, the world's largest online service, recently sent out postcards to its members about the new pricing plan of $19.95 a month for unlimited use of the service.
The postcards also warned members that the company expected a slowdown in its service during peak hours on Sunday, as users celebrated the flat-fee by going online for hours. ""There were no serious problems,"" the spokesman said.
Analysts said with more new users expected, AOL needs to upgrade its network, especially after its nearly 19-hour outage on Aug. 7, which happened during regular maintenance caused by a software glitch and angered many users.
Already this quarter, AOL's subscriber growth is on the rebound, and in October, the company added 275,000 new members. In the summer, AOL was hurting from a slowdown in subscriber growth.
The online service provider did not make any further mention of the recent investigation into its pricing policy by the attorneys general of about 18 states.
Last month, AOL said it had received inquiries from states' attorneys general expressing concern with how it was implementing and disclosing the new pricing plans to members. A spokesman said at the time that its plan and the implementation was ""fair in every sense.""
Last week, the attorney general of the state of Washington signed a letter of agreement with AOL, resolving allegations that AOL had violated Washington's Consumer Protection Act by planning to bill subscribers the new $19.95 rate for unlimited service, without their positive assent to it.
AOL agreed to notify customers of the upcoming price changes by using a ""pop-up"" screen which appears when members sign on. Customers must choose one pricing plan by March 31.
",46
"Netscape Communications Corp. Tuesday unveiled a line of low-cost software to make corporate networks more like the Internet and said that it would ""embrace"" archrival Microsoft Corp.'s products as part of its war for control of the corporate software market.
Netscape is under heavy attack from software behemoth Microsoft, which is seeking to wrestle away some of Netscape's dominant share in both Internet and intranet software.
The Mountain View, Calif.-based upstart has about 80 percent of the Internet browser software arena with its Navigator software and between 60 percent to 70 percent of the exploding ""intranet"" market.
A corporate ""intranet"" is a computer network designed around Internet technology and open standards.
As part of its plan to try to hold onto its lead and to gain entree to more companies, Netscape unveiled several products for the corporate market and said it was ""embracing"" Microsoft applications software and its operating systems because many potential customers rely on Microsoft products.
""We are very hard-core about ... fitting into our customers' 'legacy' systems,"" Marc Andreessen, co-founder and senior vice president of technology at Netscape, told a news conference, in one of many jabs at Microsoft.
""Legacy systems"" is a term in the industry that usually refers to the established, older technology running a corporation, such as mainframe computers.
Netscape stock dipped 62.5 cents to $44.25, while Microsoft rose $2.25 to $138.875 on Nasdaq.
Netscape announced several new intranet products, including new software incorporating the latest upgrade of its popular Navigator Web browser, Version 4.0, and priced them way below similar offerings by both Microsoft and Lotus Development Corp., Netscape said.
One new software product, Netscape Communicator, combines Navigator and other components: Composer, to create documents in the hypertext markup language (HTML) used on the Internet's World Wide Web; Messenger, an electronic mail application; Collabra group discussion software; and the Netscape Inbox Direct service, which delivers messages and news stories to an e-mail address daily at no extra cost.
Netscape Communicator will replace the current Navigator software for consumers. Communicator is priced at $49 for the standard version and $79 for the professional edition, per user.
Netscape expects to make Communicator available by next year's first quarter for 17 major computer operating systems, including Windows 95, Windows 3.1 and Apple's Macintosh.
Users of Navigator 3.0 who have purchased a subscription will receive an upgrade to Communicator at no charge.
Netscape also introduced an upgrade of its SuiteSpot software, which manages the server computers that run corporate networks.
SuiteSpot is priced at $57,900 for 1,000 users. This compares with prices of $73,590 to $279,590 for competing products from Microsoft and Lotus, Netscape said.
Netscape also unveiled an initiative to help corporate users make it easier to use its software with core Microsoft products, such as its Windows 95 and Windows NT operating systems and Microsoft Office with Netscape products.
Analysts said Netscape is trying to appeal to a whole new group of corporations by enabling its software to run with the huge installed base of Microsoft-based PCs and servers.
""The strategy is not to scare away the IT (information technology) managers,"" said Eric Brown, a Forrester Research analyst.
Netscape's not-so-friendly bear hug of Microsoft is part of the David-and-Goliath war with Redmond, Wash.-based Microsoft, the world's No. 1 software company, for control of the Web browser market and more importantly, control of the corporate network. Netscape already derives 80 percent of it revenues from sales of intranet software.
But Netscape acknowledged it may lose some share in the future intranet software market, which Forrester Research is forecasting to reach $10 billion by 2000.
""Dominance is hard to measure,"" Andreessen said in an interview. ""I think we can get at least 50 percent of the intranet software market in five years.""
According to a recent Hambrecht & Quist survey of 200 companies, Netscape now has about 60 percent of corporate intranets, Microsoft's BackOffice has 30 percent and International Business Machines Corp.'s Lotus Notes 10 percent.
Netscape's Navigator software has created a huge brand name and a ""calling card,"" giving it entree to major  corporations. Now the company must execute its strategy and build a sales infrastructure, Andreessen said, a major challenge as its growth continues to explode.
The company, which went public in August 1995, is expected to grow to about 1,700 employees by year-end, up from about 400 at the time of its initial public offering, Andreessen said.
Andreessen added that Netscape has not abandoned its consumer focus in favor of the corporate user.
Netscape also signed deals with more than 70 manufacturing partners, including Apple Computer Inc., Compaq Computer Corp., Digital Equipment Corp., Hewlett-Packard Co., International Business Machines Corp., Ing. C. Olivetti & C. SpA, Siemens Nixdorf and Sun Microsystems Inc.
",46
"Digital Equipment Corp.'s top executives host computer industry analysts Tuesday, hoping to impart a view of a brighter future and re-ignite interest in the company's downtrodden stock on Wall Street.
Analysts expect the Maynard, Mass.-based computer maker, which just last month reported a big fourth-quarter loss and restructuring charge, to focus on its long-term direction and goal of reaching operating margins of 6-7 percent of revenues.
""They are going to talk about their vision of the future,"" said Gary Helmig, a SoundView Financial Group analyst.
He said Digital will likely focus on its growth areas, such as servers designed on its fast Alpha chip that run Microsoft Corp.'s Windows NT software, prospects for its computer services business, growth in semiconductors and its plans to spin off part of its Alta Vista Internet unit.
But after Digital's most recent loss, Wall Street will likely also be looking for any forecast for the first quarter, in which some analysts project a loss.
In the fourth quarter ended June 30, Digital reported a loss of $433 million, or $2.87 a share, after taking a $492 million restructuring charge for job cuts and plant closings.
Morgan Stanley analyst Steve Milunovich recently wrote in a report that the first fiscal quarter is off to a slow start.
""Management indicated that first quarter is off to a slow start, likely due to short-term disruption from sales force changes,"" Milunovich said. ""A loss appears increasingly likely.""
According to First Call, which monitors Wall Street earnings estimates, the consensus estimate for DEC's first quarter is a loss of 3 cents a share.
Many analysts expect the tone of the meeting to be positive, as Digital executives highlight the company's strengths and growth opportunities. But they are also hoping for some hints at Digital's fix-it plans for its PC business.
""The story for the Alpha server business, the networking business, the storage business and the semiconductor division is quite encouraging,"" John Jones of Salomon Brothers said in a report to clients. ""But PCs are a big overhang currently.""
In the fourth quarter, Digital's PC business lost more money than it had previously expected, estimated around $90 million, and analysts said speculation is ""rampant"" that Digital is looking for a manufacturing partner to help shave costs in PCs.
But Digital is not expected to make any announcements on the unit, other to confirm that it is seeking a manufacturing partner.
""They will talk about how they are going to change the sourcing of their PCs,"" Helmig said. ""They will talk about the fact that they are doing it, but they won't be able to announce what they are doing. They haven't dotted the I's and crossed the T's.""
Analysts said one of Digital's biggest opportunities for improving gross margins is in services, which had margins of 32 percent of revenues in 1996. Services is also a growth engine for International Business Machines Corp..
They will also be eager for details on Digital's plans to spin off 20 percent of its Alta Vista Internet software unit.
Alta Vista is Digital's popular and powerful search engine for finding entries on the Internet's vast World Wide Web.
Digital plans to retain 80 percent of the unit, which will also develop other kinds of Internet software, aiming to capitalize on the Alta Vista brand name.
Analysts said the motive behind spinning off part of Alta Vista is likely that its shares may do better if they trade separately from Digital, which has seen its stock drop from a high of 76-1/2 in February to 38-5/8 on Friday.
",46
"Computers appear to have taken a back seat this holiday season to gifts of other sorts as several computer retailers this week reported a sluggish start to the big holiday season.
Among major computer retailers, November sales showed ongoing weakness and heavy promotions, and analysts said this combination may bode poorly for sales of personal computers to consumers this quarter.
""Bad would be a better word than sluggish,"" said Stephen Baker, an analyst at Framingham, Mass.-based International Data Corp. ""Promotional (discounting) is a code word for lower profits.""
Retailers noted, however, that calendar quirks made some year-to-year comparisons look negative because Thanksgiving, the traditional start to the holiday shopping season, was later this year.
Circuit City Stores Inc., the largest retailer of brand-name consumer electronics and a leading retailer of personal computers, said that industry sales remained weak.
The Richmond, Va.-based company reported an 8 percent increase over November 1995 sales, but at stores open at least a year sales fell 8 percent compared with a year earlier.
""Industry sales trends remained weak and promotional activity intensified,"" said Richard Sharp, Circuit City's chairman and CEO, in a statement.
Best Buy Co. Inc., based in Minneapolis, said that there were more discounts in the PC category in November.
""Third quarter sales were well below earlier expectations,"" said Allen Lenzmeier, Best Buy chief financial officer. Third quarter sales were up 4 percent.
But for the four-week period ending November, Best Buy's sales in stores open at least one year fell 8 percent, compared with an increase of 15 percent last November.
""The numbers in general in computer retailing were pretty weak,"" said Tom Courtney, a Montgomery Securities analyst. He estimates that in the computer category at Circuit City, for example, November sales fell 20 percent to 25 percent.
""We think that what's happening is there is a big shift to the direct channel,"" Courtney said, referring to companies such as Dell Computer Corp. and Gateway 2000 Inc. that sell PCs through phone and mail order.
Analysts also cited increased interest in apparel this holiday season, following years of heavy buying of all sorts of home electronics -- from computers to satellite dishes to audio and video products.
""This is the first Christmas in a few years when there hasn't been a really compelling new reason to buy a PC,"" said Nick Donatiello, president of Odyssey LP, a market research firm in San Francisco. ""Last Christmas and the year before you had CD-ROMs, fast modems, the Internet and new Pentium chips.""
""The market of first-time buyers seems to be shrinking,"" said Baker.
""You've already gotten a PC into the homes that can afford a decent quality PC.  The rest of the households say it's either too much or what am I going to do with it,"" Baker said.
Tandy Corp. was lukewarm about the start of the season. ""Traffic in our stores was very good the first few days after Thanksgiving,"" Chief Executive John Roach said in a statement.
Tandy's November RadioShack sales for stores open at least one year were down 5 percent; Computer City was up 3 percent and Incredible Universe superstore sales were flat.
Some analysts said they were not worried by the sluggish retail sales, because they were looking to corporate sales for the bigger profits this quarter. The consumer sector, fraught with price cuts, is still barely profitable for some companies.
Even before Thanksgiving, industry leader Compaq Computer Corp. cut prices on its Presario home PCs by as much as 21 percent. Analysts also said Sony cut prices on new PCs.
""I don't think it means a lot,"" said Andrew Neff, a Bear Stearns analyst, of the sluggish start to the holiday season. ""People are in no hurry to buy.""
Neff said this PC makers expect corporate sales to be the driver of PC growth, not consumer sales. Dataquest Inc. has predicted that the PC market will grow at about 19.7 percent worldwide in 1996, still strong but behind the record growth of 24.7 percent growth in 1995.
""I just view anything that happens in retail as icing on the cake,"" Neff said.
",46
"U.S. 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 have a negative impact on some big systems makers.
And 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, fueled by hefty corporate PC buying.
Apple is first to report, with Q1 late Wednesday.  
Earlier this month, Cupertino, Calif.-based Apple Computer forecast it would report an operating loss for its first quarter, ending December, citing weak U.S. demand for its Performa consumer PC and continued shortages of notebooks.
""Most of the indications are that business throughout the (PC) sector, other than Apple, was strong,"" said Eugene Glazer, a Dean Witter analyst. ""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 PC leader Compaq Computer Corp is likely to report strong earnings, especially after semiconductor giant Intel Corp reported a blow-out fourth quarter, surpassing Wall Street's highest estimates.
Compaq gets about 20 percent or so of its revenues from the retail consumer channel and the rest of its revenues are 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 benefitting from the same forces, the transition to the PentiumPro (chip), a hot notebook market and progress in the server business.""  
On the larger systems side, companies like International Business Machines Corp, Digital Equipment Corp, Unisys Corp, are expected to see some negative impact from a stronger dollar overseas, plus sluggish sales in Europe, while business in the U.S. remains strong.
""Business is quite good in the U.S.,"" said Jay Stevens, a 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 Steve Milunovich, a Morgan Stanley analyst. ""The dollar did strengthen at the end of the quarter. You will generally see numbers near consensus.""
Analysts said they expect IBM's earnings to be a bit better than expected, but that its expenses for headcount reductions will be greater than the previous quarters.
""Europe remains a slower grower, which has led to a number of organizational and planned efficiency changes,"" said John Jones, a Salomon Brothers analyst. IBM reports after the stock market closes next Tuesday, changing an old tradition.  
The following estimates for some major computer makers are compiled by First Call, a unit of Thomson Financial Networks.
    COMPANY		   CONSENSUS	     DATE
Amdahl Corp		   profit $0.13	  Jan. 29
Apple Computer Q1	   loss $0.62	    Jan. 15
Compaq Computer	     profit $1.53	  Jan. 22
Digital Equipment Q2	profit $0.10	  Jan. 16
Gateway 2000		  profit $1.01	  Jan. 23
IBM Corp			profit $3.88	  Jan. 21
Sun Microsystems Q2	 profit $0.42	  Jan. 16
Unisys Corp		   profit $0.13	  week Jan. 20
",46
"The stock of IBM, years ago dubbed ""I've Been Mugged,"" is back in style and hitting historic highs on Wall Street, where investors say shares of the world's biggest computer company can continue rising.
The rally in International Business Machines Corp. stock started on Friday when an influential analyst, Daniel Mandresh of Merrill Lynch, raised his 12-month price target on IBM to $195 from about $155.
Since Friday, IBM's shares have soared more than 20 percent and touched $159 on Wednesday, a level last seen before the 1987 stock market crash. Investors called the stock a relative safe haven among technology shares. IBM hit an all-time high of $175 in August 1987.
The stock ended at $152.75 Wednesday, off $1.375, on some mild profit-taking, but the shares are still up about 68 percent since July 15, when they stood at $91.
When IBM was losing money and restructuring, and after its first dividend cuts in 1993, the stock sank as low as $43 and gained the moniker of ""I've Been Mugged"" on Wall Street.
Now, with a steady stream of profits and many bullish opinions by analysts, some analysts are again viewing the stock as a bellwether that is also helping fuel the rally in the Dow Jones industrial average.
One question now hounding investors is whether it would be wise to jump in and buy Big Blue, or wait for the stock to decline.
Market technicians and some analysts who follow IBM say that the once-beleaguered stock still has room to climb.
Some analysts still have buy ratings on IBM, even at these levels, because its value remains low relative to many other technology stocks, a point IBM officials have tried to bring home to investors in recent months.
Apparently, many on Wall Street are hearing the message, and some are encouraged by IBM's progress and double-digit revenue growth in areas such as services.
""Investors are looking for more defensive plays with companies with solid earnings outlooks,"" said Bill Milton, an analyst at Brown Brothers Harriman. ""It still sells at a relatively low valuation, relative to the technology sector.""
Technology stocks typically trade at a price about 20 times their estimated earnings. But even with its latest surge, IBM is still trading at a only about 14 times its current estimates.
Technicians, who use charts, graphs and computer analysis without considering company fundamentals, said that IBM's shares have recently broken out of two previous resistance levels, one at $128 and another at $148, and are now poised for further gains.
""At these levels there really isn't much resistance, this can continue to work higher,"" said Susan Stern, a senior technical analyst at Smith Barney. Resistance refers to a price ceiling where a stock price consolidates.
""I think the primary trend remains up,"" said Gregory Nie, a technical analyst at EVEREN Securities Inc. ""The stock is getting a little extended on a short-term basis.""
",46
"Philip Zimmermann, a computer programmer and cryptographer who was investigated by the U.S. government for three years because his encryption software given away over the Internet was classified as a weapon, is going mainstream with the hopes of making money.
At this week's Internet World trade show in New York, Zimmermann, who has become a hero among the Internet cognoscenti after his battle with the government will unveil his company, a private firm called Pretty Good Privacy Inc. and two security software products for Internet users, aimed at protecting privacy in cyberspace.
Zimmermann's original data scrambling software, also known as encryption software, is already being used by more than 2 million users since Zimmermann first began distributing it over the Net in 1991.
PGP Mail, as the product is called, scrambles electronic mail, which can be unscrambled by the designated recipient.
But Zimmermann's software was so powerful that it attracted the attention of the U.S. Justice Department and the Department of Commerce. Its encryption was stronger (and harder to crack) than the legal limits set by the United States for export and was therefore considered a munition.
Last January, the United States dropped its investigation of Zimmermann, without ever saying what it was investigating, after three years of intense scrutiny.
""It was like a sword of Damocles hanging over his head,"" said a spokesman for PGP, based in San Mateo, Calif.
Now, as Zimmermann goes from a ""shareware"" model of giving the software away for free, into a real commercial venture, he joined with some heavy hitters in Silicon Valley. Jonathan Seybold, a noted industry analyst, is a founder of Pretty Good Privacy, as is Dan Lynch, who founded the InterOp trade show. Other executives who recently joined the company include Phil Dunkelberger, formerly vice president of marketing at Symantec Corp. Inc. and Tom Steding, most recently of 3Com Corp..
PGP so far is privately funded, with no venture capital help, even though some venture capitalists offered to become investors. The company has also purchased two other small software firms, whose products make a good match with PGP's.
For example, PGP acquired ViaCrypt, which was the company Zimmermann licensed PGP software to while he was under federal investigation. Now with ViaCrypt's enhancements, PGP Mail is even easier to use and will ""plug in"" easily to popular electronic mail packages, such as QualComm Inc.'s Eudora Mail.
PGP Mail, because of its heavy encryption, still cannot be used outside the United States, but it can be used to send mail within the United States and Canada. It has the strongest encryption available, using mathematical algorithms to encode the data that can be as big as 3,072 bits long, which is considered military-grade.
Currently, the United States allows software with 128-bit encryption to be exported, but that is only if the users will provide a key to decipher the data.
Pretty Good Privacy will also introduce a product called the PGP Cookie Cutter, based on software from a company it bought called PrivNet, of Chapel Hill, N.C., but now moving to San Mateo as it merges with PGP, which has about 60 employees.
The PGP Cookie Cutter lets a user selectively block the so-called ""cookies"" on the Internet, which monitor his or her Web visits. Cookies are data files which track where a user has been and what the user is doing on the World Wide Web. They are increasingly used by companies and advertisers to monitor and accumulate Internet user data.
Both products will be commercially available next year.
",46
"The stock of IBM, which in recent years was derisively dubbed ""I've Been Mugged,"" is back trading at historic highs, with many analysts and traders predicting its shares will continue to soar.
The major rally was sparked last Friday when an influential Wall Street analyst, Daniel Mandresh of Merrill Lynch, raised his 12-month price target on International Business Machines Corp, to $195 from about $155.
Since Friday, IBM's shares have soared 20.2 percent to 153-3/4 at Tuesday's close of market.  
One question now among investors is whether to jump in at these levels like sheep, or wait for IBM's stock to decline.
Market technicians and some analysts who follow IBM say that its once-beleaguered stock still has room to climb.
Even after Friday's run-up, analyst Steve Milunovich of Morgan Stanley on Monday raised his 12-month price target to $170, from $145.
IBM's shares are now trading at levels its shares have not seen since before the 1987 stock market crash, having in fact reached a nine-year high.  
""It still sells at a relatively low valuation, relative to the technology sector,"" Milton said.
Technology stocks typically trade at a price/earnings ratio of about 20 times their earnings estimates. But even with its intraday surge Tuesday of 7-1/4, IBM is still trading at a P/E of only about 14.2 times its trailings earnings estimates.
IBM's shares have climbed nearly 70 percent since July 15, when it was trading around 90-7/8.  
Market technicians, who use charts, graphs and computer analysis without considering company fundamentals, said that IBM's shares have recently broken out of two previous resistance levels on the charts, one at 128 and another at 148, and are now poised for a further uptick.
""At these levels there really isn't much resistance, this can continue to work higher,"" said Susan Stern, a senior technical analyst at Smith Barney. Resistance refers to a price ceiling where a stock price consolidates.  
""I think the primary trend remains up,"" said Gregory Nie, a technical analyst at EVEREN Securities Inc. ""The stock is getting a little extended on a short-term basis.""
Traders seem to agree. One technology trader said he has now covered a short position in IBM. ""I think the move has probably been overdone short-term, but on a valuation, it is a lot cheaper than a lot of tech stocks,"" the trader said. ""The way it's been trading, it's got a little more to go.""
However some more bearish analysts point out that since Mandresh and Milunovich upped their price tagets on IBM's stock price, neither analyst increased earnings estimates.  
Stephen Smith, a PaineWebber analyst, said that he believes some of the fourth quarter 1996 and 1997 earnings estimates on Wall Street for the world's largest computer maker are too high.
""Obviously they have done a good job financially, but it's going to be a lot tougher for them going forward,"" Smith said, adding that he believes IBM has already seen the biggest positive swing in its earnings it will get from its transition to lower-cost mainframe computers based on CMOS technology.
When IBM was in the midst of a huge losses, a management upheaval and restructuring, and its first dividend cuts in 1993, its shares sunk to a low of 43, where it gained the moniker of ""I've Been Mugged"" by many traders on Wall Street.
Now, with a steady stream of profits and many bullish views by analysts, some market analysts are again viewing the stock as a bellwether that is also helping fuel movements in the Dow Jones Industrial average.
",46
"Unisys Corp. posted improved results in the third quarter, the company said Wednesday, as its new business structure began to pay off, while Stratus Computer Inc. reported better-than-expected profits.
Unisys, based in Blue Bell, Pa., reported a third quarter profit of $14.2 million, but a loss of 9 cents a share after paying $30.2 million in dividends on preferred stock. That compared with a net loss of $32.2 million, or 36 cents a share a year ago.
Revenues for the third quarter were $1.63 billion, up 9 percent from $1.49 billion in the year-ago quarter.
Unisys said revenues were up at each of its three business units: information services, computer systems and computer services. The three units were formed in a restructuring.
""After nine months of operations under the new business structure, our three businesses ... are more cost-competitive, streamlined, and focused on capturing opportunities in their respective markets,"" said James Unruh, chairman and CEO.
Unisys shares closed at $6.875, up 37.5 cents, on the New York Stock Exchange.
Unisys said its computer systems group has made excellent progress in working through a major product transition to its new lower-cost mainframes, which have experienced a delay as it tested problems with a new chip.
Unisys said while the transition continued to affect its results, sales of computer systems were up 14 percent and profitability in this unit ""rebounded nicely"" in the quarter.
Analysts said a sale of more than 50,000 election systems in Brazil helped its computer systems unit. Revenue increased strongly both in the United States and internationally.
""The Brazilian deal was over $50 million,"" said John Jones, a Salomon Brothers analyst.
Unisys said it planned to meet its revised shipment schedule for its new mainframe computers, which are a major transition to a new lower-cost architecture. Analysts said they expected the high-end versions of these systems to begin shipping around March and April.
Separately, Stratus Computer Inc. of Marlboro, Mass., reported a better-than-expected third quarter, citing a positive contribution from its once-beleaguered software business and improved sales of its new computers.
Stratus reported third quarter income of $10.8 million, or 45 cents a share, compared with a loss of $9.3 million, or 40 cents a share in the third quarter of 1995.
Revenues totalled $150 million vs. $151 million last year.
Stratus's results were better than Wall Street expectations. According to First Call, the consensus estimate was for third quarter earnings of 42 cents a share. The company's shares closed at $24.25, up 25 cents, on the NYSE.
Stratus said its software business contributed to earnings for the first time this year, as the benefits of its recent restructuring began to take effect.
""With a sharpened focus on the best opportunities, we expect that results will continue to improve in this part of our business,"" said Bill Foster, chairman and CEO, in a statement. Stratus restructured its software unit in the second quarter.
Hardware revenues were up 15 percent on a sequential basis and were up 5 percent vs. the year-ago period, as its Continuum Series computer line saw strong sales growth. It expects even stronger Continuum growth in the current quarter.
Jones of Salomon said its new Radio systems, which run Microsoft Corp.'s NT operating system, will also be a contributor when it begins volume shipments this quarter.
Stratus develops so-called fault-tolerant computers specifically designed with a backup system in case of system failures.
",46
"Shares in media group Pearson rose sharply on Monday as takeover speculation swirled on a report, later denied, that broadcaster BSkyB might be planning a bid, just days after new management was appointed.
""The price was boosted last week by the management change but now it reflects revived bid speculation,"" said one sector analyst who declined to be named.
Pearson shares were up 25 pence at 721-1/2 pence by 1115 GMT after touching a peak of 745 pence, a high for the year.
A report in Monday's Independent newspaper said BSkyB, in which Rupert Murdoch's News Corp has a 40 percent stake, was in the early stages of planning a bid worth more than four billion pounds ($6.4 billion) in cooperation with a U.S.-based media group.
But BSkyB's chief executive, Sam Chisholm, was quoted in later editions of Murdoch's Times newspaper saying there were ""no talks taking place between News Corp, BSkyB or any associated company about a bid for Pearson.""
BSkyB was not immediately available for comment on Monday.
Pearson, which owns the Financial Times newspaper, Penguin Books and a number of television production companies, said it did not comment on speculation.
Analysts said although BSkyB appeared to have ruled itself out of a bid, observers felt any move on Pearson was likely to be made before new management takes control next year.
Last week, Pearson appointed Marjorie Scardino to be chief executive from January 1 -- the first female head of a company represented in the key FT-SE 100 share index -- and Dennis Stevenson chairman.
""If someone is thinking seriously about a bid, now is the time to do it. The new management hasn't arrived yet and so it would be harder to mount a defence,"" said one media analyst who asked not to be identified.
But analysts said Pearson shares were now approaching the top end of their price target range for full valuation of the business and the price tag attached to speculation around BSkyB was high.
""It is touching the stratosphere at these levels,"" said Anthony De Larrinaga of Panmure Gordon.
The media analyst said it was difficult to put a price tag on Pearson because its diversified nature meant it could have specific attractions for a variety of bidders.
Speculation of a bid for the company last surfaced in August when Anglo-Dutch publisher Reed-Elsevier was rumoured as a possible buyer.
After initial stock market disappointment, Scardino's appointment at Pearson was greeted with a 12 pence jump in shares on Friday as hopes emerged that she might reorganise the sprawling media company.
The Sunday Times newspaper reported that a sale of its television interests, which include soap opera and games show producer Grundy, might be on the cards.
""It may be that BSkyB want to acquire Grundy or Thames Television but whether they would want the entire group is another matter,"" said Anthony De Larrinaga of Panmure Gordon.
So far, Scardino appears to be keeping her options open, analysts said.
""There is no real evidence yet that she would consider any demergers and it is open to question whether such a move would bring shareholder benefit,"" the sector analyst said.
""We have the stock on a hold at the moment. Let's see what the new management comes up with and let's see if there is anything concrete behind this bid speculation,"" he added. ($1=.6298 Pound)
",16
"Britain's decision to take legal action to ban Resale Price Maintenance (RPM) on non-prescription medicines is likely to boost competition and could benefit some stores in terms of market share, analysts said on Friday.
""Anything that actually causes prices to fall is not good news (for retailers), but for those wanting to increase market share it will mean more people coming through the stores,"" said one share analyst who asked not to be identified.
Office of Fair Trading head John Bridgeman said in a statement earlier that he would seek to remove RPM from over-the-counter (OTC) medicines, because ""there are good reasons for believing that it is time to end price-fixing.""
RPM allows manufacturers to set minimum levels for sale of certain over-the-counter medicines. The Community Pharmacy Action Group, which lobbies on behalf of pharmacies, said its removal could mean the closure of one in four local outlets.
The OFT's request goes to the Restrictive Practices Court which is unlikely to be able to consider the issue before late 1997, Bridgeman told a press conference.
Retailers therefore did not appear to be about to start an immediate round of price cuts.
Chemist and beauty products store chain Boots said it was disappointed at the decision and believed that RPM ""operates in the public interest.""
Boots has not reduced prices of such medicines during a long-running inquiry into price-fixing and industry sources said it was unlikely to take that route in the near future.
UniChem, a pharmaceuticals wholesaler and retailer, said removal of RPM would be ""immaterial to...profitability,"" while Superdrug, the high street chemist chain owned by Kingfisher, welcomed the move but ruled out immediate price cuts.
Supermarket retailer ASDA, which has led the campaign over the last year to have RPM removed after successfully lobbying for it to be withdrawn from books, also welcomed the OFT's decision, saying it could save consumers 300 million pounds ($476 million) on everday healthcare products.
But it said its stance on prices would not change.
""RPM is still in place, we are still in the same situation we were in yesterday and we will still be in it tomorrow,"" a spokesman said.
ASDA is currently refusing to sell Anadin Paracetamol, a painkiller produced by Whitehall Laboratories, and large packs of indigestion treatment Alka Seltzer, after it baulked at manufacturers' price increases.
It has launched a range of some 40 own-brand OTC medicines and vitamins selling for as little as half the price of branded equivalents, and says they have helped it extend market share.
Also on Friday, ASDA said it was launching an initiative to help support local pharmacies, shops which chief executive Allan Leighton told BBC television he had no wish to see put out of business.
Share analysts said that removal of RPM on non-prescription medicines could see specialists such as Boots increasing market share, reflecting events after RPM was taken off books when specialist retailer W H Smith increased market share.
""Smiths got stronger, increasing market share through promotions and using muscle with suppliers. I expect the same will happen to Boots - it'll get bigger and stronger,"" said Nick Bubb of MeesPierson.
Boots shares dipped on the news and stood at 638-1/2p, down 5p, by 1440 GMT. ASDA was up a penny to 114-1/2 pence while Kingfisher was down 1-1/2 pence at 654 pence. ($1=.6298 Pound)
",16
"British supermarket retailer J. Sainsbury Plc expects its new banking venture to turn in profits ""in a relatively short period of time,"" marketing director Kevin McCarten told Reuters in an interview.
""We see this as a commercial venture...it is not a huge sink of money,"" he said.
Sainsbury announced on Friday that it had applied for authorisation from the Bank of England to set up Sainsbury's Bank in which it would have 55 percent with Bank of Scotland taking 45 percent.  
He said the banking service would offer ""great products...at better value than is currently available,"" but declined to comment on possible interest rates on accounts.
Sainsbury will draw on its database of customers signed up to its Reward loyalty card and other store cards for direct marketing of the banking facilities, McCarten said, but added that it was not planning to limit access to these customers.
""Our objective is to build (the business) across the UK,"" he said.  
Sainsbury currently has about five stores in Scotland, while Bank of Scotland will benefit because it has a limited presence south of the border.
""It's a lovely distribution channel,"" a Bank of Scotland spokesman told Reuters, adding that the new bank would have its own identity and would not carry the Bank of Scotland logo.
McCarten said there would not initially be banking counters in stores but added it could not be ruled out for the future.  
No decision has yet been reached on use of cash dispensers, the Bank of Scotland spokesman said, although he ruled out stand-alone machines.
McCarten said the banking facilities would be ""completely separate"" from its Reward loyalty card other than using the database.
He added that the aim was to encourage customers to see banking as part of Sainsbury's supermarket offer, which should have a knock-on effect for the stores.
""If you can increase customer spend a little, you grow your business,"" McCarten said.  
-- London Newsroom +44 171 5427717
",16
"J. Sainsbury Plc announced plans Friday to launch a jointly owned banking service with Bank of Scotland, the first supermarket to do so in Britain's hotly competitive food retailing business.
""It could be a winner if it is done in the right way,"" said one industry analyst who asked not to be identified.
Sainsbury said it had applied to the Bank of England for authorisation for a new bank to be owned 55 percent by the company and 45 percent by the Bank of Scotland, based in Edinburgh.
The venture, to be called Sainsbury's Bank, will offer telebanking services for deposits, lending and cash management to a target audience of 12 million customers, Sainsbury said. It will kick off next year with the launch of Classic and Gold Visa cards along with account and card-based services.
""It certainly shows Sainsbury is alive and kicking, which we had begun to doubt,"" one sector analyst said.
Sainsbury, which posted lower profits for the first time in 22 years last year, was forced to launch its Reward loyalty card in June after archrival Tesco Plc offered its ClubCard, which allows shoppers to build up credit balances at favourable interest rates to be used in Tesco stores.
But Sainsbury's move makes ClubCard Plus look timid, one analyst said. ""The market wanted to see them doing something and this is certainly a pleasant surprise,"" the analyst said.
Sainsbury Chairman David Sainsbury said that Sainsbury's Bank would give customers ""the reassurance of a name they know and trust, coupled with the banking expertise of the Bank of Scotland.""
The move will result in ""a compelling alternative ... for Sainsbury's customers,"" said Bank of Scotland Chief Executive Peter Burt.
Analysts warned, however, that Sainsbury's Bank would have to offer attractive deals to secure customers, many of whom already have bank accounts.
""It has to undercut the competition or link banking up to Reward points, a lot will depend on the marketing,"" one industry analyst said.
Another warned that the financial services of retailer Marks & Spencer, although not directly comparable, made only a small contribution to profits even though it had been running for 15 years.
""They will have to decide to really go for it if they are going to make it profitable,"" he said.
Analysts said the market would still look for progress in its core grocery business sales when Sainsbury reports interim results on Oct. 30.
Sainsbury shares rose 10.5 pence (17 cents) to 360.5 pence ($5.75). Tesco rose 2.5 pence (4 cents) to 324 pence ($5.17).
",16
"Tax changes on long-term assets made in the British budget sparked falls in utility sector stocks on Wednesday but analysts said the concerns might be overdone and expected the sector to recover.
""It is not a welcome move but it should not be a disaster. I do not think it should have a significant impact,"" said one analyst who asked not to be named.
The changes, proposed by finance minister Kenneth Clarke in the budget on Tuesday, cut capital allowances on assets with a working life of over 25 years to six percent from 25 percent.
The Treasury said it hoped to raise around 1 billion pounds ($1.68 billion) over three years from the move.
Shares in utilities fell across the board, with water company Anglian Water down five pence to 566 pence at 1150 GMT, Yorkshire Water losing seven pence to 677 pence and Severn Trent slipping nine pence to 671 pence.
Multi-utility Hyder slid 18 pence to 738 pence.
Among energy and power companies, PowerGen shed eight pence to 571.5 pence and Yorkshire Electricity lost 7.5 pence to 772 pence.
""The tax changes are definitely why the shares are down,"" one analyst said. The proposals will affect companies spending over 100,000 pounds a year on long-term fixed assets with exceptions for shipping and rail businesses and office buildings.
Utilities could be particularly vulnerable because they have large amounts of infrastructure and plant which will require future investment, analysts said.
""But a billion pounds across all companies means the impact will be pretty small for each business,"" one analyst said.
Companies were largely unwilling to comment immediately on the likely impact, with United Utilities and Southern Electric both saying it was too early to assess.
But both companies might give further details when they report half year results on Thursday, analysts said.
The change has been seen by some observers as pre-empting the opposition Labour party's proposals for a one-off ""windfall"" tax levy on utilities for what are seen as excess past profits.
These plans, from a party which is well ahead of the Conservative government in polls running up to a general election in the next six months, have been keeping a dampener on utility stocks recently.
Analysts said the changes in the budget would mean that any windfall tax imposed by a Labour government might hit companies harder.
Estimates are that a Labour government might seek to raise five billion pounds or more from such a measure in order to finance measures to combat youth and long-term unemployment.
At the same time, Labour might seek to reverse the changes on capital allowances, analysts said, as it pushes for increased investment by companies.
""These measures could reduce Labour's ability to push ahead with any windfall tax, on the other hand the party might repeal the changes to encourage investment,"" the analyst said.
""Utility shares have been discounted because of worries over any plans for a windfall tax by Labour. Today's falls could make some of them more attractive for canny investors,"" he added. ($1=.5956 Pound)
",16
"J. Sainsbury Plc announced plans Friday to launch a jointly owned banking service with Bank of Scotland, the first supermarket to do so in Britain's hotly competitive food retailing business.
Sainsbury said it had applied to the Bank of England for authorisation for a new bank to be owned 55 percent by the company and 45 percent by the Bank of Scotland, a banking and financial services company based in Edinburgh.
Industry analysts said the move was a bold one that could eventually prove profitable but noted that Sainsbury, Britain's largest supermarket chain in terms of sales, had its work cut out for it.
""It could be a winner if it is done in the right way,"" said one industry analyst who asked not to be identified.
Sainsbury has about 690 supermarkets and other outlets in Britain, including five in Scotland. Its Shaw's chain has 105 stores in the United States and it also owns a stake in Giant, with 169 U.S. outlets.
The new venture, to be called Sainsbury's Bank, will offer telebanking services for deposits, lending and cash management to a targeted 12 million customers, Sainsbury said. It will kick off next year with the launch of Classic and Gold Visa cards along with account and card-based services.
""It certainly shows Sainsbury is alive and kicking, which we had begun to doubt,"" one sector analyst said.
Sainsbury, which posted lower profits for the first time in 22 years last year, was forced to launch its Reward loyalty card in June after archrival Tesco Plc offered its ClubCard, which allows shoppers to build up credit balances at favourable interest rates to be used in Tesco stores.
But Sainsbury's move makes ClubCard Plus look timid, one analyst said. ""The market wanted to see them doing something and this is certainly a pleasant surprise,"" the analyst said.
Sainsbury Chairman David Sainsbury said that Sainsbury's Bank would give customers ""the reassurance of a name they know and trust, coupled with the banking expertise of the Bank of Scotland.""
The move will result in ""a compelling alternative ... for Sainsbury's customers,"" said Bank of Scotland Chief Executive Peter Burt.
Analysts warned, however, that Sainsbury's Bank would have to offer attractive deals to secure customers, many of whom already have bank accounts.
""It has to undercut the competition or link banking up to Reward points, a lot will depend on the marketing,"" one industry analyst said.
Sainsbury marketing director Kevin McCarten said the new service would offer ""great products ... at better value than is currently available,"" but declined to specify interest rates on accounts or give financial terms of the venture.
Sainsbury expected the new services to turn in profits ""in a relatively short space of time,"" he said in an interview.
One analyst noted, however, that the financial services of retailer Marks & Spencer Plc, although not directly comparable, has made only a small contribution to profits although it has been running for 15 years.
""They will have to decide to really go for it if they are going to make it profitable,"" he said of Sainsbury.
Sainsbury shares rose 10.5 pence (17 cents) to 360.5 pence ($5.75). Tesco rose 2.5 pence (4 cents) to 324 pence ($5.17).
",16
"CalEnergy of the U.S. threw British regional electricity company Northern Electric its second bid challenge in just over a year on Monday with a $1.225 billion offer and analysts said it may succumb.
""We will see an agreed bid eventually,"" said Philip Hollobone at Williams de Broe, who said the price could rise to 650-657 pence per share from the current 630 pence offer.
CE Electric, jointly owned by CalEnergy with 70 percent and U.S.-based construction, mining and telecoms group Peter Kiewit Sons with 30 percent, said on Monday it would pay 630 pence each for the ordinary shares of Northern Electric.
The deal also offers 103 pence per preference share. CE Electric pounced on 12.72 percent of Northern at the bid price of 630 pence as the shares vacillated between a peak of 645 pence and a low of 609.75 pence, trading up 120 pence at 640 by 1320 GMT.
Northern Electric successfully fended off a hostile bid last year from Trafalgar House, now owned by Sweden's Kvaerner, offering the carrot of a special package worth 560 million pounds ($894 million) for shareholders.
That has left its balance sheet too weak to squeeze a substantially higher bid, according to Hollobone.
CalEnergy chairman David Sokol said he felt the offer was ""a very full price,"" adding that CE Electric had sought to agree a bid with Northern Electric but ""the only area we could not agree on was value.""
A rash of bids last year in the electricity sector were made at levels of around 14 times earnings, according to Andrew Stone, analyst at Daiwa, but CE Electric's price values Northern at a ratio of about 10.5.
""There might well be some upside, but I don't think we're likely to see the 14 times earnings figure,"" Stone added.
CalEnergy's Sokol said CE Electric had targeted Northern Electric, based in north-east England, because it wanted to add distribution and supply to its existing skill base of generation while the previous bid had made information on the regional electricity company more accessible.
In addition, he said Northern's size was ""very manageable.""
""They are the smallest regional electricity company and that means that you can get them cheaper,"" said one analyst who asked not to be named.
Northern urged its shareholders to do nothing and said it would make a further statement later on Monday, while CalEnergy's Sokol said he hoped to secure a recommended bid.
Rumours a U.S.-based company, possibly Houston Industries or Duke Power, might bid for one of the five remaining independent British regional electricity companies sent shares surging on Friday, but Northern had been seen as one of the least attractive because of its high gearing.
East Midlands Electricity, which led Friday's climb, slipped back 9.5 pence to 555 pence, while Yorkshire Electricity added nine pence to 757 pence and Southern Electricity rose 18.5 pence to 647 pence with London Electric gained 16 pence to 600 pence.
Some analysts suggested that CE Electric might have to raise its bid to cover a 56.5 pence special dividend which Northern intends to pay as a special dividend in February.
CalEnergy is a U.S.-based power generator which uses geothermal, natural gas and hydroelectric resources and operates facilities worldwide. Total assets are $3.5 billion with a market capitalisation of $1.9 billion. ($1=.6264 Pound)
",16
"London Electricity on Tuesday became the latest British regional electricity company (Rec) to attract bid speculation after U.S. firm Entergy was reported to be mulling a 1.2 billion pound ($2 billion) bid.
London Electricity declined comment on a report in the Wall Street Journal Europe that confidential documents showed the U.S. company was seeking 1.1 billion pounds to acquire an unnamed British electricity firm whose financial profile matched that of London Electricity.
Entergy told Reuters that any talks with another party were ""too early in the scheme of things to be really meaningful.""
""As far as specifying a target of that interest, we're not simply going to comment on what has been speculated and rumoured,"" Entergy spokesman Patrick Sweeney said.
However, he declined to deny the Wall Street Journal Europe article.
Shares in London Electicity touched a high of 671 pence before easing back to close at 667 pence, up 30-1/2 pence. The newspaper article said confidential Entergy company documents referred to used a code name ""Atlantic"" for the target company whose financial profile met that of London Electricity on a number of points.
The Journal said the bid was assumed in the documents to be for around 700 pence per share. The newspaper quoted Entergy's Sweeney as saying Entergy was interested in the British market and ""obviously if you're interested, one of the results could be an acquisition.""
The article followed a denial by Entergy on Monday of a report in Britain's Sunday Telegraph newspaper that the U.S. firm was considering a bid for Yorkshire Electricity Group Plc. The electricity sector has seen a flurry of bid speculation recently over the five remaining independent Recs. Northern Electric currently faces its second hostile offer in less than two years as it tries to fend off a $1.225 billion ($1=.5994 Pound)
",16
"British spirits, pubs and fast food group Allied Domecq on Tuesday reported a fall in annual profits but effectively ruled out a demerger as a solution to its problems.
Allied chairman Sir Christopher Hogg said in a statement the company was ""clear that the best way to improve shareholder value is to improve operating performance and that this should be our overriding objective for the foreseeable future.""
He disappointed market hopes of a demerger of the company's spirits and wines business, saying this option had been ""thoroughly reviewed"" and the company was ""intent on developing the group's two principal businesses.""
Full-year pretax profits to August before exceptionals slipped to 575 million pounds ($947.4 million) from 645 million previously but were within analyst forecasts of between 560 and 581 million.
Allied Domecq said exceptional losses for the year totalled 311 million pounds, the largest part of which was on the 205 million pound sale of its 50 percent stake in brewer Carlsberg-Tetley to Bass in August.
Allied paid out a total dividend of 23.59 pence a share, unchanged from the year ending March 1995, which was used as a comparison because of a change to its accounting period.
""The figures were very much in line with expectations. Some people had been worried the dividend may be cut but it has been maintained and that's a positive,"" one analyst, who asked not to be identified, said.
Allied's shares eased 10 pence to 458 pence by 1040 GMT.
""The divisions have gone in the direction expected but if you were someone who wanted action -- a demerger or management change -- you haven't got either and there will be disappointment,"" the analyst said.
Allied said its corporate restructuring had been largely completed with the sale of its stake in Carlsberg-Tetley and smaller food companies.
Hogg said the group ""must improve the returns it delivers to shareholders."" He said an essential part of this was recognising and remedying overstocking of spirits distributors.
The cost of tackling overstocking of U.S. spirits was the main factor in a 14 percent fall in year trading profits in the group's spirits and wines business, the company said.
Allied said it was ""determined to increase prices (in spirits and wines) where we can,"" adding that strong brands and market leadership were the best basis for achieving this.
The company said it hoped the division would benefit from the increasing focus on key brand/market combinations, more favourable shipment patterns and from efficiency gains.
But it warned that the trading environment ""may offer little prospect of improvement."" The group's retailing business, which includes pubs and fast food outlets, saw underlying profits rise four percent during the year and Allied said it saw further opportunities for developing its leading pub brands.
""The company has said they can grow earnings and that's the way to create shareholder value,"" the analyst said.
But he added that there was still ""a lot of scepticism that they have to dispose of."" ($1=.6069 Pound)
",16
"A unit of CalEnergy Co., a fast-growing, Nebraska-based energy company, Monday launched a $1.2 billion takeover bid for British regional utility Northern Electric Plc, which promptly rejected the unsolicited offer.
The offer was the second for Northern Electric in just over a year and the fourth for a British power company by a U.S. utility. Industry analysts said Northern Electric might end up agreeing to a takeover if it could extract a higher price.
Omaha, Neb.-based CalEnergy, through its 70 percent-owned CE Electric unit, said it would pay 630 British pence ($10.06) for each common share and 103 pence ($1.64) for each preferred share of Northern Electric, valuing the company at about $1.23 billion. The U.S.-based construction and mining company Peter Kiewit Sons owns the other 30 percent of CE Electric.
Newcastle-based Northern Electric successfully fended off a hostile bid last year from Trafalgar House, now owned by Sweden's Kvaerner, by offering a special package worth 560 million pounds ($894 million) for shareholders.
""Our strategy is to become a leading global provider of a full range of energy services,"" CalEnergy Chairman David Sokol said in a statement announcing the offer.
Sokol's company has invested in geothermal and other energy projects at home and in Indonesia and the Philippines in recent years. Its core operations are in California, New York and Texas, and the bid for Northern Electric is a major move outside the U.S. market.
U.S. utilities, faced with slow growth and deregulation in their local markets, have been merging in the United States and investing abroad as they seek to grow.
Sokol said Northern Electric had distribution and supply know-how that would complement CalEnergy's production capacity, while its size was ""very manageable.""
""They are the smallest regional electricity company and that means that you can get them cheaper,"" said one analyst who asked not to be identified.
""We will see an agreed bid eventually,"" said Philip Hollobone at brokers Williams de Broe, who said CE Electric might eventually raise its price to secure agreement from Northern's board of directors.
In its statement rejecting the bid, Northern Electric said that in talks through Sunday, CE Electric had contemplated offering about 700 pence ($11.17) per Northern Electric share.
""Northern Electric is clearly saying you can have us for 700 pence per share,"" said one sector analyst who asked not to be identified.
CE Electric, which bought a 12.7 percent stake in Northern in the open market, said that it never suggested ""any intent to value the company at 'around 700 pence per share' or even anywhere close to this figure.""
Sokol said he felt the offer was ""a very full price,"" adding that CE Electric had sought a merger agreement with Northern Electric but ""the only area we could not agree on was value.""
Some analysts said Northern Electric's weak balance sheet would limit what CE Electric would bid and that it might be hoping to attract another bidder. The shareholder package paid to fend off Trafalgar House left it heavily in debt.
Northern Electric stock jumped 131 pence ($2.09) to close at 651 pence ($10.40) after CE Electric had managed to buy its 12.72 percent stake at the offered price earlier in the session.
CalEnergy announced in August that it bought three gas-fired cogeneration plants in Texas, Pennsylvania and New York for $226 million from Falcon Seaboard Resources Inc., a closely held energy company.
",16
"British utility South West Water could face bids worth 950 million pounds ($1.51 billion) if the government lets Severn Trent and Wessex Water go ahead with firm offers, analysts said on Thursday.
However, the official go-ahead for any bids is likely to be linked to a deal offering price cuts for customers, they said.
""The Department of Trade and Industry (DTI) will probably decide that the bids are against the public interest unless there are price cuts to outweigh that,"" said Philip Hollobone, analyst at Williams de Broe.  
The DTI could make an announcement as early as Friday, four weeks after a report on the bids was submitted in late September by the Monopolies and Mergers Commission (MMC).
Wessex Water announced that it intended to bid for South West Water on March 7, prompting Severn Trent to put its hat into the ring on March 21.
Both intended bids were automatically passed on to the MMC under government regulations covering mergers of water and sewerage companies.  
Neither Wessex nor Severn Trent put a figure on their offers, preferring to wait for the DTI's decision, while South West Water has consistently said the bids are unwelcome.
South West Water shares were trading at 705.5 pence, up 4.5 pence by 1253 GMT, prompting analysts to suggest that offers might be at around 750 pence per share which would value the company at over 950 million pounds ($1.52 billion).
Severn Trent, which covers the Midlands of England, saw its shares trading down 3.5 pence to 572.5 pence while Wessex, which abuts South West Water's territory in the west of England, was down two pence to 317.5 pence.  
Analysts expect the DTI to seek price cuts of about 20 percent before giving approval to bids, after it secured decreases of 15 percent by 2001 from France's Lyonnaise des Eaux last year when it paid 823 million pounds for Northumbrian Water.
""I think there will be significant price cuts proposed but they will not want to over-egg the pudding,"" said Nigel Hawkins of Yamaichi.
The government could put off the two bidders if price cut requirements were too severe, analysts pointed out, leaving South West Water with no incentive to cut bills.  
""They won't want to make the price cuts so big that there's no bid, because then there will not be any price cuts at all,"" Hollobone said.
The area, which has large stretches of coastline demanding hefty investment to meet environmental standards, has some of the highest customer bills in the country and a strong representation from the minority opposition Liberal Democrats.
""There are some clear political incentives for getting price cuts in place for the area, particularly ahead of a general election,"" the analyst said.  
The ruling Conservative party, which sold off the water companies in 1989 as part of its privatisation drive, must call a general election by May 1997 and currently lags in the polls behind the opposition Labour party.
Analysts said price cuts of 20 percent should still leave South West Water an attractive proposition for the two bidders, who stand to make cost savings from combining operations.
United Utilities, formed from the merger of North West Water and Norweb earlier this year, forecast that it could secure annual savings of 140 million pounds by the turn of the century.
-- London Newsroom +44 171 5427717
",16
"Britain's Northern Electric is set to rush out a glowing set of figures aimed at persuading the market that the 630 pence per share hostile bid by CE Electric is too low, analysts said on Friday.
The regional electricity company (Rec) said it would bring its half-year results forward from a scheduled date of December 5 when it rejected U.S.-based CE Electric's bid on Monday. Industry sources expect the results to come some time next week.
Northern could boost its case with an improved gearing forecast after a 560 million pound ($918.6 million) package for shareholders which helped it fend off last year's bid from Trafalgar House.
""The critical answer is interim results, especially the balance sheet, which could be stronger than expected,"" said David Campbell of Greig Middleton.
Northern has said that CE Electric, which is 70 percent owned by CalEnergy of the U.S., had indicated a price of 700 pence per share, but that claim was denied by the Americans, who said their $1.225 billion bid was a full and fair price.
Since the bid on Monday, there have been no further talks between the companies, industry sources said, and CE Electric has snapped up around 13 percent of Northern's shares.
The share price has struggled to rise above the offer level, which was at a premium of 21.2 percent to the last closing prices before the bid, and On Friday was trading at 631.5 pence, down two pence.
""I think Northern should be able to force a higher price but the critical factor is portfolio investors, who may prefer an instant 630 pence rather than a possible higher number,"" said one analyst who asked not to be named.
Northern's costly defence against Trafalgar House, the only successful rebuttal by any of the eight Recs which have faced bids since privatisation in 1990, has left it with little more to offer, analysts said, which could keep a lid on the shares.
There is also scepticism a rival bid will emerge, as the remaining four independent and cash-rich Recs could be more attractive without the operational rationale of CE Electric, which wants to add supply expertise to its generating business.
Electricity sector shares were led higher last Friday by East Midlands Electricity, which was seen as the most attractive bid candidate before CE Electric launched its offer for Northern.
Northern is likely to report pretax profits slightly down at around 50 million pounds from 58.7 million pounds a year ago and raise the dividend by seven percent to near 13 pence.
Gearing could come in around 125 percent and show signs of falling to 100 percent or less, analysts said, from peaks nearer 170 percent under the impact of the costly defence package.
The market is also waiting for CE Electric, in which U.S. construction, mining and telecoms company Peter Kiewit Sons has a 30 percent stake, to post its offer document. This move will set the 60-day clock ticking for the takeover timetable.
At the same time, electricity industry watchdog Offer has started a review of the bid, requesting comments by November 7.
Analysts said Offer's move might have contributed to dampening Northern's share price by triggering concerns the bid might be referred to British competition authorities.
There appears to be little precedent for such a referral, however, as three Recs have already fallen to U.S. companies with approval from the government.
But last week's surprise decision to block rival bids for water utility South West Water from its colleagues Severn Trent and Wessex has unsettled the market, analysts said.
The Conservative government, well behind the opposition Labour party in opinion polls with no more than six months to go before a general election, might see Northern's takeover as a political hot potato.
Labour, traditionally against privatisation and fiercely critical of takeovers in the sector, might take an additional interest in Northern as it supplies the party leader Tony Blair's constituency in north east England.
",16
"ASDA Plc may not be Britain's biggest supermarket chain but new chief executive Allan Leighton is determined to make it the best.
ASDA is currently one of Britain's top four supermarkets with around 13.1 percent of the market, behind Tesco's leading 22.7 percent and its arch-rival J. Sainsbury's 19.3 percent, according to industry figures for September.
""I don't want particularly to be the biggest but what I want to be is the best,"" Leighton told Reuters in an interview.
Leighton took over on August 27 from his close colleague Archie Norman, the dynamic former chief executive who stepped up to chairman and who has just embarked on a political career as a prospective parliamentary candidate for the Conservative Party.
Norman is credited with turning ASDA around from a debt-laden, downbeat chain when he took over five years ago to its current position as value-for-money with cheeky, high-profile marketing campaigns and a lively image.
But Leighton feels there is still more to do.
""We've still got less than half the store base that we're really satisfied with...a lot of the gain in terms of productivity...and supply chain that our competitors have, we have not yet got and have been slow in getting,"" he said.
CLOTHING MARGINS HIGHER THAN FOOD
Leighton wants to boost the chain's George clothing range to second place in the market behind own-brand high street name Marks & Spencer. ""I'd like it to be...close towards 10 percent (of total sales) in the chain...about a 600 million pound (a year) business,"" he said, adding that he thought that could be done in ""the next couple of years"".
Clothing margins are around twice those of groceries for ASDA, Leighton said.
The George clothing brand, exclusive to ASDA, is headed by George Davies who founded the Next chain of fashion stores.
Leighton sees the handover from Norman as an ""evolution"", valuing continuity but seeing clear areas for change.
""I think continuity in management succession is very important,"" he said. He added: ""There will be some changes, that goes with the territory.""
He said the pace of innovation could be speeded up. ""We've got a bit more comfortable and I don't like that and so we're just going to hot (innovation) up a bit,"" he said.
Leighton, a graduate of Harvard business school, sees improvements in technology as a way of achieving greater profitability for the stores.
ASDA needs to make ""another quantum (leap)"" in using technology, Leighton said, primarily to speed up distribution and product roll-out.
He admitted that in technology ""I'm not satisfied with what we are doing...We're not leaping, we're catching up.""
Leighton also wants to see a quarter of ASDA's business unique to its outlets, mostly 40-50,000 square feet, in three years' time.
""One of our objectives (is that) in three years, 25 percent of what we do in our stores you would not be able to do in a competitor superstore of up to 30,000 square feet,"" he said.
DRIVE A JAGUAR FOR ONE MONTH
ASDA's renowned innovative management style, where everyone from checkout staff to chairman is a colleague and employees are encouraged to ""Tell Archie"" of ideas, has looked largely to Norman and Leighton to carry the company image.
Now, Leighton feels it needs to become ""less dependent on two individuals. Now it's time for the team to deliver"".
Employees work in an atmosphere where weekly and monthly sector targets are posted in staff areas while A,B,C,D awards are made for action ""Above and Beyond the Call of Duty.""
Sales competitions reward the winner with use of the company's red Jaguar for a month and there is strong participation in the employee share scheme.
""People want to work in successful businesses and the measure of our success will be in our profitability, earnings per share, and our sales performance and market share,"" he said.
Leighton feels the confidence in employees engendered by the management style accounts for ""a third of our success"".
And he sees it in tune with opposition Labour Party leader Tony Blair's concept of a ""stakeholder society"".
""That's exactly what it is. People should be involved in what they do and there's no reason why they shouldn't be,"" he said.
Leighton remains committed to ASDA's aim to be the cheapest across a basket of goods and vowed to respond to market leader Tesco's latest challenge of ""Unbeatable Value"" price offers.
ASDA VOWS TO KEEP MARKET SHARE
""ASDA is very determined we will hold our position. It is very important for us to do that and we will hold it,"" he said.
""If we are under pressure in some areas, we will and have and are responding,"" he added.
He said food retailing was currently very competitive and likely to stay that way for ""six to nine months"".
Own brand goods, which generally give higher margins to retailers, currently account for 35 percent or so of ASDA's sales and Leighton would like to push that up to around 40 percent, but cautioned that ""five percent is a lot"".
Healthcare, where ASDA has battled against Retail Price Maintenance (RPM), could be an area of opportunity for own brand, he suggested.
But one area where ASDA seems in no hurry is in launching loyalty cards in its stores nationwide, to match moves from Tesco and the other big supermarkets, Sainsbury and Safeway.
ASDA is trying out a loyalty card -- which rewards customers and also provides information about what they buy -- in selected stores but Leighton is unwilling to roll it out until he can see real value for the company in such a move.
""I only feel the need for the database (but) people have still not really worked out how to mine the database,"" he said.
Leighton suggested that if ASDA had to chose between investing in a decrease in margins through lower prices or loyalty, price would still win out.
""If 0.75 percentage point were the cost, well I could do quite a lot with 0.75 percent in terms of pricing,"" he said.
",16
"British opposition Labour party's plans for a one-off ""windfall"" tax on utility companies may be causing more stock market damage through uncertainty than the tax itself would, analysts said on Thursday.
If it won the next general election, due within six months, Labour has said it would levy a tax to reap excess profits from recently privatised utilities to help pay for welfare reform.
""The market does not like uncertainty -- give it a tax like this with no parameters and it will assume the worst-case scenario,"" said one analyst who asked not to be named.
As parliament prepared to debate the issue, at the prompting of the ruling Conservatives, analysts said if the Labour party would be more specific about plans, some of the uncertainty weighing on utility shares might lift.
""They have promised to raid the utilities but they have not said which, how much or when, and that is damaging,"" said Philip Hollobone, analyst at Williams de Broe.
Labour, which is well ahead in opinion polls, has said it would use the funds to tackle youth and long-term unemployment but has declined to set target companies, amounts or timeframes.
Newspaper reports have suggested the tax might be aimed at raising more than five billion pounds ($8.42 billion) and possibly as much as 10 billion pounds.
Speculation on possible targets has widened to include up to 30 companies, like British Telecom, British Gas and perhaps airport operator BAA Plc, in addition to the water and electricity companies initially pointed to.
Some of these, such as BAA, have already rehearsed arguments why they should not be included in any windfall tax net.
The water and electricity sectors, privatised around the start of the decade by the Conservatives, became unpopular after a spate of huge executive pay rises, hefty dividend payouts, and head-turning takeovers deals.
One analyst who declined to be named, suggested that the water sector stocks are currently undervalued by around five billion pounds, reflecting concerns over the tax.
Thames Water, for example, has underperformed the FT All Share Index by as much as 10 percent since late August, according Reuters Securities 3000 data, although its relative has improved recently to underperformance of some four percent.
Shares in regional electricity companies, however, were pulled in two directions as a resurgence of bids in the sector boosted speculation which analysts said may have offset some of the downside of a utility tax.
""The worries over the windfall tax are severely overdone...even if it does happen, most companies will be able to find the money, even if they do not want to,"" said Hollobone.
Along with several other analysts, he warns that even if Labour does win power it may not be able to effect the tax because of legal problems in ensuring it is non-discriminatory.
Several utility companies have said they would challenge any windfall tax plans in court, but Labour's treasury spokesman Gordon Brown described the proposal as ""legally iron tight.""
On Thursday, the Institute of Directors (IoD), which represents British business interests, warned against the tax although it acknowledged that ""some of the utilities do have spare funds at the moment.""
The IoD said the tax could lead to problems over who should pay what amounts and said customers might face increased prices.
The Conservatives have claimed the tax could mean an extra 192 pounds on the average household bill and challenged Labour to come up with figures to contradict this.
""Investors who are wise to the market's over-caution on the proposed tax are buying. These stocks are undervalued and...some are yielding more than long-term bonds,"" said one analyst.
($1=.5940 Pound)
",16
"Welsh multi-utility Hyder's shares rose after it posted a 25 percent hike in half-year profits on Friday and said electricity business Swalec, which it took over in January, should boost earnings.
Pretax profits rose to 100.7 million pounds ($169.5 million) for the six months ending September 30 from 80.6 million pounds a year ago, and Hyder paid an interim dividend of 14.6 pence per share from 12.6 pence. The results were in line with forecasts.
Shares were up 13-1/2 pence to 755-1/2 pence by 1127 GMT.
The company said in a statement that Swalec, taken over by Welsh Water to form Hyder, ""should be materially earnings enhancing on a full year basis.""
It added that efficiency savings from its merged services were ahead of target.
""These are very good results. Hyder is also showing that synergy savings are happening more quickly than expected,"" said one analyst who asked not to be identified.
Hyder managing director Graham Hawker said in an interview with Reuters that Swalec's savings were ahead of targets set before Welsh Water's bid last year.
""Before the bid, Swalec was looking at savings of 45 million pounds by 2000. We are slightly ahead on achieving those,"" he said.
Hyder said in June that the merger could cut operating costs by 46 million pounds in 2000 while cumulative cost savings from the merger should total 275 million pounds by then.
That compares with cost savings of 105 million pounds in 1997/98 predicted by United Utilities, the first multi-utility to be created when North West Water took over regional electricity company Norweb last year.
United Utilities also said it expected real dividend growth of 11 percent, but Hawker would not comment on whether Hyder would maintain half year real dividend growth of 11 percent.
""We will let actions speak louder than words,"" he said.
Hyder will continue to take costs out of its regulated businesses which should help dividend growth, Hawker said.
But it will also be looking to increase its non-regulated business, he said. Those turned in profits before interest of 13.1 million pounds in the half year.
Its infrastructure business saw profits before interest leap to 3.3 million pounds from 0.6 million a year ago and the company said its Infrastructure Developments business profits are ""continuing to improve.""
Hawker said the infrastructure business should benefit from government moves to finance projects through the government-sponsored Private Finance Initiative.
""That could be a very big market,"" he said.
Hyder will aim to secure a ""largish number of five to 10 million pound-a-time projects,"" which spread exposure, he said.
He said returns for Hyder on its involvement with a group which won a contract to run 122 kilometres of the busy M40 motorway between London and Warwick in central England ""will considerably exceed our cost of capital.""
Hyder holds a 40 percent stake in that group, UK Highways, along with Tarmac, John Laing, France's Caisse des Depots et Consignations and Transroute International. ($1=.5940 Pound)
",16
"Britain's J. Sainsbury Plc stole a march on competitors on Friday by announcing plans to become the first supermarket to launch banking services in a link with Bank of Scotland which analysts said may prove to be a money spinner.
""It could be a winner if it is done in the right way,"" said one analyst who asked not to be identified.
Marketing director Kevin McCarten said in an interview with Reuters that he expected the banking services to turn in profits ""in a relatively short space of time.""
Sainsbury, second placed to Tesco in market share, said in a statement it had applied to the Bank of England for authorisation for a new bank to be owned 55 percent by the company and 45 percent by Bank of Scotland.
The venture, to be called Sainsbury's Bank, will use telebanking for a range of deposit, lending and cash management services to 12 million customers, the company said.
McCarten said the banking service would offer ""great products...at better value than is currently available,"" but declined to comment on possible interest rates on accounts or give financial terms of the venture.
Sainsbury's Bank will kick off in 1997 with the launch of Classic and Gold Visa cards along with account and card-based services.
""It certainly shows Sainsbury is alive and kicking, which we had begun to doubt,"" one sector analyst said. Sainsbury, which turned in its first fall in profits for 22 years last year, was forced to launch its Reward loyalty card in June after arch-rival Tesco Plc pipped it to market leader with its ClubCard, and it has been struggling to regain the intiative.
Tesco pre-empted Reward's launch by introducing its ClubCard Plus account which allowed shoppers to build up credit balances with favourable rates of interest to be used in its stores. But Sainsbury's move ""makes ClubCard Plus look a bit of a damp squib,"" the analyst said.
""The bank plan has certainly cheered the market up, the initial reaction is clearly positive,"" the sector analyst said.
Sainsbury shares closed up 10.5 pence at 360.5 pence, off a high of 363 pence while Tesco was up 2.5 pence to 324 pence, off a high of 326 pence.
""The market wanted to see them doing something and this is certainly a pleasant surprise,"" the analyst said.
Sainsbury chairman David Sainsbury said that Sainsbury's Bank would give customers ""the reassurance of a name they know and trust, coupled with the banking expertise of the Bank of Scotland.""
The move will result in ""a compelling alternative to the conventional high street bank or building society for Sainsbury's customers,"" said Bank of Scotland chief executive Peter Burt.
Sainsbury currently has around five stores in Scotland and 367 supermarkets in the UK, along with 307 do-it-yourself outlets and 12 hypermarket SavaCentres.
It owns Shaw's in the U.S. with 105 stores and has 50 percent voting rights in Giant, which runs 169 U.S. outlets.
Bank of Scotland will benefit because it has a limited presence south of the border.
""It's a lovely distribution channel,"" a Bank of Scotland spokesman told Reuters, adding that the new bank would have its own identity and not carry the Bank of Scotland logo.
Analysts warned, however, that Sainsbury's Bank would have to offer attractive deals to secure customers, many of whom already have bank accounts. ""It has to undercut the competition or link banking up to Reward points, a lot will depend on the marketing,"" the sector analyst said.
""They will have to decide to really go for it if they are going to make it profitable,"" he said. And analysts said the market would still look for progress in its core grocery business sales when Sainsbury reports interim results on October 30.
Analysts forecasts for half-year pre-tax profits range from 383 million pounds ($611.4 million) to 396 million pounds, compared with 450 million previously.
",16
"Shares in Britain's second biggest supermarket chain J. Sainsbury Plc rose on Wednesday after the group held out hope of an improved performance despite a fall in half year profits and sluggish sales.
""The share price rise is a triumph of hope over statistics,"" said one sector analyst.
Sainsbury, which last year was overtaken as market leader by arch-rival Tesco, said half year pre-tax profits slipped, as analysts expected, to 393 million pounds ($637.4 million) from 456 million pounds in the same period last year.
Sainsbury also announced a dividend of 3.5 pence per share, up from 3.4 pence.
The company suffered its first fall in full year profits in 22 years when it reported in May. Pre-tax earnings before exceptional items fell 5.5 percent to 764 million pounds in the business year to March 9, 1996.
After Wednesday's results, several analysts cut forecasts for the current full year to 710-725 million pounds, a level some analysts were already predicting, market sources said.
But shares closed up 8.5 pence to 363.5 pence, in a market which was generally easier after an unexpected quarter-point rise in British interest rates.
The group said current sales from comparable stores, excluding petrol, were rising in line with inflation of around three percent, well below the 7.5-percent gain reported by Tesco in September.
A sector analyst who asked not to be named said ""Sales moving in line with inflation is pretty disappointing, considering they've introduced the loyalty card.""
The Reward card is now accounting for much of the increase in sales Sainsbury is currently seeing.
""Clearly, we want to do better (than three percent)"", chairman David Sainsbury told Reuters. ""This year will be about getting the basics right, next year will be about getting profits moving.""
The company said marketing and operations initiatives along with the Reward card should continue to help boost sales and provide a strong Christmas season.
""We will be fighting on our traditional ground of quality and choice, along with customer loyalty,"" Sainsbury said.
Sainsbury, which last week announced plans to launch a bank with Bank of Scotland, said there would be another ""major development"" on Reward soon and that it would move to strengthen its leadership in quality and choice.
The group also said Dino Adriano, currently deputy chief executive of the supermarket business, will take over from Tom Vyner as chief executive of the unit on March 8 rather than at the end of 1997 as previously planned. ($1=.6165 Pound)
",16
"U.S. group Dominion Resources on Wednesday agreed a 1.3 billion pound ($2.15 billion) bid for East Midlands Electricity, one of only five remaining British independent regional electricity companies.
But East Midlands shares languished well below the 670 pence per share offer price, as concerns emerged the bid might face obstacles from British competition authorities.
Virginia-based Dominion said last week it was considering a bid ""at a price not much in excess of 608 pence per share"". But East Midlands had scorned that price, saying it would undervalue the Nottingham-based electricity company's prospects.
Executives from Dominion, the fifth U.S. utility to bid for a British power supplier, met East Midlands management late on Tuesday with a takeover price top of the agenda.
East Midlands chairman Sir Nigel Rudd said in a joint statement that his board was recommending the offer ""because it represents fair value for an excellent business, which has successfully differentiated itself from the sector.""
East Midlands shares were up 13 pence at 624 pence after 1400 GMT, off a high of 650 pence.
""Everyone's expecting the MMC (Monopolies and Mergers Commission) to take a close look at the deal. That is why the shares are only trading around 630 pence,"" said one trader.
Seven of the original 12 Recs have already been bought since they came up for grabs last March after the government's protective golden share expired, five years after privatisation in 1990.
Northern Electric is currently fighting off its second hostile approach in less than two years, rejecting a bid at 630 pence per share from CE Electric, a subsidiary of U.S. energy group CalEnergy, which holds just over 29 percent of the
""Dominion's offer looks a fair compromise price,"" said Chris Perry, utilities analyst at Charterhouse Tilney.
But he added there were ""very genuine concerns"" that the offer might be referred to the MMC.
""If Dominion is allowed to buy East Midlands and CalEnergy secures Northern, that would leave only three independent Recs,"" one analyst said.
British electricity watchdog Offer is expected to consult on Dominion's bid and then pass on its advice to Ian Lang, the trade and industry secretary, who will then decide whether the bid should be referred to the MMC.
Offer has completed consultations on CalEnergy's bid and will be passing on its advice to Lang shortly, industry sources said.
So far, only generators National Power and PowerGen have had their bids for Recs blocked, as they would have created fully integrated generation and supply companies.
Dominion's chief financial officer Linwood Robertson said in an interview that the company was now talking to the regulator.
""We intend to run this as a stand-alone business,"" he said, adding that he certainly hoped for approval from Offer.
He also said the group hoped to keep East Midlands' management team, which is highly regarded by industry analysts.
East Midlands was the first of Britain's electricity utilities, which were privatised with strong cash balance sheets, to launch a share buy-back to redistribute cash to shareholders.
Robertson said Dominion looked forward to the diversification East Midlands would bring to it and said the U.S. company would bring strengths to the British firm. ($1=.6050 Pound)
",16
"The government's surprise decision to block proposed bids for South West Water on Friday seems to make mergers between water firms taboo but keeps open the door to the creation of more multi-utilities, analysts said.
""It is surprising...(now) the idea of multi-utilities is gaining ground, it does look as if that is the platform from which companies can grow,"" said Marshall Whiting of Societe Generale Strauss Turnbull.
Department of Trade and Industry (DTI) head Ian Lang said in a statement he had decided not to permit planned bids by Severn Trent and Wessex Water for South West because they would be against the public interest.
Ian Byatt, head of industry watchdog Ofwat, told Reuters Financial Television such mergers were ""not in my view the best way to get efficiency for customers.""
He added takeovers from outside the water industry ""do not damage competition and my use of (yardsticks) in the same way.""
Wessex Water said on March 7 it wanted to bid for South West, prompting Severn Trent to enter the arena on March 21 but both companies declined to name a price until the DTI, which automatically considers such mergers, announced its decision.
Analysts had suggested such bids might value South West Water at over 950 million pounds ($1.52 billion) or around 750 pence per share.
The two bids were the first by British water companies for one of their colleagues, although France's Lyonnaise des Eaux bought Northumbrian Water last year after promising 15 percent price cuts to 2001.
North West Water took over regional electricity company (REC) Norweb to create United Utilities in January this year while Hyder was formed when Welsh Water bought South Wales Electricity (Swalec).
The DTI's block shook the market, which had been expecting approval conditional on price cuts, possibly up to 20 percent.
Ofwat said it had recommended price cuts of 15 percent from Wessex if its bid were to be approved but had advised that it saw no remedy which would make Severn Trent's bid acceptable.
South West Water's shares plunged to touch a low of 565 pence before recovering slightly to be down 128 pence at 577.5 pence by 1144 GMT.
Severn Trent shares peaked at 619 pence but then eased back to be up 37 pence at 612.5 pence while Wessex added 25 pence to 342.5 pence, off a high of 349 pence.
Relieved of the bid pressure, South West bowed to promptings from Ofwat and said it would pay customers a 15 pound rebate in June 1997 while promising to hike its interim dividend 20.4 percent to 11.8 pence as sector results begin to flow next week.
The company, whose area covers large stretches of coastline requiring hefty investment to meet environmental standards, has the highest customer bills in the country.
Wessex said it was ""disappointed"" that it could not go ahead with a bid, saying it felt a merger would have created ""significant benefits for both customers and investors.""
The utility, which abuts the area of South West Water in western England, said it remained committed to strategic goals of delivering quality service and enhanced shareholder value.
Analysts said Severn Trent might now buyback shares or make a special dividend, despite recent tax changes adverse to these.
Severn Trent said it had expected to offer savings of 27 pounds a year to households from the proposed merger, adding that now it would concentrate on sharing benefits of improved operational performance with shareholders and customers.
Wessex Water, meanwhile, might switch attention to the possibility of a merger with another utility, analysts said.
""Now the government has blocked Wessex from bidding for South West, Southern Electric might take a look,"" said Nigel Hawkins of Yamaichi.
The regional electricity company was confounded in its attempts to take over Southern Water earlier this year, losing out to generator and distributor Scottish Power. ($1=.6264 Pound)
",16
"U.S.-based Dominion Resources on Wednesday agreed a 1.3 billion pound ($2.15 billion) takeover of East Midlands Electricity, one of only five remaining British independent regional electricity companies (Recs).
But doubts that the deal would make it past UK competition authorities as political pressures gather ahead of a general election due by May 1997 kept the lid on share prices.
Executives from both firms told a press conference they saw no reason for a referral of the 670 pence per share bid, the fifth by a U.S. utility for a Rec, to the UK's Monopolies and Mergers Commission (MMC).
But East Midlands shares closed up only 12 pence at 623 pence, as concerns grew trade secretary Ian Lang might halt this latest in a wave of bids in which seven of the 12 cash-rich Recs have been snapped up since expiry of a protective golden share last March, five years from privatisation.
""Everyone's expecting the MMC to take a close look at the deal. That is why the shares are only trading around 630 pence,"" said one trader.
Three of the seven Recs sold have already gone to U.S. utilities which are attracted by relatively loose UK regulation.
Only two bids have so far been blocked by trade secretary Ian Lang, who stunned the market by stopping generators National Power and PowerGen from consuming two Recs earlier this year.
Executives from Dominion met East Midlands management late on Tuesday with a takeover price top of the agenda.
The Virginia-based company said last week it was considering a bid ""at a price not much in excess of 608 pence per share."" But East Midlands rejected that, saying it would undervalue the Nottingham-based electricity company's prospects.
East Midlands chairman Sir Nigel Rudd said in a joint statement that his board was recommending the current offer ""because it represents fair value for an excellent business, which has successfully differentiated itself from the sector.""
""Dominion's offer looks a fair compromise price,"" said Chris Perry, utilities analyst at Charterhouse Tilney.
Dominion chairman Tom Capps told a press conference that the company had looked at many Recs but focused on East Midlands in spring as it ""liked the management...and the way the numbers fitted with ours.""
Chief financial officer Linwood Robertson told Reuters that the company intended to run its target as a stand-alone business and that it wanted to keep East Midlands' management team, which is highly regarded by industry analysts.
East Midlands was the first of Britain's electricity utilities, which were privatised with strong cash balance sheets, to launch a special dividend to redistribute cash to shareholders, in November 1994. Robertson said Dominion looked forward to the diversification East Midlands would bring to it and said the U.S. company would bring strengths to the British firm.
The U.S. company has a 1.3 billion pound credit to fund its bid underwritten by NationsBank and Union Bank of Switzerland, banking sources said.
($1=.6054 Pound)
",16
"British regional electricity company Northern Electric said on Monday it would rush out results by the end of November to show that a $1.225 billion bid from CE Electric of the U.S. was inadequate.
In its first formal defence since CE Electric posted its bid on November 5, Northern said the half-year figures, previously scheduled for December 5, would include ""important financial information"" to show the value of the company.
It reiterated its belief that the 630 pence per share CE offer was too low and ""below even the lowest price put...by the bidder prior to the launch of its hostile offer.""
Northern said when the bid was announced at the end of October that CE Electric, which is 70 percent owned by U.S. energy group CalEnergy, had suggested a price of 700 pence per share, a claim that the Americans have denied.
CE Electric made no immediate comment on Northern's latest statement.
The U.S. group has already snapped up nearly 30 percent of its target, as its shares have been clouded by uncertainty over whether the government will approve the bid. Northern shares were up just a penny by 1310 GMT to 610 pence.
The company reiterated plans to pay a 56.5 pence special dividend in February 1997 if CE Electric's offer lapsed and said that could mean the U.S. firm stood to reap gross yields of over 9.5 percent a year from its net investment.
""Northern Electric is worth more to CE Electric,"" the company said in a statement.
Chairman David Morris added that the company ""believes that uncertainty as to whether CE Electric's bid will be referred to the MMC (Monopolies and Mergers Commission) is currently dominating the market's reaction,"" which is keeping shares low.
So far, the government has approved takeovers of seven of the original 12 cash-rich regional electricity companies (recs) in under two years, three of which have been bought by U.S. companies.
Only two bids for recs have been blocked, when offers from generators National Power and PowerGen were deemed against the public interest in a surprise decision by trade secretary Ian Lang.
Northern itself is the only rec to survive a hostile bid, when it fended off Trafalgar House, now a unit of Kvaerner, with a 560 million pound ($934.2 million) benefit package last year.
Since Northern came under threat, East Midlands Electricity has agreed to a 670 pence per share $2.15 billion takeover by Dominion Resources of the U.S.
Yorkshire Electricity, one of the three remaining recs untouched by bids so far, denied on Monday a report in the Sunday Telegraph that it was in talks with Entergy of the U.S., a report also denied by Enetergy.
Shares in Yorkshire gained 12 pence to 746-1/4 pence while East Midlands slipped four pence to 620 pence.
The market is now worried that political pressures on the Conservative government, in second place in opinion polls ahead of a general election which is expected within six months, might prompt it to block any more bids.
The sector, privatised by the Conservatives in 1989, has reaped unpopularity for high dividend payouts, hefty executive pay packets and head-turning takeover deals.
""We believe this bid should be decided on value and...(call) for a rapid end to this period of regulatory uncertainty,"" Northern's chairman David Morris said in a statement.
($1=.5994 Pound)
",16
"London Electricity on Tuesday became the latest British regional electricity company (Rec) to attract bid speculation after U.S. Entergy was reported to be planning a 1.2 billion pound ($2 billion) bid.
London Electricity declined comment on the report in the Wall Street Journal Europe.
""It is speculation and obviously we can't comment on a rumour,"" a London Electricity spokeswoman said.
Shares in the company leapt to a high of 665 pence before easing back to 662-1/2 pence, up 26 pence by 1115 GMT.
The Wall Street Journal Europe said on Tuesday that a 1.2 billion pound bid for the Rec could be in the offing.
It said confidential Entergy company documents showed the company seeking 1.1 billion pounds for an acquisition.
The documents used a code name ""Atlantic"" for the target company whose financial profile, the newspaper said, met that of London Electricity on a number of points.
The Journal said the bid was assumed in the documents to be for around 700 pence per share.
The newspaper quoted Entergy spokesman Patrick Sweeney as saying Entergy was interested in the British market and ""obviously if you're interested, one of the results could be an acquisition.""
Sweeney on Monday denied to Reuters a report in The Sunday Telegraph newspaper that it was considering a bid for Yorkshire Electricity Group Plc.
But he added, ""We simply don't comment on situations until they get to a point until it is prudent to do so.""
The electricity sector has seen a flurry of bid speculation recently over the five remaining independent Recs.
Northern Electric currently faces its second hostile offer in less than two years as it tries to fend off a $1.225 billion bid at 630 pence per share from CE Electric, of which CalEnergy of the U.S. holds 70 percent.
Last week, East Midlands Electricity agreed to a 1.3 billion pound offer at 670 pence per share from U.S.-based Dominion Resources.
Both bids depend on approval from the British government, which has already nodded through the sale of seven of the original 12 cash-rich Recs, three of which were bought by U.S. firms attracted by the looser regulations in the British market.
But concerns that political pressures might prompt the government to block the latest batch of bids have kept share prices of both targets well below offer levels.
Northern was trading down a penny at 593 pence while East Midlands off half a penny at 617 pence.
High dividend payouts, hefty executive pay packets and head-turning takeover deals have all contributed to criticism of the electricity sector, which was privatised by the Conservative government in 1989.
The Conservatives currently lag the opposition Labour party in opinion polls and must hold a general election by May 1997.
An added concern is that approval of current bids would leave just three independent Recs -- London Electricity, Southern Electricity and Yorkshire Electricity -- which might not be adequate for watchdog Offer to use as yardsticks. ($1=.5994 Pound)
",16
"British regional electricity company Northern Electric on Monday promised to rush out results by the end of November to prove that a $1.225 billion hostile bid from America's CE Electric undervalued it. But CE Electric said it still felt its 630 pence per share offer was full and fair, adding that there was ""nothing in Northern Electric's defence document which changes our view.""
In its first formal defence since CE Electric posted its bid on November 5, Northern said the half-year figures, previously scheduled for December 5, would include ""important financial information"" to show the value of the company. It reiterated its belief that the offer was too low and said that when CE Electric announced the bid at the end of October, it had suggested a price of 700 pence per share.
But CE Electric, which is 70 percent owned by U.S. energy group CalEnergy, denied this in a statement on Monday, saying: ""This ambitious range was entirely the proposal of Northern Electric's board.""
The U.S. group has already snapped up nearly 30 percent of its target, as Northern's shares were clouded by uncertainty over whether the government would approve the bid. Northern shares eased half a penny to 608-1/2 pence by 1543 GMT. Northern confirmed it planned to pay a 56.5 pence special dividend in February 1997 if CE Electric's offer lapsed and said that could mean the U.S. firm stood to reap gross yields of over 9.5 percent a year from its net investment. ""Northern Electric is worth more to CE Electric,"" the company said in a statement. But CE Electric said the special dividend was ""fully reflected"" in the share price before the offer was launched. Northern chairman David Morris said the company believed that uncertainty as to whether CE Electric's bid would be referred to the MMC (Monopolies and Mergers Commission) was dominating the market's reaction and keeping the share low. The British government has approved takeovers of seven of the original 12 cash-rich regional electricity companies (Recs) in two years, of which three were bought by U.S. companies. Only two bids for Recs have been blocked, when offers from generators National Power and PowerGen were deemed against the public interest by trade secretary Ian Lang. Northern itself is the only Rec to have survived a hostile bid, when it fended off Trafalgar House, now a unit of Kvaerner, with a 560 million pound ($934.2 million) benefit package last year.
Since Northern came under threat, East Midlands Electricity agreed to a 670 pence per share $2.15 billion takeover by Dominion Resources of the U.S. last week. Bid speculation has sparked price rises in other RECS, including Yorkshire Electricity.
A report in the Sunday Telegraph said Yorkshire was in talks with Entergy of the U.S., but both firms denied this on Monday.Shares in Yorkshire gained 12 pence to 747-1/2 pence while East Midlands slipped 2-1/2 pence to 623 pence. The market is worried that political pressures on the ruling Conservative government, which opinion polls put in second place before the general election less than six months away, might prompt it to block any more bids.
The electricity sector, privatised by the Conservatives in 1989, has proved unpopular due to high dividend payouts, hefty executive pay packets and head-turning takeover deals.
($1=.5994 Pound)
",16
"British spirits, pubs and fast food outlet group Allied Domecq on Tuesday reported a fall in annual profits but effectively ruled out a demerger of its spirits business as a solution to its problems.
Allied chairman Sir Christopher Hogg said in a statement the company was ""clear that the best way to improve shareholder value is to improve operating performance and that this should be our overriding objective for the foreseeable future.""
Costs of a demerger, which the market had hoped was on the cards, would have been ""very, very expensive,"" chief executive Tony Hales said in an interview with Reuters Financial Television.
It would have distracted management for at least 12 months, he said, adding that there was ""no obvious shareholder value to be unlocked.""
Full-year pretax profits to August before exceptionals slipped to 575 million pounds ($950.4 million) from 645 million previously but were within analyst forecasts of between 560 and 581 million.
Allied Domecq said exceptional losses for the year totalled 311 million pounds, the largest part of which was on the 205 mllion pound sale of its 50 percent stake in brewer Carlsberg-Tetley to Bass in August.
Allied paid out a total dividend of 23.59 pence a share, unchanged from the year ending March 1995, which was used as a comparison because of a change to its accounting period.
""The figures were very much in line with expectations. Some people had been worried the dividend may be cut but it has been maintained and that's positive,"" one analyst said.
Allied's shares had shed 15 pence to 453 pence by 1330 GMT after touching a low of 451 pence.
""The divisions have gone in the direction expected but if you were someone who wanted action -- a demerger or management change -- you haven't got either and there will be some disappointment,"" the analyst said.
But Hales stressed in the interview that there was ""a lot we can do in terms of improving performance.""
The spirits and wines business could benefit from increasing marketing, improving relations with customers, taking more costs out and improving returns on capital employed, he said.
In the retail sector, expansion in the pub business and cost cutting should push business forward, he added.
The company said that the cost of tackling overstocking of U.S. spirits was the main factor in a 14 percent fall in year trading profits in the group's spirits business.
It said it was ""determined to increase prices (in spirits and wines) where we can,"" adding that strong brands and market leadership were the best basis for achieving this.
But it warned that the trading environment ""may offer little prospect of improvement.""
The group's retailing business, which includes pubs and fast food outlets, saw underlying profits rise by four percent during the year and Allied said it saw further opportunities for developing its leading pub brands.
""The important thing now is to get the businesses trading well,"" said one sector analyst who declined to be named.
Some analysts were sceptical, however, that Allied could achieve its goals.
""They are trying to do the right things, but they have poor raw material,"" the sector analyst said. ($1=.6050 Pound)
",16
"British water and sewerage company South West Water saw half year profits surge on Thursday and it hiked its dividend 20 percent, as expected, with a promise of real dividend increases of eight percent in coming years.
""The dividend policy will continue to be based on the pursuit of progressive growth,"" the company said in a statement.
South West Water's pretax profits for the six months ending September 30 rose to 72.9 million pounds ($120.4 million), up 35 percent and ahead of expectations which were between 57 and 68 million pounds.
It had promised to pay out an interim dividend of 11.8 pence when two proposed bids for it, from Severn Trent and Wessex, were blocked by the UK government in October.
In a statement, the company said it hoped to raise the total dividend for the year by 20 percent and then reach eight percent real increases in the annual payout to shareholders.
But the half year surge in profits was unlikely to be repeated, finance director Ken Hill told Reuters.
""I do not think a 35 percent increase in PBT (profit before tax) is likely to occur at the end of this year,"" he said, nor in years immediately following. ""But we are looking for profit increases,"" he added.
Shares in the company gained five pence to 582.5 pence by 0940 GMT.
Anglian Water, which reported last week, saw half year profits rise 5.5 percent and raised its dividend 14.6 percent.
Thames Water, which kicked off the flow of interim results in the sector on October 29, turned in pretax profits before exceptionals up 15 percent and raised its dividend 22 percent.
South West Water has also committed to pay out a rebate of 15 pounds each to customers after trade secretary Ian Lang blocked the bids, which were awaiting approval before being priced.
Hill said the company's strategy now was to ""focus on the core business...and develop very carefully the strategy of the non-regulated businesses.""
South West Water has interests in waste management, environmental instrumentation and construction services, which contributed 6.6 million pounds to profits in the first half.
Hill said recent tax changes affecting some share buy backs would not alter the company's strategy of only using its mandate if it were in the interests of shareholders.
South West Water said a complicated financing deal which involves standby letters of credit which are counter-indemnified by cash deposits had contributed 5.7 million pounds to first half profits.
The facility should boost annual profits by nine million pounds in each of the next three years, the company added.
It said capital expenditure was 61.6 million pounds in the first half of the year and ""a further substantial uplift is planned for the second half.""
Water leakage, an issue which has triggered severe criticism of water companies from politicians and lobby groups, has been cut to 21 percent from 28 percent in 1992, the company said.
Its target of only 15 percent of water leaking from infrastructure by 1999 should be reached, it added.
The company's non-executive chairman Keith Court steps down in February and a replacement is being sought after non-executive deputy chairman Alan Fletcher bowed out.
($1=.6054 Pound)
",16
"The stock of media group Pearson closed sharply higher Monday as takeover speculation swirled on a report, which was later denied, that broadcaster BSkyB might be planning a bid in the wake of announced management changes.
Pearson shares closed 34-1/2 pence (55 cents) higher at 731p ($11.60) after earlier touching a high for the year of 745p ($11.82), as 6.7 million shares changed hands.
""The price was boosted last week by the management change but now it reflects revived bid speculation,"" said one analyst, referring to last week's naming of a new Pearson chief executive and chairman.
A report in the Independent newspaper said BSkyB, in which Rupert Murdoch's News Corp. has a 40 percent stake, was in the early stages of planning a bid worth more than 4 billion British pounds ($6.4 billion) in cooperation with a U.S.-based media group.
But BSkyB's chief executive, Sam Chisholm, was quoted in later editions of Murdoch's Times newspaper saying there were ""no talks taking place between News Corp, BSkyB or any associated company about a bid for Pearson.""
A BSkyB spokesman confirmed Chisholm had denied any such talks.
Pearson, which owns Britain's main business newspaper, the Financial Times, Penguin Books and a number of television production companies, said it did not comment on speculation.
Analysts said that although BSkyB appeared to have ruled itself out of a bid, observers felt any move on Pearson was likely to be made before new management takes control next year.
Last week Pearson appointed Marjorie Scardino to be chief executive from Jan. 1 -- the first female head of a company represented in the key FTSE 100 share index. It also named Dennis Stevenson its new chairman.
""If someone is thinking seriously about a bid, now is the time to do it. The new management hasn't arrived yet and so it would be harder to mount a defence,"" said one media analyst, who asked not to be identified.
But analysts said Pearson shares were now approaching the top end of their price target range for full valuation of the business and the price tag attached to speculation around BSkyB was high.
""It is touching the stratosphere at these levels,"" said Anthony De Larrinaga of Panmure Gordon.
The media analyst said it was difficult to put a price tag on Pearson because its diversified nature meant it could have specific attractions for a variety of bidders.
Speculation of a bid for the company last surfaced in August, when Anglo-Dutch publisher Reed-Elsevier was rumoured as a possible buyer.
After initial stock market disappointment, Scardino's appointment at Pearson was greeted with a 12 pence (19 cents) jump in the stock price on Friday as hopes emerged that she might reorganize the sprawling media company.
So far, Scardino appears to be keeping her options open, analysts said. ""There is no real evidence yet that she would consider any demergers (spin-offs) and it is open to question whether such a move would bring shareholder benefit,"" one said.
",16
"Cable & Wireless Communications, a major new British cable operator formed on Tuesday from a group led by Cable & Wireless Plc, has the potential to be competitive and focuses attention on the fast-growing area, analysts said.
""The logic is irrefutable...the advantages of scope and size are undoubtedly there,"" said Societe Generale Strauss Turnbull analyst John Tysoe.
Cable & Wireless, NYNEX Corp of the U.S. and Bell Canada International announced they would merge the operations of their British subsidiaries in a complex deal, culminating in a float of 15 percent of the new company.
""That creates an integrated second force, which will give BT a run for its money,"" Tysoe said, referring to telecommunications giant British Telecommunications.
Shares in Cable & Wireless closed up 25.5 pence to 466.5, after touching a high of 476.5 pence, while NYNEX Cable Communications gained 23.5 pence to 119.5 pence.
""It's a jolly bold and impressive move,"" said one sector analyst.
The merger should result in quite significant cost savings, said Chris McFadden of Merrill Lynch, including tax offsets, refinancing of high-yield cable television funding and possibly through staff cuts.
""The new company can offer the complete range of services and it will be competing with BT in the franchises which it operates,"" the sector analyst said.
Analysts added that the deal was expected to dilute earnings slightly in the first year but enhance them from year two.
BT's shares edged down four pence to 354 pence as the market weighed the emergence of a new competitor.
But BT welcomed the consolidation in the sector, saying it would create a market ""where competition can become the natural regulator.""
Analysts said BT's calls to be allowed to provide cable television, which the Conservative government has so far rebuffed, could gain impetus from the emergence of Cable & Wireless Communications.
For other cable companies, the move has focused market attention, which had been flagging, back on the fast-growing sector, with stock market valuations now looking a little low.
""People are reassessing the value (of cable companies). There could be more consolidation. They have to respond,"" McFadden said, adding that calculations suggested a 2.9 billion pounds ($3.6 billion) tag for C&W's Mercury unit after the deal.
Telewest Communications shares jumped 12 pence to 135, while General Cable gained 18 to 197 pence.
The British cable market is growing fast, with around 7.5 million homes now within striking distance of connections, as around six billion pounds has already been invested in building cable networks and a further six billion is planned.
The new company will eclipse its rivals in terms of market share, with 2.47 million homes within reach, compared with its nearest rival, Telewest, with around two million.
But analysts said it would not be in direct competition with other cable network companies as they mainly operated in different franchises.
Cable & Wireless Communications may flex its muscles in securing more favourable terms for programming from BSkyB, the satellite broadcaster in which Rupert Murdoch's News Corp has a 40 percent stake, analysts said.
BSkyB shares were down 16-1/2p to 680p, after touching a low of 678p.
""I think that is why BSkyB has come under pressure. People think the merged company might secure more attractive rates,"" the sector analyst said. ($1=.7986 Pound)
",16
"British electricity transmission business National Grid should report a rise in half year profits on November 26 and could explain how it will cope with new pricing controls that come into effect on April 1, 1997.
""We will be looking for indications on how they are going to cope, whether there will be any cost cutting,"" said one analyst who asked not to be named.
Analysts expect National Grid's first half profits to range from 279 to 304 million stg, up from 278.9 million previously. A dividend payout of 4.45 to 4.9 pence per share is forecast.  
The company, which was floated in December 1995, capitulated in October to revised transmission pricing proposed by industry watchdog Offer which included a one-off reduction of 20 percent in the first year starting April 1, 1997.
For the following three years, price increases will be capped at four points below inflation.
National Grid had called Offer's original proposals of a one-off cut between 20 and 26 percent ""contrived, illogical and inconsistent.""  
The company said when it accepted the revised controls that it would introduce further measures to improve efficiency but that the cuts would have ""a material impact on transmission business profitability.""
""Does the review mean that its finances are going to be hit hard?"" asked the analyst. ""I feel it needs to justify its capitulation, which sold shareholders down the river,"" he added.
National Grid chief executive said at the time price cuts were agreed that he was confident of maintaining a ""progressive"" dividend policy but analysts said clearer indications would be welcomed.  
The market will also be watching for updates on progress in finding a partner for its Energis telecommunications service.
Energis said in October that it was on track to announcing a link with an international carrier within a year.
Energis made an operating loss of 72.8 million stg last year but expects to break even in 1999/2000.
National Grid shares were up 6p in late trade on Friday at 192p.
-- London Newsroom +44 171 542 7717
",16
"U.S. group Dominion Resources on Wednesday agreed a 1.3 billion pound ($2.15 billion) bid for East Midlands Electricity, one of only five remaining British independent regional electricity companies.
But East Midlands shares languished well below the 670 pence per share offer price, as concerns emerged the bid might face obstacles from British competition authorities.
Virginia-based Dominion said last week it was considering a bid ""at a price not much in excess of 608 pence per share"". But East Midlands had scorned that price, saying it would undervalue the Nottingham-based electricity company's prospects.
Executives from Dominion, the fifth U.S. utility to bid for a British power supplier, met East Midlands management late on Tuesday with a takeover price top of the agenda.
East Midlands chairman Sir Nigel Rudd said in a joint statement that his board was recommending the offer ""because it represents fair value for an excellent business, which has successfully differentiated itself from the sector.""
East Midlands shares were up 13 pence at 624 pence ahosrlty after 1400 GMT, off a high of 650 pence.
""Everyone's expecting the MMC (Monopolies and Mergers Commission) to take a close look at the deal. That is why the shares are only trading around 630 pence,"" said one trader.
Seven of the original 12 Recs have already been bought since they came up for grabs last March after the government's protective golden share expired, five years after privatisation in 1990.
Northern Electric is currently fighting off its second hostile approach in less than two years, rejecting a bid at 630 pence per share from CE Electric, a subsidiary of U.S. energy group CalEnergy, which holds just over 29 percent of the
""Dominion's offer looks a fair compromise price,"" said Chris Perry, utilities analyst at Charterhouse Tilney.
But he added there were ""very genuine concerns"" that the offer might be referred to the MMC.
""If Dominion is allowed to buy East Midlands and CalEnergy secures Northern, that would leave only three independent Recs,"" one analyst said.
British electricity watchdog Offer is expected to consult on Dominion's bid and then pass on its advice to Ian Lang, the trade and industry secretary, who will then decide whether the bid should be referred to the MMC.
Offer has completed consultations on CalEnergy's bid and will be passing on its advice to Lang shortly, industry sources said.
So far, only generators National Power and PowerGen have had their bids for Recs blocked, as they would have created fully integrated generation and supply companies.
Dominion's chief financial officer Linwood Robertson said in an interview that the company was now talking to the regulator.
""We intend to run this as a stand-alone business,"" he said, adding that he certainly hoped for approval from Offer.
He also said the group hoped to keep East Midlands' management team, which is highly regarded by industry analysts.
East Midlands was the first of Britain's electricity utilities, which were privatised with strong cash balance sheets, to launch a share buy-back to redistribute cash to shareholders.
Robertson said Dominion looked forward to the diversification East Midlands would bring to it and said the U.S. company would bring strengths to the British firm. ($1=.6050 Pound)
",16
"British industry watchdog Ofwat said on Tuesday it would review water company price limits in 1999, five years ahead of schedule, in a move which commentators said was not unexpected and possibly with political undertones.
The opposition Labour party, currently standing ahead of the ruling Conservative party in opinion polls with a general election due by May 1997, welcomed the move as ""long overdue"".
Ofwat set the current price limits in 1994 for a 10-year period with an option to review in five years at the request either of Ofwat director general Ian Byatt or the companies.
In a statement, Byatt said ""a gap of ten years between reviews is too long even given the long term nature of the water industry.""
""The regulator's decision to have a review in 1999 comes as no surprise,"" Janet Langdon, director of the Water Services Association which represents water firms, said in a statement.
Labour environment spokesman Frank Dobson said in a statement the review was an admission by Ofwat that Labour ""has been right to argue that the water companies have been allowed to rip off their customers since privatisation.""
Byatt said he was announcing the review now ""to remove speculation and regulatory uncertainty...to give sufficient time for consultation with all those involved.""
Water company shares dipped on the news with Anglian Water down six pence to 547-1/2 pence while Severn Trent shed four pence to 600 pence and Thames Water was down four pence to 548-1/2 pence.
Multi-utilities Hyder and United Utilities also suffered, sliding 12-1/2 pence to 700 pence and four pence to 585 pence respectively.
Byatt said major consideration would be given during the review to the need for balancing supply and demand and to pay more attention to leakage control, factors highlighted in last year's drought when many firms banned non-essential water use.
Labour criticised the industry at the time for allowing some 826 million gallons of water a day to seep out through pipes while paying large dividends and hefty salaries to directors.
Ofwat has already flexed its muscles against Yorkshire Water's inadequate handling of the drought which saw the company forced to tanker in supplies, by imposing price cuts for next year and singling it out at the time for a review in 1999.
The company, which has since had a change of management, said on Tuesday it would finally lift all restrictions imposed in the summer of 1995 on November 1.
Labour, which has utility companies in its sights for a proposed ""windfall"" profits tax, said Ofwat's planned price review would ""have to play its part in (a) better deal for customers.""
Byatt, by announcing an early review and stressing the need to pass savings on to customers, is ""moving to assuage the politicians,"" said one analyst who declined to be named.
""There is lots of jockeying for position ahead of an election. The companies want to be seen to be doing the right thing,"" said Chris Perry, analyst at Charterhouse Tilney.
Later this year, companies will have an opportunity to go some way to pre-empting a harsh review when they announce interim results at the end of November.
Several of the water companies have used the announcement of past results to share out benefits of cost savings between customers and shareholders, giving rebates to the former and generous dividend payouts to the latter. ""Companies may well consider there is a value now in laying out their plans for benefit sharing ahead of the next election,"" one analyst said.
",16
"Entergy Corp on Wednesday called off talks with British regional electricity company (Rec) London Electric but the U.S. firm said it was still keeing an eye on the electricity sector, which has seen a recent flurry of bids and rumours.
In a statement responding to newspaper reports it planned a 1.2 billion pound ($2.02 billion) takeover of London Electric, Entergy said exploratory discussions had taken place but had been discontinued.
""We continue to evaluate attractive markets and investment opportunities worldwide and consider the UK electricity market to be in that category,"" Entergy spokesman Patrick Sweeney said.
Shares in London, which had surged higher on the bid reports, slipped to a low of 630 pence but later climbed back to 661-1/2 pence, down just 3-1/2 pence.
""What (Entergy is) saying is that the talks with London Electricity have ended. That doesn't mean they've ruled out a hostile bid for London Electricity, Yorkshire, or another,"" said Yamaichi analyst Nigel Hawkins.
Recent interest has seen two of the five remaining Recs attract U.S. predators -- Northern Electric is fighting CalEnergy's $1.225 billion bid and East Midlands has agreed to a $2.15 billion offer by Dominion Resources.
Seven of the original 12 cash-rich Recs have already been sold, three of them to U.S. companies which are attracted by the looser regulatory system in the UK.
Earlier this week, Entergy denied a report in the Sunday Telegraph newspaper that it was interested in bidding for Yorkshire Electricity, considered the most attractive of the remaining Recs.
Southern Electric, which has so far kept out of this round of bid speculation, avoided takeover by British generator National Power when the government blocked the bid on competition grounds in April.
The company then went on to make an offer itself for its cousin Southern Water but was pipped by power company Scottish Power with a 1.68 billion pound bid.
The latest two bids for Recs are clouded by concerns that political pressures might prompt a block, however, as the ruling Conservatives struggle to catch the opposition Labour party's lead in polls before a general election due by May 1997.
The Recs, which were privatised by the Conservatives in 1989, have triggered sharp public and opposition party criticism for big dividends, bulging executive pay packets and bumper takeover prices.
But companies may well consider chances of an approval for takeover more likely with a Conservative government than from Labour, which already plans a ""windfall"" tax on utilities if it gains power.
""There's definitely a feeling that the window of opportunity is closing on these bids,"" said the sector analyst.
Analysts said there could be other U.S. companies looking at the sector, adding that Yorkshire Electricity remained one of the most attractive for a predator.
Industry watchdog Offer completed consultation on CalEnergy's bid on November 7 while the closing date for comments on Dominion's offer is November 22.
Trade secretary Ian Lang has a first deadline for deciding on CalEnergy's bid of November 25, analysts said, but might extend it to mid-December. ($1=.5950 Pound)
",16
"Thames Water reported a strong rise in profits and dividend on Tuesday to kick off Britain's water utility half-year results season, perking up shares in the sector with hopes others would be as generous to shareholders.
Thames said first half pre-tax profits rose to 176 million pounds ($281 million) after exceptional items from 165.4 million pounds in the same period last year while profits before exceptionals were up 15 percent to 188 million pounds.
The one-off items included a 12.2 million pound cost on the premium of repurchasing convertible bonds alongside its buyback of 10 percent of its shares over the summer. Thames hiked its dividend by 22 percent to 11.2 pence.
""The figures are quite reassuring, the dividend is probably the major feature,"" said David Campbell of broker Greig Middleton.
Thames managing director Bill Alexander told Reuters he expected to ""maintain the dividend at this sort of level,"" pointing out that the half year increase included a rise of some 11 percent taking account of the buyback.
""They are indicating the rate of dividend increase will be like this for the full year,"" Campbell said.
Thames shares were up four pence to 549 pence by 1056 GMT, off a high of 555 pence. Among other privatised water companies due to report in the coming weeks, Severn Trent was up eight pence to 611 pence and Yorkshire Water gained six pence to 590 pence.
Thames also said it would make extra investment of 150 million pounds in services, which Alexander said would be targeted at reducing leakage of water, at sewerage systems, an extension to the London ring main supply and a new reservoir.
Leakage, which has been a hot political issue for the privatised water firms, was down 10 percent from year-ago levels, Alexander said.
Thames will focus on core water and sewerage activities, it said, but still managed to turn round its activities outside the regulated British water sector to a nine million pound profit at the half year from three million pounds loss a year ago.
""People will be pleased we got nine million pounds from the non-core for the first time...but our primary concern is the core and getting that right,"" Alexander said.
The non-core businesses cover international contracts, services such as waste management, and property and insurance. Thames said in a statement i
""There is a little confusion as to where all that's going,"" Campbell said.
Thames said that operating margins rose to 33.7 percent in the first half, up 2.6 percent on the same time last year, while gearing was up to 39 percent from 30 percent.
Alexander said the company was looking at broadening cooperation with local electricity supplier London Electricity but said a merger between the two was still not on the cards.
""We considered that and ruled it out some time ago,"" he said.
($1=.6264 Pound)
",16
"British water and sewerage company South West Water turned in sparkling first half profits on Thursday and hiked its dividend by an expected 20 percent, promising further increases in years to come.
The company, which evaded takeover earlier this year when two proposed bids were blocked by the UK government, said it expected to raise its total dividend by 20 percent this year and make real a rise of eight percent ""for the foreseeable future"".
South West Water's pretax profits for the six months ending September 30 rose to 72.9 million pounds ($121.4 million) up 35 percent and ahead of expectations of 57 to 68 million pounds.
It paid out a dividend of 11.8 pence as promised when the bids, from Severn Trent and Wessex, were unexpectedly halted by the UK government in October.
""The dividend policy will continue to be based on the pursuit of progressive growth,"" the company said in a statement.
But the half year surge in profits was unlikely to be repeated, finance director Ken Hill told Reuters. ""I do not think a 35 percent increase in PBT (profit before tax) is likely to occur at the end of this year,"" he said, nor in years immediately following. ""But we are looking for profit increases,"" he added.
Shares in the company closed three pence up at 580 after touching a high of 589 pence.
Anglian Water, which reported last week, saw half year profits rise 5.5 percent and raised its dividend 14.6 percent. Thames Water, which kicked off the flow of interim results in the sector on October 29, turned in pretax profits before exceptionals up 15 percent and raised its dividend 22 percent.
South West Water has also committed to pay out a rebate of 15 pounds each to customers after the planned bids were blocked but Hill warned further rebates would not be automatic.
The company failed last year in a bid to have price caps imposed by regulator Ofwat raised as the Monopolies and Mergers Commission said it should find an extra 100 million pounds it said it needed for environmental upgrades from efficiencies.
It has since made an earlier rebate of 10 pounds to customers, announced additional investment of 74 million pounds and brought forward 20 million pounds of investment in cleaning up at Newquay, a favourite beach area for surfers. Hill said the company's strategy now was to ""focus on the core business...and develop very carefully the strategy of the non-regulated businesses.""
Dividend payouts would be helped by efficiency savings and improved profitability in its non-regulated businesses, which contributed 6.6 million pounds to interim profits, executives told a press conference.
Chairman Keith Court told journalists the company aimed to balance turnover contributions of non-regulated and regulated businesses ""as soon as we can.""
New acquisitions contributed around 3.5 million pounds to operating profits of some 7.5 million pounds in non-regulated business this year and Hill said there was between 100 and 200 million pounds available to make further purchases.
But there are no specific plans for acquisitions. ""Our track record shows...we are not frightened (of making acquisitions) but it is a question of finding ones that make sense,"" Colin Drummond, head of the group's non-core division, said.
At the same time, the company's balance sheet was strong enough to effect a share buyback if it decided to make use of a mandate to buy 10 percent of shares, Hill said.
($1=.6004 Pound)
",16
"Virginia-based Dominion Resources Inc., continuing an American invasion of the recently privatised utility industry in Britain, agreed Wednesday to acquire East Midlands Electricity Plc for about 1.3 billion pounds ($2.15 billion).
Executives from Dominion met East Midlands management late Tuesday to offer 6.7 pounds ($11.07) a share for one of five remaining independent electric companies in Britain.
But East Midlands shares languished well below the offer price Wednesday as concerns emerged that the bid might face obstacles from British competition authorities.
""Everyone's expecting the MMC (Monopolies and Mergers Commission) to take a close look at the deal,"" said one trader.
Dominion, based in Richmond, Va., said last week it was considering a bid ""at a price not much in excess of 608 pence per share."" But East Midlands scorned that price, saying it would undervalue the Nottingham-based electricity company.
East Midlands Chairman Sir Nigel Rudd said Wednesday that his board was recommending the latest offer ""because it represents fair value for an excellent business, which has successfully differentiated itself from the sector.""
Seven of Britain's original 12 regional electricity companies have already been bought -- four by U.S. firms -- since they came up for grabs last March when the government's protective golden share expired, five years after privatisation in 1990.
""Dominion's offer looks a fair compromise price,"" said Chris Perry, utilities analyst at Charterhouse Tilney.
But he added that there were ""very genuine concerns"" that the offer might be referred to the Monopolies and Mergers Commission.
Dominion Chief Financial Officer Linwood Robertson said in an interview that the company was talking to the regulator.
""We intend to run this as a stand-alone business,"" he said, adding that he certainly hoped for approval.
He also said the group hoped to keep East Midlands' management team, which is highly regarded by industry analysts.
Robertson said Dominion looked forward to the diversification East Midlands would bring to it and said the U.S. company would bring strengths to the British firm.
Dominion's stock gained 37.5 cents to $40.125 in early trading on the New York Stock Exchange.
",16
"Britain's J. Sainsbury Plc stole a march on competitors on Friday by becoming the first supermarket to launch banking services in a link with Bank of Scotland, which analysts said may prove to be a money spinner.
""It could be a winner if it is done in the right way,"" said one analyst who asked not to be identified.
Sainsbury said in a statement it had applied to the Bank of England for authorisation for a new bank to be owned 55 percent by the company and 45 percent by Bank of Scotland.
The venture, to be called Sainsbury's Bank, will use telebanking for a range of deposit, lending and cash management services to 12 million customers, the company said.
It will kick off in 1997 with the launch of Classic and Gold Visa cards along with account and card-based services.
""It certainly shows Sainsbury is alive and kicking, which we had begun to doubt,"" one sector analyst said.
Sainsbury, which turned in its first fall in profits for 22 years last year, was forced to launch its Reward loyalty card in June after arch-rival Tesco Plc pipped it to market leader with its ClubCard, and it has been struggling to regain the intiative.
Tesco pre-empted Reward's launch by introducing its ClubCard Plus account which allowed shoppers to build up credit balances with favourable rates of interest to be used in its stores.
But Sainsbury's move ""makes ClubCard Plus look a bit of a damp squib,"" the analyst said.
""The bank plan has certainly cheered the market up, the initial reaction is clearly positive,"" the sector analyst said.
Sainsbury shares closed up 10.5 pence at 360.5 pence, off a high of 363 pence while Tesco was up 2.5 pence to 324 pence, off a high of 326 pence.
""The market wanted to see them doing something and this is certainly a pleasant surprise,"" the analyst said.
Sainsbury chairman David Sainsbury said that Sainsbury's Bank would give customers ""the reassurance of a name they know and trust, coupled with the banking expertise of the Bank of Scotland.""
The move will result in ""a compelling alternative to the conventional high street bank or building society for Sainsbury's customers,"" said Bank of Scotland chief executive Peter Burt.
Analysts warned, however, that Sainsbury's Bank would have to offer attractive deals to secure customers, many of whom already have bank accounts.
""It has to undercut the competition or link banking up to Reward points, a lot will depend on the marketing,"" the sector analyst said.
One analyst warned that the financial services of retailer Marks & Spencer, although not directly comparable, made only a small contribution to profits even though it had been running for 15 years.
""They will have to decide to really go for it if they are going to make it profitable,"" he said.
And analysts said the market would still look for progress in its core grocery business sales when Sainsbury reports interim results on October 30.
Analysts forecasts for half-year pre-tax profits range from 383 million pounds ($611.4 million) to 396 million pounds, compared with 450 million previously.
($1=.6264 Pound)
",16
"The birth of a cable giant led by British Telecom's rival Cable & Wireless should enliven competition and could eventually ease pressure on BT by regulators long worried by its dominance of the UK market, analysts said on Wednesday.
In its latest rebuff, telecommunications watchdog Oftel on Wednesday banned a promotion by BT, Britain's biggest telephone company, with satellite broadcaster BSkyB, citing a ban on BT's use of its network for entertainment.
""Oftel's decision is nuisance value for BT. (but) the Cable & Wireless deal has far-reaching implications,"" said Patrick Hickey of Henderson Crosthwaite.
The merger announced on Tuesday created Cable & Wireless Communications, a company controlled by C&W that brings together its own Mercury telecoms business with the British operations of NYNEX of the U.S., Bell Canada International, and Videotron to create a $7.5 billion group. Its constituent companies already reach almost 2.5 million homes for cable television.
""The stronger Cable & Wireless is perceived, the more Oftel will get off BT's back,"" suggested Tressan MacCarthy, analyst at Panmure Gordon.
""BT is likely to push hard and use this as an argument for letting them into the market,"" she added of the potentially lucrative multi-media business opportunities.
Following the Oftel decision, BT shares fell, closing off 7 pence to 346 pence and BSkyB was off 40 pence to 637 pence, a low for the day. C&W was up 4 pence to close at 470.
Oftel said that BT's promotion, which involves discounts on subscriptions to BSkyB for customers using a ""Friends and Family"" phone charges offer, was discriminatory.
BT said it was ""baffled"" by Oftel's statement and claimed that the promotion offered cost savings to customers and was open to all BT users.
Oftel's decision is particularly emotive, analysts said, as it follows hot on the heels of its rivals' merger and despite active lobbying by BT to have the restriction on it offering television lifted.
BT welcomed the new Cable & Wireless Communications, saying that it would help to create a market where ""competition can become the natural regulator."" It points out that C&W already has a telephony company that competes with BT.
The Conservative government has stood its ground on BT's ban from cable television, saying there will be a review of the situation in 2001 with a possible early look in 1998.
The opposition Labour party, currently leading in polls ahead of a general election which must be held by May 1997, has linked opening doors for BT to connecting up schools to the Internet.
BT's promotion with BSkyB would have seen cost savings of around 90 pounds ($143.8) a year per customer in subscription discounts and credits to telephone bills, a BT spokesman said.
Analysts said customers also stood to benefit from the emergence of C&W as a strong domestic competitor to BT.
""As the businesses are put together, say a year out, it will begin to have an impact on BT,"" said Hickey.
""It will be a pretty competitive environment,"" he added.
Cable & Wireless Communications has around 2.47 million homes in its sights through a variety of franchises throughout the country and access to 18 million business and domestic telephone customers through its Mercury unit.
It will be offering not just cable television and telephony but also home shopping and Internet link-ups.
""It will be a more coherent competitor to BT, customers will feel more confident of one name instead of fractured franchising,"" said one analyst who asked not to be named.
For BSkyB, which is 40 percent owned by media tycoon Rupert Murdoch's News Corp, the new cable power could mean harder negotiations on programme pricing, analysts said.
""Cable & Wireless Communications might feel it has more muscle to flex but BSkyB could see it as desperate for content; they both will need each other,"" Hickey said. ($1=.6260 Pound)
",16
"London Electricity on Tuesday became the latest British regional electricity company (Rec) to attract bid speculation after U.S. firm Entergy was reported to be mulling a 1.2 billion pound bid.
London Electricity declined comment on a report in the Wall Street Journal Europe that confidential documents showed the U.S. company was seeking 1.1 billion pounds to acquire an unnamed British electricity firm whose financial profile matched that of London Electricity.
Entergy told Reuters that any talks with another party were ""too early in the scheme of things to be really meaningful.""
""As far as specifying a target of that interest, we're not simply going to comment on what has been speculated and rumoured,"" Entergy spokesman Patrick Sweeney said.
However, he declined to deny the Wall Street Journal Europe article.
Shares in London Electicity touched a high of 671 pence before easing back to close at 667 pence, up 30-1/2 pence. The newspaper article said confidential Entergy company documents referred to used a code name ""Atlantic"" for the target company whose financial profile met that of London Electricity on a number of points.
The Journal said the bid was assumed in the documents to be for around 700 pence per share. The newspaper quoted Entergy's Sweeney as saying Entergy was interested in the British market and ""obviously if you're interested, one of the results could be an acquisition.""
The article followed a denial by Entergy on Monday of a report in Britain's Sunday Telegraph newspaper that the U.S. firm was considering a bid for Yorkshire Electricity Group Plc. The electricity sector has seen a flurry of bid speculation recently over the five remaining independent Recs. Northern Electric currently faces its second hostile offer in less than two years as it tries to fend off a $1.225 billion.
($1=.5994 Pound)
",16
"Political pressures ahead of a general election may mean the latest bids in a wave of takeovers of British regional electricity companies (Recs) do not get a rapid nod from the UK government, analysts said on Wednesday.
""A referral (to competition authorities) is a distinct possibility. I think it is a 50-50 shot,"" said Gordon Culfeather, utilities analyst at Greig Middleton.
Seven of the original 12 cash-rich Recs have now been sold in a flurry of takeovers since they came up for grabs last March after the government's protective golden share expired, five years after privatisation in 1990.
Three of those have been sold to U.S. utilities, who see the UK sector as an opportunity to expand outside U.S. regulatory shackles, particularly into a market which is scheduled to be liberalised to supply competition in 1998.
The latest bid is from  U.S. energy group Dominion Resources which agreed to pay 1.3 billion pounds ($2.15 billion) on Wednesday to take control of East Midlands Electricity, one of only five remaining independent Recs, in an a offer at 670 pence per share.
Northern Electric faces its second hostile approach in less than two years as it battles to throw off a 630 pence per share bid from CE Electric, a unit of U.S.-based CalEnergy, which has already snapped up 29 percent of its target.
Only two bids have so far been blocked by trade secretary Ian Lang, who stunned the market by stopping generators National Power and PowerGen from consuming two Recs earlier this year.
Another two Recs fell prey to their regional water and sewerage companies, while industrial conglomerate Hanson picked up Eastern Electricity, which it now aims to spin off as part of a separate business under its demerger plans.
The remaining victim was Manweb, which succumbed to Scottish Power, an aggressively expansive electricity generator and distributor based in Scotland.
Dominion and East Midlands said they saw no reason for their deal to be referred to the Monopolies and Mergers Commission (MMC), adding that a meeting was scheduled with industry watchdog Offer, which initially consults on bids.
""If Lang was following a consistent route, he would not stop these latest bids,"" said one analyst who asked not to be named.
""But if I were a regulator, I would probably want at least five firms to make comparisons,"" he added.
Offer head Stephen Littlechild will send his advice on both bids to Lang for the trade secretary to decide whether they should be referred to the MMC.
Another pressure on Lang is the prospect of a general election, which must be held by May 1997, with the opposition Labour party running ahead in opinion polls and allegations of sleaze miring the current Conservative government.
Its privatisations, which have seen most of Britain's strategic industries sold off, have been heavily criticised for huge executive pay packets, hefty shareholder payouts and heady takeovers which value firms well above privatisation levels.
Labour, which has vowed to levy a ""windfall"" tax on privatised utilities, said in an opening salvo on the latest bids that it planned ""tough, efficient regulation wherever necessary in the privatised utilities and we intend to see it enforced whoever is the owner.""
Lang could chose to refer the bids to the MMC in order to delay any decision on this hot political issue beyond an election, some analysts said.
The market on Wednesday showed its concerns by capping share prices at well below the bid levels, with Northern trading at 592 pence per share by 1450 GMT and East Midlands at 623 pence.
""The market is holding its breath on this issue,"" Culfeather said. ($1=.6054 Pound)
",16
"British supermarket chain Safeway, known for cute kid adverts and innovative technology, turned in a seven percent rise in half year profits on Thursday and said sales were rising with hopes of a cheery Christmas.
""I am positive about Christmas, there are some good statistics on retail generally...I would hope that (consumers) would have more confidence to spend,"" chief executive Colin Smith said in an interview.
The company announced plans to open 450,000 square feet (41,810 sq metres) of extra space, or about 18 stores, in the next two years, which will generate about 5,200 jobs.
But with the company's profits and dividend coming in towards the lower end of expectations, Safeway shares reversed a recent trend to slip to a low of 362 pence, down nine, before recovering to 370 by 1150 GMT,
Safeway checked in half year pretax profits of 228.2 million pounds ($383.5 million), compared with forecasts of between 228 and 231 million. It paid a dividend of 4.4 pence, up from 4.05 pence and within forecasts of 4.4 to 4.6 pence per share.
The company, which completed its ""Safeway 2000"" strategic review in the summer aimed at boosting sales and cutting costs, said sales from existing stores were up five percent in the first five weeks of the second half.
That followed a 5.1 percent gain in the first half, including price inflation of 2.6 percent.
""Our strategy to attract more family shoppers to our stores is succeeding and this success is reflected in sales growth which is outperforming the industry average,"" the company said.
But Smith said the sector was ""very competitive...and margins at the moment are slightly down.""
Supermarkets are attempting to steer clear of an all-out price war by relying on marketing initiatives such as loyalty cards and customer service to boost sales, but pricing remains a key element.
In the first half, a fierce petrol price war hit profitability in Safeway's petrol forecourts to the tune of 10 million pounds, but Smith said he hoped this would not impact on the second half.
Gross margins have run slightly down on a year ago in the first half and start of the second half, Safeway said, driven by ""our immediate and vigorous response to a number of significant marketing and pricing initiatives launched by our competitors.""
But net margins were stable in the first half at 6.9 percent as productivity gains and efficiency improvements helped.
The supermarket chain plans to extend its innovative self-scan shopping, where customers track and total their own shopping to avoid queueing at checkouts. The scheme will be added at 50 stores on top of the current 100.
Smith said the company would continue to focus on the family shopper and the large family weekly shop to boost sales.
""Increasing efficiencies mean we can be a low cost operator...which allows us to afford to reinvest in being competitive."" ($1=.5950 Pound)
",16
"Britain's second biggest supermarket group J. Sainsbury Plc reported a fall in half year profits as expected on Wednesday and sluggish sales.
But the company, which last year was overtaken as market leader by arch-rival Tesco, held out the hope of improvements, and its shares rose.
Sainsbury said half year pretax profits slipped to 393 million pounds ($631.5 million) from 456 million pounds in the same period last year and is paying out a dividend of 3.5 pence per share, up from 3.4 pence.
The company suffered its first fall in full year profits for 22 years when it reported in May.
Its shares were up 11 pence to 366 pence by 1120 GMT, however, just off a high of 367 pence.
""The share price rise is a triumph of hope over statistics,"" said one analyst who asked not to be named.
The group said current sales from comparable stores, excluding petrol, were rising in line with inflation of around three percent, well below the 7.5 percent gain reported by Tesco in September.
""Clearly we want to do better (than three percent)"", chairman David Sainsbury told Reuters.
""This year will be about getting the basics right, next year will be about getting profits moving,"" David Sainsbury said.
""Sales moving in line with inflation is pretty disappointing considering they've introduced the loyalty card,"" said one sector analyst who asked not to be named.
The company was forced to introduce its Reward loyalty card offering special deals for regular customers four months ago after Tesco's ClubCard helped it to beat Sainsbury to the market leader slot, and it is now accounting for much of the sales uplift.
Sainsbury said marketing and operations initiatives along with the Reward card should help to boost sales and the company said it was looking forward to a strong Christmas season.
""We will be fighting on our traditional ground of quality and choice, along with customer loyalty,"" David Sainsbury said.
Sainsbury, which last week announced plans to launch a bank with Bank of Scotland, said there would be a further ""major development"" on Reward soon and said it would move to strengthen its leadership in quality and choice.
The group said Dino Adriano, currently deputy chief executive of the supermarket business, will take over from Tom Vyner as chief executive of the unit on March 8 rather than at the end of 1997 as previously planned.
Analysts have been waiting for Adriano to show himself as a rising star but so far he remains largely unproven, they said.
The company said it intended to boost its sales area by 6.4 percent this year, which David Sainsbury said ""enormously helps in driving forward market share.""
Despite sluggish sales growth, Sainsbury managed to increase market share during the first half to 12.5 percent from 12.3 percent and still has the highest sales per square foot of the big four retailers, including ASDA and Safeway.
At the same time, the group is now breaking even on petrol sales after a fierce price war triggered losses which helped to erode first half gross margins by 0.8 percent of sales.
""There's relief that it was not even worse and Sainsbury carries an enormous amount of goodwill, but sentiment could still go either way,"" one analyst said. ($1=.6223 Pound)
",16
"The birth of a cable giant led by British Telecom's rival Cable & Wireless should enliven competition and ease pressure on BT by regulators long worried by its dominance of the UK market, analysts said on Wednesday.
In its latest rebuff, telecommunications watchdog Oftel on Wednesday banned a promotion by BT, Britain's biggest telephone company, with satellite broadcaster BSkyB, due to a ban on BT's use of its network for entertainment.
""Oftel's decision is nuisance value for BT. (but) the Cable & Wireless deal has far-reaching implications,"" said Patrick Hickey of Henderson Crosthwaite.
The merger announced on Tuesday created Cable & Wireless Communications, a company controlled by C&W that brings together its own Mercury telecoms business with the British operations of NYNEX of the U.S., Bell Canada International, and Videotron to create a $7.5 billion group. Its constituent companies already reach almost 2.5 million homes in Britain.
Following the Oftel decision, by 1230 GMT, BT shares were off 5.5 pence to 348.5 pence and BSkyB was off 17 pence to 661.5 pence, a low for the day, while C&W was up 7.5 pence to 474.5.
Oftel said that BT's promotion, which involves discounts on subscriptions to BSkyB for customers using a ""Friends and Family"" phone charges offer, was discriminatory.
BT said it was ""baffled"" by Oftel's statement and claimed that the promotion offered cost savings to customers and was open to all BT users.
Oftel's decision is particularly emotive, analysts said, as it follows hot on the heels of its rivals' merger and despite active lobbying by BT to have the restriction on it offering television lifted.
BT welcomed the new Cable & Wireless Communications, saying that it would help to create a market where ""competition can become the natural regulator.""
""The stronger Cable & Wireless is perceived, the more Oftel will get off BT's back,"" suggested Tressan MacCarthy, analyst at Panmure Gordon. ""BT is likely to push hard and use this as an argument for letting them into the market,"" she added.
The Conservative government has stood its ground on BT's ban from cable television, saying there will be a review of the situation in 2001 with a possible early look in 1998.
The opposition Labour party, currently leading in polls ahead of a general election which must be held by May 1997, has linked opening doors for BT to connecting up schools to the Internet.
BT's promotion with BSkyB would have seen cost savings of around 90 pounds ($143.8) a year per customer in subscription discounts and credits to telephone bills, a BT spokesman said.
Analysts said customers also stood to benefit from the emergence of C&W as a strong domestic competitor to BT.
""As the businesses are put together, say a year out, it will begin to have an impact on BT,"" said Hickey.
""It will be a pretty competitive environment,"" he added.
Cable & Wireless Communications has around 2.47 million homes in its sights through a variety of franchises throughout the country and access to 18 million business and domestic telephone customers through its Mercury unit.
It will be offering not just cable television and telephony but also home shopping and Internet link-ups.
""It will be a more coherent competitor to BT, customers will feel more confident of one name instead of fractured franchising,"" said one analyst who asked not to be named.
For BSkyB, which is 40 percent owned by media tycoon Rupert Murdoch's News Corp, the new cable power could mean harder negotiations on programme pricing, analysts said.
""Cable & Wireless Communications might feel it has more muscle to flex but BSkyB could see it as desperate for content; they both will need each other,"" Hickey said. ($1=.6260 Pound)
",16
"Privatised nuclear power generator British Energy Plc sparked criticism on Wednesday when it announced job cuts that failed to impress the stock market and angered unions.
""I don't think this move transforms (British Energy's) prospects at all,"" said Philip Hollobone, utilities analyst at Williams de Broe.
British Energy said in a statement it aimed to cut 1,460 jobs in Scotland and Wales to make savings in staff costs of 50 million pounds ($78 million) within three years.
It said it would have a one-off restructuring charge of 100 million pounds which was already provided for.
Chief executive Robert Hawley said there could be more savings to come as cuts in office costs came through.
Union representatives slammed the move in a statement as ""a high risk strategy,"" warning that job cuts could ""reduce training, lower standards and threaten safety.""
The Nuclear Installations Inspectorate (NII), part of Britain's Health and Safety Executive, said it would review the plans and take action if it felt safety would suffer.
""If we think (the plans) are adverse (for safety), we will use regulatory powers to stop (British Energy) doing them,"" a spokesman for the NII said.
But Hawley maintained that ""safety is our bottom line, not profit.""
British Energy's debut on the stock exchange in July was overshadowed by temporary closures of two of its eight reactors after cracks were discovered.
Shares kicked off below the partly-paid issue price of 105 pence to institutions and 100 pence to small investors and have rarely moved above those levels, mangaging just a half penny rise on the day on Wednesday to stand at 108 pence at 1130 GMT.
The ruling Conservative government pressed ahead with its privatisation despite the deep unpopularity of the deal and has been left with a stake of around 12 percent.
The opposition Labour Party also criticised the job cuts, which energy and industry spokesman John Battle said showed British Energy ""has not performed as they promised they would.""
He called on the company to confirm its dividend policy which it has said is vulnerable to underperformance by nuclear power stations.
Although Hawley maintained the company's plans were aimed at making ""absolutely sure we are competitive in the market place,"" analysts expressed concern it faced stiff challenges and remained an unattractive investment.
""They are under pressure,"" said Marshall Whiting of Societe Generale Strauss Turnbull (SGST).
Whiting said the crucial factor for British Energy was price of electricity in the so-called ""pool,"" or wholesale market.
""Pressure on electricity prices is downward in the medium to long term. (British Energy) has to address operating costs to get profits to stand still,"" he said.
Hollobone said the cost cuts should make predictions for dividend growth more secure but added that these were still below market averages.
""Dividend growth is one of the lowest in the sector and there is no sign of a special dividend,"" he said.
British Energy said at its privatisation that the first interim dividend would be 4.6 pence a share and forecasts for final dividend are for 9.1 pence in 1996/97.
""You can get better value elsewhere. Why invest in British Energy?"" Hollobone said. ($1=.6393 Pound)
",16
"A unit of CalEnergy Co., a fast-growing, Nebraska-based energy company, Monday launched a $1.2 billion takeover bid for British regional utility Northern Electric Plc, which promptly rejected the unsolicited offer.
The bid is the latest for a British power company and the second for Northern Electric in just over a year. Industry analysts said Northern Electric might end up agreeing to a takeover if it could extract a higher price.
Omaha, Neb.-based CalEnergy, through its 70 percent-owned CE Electric unit, said it would pay 630 British pence ($10.06) for each common share and 103 pence ($1.64) for each preferred share of Northern Electric, making the deal worth about $1.23 billion. The U.S.-based construction and mining company Peter Kiewit Sons owns the other 30 percent of CE Electric.
Northern Electric successfully fended off a hostile bid last year from Trafalgar House, now owned by Sweden's Kvaerner, by offering a special package worth 560 million pounds ($894 million) for shareholders.
""Our strategy is to become a leading global provider of a full range of energy services,"" CalEnergy Chairman David Sokol said in a statement announcing the offer.
Sokol's company has invested in geothermal and other energy projects at home and in Indonesia and the Philippines in recent years. Its core operations are in California, New York and Texas, and the bid for Northern Electric is a major move outside the U.S. market.
U.S. utilities, faced with slow growth and deregulation in their local markets, have been merging in the United States and investing abroad as they seek to grow.
Sokol said Northern Electric, based in northeastern England, had distribution and supply know-how that would complement CalEnergy's production capacity, while its size was ""very manageable.""
""They are the smallest regional electricity company and that means that you can get them cheaper,"" said one analyst who asked not to be identified.
""We will see an agreed bid eventually,"" said Philip Hollobone at brokers Williams de Broe, who said CE Electric might eventually raise its price to secure agreement from Northern's board of directors.
In its statement rejecting the bid, Northern Electric said that in talks through Sunday, CE Electric had contemplated offering about 700 pence ($11.17) per share.
""Northern Electric is clearly saying you can have us for 700 pence per share,"" said one sector analyst who asked not to be identified.
CE Electric, which bought a 12.7 percent stake in Northern in the open market, said that it never suggested ""any intent to value the company at 'around 700 pence per share' or even anywhere close to this figure.""
Sokol said he felt the offer was ""a very full price,"" adding that CE Electric had sought a merger agreement with Northern Electric but ""the only area we could not agree on was value.""
Some analysts said Northern Electric's weak balance sheet would limit what CE Electric would be willing to bid and that it might be hoping to attract another bidder. The special shareholders' package it paid to fend off Trafalgar House left it heavily in debt.
Northern Electric stock jumped 131 pence ($2.09) to close at 651 pence ($10.40) after CE Electric had managed to buy its 12.72 percent stake at the offered price earlier in the session.
CalEnergy announced in August that it bought three gas-fired cogeneration plants in Texas, Pennsylvania and New York for $226 million from Falcon Seaboard Resources Inc., a closely held energy company.
",16
"Electricity stocks crackled higher on Friday as rumours swirled around the market of a U.S. buyer for one of five remaining regional utilities and analysts said the forthcoming results season could provide a spur for action.
""There is going to be a big focus on the ability of these companies to hand out more cash...if the results season is not going to get it going, then nothing will,"" said Chris Perry, analyst at Charterhouse Tilney.
Electricity sector companies kick off their half year results season towards the end of November.
Leading the sector higher on Friday was East Midlands Electricity, after a report in the Daily Mail newspaper that a bid might emerge from Houston Industries of the United States at around 750 pence a share.
Houston, tipped to buy one of the five remaining regional electricity companies (Recs) earlier this year, had been thought to have given up on the idea in August when it bought U.S. gas utility NorAm Energy for $3.8 billion.
East Midlands shot up to a high of 565 pence but eased back to close at 562, up 44 pence.
""At the time of its last results, the company effectively indicated its surprise that it hadn't been taken over. Their shares had fallen back a long way and perhaps it's no surprise that bid rumours are re-emerging,"" Perry said.
Other power utilities which remain independent also climbed, with Yorkshire Electricity up 28 pence to 742 pence and Southern Electric adding 13.5 pence to 631 pence.
Northern Electric, which survived a takeover bid from Trafalgar House last year, was up 29 pence to 523 pence and London Electricity, which supplies the capital with power, jumped 18.5 pence to 585 pence.
""East Midlands is the one most likely to face a bid, it is smaller than others and more purely a distribution company,"" Nigel Hawkins at brokers Yamaichi said.
A report in the Daily Telegraph newspaper also suggested that U.S. utility Duke Power might be circling the sector but no comment was available from either U.S. company.
Analysts said U.S. companies might not be the only ones interested in the sector, which has seen seven of the 12 Recs created at privatisation in 1990 fall prey to takeover bids.
The domestic supply business is to be opened to competition in 1998 and a range of companies from oil producers to supermarkets have already indicated an interest.
Other potential interest could come from water companies, analysts said, especially following Britain's decision on Friday to block planned bids for South West Water from Severn Trent and Wessex Water.
""You've got two disappointed companies there,"" said Marshall Whiting of Societe Generale Strauss Turnbull.
Analysts said Severn Trent could decide to use its resources to make a share buyback or a special dividend payout.
But Wessex Water may be enticed to link up with Southern Electric, analysts said, as multi-utilities have been approved.
Welsh Water took over Swalec to form Hyder while United Utilities combined North West Water and Norweb.
""The idea of multi-utilities is gaining ground,"" Whiting said.
",16
"Shares in British utility Northern Electric rose on Friday after a newspaper reported that U.S. group CalEnergy was set to raise its 630 pence a share takeover offer.
The report in the London Evening Standard said CalEnergy, through CE Electric in which it has a 70 percent stake, might be willing to increase its 650 million pound ($1.08 billion) bid to 660 pence to win a recommendation from the regional power distribution company (Rec).
Neither side would make any offical comment, however, and market sources were sceptical that any increased bid was in the offing.
Despite market scepticism, Northern shares rose to an intraday high of 618 pence before easing back to close up seven pence at 608.
Other stocks in the sector also gained, bouyed by a resurgence in bid activity which saw East Midlands succumb to an agreed 1.3 billion pounds bid at 670 pence per share from U.S.-based Dominion Resources on Wednesday.
Seven of Britain's original 12 regional power firms have been swallowed up in under two years. Among the remaining five, Southern Electric jumped 30p to 708p, while London Electric added 21-1/2p to 627p.
CalEnergy, which has already snapped up more than 29 percent of Northern, has consistently said its 630 pence offer is a full and fair price.
But Northern has argued the offer undervalues the company and claimed a level of 700 pence was discussed in talks ahead of the bid launched on October 28, an assertion which CalEnergy has denied.
Analysts said the U.S. company might be in no rush to improve its offer as it has already attracted nearly 30 percent of Northern shareholders and the shares are languishing below this level.
Hanging over both bids are concerns they may be referred to British competition authorities as political pressure mounts on the Conservative government, which lags the opposition Labour Party in the polls ahead of a general election due by next May.
Previous similar bids have been approved, but the market is worried that heavy criticism of high shareholder payouts, hefty executive pay packets and high takeover prices might weigh the scales against approval this time.
In addition, approval of both bids would leave just three independent power firms in the sector and this may not be enough for industry regulator Offer to make comparisons, analysts said. Those worries have kept share prices of both bid targets largely below offer levels, with East Midlands closing down 4-1/2p at 623p.
It is not clear whether Trade Secretary Ian Lang, who will decide whether to refer the bids, would be swayed by a recommended offer.
In addition, CalEnergy might want to wait for Northern's defence document, expected by next Tuesday, and interim results due by the end of the month instead of the previously scheduled December 5 announcement.
Northern, which spent 560 million pounds last year on a package of shareholder benefits to successefully fend off Trafalgar House, now a unit of Hanson, is expected to use sparkling interim results to pitch for a higher offer.
Analysts said CalEnergy's bid compares favourably with that of Dominion on a cashflow basis and shows a 27.5 percent premium to share prices ahead of the bid, compared with a 25 percent level for Dominion's offer.
But on a price to earnings basis, CalEnergy's offer comes in slightly lower than that for East Midlands, they added. ($1=.6005 Pound)
",16
"CE Electric's $1.225 billion bid for British regional electricity company (Rec) Northern Electric has highlighted possible renewed interest in the four other remaining independent Recs, analysts said on Tuesday.
""There are clearly operational reasons which make the bid attractive to CE Electric, so there may be other bidders. And other Recs must also be under the spotlight,"" said one sector analyst who asked not to be identified.
The U.S. group said it wanted Northern's expertise in supply to complement its own generation capabilities as the international market in electricity opens up to privatisation.
But Northern Electric rejected the bid, the second unwanted advance it has faced in two years. However, its chairman, David Morris, has indicated that it might consider a higher price.
On Monday he said talks with CE Electric, which is 70-percent owned by Nebraska-based CalEnergy, culminated on Sunday with a proposal that bid negotiations be pitched at about 700 pence per share, compared with the 630 pence which was then offered.
This was promptly denied by CE Electric, which insisted that it had at no time suggested such a price.
Even that level is some way off the giddy heights paid for many of the seven cash-rich Recs already sold to predators, four of them to U.S. companies. Those sales peaked with North West Water's 11.50 pounds per share bid for Norweb in November 1995.
But analysts said Northern, which used a 560 million pound ($900 million) package of benefits to shareholders to beat a hostile bid last year from shipping and construction firm Trafalgar House, now owned by Norway's Kvaerner, has little left in its cupboard.
""They (CE Electric) are not going for its cash pile, because it hasn't got one. The logic must be for operational reasons,"" the sector analyst said.
Northern's attractions in this context could be that its price would be cheaper than other Recs because it lacks cash.
Reports have suggested other possible interested U.S. buyers of CE Electric might be Houston Industries, Duke Power, Florida Power and Light or Pacific Gas and Electric.
But if other U.S. firms decline to get involved in a tussle with CE Electric, they might look at other Recs and be keen to buy before the next British election, due by May 1997, which could give power to the opposition Labour Party. Labour has slammed previous takeovers.
""These U.S. companies need the expertise, they need the supply experience and they are looking to move into the international market ahead of further privatisation,"" the sector analyst said.
However, one analyst questioned the strategy and asked why U.S. companies did not just hire employees with the required knowledge.
""It doesn't make sense to me to buy these companies at these prices,"" he said. Northern Electric shares eased on Tuesday to 636 pence, down 12 pence by 1600 GMT, as the market held its breath to see if a higher offer would emerge.
Without a rival bidder, analysts said there was little to prompt CE Electric, in which U.S.-based construction, mining and telecoms group Peter Kiewit Sons has a 30 percent stake, to raise its offer, apart from the prospect of an agreed rather than a hostile bid.
That might be possible around half way between CE Electric's current offer and Northern's price ideas, they added.
But one analyst noted that CE Electric had already snapped up 12.72 percent of the company at the offer price, indicating that some investors were happy to sell at this level.
Northern, which has said it will bring forward its half-year results, will have two weeks to submit an initial bid defence after CE Electric posts its offer document.
Under British takeover rules, the last day a company may announce defence measures is 39 days after posting the bid document. A bidder has up to 46 days after posting its offer in which to raise the terms, unless a rival bidder emerges. ($1=.6223 Pound)
",16
"Britain's nuclear generator British Energy Plc said on Tuesday it would announce job cuts and cost savings on October 9 which were largely expected by the market but criticised by opposition politicians.
""It is clear that British Energy has not performed as they promised they would,"" Labour's energy and industry spokesman John Battle said in a statement.
A British Energy spokesman confirmed Wednesday's announcement would cover job cuts and cost savings but declined to give further details.
Analysts said they were expecting the company to outline a cut of some 20 percent in its workforce of over 6,500 by the year 2000.
""That's what we have based our valuation on, it was the figure given to the analysts' briefing over privatisation,"" said one analyst who asked not to be identified.
Newspaper reports this week have said the company could cut between 1,300-1,500 posts in an effort to make cost savings of around 100 million pounds ($156.4 million).
Battle called on British Energy to confirm the dividend policy outlined in the company's privatisation prospectus, which warned that it was vulnerable to underperformance by nuclear power stations.
At privatisation, the company said its initial interim dividend would be 4.6 pence per share and forecasts for final dividend are at 9.1 pence for 1996/97.
But Labour's Battle said the job cuts could damage performance and see the company falling below targets. ""Performance targets anticipated in the prospectus have never previously been consistently achieved and the loss of a reported 1,300...staff is expected to further undermine chances of reaching them,"" Battle said.
British Energy, which runs eight nuclear power stations in England and Scotland, was one of the ruling Conservative party's most unpopular privatisations when it was sold off in July.
It had a first instalment price of 100 pence for small investors and 105 pence for institutions but slid below these levels at its debut and has rarely moved above since.
Its launch was overshadowed by concerns over its future profitability when it closed two of its eight reactors after finding cracks just days before shares started trading. Analysts said the job cuts had largely been outlined at the time of privatisation.
""All that has been absorbed into forecasts,"" said Kevin Lapwood of Merrill Lynch.
British Energy shares were down half a penny at 105 pence by 1109 GMT, which analysts said reflected market nonchalance over job cuts. ($1=.6393 Pound)
",16
"Shares in media group Pearson closed sharply higher on Monday as takeover speculation swirled on a report, later denied, that broadcaster BSkyB might be planning a bid in the wake of announced management changes.
Pearson shares closed 34-1/2p higher at 731p after earlier touching a high for the year of 745p, as 6.7 million shares changed hands.
""The price was boosted last week by the management change but now it reflects revived bid speculation,"" said one sector analyst in a reference to last week's naming of a new Pearson chief executive and chairman.
A report in the Independent newspaper said BSkyB, in which Rupert Murdoch's News Corp has a 40 percent stake, was in the early stages of planning a bid worth more than four billion pounds ($6.4 billion) in cooperation with a U.S.-based media group.
But BSkyB's chief executive, Sam Chisholm, was quoted in later editions of Murdoch's Times newspaper saying there were ""no talks taking place between News Corp, BSkyB or any associated company about a bid for Pearson.""
A BSkyB spokesman on Monday confirmed Chisholm had denied any such talks.
Pearson, which owns Britain's main business newspaper, the Financial Times, Penguin Books and a number of television production companies, said it did not comment on speculation.
Analysts said although BSkyB appeared to have ruled itself out of a bid, observers felt any move on Pearson was likely to be made before new management takes control next year.
Last week, Pearson appointed Marjorie Scardino to be chief executive from January 1 -- the first female head of a company represented in the key FT-SE 100 share index -- and Dennis Stevenson chairman.
""If someone is thinking seriously about a bid, now is the time to do it. The new management hasn't arrived yet and so it would be harder to mount a defence,"" said one media analyst who asked not to be identified.
But analysts said Pearson shares were now approaching the top end of their price target range for full valuation of the business and the price tag attached to speculation around BSkyB was high.
""It is touching the stratosphere at these levels,"" said Anthony De Larrinaga of Panmure Gordon.
The media analyst said it was difficult to put a price tag on Pearson because its diversified nature meant it could have specific attractions for a variety of bidders.
Speculation of a bid for the company last surfaced in August when Anglo-Dutch publisher Reed-Elsevier was rumoured as a possible buyer.
After initial stock market disappointment, Scardino's appointment at Pearson was greeted with a 12 pence jump in shares on Friday as hopes emerged that she might reorganise the sprawling media company.
The Sunday Times newspaper reported that a sale of its television interests, which include soap opera and games show producer Grundy, might be on the cards.
""It may be that BSkyB want to acquire Grundy or Thames Television but whether they would want the entire group is another matter,"" said Anthony De Larrinaga of Panmure Gordon.
So far, Scardino appears to be keeping her options open, analysts said.
""There is no real evidence yet that she would consider any demergers and it is open to question whether such a move would bring shareholder benefit,"" one said.
""We have the stock on a hold at the moment. Let's see what the new management comes up with and let's see if there is anything concrete behind this bid speculation."" ($1=.6298 Pound)
",16
"British power generator National Power Plc said on Wednesday that half year profits had slipped, hurt by exceptional charges over costs of an aborted takeover, and said the year's output could be 20 percent down.
Pretax profits for the half year before exceptional items of 57 million pounds ($95.79 million) were 251 million pounds, down from 254 million pounds previously, compared with forecasts of between 210 and 253 million pounds.
The company paid out a dividend of six pence per share, up from 5.4 pence, towards the lower end of forecasts, and said it would continue to deliver real dividend growth.
Shares slid 12-1/2 pence by 1206 GMT to 440-1/2 pence, having touched a low of 435 pence.
""The results were all pretty solid and as expected but there is some disappointment that the dividend was skimpy and the market was a bit caught out on the exceptionals,"" said one sector analyst who asked not to be named.
National Power's 11 percent increase in dividend compares with a 20 percent hike made by its colleague PowerGen at interim results on November 14.
The exceptional charges included an unrealised loss on its investment in and abortive acquisition costs of regional electricity company (rec) Southern Electric.
The bid was blocked by the UK authorities in April along with PowerGen 's proposed takeover of Midlands Electricity.
""Taking a charge over Southern is a prudent thing to do and they may be able to sell at a profit later,"" the analyst said.
National Power was understood to have written down the stake it holds in Southern at 615.5 pence per share, compared to trading levels of around 700 pence on Wednesday.
""The situation could reverse itself very easily, look at PowerGen,"" the analyst said.
PowerGen sold the 21 percent stake it had built up in Midlands to the Rec's eventual owner Scottish Power and took an exceptional credit of 69 million pounds.
National Power said increasing competition in the UK market had affected first half results and that its market share slipped to 27 percent from 30 percent a year ago as total demand grew by three percent.
The slide was largely anticipated after National Power was forced to sell 4,000 MegaWatts of generating capacity to comply with industry watchdog Offer requirements.
The company said it was changing shape to emerge as ""a leading global power company,"" and pointed to an increasing input from overseas activities, which are expected to contribute post tax income of 70 million pounds for the year.
Overseas investments now total 900 million pounds with interests in some 7,500 MW of capacity or 3,000 MW on a net basis.
""Overseas is coming along quite nicely,"" the analyst said.
National Power said its repositioning ""means we are well placed both to compete strongly in the UK market, and to build on our material and increasingly profitable overseas business.""
The company said costs associated with paying out a one pound per share special dividend, announced with full year results in May, would total around 50 million pounds and would fall in the second half of the year.
""Over time, National Power is going to become a different type of company with less earnings from the UK. This is the uncertain transition period,"" the sector analyst said.
($1=.5950 Pound)
",16
"British utilities could find share buybacks and takeovers more costly as the government ruled out tax credits on buybacks and some special dividends on Tuesday, analysts said, but they are unlikely to stop such moves.
""It should not stop companies doing buybacks or special dividends,"" said Michael Cohen, utilities analyst at Salomon Brothers, ""those should still go ahead if justified.""
Chancellor Kenneth Clarke said shareholders would no longer be able to claim tax credits on share buybacks or special dividends associated with share consolidations or takeovers.  
The move is a means of giving the UK Treasury more room for a cut in income tax in its November budget, analysts said.
Shares in the utility sector, which has seen a steady flow of buybacks and special dividends both within and outside the context of takeovers, initially slumped on the news but later showed some recovery.
""It was a knee-jerk reaction, slightly overdone,"" said Kevin Lapwood, utilities analyst at Merrill Lynch.  
Shares in Anglian Water slid 31-1/2 to a low of 525 pence before edging back to 544-1/2 pence at 1300 GMT while Yorkshire Water was down 17-1/2 pence at 622-1/2 pence after slumping to a low of 613 pence.
In the electricity sector, London Electric stumbled to a low of 598 pence before recovering to be down 20-1/2 pence at 608-1/2 pence while generator PowerGen was off 10-1/2 pence at 479 pence from a low of 460 pence earlier.
""The market was of the view that release of value from the balance sheets was less likely, but I think that was overdone,"" Lapwood said.  
Water and electricity companies report half-year results in a flood between November and December and several had been tipped as likely to offer a buyback or special dividend.
Analysts said the upshot of the government's decision would be to make buybacks more expensive, but the impetus for such moves will not change.
""The logic of a buyback has not changed, it will just be at a premium. And the move on special dividends could make takeovers more expensive, but if it is a good acquisition, it will go ahead,"" said one analyst who asked not to be identified.  
Companies are generally reticent about specific plans and several contacted declined to comment on the new tax rules or share strategies.
Analysts suggested that of the water companies, Yorkshire Water might consider a buyback while Anglian and Thames might consider restructuring the balance sheet.
East Midlands Electricity, Yorkshire Electricity and London Electric were singled out as potentially considering special dividends, while the market is still waiting to see such a move from PowerGen, analysts said.
""It does not really affect the companies, just a group of investors,"" Cohen said.
Those funds affected by the move are likely to change investments to try to avoid any impact, analysts said.
""At the end of the day it will probably end up roughly equal,"" the analyst said.
""Gross funds will restructure and companies will come out with cleverer mechanisms,"" he added.
-- London Newsroom +44 171 542 7717
",16
"Britain's Serious Fraud Office has yet to contact London-based securities houses after a request for help with a French probe into Eurotunnel SA /Plc share dealings, market sources said on Monday.
The SFO said on Sunday it had been asked to lend a hand in an investigation by the French authorities into alleged market manipulation of the debt-laden channel tunnel operator's shares.
The SFO said it would help in the French probe although it had no grounds to launch an investigation of its own into the dealings which form the basis of the latest Paris investigation.
Securities firms contacted by Reuters on Monday said they had received no approach from the SFO and did not expect to do so. They all said they would co-operate fully if they were approached.
The investigation is another chapter in a troubled corporate story littered with incidents, which earlier this year saw two firms -- Salomon Brothers and Swiss Bank Corp (SBC) -- cleared of insider trading.
The two had been among underwriters of a Eurotunnel rights issue in 1994 and, although never named by Paris stock exchange watchdog the Commission de Operations de Bourse (COB), said that they were under investigation in July last year.
The underwriting group also included Banque Indosuez, Morgan Grenfell, now owned by Deutsche Bank AG, Societe de Banque, Banque Nationale de Paris, Banque Paribas, Caisse des Depots, Crdit Agricole, Credit Lyonnais, Robert Fleming, S.G. Warburg (now part of SBC) and Belgian utility Tractebel SA.
About two thirds of Eurotunnel shares are held in France and, as a general rule, more trading in the shares goes on in Paris than in London.
The SFO's usual practise is to issue notices which require a person or institution to be interviewed or hand over documents, although it can also apply for a search warrant if it wants to surprise its target.
On Monday, it remained unclear what period is currently under investigation.
The COB has already investigated the period surrounding the rights issue, though it could be revisiting this highly volatile time.
There have been persistent suggestions that some operators were short-selling at around the time of the rights issue -- forcing the prices down by selling shares they do not own in the hope of buying them back more cheaply later.
Eurotunnel has called on stock exchange authorities on both sides of the Channel to investigate volatile dealings at various times over the years.
Another example was in Agust 1995, when a rogue report that the company had signed a debt rescheduling agreement sent the stock reeling.
The Anglo-French tunnel operator at that time denied it had signed a debt agreement and demanded an inquiry into the trading activity and erroneous reports surrounding its shares and the incident might well be the focus of the French probe.
The incident occurred around three weeks before Eurotunnel announced a payments freeze on its huge debts and entered into negotiations on a rescheduling resulting in a restructuring of the debt announced a year later -- a year which also saw its fair share of leaks and speculation.
",17
"The London High Court on Thursday adjourned a hearing to decide whether British authorities will hand over to Italy documents related to the business affairs of Italian media tycoon Silvio Berlusconi.
The judge decided the hearing could not be finished in the two days allotted and lawyers would have to return in the first week of October before two new judges.
Britain's Serious Fraud office (SFO) seized the documents -- 15 bags full -- earlier this year from London lawyer David Mills who represents the business interests of former Italian Prime Minister Berlusconi, who, among other things, owns three TV channels and the football club AC Milan.
An SFO statement after the adjournment said: ""We regret that the court has not been able to hear this matter, particularly as it is now nearly five months since the documents were seized.""
The hearing stemmed from an appeal by Berlusconi and his company Fininvest and others against a decision that the papers be handed over to Italian magistrates.
An earlier court hearing was told the papers were linked to fraud and false accounting allegations amounting to 41 million pounds ($64.33 million) at overseas companies which were moved from Switzerland to England.
Italian investigators suspect Berlusconi's Fininvest may have used offshore companies to channel payments to politicians.
Berlusconi is on trial in Milan for alleged complicity in bribing tax officials for lenient audits of Fininvest companies.
The tycoon, who leads the centre-right Freedom Alliance, has also been indicted in another case in which he is charged with illegal party funding.
In court on Thursday, a lawyer for the appellants told the judge the SFO had allowed Italian police too much time to see the documents before a decision was made on whether to send them officially to Italy.
She also alleged that the Italian government's request for documents was too wide and amounted to a ""fishing expedition"", which is not allowed under British law.
",17
"Britain's Woolwich Building Society on Monday set the timetable for a three billion pounds ($5.1 billion) stock market flotation in July which will bring an average windfall of over 1,200 pounds to its members.
The mutually-owned building society, the third largest in the country with assets of more than 30 billion pounds, said qualifying customers would receive at least 450 free shares upon its conversion to public limited company (Plc) status.
The Woolwich said it expected a basic distribution of 450 free shares to around 2.57 million people, which includes qualifying employees and qualifying pensioners.
Chief executive John Stewart said the Woolwich would be among Britain's top 10 banks and would be included in the FT-SE 100 index of blue-chip shares.
""(The conversion and flotation) will give the Woolwich a corporate structure which will allow it to meet its strategic objectives by remaining an independent provider of a wide range of personal financial services,"" Stewart added.
The Woolwich said its financial advisers, investment banks Schroders and BZW, have made an historic valuation that puts its market capitalisation at between 2.96 and 3.38 billion pounds with a mid value of 3.17 billion had the conversion happened on December 20, 1996.
This represents a range of price per share of between 175 and 200 pence with a mid-price of 187.5 pence and is at the top end of market expectations, analysts said.
Rob Thomas, building society analyst at UBS, said the eventual flotation price was likely to use the fairly strong performance of Abbey National Plc, the only other building society to have floated, as a benchmark.
The Woolwich is one of four building societies -- traditionally mainly mortgage lenders but now expanding their role -- which plan stock market flotations in 1997.
They are led by Britain's largest mortgage lender, the Halifax, which is expected to be valued at around 10 billion pounds, the Alliance & Leicester worth around 2.5 billion and the Northern Rock, which is expected to raise around one billion pounds.
The Woolwich will be protected from takeover for five years after flotation but, if proposed legislation goes through this year, it would lose protection if it buys a financial company or if 75 percent of its shareholders vote to waive it.
Banking analysts said the Woolwich would have to weigh up the pros and cons of losing its protected status. But to compete effectively in a congested market it would have to grow, especially in the life assurance and independent financial advice areas.
""The Woolwich may decide that the 75 percent rule still makes it very vulnerable and the best chance for long-term survival is to grow through acquisitions,"" Thomas said.
Stewart became chief executive last June after his predecessor Peter Robinson, architect of the flotation strategy, left amid allegations that he ""misused the facilities"" of the group, where he had worked for more than 30 years.
Stewart at once identified life insurance and fund management as gaps in the Woolwich armoury. He has ruled out a move into commercial or investment banking, stressing that the bank will specialise in personal financial services.
The Woolwich said the average distribution to members, including a variable element, would be 1,233 pounds, although the exact distribution would depend on how much people have in their accounts on the qualifying dates.
An additional handout of up to 2,000 free shares will be made to savers who have been with the society for more than two years.
($1=.5899 Pound)
",17
"After a five year struggle, creditors of the collapsed, fraud-ridden BCCI will receive a payment of $2.65 billion on Tuesday, equal to 24.5 percent of their claims, a spokesman for the liquidators said on Monday.
Bank of Credit and Commerce International, founded in 1972, was closed by central banks in 1991 and collapsed with debts of more than $12 billion when evidence of massive fraud and money laundering was unearthed leading to a tangled web of litigation which shows no sign of reaching an early conclusion.
BCCI had assets of $24 billion and operations in 71 countries at the time of its collapse.
Liquidator Deloitte and Touche said a further payment, reportedly of 10 percent, of the admitted claims which total some $10.5 billion should be made in the next 12 to 16 months.
The gross fund of amounts recovered by the liquidators stands at around $4.0 billion and includes $1.5 billion paid by BCCI's majority shareholder, the government of Abu Dhabi, which will pay a further $250 million in due course following a settlement reached earlier this year.
This, in addition to efforts by US authorities which resulted in the recovery of more than $500 million from the United States paved the way for the first dividend payment.
A further $245 million was paid by Saudi billionaire Sheikh Khalid bin Mahfouz who the liquidators alleged was involved in covering up the BCCI scandal. Under a 1995 Luxembourg court settlement, Mahfouz agreed to pay without admitting liability, in return for the lawsuits being dropped.
The liquidators still have outstanding claims against the Bank of England, the Institut Monetaire Luxembourgeois (BCCI's operations were based in Luxembourgh) and the auditors of the bank, international accountancy firms Price Waterhouse and Ernst & Whinney, now part of the merged Ernst & Young.
Price Waterhouse has said it is making a multi-billion dollar counter claim against Abu Dhabi.
Further law suits are also pending around the world in an attempt to recover further amounts.
The two biggest groups of creditors of BCCI are in the United Arab Emirates (UAE) and in Britain.
The English liquidators of BCCI, Deloite & Touche, have recovered over $1 billion and have been paid a massive $200 million in fees.
In a report to the High Court earlier this year, the liquidator said legal fees in the liquidation ammounted to over $75 million so far.
",17
"Sir Chippendale ""Chips"" Keswick who, it was announced on Wednesday, will take over the chair of Hambros, one of the few remaining British independent investment banks, has been regarded by some as an outsider.
The firm has been dominated by the Hambro family but Keswick, 56, has over 30 years under his belt at the bank where he will fill both the chairman's and chief executive roles from July next year. He can hardly be called a complete outsider.
Nevertheless, it will be the first time in the bank's history that a Hambro has not occupied the chair.
That history is a long one, dating back to 1839 in London and back into the 18th century and its Danish origins.
Universally known as ""Chips"", Keswick is a member of the family which controls the Jardine group of companies in the Far East. He was born in Shanghai in 1940 and attended Eton College completing his studies at a French university.
After a few years with Glynn Williams, Keswick joined Hambros Bank in 1965. He became chairman of the bank in 1986, vice-chairman of the group in the same year and chief executive last year.
Keswick is known as a private person who is much more at home talking about the business than about himself.
Married with three sons, Keswick is a non-executive director of the Bank of England as well as of De Beers Consolidated Mines, Anglo American and British housebuilder Persimmon.
He lists his pastimes as bridge and field sports.
Keswick, who takes over from Charles, Lord Hambro, chairman since 1983, has been involved with the bank during some recently troubled times.
Hambros had appeared to lose its way, not following its peers into the competitive world of modern investment banking but still managing to make losses.
Ironically, along with a few others, it has managed to remain independent while other names such as S.G. Warburg, Kleinwort Benson, Barings and Morgan Grenfell have fallen into the hands of foreign parents.
Some observers would remark that Hambros wasn't worth buying but those people are beginning to feel that Hambros' new strategy of concentrating on its core banking and investment management businesses could be the way forward.
Keswick says he is confident of the strategy and is unlikely to be be aloof from the business.
""Chips will inevitably be a hands-on chairman,"" one of his senior colleagues said.
",17
"British bank Barclays on Tuesday sold its global custody business to U.S. investment bank Morgan Stanley for an undisclosed sum thought to be below 50 million pounds.
The purchase by Morgan Stanley marks another step in the consolidation of custody business which is increasingly being seen as a banking activity where ""big is beautiful"".
The custody business includes traditional safekeeping of securities, increasingly electronically, performance measurement and stock lending.
""Barclays believes global custody has become very much a scale business requiring substantial investment in technology,"" said Chief executive Martin Taylor.
A spokeswoman for Barclays said the investment in technology would be considerable and continuing and that Barclays had decided this would not be an effective investment.
Sir David Walker, chairman of Morgan Stanley Europe, said, ""This transaction enables us to offer a broader range of products to our clients. It will strengthen Morgan Stanley's global franchise, particularly in Europe, and will increase our fee-based revenues.""
Morgan Stanley said the combined custody assets of the two business would amount to some $390 million, taking it up the global custody ladder which is dominated by large American players.
The list is headed by Chase Manhattan which has over $one trillion of assets in custody, followed by Citibank, Bank of New York, Deutsche Bank, the largest European player, and State Street Boston.
Barclays was Britain's largest player followed by Lloyds TSB and Royal Bank of Scotland.
Barclays Global Custody currently employs some 488 staff worldwide of which only those in sales, relationship management, marketing and client support will be moving to Morgan Stanley -- considerably fewer than half of the total.
Barclays staff trade union UNIFI said only 67 of the staff would transfer with the business.
Analysts said Morgan Stanley is expected to have paid under 50 million sterling for the business but the banks said that a final price would not be fixed for some time. The deal is expected to be closed at the beginnning of April 1997.
Barclays had included custody in its ""Businesses in Transition"" category. These include ""lending and other assets that are unlikely to be of long-term interest to the group or that need significant restructuring.""
""Barclays was going to have to pump a lot of cash into the business to make it work and obviously has other uses for its money,"" said one analyst who declined to be named.
",17
"Britain's largest mortgage lender, the Halifax Building Society, on Friday said its planned stock market flotation in June could be worth as much as 12 billion pounds ($20 billion).
Unveiling a price range and details of share allocations to the society's members, Halifax chief executive Mike Blackburn said it ""will represent the largest single extension of private share ownership ever witnessed in the UK,"" said
The mutually-owned Halifax, with assets of over 100 billion pounds, said flotation adviser Deutsche Morgan Grenfell had estimated a share price of between 390 and 450 pence per share if the flotation had taken place on December 16, 1996.
This equals a market worth of between 10.4 and 12 billion pounds, and analysts expect the final outcome to be at the top end of this range given the recent positive performance of the most comparable stock in the market, former building society Abbey National Plc.
""The valuation of 12 billion (pounds) is right in line with our expectations,"" said Peter Toeman, banking analyst at ABN AMRO Hoare Govett.
Other analysts agreed and many expect the price on flotation day to be higher, saying that Friday's figures looked a little conservative.
The Halifax said each qualifying member will receive a basic allocation of 200 shares in a flotation of 2.675 billion shares.
The Halifax has 6.7 million investing members and two million borrowing members. Of these, there is an overlap 700,000 which means that the Society is sending out a total of around 8.0 million voting packs.
Investing members will also get a variable share allocation depending on how much money they had in their accounts on particular dates. This will range from 200 shares to a maximum of 1,181 for those with 50,000 pounds ($84,430) or more.
At its special general meeting on February 24, over 50 percent of the investing members must vote in favour of the proposal or it will fail. The society has started a huge advertising campaign to encourage members to vote.
The Halifax is expected to be in the top 20 companies by market capitalisation in the FTSE 100 index of blue-chip firms and is sure to threaten the Abbey's position as Britain's fifth largest publicly-quoted bank.
It said it sees room for huge expansion in the British insurance and long-term savings sectors.
""We'll focus on the UK personal financial services sector,"" Halifax spokesman Davis Gilchrist told Reuters Financial Television in an interview.
""That's a very wide area, both on the borrowing side and, increasingly, on the savings side -- traditional savings and long-term savings.""
Asked whether the expansion would be by acquisition or through organic growth, Gilchrist ruled nothing out.
""That will give us a major programme of expansion in life assurance and general insurance as well,"" he said. ""We'll look at the best (expansion) method. In some cases, organic growth from a solid base can be the best way.""
The Halifax joins the Woolwich, Alliance & Leicester and Northern Rock which are all coming to the market this year from the building societies sector in flotations worth an aggregate of around 18 billion pounds.
Economists have expressed concern that a large chunk of the proceeds will be spent as a windfall and could stoke up inflationary pressures in the British economy later this year.
",17
"British bank Barclays Tuesday sold its global custody business to investment bank Morgan Stanley for an undisclosed sum thought to be less than 50 million British pounds ($83 million).
The purchase by Morgan Stanley marks another step in the consolidation of custody business, which is increasingly being seen as a banking activity where ""big is beautiful.""
The custody business includes traditional safekeeping of securities, increasingly electronically, performance measurement and stock lending.
""Barclays believes global custody has become very much a ... business requiring substantial investment in technology,"" said Chief Executive Martin Taylor.
A Barclays spokeswoman said the investment in technology would be considerable and that Barclays had decided this would not be an effective investment.
Sir David Walker, chairman of Morgan Stanley Europe, said, ""This transaction enables us to offer a broader range of products to our clients. It will strengthen Morgan Stanley's global franchise, particularly in Europe, and will increase our fee-based revenues.""
Morgan Stanley said the combined custody assets of the two business would amount to some $390 million, taking it up the global custody ladder dominated by large American players.
The list is headed by Chase Manhattan, which has more than $1 trillion in assets in custody, followed by Citibank, Bank of New York, Deutsche Bank, the largest European player, and State Street Boston.
Barclays had Britain's largest custody business, followed by Lloyds TSB and Royal Bank of Scotland.
Barclays Global Custody employs some 488 staff members worldwide, of which only those in sales, relationship management, marketing and client support will be moving to Morgan Stanley -- considerably fewer than half of the total.
Barclays employee union UNIFI said only 67 of the staff would transfer with the business.
Analysts said Morgan Stanley was thought to have paid less than 50 million pounds ($83 million) for the business, but the banks said a final price would not be fixed for some time. The deal is expected to be closed at the beginnning of April 1997.
",17
"British property giant Land Securities said on Wednesday there were signs of rental growth in some sectors of the British property market and that it expected more to come.
Company chairman Peter Hunt said that while there was a feeling there was more rental growth to come, so far it had been patchy.
Growth in rental rates would be slower than in the 1980s and because it was not across the board it was crucial to be selective in the properties and developments chosen.
Land on Wednesday reported a pre-tax profit of 128.9 million pounds ($213 million) for the first half, including sales of properties, from 118.1 million pounds last time.
The company, which reported an increased interim dividend of 7.35 pence, said it had plans for ""major shopping centre schemes"" in a number of British towns, including Canterbury, York and Sunderland, as well as ""several proposed new leisure developments"".
The group said the annual level of expenditure on its current development programme was expected to peak during the second half of the financial year.
It said revenue profit, which was down to 115.5 million pounds from 118.2 million pounds for the period, ""is being affected by our prudent policy of not capitalising interest as part of the cost of carrying our substantial programme"".
But it was upbeat on its overall prospects. ""We believe that our strategy of creating growth assets through development will result in a considerable addition to the rental income and capital value of the portfolio in years to come,"" Hunt said.
""Yes, they (the developments) are on target, although you can never be totally sure,"" he added in an interview.
Finance director Jim Murray told Reuters a drop in revenue profit for the half year, to 115.5 million pounds from 118.2 million pounds the previous year, was widely expected and had been flagged in advance.
This reflected the fact that the group was financing a large development programme and was not capitalising interest as part of the cost of carrying this out.
Hunt said property developments continued to be higher yielding business but that most land-owners were holding out on the sale of good land.
""(There is) a much better performance on a development. It is the best growth stock...it's very much in demand. That's why we are concentrating on doing as much development as we can,"" Hunt added.
The group was also buying investments in the ""second-hand"" market. ""We are pursuing both avenues,"" he said, pointing out that Land Securities had recently added the Team Valley Retail Park, south of Newcastle-upon-Tyne, to its portfolio.
This would make ""a substantial and valuable addition to our 500 million pound retail warehouse portfolio,"" he said in his chairman's statement.
During the half year the company had bought, or agreed to buy, nearly 80 million pounds of investment properties.
Hunt said he did not think there would be a less favourable environment for the group if Britiain's opposition Labour party won power from the ruling Conservative government at the next general election, due to be held by May 1997.
""I believe the strategies we are pursuing will apply equally within a New Labour environment as in a Conservative (one).""
Hunt said that while he could not comment on possible acquisition targets, the firm looked at ""everything from time to time"" but would have to ""want to own quite a high proportion of the properties"" of any target company before making a bid.
",17
"Northern Rock Building Society will publish detailed proposals for its stock market flotation, including a preliminary valuation of the company, in the first week in March, director Adam Applegarth said on Wednesday.
Applegarth told Reuters in an interview that the document will be followed by a special meeting of members in April to vote on the approval.
But he declined to speculate on what value in shares each member would receive from the flotation, an amount which has been predicted at between 750 and 1,000 stg.  
Earlier, Northern Rock announced record profits in 1996, making a pre-tax profit of 167.5 million, a rise of 14 percent over the 145 million seen in 1995. This excluded 10.3 million stg of non-recurring costs related to the flotation.
Applegarth highlighted the fact that the business had continued to perform well during the conversion process which he described as ""onerous"".
""As one of the most cost-efficient lenders, it's important for us to improve those efficiencies and we've done that,"" Applegarth said. Cost to income ratio dipped to 33.1 percent at the end of 1996 compared with 33.5 percent at the end of 1995.  
Applegarth also pointed to the society's lending performance as a highlight of last year.
Net lending jumped 44 percent 1.9 billion stg, giving the Northern Rock around 10 percent of the UK net mortgage market.
Applegarth said market conditions were improving. ""The general summary is that the market is looking slightly better than it did a year ago. With a bit of luck, this will be a sustained rise instead of falling back or a boom.""
He said that if British interest rates needed to rise it would be better for the home lending market if this were to happen gradually.  
Applegarth said the Northern Rock will not try and compete with Britain's large retail banks after its conversion in terms of the range of products they offer.
""I have no doubt that if we attempted to become an all-singing, all-dancing high street clearing bank we would be too small and we would get eaten up,"" he added.
Applegarth rejected any charge that in the long-term, the society's members would be worse off because of conversion.
""What matters to customers is not the status of the company but the value of the packages they get.""  
Applegarth said that ""hairshirt"" mutuals who are trying to justify the maintanence of that status by effectively paying dividends to their members through deflating their profits will not be able to count on this strategy in the longer term.
""They don't have the profitability to go out and buy new customers,"" he said.
Applegarth said Northern Rock's cost to assets ratio of 0.72 percent compares to around 1.2 percent for the top 10 building societies. ""That means I've got a 50 pence margin to play with. We can use some of it to improve profitability and some of it, frankly, to cherry-pick business.""
-- London Newsroom +44 171 542 8864
",17
"Royal Bank of Scotland is constantly reviewing its options to expand its distribution channels, especially in the south east of England, its chief executive George Mathewson said on Thursday.
""It's right to assume we've been talking to a lot of people,"" Mathewson told Reuters in an interview. ""People (who are looking for a tie-up) assume they should talk to us because of our lack of penetration in the south east. All I can say is that we are reviewing all the options.""  
He was speaking after the bank announced a 15 percent rise in pretax profits to 695 million stg, towards the higher end of market expectations, which saw Royal Bank shares rise 8p to 530p.
Earlier this year, Royal Bank's arch-rival Bank of Scotland announced a banking joint venture with retailer Sainsburys and other banks are making moves in the same direction.
It has long been assumed that Royal Bank would boost its distribution by buying an English building society and Mathewson again refused to rule out this possibility.  
""That remains a possibility,"" he said. ""Assuming that a building society became available and that the price was not ridiculous.""
Mathewson said any such purchase would have to take into account shareholder value and business criteria like the strength of the brand name.
Some analysts have doubted that Royal Bank's capital position would allow a major purchase but Mathewson dismissed such doubts.  
Noting that its capital ratios had strengthened over the past year (tier one to 6.8 pcercent from 6.3 and total to 11.0 from 10.3), Mathewson said Royal bank would have no trouble raising money if necessary.
""Whatever we have done with our money has been open to market scrutiny -- unlike some other companies,"" Mathewson said. ""We didn't just pay it down the drain. If we need money, we will make a case and we will get it.""
The Royal Bank results included a 22 percent gain for the UK banking operations and a 57 percent rise for its New England banking unit Citizens.  
But difficult trading conditions at its insurance unit Direct Line saw profits there collapse by 86 million stg to just 26 million.
Mathewson said he was not really disappointed by the Direct Line result -- ""But I'd prefer it (profit) to be bigger, don't get me wrong"" -- saying that it stemmed from the higher rate of claims and market pressure against higher prices.
""The pressure in the market means we couldn't put up prices to compensate but we are making an awful lot more than any of our competitors,"" he said.
Mathewson said the outlook was positive for Direct Line.
""But I'm not jumping to any conclusions. Prices are beginning to move (higher), many companies are losing substantial amounts of money and history tells me that can't continue for very long.""
In the UK bank, cost to income ratio dipped to 59.2 percent from 63.2 percent as the effects of the bank's ""Operation Columbus"" restructuring continue to come through. -- London Newsroom +44 171 542 8864.
",17
"Royal Bank of Scotland, which reports full year data next Thursday, is expected to raise its pre-tax profit from last year's 602 million stg but not by as much as analysts thought just a few months ago.
They expect Royal Bank's profits to rise to between 670 and 700 million stg, with a much smaller contribution from its Direct Line low cost insurance, but benefits continuing to accrue from the bank's efforts to reduce costs.
Total dividend is expected to be around 18.6 pence a share versus last year's 16.2p.  
The pre-tax figures will be complicated by an exceptional gain from Royal Bank's disposal of its 50 pct stake in Germany's CC Group, from which it said it would make 70 million stg, and by restructuring costs of around 23 million pounds stemming from an acquisition by its New England subsidiary Citizens.
Forecasts for Direct Line vary widely but analysts are generally pessimistic, with the company's main market -- motor insurance -- going through ""probably the most diffucult period in its history"", as chief executive Ian Chippendale told Reuters in an interview last week.  
""I think Chippendale was sending a strong message,"" said one analyst who declined to be named. ""I think he was softening up the market for a poor set of results.""
Some analysts suspect the results may not be quite as poor as hs been feared by some.
They see the core bank as continuing to perform quite well with the positive results of its ""Project Columbus"" helping costs and income.
David Poutney expects a pre-tax profit of 695 million stg, which includes the exceptional items, while BZW analysts expect 675 million.  
The market received a big clue on the performance of Citizens from the recent results of Bank of Ireland which owns 23 percent of the operation.
""Citizens is doing reasonably well,"" Poutney said, but analysts say it is being affected by the rather lacklustre New England economy.
The market will be expecting improvement in the cost income ratio but analysts say that even an improvement this time will leave the bank plenty of scope for improvement.  
The market will be looking for further clues on lending which showed good growth, mostly in corporate lending area, in the first half.
Inevitably, Royal Bank will also be watched for signs of acquisitions.
It is known to be interested in buying a building society to extend its presence in England but in the current climate, it is unlikely to be willing to pay the high prices likely to be asked.
In any case, analysts say Royal Bank would have to raise cash to be able to perform any major acquisition.  
In the meantime, the market will be looking to its relationship with mutually owned insurance and pensions firm Scottish Widows, which some think may result in an eventual merger.
Royal Bank shares were 15p higher on Friday to stand at 519-1/2p.
-- London Newsroom +44 171 542 8864
",17
"Lloyds Bank was fined 325,000 pounds ($550,000) Wednesday by a British investment industry watchdog and appears set to pay millions of pounds in compensation to disadvantaged customers.
The Investment Management Regulatory Organisation said it fined Lloyds, which merged with TSB last year to form Lloyds TSB Group Plc, for breaches of rules relating to its pensions transfer business between April 1988 and June 1993.
Lloyds agreed to a settlement of disciplinary proceedings brought against it, the fifth such settlement IMRO has made with firms that have been found guilty of improper sales of pension products.
IMRO said Lloyds ""did not obtain or have systems to obtain all relevant facts about the personal and financial circumstances of its customers needed to advise them properly about pensions transfers.""
It said Lloyds had not provided certain customers ""with all the information needed to enable them to make a balanced and informed decision on whether to carry out a pension transfer.""
Lloyds, which must pay IMRO's investigation costs of 63,000 pounds ($107,000) and make a contribution to its disciplinary costs, has already offered redress to some customers and the review of some 2,600 Lloyds transfer cases ""is well advanced and will be substantially completed by Dec. 31, 1997,"" IMRO added.
The bank expressed its regret in a statement.
""Lloyds Bank deeply regrets the errors which have resulted in charges being brought against it by IMRO for its pension transfer business,"" it said.
As a group, Lloyds TSB has made provisions totalling 165 million pounds ($279 million) for possible compensation payments to do with the mis-selling of pension products.
These relate to the Lloyds Bank business as well as the pensions activities of TSB before the merger, and of Lloyds' insurance subsidiary Lloyds Abbey Life.
The pension scandal, whereby individuals transferred their pensions and were disadvantaged as a result, has been one of the most serious faced by the British financial services industry in recent years.
The affair knocked a big hole in the public's confidence in the industry and companies are set to pay a price running into hundreds of million of pounds as a result.
In November, Britain's top financial markets regulator the Securities and Investments Board announced a new strategy to try and clear a logjam in the pensions industry's review of the selling of pension products and the payment of compensation to investors.
Both regulators and insurance and investment companies have come under a barrage of criticism over the length of time it has taken to complete a review of cases.
Lloyds said it has identified some 2,600 pension transfer customers of which it anticipates having to pay compensation to around 1,500.
",17
"The flotation price of the Halifax Building Society is expected to materialise at the high end of an estimate prepared by the Society's bankers last month, banking analysts said on Friday.
Deutsche Morgan Grenfell, the Halifax's investment banking advisers, set a price range for the June float of between 390 and 450 pence which would produce a market capitalisation of between 10.4 billion and 12 billion stg.
""The valuation of 12 billion (stg) is right in line with our expectations,"" said Peter Toeman, banking analyst at ABN AMRO Hoare Govett.
Other analysts were in agreement but some expect the price on flotation day to be higher, saying that today's figures look a little conservative.
""Based on a 1997 earnings per share figure of 44 or 45 pence, a share price of around 475 pence or even 490 pence would seem to fit,"" said John Leonard, banking analyst at Salomon Brothers.
Analysts tend to use a comparison with Abbey National Plc to do their calculations.
Abbey is the only building society to have converted so far, it became a bank in 1989, and still makes 65 percent of its money from its core mortgage and deposit activity, according to Rob Thomas, building societies analyst at UBS.
The Halifax makes about 80 percent of its income from its core activities and looks set to expand vigorously into other areas like life and general insurance, long-term savings and funds management.
""There's a good possibility that the Halifax will be rated higher than the Abbey when it comes to the market but the other societies will probably be lower,"" Thomas said.
The Woolwich, Alliance & Leicester and Northern Rock will join the Halifax in floating later this year.
Thomas added that the prospective flotation levels of the societies will fluctuate broadly in line with movements in the Abbey's share price between now and the summer.
""Using the Abbey as a pointer is fine because banking sector valuations are pretty close together at around 10 times earnings, except for Lloyds TSB,"" said David Poutney, analyst at Panmure Gordon. ""But there's nothing clever or scientific about it.""
Analysts agreed that one cloud on the horizon for potential shareholders may be the possibility of higher interest rates in Britain, especially after the general election which must be held by May 22.
Currently, sterling strength is seen by some economists as keeping a lid on inflationary pressures and consequently rates, but there is a feeling that rates will have to rise.
But analysts say a rise of 100 basis points or more would be needed to seriously dent the banking sector and damage the summer's flotations.
-- London Newsroom +44 171 542 8864
",17
"British banks have a made a positive start to 1997.
Share prices are buoyant and analysts on Thursday saw few serious clouds on the horizon to jolt the sector out of its seemingly inexorable rise.
The sctor, which has outperformed the FTSE 100 index by around 20 percent over the past six months, has become more diverse in recent years.
But, for differing reasons, analysts are quietly confident that based on a benign economic environment, the banks should continue to show good profit growth.
There are also positive stories to be told on an individual basis with Barclays and National Westminster, for example, expected to offer further share buybacks and HSBC and Standard Chartered set to continue reaping the benefits of their strong Far East franchise.
""The Far East is still looking attractive and we still have Standard Chartered on an outperform rating,"" said Nick Collier, banking analyst at Morgan Stanley. ""We also like Natwest, it's the cheapest stock in the sector, and looks likely to emerge with a more compelling story in 1997,""
Analysts expect NatWest to consolidate its recent heavy acquisition programme and spend possibly 300 million pounds on buying back shares as its Tier One capital ratio measure rises. Barclays is also expected to continue repurchases on which it has already spent around one billion pounds.
Lloyds TSB could also eventually join the share buy-back club as its capital ratios improve, though most analysts do not see this happening before 1998.
Salomon Brothers banking analyst John Leonard said he expects the British economic outlook to remain favourable.
The strength of sterling, while affecting those banks that report dollar income in sterling, looks set to keep the lid on inflation and interest rates, a scenario the banks should be able to deal with.
If rates were to rise more than expected then that could be a problem for bank share prices if the market thought bad debt provisions were set to rise.
On the other hand, many analysts are not convinced by the link between interest rates and bank share prices.
""It's sometimes dificult to tell what causes prices to fall from the outside,"" said one analyst who declined to be named. ""Bank shares have done very well in recent years and operators may well take profits on any (market) setback to lock them away. But that doesn't mean they have changed their view.""
On domestic banking, analysts are happy that banks have been moving more into higher-margin personal sector borrowing at the expense of the lower margins seen in the corporate sector.
But they are less happy about the competitive mortgage market which, despite an upturn, is hardly setting the world alight.
While bad debts remain stable, net bad debt charges could rise as releases of old provisions work their way out of the system.
Other share markets could also have an influence, analysts say.
Some investors compare the British and U.S. bank sectors and last year, the U.S. rather lost out. If this were to turn, then the British banks could come under some pressure, said Salomon's Leonard.
But analysts are already a little nervous given that the banks' good run has continued with such strength.
""Some stocks are definitely looking less compelling given the rush of blood we've seen in the New Year,"" said one.
",17
"Three of Britain's largest bulding societies, which plan stock market flotations in 1997, on Thursday said draft legislation relating to protection from takeovers had forced them to examine their float plans closely.
The mutually-owned societies, who specialise in mortgage lending, the Woolwich, Alliance & Leicester and the Northern Rock, all plan to convert to bank status next year and have combined assets of around 70 billion pounds ($117 billion).
But a change in the draft of a new Building Societies Act has thrown their plans into confusion as the government proposes to change the way converted societies will be treated in the crucial area of takeover bids.
The issue is most pressing for the Alliance & Leicester as it seems highly unlikely that the new draft will be ready before Alliance members meet on December 10 to vote on conversion.
Previously, converting societies were protected by a rule which protected them from takeover for five years after flotation, allowing them to make the transition successfully.
Until now, the only one to have gone through the process is the Abbey National, which converted to a bank in 1989.
Draft legislation is now under consideration although it is doubtful whether there will time for it to become law before next year's general election.
The draft proposes that societies lose their immunity from takeover if they merge with another ""financial institution"" (after flotation) even on an agreed basis.
A Treasury spokeswoman said this did not include the buying of mortgage portfolios from other financial institutions.
The Treasury argues that converting societies should play by the market rules and that the focus of the bill is on those societies who want to remain mutual.
""The loss of the five year protection if any acquisition is undertaken - not just a hostile bid - seems a little unfair,"" Adam Applegarth, director of Northern Rock told Reuters.
The Teasury said it was considering representations to retain immunity in the case of friendly mergers where a large society might merge with a small local institution.
Applegarth said the Northern Rock and other societies were also very concerned at another proposed clause which would allow shareholders of the new company to waive the five year protection, saying this could allow takeovers by the backdoor.
He said a predator might be able to buy up 10 percent of the stock of the company and announce a bid at the same time, calling an extraordinary general meeting of shareholders which would be asked to waive the protection, bypassing the board.
The societies all said the uncertainty was the biggest problem at the moment -- what the bill will say and also when it will be published and whether it will have time to be passed.
""We think that if there is little chance that the bill will be passed, it would be better not to publish it at all, frankly,"" said Applegarth.
The societies have a duty to inform members of all possible relevant information so they can make an informed decision.
The Treasury said it hoped to publish its revised proposals next month regardless of whether the bill is likely to pass into law before the election which must be held by May 1997.
A Woolwich spokeswoman said there was no more than a possibility that the draft bill would delay its float. ""If the rules are changed, then the board would have a duty to reconsider,"" she said.
The other societies took a similar view, but the Alliance & Leicester has a particular problem as its members have already been voting on the change by post.
""At the moment we are steaming ahead, we are on schedule,"" a spokesman for the Alliance said. But he agreed that timing could be affected and confirmed that the Alliance board would discuss the problem at a meeting on Thursday.
The Northern Rock plans to issue its transfer document, to members in early March of next year, but it must be printed in February, leaving little time for the government to produce the finished version of the proposed law ahead of this.
($1=.5956 Pound)
",17
"The world's major banks are busy jockeying for position in an emerging super-league that is set to dominate the massive and higly lucrative private banking market in the next decade, a survey showed on Wednesday.
Private banking concentrates on ""high net-worth individuals"" -- people whose liquid assets, their easily available cash, is a number with a lot of noughts, usually at least $500,000.
The survey, by accountancy and consulting firm Price Waterhouse, estimates the global market for these super-rich people at somewhere between $17 and $20 trillion.
Of this, a sizeable amount, probably between $4 and $6 trillion is estimated to be in Europe, both in domestic markets and offshore.
Ian Woodhouse, head of Price Waterhouse's private banking practice, said the survey sees the emergence of a private banking super-league comprising, perhaps, 25 to 30 banks.
These will have at least $75 billion under management with many in the $100 billion-plus bracket.
They will be banks like Chase/Chemical and Citicorp in the U.S.; Swiss Bank Corp, Credit Suisse, Union Bank of Switzerland, ABN AMRO and Deutsche Bank in Europe; and the HSBC group 00005.HK with its huge Asian franchise plus Midland Bank in Britain.
In comparison, one of Britain's biggest private banking operations, the Coutts Group owned by National Westminster, has around 20 billion pounds ($33.6 billion) under management, putting it in the medium-sized bracket.
Woodhouse says one of the trends to emerge from its latest survey, which received responses from 116 leading names in the industry, is that they all see the environment getting more and more competitive,
""Competitive pressures are building. Clients used to walk through the door, now you have to go out and get them,"" he said.
The super-rich are becoming more and more demanding and less and less loyal -- they will often use more than one bank or compare what is on offer from a number before making a choice.
They are also demanding ever increasing levels of sophistication in the products they are sold. Complicated cross-border trust structures, for example, which can earn a huge margin for the private bank concerned.
Private banks with healthy investment bank cousins are also looking to make the most of this resource.
Client managers will often work with their investment banking colleagues to think up a product tailored to a client's needs or to beat what they are being offered elsewhere.
Currently, Europe takes the biggest slice of the global private banking cake but the fastest growth is in India and the Far East and this latter region is set to take the lead soon, Woodhouse said.
The survey shows that over half the private banks expect offshore business to grow by between 11 and 15 percent annually over the next five years.
To take advantage of this, given greater client demands and competition, banks will have to manage their cost base as well as their revenue income.
The survey also sees a continuation of the recent restructuring, merging and alliance-forming, which has been going on. New players are also expected as plain retail and investment banking areas become more and more congested. ($1=.5950 Pound)
",17
"Banking analysts said on Monday they were positive on implications for Bank of Scotland in its joint venture into supermarket banking with J Sainsbury, with one analyst even upgrading his recommendation.
Others maintained their positive stances on the Scottish bank and played down the negative impact the innovative plan would have on the rest of the retail financial services sector.
""The Sainsbury move is a confirmation of Bank of Scotland's strategy of alternative distribution into England,"" Goldman Sachs banking analyst David Townshend said.
Goldman Sachs and BZW reiterated their positive stances on the group while SBC Warburg upgraded its recommendation on the stock to ""trading buy"" from ""hold,"" market sources said.
Bank of Scotland's link with Sainsbury is seen giving the bank a boost in the British market. The move is expected to help the bank enlarge its small retail customer base in England and find a new outlet for its range of financial services, which it can sell through its excellent technological infrastructure.
Bank of Scotland's low-cost operation could mean Sainsbury's Bank could offer a better rate to depositors than customers currently get through retail store group Tesco's link with National Westminster Bank, BZW said in a research note. Tesco currently offers five percent on deposits.
But even so, analysts doubted existing banks will lose many accounts to Sainsbury's Bank, which is due to begin trading in the first half of next year.
""I don't see a material threat of switching,"" said Nick Collier, banking analyst at Morgan Stanley.
Analysts said there is a certain amount of inertia in the banking market and many consumers already have more than one account so they could easily take on a Sainsbury account without necessarily closing their more conventional one.
Some also noted that British banks, with already large customer bases, were addressing different problems.
A lack of customers is not the problem for Barclays or Lloyds, said Tim Sykes, banking analyst at BZW.
""These banks don't have the same need,"" Sykes said, ""The thing they want to achieve is to sell more of their products to their existing customers.""
Most British banks have moved heavily into ""bancassurance"" style operations in recent years, offering a wide range of lending, investment and insurance products.
Plain banks are also still seen as having an advantage in terms of the ""horses for courses"" argument. Analysts said many customers prefer a more traditional approach.
While telephone banking has grown quickly in popularity in recent years, for example, the vast majority of bank customers still prefer having a ""normal"" account although seemingly few visit their branch very regularly.
",17
"Morgan Grenfell Asset Management, the fund management arm of Germany's Deutsche Bank AG, said on Tuesday trading would resume on Thursday in its three European funds suspended earlier this week.
The three funds -- the 788 million pound ($1.23 billion)  MG European Growth Trust, the 137 million MG Europa and the 444 million Dublin-listed MG European Capital Growth -- were suspended pending investigation into what DMG called ""possible irregularities centring on certain unquoted securities.""
MGAM said fund managers will meet their liabilities ""in respect of any irregularities identified in the course of the investigation into the three funds.""
Britain's Investment Management Regulatory Organisation (IMRO) has said it is investigating the management of the funds in conjunction with MGAM.
A spokeswoman for IMRO said it had been working hard with MGAM to remove investors in the three funds from the state of limbo they had been in since Monday when dealings were suspended.
IMRO said it was far too early to tell when the investigation into the funds would be complete.
The investigation is thought to centre on the level of unquoted securities in the fund and their valuation. These include stock in some high-tech Scandinavian companies.
The company said its parent bank, Deutsche, has bought some of the securities in the funds for its own account with a view to protecting investors' interests. It said that after taking this action ""the prices at which the funds recommence dealing should not be affected by such irregularities"".
Industry sources said Deutsche Bank may have spent around 150 million stg buying securities for its own account and thus removing them from the funds.
The sources said the theory behind the action was that, with the suspect securities removed, the funds should resume dealing at prices close to where they were suspended.
But the 150 million pounds spent by Deutsche may not be lost because the stock will have a certain value which remains to be set.
MGAM said enquiries centre only on the three funds and that dealing in all other Morgan Grenfell investment funds are unaffected.
MGAM confirmed that Peter Young the manager of two of the funds -- MG European Growth Trust and MG European Capital Growth -- has been suspended and said he has been replaced by Stuart Mitchell who until February 1996 was manager of its offshore MG European Profund.
Industry sources said the market will be relieved that MGAM has moved quickly to quell speculation and return the funds to an even keel but said confidence in MGAM may take longer to restore.
",17
"Britain's Northern Rock Building Society, due for flotation in the autumn, on Wednesday reported pretax profits of 167.5 million pounds ($270 million) for 1996, up 14 percent from 147 million the previous year.
The home loan provider said it would publish its transfer document giving details of the flotation and a preliminary valuation in the first week of March. Members will meet to vote on plans to convert the institution into a bank in April.
Northern Rock, based in the north-east of England and fiercely independent, said its profit figures excluded a non-recurring cost of 10.3 million pounds related to the conversion to bank status.
Uniquely, the society has said it will create a foundation to which it will covenant five percent of its annual pre-tax profits after flotation. The money will go to worthy causes, mostly local communities in its area of operation.
Northern Rock director Adam Applegarth declined to speculate on the value in shares each member would receive from the flotation. Predictions range between 750 and 1,000 pounds, valuing the floated company at more than one billion pounds.
Applegarth highlighted the fact that business had continued to perform well during the conversion process which he described as ""onerous"".
""As one of the most cost-efficient lenders, it's important for us to improve those efficiencies and we've done that,"" he said in an interview.
The society's cost to income ratio dipped to 33.1 percent at the end of 1996 compared with 33.5 percent at the end of 1995.
Applegarth pointed to the society's lending performance as a highlight of last year.
Net lending for the year rose 44 percent to 1.9 billion pounds from 1.3 billion with its share in Britain's net mortgage lending market rising to 10 percent from eight percent. Assets grew 19 percent to 13.7 billion pounds from 11.6 billion. Net receipts from savers rose to 584 million pounds from 560 million in the previous year.
Applegarth said the Northern Rock would not try to compete with Britain's large retail banks after its conversion in terms of the range of products they offer.
""I have no doubt that if we attempted to become an all-singing, all-dancing high street clearing bank we would be too small and we would get eaten up.""
Applegarth rejected any charge that in the long-term, the society's members would be worse off because of conversion.
""What matters to customers is not the status of the company but the value of the packages they get.""
Applegarth said that ""hairshirt"" mutuals who are trying to justify the maintanence of that status by effectively paying dividends to their members through deflating their profits will not be able to count on this strategy in the longer term.
""They don't have the profitability to go out and buy new customers,"" he said.
Applegarth said Northern Rock's cost to assets ratio of 0.72 percent compares with around 1.2 percent for the top 10 building societies. ""That means I've got a 50 pence margin to play with. We can use some of it to improve profitability and some of it, frankly, to cherry-pick business."" ($1=.6199 Pound)
",17
"The British government on Wednesday published proposed new laws governing home lenders which watered down the building societies' immunity from takeover if they converted into banks.
The new legislation provoked a cool response from some home lenders and prompted one leading player to say its plans for conversion may well have been different if it had known what the government was planning.
Under the new draft law, a building society  would forfeit its five-year immunity from takeover after it converted to bank status if it took over another financial institution.
The Woolwich, which has assets of just under 30 billion pounds ($50 billion) and plans to float next July, said it was disappointed the government had not taken account of its ""serious concerns"" on the timing of the draft.
""Had our board known when it took the decision to convert that this (change in the law) was even a possibility, then we might have chosen to convert in a different way,"" a spokeswoman for the Woolwich said.
The Treasury acknowledged the new Building Societies Bill might not even make it to the statute book before an election because of a lack of parliamentary time between now and next May, the last date for the polls to be called.
If it went ahead, the Woolwich spokeswoman said the board would have a duty to revisit its conversion plans.
The Alliance & Leicester in a statement also expressed disappointment, and said areas of concern ""have still not been fully resolved.""
""We will now need to move forward while carefully considering outstanding issues,"" the Alliance statement said, noting the move came in the middle of ""a long and costly conversion process"".
In contrast the Northern Rock, a third society which plans a flotation in 1997, welcomed the changes.
""We are delighted with it,"" said Adam Applegarth, a director of the Northern Rock. ""It's a prefectly reasonable compromise and you can't ask for more than that.""
A Treasury spokeswoman said it still hoped to find time for the bill in the Parliamentary agenda in the New Year.
""The societies converting to banks will go ahead if that is what their members want,"" said Treasury Minister Angela Knight in a statement. ""When converted they will be allowed to establish themselves. But if they want to play the takeover game then they will have to play by the same rules as everyone else.""
The Building Societies Association welcomed the revised Bill and encouraged its early introduction to Parliament.
BSA chairman Brian Davis, who is also chief executive of the Nationwide Building Society that is not planning to convert, said the BSA fully supported the Treasury's ""thoughtful compromise"" on the question of takeover protection.
Under current company law, 10 percent of shareholders can call a special general meeting of the company and this will not change for converting societies. But any proposal to waive its five-year immunity to takeover will have to be approved by 75 percent of the voting shareholders.
Some societies had criticised the Treasury's proposals because they did not allow friendly takeovers, such as between one large society and a local smaller one.
""We came to the conclusion that the distinction between friendly and hostile takeovers was too difficult to define and that it would have been unworkable,"" the Treasury said.
The Halifax, the country's biggest home lender has already waived its right to takeover protection by transferring its business to an existing subsidiary. ($1=.6003 Pound)
",17
"A thankful Elizabeth Forsyth, a former aide of Polly Peck head Asil Nadir, walked free from court on Thursday after three judges allowed her appeal against a five-year sentence for handling stolen money.
Forsyth, 60, who is also appealing against the money-laundering conviction itself, described her 10 months in prison as an ""experience"".
""I would just like to thank the court for its understanding and consideration,"" Forsyth told reporters as she was freed from the cells of London's Royal Courts of Justice.
Forsyth, who was chairman of South Audley Management, a firm set up by Turkish Cypriot Nadir to deal with his wealthy family interests before his Polly Peck empire collapsed in 1990 under a mountain of debt, said she could not comment further on the appeal as it was still continuing.
Earlier, the appeal judges surprised the court by making it clear at once that Forsyth would not be returning to spend another night at Holloway prison.
""We have formed a view that this sentence cannot stand,"" Lord Justice Beldam said at the outset of the appeal hearing, adding that the sentence was so disproportionate that, ""taking into account the time she has already served...she should not serve any longer.""
Beldam, hearing the appeal with two other judges, then moved on to consider Forsyth's appeal against her conviction on two counts of dishonestly handling 400,000 pounds ($650,000) of stolen funds.
Forsyth's lawyer, Geoffrey Robertson, later made a bail application so that Forsyth could be freed pending the outcome of the rest of the appeal.
At the end of the court session, Forsyth told reporters she was heading for her mother's home.
""I'm looking forward to going home...and it won't be an iron bed with a thin mattress,"" she said, adding that her son was arrving for a family reunion.
She said of her time in prison, ""I learnt an awful lot, it was an education process."" She took up art in prison and was a library orderly.
Asked if she bore any grudges against the legal system, she said: ""There's a lot wrong with the system. The prison officers work very hard to do a difficult job under difficult circumstances.""
Forsyth has been in prison since March 1996 when Justice Sir Richard Tucker surprised those following the case with the severity of his sentence.
During her five-week trial, the jury accepted that Forsyth had helped to launder money that had been stolen from Polly Peck by Nadir.
Nadir still faces charges connected to Polly Peck but in 1993 he fled to northern Cyprus, a territory not recognised by the British government, skipping 3.5 million pounds ($5.67 million) bail.
",17
"NatWest Markets, the investment banking arm of National Westminster Bank, on Monday named Peter Hall as the man to run its expanding operations but other questions over the bank's strategy remained, analysts said.
NatWest said Hall, who currently runs its American operations, would take over as chief operating officer of the investment bank, reporting to chief executive Martin Owen.
At the same time, NatWest Markets said it would streamline origination and distribution functions into one Global Financial Markets division from the current capital markets and treasury divisions.
NatWest said no job losses would result from the consolidation.
The bank has been on the acquisition trail recently, buying corporate finance boutique J O Hambro Magan in October, spending $590 million on U.S. primary dealer Greenwich Capital and 472 million pounds on Gartmore, the British fund manager. It also acquired U.S. merger and acquisitions specialist Gleacher for $135 million.
But analysts have expressed concern that NatWest will find it difficult to bring these all together, despite the fact that the businesses seem to compliment each other.
Some feel that NatWest is spending large amounts of cash on buying businesses that could be near the top of their business cycle.
""The NatWest markets business is robust and it can make returns while it is still building,"" said one analyst. ""But a revenue downturn will tend to hit the players who are building rather than those who are already established.""
Currently, investment banks are enjoying generally the low-inflation, steady growth conditions seen in many major economies with an accompanying healthy amount of mergers and acquisitions activity.
But a substantial downturn on Wall Street, predicted by many strategists, could leave some high-cost acquisitions looking a little less appetizing, analysts say.
Owen said the fast growth of NatWest markets, both organically and by acquisition, had led him to the conclusion that the day-to-day operational management should be separated from strategy, client development and financial supervision.
""As President and COO, Peter will be charged with implementing our operational plan, leaving me more time to work with global product heads to shape our strategies,"" Owen said.
Analysts were happy that NatWest had brought an insider to the job.
""Sometimes it gets difficult to keep continuity and things can start to fall apart,"" said one analyst. ""I would class this appointment as continuity, so that's good.""
",17
"Italian business tycoon Silvio Berlusconi on Wednesday lost an appeal in the London High Court against the transfer of documents to Italian authorities investigating allegations of fraud and false accounting.
Britain's Serious Fraud Office seized 15 bags of documents in April from the office of London lawyer David Mills who represents the interests of former Italian Prime Minister Berlusconi in Britain.
The judges, Lord Justice Simon Brown and Mr Justice Gage, rejected all the grounds of the appeal, but Brown agreed to hear an application by the appellants on Friday morning, which could lead to an appeal to the House of Lords, although legal sources said this was unlikely to succeed.
The hearing stemmed from an appeal by Berlusconi, who was Italian Prime Minister for seven months in 1994 and is on trial in Milan on corruption charges, his company Fininvest and company president Fedele Confalonieri against a court ruling earlier this year that the papers should be sent to Italy.
Brown said the papers were linked to fraud and false accounting allegations amounting to 51 million pounds ($82 million) which had been ""surreptitiously removed from Fininvest and used for criminal purposes.""
He noted that prosecutions were already underway in Italy against Berlusconi for bribing Revenue inspectors and for making illicit donations to former Prime Minister Bettino Craxi.
Italian investigators suspect Berlusconi who, among other holdings, owns three TV channels and the football club AC Milan, may have used offshore companies to channel payments to politicians.
At the end of his judgement Brown pointed out that, ""It is imperative to recognise, however, that none of the applicants has yet been convicted of anything and that nothing I have said should be thought to raise the least presumption of guilt against them.""
He rejected all the grounds of the appeal on the basis that the Italian request was not too wide, that it was justified and that the offences in question were not ""political"".
One of the grounds of appeal had been that the SFO had gone to Berlusconi's lawyer's office on a ""fishing expedition"" -- an unspecific search -- which is illegal under English law.
Brown described the case as a ""wide-ranging, multi-faceted, international fraud involving far-reaching allegations against a large number of individuals in connection with an even larger number of companies.""
The SFO said it was ""happy"" with the ruling.
""The SFO's fight against fraud on an international level has been strengthened by this welcome judgement,"" it said in a statement.
The SFO said the judges had rejected all of the main arguments put forward by the appellants. ""We look forward to the speedy transfer of the documents to Milan so that the investigators can get on with their job,"" it said.
A hearing on Friday will decide whether Berlusconi can appeal against today's ruling to the British House of Lords.
SFO senior assistant director Chris Dickson said the judges in the current hearing were aware that, if any House of Lords hearing did not take place until next year, this would mean the papers would arrive too late to be used in Italian proceedings.
He said that if the appellants were not given leave to appeal on Friday he expected the papers to be transferred immediately, although this was a decision for the Home Office.
($1=.6260 Pound)
",17
"British fund management group Mercury Asset Management on Tuesday posted a 29 percent jump in first half pretax profits to 81.8 million pounds ($133.9 million), up from 63.6 million in the first half last year.
It also saw its cash pile rise sharply to 261.6 million pounds from 189.9 million at the end of March, raising speculation that the firm might use the surplus to fund expansion in the lucrative U.S. fund management industry.
MAM chairman Hugh Stevenson said the company would consider acquisitions but only if they increased value for shareholders.
Asked if MAM was considering a U.S. acquisition, where MAM already operates, Stevenson said: ""The US is obviously an extremely important market, it's the biggest savings market in the world but value for our shareholders is the main aim.""
On the cash pile, Stevenson said that the company prefers a conservative balance sheet.
""Cash has risen materially in the last six months,"" he said. ""It's a question of a balance between a prudent balance sheet and returning value in the form of dividends to shareholders. We've had a very progressive dividend policy over recent years.""
Mercury, formerly controlled by investment bank S.G. Warburg before Warburg was bought by Swiss Bank Corp last year, raised its interim dividend to 10 pence per share from six pence last time. It said the significant increase was due to a rebalancing between interim and final payouts.
Funds under management rose to 85.9 billion pounds at the end of September after 70.9 billion at the same time last year. The most recent figure includes two billion pounds of net new business, which analysts said follows its recent growth trend.
MAM said it had seen a rise in defined contribution pension scheme business in the last six months and expected this to be a growth area.
Mercury shares were 23.5 lower at 11.19 pounds at 1130 GMT with analysts reporting some profit taking after the stock reached a year's high of 11.50 this week.
The profit figures were just under some expectations but were mostly unsurprising. Some analysts, including Martin Cross of UBS, say the shares are fully valued.
""The price/earnings ratio (at 21.6) is at the top end of the sector,"" Cross said. ""It's near companies like Perpetual and M &G which are much more retail oriented and have better grwoth prospects in my opinion.""
Perpetual has a P/E ratio of 25.4 and M & G 22.3.
Stevenson said it was too early to tell what effect problems at Morgan Grenfell Asset Management, where alleged irregularities are being investigated by Britain's Serious Fraud Office, might have on the funds industry in the longer term.
""It's a growth industry,"" Stevenson said, ""and it continues to grow. The UK market is changing and we have been doing more in defined contribution business.""
About two thirds of MAM's business is in the institutional pension fund management area, 20 percent for investors overseas and the rest for private investors.
Costs continued to rise but were more than matched by revenue growth.
Stevenson said the rise reflected the consolidation of its Australian subsidiary, large investment in systems and infrastructure, and ""higher provision for variable remuneration"" -- otherwise known as bonuses. ($1=.6107 Pound)
",17
"Anglo-French Channel Tunnel operator Eurotunnel on Monday announced a deal giving creditor banks 45.5 percent of the company in return for wiping out one billion pounds ($1.56 billion) of its debt mountain.
The long-awaited restructuring brings to an end months of wrangling between Eurotunnel and the 225 banks to which it owes nearly nine billion pounds.
The deal, announced simultaneously in Paris and London, brings the company back from the brink of insolvency but leaves shareholders owning only 54.5 percent of the company.
""The restructuring plan provides Eurotunnel with the medium term financial stability to allow it to consolidate its substantial commercial achievements to date and to develop its operations,"" Eurotunnel co-chairman Alastair Morton said.
The firm was now making a profit before interest, he added.
Although shareholders will see their interests diluted, they were offered the prospect of a brighter future after months of uncertainty while Eurotunnel wrestled to reduce crippling interest payments negotiated during the tunnel's construction.
Eurotunnel, which has taken around half the cross-Channel market from the European ferry companies, said a strong operating performance could allow it to pay its first dividend within the next 10 years.
French co-chairman Patrick Ponsolle said shareholders would have to be patient before they could reap the benefits of the company's success.
He called the debt restructuring plan ""an acceptable compromise"" for holders of Eurotunnel shares.
The company said in a statement there was still considerable work to be done to finalise and agree the details of the plan before it can be submitted to shareholders and the full 225 bank syndicate for approval, probably early in 1997.
Monday's announcement followed two weeks of highly secretive negotiations between Eurotunnel and its six leading banks. This was extended to the 24 ""instructing banks"" at a meeting late last week in London.
Eurotunnel said the debt-for-equity swap would be at 130 pence, or 10.40 francs, per share. That is considerably below the level of around 160 pence widely reported in the run up to the deal, and will reduce outstanding debt of 8.7 billion pounds by 1.0 billion.
The company said a further 3.7 billion pounds of debt would be converted into new financial instruments and existing shareholders would be able to participate in this issue.
If they choose not to take up free warrants entitling them to subscribe to this, Eurotunnel said shareholders' interests may be reduced further to just over 39 percent of the company by the end of December 2003.
Eurotunnel's shares, which were suspended last week at 113.5 pence ahead of Monday's announcement, should resume trading on Tuesday, the company said. ($1=.6393 Pound)
",17
"Former Barings treasury and risk chief Ian Hopkins has been banned from being a director in the City, industry sources said on Thursday after a three-day disciplinary hearing.
Britain's Securities and Futures Authority (SFA) said in a statement that the outcome would not be formally announced until after any appeal process had ended.
But the sources said the tribunal had banned Hopkins from being a registered director for three years and ordered him to pay an unspecified amount of costs.
Hopkins, who was not immediately available for comment, did not appear before the tribunal, chaired by Judge Colin Kolbert, and was not legally represented.
After he has been formally given the full written judgment, he will have 10 business days to lodge an appeal.
Hopkins was among a group of former Barings executives against whom the SFA brought disciplinary charges for their part in the downfall of the investment bank. It collapsed nearly two years ago when Singapore-based trader Nick Leeson ran up debts of almost $1.4 billion in unauthorised derivatives trades.
Hopkins, who worked for Barings in London, has always maintained that he tried to warn other Barings executives of the bank's dangerous position but that he was effectively ignored.
He told a parliamentary committee investigation into Barings last year that his attempts to alert more senior Barings staff to potential problems had failed. He painted a picture of culture clashes between the traditional Barings banking activities and its newer securities activities.
In the official Singaporean report into the Barings affair, executives of the bank were criticised for not heeding Hopkins's warnings.
""In our view, the collapse might have been averted if Mr Hopkins's concerns had been taken seriously, and acted upon promptly and effectively,"" the Singapore inspectors said.
The tribunal heard the SFA case, put by prominent barrister Presiley Baxendale, and questioned seven witnesses. It also took into account evidence given by Hopkins to the Singapore enquiry and to Britain's Board of Banking Supervision.
Earlier this month the SFA reprimanded Barings former head of equity derivatives Mary Walz for her part in the bank's collapse and has already banned several other former Barings executives including former chief executive Peter Norris.
",17
"Former Barings executive Ron Baker rejects a lawsuit filed by Dutch bank ING Barings which makes a claim for repayment of a 100,000 pounds ($165,000) loan he is alleged to have received, his lawyer told Reuters on Thursday.
ING Barings earlier confirmed a press report it is suing Baker for 113,000 pounds, representing the loan given while Baker was employed by Barings, plus interest.
It is alleged to have been paid in two 50,000 pounds tranches, the last of which was made just two weeks before the collapse of the bank in February 1995.
""He (Baker) is satisfied that he doesn't owe them (ING Barings) any money,"" Baker's lawyer Lindsay Hill, a partner at Fox Williams, said. ""This doesn't constitute a good claim against Mr Baker.""
Hill said Baker, who was head of financial products at Barings, ""roundly rejects"" the ING claim and says that whatever money was paid to him, it was not sufficient to cover what he was owed.
Asked if Baker was considering making a claim against ING Barings for unpaid money, Hill said his client was currently concentrating on a tribunal hearing where he is challenging charges levelled against him by Britain's Securities and Futures Authority (SFA).
In May, Baker said he was satisfied he had acted properly throughout his time at Barings. He said he was not involved in the bank's agency business through which rogue trader Nick Leeson racked up $1.4 billion losses which bankrupted the blue-blooded investment bank.
The tribunal hearing has been going on for around two weeks and is expected to conclude soon. If Baker loses, he has the opportunity to appeal. ($1=.6093 Pound)
",17
"Anglo-French Channel Tunnel operator Eurotunnel Monday announced a deal giving its creditor banks 45.5 percent of the company in return for wiping out one billion pounds ($1.56 billion) of its debt.
The long-awaited restructuring brings to an end months of wrangling between Eurotunnel and the 225 banks to which it owes nearly nine billion pounds ($14.1 billion).
The deal, announced simultaneously in Paris and London, brings the company back from the brink of insolvency but leaves shareholders owning only 54.5 percent of the company.
""The restructuring plan provides Eurotunnel with the medium-term financial stability to allow it to consolidate its substantial commercial achievements to date and to develop its operations,"" Eurotunnel co-chairman Alastair Morton said.
The firm was now making a profit before interest, he added.
Although shareholders will see their interests diluted, they were offered the prospect of a brighter future after months of uncertainty while Eurotunnel wrestled to reduce crippling interest payments negotiated during the tunnel's construction.
Eurotunnel, which has taken around half the cross-Channel market from the European ferry companies, said a strong operating performance could allow it to pay its first dividend within the next 10 years.
French co-chairman Patrick Ponsolle said shareholders would have to be patient before they could reap the benefits of the company's success.
He called the debt restructuring plan ""an acceptable compromise"" for holders of Eurotunnel shares.
The company said there was still considerable work to be done to finalise and agree on the details of the plan before it can be submitted to shareholders and the full 225 bank syndicate for approval, probably early in 1997.
Monday's announcement followed two weeks of highly secretive negotiations between Eurotunnel and its six leading banks. This was extended to the 24 ""instructing banks"" at a meeting late last week in London.
Eurotunnel said the debt-for-equity swap would be at 130 pence, or 10.40 francs, per share. That is considerably below the level of around 160 pence widely reported before announcement of the deal, and will reduce outstanding debt of 8.7 billion pounds ($13.6 billion) by 1.0 billion ($1.56 billion).
The company said a further 3.7 billion pounds ($5.8 billion) of debt would be converted into new financial instruments and existing shareholders would be able to participate in this issue.
If they choose not to take up free warrants entitling them to subscribe to this, Eurotunnel said shareholders' interests may be reduced further to just over 39 percent of the company by the end of December 2003.
Eurotunnel's shares, which were suspended last week at 113.5 pence ahead of Monday's announcement, should resume trading on Tuesday, the company said.
",17
"Royal Bank of Scotland on Thursday reported a 15 percent rise in full year pretax profits to 695 million pounds ($1.2 billion) as strong growth in its UK and U.S. banking operations offset a dip at its insurance unit.
Chief Executive George Mathewson told Reuters the bank is constantly reviewing its options to expand market share, especially in the south east of England.
""It's right to assume we've been talking to a lot of people,"" Mathewson said in an interview. ""People (who are looking for a tie-up) assume they should talk to us because of our lack of penetration in the south east. All I can say is that we are reviewing all the options.""
Earlier this year, Royal Bank's arch-rival Bank of Scotland announced a banking joint venture with retailer Sainsburys and other banks are making moves in the same direction including Abbey National, which on Thursday said it would offer financial services in conjunction with supermarket chain Safeway's loyalty card.
It has long been assumed that Royal Bank would boost its distribution by buying an English home loans institution and Mathewson again refused to rule this out.
""That remains a possibility,"" he said. ""Assuming that a building society became available and that the price was not ridiculous.""
Mathewson said any such purchase would have to take into account shareholder value and business criteria like the strength of the brand name.
Some analysts have doubted that Royal Bank's capital position would allow a major purchase but Mathewson dismissed such doubts.
Noting that its capital position had strengthened over the past year, Mathewson said Royal Bank would have no trouble raising money if necessary.
""Whatever we have done with our money has been open to market scrutiny unlike some other companies,"" Mathewson said. ""We didn't just pay it down the drain. If we need money, we will make a case and we will get it.""
Royal Bank said its U.S. bank Citizens, based in New England, lifted profits by 61 million pounds, or 57 percent, adding that it will continue its strategy of deepening its franchise and expanding its core business.
Profits were also higher in UK Banking, up 97 million pounds or 22 percent, and this part of the business also showed a healthy improvement in cost-to-income ratio.
The latter fell to 59.2 percent from 63.2 percent while the group ratio was down to 50 percent from 51.7 percent.
Direct Line, which sells motor, house and life insurance, saw profits shrink by 86 million pounds to 26 million for the year as premium rates continued under pressure and it saw increased claims.
Mathewson said he was not really disappointed by the Direct Line result -- ""But I'd prefer it (profit) to be bigger, don't get me wrong"" -- saying that it stemmed from the higher rate of claims and market pressure against higher prices.
""The pressure in the market means we couldn't put up prices to compensate but we are making an awful lot more than any of our competitors,"" he said.
Mathewson said the outlook was positive for Direct Line.
""But I'm not jumping to any conclusions. Prices are beginning to move (higher), many companies are losing substantial amounts of money and history tells me that can't continue for very long.""
",17
"BZW, the investment banking arm of Barclays Plc, said on Wednesday it plans to use state-of-the-art defence technology to help it with a perennial problem -- managing risk in the financial markets.
The bank has formed the Financial Laboratory Club to develop new risk management solutions, using the scientific and computing potential of the Defence Evaluation and Research Agency of the British Ministry of Defence -- the biggest research and development organisation in Western Europe.
Also involved in the project, which has funding of 1.8 million pounds ($3.0 million) for the first two years, are Silicon Graphics, insurance company Royal Sun Alliance, the London Stock Exchange, the City University and Business School and risk management consultancy Z/Yen.
The British government is providing a grant of 750,000 pounds for the project and BZW is putting in 500,000 over two years.
With margins getting ever finer in the highly competitive investment banking world, BZW hopes defence technology can help it keep ahead.
""We have to manage our risk well,"" said Martin Dooney, global head of money markets at BZW. ""We want to start setting the standard and make strides to be ahead of the pack.""
Dooney and DERA scientists believe there is enough common ground between the worlds of the trading room and the battlefield to make the exercise worthwhile.
""The risks are obviously different,"" he said. ""For the crew of a main battle tank it could be the missile defences of the opposing force and for the bond trader it could be the movement of short-term interest rates.""
But Dooney said there are many similarities, not least the fact that that both are high-stress environments which both require the sophisticated modelling and simulation techniques which have, until now, been largely the preserve of the defence industries.
One reason for this is that research into this field needs massive computing power which DERA can provide via its four Cray Computer Corp super-computers which are millions of times more powerful than the average desktop PC.
BZW believes the project can help people at every level in the company to better understand the firm's risk position by replacing a mass of numbers by visualisation techniques.
The project will also look into using modelling techniques used to develop military consoles to look at the design of future trading stations and try to develop different ways of evaluating dealer performance.
This will, in particular, provide early warning of problems based on trading pattern evidence.
""The financial services industry wants something that it can use in the heat of battle,"" said Michael Mainelli, development director at DERA.
""If financial markets are destabilised they could be as, or even more, damaging than a conventional war.""
$1=.5976 Pound)
",17
"Former Morgan Grenfell Asset Management (MGAM) star fund manager Nicola Horlick continued her battle against her ex-employer on Tuesday but, after a meeting with her lawyer, said her chances of being reinstated were slim.
""Reinstatement doesn't seem very likely,"" she told Reuters.
Horlick is waging a campaign for reinstatement or compensation from the firm from which she resigned in a blaze of publicity last week after allegations that she planned to defect and poach some of her colleagues.
But so far MGAM, and its parent company Deutsche Morgan Grenfell (DMG), have remained deaf to her pleas.
Horlick met her lawyer John Farr of law firm Herbert Smith again on Tuesday and although her advisers hinted it was far too early to talk of legal action against DMG, this has not been ruled out by Horlick's camp.
The advisers indicated an early resolution of the dispute was unlikely and could take several weeks as Deutsche and MGAM had still to complete an internal inquiry into the affair.
""It will take several days, if not weeks, I should think,"" one adviser said.
Despite indications that discussions took place on Tuesday between Farr and DMG's legal representatives, a DMG spokesman denied there had been further contact.
The bank is sticking firmly to its guns in the row with the 35-year-old mother of five, one of London's most prominent fund managers.
It says Horlick, having been promoted to the rank of managing director, was suspended just days later for ""soliciting staff"" to join a rival firm and then resigned her position.
The plot has thickened amid unconfirmed allegations that this was a prelude to a takeover of MGAM's pension fund business by Dutch bank ABN AMRO.
ABN AMRO declined to comment on the latest reports but has already denied having tried to poach Horlick and her team.
On Tuesday, however, the Dutch bank acknowledged it would be interested in buying a large British fund manager and its global asset management director Jan Vroegop told Reuters it would like to make ""big steps"" in London funds management.
Horlick continues to deny allegations that she was leading a breakaway group.
DMG's line is that Horlick will not be reinstated and that there will be no compensation because she had resigned. DMG's parent Deutsche Bank also said late Monday that it did not expect to go to court with Horlick.
Deutsche board member Rolf Breuer, who is poised to take over the helm of Deutsche in May from Hilmar Kopper, said: ""The facts are clear. Mrs Horlick inflicted damage on the bank with her attempt to poach staff and then resigned.""
Meanwhile, differing versions of what led up to her suspension continued to trickle out.
British newspaper reports said ABN AMRO was involved with Horlick in planning to fund a management buyout of the 18 billion pounds ($30 billion) pension fund business which Horlick headed.
They said ABN ARMO planned to recruit Horlick and her team and then to offer to buy the residue from Morgan Grenfell for a reported 385 million pounds.
Horlick's colleagues were reported to have been unconvinced by the merits of ABN's alleged plan to poach the team, not least because one of the team's key aims had been to have Horlick promoted to a more influential position within MGAM. Once this happened it removed a key complaint against top management.
MGAM has had a troubled time since the sacking of fund manager Peter Young last September after irregularities came to light in three of the group's funds, hitting staff morale and also rattling clients.
Young has denied any criminal activity and is being investigated by Britain's Serious Fraud Office.
So far no clients have withdrawn their business from MGAM as a result of the Horlick affair. However, several major clients have expressed their concern and said they would be reviewing their relationship with the firm. ($1=.6021 Pound)
",17
"British Chancellor of the Exchequer Kenneth Clarke on Tuesday took the expected step of phasing out tax relief on profit related pay (PRP) schemes.
But analysts were pleasantly surprised the proposal still allowed new schemes to be registered as the tax relief is reduced and were relieved the Chancellor did not abolish the arrangement in one go.
Clarke said there would be no change to the upper limit of pay that is free of income tax, currently 4,000 stg, in profit periods beginning before January 1 1998.  
For 1998 the ceiling will be reduced to 2,000 stg and 1,000 stg in 1999. No relief will be given for profit periods starting on or after January 1, 2000.
""I'm not surprised that the relief was not abolished in one go,"" said Bob Rothenburg of accountancy firm Blick Rothenberg. ""It would have created a lot of pressure on employers to compensate employees.""
Douglas Fairbairn of Ernst and Young said he was relieved at the Chancellor's proposals, which could have included immediate abolition.  
For Fairbairn, the main surprise was that new schemes would be allowed at the lower rates of relief.
This was confirmed by the Inland Revenue, where a spokeswoman said if existing schemes were to be allowed to continue, it was only fair that companies wishing to introduce new schemes, even at the lower rates of relief, should be allowed to do so.
Fairbairn said the fact that new schemes were to be allowed, meant he doubted the government's estimate of the yield from the measure would be met.
The Inland Revenue said it expected the proposal to yield 100 million stg in 1997/98; 700 million stg in 1998/99; 1.7 billion stg in 1999/2000; and 3.1 billion stg in 2000/2001.
Tax experts contacted by Reuters said one other possibility for Clarke would have been to limit the relief on PRP to the standard rate of tax, which he reduced to 23 percent from 24 percent, rather than the marginal rate -- currently 40 percent.
After a slow start following its introduction in 1987, there are now around 14,000 PRP schemes covering 3.7 million employees. Take-up of the schemes increased considerably after the tax relief was doubled in 1991.
-- London Newsroom +44 171 542 7717
",17
"A bumper crop of results from the six major British banks which start their reporting season next week should take aggregate pre-tax profit comfortably above 12 billion stg for 1996 from just over 10.8 billion stg in 1995.
Analysts also expect some of them to return surplus capital to shareholders, either in the form of share buybacks or generous dividend payments.
Leading the way on February 14 will be Lloyds TSB Group which, despite trading at a big premium to the sector, is still favoured by analysts because of its business mix.  
The bank's new chief executive Peter Ellwood is expected to give voice to his plans for the group as he takes over from Sir Brian Pitman.
Lloyds is expected to weigh in with over 2.4 billion stg in pretax profit and dividend per share of about 13p, accompanied by the highest return on equity at around 32 percent.
Next on the agenda will be Barclays on February 18, when many analysts are expecting another chapter in its series of share buybacks. The bank has already spent over 1.0 billion stg on these in the last 18 months.  
Profits are expected to rise to a consensus expectation of around 2.39 billion stg compared to 2.08 billion in 1995.
Barclays is expected to show strong growth in businesses like Barclaycard and consumer lending but its investment banking unit BZW, which has had a year of upheavals, could disappoint.
Barclays will be followed by the very different Standard Chartered, the London-based bank with a strong Far East franchise.
Some analysts have cut their earnings estimates slightly but StanChart's pretax profit is still seen rising to around 870 million stg from 661 million last time.  
Growth in consumer banking in Asia will be tempered by the decline in the dollar, a possible small upturn in costs and the sale of its profitable private banking unit last year.
A dividend of 14 or 15p per share is seen after 11p in 1995.
HSBC Holdings, the other London-based bank with huge Far East interests and the most profitable bank in the group, reports on March 3.
HSBC, which brings together Britain's Midland Bank, Hongkong Bank, Hang Seng Bank, and Marine Midland in the U.S., is expected to post pretax profits of some 4.6 billion stg after 3.67 billion in 1995.  
Dividend per share is seen rising to around 40p from 32p the previous year.
HSBC is also expected to have been affected by the recent strength of sterling but will show profit gains in all its regions and units, with analysts bullish for the potential still to be unlocked in Asia.
National Westminster Bank, unlike HSBC, has a much stronger focus on investment banking and has spent a lot of money building up its NatWest Markets unit with several acquisitions and other investment.  
This has led to nervousness among investors and the shares underperformed the rest of the sector last year.
NatWest reports on February 25 and is expected to post pretax profits of 1.1 to 1.2 billion stg -- after disposal losses and exceptional asset write-downs -- and a full year dividend of 29p.
Many analysts also expect a further repurchase of shares.  
Finally, Abbey National, in the news currently because of its bid for mutual life assurance firm Scottish Amicable, reports on February 27 and is expected to show pretax profits of around 1.15 to 1.16 billion stg (after 1.03 billion in 1995) and a dividend of around 26p compared to 21.75p.
The Abbey's capital position has led to talk of a share buyback but the management is against this because of the large number of small shareholders on the register.
A special dividend could be on the cards but most analysts expect the Abbey to continue its relatively generous ordinary dividend policy.  
The figures are likely to have been helped by some growth in the mortgage market and by a good rise in consumer lending. -- London Newsroom +44 171 542 8864.
",17
"BZW, the investment banking arm of Barclays Plc, has restructured its Global Markets division in another step towards reshaping its business to compete wth global rivals, banking sources said on Thursday.
BZW has been carrying out a top-to-bottom review of the markets business including matching staff profiles and skills against the needs of sustaining a profitable business.
The review resulted in around 30 people leaving this week, including Alex von Ungern-Sternberg, deputy chief executive of Global Markets, and Klaus-Peter Moeritz, head of foreign exchange trading in the UK and Europe.
But not all were at such high levels. Those departing also include seven foreign exchange traders, metals traders, secretaries and telephonists.
In an internal memo, Bob Diamond, who has been Global Markets chief since July, said von Ungern-Sternberg had decided to leave after the new structure was put in place as his role ""was substantially narrower.""
Since Bill Harrison joined BZW as chief executive from Robert Fleming there have been the usual personnel changes associated with the investment banking business.
There was no room, for example, for Barclays veteran Donald Brydon who had been running BZW after its previous head, David Band, died earlier in the year.
Harrison and Diamond are thought to be working on methods to make profitability more sustainable -- a quandary which is at the centre of the debate on the investment banking industry.
The industry's detractors, among them Lloyds TSB chief Brian Pitman, always point to the fact that the revenue stream cannot be relied upon as it is subject to market volatility.
In the good times, when markets are booming and mergers and acquisitions on a roll, investment banks rake in profits as if there is no tomorrow and the participants get paid huge bonuses.
But in the bad times, the banks can rack up heavy losses in markets which suddenly look very over-populated.
Diamond, in common with the head of the Barclays group, chief executive Martin Taylor, is known to want to intensify the return on capital employed in the business.
He knows that unless BZW's profits are sustained at high levels, he will find it difficult to put together the kind of team needed to succeed in an increasingly competitive and crowded environment.
No aspect of BZW's markets business from gilts to JGBs (Japanese government bond) and dollar/yen to copper will be left out of the in-depth review, banking sources added.
In the meantime BZW, along with other banks, will also continue to react to more short-term events in the markets.
For example the departure of foreign exchange traders follows a period of reduced volatility in the market over the last few months.
Ironically, such periods of volatility are key to both outperformance and underperformance which dictate returns on capital for investment banks.
-- London Newsroom +44 171 542 8864
",17
"Ailing Union Plc, formerly a pillar of the London money market scene, could be broken up to release shareholder value after the company said it would not pay a final dividend for 1996, analysts said on Tuesday.
They said a buyer might be found for Union's profitable fees and commission businesses to break them away from the loss making trading division which has been hard-hit by changes in the money market.
""Union has lurched from crisis to crisis in the past few years,"" said one analyst who declined to be named.
""It could be that they have come to the conclusion that it's time to salvage what they can for shareholders.""
Formerly known as Union Discount and with famously palatial offices in Cornhill in London's financial heartland, Union has had limited success in its struggle to diversify away from its traditional role as a discount house in the mysterious and highly cyclical and volatile workings of the money market.
Forays into medical equipment leasing and equities market-making, in the shape of Winterflood Securities, ended in disposals and the years have seen Union shrink to a shadow of its former self with a market value of only 25 million pounds.
Now, Union says the Bank of England's plan to remove the exclusive right of the seven discount houses to deal directly with the Bank in its liquidity operations will ""have a significant impact on the group's future.""
As a consequence, it said that Advance Corporation Tax (ACT), which it had intended to carry forward on its books, would now have to be written off.
It gave no figures but said this would rule out the payment of a final dividend for 1996.
It also said that it would not receive any profit contribution in the 1996 year from a venture to sell equity index options trading software in Canada.
Analysts said they had expected Union to hold its full year payout at three pence per share, with 1.5 pence coming in the second half.
Union has said that it wants to develop its fee earning businesses and move away from a dangerous dependence on trading.
The fee and commission businesses include the Union CAL futures and foreign exchange broking, liquidity fund manager Union Fund Management and Cornhill Commercial Services, which provides project finance advice and consultancy.
Late last year the two ""discount houses"", Gerrard & National and King & Shaxon, merged but with them, the money market side of the business takes a back seat compared to private-client stockbroking and fund management.
Union shares closed 12 pence lower at 81-1/2, having collapsed to 73p at one point.
Directors at Union were not immediately available for comment.
",17
"Lloyds Bank was on Wednesday fined 325,000 pounds ($550,000) by a British investment industry watchdog and looks set to pay millions of pounds in compensation to disadvantaged customers.
The Investment Management Regulatory Organisation (IMRO) said it had fined Lloyds, which merged with TSB last year to form Lloyds TSB Group Plc, for breaches of rules relating to its pensions transfer business between April 1988 and June 1993.
Lloyds agreed to a settlement of disciplinary proceedings brought against it, the fifth such settlement IMRO has made with firms who have been found guilty of mis-selling pensions products.
IMRO said Lloyds ""did not obtain or have systems to obtain all relevant facts about the personal and financial circumstances of its customers needed to advise them properly about pensions transfers"".
It said Lloyds had not provided certain customers ""with all the information needed to enable them to make a balanced and informed decision on whether to carry out a pension transfer"".
Lloyds, which must pay IMRO's investigation costs of 63,000 pounds and make a contribution to its disciplinary costs, has already offered redress to some customers and the review of some 2,600 Lloyds transfer cases ""is well advanced and will be substantially completed by December 31, 1997"", IMRO added.
The bank expressed its regret in a statement.
""Lloyds Bank deeply regrets the errors which have resulted in charges being brought against it by IMRO for its pension transfer business,"" it said.
As a group, Lloyds TSB has made provisions totalling 165 million pounds for possible compensation payments to do with the mis-selling of pension products.
These relate to the Lloyds Bank business as well as the pensions activities of TSB before the merger, and of Lloyds' insurance subsidiary Lloyds Abbey Life.
The pensions mis-selling scandal, whereby individuals transferred their pension and were disadvantaged as a result, has been one of the most serious faced by the British financial services industry in recent years.
The affair knocked a big hole in the public's confidence in the industry which is only now being repaired and companies look set to pay a price running into hundreds of million of pounds as a result.
In November, Britain's top financial markets regulator the Securities and Investments Board (SIB) announced a new strategy to try and clear a logjam in the pensions industry's review of the mis-selling of pensions products and the payment of compensation to investors.
Both regulators and insurance and investment companies have come under a barrage of criticism over the length of time it has taken to complete a review of cases.
Lloyds said it has identified some 2,600 pension transfer customers of which it anticipates having to pay compensation to around 1,500.
It said its procedures had been fully overhauled three years ago to ensure that other customers will not be similarly affected in future.
",17
"Fund management company Mercury Asset Management Plc is expected to post a good rise in pre-tax profits for the first half next Tuesday, having benefited from buoyant exchanges.
On Friday, MAM shares stood near their year highs at 11.32 stg, with analysts expecting pre-tax profits of around 80 million stg, up from 63.6 million stg last time
The market expects a higher interim dividend after six pence last year and some analysts see the company rebalancing the pay-out between the interim and final stage.  
Analysts said Mercury has already proved it can go it alone since it was broken away from former owner S.G. Warburg when the latter was bought by Swiss Bank Corp last year.
At the time, there was talk of Mercury being taken over as banks looked to expand their fund management interests. But, this speculation has evaporated, although the bid premium in MAM's share price may not have, and there is more interest in what Mercury itself might buy.
UBS analyst Martin Cross said any bid premium is unjustified and points out that MAM has a lot of capital, some of which it might want to spend on expansion in the U.S. markets.  
""That could be a worry, however, as there might be a fear that MAM would be buying at the top of the market,"" Cross said.
Phillip Gibbs, an analyst at BZW, said he expects MAM to follow the trend of recent years in making relatively small strategic acquisitions.
""It's been a pretty helpful period in terms of the markets, especially London where the FTSE index went up from 3,700 to 3,954 in the six months we're looking at,"" Gibbs added.
Analysts will be looking at Maercury's cost base to make sure there has been no untoward growth. In any case, cost growth is expected to have been comfortably exceeded by revenue growth.  
Gibbs said the key element would be how much new money MAM has been able to attract as this is the main indicator of the fundamental health of the business.
Mercury will also have profited from realisations in its venture capital business but the effects of problems at other fund managers, notably Morgan Grenfell Asset management, are not expected to have had too much impact in the first half.
Mercury may have picked up some business and the effect may be more marked in the second half. -- London Newsroom +44 171 542 8864.
",17
"International accountancy and consultancy partnership Ernst & Young said it made a profit of 75.2 million pounds ($125.4 million) in Britain as it revealed financial details of its operations for the first time on Tuesday.
The 21 percent rise in profit in the year to June 30 was made on gross fee income of 456 million pounds and represented a 17 percent rise in average profit per partner of 200,000 pounds.
Ernst & Young's senior partner Nick Land also confirmed that the firm was still planning to become a limited liability partnership registered in the Channel Island of Jersey despite the fact that the government has said it intends to introduce legislation recognising partnerships of this kind in Britain.
Land also said that Ernst & Young's worlwide revenue for the year to September would show a 13 percent rise to $7.8 billion.
Ernst & Young is the world's largest tax accontancy practice and the second largest management comsultancy after Arthur Andersen. It was formed in 1989 from the merger of Ernst & Whinney and Arthur Young.
Ernst & Young's move to limited liablity reflects an industry-wide change whereby accountancy firms feel exposed by their current unlimited liablity status, which puts personal assets in jeopardy if the firm were to become insolvent.
Under an LLP, only the capital subscribed by each partner, which currently totals some 72 million pounds, and the personal assets of those partners shown to be directly responsible for any negligent act leading to a loss would be at risk.
Land said there was too much political uncertainty in Britain ahead of next year's general election to rely on British legislation regarding LLPs emerging any time soon.
The firm's move to LLP status is dependent on Jersey's legislation being finally approved and on the LLP's tax status being agreed with Britain's Inland Revenue.
Land said that Ernst & Young's decision to publish its results had not been taken to gain any advantage.
""We are not doing this for any competitive advantage,"" Land said. ""We just thought it was time that we did it.""
He added that Ernst & Young wanted to take a full part in the debate on corporate governance and could hardly do so unless its own financial affairs were transparent.
""Clients are also beginning to ask questions about our financial strength.""
Fastest growth in the past year was shown by Ernst & Young's management consultancy which increased gross fees by 40 percent to 77.4 million pounds.
Only its insolvency practice saw a decline in fees during the year, ironically hit by the recovery in the British economy.
($1=.5995 Pound)
",17
"Britain's largest mortgage lender, the Halifax Building Society, said Friday its planned initial public offering in June could be worth as much as 12 billion pounds ($20 billion).
Unveiling a price range and details of share allocations to the society's members, Halifax Chief Executive Mike Blackburn said it ""will represent the largest single extension of private share ownership ever witnessed in the UK.""
The mutually-owned Halifax, with assets of over 100 billion pounds ($167.8 million), said flotation adviser Deutsche Morgan Grenfell had estimated a share price of between 390 and 450 pence ($6.54 to $7.55) per share if the IPO had taken place on Dec. 16.
This equals a market worth of between 10.4 billion ($17.5 billion) and 12 billion pounds ($20.1 billion), and analysts expect the final outcome to be at the top end of this range given the recent positive performance of the most comparable stock in the market, former mortgage banker Abbey National Plc.
""The valuation of 12 billion (pounds) is right in line with our expectations,"" said Peter Toeman, banking analyst at ABN AMRO Hoare Govett.
Other analysts agreed and many expect the price on flotation day to be higher, saying that Friday's figures looked a little conservative.
The Halifax said each qualifying member will receive a basic allocation of 200 shares in a flotation of 2.675 billion shares.
The Halifax has 6.7 million investing members and two million borrowing members. Of these, there is an overlap 700,000, which means that the Society is sending out a total of around 8.0 million voting packs.
Investing members will also get a variable share allocation depending on how much money they had in their accounts on particular dates. This will range from 200 shares to a maximum of 1,181 for those with 50,000 pounds ($84,430) or more.
At its special general meeting on Feb. 24, over 50 percent of the investing members must vote in favour of the proposal or it will fail. The society has started a huge advertising campaign to encourage members to vote.
The Halifax is expected to be in the top 20 companies by market capitalisation in the FTSE 100 index of blue-chip firms and is sure to threaten Abbey's position as Britain's fifth-largest publicly-owned bank.
It said it sees room for huge expansion in the British insurance and long-term savings sectors.
""We'll focus on the UK personal financial services sector,"" Halifax spokesman Davis Gilchrist said. ""That's a very wide area, both on the borrowing side and, increasingly, on the savings side -- traditional savings and long-term savings.""
",17
"Channel tunnel operator Eurotunnel on Monday announced details of a deal giving bank creditors 45.5 percent of the company in return for wiping out 1.0 billion pounds ($1.6 billion) of its massive debts.
The long-awaited but highly complex restructuring of nearly nearly nine billion pounds of debt and unpaid interest throws the company a lifeline which could secure what is still likely to be a difficult future.
The deal, announced simultaneously in Paris and London, brings the company back from the brink of bankruptcy but leaves current shareholders, who have already seen their investment dwindle, owning only 54.5 percent of the company.
""We have fixed and capped the interest payments and arranged only to pay what is available in cash,"" Eurotunnel co-chairman Alastair Morton told reporters at a news conference. ""Avoiding having to do this again is the name of the game.""
Morton said the plan provides the Anglo-French company with the medium term financial stability to consolidate its commercial position and develop its operations, adding that the firm was now making a profit before interest.
Although shareholders will see their holdings diluted, they were offered the prospect of a brighter future and urged to be patient after months of uncertainty while Eurotunnel wrestled to reduce the crippling interest payments negotiated during the tunnel's construction.
Eurotunnel, which has taken around half of the market in the busiest cross-Channel route from the European ferry companies, said a strong operating performance could allow it to pay its first dividend within the next 10 years.
French co-chairman Patrick Ponsolle told reporters at a Paris news conference that the dividend could come as early as 2004 if the company performed ""very well"".
Eurotunnel and the banks have come up with an ingenious formula to help the company get over the early years of the deal when, despite the swaps of debt for equity and bonds, it will still not be able to afford the annual interest bill of 400 million pounds.
If its revenue, after costs and depreciation, is less than 400 million pounds, then the company will issue ""Stabilisation notes"" to a maximum of 1.85 billion pounds to the banks. Eurotunnel would not pay interest on these notes (which would constitute a debt issue) for ten years.
Analysts said that under the deal, Eurotunnel's ability to finance its debt would become sustainable, at least for a few years.
""If you look at the current cash flow of between 150 and 200 million pounds a year, what they can't find (to meet the bill) they will roll forward into the stabilisation notes, and they can keep that going for seven, eight, nine years,"" said an analyst at one major investment bank.
""So they are here for that time,"" he added.
The company said in a statement there was still considerable work to be done to finalise and agree the details of the plan before it can be submitted to shareholders and the bank group for approval, probably early in the Spring of 1997.
Eurotunnel said the debt-for-equity swap would be at 130 pence, or 10.40 francs, per share -- considerably below the level of 160 pence widely reported in the run up to the deal
The company said a further 3.7 billion pounds of debt would be converted into new financial instruments and existing shareholders would be able to participate in this issue.
If they choose not to take up free warrants entitling them to subscribe to this, Eurotunnel said shareholders' interests may be reduced further to just over 39 percent of the company by the end of December 2003.
Eurotunnel's shares, which were suspended last week at 113.5 pence ahead of Monday's announcement, will resume trading on Tuesday.
Shareholders and all 225 creditor banks have to agree the deal. ""I'm hopeful but I'm not taking it (approval) for granted,"" Morton admitted, ""Shareholders are pretty angry in France.""
Asked what would happen if the banks reject the deal, Morton said, ""Nobody wants a collapse, nobody wants a doomsday scenario.""
($1=.6393 Pound)
",17
"Britain's Barclays Plc said on Monday it was in talks with U.S. group Morgan Stanley about its global custody business and banking sources confirmed the unit is up for sale.
Barclays and Morgan Stanley were coy in responding to press speculation, saying only that they are ""in discussions to explore the potential for future co-operation"".
The move would be another step in the consolidation of the global custody business which is becoming dominated by those banks who are willing to make the large front-end investment in systems which are necessary to later rake in fees.
Barclays' custody business has 350 to 400 staff worldwide, with some working in the Far East, but has for some time been treated as not in the bank's core business.
Securities worth some 150 billion pounds ($239.2 billion) have been placed with the unit.
In its interim results, published in August, Barclays included custody in its ""Businesses in Transition"" category which includes restructuring businesses in France and the United States. The category including custody made a profit of 23 million pounds in the half-year to June 30.
The report said, ""Businesses in Transition primarily comprises lendings and other assets that are unlikely to be of long-term interest to the Group or that require significant restructuring.""
It was not clear when the deal will be finalised but analysts said it would mark a further step in the consolidation of the global custody market.
""Consolidation is a natural if you look at the economic of the business,"" said John Leonard, banking analyst at Salomon Brothers. ""It's a scale economy buisiness.""
Leonard said that some banks had taken the decision not to invest the large sums needed to get computer systems up to scratch to be competitive.
Custody businesses range from traditional safekeeping of securities, which in Britain is dominated by Lloyds TSB and Royal Bank of Scotland, to performance measurement and stock lending.
As such, it has ceased to be the largely risk-free business it once was although risk levels are still relatively low.
""It guarantees a steady income stream but it's not totally insensitive to market volumes,"" Leonard added.
Analysts said Barclays has presumably decided that without further investment, the business will be too small to compete on the global stage. They expect Morgan Stanley to pay well under 100 million pounds for the business. ""It could well be less than fifty million (pounds),"" said one.
Finance workers' union BIFU attacked the leak of the discussions, saying staff face an uncertain future if the business was sold.
It called on the bank to ""come clean"" over its intentions. ($1=.6270 Pound)
",17
"Britain's largest mortgage lender, the mutually-owned Halifax Building Society, on Thursday (corrects from Wednesday) said its planned stock market flotation in June could value it at as much as 12 billion pounds ($20 billion).
""This will represent the largest single extension of private share ownership ever witnessed in the UK,"" said Halifax chief executive Mike Blackburn.
The Halifax, which has assets of over 100 billion pounds, said its investment bank adviser Deutsche Morgan Grenfell had estimated a market price of between 390 and 450 pence per share if the flotation had taken place on December 16, 1996.
This would have meant a company worth between 10.4 and 12 billion pounds and analysts expect the final outcome to be at the top end of this range, given the recent positive performance of the most comparable stock in the market -- former building society Abbey National Plc.
The Halifax said each qualifying member will receive a basic allocation of 200 shares in a flotation of 2.675 billion shares.
The Halifax has 6.7 million investing members and 2.0 million borrowing members. Of these, there is an overlap 700,000 which means that the Society is sending out a total of around 8.0 million voting packs.
Investing members will also get a variable share allocation depending on how much money they have in their accounts on particular dates, this will range from 200 shares to a maximum of 1,181 for those with 50,000 pounds ($84,430) or more.
At its special general meeting on February 24, over 50 percent of the investing members must vote in favour of the proposal or it will fail.
The Halifax is expected to be in the top 20 companies by market capitalisation in the FTSE 100 index of blue-chip firms and is sure to threaten the Abbey's position as Britain's fifth largest publicly quoted bank.
Due to its conversion route -- the Halifax is not setting up a seperate flotation vehicle -- the legal requirement is that over 50 percent of its investing members must vote in favour of the proposal at the special meeting.
""It is a big voting requirement,"" said Halifax assistant general manager Graham Johnston, ""50 percent is a higher hurdle than others have faced...we're very confident we'll get it.""
The society has started a huge advertising campaign to encourage members to vote.
The Halifax will also not face the problem of other converting societies in that it has waived the protection from takeover that others will enjoy.
It joins the Woolwich, Alliance & Leicester ALL.CN and Northern Rock who are all coming to the market this year in flotations worth an aggregate of around 18 billion pounds.
Economists have expressed concern recently that a large chunk of the proceeds may be seen as a windfall by beneficiaries and will be spent. This could stoke up inflationary pressures in the British economy later this year. ($1=.5922 Pound)
",17
"A British High Court judge rejected on Thursday a $1.8 billion claim by the liquidators of Bank of Credit and Commerce International (BCCI) against accountancy firm Ernst & Whinney, now known as Ernst & Young.
BCCI was closed by central banks in 1991 and collapsed with debts of more than $12 billion amid evidence of massive fraud and money laundering which has since led to a complex series of court cases, both criminal and civil, in several countries.
Judge Hugh Laddie said the claim by the liquidators of BCCI (Overseas), Deloitte & Touche, that Ernst & Whinney owed a duty of care to the bank was based ""long on assertion and deficient on relevant facts"".
Ernst & Young said the original claim against its predecessor firm was for $10 billion but this was reduced to $3.5 billion in June 1995.
Following this judgement, the principal claim against Ernst & Whinney now stands at around $1.7 billion in respect of the firm's 1985 and 1986 audit of BCCI Holdings SA and BCCI SA.
A similar claim remains outstanding against another international accountancy firm, Price Waterhouse, which took over as auditor to BCCI in 1987 when Ernst & Whinney resigned.
""The BCCI liquidators have now had struck out, or been forced to withdraw, 85 percent of the claims originally brought against Ernst & Whinney,"" said Ernst & Young senior partner Nick Land. ""We look forward to dealing with the remaining 15 percent in a similar fashion and to recovering our costs which are substantial.""
Land attacked the liquidators for choosing to spend millions of pounds pursuing what he called ""speculative and unfounded claims"" rather than making money available to those who suffered losses from the BCCI collapse.
Deloitte & Touche was not immediately available to comment on the judgement.
After a five year struggle, BCCI creditors began to receive payments last month. Deloitte & Touche said it was making a payment of $2.65 billion, equal to 24.5 percent of their claims.
BCCI had assets of $24 billion and operations in 71 countries at the time of the collapse.
",17
"Lloyds TSB Group kicks off the UK bank reporting seson on February 14 and, despite trading at big premiums to the sector, is still favoured by analysts because of what they see as a well-positioned business mix.
Lloyds is expected to weigh in with over 2.4 billion stg in pre-tax profit and dividend per share of as much as 13p, accompanied by the highest return on equity in the sector at around 32 percent. In 1995, Lloyds TSB made 1.65 billion stg.
The bank's new chief executive Peter Ellwood will give voice to his plans for the group as he takes over from Brian Pitman.  
But with Pitman still at the bank as chairman, analysts are not concerned there will be a radical change of strategy.
David Poutney, banking analyst at Panmure Gordon, says he expects Lloyds TSB to make a pretax profit of 2.45 billion stg and pay a dividend of 12.6p per share. ""The key thing is to see how the cost-cutting is coming through,"" Pountney said.
He estimates that savings from the 1995 merger between Lloyds and TSB will only have been between 75 and 100 million stg in 1996 but these will rise to 350 million stg in 1998 and the bank will be saving a further 50 million stg a year from its buyout of the minority of Lloyds Abbey Life.  
These transactions have taken Lloyds TSB's tier one capital ratio down to an expected six percent or just over and analysts say there will be little scope for the group to return capital until the second half of this year.
Even then, the bank seems to favour returning value through more generous dividends than through share repurchases, said John Leonard, banking analyst at Salomon Brothers.
Leonard expects a pretax profit of 2.456 million stg and a dividend payment of 12.6p per share, and he sees strong earnings growth at least for the next three years.  
Strategically in its core UK retail financial services business, Lloyds TSB wants to expand its life assurance presence, analysts said, and may do this by acquisition.
The current bidding battle for mutually-owned Scottish Amicable will give a pointer as to the price that Lloyds might have to pay for such an expansion.
Increasing its life assurance business would mean that Lloyds TSB continues to follow the strategy of building up the low-risk element of its earnings and an income stream that is both stable and high quality.  
In the figures for the second half of 1996, analysts expect to see evidence of continued growth in consumer lending and a bigger market share in mortgages, although the group is thought to have been less aggressive on the latter front in the second six months. -- London Newsroom +44 171 542 8864.
",17
"A thankful Elizabeth Forsyth, a former aide of Polly Peck head Asil Nadir, walked free from court on Thursday after three judges allowed her appeal against a five-year sentence for handling stolen money.
Forsyth, 60, who is also appealing against the money-laundering conviction itself, described her 10 months in prison as an ""experience"".
""I would just like to thank the court for its understanding and consideration,"" Forsyth told reporters as she was freed from the cells of London's Royal Courts of Justice.
She said she could not comment further on the appeal as it was still continuing.
Earlier, the appeal judges surprised the court by making it clear at once that Forsyth would not be returning to spend another night at Holloway prison.
""We have formed a view that this sentence cannot stand,"" Lord Justice Beldam said at the outset of the appeal hearing, adding that the sentence was so disproportionate that, ""taking into account the time she has already served...she should not serve any longer.""
Beldam, hearing the appeal with two other judges, then moved on to consider Forsyth's appeal against her conviction on two counts of dishonestly handling 400,000 pounds ($650,000) of stolen funds.
Forsyth's lawyer, Geoffrey Robertson QC, later made a bail application so that Forsyth could be freed pending the outcome of the rest of the appeal.
Forsyth has been in prison since March 1996 when Justice Sir Richard Tucker surprised those following the case with the severity of his sentence.
She was chairman of South Audley Management, a firm set up by Turkish Cypriot Nadir to deal with his wealthy family interests before his Polly Peck empire collapsed in 1990 under a mountain of debt.
During her five-week trial, the jury accepted that Forsyth had helped to launder money that had been stolen from Polly Peck by Nadir.
Nadir still faces charges connected to Polly Peck but in 1993 he fled to northern Cyprus, a territory not recognised by the British government, skipping 3.5 million pounds ($5.67 million) bail.
One of Forsyth's supporters told Reuters outside the court that her 90-year-old mother had been told and was said to be ""well pleased"". At the time of her sentencing, Forsyth's lawyers had argued for leniency saying she should remain outside prison to care for her mother.
Another of Forsyth's lawyers, Peter Krivinskas, said an application by Nadir to have the charges against him dropped would probably depend on the outcome of Forsyth's appeal against her conviction.
The outcome of the original trial was seen as a boost for Britain's Serious Fraud Office (SFO) which prosecutes big fraud cases but has failed to secure convictions in several high-profile cases.
($1=.6172 Pound)
",17
"British Chancellor of the Exchequer Kenneth Clarke could cut tax credits on dividends in a ""robbing Peter to pay Paul"" measure which would help fund widely expected cuts in income tax in his budget speech next Tuesday.
Roger Bootle, group chief economist at HSBC Markets, thinks Clarke may well see pension funds as one target to provide him with some resources to distribute elsewhere.
From a tax credit reduction to 15 percent from 20 percent, ""the sufferers would be tax-exempt pension funds and higher rate tax payers with dividend income,"" Bootle said on Thursday.
Accountancy firm Coopers & Lybrand, in its survey of budget options, says such a measure could save the Inland Revenue around 1.0 billion pounds ($1.68 billion) a year, although this would take some time to come through.
But Coopers point out that such a move would act against the Government's long-term objective of encouraging increased private savings provision and might turn out to be a burden on the corporate sector if institutional shareholders press companies to compensate by raising gross dividend payouts.
Bootle raises another negative aspect.
""It would not necessarily be popular either,"" he says. ""It would probably cause the equity market to fall and might well be described in the press as ""Mr Clarke raids your pension - to give you an income tax cut'.""
Clarke has already removed the tax credit on targeted share buy-backs and special dividends associated with share consolidations and take-overs.
Most economists expect no change in the basic structure of Corporation Tax itself, although Coopers say the Chancellor might introduce some minor measures to aid small business and entrepreneurs.
But they are not so confident that the profit-related pay scheme, first introduced in 1987, will survive the budget unscathed.
Under the scheme, employees get relief at their marginal rate of tax on 20 percent of their salary up to a maximum of 4,000 stg and the benfits are linked to the company reaching profit goals agreed with the Revenue.
Estimates vary on how many employees are in the scheme from 3.5 to 4.5 million, but accountancy firm Ernst & Young says it is costing the Government some 1.5 billion pounds annually in lost revenue and rising.
There also seems to be a measure of agreement on the idea that the scheme does not really link employees' pay to profitability since some companies guarantee no reduction in final salary if profits disappoint.
Outright abolition of PRP is thought unlikely given it is firmly entrenched in many pay structures and would again put pressure on companies to make up the difference and so economists see Clarke possibly limiting the relief to the lower 20 percent rate of income tax.
BZW economists say this could raise some 700 million pounds. ($1=.5950 Pound)
",17
"The British government on Wednesday published new draft legislation governing home lending institutions but a lack of parliamentary time might mean it will not reach the statute book before a general election.
The Building Societies Bill, if passed, would remove a society's five-year immunity from takeover once it converts to bank status if it, in turn, took over another financial institution.
Immunity would not be affected by one of the new banks buying mortgage books or by joint ventures, however.
The draft received a mixed reception from the four societies currently planning to convert themselves into banks.
A Treasury spokeswoman admitted that there was currently no slot for the bill in the Parliamentary agenda but added it remained hopeful an opportunity could arise in the New Year.
""The societies converting to banks will go ahead if that is what their members want,"" said Treasury Minister Angela Knight in a statement. ""When converted they will be allowed to establish themselves. But if they want to play the takeover game then they will have to play by the same rules as everyone else.""
The Woolwich, which has assets of just under 30 billion pounds ($49.97 billion) and plans to float next July, said it was disappointed the government has not taken into account its ""serious concerns"" on the timing of the draft.
""Had our board known when it took the decision to convert that this (change in the law) was even a possibility, then we might have chosen to convert in a different way,"" a spokeswoman for the Woolwich said.
If the bill was enacted, she said the Woolwich board would have a duty to revisit its conversion plans.
In contrast the Northern Rock, also planning a flotation in 1997, welcomed the changes.
""We are delighted with it,"" said Adam Applegarth, a director of the Northern Rock. ""It's a prefectly reasonable compromise and you cant ask for more than that.""
The Building Societies Association also welcomed the revised Bill and encouraged its early introduction to Parliament.
BSA chairman Brian Davis, who is also chief executive of the Nationwide Building Society that is not planning to convert, said the BSA fully supported the Treasury's ""thoughtful compromise"" on the question of takeover protection.
Under current company law, 10 percent of shareholders can call a special general meeting of the company and this will not change for converting societies. But any proposal to waive its five-year immunity to takeover will have to be approved by 75 percent of the voting shareholders.
Some societies had criticised the Treasury's proposals because they did not allow friendly takeovers, such as between one large society and a local smaller one.
""We came to the conclusion that the distinction between friendly and hostile takeovers was too difficult to define and that it would have been unworkable,"" the Treasury said.
The Halifax, the country's biggest home lender has already waived its right to takeover protection by transferring its business to an existing subsidiary.
The mutually-owned building societies have traditionally been the largest mortgage lenders in Britain although in recent years, commercial banks have taken some market share. ($1=.6003 Pound)
",17
"Fund management Group Mercury Asset management will make acquisitions if it can enhance shareholder value, its chairman Hugh Stevenson said on Tuesday after announcing bumper profits and a sharp jump in its cash pile.
Profits rose 29 percent to 81.8 million stg from 63.6 million stg in the first half last year while cash rose to 261.6 million stg from 189.9 million at the end of March.  
Asked if MAM was considering a U.S. acquisition, Stevenson said: ""The U.S. is obviously an extremely important market, it's the biggest savings market in the world but value for our shareholders is the main aim.""
Stevenson said an acquisition which enhanced this value would have to be considered.
On the cash pile, Stevenson said that the company prefers a conservative balance sheet.
""Cash has risen materially in the last six months,"" Stevenson said.  
""It's a question of a balance between a prudent balance sheet and returning value in the form of dividends to shareholders. We've had a very progressive dividend policy over recent years.""
Stevenson said the rise in the interim dividend to 10 pence per share from six pence last time reflected a desire to rebalance the interim and final payout.
He was unsure if this rebalancing was complete given the uncertainty of how the full year will turn out.  
Stevenson refused to comment on the state of world equity markets and thus the company's prospects for the second half, ""We tend to reserve comments on the markets for our clients.""
But in a statement earlier, he said the firm was determined to create value through profitable expansion notwithstanding short-term market movements.
MAM again showed that it is not missing its tie to former owner S.G. Warburg which was cut when the latter was gobbled up by Swiss Bank Corp last year.  
Stevenson said the first half had been positive with funds under management rising to 85.9 billion stg from 70.9 billion at the same point last year and 81 billion at the end of March.
The current figure included 2.0 billion stg of net new business which was lower than the 2.5 billion stg seen in the second half of last year.
He said it was too early to tell what effect problems at Morgan Grenfell Asset Management, where alleged irregularities are being investigated by the Serious Fraud Office, might have on the industry in the longer term.
""It's a growth industry,"" Stevenson said, ""and it continues to grow. The UK market is changing and we have been doing more in defined contribution business.""
About two thirds of MAM's business is in the institutional pension fund management area, 20 percent for investors overseas and the rest for private investors.
Costs continued to rise but were more than matched by revenue growth.
Stevenon said the rise reflected the consolidation of its Australian subsidiary; large investment in systems and infrastructure; and the coyly termed ""higher provision for variable remuneration"", otherwise known as bonuses. -- London Newsroom +44 171 542 8864.
",17
"Bankers in London say they hope to sign a package restructuring the 8.7 billion pounds ($14 billion) debt of channel tunnel operator Eurotunnel well before a new year-end deadline runs out.
""Just as the previous deadline of April was a bit optimistic, the new one errs on the side of caution,"" said one banking source. ""It'll look good now if they bring it in ahead of time.""
Earlier this week, Eurotunnel and its creditor banks agreed a nine-month extension of a debt payment standstill until the end of the year. The debt standstill went into effect in September 1995 and was due to run for 18 months.
Bankers said, despite the fact that the extended standstill would mean interest would continue to accrue, this would have no effect on the debt deal which will continue to be applied to Eurotunnel's debt position as of October 15, 1996.
""The interest and any other charges due since the cut-off date will become payable when the deal goes into effect,"" the banking source said.
Last October, following marathon negotiations, Eurotunnel and the steering committee of banks agreed a restructuring deal which will have to agreed by a total of 225 creditor banks and the shareholders of the company.
The deal included a 1.0 billion pounds swap of debt for equity at 130p per share, a swap for interest-bearing equity notes, shareholder warrants, loan notes and resettable bonds.
An amount of 4.0 billion pounds would remain as junior debt, paying a fixed interest rate until the end of 2003 and then reverting to 1.25 percent above the London Interbank Offered Rate.
The company also has the right to issue ""stabilisation notes"" to cover any unpaid interest resulting from the deal. These would be interest-free until the start of 2006 and would then pay 1.25 percent over Libor.
Suspended at 113-1/2p ahead of the debt refinancing announcement last year, Eurotunnel shares quickly fell to below 90p in the days following and have remained relatively stable since then.
On Wednesday, they were quoted up 2-1/2p at 86-1/2.
The lower price means the 130p debt to equity swap price looks even better for shareholders but bankers say this is unlikely to cause a problem for the deal.
""They (the shareholders) are getting a better deal on that portion of the debt but the shares were probably overvalued and I can't see my colleagues ditching the deal because of that,"" the banking source said. ""The deal has to happen, both sides know that."" ($1=.6035 Pound)
",17
"The Justice Department asked the Supreme Court Thursday to lift a lower court suspension of landmark federal rules aimed at prying open the nation's local telephone monopolies to competition.
The department, acting on behalf of the Federal Communications Commission, said the lower court's ""stay"" could hurt consumers by delaying the introduction of full-fledged competition in the $100 billion market.
The request comes after a U.S. appeals court based in St. Louis last week suspended key provisions of the FCC's ""interconnection"" order, which spells out how long-distance carriers, cable-TV operators and others could operate in the local phone market under the new telecommunications law.
The rules were frozen while the appeals court considers a challenge to the FCC order by GTE Corp., the so-called Baby Bell phone companies, other local carriers and state regulators who want the measure overturned.
They argue the FCC overstepped the power granted to it by Congress. The FCC, among other things, ordered the regional Bells and other local phone companies to lease their lines to new rivals at discounts of 17 percent to 25 percent.
The three-judge appeals court panel said the opponents ""have a better than even chance of convincing the court"" that the FCC's rules conflicted with the law.
But the Justice Department told the high court the appeals court action ""already imperils"" the timetable set by Congress for opening the local phone market.
""The stay draws into question not just the timing of competition in the local market, but also the timing of full entry by the Bell companies into the long-distance telephone market,"" the department added.
Long-distance carriers AT&T Corp. and MCI Communications Corp. among other companies, also asked the high court on Thursday to lift the stay.
Lawyers were divided over the likely outcome.
""They have a decent shot at lifting the stay,"" said Alfred Mamlet of Steptoe & Johnson. He noted the FCC's success last year in having Supreme Court Justice John Paul Stevens lift a lower court stay that had blocked a major FCC airwave auction.
But others were less sure. ""It's very difficult to predict,"" said Nicholas Allard of Latham & Watkins.
The Justice Department request, along with those of the long-distance companies, is expected to go to Supreme Court Justice Clarence Thomas, who oversees matters related to the St. Louis-based appeals court.
Thomas could refer the request to the full court for its consideration.
",40
"Regulators proposed Thursday to set aside $2.3 billion a year to link schools and libraries to the Internet at discounted rates, but declined to endorse President Clinton's call to hook them up free of charge.
Eligible institutions could buy access to the computer network at discounts of 20 percent to 90 percent, under the plan offered by an eight-member board of state regulators and members of the Federal Communications Commission.
""Schools will be able to connect every single classroom to the Information Highway,"" said FCC Chairman Reed Hundt, who oversaw the panel.
""The ramp will be a high-speed, high-bandwidth, cutting-edge connection. The discounts, tailored to each school's individual level of need, will make building and maintaining the ramp truly affordable for every school.""
The Internet proposal is part of a broader plan to overhaul the multi-billion dollar ""universal service"" programme that ensures affordable phone service to rural communities and low-income neighbourhoods. The FCC must adopt rules by early May.
Officials hope the wide-ranging proposal, which stems from the new telecommunications law, eventually will generate lower phone rates through increased competition.
But some board members fear the plan -- to be paid for from the revenues of phone companies, cable TV operators and other communications carriers -- may prove too ambitious and ultimately push up rates.
""A universal service fund that taxes consumers billions of dollars a year is not only inconsistent with congressional intent, but could be extremely harmful nationwide to consumers,"" said Laska Schoenfelder, chairman of the South Dakota Public Utilities Commission.
Under the Internet provision, less well off institutions and those in out-of-the-way high-cost areas would be entitled to the larger discounts.
Officials said the average discount would be 60 percent. One-third of schools would get at least an 80 percent discount, and the poorest 15 percent would get a 90 percent discount.
""It is no secret and no surprise that access to technology in the nation's schools and classrooms is tremendously unequal,"" said Vice President Al Gore. ""Wealthier schools are twice as likely as poor schools to have Internet access, and wealthier students use computers 20 percent more than their poorer peers.""
But the plan stops short of the president's proposal to give schools and libraries free basic service, with the nation's communications carriers footing the bill.
In other areas, the board left many key provisions of its proposals vague, including the cost of the federal fund that would be used to subsidise carriers that offer phone service in high-cost rural areas and in low-income neighbourhoods.
Overriding the objections of some regulators, the board proposed to fund the federal programme through the interstate and intrastate revenues of telecommunications carriers.
Some state regulators objected to the use of intrastate revenues, saying such funds should be used only by the states to set up their own funds that would help provide distinct telecommunications services within their borders.
The board said that the current $3.50 a month subscriber line charge that residential customers now pay should not be increased. The charge is used to help fund universal service.
And it held out the prospect that the charge -- along with the ""access"" charges long-distance carriers pay to local phone companies to hook up to their networks -- could drop if the federal universal fund is indeed bankrolled by interstate and intrastate phone revenues.
",40
"Regulators this week gave final approval to a technology standard for a new generation of high-definition digital television, setting off a race between computer makers and TV manufacturers to woo viewers.
The Federal Communications Commission on Tuesday approved the compromise standard hammered out last month between TV manufacturers, broadcasters and the computer industry.
Digital TV offers crystal-clear pictures and CD-quality sound. It is also expected to promote a ""computer friendly"" TV system that allows viewers to watch programmes while surfing the Internet over the same ""smart box.""
The new standard ""hastens convergence, transporting us into a competitive world of computer-friendly television sets and broadcast-friendly computers,"" commissioner Susan Ness said. ""Our decision also provides a springboard for global leadership in high-definition digital equipment and programming.""
The standard, among other things, covers how voice and video material will be attached to digital signals, how the signals will be ""compressed"" for transmission, and how they will be ""reopened"" at the TV receiver.
But not every detail is spelled out. Under the industry compromise, the standard does not specify the video format by which images will be put onto the screen, or ""scanned.""
Broadcasters and TV manufacturers had wanted to require a format known as ""interlace"" scanning. Computer companies argued that would stifle the convergence of TV and computer technologies. They wanted to mandate ""progressive"" scanning, which is better suited to computers, or no format at all.
Progressive scanning, used by most computers, updates every line of the TV picture at each pass. Interlaced scanning, used in exisiting television sets, updates every other line.
Because no scanning format was specified, the computer industry will be free to manufacture computers that use just progressive scanning. And TV manufacturers are ready to make sets that offer both interlace and progressive technology.
That sets up a competition between the two industries over how consumers will want to watch TV -- over a TV set or over a computer.
""Ultimately, the personal computer will be the preferred communications device in the household,"" said Paul Misener, manager of telecommunications and computer technology policy at Intel Corp., a major computer chip maker.
Not so fast, argue TV manufacturers.
""The computer people need to evaluate how the average consumer wants to get delivery to the home,"" said Lisa Fasold, a spokeswoman for the Consumer Electronics Manufacturers Association, an industry group.
""TV sets typically last a lot longer than computers. And they're much more simple to operate.""
In any event, industry officials agree that digital TV is likely to hasten the long-promised convergence of TV and computer technologies.
For example, sports fans will be able to watch a baseball game and split the screen of their machine to receive up-to-the-minute scores of other games over the Internet, according to industry officials.
TV manufacuters expect to begin bringing digital receivers to market in 1998. The new sets are expected to cost from $1,500 to $3,000. Prices are forecast to drop as broadcasters offer more digitally transmitted programmes, presumably boosting demand for digital TV.
",40
"Ameritech Corp. Thursday became the first Baby Bell phone company to seek federal approval under the new telecommunications law to offer long-distance service from its regional calling area.
The Chicago-based carrier asked the Federal Communications Commission for permission to provide long-distance service to residents in Michigan, one of five midwestern states in which the company now provides local service. Ameritech has 3.5 million customers in Michigan.
Under last year's law, Ameritech and other Bells can offer long-distance service from within their local-calling regions once regulators are convinced the Bells have opened their local network to new rivals such as AT&T Corp. and others.
The Bells can then provide customers the convenience of one-stop shopping involving local and long-distance service.
""It's the single largest potential change that can occur quickly in the communications market,"" said analyst Scott Cleland of Schwab Washington Research Group.
""If Ameritech gets a yes, it's easy for them to gain customers."" The company has 11 million residential customers in Illinois, Michigan, Wisconsin, Indiana and Ohio.
FCC Chairman Reed Hundt said Ameritech's more than 4,000-page application ""opens a new chapter"" in the implementation of the landmark telecom law.
But the application is sure to face tough scrutiny at the agency and from other government regulators.
Long-distance giants AT&T Corp. and MCI Communications Corp. called on the FCC to reject the move, saying Ameritech has not yet opened its local phone market.
The FCC -- after consulting with the Justice Department and Michigan regulators as well as seeking public comment -- has 90 days to decide whether Ameritech's entry is in the public interest.
In particular, the carrier must meet a detailed 14-point checklist showing it has opened its local network in Michigan to new competitors.
""The American people have called for choice,"" said Ameritech Chief Executive Richard Notebart. ""Congress responded last year by passing a law that accelerates a competitive marketplace for all communications services. Ameritech is stepping forward to make this happen.""
AT&T, however, called Ameritech's bid ""clearly premature.""
""It's obvious that real local service competition does not yet exist in Ameritech's Michigan territory,"" said AT&T spokesman Ray O'Connell.
O'Connell accused Ameritech of trying to delay competition by ignoring orders from Michigan regulators to open its local network. He pointed out that Michigan's attorney general has intervened against Ameritech in a case pending before the state's supreme court.
""By any competitive or public interest standard, Ameritech's application to begin offering in-region long-distance service should be rejected,"" said Jonathan Sallet, MCI's chief policy counsel.
The No. 2 long-distance carrier said that Ameritech still controls 99.6 percent of Michigan's local phone customers, and that only four companies offer local service in Michigan.
None of the big three long-distance carriers -- AT&T, MCI and Sprint -- now offer such service.
In any event, Ameritech's bid is expected to put pressure on other Bells to seek similar permission soon. Nynex Corp., which serves the Northeast United States, is considered a top candidate to seek approval in the near future.
",40
"Federal and state regulators raced Wednesday to finalise a multi-billion dollar proposal to ensure all Americans get quality and affordable phone service and that schools and libraries can hook up to the Internet.
An eight-member board of state regulators and members of the Federal Communications Commission is trying to figure out the size of a federal fund to subsidise ""universal"" service.
Estimates range anywhere from $4 billion to $12 billion a year. It could influence what consumers and businesses pay for their phone bills.
""Depending on how big the dollar figures are and what the recovery mechanism is, consumers may have something at stake,"" said Mark Cooper of the Consumer Federation of America.
The panel, established by the new telecommunications law, is scheduled to unveil its plans Thursday. Several issues are at stake, some of which were unresolved at the last minute.
""All the issues are still being discussed,"" said a state official requesting anonymity. ""There will be sections where we need further clarification on issues.""
Regulators must determine how local and long-distance companies, cable-TV operators, and other telecommunications carriers foot the bill to ensure that residents of secluded rural communities and poor inner-city areas get quality, affordable phone service.
They must spell out how the nation's schools and libraries will get hooked up to the Internet and at what cost.
And regulators must determine what roles the states and federal government will play in overseeing universal service.
The board must issue its recommendations to the FCC by Friday. The agency must then issue final rules by early May.
The nation's hundreds of local phone companies now provide universal service. It is funded in part via ""access"" charges that long-distance carriers such as AT&T Corp. pay to hook up to the local phone network.
In 1994, local companies took in about $21 billion in interstate access charges. The seven regional Baby Bells received about $17 billion of that amount. Long-distance companies want those charges slashed.
Following are the issues the joint board is grappling with:
-- The extent to which schools and libraries should be hooked up to the Internet at discounted rates.
President Clinton has proposed giving these institutions free basic service, with the nation's communications carriers paying the tab. Members of the joint board disagree on whether every school, or every classroom, should be wired.
There also is disagreement over what discounts schools and libraries should receive.
-- The type of funding mechanism that would be used to pay for universal service. The telecom law requires that companies offering interstate phone service -- or virtually all carriers -- must foot the bill for universal service in an ""equitable and non-discriminatory"" manner.
A national fund will be established to pay for universal service. State regulators want the ability to establish and oversee their own funds as well. Those funds would be backed by intrastate phone revenues.
-- How to ensure phone service to low-income consumers. Poor Americans currently receive subsidised service through two plans, ""Lifeline Assistance"" and ""Link Up America."" Both are expected to be retained, expanded and improved.
-- How to determine the cost of subsidies for companies that offer phone service in high-cost, out-of-the-way areas such as rural communities.
The joint board has been examining whether to calculate such costs based on existing costs of providing such service, or a new model spelling out different ""proxy"" prices that would be used as a reference by regulators. The proxy prices would influence how much subsidies carriers would receive.
",40
"Responding to a dispute with the United States, Canada said Tuesday it plans to develop its own satellite-TV industry rather than rely on U.S. companies such as Tele-Communications Inc. to jump-start the business.
The announcement came just hours after the Federal Communications Commission rejected for a second time a bid by TCI and Colorado-based TelQuest Ventures to beam TV programmes to the United States from two satellites in Canadian-authorised orbits.
The Canadian satellites also would have beamed shows to Canadian households via pizza-sized dishes. The satellites were to have been launched by Telesat Canada, a Montreal-based satellite-communications company. It planned to lease space to both TelQuest and TCI, the No. 1 U.S. cable TV operator.
""My belief is that the time has come for us to proceed with a possible Canada-only solution and my hope is that there will be some companies that will be able to pursue that, including Telesat,"" Canada's minister of industry John Manley told reporters in Ottawa.
Manley plans soon to invite Canadian companies to bid for the ownership and operation of two Canadian satellites.
He told Telesat in a letter Monday he would revoke his ministry's support for the company to have access to the two satellite slots, unless the FCC gave the needed green light.
The FCC, however, rejected the TCI and TelQuest requests by noting that the Canadian government had not yet officially licensed the two satellites. The FCC had issued the same decision earlier in the summer, prompting TelQuest and TCI in August to file emergency requests for FCC approval.
Lawyers and government officials said the basis of the dispute stems from the Clinton administration's objection to allowing a Canadian satellite to beam programmes into the United States -- while U.S. companies cannot enjoy the same rights to broadcast into Canada.
In July, administration officials urged the FCC to defer action on TCI and TelQuest's bid to offer direct broadcast satellite (DBS) services from the Canadian orbital slots.
Officials from the U.S. Trade Representative's office, the Justice Department, the Commerce Department and the State Department said in a letter to FCC Chairman Reed Hundt that the requests ""raise foreign, trade or competition policy issues within the jurisdiction of the Executive Branch.""
They argued that Canadian curbs discriminate against U.S. programmers by requiring a minimum amount of Canadian content in TV, cable and satellite-TV broadcasts. They asserted  that Canada maintains curbs on the use of non-Canadian satellites to distribute phone and broadcast services to Canada.
In his letter to Telesat, Manley noted that U.S. officials rejected proposals to allow the TCI-TelQuest venture to proceed, while not addressing the issue of Canada's content restrictions on programming.
""The Canadians are going to insist on retaining their protectionist policies on content. And since the U.S. will not accept those policies, the Canadian are picking up their DBS marbles and going home,"" said Scott Harris, an attorney with Gibson, Dunn & Crutcher.
",40
"Television executives have tentatively agreed to rate shows based on their suitability for kids of different age groups, industry sources said Tuesday, disappointing advocates of a ratings system that would specify the level of sex, violence and bad language.
The new ratings system is expected to be completed by year's end and would be similar -- but not identical to -- the 28-year-old system now used by the motion-picture industry.
The Motion Picture Association of America (MPAA) code uses letters and numbers -- G, PG, PG-13, R and NC-17 -- to suggest the age groups for which a film is appropriate.
The TV industry executives, meeting privately since March, rejected a system backed by children's advocates and educators to rate shows based on content -- sex, violence and language.
An industry source said that approach -- now used by cable network HBO -- would be unworkable for the hundreds of shows on broadcast and cable TV and would fail to deliver a uniform standard across the various broadcast and cable networks.
Individual networks or syndicators would rate their shows.
""It's just too hard to have uniformity,"" said the source.
The HBO system, first devised in the mid-eighties, offers content-based ratings such as ""MV"" for ""mild violence,"" ""SC"" for ""strong sexual content"" and ""AL"" for ""adult language.""
Industry sources stressed that the TV ratings system has not been finalised and that details need to be worked out.
Publicly, executives said no agreement has been reached.
""It would be premature to suggest that we've reached any agreement,"" said Decker Anstrom, president of the National Cable Television Association.
Once completed, the ratings will be used with a ""V-chip"" that will be installed in new TV sets to allow parents to block shows they consider too violent or racy.
News that a content-based system had been rejected brought protest from children's advocates and others.
""It's very unfortunate. We're going to end up with a system that is not going to be very helpful to parents,"" said Kathryn Montgomery of the Centre for Media Education.
Montgomery, who met Tuesday with the industry group overseeing the ratings system, charged that the TV executives ""never seriously considered"" a content-based system and that ""their minds were made up from the beginning.""
Representative Edward Markey, R-Mass., the backer of the 1996 V-chip legislation, said the ""'V' for violence"" appears to have been ""hijacked."" ""It's time the public joined in a search for the missing 'V' so we can restore it to the V-chip,"" he added.
A survey issued last month by the National Parent Teacher Association,  the Institute for Mental Health Initiatives and University of Wisconsin researchers reported that 80 percent of parents polled preferred a content-based ratings system.
",40
"The government's largest wireless phone auction ended Tuesday, with prices taking a U-turn back toward earth after 125 companies bid a total of $2.5 billion to offer a new generation of cellular service.
The total was down 75 percent from a similar Federal Communications Commission auction that raised $10.2 billion last May. The average price for a license to provide ""personal communications services,"" or PCS, tumbled more than 90 percent.
PCS technology is expected to turn the wireless phone into a mass-market product, allowing consumers to use different communications services -- such as phone, paging, fax and Internet access -- through a single handheld device.
The drop reflected the flood of new entrants into the wireless phone market, a dearth of new money after the sky-high prices paid at last year's PCS sale, and the smaller slice of airwaves covered by the new licenses, analysts said.
The top bidder this time around was a unit of No. 3 long-distance carrier Sprint Corp. It bid $544 million for 160 licenses in Chicago, Houston, and Atlanta, among other cities. The permits cover a total population of 70 million nationwide.
Next was a unit of long-distance giant AT&T Corp., which bid $407 million for 222 licenses in New York, Los Angeles and elsewhere. The licenses cover 139 million people. AT&T was followed by a unit of BellSouth Corp., which bid $205 million for 39 licenses reaching nearly 12 million people in the Southeast.
The No. 4 bidder was OPCSE-Galloway Consortium, a consortium made up of Omnipoint Corp. of Arlinton, Va., and Galloway Entrepreneurs of Charlottesville, Va. It bid $181 million for 109 licenses.
The licenses will allow the companies to expand their wireless networks.
The FCC sold 1,479 PCS licenses nationwide in three different blocks, making this the most licenses sold at once. A third were reserved for small companies. Markets that generated the highest bidding were New York, Chicago and Los Angeles.
Based on the population sizes covered by the licenses, the average bid at the auction was just $3.32 a person.
That was down from the average bid of $39.88 at last May's ""C-Block"" sale, which was reserved for small companies. Analysts called those prices too high for companies to make much money.
The FCC's first PCS auction, which raised $7.7 billion and ended in March 1995, had an average bid of $15.54.
""It's phenomenally cheaper,"" said Jonathan Foxman, vice president of Americall International, a Phoenix-based PCS firm that bid at the auction.
Mark Lowenstein, a vice president with Boston consulting firm Yankee Group Inc., called the latest prices ""more reflective of the current market reality.""
Analysts listed several factors behind the lower prices.
The airwave parcels sold, at 10 megahertz (MHz) each, were a third the size of the 30 MHz parcels sold at the two prior auctions and thus less attractive. The permits cover less geographic area.
Analysts also said the wireless market was getting crowded with companies holding PCS and traditional cellular licenses -- meaning less profits.
""The market is going to be too crowded,"" predicted P. William Bane, a director at Mercer Management Consulting.
The steep prices at last year's PCS auction meant less money available this time around. ""The latest prices are an indication that people have run out of money,"" said Bane.
In addition, analysts said, Wall Street has not rushed to extend financing to PCS providers.
",40
"The state of Alaska has asked the Federal Communications Commission to ban broadcast advertising of hard liquor, adding to the controversy over whether liquor ads should be allowed on television and radio.
Lawyers said the state's petition -- backed by former U.S. Surgeon General C. Everett Koop -- was significant.
It could be used at the least as a vehicle within the FCC to generate public debate on the issue, or as a catalyst leading to rules restricting broadcast liquor promotions.
""Whenever you have a state formally asking the FCC to step in, it legitimises the involvement of the commission for any 'doubting Thomases' that might remain,"" said attorney Nick Allard of Latham & Watkins.
The FCC is divided over the issue. Chairman Reed Hundt favours banning the ads if TV stations refuse to abide by a voluntary ban. But two of the FCC's four commissioners have doubts over the FCC's authority to act in the matter.
FCC officials have yet to decide how to handle the Alaska request, which was submitted last month but drew little notice. They also have not yet decided how to respond to a recent bipartisan request from 26 members of Congress asking the FCC to open a formal investigation into broadcast liquor ads.
The split among commissioners has stymied action for now.
The Federal Trade Commission has opened a formal investigation into alcoholic beverage advertising on TV, both for liquor and beer. It is training its sights for now on distiller Joseph E. Seagram & Sons and the Stroh Brewery Co. Seagram is a subsidiary of Montreal-based Seagram Co.
Alaska, in its petition, asserted that the FCC does have the jurisdiction to act and called for speedy action.
""Advertising of distilled spirits on television and radio will inevitably increase the use of this potent drug among the nation's young people,"" Alaska said in its petition, written by the state's attorney general, Bruce Botelho, and Assistant Attorney General Stephen Slotnick.
The petition cited data showing that Alaska's per-capita alcohol consumption was third-highest in the nation in 1994.
Alaska made its request after the nation's distillers last month ended their decades-old voluntary ban on broadcast ads. It had been in place since 1936 for radio and 1948 for TV.
In June, Seagram began airing TV ads for its Royal Crown whiskey in Texas.
Some dismissed Alaska's bid.
""It's fair to say the Alaska proposal and (the state's) alcohol problem have more to do with a lack of sunlight than whether Seagram advertises for its whiskey,"" said attorney Robert Corn-Revere of Hogan & Hartson.
""An FCC ban of hard-liquor advertising would have a very hard chance of surviving judicial review,"" he added.
But others said a carefully crafted FCC proposal -- such as restricting the ads until after 10 p.m. or later -- could withstand judicial scrutiny. ""The courts have looked favourably on regulations designed to protect children,"" said attorney George Vradenberg of Latham & Watkins.
Lawyers said the FCC must decide what, if any, action it wants to take. Some within the FCC suggest putting the Alaska and congressional requests out for public comment to allow the agency to learn more about the issue.
""Let's take it one step at a time,"" said an FCC official.
",40
"The nation's top communications regulator Friday appealed to nearly 1,200 television stations nationwide to adhere to a voluntary ban and refrain from airing liquor advertisements.
Federal Communications Commission Chairman Reed Hundt, speaking a day after a liquor industry group said it would end its own voluntary ban on radio and TV promotions, also said he had no immediate plans to issue rules to block such ads.
""That is a long, long and hard road to travel,"" Hundt said of the rulemaking process.
For now, the FCC chairman plans instead to use his position as a bully pulpit to convince TV stations not owned by the four major networks to abstain from showing ads for gin, whiskey and other spirits.
Seagram Co. Ltd. in June began airing TV ads for its Royal Crown whiskey in selected local markets.
The National Association of Broadcasters (NAB), while ""disappointed"" with the lifting of the decades-old ban by the nation's distillers, declined to embrace Hundt's call for a voluntary ban.
Hundt applauded the decision by the big networks -- ABC, CBS, NBC and Fox -- to leave unchanged their own policies against accepting liquor ads. Together, the four own about 50 stations in major markets.
That leaves just under 1,200 commercial stations scattered across the nation not owned by the major networks.
""The government has many, many options available to it. It's not necessary for these options to be explored if the broadcasters will stand up the way the four major networks have done,"" Hundt told a news conference.
NAB President Edward Frits, however, noted that ""over the years, individual stations have adopted their own standard regarding the acceptability of hard liquor advertising.
""We believe this process has served American consumers well, since individual stations make and will continue to make judgments every day on what is most appropriate for their local audiences,"" he said in a statement.
On Thursday, the Distilled Spirits Council of the United States, or Discus, said it formally ended its decades-old voluntary ban on radio and TV liquor ads. The ban had been in place since 1936 for radio and 1948 for TV.
The group said distillers should enjoy the same right to promote their products as beer and wine producers, whose ads are carried on TV. Over the past 14 years, liquor consumption in the United States has tumbled 28 percent, to 325 million gallons last year from 449 million in 1981.
The Seagram ad campaign already has unleashed criticism from lawmakers, regulators, consumer advocates and President Clinton. The FCC has opened its own probe of ads shown in Texas and New Hampshire.
Meanwhile, other liquor makers have said they are planning their own ad campaigns or are considering their options.
",40
"The U.S. communications revolution is off to a slow start, unleashing more hype than competition among local and long-distance carriers, cable-TV firms, utilities and others.
But experts say that, just one year after passage of the huge telecommunication reform bill, it is too early to judge it a failure. Most predict the current ""phoney war"" ultimately will be followed by heated competition, new services and lower prices in communications.
But it will take time, possibly five years or more.
""This is on track to be the kind of event that will change our economy and our society,"" said industry analyst Jeffrey Kagan of Kagan Telecom Associates in Atlanta.
""Expecting there to be significant change in the first year is bordering on ridiculous,"" Kagan said.
Scott Cleland of Schwab Washington Research Group agreed: ""The timetable people had for this bill was overly ambitious.""
The Telecommunications Act of 1996, enacted on February 8, ripped down 62-year-old legal barriers and encouraged local and long-distance carriers, cable-TV operators, electric utilities and others to invade each other's backyards.
Lawmakers, analysts and industry officials held out the prospect of one-stop shopping, enabling technology junkies to dial local and long-distance calls, hook up to the Internet, and speak over wireless phones via the same company.
But that has yet to materialise in a big way and prices are up. Experts attribute the slow start to several factors.
The law's timetable stretches out as long as 15 months. Consequently, key rules designed to help break open the $100 billion local phone market to new competitors have yet to be finalised by the Federal Communications Commission.
A U.S. appeals court in St. Louis has suspended the market-opening rules already set by the FCC. And carriers are going to court over key decisions by state regulators.
Moreover, industry officials say it takes time to get new technology, packaging and billing procedures in place.
""It takes time to design a system, get the components ordered and assembled, hire the people and train them,"" said NYNEX Corp Executive Vice President Tom Tauke.
The law's critics have plenty to gripe about.
Prices for long-distance service were expected to fall, and the phone, cable-TV, utility, broadcast and computer industries were expected to scramble to bring entertainment, news, information and calling services to homes and offices.
PROMISED COMPETITION IS BARELY SEEN, MANY PRICES RISE
But a year later, the local phone market remains a monopoly run by the Baby Bells and other local carriers. So far, they have been successful in court fighting FCC rules.
The $78 billion long-distance market remains dominated by AT&T Corp., MCI Communications Corp. and Sprint Corp.. However, Ameritech Corp. has asked for FCC approval to offer long-distance service from its local-calling region.
Big cable-TV operators such as Time Warner Inc. and Tele-Communications Inc. have watered down plans to offer phone service and are instead defending their own turf. Phone companies have trimmed plans for cable-TV.
Prices for communications services, instead of falling, are rising. Cable-TV rates jumped 7.8 percent last year, more than double the 3.3 percent rise in consumer prices. Residential interstate long-distance rates rose 3.7 percent, while intrastate long-distance rates jumped 6.1 percent.
""My reasons for voting against the bill were valid. And I'm very sorry, because it's the American citizen who is paying more for these services rather than less,"" Sen. John McCain, chairman of the commerce committee, told Reuters.
The Arizona Republican is planning hearings on the telecom industry but will not push any major bills this year.
A string of mergers among the seven Bells, meanwhile, has narrowed the number of potential competitors in the phone business, with Bell Atlantic Corp. acquiring NYNEX and SBC Communications Inc. buying Pacific Telesis Group.
Outside the Bells, No. 4 long-distance carrier WorldCom Inc. is buying MFS Communications Co., a supplier of local phone to businesses. And British Telecommunications Plc plans to buy the No. 2 U.S. long-distance carrier, MCI.
""The forces of evil are running well ahead of the forces of good,"" says the Consumer Federation of America's Mark Cooper. ""Price increases and market concentration are keeping apace .... Nothing good happened this year for competition.""
BILL'S SUPPORTERS COUNSEL PATIENCE
But the bill's supporters counsel patience.
""I don't think you can stop it now. The competition genie is out of the bag,"" Representative Billy Tauzin, a Louisiana Republican who chairs the telecommunications subcommittee, said.
Industry officials admit they underestimated the task -- both the cost and complexity of new technologies to allow competition to proceed.
Companies will have to overcome such hurdles when bundling together services -- such as local, long-distance and wireless phone services -- into one package for customers.
And there are other complexities: long-distance carriers will have to lease space on their lines to local carriers wanting to offer long-distance service; alternatively, local carriers will have to lease their networks to long-distance carriers seeking to break into the local phone business.
""Getting systems in place on every side is a tough thing to do,"" said Randy New, a BellSouth Corp. vice-president.
Analaysts and industry officials also say that the FCC must still resolve key issues before local competition can truly come to the local phone market -- namely, how to finance and ensure affordable phone service for all Americans and how to cut the $20 billion in ""access charges"" long-distance carriers pay local phone companies to link to their networks.
FCC Chairman Hundt says the courts, regulators and lawmakers must resist industry efforts to stifle competition.
""For the next two years, everybody is going to beat us up to maintain the status quo,"" he told Reuters. ""We should be very optimistic as long as we stay the course.""
",40
"Federal regulators are set to kick off a two-part plan to slash rates on overseas phone calls, a move that could save consumers and companies billions of dollars but may ruffle the feathers of foreign governments.
The Federal Communications Commission is expected Tuesday to make it simpler for U.S. and foreign phone companies to negotiate cheaper rates for international calls to and from the United States.
Next month the FCC is expected to propose rules to cut the charges U.S. carriers pay foreign phone monopolies to complete overseas calls made from the United States.
""The ultimate goal is to get lower-priced and better-quality services for consumers,"" said Don Gips, head of the FCC's international bureau.
Officials say the foreign charges, or ""accounting rates,"" run five to 10 times actual costs, reflecting the power of state-run monopolies unexposed to home competition. Monopolies control more than 90 percent of the non-U.S. market.
U.S. phone companies, as a result, paid their overseas counterparts $5.5 billion more in 1995 than foreign companies paid U.S. carriers to complete calls.
""This figure would drop in half overnight if American carriers simply paid fees even vaguely related to costs,"" FCC Chairman Reed Hundt said in a recent speech. He noted that the imbalance dwarfs the U.S. foreign aid budget of $2 billion.
The United States has big imbalances with China, Jamaica, Mexico, Hong Kong, Columbia and Argentina, among others.
""Those few countries trying to defend their monopolies are going to be nervous"" about the FCC effort, said Dan Rosen of the Institute for International Economics.
U.S. carriers support the strategy.
""You've got to move accounting rates to cost,"" said AT&T Corp. Vice President Gerry Salemme. AT&T said it must pay 45 cents a minute to have its calls connected to the Dominican Republic, but that the actual cost is 7 to 8 cents a minute.
The FCC actions come as the United States is seeking to open overseas telecommunications markets through talks sponsored by the World Trade Organisation.
To cut rates and open markets, the FCC is adopting a carrot-and-stick approach. Tuesday's order is meant for open markets, such as those in Britain, Canada and Chile.
The FCC will waive its ""proportionate return"" rules that limit the ability of U.S. and foreign carriers to negotiate lower rates for overseas calls. To win a waiver, a foreign carrier's home market must be open to competition.
The existing rules require overseas companies to turn over their long-distance calls to U.S. carriers in the same proportion U.S. carriers send calls to a foreign carrier's home market.
If AT&T, for example, accounts for 60 percent of calls to a country, then that country's monopoly must hand off 60 percent of its U.S.-bound calls to AT&T.
The FCC proposal due next month would set ""benchmark"" rates for what U.S. carriers could pay foreign carriers to complete calls. These rates, according to FCC officials, would better reflect actual costs.
The agency must still work out the details of how long a country would have to lower its rates and what steps could be taken if it refused to do so.
""It literally has the potential of saving consumers billions of dollars,"" said Scott Harris, an attorney with Gibson, Dunn & Crutcher.
But the plan could rub governments the wrong way. High rates charged by their own phone monopolies can be used to maintain bloated payrolls or to subsidise local phone service.
",40
"The brouhaha over Newt Gingrich's intercepted telephone call has shed light on how easy it is to eavesdrop on cellular calls and how seldom cases are prosecuted -- even though the law is violated daily.
""It's had the chilling effect of reminding us all that anyone at any time could be listening to our most private conversations,"" Rep. Billy Tauzin, a Louisiana Republican, said of the widely publicized incident involving the House speaker.
Tauzin, who chairs the House of Representatives telecommunications subcommittee, has called for hearings into cellular privacy.
Federal law makes it a crime to intentionally intercept or disclose the contents of a telephone call, regardeless of whether it is over a hard-wired, cellular or cordless phone.
But experts can cite only a handful of cell-phone cases that have drawn publicity. Politicians have been involved.
Justice Department spokesman John Russell said that in the case of cellular calls, the law is ""seldom used"" and the department ""seldom"" gets complaints.
For one, people rarely know when they have been overheard on their cell phone. And the complicated law is little known.
In once case, Sen. Charles Robb, a Virginia Democrat, got into hot water in 1991 over an illegal tape recording of a cellular call made by a political rival, Virginia Gov. Douglas Wilder. Robb was spared indictment. Four associates pleaded guilty in the case.
Another case in 1990 centered on an intercepted cell-phone conversation involving then-Rep. Bill Sarpalius, a Democrat from Texas.
Tapes and transcripts of the call -- in which Sarpalius spoke with a young woman about a date and a possible job -- were made available to local media. Two unrelated men were later fined about $250 each in connection with the incident.
Why the dearth of legal action?
""Violations of this law are very, very hard to detect. That is why there are so few cases,"" said Clifford Fishman, a law professor at Catholic University of America in Washington.
""The person whose privacy is invaded usually never hears about it and so does not alert authorities.""
What's more, the eavesdroppers usually are not familiar with the people they are monitoring. Penalties generally are light, except in cases involving repeat offenses or use of the information to commit another crime.
The only times a case does seem to arise is when the perpetrator tries to capitalize on the conversation.
""It doesn't come to light unless somebody makes political or commercial use of the information,"" said Paul Rothstein, a law professor at Georgetown University Law Center in Washington.
Yet experts agree the law is broken frequently -- possibly hundreds or thousands of times a day -- given the availability and use of scanners that can tune in wireless calls. It's estimated that anywhere from 10 million to 20 million scanners are in use nationwide, many able to eavesdrop on cellular calls.
""While the cellular industry may give their customers the illusion of privacy by assuring customers that it is illegal to listen, and that cellular-capable scanners are no longer manufactured or imported into the United States, millions of Americans do listen in,"" according to Bob Grove, publisher of Monitoring Times Magazine.
Last week, the FBI opened an investigation into the taping and leaking of a telephone conference call between Gingrich and his top lieutenants. The probe came after a Florida couple said they  delivered a tape of the cellular phone conversation to the senior Democrat on the House Ethics Committee.
A transcript of the tape was published in two newspapers two days later, prompting Republican calls for an FBI criminal probe into the source of the leak.
""You're not going to see the law enforced unless it involves a person of rank, such as a politician,"" said Linus Layne Baker, a Kansas City, Mo. attorney who was fined in the Texas case. ""You won't see the media prosecuted either.""
One option under study in wake of the Gingrich incident is whether to beef up a law that outlaws the sale, manufacture or imporation of scanners capable of picking up cellular calls.
",40
"Regulators are set to kick off a two-part plan to slash rates on overseas phone calls, a move that could save American consumers and companies billions of dollars but ruffle the feathers of foreign governments.
The Federal Communications Commission is expected Tuesday to make it simpler for U.S. and foreign phone companies to negotiate cheaper packages for connecting international calls to and from the United States.
Next month the FCC is expected to propose rules to cut the charges U.S. carriers pay foreign phone monopolies to complete overseas calls made from U.S. shores. ""The ultimate goal is to get lower-priced and better-quality services for consumers,"" said Don Gips, head of the FCC's international bureau.
Officials say the foreign charges, or ""accounting rates,"" run five to 10 times actual costs, reflecting the power of state-run monopolies unexposed to home competition. Monopolies control more than 90 percent of the non-U.S. market.
U.S. phone companies, as a result, paid their overseas counterparts $5.5 billion more in 1995 than foreign companies paid U.S. carriers to complete calls.  
""This figure would drop in half overnight if American carriers simply paid fees even vaguely related to costs,"" FCC Chairman Reed Hundt said in a recent speech. He noted that the imbalance dwarfs the U.S. foreign aid budget of $2 billion.
The United States has big imbalances with China, Jamaica, Mexico, Hong Kong, Colombia and Argentina, among others.
""Those few countries trying to defend their monopolies are going to be nervous"" about the FCC effort, said Dan Rosen of the Institute for International Economics.
U.S. carriers support the strategy. ""You've got to move accounting rates to cost,"" said AT&T Corp Vice President Gerry Salemme. AT&T said it must pay 45 cents a minute to have its calls connected to the Dominican Republic, but that the actual cost of the termination is 7 to 8 cents a minute.
The FCC actions come as the United States is seeking to open overseas telecommunications markets through talks sponsored by the World Trade Organization.
To cut rates and open markets, the FCC is adopting a carrot-and-stick approach. Tuesday's order is meant for open markets, such as possibly those in Britain, Canada and Chile.  
The FCC will waive its ""proportionate return"" rules that limit the ability of U.S. and foreign carriers to negotiate lower rates for terminating overseas calls. To win a waiver a foreign carrier's home market must be open to competition.
The existing rules require overseas companies to turn over their long-distance calls to U.S. carriers in the same proportion U.S. carriers send calls to a foreign carrier's home market. If AT&T, for example, accounts for 60 percent of calls to a country, then that country's monopoly must hand off 60 percent of its U.S.-bound calls to AT&T.
The FCC proposal due out next month would set ""benchmark"" rates for what U.S. carriers could pay foreign carriers to complete calls. These rates, according to FCC officials, would better reflect actual costs. The agency must still work out the details of how long a country would have to lower its rates and what steps could be taken if it refused to do so.
""It literally has the potential of savings consumers billions of dollars,"" said Scott Harris, an attorney with Gibson, Dunn & Crutcher.
But the plan could rub governments the wrong way. High rates charged by their own phone monopolies can be used to maintain bloated payrolls or to subsidize local phone service.
",40
"Regulators took the first of two steps Tuesday to slash the cost of overseas phone calls for consumers and businesses, making it easier for U.S. and foreign carriers to negotiate cheaper international rates.
The Federal Communications Commission hopes to save U.S. callers billions of dollars by backing up the new rules with a plan next month to cut the charges U.S. carriers pay foreign phone monopolies to complete calls from the United States.
Americans spend about 16 cents a minute for a domestic call. But they must shell out an average of 99 cents a minute to call overseas -- even though the cost of the calls are not much different, according to FCC officials.
""At 99 cents a minute, you're not going to get a global information highway,"" complained FCC Chairman Reed Hundt.
Tuesday's rules are targeted at countries whose own phone markets are open to competition from U.S. carriers, or are in the process of opening. FCC officials cited Canada, Britain, Chile and Sweden, as well as Europe and Mexico.
The FCC will waive rules that limit the ability of U.S. carriers to negotiate cheaper calling rates with an overseas phone company whose own market is considered open. The rules were crafted to prevent market abuse by foreign monopolies.
Don Gips, head of the FCC's International Bureau, said the new rules ""will allow competitive pressures, rather than archaic rules,"" to govern the telecommunications market.
AT&T Corp. Vice President Gerry Salemme said they ""can lead to a significant reduction in the amount that American consumers pay for international telephone calls.""
Under the new approach, a company such as AT&T -- with FCC approval -- could ask competing foreign carriers to bid for the right to handle AT&T phone traffic from the United States to a foreign market.
Alternatively, a U.S. carrier could offer end-to-end service from the United States to a foreign market without using the existing rate system for completing calls.
Officials say these ""accounting rates"" run five to 10 times actual costs, reflecting the power of state-run monopolies unexposed to home competition. U.S. carriers paid their overseas counterparts $5.5 billion more in 1995 than foreign companies paid U.S. carriers to complete calls.
While the accounting rates paid by both carriers are about equal, the imbalance reflects the fact that many more overseas calls are made from the United States than into this country.
International calls from the United States account for about a quarter of all international calls worldwide.
To reduce the rates, the FCC proposal scheduled for next month would set ""benchmark"" rates for what U.S. carriers could pay foreign carriers to complete calls. These rates, according to FCC officials, would better reflect actual costs.
The agency must still work out the details of how long a country would have to lower its rates and what steps could be taken if it refused to do so.
The FCC actions come as the United States is seeking to open overseas telecommunications markets through talks sponsored by the World Trade Organisation.
The United States has big rate imbalances with China, Jamaica, Mexico, Hong Kong, Columbia and Argentina, among others. Next month's proposal is likely to ruffle feathers.
""There will be concern from countries around the world with the benchmark item. There's no doubt about that,"" said the FCC's Gips.
",40
"Television industry moguls crafting a ratings system should spell out sexual and violence content of shows, not rely solely on a system like the motion picture code, a survey of parents issued Thursday concluded.
The nationwide survey of 679 parents showed 80 percent preferred a system that specified the level of violence, sex or bad language rather than the age group for which a program is intended, as the motion picture industry's 28-year-old system does for movies.
The survey was a joint effort of the National Parent Teacher Association, the Institute for Mental Health Initiatives and University of Wisconsin researchers. It came as TV executives raced to complete a ratings system in the next month.
The executives favor an approach like the alphabetical code used by the Motion Picture Association of America (MPAA) for movies. Individual networks would rate their shows.
But the survey sponsors -- along with Rep. Edward Markey, D-Mass. -- want a system that covers content and viewer age.
""Parents want it all. They want every shred of information available about every program,"" said Markey, the author of a provision in the new communications law requiring TV makers to install a ""V-chip"" in all new sets. The device can be used with the upcoming ratings to let parents block shows they consider too violent or racy.
Markey told a news conference it would be ""very unfortunate"" if the TV industry ignored the survey results and did not incorporate the kind of system used by the Home Box Office cable-TV movie channel to rate its shows. Each HBO show is given a rating based on content such as ""MV"" for ""mild violence"" or ""SC"" for ""strong sexual content.""
Markey vowed the groups sponsoring the poll would ""scream to the high heavens"" if the TV ratings ignored program content.
MPAA President Jack Valenti, overseeing the ratings' creation, said his group welcomed all suggestions. ""We are trying to devise a TV parental guidance system which will be family friendly, easy to understand, easy to use, and most of all grounded in honorable purposes so that parents can better monitor and supervise the TV watching of their children.""
",40
"Negotiations between American Airlines and its pilots union continued into the early hours of Friday, with neither side reporting any breakthrough that would avert a midnight strike at the nation's number-two carrier.
A federal mediator refereeing the talks at a downtown hotel informed the pilots that American had rejected a key union contract proposal covering who should pilot -- and at what pay -- the carrier's smaller American Eagle planes.
Mediators are shuttling back and forth between the two sides offering hypothetical ""what if"" proposals on a variety of issues in an effort the bring the two sides closer together and prevent a midnight Friday (0500 GMT Saturday) strike by the pilots which would throw the nation's air transport system into turmoil.
""They're going to work all night, throughout the night. All day (Friday),"" said Dave Bates, a spokesman for the Allied Pilots Association, which represents American's 9,000 pilots.
He said the union is ""disappointed at the lack of progress"" so far.
""We will continue to negotiate for as long as it takes. But (Friday) night at midnight the pilots will be on strike.""
Bates said no face-to-face talks had as yet been scheduled. An American spokesman would only say that the negotiations were continuing.
Going into the talks on Thursday evening, Kenneth Hipp, chairman of the National Mediation Board, said he was hopeful an agreement could be worked out in time to avert a strike.
The union had proposed that its pilots fly the American Eagle flights, but with lower pay than pilots flying the regular American aircraft. American, however, wants to continue using lower-paid commuter pilots from a different union to fly the smaller planes.
While the mediator has informed the union of the airline's rejection of the proposal on small planes, union official said the company itself has not notified them directly of that.
The dispute also centers around the pilots' pay. They now earn an average of about $120,000 a year.
The union earlier had said it would offer a new pay proposal -- probably less than the 11.5 percent over four years it had sought. The latest reported offer from American was a six percent boost over four years.
A strike would ground 2,200 American flights on Saturday and affect about 200,000 passengers. American, a unit of AMR Corp., accounts for about 20 percent of the nation's airline capacity.
The Fort Worth, Texas-based airline is trying to rebook passengers on other carriers and has already canceled nearly all international flights scheduled for Friday night.
American Airlines spokesman John Hotard said on Thursday the carrier was canceling 12 of its domestic flights scheduled for Friday. ""There are some small domestic airports where we have no permanent place to park the planes if there is a strike, so we decided to cancel those 12 flights.""
A Transportation Department official said a strike could cost the U.S. economy up to $200 million a day.
American Airlines Chairman Robert Crandall called for binding government arbitration of the dispute, a proposal the pilots have repeatedly rejected.
""I think mandatory binding arbitration should be required"" to prevent airline strikes, Crandall told a congressional subcommittee. Binding arbitration would mean both parties agreed to abide by the decision of an arbitrator.
""I seriously doubt we could accept that,"" union spokesman Wally Pitts said.
Crandall told a hearing of a House of Representatives Transportation subcommittee he was unsure if a strike could be avoided. ""We have two choices: we can either cave in or take a strike. A strike of 90 days will destroy this airline.""
As the talks entered their fourth day of intensive bargaining, President Bill Clinton was keeping a close watch.
Clinton could intervene and name an emergency board to try to resolve the issues. Under the Railway Labor Act, which also covers airlines, the president has the power to declare a national emergency to stop a strike and to keep planes flying for 60 days. The last time such an action was taken in an airlines strike was in 1966.
But at an unrelated news conference on Thursday, Clinton repeated that the parties should use the government mediator to reach an agreement.
",40
"The federal government's bid to pry open the phone business has hit a snag that could postpone the onset of full-blown competition in the local and long-distance markets and delay cheaper phone service.
The snag came when a federal appeals court Tuesday suspended, or stayed, key parts of a Federal Communications Commission rule opening local phone monopolies to competition from long-distance carriers, cable TV operators and others.
Experts said the action could postpone competition in the $100 billion local phone market now controlled by the regional Baby Bell phone companies, until the case makes its way through the courts in coming months. A final decision could easily take a year or more.
""We're in for a very messy 1997, and the dust won't settle until fairly deep into 1997,"" said Henry Geller, a former top telecommunications official in the Commerce Department.
That, in turn, could delay the Baby Bells' entrance into the $70 billion long-distance market. The telecommunications law enacted in February lets the Bells offer long-distance only after they have opened their own markets to new rivals.
Even before the appeals court acted, government officials suggested a prolonged delay of the FCC's rules would make it tougher for regulators to allow the Bells to enter the long-distance business.
The FCC -- along with the Justice Department and state regulators -- has the final say over whether the Bells have satisfied a 14-point ""checklist"" that includes provisions of the now-suspended FCC rule.
""If the stay chills investment and retards new entry into the local marketplace, it may become more difficult for the (FCC) to authorise the Bell companies to offer long-distance (service),"" FCC Commissioner Susan Ness said in a speech only hours before the appeals court order.
And she noted that the Justice Department -- whose views ""must be accorded 'substantial weight'"" by the FCC -- already has signalled it will be reluctant to support Baby Bell entry as long as as the key parts of the FCC's proposed rules are on ice.
David Turetsky, deputy assistant attorney general in the department's antitrust division, said last month a stay would ""seriously impair"" the Bell entry process spelled out in the telecommunications law.
Any delays could delay the benefits of competition that Congress and President Clinton promised when enacting the law.
""The sooner there is competition in the local market, the consumer will benefit. And that's for sure when the Bells are allowed to go into long distance,"" said Geller.
""That will result in marketing and price wars. And the consumer again will greatly benefit.""
But Baby Bell stocks rallied after the ruling because state regulators were likely to call for lower discounts when the companies lease their phone lines to new competitors, analysts said.
GTE, the nation's largest local phone company -- which has spearheaded the legal challenge to the FCC rules -- jumped $3.625 to $42.25 on the New York Stock Exchange.
BellSouth added $2.50 to $38.875, Bell Atlantic gained $2.125 to $60.875, NYNEX rose $1.625 to $44.50, Ameritech was up $1.75 to $56.125 and Pacific Telesis rose $1.28 to $34.66, all on the NYSE.
The appeals court suspended the FCC rule until the judges consider a challenge to the measure early next year by GTE Corp., the Bells, other local carriers and state regulators.
They argue the FCC overstepped its power by requiring the Bells and local carriers to lease their phone lines to new competitors at steep discounts of up to 25 percent.
The court's action, for now, puts back in the hands of state regulators the responsibility to set such prices.
But local phone company officials discount the chance that competition will be delayed.
""The Telecommunications Act of 1996 passed by Congress in February is the law of the land and sets forth a timetable for the introduction of competition,"" said GTE Senior Vice President William Barr. He said that timetable is ""unaffected"" by the court's action and will proceed.
",40
"A television industry group is set to formally unveil its controversial system for rating programmes on Thursday so parents can better control the shows their children tune in.
The group of broadcast, cable-TV and Hollywood executives has been meeting privately since March to fashion a motion-picture style system to rate the thousands of hours of shows based on their suitability for kids of different ages.
Despite loud criticism from lawmakers, parents groups, consumers advocates, educators and others, the executives said they have decided against a content-based system that would spell out the level of sex, violence and strong language.
They called such an approach unworkable. And they said an age-based system -- such as TV-14 as suitable for children age 14 and older -- will be easy for parents to use, simple to understand, and convenient for newspapers to publish.
Jack Valenti, chief executive of the Motion Picture Association of America and head of the group developing the ratings, predicted to reporters that once more people begin to understand the new system, they will realise ""this is a hell of a lot better than what we have now.""
The ratings, to be unveiled in Washington, are expected to include six categories. Four are expected to be: TV-G for suitable for all ages; TV-PG for parental guidance suggested; TV-14 for kids 14 and older; and TV-M for mature audiences.
The other two will cover children's programs: those suitable for all kids and those for children older than seven.
The ratings will be put in use next month. TV networks and syndicators will rate their shows. News, news magazine shows such as ""60 Minutes"" and sports will be exempted.
But programmes such as ""Hard Copy"" and ""Entertainment Tonight"" are expected to receive ratings instead of being classified as bona fide news programmes, said one source.
President Clinton last week gave the system a conditional green light, saying that critics should allow the TV industry to test the ratings for 10 months before demanding changes.
Yet the controversy is unlikely to die soon. Kathryn Montgomery, president of the Centre for Media Education, a children's advocacy group, called the system ""inadequate.""
She said it ""fails to provide parents the information they need to make decisions about what their children will watch.""
Top officials at the Federal Communications Commission plan to reserve judgment until they study the system.
",40
"The television and entertainment industries vowed Thursday to use only their system for rating TV programs and promised to reject -- by legal means, if necessary -- any government-imposed plan.
Following months of work, a group of TV and Hollywood executives are scheduled next week to unveil plans for a system to rate shows based on their suitability for kids of different ages, especially those under 14 years of age.
It will be similar to the 28-year-old system of letters and numbers used by the motion-picture industry and which includes the ratings G, PG, PG-13, R and NC-17.
""We will not use any other TV rating guidelines other than the ones we are going to announce next week,"" said Jack Valenti, chief executive of the Motion Picture Association of America and head of the ""implementation group"" developing the ratings.
But parental groups, children's advocates, educators and some key lawmakers -- including Rep. Edward Markey, a Massachusetts Democrat -- have demanded that the group include a content-based system specifying the level of sex, violence and bad language.
Lawmakers have not ruled out a legislative fix.
""It is clear that the industry has so far failed to respond adequately to the fundamental interest of parents in knowing the specific content of TV shows in advance,"" Markey said at a news conference accompanied by other lawmakers and groups pushing for a content-based system like the one now used by the HBO cable channel.
At a press conference responding to Markey, Valenti lashed back. He accused Markey of trying to use government as a ""big brother"" to impose his own scheme. And Valenti vowed not to bend under pressure and alter his group's system.
""We're not going to change a word of it. We're not going to redot an 'i' or recross a 't,'"" Valenti said. ""If there is any intervention by government, we're going to be in court in a nanosecond.""
The Federal Communications Commission also must approve or reject the ratings system. If it were to reject it, the agency could call for development of an alternative plan -- one that Valenti said the industry would ignore.
Once the ratings are implemented in January, Valenti did say the industry would revisit the system after about a year to determine whether it should be changed or ""tweaked.""
""Is it perfect? Of course not. All subjective systems are flawed. So is ours,"" Valenti said.
The ratings -- expected to include six broad categories -- will not apply to news, news magazine shows such as ""60 Minutes"" or sports. TV networks and syndicators will issue the ratings, with the categories ""mingling"" age and content, according to Valenti.
Proposed guidelines leaked to the media include two for children: ""TV-K"" for kids and suitable for all ages; and ""TV-K7"" for children older than seven.
The other four are: ""TV-G"" for general audiences; ""TV-PG,"" parental guidance suggested; ""TV-14"" for parents strongly cautioned; and ""TV-M"" for mature audiences only.
The rating are to be used in conjunction with a ""V-chip"" installed in TV sets that allow parents to block out shows they consider too violent or racy.
The HBO system, developed in the mid-80s, offers ratings such as ""MV"" for ""mild violence,"" ""SC"" for ""strong sexual content"" and ""AL"" for ""adult language.""
But Valenti said that system is unworkable and is too complicated to appear in TV listings in the newspaper.
He also said a 19-member monitoring and oversight group will be created to oversee the new ratings. It will include a chairman and representives from the creative side of the industry, TV broadcasters and the cable-TV industry.
",40
"An obscure part of the new telecommunications law could restrict how phone companies use confidential customer data to peddle everything from calling plans and caller I.D. to Internet access and credit cards.
The law pits consumer advocates who fear an onslaught of telemarketers and a loss of personal privacy against local, long-distance and cellular carriers wanting to offer their customers one-stop shopping in the new communications age.
The data, which include billing records and calling patterns, are taking on added importance as local and long-distance companies, cable-TV operators and others brace to get into each other's business under the new telecom law.
""Everybody wants to use these data -- subject to the law -- for their marketing efforts, given that it's a much more competitive environment now,"" said attorney Alfred Mamlet of Steptoe & Johnson. ""There are new technologies and new markets for the companies.""
The Federal Communications Commission is drafting rules to spell out the limits set by Congress on the use of ""customer proprietary network information."" CPNI details when calls are made, the destination, the frequency and length, the number and type of phone lines ordered, and the price of the bill.
Few curbs existed before the new telecom law. The new FCC rules -- which stem from a provision in the law pushed by Representative Edward Markey, D-Mass., -- are expected in early 1997.
The agency must decide what form of customer approval a carrier must receive before using the data for marketing.
The rules will determine, for example, what if any okay is needed for a carrier to use a customer's long-distance calling pattern to pitch a cellular service if a customer is seen to make plenty of calls from the road.
Many phone companies want the FCC to avoid stringent rules requiring detailed customer approval. Industry executives argue that consumers would benefit from flexibile rules that let companies target a customer's communications needs.
""It would give us the opportunity to tailor their package of services to what they need and what they want,"" said James Spurlock, AT&T Corp.'s director of federal government affairs.
But consumer and privacy groups fear the data could fall into the wrong hands without tough curbs and clear approval.
They also fear an explosion in telemarketing: Companies could use CPNI to market a vast array of products and services unrelated to the phone service a customer actually receives.
""When consumers sign up for telehone service, they don't expect the information to be used to market non-phone services such as credit cards or investment information,"" said John Windhausen, general counsel for the Competition Policy Institute (CPI), a consumer advocacy group.
Companies already use the information. Long-distance carriers pitch cheaper plans based on a customer's calling habits. The marketing is expected to heat up.
Under contention at the FCC is whether a company can use the data derived from its long-distance business to pitch local or cellular service, without prior customer assent.
The telecom law lets carriers use CPNI without prior approval when supplying the service a customer ordered.
The FCC has proposed to classify phone service under three categories: local, long distance and cellular. CPNI from one could not be used to market another without a customer's okay.
A number of phone companies, including several regional Baby Bell companies, have asked the FCC for just one broad category that would give them greater marketing flexibility.
Texas phone regulators, by contrast, propose categories based on ""the exact services (the customer) has ordered.""
The FCC also has proposed requiring phone companies to notify customers of their right to restrict access to CPNI.
Under contention is whether the notification should be oral or written, such as a notice stuffed into a bill or posted in the ""white pages"" phone directory.
Consumer advocates, privacy groups and state regulators want advance written approval for use of the information.
Some companies -- AT&T, several of the Bells and GTE Corp. -- suggest that no response to a detailed notification about a customer's CPNI rights should amount to a customer's blessing.
",40
"The nation's distillers Thursday formally reversed their 48-year-old voluntary ban on broadcast advertising of liquor, saying whiskey and gin should be treated just like beer and wine.
The announcement -- coming two days after the presidential election and just ahead of the holiday season -- affirms the decision by Seagram Co. Ltd. in June to begin airing TV ads for its Royal Crown and Chivas Regal whiskey.
That ad campaign has unleashed criticism from lawmakers, regulators and President Clinton. And the latest decision is sure to rachet up the debate.
""For decades, beer and wine have been advertised on television and radio while the distilled spirits industry has upheld its own voluntary ban,"" said Fred Meister, president of the Distilled Spirits Council of the United States (DISCUS).
""The absence of spirits from television and radio has contributed to the mistaken perception that spirits are somehow 'harder' or worse than beer or wine and thus deserving of harsher social, political and legal treatment.""
The reversal of the voluntary ban was adopted in DISCUS's ""code of good practice.""
The announcement drew an immediate rebuke from the chairman of the Federal Communications Commission, who has made it clear he is opposed to the practice and has raised the specter of new rules that would bar such advertising.
""This decision is disappointing for parents, and dangerous for our kids,"" said FCC Chairman Reed Hundt, whose agency has begun a probe of the ad campaign.
Consumer advocates also objected. ""Today's decision by DISCUS to dump its voluntary ban marks the beginning of an open liquor-marketing season on America's children and teens,"" said George Hacker of the Centre for Science in the Public Interest.
He urged President Clinton to renew his appeal to distillers to return to the voluntary ban, and he called on the Federal Trade Commission to assist the FCC in its probe.
In Congress, Representative Joseph Kennedy has offered legislation to make it illegal to advertise hard liquor on radio or TV.
Broadcasters, meanwhile, criticised the distillers' decision but stopped short of refusing to run liquor ads.
The National Association of Broadcasters advocated to continue leaving the decision on whether to air the ads to individual TV and radio stations.
""We believe this process has served American consumers well, since individual stations make and will continue to make judgments every day on what is most appropriate for their local audiences,"" said NAB President Edward Fritts.
",40
"Regulators set aside a chunk of airwaves Thursday to let schools, businesses, communities and others bypass phone lines and send video images, data and voice over their own local wireless computer networks.
The Federal Communications Commission's decision, for example, will allow a school to create a high-speed wireless network among classrooms that could then hook up to the World Wide Web, the multimedia portion of the Internet.
That way, the school can avoid the costs of rewiring a building with high-capacity phone lines for computer use. Drilling through walls with asbestos can be expensive.
""In many buildings, including schools, a wireless connection will be a cost-effective alternative to pulling wire through walls and ceilings,"" said Commissioner Susan Ness.
Hospitals, community groups, companies and libraries also could create local high-speed networks in a building, or link up with computers and printers in nearby facilities or communities.
Users of the new spectrum will not need an FCC license, just like users of baby monitors and cordless phones that also operate over the radio spectrum.
And users will be able to cram more data on a high-speed wireless network than over a traditional phone line.
Computers equipped with antennas are expected to allow consumers, businesses, hospitals and others to create the networks. Now that the FCC has set aside the spectrum, companies are set to produce the needed technology. The equipment, when it is available, must receive FCC approval.
""Companies can now go ahead and build products for use in the spectrum,"" said Eric DeSilva, an attorney representing the Wireless Information Networks Forum. The consortium is made up of Lucent Technologies Inc., International Business Machines Corp. and other companies promoting wireless networks.
Government and industry officials said potential applications abound.
Hospitals staffers could receive on-the-spot patient data or X-rays over a wireless network throughout the building. Or a neighbourhood group could communicate within a community over the airwaves via computer.
The FCC set power limits on the different spectrum bands that will be used so that existing users of the airwaves -- such as satellites and high-powered government radar systems -- will not face interference.
Operators over the lowest spectrum band will be restricted to indoor use. Users of the middle band will be able to operate over a wider area, such as a college campus. And those using the highest band will be able to operate over several kilometres, such as within a community or with a nearby community.
",40
"Negotiations between American Airlines and its pilots union continued into the early hours of Friday, with neither side reporting any breakthrough that would avert a midnight strike at the nation's No. 2 carrier.
A federal mediator refereeing the talks at a downtown hotel informed the pilots that American had rejected a key union contract proposal covering who should pilot -- and at what pay -- the carrier's smaller American Eagle planes.
Mediators are shuttling back and forth between the two sides offering hypothetical ""what if"" proposals on a variety of issues in an effort the bring the two sides closer together and prevent a midnight Friday (0500 GMT Saturday) strike by the pilots which would throw the nation's air transport system into turmoil.
""They're going to work all night, throughout the night. All day (Friday),"" said Dave Bates, a spokesman for the Allied Pilots Association, which represents American's 9,000 pilots.
He said the union is ""disappointed at the lack of progress"" so far.
""We will continue to negotiate for as long as it takes. But (Friday) night at midnight the pilots will be on strike.""
Bates said no face-to-face talks had as yet been scheduled. An American spokesman would only say that the negotiations were continuing.
Going into the talks on Thursday evening, Kenneth Hipp, chairman of the National Mediation Board, said he was hopeful an agreement could be worked out in time to avert a strike.
The union had proposed that its pilots fly the American Eagle flights, but with lower pay than pilots flying the regular American aircraft. American, however, wants to continue using lower-paid commuter pilots from a different union to fly the smaller planes.
While the mediator has informed the union of the airline's rejection of the proposal on small planes, union officials said the company itself has not notified them directly of that.
The dispute also centres around the pilots' pay. They now earn an average of about $120,000 a year.
The union earlier had said it would offer a new pay proposal -- probably less than the 11.5 percent over four years it had sought. The latest reported offer from American was a 6 percent boost over four years.
A strike would ground 2,200 American flights on Saturday and affect about 200,000 passengers. American, a unit of AMR Corp., accounts for about 20 percent of the nation's airline capacity.
The Fort Worth, Texas-based airline is trying to rebook passengers on other carriers and has already cancelled nearly all international flights scheduled for Friday night.
American Airlines spokesman John Hotard said on Thursday the carrier was cancelling 12 of its domestic flights scheduled for Friday. ""There are some small domestic airports where we have no permanent place to park the planes if there is a strike, so we decided to cancel those 12 flights.""
A Transportation Department official said a strike could cost the U.S. economy up to $200 million a day.
American Airlines Chairman Robert Crandall called for binding government arbitration of the dispute, a proposal the pilots have repeatedly rejected.
""I think mandatory binding arbitration should be required"" to prevent airline strikes, Crandall told a congressional subcommittee. Binding arbitration would mean both parties agreed to abide by the decision of an arbitrator.
""I seriously doubt we could accept that,"" union spokesman Wally Pitts said.
Crandall told a hearing of a House of Representatives Transportation subcommittee he was unsure if a strike could be avoided. ""We have two choices: we can either cave in or take a strike. A strike of 90 days will destroy this airline.""
As the talks entered their fourth day of intensive bargaining, President Bill Clinton was keeping a close watch.
Clinton could intervene and name an emergency board to try to resolve the issues. Under the Railway Labour Act, which also covers airlines, the president has the power to declare a national emergency to stop a strike and to keep planes flying for 60 days. The last time such an action was taken in an airlines strike was in 1966.
But at an unrelated news conference on Thursday, Clinton repeated that the parties should use the government mediator to reach an agreement.
",40
"President Clinton and Congress are again set to look to airwave sales to cut the deficit, although analysts note the radio spectrum is not a bottomless money pit and prices should fall as more space is sold.
""They need to be careful that they're not killing the golden goose,"" said Joe Boyer of Hatfield Associates Inc., a Boulder, Colo. telecommunications consulting firm.
""The issue may be whether the federal government creates a glut of spectrum available,"" said Boyer, noting that such an oversupply would force down prices -- and thus the amount of money the government could fetch through auctions.
Auctions for the rights to use the airwaves have been a cash bonanza for Uncle Sam. Since the summer of 1994, the Federal Communications Commission has raised about $23 billion for the government through 12 spectrum auctions.
The FCC has sold licenses for a new generation of cellular phones known as ""personal communications services,"" or PCS, satellite TV, ""wireless"" cable TV and other services.
""It's been the most valuable asset the government has had to sell in decades,"" said budget analyst Stan Collender of Burson-Marsteller.
The president is set to unveil his fiscal 1998 budget on Feb. 6 for the year that begins next Oct. 1. White House officials have told lawmakers to expect spectrum auctions to be a part of the plan, though details are unclear.
For fiscal 1997, Clinton proposed, among other things, to auction in 2002 the ""analog"" spectrum TV broadcasters would return to the government in the transition to high-definition digital TV. The sale was projected to raise $17 billion.
But more sales could well mean lower prices.
The Congressional Budget Office last year predicted the price of valuable spectrum under 3 GHz -- airwaves that can be used for PCS, digital TV, paging, and other services -- will fall ""as more spectrum is brought to market.""
Already, there are signs of softer prices. A PCS auction that ended last month netted $2.5 billion, down 75 percent from a similar auction last May that raised $10.2 billion.
The average license price tumbled more than 90 percent.
Analysts were quick to note that smaller airwave parcels were auctioned at the latest sale and that financing terms extended by the government were not as attractive.
But they also said the drop reflected the dearth of new money available after the sky-high prices paid at last year's PCS sale and the flood of new entrants to the market.
""If everybody builds out the spectrum that has been acquired in the PCS auctions, there would be more than enough capacity for every man, woman, and child and every household pet in the United States,"" said Boyer.
While more sales could mean lower proceeds, many analysts argue that more auctions also would usher in more competitors to the market -- and thus drive down prices of cellular phone service, pagers, Internet access and other services.
""The first thing you have to think about is 'What's good for getting communications services to the public?'"" said Charles Jackson, of Strategic Policy Research, a consulting firm in Bethesda, Md. ""Only after you've solved that problem do you worry about auction revenues.""
Experts said plenty of spectrum is available to auction. ""There's a lot more spectrum out there,"" said James Gatusso of Citizens for a Sound Economy, a free-market advocacy group.
""There's much, much more that can be done,"" he said.
",40
"Federal regulators are set to kick off a two-part plan to slash rates on overseas phone calls, a move that could save consumers and companies billions of dollars but may ruffle the feathers of foreign governments.
The Federal Communications Commission is expected Tuesday to make it simpler for U.S. and foreign phone companies to negotiate cheaper rates for international calls to and from the United States.
Next month the FCC is expected to propose rules to cut the charges U.S. carriers pay foreign phone monopolies to complete overseas calls made from the United States.
""The ultimate goal is to get lower-priced and better-quality services for consumers,"" said Don Gips, head of the FCC's international bureau.
Officials say the foreign charges, or ""accounting rates,"" run five to 10 times actual costs, reflecting the power of state-run monopolies unexposed to home competition. Monopolies control more than 90 percent of the non-U.S. market.
U.S. phone companies, as a result, paid their overseas counterparts $5.5 billion more in 1995 than foreign companies paid U.S. carriers to complete calls.
""This figure would drop in half overnight if American carriers simply paid fees even vaguely related to costs,"" FCC Chairman Reed Hundt said in a recent speech. He noted that the imbalance dwarfs the U.S. foreign aid budget of $2 billion.
While the accounting rates paid by both carriers are about equal, the imbalance reflects the fact that many more overseas calls are made from the United States than into this country.
The United States has big imbalances with China, Jamaica, Mexico, Hong Kong, Columbia and Argentina, among others.
""Those few countries trying to defend their monopolies are going to be nervous"" about the FCC effort, said Dan Rosen of the Institute for International Economics.
U.S. carriers support the strategy.
""You've got to move accounting rates to cost,"" said AT&T Corp. Vice President Gerry Salemme. AT&T said it must pay 45 cents a minute to have its calls connected to the Dominican Republic, but that the actual cost is 7 to 8 cents a minute.
The FCC actions come as the United States is seeking to open overseas telecommunications markets through talks sponsored by the World Trade Organisation.
To cut rates and open markets, the FCC is adopting a carrot-and-stick approach. Tuesday's order is meant for open markets, such as possibly Britain, Canada and Chile.
The FCC will waive its ""proportionate return"" rules that limit the ability of U.S. and foreign carriers to negotiate lower rates for overseas calls. To win a waiver, a foreign carrier's home market must be open to competition.
The existing rules require overseas companies to turn over their long-distance calls to U.S. carriers in the same proportion U.S. carriers send calls to a foreign carrier's home market.
If AT&T, for example, accounts for 60 percent of calls to a country, then that country's monopoly must hand off 60 percent of its U.S.-bound calls to AT&T.
The FCC proposal due next month would set ""benchmark"" rates for what U.S. carriers could pay foreign carriers to complete calls. These rates, according to FCC officials, would better reflect actual costs.
The agency must still work out the details of how long a country would have to lower its rates and what steps could be taken if it refused to do so.
""It literally has the potential of saving consumers billions of dollars,"" said Scott Harris, an attorney with Gibson, Dunn & Crutcher.
But the plan could rub governments the wrong way. High rates charged by their own phone monopolies can be used to maintain bloated payrolls or to subsidise local phone service.
",40
"The Clinton administration is making a $36 billion bet in its new budget that companies will rush to pay big bucks for a chunk of the airwaves to roll out newfangled communications services to the public.
As a part of the bet, the administration is wagering it can overcome major political forces, such as TV broadcasters, opposed to aggressive plans for selling spectrum.
Experts are split on whether the wager will pay off.
To finance its fiscal 1998 budget, the White House proposed Thursday 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 things.
The administration also proposed to auction toll-free 888 phone numbers instead of giving them away.
The White House, however, offered few details about its grand auction plan, which covers the five years through 2002.
Many economists think the $36 billion is achievable because of the large amounts of spectrum still available and the rush by companies to develop new products incorporating the Internet and other communications services.
""There's a lot of unmet demand for frequencies that can be used to offer new services,"" said James Gatusso of Citizens for a Sound Economy, a free-market advocacy group.
""A lot of people are coming through the front door of the Federal Communications Commission asking for spectrum.""
Among the new services that could be rolled out in the future over newly available spectrum: high-speed wireless access to the Internet or mobile video services that allow drivers to download maps or traffic pictures in their cars.
Critics charge that any aggressive bid to sell spectrum to companies that want to use it for any purpose will backfire by driving down airwave prices and hurting companies -- such as wireless phone providers -- that already hold licenses.
""What they will do is drive the price of spectrum to zero and therefore kill the goose that lays the golden egg,"" said Tom Wheeler, president of the Cellular Telecommunications Industry Association, an industry trade group representing cellular carriers and other wireless phone providers.
Since 1994, the FCC has raised about $23 billion through 12 spectrum auctions for wireless cable television, satellite TV, a new generation of cellular phones and other services.
The White House proposed four auctions to raise:
-- $700 million through the sale of 888 phone numbers.
-- $17.1 billion by extending and broadening the FCC's auction powers to sell spectrum not used by TV stations.
-- $3.5 billion to sell part of the airwaves now occupied by TV channels 60-69. The channels would be made available through the transition to high-definition digital TV.
-- $14.8 billion through the sale of the analogue spectrum now occupied by TV broadcasters. The frequencies also would become available in the transition to digital TV.
The administration wants to speed up the return of the analogue spectrum to the government by requiring stations to return it by 2005. The auction would be held in 2002.
But broadcasters want to postpone any auction.
""We remain opposed to upfront auctions or accelerated giveback of broadcast spectrum. We expect the government will receive full value for spectrum once the broadcast industry transition to digital is complete,"" said Dennis Wharton, a spokesman for the National Association of Broadcasters.
The NAB supports an FCC plan for an approximately 15-year transition to digital broadcasts.
",40
"Television and Hollywood moguls on Thursday formally unveiled their controversial system to rate TV programmes, ushering in a new era meant to enable parents to control their kids' viewing habits better.
Broadcast and cable-TV networks will begin displaying the six ratings categories at the start of shows as soon as Jan. 2. The ratings will appear briefly as a small icon in the upper left-hand corner of the TV screen.
The age-based system is similar to the 28-year-old motion-picture industry ratings and will apply to nearly all shows, including cartoons and talk shows. News and sports programmes will be exempted.
President Bill Clinton, appearing in the Oval Office with leading TV and Hollywood executives, called the new ratings a ""huge step forward over what we have now, which is nothing.""
While not endorsing the system, Clinton said the ratings ""are going to give America's families more help in choosing appropriate television programming for their children.""
Even before its unveiling, the system had drawn flak from lawmakers, parent groups, children's advocates, educators and others. They want the ratings content-based, specifying the level of sex, violence and strong language.
The ratings are: TV-G for suitable for all ages; TV-PG for parental guidance suggested; TV-14 for parents of children under 14 strongly cautioned; TV-M for mature audiences only and two categories applying to children's shows: TV-Y for all children and TV-Y7 for kids seven and older.
Executives said they expected programmes such as ""Hard Copy"" and ""Entertainment Tonight"" to receive ratings instead of being exempted as bona fide news programmes.
""Our goal was to create TV parental guidelines which would be simple to use, easy to understand and handy to find, and we have accomplished it,"" said Jack Valenti, president of the Motion Picture Association of America and head of the group that developed the television ratings.
The group included representatives from the broadcast and cable-TV industries and Hollywood. ""We don't claim any divine inspiration,"" Valenti told a news conference, adding that the system was ""not written in stone."" Industry executives plan to review the ratings over the next few months.
""What we are presenting is our best offer,"" Valenti said.
Networks and producers will rate their own shows, unlike the movie industry, where an independent panel rates films. TV executives argue they have far more programmes to rate, with up to 2,000 hours a day of shows, equivalent to about 1,000 movies a day.
Critics, while welcoming the system, say it is vague, does not go far enough and will prove unhelpful to parents. Child advocacy, public health, religious and education groups plan a campaign to see that a content-based system is developed. They favour an approach in which letters such as V, S and L are used to denote the level of violence, sex and bad language.
""The system which they propose is too complicted. It's too vague. It doesn't give parents the information which they need in their homes for their kids,"" said Representative Edward Markey, a Democrat from Massachusetts and a vocal critic of the TV industry plan. He called on the industry to test both the aged-based and content-based systems side by side in the home.
But industry officials said a content-based plan would be unwieldly. They said their own system would be more practical for parents, and more convenient for newspapers to print.
The ratings stem from the telecommunications law enacted in February that requires new TV sets to include a ""V-chip."" The technology, expected to be available in a year or so, will be used in conjunction with the ratings and allow parents to screen out programmes they do not want their children to watch.
Clinton last week gave the system a conditional green light, saying critics should allow the TV industry to test the ratings for 10 months before demanding changes.
Top officials at the Federal Communications Commission will review the ratings over the next few weeks. Under the telecommunications law, the FCC must set up an advisory panel to devise a ratings system if the industry fails within a year to craft an ""acceptable"" plan.
Valenti vowed to fight any government-imposed system in court on First Amendment free speech grounds.
",40
"The television and entertainment industries vowed Thursday to use only their system for rating TV programmes and promised to reject -- by legal means, if necessary -- any government-imposed plan.
Following months of work, a group of TV and Hollywood executives are scheduled next week to unveil plans for a system to rate shows based on their suitability for kids of different ages, especially those under 14 years of age.
It will be similar to the 28-year-old system of letters and numbers used by the motion-picture industry and which includes the ratings G, PG, PG-13, R and NC-17.
""We will not use any other TV rating guidelines other than the ones we are going to announce next week,"" said Jack Valenti, chief executive of the Motion Picture Association of America and head of the ""implementation group"" developing the ratings.
But parental groups, children's advocates, educators and some key lawmakers -- including Representative Edward Markey, a Massachusetts Democrat -- have demanded that the group include a content-based system specifying the level of sex, violence and bad language.
Lawmakers have not ruled out a legislative fix.
""It is clear that the industry has so far failed to respond adequately to the fundamental interest of parents in knowing the specific content of TV shows in advance,"" Markey said at a news conference accompanied by other lawmakers and groups pushing for a content-based system like the one now used by the HBO cable channel.
At a press conference responding to Markey, Valenti lashed back. He accused Markey of trying to use government as a ""big brother"" to impose his own scheme. And Valenti vowed not to bend under pressure and alter his group's system.
""We're not going to change a word of it. We're not going to redot an 'i' or recross a 't,'"" Valenti said. ""If there is any intervention by government, we're going to be in court in a nanosecond.""
The Federal Communications Commission also must approve or reject the ratings system. If it were to reject it, the agency could call for development of an alternative plan -- one that Valenti said the industry would ignore.
Once the ratings are implemented in January, Valenti did say the industry would revisit the system after about a year to determine whether it should be changed or ""tweaked.""
""Is it perfect? Of course not. All subjective systems are flawed. So is ours,"" Valenti said.
The ratings -- expected to include six broad categories -- will not apply to news, news magazine shows such as ""60 Minutes"" or sports. TV networks and syndicators will issue the ratings, with the categories ""mingling"" age and content, according to Valenti.
Proposed guidelines leaked to the media include two for children: ""TV-K"" for kids and suitable for all ages; and ""TV-K7"" for children older than seven.
The other four are: ""TV-G"" for general audiences; ""TV-PG,"" parental guidance suggested; ""TV-14"" for parents strongly cautioned; and ""TV-M"" for mature audiences only.
The rating are to be used in conjunction with a ""V-chip"" installed in TV sets that allow parents to block out shows they consider too violent or racy.
The HBO system, developed in the mid-80s, offers ratings such as ""MV"" for ""mild violence,"" ""SC"" for ""strong sexual content"" and ""AL"" for ""adult language.""
But Valenti said that system is unworkable and is too complicated to appear in TV listings in the newspaper.
He also said a 19-member monitoring and oversight group will be created to oversee the new ratings. It will include a chairman and representives from the creative side of the industry, TV broadcasters and the cable-TV industry.
",40
"The Federal Communications Commission is expected to curb its power to approve or reject long-distance rates by ending a Depression-era rule requiring telephone carriers to notify the FCC before rate changes.
The new rules, set to be adopted on Tuesday, are meant to pump more competition into the $70 billion long-distance market and trim government red tape for AT&T Corp, MCI Communications Corp, Sprint Corp and other long-distance carriers, said FCC officials.  
The 1934 rule that is headed for the scrap heap has forced long-distance companies to notify the FCC in advance of plans to change rates or offer new services through ""tariff"" filings with the agency.
It was intended originally to let regulators review the changes while giving the public an advance look, although the language contained in the filings is arcane and read by few.
Regulators say the new approach will let companies respond more quickly to competitors' price changes -- without the need to file burdensome paperwork with the FCC.  
They also say it will reduce the opportunity for companies to collude tacitly on long-distance rates.
And carriers will have to notify residential customers directly of a rate change. Currently, they unveil any rate increases through the complex tariff filings.
The new approach represents the first major step the FCC has taken under a provision of the new telecommunications law allowing it to shed outdated rules if the public interest is not harmed.
Currently, tariff filings take effect one day after their submission to the FCC. But it has not always been that way.  
When it was considered a ""dominant"" long-distance carrier, AT&T complained that the filings offered competitors an early look at its plans, allowing the others to mimic the move and implement it beforehand.
The top long-distance company had to wait up to 60 days after a tariff filing for a new promotional plan before it could act on the plan. A year ago, the FCC ended AT&T's dominant carrier status. That also ended the long delays.  
The FCC tried to eliminate long-distance tariff filings for ""non-dominant"" carriers such as MCI and Sprint about a dozen years ago. But a court said the agency lacked the power to do so. The FCC then asked Congress to change the law.
Industry officials have sought -- but apparently without success -- to retain the option of filing tariffs for certain residential telephone plans, saying that would make it easier to let consumers know what their phone rates are.
""We think there ought to be something in place for the mass marketplace,"" said an AT&T spokesman.  
He added that tariff filings allow residential customers to know the terms and conditions of their service. And he said they save the company the expense of having to communicate those terms and conditions to individual customers.
But critics complain that such a practice would make it tougher for consumers to know when a rate rise was coming, because it would be buried in the jargon of the tariff filing.
Officials do favor ending tariff filings for big business customers, paperwork that can run hundreds of pages. Ending the practice, they say, would give carriers added flexibility to negotiate the best deals with big customers.
Business users agree.
""It allows for individual customers to negotiate the best terms and conditions for them, while preserving the normal customer-supplier confidentiality we see in other contracts,"" said Ray Cline, director of information systems for the American Petroluem Institute, an oil industry trade group.
",40
"Ameritech Corp. won an important endorsement Wednesday from Michigan regulators in its bid to become the first Baby Bell to offer long-distance telephone service from its local calling region.
The Michigan Public Service Commission voted to advise the Federal Communications Commission that it appears Ameritech has met a 14-point checklist for opening its local phone network in the state to new competitors -- such as AT&T Corp. and other companies wanting to offer local phone service.
That checklist was spelled out under last year's big communications law as a condition for local carriers to offer long-distance service from their regions.
""We're extremely disappointed with this decision. It seems to ignore the overwhelming evidence that Ameritech faces no viable local telephone competition in Michigan,"" said an AT&T spokesman. An Ameritech spokesman was not available.
The FCC will make the final determination on whether Ameritech has indeed met the technical checklist for entry into the $78 billion long-distance market.
But a negative review from Michigan would have dimmed the Chicago-based carrier's prospects considerably. The Justice Department must issue a recommendation to the FCC by Feb. 21.
Ameritech asked the FCC on Jan. 2 for permission to provide long-distance service to residents in Michigan, one of five Midwestern states in which the company provides local phone service. Ameritech has 3.5 million customers in Michigan.
Long-distance carriers such as AT&T and MCI Communications Corp. have called on regulators to reject Ameritech's request, saying the company has not yet opened its local market fully to competitors.
The Michigan commission said that in a 2-1 vote among commissioners the agency authorised the filing of its comments in the Ameritech case with the FCC.
""For many years, the Michigan Public Service Commission has supported allowing expanded choice for telephone customers,"" said commission Chairman John Strand.
""Our comments today are designed to assist the Federal Communications Commission to follow a course that will introduce more competition in the telecommunications marketplace.""
After filing its initial request with the FCC, Ameritech was forced to amend its application with an additional 1,500 pages of documents. Regulators had determined that many needed pages were missing.
Other Baby Bells are expected to ask the FCC for similar approval soon.
",40
"An obscure part of the new telecommunications law could restrict how phone companies use confidential customer data to peddle everything from calling plans and caller I.D. to Internet access and credit cards.
The law pits consumer advocates who fear an onslaught of telemarketers and a loss of personal privacy against local, long-distance and cellular carriers wanting to offer their customers one-stop shopping in the new communications age.
The data, which include billing records and calling patterns, are taking on added importance as local and long-distance companies, cable-TV operators and others brace to get into each other's business under the new telecom law.
""Everybody wants to use these data -- subject to the law -- for their marketing efforts, given that it's a much more competitive environment now,"" said attorney Alfred Mamlet of Steptoe & Johnson. ""There are new technologies and new markets for the companies.""
The Federal Communications Commission is drafting rules to spell out the limits set by Congress on the use of ""customer proprietary network information."" CPNI details when calls are made, the destination, the frequency and length, the number and type of phone lines ordered, and the price of the bill.
Few curbs existed before the new telecom law. The new FCC rules -- which stem from a provision in the law pushed by Rep. Edward Markey, D-Mass., -- are expected in early 1997.
The agency must decide what form of customer approval a carrier must receive before using the data for marketing.
The rules will determine, for example, what if any okay is needed for a carrier to use a customer's long-distance calling pattern to pitch a cellular service if a customer is seen to make plenty of calls from the road.
Many phone companies want the FCC to avoid stringent rules requiring detailed customer approval. Industry executives argue that consumers would benefit from flexibile rules that let companies target a customer's communications needs.
""It would give us the opportunity to tailor their package of services to what they need and what they want,"" said James Spurlock, AT&T Corp.'s director of federal government affairs.
But consumer and privacy groups fear the data could fall into the wrong hands without tough curbs and clear approval.
They also fear an explosion in telemarketing: Companies could use CPNI to market a vast array of products and services unrelated to the phone service a customer actually receives.
""When consumers sign up for telehone service, they don't expect the information to be used to market non-phone services such as credit cards or investment information,"" said John Windhausen, general counsel for the Competition Policy Institute (CPI), a consumer advocacy group.
Companies already use the information. Long-distance carriers pitch cheaper plans based on a customer's calling habits. The marketing is expected to heat up.
Under contention at the FCC is whether a company can use the data derived from its long-distance business to pitch local or cellular service, without prior customer assent.
The telecom law lets carriers use CPNI without prior approval when supplying the service a customer ordered.
The FCC has proposed to classify phone service under three categories: local, long distance and cellular. CPNI from one could not be used to market another without a customer's okay.
A number of phone companies, including several regional Baby Bell companies, have asked the FCC for just one broad category that would give them greater marketing flexibility.
Texas phone regulators, by contrast, propose categories based on ""the exact services (the customer) has ordered.""
The FCC also has proposed requiring phone companies to notify customers of their right to restrict access to CPNI.
Under contention is whether the notification should be oral or written, such as a notice stuffed into a bill or posted in the ""white pages"" phone directory.
Consumer advocates, privacy groups and state regulators want advance written approval for use of the information.
Some companies -- AT&T, several of the Bells and GTE Corp. -- suggest that no response to a detailed notification about a customer's CPNI rights should amount to a customer's blessing.
",40
"A U.S. appeals court in St. Louis is set to hear arguments Friday on whether to reactivate or throw out a major Federal Communications Commission order opening the $100 billion local phone market to competition.
Lawyers and analysts predict the FCC and its long-distance phone company allies will lose the latest battle to GTE Corp., the Baby Bells, other local carriers and state regulators who want to overturn the order. It spells out how new entrants to the local phone business can link to Bell local networks.
The appeals court suspended the FCC order in October, pending Friday's case. ""The FCC faces a tough uphill battle,"" said attorney Alfred Mamlet of Steptoe & Johnson. ""This case is headed for the Supreme Court.""
As a result, the FCC's ""interconnection"" order is likely to hang in legal limbo for at least a year while it is fought over in court -- a prospect analysts expect will cloud the phone industry's outlook and weigh on phone company stocks.
""It adds to the uncertainty out there,"" said analyst Scott Cleland of Schwab Washington Research Group.
The order was meant to implement the 1996 communications law, which allowed local and long-distance carriers, cable-TV operators and others into each other's business.
The appeals court, in suspending the order, sided with the local carriers and state regulators who charged that the FCC overstepped its power by issuing national rules on pricing and other matters instead of leaving those issues to the states.
The court wrote that opponents ""have a better than even chance of convincing the court the the FCC's pricing rules conflict with the plain meaning"" of the 1996 law.
With the order expected to remain on ice for a while, lawyers and analysts said state regulators and federal judges will have the chief job of prying open local phone monopolies to long-distance companies such as AT&T Corp. and others.
FCC Chairman Reed Hundt warned that piecemeal deregulation -- with judges around the nation ultimately deciding terms for opening local phone markets -- would have a ""very negative impact"" on industry efforts to raise capital.
FCC officials have said the case will not be resolved before the high court until spring 1998, at the earliest.
The order requires the Bells and other local carriers to lease their phone lines to new competitors at discounts of up to 25 percent.
The FCC also ordered local carriers to ""unbundle"" their local networks into pieces -- such as call-switching devices and operator and directory assistance -- so new competitors can lease components to complete their own networks.
The ""unbundled elements"" were to be priced at competitive levels based on the cost of new and more-efficient facilities.
In the meantime, state regulators have been issuing decisions on terms for opening the local markets. FCC Chairman Hundt said that despite the suspension of his agency's order, 29 of 31 states so far have adopted the FCC pricing policies.
But even those decisions are being challenged. GTE Corp. in particular, as well as AT&T, have appealed some of those rulings to federal courts around the country.
Henry Geller, a former FCC general counsel, blamed the legal morass on Congress, saying lawmakers ""botched"" the job of writing the 1996 law. ""The whole idea was that the courts weren't going to be determining this,"" he said.
",40
"Regulators proposed Thursday to set aside $2.3 billion a year to link schools and libraries to the Internet at discounted rates, but declined to endorse President Clinton's call to hook them up free of charge.
Eligible institutions could buy access to the computer network at discounts of 20 percent to 90 percent, under the plan offered by an eight-member board of state regulators and members of the Federal Communications Commission.
""Schools will be able to connect every single classroom to the Information Highway,"" said FCC Chairman Reed Hundt, who oversaw the panel.
""The ramp will be a high-speed, high-bandwidth, cutting-edge connection. The discounts, tailored to each school's individual level of need, will make building and maintaining the ramp truly affordable for every school.""
The Internet proposal is part of a broader plan to overhaul the multi-bilion dollar ""universal service"" program that ensures affordable phone service to rural communities and low-income neighborhoods.
Officials hope the wide-ranging proposal, which stems from the new telecommunications law, eventually will generate lower phone rates through increased competition.
But some board members fear the  plan -- to be paid for from the reveneus of phone companies, cable-TV operators and other communications carriers -- may prove too ambitious and ultimately push up rates.
""A universal service fund that taxes consumers billions of dollars a year is not only inconsistent with congressional intent, but could be extremely harmful nationwide to consumers,"" said Laska Schoenfelder, chairman of the South Dakota Public Utilities Commission.
Under the Internet provision, less well off institutions and those in out-of-the-way high-cost areas would be entitled to the larger discounts.
The plan stops short of the president's proposal to give schools and libraries free basic service, with the nation's communications carriers footing the bill.
In other areas, the board left many key provisions of its proposals vague, including the cost of the federal fund that would be used to subsidize carriers that offer phone service in high-cost rural areas and in low-income neighborhoods.
Overriding the objections of some regulators, the board proposed to fund the federal program through the interstate and intrastate revenues of telecommunications carriers.
Some state regulators objected to the use of intrastate revenues, saying such funds should be used only by the states to set up their own funds that would help provide distinct telecommunications services within their borders.
The board said that the current $3.50 a month subscriber line charge that residential customers now pay should not be increased. The charge is used to help fund universal service.
And it held out the prospect that the charge -- along with the ""access"" charges long-distance carriers pay to local phone companies to hook up to their networks -- could drop if the federal universal fund is indeed bankrolled by interstate and intrastate phone revenues.
",40
"The television industry's controversial system for rating programs is set to begin airing Wednesday on the big networks ABC, CBS, NBC and Fox.
Broadcast and cable networks will carry the ratings, though start dates will vary. Time Warner Inc.'s upstart WB network began rating shows on Dec. 22. Cable network Black Entertainment Television does not plan to use the ratings.
Following are questions and answers about the system, unveiled by TV and Hollywood executives on Dec. 19.
Question: What are the ratings?
Answer: There are six categories, with two for children's shows. Like the 28-year-old motion-picture industry ratings, the TV ratings are meant to show a program's suitability for kids of different age groups. In general, they are:
TV-Y  -- Children of all ages.
TV-Y7 -- Children seven and older.
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.
Q: How about some examples?
A: Westinghouse Electric Corp.'s CBS issued these ratings: ""Teenage Mutant Ninja Turtles,"" TV-Y7; the Rose Bowl parade, TV-G; ""Touched by an Angel,"" TV-PG; and ""Chicago Hope,"" TV-14.
Walt Disney Co.'s ABC offered the following: ""Bugs Bunny and Tweety Show,"" TV-Y; ""Sabrina, the Teenage Witch,"" TV-G; ""Lois and Clark,"" TV-PG; and ""NYPD Blue,"" TV-14.
General Electric Co.'s NBC will broadcast the Holocaust movie ""Schindler's List"" in February with a TV-M rating. And News Corp.'s Fox said the year's first episodes of ""Melrose Place"" and the ""X-Files"" will be rated TV-14.
Q: What are prime-time shows likely to receive?
A: Networks expect most will carry a middle-of-the-road TV-PG. But a show's rating can vary from episode to episode.
Q: Where will the ratings appear?
A: They will be displayed briefly as a small icon in the upper-left corner of the TV screen at the start of a show. Newspapers, TV Guide and cable publications and on-screen listing services are expected to publish the guidelines.
Q: Are all shows affected?
A: No. News and sports programs are exempted. All other programs, including cartoons and talk shows, will be rated. Each local TV station will have the final say over whether a show is rated and what rating it will receive.
Q: Who will rate the programs?
A: Networks and producers will rate their own shows, unlike the movie industry, where an independent panel made up of parents rates films. TV executives contend they have far more programs to rate, with up to 2,000 hours a day of shows.
Q: What's been the public's reaction?
A: Mixed. The ratings have drawn flak from some lawmakers, parent groups, children's advocates, educators and others. These groups say the new system does not go far enough.
They favor a system that also would specify violence, sex and foul language, using letters such as V, S and L. An example: V-PG for a program in which parental guidance is suggested because of violent scenes.
Q: What do the critics plan to do?
A: They will ask the Federal Communications Commission to reject the industry's plan. And they want the industry to test the two approaches side by side in the home.
Q: What's the industry's response?
A: It will not participate in such a test. Executives also argue their system ""mingles"" age and content. For example, the system notes a TV-14 show may contain ""sophisticated themes, sexual content, strong language and more intense violence.""
Q: What is the origin of the ratings?
A: They stem from the communications law enacted in February that requires new TV sets to include a ""V-chip."" The technology, expected to be available in a year or so, will be used with the ratings to allow parents to block certain shows.
Q: What is the FCC's role?
A: The FCC must set up an advisory panel to devise a new system if the agency considers the industry plan unacceptable.
Q: Would the industry use such an alternative?
A: No. It has vowed to fight any government-imposed plan in court on First Amendment grounds.
",40
"The Justice Department asked the Supreme Court Thursday to lift a lower court suspension of landmark federal rules aimed at prying open the nation's local telephone monopolies to competition.
The department, acting on behalf of the Federal Communications Commission, said the lower court's ""stay""  could hurt consumers by delaying the introduction of full-fledged competition in the $100 billion market.
The request comes after a U.S. appeals court based in St. Louis last week suspended key provisions of the FCC's ""interconnection"" order, which spells out how long-distance carriers, cable-TV operators and others could operate in the local phone market under the new telecommunications law.
The rules were frozen while the appeals court considers a challenge to the FCC order by GTE Corp., the so-called Baby Bell phone companies, other local carriers and state regulators who want the measure overturned.
They argue the FCC overstepped the power granted to it by Congress. The FCC, among other things, ordered the regional Bells and other local phone companies to lease their lines to new rivals at discounts of 17 percent to 25 percent.
The three-judge appeals court panel said the opponents ""have a better than even chance of convincing the court"" that the FCC's rules conflicted with the law.
But the Justice Department told the high court the appeals court action ""already imperils"" the timetable set by Congress for opening the local phone market.
""The stay draws into question not just the timing of competition in the local market, but also the timing of full entry by the Bell companies into the long-distance telephone market,"" the department added.
Long-distance carriers AT&T Corp. and MCI Communications Corp., among other companies, also asked the high court on Thursday to lift the stay.
Lawyers were divided over the likely outcome.
""They have a decent shot at lifting the stay,"" said Alfred Mamlet of Steptoe & Johnson. He noted the FCC's success last year in having Supreme Court Justice John Paul Stevens lift a lower court stay that had blocked a major FCC airwave auction.
But others were less sure. ""It's very difficult to predict,"" said Nicholas Allard of Latham & Watkins.
The Justice Department request, along with those of the long-distance companies, is expected to go to Supreme Court Justice Clarence Thomas, who oversees matters related to the St. Louis-based appeals court.
Thomas could refer the request to the full court for its consideration.
",40
"Federal and state regulators raced Wednesday to finalize a multi-billion dollar proposal to ensure all Americans get quality and affordable phone service and that schools and libraries can hook up to the Internt.
An eight-member board of state regulators and members of the Federal Communications Commission is trying to figure out the size of a federal fund to subsidize ""universal"" service.
Estimates range anywhere from $4 billion to $12 billion a year. It could influence what consumers and businesses pay for their phone bills.
""Depending on how big the dollar figures are and what the recovery mechanism is, consumers may have something at stake,"" said Mark Cooper of the Consumer Federation of America.
The panel, established by the new telecommunications law, is scheduled to unveil its plans Thursday. Several issues are at stake, some of which were unresolved at the last minute.
""All the issues are still being discussed,"" said a state official requesting anonymity. ""There will be sections where we need further clarification on issues.""
Regulators must determine how local and long-distance companies, cable-TV operators, and other telecommunications carriers foot the bill to ensure that residents of secluded rural communities and poor inner-city areas get quality, affordable phone service.
They must spell out how the nation's schools and libraries will get hooked up to the Internet and at what cost.
And regulators must determine what roles the states and federal government will play in overseeing universal service.
The board must issue its recommendations to the FCC by Friday. The agency must then issue final rules by early May.
The nation's hundreds of local phone companies now provide universal service. It is funded in part via ""access"" charges that long-distance carriers such as AT&T Corp. pay to hook up to the local phone network.
In 1994, local companies took in about $21 billion in interstate access charges. The seven regional Baby Bells received about $17 billion of that amount. Long-distance companies want those charges slashed.
Following are the issues the joint board is grappling with:
-- The extent to which schools and libraries should be hooked up to the Internet at discounted rates.
President Clinton has proposed giving these institutions free basic service, with the nation's communications carriers paying the tab. Members of the joint board disagree on whether every school, or every classroom, should be wired.
There also is disagreement over what discounts schools and libraries should receive.
-- The type of funding mechanism that would be used to pay for universal service. The telecom law requires that companies offering interstate phone service -- or virtually all carriers -- must foot the bill for universal service in an ""equitable and non-discriminatory"" manner.
A national fund will be established to pay for universal service. State regulators want the ability to establish and oversee their own funds as well. Those funds would be backed by intrastate phone revenues.
-- How to ensure phone service to low-income consumers. Poor Americans currently receive subsidized service through two plans, ""Lifeline Assistance"" and ""Link Up America."" Both are expected to be retained, expanded and improved.
-- How to determine the cost of subsidies for companies that offer phone service in high-cost, out-of-the-way areas such as rural communities.
The joint board has been examining whether to calculate such costs based on existing costs of providing such service, or a new model spelling out different ""proxy"" prices that would be used as a reference by regulators. The proxy prices would influence how much subsidies carriers would receive.
",40
"The Federal Communications Commission's new rules opening the local telephone market to competition are likely to survive a slew of legal challenges leveled by state regulators and local phone companies, lawyers predicted Wednesday.
They said it is unlikely a federal court would overturn the core of the ""interconnection"" rules.  They said such a move would happen only if the FCC acted arbitrarily, or grossly overstepped its legal boundaries by making the rules inconsistent with the new telecommunications law.  
But lawyers do not believe the FCC has overstepped the law. ""Unless the commission has really overstepped the bounds, no court is going to be eager to overturn this carefully constructed apple cart,"" said attorney Jeffrey Olson with Paul, Weiss, Rifkind, Wharton & Garrison.
Scott Harris, a former top FCC official who is now an attorney with Gibson, Dunn & Crutcher, echoed that view.
""The commission will eventually win in court,"" he said.
State regulators already have filed suit to block the new rules, which the FCC issued last month.  
On Wednesday, the New York Public Service Commission said it asked the U.S. Court of Appeals in New York to annul the rules, which implement the 1996 Telecommunications Act.
The regulator said the FCC rules are an intrusion on the state's authority to set local telecommunications policy.
Last week, the National Association of Regulatory Utility Commissioners -- which represents state regulators -- said it would ask the courts to offer a speedy review of the rules.
The regulations are designed to break open local phone monopolies and give long-distance companies, cable television firms and others a crack at offering local phone service.  
Meanwhile, GTE Corp and Southern New England Telecommunications Corp said they would ask a federal appeals court in Washington to block the rules.
BellSouth Corp said it would ask a federal appeals court to overturn the rules, charging that the FCC had ""gone far beyond the intent of Congress.""
U S West Communications Group is exploring legal options, including a legal challenge or having the court set aside certain components of the rules through a ""stay.""  
In addition, the United States Telephone Association, a trade group representing the Baby Bells and local phone companies, said it is exploring its legal options and plans to be involved in the appeals process.
But lawyers think the rules will withstand such moves.
""The (FCC) did such a good job here it is going to be sustained on appeal,"" said Harris of Gibson, Dunn & Crutcher.
Lawyers said that while a court could rule against the FCC on smaller aspects of the interconnection rules, the heart of the rules should remain unscathed.  
Still, lawyers hedged their bets and said it was possible that the FCC could lose and that the legal challengers could pull a rabbit out of the hat and have the rules overturned.
""You may get lucky.  You may win the lottery,"" said Olson of Paul, Weiss, explaining the tactics behind the challenges.
""If I were a betting man, the odds favor the commission over the petitioners,"" said former FCC General Counsel Henry Geller.  ""But I wouldn't put a lot of money on it.""
",40
"Lawmakers and law-enforcement officials voiced support Wednesday for tougher laws to bar eavesdropping on cellular phone calls, following the uproar over Newt Gingrich's intercepted call.
A House telecommunications subcommittee is training its sights on a little-enforced law banning the sale, manufacture and importation of scanners that can pick up cellular calls.
Despite the 1992 law, scanner enthusiasts have used legal loopholes to modify tens of thousands of otherwise legal scanners so they can overhear cellular traffic. An estimated 10 million legal scanners are in the hands of the public.
""Our goal is to make sure that the sale of this kind of equipment drops precipitously,"" declared Representative Edward Markey, a Massachusetts Democrat and author of the law.
Markey, speaking at a hearing of the subcommittee, called the modified scanners ""a great danger to the presumption of privacy"" enjoyed by users of cellular phones.
Markey expressed support for closing the necessary loopholes to make it tougher for scanner operators to illegally tap in on cellular calls.
The head of the subcommittee, Representative Billy Tauzin, R-La., also said ""there is a problem in enforcement.""
He noted the Federal Communications Commission refers potential criminal cases to other agencies ""that may have less interest in enforcing the anti-intercept laws, due to other, and perhaps, more important law-enforcement priorities.
""Perhaps a solution is to rationalise the respective enforcement roles of the FCC, the Justice Department and the FBI,"" Tauzin added.
Last month, the FBI opened an investigation into the taping and leaking of an embarrassing conference call between House Speaker Gingrich and his top lieutenants.
The probe came after a Florida couple said they delivered a tape of the cell-phone conversation to the senior Democrat on the House Ethics Committee, which was deliberating over a politically charged case involving Gingrich.
A transcript of the tape was published in two newspapers two days later, prompting Republican calls for an FBI criminal probe into the source of the tape.
Federal law also makes it a crime to intentionally intercept or disclose the contents of a phone call, regardless of whether it is over a hard-wired, cellular or cordless phone. Criminal violation is punishable by a penalty of up to five years in jail and a $250,000 fine.
But in the case of wireless calls in particular, the law is little enforced and penalties are light because cellular traffic is so easily intercepted.
Unless there are ""aggravating"" circumstances, such as a repeat offence, eavesdropping on a cellular call is treated as an infraction, with no jail time and a maximum fine of $5,000.
Deputy Assistant Attorney General Robert Litt suggested to lawmakers they explore ""whether it continues to make sense"" to levy different penalties for eavesdropping on the different types of calls.
""From the point of view of the person having the conversation, the invasion of privacy is the same,"" he said.
",40
"U.S. Vice President Al Gore on Wednesday defended last year's telecommunications law against critics who charge it is a failure, saying that the Clinton administration has no plans to try and reopen the act.
""This is the first year of a process of change that will take quite some time,"" Gore told a group of reporters. He also noted that several key provisions of the sweeping law have yet to be implemented.  
The law, enacted last February 8, ripped down 62-year-old legal barriers and encouraged local and long-distance carriers, cable-TV operators, electric utilities and others to invade each other's backyards.
Gore said the difficult negotiations over the bill during the prior four years have led most participants to realize just how delicate and complex the legislation is.
""Most reasonable people believe it will be a little time before much of it is opened up,"" Gore said, echoing the view of several lawmakers on Capitol Hill.  
But critics -- including influential Arizona Republican Senator John McCain and consumer groups -- complain that despite the bill's enactment, the $100 billion local phone market remains a monopoly run by the Baby Bells and other local carriers.
They also note that the $78 billion long-distance market remains dominated by AT&T Corp, MCI Communications Corp and Sprint Corp.
Prices for communications services, instead of falling, are rising. Cable-TV rates jumped 7.8 percent last year, more than double the 3.3 percent rise in consumer prices.  
Residential interstate long-distance rates rose 3.7 percent, while intrastate long-distance rates jumped 6.1 percent.
Gore noted, however, that the increases in cable-TV rates are not a result of the new law and that they come within the guidelines established by a major 1992 cable-TV law.
Meanwhile, big cable-TV operators such as Time Warner Inc and Tele-Communications Inc have watered down plans to offer phone and other services and are instead defending their own turf.  
Gore said he was ""surprised"" by those decisions, but added that it has not been universal among all cable companies.
""I rather suspect the pioneers who make these investments will be handsomely rewarded by the market,"" Gore said. That, in turn, should spur other cable companies to take the plunge and diversify their offerings.
Meanwhile, Gore aide Greg Simon told reporters that the administration is sticking by its proposal for an expedited auction of analog spectrum that will be returned by television broadcasters during the transition to digital TV.
Under the administration plan, the government would auction the spectrum in 2002, with digital TV stations required to return their analog channel to the government no later than 2005.
",40
"Supreme Court Justice Clarence Thomas refused Thursday to reinstate landmark federal rules aimed at prying open the nation's $100 billion local telephone market to full-fledged competition.
Thomas let stand, without comment, a U.S. appeals court order suspending key parts of the Federal Communications Commission's ""interconnection"" rules. The FCC, long-distance giants AT&T Corp. and MCI Communications Corp., and other phone companies had asked Thomas to restore the rules, but he rejected the request.
The FCC and the long-distance companies immediately submitted a new request for the high court to lift the lower court's ""stay."" The matter is expected to be taken up by the entire Supreme Court for consideration. In the meantime, deregulation of the nation's local phone monopolies remains in legal limbo.
The 8th U.S. Circuit Court of Appeals, based in St. Louis, issued its stay on Oct. 15 while it considers a challenge to the rules, which spell out how long-distance carriers, cable-TV operators and others can link up to the local phone market under the new telecommunications law. Oral arguments are set for January.
GTE Corp., the Baby Bell phone companies, other local carriers and state regulators want to overturn the rules, saying the FCC overstepped its authority and usurped state powers to issue policies on pricing and other matters. Local companies and state regulators had requested the stay.
""We're gratified that the court declined to lift the stay. We are anticipating that the appeals process (against the FCC rules) will go forward and we think that is the right decision,"" said Bell Atlantic Corp. spokesman Jay Grossman.
The FCC and the long-distance companies had told the high court the stay ran counter to the telecom law and would hurt consumers by delaying the introduction of competition in the local market.
Thomas oversees appeals from the St. Louis-based appeals court.
The FCC rules, adopted in August, are intended to serve as a guide to negotiations between local phone companies and new rivals seeking to enter the local market.
They also are intended to serve as a reference for state arbitrators overseeing stalled negotiations.
The FCC rules, among other things, require the Bells and other local carriers to lease their phone lines to new competitors at steep discounts of up to 25 percent.
With the stay in place, state regulators will hold sway in determining what pricing and other policies will apply to the interconnection agreements between the Bells and GTE and new market entrants. Regulators in several states already have begun to issue preliminary arbitration agreements.
Scott Cleland, an analyst at the Washington Research Group, said the decision to leave the stay in place throws the process of telecommunications deregulation into uncertainty.
""It decentralizes the deregulation process down to the states and injects a lot of potential uncertainty over time,"" he said.
",40
"Regulators took the first of two steps Tuesday to slash the cost of overseas phone calls for consumers and businesses, making it easier for U.S. and foreign carriers to negotiate cheaper international rates.
The Federal Communications Commission hopes to save U.S. callers billions of dollars by backing up the new rules with a separate proposal to be unveiled next month to cut the charges U.S. carriers pay foreign phone monopolies to complete calls from the United States.
Americans spend about 16 cents a minute for a domestic call. But they must shell out an average of 99 cents a minute to call overseas -- even though the cost of the calls are not much different, according to FCC officials.
""At 99 cents a minute, you're not going to get a global information highway,"" complained FCC Chairman Reed Hundt.
Tuesday's rules are targeted at countries whose own phone markets are open to competition from U.S. carriers, or are in the process of opening. FCC officials cited Canada, Britain, Chile and Sweden, as well as Europe and Mexico.
Under the plan announced Tuesday, the FCC will waive rules that limit the ability of U.S. carriers to negotiate cheaper calling rates with an overseas phone company whose own market is considered open. The rules were crafted to prevent market abuse by foreign monopolies.
Don Gips, head of the FCC's International Bureau, said the new rules ""will allow competitive pressures, rather than archaic rules,"" to govern the telecommunications market.
AT&T Corp. Vice President Gerry Salemme said they ""can lead to a significant reduction in the amount that American consumers pay for international telephone calls.""
Under the new approach, a company such as AT&T -- with FCC approval -- could ask competing foreign carriers to bid for the right to handle AT&T phone traffic from the United States to a foreign market.
Alternatively, a U.S. carrier could offer end-to-end service from the United States to a foreign market without using the existing rate system for completing calls.
Officials say these ""accounting rates"" run five to 10 times actual costs, reflecting the power of state-run monopolies unexposed to home competition. U.S. carriers paid their overseas counterparts $5.5 billion more in 1995 than foreign companies paid U.S. carriers to complete calls.
While the accounting rates paid by both carriers are about equal, the imbalance reflects the fact that many more overseas calls are made from the United States than into this country.
International calls from the United States account for about a quarter of all international calls worldwide.
To reduce the rates, the FCC proposal scheduled for next month would set ""benchmark"" rates for what U.S. carriers could pay foreign carriers to complete calls. These rates, according to FCC officials, would better reflect actual costs.
The agency must still work out the details of how long a country would have to lower its rates and what steps could be taken if it refused to do so.
The FCC actions come as the United States is seeking to open overseas telecommunications markets through talks sponsored by the World Trade Organisation.
The United States has big rate imbalances with China, Jamaica, Mexico, Hong Kong, Columbia and Argentina, among others. Next month's proposal is likely to ruffle feathers.
""There will be concern from countries around the world with the benchmark item. There's no doubt about that,"" said the FCC's Gips.
",40
"The television industry's new ratings system is a bust and is rife with inconsistencies that make it tougher for parents to pick shows appropriate for kids, a conservative media watchdog group charged in a new study on Tuesday.
The Media Research Centre reviewed 150 hours of shows in the two weeks that ended Jan. 16 on six broadcast networks: ABC, CBS, Fox, NBC, UPN and WB. The study concluded the age-based system, which began airing Jan. 1, was confusing and contradictory.
TV officials said it was too soon to judge.
The study, for example, said 61 percent of shows got a middle-of-the-road TV-PG rating -- parental guidance suggested -- although about half of these shows contained obscenities while half did not.
Words such as ""ass,"" ""bastard,"" and ""son of a bitch"" were typical on PG shows, and while an obscenity for sexual intercourse was bleeped out three times, it was understandable when uttered, the study said.
It also charged there was no consistency within different episodes of a series. In an episode of CBS's ""Moloney,"" a girl shot her uncle. The man fell over dead with no blood. That bloodless depiction drew a TV-14, for parents of kids under 14 strongly cautioned.
An episode a week later had a lesser PG rating even though it showed a bloody torture scene, the group said. In that episode a man put a razor blade in his wife's hand, then clasped the hand between his own and squeezed it violently, forcing the blade into her hand and causing the hand to bleed.
""After only a few weeks of the new system, it is apparent that those who said it would never work were right,"" said Brent Bozell, chairman of the Media Research Centre.
Bozell told a news conference the system ""is a failure and should be junked at the earliest possible opportunity.""
Others from the opposite end of the political spectrum said the study's findings backed their own view.
""You can't tell what the content of the shows are from the ratings,"" said Kathryn Montgomery of the Centre for Media Education, a children's advocacy group.
A number of groups representing lawmakers, parents, children's advocates, educators and others believe this system is too vague and advocate a content-based system that would specify violence, sex and strong language, using letters such as V, S and L.
The current ratings have two categories for children: TV-Y, children of all ages, and TV-Y7, children 7 and older.
Aside from TV-PG and TV-14, the other two categories are: TV-G, suitable for all ages; and TV-M, for mature audiences only.
TV industry officials stressed that their system was still in its infancy and that it was too early to draw conclusions.
""The television industry's parental guidelines system is barely 42 days old. Before its critics attempt to kill it in the cradle, it should be given a fair chance to establish itself,"" said Martin Franks, CBS Inc. senior vice president.
Congress was expected to hold hearings later this month on the system's effectiveness.
",40
"Deregulation of the $100 billion local telephone market is progressing -- but not by the script written by the Federal Communications Commission.
Although the Supreme Court Tuesday declined to revive key parts of the FCC's landmark rules for prying open local phone monopolies, the march to competition is not dead, industry and government officials agree, and earlier fears that consumers would not see lower rates anytime soon may be overblown.
""Things haven't come to a halt,"" said Henry Geller, a former FCC general counsel. ""It's not the end of the world.""  
But the deregulation road map has changed.
State regulators, not the FCC, are calling many of the shots over how to open the local market to competition from the likes of long-distance carriers such as AT&T Corp, cable-TV operators, utilities and other companies.
The states do, however, appear to be taking account of the FCC's now-defunct rules governing the prices new entrants to the local business must pay to acess the existing network controlled by the Baby Bells and other local carriers.  
FCC Chairman Reed Hundt -- who last month charged that an appeals court order suspending the FCC rules amounted to a ""monkey wrench"" in the  deregulation process -- now sees matters differently. ""I'm pretty encouraged as of this moment about the general trend here,"" he said last Friday.
What's more, long-distance carriers such as AT&T are not now sounding alarm bells.
And despite warnings that state regulators would give local carriers preferential treatment once the FCC rules were suspended, the Baby Bells and other local companies concede that state decisions so far represent a ""mixed bag"" for them.  
BellSouth Corp Vice President Randy New insists ""it is impossible not to conclude"" the states are being independent.
Last month, a U.S. appeals court in St. Louis suspended key provisions of the FCC's ""interconnection"" rules that spell out how new entrants can hook up to the local network under the new communications law.
The court said the FCC likely erred when writing them. The Baby Bells, GTE Corp and other local carriers and state regulators want the rules overturned.  
They argue that the FCC unfairly snatched from the states power to issue policies governing pricing and other matters.
Thanks to the appeals court order, state regulators are responsible for deciding important pricing issues. The FCC rules prescibed standardized prices for all 50 states.
Lawyers and industry officials agree that even though the FCC rules are suspended, their influence still lingers.
Regulators in Texas, Maryland, Virginia, Pennsylvania, Iowa, and elsewhere have not strayed far from them in arbitration decisions they've issued involving AT&T and MCI Communications Corp. and the Baby Bells.  
The decisions lay the groundwork for how the two long-distance giants access the local network.
""So far, states are taking an approach generally consistent with the FCC's rules,"" said Richard Levine of the management consulting firm A.T. Kearny Inc.
The FCC required the Baby Bells to lease their networks in bulk at discounts of 17 percent to 25 percent.
The FCC also ordered local carriers to ""unbundle"" their networks into seven pieces that new rivals could lease to complete their own networks. The price of the pieces -- such as call-switching devices and operator assistance -- were to be based on the cost of new and more efficient facilities.
""In general, the states so far are very consistent with the FCC's interconnection order and with the general pricing construct the FCC laid out,"" said AT&T Vice President Steve Davis.
Predicted Dan Hubbard, a senior vice president for a division of SBC Communications Inc : ""There will be competition in the local markets by the early part of 1997.""
",40
"The government's largest wireless phone auction ended Tuesday, with prices taking a U-turn back toward earth after 125 companies bid a total of $2.5 billion to offer a new generation of cellular service.
The total was down 75 percent from a similar Federal Communications Commission auction that raised $10.2 billion last May. The average price for a license to provide ""personal communications services,"" or PCS, tumbled more than 90 percent.
PCS technology is expected to turn the wireless phone into a mass-market product, allowing consumers to use different communications services -- such as phone, paging, fax and Internet access -- through a single handheld device.
The drop reflected the flood of new entrants into the wireless phone market, a dearth of new money after the sky-high prices paid at last year's PCS sale, and the smaller slice of airwaves covered by the new licenses, analysts said.
The top bidder this time around was a unit of No. 3 long-distance carrier Sprint Corp. It bid $544 million for 160 licenses in Chicago, Houston, and Atlanta, among other cities.
Next was a unit of long-distance giant AT&T Corp., which bid $407 million for 222 licenses in New York, Los Angeles and elsewhere, followed by a unit of BellSouth Corp., which bid $205 million for 39 licenses.
The No. 4 bidder was OPCSE-Galloway Consortium, a consortium made up of Omnipoint Corp. of Arlinton, Va., and Galloway Entrepreneurs of Charlottesville, Va. It bid $181 million for 109 licenses.
The FCC sold 1,479 PCS licenses nationwide in three different blocks, making this the most licenses sold at once. A third were reserved for small companies. Markets that generated the highest bidding were New York, Chicago and Los Angeles.
Based on the population sizes covered by the licenses, the average bid at the auction was just $3.32 a person.
That was down from the average bid of $39.88 at last May's ""C-Block"" sale, which was reserved for small companies. Analysts called those prices too high for companies to make much money.
The FCC's first PCS auction, which raised $7.7 billion and ended in March 1995, had an average bid of $15.54.
""It's phenomenally cheaper,"" said Jonathan Foxman, vice president of Americall International, a Phoenix-based PCS firm that bid at the auction.
Mark Lowenstein, a vice president with Boston consulting firm Yankee Group Inc., called the latest prices ""more reflective of the current market reality.""
Analysts listed several factors behind the lower prices.
The airwave parcels sold, at 10 megahertz (MHz) each, were a third the size of the 30 MHz parcels sold at the two prior auctions and thus less attractive. The permits cover less geographic area.
Analysts also said the wireless market was getting crowded with companies holding PCS and traditional cellular licenses -- meaning less profits.
""The market is going to be too crowded,"" predicted P. William Bane, a director at Mercer Management Consulting.
The steep prices at last year's PCS auction meant less money available this time around. ""The latest prices are an indication that people have run out of money,"" said Bane.
In addition, analysts said, Wall Street has not rushed to extend financing to PCS providers.
",40
"The Federal Communications Commission reined in its regulation of long-distance telephone rates Tuesday by scrapping a Depression-era rule requiring phone carriers to tell the agency beforehand of rate changes.
FCC officials said the move was designed to inject more competition into the $70 billion long-distance market and cut thousands of pages of government red tape for long-distance companies such as AT&T Corp. and MCI Communications Corp.
But industry officials and consumer advocates argued the new approach will lead to consumer confusion and make it tougher for consumers to get the best possible deals.
The 1934 rule the FCC ended forced long-distance carriers to tell the FCC ahead of time of plans to change rates or offer new services via ""tariff"" filings with the agency.
The rule was intended originally to let regulators approve or reject the changes while giving the public an advance look.
Under the new approach, companies will be required to disclose their rates and conditions to the public, such as through ad campaigns or over the Internet computer network.
FCC officials said the onset of greater competition in the long-distance market made the old rule outdated. They said that few people actually read the complex filings.
Officials said elimination of the tariff requirement removes the opportunity for long-distance carriers to tacitly collude on phone rates by getting a preview of their competitors' pricing policies.
""Competition will intensify and consumer benefits will increase as a result,"" said Commissioner Susan Ness.
The tariff filings currently take effect one day after their submission to the FCC. When AT&T was classified a ""dominant"" carrier, the No. 1 long-distance company had to wait up to 60 days. The FCC ended AT&T's dominant status last fall.
The new approach is the first major step the FCC has taken under a part of the new telecommunications law allowing the agency to shed outdated rules, as long as the public interest is unharmed. The new rules will take effect in nine months.
""We think it's a terrible mistake,"" said Mark Cooper of the Consumer Federation of America. ""You need informed choices."" He noted that groups such as his use the data from the tariff filings to help consumers find the best phone packages and avoid questionable deals.
Industry officials had sought -- but without success -- to retain the option of submitting tariff filings for certain residential and small-business phone plans, saying that would make it easier for customers know their phone rates.
""While AT&T has always favoured less regulation, we're concerned the FCC's decision to mandate the end of tariffs will lead to more consumer confusion and possible litigation,"" said AT&T Vice President Gerry Salemme.
",40
"Following weeks of talks, representatives from the television and computer industries reached an agreement in principle Monday on a broadcast standard for a new generation of high-definition digital TV.
The accord is aimed at allowing the Federal Communications Commission to finalise by year's end a government-prescribed standard for advanced digital TV, which offers cinema-quality pictures and CD-quality sound. TV manufacturers, as a result, hope to begin bringing digital-TV receivers to market in 1998.
While the accord between the computer, broadcast and consumer electronics industries calls on the FCC to issue a broadcast transmission standard, the agency would not mandate key aspects of digital TV technology.
Instead, the eventual shape of the TV screen and the technology for putting images on to the screen would be dictated by the market -- and not a government agency.
FCC officials welcomed the pact. ""I am confident that, based on today's announcement, the FCC can act before the end of 1996,"" Commissioner Susan Ness said in a statement.
FCC Chairman Reed Hundt said, ""Our goal has been to trust the market, not government, to define the digital television of the future. Today's agreement is wholly welcome.""
Computer companies, led by Microsoft Corp. Chairman Bill Gates, had objected to the broadcast standard the FCC initially proposed in May, saying it would work poorly with computers and stifle the the convergence of TV and computer technologies.
The long-promised convergence would allow consumers to watch TV and surf the Internet via the same ""smart box.""
The latest round of talks, which were held in Washington, also resolved objections raised by Hollywood directors, actors and cinematographers who complained that the proposed screen size would mangle images in wide-screen films.
The FCC proposal stalled after the Clinton administration made an election-year reversal in August and warned the plan could be ""overly prescriptive"" and could ""stymie"" development of new products and services.
It initially backed the plan, but reversed itself after the objections from the computer industry and Hollywood.
""If the FCC acts this year, it could make high-definition TV a reality for consumers in 1998,"" said Gary Shapiro, president of the Consumer Electronics Manufacturers Association, a trade group representing TV makers.
The latest talks involved representatives for TV broadcasters, the big networks, TV manufacturers Philips Electronics N.A. Corp. and Thomson Consumer Electronics, plus Microsoft, Intel Corp., Compaq Computer Corp., and Apple Computer Inc.
The initial FCC proposal stemmed from a recommendation by an advisory panel that included representatives from the entertainment, broadcast, electronic and computer industries. The plan took more than eight years to develop.
The negotiations were initiated after a request last month from Commissioner Ness. She set a Nov. 25 deadline for the negotiators to reach agreement, although the date was not legally binding.
",40
"The Supreme Court Tuesday declined a request by federal regulators and long-distance phone companies to reactivate landmark rules intended to pry open the nation's local phone monopolies to competition.
The denial means key terms and conditions for deregulating the $100 billion local phone market will for now depend on the decisions of state regulators in the 50 states -- instead of on uniform rules issued by the Federal Communications Commission.
The denial was a defeat for the FCC and long-distance giants AT&T Corp.  and MCI Communications Corp., which had sought to reinstate FCC rules suspended by a U.S. appeals court pending a legal challenge to the rules. Supreme Court Justice Thomas had declined to restore them.
It was a victory for the regional ""Baby Bell"" companies, GTE Corp.  , other local carriers and state regulators who are seeking to overturn the rules in the appeals court in St. Louis. They argue that the FCC unfairly snatched from the states power to issue policies governing pricing and other matters.
The rules spell out how long-distance companies, cable-TV operators, utilities and others wanting to get into the local phone business can plug into local networks under the new federal telecommunications law.
""For all practical purposes the states have complete control over the prices new entrants will pay to share the existing telephone networks during the critical period when competition is supposed to begin in local telephone markets,"" FCC Chairman Reed Hundt said after the high court's denial.
The appeals court temporarily suspended the rules last month, saying the FCC probably erred when it drafted them.
On Oct. 31, Justice Thomas declined a request by the FCC and its long-distance allies to lift the lower court's ""stay."" They separately asked Justices Ruth Bader Ginsberg and John Paul Stevens to reconsider the request, and the justices referred the matter to the entire court.
""The stay prevents grossly arbitrary and distored pricing rules from going into effect and ruining the whole process,"" said GTE General Counsel William Barr. ""It does not delay the timetable set forth in the Telecommunications Act of 1996 for the introduction of competition, but instead allows for a more level playing field.""
Oral arguments in the case are set for January. FCC Chairman Hundt conceded Friday it was unlikely the appeals court would decide in favour of the FCC, and he doubted that the rules would be put into effect for at least 1-1/2 years, if ever, while they were fought over in the courts.
Hundt was encouraged, however, by the actions of state regulators arbitrating connection agreements between the Bells and their long-distance rivals.
He said key provisions of the arbitration decisions issued thus far were similar to the suspended FCC rules.
Iowa, Texas, Maryland, Virginia and Pennsylvania have been among the states that have issued decisions that will lay the groundwork for arbitrated agreements between the Bells and AT&T, MCI and No. 3 long-distance company Sprint Corp.
""There hasn't been any evidence that the states are going off and doing any wild and crazy stuff,"" said analyst Robert Mayer of Deloitte & Touche Consulting Group.
",40
"Deregulation of the $100 billion local telephone market is progressing -- but not according to the script written by the Federal Communications Commission.
Although the Supreme Court Tuesday declined to revive key parts of the FCC's landmark rules for prying open local phone monopolies, the march to competition is not dead, industry and government officials agree. In addition, fears that consumers would not see lower rates anytime soon may be overblown.
""Things haven't come to a halt,"" said Henry Geller, a former FCC general counsel. ""It's not the end of the world.""
But the deregulation road map has changed.
State regulators, not the FCC, are calling many of the shots over how to open local markets to competition from the likes of long-distance carriers, cable-TV operators, utilities and other companies.
The states do, however, appear to be taking account of the FCC's now-defunct rules governing the prices new entrants to the local business must pay to acess the existing network controlled by the Baby Bells and other local carriers.
FCC Chairman Reed Hundt -- who last month charged that an appeals court order suspending the FCC rules amounted to a ""monkey wrench"" in the  deregulation process -- now sees matters differently. ""I'm pretty encouraged as of this moment about the general trend here,"" he said last Friday.
What's more, long-distance carriers such as AT&T Corp. are not now sounding alarm bells.
Despite warnings that state regulators would give local carriers preferential treatment once the FCC rules were suspended, the Baby Bells and other local companies concede that state decisions so far represent a ""mixed bag"" for them.
BellSouth Corp. Vice President Randy New insists ""it is impossible not to conclude"" the states are being independent.
Last month, a U.S. appeals court in St. Louis suspended key provisions of the FCC's ""interconnection"" rules, which spell out how new entrants can hook up to the local network under the new communications law.
The court said the FCC likely erred when writing them. The Baby Bells, GTE Corp. and other local carriers and state regulators want the rules overturned.
They argue that the FCC unfairly snatched from the states power to issue policies governing pricing and other matters.
Thanks to the appeals court order, state regulators are responsible for deciding important pricing issues. The FCC rules prescibed standardised prices for all 50 states.
Lawyers and industry officials agree that even though the FCC rules are suspended, their influence still lingers.
Regulators in Texas, Maryland, Virginia, Pennsylvania, Iowa, and elsewhere have not strayed far from them in arbitration decisions they've issued involving AT&T and MCI Communications Corp. and the Baby Bells.
The decisions lay the groundwork for how the two long-distance giants access the local network.
""So far, states are taking an approach generally consistent with the FCC's rules,"" said Richard Levine of the management consulting firm A.T. Kearny Inc.
The FCC required the Baby Bells to lease their networks in bulk at discounts of 17 percent to 25 percent.
The FCC also ordered local carriers to ""unbundle"" their networks into seven pieces that new rivals could lease to complete their own networks. The price of the pieces -- such as call-switching devices and operator assistance -- were to be based on the cost of new and more efficient facilities.
""In general, the states so far are very consistent with the FCC's interconnection order and with the general pricing construct the FCC laid out,"" said AT&T Vice President Steve Davis.
Dan Hubbard, a senior vice president for a division of SBC Communications Inc., predicted: ""There will be competition in the local markets by the early part of 1997.""
",40
"The nation's distillers Thursday formally reversed their 48-year-old voluntary ban on broadcast advertising of liquor, saying whiskey and gin should be treated just like beer and wine.
The announcement -- coming two days after the presidential election and just ahead of the holiday season -- affirms the decision by Seagram Co. Ltd. in June to begin airing TV ads for its Royal Crown and Chivas Regal whiskey.
That ad campaign has unleashed criticism from lawmakers, regulators and President Clinton. And the latest decision is sure to rachet up the debate.
""For decades, beer and wine have been advertised on television and radio while the distilled spirits industry has upheld its own voluntary ban,"" said Fred Meister, president of the Distilled Spirits Council of the United States (DISCUS).
""The absence of spirits from television and radio has contributed to the mistaken perception that spirits are somehow 'harder' or worse than beer or wine and thus deserving of harsher social, political and legal treatment.""
The reversal of the voluntary ban was adopted in DISCUS's ""code of good practice.""
The announcement drew an immediate rebuke from the chairman of the Federal Communications Commission, who has made it clear he is opposed to the practice and has raised the specter of new rules that would bar such advertising.
""This decision is disappointing for parents, and dangerous for our kids,"" said FCC Chairman Reed Hundt, whose agency has begun a probe of the ad campaign.
Consumer advocates also objected. ""Today's decision by DISCUS to dump its voluntary ban marks the beginning of an open liquor-marketing season on America's children and teens,"" said George Hacker of the Center for Science in the Public Interest.
He urged President Clinton to renew his appeal to distillers to return to the voluntary ban, and he called on the Federal Trade Commission to assist the FCC in its probe.
In Congress, Rep. Joseph Kennedy has offered legislation to make it illegal to advertise hard liquor on radio or TV.
Broadcasters, meanwhile, criticized the distillers' decision but stopped short of refusing to run liquor ads.
The National Association of Broadcasters advocated to continue leaving the decision on whether to air the ads to individual TV and radio stations.
""We believe this process has served American consumers well, since individual stations make and will continue to make judgments every day on what is most appropriate for their local audiences,"" said NAB President Edward Fritts.
",40
"Cable and telecoms giants Cable & Wireless, NYNEX Corp and Bell Canada International on Tuesday announced the formation of a major new British cable player by merging the operations of their British subsidiaries.
This brings together C&W's Mercury, British cable company Videotron, Bell Cablemedia and NYNEX CableComms.
In a related deal, Videotron is being bought by Bell Cablemedia in a complex deal which involves a $338 million equity investment in Bell Cablemedia by Cable & Wireless and values Videotron at around $1.09 billion.
Videotron, which was already 26 percent owned by Bell Cablemedia, was the target of a long-running takeover battle, with Cable & Wireless emerging as favourite.
Recent reports said German telecoms group Deutsche Telekom and International CableTel of the U.S. were also interested in taking it over.
Once the merger and the Videotron deal have been completed, Cable & Wireless will own 52.6 percent of the new company - to be called Cable & Wireless Communications - with NYNEX owning 18.5 percent and Bell Canada 14.2 percent of the shares. The remaining 15 percent will floated, C&W told Reuters.
The groups intend to list the company, which will provide integrated telecommunications, information and entertainment services, in both London and New York. This is likely to take place in about six months, C&W added.
Cable & Wireless Communications ""...will provide local, national, international, data and mobile telecommunications, together with multichannel television and Internet services"" to around six million franchised homes and to businesses throughout Britain, the groups said in a statement.
Richard Brown, chief executive of Cable & Wireless, said the new company would be the only company in Britain able to offer multiple services that until now people had to get from different providers.
""Cable & Wireless Communications will be the only company in the UK capable of offering a combination of telecoms, broadband, data transmission, video shopping and Internet access,"" Brown said in a statement.
The companies outlined a number of benefits from the new company, saying it would increase its revenues by providing a wider range of services to existing customers and increased access to a broader customer base.
It would also produce ""significant cost savings"" by eliminating duplication, enhancing purchasing power increasing capital expenditure efficiencies, they added.
As well as the services it will be able to offer immediately, the new company will be strategically positioned to offer new products such as interactive digital services and multi-media products ""as they become available"", they said.
",2
"British venture capital firm 3i Group Plc on Thursday reported a rise in first half net asset value (NAV) per share and revenue profits but said it had been held back by continental Europe and a strong pound.
3i's NAV for the period rose to 454 pence per share, from 426 pence in the first half last year, while profit before tax rose to 62.9 million pounds ($106 million) from 54.3 million.
""Its a pretty healthy increase. Its held back a bit by continental Europe...the markets have not been that good and there has also been the appreciation of sterling,"" Ewen Macpherson, 3i's chief executive said in an interview.
Macpherson said a better indication of the group's performance was its British portfolio which had performed ""extremely well"", reflected in an 18 percent growth in revenue.
There were still plenty of opportunities available, he said, with the sort of companies that 3i invested in doing very well.
There had also been an improvement in general business confidence in Britain, which had improved for the fourth consecutive quarter, according to 3i's latest ""Enterprise Barometer"" survey.
Of 327 million pounds invested by 3i during the period, 284 million was in Britain.
Macpherson said the prospect of a general election in Britain by May 1997, had resulted in a number of investment opportunities for 3i as some company founders or management teams decided to sell their corporate holdings while the tax regime remained clear.
While the European performance had an impact on the NAV figure, the investment opportunities for 3i on the continent remained good, Macpherson said. Current pricing levels for small and medium-sized European companies in which the group invests were ""very attractive"".
During the first half of the year, realisation of investments continued at an encouraging rate, with sales worth 122 million pounds in Britain and some 36 million pounds in continental Europe.
Macpherson said the group had ""significant plans to expand in Europe"" and this was reflected in its decision to open an office in the German city of Duesseldorf in January.
This regionalisation would also involve opening offices in three other German cities -- Hamburg, Munich and Stuttgart -- and the group also plans to extend its presence into the south of France.
The group said it wanted to open its first office in Southeast Asia, in Singapore, early in 1997.
Macpherson said Asia was ""an exciting part of the world"" for investment capital and Singapore had been chosen as it was a good communication centre from which other parts of the region could be covered.
He said the office would look at opportunities in Malaysia, the Philippines, Thailand and Indonesia but not in China. ($1=.5956 Pound)
",2
"European privatisations in 1997 could total a record $53 billion, with the telecommunications and utilities sectors expected to dominate activity, U.S. investment bank J.P. Morgan said in a report on Monday.
""Compared with last year, we expect a significantly higher number of IPOs (Initial Public Offerings)...Italy stands out as having the most ambitious (privatisation) programme, at close to $20 billion,"" said Caroline Meroz, one the survey's authors.
The report said in the run up to Economic and Monetary Union (EMU), European governments ""may feel under increasing pressure to accelerate...privatisation programmes to place themselves on track to meet the Maastricht three percent deficit criterion"".
Proceeds could be used to reduce government's financial debt, although they cannot be taken into account when calculating the deficit.
It said proceeds of European privatisations in 1996 totalled a record $43 billion, a 30 percent increase on the previous high in 1994, bringing the total value of the European privatisation programme so far to $230 billion.
And the total estimate for the proceeds of privatisations through to the end of the century could total $118 billion, according to the report, which was based on 53 enterprises which governments have confirmed they plan to privatise.
Meroz told Reuters that the utility sector had shown the greatest slippage on scheduled privatisations for 1996 with a completion rate of only 20 percent, but that otherwise it had been ""a pretty good year"".
This had been fuelled by strong European equity markets which, excluding Britain, rose by 26 percent over the year and also by ""the variety of small innovative deals such as share buy-backs,"" Meroz said.
Such buy-backs could, Meroz said, be used by governments to dispose of residual holdings in companies during 1997.
The report said the energy sector accounted for a larger than expected portion of offerings while the privatisations of Deutsche Telekom and Italy's ENI ""together accounted for 25 percent of 1996 proceeds"".
Demand for future offerings should be well suppored by growing domestic interest and J.P. Morgan forecasts that foreign tranches will be closer to 40 percent than the 50 percent take-up by foreign investors expected in the past.
""The market has been able to absorb a lot of equities. We think the demand is there,"" Meroz said, adding there would be strong retail as well as institutional demand.
Some of the major privatisations planned for 1996 which failed to see the light of day were included in the report's 1997 estimates but the rest ""may be cancelled (or possibly postponed to much later years) or may be carried out through alternative methods, such as private sales"".
But a lack of mix of new ideas, both in terms of sectors and the countries the privatisations hail from, could have a dampening effect on the market in 1997, with privatised stocks seldom able to offer the upside of consumer recovery.
",2
"Britain's Invesco Plc Monday agreed to merge with Houston-based mutual fund company AIM Management Group Inc. in a deal valued at $1.6 billion, creating one of the world's largest investment management businesses.
The deal is the largest in U.S. fund history, industry experts said.
The combined group will be called Amvesco Plc and have around $150 billion under management. The merger will be paid for with about $1.1 billion in new stock and the rest in cash and debt, Invesco officials said.
""We are creating a prototype company for the future,"" Bob McCullough, Invesco's chief financial officer, said in an interview.
Invesco Chairman Charles Brady, who will lead the combined group, said it would have ""the scale necessary for success as a financially strong and independent business operating in an increasingly concentrated industry.""
McCullough stressed the deal was a merger of the two companies, which would focus on growing revenue but retain their individual identities.
""They're buying themselves into the U.S. money management market,"" said Bruce Brewington, an equity analyst at Putnam, Lovell & Thorton, an investment banking firm in San Francisco.
Martin Cross, analyst at UBS, said Invesco is buying at the top of the Wall Street market, which many experts see as overpriced. He said UBS strategists are forecasting a 15 percent downward correction in the Dow Jones industrial average next year, and if it occurs, it would leave AIM looking rather expensive.
""The deal is exquisitely timed for the AIM shareholders and conversely not so exquisitely for Invesco shareholders,"" Cross said.
Invesco said it would fund the deal by issuing 290 million new shares to AIM shareholders. These would be valued at about $1.1 billion. AIM shareholders will own around 45 percent of the merged company.
McCullough said another $500 million needed to fund the merger would come in the form of cash and debt.
The merger presented a chance for the two companies to use different distribution channels and approaches. McCullough said he did not forsee any culture clash between the two.
There would be no change in their differing approaches, with Invesco continuing to be a ""no-load"" house, selling products direct to the customer, and AIM selling its nearly three dozen funds through brokers.
McCullough said the cost of the merger was not excessive.
""There's no question that it is a lot of money, but we view this as a long-term investment for both of us,"" he said. The long-term commitment was underlined by the fact that almost 50 percent of the combined shares would be held by management.
Both companies were ""really active managers"" and would stay that way rather than moving to passive management, McCullough said, adding that Invesco's global infrastructure presented a major opportunity.
He denied the heavy exposure to the United States would hinder Invesco from making the most of opportunities in other parts of the world. ""We would like nothing better than to find opportunities in Asia and Europe,"" he said.
The merger would enhance the group's strength in the United States and lead to cost savings, officials said.
McCullough said the merger must be approved by Invesco and AIM shareholders and other approvals were required. The deal should be completed early next year, the company said.
",2
"A high-profile purge at Deutsche Morgan Grenfell of any managers found to bear responsibility for failing to spot irregular dealings by former fund manager Peter Young is expected next week, banking sources said on Friday.
The investment banking arm of Deutsche Bank is due to complete a preliminary report with accountants Ernst & Young into what went wrong internally and led to the suspension of three Morgan Grenfell Asset Management (MGAM) funds last month and Young's dismissal for alleged ""gross misconduct"".
Trading in the three funds, which totalled around 1.4 billion pounds ($2.21 billion) and were held by around 90,000 retail investors, was temporarily suspended early in September but resumed after Deutsche stepped in with a 180 million pounds cash injection.
Young, who has had his assets frozen and his passport impounded, is currently under investigation by Britain's Serious Fraud Office, which probes major financial crime.
He has said he was not guilty of any criminal activity and is being made a scapegoat for failings.
A probe into his management of two of the funds in question, which held too high a proportion of unlisted, speculative stocks has been underway since problems emerged.
Both MGAM and investments watchdog the Investment Management Regulatory Organisation (IMRO) have undertaken their own inquiries with forensic accountants carrying out a detailed dissection of trading history of the funds.
IMRO's own investigation, which could lead to hefty punishments against the firm, will take longer to conclude.
There have been conflicting reports over what the ramifications of any sackings following the debacle would be.
As head of the asset management arm Keith Percy's position will inevitably be under review but some British newspapers have suggested key MGAM clients are opposing any action against him while others are said to be threatening to withdraw assets if he stays.
A similar quandary is reported to be exercising the minds of Deutsche Morgan Grenfell (DMG) officials in London and the Deutsche Bank hierarchy in Frankfurt.
Other key managers, including Glyn Owen, MGAM's chief European investment officer and Mike Wheatley, compliance director for the fund management business are also likely to face scrutiny because of their executive responsibilities.
Deutsche Morgan Grenfell said it could not comment on speculative newspaper reports, but the group said when problems first surfaced that it would produce a preliminary report within six weeks.
""We can't comment on any such speculation and we have always pointed out that we would announce potential management decisions after the internal investigation has been finalised,"" a DMG spokesman in London told Reuters.
From the beginning Deutsche has made it clear that it would take any action deemed necessary to restore confidence in its fund management business and if lapses in internal controls were found, heads would roll.
But despite difficult decisions emerging in the intervening weeks, Deutsche's resolve to give its fund management arm and by association its investment banking operation a clean bill of health, has not faltered, banking sources said.
($1=.6350 Pound)
",2
"British property group MEPC on Thursday announced a 14 percent increase in pretax profits for the year but said a writedown on a Los Angeles shopping mall had reduced its net asset value (NAV).
MEPC's chief executive said he was pleased with the rise in pretax profits to 140 million pounds ($227.2 million) from 122.6 million pounds the previous year, but admitted disappointment at the fall in NAV to 450 pence per share from 457 pence.
MEPC shares were 11p lower at 441-1/2p by 1218 GMT as traders said the NAV was below market expectations.
""We feel very confident about the whole of the profit statement. The only slight disappointment is on the NAV side,"" Tuckey said in an interview. Earnings per share rose nine percent to 22.9 pence and the total dividend stayed at 20 pence.
Tuckey said the NAV drop reflected a marginal fall in values both in Britain and elsewhere but it was less than the relevant indices. ""We feel that the performance of our UK portfolio, which accounts for 70 percent of the group, is indeed where we would have expected it to be.""
He pointed out the valuation date for the portfolio was August 31 and there had been activity and evidence of an improved market since then. ""If we redid the valuation for December 1, we would probably get a different answer,"" he said.
The other factor which had brought the NAV down was the 31 million pound write-down on the valuation of MEPC's Northridge Mall. This had been equivalent to 7.5 pence per share.
""We are convinced this is a temporary write-down because the centre is still getting back on its feet after the earthquake some three years ago. We are quite confident we will get that value back in the next two to three years as the centre re-establishes itself,"" he said.
And he defended MEPC's decision to give a target NAV of 690 pence per share for 2001.
""We're sticking our necks out...The portfolio is very very different to what it was three years ago and what we're trying to do is give shareholders some feel of where we think the performance is going to be in five years time,"" Tuckey said.
Tuckey said the full impact of the change of strategy in MEPC's portfolio would take time but there would be progress towards the firm's targets each year.
He said there was a much firmer tone to the markets, particularly in Britain over the last few months. Apart from Northridge, the rest of the U.S. portfolio had performed ""extremely well"".
MEPC plans to keep the lion's share of its portfolio in Britain, with the remainder in the United States and Australia. It has wound down its European portfolio and has no plans to go back into continental Europe in the immediate future.
Tuckey said the group was keen to make acquisitions, with the proceeds of its European disposals, but that there was a shortage of good stock available, particularly in Britain.
While MEPC has resolved to increase the dividend paid to shareholders, Tuckey said he could not predict when it would be increased although he pointed out that dividend cover had improved to 1.15 times from 1.05 a year before.
""It depends on the forward look, on how the markets are feeling,"" he said. The market was competitive and good stock was hard to find but Tuckey said he welcomed the prospect of changes to the way the market functioned with more liquidity likely.
($1=.6161 Pound)
",2
"After several shaky starts, Britain's commercial property market looks set to build on some improvement during 1996, but property experts stress there will not be a return to the sort of boom seen during the 1980s.
""This is the ""Real Thing'. That is the growing opinion among investors when they consider the recovery now underway in the UK real estate market,"" said David Hutchings of property consultants Healey & Baker in his 1997 outlook.
Hutchings predicts real rental growth of three percent in 1997 and possible total returns of 15-17 percent for institutional quality portfolios. This should outstrip the return on gilts and may surpass equity returns too, he adds.
But uncertainty ahead of a general election, which must be held by the end of May, means a ""gradual but sustained upturn"" is more likely than a market boom, he said.
Improved signs of demand, particularly for office space in central London and retail developments, especially shopping centres, have raised expectations. ""The feeling is generally that this year is going to be a good one,"" a senior property analyst at another leading firm of advisors told Reuters.
This view is supported by a recent survey by the Confederation of British Industry (CBI) and property consultants Grimley which was also cautiously bullish. It found increased business confidence meant a third of British firms expect to raise property holdings over the next six months.
The six-monthly survey, which canvassed 645 private sector firms across the range of sectors and regions in Britain, found 32 percent of companies expect to increase property holdings, 26 percent see a reduction and 41 envisage no change.
NO DRAMATIC SURGE IN DEMAND
""We expect a steady improvement rather than a dramatic surge in property requirements. The net balance on this survey is plus six percent over the next six months,"" Stuart Morley, Grimley's head of research, said last week.
Sudhir Junankar of the CBI said firms expect a further pick-up in business, led by domestic demand. ""With profitability set to grow faster over the next six months, the upturn in the commercial property market is becoming more firmly based.""
The CBI/Grimley survey predicts such growth will be strongest in the northwest of England, followed by Northern Ireland, Greater London and Scotland.
Larger companies are expected to lead the charge with those involved in distribution, transport and communications citing expanding capacity as the main spur in giving the go-ahead to capital expenditure on property.
The survey found smaller firms, as well as those involved in metal manufacturing, chemical processing, finance and business services, said that increasing efficiency was the main factor influencing plans for investment in property.
INTERESTED INVESTORS
But companies seeking additional or new space are not the only ones likely to fuel demand for real estate during 1997. Hutchings said the recovery underway in the property market is supported by both occupational and investment demand, in contrast to a brief upsurge during 1993.
Property consultant Knight Frank predicts that prime investment yields will be little changed in December from their levels in December 1996.
It forecasts the yield on City of London offices will be unchanged at 5.5 percent, while yields on offices in the area around London's M25 motorway and provincial towns will rise from 6.25 percent to 6.5 percent and from 6.5 percent to 7.0 percent respectively. In addition to offices, investors and property companies are particularly keen on shopping centres. ""The prospects for the retail sector are good,"" the second analyst said.
Hutchings also forsees higher rents during the year ahead, fuelled by a growing economy, a shortage of top quality supply and low interest rates. Although some occupiers will hang back until after the election, occupational demand means rents will rise ""at least until new development comes forward"".
Some development has already begun and Hutchings says there are now growing signs ""that institutional funds will re-enter the speculative development market in 1997"" although bank lending for such schemes remains tight.
This is not the case for other projects where bank loans are more readily available and competition to lend for quality developments has led to wafer-thin margins being charged by some banks, particularly German lenders.
LONDON LEADS THE WAY
While the number of cranes over the City of London -- London's traditional financial heartland -- has not mushroomed, development activity has begun to pick up and more can be expected over the next 12 months, market players said.
In London one very visible factor is the heated rivalry that has emerged between the City and Docklands, the former docks area to the east of the capital which is home to the Canary Wharf tower, London's tallest building.
Firms such as U.S. investment bank Merrill Lynch and Britain's Robert Fleming have still to decide on where to relocate, with others such as Close Brothers and Cazenove also rumoured to be in the hunt.
And in the retail sector, last year's sale of former fashion mecca Carnaby Street by Dutch property fund Wereldehave for 90 million pounds ""is a testament to the strength of investors' faith in the London market"", said Hutchings.
",2
"British fund manager Invesco announced its widely-expected merger with U.S. mutual fund company AIM Management Group on Monday, creating one of the world's largest investment management businesses.
The combined group will be called AMVESCO Plc and have around $150 billion under management. The merger values AIM at approximately $1.6 billion, Invesco said..
""We are creating a prototype company for the future,"" Bob McCullough, Invesco's chief financial officer, told Reuters.
But analysts were divided as to the timing of the deal although most were happy to give Invesco the benefit of the doubt as far as its claims on synergy are concerned.
""The deal is exquisitely timed for the AIM shareholders and conversely not so exquisitely for Invesco shareholders,"" said Martin Cross, analyst at UBS.
Cross argues that Invesco is buying at the top of the Wall Street market which many see as having some very stretched valuations. Cross said that UBS strategists are forecasting a 15 percent downward correction on the Dow Jones index next year which, if it came to pass, would leave AIM looking rather expensive.
But Phillip Gibbs at BZW was upbeat about the merger.
""It looks rather cheap, I think they've done rather nicely,"" Gibbs said but did add a rider on the possibility of a major correction in the US equities market.
Analysts said the price paid by Invesco was something short of what had been predicted but Cross said it was a ""pretty full price but what one might expect for a premium company.""
Invesco shares closed unchanged at 237.5p Invesco's chairman and chief executive Charles Brady, the man who will lead the new group, said it would have ""the scale necessary for success as a financially strong and independent business operating in an increasingly concentrated industry.""
Invesco said it would fund the merger with the issue of 290 million new shares to existing holders of AIM shares. These would be valued at approximately $1.1 billion. AIM shareholders will own around 45 percent of the enlarged group and be subject to restrictions on selling the shares.
McCullough said the merger, which is conditional on approval by both Invesco and AIM shareholders and other approvals, would be non-dilutive and would not have any cost savings built-in. However, there would be cost savings in the future, he said.
The merger is not expected to be completed before February.
McCullough also said the $500 million needed to fund the merger would come in the form of cash and debt, with a one-for-five rights offering on the cards. This would involve issuing roughly 50 million new shares, he said.
McCullough said the cost of the merger was not excessive. ""If you look at it on the basis of funds under management, it (the cost) is less than three percent,"" he said.
""There's no question that it is a lot of money, but we view this as a long-term investment for both of us,"" he said. This long-term commitment was underlined by the fact that almost 50 percent of the combined shares would be held by management.
The merger presented an enormous number of synergies, with the two companies using different distribution channels and approaches. McCullough said he did not forsee any culture clash between the two.
There would be no change in their differing approaches, with Invesco continuing to be a ""no-load"" house, selling products direct to the customer, and AIM making its sales through intermediaries.
Both companies were ""really active managers"" and would stay that way rather than moving to passive management, McCullough said, adding that Invesco's global infrastructure presented a major opportunity.
He denied the heavy exposure to the U.S. would hinder Invesco from making the most of opportunities in other parts of the world. ""We would like nothing better than to find opportunities in Asia and Europe,"" he said.
",2
"Britain's largest home loan lender, Halifax Building Society, said on Thursday it was confident of avoiding any takeover attempt when it floats on the stock market and sheds mutuality for bank status next June.
""We think we can stand on our own feet,"" David Gilchrist, Halifax's director of corporate affairs said.
The society, currently owned by its savers and borrowers, gave details of the timetable for conversion and flotation, which analysts have said could be worth 10 billion pounds ($16 billion).
The building society's nine million members will vote early next year on the conversion, which it is billing as the largest single extension of private share ownership in Britain.
Gilchrist said a decision to transfer its business to an existing subsidiary rather than to a company specially formed for conversion meant it would lose five-year protection against takeover but underlined its confidence.
Analysts said the consolidation of Britain's financial services market is likely to continue, which could make the large and successful Halifax a possible target.
The flotation will project the society into the top 25 companies in London's blue chip FTSE 100 stock index and Gilchrist said he was confident that shareholders would be convinced by its past performance to reject any bid attempt.
The concersion method raises the voting threshold needed for the plans to go ahead, but Gilchrist said he believed the necessary 50 percent of investing members entitled to vote would be met.
""We have no real concerns as far as the voting is concerned,"" he said, adding that previous building society conversions achieved approvals of over 75 percent.
""It will be a high-profile exercise, backed up by plenty of marketing,"" Gilchrist said.
But members eagerly expecting to find out how big a windfall they are likely to receive when they receive free shares will have to wait until January before getting any indication.
The Halifax said its members would be given full details of the conversion plans and share distribution scheme. This will tell them the number of shares they are entitled to and indicate their likely price range, based on prevailing market conditions.
Gilchrist said members would get a ""broad idea"" at this time, but would not be drawn on what the share hand-out was likely to be worth to the average investor.
He also declined to comment on the cost of the conversion exercise. But it seems likely to provide a boon to Britain's postal service and the printing industry as well as the financial and legal advisors working on the plans.
""The major element of cost is printing and mailing. We will be sending 75 million items of mail,"" he said.
Halifax members will be urged to vote ""as quickly as possible"" on the proposals and a special general meeting will be held in February. If members vote in favour, they will be sent details of share allocations in April or May.
Gilchrist said the Halifax had not yet done any market research on how many members would sell or retain shares.
""We are not trying to persuade people one way or another whether to hold shares or to sell the shares,"" he said, adding the Halifax would sound out members nearer the time.
The society will remind its members that they should have at least 100 pounds in total in their accounts on December 31 1996.
If eligible for a variable distribution of extra free shares they ""may need to top up their share accounts to the November 25 1994 level by the date of the special general meeting"" to qualify for the maximum number of free shares, the Halifax said. ($1=.6260 Pound)
",2
"Britain's investment watchdog on Thursday punished companies in the Robert Fleming group for rule breaches, with fines totalling 700,000 pounds ($1.09 million).
At the same time Hong Kong authorities secured voluntary compensation of nearly $20 million from a company jointly owned by the Jardine Matheson and Robert Fleming groups.
Britain's IMRO (the Investment Management Regulatory Organisation) handed down a 400,000 pound fine to Robert Fleming Asset Management (RFAM) and 100,000 pound penalties to three other firms in the group, while Hong Kong's SFC (Securities and Futures Commission) agreed the compensation package.
Failings exposed by the investigation were accepted by Robert Fleming Asset Management, which regretted the breaches. ""We are embarrassed by it, there's no doubt about that,"" Paul Bateman, RFAM's chairman told Reuters in an interview.
The disciplinary action resulted from a five-month joint investigation by IMRO and the SFC into dealing procedures at Jardine Fleming Investment Management (JFIM) and related companies, with the co-operation of all the firms involved.
JFIM is a member of the Jardine Fleming group,
The probe revealed Colin Armstrong, a former senior fund manager and director of JFIM had engaged in late allocation of deals after changes in the price of the instruments traded had occurred, the SFC said.
His actions had resulted in three accounts managed by JFIM losing money and led to the group agreeing to make voluntary payments totalling $19.3 million to compensate these clients.
Armstrong made ""substantial profits from trading in Japanese exchange traded options"" for his own account, the SFC said. He has since cooperated With JFIM and had paid back any gains.
This has been used by JFIM as part of the compensation.
""The heart of the problem is JFIM. The weakness was their back office and procedures were not up to IMRO standards,"" said Bateman, adding the problem had been isolated to one fund manager, but said it had exposed systemic weakness.
With hindsight he acknowledged that these procedural and compliance monitoring problems could and should have been spotted earlier but said it was difficult to tell how much quicker it could have been dealt with, although there had been a steady increase in the management response.
Armstrong's behaviour had been an abuse of trust, but no decision had yet been made over whether it would result in court action, he added. Bateman said Armstrong had accepted the SFC termination of his registration as an investment adviser and securities dealer. ApaRt from fining the Robert Fleming subsidiaries that had delegated fund management of 1.2 billion pounds to JFIM, IMRO ended the registration of Robert Thomas, the former chief executive of JFAM and JFIM, who accepted he ""bore ultimate responsibility for the compliance failures in the companies"". JFAM has also had its authorisation brought to an end and the Jardine Fleming and Robert Fleming groups will offer its 10 customers
But IMRO denied the penalties were insufficient either as punishment or a deterrent against future breaches. ""It always sends out a message to others when we take out a disciplinary action,"" an IMRO official told Reuters, adding the fines matched the scale of the breaches and the negative publicity would also have an effect.
Bateman said the Robert Fleming group would be in close contact with all of its clients, but said he did not expect any material loss from the findings and clients had so far been ""understanding of the position"". ($1=.6412 Pound)
",2
"British property company Greycoat is unlikely to crumble under pressure from rebel shareholders who want it broken up or succumb to a merger approach from smaller rival Moorfield Estates, analysts said on Monday.
""I don't think they are on the critical list in any sense or meaning of the word,"" one analyst said.
A proposal to sell-off Greycoat's assets is due to be put to shareholders at a special meeting on Thursday. It has been put forward by the UK Active Value Fund, which is advised by rebel shareholder Brian Myerson's Active Value Advisers.
UK Active Value Fund bought its 11 percent stake in Greycoat three years ago, rescuing it from receivership. But Myerson's relationship with the firm's management has not run smoothly.
The South African financier's challenge to the Greycoat management has also triggered a proposal by Moorfield Estates involving a share exchange offer for the larger Greycoat, which has so far dismissed the approach.
Moorfield said in a statement on Monday that it had ""developed a proposal to add value for all shareholders through a strategy of more active management of the assets of Greycoat"".
It said this had been presented to some of Greycoat's larger shareholders, accounting for close to 40 percent of the shares, and an approach had then been made to Greycoat's chairman.
They include merging the two companies by a share exchange and restructuring the assets of the enlarged group.
This would involve a Central London portfolio made up initially of Greycoat's main assets, Embankment Place and 123 Buckingham Palace Road, which would later be demerged.
Moorfield also intends setting up a portfolio of ""investment and development property earmarked for immediate disposal to a major property company"".
The remainder of the enlarged group would constitute ""an investment, trading and development portfolio"" and there would be a reorganisation of the management structure to reduce costs by ""at least 1.5 million pounds ($2.47 million) per annum"", Moorfield said.
While analysts agreed the Moorfield plan was unlikely to succeed, some said there was an opportunity for Greycoat to take over another company with higher profitability so the combined company could capitalise on Greycoat's favourable tax position.
""But they are not going to be flushed out by Thursday,"" a second property analyst told Reuters, adding that three or four companies had looked ""very seriously"" at the possibility of joining with Greycoat.
Another possibility would be a larger group such as British Land sweeping up Greycoat, although such an outcome seems remote in the short-term, analysts said.
Myerson's proposed sale of Greycoat's London property assets is seen by some as an unwise ""forced sale"" which would not achieve shareholder value in what is an improving market.
""Generally speaking a forced sale of their assets would not gain anything in the short term,"" the first analyst said, adding that with rental growth starting to show through, it made sense to hold onto Greycoat's two largest properties.
""They are vulnerable to any change in market conditions, but it would be a mistake to be forced into a corner and to sell something in a relatively short timescale. It would be totally counterproductive,"" he added.
But others said the time was right to sell off Greycoat's largest assets. ""This is exactly the right time of the cycle (to sell,"" the second analyst said.
Greycoat shares closed 6.5 pence higher at 155.5 pence while Moorfield shares were unchanged at 30.5 pence. ($1=.6069 Pound)
",2
"British yachtsman Tony Bullimore's survival for four days in the icy Southern Ocean owes much to the high-tech safety equipment available to the modern sailor.
This year's London International Boat Show was crammed with gadgets such as the Emergency Position Indicating Radio Beacon (EPIRB). It costs 700 pounds ($1,176) but proved its worth by showing Bullimore's Australian rescuers where to look for him.
Bullimore's ordeal in the upturned hull of his yacht after it capsized in a solo round-the-world race is a far cry from the ""Mediterranean marina"" which was the centrepiece of this year's boat show at Earl's Court in west London.
Huge ""Gin Palaces"" abound but the show's organisers were keen to stress ""messing about in boats"" is not only for the rich.
The smallest vessel on show, the aptly-named Tadpole, was six foot (two metres) long and costs 297 pounds.
Around 800 boats were on display, 20 of them bobbing gently up and down in a giant indoor marina, built specially for the show, an annual event.
The 200,000 visitors had to wear slippers over their shoes to protect the polished decks if they wanted to go on board.
The British boating sector has a turnover of some two billion pounds and the boats on show were not just for dreaming about. Orders totalling millions of pounds were placed in the first week of the show, which ended on Sunday.
TRADITIONAL VERSUS HIGH-TECH EQUIPMENT
The halls were full of the paraphernalia of boating, with stands displaying traditional brass clocks and barometers competing with the latest in high-tech satellite navigation equipment.
If the latest in pump-action lavatories, the smoothest automatic winches or a machine that turns sea-water into drinking water is what you are after, this was the place to be.
Some firms demonstrated state-of-the-art sail materials, whose development owes much to the space programme. Others showed how traditional wooden ""clinker"" boat-building still has a place in the late 20th century.
The sunnier side of pleasure cruising was to the fore, but, topically, there were also tales of disaster and endeavour.
Among the speakers were a couple who 23 years ago spent four months drifting in the Pacific in a tiny inflatable life-raft.
Motor boats such as the sleek Sunseekers, the latest model of which, the Predator, sells for 1.8 million pounds, dominate one area, but most of the floorspace was dedicated to sailing.
SAILING REFLECTS BRITISH APPROACH TO THE SEA
This, says Tony Beechey, executive chairman of the British Marine Industries Federation, is in keeping with the British approach to the sea and reflects recent Olympic successes.
""Britons have always been more sail-oriented than power, maybe it is something to do with the climate...but we seem to have a stronger sailboat past,"" he told Reuters.
John Merricks, who with Ian Walker won a silver medal at the Atlanta Olympics in the 470 dinghy class, says boats need to keep evolving if sailing is to compete with other sports, even if this means his class is dropped after the 2000 games.
""It's harder to draw people into the sport with new outdoor activities competing against it,"" he said. ""We need new, fast, exciting and colourful classes.""
Many visitors made a beeline for the 49-er, recently selected as a new Olympic class and one of a new breed of ""skiffs"" --lightning-quick sailing dinghies which appear to fly across the water with both helmsman and crew suspended from trapezes.
They may cost just over 10,000 pounds, but Martin Wadhams of LDC Racing Sailboats which produces the space-age looking dinghy says fitness, skill and the agility of crews are what counts.
""The major thing about the boat is it brings the true spirit of the Olympics. It is going to spawn a new era in sailing."" ($1=.5950 Pound)
",2
"Increased confidence means a third of British companies expect to raise property holdings over the next six months, according to a survey by the Confederation of British Industry (CBI) and property consultants Grimley.
""Business confidence has strengthened markedly compared with six months ago and companies expect a further pick-up in business, led by domestic demand,"" said Sudhir Junankar, associate director of economic analysis at the CBI.
""With profitability set to grow faster over the next six months, the upturn in the commercial property market is becoming more firmly based,"" he added.
The six-monthly survey, which canvassed 645 private sector firms across the range of sectors and regions in Britain, found 32 percent of companies expect to increase property holdings, 26 percent see a reduction and 41 percent do not envisage a change.
""We expect a steady improvement rather than a dramatic surge in property requirements. The net balance on this survey is plus six percent over the next six months,"" Stuart Morley, Grimley's head of research, said at a briefing on the survey. This, he said was the highest result of the five surveys so far.
The report singled out the distribution, metal manufacturing and chemical processing, transport and communications sectors as those likely to see the largest increases in property holdings while over the last six months the largest increases have been in the retail sector.
Larger companies are most likely to increase their property holdings, reversing a declining trend over the last six months. This, said Morley, could mark the end of the large-scale restructurings which such companies have been undergoing.
""Large companies have gone through a period of restructuring. This suggests that period has come to an end. They are now looking to expand their holdings,"" he said.
Morley said companies were also ""noticeably more optimistic about employment prospects than they were in previous surveys"", adding this was ""now feeding through into increased property demand"", and rents were rising fastest in the retail sector.
Retail was most active in terms of change of holdings and the survey said this should continue. ""Not only did this sector see the largest net increase in property holdings over the past six months, it is also expecting the largest net increase.""
Areas where growth in demand for property is expected to be greatest are the north west of the country, followed by Northern Ireland, Greater London and Scotland while holdings are expected to fall at a greater rate in the south east,
Town centres, with government encouragement, have become more attractive with 50 percent of the extra retail space in these areas rather than out-of-town.
""This shows a gradual realisation that government policies are beginning to bite, a gradual realisation of the encouragement towards town centres where more companies will be looking for space,"" Morley said.
Demand for office space is particularly strong in town centres, although the largest companies are still seeking out-of-town floorspace.
According to the survey the main reason for companies to spend capital on property over the next six months ""is the need to expand capacity"" ahead of spending to replace property or to increase efficiency.
The main constraints companies see to capital expenditure on property are inadequate net returns, difficulty in disposing of property and a shortage of suitable property, the survey found.
",2
"Cable and telecoms giants Cable & Wireless, NYNEX Corp of the U.S. and Bell Canada International on Tuesday announced the formation of a major new British cable player by merging the operations of their British subsidiaries.
This brings together C&W's Mercury, British cable company Videotron, Bell Cablemedia and NYNEX CableComms.
In a related deal, Videotron is being bought by Bell Cablemedia in a complex deal which involves a $338 million equity investment in Bell Cablemedia by Cable & Wireless and values Videotron at around $1.09 billion.
Videotron, which was already 26 percent owned by Bell Cablemedia, was the target of a long-running takeover battle, with Cable & Wireless emerging as favourite.
Recent reports said German telecoms group Deutsche Telekom and International CableTel of the U.S. were also interested in taking it over.
Once the merger and the Videotron deal have been completed, Cable & Wireless will own 52.6 percent of the new company - to be called Cable & Wireless Communications - with NYNEX owning 18.5 percent and Bell Canada 14.2 percent of the shares. The remaining 15 percent will floated, C&W told Reuters.
The groups intend to list the company, which will provide integrated telecommunications, information and entertainment services, in both London and New York. This is likely to take place in about six months, C&W added.
Cable & Wireless Communications ""...will provide local, national, international, data and mobile telecommunications, together with multichannel television and Internet services"" to around six million franchised homes and to businesses throughout Britain, the groups said in a statement.
Richard Brown, chief executive of Cable & Wireless, said the new company would be the only company in Britain able to offer multiple services that until now people had to get from different providers.
""Cable & Wireless Communications will be the only company in the UK capable of offering a combination of telecoms, broadband, data transmission, video shopping and Internet access,"" Brown said in a statement.
The companies outlined a number of benefits from the new company, saying it would increase its revenues by providing a wider range of services to existing customers and increased access to a broader customer base.
It would also produce ""significant cost savings"" by eliminating duplication, enhancing purchasing power increasing capital expenditure efficiencies, they added.
As well as the services it will be able to offer immediately, the new company will be strategically positioned to offer new products such as interactive digital services and multi-media products ""as they become available"", they said.
",2
"Final approval for Lloyd's of London's recovery plan edged closer Wednesday as it declared that over 90 percent of members had accepted a settlement offer aimed at securing the 300-year-old insurance market's future.
Lloyd's said it had been swamped by U.S. investors signing up for its recovery plan after a U.S. appeals court overturned a ruling that had threatened the insurance market's survival. By Wednesday afternoon, 66.7 percent of U.S. members had accepted.
""The level of acceptances speaks for itself. Members have made their views toward the reconstruction of Lloyd's abundantly clear,"" Lloyd's Chairman David Rowland said in a statement.
Earlier, a Lloyd's spokesman said acceptances from U.S. investors in the market, known as Names, had flooded in overnight.
Almost half of the 2,700 U.S. Names had until Tuesday night held off, with only 53 percent accepting by then.
This followed a decision by a federal appeals court in Baltimore Tuesday to overturn U.S. District Court Judge Robert Payne's ruling in Richmond, Va., Friday to allow U.S. Names more time to consider the plan.
Payne granted an injunction giving U.S. Names more time to consider the plan and ordered Lloyd's to provide further information by Sept. 23. On Tuesday, the panel of judges in Baltimore sent the case back to the lower court with orders to dismiss it.
Rowland said he acknowledged that many overseas members had deferred their acceptance in the light of the Virginia court judgment and the subsequent Baltimore ruling.
Over the last few days, evidence of support for the Lloyd's proposals among its 34,000 investors worldwide has grown. On Tuesday evening, acceptances totalled 82 percent, compared with 75 percent Saturday.
Wednesday's noon deadline for accepting the 3.2 billion pounds ($4.7 billion) recovery plan, under which Lloyd's proposes that Names pay to help reinsure billions of pounds in liabilities into a new company called Equitas, was extended to give all a chance to respond.
Rowland said Wednesday afternoon that under the circumstances it was ""fair and proper"" to exercise flexibility in pushing back the deadline for acceptances.
Lloyd's said that any formal, longer-term extension would be subject to a decision by its council at a Thursday meeting at which it would consider ""the prospect of declaring the settlement offer acceptances unconditional.""
This extension will give the market enough time to collect the convincing majority of acceptances, especially from U.S. Names, which it needs to prove its own solvency.
Lloyd's problems began in the 1980s when a destructive combination of negligent underwriting, poor investment advice and a sequence of natural disasters conspired to bring about losses of several billion pounds.
Long-standing Names were for the first time in their lives suddenly faced with the prospect of unlimited losses.
The market is due to submit figures to Britain's Department of Trade and Industry next week in an annual solvency test, and file with the U.S. Treasury and New York Insurance Department later next month.
Equitas may lift off in two weeks if all goes as planned. The recovery plan's success increasingly looks likely, but another challenge by U.S. Names has not been ruled out.
However, U.S. legal sources said overnight that while U.S. investors could in theory attempt to challenge Tuesday's order, it would be difficult to do so successfully.
Despite that, one U.S. Name, Kenneth Chiate, who is chief negotiator for a group known as the American Names Association, said he expected U.S. Names to appeal the Baltimore ruling.
",2
"Shareholders in British property company Greycoat on Thursday left a large question-mark hanging over the future of the group, which is currently facing a break-up demand and a merger proposal from a smaller rival.
Greycoat shareholders postponed for three weeks a vote on a proposal to sell off the company's 500 million pounds ($831.5 million) portfolio in anticipation of talks with predator Moorfield Estates, run by two former Goldman Sachs property analysts.
But Greycoat said it still has to see concrete proposals from Moorfield, which wants a paper merger of the two and then a possible de-merger of Greycoat's largest property assets.
""We have yet to see any detailed proposals from Moorfield. As we keep saying we will consider those proposals once they are received. So far we have only seen one page of vague bullet points,"" a Greycoat spokesman told Reuters.
The rebel investment fund shareholders which put forward the break-up resolution are the UK Active Value Fund, IMP UKAV Inc and Chaddesley Investments. They control 11 percent of the shares and are advised by Brian Myerson's Active Value Advisors.
But at an extraordinary general meeting South African Myerson asked shareholders to put off a vote on their proposals for a controlled programme of disposals which he has said would significantly enhance shareholder value.
This change in strategy came after Greycoat's chairman Michael Beckett told the meeting it had asked Moorfield to come up with a ""full and detailed proposal"" which, if forthcoming, it would ""consider carefully"".
After a vote on postponement, carried by 53 million shares in favour versus about 42 million shares against, Myerson said, ""It's an overwhelming vote in favour of shareholder choice. We are supportive of Moorfield in terms of its proposals. We want the board to sit down with them.""
Greycoat, which specialises in London property, said last week that the break-up resolution was not in shareholders' best interests and urged them to reject it.
But news of the Moorfield approach surfaced over the weekend, adding another dimension to the uncertainty already hanging over the company and according to some analysts, holding down its share price which closed at 155-1/2p on Thursday.
Moorfield said earlier this week that it would de-merge Greycoat's largest assets, its Embankment Place and 123 Buckingham Palace Road properties, and had earmarked some of its developments for immediate sale to a large property company.
It said it plans to bring the remainder of the enlarged group's assets into an investment, trading and development portfolio and reorganise the board and management structure to reduce costs by at least 1.5 million pounds a year.
Myerson told reporters after the meeting that the British property company would now be forced to talk to Moorfield. ""The (Greycoat) board will be forced to sit down and look at the Moorfield proposals,"" he said.
Myerson said he was delighted shareholders had voted to adjourn his original proposal and repeated that his main object was to create shareholder value.
He added the Moorfield proposals, which have so far been rejected by Greycoat as being too vague, had the backing of holders of 40 percent of Greycoat shares
Myerson said these holders had already seen Moorfield's 40-page document and expressed their support for it, adding that he was ""supportive"" of both the proposals and the Moorfield management.
""We are supportive of Moorfield in terms of its proposals and we want it (the board) to sit down with them...We expect Moorfield to refine its proposals over the next couple of weeks,"" he added. ($ = 0.601 British Pounds)
",2
"Final approval for Lloyd's of London's recovery plan edged closer on Wednesday as it declared that over 90 percent of members had accepted a settlement offer aimed at securing the 300-year-old insurance market's future.
Lloyd's said it had been swamped by U.S. investors signing up for its recovery plan after a U.S. appeals court overturned a ruling that had threatened the insurance market's survival. By Wednesday afternoon 66.7 percent of U.S. members had accepted.
""The level of acceptances speaks for itself. Members have made their views toward the reconstruction of Lloyd's abundantly clear,"" Lloyd's chairman David Rowland said in a statement.
Earlier a Lloyd's spokesman said acceptances from U.S. Names, investors in the market, had flooded in overnight.
Almost half of the 2,700 U.S. Names had until last night held off. Only 53 percent had accepted by Tuesday.
This followed a Baltimore appeal court's decision late on Tuesday to overturn U.S. judge Robert Payne's ruling last Friday to allow U.S. Names more time to consider the plan.
Payne granted an injunction giving U.S. Names more time to consider the plan and ordered Lloyd's to provide further information by September 23. On Tuesday a panel of judges in Baltimore sent the case back to the Virginia district court with orders to dismiss it.
Rowland said he acknowledged many overseas members had deferred their acceptance in the light of the Virginia court judgement and the subsequent Baltimore ruling.
Over the last few days, evidence of support for the Lloyd's proposals among its 34,000 investors worldwide has grown. On Tuesday evening acceptances totalled 82 percent, compared to only 75 percent on Saturday.
Wednesday's noon deadline for accepting the recovery plan, under which Lloyd's proposes Names pay to help reinsure billions of pounds in liabilities into a new company called Equitas, was extended to give all a chance to respond.
Rowland said on Wednesday afternoon that in the circumstances it was ""fair and proper"" to exercise flexibility in pushing back the deadline for acceptances.
Lloyd's said that any formal, longer-term extension would be subject to a decision by its council at a Thursday meeting at which it would consider ""the prospect of declaring the settlement offer acceptances unconditional.""
This extension will crucially allow the market enough time to collect the convincing majority of acceptances, especially from U.S. Names, which it needs to prove its own solvency.
Lloyd's problems began in the 1980s when a destructive combination of negligent underwriting, poor investment advice and a sequence of natural disasters conspired to bring about losses of several billion pounds.
Long-standing Names were for the first time in their lives suddenly faced with the prospect of unlimited losses.
The market is due to submit figures to Britain's Department of Trade and Industry next week in an annual solvency test, and file with the U.S. Treasury and New York Insurance Department later next month.
Equitas may lift off in two weeks if all goes as planned. The recovery plan's success increasingly looks likely, but another challenge by U.S. Names has not been ruled out.
However, U.S. legal sources said overnight that, while U.S. investors could in theory attempt to challenge Tuesday's order it would be difficult to do so successfully.
Despite that, one U.S. Name and chief negotiator for an action group known as the American Names Association, Kenneth Chiate, said he expected U.S. Names to appeal the Baltimore ruling.
",2
"Former Barings executive Ron Baker plans to bring a counter-claim in a lawsuit against him by Dutch bank ING Barings for repayment of a loan he is alleged to have received, his lawyer told Reuters on Friday.
""He (Baker) plans to bring in his own counter-claim into those proceedings and they will be heard together unless some sort of arrangement is reached beforehand,"" Lindsay Hill, a partner at London law firm Fox Williams said.
ING Barings last month confirmed it was suing Baker for 113,000 pounds ($185,800), representing a 100,000 pound loan allegedly given to Baker when he was at Barings, plus interest.
British merchant bank Barings collapsed in February 1995 amid losses of around $1.4 billion run up by the unauthorised derivatives trades of Singapore-based trader Nick Leeson. It was rescued by ING which formed ING Barings as its investment banking arm.
Leeson is currently serving a six-and-a-half year jail sentence in Singapore for his part in the bank's downfall.
But the saga looks set to run on for some time, with writs filed by administrators of the bank against the former auditors and subsequent third party proceedings being issued against former bosses, including Baker.
Hill said Baker would contest the ING Barings case against him and his counter-claim would be for an unpaid bonus.
""He believes that the monies that he was promised by way of bonus remain due and are outstanding so yes, they will come into the equation in terms of resolving the dispute with ING Barings,"" Hill said.
Baker would not be the first to attempt to force ING Barings to pay a bonus which had apparently been promised before the collapse of Barings itself and ING's takeover.
But Hill said the decision by a London industrial tribunal on Thursday to reject a claim by another former Barings executive for an allegedly unpaid bonus had no implications for Baker's case.
""It's a different case, it's for different sums of money and the circumstances are not the same,"" Hill said.
Mary Walz, who was global head of equity financial products at Barings Investment Bank, had her 500,000 pound claim, which she said she was told was ""set in stone"" by her former Barings bosses, thrown out by the tribunal.
Hill declined to say how much Baker's counter-claim would be for but said the sum was ""substantial"".
",2
"Privately owned British investment bank Robert Fleming on Wednesday announced increased pre-tax profits for the first half of the year which it said underlined its ability to remain independent.
""We are committed to remaining independent. These results, our second best interim results ever, show we can remain independent,"" a Robert Fleming spokesman told Reuters.
Flemings has been widely talked about as a possible takeover target for a larger foreign investment bank, but has resolutely said it would retain its independence.
Flemings said its pretax profit for the first half of the year had increased by 16 percent to 92.2 million pounds ($154 million), from 79.4 million pounds a year earlier but warned it would have to cope with difficult markets in the second half.
Some analysts said the increase was not particularly impressive given market conditions but chief executive John Manser said it was ""a very good start"" and showed new businesses were ""making a valuable contribution to profitability.""
""While the outlook for the year seems promising, flat Asian markets and heightened competitive pressures in other markets are factors that we will continue to have to contend with during the next six months,"" Manser said in a statement.
The Flemings official said the results showed that while Flemings may have been perceived as an Asian-centric bank, it was now a much more international operation and had succeeded in bringing down its cost income ratio.
Flemings has not had an easy year so far. In July it lost investment banking head Bill Harrison who was poached by BZW, the investment banking arm of Britain's Barclays.
And in August Jardine Fleming, a joint venture with Jardine Matheson, revealed a five-month probe by British and Hong Kong regulators into irregular trades by a former senior fund manager at Jardine Fleming Investment Management.
This resulted in hefty fines and voluntary compensation of nearly $20 million to clients. Regulators also withdrew the authorisation of Jardine Fleming's London-based fund company. In September the company's chairman retired and the group created a new supervisory board.
Flemings acknowledged the problems at Jardine Fleming meant the joint venture had recorded a ""marginally lower"" interim result than its net interim profit of $63.9 million in 1995.
This was after taking into account provisions ""arising from the regulatory issues relating to earlier years,"" it said. The Flemings spokesman told Reuters some clients had been lost, but new clients had also been taken on.
He described the events as a ""painful experience."" ""But we believe we have clearly drawn a line in the sand,"" he added.
Any impact these problems may have had on Flemings' overall business was not, however, reflected in the interim dividend which rose to eight pence per share from seven pence.
Flemings said it had seen strong profit growth from its fund management businesses adding that its securities business had reported ""a marked increase in profits aided by a strong performance by UK and continental European broking.""
Its capital markets arm had helped companies raise 13.4 billion pounds of new capital while its corporate finance division had completed 43 deals during the period.
The appointment of Manser, 56, to replace Robin Fleming, 64, who will retire as chairman of Robert Fleming Holdings at the end of March 1997, means Manser would be more involved in business development and winning new business as well as strategy and relationships with major clients and shareholders.
William Garrett, 50, who was hired by Manser as a fund manager in 1970, was named as his replacement as chief executive and chairman of the group executive committee. Garrett will be responsible for the day-to-day running of the group.
",2
"It may sound like a dull backwater but the role of compliance has again been thrust into the limelight as yet another respected financial institution was rapped by the authorities this week for breaking the rules.
Compliance officials play a key role in banking and finance, ensuring procedures to safeguard against fraud and malpractice are adhered to from the back office to the board room.
On Thursday British investment watchdog IMRO fined companies in the Robert Fleming group 700,000 pounds ($1.09 million) and Hong Kong's Securities and Futures Commission (SFC) secured voluntary compensation of nearly $20 million from a Robert Fleming and Jardine Matheson joint venture.
These punishments stemmed from compliance violations which also saw two individuals banned from the markets.
A compliance officer at a top international investment bank, who did not want to be named, told Reuters the irregular dealing leading to the probe was ""as old as the hills"".
And it was something the right checks and balances should have avoided. ""I'm surprised that something as old as this has cropped up again. It's the sort of thing that any compliance officer worth his salt should have his eye open for,"" he added.
The joint IMRO and SFC investigation revealed that Colin Armstrong, a former senior fund manager at Jardine Fleming Investment Management, had made profits for his own account by the late allocation of deals, thereby depriving client accounts.
Compliance industry insiders said a number of red flags might have warned those in charge that something was amiss far earlier and thereby prevented much of the damage.
Larger-than-life characters and big earners are often left to their own devices and not investigated until too late.
Compliance officers first started appearing in London firms about 10 years ago, but the profile has changed significantly over this period, with many coming from the ranks of accountants and lawyers and seeking a career in the area.
Industry sources say top-ranking individuals can now earn as much as 100,000 pounds a year, including bonuses, which although falling short of what dealers earn, is attracting good people.
For a system of compliance with both internal and external rules and regulations to be wholly effective, the personnel involved not only need to be top notch, they must also have adequate resources and the full backing of senior management.
""The chief executive officer is personally accountable for compliance,"" the first source said. This means ensuring rules are not breached is not only in the interests of the firm, but also a question of self-preservation for the CEO.
In the Robert Fleming Asset Management (RFAM) probe, RFAM's former chief executive Robert Thomas accepted he ""bore ultimate responsibility for the compliance failures..."". As a result Thomas had his registration with IMRO ended.
In order to prevent the kind of dealing that Armstrong was engaged in, adequate separation between front and back offices, where the deals are struck and where they are processed, and strict rules on the use of personal accounts are critical.
Market sources noted similarities with Barings, where one of the main criticisms was that Nick Leeson, the trader who stacked up the losses which led to its collapse, was responsible not only for executing trades but settling or matching them as well.
This made it unlikely that any discrepancies in his trading would be uncovered in the back office, the sort of loophole regulators such as IMRO look for when they inspect firms.
Insiders said the Jardine Fleming outcome was a good result for the British watchdog, which came under fire for its handling of previous cases. ""If you find a major problem you tell them. If it's a serious problem you tell them immediately, you certainly wouldn't sit on it,"" said one.
And while the incidence of breaches may appear to be on the rise, it can be argued that the trend shows the net is tightening. But even the best systems will not prevent mistakes.
""Even the best of us make mistakes. If you are a large firm problems do arise, if you find them then you take remedial action. There will always be fools, crooks and incompetents,"" the first compliance source said.
($1=.6420 Pound)
",2
"British merchant bank Hambros, under fire from a rebel Hong Kong shareholder calling for its breakup, reported a return to first-half profit on Wednesday and said the benefits of restructuring should begin to show through.
""We have great confidence in ourselves and what we are trying to do,"" said Sir Chips Keswick, group chief executive.
He dismissed efforts by Hong Kong investment manager Regent Pacific Group, which holds three percent of Hambros, to break up the firm in an attempt to realise shareholder value.
""Regent is a three percent shareholder and is perfectly entitled to (its) views. We are perfectly entitled not to share them,"" Keswick said.
This view was supported by analysts who said the subject of Regent's shareholding and its calls for Hambros to sell its now successful Hambro Countrywide estate agency subsidiary was not raised at their meeting with the company.
Hambros reported pretax profits of 35.0 million pounds ($57.81 million) for the first half, compared with a 7.7 million pound loss for the same period in 1995.
Some analysts had forecast pretax profits of up to 45.0 million pounds based on a strong Hambro Countrywide performance. But they were disappointed by a worse-than-expected showing by Hambros' banking group.
""People are going to be downgrading their figures, they wre expecting better profits from the banking side,"" an analyst at one large investment bank told Reuters.
He said it was disappointing Hambros had not done better in what were essentially good markets. ""Clearly the banking side is struggling to do anything. Countrywide is the star,"" he added.
Analysts had predicted an interim dividend of 2.5 to 3.0 pence. In the event the dividend was unchanged at 2.5 pence.
Hambros shares closed down 7.5 pence at 245 pence.
Hambros is among a dwindling list of British investment banks which are the constant subject of takeover speculation. But it has been seen as one of the less attractive targets due to recent poor performance and major provisions for bad debts.
""I wouldn't have thought (a takeover) was terribly likely,"" said one analyst, adding that Hambros did not have the sort of distribution or securities operation an expanding investment bank would be seeking.
Asked whether Hambros was a takeover target, Keswick said a public company was always in the firing line but he was happy with the group's direction.
While he could not talk for shareholders in the group, Keswick said he had the impression from discussions with them in the wake of the Regent Pacific move that they were supportive of changes the company had implemented.
Keswick said it was on track to replace ""low margin vanilla business"" with increased return per customer business. It had decided it was best to undergo major upheavals for a year rather than piecemeal changes over a longer period to achieve this.
Keswick, who forecast the benefits of the changes could take a year or two to come through, said he was pleased the group had moved back into profit, adding that the Investment Group's result had been particularly good.
But Hambros chairman Lord Hambro warned profits from this part of the business were not expected to match the first half in the rest of the year. But he expected ""considerable improvement"" from Hambros' subsidiaries and, despite a challenging environment for the group, prospects were good.
Lord Hambro said he would retire from his post in July 1997 and be succeeded by Keswick. ""Chips will inevitably be a hands-on chairman,"" Michael Sorkin, deputy chairman of Hambros Bank, said.
($1=.6054 Pound)
",2
"Following a bumper year in 1996, yet more British companies are likely to be takeover targets in 1997, but much of the merger and acquisition activity will be in the form of agreed deals, corporate financiers say.
""We certainly see the first quarter of next year being very active. There are a lot of transactions in the pipeline, a lot of activity,"" Rupert Faure Walker, head of corporate finance at HSBC Samuel Montagu, told Reuters.
Britain is still regarded as the European leader for takeover activity. ""The markets here have always been more open than elsewhere, with not many constraints to other companies coming over here,"" another senior corporate financier said.
In the first nine months of 1996, 278 British companies valued at 14.4 billion pounds ($23.99 billion) were sold in cross-border deals, compared to 258 firms worth 19.1 billion pounds in the same period a year earlier.
Faure Walker said most of the deals in the pipeline were agreed rather than contested, with a number of strategic mergers reflecting industry rationalisations and cost eliminations. Others said consolidation and deconsolidation would both be driving forces behind activity in the year ahead.
ELECTION TO SET BUSINESS TEMPO
But while the outlook for the first quarter of the year looks promising for the corporate financiers who earn their fees by advising either acquirer or target, political influences are likely to colour how the market progresses, with the result of the impending general election the major force at work.
""The big thing next year is the election,"" said Faure Walker, adding that the election of a new goverment was likely to introduce a note of caution into the market.
This view was backed by the second corporate financier who said there could be some slowing of activity ahead of the election as companies did their best to avoid a deal being straddled across an election period.
Britain's opposition Labour party has consistently been ahead of the ruling Conservatives in the opinion polls and an election is due to be called by May.
If Labour wins, companies could take some time to adjust to the new environment and could wait until after a first Labour budget before making any significant moves. For a typical large acquisition this could result a 6-9 month period of caution, some industry players said, although others said activity was likely to continue whatever the government.
TAKEOVERS TO TAKE IN MORE SECTORS
A broader spread of takeovers, evident during 1996, is expected to run into 1997 as companies play ""catch-up"" after a period of caution following the recession of the early 1990s. Formerly publicly-owned utilities, including the few remaining regional electricity suppliers, will be joined by insurance brokers struggling with declining rates and a host of others.
""The inevitable reconstruction of industries will continue. The pace will quicken,"" the second corporate financier said.
The tendency towards agreed deals also reflected the fact that Britain's Office of Fair Trading had largely referred contested deals to the department of trade and industry (DTI) in recent months rather than agreed bids, financiers said.
REMAINING RECS SET TO FALL
In the electricity sector, the remaining privatised regional electricity companies (RECs) are viewed as likely targets for U.S. predators. Southern Electric and Yorkshire Electricity are tipped to follow recent takeover targets Northern Electric and London Electricity into U.S. hands.
With only two RECs remaining, some analysts suggest attention will now turn to the water companies, with further takeovers among them.
SMALLER FINANCIAL PLAYERS TO FEEL THE PINCH
The financial services sector is also seen as a hot-bed for further takeovers with perennials such as merchant banks Schroders, Hambros, and Robert Fleming all possible targets for larger global investment banks.
Further consolidation among small, specialist City of London and regional boutiques is also likely and Britain's dwindling club of large mutually-owned building societies could also attract attention from larger groups.
In the insurance sector Commercial Union is seen as a likely bid target or merger partner after widespread rumours suggesting talks with the financial services arm of B.A.T. It has also been linked with General Accident and Guardian Royal Exchange.
Among the insurance brokers, talk of consolidation as firms try to cut costs in the face of declining rates and overcapacity has been fuelled by recent mergers such as Lloyd Thompson and JIB. Willis Corroon and Sedgwick have long been rumoured to be possible merger or takeover candidates.
TELECOMS TO RING IN MORE CHANGES
Corporate financiers see the telecommunications and media sectors as providing significant merger activity during 1997, with Vodafone, cable group Telewest and Orange all tipped as possible targets.
There have also been suggestions that Mercury One-2-One may join Mercury Communications and that British Telecom may buy out its 40 percent partner in Cellnet. Energis, the cable company owned by National Grid, has been valued by some at 600 million pounds, while privately-owned Ionica also has long-term plans to float.
Among media companies, HTV, Yorkshire Tyne Tees and STV have all been suggested as possible targets, with Pearson an outside contender. In the growing sector of publicly quoted football clubs, Manchester United has obvious appeal.
OIL AND GAS TO REMAIN IGNITED
The demerger of British Gas into separate trading and transport firms in February has led to widespread market speculation that an oil major could be interested in buying the trading arm, to be called Centrica.
Worldwide consolidation in the oil industry is seen also affecting British firms. Smaller exploration and production firms might be eyed by the big players, all cash-rich after years of cost-cutting and keen to boost oil and gas reserves.
Other firms tipped to face takeover attempts are DIY retailer Wickes, defence to electronics group Racal, auto-components group T&N, construction group Costain and Imperial Tobacco. Energy, currently part of Hanson but due to be demerged next year, is not expected to be left uncourted for long.
Britain's drink companies are entering a period of steady, organic growth which precludes any major acquisitions. But Allied Domecq, Grand Met and Guinness have been dissuaded from pursuing the idea of demergers.
The major food companies are also looking to prune their brand portfolios to allow a more concentrated marketing push behind core brands with international appeal. This strategy will involve disposal programmes and small bolt-on acquisitions.
Bass and Guinness, Associated British Foods and Tate & Lyle are all sufficiently cash-rich to launch sizeable takeovers.
",2
"Financial services and property group Liberty International Holdings on Thursday unveiled a move into the British pensions market in ventures involving the British Telecom Pension Scheme and pension fund management group Hermes.
Liberty is establishing its own pensions company, Liberty International Pensions, which will target both the needs of money purchase pension schemes and retail pensions.
BT Pension Scheme, which owns Hermes, is to pay five million pounds ($7.8 million) for 10 percent of the equity of Liberty International Pensions, with the rest held by Liberty.
Liberty and Hermes said in a joint statement they were also setting up a new subsidiary called Hermes Liberty International Pensions to offer specialised investment services to the British pensions industry, with Hermes as fund manager.
BT Pension Scheme is giving the Hermes Liberty joint venture ""critical mass from the outset"" with a 1.5 billion pound transfer of assets to the new funds, Liberty's chairman Donald Gordon said.
Gordon said Liberty was ""well positioned to take advantage of the changes affecting the UK pensions industry."" Hermes' expertise in investment management and track record would help it to provide quality and competitively priced pension services.
David Fischel, Liberty's managing director, said Liberty International Pensions still required approval of Britain's Department of Trade and Industry but was otherwise ready for launch.
Hermes called the joint pensions venture a meeting of minds.
""Liberty has the ability and techniques of selling pensions, it also has the systems...and the administration. We on the other hand are good at our particular core areas of investment management...we think that's a very good marriage,"" Alastair Ross Goobey, chief executive of Hermes, said.
Ross Goobey said Hermes had approached Liberty International only to find the group had been considering an approach to Hermes.
""It really was a meeting of minds on this. Whether it develops further from this we shall see. I think one step at a time is quite enough for us.""
He said the venture would probably not be up and running until the first quarter of next year as regulatory approval first had to be obtained for the new group.
The decision by the giant British Telecom Pension Scheme to transfer assets to the new Hermes Liberty International Pensions funds would give the new venture a boost.
""I would hope it gives some people some feeling of security that BT Pension Scheme, which is after all the biggest in the country, is willing to do this,"" he said.
Liberty plans to sell personal pensions at its regional shopping centres, which are held through a majority-owned subsidiary Capital Shopping Centres. These have more than 150 million customer visits a year, Liberty said.
Fischel said an announcement would be made on exactly how the retail customer business would work at a future date, adding he could not give details at present. ($1=.6395 Pound)
",2
"Britain's Halifax Building Society is confident of avoiding any takeover attempts once it sheds its mutual status and becomes a publicly quoted bank in June next year, a senior official said on Thursday.
""We think we can stand on our own feet,"" David Gilchrist, Halifax's director of corporate affairs said in a telephone interview following the announcement of the timetable for the planned conversion and 10 billion stg flotation.
The building society's nine million members -- its savers and borrowers -- will vote on the conversion early next year.  
Gilchrist said the building society's decision to convert by transferring its business to an existing subsidiary rather than to a company specially formed for conversion meant it would lose a five-year protection against takeover.
It will also increase the voting threshold needed to give the plans the go-ahead. But he was confident that it would achieve a sufficiently high vote in favour, of at least 50 percent of all investing members entitled to vote.
""We have no real concerns as far as the voting is concerned,"" he said, adding that previous building society conversions achieved approvals of over 75 percent.  
""It will be a high-profile exercise, backed up by plenty of marketing,"" Gilchrist said.
Earlier, the Halifax said its members would be given full details of the conversion plans and share distribution scheme in January 1997. This will tell them the number of shares they are entitled to receive and an indication of their likely price range, based on prevailing market conditions at the time.
Gilchrist said members would get a ""broad idea"" at this time, but would not be drawn on what the share hand-out was likely to be worth to the average investor.  
He also declined to comment on what the cost of the conversion exercise would be, saying only that a significant element would be printing and postage costs.
""The major element of cost is printing and mailing. We will be sending 75 million items of mail,"" he said.
Halifax members will be urged to vote ""as quickly as possible"" on the proposals and a special general meeting will be held in Sheffield in February. If members vote in favour, they will be sent details of share allocations in April or May.
Gilchrist said the Halifax had not yet done any market research on how many members would sell or retain shares.  
""We are not trying to persuade people one way or another whether to hold shares or to sell the shares,"" he said, adding the Halifax would sound out members nearer the time.
But it was working on the basis that a ""large number"" would have already planned to spend their windfall and had set up a share dealing system to ensure an orderly market for what will be the largest single extension of private share ownership ever in Britain, Gilchrist added.
Those who decide to sell will be offered a free-of-charge postal service for a limited period while those who keep them can chose between placing them in a nominee company or receiving a share certificate. The Halifax favours the nominee option.
The society will remind its members that they should have at least 100 stg in total in their accounts on December 31 1996.
If eligible for a variable distribution of extra free shares they ""may need to top up their share accounts to the November 25 1994 level by the date of the special general meeting"" to qualify for the maximum number of free shares, the Halifax said.
-- London Newsroom +44 171 542 7717
",2
"The ""Big Bang"" maintained London as one of the world's financial hubs, but 10 years on the role of specialised financial ""boutiques"" at the heart of the City is under mounting pressure from huge integrated investment banks.
""The wonderful time that there has been for the small boutique since Big Bang is over. The days of the single violinist are past, it's time for the full orchestra,"" one banking source told Reuters.
The so-called Big Bang of 1986 brought about radical reforms in the way the London Stock Exchange and the British government bond market operated, principally by allowing mergers between merchant banks, brokers and stock jobbers.
It saw the demise of traditional names such as Wedd Durlacher Mordaunt and Phillips and Drew which became parts of Barclays' investment bank BZW and of UBS respectively.
And ever since the initial wave of changes investment banking giants with global aspirations have been hoovering up small players which have carved out a niche for themselves.
U.S. EXPERIENCE SETS THE PACE
In the world of corporate finance this pattern of smaller firms being swallowed up by the large players is set to mirror what has taken place in the U.S., corporate financiers say.
""I believe the world is moving away from small nimble-footed boutiques, which had a wonderful time under the Conservative government. The new world is going to be based around very big cross-border corporate finance. You need a very big broking arm behind you,"" one corporate financier said.
This need for broking capacity and a dwindling number of independent brokers, combined with increasing regulatory demands for capital, has shrunk the opportunities for boutiques. Even in the growing derivatives market, the amounts of capital needed to play the global markets mean small outfits are hard to sustain.
BOUTIQUES THREATENED BY EUROPE INTEGRATION
Apart from the possibility of an opposition Labour government and perhaps greater restrictions on mergers and acquisitions activity, with the need for companies to prove that a takeover is in the public interest, the other threat to corporate finance boutiques comes from European integration.
Increased bureaucracy and more rigorous European Commission demands on the companies involved in takeovers will mean even greater research capabilities and legal back-up are required by the financiers advising companies on such deals, bankers say.
""Boutiques won't be much good if you have got to take a huge team of analysts and brokers out to Brussels every time you are planning a deal,"" said one.
With U.S. investment banking mammoths such as Goldman Sachs and Merrill Lynch building increasing roles in corporate finance as well as their traditional broking and trading strengths, this is also putting pressure on the small corporate finance players.
HAMBRO MAGAN FALLS TO NATIONAL WESTMINSTER
A recent casualty is J Hambro Magan, which two weeks ago was sold to NatWest Markets, the investment banking arm of Britain's National Westminster Bank, for an estimated 80 million pounds ($127.3 million).
The prominent corporate finance boutique was set up by George Magan in 1988 and has been involved in some of the biggest mergers and acquisitions in Britain in recent years.
""The new world is going to be dominated by the very big boys,"" another banker said.
Some commentators say the future of small boutiques is not as bleak as it may appear. They see the demise of some as merely part of a cycle which will spawn new dynamic teams based around talented individuals who may decide to leave a large established firm, take clients and expertise with them, and go it alone.
""It's an on-going process. It's always postulated every time there's a rash of takeovers that boutiques are going out of fashion. But it's the same process as Big Bang. Small firms have developed since. Some have disappeared and been replaced by others,"" a banking analyst at one U.S. investment bank said.
In cases such as Hambro Magan, the cycle has turned full circle, with the key individuals making significant financial gains for themselves by selling a highly successful business at its peak and coming back into the folds of a larger player.
SMALL FIRMS CAN SELL PERSONALISED SERVICE
But while small firms will never compete for the truly global roles, there is still a place for the personalised localised service offered by boutiques. ""There's always a demand for that type of service,"" he added.
Others agree that in a world where investment banks are attempting to become so-called ""one-stop shops"", the pressures to sell clients an entire package of products could in fact enhance the position of boutiques, whose advice is perhaps more truly independent as they don't have other axes to grind.
DRESDNER KLEINWORT BUYS LUTHY BAILLIE
Another boutique to have fallen prey to a multi-national banking player with plenty of capital behind it, sophisticated trading and broking operations and global ambitions is the bond specialist Luthy Baillie Dowsett Pethick & Co.
It was snapped up only two weeks ago by Dresdner Kleinwort Benson, the investment banking division of Germany's second largest commercial bank Dresdner Bank.
Peter Luthy, one of the founders of the 15-person bond boutique which was set up in 1990, said the firm's reliance on a market undergoing significant changes because of the interest rate environment and the constraints of size had forced it to seek embrace of a larger partner.
""We learned a hell of a lot. But our business skills are better used in a big firm. The opportunities are better in a big firm,"" Luthy told Reuters recently.
Such changes will not necessarily end with the small firms such as Luthy's. Banking analysts and corporate financiers alike have for some time been predicting the days are numbered for what one called the ""super-boutiques"".
This dwindling list of traditional British merchant banks includes Cazenoves, NM Rothschilds, Hambros, Schroders and Robert Fleming. Takeovers here are complicated in some cases by family holdings, but strategic alliances have been suggested as an acceptable alternative in order to compete globally.
""I think even the super-boutiques are going to be struggling over the next five years,"" the first banking source said. ($1=.6285 Pound)
",2
"Top managers in major financial firms need to be razor-sharp if the world's increasingly complex markets are to run smoothly, however sophisticated the regulatory regime, regulators and politicians said on Thursday.
""Management needs to know its business. (It) sets the ethos of the company,"" Alistair Darling, spokesman on treasury affairs for Britain's opposition Labour party told a conference on financial regulation and minimising systemic risk.
Examples of where rules had been broken by so-called ""rogue traders"" were a clear sign of management failure, he said.
Christine Cumming, senior vice president at the Federal Reserve Bank of New York, also voiced doubts about management's current ability to deal with regulatory problems.
The health of an institution lay in its management and directors, but they were not necessarily properly armed to deal with problems when they arose, she said.
""Do we prepare directors and managers enough?"" Cumming said.
Britain's often criticised regulatory system, which relies heavily on so-called ""self-regulation,"" is also under scrutiny.
Darling said that whichever party won the next general election, due by May 1997, the British regulatory system ""will be reformed."" But this would not mean ""tearing everything up or dramatic change,"" he added.
He said Labour wanted to establish a regulator with sufficient ""clout reputation and stature"" to deal with its international counterparts.
But it would not create a ""Super-SIB,"" an enlarged version of the top regulator the Securities and Investments Board (SIB), as some commentators have suggested. A Labour government would also attempt to limit the number of regulations.
Darling's call for minimising the regulatory burden by making it as cost-effective as possible was echoed by most of the speakers at the conference.
Angela Knight, Britain's economic secretary to the Treasury, said the government wants to see a cost-benefit analysis applied to all regulations. If they fail to make sense on this basis then they should not be adopted, she said.
Knight also underlined the dramatic effect on the industry as a whole of the collapse of blue-blooded merchant bank Barings in February 1995 was ""a more salutory lesson than any regulation"" to other banks and financial institutions.
There were calls from both politicians for interchange between industry and the regulators, so that the experiences on either side of the fence could be carried across by individuals.
But while the idea of the regulators being staffed by people with first-hand industry knowledge won support from many of those attending the meeting, the question of how the pay structure could accomodate such movements was seen by some as a serious obstacle to this system spreading.
And while regulators need to keep up with rapid changes in financial instruments and the industry landscape both on a domestic and a global scale, they can never be expected to be one step ahead of the business they are monitoring.
""Regulators should respond to business realities rather than be ahead of business trends,"" Sir Andrew Large, chairman of the SIB told the meeting.
This would mean regulators becoming increasingly sophisticated to cope with the changing business environment and having to co-operate more and more with their counterparts in other countries.
""The next generation of supervisors will have to evaluate far more complex information and make far more complex judgements,"" Large said.
",2
"The debt restructuring package hammered out between Anglo-French Channel Tunnel operator Eurotunnel and its creditors may not be able to withstand any extra financial demands resulting from last month's fire, secondary debt trading firm Klesch & Co said on Thursday.
""The recent fire onboard a Eurotunnel HGV shuttle has now raised fundamental safety concerns, with potentially dire (but as yet unquantifiable) long-term implications,"" Klesch & Co said in a report on the restructuring plans.  
It said from an investment viewpoint the events ""call into question the likely adequacy of the financial restructuring package as currently proposed"" but acknowledged the immediate impact on Eurotunnel's revenues ""is likely to be minor.""
The report said that according to its calculations, the multi-billion pound debt restructuring hammered out between Eurotunnel and a group of 225 creditor banks, which was finally agreed in October, had only left the company with ""headroom,"" or contingency reserve, of 600 million pounds ($990.7 million), or around 67 million pounds a year over nine years.  
""Any development (such as the fire) which has the potential to impact future revenues or operating efficiency, could threaten the suffciency of a financial restructuring package.""
Passenger car shuttle services resumed through the tunnel on Tuesday, three weeks after the fire closed the undersea link. The fire on a truck destroyed a freight vehicle and damaged a section of the tunnel. Thirty-four people were injured.  
Rail services for passengers between Paris and London and Brussels and London resumed last week but no date has been set for a resumption of the shuttle service for trucks.
The report said that in the aftermath of the fire the Channel Tunnel Safety Authority would have to consider the design and operation of the open-lattice freight carriers.
""Should (it) decide that fundamental changes will be required to the HGV shuttles, the potential for a reduction in revenues and/or increases in costs could reduce the contingency made available by the restructuring,"" it added.
Klesch & Co also pointed out the fire had highlighted that Eurotunnel ""consists in its entirety of a single, high profile, effectively irreplaceable, hugely expensive and vulnerable operating asset,"" a factor at the core of its concerns.
",2
"Britain's largest cable operator was born on Tuesday from the merger of the British operations of cable and telecoms giants Cable & Wireless, NYNEX Corp of the U.S. and Bell Canada International.
The deal, which took only five weeks to complete, brings together C&W's Mercury, British cable company Videotron, Bell Cablemedia and NYNEX CableComms, eclipsing Telewest as Britain's biggest cable operator.
It is a landmark deal for C&W chief executive Richard Brown, appointed five months ago, and follows the collapse of merger talks earlier this year between C&W and its great rival British Telecommunications Plc.
C&W last month replaced BT in a major German alliance with diversified utility RWE that is seen as the main competitor to the dominant Deutsche Telekom as the German market is being liberalised.
Brown said the merged company, which will provide integrated telecommunications, information and entertainment services, would give C&W's telephone company Mercury access to a total of 18 million business and domestic customers.
Latest statistics show 30 percent of homes which can take cable after an extensive cable-laying drive beneath Britain's streets have opted for one or more cable service.
Brown said the move had been spawned by a common vision.
""We had a common vision of what could be done and we have done it with speed and nimbleness,"" he told Reuters.
The development was welcomed by the industry, battling to compete with satellite operators such as BSkyB in television services and British Telecom in telephones.
""This is clear evidence of confidence in the future of the UK cable industry,"" a spokesman for industry body the Cable Communications Association, said.
""The broadband fibre optic network being laid across the UK is the most advanced in the world for delivery to individual homes,"" he said, adding that around 6 billion pounds ($7.5 billion) had already been invested in building the network and a further six billion of investment was planned.
In a related deal, Videotron is being bought by Bell Cablemedia in a complex transaction involving a $338 million equity investment in Bell Cablemedia by Cable & Wireless. This values Videotron at around $1.09 billion.
Once the merger and the Videotron deal have been completed, Cable & Wireless will own 52.6 percent of the new company -- to be called Cable & Wireless Communications -- with NYNEX owning 18.5 percent and Bell Canada 14.2 percent of the shares.
The remaining 15 percent will floated and the groups intend to list the company in both London and New York. This is likely to take place in about six months.
C&W's Brown said he could not detail the financial aspects of the merger because of the new company's planned listing.
Cable & Wireless Communications ""...will provide local, national, international, data and mobile telecommunications, together with multichannel television and Internet services"".
Brown said the new company would be the only one in Britain able to offer multiple services which people had to get from different providers until now.
""Cable & Wireless Communications will be the only company in the UK capable of offering a combination of telecoms, broadband, data transmission, video shopping and Internet access.""
The group aims to increase revenues by providing a wider range of services to existing customers and increased access to a broader customer base. It will also produce ""significant cost savings"" by eliminating duplication, enhancing purchasing power and increasing capital expenditure efficiencies.
The new company will be strategically positioned to offer new products like interactive digital services and multi-media products ""as they become available"", the companies said.
Stephen Pettit, executive director of European operations at C&W, told Reuters Financial Television that the deal would not lead to duplication.
""Both Mercury and the cable companies had strategies to dig up the streets and lay cables and they are looking at the same streets. This gives the chance to do it once and keep the costs down as a result,"" he said.
Pettit said no other players could match what he described as ""a unique force"" in the British market.
",2
"Financial services and property group Liberty International vowed on Thursday to change the way the British pensions market works with the launch of a new user-friendly subsidiary.
""The market is poised for change, requiring a fresh approach, and our company will provide this by demystifying pensions for everybody - both individuals and the companies for which they work,"" Liberty chairman Donald Gordon said.
Liberty has set up its own pensions company, Liberty International Pensions, and will target retail pensions and money purchase pension schemes -- pensions where the benefit is linked to the amount an individual has put in.
Liberty, 69 percent owned by South Africa's Liberty Life, has enrolled the giant British Telecom Pension Scheme, which will pay five million pounds ($7.8 million) for 10 percent of the equity of Liberty International Pensions.
Liberty's Gordon said the move into the British pensions market was an extension of a worldwide shift from defined benefit -- where an individual's pension is related to his final salary -- to defined contribution principles.
This would have ""a most profound influence on business practice and retirement savings in the future"". In Britain there is also ""an urgent and growing need for quality privatised retirement savings which require a radical change in approach and funding techniques"", Gordon added.
A rapidly ageing population and low birth rate were combining to increase this need, Gordon said.
Liberty also announced it had teamed up with fund management group Hermes to form Hermes Liberty International Pensions. This will offer specialised investment services to the British pensions industry, with Hermes as fund manager.
BT Pension Scheme is giving the Hermes Liberty joint venture ""critical mass from the outset"" with a 1.5 billion pound transfer of assets to the new funds, Gordon said.
He said Hermes' expertise in investment management and track record would help the group to provide quality and competitively priced pension services. Hermes called the joint pensions venture a meeting of minds.
""Liberty has the ability and techniques of selling pensions, it also has the systems...and the administration. We on the other hand are good at our particular core areas of investment management...we think that's a very good marriage,"" Alastair Ross Goobey, chief executive of Hermes, said.
""It really was a meeting of minds on this. Whether it develops further from this we shall see. I think one step at a time is quite enough for us.""
He said the venture would probably not be up and running until the first quarter of next year as regulatory approval first had to be obtained for the new group.
As well as selling pensions directly by telephone, Liberty also plans to sell personal pensions at its regional shopping centres, which are held through a majority-owned subsidiary Capital Shopping Centres. These have more than 150 million customer visits a year, Liberty said. ($1=.6395 Pound)
",2
"Hunting so-called ""fat cats"" - the biggest company boardroom earners - may have become a British media obsession but the pay packets of the country's top players are under even closer scrutiny from institutional shareholders.
The latest row, between electronics giant General Electric Co and some of its major shareholders who objected to a 10 million pound ($15.61 million) five-year package for new managing director George Simpson, resulted in GEC setting tougher performance targets.
But questions remain over how much the individuals charged with running some of Britain's most, and in some cases least, successful companies deserve to be paid and have led to a reappraisal of the fundamentals of corporate governance.
Both last year's Greenbury committee on executive pay and the earlier Cadbury report on corporate governance laid down guidelines on how companies should behave. But not all the rules are compulsory and some firms have opted not to toe the line.
This has led to a more active approach by leading institutional shareholders like Norwich Union and has seen greater involvement from bodies such as the Association of British Insurers and the National Association of Pension funds.
""Institutional shareholders are paying a lot more attention to these issues, not perhaps out of choice but because of circumstances. We do think remuneration issues are important but perhaps get more publicity than they should,"" Anita Skipper, corporate governance manager at Norwich Union told Reuters.
Skipper said the group, which has been looking at corporate governance issues for more than a decade, does not generally give a view on the general package an executive receives, but tries to ensure a company's performance justifies the benefit.
This means close scrutiny of every aspect of the company's performance, including factors such as its return on capital, cashflow, the way it is managed and its prospects.
""It's good to see the big investing institutions flexing their muscles and taking an active interest in this way,"" one industry insider told Reuters.
Last week Tim Melville-Ross, director general of the Institute of Directors, rallied behind Simpson, arguing that very few people were capable of doing the job.
Melville-Ross also sat on the Greenbury panel which urged the remuneration committees - which decide directors' salaries - to take into account the wider scene, including pay and employment conditions elsewhere in the company and industry.
A row over a new executive bonus scheme at British power and water giant United Utilities in July fuelled public outrage at the million-pound packages that executive directors of monopoly utilities have managed to amass since privatisation.
Last year, chairman of Marks and Spencer Sir Richard Greenbury was given the job of attempting to impose curbs following public outrage over the pay of Cedric Brown, formerly the chief executive of British Gas.
""That was a watershed. That was what raised public awareness of the issue (of directors' pay),"" Norwich Union's Skipper said.
The Greenbury committee said a number of privatised water and energy companies ""have developed, perhaps unintentionally, remuneration packages which are richer than required to recruit, retain and motivate quality managers"".
Skipper maintains that revealing directors' pay is a requirement of good corporate governance. ""It should be there for shareholder scrutiny,"" she said.
But her view is not appreciated by all directors. One director of a quoted financial institution, recently told Reuters he was firmly against having his salary and pension details published not least because of the potential personal repurcussions.
His mother-in-law happens to be a shareholder and receives the company's annual report and accounts and he confided that she has since hinted she will re-write her will in favour of her other children.
($1=.6406 Pound)
",2
"Singapore's Hotel Properties and property group Canary Wharf on Friday applied for detailed planning consent for a development aimed at injecting life into an office-dominated area of London's former docks.
""Life means people who stay here. We looked at what was lacking (in Canary Wharf) and that was life,"" Thio Gim Hock, executive director of HPL, told Reuters in an interview.
HPL and Canary Wharf, which is owned by an international consortium led by Paul Reichmann and including Prince Al Waleed bin Talal bin Abdulaziz al Saud of Saudi Arabia, formed an 80-20 joint venture for the residential, hotel and leisure project.
The multi-million pound scheme represents the first phase of development of an 11-acre (4.5 hectare) site adjoining the River Thames. It will be part of the landmark Canary Wharf docklands development to the east of the City financial district, home to Britain's tallest building.
The development will be the first at the massive Canary Wharf site since an agreement last year by banks to sell out to the Reichmann-led consortium. The banks had taken over the ownership when the original development company went into administration.
Despite these problems, 80 percent of the offices have now been occupied and Canary Wharf is vying with the London's traditional financial heartland as a site for large global investment banks to locate their new headquarters.
Office blocks have so far dominated the site, however, and Thio Gim Hock said he expects to start building 330 residential units, a five star hotel and sports club early in 1997. They are due to be completed by the end of 1998 or early 1999.
There is already outline planning permission from the London Docklands Development Corporation (LDDC) to develop the site and Canary Wharf's Robert John, a director of the joint venture, believes detailed permission should be granted.
An initial capitalisation of 50 million pounds ($83.95 million) will come from the partners. Further funding is expected to come from sale of apartments and bank loans, although Thio Gim Hock would not be drawn on the financing.
HPL, which has a stake in Britain's Virgin Cinemas as well as interests in hotels such as Four Seasons and residential developments, said in July the Canary Wharf scheme would cost around 250 million pounds, although the total cost is likely to be higher given the estimates for the first phase.
Designer Philippe Stark is to shape the hotel and leisure component of the new development, which will include a glass-covered ""infinity"" swimming pool which will give the appearance of dropping into the river Thames below.
Thio Gim Hock said Stark will ""give some sex appeal to the development"", which he says will have a country club atmosphere. He wants the hotel to have its own distinctive character which will be ""elegant, understated and aimed at business people"".
The developers also envisage opportunities for top-class restaurants with river views on the site.
He expects many of the apartments to be sold to people in Britain, but also hopes for overseas interest and foresees some buyers seeking an investment rather than a place to live. HPL's track-record in Singapore will, he said, encourage interest from the company's home patch.
""I have no doubt that a lot of them will come and buy here.""
Work on the Canary Wharf project in the former London docks began in 1987 under Olympia and York, owned by the Reichmann family of Canada.
But in May 1992 Olympia and York Canary Wharf Ltd went into administration and was rescued by a group of banks that had financed the project in October 1993. ($1=.5956 Pound)
",2
"Lloyd's insurance market on Tuesday welcomed a crucial U.S. district court ruling in its favour and said it would extend a deadline for acceptances of a 3.2 billion pound ($5.5 billion) recovery plan.
""We have decided in the circumstances we will keep the offer open,"" Lloyd's chairman David Rowland said after a district court in Baltimore, Maryland, overturned an injunction by U.S. Names -- as investors in the market are known -- who were unhappy with the plan.
Rowland did not say how long the deadline would be extended from noon (1100 GMT) on Wednesday, but insurance sources said it would probably be stretched for several days to allow more U.S. Names to approve the plan.
A Lloyd's spokesman said the ruling had removed the last major legal obstacle to the 300-year-old insurance market's recovery plan, aimed at ending years of turbulence triggered by huge liabilities.
Lloyd's earlier said more than 82 percent of its 34,000 worldwide members had approved the plan, but only 53 percent of the 2,700 U.S. names had given the go-ahead.
""Since we won the appeal, faxes have been flooding in from U.S. Names accepting the settlement offer,"" a Lloyd's spokesman said by telephone.
Lloyd's hopes the support shown by Names will be enough to declare the plan unconditional when its ruling council meets on Thursday. The plan still has to be approved by the Department of Trade and Industry.
Lloyd's problems began in the 1980s when a fatal combination of negligent underwriting, poor investment advice and a sequence of unexpected natural disasters conspired to bring about losses of several billion pounds.
Long standing Names were for the first time in their lives suddenly faced with the prospect of unlimited losses.
A spokesman for one of the three key litigating British action groups representing major loss-making Names described the successful appeal as ""very good"" for the recovery plan.
""I think we did better by the settlement than by going through the courts,"" said the spokesman for the Merrett 418 Names Association, which groups 1,932 members.
Under the proposals, Lloyd's will reinsure its massive liabilities in a new company called Equitas. It is asking investors to help fund Equitas but has offered them a compensation package to help offset their losses.
Rowland said he was delighted by the U.S. ruling, which overturned a injunction granted by a lower court to a group of U.S. Names who wanted more time to study the terms of the settlement.
""I am very pleased. I have believed for a long time that what we are doing is in the interest of the whole society,"" Rowland told Reuters, adding he did not want to exclude anyone from the offer.
Many of the market's pre-1993 liabilities stem from pollution and asbestosis related claims in the United States, some of them dating back even to the last century.
",2
"Privately-owned British investment bank Robert Fleming on Wednesday announced increased pre-tax profits for the first half of the year which it said underlined its ability to remain independent.
""We are committed to remaining independent. These results, our second best interim results ever, show we can remain independent,"" a Robert Fleming spokesman told Reuters.
Flemings has been widely talked about as a possible takeover target for a larger foreign investment bank, but has resolutely said it would retain its independence.
Flemings said its pretax profit for the first half of the year had increased by 16 percent to 92.2 million pounds ($154 million), from 79.4 million pounds a year earlier but warned it would have to cope with difficult markets in the second half.
Some analysts said the increase was not particularly impressive given market conditions but chief executive John Manser said it was ""a very good start"" and showed new businesses were ""making a valuable contribution to profitability.""
""While the outlook for the year seems promising, flat Asian markets and heightened competitive pressures in other markets are factors that we will continue to have to contend with during the next six months,"" Manser said in a statement.
The Flemings official said the results showed that while Flemings may have been perceived as an Asian-centric bank, it was now a much more international operation and had succeeded in bringing down its cost income ratio.
Flemings has not had an easy year so far. In July it lost investment banking head Bill Harrison who was poached by BZW, the investment banking arm of Britain's Barclays.
And in August Jardine Fleming, a joint venture with Jardine Matheson, revealed a five-month probe by British and Hong Kong regulators into irregular trades by a former senior fund manager at Jardine Fleming Investment Management.
This resulted in hefty fines and voluntary compensation of nearly $20 million to clients. Regulators also withdrew the authorisation of Jardine Fleming's London-based fund company. In September the company's chairman retired and the group created a new supervisory board.
Flemings acknowledged the problems at Jardine Fleming meant the joint venture had recorded a ""marginally lower"" interim result than its net interim profit of $63.9 million in 1995.
This was after taking into account provisions ""arising from the regulatory issues relating to earlier years,"" it said. The Flemings spokesman told Reuters some clients had been lost, but new clients had also been taken on.
He described the events as a ""painful experience."" ""But we believe we have clearly drawn a line in the sand,"" he added.
Any impact these problems may have had on Flemings' overall business was not, however, reflected in the interim dividend which rose to eight pence per share from seven pence.
Flemings said it had seen strong profit growth from its fund management businesses adding that its securities business had reported ""a marked increase in profits aided by a strong performance by UK and continental European broking.""
Its capital markets arm had helped companies raise 13.4 billion pounds of new capital while its corporate finance division had completed 43 deals during the period.
The appointment of Manser, 56, to replace Robin Fleming, 64, who will retire as chairman of Robert Fleming Holdings at the end of March 1997, means Manser would be more involved in business development and winning new business as well as strategy and relationships with major clients and shareholders.
William Garrett, 50, who was hired by Manser as a fund manager in 1970, was named as his replacement as chief executive and chairman of the group executive committee. Garrett will be responsible for the day-to-day running of the group.
",2
"Britain's largest cable television company was born Tuesday in the merger of the British operations of cable and telecommunications giants Cable & Wireless, NYNEX Corp. of the United States and Bell Canada International.
The deal, which took only five weeks to complete, brings together C&W's Mercury, British cable company Videotron, Bell Cablemedia and NYNEX CableComms, eclipsing Telewest as Britain's biggest cable operator.
It was a landmark deal for C&W Chief Executive Richard Brown, appointed five months ago, and follows the collapse of merger talks earlier this year between C&W and its great rival, British Telecommunications Plc.
C&W last month replaced BT in a major German alliance with diversified utility RWE that is seen as the main competitor to the dominant Deutsche Telekom as the German market is being liberalised.
Brown said the merged company, which will provide integrated telecommunications, information and entertainment services, would give C&W's Mercury telephone company access to a total of 18 million business and domestic customers.
Latest statistics show 30 percent of homes that can take cable after an extensive cable-laying drive beneath Britain's streets have opted for one or more cable service.
The development was welcomed by the industry, battling to compete with satellite operators such as BSkyB in television services and British Telecom in telephones.
""This is clear evidence of confidence in the future of the U.K. cable industry,"" said a spokesman for the Cable Communications Association, an industry group.
""The broadband fibre optic network being laid across the U.K. is the most advanced in the world for delivery to individual homes,"" he said, adding that around 6 billion pounds ($7.5 billion) had already been invested in building the network and another six billion of investment was planned.
In a related deal, Videotron is being bought by Bell Cablemedia in a complex transaction involving a $338 million equity investment in Bell Cablemedia by Cable & Wireless. This values Videotron at around $1.09 billion.
Once the merger and the Videotron deal have been completed, Cable & Wireless will own 52.6 percent of the new company -- to be called Cable & Wireless Communications -- with NYNEX owning 18.5 percent and Bell Canada 14.2 percent of the shares.
The remaining 15 percent will floated and the groups intend to list the company in both London and New York. This is likely to take place in about six months.
""Cable & Wireless Communications will be the only company in the U.K. capable of offering a combination of telecoms, broadband, data transmission, video shopping and Internet access,"" Brown said.
Stephen Pettit, executive director of European operations at C&W, told Reuters Financial Television that the deal would not lead to duplication.
""Both Mercury and the cable companies had strategies to dig up the streets and lay cables and they are looking at the same streets. This gives the chance to do it once and keep the costs down as a result,"" he said.
",2
"UK investment capital group 3i Group Plc said on Thursday the increase in its first half net asset value (NAV) per share was healthy but had been partly held back by continental Europe and a strong pound.
""Its a pretty healthy increase. Its held back a bit by continental Europe...the markets have not been that good and there has also been the appreciation of sterling,"" Ewen Macpherson, 3i's chief executive told Reuters.
3i's NAV for the period rose to 454 pence per share, from 426 pence for the same period the previous year.  
Macpherson said a better indication of the group's performance was its UK portfolio which had performed ""extremely well"", reflected in an 18 percent growth in revenue.
He said there were still plenty of opportunities available, with the sort of companies that 3i invested in doing very well. There had also been an improvement in general business confidence in the UK, which had improved for the fourth consecutive quarter according to 3i's latest survey.
""The confidence in the businesses underlying our portfolio has been so positive,"" he said. Of 327.3 million stg invested by 3i during the period, 284.2 million stg was in the UK.  
Macpherson said the prospect of a general election in the UK, which must be held by May 1997, had resulted in a number of investment opportunities for 3i as some company founders or management teams decided to sell their holdings in a firm while there was no doubt about the tax implications.
While the European performance had an impact on the NAV figure, the investment opportunities for 3i on the continent remained good, Macpherson said, adding that current pricing levels for the small and medium-sized European companies in which the group invests were ""very attractive"".  
During the first half of the year, 3i said, realisations on investments had continued ""at an encouraging rate"". It realised investments of 122.2 million stg in the UK and 35.9 million stg in continental Europe.
Macpherson said the group had ""significant plans to expand in Europe"" and this was reflected in its decision to open an office in Dusseldorf, Germany in January. This regionalisation would involve opening offices in Hamburg, Munich and Stuttgart.
And the group was also planning to extend its presence into the south of France, he added.  
The group also announced it would open its first office in South East Asia, in Singapore, early in 1997.
Macpherson said the area was ""an exciting part of the world"" for investment capital and Singapore had been chosen as it was a good communication centre from which other parts of the region could be covered.
He said the office would start small, with a staff of three, and would have a maximum of ""half-a-dozen"" people for the first year or so and would look at opportunities in Malaysia, the Philippines, Thailand and Indonesia but not in China.
-- London Newsroom +44 171 542 7719
",2
"The British arm of accountancy firm Coopers & Lybrand, auditors for failed British bank Barings, said on Friday it had issued third party proceedings against nine former directors and employees of the bank.
""Despite the fact that we are not responsible for the collapse of Barings, we face a substantial claim. We are perceived to have deep pockets which are available to those who have lost money while those who were really responsible for the collapse of Barings escape,"" Coopers said in a statement.
""We may also take additional third party proceedings against other members of Barings management in due course,"" it added.
Coopers & Lybrand's British firm was auditor for Barings Plc, the parent company. Barings was rescued by Dutch financial giant ING Groep after it collapsed in February 1995 under losses of around $1.4 billion run up by the unauthorised derivatives trades of Singapore-based Nick Leeson.
Leeson is currently serving a six-and-a-half year jail sentence in Singapore for his part in the bank's downfall.
Ernst & Young, administrators to the bank, later issued claims of negligence in audits against accountants Coopers & Lybrand in London and Singapore and Deloitte & Touche in Singapore.
Some commentators estimate the total amount of these writs, which have not been specified, to be around 1.0 billion pounds ($1.68 billion). A Coopers & Lybrand official in London said no amount had been specified on the writ issued against it.
A spokesman at Ernst & Young told Reuters the firm was aware of the third party writs issued by Coopers but said that it was ""inappropriate to comment at this stage.""
The Coopers & Lybrand official said the third party writs against the nine former Barings directors and employees had not yet been served, adding it had four months in which to do so.
The firm said in a statement that the writs had been issued in the Chancery Division of the High Court against former Baring Investment Bank head Peter Norris and former deputy chairman Andrew Tuckey as well as Ron Baker, Mary Walz, Ian Hopkins, Anthony Gamby, Geoffrey Broadhurst, James Bax and Simon Jones.
Baker's lawyer, Lindsay Hill of law firm Fox Williams, told Reuters he was surprised Coopers & Lybrand had taken the action against Baker.
""I am surprised that Coopers & Lybrand should have taken this sort of action against Mr. Baker. I think the way events have unfolded before the SFA (Securities and Futures Authority) have demonstrated that he has not been in breach of any of his obligations or duties as a director,"" Hill said.
He said he did not expect Coopers & Lybrand to be successful in any claim against Baker and suggested that issuing the writs had been ""a tactical move intended to divert attention away from the main action.""
Earlier this month Baker was cleared of most misconduct charges brought by the SFA, a British financial markets watchdog, after a hearing by an independent tribunal.
Norris, who along with Broadhurst was banned from working in the City of London by the SFA in May, could not be contacted by Reuters.
Tuckey, who was deputy chairman of Barings, was not disciplined by the SFA. In March the SFA said it ""found no evidence indicating that the insolvency of the group"" could be attributed to his actions.
But he had to assure the SFA he would not seek any position in an investment house which would require his registration by the SFA as a senior executive officer or as a director unless his duties were limited to giving corporate finance advice.
Gamby was reprimanded by the SFA in August. He had his registration as a director suspended for a year and was required to pay 5,000 pounds towards costs.
SFA proceedings against Walz, Hopkins and Bax have yet to be concluded, while Jones was not regulated by the watchdog. ($1=.5953 Pound)
",2
"Members of the Transport and General Workers Union (T&G) at Tradeteam, the distribution arm of the brewing operation of Britain's Bass Plc, are to vote on strike action over proposed pay cuts, the union said on Friday.
The union said in a statement that the ballot of more than 1,000 workers at Tradeteam would start on December 9 and the result would be known on December 20.
Bass said there was no threat to the delivery of drinks to its customers in the run up to the busy Christmas period.
The T&G said the ballot was going ahead after an attempt by Tradeteam, a joint venture between Bass and NFC, to have it halted by a legal injunction failed on Friday.
""Since Bass established Tradeteam in a joint venture with Exel Logistics, management has been trying to cut wages by 100 stg per week and impose inferior working conditions in order to save 10 million stg a year,"" the union said.
It said Tradeteam had also rejected T&G attempts to establish national bargaining. The T&G said a Liverpool judge had refused to grant an injunction to stop the ballot.
""Bass Brewers Ltd is a very profitable company, which made over 157 million pounds profit over the last year. Their aim at Tradeteam has been to cut the wages of draymen and warehouse workers, many of whom have given over 20 years' loyal service to the company,"" T&G national secretary for the drinks industry Brian Revell said.
Draymen deliver beer and other drinks to pubs.
""I am pleased that the judge refused the injunction. We are prepared for a long battle with Bass until it honours its responsibilities,"" he added.
A spokesman for Tradeteam, which is 50.1 percent owned by NFC, denied a trade dispute existed with the union.
""There is no trade dispute with the T&G. Current settlements on pay and conditions between Tradeteam and its staff represented by the T&G have been made with full agreement of the T&G at local branch level,"" he told Reuters.
""To agree to national wage agreements would mean Tradeteam would be totally out of step with the rest of the industry.""
He said the union had been involved throughout the consultation process. This had resulted in the current terms and conditions for staff at each of the local offices at which the T&G was represented, he added.
Bass Brewers said the decision to vote on strike action would not affect beer deliveries over Christmas.
""Obviously the strike issue is one for Tradeteam but we want to reassure customers this will not affect their beer deliveries during or before the Christmas period,"" Stewart Cain of Bass Brewers told Reuters.
Earlier this week brewer-to-leisure group Bass, the parent company, said it planned to spend 670 million pounds on the business next year, creating some 7,000 jobs.
It said it planned a 300 million pounds investment programme over the next year on its Bass Taverns, converting many pubs to branded concept bars.
",2
"British property company Greycoat Plc, under fire from a group of shareholders calling for it to be broken up, said on Monday it was confident of getting the support of its institutional shareholders in rejecting the plan.
""I would be very surprised if they (Greycoat's institutional shareholders) would come down on the side of a closing down sale,"" Greycoat's chief executive Peter Thornton told Reuters.
Thornton said he believed the liquidation proposal by the UK Active Value Fund, which will be put to shareholders in 10-days time, was ""ill-conceived and fails to secure shareholder value"".  
Earlier Greycoat wrote to its shareholders urging them to reject the resolution, put forward by rebel shareholder Brian Myerson, at an extraordinary general meeting on November 14.
Myerson's Active Value Advisors Ltd (AVA) advises the UK Active Value Fund and is expected to put out its own response to the statement later today.
Last month Myerson said it was time to ""unlock the value of Greycoat"" as the company's shares stood at a 23 percent discount to the forecast net asset value for 1997.
He said there was ""considerable support"" for the proposal to dispose of Greycoat's assets and enhance shareholder value.  
Greycoat, which focuses on central London office developments, earlier announced a rise in interim pre-tax profits to 3.8 million stg and predicted a final dividend of 1.2 pence per share.
Thornton said the results showed the company was having a very good year, adding it was well placed to take advantage of favourable investor sentiment on the central London property market. ""The whole market is moving in our direction,"" he said.
The share discount to net asset value had been worsened by the fact that UKAV held 10 percent of the shares and this was overhanging the market, he added.  
Martin Poole, Greycoat's finance director, said the company had got its long-term debt in place, adding that its lender banks were not in any way ruffled by the current uncertainty.
""The novelty has worn off from the bank's point of view,"" Poole told Reuters. To get rid of the bank debt, which would be required by any liquidation plans, would cost ""roughly 10 million stg"", he added.
Poole said he expected good growth in the dividend in the medium term, in line with the group's policy of progressively increasing it. ""There is no reason why we shouldn't continue at the higher rate of profit,"" he said.  
While Greycoat does not intend to use further resources on development sites, it is likely to use the cash generated by the sale of its Buckingham Palace Road property for investment.
Thornton said discussions were already underway with several parties, but he stressed the company would not pay over the odds, would not compromise on what it wanted and would not buy anything in the market.
Rather than concentrating on a single asset, there would be two or three purchases or ""possibly more"". Greycoat had around 50 million stg to spend and this would be geared up to around 50 million stg cash and the same amount of debt, Thornton added.
-- London Newsroom ++ 44 171 542 7719
",2
"CE Electric, the U.S. energy group, appeared poised to win its hostile bid for British regional electricity group Northern Electric Plc on Tuesday after Britain's Takeover Panel ruled against the target firm.
Late on Monday night the British company lost an appeal to the panel, which polices London's mergers and acquisitions market, to reverse an extension of the offer period for CE's 782 million pound ($1.3 billion) bid to 1300 GMT on Tuesday.
On Monday morning CE, which is controlled by CalEnergy Co Inc, said it had received acceptances totalling just over the 50 percent mark needed for victory. The offer was meant to close last Friday but was extended after an appeal by CE.
This extension was granted because CE raised concerns about the purchase of Northern Electric shares last week by its advisers British merchant bank Schroders and BZW, the investment banking arm of Barclays, and a discretionary payment of 250,000 pounds to BZW but not declared until Friday.
In its statement the panel said it had only been informed of the payment early on Friday but that while ""neither element of the fee arrangement was dependent upon the success or failure of the offer"", it was ""material information which ought to have been made known to the executive"" earlier in the week.
Northern in turn launched its own appeal against the extension of the deadline because at the time of the first deadline, CE had only gathered support totalling 49.77 percent and therefore fell short of the total needed to win.
But after a day of uncertainty on Monday, the panel said its appeal committee had ""unanimously dismissed"" Northern's appeal, that the latest time for acceptance of CE's offer should be extended and ""any valid acceptances and withdrawals received by the latter time should be taken into account"".
The panel also said the non-disclosure ""may have had market consequences affecting the outcome of the bid, bearing in mind the narrow margin between success and failure in this case"".
CE officials were not immediately available for comment but Northern, which has fought off CE's approach from the beginning claiming it undervalued the company, refused to throw in the towel and urged shareholders who had indicated they would accept CE's 650 pence per share offer to think again.
""It is now up to the market to decide. If shareholders do not wish this bid to succeed they should deliver withdrawals of acceptances to the Royal Bank of Scotland by 1300 on Tuesday,"" a spokesman for Northern Electric told Reuters after the ruling.
The spokesman said that in the event of the CE bid lapsing, Northern was willing to ""attempt to reach agreement with CE Electric or any other bidder on the true value of the company"".
By agreeing to effectively ""collapse"" a rule which says a bidder cannot come back and bid for the same company within a 12 month-period, the spokesman said Northern was opening the way for shareholders to withdraw their acceptances and reopen the debate about the value of the company.
BZW, which as a result of not declaring the discretionary fee from Northern at the appropriate time will not now be paid this part, said it had done nothing wrong.
""BZW has at all times acted in good faith and has risked its own capital in support of Northern's defence. Our fee arrangement was in no way contingent upon the purchase of Northern shares and the panel has permitted this purchase to stand,"" a spokesman for the firm told Reuters.
This is not the first time such uncertainty has surrounded Northern's future since it was privatised along with its 11 regional electricity company (REC) peers in 1990.
In 1994 it was the first of the cash-rich RECs to face a takeover and successfully fought 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 ASA.
If CE's bid goes through only two of the original RECs will remain independent, Yorkshire Electricity and Southern Electric.  
""It is now up to the market,"" Northern said, calling for shareholders to withdraw their shares from CE's offer by 1300 GMT on Tuesday, the deadline for the hostile bid.
""In the event that this bid lapses, the board is willing...to enter into discussions with CE Electric, or any other party, with a view to reaching agreement on an improved offer for Northern Electric,"" the utility said in a statement.
On Monday morning, CE said it had received acceptances totalling just over the 50 percent needed for victory.
CE's offer had been due to end on Friday, when it had only gathered support totalling 49.77 percent of the total. However, the Takeover Panel extended the deadline after CE appealed, questioning the purchase of Northern Electric shares by its advisers, Schroders and BZW, and a discretionary payment of 250,000 pounds to BZW.
($1=.5973 Pound)
",2
"Britain's Invesco Plc Monday agreed to merge with Houston-based mutual fund company AIM Management Group Inc. in a deal valued at $1.6 billion, creating one of the world's largest investment management businesses.
The combined group will be called Amvesco Plc and have around $150 billion under management. The merger will be paid for with about $1.1 billion in new stock and the rest in cash and debt, Invesco officials said.
""We are creating a prototype company for the future,"" Bob McCullough, Invesco's chief financial officer, said in an interview.
Invesco Chairman Charles Brady, who will lead the combined group, said it would have ""the scale necessary for success as a financially strong and independent business operating in an increasingly concentrated industry.""
McCullough stressed the deal was a merger of the two companies, which would focus on growing revenue but retain their individual identities.
Invesco said it would fund the deal by issuing 290 million new shares to AIM shareholders. These would be valued at about $1.1 billion. AIM shareholders will own around 45 percent of the merged company.
McCullough said another $500 million needed to fund the merger would come in the form of cash and debt.
The merger presented a chance for the two companies to use different distribution channels and approaches. McCullough said he did not forsee any culture clash between the two.
There would be no change in their differing approaches, with Invesco continuing to be a ""no-load"" house, selling products direct to the customer, and AIM selling its nearly three dozen funds through brokers.
McCullough said the cost of the merger was not excessive.
""There's no question that it is a lot of money, but we view this as a long-term investment for both of us,"" he said. The long-term commitment was underlined by the fact that almost 50 percent of the combined shares would be held by management.
Both companies were ""really active managers"" and would stay that way rather than moving to passive management, McCullough said, adding that Invesco's global infrastructure presented a major opportunity.
He denied the heavy exposure to the United States would hinder Invesco from making the most of opportunities in other parts of the world. ""We would like nothing better than to find opportunities in Asia and Europe,"" he said.
The merger would enhance the group's strength in the United States and lead to cost savings, officials said.
McCullough said the merger must be approved by Invesco and AIM shareholders and other approvals were required. The deal should be completed early next year, the company said.
",2
"Britain's Takeover Panel, after battling to defend its policing role of London's busy mergers and acquisitions market against European interference, has ended the year in the spotlight over its handling of CE Electric's bid for Northern Electric.
The non-statutory body has spent much of 1996 campaigning against a framework European Union proposal on takeover bids which it says will lead to multi-million pound lawsuits and harm London's system of takeover regulation.
But on Monday the panel's own role was under scrutiny as the outcome of a bitter bid battle between U.S. group CE and British utility Northern hung in the balance.
""What is going on at the moment is being watched pretty closely. It is a fairly unique situation,"" a financial services lawyer said.
Criticism of the part the panel has played stems from a 250,000 pound ($418,600) payment made by Northern to one of its advisors, BZW, the investment banking arm of British banking giant Barclays Plc.
BZW said this was a discretionary fee and denied that it was linked to its purchase last week of Northern shares, which had already been allowed by the panel. After it was told of the payment, the panel extended the deadline for acceptances.
After the official close of the offer last Friday, Northern would have remained independent as CE had only achieved the support of 49.77 percent of Northern shareholders. But following the extension, CE said on Monday it had 50.13 percent.
A source close to the discussions said it was ""very unusual and maybe unique"" for the panel to be in the position of deciding the fate of a company in this way.
This view was echoed by other market participants.
""This is an unndented step the panel has taken,"" one investment banking source told Reuters of the decision to grant an extension to the offer period at such a late stage.
Northern's fate now lies in the panel's hands. The company has said it wants to appeal against the decision and revert to the result at the original end of the offer period. Acceptances after the initial deadline require the panel's approval.
""They (the panel) now find themselves in a very difficult situation,"" the investment banking source added.
Any changes in the way in which the panel operates must either come from government, by bringing in legislation to establish a statutory force to regulate takeovers, or from within the body itself, market players said.
Pressure from industry participants could lead to the panel making changes itself. ""They can change the ""Blue Book"" (the rule book regulating takeovers) at the drop of a hat,"" one industry source said, adding that it had so far managed the system well.
""The panel seemed to be coping well with the upturn in bid activity. The system seemed to be working pretty well,"" he said. Mergers and acquisitions activity has reached peak levels in recent weeks, with a number of both agreed and disputed bids.
Apart from the potential threat from the European takeover directive, there had ""been no major challenges to the panel's authority over the year"", he added.
Even if the ruling Conservative Party loses a general election which must be held by next May, market participants said they did not expect pressure for legislation to put the panel on a statutory footing under a Labour government.
""The general feeling is pretty much against it (legislation) and the indications so far ist change it,"" said one.
",2
"British property group MEPC said on Thursday it was pleased with a rise in pretax profits for the year but admitted disappointment at a fall in its net asset value (NAV) to 450 pence per share from 457 pence.
""We feel very confident about the whole of the profit statement. The only slight disappointment is on the NAV side,"" James Tuckey, MEPC's chief executive, said in an interview.
Earlier MEPC announced a 14 percent increase in pretax profit for the year to 140 million stg from 122.6 million stg. Earnings per share rose nine percent to 22.9 pence.  
Tuckey said the NAV fall reflected a marginal fall in values both in Britain and elsewhere but said the NAV drop was less than the relevant indices.
""We feel that the performance of our UK portfolio, which accounts for 70 percent of the group, is indeed where we would have expected it to be,"" he added.
He pointed out the valuation date was August 31 and there had been activity and evidence of an improvement in the market since then. ""If we redid the valuation for December 1, we would probably get a different answer,"" he said.  
Tuckey said the other factor which had brought the NAV down was a significant 31 million stg write-down on the valuation of MEPC's Northridge Mall in Los Angeles. This had been equivalent to 7.5 pence per share.
""We are convinced this is a temporary write-down because the centre is still getting back on its feet after the earthquake some three years ago. We are quite confident we will get that value back in the next two to three years as the centre re-establishes itself,"" Tuckey said.
""We felt that we wanted to share as much information as we could with shareholders,"" he added.  
MEPC's decision to give a target NAV of 690 pence per share for 2001 reflected its repositioning of its portfolio.
""We're sticking our necks out...The portfolio is very very different to what it was three years ago and what we're trying to do is give shareholders some feel of where we think the performance is going to be in five years time,"" Tuckey said.
""We believe we need to share with our stakeholders what it is we are trying to achieve.""
Tuckey said the full impact of the change of strategy in MEPC's portfolio would take time but there would be progress towards the firm's targets each year.  
He said there was a much firmer tone to the markets, particularly in the UK over the last few months. Apart from Northridge, the rest of the U.S. portfolio had performed ""extremely well"".
MEPC plans to keep the lion's share of its portfolio in the UK, with the remainder in the U.S. and Australia. It has wound down its European portfolio and has no plans to go back into continental Europe in the immediate future.
Tuckey said the group was keen to make acquisitions, with the proceeds of its European disposals, but that there was a shortage of good stock available, particularly in the UK.  
While MEPC has resolved to increase the dividend paid to shareholders, Tuckey said he could not predict when it would be increased although he pointed out that dividend cover had improved to 1.15 times from 1.05 a year before.
""It depends on the forward look, on how the markets are feeling,"" he said. The market was competitive and good stock was hard to find but Tuckey said he welcomed the prospect of changes to the way the market functioned with more liquidity likely.
""I think there are changes afoot and they are changes for the good because what they will allow is greater liquidity for the sector, possibly through derivatives or the property investment trusts that have been talked about,"" he said, adding that MEPC would be involved in any such developments.
-- London Newsroom +44 171 542 7717
",2
"Embattled British property company Greycoat had the immediate threat of a shareholder call for its break-up removed on Thursday, but the firm still faced an unwanted merger proposal from a smaller rival.
Greycoat welcomed an overwhelming vote against the breakup resolution put forward by the UK Active Value Fund (UKAV) and chief executive Peter Thornton said he hoped the group could now get on with its normal business.
""It has cost us a lot of money and a lot of wasted effort and time. What we would like to do is get on with running a property company,"" Thornton said in an interview.
He was speaking after the vote by Greycoat shareholders on UKAV's call for the sale of all Greycoat's 500 million pound ($811.6 million) assets. Among Greycoat sharholders, 95 percent of those who voted, representing 55 percent of the share capital, voted against the sale.
Shares in Greycoat closed unchanged at 163.5 pence, compared with a year high of 168 pence and a low of 130 pence.
UKAV, which is advised by South African Brian Myerson's Active Value Advisers, said on Wednesday it would abstain at the reconvened extraordinary general meeting.
It argued it had already achieved one of its main aims, the sale of Greycoat's largest asset, Embankment Place, on the River Thames in central London.
It now thought a merger proposal from Moorfield Estates had ""considerable merit and could better serve the interests of Greycoat shareholders"".
Thornton welcomed the fact that one uncertain element surrrounding the group was over, adding Greycoat had yet to receive the answers needed about the Moorfield merger proposal.
""We still haven't received answers to our 30-odd questions,"" he said of the Moorfield approach, adding Greycoat was not prepared to embark on a due diligence exercise or open its books to Moorfield without more concrete details of the firm's plans.
Moorfield has suggested demerging Greycoat's largest assets, but Thornton said it had yet to convince him it had proposals that would work.
Moorfield shares were also unchanged at 30.5 pence, compared with a year high of 34 pence and a low of 24 pence.
Thornton said relations with potential purchasers had been established but there were fairly few buyers in the world able to pay more than 200 million pounds ($324.6 million).
But he said he could not quantify how much losing the opportunity of an ""off market"" sale might shave off the sale price. ($1=.6161 Pound)
",2
"Privately-owned British investment bank Robert Fleming on Wednesday announced increased pre-tax profits for the first half of the year but warned it would have to contend with some difficult markets in the second half.
Flemings said its pretax profit for the first half of the year had increased by 16 percent to 92.2 million pounds ($154 million), from 79.4 million pounds a year earlier.
Some analysts said the increase was not particularly impressive given market conditions but chief executive John Manser said it was ""a very good start"" and showed new businesses were ""making a valuable contribution to profitability"".
""While the outlook for the year seems promising, flat Asian markets and heightened competitive pressures in other markets are factors that we will continue to have to contend with during the next six months,"" Manser said in a statement.
But one analyst, who declined to be named, said the group would have given a more precise break-down of the performance of its various arms if the results had been outstanding.
Flemings has not had an easy year so far. In July it lost investment banking head Bill Harrison who was poached by BZW, the investment banking arm of Britain's Barclays.
And in August Jardine Fleming, a joint venture with Jardine Matheson, revealed a five-month probe by British and Hong Kong regulators into irregular trades by a former senior fund manager at Jardine Fleming Investment Management.
This resulted in hefty fines and voluntary compensation of nearly $20 million to clients. Regulators also withdrew the authorisation of Jardine Fleming's London-based fund company. In September the company's chairman retired and the group created a new supervisory board.
In its interim results on Wednesday Robert Fleming acknowledged that the problems at Jardine Fleming meant the joint venture had recorded a ""marginally lower"" interim result than its net interim profit of $63.9 million in 1995.
This was after taking into account provisions ""arising from the regulatory issues relating to earlier years"", it said. But despite widespread speculation that Jardine Fleming would lose clients as a result of the scandal, it recorded a net trading profit of $82.0 million, an increase of 28 percent.
Robert Fleming said ""the shortcomings which gave rise to these problems have been fully addressed"", management had been strengthened and the Jardine Fleming businesses were fully compliant with ""local and UK regulation and controls"".
They were ""being further upgraded to bring them completely in line with best international practice,"" it added.
Any impact these problems may have had on Flemings' overall business was not, however, reflected in the interim dividend paid by Robert Fleming, which announced an increased dividend of 8.0 pence per share, from 7.0 pence.
Flemings said it had seen strong profit growth from its fund management businesses and its securities business had reported ""a marked increase in profits aided by a strong performance by UK and continental European broking"".
Its capital markets arm had helped companies raise 13.4 billion pounds of new capital while its corporate finance division had completed 43 deals during the period.
It also announced that Manser will replace Robin Fleming who will retire as chairman of Robert Fleming Holdings at the end of March 1997. William Garrett was named as replacement chief executive and chairman of the group executive committee.
Other moves include Peter Jamieson becoming chairman of Robert Fleming & Co and Lawrence Banks who will join him as deputy chairman of Robert Fleming Holdings.
",2
"Shares in Cable & Wireless (C&W) advanced on Tuesday after investors welcomed news of a deal with NYNEX of the United States and Bell Canada International to create Britain's largest cable operator.
""This was a bold strategic stroke by the (C&W) chief executive,"" said Chris McFadden, analyst at Merrill Lynch.
The deal, which took only five weeks to complete, brings together C&W's Mercury, British cable company Videotron, Bell Cablemedia and NYNEX CableComms, eclipsing Telewest as Britain's biggest cable operator.
It sent C&W shares soaring, peaking at 476.5 pence before easing back to close up 25.5 at 466.5 pence.
The move is a landmark deal for C&W chief executive Richard Brown, appointed five months ago, and follows the collapse of merger talks earlier this year between C&W and its great rival British Telecommunications Plc.
""The logic is irrefutable...the advantages of scope and size are undoubtedly there,"" said Societe Generale Strauss Turnbull analyst John Tysoe.
BT said it welcomed the consolidation in the sector and analysts said the move could strengthen the telecoms giant's calls for it to be allowed to provide cable television.
But BT's shares edged lower to close down 4.5 at 353.5 pence and analysts said the new company would give BT a run for its money.
""We had a common vision of what could be done and we have done it with speed and nimbleness,"" Brown told Reuters. C&W last month replaced BT in a major German alliance with diversified utility RWE that is seen as the main competitor to Deutsche Telekom's dominance as the German market is liberalised.
The new merged company, which will provide integrated telecommunications, information and entertainment services, will give C&W's telephone company Mercury access to 18 million business and domestic customers, Brown said.
The number of homes within its sights will eclipse former market leader Telewest's two million at 2.47 million but it will not be in direct competition as the companies operate in different franchises.
Telewest's shares were boosted by the news, as analysts re-evaluated the potential in the sector, gaining 12.5 pence to close at 135.5 pence.
""This is clear evidence of confidence in the future of the U.K. cable industry,"" a spokesman for industry body the Cable Communications Association, said.
Around six billion pounds ($7.5 billion) has already been invested in laying out cable networks and a further six billion pounds of investment is planned, the spokesman added.
In a related deal, Videotron is being bought by Bell Cablemedia in a complex transaction involving a $338 million equity investment in Bell Cablemedia by Cable & Wireless. This values Videotron at around $1.09 billion.
Once the merger and Videotron deal have been completed, Cable & Wireless will own 52.6 percent of the new company -- to be called Cable & Wireless Communications -- with NYNEX owning 18.5 percent and Bell Canada 14.2 percent.
The remaining 15 percent will be floated, which analysts said would give it some scarcity value, with listings planned in both London and New York, probably in about six months.
C&W's Brown said he could not detail the financial aspects of the merger because of the new company's planned listing.
McFadden said cost savings should be quite significant, including tax offsets, refinancing of high-yield cable television funding and possibly through staff cuts, along with eliminating duplication in laying cables.
The new group aims to increase revenues by providing a wider range of services to existing customers, offering a combination of telecoms, broadband, data transmission, video shopping and Internet access.
It could also secure more favourable terms for programming from BSkyB, the satellite broadcaster in which Rupert Murdoch's News Corp has a 40 percent stake.
BSkyB shares ended down 18 pence at 678.5 pence. ($1=.7986 Pound)
",2
"KPMG, one of the world's big six international accounting and consultancy firms, believes investment in infrastructure and technology has put it on track to hasten revenue growth.
""We would like to be growing faster and are committed to growing faster,"" Jon Madonna, chairman of KPMG International told Reuters in an interview on Tuesday.
Earlier the group reported an eight percent rise in worldwide revenues for the fiscal year to September 30, 1996 to $8.1 billion, up from $7.5 billion the year before.
Madonna, who earlier this year said revenue growth in excess of 10 percent was a reasonable expectation, said KPMG had invested heavily in infrastructure and technology during the year and this would pay off in terms of further growth.
He said all sides of the business had performed well over the year but stressed that significant growth in revenues was likely to come from the consulting side of the business rather than from the traditional backbone of auditing and tax.
""If you look at where the great opportunity is, its on the consulting side,"" Madonna said.
While KPMG's growth rate for the year was lower than rival firm Andersen Worldwide, which last month reported a 16 percent increase in 1996 revenues to $9.4 billion, Madonna said he was not disappointed with the firm's result.
When looked at on a dollar-adjusted basis, the 1996 revenue growth was the same as for the previous year, Madonna said.
But there was still work to be done.
""I said a year ago we need to be growing faster. I just think we have got to do a lot better than that. It's a big ship and you don't turn it around in just a few days,"" he added.
The investment and strategic moves KPMG had made had ensured it would be in a strong position for the future. ""The road we are on is the right road"".
Madonna said the firm's partners were agreed that the moves it had made over the year were correct and the fact that everybody wanted faster growth confirmed the need for large-scale investments.
""We are making sizeable dollar investments in terms of infrastructure and product development."" This included around $500 million a year on technology and ""well in excess"" of $100 million on products.
For Madonna the key is what the partnership, which employs more than 77,000 people and has more than 6,250 partners, is doing in three years' time.
The strategy which KPMG has embarked on will not be altered to achieve further revenue growth and areas such as developing new products and establishing a framework of common industries and a common infrastructure across the firm's worldwide business will continue.
Madonna, who believes there will be further consolidation among the big accountancy firms, said KPMG will also stick to growing from within rather than through large-scale acquisition.
The number of major accounting firms in the world has dropped from eight in the mid-1980s to six, with a rise in competition from other types of firms.
But Madonna does not see KPMG making any big buys.
""There will be local acquisitions and mergers down the road but I don't think anything big is on the horizon.""
",2
"Even if British media and leisure group Pearson decides to sell its interest in merchant banking group Lazards, the bank would not be under immediate threat from larger rivals, banking sources said on Monday.
Marjorie Scardino's accession last week as Pearson chief executive has prompted widespread talk that Pearson would sell its 50 percent in Lazard Partners, which owns the three Lazard houses in London, Paris and New York.
But a pre-emption agreement in cross-shareholdings between Lazards and Pearson would ensure the partnership has first refusal on its own shares if Pearson decides to sell its stake, thus preventing the family-run merchant bank from falling into the hands of larger and expanding international rivals.
""This (speculation) is prompted by the fact that Pearson has a new chief executive who will obviously want to review things,"" one senior corporate financier told Reuters, adding that the pre-emption agreement meant Lazards ""either stays with Pearson or comes within the Lazard empire fully"".
Officials at both Pearson and Lazard Brothers in London declined to comment on talk of a possible sale.
Pearson has a 50 percent stake in London's Lazard Brothers and smaller nine percent stakes in Lazard Freres in Paris and New York. Its 50 percent stake in the umbrella group Lazard Partners was negotiated during the 1980s.
Analysts suggest Lazards does not fit into Pearson's main information, education and entertainment divisions and is therefore a target for being spun off. But banking sources point out that Lazards has been a profitable venture and not a drain.
""It (Lazards) has not required any capital or management time (from Pearson),"" the senior financier added.
Pearson, in its 1995 annual report and accounts, points out that its ""close ties to the three Lazard investment banking houses again proved their worth in 1995"".
It highlighted attributable profits of 39.9 million pounds from the group for that year. If Pearson, described by Michel David-Weill -- senior partner of Lazard Freres in Paris -- as a ""great partner"" to Lazards since 1919, decides to sever its ties with the merchant bank, there could also be other complications.
The Lazard group, which has successfully specialised in corporate finance advisory work as well as asset mangagment and trading activities, holds 48 million Pearson shares.
The Financial Times at the weekend quoted David-Weill as saying Lazards might decide to sell this 360 million pound ($600 million) stake to finance a buy-back of Pearson's holding.
The newspaper said David-Weill had said the Lazards holding in Pearson was equivalent in value to Pearson's Lazard stake.
Although Lazards's stake has been seen as obstacle to a takeover attempt against Pearson, it might sell its shares on the market but in discussion with the group and ""not to a party which could be hostile"", David-Weill told the paper.
While Scardino's role at Pearson has been the subject of close scrutiny since her appointment, Lazards have also been in the news, with suggestions of a power-struggle over who will succeed 64-year-old David-Weill.
David-Weill said last week there was no succession crisis at the bank, adding he still had time. Under the bank's statutes, he can remain at the helm for another eight years. ($1=.5974 Pound)
",2
"British merchant bank Hambros, under fire from a rebel Hong Kong shareholder calling for its breakup, reported a return to first-half profit on Wednesday and said the benefits of restructuring should begin to show through.
""We have great confidence in ourselves and what we are trying to do,"" Sir Chips Keswick, the group's chief executive, said in an interview.
He dismissed efforts by Hong Kong investment manager Regent Pacific Group, which holds three percent of Hambros, to break up the firm in an attempt to realise shareholder value.
""Regent is a three percent shareholder and is perfectly entitled to (its) views. We are perfectly entitled not to share them,"" Keswick said.
Hambros reported pretax profits of 35.0 million pounds ($57.81 million) for the first half, compared with a 7.7 million pound loss for the same period in 1995.
Some analysts had forecast pretax profits of up to 45.0 million pounds based on a strong performance by Hambros' estate agent subsidiary Hambro Countrywide.
They also predicted an interim dividend range of between 2.5 and 3.0 pence. In the event the dividend was unchanged at 2.5 pence.
Hambros is among a dwindling list of British investment banks which are the constant subject of takeover speculation. However, it has been seen as one of the less attractive targets due to recent poor performance and major provisions for bad debts.
Bad debt provisions for the period were 5.9 million pounds compared with 23.5 million in the same period in 1995.
Asked about the possibility of Hambros becomin a takeover target for a larger international player, Keswick said a public company was always in the firing line but he was happy with the group's direction.
While he could not talk for shareholders in the group, Keswick said he had the impression from discussions with them in the wake of the Regent Pacific move that they were supportive of changes the company had implemented.
Keswick said the group was on track to replace ""low margin vanilla business"" with increased return per customer business. It had decided the best strategy was to undergo major upheavals for a year rather than piecemeal changes over a longer period in order to achieve this.
Keswick, who forecast the benefits of the changes could take a year or two to come through, said he was pleased the group had moved back into profit, adding that the Investment Group's result had been particularly good.
But Hambros chairman Lord Hambro warned that profits from this part of the business were not expected to match the first half in the rest of the year.
However, he expected ""considerable improvement"" from Hambros' subsidiaries and, despite a challenging environment for the group as a whole, prospects were good.
Lord Hambro said he would retire from his post in July 1997 and be succeeded by Keswick.
""Chips will inevitably be a hands-on chairman,"" Michael Sorkin, deputy chairman of Hambros Bank, said. ($1=.6054 Pound)
",2
"Mention moneylending to most Britons and their instant reaction is ""you mean loan-sharks!"".
But Britain's established credit companies, which lend to people unable to borrow from the high street banks or credit card companies, say the public image of menacing debt collectors is a far cry from how they conduct their regulated business.
""We are credit collectors. A debt collector is someone who has no relationship with the customer. It's a totally different process,"" says Eddie Cran, chief executive of the financial services group Cattle's, which runs door-to-door moneylenders Shopacheck.
Such firms are tied closely to the wheeling and dealing of the City of London. Provident Financial, Cattle's and London Scottish Bank are all publicly quoted, profitable firms paying shareholders annual dividends.
People who borrow from them may have had minor civil court judgements against them, be unemployed or simply not want to have bank accounts or credit cards. The firms provide a service others -- except for unregulated outfits -- will not, and while it won't cost a pound of flesh, it is not cheap.
To those used to credit cards or in-store credit the rates may appear outrageously high. But credit companies point out they include major costs such as collection and insurance, are agreed in advance and do not rise if a payment is missed.
So while interest rates may be at all-time lows, these service charges mean the APRs (annualised percentage rate) can exceed 150 percent. To borrow 100 pounds ($167) over 25 weeks from Shopacheck with a five pound weekly repayment costs 25 pounds.
Shopacheck, which started in the 1930s in northeast England, has 2,800 agents. Its average loan is for six months, the average amount 150 pounds and average indebtedness 350 pounds.
STREET COLLECTING
Only a few miles from the City, but a million miles from its hefty salaries and bonuses, Kathy, a self-employed agent for Shopacheck, does her weekly door-to-door collection of debt repayments through the streets of northwest London.
The terraced suburban houses at which she stops are remarkably average. Most have front gardens, some are neatly laid out with blooming rose bushes while others are less well-kept, with tatty patches of litter-strewn grass.
Inside there are the usual consumer trappings of late 1990s British life.
Televisions, video-recorders, washing machines and microwave ovens, even the odd fish tank, are all in evidence, especially when crammed into a small council flat along with children, their toys, pets and piles of ironing.
At each house Kathy, a 37-year-old mother of three, collects sums ranging from two pounds fifty to 20 pounds.
Some customers take loans in the form of vouchers which can be spent only at certain high street shops, while others use the retail service offered by Shopacheck and buy items such as bed linen, beds or barbeques from the firm's own catalogue.
Most of her clients seem to welcome her as a friend, they expect her visits and have the money ready to hand to her. Kathy says that, after eight years, she is a treated as a long-standing family friend or agony aunt by many of them.
Only at one home does the son of the house come to the door and tell Kathy that his mother isn't in. ""Fine, can you tell her I'll see her as usual next week,"" says Kathy.
But getting money back isn't always this easy.
Kathy admits that if a customer threatens her, she passes the problem back to the company, which says it instructs its self-employed agents not to take personal risks.
MONEYLENDERS PLUG GAP IN FINANCIAL SERVICES
""The one thing about credit is that it is easy to give but much harder to get back,"" says Paul Oliver, a Shopacheck regional manager who has been in the business for 27 years as customer, agent and manager.
He is not alone as a successful businessman who has made use of Britain's long-standing system of moneylending. The managing director of one British bank confided he would not be where he is today had it not been for a money lending firm.
His family could not afford to buy him a suit for an interview. He took a loan, bought the essential attire, got his first job and set himself on the path to greater things.
Oliver says nine out of 10 times business is conducted with the woman of the house and although bad debts are expected, they only reach about four percent a year, which is good going for a business the mainstream lenders won't touch because of the risk.
A recent television documentary showed some moneylenders breaking rules laid down by the Consumer Credit Act. Oliver says he deals harshly with anyone who steps outside the rules.
For Cran firms such as his are plugging a gap in Britain's financial services marketplace and he is keen to correct what he sees as ""untrue perceptions"" about the business. ""What we are actually attempting to do is to deal with customers who cannot get credit through the mainstream lenders,"" Cran told Reuters.
""It (door-to-door lending) is very high cost and very personal. We have to train people to look after a number of customers,"" he added. A customer who fails to pay is only pursued through the courts ""as a very last measure"" and only in ""very extreme circumstances"" is an outside firm called in.
Cran says Cattle's target market is about five-and-a-half million people, around two million of whom need the discipline of an agent calling to collect every week.
But the stigma involved means Cattle's also offers Welcome, a loans service for people who have bank accounts and pay by direct debit. This ""requires a very high rejection rate and an in-depth granting procedure"", Cran says.
SHAREHOLDERS REAP THE DIVIDENDS
For Cattle's and its competitors credit is a lucrative business. In September it reported increased pre-tax profits for the first six months of the year of nearly 15.0 million pounds. In 1995 its shareholders received a total dividend of 6.9 pence.
In August Provident Financial, the sector's biggest player, reported first half pre-tax profits of 47.5 million pounds. It said it had seen continued growth in home collected credit and was confident of a ""good result"" for the year as a whole.
But for customers, things might not be so rosy. While most manage to pay back their loans, some do not. Kathy soon spots trouble. ""You can see they are struggling if they start having to scrabble around for pennies,"" she says. ($1=.5990 Pound)
",2
"British fund manager Invesco announced its widely-flagged merger with U.S. mutual fund company AIM Management Group on Monday, creating one of the world's largest investment management businesses.
The combined group will be called AMVESCO Plc and have around $150 billion under management. The merger values AIM at approximately $1.6 billion, Invesco said in a statement.
""We are creating a prototype company for the future,"" Bob McCullough, Invesco's chief financial officer, told Reuters.
Invesco's chairman and chief executive Charles Brady, the man who will lead the new group, said it would have ""the scale necessary for success as a financially strong and independent business operating in an increasingly concentrated industry.""
McCullough stressed the deal was a merger of two companies rather than a takeover, as it had been described in some quarters. The two would combine to focus on revenue enhancement but would retain their individual identities, he added.
""Brand awareness will continue. Both will retain their names in the market place,"" he said.
Invesco said it would fund the merger with the issue of 290 million new shares to existing holders of AIM shares. These would be valued at approximately $1.1 billion. AIM shareholders will own around 45 percent of the enlarged group and be subject to restrictions on selling the shares.
McCullough said the merger, which is conditional on approval by both Invesco and AIM shareholders and other approvals, would be non-dilutive and would not have any cost savings built-in. However, there would be cost savings in the future, he said.
The merger is not expected to be completed before February.
McCullough also said the $500 million needed to fund the merger would come in the form of cash and debt, with a one-for-five rights offering on the cards. This would involve issuing roughly 50 million new shares, he said.
McCullough said the cost of the merger was not excessive. ""If you look at it on the basis of funds under management, it (the cost) is less than three percent,"" he said.
""There's no question that it is a lot of money, but we view this as a long-term investment for both of us,"" he said. This long-term commitment was underlined by the fact that almost 50 percent of the combined shares would be held by management.
Invesco had been approached by a number of banks offering it loans, with the debt element being placed with them. Both companies were currently ""largely debt free,"" he said.
The merger presented an enormous number of synergies, with the two companies using different distribution channels and approaches. McCullough said he did not forsee any culture clash between the two.
There would be no change in their differing approaches, with Invesco continuing to be a ""no-load"" house, selling products direct to the customer, and AIM making its sales through intermediaries.
Both companies were ""really active managers"" and would stay that way rather than moving to passive management, McCullough said, adding that Invesco's global infrastructure presented a major opportunity.
He denied the heavy exposure to the U.S. would hinder Invesco from making the most of opportunities in other parts of the world. ""We would like nothing better than to find opportunities in Asia and Europe,"" he said.
The merger would enhance the group's strength in the U.S., increasing the amount of its business there from between 85 and 90 percent to around 95 percent.
",2
"Police arrested a U.S. pilot carrying a suitcase packed with at least 13.5 pounds (6.2 kg) of high grade heroin at Bogota's international airport on Sunday evening, a prosecutor said.
Bradley Dale Brandt, 40, originally of North Dakota but now living in southern California, was detained as he made his way to board one of the Colombian airline's ACES flights to Panama City, said the prosecutor, who cannot be named for security reasons.
Brandt told Reuters he had been framed and the suitcase was not his. He was to have travelled on the flight to Panama as a passenger but was wearing a commercial aviator's uniform when arrested. He declined to say exactly where in southern California he lived but his passport was issued in Los Angeles.
""I was carrying the suitcase but it was not mine. I was totally surprised when the police opened it up. The clothes inside were mine but nothing else was. I'll kill the person who switched my bag if I ever find them,"" Brandt said.
""I just wouldn't do a thing like that. This has put my career and my family in jeopardy. I've worked too hard just to blow it on something stupid like this,"" he added.
Brandt declined to say which airline he worked for. No airline insignia were visible on his uniform or his pilot's overcoat.
A police spokeswoman said the heroin was discovered when the bag Brandt was carrying was put through an x-ray machine -- one of the multiple routine checks that international passengers have to undergo when leaving Bogota.
""Brandt was arrested with a suitcase stuffed with clothes and high quality heroin,"" the spokeswoman said.
The prosecutor said Brandt would be interviewed further in the presence of a lawyer and an interpreter on Monday.
Earlier in the day airport police seized a Mexican passenger as he tried to board a flight to Mexico City with false-bottomed suitcases packed with 93 pounds (42 kg) of cocaine.
The U.S Drug Enforcement Administration (DEA) estimates Colombian drug cartels supply at least 80 percent of the world's cocaine. And in a report late last year, it said Colombia had edged out the Golden Triangle of southeast Asia as the No. 1 supplier of high grade heroin to the United States.
",20
"A former German secret agent and his wife were formally charged with abduction on Wednesday after their bid to smuggle a rebel kidnap victim out of Colombia backfired at the weekend.
The charges, announced by the chief prosecutor's office, brought another twist to a brewing scandal that has set the Colombian government at odds with German diplomats and businessmen over clandestine payments to kidnappers.
Police and Colombian officials accuse Werner Mauss, 56, of being an international member of the country's National Liberation Army (ELN) guerrilla force, or a mercenary negotiating the release of abducted foreigners in return for a cut of the ransom.
In a statement issued in Bonn on Wednesday, German government official Peter Hausmann said the government was ""fully informed"" of the former state security agent's mission and welcomed such ""unconventional methods to rescue Germans from life and death situations.""
Mauss and Silvia Schroder, 36, were seized at Rionegro airport near Medellin early on Sunday as they tried to bundle a third German, Brigitte Schoene, the wife of a former BASF Chemicals executive, aboard a private charter plane bound for Venezuela. Schoene was kidnapped in mid-August by the ELN, which had demanded $6 million for her release.
In its press release, the chief prosecutor's office referred to Mauss and his wife as Juergen and Isabel Seidel -- one of their many aliases. The couple were remanded in custody.
An executive secretary of Siemens-Colombia said on Wednesday she had hired the plane that Mauss was to use for his getaway on the orders of a top industrialist formerly based in Bogota.
Security experts say Colombia -- home to Latin America's longest-running guerrilla war -- is swarming with foreign mercenaries carrying out shadowy undercover missions as kidnappings reportedly run at almost one every 2-1/2 hours.
""Many multinationals are hiring so-called security advisers for kidnap, terrorist and extortion situations but these are simply mercenaries and adventurers willing to make pacts with kidnappers and guerrillas,"" said private security consultant Col. Luis Enrique La Rotta.
Parliamentarian Guillermo Martinez, a retired air force officer, told Reuters he was sure dozens of foreign mercenaries like Mauss had poured into Colombia to carry out hostage rescue missions.
""Regardless of whether the Colombian authorities can or cannot control the (kidnap) situation it is totally unacceptable for foreign companies to fly in mercenaries to do this type of work,"" he said.
",20
"British Petroleum Co Plc considers its Piedemonte prospect in eastern Colombia ""fundamental"" to its worldwide operations despite drilling problems and wrangles over the exploitation contract, a top company official said Thursday.
John Doust, executive director of BP's local subsidiary, British Petroleum Exploration (Colombia) Ltd, predicted the field, still at the test stage, could come on stream by the end of 1999.
He estimated the total cost of developing the field, estimated to contain between 600 million and one billion barrels of crude and condensates, could run to about $2.2 billion, some of which would be shared by state oil company Ecopetrol.
""The oil project currently under way in the Piedemonte is fundamental for the worldwide organisation of the BP group,"" Doust said in a speech to journalists.
His recognition of the strategic importance of the 287,000 hectare block, in which BP has pinpointed three promising hydrocarbon formations after exploring just 15 percent of the total area, once again raises the question how BP will push the Colombian government for sweeter contract terms.
BP, Colombia's single largest foreign investor, argues that given tough drilling conditions, the terms of its so-called sliding scale association contract with Ecopetrol makes it unprofitable to exploit the field.
Under the existing contract, Ecopetrol's share of the profits rise as production increases from 50 percent to a maximum 76 percent.
BP has been pushing for a so-called R Factor contract -- which the Colombian government has so far denied -- which would take account of investment and operating costs to ensure adequate profit margins.
""We understand the uncertainty of the (Piedemonte) issue and the nature of the debate have caused uneasiness amongst many people... Let us keep in mind that we are truly seeking to achieve a break-even point and a platform of confidence for BP so that we can operate in an internationally competitive economic position,"" Doust said.
Last month, Colombia's Mines and Energy Minister Rodrigo Villamizar proposed BP should hand back rights to the 85 percent of the block that is virtually unexplored with the guarantee that Ecopetrol would re-award BP half that area under R Factor conditions at a later date and contract out the remainder to other companies.
Doust said BP was ""seriously considering"" the proposal. It is understood, however, that BP would be loath to surrender the rights to almost 50 percent of a block with huge potential under the current offer on the table.
BP has recently been hit by allegations of indirect links to right-wing paramilitary death squads that have assassinated social leaders close to its operations in eastern Colombia.
Doust blamed the accusations on a campaign to discredit the company and repeated earlier statements that he had invited the country's chief prosecutor to carry out an in-depth investigation into the claims.
",20
"Another member of Colombia's main oil workers' union was arrested on terrorist charges, a union leader said Sunday on the eve a meeting to set the start date for a strike that could paralyze the industry.
The capture of Edgar Riano in Huila province Saturday came after the arrest of 12 others Thursday -- 10 of them from the USO oil union.
All are accused of carrying out dynamite attacks on the country's oil pipelines and of links to the National Liberation Army (ELN), the country's second largest guerrilla force. The chief prosecutor's office was unavailable for comment on the latest detention.
USO head Hernando Hernandez said last Thursday the union would fix the ""zero hour"" for the start of an indefinite strike to protest the wave of arrests at an extraordinary assembly Monday. The action is also to oppose government plans for what the union sees as the creeping privatization of state-run oil company Ecopetrol, Hernandez said.
Following a merger between the 5,700-strong USO and smaller oil workers' associations, the strike could spread to the private sector, including foreign multinationals operating in Colombia.
USO leaders were due to meet Colombian Interior Minister Horacio Serpa Sunday evening to discuss the arrest of members and the planned walkout. The government seems likely to declare an oil workers' strike illegal on the grounds that it is affecting a key sector of the economy.
Mines and Energy Minister Rodrigo Villamizar said Friday that Ecopetrol had enough fuel reserves to meet demand for 19 days and said any shortfalls in domestic supply could be made up by increasing imports in the event of a USO strike.
A 24-hour stoppage by USO workers in mid-October paralyzed pumping -- 350,000 barrels a day -- along the country's two main oil pipelines for the first time ever.
In a separate incident in the oil town of Barrancabermeja, two unidentified assailants blasted local USO official Gilberto Carreno at close range with a shotgun and wounded as he left a bar Saturday morning.
USO social services secretary Gustavo Triana the motives for the attack were unclear. Members of USO, known for its fiercely nationalistic stance, have frequently been targeted by right-wing paramilitaries who accuse the union of backing the ELN.
",20
"Colombian President Ernesto Samper decreed an economic emergency on Monday, warning that the ""economic and social stability of the country"" was under threat.
In a televised speech to the nation, Samper called for urgent belt-tightening measures to cut the central government's yawning fiscal deficit.
The economic emergency, the first in five years, has been decreed for 20 days but could be extended for a maximum of 90 days, presidential sources said. All measures in that period can be introduced without the approval of Congress.
Further austerity measures are scheduled to be announced on Tuesday, government sources said.
Finance Minister Jose Antonio Ocampo later announced the first series of concrete measures aimed at slashing Colombia's foreign debt by more than $800 million this year.
Wilson Borja, head of the 800,000-strong FENALTRASE public sector union, said he feared the government could use crisis powers to cut as many as 19,000 state jobs in the coming days. The union was protesting against a 13.5 percent weighted pay increase, well below annual inflation, announced last week.
""We had initially been planning to launch a stoppage around mid-February but this decree could force us to bring those plans radically forward. We could start a strike as early as next week,"" Borja said.
Anticipating the unions' reaction, Samper said in his televised speech: ""I want to warn you once and for all. Protests and strikes will lead nowhere -- quite simply because although the government has all the goodwill in the world, it is short of money.""
""If the fiscal, exchange rate and unemployment situation continue to deteriorate, the social and economic order will seriously and ostensibly worsen... The economic stability of the country will be severely affected,"" the decree signed by Samper and his cabinet said.
The crisis measure comes against the backdrop of a sharp economic slowdown in 1996, coupled with a steady strengthening of the country's peso currency, which has undermined export activities. The government fiscal deficit has burgeoned and hit 4.0 percent of Gross Domestic Product (GDP) in 1996 up from 0.2 percent in 1995.
In the first of the specific emergency measures, finance chief Ocampo said the planned issuance of $1.8 billion in foreign debt bonds would be reduced by about $800 million.
He announced an overall cut in the national debt programme and unveiled a new tax on private and public companies which looked abroad for fresh loans.
Ocampo said the emergency measures, coupled with income from a recent wave of power plant privatisations, would help to cut the government deficit to 2.5 percent of gross domestic product in 1997, compared to an initial forecast of 3.4 percent.
",20
"Colombia's President Ernesto Samper announced Tuesday plans to boost revenues by broadening the tax base, and said the 1997 budget would be cut by over a trillion pesos -- a figure higher than the 900 billion pesos previously approved by Congress.
The measures are part of an emergency plan to rein in the yawning fiscal deficit.
Samper said the overall rates of income tax and the 14 percent value added tax would not be raised, but he pledged to expand the tax base and combat tax evasion.  
Below-inflation wage rises for public sector workers, announced last week as part of a separate austerity law, and the merger or closure of inefficient government offices will help stem public spending, Samper said.
Earlier in the day, Finance Minister Jose Antonio Ocampo said, ""Everybody would be affected by draconian measures,"" but so far many of the proposals put forward have not yet been fleshed out.
The economic emergency has been decreed for an initial period of 20 days and allows the president to rule by decree without consulting Congress.  
""If we go on increasing the levels of public debt, we will be creating elements of instability in our fiscal system. We will be laying landmines in the path of the state's finances,"" Samper said in a speech at the presidential palace.
The fiscal deficit rose to 4 percent of gross domestic product (GDP) in 1996 from 0.2 percent in 1995. Ocampo said Monday that the effects of the emergency measures, coupled with income from a recent spate of power plant privatizations, could cut that shortfall to 2.5 percent of GDP this year, compared to the 3.4 percent originally forecast.  
Samper said that the Expenditure Rationalization Law, which was approved at the end of last year and which included provision for a weighted 13.5 percent pay rise for public sector workers, would mean budget savings of 900 billion pesos.
He added that under the terms of the economic emergency decree, public officials had been ordered to look for ways to cut an additional 300 billion pesos from the overall national budget. This he said would lead to total savings of about 1.2 trillion pesos on a budget originally set last year at 30.3 trillion pesos.  
Although Samper gave a broad outline of the crisis measures, his speech was short on specifics.
Wilson Borja, head of the main public sector union FENALTRASE, said he feared as many as 19,000 state jobs could be slashed in the cost-cutting drive.
Although Samper talked of closing government departments, he failed to spell out the impact this could have on jobs.
The president spoke of the drain imposed on central government coffers by provincial authorities, raising the specter of funding cuts to the regions, already suffering from chronic lack of resources and social injustice.
He also said he would cut the government's external consultancy services by 50 percent and reduce official trips abroad. He did not, however, give an estimate of what saving that represented.
((-- Bogota newsroom, 571 610 7944))
",20
"Moves toward just-in-time roasting and savage cuts in coffee inventories in consumer countries will force exporters, traders and processors to resort to sophisticated financial mechanisms to offset price volatility, the head of the International Coffee Organization said.
ICO chief Celsius Lodder predicted booming growth in risk management measures such as options, futures and secondary instruments and said they would become key in influencing short and medium term coffee prices.  
They will also replace more traditional methods of building up stocks, and other physical strategies, as a buffer to sudden swings in the market, he said.
Meanwhile, in some producer countries, growers may find themselves bearing an increasing responsibility for storing the crop, thereby seeing their costs pushed up.
""Risk management, similar to an insurance contract, will become an increasingly important instrument for exporters, traders and processors,"" Lodder said in a speech organized by Bogota's Los Andes University.  
""Growers and growers' cooperatives will have to take on greater responsibilities for storing inventories. This will push up costs, reduce their cash flow and mean much of the stocks will be stored in remote areas, delaying dispatch,"" the coffee chief said.
Despite the grim message that shifting trends in consumer countries could force their costs up higher, Lodder did offer a ray of hope for Colombian growers, already hard hit by the strengthening peso and the high cost of credit.  
Lodder highlighted the growing opportunity for niche marketing of specialist coffees in traditional markets where consumer palates are becoming more sophisticated even though the overall demand in those areas may have stagnated.
He also talked up prospects of new markets opening in the former Soviet Union and China. Colombia's President Ernesto Samper, and his official delegation, returned from the Far East at the end of last week. His itinerary included China and both he and his Foreign Minister Maria Emma Mejia were upbeat about the chance of selling the Colombian bean to the country's 1.3 billion-strong population.  
During the visit to Beijing and Shanghai, Mejia calculated that if Colombia could sell one cup of coffee a day to every inhabitant of China, the Communist nation would absorb Colombia's entire annual harvest.
National Coffee Growers' Federation chief Jorge Cardenas did his own calculations and worked out that Colombia would have to double its coffee harvest if it was looking to meet Mejia's target.
In his speech, Lodder recognized the ICO's changing role and agreed it was no realistic for it to adopt interventionist strategies in a globalized free market.  
""The patterns of economic and political cooperation seen in the 1960s have been replaced by a new  model, perhaps more realistic and certainly different. There's no consensus for a return to intervention but the ICO is a dynamic organization and it must reflect the current situation and not be constrained by its former role,"" he said.
""I believe the ICO must remain flexible and look for the broadest possible consensus and build on the foundations of our cooperation with trade experts.""
He added that the ICO would concentrate on looking for specific solutions to specific problems as they arose throughout the coffee sector either in production or marketing.
Meanwhile, Colombia's transport system got back to normal this week after a crippling 11-day strike by truckers, which ended with an agreement early last Friday.
There has, nevertheless, been a significant delay in coffee deliveries and Cardenas forecast that about 150,000 60-kg sacks of coffee promised for October delivery would not in fact reach buyers until November.
-- Bogota newsroom 571 610 7944.
",20
"A former Colombian rebel leader who masterminded a 61-day takeover of an embassy in Bogota in 1980 on Wednesday urged Peruvian guerrillas holding hostages in the Japanese embassy residence in Lima to keep cool.
Rosemberg Pavon, alias ""Comandante Uno"" of the now defunct M-19 group, urged the Tupac Amaru Revolutionary Movement (MRTA) gunmen to avoid bloodshed.
He said the crisis in Lima, where MRTA guerrillas took up to 490 hostages in the residence on Tuesday evening, hung by a thread and one false move by the rebels or security forces could spark a bloodbath.
Pavon headed an occupation of the Dominican embassy in Bogota which began in February 1980. A 15-strong commando of the M-19 held 57 hostages, including 19 diplomats, for 61 days before mediation by Cuban leader Fidel Castro ended the crisis and the guerrillas took refuge in Cuba.
""These situations are moments of high tension, great uncertainty and intense panic. The MRTA must try to keep as calm as possible,"" Pavon told Reuters in a telephone interview from the southwestern city of Cali.
""At any second there could be a tragedy because the whole rebel operation hangs by a thread between success and failure,"" he said. ""Both sides must work towards a rapid solution and keep a cold head in any negotiations.""
Pavon said that the MRTA, like the M-19 which laid down its arms in 1990, was fighting for social justice.
""We shouldn't fall into the trap of generalizing the MRTA as a pro-Cuban force. Like us it is fighting for a Latin American process of democracy,"" Pavon said.
He said he would be ready to travel to Peru to help negotiate an end to the crisis based on his experiences of 1980.
""I would say to the Peruvians that these situations can only be resolved with patience and with the desire for dialogue,"" he said in a separate interview with Colombia's Caracol radio.
In 1985, M-19 guerrillas seized the Palace of Justice in Bogota and held more than 200 hostages for two days before the army stormed the building. About 100 people were killed, including rebels and judges.
""The Peruvian government must at all costs avoid any repeat of a Palace of Justice scenario. The Colombian people have still not recovered from the scars of that incident,"" he said.
",20
"A powerful car bomb rocked a residential district of Medellin early on Monday, killing a woman and injuring at least 48 other people, police said.
About 120 pounds (50 kg) of dynamite packed into a minibus blew up outside the house of Juan Gomez Martinez, a regional newspaper editor, politician and former provincial governor.
The Colombian government said it suspected drug cartels were behind the massive blast. President Ernesto Samper vowed not to bow to terrorist violence from drug traffickers.
""We will not allow the specter of narco-terrorism to return to this country and intimidate us,"" he told reporters. ""The state will combat these acts of violnce head-on.""
Five unidentified gunmen, one of them a woman, opened fire on private security guards near Gomez's home before the bomb went off, Medellin police chief Gen. Alfredo Salgado said.
He said three houses were virtually destroyed and 15 others seriously damaged by the explosion.
The dead woman was identified as Lucia Cevallos de Bernal, 60, who lived near the site of the blast. Gomez was not home at the time but one of his three sons was injured.
Authorities offered a $150,000 reward for information leading to the capture of those responsible.
""This is a savage act. The first indications point to drug traffickers but I don't want to draw premature conclusions,"" said Defence Minister Juan Carlos Esguerra.
The attack came three days after the Colombian Congress approved a tough new law to strip Colombia's cocaine barons of their multi-billion dollar fortunes. Another bill to introduce stiffer jail terms for drug traffickers is due to come up for discussion in a special session of Congress later this week.
But it was not clear why Gomez, who is not a congressman, should have been targeted.
Gomez is a member of the opposition Conservative Party and head of the regional El Colombiano newspaper, which has its headquarters in Medellin, once home to the world's most powerful cocaine cartel.
His newspaper recently printed an interview with Carlos Castano, leader of a feared right-wing death squad, whose main target is leftist rebels and their supporters.
A few hours after the blast an unknown group calling itself the Special Anti-Paramilitary Commando issued a communique, a copy of which was obtained by Reuters, declaring war on paramilitary groups. The group claimed to be made up of ex-guerrillas who had previously laid down their arms and accused the state of sponsoring paramilitary groups.
Medellin was scarred by violence in the late 1980s and early 1990s when drug lord Pablo Escobar waged a successful war to force Colombia's Congress to ban the extradition of Colombians to the United States.
In June last year a bomb killed 28 people in the city centre. Nobody claimed responsibility for that blast.
",20
"British Petroleum Co Plc gave a lukewarm reception Tuesday to a Colombian proposal that would see it losing almost half the oil-rich Piedemonte field in return for sweeter contract terms on much of the remainder.
The proposal, outlined by Mines and Energy Minister Rodrigo Villamizar to reporters Monday, is the latest twist in a long- running saga that has seen BP trying to boost the profit margins on its Piedemonte operations while Colombia seeks to sidestep criticism that it is allowing multinationals to call the shots.  
Piedemonte, in Colombia's eastern plains is estimated to contain between 600 million and one billion barrels of crude oil and condensates.
But so far BP has only pinpointed three hydrocarbon formations -- Volcanera, Pauto and Florena -- accounting for about 15 percent of the total area, arguing that current overheads do not make it profitable to explore the rest.  
If Villamizar's complex proposal were accepted, a BP spokesman said it would require the company to hand back rights to the 85 percent of the Piedemonte field that is still virtually unexplored, with the guarantee that state oil company Ecopetrol would re-award BP half that area under improved contract terms.
The spokesman for BP's Colombian subsidiary, BP Exploration Co (Colombia) Ltd, told Reuters: ""This is an interesting proposal but we regret that this solution would mean losing access to what is a large proportion of the Piedemonte field.""  
He conceded it may be a possible way forward but indicated that it represented little more than an opening gambit in the search for a new working formula between BP, Colombia's single largest foreign investor, and Ecopetrol.
Under the so-called ""sliding scale"" terms of the existing Piedemonte association contract, profits are divided equally between BP and Ecopetrol while production remains below 60 million barrels. Ecopetrol's share rises as production increases, topping out at 76 percent when output hits 150 million barrels.  
BP had been pressing for the entire Piedemonte contract to be renegotiated using the new-style Factor R, which takes account of investment and operating costs in individual fields to ensure adequate profit margins for foreign companies.
But those demands were rejected by Villamizar last month following a congressional debate. Villamizar's new proposal, however, would open the way for a Factor R contract to be drawn up on that area of the Piedemonte field which BP would cede and then win back. Ecopetrol would then operate the rest of field itself or contract it to other private oil companies.  
Gustavo Triana, a senior official of the powerful USO oil workers' union, known for its fierce opposition to multinationals, said the union would not readily welcome any ""underhand deal"" that granted better terms to BP after the government had said it would not do so.
",20
"Colombian police said on Sunday they discovered a second multimillion-dollar drug stash aboard a yacht owned by three Britons being held on cocaine smuggling charges stemming from a bust on the yacht in December.
The three men Michael Hayne, 50, of Egham, Surrey, his son Stephen Alan Hayne, 27, of Ashford, Kent, and David Maurice Shaw, 49, of Oldham, Lancashire, were arrested on Dec. 13 in the Caribbean coast port of Barranquilla and were being held on cocaine smuggling charges.
At the time, officials of the state security force DAS discovered more than 425 pounds (194 kg) of highly pure cocaine aboard their U.S.-registered boat Perla del Mar (Sea Pearl). In a more exhaustive search, conducted over the weekend, police turned up another 326 pounds (148 kg) of cocaine -- stowed away in the vessel's waste water tanks.
A DAS chief estimated the street value of the first haul at $50 million. Police declined on Sunday to speculate on the overall value of the illicit consignment.
""The drugs were coated with a mixture of burned oil and coffee, which masks the smell and makes it more difficult for sniffer dogs to detect,"" a Barranquilla police spokesman said.
The Britons were being held in custody in Barranquilla's El Modelo jail. They could not be contacted on Sunday.
In a phone conversation in December, Michael Hayne told Reuters the situation had been a ""huge mix-up"" and hoped everything would be ""straightened out soon.""
DAS officials said Hayne, whose passport was issued by the British Embassy in Spain, and his son had entered Colombia illegally from Venezuela. Shaw entered Colombia legally -- his passport had been issued by the British High Commission in Trinidad.
A spokeswoman for the regional prosecutor's office said the men could face between four and 12 years behind bars if convicted of the smuggling charges.
Colombian laws on drug trafficking are frequently seen as lax compared to standards in Britain and the United States.
The country's cocaine kings Gilberto and Miguel Rodriguez Orejuela, heads of the once-mighty Cali drug cartel were sentenced 10 days ago.
The brothers admitted running a vast international criminal empire for more than 20 years and arranging the shipment of almost 40 tonnes of cocaine into the United States -- thought to be just a fraction of the real amount they sent. They received jail terms that could in practice let them walk free in just five years.
",20
"Plans are being drawn up for new peace talks between the government and leftist rebels in a bid to end Latin America's longest-running conflict, a spokesman for Colombia's Conciliation Commission said on Sunday.
Diego Vargas Uribe, a member of the semi-autonomous body of former ministers and Church representatives, said details would not be released for a few more weeks, but that all sides in the four-decade old war had been consulted about talks.
""The Conciliation Commission has carried out a consultation with different sectors about the basis for a negotiated peace. We are drawing up a document and will present that to the government and the armed groups before making it public,"" Uribe told Radionet radio network.
Political analysts warn that the prospect of peace is slight. The armed forces said two weeks ago they would step up their counterinsurgency campaign and Marxist rebels have escalated their attacks this year.
Spokesmen for the FARC, Colombia's largest guerrilla army set up as a pro-Soviet group in 1964, were not available for comment on Sunday. But in the latest copy of their magazine Resistencia, FARC leader Manuel Marulanda wrote: ""I reiterate the will that the (FARC) has always expressed to find a political solution to the social and armed conflict.""
He stressed any peace deal would have to resolve ""political, social and economic inequalities"" and not simply map out a timetable for the demobilization of rebel forces.
The National Liberation Army (ELN), the second largest rebel force founded by radical Roman Catholic priests in the mid-1960s, began tentative moves last year toward German governmment-brokered peace talks with President Ernesto Samper's administration.
Efforts broke down in November with the much-publicised arrest of Werner Mauss, a German private eye who was acting as a go-between in the talks.
The last peace process between the Colombian government and rebels collapsed without agreement in Mexico in 1992. The FARC accused the authorities of trying to force the guerrillas to surrender unilaterally.
Unlike Colombia's M-19 rebel group, which laid down its arms in the late 1980s, neither the FARC nor the ELN have been defeated militarily.
The FARC still holds prisoner 60 troops it captured in southern Colombia last August. In a statement on Sunday, the FARC confirmed it was holding 10 marines seized in an ambush in western Choco province in mid-January. It said the men would be held with the other 60 soldiers until terms for a handover were agreed with the government.
",20
"Colombia's largest guerrilla army said on Wednesday it would not free 60 captive government troops unless a huge swathe of southern jungle was demilitarized.
President Ernesto Samper said on Monday he would honour his pledge to clear 5,400 square miles (14,000 sq km) of Caqueta province but rejected demands by the Revolutionary Armed Forces of Colombia (FARC) to clear three military bases in the zone.
He urged the rebels to make a goodwill gesture and release their prisoners before Christmas under terms he set last week.
The FARC decision, relayed in a communique from Mexico City, is a new hitch in the process to secure the release of the soldiers, who were captured three months ago when guerrillas overran a base in neighbouring Putumayo province.
""The FARC southern bloc maintains unchanged its original proposal (for the demilitarized zone) with the aim of offering adequate conditions to protect the lives of the 60 compatriots,"" the communique said.
The FARC's Aug. 30 attack on the Putumayo base, in which 27 soldiers died in addition to those taken prisoner, signalled the start of one of the bloodiest guerrilla offensives in decades.
Army commanders, already humiliated by the initial military defeat, have been loath to allow the FARC to score political points by dictating its own terms for the troop handover, military analysts said.
Samper pressured top brass into accepting a deal to clear a 5,400-square-mile (14,000 sq km) area of Caqueta for 10 days starting on Friday to make way for the troop handover, but was unlikely to be able to wring further concessions out of them, the analysts said.
The president and the military said they would not pull troops out of barracks in Montanitas, Cartagena del Chaira and Remolinos del Caguan for fear of losing grip on rampant drug trafficking operations in the region.
The FARC said the towns lie on strategic entry routes into and out of the proposed demilitarized zone.
",20
"At least 23 people were murdered in attacks in central and northern Colombia, including an entire family hacked to death with machetes, police said on Thursday.
Unidentified axe and machete-wielding assailants killed three children, their mother and grandparents early on Thursday in San Miguel de Sema, in central Boyaca province, police chief Col. Humberto Prieto said.
""We're investigating to see if these killings are related to the death of two other relatives several years ago. Early indications suggest they were murdered for personal reasons -- a revenge attack,"" Prieto said.
Boyoca is known as a stronghold of right-wing paramilitary groups but Prieto said San Miguel was not affected by right-wing or leftist political violence.
In northern Sucre province, the bullet-ridden bodies of 17 peasants were found scattered in four isolated areas near the town of Tolu Viejo on Thursday morning, police said.
""We're still looking at all the facts. The province has been hard hit by subversion,"" said Benjamin Irragori, regional head of the state security service DAS.
He said two fronts of the Revolutionary Armed Forces of Colombia (FARC) were active in the area.
Sucre has seen a recent rash of attacks by right-wing paramilitary death squads. One television report, which quoted a police source as saying the leading suspects in the massacre were rightists, showed some of the dead with their hands tied behind their backs.
Almost 40 people died in a wave of killings, attributed to paramilitary groups, across northern Colombia two weeks ago. Last month, the country's paramilitary forces held a summit in which they pledged to step up their war against leftist guerrillas and rebel sympathisers.
In a separate attack in the city of Cucuta, in northeast Norte de Santander province, a Roman Catholic priest was gunned down by two unidentified killers on Wednesday evening, police said.
He was the third priest killed in two months -- a sign, some clergymen say, that they are increasingly caught in the crossfire of guerrilla and paramilitary violence, which has surged in recent months.
""The basic problem is not the lack of respect for priests but the total disregard for the value of human life,"" said Monsignor Juan Francisco Sarasti, vice president of Colombia's Episcopal Conference.
",20
"Colombian truckers began climbing back behind the wheel early on Friday after their leaders signed a deal with the government to end their crippling 11-day old strike.
Colombian Truck Drivers' Association (ACC) head Javier Suarez said the accord granted an immediate 16 percent raise in cargo freight rates with the promise of another inflation-linked increase at the start of next year -- short of the instant 30 percent hike originally demanded.
The breakthrough in talks between the independent association, the Transport and Interior Ministries and private transport companies came late on Thursday, a day after Interior Minister Horacio Serpa threatened to use police and the military to help smash the nationwide strike by clearing road blocks and forcing truckers back to work.
""This is a partial solution to our problems but I think it will be good for our members. This doesn't mean truckers will now be making any profits but at least we won't be operating at a loss like at present,"" Suarez told Reuters in a telephone interview. ""We have also agreed to set up a joint committee that will look at future transport policies.""
Key sectors of the economy, primarily those linked to import and export, had issued stiff criticism of the transport paralysis earlier in the day but heaved a collective sigh of relief with news of the agreement.
But the lifting of the strike seems unlikely to offer an instant fix for the crisis-hit coffee sector, which has seen 250,000 60-kg sacks of coffee -- a quarter of that promised for October delivery -- delayed by the truckers' action.
Earlier in the week, private coffee exporters said many would be forced to default on this month's delivery contracts even if the stoppage ended before the weekend because of the backlog of coffee in port and in warehouses.
In addition to the raise in freight cargo rates, a joint committee of truckers, industry representatives and Transport Ministry officials will be created to look at other concerns highlighted by the drivers' association, Transport Minister Carlos Hernan Lopez said.
These include the cost of highway tolls, the price of operating licenses and associated taxes and maximum load restrictions on cargoes.
Part of Thursday night's agreement means the Transport Ministry will send a communique to transport companies ordering them to lift unilateral bans on contracting the services of drivers operating trucks more than 11 years old where these are currently in force.
Suarez said he did not think the deal hammered out would have an impact on inflation, already running above the 18 percent originally targetted at this point in the year by the government.
""Hopefully we will not see any gains in inflation or the cost of this accord being passed on to the consumers because the intermediaries, the transport companies, will be absorbing the cost of it by taking a cut in their profit margins,"" he said.
The overall cost of the strike is difficult to calculate but certainly runs into many million dollars. Colombia's main Pacific coast port, Buenaventura, estimated its losses at more than $20 million a day because no cargo was coming in or out.
",20
"Two Germans, thought to be members of a Colombia leftist guerrilla group, were arrested in the northwest of the country early on Sunday as they tried to smuggle a kidnap victim out of the country, police said.
They were seized at Rionegro international airport, near Medellin, at 1 am local time (0600 GMT) as they tried to bundle a third German, Brigitte Schoene, the wife of a former BASF Chemicals director snatched on Aug. 15, on to a charter plane.
A list of 83 international guerrilla organisations together with a number of false passports were found in the bags of the two detainees -- a 54-year-old man and a 36-year-old woman -- police said.
""I would dare to say that these (German) citizens we captured are the international finance heads and advisers of the National Liberation Army (ELN),"" Gen. Alfredo Salgado, head of the anti-kidnap police in nortwest Antioquia province, told reporters.
The ELN is Colombia's second largest rebel group. It is notorious for its attacks on oil infrastructure and on multi- national companies and their employees.
Gen. Salgado said the two Germans in initial questioning claimed they were carrying out an international peace mission and merely mediating the release of Schoene, seized from her home in Prados de Llanogrande, Antioquia, along with her five-year-old son and chauffeur. Both her son and the chauffeur were released hours after being snatched.
Salgado gave no details of the other guerrilla groups named in the documents seized from the couple and was unable to say if either had been linked to the German urban guerrilla groups of the 1970s.
The German Embassy in Bogota declined to comment on the arrests. Names found on the man's forged ID papers were Norbert Schroder, of Munich, and Jurgen Seidel. The woman's papers gave her name as Silvia Schroder and Isabel Seidel.
The man is also believed to have played a prominent role in the kidnap of a British, Danish and German engineer in Antioquia province earlier this year, Gov. Alvaro Uribe said. The release of the three in return for an undisclosed ransom, paid without the knowledge of the Colombian authorities, led to an angry exchange between Uribe and the German and British embassies.
In comments to reporters on Sunday, Uribe said he had spoken to Schone after her release and that she had confirmed she had been held by the ELN and complained of pyschological torture.
Colombia is the kidnap capital of the world with one person abducted every 2-1/2 hours, according to security experts. About half the kidnaps are attributed to the country's rebel armies.
",20
"Colombia has taken the first step to lifting a constitutional ban on extradition but the country's crusading anti-drug prosecutor on Wednesday dismissed the move as virtually meaningless.
Amid threats of a repeat of the bloodbath unleashed by drug gangs against extradition in the late 1980s, a Senate panel approved draft legislation late on Tuesday to lift the prohibition on sending Colombians abroad to stand trial
But chief prosecutor Alfonso Valdivieso said the measure prohibited as much as it allowed and threatened to hog-tie the government in endless red tape. He said the legislation should be strengthened before a final vote in Congress.
""What we should be doing here is lifting the 1991 ban, which was a national disgrace. But the text approved by the Senate doesn't represent any advance,"" he said. ""I'm not saying it's a step back but it leaves us in exactly the same position.""
The draft legislation approved by an 11-8 vote by the Senate constitutional committee was also unlikely to satisfy Colombia's critics in the United States.
If the draft survives a required seven more congressional votes, it would open the door to extradition in some isolated cases. But it would not be retroactive, ensuring that the Cali cartel drug lords jailed last year, the target of a U.S. extradition request in June, will never see U.S. courts.
Furthermore, the legislation would prevent the extradition of criminals who voluntarily surrendered to Colombian justice and forbid their handover if they risked receiving stiffer sentences abroad than those they would face at home.
One of the main arguments by U.S. authorities, who have long pressed for the extradition of drug traffickers, is that Colombian justice is too lenient and convicted drug lords continue running their criminal empires from behind bars.
Drug lords led by Pablo Escobar, the late and notoriously violent leader of the Medellin cartel, waged a nationwide campaign of bombings, kidnappings and assassinations in the late 1980s and early 1990s to force the government to impose the constitutional ban on extradition passed by Congress in 1991. Memories of the thousands of people who died in that campaign of terror are still fresh.
Death threats against extradition supporters have been scrawled in the last week on walls around Cali, home to the powerful syndicate that edged out Escobar's organisation to become the world's major cocaine supplier.
A group calling itself ""Colombians For Peace"" issued pamphlets reminding people of the bloodbath of the 1980s because of the extradition issue.  ""Today that situation is once again threatening Colombia. Avoiding it depends on the government, congress and our judges,"" it said.
President Ernesto Samper, dogged by allegations of his own ties to drug lords, has said the extradition debate was poorly timed and insisted that priority should be given to his own proposal to introduce stiffer penalties for drug crimes.
",20
"Colombian stocks have shaken off three years of stagnation to stage a meteoric rise in 1997, but bourse chiefs warn deep-rooted structural problems cloud the outlook for one of the world's best-performing markets so far this year.
The country's two major indices, Bogota's IBB and Medellin's IBOMED, have gained more than 22 percent in the 10 sessions of the year to Thursday, Jan. 16, grabbing international attention and sending investors reeling with surprise.  
Brokers are convinced that bigger gains are still to come in the course of the year and that Colombian stocks continue to be undervalued by as much as 25 percent.
But the chairmen of the Bogota and Medellin exchanges believe the traditional ""marriage"" between industrialists and bankers will hamper the transformation of Colombia's markets into sophisticated, modern bourses.
""Market performance has been pretty good in the year so far and we've seen gains that nobody really dared foresee,"" said Luis Fernando Uribe, head of the Medellin exchange.  
Bogota's IBB has gained about 22.5 percent -- despite small falls on profit-taking Wednesday and Thursday after 18 days straight gains.  It rose just 11.8 percent in peso terms in 1996 -- a real-term loss when set against 21.63 percent inflation.
Medellin's IBOMED index has leapt more than 23 percent after losing 3.68 percent in nominal terms in 1996.
Trading volume is extremely thin, however.  Volume on all three of the country's exchanges, including Cali's tiny Bolsa de Occidente, totalled just $2.3 billon in 1996.  
Market perception that Colombian shares are well below book price, a fall in deposit rates from above 30 percent for most of 1996 to about 27 percent, and optimism that the economy is about to rebound from the sharp slowdown last year are underpinning the rally.  And a new tax on fixed income papers has also put a premium on equities, many brokers say.
""Once the market caught fire everybody piled in. There was not too much differentiation between shares, which shows these are still somewhat immature markets,"" said market analyst Stephen Edkins.  
""We're bullish about the year and think shares will rise between about 40 percent and 45 percent overall,"" he added. Inflation is forecast to hit 18 percent this year, which would mean real-term yields of up to 27 percent.
Edkins expected to see downward corrections of between five percent and 10 percent in the coming weeks, with new gains from the start of the second quarter as companies turn in 1996 year-end results, followed by first quarter results.
Domestic political factors, including the country's simmering guerrilla war, which some military experts predict will intensify in 1997, seem unlikely to cause concern.  
""We've got this crazy equilibrium where there's quite a solid macroeconomic management and then this element of chaos,"" said Edkins.  But amid the optimism, bourse chiefs Caballero and Uribe sounded a warning.
""The main underlying problem is that there are a lack of shares.  That's a structural problem and cannot be resolved overnight,"" said Caballero.
""There are favorable terms for companies to raise capital in the stock market but the traditional marriage between industry and the financial sector is not going to be easy to break up,"" said Uribe.
Colombian entrepreneurs still prefer to contract debt with the banks rather than risk losing overall control of their businesses by issuing shares.
Of all the country's major conglomerates only the Sindicato Antioqueno has more than one of its companies quoted on the stock market -- but less than one-third of the shares are in free float, outside the direct control of the companies themselves.
((--Bogota newsroom, 571 610 7944))
",20
"Leaders of Colombia's three largest labour federations said on Monday they would not sign a new wage and price control pact with bosses and the government, and warned 1997 could be a year of serious social unrest.
They condemned the annual social pact, first introduced by President Ernesto Samper in 1995, as a way of forging ahead with neoliberal policies at the expense of workers, and said such a model would fuel political polarisation in 1997.
""The social pact reflects neoliberal logic and aims to pay workers less in order to make industry more competitive. The pact is a corporatist tactic that does not serve the interests of the people,"" said Luis Eduardo Garzon, chairman of the Unitary Workers' Confederation (CUT), the country's largest labour organisation.
Following internal elections in November, left-wingers led by Communist Party members like Garzon seized overall control of the CUT from Liberal and Conservative Party moderates, who had bowed to previous government demands to sign a pact.
This year's pact agreed to a 19.5 percent wage hike for workers based on an inflation target of 17 percent. But while salaries were kept within strict limits, the cost of goods and services spiralled, pushing inflation to almost 21 percent in the first 11 months of 1996 -- a 1.5 percent drop in real wages in the year to date.
The central bank last week set a 1997 inflation target of 18 percent. The government, employers and union leaders were due to meet on Wednesday for another round of discussions on the 1997 social pact.
""The government has put the economy on a war footing to combat crime and subversion. If that continues I think there's a grave risk of further polarisation of political forces in 1997 and we will be in for a very difficult time,"" Garzon said.
Cervulo Bautista, of the general secretariat of the Christian Democrat-influenced General Confederation of Democratic Workers (CGTD), also warned of worsening labour relations in 1997.
""We don't want to be accused of trying to bring down Samper's governmment but if the situation doesn't change we could be calling on the working classes for a nationwide stoppage,"" he said.
The CUT, with 600,000 affiliates, and the CGTD, with about 300,000 members, said they would be looking for minimum wage increases of 27 percent to make up for the real term erosion of salaries this year coupled with a productivity premium.
The 200,000-strong Confederation of Colombian Workers (CTC), normally loyal to Samper's Liberal Party, said it would be looking for wage rises of close to 30 percent.
Labour Minister Orlando Obregon was confident a social pact will be signed by Jan. 1, a spokeswoman said. About 35 percent of the Colombian labour force is unionized.
",20
"Colombia will announce cuts in coffee exports next week under the terms of a beefed up retention plan recently agreed by members of the Association of Coffee Producing Countries (ACPC), coffee czar Jorge Cardenas said on Thursday.
The head of the National Coffee Growers' Federation also said Colombia's internal coffee price would be raised in view of recent gains in international markets. He did not, however, say when the hike would take effect nor what the percentage rise would be.
In the provinces, meanwhile, coffee growers are becoming increasingly worried about potential crop damage caused by recent torrential downpours, which meteorologists say have pushed rainfall levels up to 160 percent higher than the seasonal average. Weather forecasters say the outlook for February is just as bad.
Under terms of the ACPC deal hammered out in Rio de Janeiro on Jan. 23, member nations will slash back total exports by 1.3 million bags in the first half of 1997 from the original target of 26.28 million bags set in May.
One million bags of that will be robusta but arabica- producing countries, like Colombia, agreed to rein back 300,000 bags of exports in solidarity. Cardenas declined to specify what proportion of the cut would correspond to Colombia.
""The cuts will respond to production conditions and the export situation in each individual country. We will be announcing the cuts this will imply for Colombia next week,"" Cardenas told Reuters.
As speculation grew this week that the federation would announce the rise in internal coffee prices at its first meeting of the year Friday, Jan. 31, private exporters complained of short supplies.
""Intermediaries and producers have increased prices to scandalous levels in anticipation of a rise in the internal coffee price. Some are just holding on and won't even sell. In some cases prices are up by as much as 10 percent,"" said Alvaro Ramirez of Cargill exporters.
""In view of the situation in external markets, we will of course have to raise the internal price of coffee,"" Cardenas said. ""We will do the projections and take the decision on the basis of that,"" he said.
The federation cut internal coffee prices by 14,000 pesos per 125-kg load to 221,500 after a turbulent coffee growers' congress on Dec. 5. The move aimed to reduce the deficit of the Coffee Fund, an organization administered by the federation which buys all Colombian coffee at a pre-agreed support price.
The cut was achieved by withdrawing a 14,000 peso premium, paid in the form of a bond instead of cash, which had been introduced to compensate for the poor outlook for coffee in the 1996 calendar year.
The good news on the internal price front, however, is taking a back seat to the recent weather problems.
""In the southwest and Andean regions, and particularly the coffee growing region, rainfall has been as much as 160 percent higher than normal,"" said Leonardo Rivera, meteorologist at the national weather center IDEAM.
""These conditions will be prolonged and we're likely to see similar levels of rainfall through February,"" he added.
January and February are normally dry months in Colombia. But the torrential rains this year have been caused by a cooling in the surface temperature of the Pacific ocean, known as the La Nina effect -- conditions not seen for at least the last 10 years.
Coffee growers say the rains are delaying the flowering period and fear the main harvest, which normally begins in October, could either be very late or that a part could be lost entirely.
Cardenas said it was too early to predict what the impact of the weather could be on crop levels but said federation technicians were drawing up a detailed report, which they hoped to issue in mid-February.
((--Bogota newsroom, 571 610 7944))
",20
"Colombian lawmakers bowed to intense government pressure on Thursday and put the bite back into a bill to strip drug barons of their ill-gotten gains.
If the legislation survives a congressional plenary vote -- likely to be plain sailing after a stormy passage -- it could go some way to appeasing the United States, which has threatened to slap economic sanctions on Colombia for its perceived failure to crack down on billionaire drug barons.
A conference committee hauled the asset forfeiture bill back from the brink by reversing a decision by the lower house which would have taken the teeth out of the law.
In a narrow vote on Tuesday, the House of Representatives rejected the provision, previously approved in the Senate, that would empower the government to seize drug-related assets accumulated over the last 20 years.  The House ruled the law could only be retroactive to 1991, leaving much of the property amassed by the jailed Cali Cartel kingpins, estimated at more than $50 billion, untouched.
Justice Minister Carlos Medellin, who like a handful of other top ministers spent much of the day lobbying key lawmakers in the halls of Congress, was buoyed by the committee's decision.
""Now we just have to see if the plenary session of the Senate and Chamber of Representatives approves the decision. But I don't think there will be any problem,"" he said.
Colombia's business community also heaved a sigh of relief. It had campaigned for Congress to approve the 20-year time limit in a series of pleas over the last two days. Key export sectors of the economy are likely to be hardest hit if U.S. sanctions are imposed.
Even though the asset forfeiture law now seems to have reached high ground, the road back into the good books of the United States still promises to be rocky.
Political analysts agree there is little chance of Colombia regaining certification as a U.S. ally in the drug war, which it lost last March, even if it escapes threatened sanctions.
Other anti-drug legislation which the United States has demanded, such as stiffer sentencing and the reintroduction extradition, have been watered down or sunk in Congress in recent weeks.
",20
"Colombia's main oil workers' union, USO, known for its fierce nationalism and opposition to multinationals, has merged with a smaller labor organization in a bid to create an industry-wide front, one of its leaders said Tuesday.
The new grouping will target workers not currently represented by any union, primarily those employed by foreign companies operating in the country, USO social security secretary Gustavo Triana said.
The merger vote took place late Monday in the oil production center of Barrancabermeja and has set alarm bells ringing in some sectors of the industry, which fear the USO's spreading influence could sour labor relations with the non-unionized workforce.
""The merger was unanimously agreed and this opens a new phase of union organization in the oil industry. We will try to enter into those sectors where there is little or no union presence,"" Triana said. ""The multinationals have already spoken out against this grouping and we think they will show a great deal of resistance and look for ways to keep it out of their fields.""
The USO has about 5,700 workers and has until now only been able to recruit within the state oil company Ecopetrol. But the merger with the small ASOPETROL, which already has a foothold in the multinationals, will pave the way to what USO chief Hernando Hernandez believes could be a 40,000-strong ""super-union"".
Triana said the new union would not only cover production and refinery workers but could also extend to contractors and those involved in transport and distribution operations related to the oil industry.
SINTRAOXY, which represents multinational Occidental Petroleum's workers, is expected to join USO and ASOPETROL, Triana said.
USO, formed in the 1920s, has accused foreign multinationals of undermining national sovereignty through its production and exploration contracts with Ecopetrol. It has also attacked them for exploiting Colombian workers.
For their part, some of the multinationals believe USO has ties with Colombia's leftist guerrilla movements -- a charge its leaders deny.
A foreign oil spokesman said last week: ""The prospect of having to deal with a belligerent union with close ties to the guerrilla movements is far from stimulating.""
Another contacted Tuesday said his company was analyzing the merger decision, saying: ""It may be something we can live with. It's surprising what people who want to earn a dollar will put up with.""
Last week, the USO staged a 24-hour strike which paralyzed pumping operations along Colombia's two main oil pipelines.
",20
"The Colombian government this week may sidestep congressional stalling and use special powers to force through stiffer anti-drug laws, Justice Minister Carlos Medellin said.
In comments to local media over the weekend, he also called for the draft laws -- which include confiscating drug barons' ill-gotten gains -- to be retroactive, applying to traffickers already jailed.
The retroactivity issue has sparked controversy in parallel moves to end Colombia's constitutional ban on extradition, currently under debate in the senate.
Former justice minister Enrique Parejo believes lawmakers may welcome the decree since it would remove them from the line of fire in any violent backlash by drug traffickers.
""If we don't do something soon then it could be too late. If congress does not make headway on the confiscation (of drug traffickers' property) then I will be looking for the faculty to introduce the legal measures,"" Medellin told the conservative El Nuevo Siglo newspaper.
President Ernesto Samper submitted the tougher anti-drug proposals to congress in July with a firm eye on winning back U.S. certification as an ally in the drugs war, which was withdrawn in March. He has sent repeated requests to legislators to speed up debate, but sessions continue to be dogged by lengthy political wrangling and poor attendance, which has left committees without a quorum.
If the congress fails to pass the measures, the government is expected to announce a decision by Thursday to introduce the new anti-drug laws by decree. But political and legal analysts say the move could raise constitutional issues about whether the government has the right to override congress.
""The government wants to legislate by decree because it fears decertification by the United States again next year, which could spark a fresh crisis which it may not recover from,"" Parejo said in a telephone interview.
""It may be a relief to many congressmen who have links with drug traffickers because there are real signs that the cartels are once again preparing to unleash a new war.""
In the 1980s and early 1990s, the late Pablo Escobar, head of the once-mighty Medellin drug cartel, waged a war of bombings, assassinations and kidnaps against the state in a successful bid to get extradition banned.
The specter of a similar terror campaign is again looming after a series of bombings in recents weeks, including one defused by police which had been planted by the so-called Movement for National Sovereignty in the centre of Cali.
",20
"Colombian lawmakers met on Thursday in an 11th hour bid to rescue a bill that would strip drug barons of their fortunes and help avoid U.S. economic sanctions.
An 11-member conference committee was debating whether to override the lower house of Congress and empower the government to seize drug-related assets accumulated over the last 20 years.
In a narrow 59-57 vote late Tuesday, the House of Representatives rejected the 20-year time limit, previously approved by the Senate, ruling instead that criminal assets could only be seized if they had been amassed after 1991.
The conference committee meeting was convened under intense pressure from President Ernesto Samper and senior ministers. They condemned the lower house's decision as a ""virtual amnesty"" and raised fears that the United States would impose economic sanctions on Colombia in retaliation for its failure to crack down on billionaire drug lords.
The committee is widely expected to toe the government line and send the bill back to a plenary session of Congress, recommending that the 20-year time limit be reincorporated.
Colombia's business community has taken an unusually outspoken approach and been vociferous in calls to Congress to approve an asset forfeiture law with a 20-year clause.
The United States decertified Colombia as an ally in the drug war last March. Four months later, it withdrew Samper's U.S. entry visa, citing allegations that he financed his 1994 election campaign with drug cartel cash. Foreign Relations Minister Maria Emma Mejia said earlier this week there is a very real prospect of U.S. economic sanctions starting next year.
Other anti-drug legislation that the United States has demanded, such as stiffer sentencing and the reintroduction extradition, has been watered down or sunk in Congress in recent weeks.
",20
"Thousands of demonstrators thronged Bogota's streets on Sunday calling for an end to the crime wave that has turned Colombia into the kidnap capital of the world.
A small bomb exploded minutes before the march began about 100 yards (90 metres) from where demonstrators gathered but did not cause any injuries, police said. A spokesman said the device contained just a few ounces (under 100 grams) of explosive and was probably simply intended to sow panic.
At least 1,100 people have been abducted this year -- more than half of those by warring factions in Colombia's simmering internal conflict -- according to march organisers.
National Police chief Rosso Jose Serrano, who took part in the first march of its kind in Colombia, saw it as a direct challenge to leftist guerrillas, who fill their war chests with ransoms. Scores of others clutched photos in silent tribute to their loved ones -- kidnapped by criminals.
""When you're abducted you become like the living dead -- it strips you of your soul. Today's march is a sign that civil society is saying no to kidnap,"" said Francisco Santos, founder of Pais Libre, an independent foundation that counsels kidnap victims' families and which organised Sunday's march.
Santos, part of the family that runs Colombia's leading newspaper, was kidnapped six years ago as part of a campaign unleashed by the late drug lord Pablo Escobar and his Medellin cartel.
In a move timed to coincide with Sunday's protest, one of Colombia's most-feared right-wing paramilitary leaders released the mothers of two guerrilla chieftains in the northwest.
The women were snatched in a wave of retaliatory kidnappings carried out by Carlos Castano's paramilitary gang in the last six months in a bid to persuade the guerrilla chief to halt its campaign of abductions.
An estimated 15,000 to 20,000 people took part in the march. Organisers put the figure at twice that.
Norberto Garcia, 62, tearfully watched the march and subsequent rally in the historic Plaza Bolivar square. Almost a year ago to the day his 14-year-old daughter Andrea disappeared on her way to school in a working-class district of the capital.
""When your child is kidnapped it is like your own life ends. It's the hardest thing for a parent to suffer,"" Garcia said.
Only last Wednesday, the country was rocked by the kidnap and murder of seven-year-old schoolboy Victor Alvarez in southwest Colombia. His corpse was dumped on the doorstep of his family home when his parents failed to pay common criminals a $10,000 ransom.
But in a country where even conservative estimates put the number of abductions at three a day, the tragedy of young Victor, of Popayan, was almost forgotten by Sunday.
Anti-kidnap czar Alberto Villamizar was jeered by crowds as he delivered a message from President Ernesto Samper pledging to crack down on kidnapping.
The catcalls were preceeded by chants of ""Serrano will save the motherland"", in support of the no-nonsense chief of National Police, who heads the fight against kidnapping and drug-trafficking.
",20
"At least 24 soldiers and leftist rebels died in fierce fighting in three provinces of Colombia over the weekend, military sources said on Sunday.
The bloodiest clashes took place on Saturday in the conflict-torn region of Uraba, a banana-growing area in northwest Colombia where guerrillas and right-wing paramilitary groups have traditionally fought for control of lucrative contraband routes.
An army spokesman said 10 soldiers and eight Revolutionary Armed Forces of Colombia (FARC) insurgents died in battles there. Gen. Rito Alejo said intensive counterinsurgency operations continued on Sunday.
Elsewhere, in southwestern Huila province the FARC, Colombia's largest and oldest guerrilla force, dynamited a military convoy, killing four soldiers. And in firefights in northeastern Norte de Santander province, one soldier and one FARC rebel died early on Sunday, military sources said.
In the Caribbean port city of Barranquilla, four suspected rebels were injured when their clandestine bomb-making factory exploded.
The latest wave of deaths comes against the backdrop of what military experts say is the worst guerrilla violence in more than three decades of armed uprising.
The rebels unleashed their new offensive on Aug. 30 when they overran a military base in southern Colombia, killing 27 soldiers and taking at least 60 prisoner.
The FARC is still holding the troops and in its latest communique issued over the weekend repeated accusations that the army was planning to rescue the captives by force, thereby putting their lives at risk.
The rebel force said it has a leaked military document proving its allegations and added the army was planning to try the soldiers for cowardice once they were released -- claims denied by Interior Minister Horacio Serpa on Sunday.
While the current guerrilla offensive has led many defence analysts to suggest the situation has slipped out of control of the military, the government has been buoyed by news of the surrender of 110 fighters from the People's Liberation Army (EPL), Colombia's third-largest guerrilla force.
The Maoist-inspired rebels handed over their weapons to the military on Saturday in a rural zone of northern Cordoba province.
",20
"Colombia's cocaine kings, Gilberto and Miguel Rodriguez Orejuela, were sentenced to 21 and 18 years in prison respectively on Friday, but had their terms halved for pleading guilty, bringing a swift rebuke from the United States.
Gilberto Rodriguez, who also was fined $8 million, and his brother -- fined $4.4 million -- will be eligible for extra sentence reductions for working and studying in prison.
The sentences were called ""totally unacceptable"" by U.S. Ambassador Myles Frechette, whose government unsuccessfully called for the extradition of the Rodriguez brothers in July.
The public prosecutor's office said it would appeal the terms, but under Colombia's lenient anti-drug laws this would add little additional jail time.
""The U.S. government and American public opinion will be shocked by these low sentences,"" Frechette told reporters. ""These sentences are totally unacceptable,"" he said.
Gilberto, nicknamed the Chess Player for his cunning criminal mind, headed the powerful Cali drug cartel until his capture in June 1995.
Together with his brother Miguel, the pair masterminded a huge drug trafficking empire, supplying an estimated 80 percent of the world's cocaine and building up a multi-billion dollar fortune in the process.
U.S. officials have said repeatedly that the brothers continue to run their criminal empire from behind the walls of Bogota's La Picota prison.
That allegation, coupled with Friday's ruling by a judge in the city of Cali, could strike a fatal blow to Colombia's hopes of averting more U.S. trade sanctions in March when Washington will decide whether it should remain on a list of pariah states that have failed to cooperate in ther global fight against drugs.
A so-called ""faceless"" judge sentenced Gilberto Rodriguez, 57, to 21 years for drug-trafficking, conspiracy, illicit enrichment, falsification of documents and the illegal possession of weapons.
That term was immediately cut to 10-1/2 years, in return for his plea and prompt confession, and with extra reductions for working and studying in jail he will likely spend about six years in prison. With time already served in custody awaiting trial, Gilberto Rodriguez could be a free in 2002.
His brother Miguel, 53, was sentenced to 18 years, halved for his guilty plea and full confession. He will also be eligible for extra reductions.
The respected Colombian political magazine Semana recently estimated the combined fortune of the Rodriguez Orejuela brothers and two other top traffickers at $50 billion. The brothers may lose part of their fortune under the terms of the new asset forfeiture law passed by Congress in December.
The office of Prosecutor-General Alfonso Valdivieso, an anti-drug crusader and close ally of Washington, said it would use all legal resources to appeal the sentences and see that ""just penalties"" are eventually imposed on the Cali kingpins.
Under current legislation, the brothers faced a maximum of no more than 24 years imprisonment.
National Police chief Gen. Rosso Jose Serrano, who oversaw the arrests of the Rodriguez brothers in June and August of 1995, called Friday's sentences ""a disgrace"" and said they might just as well have been left free.
""I'm not going to continue jailing drug traffickers so they can get out in three years. It's a disgrace,"" he said.
",20
"Colombia's military and leftist rebels are oiling their guns for 1997, a year both sides predict will see Latin America's longest-running guerrilla war finally reach boiling point.
Military experts and human rights activists warn that the simmering conflict is ready to explode as the government and the insurgents harden their positions and resort to increasingly violent strikes against each other.
""1997 will be a year of greater struggles to achieve a more dignified motherland for all,"" the Revolutionary Armed Forces of Colombia (FARC), the country's largest guerrilla force, said in a communique obtained by Reuters on Monday.
""We call on all those at odds with this terrorist, despotic regime to hoist high the flags of social justice and the struggle for our rights.""
That struggle, blamed for many of Colombia's 25,000 murders in 1996, put more than half the country under emergency rule after the government granted special powers to combat leftist subversion midway through the year.
But the FARC and Colombia's second-largest rebel force, the National Liberation Army (ELN), have demonstrated increasing ease in destroying key infrastructure and launching devastating attacks on military strongholds.
""Preparations are under way for a longer, harder war on all sides. The guerrillas have shown their intention to step up the armed confrontation. The military line seems to be triumphing in the government. There's no desire for peace,"" said human rights attorney Carlos Rodriguez, member of the Colombian Commission of Jurists.
The guerrillas' growing strength was highlighted by the FARC's Aug. 30 raid on a jungle base at Las Delicias in southern Putumayo province. The guerrilla force killed 27 soldiers and is still holding 60 others prisoner -- one of the most humiliating blows dealt against the army in more than three decades of armed uprising, according to military analysts.
In an effort to regain the upper hand, the government has announced it will spend more than $900 million on defence in 1997, including the purchase of scores of Russian and U.S.-made combat helicopters -- equivalent to its total military expenditure for the last four years.
The military currently estimates the combined force of the FARC, set up as a pro-Soviet guerrilla force in 1964, and the ELN, a pro-Cuban force created by radical Roman Catholic priests in the mid-1960s, at no more than 12,000 fighters. The much smaller Maoist People's Liberation Army (EPL) was virtually decimated by a wave of desertions in the latter half of the year.
But political analyst Antonio Caballero, columnist with the influential weekly political magazine Semana, calculates the rebels' true strength at between 18,000 and 30,000.
The guerrilla forces, he says, have been able to buy ever more sophisticated weapons with money from extortion and their alleged links with the drug trade.
Meanwhile, the army's inefficiency and the crisis sparked by accusations that President Ernesto Samper financed his 1994 election campaign with drug money created a power vacuum that the rebels have stepped in to fill, Caballero said.
One Western defence attache believes at least 40 percent of Colombia is now under the de facto political and economic control of the guerrillas. He argued the conflict was not just a military problem.
""The seedbed of revolution is caused by the great social injustice which prevails. More military equipment will be of no use if there's not better coordination in the armed forces,"" he said.
",20
"A leading lawmaker said on Monday that Colombia would continue to be a ""paradise for drug traffickers"" unless Congress voted to overturn a 5-year-old ban on the extradition of drug lords and other criminals wanted abroad.
""If we don't end the culture of impunity in Colombia then we have no right to ask for international help in the fight against drugs,"" said Senator Luis Guillermo Giraldo.
Giraldo, a member of the ruling Liberal party but an outspoken opponent of President Ernesto Samper, proposed legislation in August that would reactivate a 1979 extradition treaty with the United States.
The legislation faces a key hurdle in the Senate on Tuesday when a 12-member constitutional committee was set to vote on whether it should be submitted to plenary for approval or thrown out altogether.
""If we don't restore our (extradition) treaty, Colombia will continue to be a paradise for drug traffickers,"" Giraldo said in a telephone interview with Reuters.
In the run-up to the vote in the Senate, graffiti has appeared in Cali, home to the criminal syndicate that has dominated the world's cocaine trade, threatening those who support sending Colombians to stand trial abroad.
But growing numbers of legislators appear to be increasingly swayed by the United States' argument that extradition is a vital weapon in the drug war. Moreover, some political analysts believe it may be impossible for Colombia to regain U.S. certification as an ally in the fight against drugs, withdrawn in March, unless extradition is reintroduced.
Samper, dogged by accusations that he took drug money to finance his 1994 election campaign, said on Friday he thought Giraldo's bill was poorly timed, arguing that priority should be given to a package of tougher penalties for drug crimes currently going through Congress.
Justice Minister Carlos Medellin has spoken out in favour of renewing extradition, however, and Alfonso Valdivieso, chief prosecutor and a fervent anti-drug crusader, has even called for extradition to be made retroactive -- a proposal unlikely to please those drug traffickers who surrendered to the Colombian authorities in return for lenient treatment.
While politicians, ministers and lawyers argue the merits of the move, more than 60 percent of ordinary Colombians surveyed by RCN radio in September said they opposed extradition.
Political analysts say such opposition reflected a combination of nationalistic pride and fear that renewing extradition could unleash a new campaign of bombings, kidnappings and assassinations like those led by the late drug lord Pablo Escobar in the late 1980s and early 1990s.
",20
"Colombia denied on Monday that its army was linked to paramilitary death squads and said the world should focus instead on the ""cursed alliance"" between leftist guerrillas and drug traffickers.
""Narco-guerrilla groups are heading a disinformation campaign throughout the world. ... The United States and the world must wake up to the new threat posed by the cursed alliance between drug traffickers, guerrillas and international mafias,"" Defence Minister Juan Carlos Esguerra said.
The comments were part of a fiery response to a report issued in Bogota by New York-based Human Rights Watch.
The organisation's report, titled ""Colombia's Killer Networks,"" concluded, ""The military has not only created paramilitary groups but allows virtually all of them to carry out political killings when it serves a common purpose, ridding the country of perceived guerrilla support.""
The rights group, citing confidential defence documents, said U.S. military advisers fuelled the surge in death squads after helping restructure Colombia's gathering of military intelligence in 1990.
The organisation's legal adviser, Jamie Fellner, alleged that top army commanders Gen. Harold Bedoya and Gen. Manuel Jose Bonett were ""accomplices"" or tolerated such groups in a systematic ""dirty war"" on political dissidents.
Human Rights Watch echoed calls by London-based Amnesty International last month demanding the immediate suspension of U.S. and European military aid and arms sales to Colombia until human rights violations were curbed.
Human Rights Watch estimated that much of the $322 million in U.S. military aid to Colombia since 1989 had been handed out to counterinsurgency battalions accused of rights violations.
A U.S. State Department spokesman said in Washington on Monday there were no plans for tighter checks.
The Colombian Army was dramatically humiliated when the Revolutionary Armed Forces of Colombia overran a jungle post in southern Colombia on Aug. 30, killing 27 soldiers and taking 60 prisoners.
""These soldiers are being kept in cells reminiscent of the infamous tiger cages seen in Vietnam. Amnesty International and Human Rights Watch would do well to investigate those abuses instead of inventing new charges,"" Esguerra said.
",20
"Colombia's main oil union postponed a decision to launch an indefinite strike in protest against the arrest of 11 members on terrorism charges after top-level talks with the government Sunday night, leaders said.
The 5,700-strong USO union, known for its fiercely nationalistic stance, had been due to set a start date for a crippling stoppage at a general assembly Monday. Industrial action would have begun ""soon after"" Monday's meeting, union head Hernando Hern ndez said last week.
",20
"A powerful car bomb exploded in the northwest city of Medellin early on Monday, killing one woman and injuring at least 15 other people, police chief Gen. Alfredo Salgado said.
About 120 pounds (50 kg) of dynamite was packed into a minibus and detonated outside the house of Juan Gomez Martinez, a regional newspaper editor and former provincial governor.
Four unidentified gunmen opened fire on private security guards near Gomez's home before the bomb went off about 5:30 a.m. (1030 GMT), Salgado said.
The dead woman was named as Lucia Bernal, 60, the wife of a civil engineer, who lived close to the site of the blast. Gomez was not home at the time but one of his three sons, Juan Camilo, was injured.
""We don't know the motive for this attack. It is too early to say who was behind it. We don't know if it was leftist guerrillas, drug traffickers or right-wing paramilitaries. We're looking at all the possibilities,"" Salgado said.
Gomez, a member of the opposition Conservative Party, is head of the regional El Colombiano newspaper, which has its headquarters in the industrial city of Medellin, the main city of Antioquia province.
In recent days it has been serializing an extensive interview with Carlos Castano, leader of the country's most-feared right-wing death squad, whose main target is leftist rebels and their suspected supporters.
A few hours after the bomb blast a hitherto unknown group, calling itself the Special Anti-Paramiltary Commando, issued a communique, a copy of which was obtained by Reuters, declaring war on paramilitary groups in Antioquia.
The organisation, claiming to be made up of ex-guerrillas who had laid down their arms, accused serving state governor Alvaro Uribe, of the Liberal Party's right wing, of sponsoring the paramilitaries. Uribe lives close to the site of Monday's blast but it was not clear whether the communique and the attack on Gomez's house were linked.
Medellin has in the past seen some of the worst violence unleashed by the country's powerful drug cartels. It was the scene of multiple attacks by the notorious drug mafia led by the late Pablo Escobar in the late 1980s and early 1990s. The cocaine kingpin waged war against the state in a successful bid to force Congress to ban the extradition of Colombians to the United States.
Last week Congress approved a tough new law designed to strip drug lords of their illicit billion dollar fortunes. More measures including stiffer jail terms are due to be debated in an extended session of Congress this week.
",20
"A leading Colombian coffee official on Wednesday played down a potential rift with Brazil over a call to expand the Association of Coffee Producing Countries' (ACPC) export retention plan.
John Naranjo, commercial manager of Colombia's national Coffee Growers' Federation said no decision would be taken on the plan, put forward by African producers earlier this month, until an emergency ACPC meeting in Brazil in January.
So far Brazilian traders have been cool in their reaction to the suggestion. One Brazilian exporter, who did not wish to be named, has even said it may be part of a bluff by Colombia which, he added, ""was showing signs of not having the coffee it says it has"".
Under the terms of the retention plan -- designed to reduce inventories in consumer countries, thereby increasing the bargaining power of exporters -- ACPC members agreed in May to limit green coffee exports to June 1997 to 53.5 million 60-kg sacks.  
But during their December 11 visit to Colombia, Ivory Coast Commodities Minister Guy-Alain Gauza and Abel Rwendeire of Uganda called for an additional cut of 2.5 million 60-kg sacks in the first half of next year -- a call backed by Colombia.
""I don't think our suggestion is unreasonable. There's a meeting towards the end of January and at that we will take a final decision. This will give the Brazilians a little more time to understand what the Colombian proposal is,"" Naranjo told Reuters in a telephone interview.
Colombia is forecast to export 11.5 million 60-kg sacks in the 1996-97 coffee year, according to the National Coffee Growers' Federation head Jorge Cardenas.
It is not fully clear what impact an increase in the ACPC export retention plan would have on Colombia's exports in the first half of 1997.
""The retention will not be proportional across ACPC member nations. It is more directed at coffee quality and will affect Robusta most. We cannot say how much Colombia would have to retain until we work out the exact division in January. But of course we would have no difficulty meeting our export commitments whether this measure was finally approved or not,"" Naranjo said.  
On the home front, meanwhile, 1997 is predicted to be a year of ""profound transition and adjustments"" in Colombia's embattled coffee sector, according to Armando Montenegro, head of the National Association of Financial Institutions (ANIF).
""There will be many coffee growers who quit the sector, which is in a transition from a large sector to a smaller and more competitive sector which is not easy,"" Montenegro said.
Throughout 1996, Colombia's coffee growers have been hard hit by the strengthening peso, their continuing battle against the coffee borer bug and high interest rates.
Those problems could worsen in 1997 after the National Coffee Growers' Federation announced on December 5 it would cut immediately the internal coffee price by 14,000 pesos per 125-kg load in a move designed to save the Coffee Fund it administers an estimated $70 million.
The fund, which guarantees to buy all Colombia's coffee crop at a fixed price, is nevertheless expected to rack up deficits of almost $400 million by next September.
The government has accepted that many coffee growers may be forced out of business and labourers will be left without work. It has said it will back a restructuring programme but has not yet announced a budget for the programme.
",20
"Rescuers struggled on Saturday to recover scores of bodies from the wreckage of a bus that plunged down a deep ravine in the Colombian Andes.
Red Cross officials said 37 people -- all members of a single extended family -- died in the crash and just three passengers survived, including a nine-month-old baby.
The bus ran off the road and plunged into a 1,500-foot (500-metre) chasm in a remote area of Narino province on Friday morning.
More than 50 volunteers took part in the rescue, which was made difficult by the extreme mountain conditions and hampered by thick fog and intermittent rain.
Rescuers were taking at least two hours to recover each body and Red Cross spokesman Mario Arias said it could take three more days to pull all the victims out of the ravine.
""The conditions are very dangerous and rescue work had to be suspended overnight and could only begin again at first light,"" Arias told Reuters in a phone interview from Narino, on Colombia's southern border with Ecuador.
""Rescue workers are having to abseil or scramble down into the ravine with the aid of ropes. The situation is just atrocious. It's taking us roughly two hours to bring each body out,"" he added.
The accident occurred near the town of Ricaurte as the bus travelled from Cali, the country's second-largest city, to Tumaco, a small port on the Pacific coast.
Arias said one of the survivors, Ana Maria Arboleda, 16, told him the vehicle swerved off the road when the driver, who died in the crash, tried to avoid rocks that had fallen on the highway.
Arboleda, her uncle Ambrosio Arboleda, 44, and nine-month-old Brian Montenegro were flung out of the bus as it rolled into the chasm. She suffered a broken arm and a cracked rib, and her uncle was only slightly scratched, Arias said. The baby has a cracked skull and is undergoing a series of emergency operations, Arias said.
Relatives and neighbours of the dead mourned the victims in their home city of Cali.
""This a tragedy. All these people were part of the same family,"" neighbour Eduardo Quinceno told the NTC TV news programme. All the dead worked in a small, family-run shoe factory, according to the Red Cross.
The fatal bus crash is the second in 10 days in Narino. Fifteen people died and 18 others were injured when a local bus flipped over and dropped into a ravine on Dec. 23. The latest accident is one of the worst in recent memory.
",20
"Thousands of demonstrators thronged Bogota's streets on Sunday calling for an end to the crime wave that has turned Colombia into the kidnap capital of the world.
At least 1,100 people have been abducted this year -- more than half of those by the warring factions in Colombia's simmering internal conflict -- according to event organisers.
National Police chief Rosso Jose Serrano, who took part in the first march of its kind in Colombia, saw it as a direct challenge to leftist guerrillas, who fill their war chests with ransoms. Scores of others clutched photos in silent tribute to their loved ones -- kidnapped by criminals.
""When you're abducted, you become like the living dead -- it strips you of your soul. Today's march is a sign that civil society is saying no to kidnap,"" said Francisco Santos, founder of Pais Libre, an independent foundation that counsels kidnap victims' families and which organised Sunday's march.
Santos, part of the family that runs Colombia's leading newspaper, was kidnapped six years ago as part of a campaign unleashed by the late drug lord Pablo Escobar and his Medellin cartel.
In a move timed to coincide with Sunday's protest, one of Colombia's most-feared right-wing paramilitary leaders released the mothers of two guerrilla chieftains in the northwest.
The women were snatched in a wave of retaliatory kidnappings carried out by Carlos Castano's paramilitary gang in the last six months in a bid to persuade the guerrilla chief to halt its campaign of abductions.
An estimated 15,000 to 20,000 people took part in the march. Organisers put the figure at twice that.
Norberto Garcia, 62, tearfully watched the march and subsequent rally in the historic Plaza Bolivar square. Almost a year to the day his 14-year-old daughter Andrea disappeared on her way to school in a working-class district of the capital.
""When your child is kidnapped it is like your own life ends. It's the hardest thing for a parent to suffer,"" Garcia said.
Only last Wednesday, the country was rocked by the kidnap and murder of seven-year-old schoolboy Victor Alvarez in southwest Colombia. His corpse was dumped on the doorstep of his family home when his parents failed to pay a $10,000 ransom.
But in a country where even conservative estimates put the number of abductions at three a day, the tragedy of young Victor, of Papayan, was almost forgotten by Sunday.
Anti-kidnap czar Alberto Villamizar was jeered by crowds as he delivered a message from President Ernesto Samper pledging to crack down on kidnapping.
The catcalls were preceded by chants of ""Serrano will save the motherland"", in support of the no-nonsense chief of National Police, who heads the fight against kidnapping and drug-trafficking.
",20
"Colombia's main oil workers' union, known for its fiercely nationalistic stance and opposition to multinationals, will merge with smaller labor organizations to form an industry-wide front, its leader Hernando Hernandez said on Friday.
The 5,700-strong USO union, which currently only represents workers of the state oil company Ecopetrol, will approve the decision in a general assembly on Monday in a move that Hernandez believes could eventually pave the way to a 40,000-member ""super- union"".  
Foreign oil companies fear the move will give the USO a foothold in their fields, mostly operated by non-unionized workers, and that the union will sour labor relations with its aggressive, left-wing stance. They also accuse the USO of ties with leftist guerrilla movements, which frequently target the oil industry -- a charge union leaders deny.  
""This merger will help us maintain union solidarity in the face of detrimental government policies and enable us to present a single platform,"" Hernandez said. ""This will put us in a better position to defend the future of our natural resources....
At Monday's meeting in the oil production center Barrancabermeja, the USO will approve a merger with the Association of Oil Industry Workers (ASOPETROL), which has a small but established presence in a number of multinational oil companies.  
SINTRAOXY, made up of U.S. multinational Occidental Petroleum workers, also seems set to heed the merger call.
Hernandez said the immediate effect would be the creation of a 10,000-strong organization, adding that non-unionized oil companies would be targeted in a drive to create a union 40,000 members to represent the entire industry.
This week the USO flexed its muscles and paralyzed the country's two main oil pipelines for the first time ever.  
The 24-hour strike was to combat government plans to restructure Ecopetrol, which USO fears will lead to the company's eventual privatization, and to protest against British Petroleum's demands to renegotiate an association contract with the state oil company.
A foreign oil company senior representative, who did not wish to be named, described USO's merger plans as an USO ploy to regain control after seeing its influence progressively eroded by the entry of multinationals into exploration and production.
""The merger will complicate relations with our labor force and the prospect of having to deal with a belligerent labor union with close ties to the guerrilla movements is far from stimulating,"" the representative said.
Hector Penuela, head of ASOPETROL, confirmed the imminent merger with USO.
A Labor Ministry spokesman said there was no bar on the merger but said those unions involved would have to formally inform the ministry to gain legal recognition.
",20
"The Colombian authorities hailed Wednesday the U.S. pilot who was killed during an anti-drug mission over guerrilla-infested jungles of southeast Colombia as a ""hero fighting the scourge of narco-trafficking.""
Robert Martin, 35, of Lubbock, Texas, died when his Turbo Thrush T-65 crop dusting plane crashed in Guaviare province Tuesday. He had been fumigating illicit plantations of coca leaf, the raw material for cocaine.
Colombian Defence Minister Juan Carlos Esguerra, police chief Gen. Rosso Jose Serrano and U.S. ambassador Myles Frechette were among mourners at a religious service in Bogota to honour Martin. A lone bugler played the ""Last Post"" and the U.S. flag was draped over Martin's coffin.
""We're not here to bid farewell to a pilot or to a U.S. citizen. We're here to say goodbye to a hero who decided to join us in combatting one of the worst scourges known to mankind -- narco-trafficking,"" Serrano said.
Police said Martin, one of six U.S. civilian pilots working in Colombia under contract with the U.S. State Department, was killed on the first day of his contract. Frechette said he was the first U.S. aviator to die on such a mission.
As police cadets mounted a guard of honour for Martin and three police helicopters flew in formation overhead, Frechette pledged the fatality would not affect U.S.-Colombian cooperation in the drug war.
The question of U.S. personnel taking a direct role in drug or counterinsurgency operations is a traditionally thorny issue because of what Colombian politicians see as the possible infringement of national sovereignty.
Crop-dusting planes come under frequent attack from armed gangs and leftist guerrillas who guard the clandestine drug plantations.
Police chief Gen. Rosso Jose Serrano said Tuesday there was a heavy rebel presence in the area but said there was no indication the aircraft had come under fire. He said a full investigation was under way, adding the most likely cause of the crash was human error or mechanical failure.
",20
"Four people were killed and at least 33 injured on Tuesday when a powerful bomb ripped through a building in Monteria, the main town of Colombia's northwest Cordoba province, police said.
The blast occurred in the afternoon at the headquarters of the Fondo Ganadero, a fund set up to promote cattle-ranching in the province. Police chief Col. Gabriel Carrero blamed the attack on leftist guerrillas.
The explosion came a day after a 120 pound (50 kg) car bomb went off in Medellin, killing a woman and injuring 48 people. Authorities blamed that attack on drug traffickers in league with leftist guerrillas.
Marxist rebels and right-wing paramilitary groups have been waging a fierce battle for years in northwest Colombia where both blasts occurred.
""Nobody has officially claimed responsibility for this (latest) attack but we know it is the work of subversives, terrorists and vandals,"" Monteria police chief Carrero said.
The blast in the downtown area of the small provincial town was the second explosion Monteria has suffered in the last two months. An 88 pound (40 kg) bomb, hidden in a street vendor's cart, exploded outside the town's police headquarters on Oct. 21, injuring 10 people in an attack that was  blamed on the Revolutionary Armed Forces of Colombia (FARC), the country's largest guerrilla movement.
It is not yet clear whether Tuesday's bomb may be linked to a communique issued on Monday by a hitherto unknown group calling itself the Special Anti-paramilitary Commando.
The group, claiming to be made up of ex-rebels who had previously given up the armed struggle, declared war on the country's burgeoning paramilitary gangs. Human rights groups accuse cattle ranchers of backing the paramilitaries.
Defence Minister Juan Carlos Esguerra said he believed Monday's attack in Medellin was in retaliation for approval last week by Congress of a new law to strip drug lords of their illict billion-dollar fortunes.
Colombia's major cities, and particularly Medellin, was scarred by a drug-fuelled campaign of bombings, assassinations and kidnappings in the late 1980s as the late cocaine kingpin Pablo Escobar waged war on the state in a successful bid to force Congress to ban the extradition of Colombians to the United States.
",20
"Colombia's Foreign Relations Ministry said on Thursday it would give its ""fullest attention"" to recent accusations that oil giant British Petroleum was linked to political killings, but denied any official investigation was underway.
In a statement, the ministry said: ""The allegations made (against BP) merit the government's fullest attention. But in the absence of judicial investigations it is irresponsible to give credit to such claims.""
Attempts by the Colombian government to clear BP of the allegations fuelled new controversy on Thursday. Spokesmen at the chief prosecutor's office and for the attorney general said they had opened inquiries into a series of gross human rights abuses in the eastern oil-producing provinces of Casanare and Arauca, documented in a 1995 multi-agency report.
The report, a copy of which was shown to Reuters, blamed the military and paramilitary groups for seven murders since 1991 in Casanare, the centre of BP's Colombia operations, and another 17 in Arauca, Occidental Petroleum's base.
Neither company was mentioned by name but the report blamed oil companies for generating huge social upheaval in the region, stating: ""The security forces are frequently operating outside the law and abusing peasants ... Oil exploration and production has generated harmful environmental and socioeconomic impacts and has provoked crime, sales of drugs and an increase in prostitution and begging.""
In a statement last week, BP said it paid a ""war tax"" to the government, which was partly used for the army's counterinsurgency campaign against leftist guerrillas who regularly target foreign oil companies. It also said it provided non-lethal aid to the army and denied any links to irregular, or paramilitary forces.
In recent months British newspapers, based on first-hand accounts, alleged BP was behind the wave of killings carried out by right-wing death squads and the military in Casanare and had provided photos to the army of those community leaders opposed to its oil plans.
The backing for BP, Colombia's biggest single foreign investor, in a report that also praised its social contribution to the country, came the day after the government announced it would not sweeten the terms of its oil contract, which it complained was not profitable.
""We are investigating some of these accusations of extra-judicial killings and massacres contained in the 1995 report. It is certain the chief prosecutor's office is doing the same,"" said a source at the attorney general's office.
In a speech on Thursday, President Ernesto Samper rejected the European Parliament's recent stiff criticism of Colombia's human rights record.
""It is not true the Colombian security forces have developed an emergency strategy, characterised by aid to paramilitary groups, extra-judicial killings, torture and disappearances,"" he said at an official event in Bogota.
",20
"The Ministry of Mines and Energy will investigate drug kingpins' alleged involvement in Colombia's oil industry, a spokeswoman said on Thursday.
State oil company Ecopetrol and a foreign multinational said on Thursday they had awarded multimillion-dollar service contracts to a company now thought to have been headed by suspected drug trafficker Pastor Perafan. But they said the contracts, some dating back to 1991, had been put out to bidding and there were no grounds for suspicion.
In a congressional debate on Wednesday, Margarita Mena, a former minister of Mines and Energy, said the once-powerful Medellin drug cartel had tried to invest in Colombia's oil industry in the late 1980s as a way of laundering profits from international cocaine trafficking. She did not say which companies were involved.
A spokeswoman at the Ministry of Mines and Energy said on Thursday: ""An investigation will be organized. The process is likely to be a long one. It will begin with the formation of a special commission.""
The current Mines and Energy minister, Rodrigo Villamizar, is likely to launch the inquiry formally when he returns to address Congress on Oct. 22, the spokeswoman said.
Villamizar opened congressional debate on Wednesday on the possible renegotiation of association contracts between foreign oil companies and Ecopetrol.
Mena's remarks, made during the session, took him by surprise. Afterward he told reporters he had not been aware of drug cartel efforts to muscle in on the oil industry but said he was concerned.
Earlier this week, Cromos magazine reported on Ecopetrol's and Occidental's business ties with Inversismica, a seismic surveying company in which it said fugitive businessman Perafan was the majority shareholder.
The prosecutor's office issued an arrest warrant for Perafan at the start of this year. A spokesman at the office was unable to say on Thursday whether Perafan, who is reputedly worth more than $12 billion, was involved with Inversismica. According to a recent report in Colombia's influential news weekly Semana, Perafan's investments include an oil pipeline project in the former Soviet Union.
An Ecopetrol spokesman said the state oil company had awarded seven contracts to Inversismica since 1991, including one to carry out a seismic survey of the Coporo field, a new find on Colombia's eastern plains that may eventually rival the Cusiana and Piedmonte fields.
He was unable to specify the total value of the contracts but said they would have amounted to hundreds of thousands of dollars.
Occidental signed just one contract with Inversismica, worth $1,500,000, between May 1995 and last June.
""When we had doubts about this company and after consultation with the head of police and the chief prosecutor, we canceled the contract. We do not want relations with any company that may be linked to narcotrafficking,"" the multinational's spokesman said.
An industry insider said he did not think it likely that drug traffickers would have sought to launder money in the oil industry, saying that all transactions were strictly controlled by the government and Ecopetrol.
",20
"At least four people were killed and scores more injured on Tuesday afternoon when a powerful bomb ripped through a building in Monteria, the main town of Colombia's northwest Cordoba province, police said.
The blast occurred at 3:15 p.m. (2015 GMT) at the headquarters of the Fondo Ganadero, a fund set up to promote cattle-ranching in the province. Police said they did not know the motive behind the attack.
The explosion came a day after a 120-pound (50-kg) car bomb went off in Medellin, killing a woman and injuring 48 people. Authorities blamed that attack on drug traffickers in league with leftist guerrillas.
Armed left and right-wing groups are waging a fierce battle in northwest Colombia where both blasts occurred.
""I cannot say yet who was responsible for this attack,"" provincial governor Carlos Buelvas told reporters. ""Everybody must be on their guard.""
He said an emergency meeting of the provincial security council, which includes the military and the police, would be called to analyse the situation.
The blast in the downtown area of the small town was the second in Monteria in the last two months. An 88 pound (40 kg) bomb, hidden in a street vendor's cart, exploded outside the town's police headquarters on Oct. 21, injuring 10 people in an attack that was blamed on the Revolutionary Armed Forces of Colombia (FARC), the largest guerrilla movement.
It is not clear whether Tuesday's bomb was linked to a communique issued Monday by a hitherto unknown group calling itself the Special Anti-paramilitary Commando.
The group, claiming to be made up of ex-rebels who had previously given up armed struggle, declared war on the country's burgeoning right-wing paramilitary gangs. Human rights groups accuse cattle ranchers of backing them.
Defence Minister Juan Carlos Esguerra said, however, that he believed Monday's attack in Medellin was retaliation for approval last week by Congress of a new law to strip drug lords of their billion-dollar fortunes.
Colombia's main cities, and particularly Medellin, were scarred by a drug-fuelled campaign of bombings, assassinations and kidnappings in the late 1980s when cocaine kingpin Pablo Escobar waged war on the state in a successful bid to ban the extradition of Colombians to the United States.
",20
"The general who led a bloody assault on Colombia's Supreme Court to quell leftist rebels holding 300 hostages in 1985 said on Friday that an attack was an option to end the Japanese embassy residence siege in Lima.
Gen. Jesus Armando Arias said Peru's President Alberto Fujimori should not cave in to the demands of the Tupac Amaru Revolutionary Movement (MRTA) to free jailed comrades.
Elite forces from the United States, Israel or Britain could flush out the rebels with a ""minimum of bloodshed"" if they refused to negotiate, Arias told Reuters.
More than 100 people, mostly hostages and including 11 top judges, died in the 27-hour battle Arias led to dislodge M-19 guerrillas from Bogota's Palace of Justice in Nov. 1985.
""Training techniques have progressed rapidly and there are elite forces that have the ability to seize back the (Japanese embassy residence in Lima) with the minimum of blood and damage,"" Arias said in a phone interview.
""But given the strong international interests in this case the Peruvian government should try to negotiate and reach an agreement. Bowing to the MRTA's demands on releasing prisoners would, however, set a dangerous legal precedent,"" he said.
Arias, who now teaches at a military academy, said he still believed the assault he led was the correct tactic. ""The M-19 broke in killing people right, left and centre. We could only respond in kind to that type of violence,"" he said.
Television images showed tanks firing 90mm shells into the courts building before smashing down the steel entrance doors remain vivid. Dynamite and automatic weapons fire reduced the interior of the building to rubble. More than 11 years later it has still not been fully reconstructed.
Another official involved in that incident, former Justice Minister Enrique Parejo, said the Colombian military ignored the government's orders and went ahead with the assault. He said Fujimori must keep a tight control on Peru's military if he wanted to avoid another bloodbath.
Five years before the Palace of Justice attack, the M-19 stormed the Dominican embassy in Bogota. It held 57 hostages, including 19 diplomats, for 61 days before Fidel Castro intervened and negotiated the rebels' safe passage to Cuba.
The M-19 leader who led the Dominican embassy siege, Rosemberg Pavon, called on the MRTA earlier this week to keep its cool and offered to act as go-between in the Lima drama.
",20
"President Ernesto Samper sent a message of condolences to U.S. President Bill Clinton on Wednesday after a U.S. pilot was killed during an anti-drug mission in southeast Colombia.
Robert Martin, 35, died when his Turbo Thrush T-65 crop-dusting plane crashed into dense jungle in Guaviare province Tuesday while he was fumigating illicit plantations of coca leaf, the raw material for cocaine.
""In the name of the Colombian people and that of my government, I offer sincere condolences for the tragic death of Robert Martin,"" Samper wrote to Clinton.
""His death is added to all those others that have occurred in recent years during our bitter fight against the poison of drugs. The memory of Martin, and that of our policemen and soldiers, will give us additional motivation to continue the fight,"" he said.
Police said Martin, one of six civilian pilots working in Colombia under contract with the U.S. State Department, was killed on the first day of his contract.
U.S. ambassador Myles Frechette said he was the first U.S. aviator to die on such a mission.
The question of U.S. personnel taking a direct role in drug or counterinsurgency operations is a thorny issue because of what some Colombian politicians see as the possible infringement of national sovereignty.
Samper said in his letter that Martin had been ""training Colombian pilots in illicit crop fumigation.""
But since October such ""training"" functions have extended to frontline operations, including flying live missions to spray coca leaf and opium poppy plantations, State Department officials told Reuters.
Crop-dusting planes come under frequent attack from armed gangs and leftist guerrillas who guard the clandestine drug plantations.
But police chief Gen. Rosso Jose Serrano said Tuesday there was no indication Martin's plane had come under fire despite a heavy rebel presence in the area. He said the most likely cause of the crash was human error or mechanical failure.
An accident investigation was under way and Martin's body was scheduled to be flown back to the United States Wednesday afternoon. He was employed by Texas-based aviation company Dyncorp, but authorities have not said where he was from.
Colombia's U.S.-backed drug crop eradication programme is the most ambitious in Latin America. Last year the Colombians destroyed about 14,000 acres (6,500 hectares) of poppy and more than 44,500 acres (18,000 hectares) of coca leaf.
",20
"Colombia moved a step closer to lifting its five-year ban on extradition but backlash from drug traffickers began to be felt on Wednesday as a senator fled abroad to escape death threats.
In the second of eight scheduled congressional votes late on Tuesday, the Senate approved a draft law to overturn the constitutional ban on sending criminals to stand trial in foreign courts. But proposals in Congress to introduce stiffer anti-drug laws at home, including confiscation of drug barons' properties and longer jail terms, have stagnated.
This has led to a warning from the government, eager to win back U.S. certification as an ally in the drug war, that it may bypass Congress and push through some of the measures by decree, which could trigger a constitutional crisis.
Meanwhile, signs were growing that Colombia may be on the verge of a new terror campaign, mirroring the one waged by the late Pablo Escobar, head of the Medellin drug cartel, that forced the original extradition ban in 1991.
Police last week defused a powerful bomb in a vehicle parked outside a chemical plant owned by relatives of Senator Claudia Blum in Colombia's second largest city Cali, home to the cartel said to supply 80 percent of world cocaine. In another incident, a small bomb exploded outside government offices in Bogota.
Blum and other lawmakers in the forefront of efforts to lift the extradition ban and introduce tougher anti-drug laws have received regular death threats since mid-October. In a letter to congress on Tuesday, Blum requested a leave of absence and a spokeswoman at her Bogota office said on Wednesday that she had left for the United States.
""I understand she left because of the threats she has received. Her departure was rather quick and unexpected. She has gone for an indefinite period,"" the spokeswoman said.
Justice Minister Carlos Medellin welcomed Tuesday's senate vote, describing it as a ""clear message that all political institutions are committed to strengthening our legal system"".
But chief prosecutor Alfonso Valdivieso, an anti-drug crusader and a favourite of Washington, is deeply dissatisfied with the draft law to renew extradition. Echoing calls by the United States, he believes the law must be retroactive.
Valdivieso has also charged that the extradition law, if approved in its present form, would be virtually meaningless, since it would not allow for criminals to be extradited if they faced stiffer penalties abroad than those in force in Colombia, which the United States complains are too lenient.
The current bill would dash U.S. hopes of winning the extradition of the Rodriguez Orejuela brothers, the kingpins of the Cali cartel captured last year.
",20
"Icy relations with Washington appear to be thawing and Colombia has its eyes firmly fixed on overturning its status as an international drug pariah by this spring, diplomats and government officials say.
Colombia spent most of last year smarting at the U.S. decision to ""decertify"" it -- strike it off its list of allies in the drug war -- citing lax anti-narcotics laws and President Ernesto Samper's alleged ties with drug lords. That led to a cut in U.S. aid and sparked angry protests by Bogota.
But, in an about-turn from his normally hostile stance, U.S. Ambassador Myles Frechette had glowing words of praise for the Colombian government on Wednesday.
""We're very impressed by the teamwork demonstrated by the foreign relations, defence and justice ministers (in anti-drug matters). I have now sent my report and that will have to be reviewed and evaluated in Washington,"" he said.
His comments, at a funeral service for a U.S. civilian pilot killed on an anti-drug mission in Colombia, contrasted with his criticism of anti-drug legislation in Colombia's Congress late last year, which caused a political storm.
Now Colombian authorities are hoping the appointment of outgoing Defence Minister Juan Carlos Esguerra as ambassador to Washington, a successful drug crop eradication programme and a new law to strip cocaine kingpins of their assets will convince the United States to recertify Colombia.
""We continue showing great political willpower to combat narco-trafficking and contribute to an efficient international struggle. Colombia deserves to be recognised and re-evaluated for the fight it has been waging on drugs,"" Col. Leonardo Gallego, head of the police anti-narcotics division, said.
Esguerra will take up his diplomatic post on Jan. 20 and has pledged to ""hammer on all the relevant doors"" in a bid to win back certification and the U.S. aid that would entail.
Former Justice Minister Enrique Parejo, an anti-drug crusader who survived an assassination attempt ordered by the late drug lord Pablo Escobar in the late 1980s, told Reuters on Thursday he thought it was likely Colombia would regain certification in March, but he still questioned Bogota's commitment to fighting the drug cartels head on.
""The jailed kingpins of the Cali drug cartel continue running their criminal empires from behind bars and in the short term I don't see the political will or the operational efficiency to be able to launch a frontal assault on drug trafficking,"" Parejo said.
""Colombia has been pressured by the United States into toughening its stance but I think Samper is looking to do just the bare minimum to regain certification,"" he added.
The United States annually certifies about 30 countries based on their cooperation in the international fight against drug production and trafficking. Decertification leads to a cut in most U.S. aid not linked to the fight against drugs.
In practical terms, Colombia has not suffered greatly from the reduction in aid because most of the U.S. financial help it receives is aimed at anti-drug programmes. Colombia is due to take delivery of 18 helicopters from the United States this year, enabling police to step up its drug crop eradication programme, seen as one of the most ambitious in Latin America.
",20
"A U.S. pilot flying his first anti-drug mission in Colombia was killed when his plane crashed in a jungle area of southeast Colombia on Tuesday, police said.
The pilot was identified by police chief Gen. Rosso Jose Serrano as Robert Martin, 35. He was flying a U.S.-registered Turbo Thrush T-65 crop-dusting plane and had been fumigating illicit plantations of coca leaf, the raw material for cocaine. His hometown was not released.
U.S. ambassador Myles Frechette confirmed the aviator's death and said he was the first U.S. pilot, sent to the country under the terms of a U.S. State Department contract with the Colombian government, to die on such a mission.
He said Martin's body had been recovered and said the cause of the accident would be fully investigated.
""The most likely cause of the crash was human error or mechanical failure. Leftist guerrillas are present in the zone but this plantation was very remote and I doubt the rebels could have shot down the plane,"" Serrano said.
Police said it was the first day of the pilot's contract.
The crash occurred in a remote area of Guaviare province, one of Colombia's main coca producing regions. Martin was flying one of four planes on the spraying mission and was one of six U.S. pilots assisting Colombia's drug crop eradication programme.
Illicit plantations are often guarded by heavily armed gangs and sometimes by leftist guerrillas, which the government accuses of being involved in drug trafficking. It was not clear whether the plane had come under fire.
""Unfortunately narco-terrorists frequently fire at these (crop-dusting) planes. They don't know whether Colombians or Americans are flying them,"" Col. Luis Carlos Ortiz, second-in- command of the Colombian anti-narcotics police, told Reuters.
The U.S. pilots were originally only permitted to train Colombian pilots. But since October the Colombian authorities gave them the green light to fly live missions to eradicate coca leaf and opium poppy plantations.
All the pilots are civilians, employed by Texas-based aviation company Dyncorp, but a State Department spokesman told Reuters that some were former U.S. servicemen. Dyncorp declined to comment on the accident.
Last year Colombia's U.S.-backed drug crop eradication programme destroyed about 14,000 acres (6,500 hectares) of poppy and more than 44,500 acres (18,000 hectares) of coca leaf.
",20
"Colombia has taken the first step to lifting a constitutional ban on extradition but the country's crusading anti-drug prosecutor on Wednesday dismissed the move as virtually meaningless.
Amid threats of a repeat of the bloodbath unleashed by drug gangs against extradition in the late 1980s, a Senate panel approved draft legislation late on Tuesday to lift the prohibition on sending Colombians abroad to stand trial
But chief prosecutor Alfonso Valdivieso said the measure prohibited as much as it allowed and threatened to hog-tie the government in endless red tape. He said the legislation should be strengthened before a final vote in Congress.
""What we should be doing here is lifting the 1991 ban, which was a national disgrace. But the text approved by the Senate doesn't represent any advance,"" he said. ""I'm not saying it's a step back but it leaves us in exactly the same position.""
The draft legislation approved by an 11-8 vote by the Senate constitutional committee was also unlikely to satisfy Colombia's critics in the United States.
If the draft survives a required seven more congressional votes, it would open the door to extradition in some isolated cases. But it would not be retroactive, ensuring that the Cali cartel drug lords jailed last year, the target of a U.S. extradition request in June, will never see U.S. courts.
Furthermore, the legislation would prevent the extradition of criminals who voluntarily surrendered to Colombian justice and forbid their handover if they risked receiving stiffer sentences abroad than those they would face at home.
One of the main arguments by U.S. authorities, who have long pressed for the extradition of drug traffickers, is that Colombian justice is too lenient and convicted drug lords continue running their criminal empires from behind bars.
Drug lords led by Pablo Escobar, the late and notoriously violent leader of the Medellin cartel, waged a nationwide campaign of bombings, kidnappings and assassinations in the late 1980s and early 1990s to force the government to impose the constitutional ban on extradition passed by Congress in 1991. Memories of the thousands of people who died in that campaign of terror are still fresh.
Death threats against extradition supporters have been scrawled in the last week on walls around Cali, home to the powerful syndicate that edged out Escobar's organization to become the world's major cocaine supplier.
A group calling itself ""Colombians For Peace"" issued pamphlets reminding people of the bloodbath of the 1980s because of the extradition issue.  ""Today that situation is once again threatening Colombia. Avoiding it depends on the government, congress and our judges,"" it said.
President Ernesto Samper, dogged by allegations of his own ties to drug lords, has said the extradition debate was poorly timed and insisted that priority should be given to his own proposal to introduce stiffer penalties for drug crimes.
",20
"When novice torero Ricardo Gomez steps into the arena and faces down a raging bull, only his fast-developing flair and a passion born of poverty lie between him and a gory end.
Art and courage fuse as the 22-year-old swirls his cape and moves with the elegance of a dancer. The rays of the afternoon sun glisten on his Suit of Lights -- the bullfighter's traditional costume. But when the going gets tough, the 120 pound (54 kg), 5 foot 5 inch (1.7 metre) baker's son knows the most important lessons to remember are those he has learned growing up on the tough streets of Bogota, the Colombian capital.
""I've got more passion than a rich person. I've had to put up with things in my life that a rich person would not have to suffer and when I get in front of a bull I have the same attitude. My daily life has given me one of the most important lessons for bullfighting,"" Gomez explained.
As a hand-me-down from Spanish colonialists, bullfighting -- the so-called fiesta brava -- has the image of a wealthy man's sport in Colombia. But while most of those in the stands at the capital's 15,000-capacity Santamaria bullring are from the nation's elite, the ones at the sharp end come mostly from humble origins.
Gomez is one of the rising stars of Bogota's fledgling school for bullfighters. His training programme, which he began at 16, includes pitting his wit against a contraption that resembles a shopping cart with horns. And for the last four seasons as a novice, he has cut his teeth on fighting the smaller bulls.
Like scores of other youngsters, his dream is to become a top professional -- a major league matador. His performances on two consecutive Sundays in October have drawn rave reviews from critical crowds and the specialist press. If all goes well, he may get his chance at the big time when the main season starts in December.
""I've often thought what would happen if I don't succeed in becoming a matador but I don't worry. It's something that I have to achieve -- it's as simple as that,"" he said in a short break from training.
Even if he does succeed in following in the footsteps of his idol Cesar Rincon -- reigning king of Colombian bullfighting -- 1,300 pounds (600 kgs) of killing machine will not be the only obstacle between him and living happily ever after. The sport's patrons are a wealthy minority who often value political and social contacts above ability, making it difficult for poorly connected youngsters to rise on merit.
In addition, every time a Colombian steps into the ring, he is fighting to get out of the ghetto that he has been cast into by a sport dominated by Spaniards.
""Colombian bullfighters have always been on unequal terms compared to the Spanish. While the Spanish were going from one big bullring to another the Colombians have to travel by bus along dusty village tracks looking for bulls to fight,"" said matador Alberto ""El Bogotano"" Ruiz, the training school's resident instructor.
When young hopefuls between the ages of 13 and 17 arrive at the school, Ruiz watches closely for a rare combination of intelligence, physical fitness, bravery and ""the poor man looking for fame and the chance to live a little like the rich man."" Fellow instructor Pablo Becerra separates bullfighters into those who are brave and those with great artistry. The brave ones, he says, fill seats and make millions as crowds flock to feel the fear and see if the bull finally gets its own back.
But far from the macho world portrayed in novelist Ernest Hemingway's ""Death in the Afternoon"" and ""The Sun Also Rises,"" the head of Colombia's only bullfighting school does have his sensitive side. ""Of course it's cruel to kill the bull but that's our job,"" Ruiz said. ""But it's not like killing an enemy. We try to do it the best way possible. The fiesta brava is all about courage and death.""
",20
"Latin America's oldest and largest guerrilla army on Wednesday hailed a Peruvian rebel group's storming of the Japanese ambassador's residence in Lima as a ""spectacular and well-planned"" attack.
Marco Leon Calarca, the international spokesman, based in Mexico City, of the Revolutionary Armed Forces of Colombia (FARC), defended the actions of Peru's Tupac Amaru Revolutionary Movement (MRTA), which launched the raid on Tuesday night.
He said armed struggle was often the only way to break the bonds of poverty imposed by an oligarchic system.
The Colombian authorities say the formerly pro-Soviet FARC numbers about 12,000 fighters. Independent political analysts say it has more than 18,000. The Cuban-inspired MRTA is thought to have no more than about 2,000 insurgents.
""The MRTA attack was spectacular and well-planned, which suggests it does have popular support. The MRTA, like all peoples of the world, has every right to fight by all means for basic rights,"" Calarca told Reuters in a phone interview from Mexico.
""People cannot be driven into extreme poverty without putting up a fight. They must defend themselves from the aggression of neoliberalism. The oligarchy is not simply going to hand over those rights,"" he added.
Members of the MRTA travelled to Colombia in the mid-1980s to fight in the so-called America Battalion, which also consisted of Colombia's leftist M-19 rebel group and Ecuador's Alfaro Vive Carajo! The battalion launched a failed attempt to create rebel liberated zones in Colombia, starting with the southwestern city of Cali. The FARC never joined the battalion because of military and political differences.
The FARC was set up in 1964 by Communists who had fought with self-defence forces set up by the Liberal Party during 10 years of virtual civil war that started in 1948. The government now accuses it of living off a vast fortune gleaned from kidnapping, extortion and drug trafficking.
It launched one of its bloodiest offensives in August, when it killed 27 soldiers and captured 60 in an attack on a jungle base in southern Colombia. It still has not released those captives.
",20
"Mexican Foreign Minister Jose Angel Gurria on Thursday criticised the United States for its policy of rewarding or punishing countries based on their measures to fight drug trafficking.
During a visit to Colombia, Gurria said the so-called certification process was a barrier to cooperation in the war on drugs and renewed calls for scrapping the system, saying decisions were often based on ulterior motives.
""The process of certification inhibits cooperation and puts the country under scrutiny in a very difficult position. I believe there are much better ways of promoting cooperation,"" Gurria said at a news conference. He added that ""the decision is often based on criteria other than those that one would rationally take into consideration.""
Last year, Colombia was struck off the United States' list of allies in the drug war. Mexico came under severe criticism but managed to get certification and escape sanctions.
Mexico has since set up a ministerial contact group to address the issue with Washington, and that has led to an improved climate between the two governments, Gurria said.
Colombia has continued to come under heavy criticism from the United States for its perceived failure to crack down hard enough on drug trafficking.
Politicians and political analysts were divided on whether Colombia would regain certification this March in the wake of of a new law to strip drug kingpins of narcotics profits.
The U.S. Drug Enforcement Administration estimates that 80 percent of the world's cocaine is supplied by Colombia while more than half that on the streets of U.S. cities has been transported through Mexico.
",20
"Granada Group, which won control of leading British hotelier Forte 10 months ago, on Wednesday reaped the fruits of its victory when it posted a 37 percent rise in annual profits to 480 million pounds ($806 million).
Media and leisure group Granada said that it was on target to keep a promise made in the heat of the takeover battle by boosting profits at Forte by over 100 million pounds per annum from the current year.
It said it had already achieved some 40 million pounds in profit improvements at Forte. Such rapid progress lifted the pre-tax, pre-exceptional profits to that 480 million pound figure, topping most share analysts' expectations.
Turnover in the year to end-September grew by 60 percent to 3.82 billion pounds as Granada grafted on Forte's hotel and roadside restaurant businesses.
Total dividend was raised by 11 percent to 13p per share.
""The key has been the speed with which we have been able to move on the Forte businesses,"" said chairman Gerry Robinson.
Granada took over family-controlled Forte in a 3.9 billion pound deal earlier this year after a bitter bid battle that raged over the Christmas and New Year period 12 months ago.
Analysts were surprised at the lacklustre reaction to Granada's strong results and an upbeat statement in which it said that trading had been encouraging in the first few weeks of its new financial year.
The shares, which had gained in recent days in anticipation of bumper results, slipped 7 1/2p to 885p by mid-afternoon in a generally gloomy market.
""Granada is a cheap stock on fundamentals and is backed by good management,"" said Greg Feehely of Kleinwort Benson.
Granada, which runs two British commercial television stations and a chain of high street rental stores, continues to reorganise following its acqusition of Forte.
It hopes to complete the sale of a group of top international hotels and the disposal of the Welcome Break chain of British motorway service areas in early 1997.
Analysts expect the hotels to raise a total of around 900 million pounds and the service areas a further 350-400 million pounds. That would help cut net debt from 3.5 billion pounds.
Granada sold the first of the 17 Exclusive hotels on Tuesday when Hong Kong based Mandarin Oriental International Ltd bought London's Hyde Park Hotel for 86 million pounds.
But Robinson said Granada planned to retain its 10.8 percent stake Granada holds in pay television operator British Sky Broadcasting. That investment is worth over one billion pounds.
The largest contribution came from the Restaurants division, which boosted profit before interest and tax by 80 percent to 217 million pounds on turnover which rose over 60 percent to 1.7 billion pounds.
The new Hotels unit contributed 168 million while Media made 163 million, up 17 percent. Profits from the high street rentals arm were marginally higher at 126 million. ($1=.5950 Pound)
",21
"A $22 billion deal between British Telecom and MCI Communications Corp. that would create the world's second largest telecoms group looked set to be announced Sunday, sources close to the talks said.
BT said it had scheduled a news conference for 8 a.m. EST Sunday at its Central London headquarters following an earlier announcement that it was in merger talks with MCI Communications Corp.
A spokesman said he could not say what the news conference would be about, only that it would be in connection with recent developments.
Executives from BT and MCI were locked in separate board meetings on opposite sides of the Atlantic Saturday as they and their advisers attempted to stitch together the biggest deal ever in the rapidly expanding telecommunications industry.
MCI, the number two U.S. long-distance phone company, sent shock waves through the global communications industry Friday when it said it was in talks about a takeover by BT.
BT, the dominant player in the British market, has been building its overseas presence in recent years and already has a 20 percent stake in MCI. The two also operate a joint venture known as Concert which serves customers in more than 50 nations.
Analysts are speculating on a price of $40 a share -- valuing MCI at $28 billion and leaving BT with a bill of about $22.1 billion to pay for the remaining 80 percent of MCI.
The deal would be the second largest involving a U.S. company -- topped only by the buyout of RJR Nabisco by Kohlberg Kravis Roberts & Co.
A BT spokesman confirmed that the BT board was meeting over the weekend to consider an anticipated proposal from MCI.
BT's nine-story corporate headquarters was a hive of activity Saturday as bankers, lawyers and advisers worked alongside the BT board. A BT spokesman said that the MCI board was also meeting in Washington.
BT and MCI have both said there are no assurances that an agreement will be reached or that any transaction will be consummated. They have said a further announcement is anticipated before the London stock market opens Monday.
BT had unsuccessful merger talks earlier this year with British rival Cable & Wireless -- a deal which would have created the world's fifth largest telecoms group by revenue.
Any BT/MCI deal would spawn a massive company with a market capitalisation of some $64 billion, just ahead of AT&T Corp -- the leading, but struggling, U.S. phone company. It would still be some way behind Japanese giant NTT Data Corporation -- the world's largest.
Analysts said a merged company would be a good fit in the ultra-competitive U.S. long-distance phone industry where MCI and number three Sprint have been battling AT&T.
Its critical mass would leave it excellently placed to expand into other international markets and new technologies -- MCI possessing the biggest Internet backbone in the U.S.
""This is AT&T Corp's worst nightmare,"" said consultant Jeffrey Kagan of Kagan Telecom.
AT&T said late Friday it was confident any MCI/BT deal would receive proper scrutiny by the U.S. government.
""We would expect that our government would condition any such merger on the complete and unqualified opening of the telecom market in the United Kingdom,"" it said.
However, analysts regard the British market as broadly open to competition.
For its part, Britain's Trade and Industry Department (DTI) said Saturday it was too early to say what regulatory hurdles any merger would have to clear.
",21
"Glasgow-based Stakis Plc and Saudi billionaire Prince al-Waleed bin Talal are the likely purchasers of the Metropole and Princess hotel chains from Lonrho Plc, analysts said on Wednesday.
British conglomerate Lonrho, in the throes of a demerger, said last month it had received interest from potential buyers of the hotels and shelved plans to float them.
The London daily Financial Times reported on Wednesday that the sale of the chains for more than 650 million pounds ($1 billion) could be completed within the next fortnight. There was no immediate comment from Lonrho on the report.
Stakis, which has some 46 British hotels, has refused to comment on reports it planned to buy the five Metropole properties. But the hotels and casino group remains the clear favourite to clinch a deal.
""It would be an excellent fit for Stakis. It's just the size of the deal that could cause concern,"" said analyst Fraser Ramzan of Lehman Brothers.
Markets have speculated that Stakis was planning a rights issue to fund the purchase of the Metropole hotels, valued at about 350 million pounds.
The Metropole group comprises five business and conference hotels located in the British cities of London and Birmingham and the seaside towns of Brighton and Blackpool.
Hotelier Millennium & Copthorne, floated in London this year, has effectively ruled itself out of the race. A company spokesman said Millennium had looked at the Metropole hotels but was not in talks to buy them.
Meanwhile. Prince al-Waleed is believed to be negotiating the purchase of the Princess chain, 10 properties of resorts in the United States, the Caribbean and Mexico.
Financial sources in the Gulf told Reuters this month that al-Waleed had exclusive rights to negotiate a deal at a price of $300 million. The prince has major investments in New York's luxury Plaza hotel, the Four Seasons hotel group, in the banking group Citicorp and Disneyland Paris theme park.
The hotel business is in a growth phase as economic recovery on both sides of the Atlantic help drive occupancy rates.
But there have also been a glut of hotel companies coming to Britain's market, with Jarvis Hotels and Thistle following the example of Millennium & Copthorne.
And there are signs of investor indigestion, as witnessed by recent cancellations of stock market floats.
Analysts said investors were now looking much more closely at the merits of individual companies but said they still expected the sector to remain positive into 1997.
""Over the past year, people have become far more discerning about the type of hotel business they become involved in. But that does not mean they are reluctant to invest in the sector,"" said Greg Feehley of Kleinwort Benson.
And if that is the case, there is also no shortage of property on the market, with British media and leisure group Granada selling 17 luxury hotels in Britain and overseas.  The hotels, known as the Exclusive range, were acquired by Granada as part of the 3.9 billion pound takeover of leading British hotelier Forte last January.
American hotel companies ITT Sheraton and Marriott are reportedly among potential purchasers for the chain. A deal is expected to be concluded around the turn of the year.
",21
"Shares in British Sky Broadcasting (BSkyB) rose strongly on Monday after the pay television operator cleared a key regulatory hurdle and amid reports it planned to push ahead and launch digital services in Britain next year.
BSkyB shares added 19p to 495-1/2p by early afternoon, reversing a downward pattern which has seen them shed almost two pounds ($3.3) since mid-October.
The rise was fuelled by an announcement from Britain's Office of Fair Trading (OFT) that it had accepted BSkyB's new terms for the supply of its channels to cable operators.
The stock had earlier been boosted by a report in the Financial Times that BSkyB, 40 percent owned by Rupert Murdoch's News Corporation, was poised to order the set-top boxes required to receive its digital satellite services.
""The news flow has been positive and some funds which are underweight in BSkyB have been taking the opportunity to buy,"" said Anthony de Larrinaga of broker Panmure Gordon, commenting on the price rise.
However, he injected a note of caution.
""We still have to see the performance for dish sales in the run-up to Christmas. The decision to push ahead with digital may be partly a reflection of weaker analogue sales,"" he added.
The OFT approved BSkyB's revised ""rate card"" -- setting out the pricing and structure for the supply of satellite channels to cable operators.
""The changes increase the flexibility of cable operators in marketing their services,"" OFT Director General John Bridgeman said in a statement.
But the cable industry criticised the decision and vowed to continue its fight. One option is to take the issue to the European Commission.
""We fail to see how today's announcement is in the consumers' interest,"" the Cable Communications Association said in a statement.
BSkyB, which supplies a diet of top-quality sport and Hollywood movies, has more than five million subscribers -- 3.3 million receiving the service via a satellite dish and almost 1.9 million on cable.
BSkyB's shares have fallen from highs in the last two months because of regulatory concerns in Britain and worries over the apparent slow take-up of the digital services of Germany's DF1, in which BSkyB and Kirch Group are partners.
BSkyB has announced plans to launch digital satellite services supplying some 200 channels into Britain late next year but recent reports had suggested that it could delay the launch.
But the Financial Times quoted Murdoch as saying that BSkyB will go ahead with a decoder box concentrating on new channels plus pay-per-view sport and films. A decoder offering access to interactive services such as home shopping would follow later.
""Now I think we will go with a straight simple box and have a second-generation box a year later. How many people really want to do home shopping and banking on their television sets or buy things, we don't know yet,"" Murdoch was quoted as saying.
($1=.6027 Pound)
",21
"A $22 billion takeover of MCI Communciations Corp would mark a spectacular end to Sir Peter Bonfield's first year as chief executive of British Telecommunications Plc.
BT was this weekend locked in talks with MCI, the second largest U.S. long-distance phone company, about buying the 80 percent of MCI it does not own.
The deal, if it can be clinched, would be a major coup for the former computer industry executive who took the helm at BT last January when the company split the roles of chairman and chief executive. Sir Iain Vallance, who had been combining the two roles since 1987, became BT chairman.
Bonfield's appointment was cheered by City commentators when it was announced last November.
The influential Financial Times newspaper described it as ""one of the most positive events in the group's history"".
The newspaper said the appointment marked ""a turning point in BT's transition from public sector utility to competitive services group"".
Bonfield, 52, had built a reputation for boosting revenue, curbing costs and international expansion during his 10 years in charge of ICL, the British computer company owned by Japan's Fujitsu Ltd.
""His wide international experience, his dedication to quality management and his in-depth knowledge of the computing services industry will be of particular relevance to BT, as we continue our global expansion,"" Vallance said when Bonfield moved to BT.
Within a few months of his arrival BT was in talks with British rival Cable & Wireless about a merger that would have created a global telecommunications powerhouse.
Those talks ended unsuccessfully in May. But any MCI/BT deal would be bigger than that one that got away.
Bonfield has said he wants BT to be one of the most successful global telecoms companies 20 or 30 years from now. He believes BT's network of continental partners built up in recent years will allow it to become a true pan-European operator.
He has also targeted Asia-Pacific as a region where BT needs to expand, hence the attempt to do a deal with Cable and Wireless, which is very strong there.
Analysts say the critical mass from an MCI deal would provide the power to drive international expansion.
Bonfield also believes BT must become more responsive to its market. One of MCI's strengths is its reputation as an aggressive and fast-moving company.
He grew up in the small town of Hitchin, north of London, where he went to a local state school. He graduated in engineering from Loughborough University in the English Midlands in 1966.
He began his career with Texas Instruments, working in the field of semiconductors and computers in Europe, the Far East and the United States. He became a divisional director of Texas based in the U.S. before joining ICL in the early 1980s.
He became ICL managing director in 1984 and its chief executive and chairman the following year.
Bonfield, a trim, bearded individual, has an informal manner and a reputation for getting on well with colleagues. A married man, he lists his hobbies as sailing, jogging and music.
",21
"British media and leisure firm Pearson, awaiting the arrival of a new chief executive, enjoyed a stock market rally on Wednesday after a trading statement which analysts said contained no nasty surprises.
Pearson shares had gained 25p to 714 1/2p by 1300 GMT as a steady trading statement confounded the pessimists who had pushed the shares down to two-month lows on Tuesday.
Texan Marjorie Scardino will take over as Pearson chief executive from January, becoming the first woman to head one of Britain's top 100 companies.
Scardino, who is moving from the 50-percent Pearson-owned Economist Group, is on record as saying that Pearson's profit performance is not good enough.
Many share analysts say that Pearson has yet to complete its 1990s journey from industrial conglomerate to focused media company and that disposals are likely.
They believe Scardino may sell off the company's merchant banking interests and its Tussauds Group theme park and exhibition unit but they expect her to take her time before beginning to mould the company in her image.
Pearson has a 50 percent stake in London merchant bank Lazard Brothers and nine percent holdings in Lazard Freres in Paris and New York.
The Tussauds portfolio includes London's famous Madame Tussaud's waxwork exhibition and theme parks such as Alton Towers in the UK and Port Aventura in Spain.
There was a sense of relief after Pearson, which has interests ranging from newspaper and book publishing to television, said that trading conditions in the second half of the current year were in line with those of the first six months.
""All in all, it's in line with expectations but that in itself is good as the last few trading updates from the company have been disappointing,"" said Anthony de Larrinaga of brokers Panmure Gordon.
Pearson said that total video retuning costs associated with the launch of the Channel 5 terrestrial television channel next March would rise to around 150 million pounds ($250 million).
This is almost treble the sum initially earmarked for dealing with video recorders affected by interference from the new channel's signal. But it is below the figure quoted in some recent media reports.
Channel 5 has recently been awarded an extra frequency to boost its coverage to 80 percent of the country and Pearson said its business plan showed significantly higher rates of return than in the original bid.
Pearson said the retuning costs and a major film deal with Fox would come out of the 300 million pound original funding agreed by the Channel 5 shareholders. The other shareholders are Britain's United News & Media, U.S. investment firm Warburg Pincus and Luxembourg broadcast group CLT.
This year's losses from Mindscape, Pearson's ailing U.S. consumer software unit, should be in line with earlier forecasts of around 46 million pounds. Pearson also saw no real impact on its 1996 profits from the current strength of sterling.
",21
"A $22 billion deal between British Telecom Plc and MCI Communications Corp that would create the world's second largest telecoms group looked set to be announced on Sunday, sources close to the talks said.
BT said it had scheduled a news conference for 1300 GMT on Sunday at its Central London headquarters following an earlier announcement that it was in merger talks with MCI Communications Corp.
A spokesman said he could not say what the news conference would be about, only that it would be in connection with recent developments.
Executives from BT and MCI were locked in separate board meetings on opposite sides of the Atlantic on Saturday as they and their advisers attempted to stitch together the biggest deal ever in the rapidly expanding telecommunications industry.
MCI, the number two U.S. long-distance phone company, sent shock waves through the global communications industry on Friday when it said it was in talks about a takeover by BT.
BT, the dominant player in the British market, has been building its overseas presence in recent years and already has a 20 percent stake in MCI. The two also operate a joint venture known as Concert which serves customers in more than 50 nations.
Analysts are speculating on a price of $40 a share -- valuing MCI at $28 billion and leaving BT with a bill of about $22.1 billion to pay for the remaining 80 percent of MCI.
The deal would be the second largest involving a U.S. company -- topped only by the buyout of RJR Nabisco by Kohlberg Kravis Roberts & Co.
A BT spokesman confirmed that the BT board was meeting over the weekend to consider an anticipated proposal from MCI.
BT's nine-storey corporate headquarters was a hive of activity on Saturday as bankers, lawyers and advisers worked alongside the BT board. A BT spokesman said that the MCI board was also meeting in Washington.
BT and MCI have both said there are no assurances that an agreement will be reached or that any transaction will be consummated. They have said a further announcement is anticipated before the London stock market opens on Monday.
BT had unsuccessful merger talks earlier this year with British rival Cable & Wireless -- a deal which would have created the world's fifth largest telecoms group by revenue.
Any BT/MCI deal would spawn a massive company with a market capitalisation of some $64 billion, just ahead of AT&T Corp -- the leading, but struggling, U.S. phone company. It would still be some way behind Japanese giant NTT Data Corporation -- the world's largest.
Analysts said a merged company would be a good fit in the ultra-competitive U.S. long-distance phone industry where MCI and number three Sprint have been battling AT&T.
Its critical mass would leave it excellently placed to expand into other international markets and new technologies -- MCI possessing the biggest Internet backbone in the U.S.
""This is AT&T Corp's worst nightmare,"" said consultant Jeffrey Kagan of Kagan Telecom.
AT&T said late on Friday it was confident any MCI/BT deal would receive proper scrutiny by the U.S. government.
""We would expect that our government would condition any such merger on the complete and unqualified opening of the telecom market in the United Kingdom,"" it said.
However, analysts regard the British market as broadly open to competition.
For its part, Britain's Trade and Industry Department (DTI) said on Saturday it was too early to say what regulatory hurdles any merger would have to clear.
One potential problem is a media joint venture between MCI and Rupert Murdoch's News Corp. BT would end up with MCI's 13 percent non-voting stake in News Corp and this could cause regulatory difficulties in Britain.
British telecoms watchdog Oftel recently banned a joint advertising campaign between BT and satellite broadcaster BSkyB, a company in which News Corp is the main shareholder.
",21
"Merchant banking and Madame Tussaud's could be deemed surplus to requirements as a new management team at Britain's Pearson Plc mould a media company for the next millennium, analysts said on Wednesday.
The Pearson empire contains prize brands such as the Financial Times newspaper and Penguin books but Marjorie Scardino, who will take over as chief executive in January, has said that overall profit performance is inadequate.
Analysts say Pearson has yet to complete its 1990s journey from industrial conglomerate to focused media enterprise.  
""The definition of their three core business areas -- Information, Education and Entertainment is a little imprecise,"" said Mark Beilby of Deutsche Morgan Grenfell. ""They may have to jettison some high value assets and focus on pinpoint areas.""
Analysts cite Anglo-Dutch company Reed Elsevier as an example of a media company which has successfully identified key market areas and built up strong positions in these -- the provision of high-margin business information being Reed's speciality.  
They point out that Pearson, with a market capitalisation of around four billion stg, is not a media giant in global terms and that its capital and management time is being too thinly spread under the current structure.
Pearson's 50 percent stake in London investment bank Lazard Brothers -- which does not fit into one of the three core business areas -- is seen as a likely candidate for disposal.
""At some stage Lazards will go out of the door to make Pearson into more of a genuine media company,"" said Louise Barton of Henderson Crosthwaite.  
Close boardroom links between Pearson and Lazards could complicate matters. However, analysts say a sale would go a long way towards convincing doubters that Scardino is prepared to shake up the company.
The Tussauds Group, which includes London's famous Madame Tussaud's waxworks museum and a number of theme parks, is also seen as peripheral and a drain on resources for a company which could earn richer pickings from television and publishing.
U.S. consumer software publisher Mindscape is the most glaring weakness, with Pearson forecasting a 46 million stg loss this year from a business it paid $462 million for in 1994.  
""If it doesn't work, they'll have to close it down. But it might provide a positive return in a couple of years,"" said one analyst. Pearson is forecasting a return to profit for Mindscape in late 1997.
Pearson's uneven record has long made it potential prey for media rivals keen to pounce on its stellar assets and sell off the rest.
Recent newspaper reports suggested BSkyB was lining up a bid but the satellite broadcaster strongly denied them. Media and leisure company Granada and Reed-Elsevier have also been rumoured as possible bidders in recent months.  
""You cannot dismiss the idea that BSkyB would be interested in Pearson's television interests as it tries to build up its content,"" said Henderson Crosthwaite's Barton.
Pearson's television interests include the Thames and Grundy production houses and a stake in Britain's planned fifth terrestrial station.
Pearson television supremo Greg Dyke is thought to favour a de-merger of the television businesses. But analysts said such a move would almost certainly prompt a bid for that part of the business from any one of BSkyB, Granada, Carlton Communications or United News & Media.
-- London Newsroom +44 171 542 7717
",21
"Britain's Ladbroke Group and the U.S. Hilton Hotels Corp (HHC) on Thursday unveiled an alliance to reunite the famous Hilton hotel brand around the world for the first time since 1964.
""We have been separated but now our companies are engaged,"" said Steve Bollenbach, HHC's chief executive officer.
""This will make Hilton the force to be reckoned with in the global hotel industry,"" Bollenbach told a news conference. ""It will eliminate customer confusion and benefit millions of our customers worldwide.""
HHC owns the Hilton name in the United States while Ladbroke holds the rights everywhere else through its Hilton International (HIC) subsidiary.
The two companies have signed an outline agreement to unify the Hilton brand, separated in 1964 when HIC was spun off from the American operation. Ladbroke acquired HIC in 1987.
In the alliance grouping 400 hotels in 49 countries, HHC and HIC intend to cooperate from next year on sales and marketing, loyalty programmes and hotel development.
Ladbroke also announced first half pre-tax profits of 72.8 million pounds ($113.5 million) before exceptional items, a 29 percent increase on last year and above analyst forecasts. The interim dividend was unchanged at 2.4 pence per share.
Ladbroke shares added 7.5p to a 1996 high of 215p in early trade before slipping back to close 2p firmer at 209.5p.
The alliance gives HHC a larger presence in the international hotel arena. It offers Ladbroke a major position in American hotels and the chance to participate in the expansion of HHC's U.S. gaming business.
The companies plan to finalise the agreement as soon as possible in order for it to become effective by early 1997.
Bollenbach and Ladbroke chief executive Peter George said the deal would be worth tens of millions of dollars when cost savings and extra sales were combined.
Share analysts applauded the alliance.
""The Hilton tie-up is more extensive than people expected. We are expecting big things from 1998 onwards,"" said Greg Feehely of Kleinwort Benson.
HHC intends to acquire a five percent stake in Ladbroke once the final agreement has been signed. Ladbroke has said it expects to invest significant sums in hotels and casinos developed by its partner in the United States.
""We're putting our money where our mouth is,"" said Bollenbach, a former Walt Disney Company executive who joined HHC in February.
He said one of his first calls at HHC was to his Ladbroke counterpart George. The two men subsequently met several times and even shared a holiday, rafting in Idaho with their wives.
Under the deal, George will join the HHC board while Bollenbach becomes a director of Ladbroke.
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 it was acquired three years later by Trans World Airlines. ($1=.6412 Pound)
",21
"United News & Media on Tuesday emerged with the winning hand after a lengthy poker game over the future of international exhibitions group Blenheim.
United, which has interests in British national newspapers and commercial television, trumped its rivals with an agreed offer valuing Blenheim at 592.5 million pounds ($935 million).
The deal will create the world's largest trade exhibition group with a turnover of more than 500 million pounds based on 1995 figures.
Media and financial services group United said it had already secured acceptances for 51 percent of Blenheim after offering five pounds per share.
""The acquisition will be earnings-enhancing in the first full year but the real attraction is the long-term growth we can get out by combining these businesses into one group,"" United chief executive Clive Hollick told Reuters.
United News shares added 30 pence to 683-1/2 pence after the announcement, while Blenheim gained 23 to 496-1/2.
Dutch publisher VNU, which last week acquired a 15 percent stake in Blenheim, said it would not make a counter bid and was likely to sell its stake. That decision effectively removed the threat of a bidding war developing for Blenheim.
Anglo-Dutch media group Reed-Elsevier had been regarded as a rival suitor, but sources close to the company indicated in recent days that it had dropped out of the running.
French utilities group Compagnie Generale des Eaux confirmed on Tuesday that it planned to sell its 15 percent stake in Blenheim following United's offer.
The deal ends an on-off saga that began in June when Blenheim said it had received a bid approach. In August it said that talks with an unnamed party had broken down but then made another statement a few weeks later confirming a new approach.
Analysts said that Blenheim's geographical strength in continental Europe, and France in particular, made it a good fit with United.
""After VNU's move, United have done well to tie it up at five pounds a share,"" said David Forster of Salomon Brothers.
""In Miller Freeman, United have a substantial established business in this area and Blenheim will fit well into it.""
United's Miller Freeman subsidiary operates more than 100 exhibitions in the United States, Europe and Asia but the American market is seen as its main strength. These exhibitions are supported by a range of trade publications.
Blenheim operates more than 170 exhibitions worldwide but does not have a significant publishing portfolio.
""The directors of United believe that the Miller Freeman and Blenheim trade show portfolios are highly complementary geographically, by market sector, and in terms of operational management,"" United said in a statement.
The acquisition is the first major move by United since the national newspaper group merged with television and financial services group MAI earlier this year.
That merger doubled the size of the company, creating a British media major with a market capitalisation of more than three billion pounds. ($1=.6337 Pound)
",21
"Britain's Granada Group, which won control of hotel and catering empire Forte in January, Wednesday reported a 37 percent surge in full-year profits to 480 million pounds ($804 million).
The media and leisure group said that it would deliver on its promise to improve profits at Forte by over 100 million pounds ($167.5 million) per annum from 1996/97.
Calling the results ""very satisfying,"" Granada Chairman Gerry Robinson told Reuters, ""The key has been the speed with which we have been able to move on the Forte businesses.""
Granada took over family-controlled Forte in a 3.9 billion pound ($6.5 billion) deal earlier this year after a bitter bid battle that raged over the Christmas and New Year period 12 months ago.
The company said Forte had responded well to its management and that it had already improved profitability there by approaching 40 million pounds ($67 million).
Granada continues to reorganize following the acquisition of Britain's leading hotel group. Robinson said there was substantial interest from a wide range of potential purchasers of the luxury hotels it has put on the market.
Granada sold the first of the 17 Exclusive hotels Tuesday when Hong Kong-based Mandarin Oriental International Ltd. bought London's Hyde Park Hotel for 86 million pounds ($144 million).
Robinson said Granada expected to complete the disposals by early 1997. Analysts calculate the sale of assets including the George V in Paris and Plaza Athenee in New York will raise a total of about 900 million pounds ($1.5 billion).
The Granada chairman said the company hoped to sell the Welcome Break chain of British motorway service areas in January or February of next year. The 21 sites were acquired in the Forte deal but must be sold off because of monopoly concerns.
But he said there were no plans to sell the 10.8 percent stake Granada holds in pay television operator British Sky Broadcasting.
Group turnover in the year to end-September climbed 60 percent to 3.82 billion pounds ($6.4 billion). Total dividend was raised by 11 percent to 13p (21.8 cents) per share.
Granada shares, which had risen in recent days in anticipation of bumper results, fell by 8p (13.4 cents) to 884 1/2p ($14.81) in a generally gloomy market.
The largest contribution came from the Restaurants division, which boosted profit before interest and tax by 80 percent to 217 million pounds ($363.5 million) as the Forte acquisition bore fruit.
The new Hotels unit contributed 168 million ($281.4 million) while Media, including Granada's two British commercial television stations, made 163 million ($273.0 million), up 17 percent. Profits from the high street rentals arm was marginally higher at 126 million ($211 million).
",21
"British mobile telephone company Cellnet on Friday reported strong growth in its customer numbers, confirming the British cellular market is healthy, already indicated by figures from rival Vodafone Group.
Cellnet, jointly owned by British Telecom and Securicor Group, said it had 2.68 million UK customers at the end of 1996, up from 2.3 million a year earlier.
Vodafone, the market leader in Britain, on Thursday reported a 20 percent increase in UK subscriber numbers over 1996 as a whole, reaching a total of some 2.8 million in December.
The market has settled down after a period of very rapid expansion at the beginning of the decade when mobile phones were a novelty.
However, analysts were impressed by the figures from Britain's two largest cellular companies and said there were signs of an increase in the rate of subscriber growth.
""Vodafone's performance was particularly creditable since historically they have done badly in Q4 while Cellnet did well, due to Cellnet's relative focus on the consumer market,"" broker SBC Warburg said in a research note.
Vodafone gained a net 146,000 UK subscribers in the last three months of last year once cancellations had been taken into account and said that its performance was an improvement on the corresponding 1995 quarter.
Vodafone shares added 4p to 244p on Friday, reversing the losses suffered in a generally weak market on Thursday.
Cellnet said its subscriber base had grown by 143,000 in the last three months of last year, against an increase of 215,000 in the Christmas quarter of 1995.
But Cellnet said that 1995 had been a bumper year and noted that the growth in its customer base was significantly higher than in the two previous quarters.
Both Vodafone and Cellnet are in the process of transferring their customers from older analogue networks to more efficient digital systems.
Vodafone said that more than 1.2 million of its UK customers were now on the digital network while Cellnet said it had over 880,000 digital customers.
One-2-One and Orange ORA.L, which offer only digital services, are due to release their connection figures next week. Orange shares were 2.5p higher at 188p on Friday.
",21
"Executives from British Telecom Plc and MCI Communications Corp were on Saturday attempting to stitch together a $22 billion merger that would turn BT into the world's second largest telecoms group.
MCI, the number two U.S. long-distance phone company, sent shock waves through the global communications industry on Friday when it said it was in talks about a takeover by BT.
BT, the dominant player in the British market, has been building its overseas presence in recent years and already has a 20 percent stake in MCI. The two also operate a joint venture known as Concert which serves customers in more than 50 nations.
Analysts are speculating on a price of $40 a share -- valuing MCI at $28 billion and leaving BT with a bill of about $22.1 billion to pay for the remaining 80 percent of MCI.
The deal would be the biggest yet in the rapidly changing telecommunications market and the second largest involving a U.S. company -- topped only by the buyout of RJR Nabisco by Kohlberg Kravis Roberts & Co.
A BT spokesman confirmed that the BT board was meeting over the weekend to consider an anticipated proposal from MCI.
He would not be drawn on where the meeting was taking place, saying only that BT chief executive Sir Peter Bonfield was not in the United States.
The spokesman said an announcement was anticipated prior to the opening of the London stock market on Monday. Sources close to the talks said no announcement was likely on Saturday.
BT and MCI have both said there are no assurances that an agreement will be reached or that any transaction will be consummated.
BT had unsuccessful merger talks earlier this year with British rival Cable & Wireless -- a deal which would have created the world's fifth largest telecoms group by revenue.
Any BT/MCI deal would spawn a massive company with a market capitalisation of some $64 billion, just ahead of AT&T Corp -- the leading, but struggling, U.S. phone company. It would still be some way behind Japanese giant NTT Data Corporation -- the world's largest.
Analysts said a merged company would be a good fit in the ultra-competitive U.S. long-distance phone industry where MCI and number three Sprint have been battling AT&T.
Its critical mass would leave it excellently placed to expand into other international markets and new technologies -- MCI possessing the biggest Internet backbone in the U.S.
""This is AT&T Corp's worst nightmare,"" said consultant Jeffrey Kagan of Kagan Telecom.
AT&T said late on Friday that it was confident any MCI/BT deal would receive proper scrutiny by the U.S. government.
""We would expect that our government would condition any such merger on the complete and unqualified opening of the telecom market in the United Kingdom,"" it said.
However, analysts regard the British market as broadly open to competition.
For its part, Britain's Trade and Industry Department (DTI) said on Saturday it was too early to say what regulatory hurdles any merger would have to clear.
One potential problem is a media joint venture between MCI and Rupert Murdoch's News Corp. BT would end up with MCI's 13 percent non-voting stake in News Corp and this could cause regulatory difficulties in Britain.
British telecoms watchdog Oftel recently banned a joint advertising campaign between BT and satellite broadcaster BSkyB, a company in which News Corp is the main shareholder.
",21
"Britain's commercial television watchdog on Thursday invited applications to run terrestrial frequencies which will multiply the number of channels available to viewers in the new digital age.
""This is a very important day for UK viewers...as many as 35 or 36 channels could be available on digital terrestrial television,"" said Peter Rogers, chief executive of the Independent Television Commission (ITC).
The ITC is seeking applications to operate four ""multiplexes"", as the blocks of frequencies are known. Each block can carry as many as six digital channels.
The BBC has already been earmarked its own multiplex, and commercial networks ITV and Channel 4 will share one.
The ITC will award the 12-year licences on critieria including speed of roll-out of the service and the appeal of programming but a cash bid will not be required. Licences are expected to be awarded next spring and broadcasting could begin by mid-1998.
Britain is leading the way in the development of digital terrestrial but some observers question whether it will succeed.
Pay television operator BSkyB, in which Rupert Murdoch's News Corp is the largest shareholder, plans to launch a digital satellite service into Britain in late 1997 -- several months ahead of the terrestrial version.
The satellite version could offer several hundred channels and BSkyB's control of key movie and sporting rights are likely to make it an attractive proposition.
The ITC's Rogers told a news conference he was confident the terrestrial option would prove attractive to investors.
""I would be surprised and disappointed if we didn't have applications for all of the multiplexes,"" he said.
His view was shared by Paul Styles, a media expert at consultancy and accounting firm KPMG.
""Most people perceive digital bandwith to be valuable so I think there will be interest in the multiplexes,"" he said.
""This will not be an overnight sensation but a business to be built,"" he said, identifying ITV companies, cable groups and BSkyB itself as potential licence applicants.
Digital technology increases the number of channels which can be transmitted and enhances sound and picture quality. it also enables interactive services such as home shopping and home banking to be created.
Digital means converting sound and pictures into binary digits -- a series of noughts and ones -- rather than transmitting them as electric signals as now happens. A set-top box or ""decoder"" will be required to receive digital services.
This is also a source of controversy, as ITC officials admit that there is no current UK or European legislation to enforce a common standard for decoders.
That means that consumers could theoretically have to pay several hundred pounds (dollars) for a set-top box to receive BSkyB's digital services and then have to buy a second box a few months later to receive digital terrestrial.
British Labour Euro MP Carole Tongue on Thursday wrote to European Commissioner Martin Bangemann to demand that all set-top boxes provide a common interface for all broadcasters.
",21
"Premier League Sunderland, one of the great names in the history of English soccer, said on Thursday that they hoped to raise up to 12 million pounds ($20 million) through a flotation on the London Stock Exchange.
The north-east club, which won the league title for the sixth and last time in 1936, joins a growing number of clubs seeking to capitalise on the popularity of the national game.
Premier league rivals Manchester United and Tottenham Hotspur have full stock market listings while clubs such as Chelsea trade on the secondary market.
Others are expected to follow suit as revenue from a television deal with satellite broadcaster BSkyB and higher crowds help to transform the sport's finances.
Sunderland said that the new funds would be used to add the finishing touches to a new 15 million pounds stadium, reduce borrowing and fund the purchase of new players.
""The proceeds will assist in retaining premier league status and enable the company to capitalise more fully upon the club's name, strong support and new opportunities arising from the move to the new stadium,"" chairman Bob Murray told a news conference.
Sunderland will leave their century-old Roker Park home at the end of the season and move to a 42,000-capacity stadium built on the site of a former colliery in the heart of the city.
The club, whose last real taste of glory came in 1973 when they won the F.A. Cup, are optimistic that the move to a new stadium will herald a period of prosperity on and off the pitch.
Sunderland were promoted to the premier league last season and forecast that increased gate receipts and television revenue would help double turnover this season to 13.6 million pounds.
Murray said that the new stadium should allow Sunderland to boost its season ticket holders from 17,000 to around 28,000. Roker Park is in a dilapidated state and large parts of the 22,000 capacity ground are vast terraces open to the elements.
Sunderland, managed by former England international Peter Reid, have only a modest playing squad without the star names of neighbours Middlesbrough and Newcastle United. They are fifth from bottom of the premier league and are likely to face a battle to avoid relegation this season.
The club conceded that staying in the premier league status was ""critical"" but said that it believed that increased income from the new stadium would offset lost television revenue if the team did go down.
Some 10 percent of the share issue will be made available to club employees and fans rather than institutional investors. The flotation is expected to value the club as a whole at 40-50 million pounds and share dealings will commence on December 24.
Chairman Murray and other leading shareholders, including manager Reid who has a six percent stake, have given undertakings not to dispose of any shares before early 1998.
($ = 0.596 British Pounds)
",21
"Investors on both sides of the Atlantic applauded the planned $20 billion merger of British Telecom Plc and MCI Communications of the United States Monday, boosting their shares in stock market trading.
British, European and U.S. regulators will subject the deal to close scrutiny amid strong opposition to it from rivals, including American long-distance market leader AT&T Corp.
British Telecom, or BT, as it is known, said it was optimistic that the European Commission would clear the largest cross-border takeover deal in history, which will create one of the largest groups in the rapidly expanding global telecommunications sector.
Britain's communications industry regulatory agency said it was studying the details of the merger and it was too early to pass judgment.
BT Chief Executive Sir Peter Bonfield has said it could take a year to clear all the regulatory hurdles.
BT's shares powered 32-1/2 pence higher to 383 1/2p -- adding around two billion pounds ($3.3 billion) to the company's market value on huge trading volume of over 40 million shares.
MCI gained $1.25 to $31.50 in early trading on Nasdaq, while AT&T fell $1.125 to $33.50 on the New York Stock Exchange.
Despite the large cost of the deal to British Telecom -- it will be the biggest-ever acquisition by a British firm -- the deal is seen as having a compelling industrial logic, linking leading phone companies on both sides of the Atlantic.
For BT shareholders the deal is also being sugared with a promise of a special one-time 35p dividend payout and a higher rate of general dividend increases in the future.
""It is positive for BT shareholders and positive for the (telecoms) sector,"" said Jim McCafferty, analyst at ABN AMRO Hoare Govett.
For customers, the deal promises better service and lower international calling charges, while for businesses it means a company that can support them wherever they are.
The merged company will be called Concert Plc. It will be the second-largest international carrier after AT&T.
The deal values all of Washington, D.C.-based MCI at just over $25 billion. Since British Telecom already owns 20 percent of MCI, it will issue Concert stock and cash worth $20.1 billion for the remaining 80 percent. Holders of MCI stock will control a third of the stock in the combined company.
Larry Stone, BT's head of EU affairs, told Reuters he hoped the deal would be dealt with under the EU's fast-track merger rules and said he did not anticipate any anti-trust problems because the companies ""operate in competitive markets.""
Analysts expect British Telecom and MCI to start making overtures to major Asian players such as Japan's giant Nippon Telegraph and Telephone Corp.
But while seeking an Asian partner, MCI appears to be putting another one on a backburner.
MCI is to cut its stake in a U.S. satellite television venture with media tycoon Rupert Murdoch to 20 percent from 50 percent, and has said it will probably not increase its stake in Murdoch's News Corp as originally expected.
MCI paid $1.35 billion for a stake of just under 9 percent, and could increase it to 13 percent with another $1 billion investment.
",21
"Wembley, England's home of soccer since the 1920s, will be the site of a new national stadium, the country's Sports Council announced on Tuesday.
The government-backed Council selected the north London venue ahead of the northern city of Manchester as the preferred location. Some 120 million pounds ($200 million) in National Lottery funding will be supplied to help turn the famous old stadium into a world class sports facility for the 21st century.
Wembley and Manchester were selected as the two leading candidates from five applicants last year. Sports Council chairman Sir Rodney Walker said that Wembley won out as it had greater potential to attract major international events.
The Sports Council has supported the English Football Association's bid to host soccer's World Cup in 2006 and the British Athletics Federation's attempts to attract the world championships in 2001.
But Manchester did not lose out completely as the Sports Council announced it had agreed in principle to provide up to 60 million pounds towards a new Stadium of the North to be used to host the Commonwealth Games in 2002, which have already been awarded to the city.
It said it would also consider backing Manchester council's bid for 20 million pound in funding for a new swimming and diving complex in the city, another Games facility.
""The Sports Council has agreed a 200 million package of financial support which will provide further opportunities for English and British sport to develop as a leading competitor on the world stage,"" Walker said.
A competition is to be held to select an architectural firm to design the English National Stadium at the site owned by Wembley Plc.
Architect Sir Norman Foster has already unveiled his radical plans for an 80,000-seater stadium.
In his design, Wembley's famous twin towers would be repositioned to form a new gateway to the stadium area. The stadium would also be spun round 90 degrees with a new North/South axis.
The Foster design also includes plans for retractable seating to allow spectators at field events like soccer and rugby league close proximity to the action. The seats would be moved back when track events were being held. ($1=.6027 Pound)
",21
"Shares in English premier league soccer club Sunderland Plc got strong support on their market debut on Tuesday, trading up to 740 pence to score a 25 percent premium to the offer price of 585p.
The traditional combination of solid defence and star striker is no longer enough to gain success in English soccer and Sunderland joins a growing band of clubs that have moved on to the stock market recently to build up financial strength.
Sunderland reported last Friday that the public offer of shares was 2.7 times oversubscribed. A total of 2.15 million shares were sold under the flotation.
On Tuesday, the price was quoted at 732-1/2p by 0954 GMT to value the club at just under 60 million stg. Trading volume of 134,500 shares was registered.
Manchester United, Britain's most profitable club, was the model for English soccer flotations and now European rivals are seeking to emulate them in the financial stakes.
United, floated in 1991, has grown into one of Britain's 250 biggest quoted companies, with a market value of some 380 million stg. The value of the Manchester United brand name means that revenue from merchandising is as high as gate receipts.
Shares in Premier League club Tottenham Hotspur have also been quoted on the London Stock Exchange for several years but a number of other ambitious clubs are now following suit as the game flourishes.
Former champions Leeds United joined the market in August when they were taken over by media company Caspian Group while Premier League struggler Southampton has recently unveiled plans for a listing.
Share analysts believe that the trend will continue as revenue from a lucrative new contract with pay television operator BSkyB and potentially greater riches from the screening of matches on a pay-per-view basis make the newly listed clubs an attractive investment.
""We are not at saturation point -- Sunderland and Southampton are relatively small clubs compared with Newcastle and Man Utd but they are still going to have access to some chunky television revenue,"" said Nick Knight, an analyst with stock broker Nomura who has researched soccer club finance.
BSkyB signed a 670 million stg deal in June to secure live rights to Premier League soccer matches until 2001.
Under the deal glamour clubs such as Manchester United and Newcastle United, which is also looking at a flotation, are forecast to more than double their television revenue to over 12 million stg from next season.
Sunderland, promoted from Division One as champions last season, are expecting television and media income to increase more than tenfold to 3.5 million stg this season.
""The key is being in the Premier League or at least in Division One and thus having the potential to get into the Premier League,"" said Knight.
He believes that up to 20 of the 44 clubs in the top two sections could join the market in the next two or three years.
The trend is European-wide, Italian champions AC Milan, owned by media mogul Silvio Berlusconi, having tentatively planned a flotation for 1997.
A stock market listing enables soccer club owners to tap into new sources of finance, to dilute their own personal exposure to the risks of an expensive business and make it easier to cash in on their stake at some point in the future.
Sunderland, are raising over 10 million stg through their flotation -- funds that will be used to put the finishing touches to a new 42,000-seater stadium, cut debt and buy new players.
Southampton, who will obtain their listing via a merger with a company that builds retirement homes, are also seeking funds to move to a new and larger home.
Improved facilities and a reduction in crowd violence have helped to lift crowds by over 30 percent since the Premier League was launched in 1992.
The financial manna from satellite television has also reversed the exodus of top talent from these shores.
The Premier League clubs are now able to attract foreign talent away from wealthy continental rivals. Players such as Eric Cantona, Ruud Gullit and Fabrizio Ravanelli are now gracing the English game and being paid handsomely for doing so.
The enthusiasm is such that many Premier League matches are sold out weeks in advance, prompting great optimism about the financial prospects from the introduction of pay-per-view.
BSkyB is planning to launch digital satellite television late next year and that will create the additional channel space to show every Premier League fixture live on a pay-per-view basis, although no date has been set for its introduction.
Analysts believe pay-per-view could eventually be worth as much as 100 million stg a year to top clubs.
""Pay-per-view could be worth a million pounds per game to Manchester United, that's 40 million pounds per season just from league matches,"" said Alon Bull, who trades in soccer club shares at brokers Winterflood Securities.
""If you add in cup and European matches you're up to around 65 million and that could grow to 100 million in two or three years especially if the games are sold to Europe and maybe even the United States.""
He forecast that the potential cash bonanza from pay-per-view made the leading soccer clubs potential prey for big business interests.
""The next gear up is where you get multinational companies bidding for football clubs,"" said Bull. ""I can see the likes of Manchester United, Spurs and Newcastle being taken out by bidders,"" he added.
-- London Newsroom +44 171 542 7717
",21
"The $22 billion takeover of MCI Communications Corp marks a spectacular end to Sir Peter Bonfield's first year as chief executive of British Telecommunications Plc.
BT and MCI, the second largest U.S. long-distance phone company, confirmed on Sunday that BT would buy the 80 percent of MCI it does not own.
The deal, if completed, is a major coup for the former computer industry executive who took the helm at BT last January when the company split the roles of chairman and chief executive. Sir Iain Vallance, who had been combining the two roles since 1987, became BT chairman.
Bonfield's appointment was cheered by City commentators when it was announced last November.
The influential Financial Times newspaper described it as ""one of the most positive events in the group's history"".
The newspaper said the appointment marked ""a turning point in BT's transition from public sector utility to competitive services group"".
Bonfield, 52, had built a reputation for boosting revenue, curbing costs and international expansion during his 10 years in charge of ICL, the British computer company owned by Japan's Fujitsu Ltd.
""His wide international experience, his dedication to quality management and his in-depth knowledge of the computing services industry will be of particular relevance to BT, as we continue our global expansion,"" Vallance said when Bonfield moved to BT.
Within a few months of his arrival BT was in talks with British rival Cable & Wireless about a merger that would have created a global telecommunications powerhouse.
Those talks ended unsuccessfully in May. But any MCI/BT deal would be bigger than that one that got away.
Bonfield has said he wants BT to be one of the most successful global telecoms companies 20 or 30 years from now. He believes BT's network of continental partners built up in recent years will allow it to become a true pan-European operator.
He has also targeted Asia-Pacific as a region where BT needs to expand, hence the attempt to do a deal with Cable and Wireless, which is very strong there.
Analysts say the critical mass from an MCI deal would provide the power to drive international expansion.
Bonfield also believes BT must become more responsive to its market. One of MCI's strengths is its reputation as an aggressive and fast-moving company.
He grew up in the small town of Hitchin, north of London, where he went to a local state school. He graduated in engineering from Loughborough University in the English Midlands in 1966.
He began his career with Texas Instruments, working in the field of semiconductors and computers in Europe, the Far East and the United States. He became a divisional director of Texas based in the U.S. before joining ICL in the early 1980s.
He became ICL managing director in 1984 and its chief executive and chairman the following year.
Bonfield, a trim, bearded individual, has an informal manner and a reputation for getting on well with colleagues. A married man, he lists his hobbies as sailing, jogging and music.
",21
"Marjorie Scardino, set to become Pearson chief executive in January, rejects the tag of company insider and has vowed to carry out radical change at the British media firm ""if needed"".
Selecting an American woman to head a top British company was certain to raise a few eyebrows in the City of London. But initial doubts are paradoxically based on the fact that she is seen as part of the Pearson family rather than a newcomer.
""The message that this appointment puts across is that we can expect more of the same from the company. That's not what the market wanted to hear,"" said one media analyst.
Scardino, 49, is chief executive of business publisher The Economist Group, 50 percent owned by Pearson.
But she said that The Economist is run as an independent operation and she is not part of the Pearson establishment.
""I would like to put that one to rest - I am an outsider to Pearson,"" the mother-of-three told Reuters.
She said that she had spoken to the members of the Pearson board and had been assured that they were prepared to accept radical change ""if needed"".
She said she was well aware of press and market criticism of a lack of management focus at Pearson, a company whose activities range from the Financial Times to Australian soap opera ""Neighbours"".
Pearson has sold off businesses in wine, china and oil services in recent years to concentrate on three media-related areas -- Information, Education and Entertainment.
""I know this company has been broken up and put back together (by journalists and analysts) in all kinds of ways. I think I'm aware of all the possibilities.""
There was more bad press on Thursday as the market questioned her qualifications.
""She's apparently been very successful at the Economist but it's not the same as running a major PLc,"" said one analyst.
But she received a glowing reference from Economist chairman Dominic Cadbury: ""I am sure that she will move quickly to assess the Pearson business and define a new strategic direction which she will set about implementing,"" he said.
Profits at the Economist have more than doubled during her three years as chief executive. Scardino is also a director of U.S. food giant ConAgra Inc and British retailer WH Smith.
Born in Arizona but brought up in Texas, Scardino worked in the 1970s as a lawyer in Savannah, Georgia -- the hometown of her journalist husband.
By night she helped him with his weekly Georgia Gazette newspaper where he won a Pulitzer prize for his work.
She moved to New York in the mid 1980s where she headed the Economist's North American operations for several years.
She lives in the swish west London quarter of Knightsbridge with husband Albert. The couple have three children -- the youngest of whom is making a name for himself as an actor.
Indeed, Hal Scardino, 11, is maybe better known than his high-powered Mum. His films include Marvin's Room with Meryl Streep, Diane Keaton and Robert de Niro and The Indian in the Cupboard, for which he won a best child actor award.
""He's been in a couple of movies but I wouldn't call him a star,"" she said. Her other son, Will, is 16 while daughter Adelaide, 18, has just returned to the U.S. to study.
",21
"English football champions Manchester United extended their outstanding recent stock market form on Monday as renewed bid speculation sent the share price soaring by over 10 percent for the second straight session.
The latest gains were by a weekend report in the Sunday Express that American Mark McCormack's IMG marketing agency was considering a bid for United.
""We never make comments on unsubstantiated press stories,"" said an official at IMG's London office. But he said that IMG, most active in sports such as tennis and golf, was interested in increasing its involvement in football.
Earlier this year IMG lost out to sportwear company Adidas in a battle for control of former French football champions Olympique Marseille.
The Express report said that any credible bid for United would have to be pitched at around 650-700 pence per share, valuing the club at around 430 million pounds ($678 million).
United shares rocketed again on Monday, rising 54.5p to 568p, valuing the club at around 350 million pounds.
The share price has virtually trebled since the start of the year and added almost 25 percent in the last two sessions alone.
The latest winning run was triggered when chief executive Martin Edwards said last week that United's status as Britain's most profitable soccer club made it a likely bid target.
Publishing group VCI is reported to have made a 300 million pound bid for United earlier this year which was rejected.
Analysts say that United would be an attractive target for media companies, citing the U.S example of television mogul Ted Turner who owns the Atlanta Braves baseball team.
The potential income from pay-per-view television deals is also helping to drive the share price and may make United's main shareholders think twice about selling now.
""The directors own 22 percent of the club...They can sit back for five years and enjoy the football and then enjoy the benefits when the really big money comes in from pay-per-view,"" said Vinay Bedi of brokerage Wise Speke.
Pay-per-view is expected to be introduced by the end of the century and could allow leading clubs such as United to earn tens of millions of pounds annually from television.
Focus on such juicy future pickings also lifted shares in Tottenham Hotspur, the other Premier League club with a full London Stock Exchange listing. They added 11p to 461p.
United, who last season won the coveted English league and F.A. Cup double, had television income of 5.7 million pounds in 1995-96 when the club made a profit of 15.4 million before tax.
A new contract between the Premier League and satellite broadcaster BSkyB will mean that United's television income should treble to around 15 million pounds from next year. ($1=.6337 Pound)
",21
"The planned $20 billion merger of British Telecom and MCI is certain to shake up the global telephone business, officials and analysts said Monday, as regulators started digging in for a close look at the deal.
British Telecommunications Plc and MCI Communications Corp. on Sunday announced the largest trans-Atlantic takeover in history.
The deal would create a global powerhouse vying with AT&T Corp., Germany's Deutsche Telekom and a handful of other companies in a fast-changing, lucrative industry that will be a critical component of global commerce well into the 21st century.
The proposal will create work aplenty for British, American and European regulators who will review the merger, which would create a $40 billion company serving 43 million business and residential customers in 70 countries.
For consumers, it could mean better service and lower international calling charges, while the new company would aim to better support its business customers around the world.
It will cause sleepless nights for rivals such as AT&T, Sprint Corp., France Telecom and Deutsche Telekom as they weigh how to respond. Sprint is allied with the French and German companies in the Global One international venture while AT&T is part of a network of alliances called World Partners.
The new company, to be called Concert, plans to take on AT&T's dominance in the U.S. long-distance market, where MCI now has about 20 percent of a $75 billion business, and to win part of the $100 market for residential local phone service.
It also is expected to expand in the Asia-Pacific region -- a long-held aim for British Telecom.
British Telecom's stock jumped in London and New York, where its American shares rose $5.375 to $60.875 on the New York Stock Exchange in afternoon trading.
MCI shares also rose, but only 50 cents to $30.75, well below the possible value of as much as $39 a share based on the price of British Telecom's American shares. Worries about regulatory hurdles and the time to complete the deal held back the stock, industry analysts and takeover specialists said.
The merger still needed to win approval from regulators in America and Britain.
British Telecom said it was optimistic that the European Commission would clear the merger.
British officials have said only that they were looking at the deal. AT&T has already called on the U.S. Federal Communications Commission to give it thorough scrutiny.
AT&T also said U.S. and European regulators should not give approval unless there is more competition in British Telecom's home market.
British Telecom Chief Executive Sir Peter Bonfield has said it could take a year for the deal to win regulatory approval.
""There are a lot of hurdles to be cleared but I think the deal will go through,"" one London-based analyst said.
Federal rules prohibit a foreign company from owning more than 25 percent of a U.S. telephone company if the acquiror's home market is not open to competition.
Under the merger British Telecom, which already owns 20 percent of Washington-based MCI, will issue Concert cash and stock for the remaining 80 percent. Holders of MCI stock will end up controlling around a third of the merged company.
The merged company will acquire the 9 percent stake which MCI holds in Rupert Murdoch's News Corp. media empire. MCI, perhaps wary of regulatory concerns, said on Sunday it did not plan to pursue an option to increase this to 13 percent.
",21
"Shares in EMI Plc, one of the world's five music majors, climbed on Tuesday after the company said that long-term prospects for the stuttering global music market were positive.
EMI, which demerged from rentals company Thorn Plc three months ago, said profit before tax and exceptional items rose 9.4 percent to 112.5 million pounds ($188.4 million) in the six months to September 30. Net interim dividend per share increased by 12.7 percent to eight pence.
EMI shares, under pressure in recent weeks on fears that music sales were faltering after a decade of strong growth, added 15p to 1,286p in a generally lower market.
""These are excellent interim results from the EMI Group,"" chairman Sir Colin Southgate said in a statement.
""They have been achieved against a background of variable growth in the major markets and mixed results from our competitors,"" he added. ""The increase in the interim dividend reflects our confidence in the long-term health of the music industry and EMI's position within it.""
Finance Director Simon Duffy said EMI remained confident that the global music business would continue to grow by some 6-8 percent annually in the medium to long-term.
""This year is looking a little bit below that level,"" said Duffy, saying that markets were patchy but that overall first half industry growth had been 5.5 percent. However, he added that the impact was diluted by the strength of sterling.
The market's sluggishness has recently been reflected by 100 layoffs at various labels within Warner Music and 400 job cuts at PolyGram NV -- another of the top five in the world music business.
EMI said that sales in the United States were almost flat and declined slightly in France. But this was offset by improvements in Japan, Britain and Germany while Southeast Asia and Latin America boasted particularly large gains.
Turnover from the EMI Music division was down marginally at around 1.1 billion pounds but improved margins helped to boost operating profits to 131.9 million pounds from 124.6 million.
The HMV division, grouping record and book stores chains, had an operating loss of 11 million pounds which the company said was in line with expectations as its international expansion continued.
EMI said major releases for the key pre-Christmas quarter included the third and final Beatles Anthology album, which entered the American charts at number one. It is also releasing a triple album from The Artist Formerly Known as Prince and the debut from British newcomers the Spice Girls. ($1=.5970 Pound)
",21
"Shares in English soccer champions Manchester United powered to record highs on Friday after the club's chief executive said the club was a likely bid target.
""Any successful company is an attractive takeover prospect. People are going to look at it, so it could well be the subject of more takeover proposals,"" chief executive Martin Edwards was quoted as telling The Times.
Britain's Press Association quoted Edwards as saying that any proposals would be given serious consideration.
""...If it arises, then we would have to look at it as and when. We would have a responsibility to talk. But it would have to be in the best interests of the shareholders and the supporters.""
The speculation sent United shares soaring to record highs of over 5.0 pounds -- valuing the club in excess of 300 million pounds ($470 million).
The club responded to the swirl of speculation with a statement that its board was not aware of any bid approaches.
""...we have noted the recent media coverage suggesting that Manchester United have received an approach which may lead to an offer being made for the Company. The Board is not aware of any proposals,"" the club said.
The shares came off their highs after the statement but were still 42 1/2p firmer at 495p at around midday.
United shares have jumped from under two pounds at the end of January as the club won the coveted English league and F.A. Cup double.
The rise has also been fuelled by a lucrative new television deal signed by the Premier League with satellite broadcaster BSkyB which will virtually treble television income for top English soccer clubs..
United are reported earlier this year to have rejected a takeover bid from publishing group VCI which valued the club at 300 million pounds. VCI did a deal with United in January to buy the publishing rights to club videos and books.
The Times article named brewer Whitbread and media and leisure group Granada as potential bidders.
It reported that Edwards, who has a stake of around 17 percent in United, has said privately that it would require a bid of over 400 million pounds to buy the club.
Granada has strong ties with the Manchester area, operating the ITV commercial television franchise for north-west England. It is also known to be interested in developing a Manchester United magazine TV channel with the club.
But sources close to Granada effectively ruled out a takeover bid, saying that the company remained focused on digesting its acqusition of leading British hotel group Forte earlier this year.
Whitbread poured scorn on the suggestion.
""We would love to buy the club but there are as many beer drinkers in Liverpool, Newcastle and Chelsea,"" a Whitbread spokeswoman said, adding that Whitbread would not want to do anything to upset customers who were fans of other clubs. ""The report is complete rubbish.""
Share analysts say that the huge interest in soccer and the potential growth in revenue from pay-per-view television deals make a bid likely for United at some stage in the near future.
Pay-per-view is expected to be introduced before the end of the century following the planned launch of digital satellite television by BSkyB late next year. It could generate tens of millions of pounds for clubs like United, the best-supported team in the country. ($1=.6350 Pound)
",21
"Shares in British media and leisure firm Pearson Plc recovered on Wednesday following a trading statement which calmed market jitters about the outlook for the company.
Pearson had dipped to a two-month low on Tuesday but bounced back after the company said trading in the second half of the current year was in line with the first half. The shares were 20 1/2p firmer at 710p by 095 GMT.
Analysts said there was relief that Pearson, which passes into the hands of new chief executive Marjorie Scardino in January, had not produced any really nasty surprises.
""All in all, it's in line with expectations but that in itself is good as the last few trading updates from the company have been disappointing,"" said Anthony de Larrinaga of brokers Panmure Gordon.
Pearson said that total video retuning costs associated with the launch of the Channel 5 terrestrial television channel next March would rise to around 150 million pounds ($250 million).
This is almost treble the sum initially earmarked for dealing with video recorders affected by interference from the new channel's signal. But it is below the figure quoted in some recent media reports.
Channel 5 has recently been awarded an extra frequency to boost its coverage to 80 percent of the country and Pearson said its business plan showed significantly higher rates of return than in the original bid.
Pearson said the retuning costs and a major film deal with Fox would come out of the 300 million pound ($500 million) original funding agreed by the Channel 5 shareholders. The other shareholders are Britain's United News & Media, U.S. investment firm Warburg Pincus and Luxembourg broadcast group CLT.
This year's losses from Mindscape, Pearson's ailing U.S. consumer software unit, should be in line with earlier forecasts of around 46 million pounds. Pearson also saw no real impact on its 1996 profits from the current strength of sterling.
Pearson's interests range from the Financial Times newspaper, through to theme parks and television production.
The company's critics have long said it lacks focus and much attention is centred on the likely impact of Texan Scardino, the first woman to head one of Britain's leading companies.
""The key issue remains what the structure of Pearson will be. Which are the core areas and do all parts of the business fit?"" said de Larrinaga. ($1=.6003 Pound)
",21
"United News & Media on Tuesday secured victory in a battle for control of international exhibitions group Blenheim with an agreed offer valuing the company at 592.5 million pounds ($935 million).
The deal will create the world's largest trade exhibition group with a turnover of more than 500 million pounds, based on 1995 figures.
Media and financial services group United said it had already secured acceptances for 51 percent of Blenheim after offering five pounds per share.
""The acquisition will be earnings-enhancing in the first full year but the real attraction is the long-term growth we can get out by combining these businesses into one group,"" United chief executive Clive Hollick told Reuters.
United News shares added 31p to 674-1/2p after the announcement, while Blenheim gained 22-1/2p to 496p.
Dutch publisher VNU, which last week acquired a 15 percent stake in Blenheim, said it would not make a counter-bid and was likely to sell its stake. That decision effectively removed the threat of a bidding war developing for Blenheim.
Anglo-Dutch media group Reed-Elsevier had been regarded as a rival suitor to United but sources close to the company indicated in the last few days that it had dropped out of the running.
The deal ends an on-off saga that began in June when Blenheim said it had received a bid approach. In August it said that talks with an unnamed party had broken down but then made another statement a few weeks later confirming a new approach.
Based on 1995 figures, combined turnover and operating profit would be 545.5 million pounds and 88 million pounds, respectively.
Analysts said that Blenheim's geographical strength in continental Europe, and France in particular, made it a good fit with United.
United's Miller Freeman subsidiary operates more than 100 exhibitions in the U.S., Europe and Asia but the American market is seen as its main strength. These exhibitions are supported by a range of trade publications.
Blenheim operates more than 170 exhibitions worldwide but does not have a significant publishing portfolio.
""The directors of United believe that the Miller Freeman and Blenheim trade show portfolios are highly complementary geographically, by market sector, and in terms of operational management,"" United said in a statement.
The acquisition is the first major move by United since the national newspaper group merged with television and financial services group MAI earlier this year.
That merger doubled the size of the company, creating a British media major with a market capitalisation of more than three billion pounds. ($1=.6337 Pound)
",21
"Shares in Pearson Plc fell on Thursday as the stock market gave an initial thumbs-down to the appointment of an American woman publishing executive as chief executive of the British media group.
Marjorie Scardino, 49, chief executive of The Economist Group that is half owned by Pearson -- which publishes the Financial Times British business daily -- will succeed Frank Barlow as chief executive at the end of the year.
Her appointment ends a long period of uncertainty over the succession to Barlow, 66, who is retiring.
But market players were dismayed by her close ties with the Pearson group and the fact that a big name executive had not been brought in from outside to knock the business into shape.
""The message that this appointment puts across is that we can expect more of the same from the company. That's not what the market wanted to hear,"" said one media analyst.
Pearson shares fell to a low of 668 pence after the announcement. They recovered a little but still ended the day 13p lower at 675.
The company also announced that Dennis Stevenson, a non-executive director, becomes deputy chairman now and will take over from Michael Blakenham as chairman next May.
Scardino said that she was not a Pearson insider.
""I would like to put that one to rest -- I am an outsider to Pearson,"" she told Reuters.
She said that a trust agreement meant that Pearson directors remained in a minority on the Economist board. ""We jealously guard our independence, we're not a part of the Pearson group.""
Trained as a lawyer, Scardino helped her journalist husband to run the Pulitzer Prize winning local weekly the Georgia Gazette in the 1970s. The couple moved to New York in the 1980s where she headed the Economist's North American operation.
Share analysts say that her main task is to bring focus to Pearson, a sprawling media and leisure company which has a market capitalisation of almost four billion pounds ($6.3 billion).
Barlow has reshaped the company in his six years in charge, selling off the Royal Doulton china business and wine and oil industry interests. The company has focused on three divisions -- Information, Education and Entertainment. Its activities range from Australian soap opera to the Financial Times and analysts say not all pieces of the jigsaw fit.
Scardino, a mother of three, said she was prepared to make radical changes ""if needed"".
""I know this company has been broken up and put back together (by journalists and analysts) in all kinds of ways. I think I'm aware of all the possibilities.""
She won a ringing endorsement from Dominic Cadbury, her colleague as chairman of business publisher the Economist.
""I am sure that she will move quickly to assess the Pearson business and define a new strategic direction which she will set about implementing,"" he said.
""She has the appropriate experience of publishing and a background as a lawyer, as well as knowing the U.S. and British environments first hand, and has a great record of success in the Economist's growing business and circulation.""
Revenue has increased by almost 80 percent in her time at trhe Economist while profit after tax has more than doubled to 17.7 million pounds this year from 7.8 million in 1993. ($1=.6299 Pound)
",21
"Britons will shortly learn how much they will be asked to pay to help fund the expansion of British Broadcasting Corporation (BBC) radio and television services in the multi-channel future.
The BBC has been lobbying the government to grant it an above-inflation increase in the annual licence fee, arguing that more money is needed if it is to remain at the forefront of broadcasting into the next millennium. The government is expected to announce its decision by early to mid-December.
The BBC, which calls itself ""the world's most successful cultural institution"", derives 95 percent of its funding from the annual fee payable by all television set owners.
The fee stands at 89.50 pounds ($150) and provided income of 1.8 billion pounds in the last financial year -- far outweighing the 77 million pound net benefit from the BBC's expanding commercial arm. The licence is guaranteed as a source of BBC funding for the next five years.
BBC Director-General John Birt launched his campaign for what he said would be the first real increase in the licence fee in over a decade at a conference in Edinburgh in August.
""If the BBC is to sustain the existing level of services; if it is to remain as creative and dynamic an institution in the 21st as it has been in the 20th century; if it is to innovate with high quality services in the new technologies...we shall need a real increase in the level of the licence fee,"" he said.
""Neither a new leap forward in efficiency, nor a vigorous drive to increase our commercial revenue will be enough.""
The BBC is believed to be seeking a rise of around five pounds -- which would generate extra revenue of more than 100 million pounds. Annual inflation is currently 2.7 percent.
Birt's call has received a cool reponse from the ruling Conservatives and opposition Labour, wary of pinning a price rise on more than 20 million households in the run-up to a general election. The new rate would take effect in April while the election must be held by the following month.
Recent newspaper reports said that National Heritage Secretary Virginia Bottomley has settled for a five-year formula that would leave the licence fee unchanged in real terms.
The reports said that Bottomley would offer higher rises in the second and third years to help fund new digital services and commercial projects but that increases in the following two years would be pegged below inflation.
The BBC, which runs two television channels and five national radio stations and has an enviable reputation as a quality public service broadcaster, has stepped up its campaign.
""You want us to do things. We want to do them. Now please give us the means and we can get on with the job,"" Will Wyatt, chief executive of the BBC Broadcast division said in a recent speech.
""We have called for only a modest increase, but one which would enable us to achieve a disproportionate amount of good.""
The BBC points out that it has cut its cost base by almost 20 percent over the past three years and increased programme investment by 300 million pounds.
The licence fee debate comes as the broadcasting industry is set to be revolutionised by the move to digital transmission.
Digital technology converts sound and pictures into binary digits -- a series of noughts and ones. It increases picture quality, multiplies the number of channels that can be broadcast and allows for the creation of interactive services.
Pay television operator BSkyB, in which Rupert Murdoch's News Corp is the leading shareholder, plans to launch a digital satellite service with some 200 channels into Britain from next year.
BSkyB, one of the corporate success stories of the 1990s, is Britain's leading pay television operator with more than five million subscribers. Its top package of premium films and live sports events costs subscribers 324 pounds per annum.
A terrestrial digital service, broadcast from land-based transmitters and offering some 36 channels, is expected to begin by mid-1998.
The BBC plans to use digital technology to offer all licence payers supplementary programming to its core BBC1 and BBC2 output plus a 24-hour news service. It plans to make them available via satellite and terrestrial distribution.
The BBC expects to retain a share of around a third of all viewing and listening in 2005, down from 45 percent as the number of channels multiplies and the market fragments.
The digital expansion creates fresh opportunities for the corporation to develop its BBC Worldwide commercial arm.
Worldwide is in negotiations with partners in Britain and the United States over the creation of a number of subscription channels, exploiting its strengths in areas such as comedy, drama and natural history.
Its partner in Britain is Flextech Plc, while it is working with Discovery Communications Inc on channels for international markets. Leading U.S. cable television operator Tele-Communications Inc is a major shareholder in both companies. It aims to launch its UK services in mid 1997.
Some media figures doubt the sustainability of the licence fee as subscription and pay-per-view services proliferate.
David Elstein, chief executive of Britain's new Channel 5 commercial television network, said recently that he believed that pay-per-view would eventually ""consign the licence fee to history, where it belongs"". ($1=.5953 Pound)
",21
"The purchase of British TV group Westcountry Television by Carlton Communications Plc slots another piece into the ITV jigsaw but analysts said on Monday it could be some time before the picture is complete.
""Westcountry was one which was on the table and Carlton have done well to snatch it but I am not convinced that there is going to be a massive rush for other ITV franchises,"" said Jason Crisp of Societe Generale Strauss Turnbull.
Carlton said on Saturday it had agreed to pay 85 million pounds ($143 million) for Westcountry, pipping United News & Media which had also been seeking to acquire the privately-owned broadcaster.
Analysts said that high prices for takeover targets was likely to dampen down takeover activity.
The ITV commercial television sector is going through a period of consolidation under new media ownership laws. The two-licence ownership limit has been removed and replaced by a cap of 15 percent of television audience.
The Westcountry deal adds the south-western corner of England to Carlton's licences in the English Midlands and for London weekday television. Carlton, United News and Granada Group Plc are the three main players in the sector and are expected gradually to tighten their grip.
The Westcountry move was described as a ""useful"" addition to Carlton's portfolio but analysts said it should be seen in context, noting that its 1995 pre-tax profit of five million stg was tiny compared with Carlton's 123 million pounds operating profit from broadcast television.
Carlton pipped United News at the post for Westcountry and the two could square up again in a battle for control of HTV, the ITV broadcaster to Wales and an area of southwest England which includes the cities of Bristol and Bath.
""What this means is that there are two suitors for HTV -- Carlton and United News,"" said one industry source.
United News took a 20 percent stake in HTV last month but said at the time that it regarded the stake as an investment and was not planning a full bid.
The Westcountry and HTV franchise areas are usually sold as a single package to advertisers while HTV does all the transmission for its smaller western neighbour. A move for HTV, which has a market capitalisation of some 315 million pounds, would have obvious benefits for Carlton.
""Carlton can afford to pay more for HTV than anyone else because it could wring out greater cost savings,"" said Louise Barton of Henderson Crosthwaite.
While United News and Carlton vie for supremacy in the south, Granada is expected to take over its northern neighbour Yorkshire-Tyne Tees Television at some point.
Granada has made its intentions clear by taking a 27 percent stake in Yorkshire, a company valued at over 800 million pounds.
Granada is believed to be sitting it out, waiting for some of the froth to come off the Yorkshire share price before it moves for the rest of the company. ($1=.5941 Pound)
",21
"Britons will shortly learn how much they will be asked to pay to help fund the expansion of British Broadcasting Corporation (BBC) radio and television services in the multi-channel future.
The BBC has been lobbying the government to grant it an above-inflation increase in the annual licence fee, arguing that more money is needed if it is to remain at the forefront of broadcasting into the next millennium. The government is expected to announce its decision by early to mid-December.
The BBC, which calls itself ""the world's most successful cultural institution"", derives 95 percent of its funding from the annual fee payable by all television set owners.
The fee stands at 89.50 pounds ($150) and provided income of 1.8 billion pounds in the last financial year -- far outweighing the 77 million pound net benefit from the BBC's expanding commercial arm. The licence is guaranteed as a source of BBC funding for the next five years.
BBC Director-General John Birt launched his campaign for what he said would be the first real increase in the licence fee in over a decade at a conference in Edinburgh in August.
""If the BBC is to sustain the existing level of services; if it is to remain as creative and dynamic an institution in the 21st as it has been in the 20th century; if it is to innovate with high quality services in the new technologies...we shall need a real increse in the level of the licence fee,"" he said.
""Neither a new leap forward in efficiency, nor a vigorous drive to increase our commercial revenue will be enough.""
The BBC is believed to be seeking a rise of around five pounds -- which would generate extra revenue of more than 100 million pounds. Annual inflation is currently 2.7 percent.
Birt's call has received a cool reponse from the ruling Conservatives and opposition Labour, wary of pinning a price rise on more than 20 million households in the run-up to a general election. The new rate would take effect in April while the election must be held by the following month.
Recent newspaper reports said that National Heritage Secretary Virginia Bottomley has settled for a five-year formula that would leave the licence fee unchanged in real terms.
The reports said that Bottomley would offer higher rises in the second and third years to help fund new digital services and commercial projects but that increases in the following two years would be pegged below inflation.
The BBC, which runs two television channels and five national radio stations and has an enviable reputation as a quality public service broadcaster, has stepped up its campaign.
""You want us to do things. We want to do them. Now please give us the means and we can get on with the job,"" Will Wyatt, chief executive of the BBC Broadcast division said in a recent speech.
""We have called for only a modest increase, but one which would enable us to achieve a disproportionate amount of good.""
The BBC points out that it has cut its cost base by almost 20 percent over the past three years and increased programme investment by 300 million pounds.
The licence fee debate comes as the broadcasting industry is set to be revolutionised by the move to digital transmission.
Digital technology converts sound and pictures into binary digits -- a series of noughts and ones. It increases picture quality, multiplies the number of channels that can be broadcast and allows for the creation of interactive services.
Pay television operator BSkyB, in which Rupert Murdoch's News Corp is the leading shareholder, plans to launch a digital satellite service with some 200 channels into Britain from next year.
BSkyB, one of the corporate success stories of the 1990s, is Britain's leading pay television operator with more than five million subscribers. Its top package of premium films and live sports events costs subscribers 324 pounds per annum.
A terrestrial digital service, broadcast from land-based transmitters and offering some 36 channels, is expected to begin by mid-1998.
The BBC plans to use digital technology to offer all licence payers supplementary programming to its core BBC1 and BBC2 output plus a 24-hour news service. It plans to make them available via satellite and terrestrial distribution.
The BBC expects to retain a share of around a third of all viewing and listening in 2005, down from 45 percent as the number of channels multiplies and the market fragments.
The digital expansion creates fresh opportunities for the corporation to develop its BBC Worldwide commercial arm.
Worldwide is in negotiations with partners in Britain and the United States over the creation of a number of subscription channels, exploiting its strengths in areas such as comedy, drama and natural history.
Its partner in Britain is Flextech Plc, while it is working with Discovery Communications Inc on channels for international markets. Leading U.S. cable television operator Tele-Communications Inc is a major shareholder in both companies. It aims to launch its UK services in mid 1997.
Some media figures doubt the sustainability of the licence fee as subscription and pay-per-view services proliferate.
David Elstein, chief executive of Britain's new Channel 5 commercial television network, said recently that he believed that pay-per-view would eventually ""consign the licence fee to history, where it belongs"".
($1=.5953 Pound)
",21
"Shares in Pearson Plc slipped on Thursday as the stock market reacted negatively to the appointment of a relatively little-known insider as chief executive of the British media group.
Marjorie Scardino, currently chief executive of The Economist Group that is half owned by Pearson, will succeed Frank Barlow as chief executive at the end of the year.
Dennis Stevenson, who is a non-executive director, becomes deputy chairman now and will take over from Michael Blakenham as chairman at Pearson's annual meeting next May.
The appointment of Scardino ends a long period of uncertainty over the succession to Barlow, 66, who had said he planned to retire by early next year.
But the market greeted her appointment with scepticism, with market players saying they knew little about her. The shares fell to a low of 668 pence, but later recovered to 678 for a loss of 10 pence.
""The market was looking for a big hitter and she wasn't the big name it was looking for,"" one market-maker said in reference to Scardino.
The market was also worried by a report in the Independent newspaper that said Pearson had resolved concerns about the tax implications of selling its stake in British satellite broadcaster BSkyB but faced difficulties separating direct and indirect holdings.
The report said Pearson's indirect stake of around four percent was worth 440 million pounds ($697.4 million) at BSkyB's current share price.
Pearson, which has a market capitalisation of almost four billion pounds, is a sprawling media and leisure company with interests ranging from the Financial Times business newspaper to television soap opera.
Analysts have criticised the company for a lack of a clear strategy and it has long been seen as a potential bid target.
Scardino said she was excited to be joining Pearson.
""It is one of the few companies positioned strongly enough to take advantage of the opportunities in the rapidly changing, digital-driven international marketplace.""
Blakenham, who has been chairman of Pearson since 1983 following a six year stint as chief executive, said in statement the appointments completed the succession process at Pearson.
Barlow, who has been chief executive for seven years, had agreed to extend his contract for two years after his retirement date in 1995 in order to help implement the group's strategy to focus on the media sector.
""I think Pearson's future is very favourable and Marjorie Scardino is a very good appointment,"" he told Reuters.
Scardino, 49, has been chief executive of the Economist since 1992, before which she headed its North American operations.
Prior to that, she was partner in a Savannah, Georgia law firm and publisher and founder with her husband of a Pulitzer Prize-winning newspaper, the Georgia Gazette.
Stevenson is chairman of aircraft leasing group GPA and is also a non-executive director of British Sky Broadcasting, J. Rothschild Assurance Plc and Manpower Inc. ($1=.6309 Pound)
",21
"British media company Carlton Communications Plc, boosted by a 20 percent annual profit rise, said on Wednesday that it planned a drive into pay television.
Carlton, the country's largest commercial television (ITV) company, said it aimed to build on its broadcasting strengths in the multi-channel future.
""We want to build up our interests in pay television, both as a content provider and operator. These may encompass cable, satellite and digital television,"" chairman Michael Green said in a statement.
""Free television and pay channels should not be seen as competitors; they are complementary businesses...Carlton wants to establish a significant presence in both markets,"" he added.
Green was speaking as Carlton unveiled a 20 percent rise in pre-tax profit to 295 million pounds ($492 million) for the year to September 30. Carlton increased its dividend by 17.5 percent to 11.1 pence per share.
The figures were in line with analysts' forecasts but Carlton shares fell 8.5p to 495p in a weaker market.
Carlton last month agreed to pay 85 million pounds for Westcountry Television, the ITV company which broadcasts to the south-western corner of England. It also operates the ITV licences for the English Midlands and London weekday television and now broadcasts to 22 million people.
Green confirmed that Carlton was considering investing in digital terrestrial television, which is expected to be launched in Britain in 1998 and offer viewers up to 36 channels.
""Digital Terrestrial Television will expand free-to-air broadcasting in the UK and opens the door to the establishment of further pay television services. We are examining these investment opportunities very carefully,"" he said.
The Independent Television Commission (ITC) recently invited applications to operate the blocks of frequencies which will carry the digital channels.
Digital terrestrial will be broadcast from land-based transmitters and viewers will not need a satellite dish to receive it. They will, however, require a set-top decoder.
Carlton already has two subscription cable channels in the UK and pay television interests in France, India and Singapore.
Operating profits from Carlton's Television division grew by only five percent to 129 million pounds as advertising revenues remained flat. But the company said the outlook for advertising revenue was good.
Carlton's video division increased profit by 21 percent to 73 million pounds as demand for pre-recorded videocassettes continued to grow.
Its film processing arm boosted profits to almost 53 million pounds -- a 27 percent jump -- as the Hollywood studios continued their policy of releasing movies to large numbers of cinemas simultaneously.
The company's products division, aiming to become the world leader in tapeless editing for the television industry, increased profits to 43 million pounds from 32 million.
",21
"Satellite broadcaster BSkyB, the dominant force in British pay television, on Tuesday reported a 66 percent rise in full-year profit to 257.4 million pounds ($398.1 million).
Annual turnover climbed to more than one billion pounds as the number of subscribers in Britain and Ireland rose to 5.5 million for BSkyB, in which Rupert Murdoch's News Corp has a 40 percent stake.
Profit for the year to June 30, 1996 -- up more than 100 million pounds on the 155.3 million reported a year ago -- was towards the top end of analysts' forecasts. The full-year dividend of 5.5 pence was lower than expected, however.
BSkyB shares shed seven pence to 530p in early trading, having climbed to record highs in recent days.
""The continuing growth in subscribers, the increase in the number of channels and the renewal of the Premier League (soccer) contract until 2001 provide a firm base from which to pioneer the development of digital television in the UK,"" chief executive Sam Chisholm said in a statement.
""The agreement with Kirch Gruppe to develop the digital platform in Germany gives us a great opportunity to extend our business into continental Europe,"" he said.
BSkyB plans to launch a British digital television service next year.
Last month it signed a deal with the group headed by Bavarian media mogul Leo Kirch under which it will take a stake of up to 49 percent in DF1, Kirch's digital pay television operation.
BSkyB is expected to inject 200 million pounds into the alliance to cover start-up losses over the next three years. The deal gives BSkyB access to Europe's largest television market.
BSkyB said spending on programming rose by 28 percent to 420 million pounds after the purchase of golf, boxing and cricket events and the launch of new channels such as Disney.
The programming spend is set to rise further following a 670 million pound deal signed in June which will enable BSkyB to retain rights to broadcast live English Premier League soccer for the next five years.
One cloud on the horizon is a report that British cable companies may seek European Commission intervention over the fees BSkyB charges for its top channels.
The Financial Times said the cable companies fear they will not secure satisfactory conditions despite BSkyB undertakings to revise the structure of its wholesale rate card.
",21
"Britain's Ladbroke Group. and the U.S. Hilton Hotels Corp (HHC) on Thursday announced a worldwide alliance that will reunite the famous Hilton hotel brand after 32 years of separation.
HHC owns the Hilton name in the United States while Ladbroke holds the rights everywhere else through its Hilton International (HIC) subsidiary.
The two companies have signed an outline agreement to reunite the brand, separated in 1964 when HIC was spun off from the American operation. Ladbroke acquired HIC in 1987.
In the alliance grouping 400 hotels in 49 countries, HHC and HIC intend to cooperate from next year on sales and marketing, loyalty programmes and hotel development.
Ladbroke also announced first half pre-tax profits of 72.8 million pounds ($113 million) before exceptional items, a 29 percent increase on last year and above analysts' forecasts.
Interim dividend was unchanged at 2.4 pence per share.
Ladbroke shares added 7.5p to a 1996 high of 215p in early trade before slipping slightly to 213p.
""This deal makes good sense to our customers, our employees and our shareholders,"" Ladbroke Chief Executive Peter George said in a statement.
""Through this alliance, our two companies intend to lead the hotel and gaming markets worlwide,"" he added.
The companies plan to finalise the agreement as soon as possible in order for it to become effective by early 1997.
HHC intends to acquire a five percent stake in Ladbroke once the final agreement has been signed. George will join the HHC board while Stephen Bollenbach, his opposite number at HHC, will become a director of Ladbroke.
The two men said that the deal would could be worth several tens of millions of dollars when cost savings and extra sales were combined.
""It seems all upside, there's hard to see a downside,"" said George. He added the deal had been under negotiation since Bollenbach became HHC chief executive in February and was agreed only on Wednesday night.
It provides for the formation of a jointly owned company to market and develop the Hilton brand around the world.
HHC's guest loyalty programme, which has some five million members, will be extended worldwide. The companies will also participate in each other's future hotels development.
Ladbroke will also have the chance to become a partner in some of HHC's gaming developments in the United States.
Ladbroke said operating profits from HIC grew strongly to 70 million pounds in the first half while those from its betting and gaming division climbed 17 percent to 43.6 million pounds.
($1=.6421 Pound)
",21
"Britain's Granada Group, which won control of hotel and catering empire Forte in January, on Wednesday reported a 37 percent surge in full-year profits to 480 million pounds ($804 million).
The media and leisure group said that it would deliver on its promise to improve profits at Forte by over 100 million pounds per annum from 1996/97.
Granada chairman Gerry Robinson called the results ""very satisfying"". ""The key has been the speed with which we have been able to move on the Forte businesses,"" he told Reuters.
Granada took over family-controlled Forte in a 3.9 billion pound deal earlier this year after a bitter bid battle that raged over the Christmas and New Year period 12 months ago.
The company said that Forte had responded well to its management and that it had already improved profitability there by approaching 40 million pounds.
Granada continues to reorganise following the acquisition of Britain's leading hotel group. Robinson said there was substantial interest from a wide range of potential purchasers of the luxury hotels it has put on the market.
Granada sold the first of the 17 Exclusive hotels on Tuesday when Hong Kong based Mandarin Oriental International Ltd bought London's Hyde Park Hotel for 86 million pounds.
Robinson said that Granada expected to complete the disposals by early 1997. Analysts calculate the sale of assets including the George V in Paris and Plaza Athenee in New York will raise a total of around 900 million pounds.
The Granada chairman said that the company hoped to sell the Welcome Break chain of British motorway service areas in January or February of next year. The 21 sites were acquired in the Forte deal but must be sold off because of monopoly concerns.
But he said there were no plans to sell the 10.8 percent stake Granada holds in pay television operator British Sky Broadcasting.
Group turnover in the year to end-September climbed 60 percent to 3.82 billion pounds. Total dividend was raised by 11 percent to 13p per share.
Granada shares, which had risen in recent days in anticipation of bumper results, fell by 8p to 884 1/2p in a generally gloomy market.
The largest contribution came from the Restaurants division, which boosted profit before interest and tax by 80 percent to 217 million pounds as the Forte acquisition bore fruit.
The new Hotels unit contributed 168 million while Media, including Granada's two British commercial television stations, made 163 million, up 17 percent. Profits from the high street rentals arm was marginally higher at 126 million.
",21
"Britain's commercial television watchdog on Thursday invited applications to run terrestrial frequencies which will multiply the number of channels available to viewers in the new digital age.
""This is a very important day for U.K. viewers...as many as 35 or 36 channels could be available on digital terrestrial television,"" said Peter Rogers, chief executive of the Independent Television Commission (ITC).
The ITC is seeking applications to operate four ""multiplexes"", as the blocks of frequencies are known. Each block can carry as many as six digital channels.
The BBC has already been earmarked its own multiplex and commercial networks ITV and Channel 4 will share one.
The ITC will award the 12-year licences on criteria including speed of roll-out of the service and the appeal of programming but a cash bid will not be required. Licences are expected to be awarded next spring and broadcasting could begin by mid-1998.
Britain is leading the way in the development of digital terrestrial television but some observers question whether it will succeed.
Pay television operator BSkyB, in which Rupert Murdoch's News Corp is the largest shareholder, plans to launch a digital satellite service into Britain in late 1997 -- several months ahead of the terrestrial version.
The satellite version could offer several hundred channels and BSkyB's control of key movie and sporting rights is likely to make it an attractive proposition.
Rogers told a news conference he was confident the terrestrial option would prove attractive to investors.
""I would be surprised and disappointed if we didn't have applications for all of the multiplexes,"" he said.
His view was shared by Paul Styles, a media expert at consultancy and accounting firm KPMG.
""Most people perceive digital bandwith to be valuable so I think there will be interest in the multiplexes,"" he said.
""This will not be an overnight sensation but a business to be built,"" he said, identifying ITV companies, cable groups and BSkyB itself as potential licence applicants.
Digital technology increases the number of channels which can be transmitted and enhances sound and picture quality. it also enables interactive services such as home shopping and home banking to be created.
Digital means converting sound and pictures into binary digits -- a series of noughts and ones -- rather than transmitting them as electric signals as now happens. A set-top box or ""decoder"" will be required to receive digital services.
This is also a source of controversy, as ITC officials admit that there is no current British or European legislation to enforce a common standard for decoders.
That means that consumers could theoretically have to pay several hundred pounds (dollars) for a set-top box to receive BSkyB's digital services and then have to buy a second box a few months later to receive digital terrestrial.
",21
"British pay television operator BSkyB said on Friday that it was considering further investment in Germany and would beam its second pay-per-view sports event into Britain later this month.
The satellite broadcaster said pre-tax profit had risen by 31 percent to 66 million pounds ($107.5 million) in the three months to September 30.
The company, in which Rupert Murdoch's News Corp is the leading shareholder, said that total paying subscribers had reached 5.65 million at 30 September, a net increase for the quarter of 146,000.
""The company has performed strongly in the first quarter and has achieved significant growth in both revenue and profits,"" said BSkyB chief executive Sam Chisholm.
""Our increased investment in all areas of programming and the quality and choice we offer our subscribers will maintain our impetus,"" he added.
Operating revenues for the three months to September 30 increased to 266 million pounds, a rise of 24 percent on a year earlier. Earnings per share were 3.9 pence, 30 percent up.
BSkyB shares rose 4p to 582-1/2p although analysts said the subscriber growth figures were ""unexciting"" and the profits in line with expectations.
BSkyB said in July that it would take a stake of up to 49 percent in DF1, the German digital television venture launched by Bavarian media mogul Leo Kirch. BSkyB said on Friday it was considering investments in additional German Pay TV channels.
DF1 has made a slow start but the German pay television market is expected to expand rapidly in coming years.
BSkyB said it would show its second pay-per-view event on November 9 when Mike Tyson and Evander Holyfield meet in Las Vegas for the WBA heavyweight boxing crown.
BSkyB successfully experimented with pay-per-view when Tyson fought Briton Frank Bruno in March. More than 600,000 homes paid some 10 pounds to see that fight.
BSkyB has said it plans to introduce digital satellite broadcasting into Britain late next year. Pay-per-view sports events and movies are likely to be one of the prime sources of income from the extra channels provided by digital.
Niche channels Sky Scottish and The Computer Channel were launched on Friday, bringing the total number of channels available on Sky Television to over forty.
However, Friday's planned launch of WBTV-The Warner Channel was postponed at the 11th hour on Thursday evening.
The Warner Channel -- a mixture of Bugs Bunny cartoons and vintage movies -- was apparently a victim of the legal battle being fought in the United States between Murdoch and the combined might of CNN founder Ted Turner and Time Warner.
That clash of the titans centres on whether Time Warner, the second largest U.S. cable operator, will carry News Corp's 24-hour Fox News Service in New York City. Fox is a major rival to CNN, now part of Time Warner following a recent merger. ($1=.6141 Pound)
",21
"United News & Media on Tuesday secured victory in a battle for control of international exhibitions group Blenheim with an agreed offer valuing the company at 592.5 million pounds ($935 million).
The deal will create the world's largest trade exhibition group with a turnover of more than 500 million pounds, based on 1995 figures.
Media and financial services group United said it had already secured acceptances for 51 percent of Blenheim after offering five pounds per share.
""The acquisition will be earnings-enhancing in the first full year but the real attraction is the long-term growth we can get out by combining these businesses into one group,"" United chief executive Clive Hollick told Reuters.
United News shares added 31 pence to 674-1/2 pence after the announcement, while Blenheim gained 22-1/2 to 496.
Dutch publisher VNU, which last week acquired a 15 percent stake in Blenheim, said it would not make a counter-bid and was likely to sell its stake. That decision effectively removed the threat of a bidding war developing for Blenheim.
Anglo-Dutch media group Reed-Elsevier had been regarded as a rival suitor to United but sources close to the company indicated in the last few days that it had dropped out of the running.
The deal ends an on-off saga that began in June when Blenheim said it had received a bid approach. In August it said that talks with an unnamed party had broken down but then made another statement a few weeks later confirming a new approach.
Based on 1995 figures, combined turnover and operating profit would be 545.5 million pounds and 88 million pounds, respectively.
Analysts said that Blenheim's geographical strength in continental Europe, and France in particular, made it a good fit with United.
United's Miller Freeman subsidiary operates more than 100 exhibitions in the United States, Europe and Asia but the American market is seen as its main strength. These exhibitions are supported by a range of trade publications.
Blenheim operates more than 170 exhibitions worldwide but does not have a significant publishing portfolio.
""The directors of United believe that the Miller Freeman and Blenheim trade show portfolios are highly complementary geographically, by market sector, and in terms of operational management,"" United said in a statement.
The acquisition is the first major move by United since the national newspaper group merged with television and financial services group MAI earlier this year.
That merger doubled the size of the company, creating a British media major with a market capitalisation of more than three billion pounds.
",21
"Tottenham Hotspur chairman Alan Sugar said on Thursday that English soccer clubs could face financial ruin if they follow the example of big spenders such as Newcastle United.
Sugar was speaking after Premier League club Tottenham posted a record pre-exceptional profit of 10.2 million pounds ($16 million) for the 14 months to July 31. The club increased its total dividend to 5p from 3p.
English soccer is booming as television revenue helps to fund an influx of top foreign talents and the sector is seen as increasingly attractive for investors.
English champions Manchester United, listed along with Tottenham on the London Stock Exchange, this week announced an annual profit of 15 million pounds.
But Sugar warned that the Bosman Ruling under which players effectively become free agents at the end of their of their contracts was ""a devastating blow to the football industry"".
Sugar said he could not see the sense in deals such as privately-owned Newcastle's recent signing of England captain Alan Shearer from Blackburn Rovers for 15 million pounds.
""Even if you win everything in sight there is no way to make it pay,"" he said, noting that Newcastle would not be able to recoup any of their outlay on Shearer once his contract was up.
Tottenham, who reported 14-month figures because of a change in their financial year, took an exceptional charge of 7.3 million pounds to reflect a drop in the value of their squad.
The value fell after Belgian Jean-Marc Bosman won a landmark case at the European Court of Justice which ended the transfer fee system for players who were out of contract.
Sugar, who has a 40 percent stake in Tottenham, acknowledged that profit figures were meaningless to fans clamouring for new signings following the injury-hit team's indifferent start to the season.
He said funds were available to team manager Gerry Francis to strenghten the squad but declined to say how much.
""I would hope in the next two to three weeks that we will see some signings at the club,"" he added, saying that the club's aim was to sign promising young players on long-term contracts.
The head of consumer electronics group Amstrad, Sugar saved Tottenham from the verge of bankruptcy five years ago when he and former England coach Terry Venables took over the club.
But the two, both working-class London boys made good, fell out spectacularly and have become locked in a series of legal battles since Sugar forced Venables to leave the club in 1993. ($1=.6395 Pound)
",21
"Political opposition to the BBC's call for more public funding lent added urgency on Monday to joint venture talks between the corporation and two rival pay television groups.
The two rivals for the BBC's hand are U.S.-controlled cable and satellite programmer Flextech and satellite broadcaster BSkyB, in which Rupert Murdoch's News Corp is the largest shareholder.
Both want to launch new subscription channels based on the BBC's wealth of quality programming.
The BBC is under increased pressure to beef up its commercial activities after politicians criticised its demand for an above-inflation licence fee increase.
BBC Director-General John Birt used a speech at the Edinburgh International Television Festival on Friday to launch the campaign for what he said would be the first real increase in the licence fee since 1985.
The fee, fixed by the government and payable by all television set owners, is 89.50 pounds ($139.1) annually.
Birt argued that more money was needed to ensure the BBC remains ""the touchstone of quality"" in the digital era.
But politicians from both main political parties appear opposed to his appeal. With a general election due by next May, party strategists believe it would be folly to support a rise.
The BBC is seeking to preserve its place at the heart of the broadcasting world as the industry gears up for a new era.
Digital technology -- in which images are transmitted as a series of binary digits rather than as varying electric signals as under the existing analogue method -- will soon make hundreds of extra channels available.
The BBC, with its huge library and production facilities, is an ideal partner for companies such as Flextech and BSkyB as they seek to compile attractive programme packages.
The BBC plans to offer a 24-hour news channel, supplementary programming and wide-screen tranmission to all licence fee payers in the digital era. Joint-venture subscription channels in areas such as drama and natural history would help fund this expansion.
The BBC reported a net benefit of 77 million pounds from commercial activity last year -- small beer compared with the 1.8 billion pounds generated by the licence fee. It is aiming to treble commercial income over the next few years.
Media industry analysts say that Flextech is in a strong position in talks with the BBC.
The two are already partners in UK Gold, a subscription channel showing vintage shows. British media group Pearson and Cox Communications of the U.S are also partners in UK Gold but Flextech is in talks to buy them out.
It could also unlock the lucrative north American market for the BBC as its parent, Tele-Communications Inc (TCI), is the largest cable television group in the United States.
A report in Sunday's Observer quoted Adam Singer, head of TCI's international division, as saying they would want any new Flextech-BBC channels to be carried on BSkyB's network as it has the widest distribution for pay channels in Britain.
But BSkyB, which is planning to launch digital satellite services offering some 200 channels in late 1997, would clearly prefer to deal directly with the BBC.
It could use its financial muscle to make the cash-strapped BBC an offer which the corporation would find hard to refuse.
($1=.6436 Pound)
",21
"The head of British public television broadcaster Channel 4 urged the government on Monday to reject moves to privatise the service.
Channel 4 chief executive Michael Grade said that privatisation was ""on the political agenda"" and called on the government to ""dispel this nonsense"".
""The board of Channel 4 is going to fight this all the way,"" Grade told a meeting at the Edinburgh International Television Festival.
Free marketeers in the ruling Conservative party have suggested that Channel 4 could be put up for sale but privatisation is not currently part of government policy. Its advocates want it included in the Conservative manifesto for the general election due by next May.
Channel 4, set up in 1982 with a brief to transmit innovative and minority programming, is a statutory, state-controlled, corporation funded by advertising.
Its funding contrasts with state-controlled British Broadcasting Corporation (BBC), which is funded by a licence fee payable by everybody who owns a television set.
""We are the nursery for talent without one penny of public subsidy. I defy the Treasury to produce a justification for chucking this achievement down the drain,"" said Grade.
He said that privatisation would spell the end for Channel 4 in its current form and force it to become more mainstream.
""The only honest approach is to admit that a one-off Treasury ""bank raid"" can only be executed by making Channel 4 just another commercial network like ITV or Channel 5.""
Grade highlighted Channel 4's promotion of the British film industry. Its support and funding has helped to produce recent international box-office hits like ""Four Weddings And A Funeral"" and ""Trainspotting"".
Recent reports have suggested that the sale of Channel 4 could raise as much as two billion pounds.
However, Anthony Fry from merchant bank BZW told the conference he was ""totally unpersuaded"" that Channel 4 was worth anything like as much as that.
",21
"Shares in Britain's newly-demerged EMI Group Plc rose on Tuesday as the stock market applauded the company's resilience to tougher conditions in the music market.
EMI, which split from rentals company Thorn Plc three months ago, said profit before tax and exceptional items rose nine percent to 112.5 million pounds ($188.4 million) in the six months to September 30. Net interim dividend per share increased by 12.7 percent to eight pence.
EMI shares, which have shed some two pounds in recent weeks on fears that global music sales were faltering after a decade of strong growth, had added 9-1/2p to 1,280-1/2p by 1330 GMT after earlier climbing to 1290p.
""These are excellent interim results from the EMI Group,"" chairman Sir Colin Southgate said in a statement.
""They have been achieved against a background of variable growth in the major markets and mixed results from our competitors,"" he added. ""The increase in the interim dividend reflects our confidence in the long-term health of the music industry and EMI's position within it.""
Analysts said that EMI appeared in better shape than some of its rivals in a patchy worldwide market.
""What we have seen from their competitors was poor but EMI is insulated as it does not have so much exposure to the U.S.,"" said media analyst Lorna Tilbian of brokers Panmure Gordon, adding: ""They tend to be strong in the areas where the growth is coming through.""
Panmure are forecasting full-year profit excluding exceptional items of 403 million pounds and have a target share price of 1360p.
Finance Director Simon Duffy said EMI remained confident that the global music business would continue to grow by some 6-8 percent annually in the medium to long-term.
""This year is looking a little bit below that level,"" said Duffy, adding that markets were mixed but that overall first half music sales growth had been 5.5 percent. However, he added that the impact for EMI was diluted by the strength of sterling.
The market's sluggishness has recently been reflected by 100 layoffs at various labels within Warner Music and 400 job cuts at PolyGram NV -- two other music majors.
EMI said that sales in the United States were almost flat and declined slightly in France. But this was offset by improvements in Japan, Britain and Germany while Southeast Asia and Latin America boasted particularly large gains.
Turnover from the EMI Music division was down marginally at around 1.1 billion pounds but analysts ascribed this to the effect of exchange rates. Better margins helped to boost operating profits in the EMI Music division to 131.9 million pounds from 124.6 million.
The HMV division, grouping record and book stores chains, had an operating loss of 11 million pounds which the company said was in line with expectations.
EMI said major releases for the key pre-Christmas quarter included the third and final Beatles Anthology album, which entered the American charts at number one. It is also releasing a triple album from The Artist Formerly Known as Prince and the debut from British newcomers the Spice Girls. ($1=.5970 Pound)
",21
"French radio group NRJ SA is aiming to break into the UK market by winning the fierce battle for a key London FM licence currently up for grabs.
NRJ, a group which has some 500 stations spread across six European nations, has focused its attention on the capital's youth, who it says are poorly served by existing stations.
""Mainstream music for young people does not exist in London. You have too many stations for adults,"" Marc Pallain, NRJ's head of development, said in an interview. ""You have an extraordinary music scene and such a poor radio landscape,"" he added.  
The Radio Authority, the body which oversees UK commercial radio, is expected to announce the winner of the licence in mid-January. Its choice will be based on criteria such as programme plans and financial viability of the applicants.
The frequency was vacated by easy-listening station Melody Radio, which relocated after complaining of interference in the south-west London area. However, the winner should be able to reach a potential audience of almost six million adults.  
Twenty-five groups have put in bids, including stations aimed at gay men and lesbians, children, London's Irish community and the over-50s. The front-runners are believed to include Capital Radio, Atlantic, XFM and The Edge.
Capital Radio, which already has an FM licence and is the market leader in London commercial radio, wants to transfer its ""Capital Gold"" oldies station from its AM frequency.
Atlantic, backed by the UK radio arm of Luxembourg broadcaster CLT, The Edge and XFM are all music-based and aiming at a 15-34 year-old audience.  
British actor Michael Caine is chairman of The Edge and his consortium also includes Radio One DJ and Channel 4 presenter Chris Evans. talent. Its co-founder is Chris Parry, manager of British band The Cure.
NRJ's ""Energy"" station plans to offer a blend of rock, rap and dance music which programme director Christophe Sabot says will be aimed primarily at the under-25s.
NRJ believes its network of stations across markets such as France, Germany and Scandinavia would allow it to give new British bands a European-wide platform.
Chairman Jean-Paul Baudecroux said that a London licence would appeal to many of the company's advertisers in mainland Europe. He said that the station could help to speed the development of radio advertising in the UK by giving companies greater access to young consumers.
Pallain said that NRJ, a company with a market value of some three billion francs, would aim to expand into other British cities if it secured a berth in the capital. He said that NRJ was already in talks with potential partners.
-- London Newsroom +44 171 542 8793
",21
"British media company EMAP said on Monday it expected to bring a damaging boardroom row to a swift conclusion and build on a strong first-half profit performance.
Finance director David Grigson told Reuters that he believed that an extraordinary general meeting next month would resolve the boardroom battle that has undermined the company's share price in recent weeks.
""The EGM will be a purging process. It will clear the air and leave us with a smaller and happier board,"" he said.
The EGM, scheduled for December 2, has been called to seek the removal of rebel non-executive directors Ken Simmonds and Joe Cooke from the board.
The pair have led the opposition to changes made to the company's articles at its annual general meeting in July. The changes remove a requirement to maintain at least five non-executive directors and allow a director to be ousted if 75 percent of the board vote for his removal.
EMAP shares, which had fallen from 783p in early October, gained 10p to 732 1/2p after first half profits beat expectations and the company made a bullish statement on its second half prospects.
Pre-tax, pre-exceptional profit grew by 34 percent to 50.6 million pounds ($83.4 million) in the six months to September 30, 1996.
The company also posted a one-off gain of 113.5 million pounds on the sale in June of its regional newspaper business to Johnston Press Plc.
EMAP began life as a regional newspaper company in 1947 but has now decided to focus on commercial radio, consumer magazines and business communications -- trade papers and exhibitions.
It is one of Britain's top commercial radio operators and has a 16 percent share of the French consumer magazine market. Interim dividend was increased from 3.7p to 4.3p as the company looked to the future with optimism.
EMAP said that margins should improve as paper prices continue to decline. Proceeds from the sale of the regional newspaper business should lead to a significant reduction in interest charges.
""EMAP is optimistic about the prospects for the second half, and looks forward to a further sustained period of profit growth,"" the company said.
Operating profit from its British consumer magazines totalled 19.9 million pounds while the recent acquisition of Tele Star helped its French magazine operation more than double profits to 13.4 million.
Radio contributed 10 million pounds to operating profits, boosted by the acquisition last year of several stations in north-east England. Business communications made an operating profit of 10.2 million.
($1=.6067 Pound)
",21
"The director-general of the BBC called on Friday for an increase in the British television licence fee to protect what he said was ""the most successful cultural institution in the world"".
Speaking at the Edinburgh International Television Festival, John Birt said the fee -- payable by all television set owners -- had fallen in real terms over the past decade and described the recent financial history of the BBC as ""miraculous"".
He said an increase was needed to help fund new services as digital technology multiplies the number of channels available.
""The BBC is the most successful cultural institution in the world, one of the great inventions of the 20th century. But it can no longer be taken for granted,"" Birt said.
""If it (the BBC) is to innovate with high-quality services in the new technologies as it has done again and again ... then at some point in the future -- and for the first time since 1985 -- we shall need a real increase in the licence fee.""
A colour television licence costs 89.50 pounds ($139.10) annually. Licence income totals around 1.8 billion pounds each year -- 95 percent of BBC income. The money funds the BBC's five national radio stations as well as its two television channels.
Sources at the BBC said it wanted a modest rise in ""low single (percentage) figures over time"". The BBC will shortly begin talks with the government to review the licence fee -- currently pegged to inflation.
Any price increase would take effect from April 1, 1997. A general election is due in Britain by next May and the government might be reluctant to saddle viewers with a higher licence fee shortly before it went to the polls.
Birt said the BBC was now towards the bottom of the European licence fee league table. He added that a top-rate subscription to satellite broadcaster BSkyB, the dominant force in British pay television, costs 300 pounds annually.
The BBC says it has achieved cost savings of 100 million pounds in each of the past three years and aims to build on its commercial success as Europe's biggest broadcasting exporter.
But Birt said more licence money was vital.
Digital technology -- which will allow the creation of hundreds of new channels and interactive services such as home shopping -- is set to reach Britain next year.
BSkyB is planning to launch digital satellite services in late 1997 and a terrestrial version is expected to follow within a further 12 months.
The BBC is planning to offer licence-fee payers supplementary programming and a 24-hour news service as it moves into the digital era.
""It (digital) will mean upholding our national role -- and opening new doors wherever we can for licence fee payers,"" Birt added.
($1=.6436 Pound)
",21
"The Office of Fair Trading (OFT) on Thursday launched a probe into the way travel companies sell foreign package holidays to millions of sun-seeking Britons.
The director-general of the consumer watchdog body, John Bridgeman, called a Monopolies and Mergers (MMC) inquiry into ownership links between leading tour operators such as Thomson and Airtours and retail travel agents.
The MMC will also be able to look at the practice among travel agents of offering holidays at a discount conditional on the purchase of specific travel insurance.
Both travel companies said they were confident they would be cleared by the 12-month MMC inquiry. But shares in Airtours plunged almost 10 percent in London, losing 69p to 644p.
Bridgeman noted that vertically-integrated companies like Thomson and Airtours supply a large proportion of a market worth seven billion pounds ($11.5 billion) and he was concerned that some of their practices could distort competition.
""I believe they have the market power to put competitors at a disadvantage, for example by de-racking (removing) or threatening to de-rack their brochures in an attempt to negotiate larger commissions,"" he said.
He also said they could pressurise tour operators not to supply independent travel agents on better terms or push their own holidays through in-house incentive schemes.
Thomson owns the leading Lunn Poly travel agency, while Airtours owns the number two travel agent Going Places.
Together they operate around 40 percent of British travel agents. They also supply around 45 percent of over 10 million foreign packages sold to Britons who make the annual pilgrimage to seek the sun around the Mediterranean or further afield.
Thomson, part of Canada's Thomson Corp, welcomed the probe.
""Thomson is confident that the industry at large, and Thomson in particular, will be vindicated from any allegations of anti-competitive practice,"" said Paul Brett, chairman and chief executive of Thomson Travel.
""We have been cleared by the OFT before in 1994 and we are sure that we will be cleared again by the MMC,"" he added.
Airtours deputy chief executive Harry Coe said there was no case to answer and claimed the British market offered the world's cheapest foreign holidays.
""Those behind the inquiry are the small tour operators and the small travel agents who can't stand the heat in the kitchen,"" he said.
But the smaller tour operators were delighted that the MMC was taking up the matter.
""Big companies are screwing the consumer and the smaller operators,"" said Sue Ockwell, head of the Association of Independent Tour Operators. ($1=.6072 Pound)
",21
"Shares in Premier Farnell dipped on Monday after the newly enlarged electronic components distributor posted half-year profits slightly below expectations.
Premier Farnell was created in April when Britain's Farnell Electronics completed a $2.8 billion takeover of America's Premier Industrial Corp -- a company twice its size.
Pre-tax profit for the six months to July 28 totalled 56.1 million pounds ($88.4 million). That was down on the pre-tax figure of 71.3 million pounds a year earlier but that had been flattered by a large one-off gain.
More pertinently, analysts had forecast profit in a range of 57.5 to 61.6 million pounds and the failure to reach that level was reflected in a 10.5p decline in the share price to 670p.
The company said that the market for electronic components has shown much lower levels of growth in 1996 than in recent years and added it did not expect any major change in conditions for the rest of the year.
""I think the evidence is we've bottomed the cycle and the signs at the moment are positive. But we are planning on a more conservative basis at this moment in time,"" chief executive Howard Poulson told Reuters.
Premier said its priorities were the development and international expansion of the catalogue business and further exploitation of synergies between its transatlantic operations.
Poulson said he was delighted with progress on integration following an acquisition which had transformed the company, based in the northern English town of Wetherby, into the third largest electronic components distributor in the world.
""The integration is going superbly..I am very pleased with what people have done on both sides of the Atlantic,"" he said.
He said he did not see any further scope for cutting costs following the acquisition.
""I think we've finished with all of the cost-cutting. This was never a deal which was built on reducing overheads and getting rid of people,"" he said.
""We said we would remove duplication in our two head offices -- we've done that, we've probably dropped about 150 people since we made the acquisition."" The company now has some 6,500 staff, 4,000 of whom are in the United States.
""What the business is about now is building sales and building our profits that way,"" he added.
Premier Farnell said its sales expansion projects were on schedule and should begin to make a contribution in the fourth quarter of the year. REUTER
($1=.6350 Pound)
",21
"British-based exhibitions group Blenheim is seen as an ideal fit with rumoured suitor United News & Media, share analysts said on Monday.
United News & Media and Anglo-Dutch group Reed Elsevier have long been seen as rivals for the hand of Blenheim. However, industry sources said Reed was thought to be out of the running.
""Blenheim's strength in Europe and France in particular mean it would be a good fit (for United),"" said one analyst. ""The exhibitions business is also doing quite well at this stage in the cycle.""
Dutch publisher VNU stirred the waters last week when it paid 500 pence a share to take a 15 percent stake in Blenheim. VNU declined comment on reports on Monday that it was set to increase its stake to 25 percent.
It said last week its 15 percent holding in Blenheim was a strategic long-term investment and said it had no intention of making an offer for the whole company unless rival offers emerged.
Its move is certain to have concentrated the mind of United News chief executive Clive Hollick, who is now reported to be weighing a bid of up to 520p per share, valuing Blenheim at some 480 million pounds ($757 million).
Blenheim shares closed 6 1/2p lower at 477 1/2p on Monday.
United News has so far refused to declare its hand. Analysts said a complicating factor was the continuing reorganisation of its businesses following its merger earlier this year with television and financial services group MAI. United News also publishes two British national newspapers.
""A bid makes a lot of sense but the timing is not good for United News,"" said media analyst Nick Ward of Credit Lyonnais Laing.
Blenheim, in which French utilities company Generale des Eaux has a 15 percent stake, posted pre-tax profits of 35.6 million pounds in 1995 on turnover of 202.5 million.
France was its largest source of revenue, accounting for 37 percent of earnings, followed by 26 percent from the U.S., 20 percent from Britain, 11 percent from Germany and six percent from the rest of the world.
Miller Freeman is the business magazines and exhibitions arm of United News. It operates in the U.S., Europe and Asia but analysts regard the American market as its main strength.
Analyst Anthony de Larrinaga of Panmure Gordon said a bid of around five pounds per share would represent an attractive deal for investors in both United and Blenheim.
He said that United was likely to be considering a bid between 480p and 530p per share. ($1=.6337 Pound)
",21
"British National Lottery operator Camelot  LOTT.CN on Tuesday posted lower interim profits as income from scratchcard sales fell by over 450 million pounds ($750 million).
Camelot chief executive Tim Holley also told Reuters that the planned second weekly National Lottery draw would be launched on February 5 and be held every Wednesday thereafter. Camelot, which has faced a storm of criticism over its jackpot earnings since the lottery was launched two years ago, reported pre-tax profits of 31.5 million pounds on sales of 2.1 billion pounds for the 24 weeks to September 14.
This compares with pre-tax profit of 36.2 million pounds and sales of 2.51 billion pounds in the same period a year ago.
Camelot's five shareholding companies -- Cadbury Schweppes, De La Rue, GTech UK, Racal Electronics and ICL shared a total dividend payount of 10 million pounds, up from 9.5 million.
Sales for the weekly National Lottery game rose two percent to 1.68 billion pounds. Two thirds of the adult population regularly buy tickets for the Saturday draw, an event which is televised live and has become a ritual for many Britons.
But sales of Camelot's ""Instants"" scratchcards fell from 871 million pounds last year to 419 million this time.
Camelot executives said that the decline in scratchcard sales was to be expected as the initial enthusiasm generated by their introduction in March 1995 waned.
""Mirroring the experience of lotteries worldwide, sales of Instants have fallen since their launch and are now settled at around 17 million pounds per week,"" Chairman Sir George Russell said in a statement.
Chief executive Holley said that the second weekly draw should boost sales of National Lottery game tickets by 15-20 percent from their current weekly average of 69 million.
Camelot said that over one billion pounds -- 50 percent of turnover -- had been handed out in prize money in the first half and that 567 million pounds had gone to ""Good Causes"" -- including charities and projects in sports and the arts.
Camelot, which has been granted a seven-year licence, said that over 40 percent of turnover went to ""Good Causes"" and the governnment in duties, making it the world's most efficient lottery operator.
Profit after tax is just under one percent of total sales and Holley dismissed criticisms of Camelot's performance.
""I think we have a slight problem in this country with success,"" he said, adding that foreign lottery companies were bemused by the atacks on Camelot.
The group confirmed plans to set up The Camelot Foundation to support organisations helping the disadvantaged and disabled.
Camelot will plough five million pounds into the foundation in its first year, which it said would make it one of the largest donors to charities among major British companies. ($1=.5994 Pound)
",21
"British media group EMAP Plc on Monday ended a damaging boardroom row when its shareholders voted to oust two rebel non-executive directors, who had contested changes to the company's articles.
Shareholders backed the board and voted overwhelmingly in favour of resolutions seeking the removal of dissidents Ken Simmonds and Joe Cooke in a poll called at an extraordinary general meeting.
More than 109.2 million votes were registered in favour of each of the resolutions and 12.3 million against.
""I am confident that with these two resolutions passed, the board will be fully united and ready to give full attention to your company's business,"" chairman Sir John Hoskyns told shareholders at the EGM.
Simmonds, who has been a non-executive director of EMAP for 15 years, struck a conciliatory tone after what had been a bitter dispute.
""Catharsis and thinking about the future are good things. EMAP is going to continue to be great,"" he said.
EMAP shares, which had fallen from a 1996 high of 790p in the last two months as the dispute worsened, firmed 5p to 735.
The row centred on the removal of a provision for a minimum of five non-executive directors and another change allowing a director to be ousted on a 75 percent board majority without an EGM being called.
The changes were approved at the company's annual general meeting in July. Cooke and Simmonds had continued to oppose them, arguing that they transferred too much power from shareholders to the board.
""You should ensure that the board is your board,"" Simmonds told the EGM. ""The board may now adjust itself quietly and without any notice to you.""
Hoskyns said that the board had not been able to function properly while the dispute simmered.
EMAP has been one of Britain's fastest growing companies in recent years, selling out of its original regional newspaper business and expanding its UK local radio operations and its consumer magazine interests at home and in France.
It last month reported pre-tax profit of 50.6 million pounds ($85.2 million) in the first half of its current financial year on turnover of 388.3 million pounds.'
Hoskyns, who is 69 and intends to retire in 1998, denied press reports that he backed chief executive Robin Miller as his successor. Miller joined the company in 1965 as a reporter with Motor Cycle News magazine.
He also dismissed talk of a rift between Miller and managing director David Arculus.
""Robin and David have worked in partnership since 1974. That partnership has always been based on hard thinking, vigorous argument and mutual trust,"" he said. ($1=.5936 Pound)
",21
"Be Inc., a private software company which Apple Computer Inc. is eyeing as a possible acquisition target, will announce Tuesday that it will license software to an Apple rival, Be executives said.
Be will license its BeOS operating system -- a type of programme that controls the basic functions of a computer -- to Power Computing Corp., a maker of computers compatible with Apple's Macintosh, executives of the companies said. Power Computing will have an exclusive license until April 1997.
Apple itself has been considering using Be's software. Earlier this year, the No. 3 PC maker shelved a mired effort to rewrite the Macintosh operating system and has been looking outside, primarily at Be, for programming talent.
Be and Power Computing executives said their agreement was not a threat to Apple's plans. Instead, the companies are offering fast machines that would appeal to saavy users, such as programmers, game developers and Web site managers, known as Webmasters.
""This agreement has no impact on any deal we may or may not conclude with Apple,"" said Mark Gonzalez, marketing director at Be, based in Menlo Park, Calif.
An Apple spokesman declined to comment on the agreement.
Be, founded in 1992 by the former head of Apple's research and development, writes software that takes full advantage of the multimedia and computing capabilities of the PowerPC microprocessor, the same computer chip that serves as the brains of the Macintosh.
The company's BeOS includes many software features and innovations that Apple's programmers have not been able to include in Macintosh software.
Apple, struggling to set the Macintosh apart from personal computers running software from Microsoft Corp., has been negotiating with Be since June about licensing its products or buying Be outright, executives close to the negotiations have said.
Apple Chairman Gilbert Amelio and Chief Technology Officer Ellen Hancock have hinted in recent weeks that Apple planned to rewrite the core of the Macintosh software itself, but will turn to outside software companies for help in developing the features a computer user would see on the screen, including next-generation multimedia capabilities.
",25
"At this year's Comdex computer trade show, the most sought-after people are not Microsoft Corp.'s Bill Gates or Intel Corp.'s Andy Grove, but corporate computer buyers.
Personal computer makers and software vendors are relying heavily on their corporate customers this year to make up for disappointing sales to consumers, executives at the trade show said this week.
While many consumers have been putting off their computer shopping until early 1997 -- when new gadgets come out -- corporate customers are finally dumping their older PCs and buying lots of machines that can run the latest business software from Microsoft.
""Certainly we see a tremendously strong business environment as a major upgrade cycle is now occurring,"" said Michael Winkler, senior vice president at Compaq Computer Corp. ""We think the fourth quarter will be excellent.""
Winkler and other PC executives said the recent release of Microsoft's Windows NT operating system and Office 97 package of business programs was fueling corporate sales. These programs work best with the computing horsepower of machines based on Intel's top-of-the-line Pentium computer chip.
In large part because of strong corporate sales, domestic PC shipments in the fourth quarter were expected to rise 20 percent to 8 million units, according to International Data Corp., a market researcher.
""The bottom line here is that the outlook for '97 for our business is very strong,"" said Jim McDonnell, a group marketing manager of PCs at Hewlett-Packard Co..
Based on executives' bullish comments at Comdex this week, stocks of most PC makers have gained in recent days.
Compaq rose $1.375 to $81.875 and International Business Machines Corp. jumped $2.50 to $156.25, both on the New York Stock Exchange, while Intel added $1.75 to $122.50 and Sun Microsystems Inc. gained $2.50 to $59.50, both on Nasdaq.
Still, the fourth quarter has been disappointing to some PC makers, especially those that concentrate heavily on consumer sales.
Last year this time, the release of Microsoft's Windows 95, software that makes PCs easier to use, drew lots of people to computer stores to buy their first PCs. The industry has no such attraction this year.
In fact, analysts said, consumers were putting off computer shopping this Christmas season as the industry prepares new machines based on Intel's upcoming MMX technology. MMX-based machines, slated to be released in early 1997, will feature better video, sound and 3-D graphics.
In late October, computer stocks slid as CompUSA Inc. and other computer retailers reported softening sales heading into the crucial Christmas season.
""There's no question that the quarter started out slow, but we're hopeful that things are getting better,"" said Mal Ransom, senior vice president of marketing at closely held Packard Bell NEC Inc., the second-biggest PC maker in the United States behind Compaq.
Consumer sales appear to be improving as it gets closer to Christmas, while prices of computer components remain low, Ransom said. ""It looks like we're going to get a reasonable quarter.""
",25
"Apple Computer Inc executives on Thursday showcased products and technology geared toward business computer users, reaffirming its committment to corporate markets.
Apple Chief Operating Officer Marco Landi, in a speech at at a software trade show, also said Apple will put much of its resources into making the Macintosh work smoothly with other computer systems from rivals such as Microsoft Corp, Sun Microsystems Inc and International Business Machines Corp.  
Apple has traditionally had a tough time selling its machines to big corporations, which prefer to buy machines based on Intel Corp computer chips running Microsoft software.
To win the favor of corporate programmers and technicians, Apple will release in coming months software and computers that can easily tap vital information stored in huge corporate databases, Landi said.
He also assured the audience of professional programmers that their investment in Apple technology and products is not in danger.  
""Apple may have its ups and downs, but you can be sure we will be there for the long haul,"" Landi said at Oracle Open World, a trade show for users of Oracle Corp's corporate software.
Apple executives demonstrated the company's network servers for storing and distributing data using Oracle database management software.
They also demonstrated Apple's HotSauce technology -- software under development to make it easy for average computer users to search huge databases without knowing esoteric computer languages and commands.  
In recent weeks, speculation has increased that Apple is close to buying Be Inc, a closely held software company in Menlo Park, Calif., to beef up its fundamental software.
Landi declined to comment about the speculation.
Other Apple officials said the company will outline its strategy for improving its Macintosh operating system in January.
-- Palo Alto desk +1 415 677 2542
",25
"Internet search firm Yahoo! Inc. Wednesday reported a smaller-than expected third quarter loss, reflecting sharply higher revenues from Internet advertising.
The Santa Clara, Calif.-based company reported a loss of $1.2 million, or 4 cents a share, for the quarter ended in September compared with a loss of $371,000, or 2 cents a share, in the 1995 quarter. Sales jumped to $5.2 million from $288,000 in the year ago quarter and $3.3 million in the second quarter.
Analysts had expected the company to lose 7 cents a share in the quarter, according to First Call, which tracks earnings estimates.
Yahoo! is an online directory that appears on computer screens as computer users tap the Internet, the global computer network. The service helps users find specific sites, articles and points of interest in the World Wide Web section of the Internet. Yahoo! makes its money from advertisers, which display banners on its Internet site.
The company, founded by two Stanford University students two years ago, went public in March.
Most of the quarter's loss came from the cost of advertising Yahoo! in traditional media, said Gary Valenzuela, chief financial officer. The company spent $4 million on sales and marketing, more than 14 times the $275,000 it spent a year ago. Research and development expenses also jumped in the quarter to $1.36 million.
""Our focus righrt now is absolutely on building market share, on expanding out reach globally and on adding"" services to the site, Valenzuela said.
Valenzuela declined to say how much the company planned to spend on marketing and research and development in coming quarters.
Yahoo! said the number of advertiser grew to 340 in the third quarter from 230 in the second quarter quarter.
Yahoo! also reported more than 1 billion ""hits,"" or viewings by computer users, in the quarter ended Sept. 30, giving the company an average of more than 14 million page views a day in September, up from an average of 9 million a day in June. The site is one of the most popular destinations on the Web.
Yahoo! had a loss of $1.4 million, or 5 cents a share, in the second quarter on sales of $3.3 million.
",25
"Most U.S. software publishers are expected to report only modest increases in their third-quarter earnings, reflecting a seasonal slowdown and a lack of new products this quarter.
""For the behemoths of the industry, like Microsoft (Corp) and Oracle (Corp ), business is still good,"" said Marshall Senk, an analyst at Robertson Stephens & Co in San Francisco. ""Summer is the slow buying season for most of the industry,"" but setting aside the seasonal slowing, ""business is still pretty okay.""  
Analysts expect Microsoft, the world's biggest personal computer software publisher, to report substantially higher earnings for its first quarter of fiscal 1997 on the back of strong sales of its networking software and business programs. Microsoft is scheduled to report results on Oct. 21.
Better-than-expected sales of personal computers in the past few months also will contribute to Microsoft's revenue, analysts said. Microsoft, based in Redmond, Wash., makes about a quarter of its revenue from the sale of its Windows family of operating systems.  Operating systems are the type of software that controls the basic functions of every PC.  
Microsoft benefits from strong PC sales because PC makers have to pay Microsoft a royalty for every copy of Windows they pack in the boxes of new machines.
Wall Street expects Microsoft to earn $0.90 a share, according to a survey of 24 analysts by First Call.  In the same quarter a year ago, Microsoft earned $0.78.
Novell Inc, the biggest publisher of computer networking software, is not expected to perform as well.  
The company is struggling to sell its NetWare flagship -- which controls the flow of computer information through departmental computer departments -- in the face of competition with Microsoft's Windows.  Novell, based in Provo, Utah, also still faces management issues following the resignation of Bob Frankenberg, the former chief executive officer, said David Takata, an analyst at Gruntal & Co in Los Angeles.
""They clearly still have a lot of work to do"" to get the company's management in order, Takata said.  
Novell is expected to earn $0.18 a share in its fiscal fourth quarter, compared with $0.16 a year ago, according to a First Call survey of 17 analysts.
Meanwhile, vendors of software for large, corporate computer networks and database management tools are expected to continue to post substantial gains in the third quarter on continuing strong demand.
""For a relatively mature market, this niche is still growing at a good clip,"" said Jim Pickrel, an analyst at Hambrecht & Quist in San Francisco.  
Pickrel said he expects Oracle and Informix Corp to report the most impressive results on strong sales of their database software -- computer programs which help big companies keep track of huge libraries of corporate information.  Both are taking business from Sybase Inc,  another database software publisher, which is still struggling to recover from marketing and technical shortcomings last year.
Sybase,is expected to report it broke even in the quarter, not counting charges for a restructuring, Pickrel said.  In the year-earlier quarter, Sybase earned $0.01 a share.  
Oracle, the biggest database software publisher, is expected to earn $0.27 a share for the fiscal second quarter ending November, according to a recent survey of 27 analysts by First Call.  A year ago in the same quarter, it earned $0.21.
Hambrecht & Quist's Pickrel said Informix could pass Sybase this quarter in revenue to become the second biggest database vendor.  Informix is expected to earn $0.18 a share, according to a First Call survey of 25 analysts.  In the same quarter a year ago, Informix earned $0.16.
",25
"Database software company Informix Corp. said Friday it filed a lawsuit against Oracle Corp., accusing its bigger rival of stealing trade secrets by hiring away its employees.
Oracle hired 11 Informix employees from Informix's Portland, Ore., research and development centre. All 11 workers quit on Wednesday morning, said Informix Chief Executive Phil White.
Informix stock fell $1.50, or 6.6 percent, to $21.375 in active trading on Nasdaq. Oracle stock fell 87.5 cents to $39.625, also on Nasdaq.
""This is a blatant effort by Oracle,"" said White. ""They're behind significantly technically. We're not going to let someone who's significantly behind technically just buy his way in.""
Oracle officials called the lawsuit ""ridiculous"" and said the 11 programmers approached Oracle on their own. They also had approached Microsoft Corp. about jobs, said Jerry Held, Oracle senior vice president of server technologies.
""This is a group of senior developers that was very frustrated by the lack of vision of Informix top managers,"" Held said. ""We did no active recruiting. I was called absolutely out of the blue"" when the former Informix staff joined Oracle.
The lawsuit, filed on Thursday in Oregon Circuit Court in Portland, seeks unspecified damages. Informix on Thursday also obtained a temporary injunction barring the former employees from giving trade secrets to Oracle, Informix said.
Informix also charged Gary Kelley, a former Informix product development vice president who left for Oracle, with breach of contract. Kelley did not return phone calls to Oracle's Portland facility.
Informix, based in Menlo Park, Calif., and Oracle, based 20 miles north in Redwood Shores, Calif., both write sophisticated programmes that store and retrieve huge amounts of information in corporate computer networks.
The companies for years have been fighting a marketing war touting their advances in database technology with each new release of their respective flagship products.
White said he believed Oracle was interested in gaining Informix's expertise in writing software for so-called massively parallel computers -- top-of-the-line machines that can process huge amounts of transactions simultaneously.
The 11 Informix employees who left for Oracle were working on this type of product, White said.
Held said Oracle does not have an interest in Informix's technology because Oracle is ahead in that area.
""Oracle has had parallel technology for years,"" Held said. ""Informix is playing catch-up. Phil has a knack for being behind and saying he's ahead.""
Technology debates aside, the spat is the most serious between the companies in years. White, normally a publicity-shy executive, said he was livid about Oracle's tactics and intended to make the lawsuit a political cause in Silicon Valley for preventing employee raids.
White said he personally went to the home of Oracle Chief Executive Larry Ellison on Thursday night to discuss the issue, but Ellison was in Hong Kong. Both men live in the same small town in Silicon Valley.
""I'm doing this not only for Informix and for our shareholders but also for the industry,"" White said. ""We can't let companies come in and throw big financial incentives and walk away with intellectual property we spent hundreds of millions of dollars developing.""
In recent years, several software rivals in Silicon Valley have accused each other of trade secret theft by employee snatching.
In 1992, Borland International Inc. accused a former employee of sending confidential electronic mail to new employer Symantec Corp.. Last year, Cadence Design Systems Inc.. filed a similar charges against direct competitor Avant Corp..
The court has set a hearing in the Informix case for Feb. 7.
",25
"Apple Computer Inc. will unveil Monday a new family of portable PowerBook computers to fill a critical gap in its product line.
The new PowerBook 1400 family, scheduled to be sold in mid-November with prices starting at $2,500, will feature a built-in CD-ROM drive and a bigger screen. The models are designed to appeal to small office users and students, Apple said.
Until now, the lack of a CD-ROM drive in its portables has held back Apple in competing with offerings from International Business Machines Corp., Compaq Computer Corp. and Dell Computer Corp., analysts said.
The new family ""isn't going to put them in the leadership role, but it's going to get them back in the game,"" said Bruce Steven, an analyst at market researcher International Data Corp.
Apple said it also plans to introduce another new series of PowerBooks in the first half of the 1997 with more advanced multimedia and communication capabilities. The company did not release any more specifications.
Apple has been scrambling to retool the PowerBook line. The predecessor to the new model, the PowerBook 5300, was recalled last spring because of several defects including a faulty AC power connector and a display casing that could easily crack.
The PowerBook 1400 will replace that family. The new machines will be based on a mid-range PowerPC microprocessor.
The faster microprocessor, the CD-ROM drive and bigger screen make the 1400 comparable in price and performance to top-selling models from other vendors, but the 1400 will have a tough time competing with low-priced offerings from second-tier PC manufacturers, Steven said.
Based on the memory, screen options and disk-drive size, the 1400 models will sell for an estimated $2,500 to $4,000 retail in the United States, an Apple spokeswoman said.
The entry-level model will not have the internal CD-ROM drive, she said.
Although the machines will go on sale in mid-November, there will be a limited supply on some models until after the New Year, she said.
",25
"Apple Computer Inc. Wednesday reported a $120 million loss in the first quarter of fiscal 1997 and warned investors it did not expect to return to profitability until September.
The troubled computer maker attributed the loss to slow sales of its its consumer-oriented Performa desktop computers during the normally robust Christmas quarter.
Apple's loss, which equalled 96 cents a share, compared with a loss of $69 million, or 56 cents a share, in the year-ago period. Sales for its first fiscal quarter ended on Dec. 27 fell to $2.13 billion from $3.15 billion.
Based on the weak first quarter results, the company said it planned to develop additional restructuring programmes during the second quarter with the goals of reducing its break-even point to $8 billion in annual revenues and enabling Apple to return to  profitability by the fourth fiscal quarter, which ends Sept. 26, 1997.
Previously, Apple had promised to return to sustainable profits by March but industry analysts had started to question that goal after Apple disclosed less than two weeks ago that sales of its Performa line were running behind plan.
""While we were very disappointed by the Performa sales results and the associated loss, our financial position remains sound,"" said Apple Chief Financial Officer Fred Anderson. ""We exited the quarter with $1.8 billion in cash and continued to show improvements in our inventory management during the quarter.
""Additionally we saw a 15 percent sequential increase in our high-end Power Macintosh sales,"" he said. ""We significantly exceeded our internal plans for shipments of PowerBooks and expect their availability to continue to improve in the second quarter.""
Nevertheless, analysts said the results, which Apple forecast less than two weeks ago represented a setback for Apple Chairman Gilbert Amelio, who had set a goal of stanching Apple's losses in 1996.
""Our expectations now do not show a profit until the fourth quarter, which ends in September,"" said Walter Winnitzki, analyst at brokerage PainWebber Inc. in New York.
",25
"Apple Computer Inc. Friday agreed to acquire NeXT Software Inc. for $400 million, a stunning move that reunites the computer company with its co-founder, Steven Jobs.
The acquisition will give Apple the software technology it needs to revamp the Macintosh personal computer, which has lost much of its technological luster to PCs running software from Microsoft Corp.
""The Mac has provided the innovation that the industry has been feeding off for the last 10 years,"" Jobs said. ""It's time for someone to come up with innovation to drive the industry forward. Who better than Apple?""
Apple Chief Financial Officer Fred Anderson said the company will pay $350 million, mostly in cash and a little stock, for Redwood City, Calif.-based NeXT. Apple also will pay off NeXT's $50 million debt.
Jobs, who founded Apple with a friend in his garage 20 years ago, led Apple through its early years until he was fired by the company's board in 1985.
Apple said he will come back to Apple part-time to lead an effort to rewrite the fundamental software of the Macintosh. He will report to Apple Chairman Gilbert Amelio.
Apple will base much of its next-generation operating system -- the computer program that controls the basic function of the Mac -- on Nextstep.
NeXT's technology will not only provide many of the software bells and whistles that Apple needs to compete with Microsoft's Windows, but will attract outside software companies to write more titles for the Mac, Amelio said.
""Without question, the technology at NeXT was the superior technology, by a significant amount,"" Amelio said.
Apple had been for months looking outside for help after having abandoned an unfinished operating system code-named ""Copland.""
The company looked at operating system technology and multimedia software from companies such as Sun Microsystems Inc. and closely held Be Inc.
Amelio said with NeXT's existing technology, he hopes Apple will have a new operating system in 1997.
For Jobs, the cheerleader who instilled an attitude in Apple that the company was out to change the world, the merger is another stop in a strange odyssey.
After being fired by his successor John Sculley in 1985, he left to found NeXT, which initially made a line of whiz-bang computers.
When NeXT ran into financial trouble in the late 1980s, the company dropped its computers to concentrate on software. In the past two years, NeXT has been selling a line of reasonably successful software for creating sites on the Internet's World Wide Web.
Meanwhile, Jobs helped co-found Pixar Animation Studios, a production studio that uses powerful computers instead of drawings. The company made last year's hit ""Toy Story.""
Jobs said he will continue to run Pixar.
",25
"Apple Computer Inc.'s expected loss of $100 to $150 million in its fiscal first quarter is a serious setback to the company's unfolding comeback plan, industry analysts said on Saturday.
Apple was banking on a strong Christmas season this year to convince potential customers there are still plenty of people using the Macintosh and plenty of people willing to write software for it, analysts said.
The company also had hoped to show software developers there would be enough demand for their products while Apple engineers finish a major overhaul of the Mac's fundamental software with the help of recently acquired Next Software Inc.
But the loss shows Apple is having a much tougher time selling its PC than analysts expected.
""I can't tell you how many people have asked me about whether they should be buying from Apple when there's so much negative news out there,"" said Richard Zwetchkenbaum, an analyst at market researcher International Data Corp.
In the September quarter, Apple's share of the PC market worldwide fell to 5.4 percent from 8.7 percent in the same quarter a year ago, according to a recent Apple filing with the Securities and Exchange Commission. In the U.S., its share fell to 7.3 percent from 13.2 percent.
Apple on Friday blamed a shortage of PowerBook laptops and slow sales of its Performa line -- which is geared toward home users -- for the shortfall. Consumer sales traditionally account for 40 percent of Apple's Christmas quarter.
Revenue for the quarter ended Dec. 27 will be about 10 percent less than the $2.3 billion reported in the September quarter, Apple said.
Meanwhile, Apple faces more technological competition from PCs based on Intel Corp. Pentium microprocessors. Intel will release in a few weeks a new Pentium with so-called MMX technology that can handle computer graphics and sounds much better than before.
Tim Bajarin, president of market research firm Creative Strategies International Corp., said some consumers may have put off buying Macintosh Performas -- until now, a favored brand for running multimedia software -- in favor of waiting for PCs based on Intel's MMX chips.
""It is an image problem,"" Bajarin said. ""Apple has not been able to convince the consumer that the software developers are coming back, and has not been able to convince them that Apple will be around in the future.""
Not counting the $400 million purchase of Next, Apple expects to report a loss of $100 million to $150 million, the company said. Based on Apple's 123.7 million shares outstanding, the loss would be about $0.80 to $1.21 a share.
Wall Street expected Apple to report a per-share loss of $0.04, according to a survey of analysts by First Call.
The expected loss puts pressure on Apple Chairman Gilbert Amelio, who on Tuesday will outline his company's strategy to thousands of Macintosh customers and programmers at the Macworld trade show.
Amelio said on Friday the company would have to reduce its expenses by about $1 billion to $8 billion annually, to return to profit, a move that could include another round of firings.
Last year, the company laid off about 1,300 people.
In recent speeches Amelio said he did not expect the company's revenue to grow until 1998, but other executives have said they expected the company to have ""sustainable profits"" by the end of the March quarter.
While it is too early to forecast the March quarter's results, Apple is ""telling people to recalibrate their expectations,"" David Harrah, corporate public relations director, said.
",25
"A motto of Bill Gates, chairman of Microsoft Corp., has been: ""A computer on every desk running Microsoft software.""
With that goal almost accomplished, Microsoft executives have set their sights on other flat surfaces, such as the kitchen counter, the living room's entertainment console and the back of airline seats.
At a Los Angeles conference for professional programmers, Microsoft executives outlined the company's plans to take its Windows family of operating systems into more types of computers, such as subway token vending machines, handheld portables and arcade video games.
The company also said it plans to spend much of its research and development budget to automate management tasks of personal computers and to simplify the machines' operations.
In recent weeks, Microsoft's competitors Sun Microsystems Inc. and Oracle Corp. have outlined their plans to build new types of computers, called network computers, that are simpler and cheaper to use than personal computers.
At Monday's Professional Developers Conference, Microsoft executives said future versions of its Windows -- which control about 80 percent of the world's desktop computers -- will do the same things.
""We are focusing now on the investments people have put in their computing technology and on increasing their returns,"" said Paul Maritz, Microsoft group vice president.
Maritz demonstrated software products that can recognize spoken commands. He also demonstrated programs that automatically take care of network chores without human help.
Features like these will help companies get more out of their investment in Microsoft products already in place, Maritz said.
He also demonstrated how programmers can use Windows in non-traditional types of computers. He showed a bullet-proof vending machine for New York subways that uses Windows software to dispense fares on smart cards.
",25
"Bay Networks Inc., keeping up with rivals in the computer networking business, said Wednesday it paid $99 million in cash and stock to buy closely held NetICs Inc.
The acquisition gives Bay Networks a line of devices called Fast Ethernet switches that are becoming increasingly popular with computer technicians for speeding up the flow of information through corporate computer networks.
Bay Networks' rivals Cisco Systems Inc. and 3Com Corp. have bought similar Fast Ethernet technology in recent months.
Bay Networks, based in Santa Clara, Calif., agreed to pay about $55 million in stock and $44 million in cash for NetICs, a company that has yet to report any revenue. Bay will charge ""a substantial portion"" of the purchase price against earnings for its quarter ending in December, the company said.
Bay Networks' stock was off 12.5 cents at $21.50 in late trading on the New York Stock Exchange.
The acquisition keeps Bay Networks up to date with rapidly emerging technology, said Dick Eyestone, its senior vice president. ""We live in dog years in this industry. Six months is like forever,"" he said.
Eyestone, who will oversee NetICs' operation as a Bay Networks unit, said his company plans to use NetICs' designs in its own line of networking products. Bay will release the first product from the acquisition in the first quarter.
NetICs, formed in 1995 by a dozen engineers, will remain in Acton, Mass. Until now, NetICs has been developing its technology and has not had any revenue, said Gary Vacon, NetICs founder and president.
Some analysts said they were surprised by the amount of money Bay was willing to pay to get its hands on the technology.
""I know companies with revenues in this sector that would be happy to get $30 million,"" said Steve Koffler, an analyst at NatWest Securities in New York. ""They obviously felt they need this technology.""
Bay Networks executives said they are paying the standard price for high-tech startups.
""This is right in line with the industry standard and our expectations,"" said Bill Ruehle, Bay Networks chief financial officer. He declined to say how much revenue he expects NetICs products to generate.
",25
"Apple Computer Inc. stunned investors Wednesday by reporting an unexpected $25 million fourth quarter profit, stemming a year of management turmoil and swelling red ink.
The Cupertino, Calif.-based computer maker, which had been expected to report a loss of 30 cents a share, posted a profit of 20 cents a share for the last three months of fiscal 1996, its first quarterly profit this year.
In the same quarter a year ago, Apple earned $60 million, or 48 cents per share. Included in the most recent quarter's operating results was a gain of $17 million.
Fourth-quarter revenue for fiscal 1996 declined 23 percent to $2.32 billion from $3 billion.
Apple released the news after the market closed and its shares jumped as much as $4.25 to $30 a share in after-hours trading.
Industry analysts attributed the profit to Apple's aggressive cost cutting, a bigger-than-expected exodus of employees and lower prices for key components, such as memory chips.
""It is a shock,"" said Daniel Kunstler, an analyst at JP Morgan in San Francisco who was expecting a loss. ""It seems they've brought the break-even point for their business down pretty dramatically. This is very encouraging.""
Most important to investors, Apple could remain profitable in coming quarters, which would bolster confidence among consumers that it will be around for years and keep loyal customers from switching to IBM-compatible personal computers, analysts said.
Fred Anderson, Apple's chief financial officer, stopped short of predicting a profit in the first fiscal quarter.
He said, however, that he expects the company's costs to increase only slightly in the December quarter on higher advertising expenses and that first-quarter revenue should be about the same as in the fourth fiscal quarter.
""We continue to make progress in strengthening Apple's financial condition, as our $410 million in positive cash flow from operations during the quarter suggests,"" Anderson said.
""We've reduced inventories by nearly $400 million since June and completed the quarter with over $1.7 billion in cash and short-term investments,"" he said in a statement.
In the previous three quarters, Apple reported huge losses because of declining Macintosh sales, management turmoil and growing popularity of personal computers running Microsoft's Windows software, which compete with Macintosh.
The company began slashing its costs when former National Semiconductor Corp. chief Gilbert Amelio took charge of Apple in February.
With most of the cost-cutting plan completed, Apple now will concentrate on the much tougher task of increasing revenue, Anderson said.
While shipments were down 26 percent in the fourth quarter to 932,000 units from the year-ago quarter, Apple said shipments were up 11 percent from the third quarter, a sign that customers were once again buying Apple's products.
Apple has a slew of new products in the works.
On Monday, the company is expected to unveil a new low-end PowerBook, a much-needed portable computer to replace Apple's older glitch-prone models.
In the first calendar quarter, the company also is expected to introduce new low-end consumer desktop models, a niche from which Apple had retreated in an effort to cut costs.
For the full year, Apple reported a loss of $816 million, or $6.59 a share, reflecting a series of hefty one-time charges for inventory writedowns and restructurings. In fiscal 1995, Apple earned $424 million, or $3.45 a share.
Revenue for the year fell 11 percent to $9.83 billion from $11.1 billion a year ago.
",25
"Macromedia Inc. shares plunged to a two-year low Friday after the software company reported an unexpected third-quarter loss and said it could face weak sales for another quarter.
Some analysts said they also were concerned that Apple Computer Inc.'s declining sales could hurt Macromedia's revenue from sale of software for Macintosh computers in coming quarters.
Shares of the San Francisco graphics software vendor fell $4.19, or 31 percent, to $9.31 in Nasdaq trading -- the lowest price since December 1994.
Macromedia on Thursday reported a loss of $2.36 million, or 6 cents a share, for its fiscal third quarter ended Dec. 31, compared with net income of $7.15 million, or 18 cents a share, in the same quarter a year ago. Third-quarter revenue fell 9 percent to $28.1 million from $30.9 million.
Wall Street expected Macromedia to report net income of 14 cents a share, according to a recent survey of analysts by First Call.
Macromedia gets about half its revenue from Director, a computer programme that helps graphic artists make animated clips for video games and multimedia software.
Macromedia customers are putting off Director purchases until the company releases a new version in a couple of months, analysts said.
""We are left with the concern that there will be a dip in revenue"" in the fourth quarter as well, said Kevane Wong, analyst at brokerage firm Jefferies & Co. in San Francisco.
Macromedia also gets about 60 percent of its revenue from Macintosh software sales. A slow rollout of high-end Macintosh PCs in Europe led to slow European sales for Macromedia as well, said Ed Bierdeman, analyst at Dakin Securities.
""The Mac market is like a block of ice melting in the sun,"" leaving many Mac software vendors, including Macromedia, to suffer, Bierdeman said.
Macromedia likely will post a small loss in its fiscal fourth quarter, ending in March, Bierdeman said.
Several analysts also said they were concerned Macromedia might not be able to finish the new version of Director until spring, which would jeopordize earnings until the quarter ended in June.
Macromedia officials could not be reached for comment immediately.
",25
"Microsoft Corp said on Monday it had sent the final version of Office 97 -- a product that is expected to be its biggest revenue generator in 1997 -- to factories and will have it in stores within weeks.
The product, a package of Microsoft's top-selling business programs, is Microsoft's biggest new product since the release of Windows 95, and is expected by analysts to increase the company's revenue by about 15 to 20 percent this year.
About half of Microsoft's $8 billion in revenue came from business applications last year.
""People on the (Office 97) development team were jumping in the fountain this afternoon,"" just after Microsoft sent the final version to manufacturing, said Pete Higgins, Microsoft group vice president of applications.
The new version, which had been in development for more than two years, features better ties to the Internet, help tools that guide computer users through common tasks and a new component called Outlook, which manages computer users' documents, appointments, contacts and electronic mail.  
Higgins said the standard edition of Office 97 will cost about $239 for users of existing versions of Office. He said Office 97 will be available on a limited basis in December, and more broadly in early January.
Foreign versions of the product will be available a month to six months later, he said.
Analysts said the new version has several significant features that could goad corporate computer buyers to upgrade.
""It will take some time to catch on because it requires a high-end PC,"" said Mary Meeker, an analyst at Morgan Stanley & Co. ""But I think products like these are going to drive PC sales.""
On Sunday, International Business Machine Corp's Lotus Development Corp unveiled its own suite of office applications, called SmartSuite 97, which it said would begin shipping in January.
Microsoft has roughly 70 percent of the market by unit volume, followed by Lotus with 23 percent, according to recent market research data.
",25
"Apple Computer Inc.'s unexpected fourth quarter profit initially impressed Wall Street, but some analysts said Thursday that the computer maker was not out of the woods yet.
Apple on Wednesday reported a profit of $25 million for its fiscal fourth quarter, defying Wall Street's expectations for a loss. But analysts said that a steeper-than-expected 23 percent drop in revenue in the quarter could hurt the computer maker's prospects in the new fiscal year.
The analysts said sluggish revenues could force Apple to skimp on research and development spending just as rivals Microsoft Corp. and Intel Corp. are preparing innovative software for personal computers that could permanently squelch Apple's technology and ease-of-use bragging rights.
""Apple's never hit a wall like this before,"" said Kurt King, an analyst at Montgomery Securities in San Francisco. ""They've never seen their sales drop this much before. It's possible they can recover, but unlikely.""
Analysts attributed Apple's profit, equal to 20 cents a share, to aggressive cost cutting, lower prices for memory chips, as well as a one-time gain of $17 million. In the 1995 quarter, the Cupertino, Calif.-based company earned $60 million, or 48 cents a share.
Revenues fell to $2.32 billion from $3 billion.
While Apple's machines remain popular in education and publishing, the company has lost many customers to Compaq, Dell, Hewlett-Packard and other competitors.
The man hired in February to revive the company, Gilbert Amelio, the former head of National Semiconductor Corp., has cut costs aggressively but has not found a way to boost sales.
In the crucial December quarter, revenues will be about even with the $2.32 billion reported for the September quarter, Apple executives said.
The prospect of flat sales during the Christmas season, typically the year's busiest, could finally convince loyal developers of educational and consumer software to defect, further loosening Apple's hold on those markets, analysts said.
""I can't remember the last time Apple's revenue declined in the December quarter from the September quarter,"" said Jim Poyner at Oppenheimer in New York. ""Christmas is supposed to be Apple's high-water mark. This isn't a good sign.""
The cautious comments were reflected in Apple's stock, which retreated after an early-morning surge to close at $26.375, up 62.5 cents, on Nasdaq. Earlier, the stock was as high as $27.75.
Apple, which lost about $800 million in the three prior quarters, has been slow to introduce new products.
It is not expected to release a new line of low-cost Macintosh machines aimed at consumers until next year, and it has been slow to replace a glitch-prone line of PowerBook portable computers. A new PowerBook line is expected to be unveiled on Monday, analysts said.
In a conference call with reporters and analysts, Apple Chief Financial Officer Fred Anderson said PowerBook sales were expected to fall $150 million in the current quarter, adding to pressure on revenues.
Anderson also said the company's research and development budget would probably be flat next year.
But the $600 million or so that Apple spent in fiscal 1996 will not keep up with Microsoft and Intel, which are each pouring billions of dollars into improving the multimedia and Internet capabilities of personal computers, analysts said.
""Where are Apple's innovations going to come from?"" said Richard Zwetchkenbaum at market researcher International Data Corp. ""They've got to come up with something new, something from the ground up.""
In the first half of calendar 1996, Apple's share of the domestic computer market fell to 6.7 percent from 9.9 percent in the 1995 period, Zwetchkenbaum said. The rest of the PC market is expected to grow 20 percent this year.
""Apple was the only vendor of the top ten PC makers to fall in shipments this year,"" Zwetchkenbaum said.
",25
"Apple Computer Inc. said Thursday it will cut U.S. prices of its Power Macintosh personal computers by as much as 30 percent to make the machines more competitive with those from rival PC makers.
The price cuts are part of Apple's effort to make its machines as attractive as so-called Wintel PCs -- machines based on Intel Corp. microprocessors running Microsoft Corp Windows software.
Apple, based in Cupertino, Calif., said it will reduce the price of its high-end Power Macintosh 9500/200 to about $4,200 from $4,900.
The price of the entry-level Power Macintosh 7200/120 business machine will be cut to about $1,600 from $2,300, the company said. The price reductions, which will be effective Nov. 2, range from 9 percent to 30 percent.
Apple can afford the price cuts because it has reduced its costs significantly since a restructuring effort began nine months ago, said Byran Longmire, a Power Macintosh product manager at Apple.
""It shows that we can take aggressive pricing actions across many of our product lines and still maintain a healthy business,"" Longmire said.
Apple's computers have traditionally been priced higher than PCs with similar features made by companies such as International Business Machines Corp. and Compaq Computer Corp.
With the release of Microsoft's Windows 95 program a year ago, Apple lost much of its bragging rights for ease-of-use and saw many of its customers flee to the IBM-compatible world. In the past year, the company reported more than $800 million in losses amid falling sales.
To make its machines more attractive, Apple has had to cut its prices to keep customers from defecting.
""Now when a business customer does a feature-for-feature comparison between a Power Macintosh and a Wintel machine, that customer will find the Power Macintosh competitively priced,"" Gary Little, Apple's senior vice president of the Power Macintosh division, said in a statement.
The price cuts should help Apple increase the momentum it has gained in recent weeks, analysts said. Earlier this month, Apple reported an unexpected profit in its fiscal fourth quarter ended Sept. 30.
The price cuts will not ""take Apple out of the hole, but we're seeing a more aggressive Apple, which is good news,"" said Scott Miller, an analyst at market researcher Dataquest Inc. The price cuts and the news about better financial health could convince more customers sitting on the fence to buy an Apple, Miller said.
",25
"Synopsys Inc. said Thursday it agreed to buy Epic Design Technology Inc. for about $428.1 million in stock to gain expertise in a hot niche of the semiconductor design business.
Synopsys, which writes software to help engineers design computer chips, said it will issue 0.7485 of its shares for each of Epic's 13.7 million shares outstanding. Based on Synopsys's closing stock price of $41.75 on Wednesday, Synopsys would pay about $31.25 for each Epic share.
Shares of Epic, based in Sunnyvale, Calif., fell 87.5 cents to $31 in late Nasdaq trading. Shares of Synopsys, based in Mountain View, Calif., were unchanged at $41.75, also on Nasdaq.
Synopsys specializes in software used in designing the overall framework of a microchip. Epic specializes in software for designing individual microscopic circuits, millions of which make up the microchip.
The acquisition gives Synopsys an edge as the so-called design automation industry scrambles to come up with ways to help engineers design ever smaller chips, analysts said.
""We believe the Epic acquisition is a good strategic move,"" said Raj Seth, analyst at Cowen & Co. in Boston. ""Synopsys picks up technologies that are increasingly critical to developing"" the tiny ""deep submicron"" circuits.
Synopsys' customers, which include some of the world's biggest chip makers, have been asking for a suite of design software that would let engineers design a chip's framework as well as its circuits, said Aart de Geus, Synopsys chief executive.
Epic will become a unit of Synopsys, the companies said. Sang Wang, Epic chairman and CEO, will head the unit.
Synopsys will take an undetermined charge for the acquisition in the quarter the transaction is done, ""ideally March,"" said Brooke Seawell, Synopsys chief financial officer. Because of little overlapping products, there should be no Epic job cuts, Seawell said.
",25
"Apple Computer Inc. Wednesday reported a $120 million loss in its fiscal first quarter and warned investors it did not expect to report a profit until September.
The troubled computer maker, based in Cupertino, Calif., also said it expected revenue for the current fiscal year, which ends next September, to drop about 13 percent to $8 billion to $8.5 billion because of weak consumer sales.
Apple's loss, which equaled 96 cents a share, compared with a loss of $69 million, or 56 cents a share, in the year-ago quarter. Sales for the quarter ended Dec. 27 fell to $2.13 billion from $3.15 billion.
Apple attributed the latest quarterly loss to slow sales of consumer-oriented Performa desktop computers during the crucial Christmas quarter, which analysts said was partly due to concerns about Apple's future.
""Apple's been under a black cloud, and part of it has been Apple's doing,"" said Lou Mazzucchelli, analyst at brokerage Gerard Klauer Mattison in New York. ""It's hard for a consumer to get the gumption to buy a Performa when everyone's asking, 'Is Apple dead yet?'""
Apple officials said the company will unveil in coming weeks its second restructuring program in two years, aimed at cutting operating costs by $400 million.
The plan could include more job cuts, Chief Financial Officer Fred Anderson said. Apple wants to reduce its break-even point to $8 billion in annual revenues to enable it to return to profitability by the end of September.
Previously, Apple had promised to return to sustainable profits by March. But industry analysts had started to question that goal after Apple disclosed less than two weeks ago that sales of its Performa line were running behind plan.
Apple, which posted a record loss last year of $816 million, has been struggling to return to profitability in the face of increased competition from computers using Microsoft Corp.'s Windows operating system and Intel Corp.'s computer chips.
Last February, Apple replaced Chief Executive Michael Spindler with National Semiconductor Corp. boss Gilbert Amelio and then, in December, announced a reunion with former co-founder Steven Jobs when it agreed to acquire Job's Next Software Inc. for $400 million.
Meanwhile, debt rating agency Standard & Poor's lowered Apple's corporate credit and debt rating another notch Wednesday, putting the company's debt further into junk bond status.
The rating agency said the downgrade reflected the challenges facing Apple, including reducing costs and restoring revenue growth, executing a cohesive operating system upgrade upon completion of the Next acquisition, and Apple's diminished liquidity and financial resources.
""Despite its position among the top five worldwide personal computer manufacturers ... Apple has been struggling with extremely competitive industry conditions, slipping market share, and operating losses,"" the rating agency said.
Despite the slowdown in Performa sales, Anderson said Apple's financial position remained strong.
""While we were very disappointed by the Performa sales results and the associated loss, our financial position remains sound,"" he said. ""We exited the quarter with $1.8 billion in cash.""
Anderson said there were some bright spots in its results. European shipments rose 50 percent in the first quarter from the fourth quarter. Sales to educational organizations also were above the company's goals, Anderson said.
Still, Performa sales, which account for about a third of Apple's revenues, will be weak for the rest of the year. ""We had a major problem in this one product area,"" he said.
Analysts said the loss, which Apple forecast two weeks ago, represented a setback for Amelio. He had set a goal of stanching Apple's losses in 1996 and getting revenue growing again by 1998.
News of the latest loss can drive even more consumers to avoid buying Apple products, analysts said.
""The question is, can Apple wait until 1998 to get its growth engine going again?"" said Walter Winnitzki, analyst at broker PaineWebber Inc. in New York.
Apple reported its results after the market closed. Apple closed at $17.25 a share, down 62.5 cents, on Nasdaq.
",25
"When Apple Computer Inc. fired co-founder Steven Jobs in 1985, Apple employees did not know whether to cry or to rejoice.
Through the early 1980s, Jobs had inspired Apple engineers to create a computer called the Macintosh which would change the world. At the same time, though, Jobs and his mercurial temper burned out many of the same engineers who adorded him.
On Friday, more than 11 years after Jobs was ousted in a stunning boardroom coup, Apple took a huge gamble by bringing him back.
His assignment is to help the Cupertinto, California-based computer company revamp the software behind the Macintosh, an effort that had been mired for three years.
The bet is that Jobs is the only person who can inspire Apple's demoralised programmers to create software that would leapfrog Microsoft Corp's competing Windows operating system.
""He will help tremendously,"" said Randy Wigginton, a former Apple programmer who worked under Jobs to write the software of the original Mac. ""Steve is incredibly bright, talented, amusing.""
On Friday, as word of Apple's decision to rehire Jobs spread, shares of the company rose $1.25 or 5.6 percent, to $23.50.
Job's new company, NeXT Software Inc., which Apple agreed to acquire on Friday for $400 million, offers a computer operating system that has many of the software bells and whistles Apple has been looking for to catch up with rival Microsoft.
Apple had tried to reach a deal with closely held software company Be Inc., founded by another former Apple executive, Jean-Louis Gassee, but the talks broke down and the company turned to Jobs for help.
With NeXT's existing technology, Apple hopes to finish the overhaul of its popular Macintosh operating system -- the type of programme that controls the fundamental functions of a computer -- in late 1997.
But the key asset that Apple acquired is Jobs. He will serve part-time as a technology adviser and will report to Apple Chairman Gilbert Amelio.
Several Apple programmers working on the Mac overhaul said they have been frustrated for months with a string of weak managers who could not get the project past a rough sketch even after three years. With Jobs, the programmers said, they hope the project can finally move forward.
""Everybody is excited,"" said an Apple employee close to the project. ""I am very excited.""
The risk of hiring Jobs is his volatility. People who have worked for him said Jobs has a knack for inspiring engineers to think that their work is a life-or-death project, a sentiment Apple now needs. But the same sentiment can burn engineers out.
""In some ways he has mellowed, but he still has an incessant drive for perfection,"" said Joanna Hoffman, the Mac's first marketing manager.
Jobs could not be reached on Saturday for comment. On Friday he told reporters he was looking forward to rejoining the company he co-founded nearly 20 years ago out of his parent's garage.
""I feel very lucky to be a part-time Apple employee and work for Gil and advise him on product strategy.""
Jobs also will work with Apple Chief Technical Officer Ellen Hancock, a veteran International Business Machines Corp. software manager who has set specific goals for the operating system team.
Jobs' visionary role and Hancock's strict, no-nonsense management style balance nicely, said Tim Bajarin, analyst at market researcher Creative Strategies Research.
",25
"Apple Computer Inc. ( stunned investors Wednesday by reporting an unexpected $25 million profit for the last three months of its fiscal year.
The Cupertino, Calif.-based computer maker, which had been expected to report a loss of 30 cents a share, posted a profit of 20 cents a share, its first quarterly profit this year.
In the same quarter a year ago, Apple had net income of $60 million, or 12 cents. Included in the most recent quarter's operating results was a gain of $17 million.
Fourth-quarter revenue for fiscal 1996 declined 23 percent to $2.32 billion from $3 billion.
Apple released the news after the market closed and Its shares jumped as much as $4.25 to $30 a share in after-hours trading.
The profit came because of Apple's aggressive cost cutting, a bigger-than-expected exodus of employees and lower prices for key components, such as memory chips, analysts said.
""It is a shock,"" said Daniel Kunstler, an analyst at JP Morgan in San Francisco who was expecting a loss. ""It seems they've brought the break-even point for their business down pretty dramatically. This is very encouraging.""
Most important to investors, Apple could remain profitable in coming quarters, which would bolster confidence among consumers that it will be around for years and keep loyal customers from switching to IBM-compatible personal computers, analysts said.
Fred Anderson, Apple's chief financial officer, stopped short of predicting a profit in the first fiscal quarter.
He said, however, that he expects the company's costs to increase only slightly in the December quarter on higher advertising expenses and that first-quarter revenue should be about the same as in the fourth fiscal quarter.
""We continue to make progress in strengthening Apple's financial condition, as our $410 million in positive cash flow from operations during the quarter suggests,"" Anderson said.
""We've reduced inventories by nearly $400 million since June and completed the quarter with over $1.7 billion in cash and short-term investments,"" he said in a statement.
In the past three quarter, Apple reported huge losses because of declining Macintosh sales, management turmoil and growing popularity of personal computers running Microsoft's Windows software, which compete with Macintosh.
The company began slashing its costs when former National Semiconductor Corp. chief Gilbert Amelio took charge of Apple in February.
With most of the cost-cutting plan completed, Apple now will concentrate on the much tougher task of increasing revenue, Anderson said.
While shipments were down 26 percent in the fourth quarter to 932,000 units from the year-ago quarter, Apple said shipments were up 11 percent from the third quarter, a sign that customers were once again buying Apple's products.
Apple has a slew of new products in the works.
On Monday, the company is expected to unveil a new low-end PowerBook, a much-needed portable computer to replace Apple's older glitch-prone models.
In the first calendar quarter, the company also is expected to introduce new low-end consumer desktop models, a niche from which Apple had retreated in an effort to cut costs.
For the full year, Apple reported a loss of $816 million, or $6.59 a share, reflecting a series of hefty one-time charges for inventory writedowns and restructurings. In fiscal 1995, Apple earned $424 million, or $3.45 a share.
Revenue for the year fell 11 percent to $9.83 billion from $11.1 billion a year ago.
",25
"Microsoft Corp. Monday will unveil a set of software technologies that lets programmers more easily create software for sharing information through corporate and public computer networks.
Microsoft executives, including Chairman Bill Gates, also will discuss at an event in Los Angeles development plans for the company's Windows family of operating systems, the company said Friday.
At one of its periodic Professional Developers Conferences, Microsoft executives will encourage programmers to write commercial software based on Microsoft's standards.
Microsoft's event will be held the same week Oracle Corp., Microsoft's biggest rival in the corporate software business, is holding a conference in San Francisco to pitch its own approach to writing programmes for shuffling information through huge networks.
Both companies in recent months have been retooling their key applications and networking software to work on the Internet's World Wide Web and internal corporate networks called intranets.
Writing even simple programmes to let computer users collaborate on documents through networks tradionally has required intimate knowledge of difficult programming techniques.
The technology Microsoft will unveil on Monday will relieve programmers of the need to know the secret handshakes of its Windows operating systems, said Tanya van Dam, a Microsoft group product manager.
The move would encourage developers to base more of their commercial products on Microsoft's Windows NT networking operating system, analysts said.
Oracle has a similar aim.
On Monday, the company will unveil its own tools for writing intranet software for tapping information stored in Oracle databases, Oracle executives said.
Corporate programmers have written huge libraries of financial, manufacturing and human resources software using Oracle's products. The new programming tools would let programmers easily convert the libraries to work on the Web, Oracle said.
",25
"Apple Computer Inc is expected to report on Wednesday that it had a loss in its fiscal fourth quarter ended in September amid declining sales of its Macintosh computers, but a turnaround may be at hand.
Apple's management is likely to tell investors that the beleagured company is getting closer to resuming profitability, possibly as early as the December quarter, analysts said.  
""The financial condition of the company has been strengthened,"" said Todd Bakar, an analyst at Hambrecht & Quist in San Francisco.  ""Questions of their long-term viability don't come up as often anymore.""
In the past three quarters, Apple has reported huge losses as customers have defected to cheap IBM-compatible personal computers running Microsoft Corp's easy-to-use Windows 95 software.  By cutting costs and firing workers, Apple has managed to whittle its losses.  
Wall Street expects Apple, based in Cupertino, Calif., to post a loss of $0.30 a share, according to a recent survey of 23 analysts by First Call.  In the fiscal fourth quarter last year, Apple reported net income of $60.1 million, or $0.48 a share, on revenue of $3.0 billion.
Apple's new management, under former National Semiconductor Corp chief Gilbert Amelio, has done a good job cutting expenses, analysts said.
Apple also has managed to raise enough cash to be out of a dire cash shortage, which threatened to hamper day-to-day operations. The company could even generate a little cash from its business this quarter, analysts said.
The trick now is to convince consumers that the Macintosh is a worthy competitor to PC clones.
",25
"Apple Computer Inc. Chairman Gilbert Amelio said Tuesday the computer maker's three-year turnaround plan was still on track despite its statement last week that it will report a first-quarter operating loss of as much as $150 million.
Amelio, speaking to thousands of Macintosh computer enthusiasts at the MacWorld trade show here also called on several star computer industry executives to express their support for the Macintosh.
In his much-anticipated keynote speech, Amelio assured Mac customers the company will have a smooth transition as Apple shores up its finances and overhauls the fundamental software of the Macintosh.
""We will encounter a few bumps on the way, but I don't want that to shake your confidence,"" Amelio told Macintosh customers and software developers. ""We are sticking to our strategy.""
Apple has been struggling for the past year to stop huge financial losses, develop new software to make the Mac more modern and increase revenues. Under Apple's three year plan, it aims to stop financial losses in 1996, develop new products in 1997 and increase revenues in 1998.
Since Amelio became chairman of the Cupertino, Calif.-based company a year ago, he has slashed costs. In December, Apple also agreed to buy NeXT Software Inc. for $400 million to get its help in revamping the fundamental software of the Mac.
In order to move developers smoothly from Apple's current operating system to the new system, Apple said it plans to continue to deliver regularly scheduled upgrades to the current system while accelerating development of a new and advanced operating system.
The new operating system, code-named ""Rhapsody,"" will be based on the merging of technologies from Apple and NeXT.
""Our goal is to be one of the world's strongest brands for consumer, education and the enterprise,"" Apple co-founder and Next Software President Steven Jobs said, adding Apple hoped to rely on Next's multimedia and computing intensive software to accomplish that goal.
Apple said Friday it expected to report a loss from operations of $100 million to $150 million because of weak sales of its Performa line of Macintosh computers. Revenue for the company's first quarter ended Dec. 27 is expected to drop 10 percent from the $2.3 billion reported in the September quarter.
Amelio blamed the shortfall on weak consumer sales for personal computers rather than a breakdown of Apple's strategy.
""We had one thing that really fell out of bed in a big way and that is, Santa Claus forgot to come,"" he said, referring to the surprisingly low sales of its Performa desktop PC line aimed at consumers.
The first quarter ""was about retail sales, not about the fundamentals in the recovery of Apple,"" Amelio told a packed ballroom.
Industry experts say part of the blame for declining revenue falls on the perception that there is not as much software for the Macintosh as there is for PCs running Windows software from Microsoft Corp..
To boost the Mac's image, Amelio turned to executives from Microsoft, Sun Microsystems Inc., and Netscape Communications Corp. to announce software plans for future versions of the Mac.
""We see great opportunities for the Mac in the future,"" said Paul Maritz, Microsoft vice president in charge of application development.
At Macworld, Microsoft introduced its Internet Explorer browser for the Mac.
The Redmond, Wash.-based software giant, which has often battled Apple for control of the PC industry, also said it created a new product unit responsible for design and development of a Macintosh version of its widely used Microsoft Office software suite.
While Microsoft remains Apple's great nemesis in the operating systems software business, Microsoft also has long served as the leading independent developer of software applications that run on Apple Macintosh computers.
""When Apple's biggest third-party developer decides to commit new resources to its Macintosh applications business, that's a pretty clear sign that there's still money to be made in the Macintosh market,"" said Jeffrey Tarter, an industry analyst and publisher of Soft*Letter.
The creation of the new Macintosh product unit, part of the Microsoft desktop applications division, marks the first time in the history of the division that an entire product unit has focused exclusively on the Macintosh, Microsoft said.
James Barksdale, chief executives of Internet software vendor Netscape, also said his company will release versions of its communication software within the next few weeks that will run on Apple's next-generation operating system.
Apple's stock closed down 37.5 cents at $17.50 on Nasdaq.
",25
"Macromedia Inc. shares plunged to a two-year low Friday after the software company reported an unexpected third-quarter loss and said it could face weak sales for another quarter.
Some analysts said they also were concerned that Apple Computer Inc.'s declining sales could hurt Macromedia's revenue from sale of software for Macintosh computers in coming quarters.
Shares of the San Francisco graphics software vendor fell $4.19, or 31 percent, to $9.31 in Nasdaq trading -- the lowest price since December 1994.
Macromedia on Thursday reported a loss of $2.36 million, or 6 cents a share, for its fiscal third quarter ended Dec. 31, compared with net income of $7.15 million, or 18 cents a share, in the same quarter a year ago. Third-quarter revenue fell 9 percent to $28.1 million from $30.9 million.
Wall Street expected Macromedia to report net income of 14 cents a share, according to a recent survey of analysts by First Call.
Macromedia gets about half its revenue from Director, a computer program that helps graphic artists make animated clips for video games and multimedia software.
Macromedia customers are putting off Director purchases until the company releases a new version in a couple of months, analysts said.
""We are left with the concern that there will be a dip in revenue"" in the fourth quarter as well, said Kevane Wong, analyst at brokerage firm Jefferies & Co. in San Francisco.
Macromedia also gets about 60 percent of its revenue from Macintosh software sales. A slow rollout of high-end Macintosh PCs in Europe led to slow European sales for Macromedia as well, said Ed Bierdeman, analyst at Dakin Securities.
""The Mac market is like a block of ice melting in the sun,"" leaving many Mac software vendors, including Macromedia, to suffer, Bierdeman said.
Macromedia likely will post a small loss in its fiscal fourth quarter, ending in March, Bierdeman said.
Several analysts also said they were concerned Macromedia might not be able to finish the new version of Director until spring, which would jeopordize earnings until the quarter ended in June.
Macromedia officials could not be reached for comment immediately.
",25
"Apple Computer Inc. said Tuesday it plans to to work with a restaurant operator to open cybercafes in the United States and Europe starting late next year.
The third-biggest maker of personal computers licensed its name and famous half-eaten apple logo to London-based Mega Bytes International BVI, a developer of theme parks. Mega Bytes will develop a high-tech chain of eateries where patrons can surf the Internet, play games and eat.
Apple said the restaurants are part of its plan to spread its famous brand into the everyday world, as other non-gourmet companies, such as Harley-Davidson Motorcyles and Nike Inc., have done.
The first restaurant, slated to open in Los Angeles in late 1997, will flaunt Apple's computers at every table, the company said. Customers can browse the World Wide Web with high-speed access, check out the latest CD-ROM titles and send e-mail.
Restaurants in London, Paris, New York, Tokyo and other cities will follow, Apple said.
Apple, based in Cupertino, Calif., will only make money from the licensing agreement, an Apple spokeswoman said. Terms of the agreement weren't disclosed. Mega Bytes will run the restaurants.
",25
"The stock of Vantive Corp. plunged as much as 24 percent Friday after the software company said it expects slowing revenue growth in the next two quarters because of a shortage of sales staff.
The warning came one day after the company reported better than expected third-quarter earnings.
Vantive, based in Santa Clara, Calif., lost $9.25 to close at $31.50 on Nasdaq trading of 4.5 million shares.
Vantive writes software that helps big companies, such as Hewlett-Packard Co. and Motorola Inc., find and keep track of customers and their requests.
In the past few quarters, Vantive's revenue has more than doubled each time on increasing demand for its customer-service products.
In the third quarter ended Sept. 30, the company's income jumped five-fold to $3.17 million, or 12 cents a share, from $632,000, or 3 cents, a year ago.
Wall Street had expected Vantive to earn 7 cents a share, according to First Call, which tracks analyst forecasts.
Third-quarter revenue more than doubled to $11.1 million from $4.29 million on strong software sales and service contracts, the company said.
In a conference call with analysts, however, Vantive executives said revenue in the its next two quarters will be about flat to slightly higher compared with the third. The company doesn't have enough qualified sales and marketing staff to sell its products, the company said.
""We believe most sequential growth for 1996 has already occurred,"" Kathleen Murphy, Vantive's chief financial officer, told the analysts.
The forecast caught Wall Street by surprise, since the firm had been expected to report continued revenue leaps.
Still, most said the forecast isn't a sign of extended tough times for Vantive.
""Even if sequential growth in the fourth and first quarter is flat, that (revenue) would be double what it was last year,"" in the same quarter, said Ed Bierdeman, an analyst for Dakin Securities.
Murphy said the company will concentrate on expanding and training its sales and support staff in the coming quarters. It takes about six months to train new sales people, so the new staff will not be effective until the second quarter of 1997.
",25
"Synopsys Inc. said Thursday it agreed to buy Epic Design Technology Inc. for about $428.1 million in stock to gain expertise in a hot niche of the semiconductor design business.
Synopsys, which writes software to help engineers design computer chips, said it will issue 0.7485 of its shares for each of Epic's 13.7 million shares outstanding. Based on Synopsys's closing stock price of $41.75 on Wednesday, Synopsys would pay about $31.25 for each Epic share.
Shares of Epic, based in Sunnyvale, Calif., fell 87.5 cents to $31 in late Nasdaq trading. Shares of Synopsys, based in Mountain View, Calif., were unchanged at $41.75, also on Nasdaq.
Synopsys specialises in software used in designing the overall framework of a microchip. Epic specialises in software for designing individual microscopic circuits, millions of which make up the microchip.
The acquisition gives Synopsys an edge as the so-called design automation industry scrambles to come up with ways to help engineers design ever smaller chips, analysts said.
""We believe the Epic acquisition is a good strategic move,"" said Raj Seth, analyst at Cowen & Co. in Boston. ""Synopsys picks up technologies that are increasingly critical to developing"" the tiny ""deep submicron"" circuits.
Synopsys' customers, which include some of the world's biggest chip makers, have been asking for a suite of design software that would let engineers design a chip's framework as well as its circuits, said Aart de Geus, Synopsys chief executive.
Epic will become a unit of Synopsys, the companies said. Sang Wang, Epic chairman and CEO, will head the unit.
Synopsys will take an undetermined charge for the acquisition in the quarter the transaction is done, ""ideally March,"" said Brooke Seawell, Synopsys chief financial officer. Because of little overlapping products, there should be no Epic job cuts, Seawell said.
",25
"Tandem Computer Inc on Wednesday will become the latest maker of high-end, proprietary computers to introduce a line of machines based on personal computer technology.
Tandem, which specializes in making transaction-processing computers for banks and stock exchanges, said it will unveil a line of servers based on Intel Corp's Pentium Pro microprocessors and Microsoft Corp's Windows NT networking operating system.
The servers -- which are computers souped up to control the flow of information through a network -- will include some of Tandem's technology for handling huge volumes of transactions, the company said. Tandem plans to pitch the machines to customers who want to set up shop on the Internet.
The machines are Tandem's first step to rely less on sales of computers based on its own proprietary software and technology.
Banks, telephone companies and stock exchanges still rely heavily on Tandem's so-called fault-tolerant computers for their heavy-duty computing.
But Tandem's sales growth has stalled in recent years as its customers have replaced some of its machines with networks of cheaper computers from companies such as Sun Microsystems Inc and Compaq Computer Corp.
To strike back, Tandem unveiled a strategy earlier this year that includes making servers based on off-the-shelf technology from Intel and Microsoft.
Other high-end computer makers, such as International Business Machines Corp and Digital Equipment Corp, embarked on similar strategies years ago.
With its new machines, Tandem plans to help its existing customers set up networks based on Microsoft's Windows NT networking software, said Chris Rooke, Tandem's vice president of corporate marketing.
""We expect Tandem to now be on our customers' vendor list when they're looking at using Windows NT in more business- critical applications,"" Rooke said. ""Yes, we do expect to open new accounts, but we expect to still be Fortune 500-class customers.""
Rooke said Tandem will concentrate on selling the machines as foundations for businesses that want to sell their wares online.
Tandem also plans on Wednesday to unveil a new line of its Himalaya servers, a line of proprietary servers for storing and retrieving huge libraries of corporate information.
Rooke declined to discuss the pricing of its new lines.
",25
"A warning about weak Christmas sales from personal computer retailer CompUSA Inc. Thursday raised concerns that the entire computer industry may have a weak fourth quarter, sending PC stocks lower.
CompUSA, tradionally one of the healthier PC retailers, said it expected a disappointingly small rise in sales in the fourth quarter because of weak PC sales. The Dallas-based company was the third major PC retailer in two weeks to report a weak outlook.
""This is certainly not a good sign,"" said Scott Miller, an analyst at market researcher Dataquest Inc. in San Jose, Calif.
Stock in Compaq Computer Corp., the world's biggest PC maker, fell $2 to $72.375. Dell Computer Corp. slipped $1.875 to $51.25. And Intel Corp., the biggest maker of PC microprocessors, declined 56.25 cents to $130.375.
Analysts said PC companies that make machines geared toward home users, including Packard Bell NEC Inc. and Acer Inc., did have a disappointing year.
Unlike last year, when Microsoft Corp. released the Windows 95 operating system, there were no compelling new technologies in 1996 to drive consumers to stores.
But investors may be overreacting, analysts said. The three biggest personal computer makers -- Compaq, International Business Machines Corp. and Dell -- get only a sliver of their revenues from sales to consumers.
In fact, each of the big three is expected to have solid fourth-quarter financial results because of strong corporate sales.
""Our checks with distributors indicate that IBM is going to have over 30 percent growth (in its PC business) this quarter,"" said Gary Helmig, an analyst at brokerage SoundView Financial. ""IBM's sales are not really focused in the consumer marketplace.""
SoundView Thursday raised its rating on IBM to long-term buy from hold.
Neither Dell nor Compaq are expected to suffer from weak consumer sales in the fourth quarter, either, analysts said.
""Corporate sales are still strong, as far as I can see,"" Dataquest's Miller said. In the past couple of months, many big companies began buying huge numbers of PCs to take advantage of new business software from Microsoft, released late this year.
""The companies that are really suffering now are the ones that are very exposed to retail,"" said Don Young, an analyst at Prudential Securities in New York.
Those companies may continue to have weak sales increases into 1997, while consumers wait for new multimedia PCs to be released, analysts said.
Packard Bell and Acer officials could not immediately be reached for comment.
",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 revitalized 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
"Apple Computer Inc.'s rehiring of company co-founder Steve Jobs and purchase of NeXT Software Inc. will give it a much-needed operating system, but analysts warned Monday the deal might not be enough to boost the computer maker's market share or bottom line.
""(The move) has a lot of PR value, but it looks to me that the company still has a strategic mess on its hand with $400 million less,"" said John Rossi, an analyst at the Robertson Stephens & Co. brokerage in San Francisco.
Apple said Friday it would pay $400 million to buy NeXT and rehire NeXT founder Jobs, Apple's mercurial co-founder, as part of a plan to revamp the Macintosh computer.
Apple bought NeXT because it needs an operating system -- the program that controls a computer's basic functions -- after its own attempt failed.
While NeXT's existing technology helps Apple make up for lost time and provides a decent foundation for a new operating system, the technology is not dazzling enough to set the Macintosh apart from computers running Microsoft Corp.'s Windows software, analysts said.
""Trying to prop up the brand name with a psychological hire is not going to solve Apple's problems,"" said one Wall Street analyst who asked not to be identified.
Analysts note that NeXT has failed to make any dent in the consumer computer market on its own. The company sold only 50,000 computers in four years as a hardware manufacturer before it focused entirely on software.
Some analysts also are disappointed that Apple chose NeXT over Be Inc., a closely held software company founded by another former Apple executive, Jean-Louis Gassee.
""I saw Be's technology. I was wowed by it,"" Rossi said. Be had many features that would have appealed to Macintosh customers, who do a lot of graphics design, video and image editing and desktop publishing. NeXT, Rossi said, ""is aged"" in comparison.
Still, Apple needed to come up with a technological blueprint to persuade outside software companies not to abandon the Macintosh.
By making no secret they were shopping around for technology, Apple's management had essentially told their customers the current Macintosh system was a dead end, analysts said.
If Apple had taken much longer to present its plan, Macintosh software developers would have begun to look for other ways to make a living.
""The technology direction implicit in the acquisition is a good one,"" said Ike Nassi, a former Apple executive and computer scientist who headed the software development effort.
Some investors agreed. Apple shares rose 12.5 cents to $23.625 in afternoon Nasdaq trading. The shares jumped $1.25 to $23.50 Friday as word spread of Apple's decision to buy NeXT, based in Redwood City, Calif.
Analysts said they may have to wait months to get a clearer picture from Apple about what the combination of NeXT and Apple software will look like.
""Merging operating systems is not a simple task,"" said Peter Andrew, an analyst at brokerage AG Edwards.
And it is still unclear where Apple will get the software expertise to include key features in the new operating system.
For example, neither Apple nor NeXT's software is efficient at handling several tasks simultaneously, such as recalculating a spreadsheet while faxing a document and updating stock quotes on the screen.
""There are many issues about how the NeXT operating system can revitalize the Mac,"" said Richard Zwetchkenbaum, an analyst at market researcher International Data Corp.
Apple executives are expected to give more technological details about their plan Jan. 7 at the MacWorld trade show in San Francisco.
Daniel Kunstler, an analyst with investment bank JP Morgan's San Francisco office, said Jobs, even if he helps Apple comes up with a brilliant operating system quickly, cannot save Apple alone.
""My investment thesis on Apple hinges on a lot of mileposts,"" including reporting a decent Christmas quarter this year and revamping its entire product line in 1997, Kunstler said. Finding an operating system was just one milepost, he said.
""The PC industry is one of the most dynamic and competitive in the world, and this announcement underscores that fact,"" said Microsoft spokesman Mark Murray. ""We look forward to watching their efforts and competing in the marketplace.""
He pointed out that Microsoft has been the biggest developer of applications for the Macintosh platform over the past 15 years.
""Until Apple provides more details on their future plans, it's going to be hard for anyone to say how they will partner with or support this new venture,"" he said. But he added that Microsoft would take a ""hard look"" at any new system, depending on customer demand.
",25
"Apple Computer Inc. Wednesday reported a $120 million loss in the first quarter of fiscal 1997 and warned investors it did not expect to return to profitability until September.
The troubled computer maker attributed the loss to slow sales of its its consumer-oriented Performa desktop computers during the normally robust Christmas quarter.
Apple's loss, which equaled 96 cents a share, compared with a loss of $69 million, or 56 cents a share, in the year-ago period. Sales for its first fiscal quarter ended on Dec. 27 fell to $2.13 billion from $3.15 billion.
Based on the weak first quarter results, the company said it planned to develop additional restructuring programs during the second quarter with the goals of reducing its break-even point to $8 billion in annual revenues and enabling Apple to return to  profitability by the fourth fiscal quarter, which ends Sept. 26, 1997.
Previously, Apple had promised to return to sustainable profits by March but industry analysts had started to question that goal after Apple disclosed less than two weeks ago that sales of its Performa line were running behind plan.
""While we were very disappointed by the Performa sales results and the associated loss, our financial position remains sound,"" said Apple Chief Financial Officer Fred Anderson. ""We exited the quarter with $1.8 billion in cash and continued to show improvements in our inventory management during the quarter.
""Additionally we saw a 15 percent sequential increase in our high-end Power Macintosh sales,"" he said. ""We significantly exceeded our internal plans for shipments of PowerBooks and expect their availability to continue to improve in the second quarter.""
Nevertheless, analysts said the results, which Apple forecast less than two weeks ago represented a setback for Apple Chairman Gilbert Amelio, who had set a goal of stanching Apple's losses in 1996.
""Our expectations now do not show a profit until the fourth quarter, which ends in September,"" said Walter Winnitzki, analyst at brokerage PainWebber Inc. in New York.
",25
"Intuit Inc., Microsoft Corp. and Checkfree Corp. said Thursday they jointly developed a software standard to make it easier to bank online.
The companies said their Open Financial Exchange -- a set of technical specifications -- will make it easier for depositors' personal computers to communicate with bank computers. That makes it easier to pay bills, transfer money between accounts and get balances via the Internet.
About 50 banks are expected to announce by fall that they will adopt the standard, said Intuit Executive Vice President Bill Harris. By then, each of the three companies also will unveil new lines of online banking products based on the standard.
Intuit and Redmond, Wash.-based Microsoft, fierce competitors since a merger agreement between them fell apart almost two years ago, said that by working together they will accelerate the adoption of online banking.
""In all of the meetings each of us have had, every one of the financial institutions asked us to bring this together,"" said Lewis Levin, head of Microsoft's desktop finance unit.
The alliance gets rid of the ""mishmash"" of standards Intuit, Microsoft and Checkfree were trying to push on banks, said Karen Epper, online banking analyst at market researcher Forrester Research.
Menlo Park, Calif.-based Intuit and Microsoft are the two largest vendors of personal financial software and checkbook programmes. Checkfree lets customers send checks and pay bills through their personal computers.
The companies said they will work with credit card issuer Visa to link Open Financial Exchange to Visa's bill payment network.
Other companies supporting Open Financial Exchange including banking software firm Edify Corp.
Stock in Microsoft, which also launched its Office 97 business software package Thursday, rose $1.125 to $85.75 in afternoon trading on the Nasdaq market. Checkfree climbed 62.5 cents to $15.375, while Intuit was unchanged at $34.625, also on Nasdaq.
",25
"Database software company Informix Corp. said Friday it filed a lawsuit against Oracle Corp. accusing its bigger rival of stealing trade secrets by hiring away its employees.
Oracle hired 11 Informix research and development employees from Informix's Portland, Ore., research and development centre. All 11 workers quit Wednesday morning, said Informix Chief Executive Phil White.
""This is a blatant effort by Oracle,"" said White. ""They're behind significantly technically. We're not going to let someone who's significantly behind just buy his way in.""
Oracle officials could not immediately be reached for comment.
The lawsuit, filed Thursday in Oregon Circuit Court in Portland, seeks unspecified damages. Informix on Thursday also obtained a temporary injunction barring the former employees from giving trade secrets to Oracle, Informix said.
Informix also charged Gary Kelley, a former Informix product development vice president who left for Oracle, with breach of contract. Kelley did not return phone calls to Oracle's Portland facility.
Oracle stock dropped 62.5 cents to $39.875 in afternoon trading on Nasdaq, where it was among the most actively traded shares. Informix lost $1.625 to $21.25, also on Nasdaq.
Informix, based in Menlo Park, Calif., and Oracle, based 20 miles to the north in Redwood Shores, Calif., both write sophisticated database programmes that store and retrieve huge amounts of information in corporate computer networks.
The companies for years have been fighting a marketing war touting their advances in database technology with each new release of their respective flagship products.
White said he believed Oracle was interested in gaining Informix's expertise in writing software for so-called massively parallel computers -- top-of-the-line machines that can process huge amounts of transactions, such as bank ATM withdrawals, simultaneously.
The 11 Informix employees who left for Oracle were working on this type of product, White said.
White, normally a publicity-shy executive, said he was livid about Oracle's tactics and intended to make the lawsuit a political cause for preventing raids in high-technology industries.
White said he personally went to the home of Oracle Chief Executive Larry Ellison on Thursday night to discuss the issue, but Ellison was in Hong Kong. Both men live in the same small town in the hills of Silicon Valley.
""I'm doing this not only for Informix and for our shareholders but also for the industry,"" White said. ""We can't let companies come in and throw big financial incentives and walk away with intellectual property we spent hundreds of millions of dollars developing.""
In recent years, several software rivals in Silicon Valley have accused each other of trade secret theft by employee snatching.
In 1992, Borland International Inc. accused a former employee of sending confidential electronic mail to new employer Symantec Corp.. Last year, Cadence Design Systems Inc.(. filed a similar charges against direct competitor Avant! Corp.
The court has set a hearing in the Informix case for Feb 7.
",25
"At this year's Comdex computer trade show, the most sought-after people are not Microsoft Corp.'s Bill Gates or Intel Corp.'s Andy Grove, but corporate computer buyers.
Personal computer makers and software vendors are relying heavily on their corporate customers this year to make up for disappointing sales to consumers, executives at the trade show said this week.
While many consumers have been putting off their computer shopping until early 1997 -- when new gadgets come out -- corporate customers are finally dumping their older PCs and buying lots of machines that can run the latest business software from Microsoft.
""Certainly we see a tremendously strong business environment as a major upgrade cycle is now occurring,"" said Michael Winkler, senior vice president at Compaq Computer Corp.. ""We think the fourth quarter will be excellent.""
Winkler and other PC executives said the recent release of Microsoft's Windows NT operating system and Office 97 package of business programmes was fuelling corporate sales. These programmes work best with the computing horsepower of machines based on Intel's top-of-the-line Pentium computer chip.
In large part because of strong corporate sales, domestic PC shipments in the fourth quarter were expected to rise 20 percent to 8 million units, according to International Data Corp., a market researcher.
""The bottom line here is that the outlook for '97 for our business is very strong,"" said Jim McDonnell, a group marketing manager of PCs at Hewlett-Packard Co..
Based on executives' bullish comments at Comdex this week, stocks of most PC makers have gained in recent days.
Compaq rose $1.375 to $81.875 and International Business Machines Corp. jumped $2.50 to $156.25, both on the New York Stock Exchange, while Intel added $1.75 to $122.50 and Sun Microsystems Inc. gained $2.50 to $59.50, both on Nasdaq.
Still, the fourth quarter has been disappointing to some PC makers, especially those that concentrate heavily on consumer sales.
Last year this time, the release of Microsoft's Windows 95, software that makes PCs easier to use, drew lots of people to computer stores to buy their first PCs. The industry has no such attraction this year.
In fact, analysts said, consumers were putting off computer shopping this Christmas season as the industry prepares new machines based on Intel's upcoming MMX technology. MMX-based machines, slated to be released in early 1997, will feature better video, sound and 3-D graphics.
In late October, computer stocks slid as CompUSA Inc. and other computer retailers reported softening sales heading into the crucial Christmas season.
""There's no question that the quarter started out slow, but we're hopeful that things are getting better,"" said Mal Ransom, senior vice president of marketing at closely held Packard Bell NEC Inc., the second-biggest PC maker in the United States behind Compaq.
Consumer sales appear to be improving as it gets closer to Christmas, while prices of computer components remain low, Ransom said. ""It looks like we're going to get a reasonable quarter.""
",25
"Apple Computer Inc. Chairman Gilbert Amelio will outline a long-awaited plan Tuesday to revamp the Macintosh personal computer with the help of recently acquired Next Software Inc.
At the Macworld trade show here next week, Apple and dozens of other vendors also will unveil new products that could help boost the Macintosh market in 1997, analysts said.
This year's show will be more cheery than last year's, when Apple's future as an independent company was in doubt, customers and vendors said. In 1996, Apple's new management under Amelio stopped huge financial losses and acted quickly to come up with a plan to update the Mac.
""We're very pleased with the decisions Apple has made with the future of the Mac,"" said Bob Roblin, senior vice president of marketing at Adobe Systems Inc., one of the biggest suppliers of Mac software.
""It's going to be a much more upbeat show, but one where a lot of questions have to be answered.""
The questions swirl around Apple's agreement last month to pay $400 million for Next, the company run by Apple co-founder Steven Jobs.
Apple, based in Cupertino, Calif., plans to take Next's well-regarded operating system -- a type of program that controls the basic functions of a computer -- and meld it with the Mac operating system. The Mac's fundamental software needs an overhaul to keep up with Microsoft Corp.'s Windows family of software.
While Apple management has outlined the Next strategy, Macintosh programmers and executives of Mac-related companies said they still needed lots of technical details before they could start working on new products.
""As a user, I want to know what this means for the interface, for the functionality, for my existing software,"" said Phil Schuller, vice president of product management at Macromedia Inc., a developer of graphics software.
Other highlights of Macworld are expected to be the release of new versions of several key Macintosh products.
Adobe officials said they will announce plans to start shipping later this month the latest version of PageMaker, which helps graphic artists design and compose magazines and newspapers and is one of the best-selling Mac programs.
Microsoft will unveil its long-awaited Internet Explorer browser for the Mac at the show, a company spokesman said.
Apple itself will announce plans to re-enter the online service business. It plans a World Wide Web site, dubbed Apple Club, where subscribers can download Mac software. An annual subscription will cost $19.95, an Apple spokeswoman said.
In 1996, Apple pulled the plug on eWorld, its first foray into the online business.
",25
"Novell Inc. said Tuesday it will license one of its key technologies to other software companies in a move to expand its sources of revenue.
Novell, which publishes computer networking programmes, wants to establish the technology, Novell Directory Services, as a software foundation for letting people easily find others on the Internet and for sharing information.
The move is part of Orem, Utah-based Novell's strategy to adapt its corporate networking software to control the flow of information through global networks, company executives said.
""The goal is to get into electronic commerce,"" said Michael Simpson, director of marketing of Novell's Internet infrastructure division. ""We believe a common infrastructure is necessary and we will provide it.""
Simpson compared the variety of computer networks and software standards to the early days of the telephone industry, when a customer of one telephone company could not call someone who was a customer of another company.
Novell Directory Services, also known as NDS, would help users in huge corporate or public computer networks reach others without knowing arcane electronic addresses.
Adapted for the Internet, the technology also would let users communicate with others regardless of computer or software standards, Novell said.
Novell plans to license the technology to networking software companies, Internet service providers and online services. Novell and other software companies would make money by writing computer programmes that take advantage of the universal directory, the company said.
Tom Arthur, a Novell vice president, declined to say how much Novell expects to make from the move, but said it would see a significant boost by the middle of 1997.
He also declined to say which companies would license NDS, but said work is being done to adapt it to run on computers using networking software from Sun Microsystems Inc., Microsoft Corp. and Hewlett-Packard Co.
For the past two year, Novell has been trying to recover from a failed strategy of taking on Microsoft Corp., its biggest rival, in the word processor and spreadsheet business.
Novell dumped its application business by selling its WordPerfect Corp. unit earlier this year. But the company has had a tough time rebuilding its business around NetWare, its flagship networking product.
Microsoft has been chipping away at NetWare's market share with its rival offering, Windows NT.
Novell's stock edged down 12.5 cents to $10.50 on Nasdaq.
",25
"Novell Inc. said Tuesday it will license one of its key technologies to other software companies in a move to expand its sources of revenue.
Novell, which publishes computer networking programs, wants to establish the technology, Novell Directory Services, as a software foundation for letting people easily find others on the Internet and for sharing information.
The move is part of Orem, Utah-based Novell's strategy to adapt its corporate networking software to control the flow of information through global networks, company executives said.
""The goal is to get into electronic commerce,"" said Michael Simpson, director of marketing of Novell's Internet infrastructure division. ""We believe a common infrastructure is necessary and we will provide it.""
Simpson compared the variety of computer networks and software standards to the early days of the telephone industry, when a customer of one telephone company could not call someone who was a customer of another company.
Novell Directory Services, also known as NDS, would help users in huge corporate or public computer networks reach others without knowing arcane electronic addresses.
Adapted for the Internet, the technology also would let users communicate with others regardless of computer or software standards, Novell said.
Novell plans to license the technology to networking software companies, Internet service providers and online services. Novell and other software companies would make money by writing computer programs that take advantage of the universal directory, the company said.
Tom Arthur, a Novell vice president, declined to say how much Novell expects to make from the move, but said it would see a significant boost by the middle of 1997.
He also declined to say which companies would license NDS, but said work is being done to adapt it to run on computers using networking software from Sun Microsystems Inc., Microsoft Corp. and Hewlett-Packard Co.
For the past two year, Novell has been trying to recover from a failed strategy of taking on Microsoft Corp., its biggest rival, in the word processor and spreadsheet business.
Novell dumped its application business by selling its WordPerfect Corp. unit earlier this year. But the company has had a tough time rebuilding its business around NetWare, its flagship networking product.
Microsoft has been chipping away at NetWare's market share with its rival offering, Windows NT.
Novell's stock edged down 12.5 cents to $10.50 on Nasdaq.
",25
"This year's Comdex, the world's most influential computer trade show, will be the showcase for some unusual computers, including machines the size of paperback books.
A host of companies will introduce second-generation handheld computers, about the size of paperbacks, which can do much of the work their desktop counterparts handle.
The trade show, expected to draw 250,000 people to Las Vegas next week, also will feature the digital video disc, or DVD, an advanced compact disc for playing movies and storing computer information.
In addition International Business Machines Corp., Microsoft Corp. and other industry giants are expected to take their year-old battle over rival approaches to simplifying personal computers to the trade show floor.
Moreso than in recent years, this year's show will highlight how the PC, the centre of a $400 billion global industry, is moving into new venues such as the living room entertainment cabinet, shirt pockets and the backs of airline seats, industry executives said.
""As more and more of the population gains experience with PCs, the types of products consumers select will diversify, and the major players have to accommodate them,"" said Tom Grueskin, marketing manager at computer maker Gateway 2000 Inc.
Microsoft will kick off Comdex on Sunday night with the introduction of Windows CE, a computer programme that will run on handheld computers. Several companies, including Compaq Computer Corp., NEC Corp. and LG Electronics Inc. will unveil devices using the software.
The handheld PCs represent the industry's second big push in four years to sell tiny computers for managing appointments and contacts and keeping in touch with the office.
Analysts said the new more powerful machines will let users do things earlier models were not good at, such as writing lengthy e-mail and tapping the Internet. Microsoft has made strides in making it easier for the handhelds to share information with desktops, analysts said.
Microsoft also will unveil Microsoft Office 97, a major revision of its top-selling package of business programmes. The product will be one of the biggest revenue generators for the world's biggest PC software company, analysts said.
Consumer electronics companies will crash Comdex this year to formally introduce DVD. The technology is based on compact discs similar to music CDs, but with many times the storage capacity.
Next year, Toshiba Corp., Sony Corp., Matsushita Electric Industrial Co. and several other companies will sell DVDs that can play movies and music.
At Comdex, the computer arms of the consumer electronics companies will unveil DVD storage devices that plug into PCs. The so-called DVD-ROM players are expected to spur development of video games that use sophisticated 3-D animation.
By the middle of next year, high-end consumer PCs will be equipped with DVD-ROM players, said Paul Dempsey, senior vice president at Pioneer Electronic Corp.'s New Media division. Several game software companies will have DVD-based products ready to show at Comdex.
By early 1998, some DVD-equipped laptops may even be able to play full-length, full-screen movies, analysts said.
Comdex may also become an arena this year for competing versions of so-called network computers -- bare bones PCs that get most of their computing power from corporate or public computer networks.
IBM will introduce several network computers, geared toward corporate customers who need simple terminals for data entry and customer service tasks.
Meanwhile, Microsoft Chairman Bill Gates and Intel Corp. Chief Executive Andy Grove may give some details in keynote speeches about their companies' plans to redesign the guts of the PC to make them easier to maintain and upgrade.
Both Gates and Groves had pooh-poohed the concept of the network computer, but decided to take a second look when it became clear consumers were intrigued by the possibility of no-brainer PCs.
",25
"Apple Computer Inc., struggling to remain the teacher's pet among computer makers, is turning a modified version of its handheld Newton organizer into an inexpensive portable computer for students.
The computer maker on Monday will unveil the Apple eMate 300, an $800 machine that looks like a grown-up's laptop with a keyboard and a flip-up screen, but in a rugged casing that can survive rough handling.
Apple plans to sell the machine directly to elementary and high schools, beginning early next year, as an alternative to personal computers. For the price of a $2,500 multimedia PC, a school can buy three eMates, Apple executives said.
""The federal government says we need to get to a three-to-one student-to-computer ratio by the year 2000,"" said Jim Groff, general manager of Apple's information appliances group. ""I would say the eMate is the only credibled vehicle for accomplishing that.""
More vital to Apple, the product could keep educators from abandoning the company as the leading supplier of computers for classrooms, analysts said.
""The potential for something like this in a classroom setting is tremendous,"" said Mike McGuire, a mobile computing analyst at Dataquest Inc. ""This will be an indication to educators that Apple is one of the few companies spending time extending computing to more and more kids.""
Apple needs a distinctive product to set itself apart from other personal computer makers crowding into the education market, analysts said.
Although Apple, based in Cupertino, Calif., still enjoys strong educational sales, sales of IBM-compatible personal computers by companies such as Compaq Computer Corp. are growing much faster.
Apple's computer has always been the favored tool for teaching children how to use computers. But in the face of Apple's uncertain future and a flood of cheap PCs, schools are less likely to remain loyal.
For the 1996-1997 school year, of all the computers that schools plan to buy, 56 percent will be Apple Macintoshs and 40 percent IBM-compatible machines, according to a recent report by Quality Education Data, an education market researcher. In the previous school year, the purchasing plans were 61 percent Macintosh and 38 percent PC.
""The numbers are overwhelming in favor of PCs,"" said Carole Cotton, president of CCA Consulting Inc., another tracker of technology purchases by schools.
""No school district can afford to make a mistake"" when picking computers they will use for years, she noted.
Apple's Groff said, however, that the eMate is not the company's answer to competitors' inroads.
Instead, he said, the device was built for schools asking for a cheap, powerful computer that can offer educational software and Internet connections -- as well as endure rough handling by kids.
""When we introduced the Newton three years ago, it was a solution in search of an application,"" Groff said. Education turned out to be one of the best applications, he said.
Along with the eMate, Apple plans to unveil a beefier version of the Newton MessagePad on Monday. The new MessagePad 2000 features better Internet capabilities, easier connection to PCs and built-in word processing and spreadsheet software.
Analysts said, however, that the eMate is the more interesting device. Teachers and students will like it because it is not as esoteric and hard to run as a traditional personal computer.
""Kids are having to learn more about how to run a computer than about reading and writing,"" McGuire said. ""The ability to have the kid just turn on the device and get right into the writing assigment is really valuable.""
The eMate weighs four pounds (1.8 kg) and fits into a backpack. It can run for a week on rechargeable batteries, according to Apple.
The machine features a built-in word processor, drawing and equation-drawing programs and an address book. With an optional modem and software, students can browse the Internet.
Still, the eMate could be a tough sell for Apple.
Because its software is based on the Newton operating system, it cannot run the thousands of educational programs written for the Macintosh and for PCs running Microsoft Corp.'s Windows software.
Apple executives are confident, however, that the eMate will help the company place more its computers on students' desks.
""There's 52 million screaming (grades) K-to-12 children to sell to,"" said Robert Kondrk, Apple's manager of education product lines. ""We've known for years this is an opportunity, but we didn't have the technology to do it before. We do now.""
",25
"Intuit Inc. shares jumped 24 percent Wednesday amid market speculation that American Express Co. is about to buy the struggling financial management software company.
Shares of Intuit, which publishes the best-selling Quicken personal finance computer program, surged $7 to close at $36.50 on Nasdaq. American Express rose 12.5 cents to $48.50 on the New York Stock Exchange.
Officials of both companies declined to comment about ""market rumors,"" and an Intuit spokeswoman called the speculation ""wild.""
Analysts said American Express, the charge card and financial services company, would be interested in buying Intuit to enable it to jump into the booming online banking industry.
Intuit, analysts said, might be receptive to an offer because of increasing doubts about its future.
Even if American Express is not interested in acquiring Intuit, other companies may be, analysts said.
More than 9 million people, most of them affluent, use Intuit's Quicken to manage their finances and do their banking chores through their personal computers.
But Intuit's growth has stalled amid fierce competition with Microsoft Corp., a one-time suitor of Intuit, and a handful of banks which are offering online banking to their customers through the Internet.
""Intuit is staring down the barrel of a gun, and that gun is the Internet, which is making financial management easier,"" said Karen Epper, an online banking analyst at market researcher Forrester Research Inc in Cambridge, Mass.
Until two years ago, Intuit relied heavily on sales of its financial and tax software for its growth. Those sales have slowed as Intuit has cut prices.
Intuit also faces renewed competition from Microsoft, which tried to buy it in 1994. Microsoft dropped the acquisition in May 1995 because of opposition from government antitrust officials.
Since then, Microsoft, the world's biggest PC software company has spent hundreds of millions to take on Intuit.
To fuel its growth, Intuit set up a business two years ago to process online banking transactions between banks and depositors. Some investors saw the transaction business as a promising source of growth.
In September, however, Intuit sold its transaction processing unit, Intuit Services Corp., to rival CheckFree Corp.
Epper said Intuit's biggest challenge is figuring out how to grow. She said the company needs the backing of a bank or bigger computer company to fuel expansion into any new business.
",25
"Cisco Systems Inc. said Tuesday its fiscal first quarter profit from operations rose 77 percent, reflecting strong sales of its computer networking equipment.
The company, which makes devices that control the flow of information between computers in a network, said earnings before gains and charges rose to $320.8 million, or 47 cents a share, for the three months ended Oct. 26, from $181.4 million or 28 cents in the same quarter a year ago.
Net income for the quarter, after taking into account a $174.6 million charge for the acquisition of Telebit Corp. and a $55.1 million gain from the sale of a minority investment, totaled $180.9 million, or 26 cents a share, slightly lower than the year-ago figure.
Revenues jumped 80 percent to $1.43 billion from $798.3 million.
Wall Street had expected Cisco, the world's biggest computer networking company and a bellwhether technology stock, to report a profit from operations of 46 cents, according to First Call, which tracks estimates.
Analysts said the company had a solid quarter, alleviating concerns in recent weeks about slowing sales of networking equipment.
""They surprised us on the revenue,"" said Eric Blachno, analyst at Bear Stearns in New York. ""It was a little higher than we thought.""
Cisco also managed to keep its gross margins -- a measure of how much profit a company makes from each dollar of sales -- at 65 percent, better than analysts had expected.
Cisco, based in San Jose, Calif., attributed the higher profits to strong sales across all its product lines.
""More of our customers are beginning to look at a single vendor"" for all of their networking needs, said John Chambers, Cisco's chief executive.
The company reported its results after the market closed. For the day, the stock had gained $1.125 to close at $61.75. After the earnings release, the shares slipped 25 cents to $61.50 in after-hour trading.
Analysts said some investors may have been disappointed that Cisco's earnings per share were not higher. Frequently, Cisco reports per-share results that are at least 3 or 4 cents above forecasts.
",25
"Apple Computer Inc. stunned investors Wednesday by reporting an unexpected $25 million profit for the last three months of its fiscal year.
The Cupertino, Calif.-based computer maker, which had been expected to lose around 30 cents a share in the quarter, posted a profit of 20 cents a share, the first time Apple was in the black this year.
Included in the operating results for the fourth quarter of Apple's fiscal 1996 was a gain of $17 million, or 14 cents a share.
Wall Street welcomed the news, bidding the company's stock price up $2.25 to $28 a share in after-hours trading.
Analysts cited improved manufacturing efficiencies, lower component costs and reduced operating expenses for the better-than-expected performance.
""It is a shock,"" said Daniel Kunstler, computer industry analyst at JP Morgan. ""It seems they've brought the break-even point for their business down pretty dramatically. This is very encouraging.""
In the year-ago quarter, Apple earned $60 million, or 48 cents a share. Revenues for the three months ended in September fell to $2.32 billion from $3.0 billion a year ago.
For the full year, Apple posted a loss of $816 million, or $6.59 a share, reflecting a series of hefty one-time charges for inventory writedowns and restructurings.
In fiscal 1995, Apple earned $424 million, or $3.45 a share.
During the year, Apple was hurt by a sharp decline in its market share, management turmoil and an inability to have the right products on the shelf at the right time.
However, in the last two quarters Apple has started to show signs of a turnaround under former National Semiconductor Corp. chief Gilbert Amelio.
In a statement, Amelio said Apple's financial situation is stablized, as evidenced by the improvement in gross margins during the quarter and cash flow.
""By increasing revenues sequentially and fortifying Apple's financial position in each of the last two quarters, we have achieved two very critical goals of Apple's transformation,"" Amelio said. ""We remain confident about reaching sustainable profitability by the end of Q2 '97.
""As we move forward, our challenges will be to extend our competitive leadership in key markets and to reclaim the mantle of industry pioneer and innovator,"" he said.
Apple's gross margins -- the difference between what it sells its products for and the cost of goods -- rose to 22 percent in the fourth quarter from 18.5 percent in the third quarter.
More importantly, however, Apple ended the quarter with more than $1.7 billion in cash and short-term investments on hand, up from $952 million a year ago.
""We continue to make progress in strengthening Apple's financial condition, as our $410 million in positive cash flow from operations during the quarter suggests,"" said Apple Chief Financial Officer Fred  Anderson. ""We've reduced inventories by nearly $400 million since June and completed the quarter with over $1.7 billion in cash and short-term investments.""
""Gross margins increased due to several factors, including declining component costs, improved manufacturing efficiencies, and sales of previously reserved inventory,"" he added. ""We achieved further sequential reductions in operating expenses, primarily in general and administrative functions.""
While shipments were down 26 percent in the fourth quarter to 932,000 units from the year-ago quarter, Apple said shipments were up 11 percent, a sign that customers were once again buying its products.
",25
"The semiconductor industry's key indicator of computer chip demand rose in September to its highest level this year, reflecting a stronger-than-expected increase in new orders.
The Semiconductor Industry Association said Tuesday the North American book-to-bill ratio, which measures the value of orders against shipments, rose to 0.99 in September from a revised 0.93 in August. The ratio means manufacturers received $99 in new orders last month for every $100 in shipments.
Industry analysts had expected the ratio to inch closer to breakeven with most estimates averaging around 0.95.
New orders for chips rose to $3.19 billion, a 9 percent increase from August, and shipments inched upward to $3.22 billion, or 2.1 percent above August's level.
""From any perspective, these are the most positive numbers we've seen all year,"" Douglas Andrey, director of information systems and finance for the association, said in a statement. ""The modest increase in orders for August and September suggest the 1996 slowdown in growth has bottomed out.
The ratio, a leading indicator of future demand tallied by the industry trade group, has been improving recently, reflecting an increase in orders by personal computer makers and more stable prices for memory chips.
""People are buying PCs as if there's no tomorrow,"" said Dan Klesken, an analyst at Robertson Stephens in San Francisco. ""We're having a PC-led recovery in the chip industry.""
Analysts predicted the better-than-expected ratio would likely send shares of key technology stocks higher on Wednesday.
In after-hours trading, shares of Intel Corp., the world's largest chipmaker, rose $1.375 to $103 and shares of Micron Technology Inc., a key supplier of memory chips, jumped 87.5 cents to $32.375.
Prices of memory chips, or DRAMs, plummeted over the course of the year to a fraction of what they were in January. Because memory chips make up about 40 percent of the unit volume of semiconductors shipped in a year, their prices have had a big influence on orders and sales measured in dollars.
But since mid-September, memory prices have risen 30 percent to 50 percent from their lows.
The September ratio marked the highest level since December of 1995 when the index hit 1.12. A year ago it stood at 1.16.
Micron said late last week that memory chip inventories were down to desirable levels from formerly excessive levels.
Worldwide, the ratio rose to 0.97 in August from 0.95 in July. Global figures include Asia, Europe, North America and Japan and are one month behind North American figures. The Japan book-to-bill ratio rose above 1.0.
Robertson Stephen's Klesken said he was particulary impressed by the rise in Europe, which had a ration of 1.04.
",25
"Jilted once, financial software company Intuit Inc appears unlikely to return to the merger altar any time soon.
Buyout speculation has swirled around Intuit since May 1995, when Microsoft Corp. dumped its plans to buy the maker of popular personal finance software like Quicken and TurboTax. Last week, Intuit shares surged again on speculation American Express Co. was about to make an offer.  
However, many industry analysts believe such a deal is not in Intuit's future, adding the best way for Intuit to grow is to attract as many partners as it can to set up online banking services.
""My personal belief is that Intuit is best able to maximize its value on its own,"" said David Farina, an analyst at William Blair.
Intuit's key asset is Quicken, a program that helps computer users track checkbook balances, check stock portfolios, pay bills, plan monthly budgets and lay out retirement plans.  
The company depends on partnerships with dozens of banks and brokerages to provide online links between customers' personal computers and their accounts.
Intuit would turn off most of its partners if it were acquired by a big financial partner, Scott Cook, Intuit's chairman, insists.
""We would never become a captive of one financial institution or a small group of financial institutions,"" Cook told a group of investors in Florida on Friday.  
Still, some analysts questioned whether Intuit has the marketing and financial muscle to compete on its own against Microsoft for long.
Microsoft, the world's biggest personal computer software company, is spending a big chunk of its $2 billion research and development budget on financial software and online banking services provided through the Internet.
Although Intuit still controls 70 percent of the market for personal financial software, Microsoft is gaining.  
Intuit also needs capital to expand into new area, such as giving online investment advice, said Karen Epper, an analyst at Forrester Research, a market researcher. Such forays will likely hurt profits, she said.
""They might get dinged on their stock price, but this area is more in line with the consumer marketing business model they have,"" Epper said.
It could be years, however, before Intuit's push into new areas could pay off, Epper said.
Intuit said in September it expects lower revenue growth in the current fiscal year ending July 1997.  
The company blamed a slow market for consumer software. Some of the shortfall is because of one-time suitor Microsoft, analysts said.
In October 1994, Microsoft stunned Wall Street by offering to buy Intuit for more than $1 billion, the biggest acquisition attempt in the software industry at the time.
Microsoft was willing to pay that huge sum to turn Quicken into a gateway for online banking services, an industry that's expected to rival brick-and-mortar retail banking in revenue in the next ten years.  
Microsoft backed out of the deal in May 1995, however, when the Justice Department said it would sue Microsoft on antitrust grounds if it pursued the transaction.
Since then, Microsoft has spent hundreds of millions beefing up its rival Microsoft Money financial management program. The company also set up a division to sell networking and Internet software to banks.
To counter Microsoft's redoubled efforts, Intuit set up a business to process online transactions -- such as bill payments and account transfers -- between banks and depositors. Some investors saw the unit, Intuit Services Corp., as a promising source of revenue.
In September, however, Intuit sold the unit to rival Checkfree Corp., partly because it did not have the expertise to handle huge volumes of transactions.
Banks also were reluctant to have Intuit sit between them and their depositors, Epper said. Most banks preferred to reach their customers through the Internet instead of Intuit's proprietary network.
""Intuit is staring down the barrel of a gun, and that gun is the Internet, which is making financial management easier,"" Epper said.
It could be a while before Intuit outlines a new strategy for growing its business, analysts said.
Meanwhile, there may be more bouts of wishful thinking about an acquisition, they said.
",25
"Most software publishers are expected to report only modest increases in their latest earnings, reflecting a seasonal slowdown and a lack of new products this quarter.
""For the behemoths of the industry, like Microsoft and Oracle, business is still good,"" said Marshall Senk, an analyst at Robertson Stephens & Co. in San Francisco.
""Summer is the slow buying season for most of the industry,"" but setting aside the seasonal slowing, ""business is still pretty okay,"" he said.
Analysts expect Microsoft, the world's biggest personal computer software publisher, to report substantially higher earnings for its first fiscal 1997 quarter on the back of strong sales of its networking software and business programmes. Microsoft is scheduled to report results Oct. 21.
Better-than-expected sales of personal computers in the past few months also will contribute to Microsoft's revenue, analysts said.
Microsoft, based in Redmond, Wash., makes about a quarter of its revenue from the sale of its Windows family of operating systems -- a type of software that controls the basic functions of a personal computer.
The company benefits from strong PC sales because PC makers have to pay Microsoft a royalty for every copy of Windows they pack in machines they make.
Wall Street expects Microsoft to earn 90 cents a share, according to a survey of 24 analysts by First Call, which tracks Wall Street analysts' estimates. In the same quarter a year ago, Microsoft earned 78 cents a share.
Unlike Microsoft, however, Novell Inc., the biggest publisher of computer networking software, is not expected to perform as well.
The company is struggling to sell its NetWare flagship software, which manages networks of computers within a company, in the face of competition with Microsoft's Windows NT.
Novell, based in Provo, Utah, also faces management issues following the resignation of Bob Frankenberg as chief executive, said David Takata, an analyst at Gruntal & Co. in Los Angeles.
""They clearly still have a lot of work to do"" to get the company's management in order, Takata said.
Novell is expected to earn 18 cents a share in its fiscal fourth quarter, compared with 16 cents a year ago, according to a First Call survey of 17 analysts.
Meanwhile, vendors of software for large, corporate computer networks and database management tools will continue to post substantial gains on continuing strong demand, analysts said.
""For a relatively mature market, this niche is still growing at a good clip,"" said Jim Pickrel, an analyst at Hambrecht & Quist in San Francisco.
Pickrel said he expects Oracle Corp. and Informix Corp. to report the most impressive results on strong sales of their database software -- programmes that help big companies keep track of huge libraries of corporate information.
Both are stealing business from Sybase Inc., another database software publisher, which is still struggling to recover from marketing and technical shortcomings last year.
Sybase is expected to report it broke even in the quarter, not counting charges for a restructuring, Pickrel said. In the year-earlier quarter, Sybase earned a penny a share.
Oracle, the biggest database software publisher, is expected to earn 27 cents a share for the fiscal second quarter ending Nov. 30, according to a survey of 27 analysts by First Call. A year ago it earned 21 cents.
Informix is expected to earn 18 cents a share, according to a First Call survey of 25 analysts. A year ago, Informix earned 16 cents.
Hambrecht & Quist's Pickrel said Informix could pass Sybase this quarter in revenue to become the second biggest database vendor.
",25
"Apple Computer Inc. plans to release a new line of computers as early as 1998 that will run an operating system written from scratch, Chief Executive Gilbert Amelio said on Wednesday.
The new operating system -- the fundamental software that controls the basic functions of the computer -- will leapfrog Microsoft Corp.'s competing family of Windows software, Amelio told investors at the American Electronics Association conference in Monterey.
""When you are the minority player in the marketplace, as we are, you need something other than market share to distinguish yourself,"" Amelio said.
Amelio declined to specify what the new software would look like or how it would outperform Windows. But he promised it would ""completely change the way"" people get their work done on computers through applications, such as word processing and spreadsheets.
Earlier this year, Apple said it would abandon the overhaul of its Macintosh operating system, an effort code-named Copland. Apple programmers will use some of the components of Copland but will practically start from scratch, Amelio said.
Amelio also told investors, as he has done recently, that increasing the struggling computer maker's revenue and market share would not be a priority until he could improve the company's operations and product lines.
The effort may take until 1998.
""I have to have a solid foundation before I can build a castle,"" Amelio said. Without a solid foundation, Apple would improve its financial performance for one or two quarters but slide again, he said.
Apple, whose headquarters are in Cupertino, California, reported an unexpected profit of $25 million for the last three months of fiscal 1996, down from a profit of $60 million a year ago. Many on Wall Street had expected the company to post a loss for the quarter.
Investors have given Amelio credit for moving quickly to improve product quality, cut costs and fix production snafus. Apple is likely to report good progress in the next two quarters as well, said Michael Murphy, president of the California Technology Stock Letter and an investment fund. it faces ""worrisome"" quarters after March, Murphy added.
""Amelio's getting closer to fixing the company's problems,"" he said, ""but we're not going to go back in yet.""
",25
"Apple Computer Inc. stock tumbled Monday after the company said it expected a loss of up to $150 million in the latest quarter, prompting even some of the company's most loyal customers to question its survival.
Apple shares fell $3.875 to $17.875, the lowest level since mid-July, as more than 16.8 million shares traded, making it the most active issue on Nasdaq.
Industry analysts, who had expected Apple to post a small loss in the normally strong Christmas quarter, said the loss made it harder for customers to justify buying a Macintosh, given serious questions about the company's finances.
""You can't dismiss this as a one-time issue,"" Montgomery Securities analyst Kurt King said. ""It really does say something about Apple's long-term position in the consumer market.""
The troubled computer maker, struggling for the past year to shore up its finances and rebuild its image, said late on Friday that weak demand for its Performa personal computers would lead to an operating loss of $100 million to $150 million in its first fiscal quarter ended in December.
The company also said it may need further restructuring aimed at cutting another $1 billion in costs, which could mean another round of cutbacks at Apple.
More damaging, the company's woes make it harder for customers -- particularly corporate technology managers -- to justify choosing a Mac over personal computers running Windows software from Microsoft Corp., buyers at the Macworld trade show said Monday.
""It's definitely a fight,"" said Donald Laird, a computer consultant who advises companies about technology purchases. ""Very seldom do I go into a shop where they're as objective (about Apple's technology) as I'd like them to be.""
Complicating matters is a new generation computer chip by industry giant Intel Corp., which the company expects to unveil on Wednesday. Analysts said the new multimedia chip should dramatically boost Intel sales and spur sales for PCs  powered by Microsoft software.
Experts said the perception that Apple was in serious financial trouble could keep potential customers away, leading to a spiral of bigger and bigger losses.
""It's frustrating"" trying to convince customers they may be better off with a Mac, said Jeff Lauterette, a technical support engineer at EPI Systems, a big Macintosh dealer in Rockville, Md.
At a presentation Monday, Apple Chief Technical Officer Ellen Hancock assured big customers that Apple will concentrate on winning back big accounts now that the company has a clear technology strategy.
""We honestly do believe our lack of a (technology) strategy until a couple of weeks ago caused us the problem"" of weak sales in the December quarter, she said. ""We are ready to go back on the attack to tell (corporate customers) that we have excellent technology.""
Last month Apple announced plans to buy Next Software Inc. for $400 million in a bid to update Apple's operating system.
News of the loss prompted several Wall Street analysts to stop recommending Apple's stock as an investment.
Bear Stearns Cos. Inc. cut its rating on Apple from hold to unattractive. Prudential Securities lowered its rating to hold from buy, according to a source at the brokerage house.
Apple Chairman Gilbert Amelio is expected to outline his company's strategy on Tuesday to thousands of Macintosh customers and programmers at the Macworld show. The highlight of his speech was expected to be Apple's plan to revamp its fundamental Macintosh software with technology acquired as part of the Next acquisition.
Some Apple customers said any technology improvement might be too late.
""I've been an Apple supporter since early on and the Mac has made a difference in my life,"" said Don Barrs, principal at Wilton Manors Elementary school in Florida. But he said he was under growing pressure to buy Windows-based computers.
""I have to be realistic about what's best for our school district and our children,"" Barrs said.
",25
"When Apple Computer Inc. fired co-founder Steven Jobs in 1985, Apple employees did not know whether to cry or to rejoice.
Through the early 1980s, Jobs had inspired Apple engineers to create a computer called the Macintosh which would change the world. At the same time, though, Jobs and his mercurial temper burned out many of the same engineers who adorded him.
On Friday, more than 11 years after Jobs was ousted in a stunning boardroom coup, Apple took a huge gamble by bringing him back.
His assignment is to help the Cupertinto, California-based computer company revamp the software behind the Macintosh, an effort that had been mired for three years.
The bet is that Jobs is the only person who can inspire Apple's demoralized programmers to create software that would leapfrog Microsoft Corp's competing Windows operating system.
""He will help tremendously,"" said Randy Wigginton, a former Apple programmer who worked under Jobs to write the software of the original Mac. ""Steve is incredibly bright, talented, amusing.""
On Friday, as word of Apple's decision to rehire Jobs spread, shares of the company rose $1.25 or 5.6 percent, to $23.50.
Job's new company, NeXT Software Inc., which Apple agreed to acquire on Friday for $400 million, offers a computer operating system that has many of the software bells and whistles Apple has been looking for to catch up with rival Microsoft.
Apple had tried to reach a deal with closely held software company Be Inc., founded by another former Apple executive, Jean-Louis Gassee, but the talks broke down and the company turned to Jobs for help.
With NeXT's existing technology, Apple hopes to finish the overhaul of its popular Macintosh operating system -- the type of program that controls the fundamental functions of a computer -- in late 1997.
But the key asset that Apple acquired is Jobs. He will serve part-time as a technology adviser and will report to Apple Chairman Gilbert Amelio.
Several Apple programmers working on the Mac overhaul said they have been frustrated for months with a string of weak managers who could not get the project past a rough sketch even after three years. With Jobs, the programmers said, they hope the project can finally move forward.
""Everybody is excited,"" said an Apple employee close to the project. ""I am very excited.""
The risk of hiring Jobs is his volatility. People who have worked for him said Jobs has a knack for inspiring engineers to think that their work is a life-or-death project, a sentiment Apple now needs. But the same sentiment can burn engineers out.
""In some ways he has mellowed, but he still has an incessant drive for perfection,"" said Joanna Hoffman, the Mac's first marketing manager.
Jobs could not be reached on Saturday for comment. On Friday he told reporters he was looking forward to rejoining the company he co-founded nearly 20 years ago out of his parent's garage.
""I feel very lucky to be a part-time Apple employee and work for Gil and advise him on product strategy.""
Jobs also will work with Apple Chief Technical Officer Ellen Hancock, a veteran International Business Machines Corp. software manager who has set specific goals for the operating system team.
Jobs' visionary role and Hancock's strict, no-nonsense management style balance nicely, said Tim Bajarin, analyst at market researcher Creative Strategies Research.
",25
"American cargo carrier Evergreen International Airlines Inc said on Wednesday it has increased the number of flights from Hong Kong due of high trans-Pacific demand.
Evergreen has six weekly Boeing 747 freighter flights a week instead of four per week and said it can't keep up with current demand.
""All flights are absolutely full and if we had additional flights into Hong Kong we would have no problem filling them because there is a lot of freight being moved and a backlog is building up,"" said Evergreen's vice-president Kersti Krepp told Reuters.
The additional flights on Mondays are to both the U.S. east and west coast - Columbus, Ohio then onto New York and Los Angeles. - Air Cargo Newsroom Tel+44 171 542 7706 Fax+44 171 542 5017
",15
"Korean Air Lines Ltd's cargo load factor dropped 3.2 percent in the six months to end-June this year compared to the same 1995 period, the airline's official traffic results provided to Reuters show.
The cumulative cargo tonnage carried to end-June was 448,000 tonnes, a rise of 8.2 percent over last year's 414,000 tonnes, the figures show.
International cargo in June was up 11.1 percent on last year to 60,000 tons, bringing the cumulative total to 335,000 tonnes, an 8.1 percent rise.
Domestic cargo in the month reached 16,000 tonnes, an increase of 6.7 percent from June last year, the figures show. The month's total cargo tonnage of 76,000 tonnes is 10.1 percent up on 1995.
Load factors for the month were 77.7 percent for international cargo in June down 0.1 percent last year. The domestic cargo load factor fell 1.8 percent to 38.7 percent. last year.
The cumulative totals are down 0.1 percent on the month compared to last June and 3.2 percent down on the year so far.
The international cargo flight tonnage kilometres (FTK) totals for June increased 16.4 percent to 407 million from 350 million last year.
The June FTK domestic total is up 10.3 percent from 5 million to 6 million. The cumulative FTK total is 9.1 percent higher at 2,315 million.
Korean Air also reported an 8.3 percent increase in the number of passengers carried in the first six months at 11,416,000. -- Air Cargo Newsroom Tel+44-171-542-7706 Fax +44-171-542-5017
",15
"Zhuhai, China Nov 5. (Reuter) China's flag carrier and largest airline, Air China is planning to restart flying to Los Angeles next year, Zhang Jinming, general director of the airline's advertising division said
The Beijing, Shanghai service would be ""at least twice weekly"" and use a Boeing 747-400 or Boeing 747 Combi aircraft, Zhang stated.
Los Angeles used to be part of the network but was stopped some time ago. Speaking through an interpreter, Zhang said it would be Air China's third service to the USA after San Francisco and New York.
Zhang was speaking on the opening day of China's first official air show held at the showpiece Zhuhai airport about 35 miles across the Pearl River delta from Hong Kong. Another major Chinese airline, China Southern Airlines, also confirmed at the show that it too was planning to start a Los Angeles service in March of next year.
Zhang also said Air China was expecting to soon announce a new service from Beijing, Shanghai and Guangzhou to Sydney and Melbourne. He could give no further details.
A recent New China News Agency report said Air China planned to open both the US west coast and Australian routes last month. No reason was given by Zhang for the apparent delay. - Air Cargo Newsroom Tel+44 171 542-7706 Fax+44 171 542-5017
",15
"Cathay Pacific Airways is to add a fourth daily flight between Hong Kong and the Philippines because of increasing demand, a company spokeswoman has told Reuters.
The increase comes three weeks after the Hong Kong government announced the successful conclusion of six years of negotiations with the Philippines over a new Air Services Agreement (ASA).
The Confidential Memorandum of Understanding reached did not reveal how many more flights, and what increase in seat and cargo capacity was negotiated but industry sources said it is around 15 per cent. The Government described the route as one of the busiest and fastest growing in Asia.
From October 27, the Airbus A340 flight will leave Hong Kong at 7.50 AM local time and return at 10.50 AM local , Cathay says.
""There is an increasing amount of traffic between Hong Kong and the Philippines and this extra flight has very good convenient connectinns with flights out of Hong Kong to the USA and Canada,"" a Cathay spokeswoman said.
Filipino flag carrier Philippine Airlines already offers four flights per day from Hong Kong. - Air Cargo Newsroom Tel+44 171 542-7706 Fax+44 171 542-5017
",15
"China Southern Airlines is ready to start its first European service to Amsterdam on November 26, Ma Ting Wei, manager of the airline's advertising division told Reuyters.
Speaking at China's first air show held at the showpiece Zhuhai airport about 35 miles across the Pearl River delta from Hong Kong, Ma also said China Southern plans to start flying to Los Angeles in the middle of March next year. But plans to start a third international destination to Brisbane in Australia have not yet been finalised, he said.
The twice weekly non-stop service to Amsterdam and the Los Angeles link will both use Boeing 777 aircraft, two of which have arrived and two more will be flown into the carrier's home airport of Guangzhou within the next two months, Ma said.
Speaking through an interpreter, Ma said the new European destination will be the airline's 26th international route which opens up new opportunities.
""We hope it will be a success and is in response to customer demand. We expect good passenger and cargo numbers to be carried,"" he said.
The Amsterdam service is the result of an Air Service Agreement between the Dutch and Chinese governments which industry observers say took five years to hammer out. The agreement also allowed Dutch flag carrier KLM to fly to Beijing and Dutch cargo airline Martinair to fly a 747 freighter service into Guangzhou. A Martinair spokesman told Reuters last week that the service was due to begin this month but could not give a definite start date.
Freight forwarders say both the China Southern and Martinair connection will mean cargo which up to now had to be flown from Hong Kong to Europe will now eliminate cross border expense and save time. - Air Cargo Newsroom Tel+44 171 542-7706 Fax+44 171 542-5017
",15
"Federal Express Corporation (Fedex) is planning to utilise another former U.S. military base in the Philippines, Fedex and Philippine officials told Reuters.
Senior officials from Fedex, which has its main Asian hub at the former U.S. naval base at Subic Bay, have made detailed visits to the former Clark U.S. air force base, which is trying to attract traffic to its special economic zone.
Operations Vice President at Clark International Airport Corporation, Tereso Isleta, said Fedex is expected to become the airport's first cargo operator next month with the first flight of breeding cattle from Australia.
""We have been very happy to show senior Fedex officials around and we have been to their main hub in Memphis to see how they work. The first flight of cattle from Australia is expected in the next few weeks. It is very important for us to see Fedex coming here and hopefully Clark will become a hub too and attract many more airlines,"" Isleta told Reuters in a telephone interview from Clark, north of Manila.
Asia Pacific public relations manager for Fedex, David Clarke, said the former base could be used as an alternative to Subic in case of bad weather and for charter traffic.
He emphasised his company's commitment to Subic Bay where Fedex recently completed the first anniversary of operations as its Asian hub.
Better known for its overnight express freight business, Fedex says the transport of live breeding cattle from Sydney, Australia would be flown into Clark aboard a Fedex McDonnell Douglas MD-11 specially adapted as an animal transport.
""It's a branch of our general operations. Charter has always played a role for us. Transporting cattle is a specialised business but we're also used to handling thoroughbred horses in Japan, Hong Kong, Singapore and the Middle East and we hope more business of this type will come our way,"" Clarke said.
Clark International Airport Corporation is funded by the Philippines government's Bases Conversion Development Authority, which helped establish the Clark Special Economic Zone, following the withdrawal of U.S. forces. --Air Cargo Newsroom Tel+44 171 542 7706 Fax +44 171 542 5017
",15
"An American airline has successfully completed a proving flight over Russian air space which the Federal Aviation Administration (FAA) said is an important milestone in the introduction of the Future Air Navigation System (FANS) on trans-Pacific routes.
The United Airlines Boeing 747-400 flight from Chicago to Tokyo's Narita airport on November 15 is expected to be followed by more pioneering trials over the next three weeks by Singapore Airlines, Japan Airlines and Cathay Pacific Airways Limited, said David Behrens, international programme officer of the FAA.
FANS, or Communication Navigation Surveillance/Air Traffic Management (CNS/ATM), is the next generation air traffic management system which uses satellite navigation for the more efficient use of air space.
""Aircraft which are FANS equipped will have the competitive edge with reduced costs all round. The technology will mean more direct routes, less fuel burned, more cargo carried, reduced air traffic controls costs, reduced errors and ground delays -- there is no turning back"", David Behrens told this week's Asian Air Cargo Summit.
The U.S. was working towards a new bilateral agreement with Russia to develop air traffic control infrastructure in the Far East to open up air space to airlines flying between Asia and American cities such as New York, Chicago and Detroit.
""There have been a lot of problems in getting demonstration flights approved by the Russian authorities. The use of English which is the international language of the skies is still a major problem. This is another milestone in the development of FANS and the most successful proving flight to date although it is still early days,"" Behrens said.
Speaking after the conference Behrens said further advances are hoped for at the Informal Pacific Air Traffic Control Co-ordination Group meeting in Tokyo on January 20.
Airlines which have already invested in FANS cockpit technology are waiting on the go ahead for a new ""fast track"" routing across the central Pacific Ocean cutting up to an hour off journey times between Hong Kong or Taipei to San Francisco or Los Angeles. China Airlines, United Airlines and Cathay Pacific which is awaiting Hong Kong government approval to use FANS cockpit technology, could be the first airlines to benefit, Behrens said.
Korean Airlines, which has to make a big U-turn to avoid military training areas near North Korea air space, is also expected to make ""huge savings"" from FANS technology with a 40 minute saving on U.S. bound flights from Seoul when a new agreement with the North is signed, the FAA estimate.
Only about 70 Boeing 747-400 aircraft, the inter-continental workhorse of many airlines, are currently equipped with FANS avionics but that total is about to mushroom and all airliners will be FANS equipped by the year 2002, Behrens predicted. - 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 August by country rose by 6.7 percent compared with the same month last year.
Air cargo imports on both scheduled and non-scheduled flights reached 59,910.5 tonnes and 71,674.9 tonnes for exports.
The top 15 countries figures (rounded) are shown in tonnes in the table below in alphabetical order.
			AUGUST 1996 ALL CARGO
			Unloaded     Loaded    Pct change
						     from July 95
AUSTRALIA	    2,675	  2,327    -8.65
CANADA		 1,836	  1,508     8.95
CHINA MAINLAND     1,841	  2,896     9.46
FRANCE		 1,720	  2,010     5.69
GERMANY		3,365	  3,866     4.70
JAPAN		  5,570	 12,197     2.35
SOUTH KOREA	  3,026	  3,867     7.95
MALAYSIA	     2,052	  1.634     5.00
NETHERLANDS	  1,142	  1,167     4.70
PHILIPPINES	  1,600	  1,737    -6.12
SINGAPORE	    4,430	  3,945    12.30
TAIWAN		 9,880	  7,161    26.98
THAILAND	     5,475	  2,380     6.62
UK		     3,378	  3,850    13.72
USA		    4.812	 14,722    -1.15
- Air Cargo Newsroom Tel+44 171 542 7706 Fax+44 542 5017
",15
"Hong Kong Air Cargo Terminals Limited (HACTL) may retain its facilities at Kai Tak as a 'down-town' depot after the territory's new airport at Chek Lap Kok opens, its managing director Anthony Charter said.
Air freight forwarders in Hong Kong said they are putting new pressure on the Government to keep Kai Tak's twin terminals open. Charter said HACTL has now made new approaches to the Government but added that a final decision is not expected until next year when a team of planning consultants report on what should happen to the valuable land which the airport occupies.
""We would be very happy to protect this bit of infrastructure which would help freight forwarders get over some of the difficulties they have with the new airport. It makes sense not to see the highly automated facilities just knocked down. We are keen on the idea of serving the freight forwarding community in the future,"" Charter told Reuters.
HACTL's private franchise at Kai Tak is due to run out when the new airport opens in April 1998 and its terminal facilities returned to the Government for the nominal fee of one Hong Kong dollar. HACTL will then move into its new one billion HK dollar state-of-the-art Super Terminal at Chek Lap Kok which it says will be the world's largest air freight complex under one roof.
But some freight forwarders, especially smaller companies, are baulking at the high cost of moving to the new airport, said the Hong Kong Association of Freight Forwarding Agents (HAFFA). Many firms have invested heavily in infrastructure close to Kai Tak and fear large staff relocation costs and high rents at the new out of town airport, it added.
HAFFA has supported calls for Kai Tak's cargo facilities to be retained and said it first proposed the idea more than five years ago but HACTL management then rejected it.
""It would make agents life easier if, as we proposed, there was a town centre facility,"" said HAFFA's chief executive Pauline Hui.
DHL International (Hong Kong) Ltd is backing the call. Andy Tseng, DHL's area manager for Hong Kong and China said he's written a letter urging that Kai Tak's cargo facilities be retained as a consolidation centre.
Supporters said the terminals could be rented out to another operator or run by HACTL.
HACTL said the former is unlikely because they own the computer software which runs the highly automated centre. Another suggestion that cargo from Kai Tak could be taken by barge to the new airport as well as along the new toll expressway has been discounted by HACTL as too slow.
HACTL said its integrated and highly automated twin cargo terminals at Kai Tak handle more than 1.5 million tonnes from 70 airlines a year making it the second busiest international cargo airport in the world. About 20 per cent of Hong Kong's external trade passes through HACTL. The company has invested more than US$256 million in Kai Tak, excluding land costs, which is probably the largest investment in air cargo facilities worldwide.
Aviation analysts said much of that investment will wasted if the Kai Tak terminals are closed down.
The lobby to keep the cargo terminal open is running alongside another campaign to keep Kai Tak open as an airport for smaller commuter aircraft. The Hong Kong government says it has rejected that proposal but is being urged to rethink its long term policy by business interests including commuter aircraft manufacturers.
HACTL, which has a monopoly on all air cargo handling at Kai Tak airport, is jointly owned by Swire Pacific Ltd, Jardine Matheson Holdings Ltd, Wharf (Holdings) Ltd, Hutchison Whampoa Ltd, China National Aviation Corp, CITIC Pacific Ltd and Cathay Pacific Airways Ltd. - Air Cargo Newsroom Tel+44 171 542-7706 Fax+44 171 542-5017
",15
"British Airways said it will be able to carry an extra 70 tonnes of air cargo a week when its twice-daily passenger services between Hong Kong and London begin a new, shorter route over China later this month.
Chris Humphrey, BA's regional cargo manager Pacific said the new northern route over Chinese air space will mean shorter journey times for BA's Boeing 747-400 aircraft which won't need to carry as much fuel enabling the cargo payload to be increased by five to six tonnes per flight on average.
He said the new routing was negotiated during recent talks between the Chinese and British governments and also benefits BA's rivals on the route, Cathay Pacific Airways Ltd and Virgin Atlantic. Both Cathay Pacific and Virgin Atlantic said they are also due to start the new shorter route on October 27.
""The new routing via Urumqi in China will be a real benefit to us with the start of our winter schedule on October the 27th. It means a shorter distance, less fuel and more cargo. With the extra capacity it will generate of around 70 tonnes a week which is very close to getting another 747 freighter on the route,"" Humphrey said.
-- Air Cargo Newsroom Tel+44 171 542 7706 Fax+44 171 542 5017
",15
"British Airways plans to offer more passenger flights to Hong Kong but will not be changing the current wet lease freighter service to the territory, said chief executive Robert Ayling.
""We quite successfully expanded our cargo business by bringing in quite a substantial proportion of freighter capacity from outside the airline and I don't see why that should not continue. It's true Hong Kong is a particularly good market for freight and I am sure the air cargo industry will continue in the future,"" Ayling told reporters in Hong Kong. He is visiting the territory as part of a tour of key BA destinations with the theme 'Taking British Airways into the new millennium.' promoting how he will be ""reinventing"" the airline
""We have had a firm policy for the past ten years not to buy freighters and I see no reason to change that. I think if you asked KLM and Lufthansa, they would prefer to be in my position. I think we will continue to operate freighters but only on a wet lease basis not involving any capital expenditure,"" he added.
BA says it currently offers a three times weekly service between London Gatwick and Hong Kong using a Boeing 747-200 freighter wet leased from Atlas Air Inc. It also has 14 Boeing 747-400 passenger flights a week to London offering belly cargo capacity. The airline says it hopes to increase the twice daily frequency when slots at Heathrow become available and before Hong Kong's new airport opens in 1998.
Rivals Virgin Atlantic recently said that it does not have enough capacity on the London to Hong Kong route and is considering replacing its popular but smaller Airbus A340 aircraft with higher capacity Boeing 747-400 aircraft to meet demand. But Virgin managers said it has no immediate plans to enter the freighter market. - Air Cargo Newsroom Tel+44 171 542 7706 Fax+44 171 542 5017
",15
"This is Reuters' 2nd ex-Hong Kong air cargo market report.
It will be published regulary until a new version is published at a later date.
HONG KONG, Oct 17 - (Reuter) Current average ex-Hong Kong air cargo market rates in Hong Kong dollars per kg for a 100kg shipment, with volume-to-weight of six to one.
						Oct 17	     Sept 30
				EUROPE
HK-LHR					22.25		20.85
HK-FRA					22.40		21.09
				USA
HK-JFK					20.70		20.50
HK-LAX					21.05		20.95
				MIDDLE EAST
HK-DXB					15.80	     15.18
				ASIA PACIFIC
HK-SIN					 9.10		9.06
HK-TAIPEI				    4.10		3.90
HK-TOKYO				    30.70	     30.50
* The rates in this report were obtained by Reuters journalists on a confidential basis from a range of airlines, large forwarders and smaller cargo agents.
* All prices were quoted in Hong Kong dollars.
* The tariffs represent average calculated from a range of prices and are indicative of current market acitivity.  
Demand for space has eased slightly as a recent backlog is cleared and some airlines provide extra capacity, but key ex-Hong Kong rates have continued to rise, Reuters research shows.
Airlines and freight forwarders report brisk business as the territory's traditional peak season gathers pace and high demand for space has allowed airlines on European routes to again raise rates for the second time within three weeks.
A rise of 50 HK cents a kg on October 16 follows a HK$2 a kg rise imposed on October 1 on key routes to Europe. Transpacific demand is also said to be especially strong allowing rates to firm slightly.
Pressure for cargo space is also being exacerbated by high demand on passenger flights which is reducing bellyhold capacity for many airlines.
Sam Chung, the chairman of the Hong Kong Association of Freight Forwarding Agents and director and general manager of Fritz Air Freight (HK) Ltd, said the market was very strong especially in his company's main sector, the United States.
""Every single flight is full but space should become a little better because some airlines are putting on extra capacity. In early October there was a backlog everywhere but that is now easing,"" Chung said.
He also highlighted the HK$2 a kilo rate rise on routes to Europe from October 1 with more ""unfair rises"" due to bite.
Two U.S. airlines have drafted in extra aircraft to cope with heavy trans-Pacific demand.
Polar Air Cargo is employing two additional Boeing 747 freighters between the territory and Chicago and New York.
""At the start of October it was really busy with a lot of airlines having a backlog in Hong Kong, Japan and Taiwan. But right after China's national day and the mid-Autumn festival when a lot of factories closed down it gave us the chance to move a lot of cargo out of Hong Kong and gave us the chance to clear the backlog,"" said David Sung, Polar Air's Hong Kong sales manager.
More extra capacity on the trans-Pacific route has come from Evergreen International Airlines Inc which says it now offers six Boeing 747 flights a week instead of four previously. The additional flights on Mondays are to Columbus,Ohio then onto New York and Los Angeles.
""All flights are absolutely full and if we had additional flights. into Hong Kong we would have no problem filling them because there is a lot of freight being moved and a backlog is building up,"" said Evergreen's Vice President Kersti Krepp
There is also extra capacity being drafted onto a main European route. Lufthansa Cargo AG says it will put an additional freighter on the Hong Kong to Frankfurt route before the end of the month because of high demand.
The extra flight will increase the total number of flights Lufthansa operates to Germany in a joint venture with Cathay Pacific Cargo to 11 per week. September also saw an additional freighter being drafted onto the route increasing the number of joint freighter from nine a week during July and August to 10 now.
British Airways World Cargo ,which has three freighter flights per week between Hong Kong and London Gatwick wet-leased from Atlas Air, in addition to belly cargo space on its twice daily passenger flights to Heathrow, also reports a very strong market.
""This is the peak of the year and we have been very strong and are very pleased with our performance. Every available metre of space is full and we think that will carry on for the forseeable future,"" said Chris Humphrey, British Airways s regional cargo manager Pacific who is based in Hong Kong.
He said rates to Europe have increased to reflect the strength of the market and thinks another rate rise is justified.
""Fuel prices have gone through the roof. Yields are again at the same level they were last year but underlying costs are increasing, particularly fuel,"" complained Humphrey.
Mark Wilson, Managing Director of freight forwarders Benair Freight also said pressure for space has recently eased as a backlog is cleared.
""Space is tight but available which proves that the airlines are working together and not discounting too much. Rates have stayed firm and the airlines are trying to keep rates up,"" he said.
He said rates to Europe have recently increased by around 20 per cent and by 15 per cent to the U.S. Inter-Asian rates are stable where yields are traditionally stronger.
Stanley Hui, the chief operating officer of the territory's only all cargo airline AHK Air Hong Ltd, which flies 747 freighters both east and westbound, said he had no complaints especially about the trans-pacific sector.
""Unlike in previous years, there has not been that much additional capacity employed during the peak period. Demand both in and out of Europe is also firm and services to Japan are busy. After last year's record year and a slow start to this year we have high expectations about Japan,"" Hui said
The latest statistics from Hong Kong's Civil Aviation department show Tokyo-Narita to be the biggest importer of Hong Kong goods. 8,742 tonnes of air cargo was flown from Hong Kong to the Japanese capital during August, according to the statistics.
Hui also said he expected rates to Europe to continue to rise.
""We are not trying to be greedy but we can't lose money forever and all cargo airlines are trying to recover what we have lost,"" Hui said.
Many airlines report being especially badly hit by Hong Kong's seasonal monsoon winds. Northerly winds mean aircraft have to take off in a steep climb over densely populated Kowloon and payload has to be reduced.
Air France Cargo said all carriers were being affected on both European and trans-Pacific long haul routes by having to suddenly off-load pallets and a backlog of more than 400 tonnes built up in early October.
""Everybody is being hit by these weather conditions and customers are unhappy about having their cargo left behind - but so are we. It is the first time I've ever known so much having to be offloaded,"" said Philippe Bour, the airline's regional cargo manager for Hong Kong, China, Macau, Taiwan and South Korea.
Paul Choi, assistant general manager of MSAS Cargo International in Hong Kong said the back log has now eased, partly due to more cargo being flown from Macau.
Gemini Air Cargo flew its first McDonnell Douglas DC-10-30 freighter into the Portuguese enclave from New York on September 27 with about 40 tonnes of cargo mostly destined to be shipped to Hong Kong. The airport which opened last November says Gemini is the fourth all cargo service to serve Macau on a regular basis and unlike Hong Kong has no severe space and slot restrictions or curfew.
Hong Kong Air Cargo Terminals Ltd (HACTL), which enjoys a monopoly on cargo handling at Kai Tak airport said after a ""pretty lack lustre"" first half the market has picked up during August and September which should continue in the traditional peak period towards Christmas.
HACTL reported a 7.1 per cent increase in throughput during September over last year whnn exports and imports rose by 5.5 per cent to 68,673 tonnes and 7.3 per cent to 49,063 tonnes respectively over September last year.
HACTL managing director Anthony Charter said transshipments ""soared"" 13.7 per cent to 16,775 tonnes ""which interestingly may point to sign of a regional pick-up.""
""There seems to be a shortage of capacity which is traditional at this time of year along with the hike in rates. I think this year we are seeing a slightly more positive outloook,"" Charter said.
HACTL says it is on course for another record year and expects a rise of around four per cent which is a far cry from the 23 per cent growth in previous years but ""still welcome."" - Air Cargo Newsroom Tel+44 171 542 8982 Fax +44 171 542 5017
",15
"Hong Kong civil aviation department statistics show cargo handled in August totalled by region rose by 6.7 per cent compared with the same month last year.
Air cargo imports on both scheduled and non scheduled flights reached 59,910 tonnes and 71,675 tonnes for exports.
Regional figures (rounded) in tonnes are shown in the table below.
		    AUGUST 1996 - ALL FLIGHTS
			    Unloaded    Loaded	Pct change
							    from Aug 95
 Africa			195	   241	20.0
 Asia - others	   4,013	 4,824	12.0
 Australasia	     2,996	 2,676	-6.1
 Continental Europe    8,850	 9,449	 1.6
 Japan		     5,570	12,197	 2.4
 Mainland China	  1,841	 2,896	 9.5
 Middle East		 700	 1,291	 2.7
 SE Asia		  15,306	10,845	 8.0
 South America		66	    65     -21.2
 Taiwan		    9,938	 7,163	27.0
 UK			  3,380	 3,850	14.0
 USA/Canada		6,940	16,176	 0.1
 Total		    59,910	71,675	 6.7
- Air Cargo Newsroom Tel+44 171 542 7706 Fax+44 171 542 5017
",15
"Landing fees at Hong Kong's new Chek Lap Kok airport must be competitively priced compared to other airports in the region, the chairman of Cathay Pacific Airways Limited Peter Sutch said.
Reports of fees double those at Kai Tak airport have already caused alarm among airlines and representative groups such as the Orient Airlines Association.
As one of the main users of the new airport, industry observers say Cathay managers are especially concerned about the level of the new fees which will heavily influence long term profitability.
The International Air Transport Association (IATA) Users' Group is one group closely watching the situation, Sutch noted at the ceremonial start of work on Cathay's new headquarters at the site of the new airport.
""As airlines compete against each other, so do airports such as Taipei, Singapore and Bangkok's new airport. It is important for the industry and the economy of Hong Kong that the airport is competitive for its users,"" Sutch said.
A spokesman for the Airport Authority, the body set up to manage Chek Lap Kok said the consultation process is still going on and the fee structure is expected to be revealed in the first or second quarter of next year.
Sutch said Cathay is considering raising passenger ticket prices and air cargo rates because of increased fuel costs.
""We are seriously considering reducing some of the increased fuel cost through higher ticket prices and cargo rates. As soon as a decision is made we will let you know,"" he said.
Airlines belonging to IATA agreed on Friday on a three per cent rise in air fares to cover higher fuel bills. -- Air Cargo Newsroom Tel+44 171 542 7706 Fax+44 171 542 5017
",15
"United Parcel Service of America Inc (UPS) said the first aircraft to use its US$4 million Asia-Pacific hub now under construction in Taiwan will arrive on September 10, Mark Sobolewski, UPS director of engineering for Asia-Pacific told Reuters.
He added that the first phase of the hub at Taipei's Chiang Kai Shek airport is due to formally open on October 10 and is on schedule to be fully operational by March next year.
Six Boeing aircraft -- two 747s, two 757s and two 767s -- are due to operate eight flights a day in and out of Taipei six days a week from March connecting the U.S. with the company's growing Asian network.
The fast package carrier confirmed this week that it had won traffic rights to operate five frequencies a week from Bangkok. Sobolewski says other cities to be linked to the Taipei hub are Singapore, Kuala Lumpur and Osaka.
""The hub will enhance our service throughout Asia, make us more competitive and as this market grows we will have a reliable product and give a superior service. We have had very positive feedback from our customers especially in Taiwan,"" Sobolewski told Reuters from his Singapore office.
With the six aircraft, some brand new, the total investment in Taipei will amount US$400 million, UPS said. It added construction work on the first phase of the 4,800 square metres sorting office began this month.
The first Taiwan-based aircraft due next month will activate traffic rights awarded to UPS under the recent Japan-U.S. bilateral agreement, allowing packages to be picked up at Osaka's Kansai airport for distribution throughout Asia.
Air Cargo Newsroom Tel+44 171 542 7706 Fax+44 171 542 5017
",15
"British Airways World Cargo (BAWC) is to employ a fourth weekly freighter between Hong Kong and London from next year, BAWC's regional cargo manager Pacific, Chris Humphrey said.
""We will definitely be moving forward with a fourth freighter. We are very bullish about the prospects for Hong Kong and Chinese economic growth. There's definitely a growing market here and next year's handover from a cargo point of view is immaterial. Other concerns such as US-Chinese trade relations have a much greater impact,"" Humphrey told Reuters in an interview at the British flag carrier's Hong Kong regional headquarters.
British Airways currently flies three Boeing 747 freighters a week between Hong Kong and London Gatwick which are wet leased from Atlas Air Inc. Denver-based Atlas uses converted passenger 747's to fly for several major airlines on aircraft, crew, maintenance and insurance (ACMI) long term, wet-lease contracts which BA says it is happy to continue because no capital costs are incurred.
The cargo executive said statistics proved how strong the Hong Kong market is for BAWC. Humphrey said statistics of all Association of European Airlines (AEA) carriers in the Asia Pacific Region showed BAWC enjoyed an 18.5 percent increase in market share between January and July measured by Freight Tonne Kilometres (FTK). The traffic average for AEA carriers, which included Air France and Swissair, both to and from the region was 8.2 per cent, he said.
He also said freight tonnage from Hong Kong to BA's world-wide network in the first half of the financial year between April and September increased by 31 per cent.
""That's a pretty dramatic increase which is indicative of the market's strength,"" Humphrey said. - Air Cargo Newsroom Tel+44 171 542 7706 Fax+44 171 542 5017
",15
"DHL Worldwide Express is investigating whether to have a new Hong Kong operations centre near the territory's new airport, its Hong Kong and China area manager Andy Tseng said.
The proposed centre would be in addition to and complement the express freight centre now under construction at Chek Lap Kok in which DHL has an equity stake.
It would also be in addition to the firm's existing town centre base near Tai Tak airport and its satellite depots across the territory. DHL recently invested HK$15 million in a new automatic handling system able to process 4,000 items an hour at its existing airport base.
""It is a vital decision for our future and a huge involvement. We must make sure we make the right decision for us and for our customer's changing needs in the future. It is difficult and we are collecting as much information as possible on what our customers want,"" Tseng said.
DHL say they have been approached by four real estate developers offering green field sites or existing buildings for conversion in west Kowloon, a mainly industrial area close to the new bridge and motorway link to the new airport on Lantau island.
Other air cargo companies are also reported to be considering off-airport sites because they fear high building rents and staff relocation problems at the new airport.
DHL says a viability study being conducted by a task force should be complete by the end of the year. - Air Cargo Newsroom Tel+44 171 542 7706 Fax+44 171 542 5017
",15
"The Hong Kong Shippers' Council is urging the government to tell airlines that a fuel surcharge on air cargo rates is illegal, the council's executive director Clement Yeung told Reuters.
Cargo managers from major airlines operating to Europe met in the territory on October 31 and some agreed to raise ex-Hong Kong cargo rates by HK80 cents per kilo from November 4 to try to offset increased jet fuel prices.
The Hong Kong Shippers' Council said it had written to the Civil Aviation Department urging it to outlaw the surcharge.
""We are reasonable people. We don't necessarily object to each and every increase but we feel the airlines should follow the rules by obtaining approval. Their case should be supported by facts and figures,"" Yeung said.
""In this case, it seems only a few airlines have decided to impose the surcharge. Others have not followed which begs the question: What is Hong Kong going to do about it and if airlines should be allowed to keep their surcharge? If they are, then it is a gross injustice to shippers and freight forwarders. The airlines should abide by the book and the governments should tell them it is illegal,"" Yeung said.
The council represents 15 of the leading trade associations in the territory including the Hong Kong General Chamber of Commerce and the Chinese Manufacturers' Association.
The Federation of Asia Pacific Air Cargo Agents (FAPAA) is also reported to be opposing the fuel surcharge. A report in the South China Morning Post quoted its chairman Bernard Angeles as saying the airlines' surcharge bid might fail because they had not applied for approval from Hong Kong's Civil Aviation Department which he said was required by law.
-- Air Cargo Newsroom Tel+44 171 542 7706 Fax+44 171 542 5017
",15
"Cathay Pacific chairman Peter Sutch on Monday dug the first turf for the airline's new corporate headquarters in Hong Kong.
""This headquarters... is a firm, visible and concrete example of our commitment to Hong Kong,"" Sutch told guests and reporters at the huge airport construction site.
The US$448 million or HK$3.5 billion HQ at the territory's Chek Lap Kok airport will house almost all the airline's staff under one roof for the first time. Sutch described the new building as a very important stage in Cathay's 50 year history offering a ""home from home"" for more than 4,000 employees.
The move to th will open up many new commercial, business and marketing opportunities.
Hank Townsend, chief executive officer of the Hong Kong Airport Authority, the body set up to run the new airport assisted at the ceremony.
""We wish you success, luck and great prosperity in the future and welcome you as one of the family, as one of the tenants here at Chek Lap Kok,"" Townsend said.
The one million square foot complex, being built by Dragages et Travaux Publics (HK) Ltd, part of the French Bouygues Group, includes a 10 storey office block, a 23 storey staff hotel with 350 rooms and a leisure area.
Cathay hopes for savings and improvements in efficiency by not having its staff and 30 department offices spread aronnd Hong Kong. Managers hope to overcome staff concerns about commuting time to the new airport site on Lantau island.
The new airport is due to open in April 1998, and Cathay said its new HQ is due to be completed in August 1998.
-- Air Cargo Newsroom Tel+44 171 542 7706 Fax+44 171 542 5017
",15
"The head of British Airways World Cargo (BAWC) in Hong Kong, Chris Humphrey, said he is confident of a ""dramatic improvement"" in freight handling service standards at London's Gatwick and Heathrow airports.
One leading Hong Kong air freight forwarder said he is just one customer who is ""appalled"" at BAWC's handling of ex-Hong Kong cargo in London. One recent consignment took three and a half days to clear Gatwick, the forwarder said speaking to Reuters on condition of anonymity, adding he tries to avoid Heathrow wherever possible because of ""indefensible"" service standards. BA recently had its ISO service standard award at its main Heathrow cargo hub revoked.
Chris Humphrey, BAWC's regional cargo manager Pacific said he is aware of the problems and has assured customers that improvements are under way.
In an interview in Hong Kong, he said major changes to working practices at Gatwick, which receives Hong Kong's three freighter flights per week, had caused a ""short term downturn in service standards"".
At Heathrow, there have also been changes. BAWC's newly opened dedicated centre for freight from the Pacific region began handling Hong Kong cargo earlier this month. BA has said the centre will create a series of customer benefits and relieve pressure from its World Cargocentre hub.
""Again I am confident that we will see a dramatic improvement in our service standards there. I won't deny that we have had problems working in a very old building which is over capacity. We are aware of that and are working very hard to bring our working practices up to date and doing an awful lot of changes in a short time which is causing pain on the labour relations front. We lost the ISO from our main cargo hub but Pacific routes and cargo from Hong Kong still goes through an ISO qualified warehouse,"" Humphrey said.
""Things are getting better,"" he added. - Air Cargo Newsroom Tel+44 171 542 7706 Fax+44 171 542 5017
",15
"Lauda Air is enjoying ""huge passenger growth"" on the Hong Kong to Vienna route but cargo is disappointing, the airline's Hong Kong general manager Sunny Yu told Reuters.
While there's been a 34 percent increase in the number of passengers along with a 42 percent growth in revenue over the past year, cargo revenue is up to three per cent below last year's level, he said. Lauda's Boeing 767-300 twice weekly flight from Hong Kong to Vienna via Bangkok averages eight to nine tonnes of belly cargo with watches a particularly common commodity, Yu said.
""Cargo is staying at more or less the same level as it was last year. A small price war and overcapacity with ad hoc charters operating into Hong Kong are major obstacles. I'm not optimistic about getting cargo rates back to the good old days,"" Yu said.
He said the cargo situation is not mirrored on the passenger side where Lauda expects another double digit rise in passenger numbers this year. The current number of passengers flying between Hong Kong and Vienna is around 9,000, Lauda says.
The Austria carrier also said it's being constricted in adding more frequencies to Hong Kong from its Vienna hub because of slot restrictions at Kai Tak airport but hopes to eventually benefit when the territory's new, round the clock airport opens in 18 months time. - Air Cargo Newsroom Tel+44 171 542 7706 Fax+44 171 542 5017.
",15
"Major airlines operating cargo flights to Europe are to raise their ex-Hong Kong cargo rates by HK80 cents per kg from November 4 to try and offset increased jet fuel prices, airline officials told Reuters.
Stanley Hui, the chief operating officer of the territory's all-cargo airline, AHK Air Hong Kong Ltd, said an emergency meeting of airlines was held in Hong Kong this morning to discuss a fuel surcharge.
Among the airlines represented were Cathay Pacific Airways Ltd, Lufthansa Cargo, Air France, Martinair and Cargolux, he said.
However British Airways World Plc -- a major carrier from Hong Kong to London was not represented, industry sources said.
""Fuel costs have escalated to such a level that it is only right and fair that the shippers share some of the cost because the impact on the airlines has been very obvious,"" Hui said.
Other carriers operating trans-Pacific routes for instance are also expected to follow suit with a similar increase, Hui added.  
Philippe Bour, regional cargo manager for Air France in Hong Kong said his airline will apply the increase from November 4 along with Lufthansa Cargo. Cargolux, Air Hong Kong and other carriers would follow a few days later, he added.
""It is a world-wide problem. Fuel prices in France rose 51 per cent from June to October, in Asia they have risen 33 per cent this year and something has to be done. We hope this will help us,"" Bour said.
Another cargo manager said, ""It is not a case of running out of patience but of running out of money.""
Japan Airlines Co Limited yesterday reported a 60.7 percent slump in profits in the six months to September due to higher fuel costs and the yen's retreat against the dollar.
JAL said fuel costs had risen by US$128 million compared with a year ago.
Other major Asian cargo airlines in the region say they are watching the situation closely.
Ming Fai Lai, cargo manager for China Airlines in Hong Kong, said it is waiting before deciding to follow suit but said an 80 cents rise would only have a limited benefit.
""If all European carriers unanimously raise their rates then we will follow but it is not clear if they will all adopt the same policy. 80 cents may help a little bit but for the future I don't think it will help that much,"" said Lai. --Air Cargo Newsroom Tel+44 171 542 7706 Fax +44 171 542 5017
",15
"Hong Kong Dragon Airlines (Dragonair) is about to buy two new Airbus Industrie consortium aircraft and lease another to cope with increasing demand on its routes into China, industry sources told Reuters.
The proposed deal is for two new Airbus A320 aircraft for delivery in 1998 and 1999 with options for five more and one larger Airbus A330 on lease from next year, the source said.
A Dragonair spokesman said it could not confirm the reported acquisition but he said talks on new aircraft had been taking place.
The airline which currently has a fleet of seven Airbus A320s and four A330s, recently said it will need additional aircraft.
""It is common knowledge that we have a requirement for extra capacity and we have been talking to Airbus but no announcement has been made yet,"" the spokesman said.
Industry analysts said expansion would be seen as a vote of confidence in future business prospects after a difficult period trying to develop its regional network especially into China.
Slot restrictions at Hong Kong's crowded Kai Tak airport were a major constraint, they added.
Expansion would also benefit Cathay Pacific Airways Ltd which holds an 18 percent stake in the regional carrier by feeding more passengers and cargo on its international network and vice versa, analysts said.
Dragonair recently began new services to the Chinese city of Qingdao and Khaohsiung in Taiwan. It also has full scheduled cargo rights on two of its Chinese routes to Xian and Chengdu and says it has plans for additional Chinese services to Chongqing, Urumqi and Shantou.
Other shareholders in Dragonair are the Chinese state-owned China National Aviation Corp with 36 percent, China-backed CITIC Pacific Ltd with 29 percent and Cathay's parent, Swire Pacific Ltd with eight percent. --Air Cargo Newsroom Tel+44 171 542 7706 Fax +44 171 542 5017
",15
"Work will start on October 30 on Cathay Pacific Airways Ltd's new HK$1.6 billion headquarters at Chek Lap Kok, the main contractor, Dragages et Travaux Publics (HK) Ltd, said in a statement.
The subsidiary of the French, Bouygues Group said the work includes a 10-storey office building, a 333 room staff complex, a three-storey workshop and stores building and a three storey leisure centre with a total floor area of 102,630 square metres.
The new building is scheduled to be completed in stages from January 1998 with an overall construction period of 22 months, the statement added.
The new airport at Chek Lap Kok is due to open in April 1998.
Dragages said it is also building the new base maintenance facility for Hong Kong Aircraft Engineering Company Limited (HAECO) and Cathay Pacific's new flight kitchen at the Chek Lap Kok.
-- Air Cargo Newsroom Tel+44 171 542 7706 Fax +44 171 542 5017
",15
"DHL Worldwide Express plans to strengthen its role as market leader in China by opening 14 new offices and employing another 600 staff within the next three years, said the company's area manager for Hong Kong and China, Andy Tseng.
DHL celebrates its tenth anniversary of China operations next month ""far ahead of our competitors and with 30 per cent market share"", Tseng told Reuters in his Hong Kong office near Kai Tak airport.
Tseng said China may win 10 per cent of all DHL sales within Asia by the year 2000. DHL expects to expand its Chinese network to 26 by the end of this year and 40 within the next three years from the current 19. The new offices, to include Harbin, Pudong and Kunming, are in 50-50 joint ventures witrh Chinese partners, DHL said.
DHL's China venture began in 1986 when it set up a joint venture with China's largest forwarding company Sinotrans. DHL says it received another boost three years ago when it became the first joint venture to offer express links between domestic Chinese companies.
""Choosing the right partner was vital as is demonstrating a long term committment to China. We have demonstrated that,"" Tseng said.
Like all fast freight companies trying to do business in China, Tseng says the lack of infrastructure is a handicap but DHL is leading the way by expanding its network.
""The distribution network and lack of freight links has been identified as the key problem. But service quality and flexibility is particularly important in China,"" he added.
The 20 year veteran with DHL said that unlike rivals such as Federal Express, it enjoys a competitive advantage in China by not having its own fleet of aircraft running in competition with Chinese airlines. Tseng says he wants to strengthen the company's ""very good"" existing relationships with third party local airlines such as China Northern and China Eastern.
Tseng also said the average express shipment is getting heavier and pointed to the marketing success of DHL's Jumbo Box as offering a simple one price product which customers find easy to understand. But he said DHL has not yet started offering the Jumbo Box to customers in China. - Air Cargo Newsroom Tel+44 171 542-7706 Fax+44 171 542-5017
",15
"Japan Airlines (JAL) is expanding its new express cargo service called ""J Speed"" to meet rising demand for rapid deliveries throughout Asia, a JAL spokesman told Reuters.
The recently introduced system guarantees delivery for shippers facing urgent deadlines on high volume cargo routes and also offers late acceptance at the departure airport and early delivery, he added in a statement.
Next on the J Speed network is a proposed service from Bangkok to Tokyo with plans for a gradual expansion over JAL's entire international network, JAL says.
Kazuto Yamamoto, JAL's assistant vice president, international sales and marketing department for freight and mail said he had high hopes for the new service which aims to boost high-yield cargo sales on key Asian routes.
""There is great potential on certain routes and we're looking closely at future expansion in the near future,"" he told Reuters.
The busy Tokyo Narita - Manila sector was chosen for the J Speed launch. With average annual growth in the Japan-Philippines market over the past three years of 50 per cent, JAL said there is an increasing need for an express service.
The flag carrier said there is usually a two hour deadline before departure from Japan while some regular cargo has to be accepted the day before.
J Speed cargo is accepted up to an hour before take off and, because the air waybill is faxed to Manila, the cargo is cleared through customs before the flight arrives, the airline says.
JAL said customers are prepared to pay a premium price.
""Yes, there is clear demand for this service on busy routes - from Narita to Manila and from Jakarta and Singapore to Japan. Shippers are prepared extra for the ""on board"" guarantee. The rates vary in each market,"" Yamamoto said.
The service has now been extended from Singapore and Jakarta to Japan. JAL also said it plans a return service soon from Japan to Jakarta, Kuala Lumpur and Bangkok and is also studying a service to Singapore.
JAL insists J Speed is a response to customer demand and not a competitive response to aggressive marketing by U.S. carriers.
""United Parcel Service and Federal Express Corp have many cargo products and services including door to door small package operations. J Speed is not such a small package service. It is an airport to airport guaranteed on board service featuring the latest acceptance of shipments at airport of departure with rapid clearance and delivery to consignees' agents at airport of arrival,"" Yamamoto said.
Typical shipments include high technology components but JAL says some cargoes are ineligible - valuables and fresh produce cannot use J Speed. --Air Cargo Newsroom Tel+44 171 542 7706 Fax +44 171 542 5017
",15
"A labour shortage is threatening to delay completion of Hong Kong's new airport, a senior airport official has told Reuters.
The official, Clinton Leeks, director of corporate development for the Airport Authority Hong Kong, the body set up to oversee completion and run the HK$49.8 billion airport at Chek Lap Kok, said an additional two to three thousand construction workers are needed if the opening target of April 1998 is to be met.
Trade unions in Hong Kong are expected to resist attempts to import more workers from overseas. The Confederation of Trade Unions has said contractors should give priority to local tradesmen.
""I am not sounding an alarm just stating the facts. If we don't get these two to three thousand extra workers then certain things are at risk but we hope it won't come to that,"" Leeks said in an interview from his Hong Kong headquarters.
One specific skills shortage is of electrical and mechanical workers, not just at the airport but throughout the territory's increasingly sophisticated construction industry. The government is aware of the problem through twice monthly regular meetings to discuss progress. Despite the shortage, all construction work is on target at the moment, Leeks said.
This latest warning of a potential delay comes three months after a senior official from the Mass Transit Railway Corporation said 5,000 imported workers were needed to ensure the vital airport rail link was completed on time.
In a statement, the Hong Kong Government said 5,000 or 18 per cent of the new airport and related infrastructure's total labour force is imported.
The Special Labour Importation Scheme is set at 17,000 giving ""ample"" room for more imported workers providing local workers are given priority and their rights and benefits safeguarded, the statement said.
The Government also said the scheme has recently been made more flexible.and contractors facing a genuine shortage are encouraged to use it.
-- Air Cargo Newsroom Tel+44 171 542 7706 Fax+44 171 542 5017
",15
"Polar Air Cargo is to start new services to New Delhi, Dubai, Bangkok, Kansai in Japan and Manila within the next four months, the all cargo carrier's executive vice president Jack Kane said.
Speaking after the handover of Polar's first Boeing 747-200 and 14th 747 freighter in all, Kane said the new acquistion from Air Hong Kong will offer longer ranges, higher weights and reduced fuel consumption for the company's Asian network which is about to rapidly expand.
Polar is awaiting final U.S. Depart of Transportation approval to begin flying to Kansai after agreement with the Japanese transportation ministry that Polar should become the third U.S. all cargo carrier, he said.
""The indications seem very favourable,"" he said.
The U.S.-based airline has also won permission to fly to Bangkok and expects to start services to Manila in the first quarter of 1997. With approval for Kansai, and new services to London and Amsterdam which began in April, Kane said the way is now opens for a round the world service to begin early next year.
""In the next 120 days we will inaugurate services to New Delhi, Dubai, Bangkok, Kansai and the Philippines,"" Kane told reporters.
When the Kansai operation begin, Polar expects to offer four cargo flights a week from Hong Kong to the U.S. west coast and five or six to east coast all via Anchorage . The 747-200 means Polar no longer has to stop in Khabarovsk in Russia to refuel.
Polar does not have rights into China but has been holding discussions with Chinese airlines on a possible joint venture. Kane declined to name the possible partners but said Polar has already cooperated with China Eastern on charter cargo flights.
Kane said Polar intends to start operating a second 747-200 aircraft, an ex Philippine Airlines Combi which is to be converted, in the first quarter of next year. The company's long term strategy is to acquire two or three 747-200 aircraft each year for the next five years bringing the fleet total then to 23 or 24 aircraft.
""Our commitment is to provide our customers with a global network and let them compete against the integrators,"" Kane said. -- Air Cargo Newsroom Tel+44 171 542 7706 Fax+44 171 542 5017
",15
"Israel's flag carrier El Al is to start using a Boeing 747 on its once weekly Tel Aviv to Hong Kong service as part of a drive to increase tourism and trade with the Middle East, Abraham Roter, the carrier's the airline's general manager for China, Hong Kong and east Asia said.
From the end of this month the 747 will replace a smaller Boeing 767 which flies via Tashkent. The 747 will be a direct flight from Israel to Hong Kong which will stop in Bombay to refuel on the return leg, Roter said.
El Al said it was the only airline offering a direct link to the Middle East, as opposed to carriers such as Emirates which fly to the Gulf, and which offers good connections around the Mediterranean region. The larger aircraft will increase cargo capacity from 10 upto 24 tonnes and increase passenger comfort, Roter told Reuters in an interview from his Hong Kong office.
El Al is holding a series of seminars with travel agents to try and entice more tourists from Hong Kong. Current passenger levels to Tel Aviv are between five and six thousand a year.
""We believe that the market has big potential because Hong Kong people are big travellers and we are offering them a wonderful destination which is just 10 hours away,"" Roter said.
Israel does not have an Air Services Agreement with Hong Kong and Roter said if demand increases the carrier could utilise its second weekly flight allowed under the current informal arrangement. -- Air Cargo Newsroom Tel+44 171 542 7706 Fax+44 171 542 5017
",15
"Investment bankers Salomon Brothers forecast ""phenomenal"" long term growth prospects for Thai Airways International Ltd and said management is ""finally getting serious"" about cargo.
In a recent 24 page equity research report, its Hong Kong based author Peter Negline recommended traders buy Thai shares below 50 baht because of the carrier's good prospects.
""Thai has phenomenal long term growth prospects resulting from a strong local economy,"" the report said.
In an analysis of Thai's strengthens it noted its global alliances with Deutsche Lufthansa AG and United Airlines and its regional competitive advantage because it is closer to European markets and the stability of the baht currency.
""A robust Thai economy should support strong passenger and cargo traffic growth. We assume Thai's improved service and price competitiveness will support higher load factors,"" Negline told Reuters.
In his report's Forecast Assumptions, Negline says economic growth on the whole should remain robust but warns of lower yields.
""This should continue to provide an ongoing platform for solid growth in passenger and cargo traffic. At an operating level, the airline is likely to suffer from further yield declines in both passenger and freight operations. However, through fiscal 1997/98, management should be able to ensure costs fall as fast, or faster, than the corresponding yield decline - largely due to the lower operating costs of the new aircraft fleet,"" the report said.
It also highlights opportunities for growth in lower operating costs through cargo.
""Thai has only really started to focus on growing its cargo business over the last two years, (over the last four years, freight revenue tonne kilometres (RTK's) have grown at only 11 per cent per annum) which is on the low side compared with other regional competitors. Thai has improved its freight load factors from 60 per cent in 1991 to 71 per cent in 1995, although cargo still represents only about 13 per cent of total revenue. Volume increases have been at the expense of yield declines. The recent announcement of a joint lease with Lufthansa indicates management is finally getting serious about this market,"" says the report.
Earlier on Tuesday the Thai Cabinet approved a proposal to allow Thai Airways to take a 40 percent stake in a new cargo company. -- Air Cargo Newsroom Tel+44 171 542 7706 Fax+44 44 171 542 5017,JG 2987 7212
",15
"All-cargo airline Polar Air Cargo is to take delivery of its first Boeing 747-200F series aircraft at Hong Kong's Kai Tak airport on December 13, an airline statement said.
The handover of the aircraft fresh from a 'C' check at Hong Kong Aircraft Engineering Company brings the number of B747s in the Polar fleet to 14, it added.
The carrier's chief executive officier, Ned Wallace said in the statement that Polar's fleet will increase by two to three 747's each year over the next five years. The next 747-200F is scheduled for delivery in first quarter 1997, he added.
Industry observers say Polar has a reputation for being a low cost airline using first generation former passenger 747 aircraft converted to carry around 100 tons of cargo.
The U.S. based carrier said it is anticipating a ""significant jump"" in its Asian operations if the U.S. Department of Transportation finalises a ""tentative"" decision awarding Polar the new U.S.-Japan all-cargo route.
Polar said the Department of Transportation's favourable evaluation was partly due to its proposal to increase using Anchorage, Alaska as a hub to trans-load traffic between Asia, South America, Europe and the U.S.
""The final award of the Japan route will mark the culmination of a three year strategy by Polar to create an effective global network of operations. As we extend our geographic reach, we enhance our competitiveness by giving our customers the market access and route flexibility they need,"" Wallace added.
--Air Cargo Newsroom Tel+44 171 542 7706 Fax +44 171 542 5017
",15
"Virgin Atlantic Cargo said it will begin flying a new, shorter route on its Hong Kong to London service later this month which will cut an hour off the journey time and enable an extra six tonnes of freight to be carried westbound and two tonnes eastbound.
The division of Virgin Atlantic Airways says China gave permission for the short cut after recent negotiations with the British government which also benefits British Airways Plc.
Virgin's pilots are due to begin the new northerly route via Beijing and then over Russia and Germany on October 27. The southerly track currently used is over Thailand, Bangladesh, Tashkent and Turkey.
Brinkley Chan, assistant manager for Virgin Atlantic Cargo in Hong Kong told Reuters that the new routing offers significant benefits for both passengers and cargo capacity.
""It is a much welcomed boost and will mean quite a dramatic increase in the amount of cargo we are able to carry  For the passenger it will mean one hour's less flying time,"" Chan said.
He said Virgin's Airbus A340 aircraft will require 50,000 pounds less fuel enabling eight tonnes of cargo to be carried with a full passenger load from Hong Kong and an extra two tonnes from London.
Until now during the winter months between November and February, Virgin has been able to carry only two tonnes of belly cargo and during the summer months four tonnes from Hong Kong. Weight penalties are less east bound, it added.
Virgin says Britain's airlines will be following in the footsteps of Germany's Lufthansa which has been flying the short cut across China for the past two years. -Air Cargo Newsroom Tel+44 171 542 8982 Fax +44 171 542 5017
",15
"Pilots in Hong Kong are becoming better connected thanks to the Internet, says the general secretary of the Hong Kong Aircrew Officers' Association, John Findlay.
The association says it is now giving each of its 700 members an e-mail address so they can stay in touch no matter where they are flying.
Findlay told Reuters in an interview that his members already find out what's happening by using a telephone modem to access the association's bulletin board. With 300 members based outside Hong Kong, the association says it's becoming increasingly popular. Committee members who are also airline pilots constantly flying all over the world also can stay in touch with union business via their laptop computers.
""We've had the bulletin board for two and half years now and its very well used. It's fairly sophisticated and updated daily so pilots can access our newsletter. It also has its other uses like a leisure forum and a 'for sale' site,"" Findlay said.
Now members will be able to send and receive messages by e_mail anywhere in the world and the eventual aim is to have a website page specifically for Hong Kong pilots, he said.
""It's the way to go,"" Findlay said. - Air Cargo Newsroom Tel+44 171 542 7706 Fax+44 171 542 5017
",15
"Virgin Group's cargo unit in Hong Kong thinks it will move significant amounts of air freight from the territory to South Africa via its new service to Johannesburg from London.
""We think there is a big market out there which is rising and that we can compete effectively via London,"" said Brinkley Chan, Assistant Manager for Dyna Trans (Hong Kong) Limited, Virgin Atlantic Cargo's Hong Kong agent.
Chan told Reuters that Virgin is offering a dedicated LD-3 container for South African bound cargo on its daily flights from Hong Kong to London.
He said Virgin's new, three times a week service to Johannesburg from London which began on October 2 can do well despite being a ""second class carrier.""
Virgin will begin flying a new shorter route to London from Hong Kong overflying China on October 27 which will permit it to carry an extra six tonnes of freight westbound.
Direct services to South Africa from Hong Kong are flown by Cathay Pacific and South African Airways.
Chan says other airlines offering indirect competition on the route include Singapore International Airlines in Singapore, Brazil's Varig via Bangkok, Gulf Air via Abu Dhabi and Emirates Airline via Dubai.
Chan said the main ex Hong Kong exports bound for South Africa will be electronics, clothing and general freight. - Air Cargo Newsroom Tel+44 171 542-7706 Fax+44 171 542-5017
",15
"Freight forwarders in Hong Kong say they have been warned that there will be a 20 percent increase in transpacific air cargo rates from the territory when the peak season starts on September 1.
Anthony Lau, vice-chairman of the 260 member Hong Kong Association of Freight Forwarding Agents Ltd (HAFFA), told Reuters that the 20 percent increase in the run up to Christmas was not surprising.
""I think it is fair and in line with expectations,"" Lau said.
He added it will apply to cargo destined for both the U.S. east and west coasts.
Warning notices had been received from the major transpacific carriers including Northwest Airlines, China Airlines, Japan Airlines, United Airlines, Evergreen International Airlines and Polar Air Cargo, Lau said.
-- Air Cargo Newsroom Tel+44 171 542 7706 Fax+44 171 542 5017
",15
"Airbus Industrie is for the first time in Asia marketing cargo space aboard the world's largest civil transporter, the consortium's press relations manager in China, David Velupillai, told Reuters.
Speaking at China's first airshow being held here, he said the Airbus A300-600 Super Transporter fleet has 800 hours a year available for wet lease. Known as the Beluga because of its giant, whale like appearance and cavernous 7.4 metre high jaw-like door, it is one of the world's most unusual aircraft which Airbus said can carry more voluminous freight than any other.
The first two of an eventual fleet of four aircraft are being used to transport large sections of fuselage and the wings for the Airbus family which are made near Chester, England and are flown to Toulouse for assembly. Other fuselage sections weighing up to 45 tons and 30 metres long are transported from Spain and Germany.
When the aircraft are not busy doing that, Airbus says it hope it can profit from wet leases of other outsize cargoes such as helicopters, aircraft engines and space satellites in which field China is a key world player with its Long March launcher.
""No other aircraft in the world can carry such large and unusual loads. The thing about satellites is they need to be transported whole and cannot be broken down for transport. It is a niche market but one we think there are opportunities in,"" Velupillai said.
Airbus said its large transporter has already been used to carry a satellite module which will form part of space station Alpha from Turin in Italy to Toulouse . Other projects include ferrying aviator Richard Branson's balloon to Morocco for his aborted round the world attempt.
The Beluga made its air show debut at Paris last year but is not being exhibited in China.
The twin engined purpose-built jets replace veteran four propellor engined Super Guppy aircraft which Airbus said are destined to become museum pieces. - Air Cargo Newsroom Tel+44 171 542 7706 Fax+44 171 542 5017
",15
"Virgin Atlantic Airways said it is considering replacing its Airbus Industrie A340 aircraft with higher capacity Boeing Co 747-400s because of high demand between Hong Kong and London.
But aircraft availability and scheduling preclude an immediate change, David Woodward, general manager commercial for the Virgin Atlantic Cargo division said in a statement.
""The Hong Kong service has been highly successful, in fact we have suffered too little capacity. There is a possibility though of the aircraft change happening in the near future,"" he added.
Another senior Virgin executive said earlier this year that the carrier was hoping to increase its daily flights from Hong Kong to London to 10 a week.
He also said Virgin has plans to start a London to Shanghai service.
Industry observers say lack of slots at the territory's overcrowded airport is thought to be a big stumbling block and larger aircraft would be a short-term solution until Hong Kong's new airport opens.
Virgin's assistant manager in Hong Kong, Brinkley Chan said there has been no progress on a proposal to add a freighter to its fleet because of low market rates between Hong Kong and Europe and low yields.
--Air Cargo Newsroom Tel+44 171 542 8982 Fax +44 171 542 5017
",15
"Asiana Airlines is to take delivery of a third new Boeing 747-400 freighter next month to replace a wet leased DC-10 cargo aircraft on the Seoul to New York route, the airline's cargo marketing and sales director, T.S. Kang said.
The South Korean carrier uses two DC-10 freighters wet leased from U.S. operators Gemini Air Cargo and World Airways for its six flights per week to New York.
The World Airways freighter is to be returned and Gemini's retained until the end of next year to continue to fly three times a week to New York with the new Boeing flying the other three, Kang told Reuters in a telephone interview from Seoul.
The 747-400 will offer Asiana extra cargo carrying capacity as it carries more than 100 tonnes compared to around 65 tonnes for the DC-10.
""The new 747 which is about to be delivered will replace one of the DC-10s which is being returned. One 747 equals two DC-10 flights and is a welcome addition to our fleet,"" Kang said
Asiana has two 747-400 and one 767 freighter and has  plans to expand its cargo aircraft fleet to 10 by 2005.
Kang said Gemini has now received permission from Korea's Ministry of Transportation and Construction to fly into Korea under its own name. Gemini specialises in offering its converted aircraft to established airlines on wet lease contracts known as ACMI - aircraft, crew, maintenance and insurance.
-- Air Cargo Newsroom Tel+44 171 542 7706 Fax+44 171 542 5017
",15
"Air Hong Kong Ltd (AHK) chief operating officer, Stanley Hui said the August 25 start of its first trans-Pacific service means the airline is now firmly headed in the right direction.
The head of Hong Kong's only all-cargo airline told Reuters in an interview said it was ""an important milestone towards a much brighter future.""
However Hui said the cargo carrier did not make any money in the first half of 1996 suffering, like many others, from low yields.
Last year AHK made its first ever profit and although Hui would not disclose the exact amount, he said it was ""very healthy"" after ""huge losses"" in the past.
Four years ago, things were so bad that the airline was just a telephone call away from going under, industry sources said.
But then a new management team was installed, Cathay Pacific Airways Ltd came to the rescue by taking a 75 percent stake, loss-making routes were cut, old aircraft were retired and three newly converted Boeing 747-200s acquired, Hui added.
The new aircraft are able to carry 25 tons more tonnes than the carrier's old aircraft and complete with a new Chinese wheel company logo signifying brisk business, they began a twice weekly service to Chicago on August 25.
When Air Hong Kong's third converted 747 leased from Cathay Pacific for 15 years joins the fleet in October, the Chicago service will become three times weekly.
Hui says the new route has been possible with the leasing of the three former combi 747s which formerly flew with the Brazilian airline Varig.
The aircraft, converted at Boeing facilities in Wichita, Kansas and at Hong Kong Aero Engine Services Ltd, will give AHK a much higher aircraft utilisation rate from 12 to 14 hours per day.
AHK existing fleet of older 747s are being returned to the leasing company.
""We're talking about more expensive aeroplanes but they're more reliable, with better payload and can help save on maintenance so it's a good investment for this company.""Hui said.
Cathay Pacific has handed its once weekly Chicago service over to AHK in order to concentrate on its own new twice weekly freighter service to New York which also started on August 24.
The new U.S. services have been made possible after a new air agreement was drawn up between the U.S. and Hong Kong government.
AHK also fly to Dubai, Brussels and Manchester five times a week and twice weekly to Osaka. It has applied for a twice weekly service to Seoul in South Korea on Friday.
Hui said there has been a 20 per cent drop in cargo selling rates over the past six months.
""But I'm not surprised, the market is very competive, very seasonal and slow in the first half. We have seen a slower market this year consequently rates have dropped, tonnage is down, rates and yields are down but I think we are seeing a nice recovery. Developing for us and Chicago will help that. It is a very important gateway for us,"" Hui said.
--Air Cargo Newsroom Tel+44-171-542-7706 Fax+44-171-542-5017
",15
"Cathay Pacific Airways Ltd said it has retired the last of its Lockheed TriStars.
Cathay's 19 TriStar airliners in the carrier's old green and white livery have been a familiar sight in the Hong Kong skies since 1975 flying more than 487,000 hours and millions of passengers. At its peak the fleet was logging 609,000 kilometres every week - equal to the moon and halfway back.
""It is more than a piece of metal. The TriStar has got character and it's a bit of a thoroughbred,"" said veteran Cathay pilot Captain John Bent.
The three engined L1011 airliners have been gradually phased out over the past two years and replaced in a US$9 billion fleet replacement programme on Cathay's regional and medium-haul routes by new, twin engined Airbus Industrie A330-300 and Boeing 777-200 airliners offering greater fuel efficiency, passenger comfort and cargo handling capability. The A330 can carry up to 32 LD-2 cargo containers in its belly weighing up to 22 tons, the TriStar can only carry around eight tons of cargo, Cathay said.
The airline says many of its TriStar fleet, which have been renowned for reliability and as a pilot's favourite, have been sold to other airlines to continue faithful service in the USA and Europe. --Air Cargo Newsroom Tel+44 171 542 7706 Fax +44 171 542 5017
",15
"Hong Kong-based freight forwarding company U-Freight Holdings Limited is considering opening an office in Guangzhou to take advantage of China Southern Airlines' growing international network, U-Freight managing director Anthony Fong said.
Until now, U-Freight's Chinese operations which started nine years ago have been concentrated in the north with freight forwarding operations in Beijing, Dalian and Shanghai, Fong said. U-Freight's new US$2 million, 4,200 square meter warehouse near Shanghai airport is on schedule for completion in December and Fong said he sees new potential just across the border from Hong Kong where the company was established 28 years ago.
""If Guangzhou is to have foreign flights then eventually other foreign carriers will fly into Guangzhou. It should save the trouble of trucking cargo down from Guangzhou to Hong Kong and we are investigating opening an office there,"" Fong said.
Industry observers said Guangzhou-based China Southern has invested in a new fleet of Boeing 777 aircraft to begin transcontinental services to Europe and the west coast of the USA and U-Freight is among a group of many well known freight forwarders who are eyeing the potential new market. Recent Hong Kong press reports said China Southern is starting a Guangzhou-Beijing-Amsterdam service next month and planning additional services to Los Angeles and Brisbane next year. No one at China Southern could be contacted for confirmation.
""We are just awaiting a start date for China Southern's new trans-Pacific flight,"" Fong told Reuters in an interview here.
Fong said the licensing procedure to start operations, especially to gain a Class one licence which allows freight forwarders to hold a stock of airway bills, will take time and patience.
""A proper licence in Shanghai took three years to achieve so it is early days yet but we would like to go into Guangzhou and a first step would be to set up a liaison office in the near future,"" Fong added. - Air Cargo Newsroom Tel+44 171 542 7706 Fax+44 171 542 5017
",15
"Demand for space has eased slightly as a recent backlog is cleared and some airlines provide extra capacity, but key ex-Hong Kong rates have continued to rise, Reuters research shows.
Airlines and freight forwarders report brisk business as the territory's traditional peak season gathers pace and high demand for space has allowed airlines on European routes to again raise rates for the second time within three weeks.
A rise of 50 HK cents a kg on October 16 follows a HK$2 a kg rise imposed on October 1 on key routes to Europe. Transpacific demand is also said to be especially strong allowing rates to firm slightly.
Pressure for cargo space is also being exacerbated by high demand on passenger flights which is reducing bellyhold capacity for many airlines.
Sam Chung, the chairman of the Hong Kong Association of Freight Forwarding Agents and director and general manager of Fritz Air Freight (HK) Ltd, said the market was very strong especially in his company's main sector, the United States.
""Every single flight is full but space should become a little better because some airlines are putting on extra capacity. In early October there was a backlog everywhere but that is now easing,"" Chung said.
He also highlighted the HK$2 a kilo rate rise on routes to Europe from October 1 with more ""unfair rises"" due to bite.
Two U.S. airlines have drafted in extra aircraft to cope with heavy trans-Pacific demand.
Polar Air Cargo is employing two additional Boeing 747 freighters between the territory and Chicago and New York.
""At the start of October it was really busy with a lot of airlines having a backlog in Hong Kong, Japan and Taiwan. But right after China's national day and the mid-Autumn festival when a lot of factories closed down it gave us the chance to move a lot of cargo out of Hong Kong and gave us the chance to clear the backlog,"" said David Sung, Polar Air's Hong Kong sales manager.
More extra capacity on the trans-Pacific route has come from Evergreen International Airlines Inc which says it now offers six Boeing 747 flights a week instead of four previously. The additional flights on Mondays are to Columbus,Ohio then onto New York and Los Angeles.
""All flights are absolutely full and if we had additional flights. into Hong Kong we would have no problem filling them because there is a lot of freight being moved and a backlog is building up,"" said Evergreen's Vice President Kersti Krepp.
There is also extra capacity being drafted onto a main European route. Lufthansa Cargo AG says it will put an additional freighter on the Hong Kong to Frankfurt route before the end of the month because of high demand.
The extra flight will increase the total number of flights Lufthansa operates to Germany in a joint venture with Cathay Pacific Cargo to 11 per week. September also saw an additional freighter being drafted onto the route increasing the number of joint freighter from nine a week during July and August to 10 now.
British Airways World Cargo ,which has three freighter flights per week between Hong Kong and London Gatwick wet-leased from Atlas Air, in addition to belly cargo space on its twice daily passenger flights to Heathrow, also reports a very strong market.
""This is the peak of the year and we have been very strong and are very pleased with our performance. Every available metre of space is full and we think that will carry on for the forseeable future,"" said Chris Humphrey, British Airways' regional cargo manager Pacific who is based in Hong Kong.
He said rates to Europe have increased to reflect the strength of the market and thinks another rate rise is justified.
""Fuel prices have gone through the roof. Yields are again at the same level they were last year but underlying costs are increasing, particularly fuel,"" complained Humphrey.
Mark Wilson, Managing Director of freight forwarders Benair Freight also said pressure for space has recently eased as a backlog is cleared.
""Space is tight but available which proves that the airlines are working together and not discounting too much. Rates have stayed firm and the airlines are trying to keep rates up,"" he said.
He said rates to Europe have recently increased by around 20 per cent and by 15 per cent to the U.S. Inter-Asian rates are stable where yields are traditionally stronger.
Stanley Hui, the chief operating officer of the territory's only all cargo airline AHK Air Hong Ltd, which flies 747 freighters both east and westbound, said he had no complaints especially about the trans-pacific sector.
""Unlike in previous years, there has not been that much additional capacity employed during the peak period. Demand both in and out of Europe is also firm and services to Japan are busy. After last year's record year and a slow start to this year we have high expectations about Japan,"" Hui said
The latest statistics from Hong Kong's Civil Aviation department show Tokyo-Narita to be the biggest importer of Hong Kong goods. 8,742 tonnes of air cargo was flown from Hong Kong to the Japanese capital during August, according to the statistics.
Hui also said he expected rates to Europe to continue to rise.
""We are not trying to be greedy but we can't lose money forever and all cargo airlines are trying to recover what we have lost,"" Hui said.
Many airlines report being especially badly hit by Hong Kong's seasonal monsoon winds. Northerly winds mean aircraft have to take off in a steep climb over densely populated Kowloon and payload has to be reduced.
Air France Cargo said all carriers were being affected on both European and trans-Pacific long haul routes by having to suddenly off-load pallets and a backlog of more than 400 tonnes built up in early October.
""Everybody is being hit by these weather conditions and customers are unhappy about having their cargo left behind - but so are we. It is the first time I've ever known so much having to be offloaded,"" said Philippe Bour, the airline's regional cargo manager for Hong Kong, China, Macau, Taiwan and South Korea.
Paul Choi, assistant general manager of MSAS Cargo International in Hong Kong said the back log has now eased, partly due to more cargo being flown from Macau.
Gemini Air Cargo flew its first McDonnell Douglas DC-10-30 freighter into the Portuguese enclave from New York on September 27 with about 40 tonnes of cargo mostly destined to be shipped to Hong Kong. The airport which opened last November says Gemini is the fourth all cargo service to serve Macau on a regular basis and unlike Hong Kong has no severe space and slot restrictions or curfew.
Hong Kong Air Cargo Terminals Ltd (HACTL), which enjoys a monopoly on cargo handling at Kai Tak airport said after a ""pretty lack lustre"" first half the market has picked up during August and September which should continue in the traditional peak period towards Christmas.
HACTL reported a 7.1 per cent increase in throughput during September over last year whnn exports and imports rose by 5.5 per cent to 68,673 tonnes and 7.3 per cent to 49,063 tonnes respectively over September last year.
HACTL managing director Anthony Charter said transshipments ""soared"" 13.7 per cent to 16,775 tonnes ""which interestingly may point to sign of a regional pick-up.""
""There seems to be a shortage of capacity which is traditional at this time of year along with the hike in rates. I think this year we are seeing a slightly more positive outloook,"" Charter said.
HACTL says it is on course for another record year and expects a rise of around four per cent which is a far cry from the 23 per cent growth in previous years but ""still welcome."" --Air Cargo Newsroom Tel+44 171 542 8982 Fax +44 171 542 5017
",15
"Hong Kong Dragon Airlines (Dragonair) is increasing its flights to Sendai in Japan from October 29 to six a week from the present four, the carrier's chief operating officer Philip Chen said in a statement.
""Our services to Hiroshima and Sendai are a good example of how Dragonair is spreading out and serving the region. Since we started Hiroshima in 1992 and Sendai in 1993 both have been very successful and we are increasing frequencies on both these routes to cope with demand,"" he added
One of Dragonair's current fleet of seven Airbus Industrie A320 will be used for the extra frequency, a spokeswoman added.
On October 24, Airbus said Dragonair had signed a contract an order for two more A320s, plus options for five others along with the lease of another Airbus A330-300.
The new planes will be used to cope with further route expansion to China and other Asian destinations, especially when Hong Kong's new round the clock airport opens in 18 months time, industry sources said.
--Air Cargo Newsroom Tel+44 171 542 7706 Fax +44 171 542 5017
",15
"The Hong Kong government said it is focusing on negotiating new overflight arrangements with several countries in time for the 1997 handover to China.
Up to now, Hong Kong has come under Britain's traffic rights umbrella. Now it must negotiate its own agreements so airlines can continue to fly over countries on key air routes, the government said.
A spokesman said the countries involved are located on routes from Hong Kong to Europe and to Africa, which are not signatories to International Air Services Transit Agreements with.
He declined to name them or say which negotiations were the most important as overflight fees will also be discussed and more pressure could be brought to bear on Hong Kong's negotiators.
Industry observers said the government is up against the clock to sign the new agreements before next year's handover.
""Some countries will be no problem, others may be sticklers,"" said a source close to the negotiating procedure.
Any proposed deal must be approved by the Joint Liaison Group, the Sino-British body set up to oversee the transition to Chinese rule. The text of a model overflight agreement to be used as the basis for the negotiations was cleared by the JLG in September.
Michael Arnold, who will be Hong Kong's chief negotiator, told Reuters that the negotiations will start as soon as possible with airlines fully involved. He said the agreements which are a form of international treaty will give greater certainty of routes.
""On flights to Europe, for example, given weather and the sometimes unstable political situation in some countries, the airlines need to have access to alternative routes. We need overflight agreements with a number of countries in order to offer several route options,"" he said.
He said overflight rights are now a priority following the successful completion of Hong Kong's final Air Service Agreement (ASA) with the Philippines last week.
""The number one task was to negotiate full ASAs to separate Hong Kong's air services from those previously provided for under the UK ASAs. This we have completed with the initialling of the Philippines agreement. We can now turn to focus on negotiating overflights,"" Arnold said.
When asked about overflight costs and whether airlines faced an increase Arnold said: ""We would hope to continue the present arrangements, obtained under the UK umbrella."" -- Air Cargo Newsroom Tel+44 171 542 8982 Fax +44 171 542 5017
",15
"Korean Air Ltd (KAL) said there was an 8.4 percent rise in the amount of cargo by weight on both domestic and international flights during July compared with the same month last year and in August there was a 6.3 percent increase.
However there was a 2.6 percent drop in July's cargo load factor and a 2.4 percent fall during August, the KAL statistics show.
 Period	  AFTK    '95     Pct chge   Weight   95    Pct
chge
July Intl
 One month	 560	512    9.4	  62	57    8.8
 Cumulative    3,641    3,217   13.2	 397     367    8.2
Domestic
 One month	  16	 12   28.1	  17	15   13.3
 Cumulative	 99	 88   13.6	 130     119    9.2
Total
 One month	 576	524    9.8	  79	72    9.7
 Cumulative    3,740    3,300   13.2	 527     486    8.4
August Intl
 One month	 547	483   13.4	  60	55    9.1
 Cumulative    4,188    3,699   13.2	 457     422    8.3
Domestic
 One month	  16	 12   25.1	  16	16    0.0
 Cumulative	115	100   15.0	 146     135    8.1
Total
 One month	 563     495    13.7	  76	71    7.0
 Cumulative    4,303   3,799    13.3	 603     557    6.3
 Period	    FTK    '95     Pct chge   Weight   '95   Pct
chge
July Intl
 One month	 419     380    10.1	  75	74    0.5
 Cumulative    2,693   2,465     9.3	  74	76   -2.7
Domestic
 One month	   6	 5    12.0	  36	41   -5.1
 Cumulative	 46	41    10.2	  46	47   -1.4
Total
 One month	 424     386    10.1	  73	74    0.2
 Cumulative    2,739   2,507     9.3	  73	76   -2.6
August Intl
 One month	 411     366   12.3	   75	76   -0.7
 Cumulative    3,104   2,831    9.7	   74	77   -2.4
Domestic
 One month	   6	 5    2.2	   36	43   -7.9
 Cumulative	 51	47    9.3	   44	47   -2.3
Total
 One month	 416     371   12.2	   74	75   -1.0
 Cumulative    3,155   2,878    9.6	   73	76   -2.4
KAL's statistics also show a 9.6 percent rise in the number of international and domestic passengers carried 1.341.400 this year from 1,224,200 last July. In August there was a nine percent increase to 1,580,000 from 1,439,200.
AFTK & FTK unit: 1,000,000 ton.km. Cargo weight unit:1,000 ton.
-  Air Cargo Newsroom Tel+44 171 542 7706 Fax+44 171 542 5017
",15
"Engineers are investigating the cause of an engine failure aboard a Cathay Pacific Airways Limited airliner on November 11 which forced return to Ho Chi Minh City on one engine, an airline spokesman said commenting on a report in Flight International.
The Airbus A330-300 and 132 passengers had reached 37,000 feet after take-off when one of its two Rolls Royce 700 engines suffered a suspected gearbox failure. The pilots could not restart the powerplant and decided to return to Ho Chi Minh City where the engine was removed and flown back to Hong Kong for a detailed inspection, the spokesman stated.
The suspect gearbox part has since been returned to the U.K. for detailed analysis, a Rolls Royce spokesman in Hong Kong said.
Cathay has a fleet of nine Airbus A330s which seat around 320 passengers and carry up to 17 tonnes of belly cargo on inter-Asian routes. A spokeswoman for Hong Kong Dragon Airlines known as Dragonair, in which Cathay holds a minority stake, operates 4 R-R powered A330s.
R-R is a long term supplier to Cathay and since the Trent 700 engine entered service with Cathay in February 1995, this is the second recorded inflight shutdown, the Cathay spokesman said.
Industry observers say aircraft engines are now so reliable that mechanical failures are extremely rare.
Intense rivalry for new engines, particularly for the next generation of the Boeing 747 family, exists between R-R and its U.S. competitors Pratt & Whitney and General Electric s, the industry sources said. - Air Cargo Newsroom Tel+44 171 542 7706 Fax+44 171 542 5017
",15
"The chairman of Hong Kong freight forwarding company Baltrans Ltd, Anthony Lau, said he expects to enjoy considerable synergy and economies of scale following the acquisition of a majority stake this summer in a Los Angeles competitor, Fond Group.
""As yet there is no integration of the companies, which are still operating on a parallel basis, but as time goes on we will enjoy economies of scale and expect to see further growth,"" he added.
Baltrans is well positioned in Asia while Fond is well placed in the US west coast, ""so additional synergy is there,"" Lau said.
Baltrans completed the HK$32.2 million deal for a 67.4 per cent stake in the Fond Group in July, Lau told Reuters in a telephone interview from his Kowloon office.
Fond specialises in shipping cargo from Hong Kong to the west coast of America and its acquisition is aimed at increasing the overall profitability of the Baltrans group on trans-Pacific segments, Lau said.
Baltrans added the Fond Group includes Fondair Express (HK), Fondocean Express (HK) and Fondexpress (USA) which have a combined turnover of around HK$300 million. --Air Cargo Newsroom Tel+44 171 542 7706 Fax +44 171 542 5017
",15
"All three airlines flying directly between Hong Kong and London said they can start to use a new, short cut to Europe across China from this weekend with the start of winter timetables on Sunbday October 27.
This means more cargo and less fuel can be carried along with a cut in passenger journey times of up to an hour, industry sources said.
Cathay Pacific Airways, British Airways and Virgin Atlantic all say they can begin to utilise the new northern route over China instead of the traditional longer southerly route over Thailand and India in their winter schedules. The short cut was agreed during recent talks between the British and Chinese governments, they say.
A Cathay Pacific spokesman said up to an hour can be cut off the flying time for its Boeing 747-400 aircraft on some European routes which will also have the ability to carry an additional four tonnes of cargo. BA can carry an extra 70 tonnes of air cargo a week if its twice weekly 747-400 aircraft utilise the new routing, its Hong Kong based spokesman said.
A spokesman for Virgin Atlantic said the new routing will enable its Airbus A340 aircraft to carry an extra six tonnes of freight westbound and two tonnes eastbound and save around 50,000 pounds of fuel.
Aviation analysts say the new routing offers significant cost saving advantages and allows airlines to carry full cargo loads all year round because strong headwinds during the summer restricts cargo payload.
But they say it is not all good news because the airlines haven't been granted permission for all flights.
""It is fantastic news for the airlines and very influential on the bottom line but realistically Cathay can't utilise the new routes on all flights because it has not been given a full quota and neither have the others,"" Peter Negline, Vice President and senior research analyst of Asia Pacific equity research at Salomon Brothers Hong Kong Limited told Reuters in an interview.
A Cathay Pacific spokesman said it will have the most access to the number of flights that can use the new routing. Other European services to Paris, Amsterdam and Frankfurt will also be able to benefit as well as London bound ones, he added.
Curfews at both Heathrow and Kai Tak airports will also cause scheduling difficulties until Hong Kong's new, around the clock airport at Chek Lap Kok is due to open in 18 months time, analysts say.
""Aircraft need to leave Hong Kong before the 11.30 pm local (16.30 GMT) curfew starts but the new routing could mean arrival at Heathrow at round 04.30 GMT which is two hours before the end of their curfew so the new routing doesn't offer a lot there,""Negline said.
""You can also see a further deterioration in cargo yields because the airlines are getting extra capacity for next to nothing,"" Negline added.
Negline said the airlines will also benefit from better aircraft and crew utilisation; the aircraft will be able to fly extra sectors and its crew who fly for less hours can be redeployed on other services.
Declan Magee, a Hong Kong based airline analyst for regional stockbrokers and investment bankers HG Asia also said the new routing will obviously benefit aircraft utilisation and fuel efficiency.
""Yes shorter routes will save money but if all three airlines are allowed to do the same thing that rules out competitive advantage. If only one airline could use the new route then it would be different but the consumer will feel the benefit.
Magee said the Hong Kong to London route is Cathay's fourth largest passenger revenue generating route of around HK$1.4 billion a year.
""It is a relatively important route but even if they can save four or five per cent on this route compared to Cathay's total turnover of around HK$30 billion a year.it's not that much. Yes, it's a useful way in which Cathay can offset some of the negatives it is facing in terms of yield decline,"" Magee said.
Analysts reckon the airlines can save around 10 tons of fuel per flight but that may be offset by expected higher overfly fees set by the Chinese who are aware of how much the airlines can save.
Analysts say the airlines need all the help they can get by utilising shorter routes and using new technology such as FANS - Future Air Navigation System which allows aircraft more direct routing. Because of successful negotiations earlier, Swissair and Lufthansa have been able to fly the shorter route over China to Europe for the past two years. - Air Cargo Newsroom Tel+44 171 542-7706 Fax+44 171 542-5017
",15
"Air Macau said it expects to carry beween 20 and 30 per cent more belly cargo when two more Airbus Industrie A321 aircraft are delivered to serve three new routes into China next year.
Speaking from the Portuguese enclave, Air Macau's cargo supervisor sales and marketing Simon Tang told Reuters the new airline is achieving 60 percent load factors on current available capacity.
Airline statistics show that Air Macau has carried 3091 tonnes of air cargo in the first nine months of cargo operations although during the first two months no cargo was carried.
The figures also show a steady increase from 161 tonnes in January to a high of 489 tonnes in August.
""For a newly established airline I am quite happy to have achieved 60 percent load factors so quickly,"" Tang said.
""Due to the new aircraft arriving next year and the new routes into China I expect cargo carrying capacity to increase by 20 to 30 percent which should be a dramatic improvement."" he added.
The Airbus A321 aircraft on seven year leases will join the airline's four other A321 and smaller A320s which are due to begin flying to three new destinations in China -- Hainan Island, Qingdao and Wuhan, the airline said.
It began flying 11 months ago when Macau International Airport opened and currently serves six destinations with 63 frequencies per week to Bangkok, Beijing, Shanghai, Xiamen, Taipei and Kaohsiung in Taiwan.
The airline said it wants to fly to 22 destinations in the next three years including Australia, Singapore, Kuala Lumpur and Seoul.
Air Macau also said it expects to carry 30 percent more passengers than forecast for its first year of operation, a total of 650,000. Many use Macau as a staging post for semi-direct flights where they are not required to change planes between the Chinese mainland and Taiwan.
--Air Cargo Newsroom Tel+44 171 542 7706 Fax +44 171 542 5017
",15
"HONG KONG, Oct 21 (Reuter) Cathay Pacific Airways said it has successfully handled its first load of pigs destined for breeding in China.
Cathay's in house newspaper said 300 pigs with an estimated value of HK$2.8 million were recently flown from Taiwan to Hong Kong en route for breeding farms in China. It said the eight pallets of swine were housed in two and three deck boxes specially equipped with automatic watering to keep them cool.
""As the pigs have a higher skin temperature than human beings, they are very afraid of heat. That's why we have to sprinkle water on them from time to time,"" Taiwanese herdsman Li Siou Tong told the newspaper.
He said the pigs were valuable breeds including Duroc, Landrace and Yorkshire which had originated in Sweden, the Netherlands nnd the United States. They are now in the southern Chinese city of Shenzhen spending 45 days in quarantine before being transported all over China for breeding.
Paulo Chan, Cathay's cargo standards and performance manager, said it was the largest number of pigs yet flown by the airline.
- Air Cargo Newsroom Tel+44 171 542 7706 Fax+44 171 542 5017
",15
"Shipping magnate Tung Chee-hwa made his first appearance in China as Hong Kong's leader-in-waiting on Thursday as Beijing prepared the next milestone in the British colony's transition to Chinese rule.
In a one-day meeting on Thursday in Shenzhen, just over the border from Hong Kong, Tung was endorsed as successor to colonial governor Chris Patten by the 150-member Beijing-picked Preparatory Committee, which is crafting the territory's political future.
Britain hands Hong Kong back to China on July 1.
Tung, 59, was selected as the post-handover leader in Hong Kong on Wednesday by a separate 400-member body carefully assembled by Beijing, smothering his two rivals by winning 80 percent of the votes.
At the Preparatory Committee meeting in Shenzhen, presided over by Chinese Foreign Minister Qian Qichen, Tung was greeted with hearty applause, smiles and back-patting as he entered the hall.
""We have already completed the selection of the first Chief Executive of Hong Kong... Tung Chee-hwa received the majority vote of 320,"" said senior Chinese envoy Lu Ping, director of the Hong Kong and Macau Affairs Office.
Preparatory Committee Vice Chairman Wang Hanbin urged delegates to show their support for China's endorsement of Tung.
""If you don't have any objection, then approve it by applauding,"" Wang said, prompting the delegates, who include some of Hong Kong's top business leaders, to begin clapping.
In a meeting with reporters later, Tung reiterated his hope that Anson Chan, Hong Kong's popular chief secretary and head of the civil service, would stay on as his deputy.
""I haven't decided on my deputy, I hope Anson Chan will stay and I hope she can be my deputy,"" Tung said.
Tung said he would also work closely with the current British-led government to promote Hong Kong in the final months of colonial rule and ensure a smooth transition.
Tung's selection was met with scuffles, anger and apathy on Wednesday in Hong Kong, where pro-democracy activists and politicans denounced the selection process as undemocratic and condemned the magnate's appointment.
In addition to endorsing Tung's appointment on behalf of the Beijing government, Thursday's Preparatory Committee meeting in Shenzhen will also discuss a package of procedures for establishing a provisional legislature on December 21 that will replace Hong Kong's elected chamber with the handover.
The legislature plan has been strongly opposed by Hong Kong pro-democracy groups, which see it as a move to crush freedom and introduce repressive laws.
An official said the gathering was also expected to discuss a move by Britain to introduce a lenient anti-subversion law in Hong Kong before the handover. A Preparatory Committee legal sub-group has recommended repealing the British law.
Tung has said he would take a hard line against meddling by provincial Chinese bosses who may disregard Beijing's edict that Hong Kong be a Special Administrative Region of China with considerable autonomy in governing its own affairs.
Hong Kong's Economic Times newspaper said China was expected to rank the future chief executive as equal to a state councillor.
This position, one level below vice-premier, would mean he outranks provincial governors and will help discourage interference in Hong Kong affairs by regional cadres, it said.
",45
"Pro-democracy demonstrators stormed into a plush Hong Kong conference centre on Friday in an attempt to disrupt a historic meeting convened by China to choose Hong Kong's future leaders.
They were stopped by police before reaching the meeting, inaugurated earlier in the day by China's Foreign Minister Qian Qichen.
Protesters had gathered before dawn outside the Hong Kong Convention Centre where the 400-member Selection Committee was due to start its month-long mission to select the territory's Chief Executive and 60 members of a replacement legislature.
As delegates were returning from lunch, about a dozen demonstrators plunged through a side door of the convention centre and were chased up escalators by police.
They managed to reach the sixth floor, one floor away from the meeting, before at least seven were seized by police as they unfurled banners and shouted slogans.
Eyewitnesses said that two prominent members of the Democratic Party, Andrew To and Chan Kwok-leung, and independent activist Wong Chung-ki, were among those detained in the building.
In a second attempt to storm the building, three screaming demonstrators were dragged away by police on the street outside.
Scuffles ensued and at least one policeman was slightly injured when up to 40 chanting protesters surged against crowd control barriers, waving models of black coffins above their heads to symbolise the death of democracy.
Some of the demonstrators had camped overnight outside the building where Britain will formally return its colony to China in 228 days' time.
They were surrounded by police at dawn and herded behind barriers across the road.
Hong Kong's pro-democracy lobby has attacked the selection process and refused to take part in the selection committee which they have branded as undemocratic.
They are adamantly opposed to China's plan to dissolve the elected legislature and replace it with an interim provisional chamber until new elections are held.
Waving banners and using loudhailers, demonstrators chanted ""We want a directly elected legislature"" and ""We reject the reversal of democracy"".
Some of them held up black boxes, saying ""This is a coffin. It represents the death of democracy and freedom in Hong Kong.""
Members of the Democratic Party had planned to pass a letter to Qian but were unable to get past police lines. An official eventually came out to accept the letter.
""We hope you will exchange views with Hong Kong people on the setting up of the provisional legislature and selection of the Chief Executive,"" the letter said.
The Selection Committee was holding a first round of voting on Friday to narrow down the list of candidates to step into the shoes of colonial governor Chris Patten when British rule ends at midnight on June 30 next year.
To qualify, candidates for the job of Chief Executive must be nominated by at least 50 members of the committee.
Two business magnates and two former judges are regarded as the front-runners in the race. The Selection Committee meets again on December 11 to pick the winner.
",45
"Royal/Dutch Shell's plan to build an oil refinery in China inched closer to reality on Monday when Chinese oil officials revealed Beijing was close to giving its long-awaited approval.
A senior Chinese oil official involved in the US$6 billion refinery and chemical complex plan told Reuters that Beijing was poised to give its stamp of approval before the end of 1996.
""From what I know, it will be approved very soon by the Chinese government,"" the official said by telephone in Beijing.
""It will probably be this year,"" said the official.
The petrochemical complex, planned for Huizhou, in southern China's booming Guangdong province, has been on the drawing board since the late 1980s. A feasibility study report was presented to Beijing in February 1994.
Shell plans to hold 50 percent in the complex and China National Offshore Oil Corp (CNOOC) 20 percent, while the Guangdong provincial government, China Merchants Holding Company and state refiner SINOPEC each would have 10 percent.
""The Chinese side and Shell have discussed this for several years. Both sides have spent a lot of effort, money,"" said the official, who declined to be named.
If successful, the Shell plant would be the second joint venture refinery in the country to involve foreign participation. The 100,000 barrel per day Dalian refinery in northern China began trial runs in October. France's Total holds 20 percent of that facility along with various Chinese partners.
Indications that fresh developments on the long-stalled project might soon emerge came in September when a top Shell official met Chinese Premier Li Peng to discuss the company's future cooperation with China.
The project figured highly on the agenda when John Jennings, chairman of Shell Transport and Trading Co, met the Chinese premier in Beijing, oil sources earlier disclosed.
""That clearly was a sign that both sides were positive about the project,"" said a Shell spokesman by telephone.
Beijing's positive stance was spurred by the overriding concern that the country needed to increase its oil production and refining capacity to meet rising oil demand, the Chinese oil official said.
China's oil consumption is forecast to explode in the next few years, fuelled by economic reforms.
Experts estimate refined oil product consumption would grow at an average yearly rate of 5.7 percent during 1995-2000, reaching 4.1 million bpd in 2000 and 5.3 million bpd by 2005.
To meet rising demand, China would need to import 40 to 50 million tonnes of crude oil by 2000 compared with 17.09 million tonnes in 1995, experts said.
The World Bank has said China would overtake the United States as the world's biggest economy within the next generation and foreign oil companies are keen to tap its domestic market by building new refineries.
Shell's project has faced countless hurdles since the early 1990s, from high costs to strained bilateral relations.
The project was kept on tenterhooks in early 1993, when Sino-British ties plunged to a low over Hong Kong after Governor Chris Patten introduced democratic reforms in the colony, which reverts to Chinese rule in mid-1997.
China's credit-tightening policy in 1994 and centralisation of the country's oil policy in the same year erected further hurdles for the costly joint venture project.
""This project was initially thought to be gunned down... because it was too costly. But now, they want to go ahead with it,"" a source with state refiner SINOPEC said by telephone.
At the same time Shell started a long-drawn-out fight for more access to the booming domestic market in China.
Some Chinese officials are known to be reluctant to giving foreign oil companies toeholds in the massive market while others preferred foreign investments be channeled into upgrades of older refineries.
A Shell spokesman in Hong Kong said the company was hopeful of a speedy decision from Beijing.
Details of the joint venture have still to be worked out and the petrochemical complex, which would take at least four to five years to complete, would be ready only after 2000, Chinese oil sources said.
",45
"Newspapers in Hong Kong were dominated on Friday by reaction to the death of Deng Xiaoping, with many eulogising his reformist policies that made China, Hong Kong's future sovereign, rich and strong.
""Nobody in the course of this century raised the material standards of living of more people than Deng Xiaoping,"" the widely-circulated South China Morning Post said.
""That, in itself, would ensure Deng his place among the leading figures of the century,"" it said in its editorial.
Little effort was spared as newspapers splashed full-colour photographs of mourners in Hong Kong and China's southern border city of Shenzhen in Guangdong province.
While some papers noted Deng's role behind the military crackdown against 1989 Tiananmen Square democracy protests, the issue was not emphasised.
The military suppression had outraged Hong Kong at the time and shook confidence in the territory, which reverts to Chinese sovereignty at midnight on June 30.
""He deserves to be treated as one of China's greatest leaders,"" the Hongkong Standard said in a front-page editorial.
Deng, who died late on Wednesday at the age of 92 of complications from Parkinson's disease and a lung infection, was widely credited with transforming China from an improverished Stalinist state into an emerging economic powerhouse.
China's economic flowering helped drive Hong Kong, as factories owned by the territory's businessmen mushroomed in neighbouring Guangdong province and Chinese products poured through Hong Kong's port.
Deng also engineered the ""one country, two systems"" formula paving the way for the return of the British colony to China.
""Learn from Xiaoping's merits, actualise the one country, two systems,"" the independent Chinese-language Ming Pao said. ""This is the best way to fulfil his dream...to ensure his vision lasts forever.""
Some papers ran polls, awarding high marks for Deng's achievements. A Ming Pao survey of over 1,900 respondents found Deng scoring 6.4 out of nine for his achievements, while 60 percent thought his death would not affect Hong Kong.
Tin Tin Daily News said a poll of 90 people it conducted showed 85 percent were confident that the one-country, two-systems formula would be implemented.
Normally trim Beijing-backed newspapers Wen Wei Pao and Ta Kung Pao boasted separate takeouts filled with condolence advertisements from companies and individuals.
Perhaps the only discordant note in Hong Kong's eloquent song of praise was an off-colour quarter-page photograph on the front page of the Chinese-language Apple Daily, which it claimed to be Deng's last picture taken while alive in hospital in December.
Photographed secretly through a crack in the door, it showed a wan Deng, with eyes red-rimmed and puffy, staring blankly into space.
",45
"Hong Kong's future leader Tung Chee-hwa is making plans to travel to major Western countries in a bid to raise the profile of the territory and clear the air over important issues related to its sovereignty transfer.
The roadshow, still in the works and its timing dependent on Tung's workload, could materialise before July 1, when the British colony of more than 150 years reverts to Chinese rule, his spokeswoman told Reuters on Sunday.
""Mr Tung's trip is to give a real picture of Hong Kong. He feels some countries do not really understand the real situation in Hong Kong,"" spokeswoman Elin Wong said by telephone.
""It would be this year. If it is possible, before (July 1) but it depends on his workload,"" Wong said, adding it would probably include the United States and some European countries.
The trip, which would be Tung's first outside China since being selected in December under close Beijing supervision as the territory's first post-handover chief, would focus on a wide range of issues related to Hong Kong's handover.
""He will not just talk on any particular issue, but a range, on all aspects that are important to Hong Kong,"" Wong said.
Tung, however, is expected to focus on what he has deemed to be misunderstandings in the West over an interim lawmaking chamber which China has vowed to install in place of Hong Kong's elected legislature upon the handover.
The 60-member provisional legislature was formed in December by a pro-China panel of 400, the same body which selected Tung as Hong Kong's first Chief Executive from July 1.
Hong Kong's British-run government has refused to cooperate with the body and the territory's pro-democracy camp, particularly the popular Democratic Party, also opposes it.
At a public function on Saturday, Tung said Western countries, particularly the U.S., has not properly understood the provisional legislature and other important issues related to Hong Kong's handover.
""Mr Tung said he would try his utmost to promote Hong Kong before July 1, and he hopes to clear all the misunderstandings now held by Western countries,"" the China-funded Wen Hui Pao newspaper reported on Sunday.
In his fiercest attack to date on critics of the provisional legislature, Tung told them last week to stop criticising the future lawmaking chamber when talking to Western leaders, adding their actions were a disservice to Hong Kong.
",45
"The future leader of Hong Kong said on Thursday he would discuss the legality and funding of the territory's controversial post-colonial assembly with China's legislators during his visit to Beijing this weekend.
""I will discuss with the National People's Congress (NPC) the legal status of the provisional legislature, and also find out more on the arrangements for its funding,"" Tung Chee-hwa told reporters after a public function.
The former shipping boss did not say whether he would ask the Chinese parliament to pass a law to endorse the existence of the provisional legislature, which was formed on December 21 in China's southern city of Shenzhen.
Tung had previously said he may ask the NPC to enact such legislation if the need arose.
Britain and the pro-democracy movement in Hong Kong say China's installation of the provisional legislature is illegal under the 1984 United Nations-registered Joint Declaration, which sets out the framework for the colony's returns to China.
China, upset by Hong Kong Governor Chris Patten's electoral reforms in the twilight of British rule, set up the legislature to reverse these reforms when it resumes sovereignty of the colony at midnight on June 30.
The interim chamber was chosen by a 400-strong Selection Committee, hand-picked by Beijing. The committee also selected Tung to succeed Patten.
Tung has said the provisional legislature would soon hold its first meeting. However it will meet in China, not Hong Kong, in order to avoid a legal challenge by the colony's Democratic Party. The territory's biggest pro-democracy group says it is constitutionally illegal to have two legislatures operating at the same time.
Tung said he would try to persuade the Democrats to accept the provisional body during a meeting with them next Thursday. ""The provisional legislature has the right to exist. I hope that everyone ... can accept it,"" he said.
The chief executive-designate also said he would hold talks with Chinese officials during his two-day visit to the Chinese capital, but would not be more specific.
Tung visited Beijing on December 17 for the first time after his selection as Chief Executive and was received by President Jiang Zemin, Premier Li Peng and Foreign Minister Qian Qichen.
",45
"China's Zhenhai Refining & Chemical Co Ltd, whose stock price has been lashed by the U.S. missile attacks on Iraq, said investors had over-reacted and assured it was able to overcome present difficulties.
""I would call the reaction in (the stock market in) Hong Kong merely psychological...there is minimal real impact, and if crude prices are high now we just would not buy,"" said a senior manager in Ningbo, eastern Zhejiang province, by telephone.
The Chinese oil refiner's share price in Hong Kong crashed almost 10 percent to HK$2.05 intraday on Tuesday before closing at HK$2.075, down 20 cents on investor fears that the refinery would be hit badly by the sharp hike in crude oil prices.
It regained only partway on Wednesday to close at HK$2.175.
After the first U.S. missile attack on Tuesday, oil prices hit their highest level since Iraq invaded Kuwait in 1990, and investors feared Zhenhai - which runs predominantly on imported crudes and sells most of its output into China's domestic markets where product prices are strictly fixed - would be hit.  
But the eight-million tonne per year refiner, which had stopped buying crude oil cargoes since the start of the Iraqi crisis on Monday, said its crude stock-pile would help tide over high prices, at least in the short term.
""It's very hard to say how prices will go, but for now, we have our two months worth of crude stock-pile,"" he said.
The refiner, China's third largest, imports up to 55 percent of its crude needs from overseas, and covers 25 percent from China's offshore production.
Twenty percent is supplied from China's highly subsidised domestic onshore production, the manager said.
While 30 percent of Zhenhai's output is sold into international markets, the volume would be increased should high crude oil prices persist, he said.
""There is no limit on how much we can export, so we can push it up to cover our higher costs,"" he said.
-- HONG KONG NEWSROOM (852) 2843-6441
",45
"Thousands of Hong Kong people took to the streets under rain-filled skies on Sunday to celebrate the 100-day countdown to the resumption of Chinese rule over the British colony at midnight on June 30.
The bad weather failed to dampen an outburst of nationalistic pride as dragons, lions and unicorns -- Chinese symbols of luck and joy -- pranced to the deafening clash of cymbals and drums.
More than 7,000 people of all ages from more than 100 pro-Beijing community organisations took part in the parade which wound through busy streets on Hong Kong island.
When Hong Kong, a British colony for more than 150 years, returns to China, it will become a Special Administrative Region (SAR) governed by its own Chief Executive and promised considerable autonomy in running its affairs.
""This is a grand and great occasion. In just 100 days, we will return to the Chinese motherland,"" said chief organiser Raymond Wu at the start of the rally which gathered in Victoria Park -- named after the British queen who reigned when Britain seized Hong Kong from a weak China in the 19th century.
""We welcome the washing away of over a century of humiliation and shame,"" Wu said to a burst of applause.
The present Queen's head is disappearing from the territory's coins and stamps. Victoria Park will be renamed Central Park after the handover.
Few of the merry-makers as much as glanced at the massive bronze statute of Victoria in the park as they left for a march through the streets.
Sporting red and white baseball caps and waving little red and gold flags of China interspersed with the red and white flags of the new Hong Kong SAR, the crowds marched through busy streets, laughing and urging bystanders to join in. Few did.
Not everyone was as joyful as those in the parade.
A handful of demonstrators, their mouths taped shut, took up position around the base of Victoria's statue and held up placards condemning China's military crackdown on student-led demonstrators around Beijing's Tiananmen Square in June, 1989.
""People are bleeding, butchers are celebrating, shame on you,"" the black and white placards read.
But they failed to get much attention.
""They are mad. This is a glorious occasion. The past has been a shame for Hong Kong. I cannot wait for the handover,"" a bystander, Wu, 65, told Reuters.
",45
"The president of Chinese state oil refiner Sinopec said on Thursday the country planned to increase refining capacity and ethylene production to help keep up with rapid economic growth and fast rising energy demand.
""Within the ninth five-year plan (1996-2000), we will boost our economic system and growth...According to the government, we have been designated a pillar industry in the country,"" said Sheng Huaren, president of China Petrochemical Corp (Sinopec).
Sheng was speaking at the beginning of a five-day exhibition in Hong Kong featuring more than 60 Sinopec subsidiaries, amongst them refiners, petrochemical plants, engineering companies and trade and investment arms.
Sheng outlined Sinopec's expansion plans in two phases.
By 2000, the company will have increased its refining capacity to over 200 million tonnes per year (4.0 million barrels per day  bpd ) while its ethylene production capacity would hit around five million tonnes per year.
By 2010, refining capacity will hit 300 to 350 million tonnes per year (up to 7.0 million bpd) while ethylene production would reach 8.0 to 10 million tonnes, Sheng said.
Sinopec's crude refining capacity is currently 166 million tonnes per year, with ethylene output at 2.36 million tonnes per year.
Fast economic growth is forecast to raise China's oil demand. Experts say refined oil product consumption will rise to 4.2 million bpd in 2000 and 6.8 million bpd in 2010 from 3.07 million bpd in 1995.
The world's sixth largest oil producer, China became a net oil importer in 1993 when brisk economic development outpaced domestic oil output, which is burdened by ageing oilfields and a lack of new discoveries.
While attempts are being made to locate new fields, Beijing has also given a clear mandate for refineries, particularly those along the coast and in big cities, to expand their capacities and upgrade to produce cleaner, more environmentally friendly products.
There are also indications that primary oil refining expansion will be accompanied by upgrading secondary petrochemical plants.
""The code is now ""oil and chemical'. Based on experiences of the oil industry elsewhere, such an approach is more realistic, comprehensive,"" said a senior official with the Fujian refinery, in the southeastern province of Fujian.
China's biggest refinery, Yanshan in Beijing, plans to increase its 9.5 million tonnes per year capacity to 10 million tonnes before 2000, a senior official told Reuters.
Ethylene production, which has been expanded from 300,000 tonnes per year to 450,000 tonnes per year since September 1994, will be increased to 600,000 tonnes during the same period, she said.
In Fujian, the 2.5 million tonnes per year refinery will be expanded to 4.0 million tonnes by 1997. Talks are also underway with foreign investors to expand capacity further to 8.0 million tonnes per year and build an ethylene plant of 600,000 tonnes capacity, a Fujian official said.
Fierce bidders for the 10 billion yuan ($1.2 billion) joint venture plan are Amoco Corp and Exxon Corp.
Yangzi refinery in Nanjing in Jiangsu province plans to raise capacity to 8.0 million tonnes from 5.5 million tonnes per year, a senior refinery official said.
It signed a letter of intent with BASF AG in March to build an integrated petrochemical site. The 50-50 joint venture, worth 50 billion yuan ($6 billion), has 16 plants, one of which is a 600,000 tonnes per year ethylene facility.
(US$1 = 8.3 yuan)
--Hong Kong newsroom (852) 28436441
",45
"European parliamentarians urged Hong Kong people on Tuesday to ""speak up and not shut up"" in the face of growing fears that China will roll back democratic freedoms when the territory reverts to China.
They also said they will recommend to the European Parliament to urge Britain to contest China's decision to replace the territory's elected legislature with an appointed interim chamber at the handover at midnight of June 30.
""Our message to Hong Kong is don't shut up, speak up,"" said Graham Watson, a member of the British Liberal Democratic Party, at a news conference during a two-day visit.
Citing a European maxim, Watson said, ""What is required for evil to triumph is for good people to remain silent"", adding that democracy was now the way of the world, while totalitarianism and dictatorship was evil.
Watson and three other members of the European Parliament (MEPs) met Hong Kong's future leader Tung Chee-hwa, prominent lawyers and members of Hong Kong's current elected legislature, and will meet colonial Governor Chris Patten.
Hong Kong, a British colony of over 150 years, reverts to China from July 1, and fears are mounting among its 6.4 million people that its democratic freedoms and rights, introduced by Britain in the final years of its rule, will be snuffed out.
Chief amongst Hong Kong's worries is a China-crafted provisional legislature which will replace the elected chamber, and Beijing's plan to amend or strike down a string of laws protecting civil liberties and democracy.
Tung, who replaces Patten on July 1, has backed the proposed changes, arguing that they were mere technicalities and necessary to preserve social order.
The MEPs, who criticised Britain for being too late in bringing democracy and civil rights to Hong Kong, also said London should contest the legality of the shadow legislature in the International Court of Justice (ICJ) in The Hague.
""We believe the United Kingdom would have a good case...for going to the United Nations, even the Security Council and asking for the matter to be referred to the ICJ,"" Watson said.
""We believe that the abolition of the elected Legislative Council is an illegal act, and we believe it should be challenged in international law,"" he said.
London has said its hands are tied on the matter as China has refused to refer the issue to the world court. The MEPs however thought the matter should be pursued.
""There is nothing to stop the United Kingdom taking it to the United Nations...we would like to see the panoply of legal instruments in due process in law be used, even if in the end the process is frustrated,"" Watson said.
A dozen activists staged a noisy protest at the office of future leader Tung on Tuesday morning, demanding an apology for his support of China's plans.
The group, a coalition of 27 grassroot organisations which called itself the Hong Kong People's United Front for the Defence of Human Rights, chanted slogans and called on Tung to relate the views of Hong Kong people to Chinese leaders.
""We strongly request the future chief executive to apologise to all Hong Kong people and to honestly reflect their views to the Chinese government and to do his duty by defending human rights, freedom and the rule of law,"" the group said in a letter later given to Tung's office employees.
",45
"One of Hong Kong's best-known pro-democracy politicians, Emily Lau, was dragged away kicking and screaming by police after lying down on a road to protest against China's methods of choosing a post-colonial leader.
Up to 40 pro-democracy activists scuffled with riot police outside the Hong Kong Convention Centre, where a committee of 400 chosen by Beijing voted for a chief executive to rule Hong Kong after Britain hands the colony back to China at midnight next June 30.
A dozen activists shouting ""oppose the phoney election"" lay down on the road and were dragged away by police.
Lau, an independent democrat fiercely critical of China's communist rulers, was among those carried off, witnesses said. It was not immediately clear if they were arrested.
Fellow legislators Andrew Cheng of the Democratic Party and trade union leader Lee Cheuk-yan were also hauled away.
""It's a sad day for Hong Kong. What can ordinary Hong Kong citizens do -- they cannot vote,"" John Wing-ling Tse, a legislator of the Democratic Party said.
Earlier, protesters erected a ""tomb of democracy"" outside the building and condemned the voting as the end of freedom and the rule of law in the territory.
Only the 400 electors chosen by China voted for the future leader. None of the rest of Hong Kong's 6.3 million people had a vote.
Several hundred pro-democracy activists demonstrated on Tuesday evening and 20 diehards camped out overnight with the imitation tomb in front of the Grand Hyatt Hotel.
As the Selection Committee members arrived in shiny limousines, their first sight was an imitation ancient Chinese-style grey arched tomb, constructed from wood.
The structure faced the Hong Kong Convention Centre with the inscription ""Tomb Of Hong Kong Democracy And Rule Of Law"". Candles flickered in the wind beside it.
The committee was convened to carry out the first of two historic tasks -- to elect the man who will step into the shoes of Governor Chris Patten when Britain pulls out. The clear favourite was shipping magnate Tung Chee-Hwa.
The committee's second task, on December 21, is to choose a provisional legislature that will replace the current elected Legco (Legislative Council) on July 1.
The scuffles erupted after police urged the demonstrators, from the United Front Against the Provisional Legislature, to move to a cordoned-off area.
Occasionally the group marched a short distance bearing the tomb aloft, as in a funeral procession. In front of the tomb a banner was posted saying ""Death of Hong Kong Rule Of Law"".
""We are against the Selection Committee's so-called election of the first chief executive,"" said Cheng. ""The selection is not real because it is done by Beijing,"" the legislator said.
The protesters brandished a colourful banner with the slogan ""Oppose the False Election Of The Chief Executive, Oppose The Provisional Legislature"" and denounced China for not allowing Hong Kong's electorate to vote.
""This is an abuse of their human rights. Some people are more equal and have more rights. In other cultures it is always your vote that counts. In Hong Kong this is apparently not the case,"" Tse said.
""They say they represent Hong Kong and Hong Kong people but they are not elected. How can they represent us if they are not elected? What is an election with 400 appointees?""
",45
"China would, if requested by Hong Kong, provide its support to stabilise fluctuations in the territory's financial markets after the handover next year, China's central bank governor said on Wednesday.
""In case of need, the People's Bank of China will, at the request of the Hong Kong Monetary Authority (HKMA) and in accordance with the Basic Law and market practices, provide its support,"" said Dai Xianglong during a dinner speech to the Hong Kong Association of Banks.
But Dai said he believed the HKMA was fully capable of handling fluctuations in Hong Kong's financial markets around the handover.
The British colony reverts to Chinese rule at midnight on June 30, 1997. Under joint Sino-British treaties, Hong Kong will maintain its own separate financial regime and currency.
Dai did not elaborate on what measures the central bank would take if the need arose.
In response to reporters questions, Dai said there was no truth in recent press reports that China was putting together a 300 billion yuan fund to help stabilise Hong Kong's financial markets after the handover.
""I don't know where those reports came from. There is no such thing,"" Dai told reporters at a press conference after the dinner.
China's central bank was determined to let Hong Kong run its own financial system, he said.
""The People's Bank of China will not replace the Hong Kong Monetary Authority and will not set up any branches in Hong Kong,"" Dai said. ""Mainland financial institutions in Hong Kong will not enjoy any special privileges. They will be subject to the same supervision of the financial regulatory authorities of Hong Kong on the same regulatory standards.""
He also said Beijing would not levy any tax in Hong Kong nor would it, for any reason or in any manner, use Hong Kong's Exchange Fund or other assets.
Dai said mainland companies participating in Hong Kong's market would be on the same footing as foreign or Hong Kong firms.
Addressing concerns that Shanghai would overtake Hong Kong in financial importance, Dai said Shanghai's financial status would be enhanced in the future.
""However, for a relatively long period of time, it (Shanghai) will not be an international financial centre, let alone replace Hong Kong,"" he said.
Dai also said there was a close business relationship between China and Hong Kong.
Hong Kong investment in China reached US$78.6 billion by the end of 1995, accounting for 58 percent of total foreign investment in the mainland.
In 1995, 90 percent of syndicated loans in China were arranged in Hong Kong and 90 percent of Chinese enterprises listed overseas chose to list in Hong Kong.
-- Hong Kong Newsroom (852) 2843 6441
",45
"Long before Hong Kong's handover to China, celebrity painter Liu Yu Yi, whose portrait subjects include Beijing's leaders, is already benefiting from the return of Britain's last Asian outpost to the Chinese fold.
Spanning an entire wall in his home in Hong Kong's posh Mid-levels district is an almost finished oil painting depicting over 200 famous personalities at a feast celebrating the handover at midnight on June 30.
Central on the canvas is China's paramount leader Deng Xiaoping, the man hailed as the architect of the ""one country, two systems"" formula under which Hong Kong would be treated after the handover.
Raising a toast, Deng is flanked by President Jiang Zemin, Premier Li Peng and Tung Chee-hwa, the man who will run Hong Kong after Britain hands back its colony of more than 150 years.
""I am using art to capture this momentous event that is watched by all nations of the world,"" Liu, reclining on a sofa, told Reuters during an interview.
THE CHINA BREAKTHROUGH
Trained at the Central Academy of Fine Arts in Beijing, Liu shot to fame in 1993 when he sold ""Liang Xiao"" (Festive Evening) -- a flashback to a historic gathering of China's leaders in 1950 -- for HK$8.36 million (US$1.08 million).
It was the highest price paid for a contemporary Chinese work of art, and he has been hitting jackpots ever since.
He sold ""Song of the Goddess Nu Wa"" for HK$8.88 million in 1994 and ""Gathering of Immortals"" for HK$10.8 million in 1995.
THE HONGKONG CONNECTION
Whether because of his talent, access to high places or being in the right place at the right time, Liu has penetrated the ranks of the rich and influential since coming to Hong Kong in 1991.
Liu, whose entire family lived on his monthly wage of 40 yuan (US$4.80) in the 1970s, has done portraits of Hong Kong business titans such as Li Ka-shing, Stanley Ho, Simon Li, Gordon Wu and Run Run Shaw.
Mindful of the handover five months away, Hong Kong's rich and pragmatic have been embracing their mainland peers, be they politicians, businessmen or artists, and are stocking up their homes with Chinese art and antiques.
But the well-connected Liu, who drew Tung into his work on the handover more than five months before the tycoon was even selected as Hong Kong's first colonial leader, betrayed little when asked what sparked the insight.
""I just thought he was the likeliest candidate,"" he chuckled before adding that the dozen empty headslots would be drawn in after Tung announces his team-designate.
SUCCESS DIDN'T COME EASY
Liu's real break came in 1988 when ""Festive Evening"" was exibited in the Memorial Hall of the late Chinese leader Mao Zedong.
It prompted a request from Beijing for Liu to create another work. The resulting ""Ren Min Wan Sui"" or ""Long Live The People"" has adorned Beijing's Tiananmen Rostrum since 1990.
But all this did not come easy for the artist who was sent off to toil in a rural commune during the ultra-leftist years of the Mao-inspired Cultural Revolution (1966-1976).
""I suffered tremendous shock, persecution. They said I was a 'black' artist, that I did not conform politically,"" Liu said.
""Seven years. Seven years I lost time to practise my art. I only came back in 1977, then I painted again,"" he said.
CULTURAL REVOLUTION HARDSHIPS PROVIDED INSPIRATION
Ironically, it was those years of persecution and aimless toil that inspired ""Liang Xiao"", his first work after the end of the revolution, and a piece which would take him till 1984.
""After the Cultural Revolution, I wanted to say many things which had been locked in my heart. I saw all the chaos and fighting. I was very depressed and I suffered a lot,"" Liu said.
""I knew this can never be repeated. I wished that it would be 'liang xiao' every night. That every night would be wonderful and whole for the country. That was what I wanted to say.""
Things have looked up since for Liu, whose works echo the leanings of socialist realism, a creed that was hammered into intellectuals and artists during the late 1950s.
Snubbing the formulaic mountains, valleys, bamboo trees and the miniature people of lofty Chinese landscape art, Liu said: ""These works have lasted for too long in China. From the Song Dynasty onwards, too many, too many.
""Under my hand, my pursuit is different...that of entry into the world, not retreat. To immerse into this world,"" he said.
FELLOW ARTISTS AND CRITICS LESS KIND
While Liu's talent as a portrait painter is admired, the material success that his brushes have brought more than just raised eyebrows from those in his trade.
Gallery owner Karl McLean, who helped sell ""Song of the Goddess Nu Wa"", said: ""He's a very good portrait painter, and has very good connections in Beijing...but the artists hate him, they think he is just political and very commercial.
""I think he's a very clever guy, he's a very smart guy. He knows how to make money and he knows how to handle the rich. He knows how to get them to pay up big time,"" McLean told Reuters. (US$1 = HK$7.73)
",45
"A leading Chinese dissident has fled to Hong Kong just days after a colleague in Beijing was sent to a labour camp and is reported to be seeking asylum in the United States, government-funded radio said on Sunday.
Radio Television Hong Kong quoted an unidentified source close to veteran democracy activist Wang Xizhe as saying he had seen Wang in Hong Kong and that he appeared to be in good health.
Wang has been missing from his home in the southern Chinese province of Guangdong since fellow activist Liu Xiaobo was arrested in Beijing last Tuesday and ordered to serve three years in a labour camp.
""The source said Mr Wang started planning his departure as soon as Mr Liu was arrested,"" Radio Television Hong Kong said.
""He confirmed that he had seen the dissident in Hong Kong and that his health was good,"" it said.
Wang had approached members of the pressure group, the Hong Kong Alliance in Support of the Democratic Movement in China, for help, the radio said.
They in turn had asked the Hong Kong government to help the democracy activist to seek political asylum in the United States, it said. A government spokesman declined to comment.
However, one Hong Kong source with close ties to the Democratic Movement said Wang could leave Hong Kong for the United States as early as Sunday night.
Wang would be the second Chinese dissident to escape to the United States via Hong Kong this year.
Dissident Liu Gang fled last May following months of police harassment at his home in northeastern Liaoning province since his release after serving a six-year prison term as a leader of the 1989 student-led demonstrations for more democracy.
Wang Xizhe had been active in recent months, sending several daring open letters to the government.
On September 30, Wang joined activist Liu Xiaobo in issuing a statement urging China's communist authorities to honour a promise in 1945 to give people freedom of the press and speech and to form political parties and stage demonstrations.
In a bold move, the two demanded Communist Party chief Jiang Zemin be indicted, impeached and step down for violating the constitution for saying the People's Liberation Army was under the ""absolute leadership"" of the party instead of the state.
Wang was paroled in 1993 after serving 12 years of a 14-year term for sedition and remains deprived of his political rights and thus is not permitted to issue such public statements.
He has long been one of China's most outspoken proponents of democracy.
Wang began his activities in 1974 when he has one of three authors of a renowned pro-democracy article that was pasted up as a wall-poster in Guangzhou, capital of Guangdong province.
Wang and his two co-authors served several years in jail for his audacity in challenging the authoritarian rule of Chairman Mao Zedong but was released in 1979.
That same year he took part in the Democracy Wall movement in Beijing, but was not arrested until 1981.
His reported escape comes amid a renewed crackdown on China's tiny, struggling democracy movement.
Detained dissident and former student leader Wang Dan faces the capital charge of plotting to subvert the government in a trial that could take place as early as this week based on evidence such as writings critical of the state and accepting funds from abroad, a human rights group said.
",45
"Ominous gray clouds scudded over Hong Kong on Sunday as the British colony marked the 100-day countdown to the handover, but there were few physical signs of gloom and doom in the wealthy community of six million.
More than 7,000 Hong Kong people took to the streets to the din of cymbols and kettle drums in a patriotic fervour to celebrate the impending reunion with China at midnight on June 30, 1997.
A stone's throw away, thousands more, most of them westerners and swelled by an influx of visitors, indulged in the ritualistic orgy that has built up around the annual international Rugby seven-a-side tournament.
The tournament was honoured this year, the last under British rule, when Rugby Authorities made it into the world cup event.
The 28th and last British governor, Chris Patten, described Hong Kong as running as smoothly as a Rolls Royce limousine -- but warned China against tinkering with the finely tuned machinery that is the Hong Kong of 1997.
But for the majority of Hong Kong's hardworking citizenry, it was a normal Sunday. A chance for a lie-in, a family gathering at a restaurant -- a day off from work.
With just 100 days to go, Hong Kong is awash in a sea of differing emotions.
Some, like the street revellers, are delighted that more than 150 years of Chinese humiliation is about to end.
""This is a grand and great occasion. In just 100 days, we will return to the Chinese motherland,"" said chief organiser Raymond Wu as the revellers gathered in Victoria Park -- named after the queen who reigned when Britain, at the height of its imperial powers, wrested Hong Kong from China's weak and crumbling Qing dynasty in the mid-19th century.
""We welcome the washing away of over a century of humiliation and shame,"" Wu said to a burst of applause.
Others fret, particularly the pro-democracy camp, about their future under a China that has already put in place plans to dilute civil liberties and dissolve the elected legislative council -- undoing democratic reforms spearheaded by Patten.
A handful of demonstrators, their mouths taped shut in what they said was a symbol of things to come, took up position around the base of Queen Victoria's statue and held up placards condemning China's brutal military crackdown on student-led demonstrators around Beijing's Tiananmen Square in June 1989.
Many people are simply keeping their fingers crossed.
But Hong Kong, as it enters the last leg of its drawn out transition from British colony to Special Administrative Region (SAR) of China, has defied those who forecast a society in chaos, of panic, economic collapse and deserted buildings.
Patten said Hong Kong had reached this moment in its history in first class condition.
He cited a poll conducted earlier this month by the 1997 Transition Project at Hong Kong's Baptist University that found that 90 percent of the people here were happy with life.
Patten said the views that Hong Kong would quickly adjust to the rolling back of freedoms or of more authoritarian government were dubious.
""Hong Kong is, as I said recently, a smoothly functioning community. It's like a Rolls Royce,"" Patten said.
""All you need to do if you're in charge is to slip into the driving 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. That only raises worries about whether it will work so well, and whether you may be persuaded by some people to start stripping it down for spare parts.""
",45
"Hong Kong's colonial Governor Chris Patten on Monday refused a request by future leader Tung Chee-hwa to support the interim legislature China will install in the territory when the British depart next year.
Shipping magnate Tung, emerging from his first meeting with Patten since being chosen on December 11 by a China-controlled committee to head Hong Kong from next July 1, told reporters that Patten flatly refused to provide any help to the new legislature in the run-up to the transfer of sovereignty to China.
""I brought up the work of the provisional legislature. I hope Mr Patten and the Hong Kong government can give help,"" Tung told reporters outside Government House, Patten's residence.
""But Mr Patten's position was very clear. I didn't successfully convince him,"" Tung said.
Both men emerged from a 1-1/2 hour meeting to exchange hearty handshakes and make brief speeches to the press, but mentioned little else of what transpired behind closed doors.
Describing the discussion as ""long and constructive"", both said they agreed to meet in the future when the need arose.
Patten, looking serious next to Tung, managed the occasional smile for photographers but turned to lead Tung into a waiting car immediately after his successor completed his short speech.
Neither of them took questions.
Monday's meeting was conducted under a cloud of strained Sino-British relations after China snubbed British objections and went ahead last Saturday with naming the provisional legislature that will replace the current elected Legislative Council (Legco) when Hong Kong returns to Chinese control 190 days from now.
The interim assembly was designed by China to reverse electoral reforms that Patten introduced unilaterally in recent years.
The move came under an international spotlight after British Foreign Minister Malcolm Rifkind on Friday challenged China to let the World Court rule on the legality of the new assembly.
Patten also lashed out at the new lawmaking body on Saturday, calling its appointment by a 400-member Selection Committee ""a bizarre farce"" and a ""stomach-churning"" process.
""What it shows about China is that, here it is taking over responsibility for a First World economy but they're trying to foist on us political institutions which a Third World country would reject,"" Patten had said.
""Here we are having foisted on us institutions which, frankly, you wouldn't try to run a tennis club with,"" he said.
China, however, has warned Britain against creating problems and to keep out of Hong Kong's affairs after the handover.
""After 1997, Hong Kong will be an internal affair of China. No foreign countries can interfere with China's internal affair,"" China's envoy in Hong Kong, Zhou Nan, told reporters.
""Whether Britain wants to accept my advice is up to it. But if it wants to create more new trouble, I don't think it will be out of the ordinary,"" he said on Monday at a public function.
The controversial new body is dominated by pro-Beijing figures, including 33 incumbent lawmakers and many politicians who lost to pro-democracy candidates in the 1995 Legco election.
The Democratic Party, the biggest single winner in last year's election with 19 of the 60 Legco seats, boycotted the creation of the provisional body, branding it undemocratic.
The Provisional Legislative Council, as it will be known, is to sit from July 1 until a new legislature can be created via elections.
",45
"The sentencing of Chinese dissident Wang Dan to 11 years in prison in Beijing on Wednesday sparked fears in Hong Kong about curbs on freedoms when the territory reverts to China next year.
Hong Kong activists denounced the verdict, and a human rights group vowed to lobby for a resolution to be passed at the United Nations condemning China's human rights record.
A Beijing court on Wednesday found the 27-year-old former student leader Wang guilty of the capital offence of conspiring to subvert the government.
Wang, who faced a potential maximum penalty of death for the charge, was also stripped of political rights for two years, a typical Chinese punishment for critics of communist rule.
The verdict, at a trial lasting less than four hours, raised an outcry in the British colony, which returns to Chinese rule in 244 days.
""We worry that the Chinese government (would) apply a similar standard in Hong Kong,"" legislator Bruce Liu of the Association for Democracy and People's Livelihood said.
""Then the freedom of Hong Kong will be limited and (people) will be charged if we openly criticise the Chinese government.""
Pro-democracy activists who staged an overnight vigil in front of Beijing's de facto embassy in Hong Kong shouted slogans when they heard the news about Wang on the radio.
Robin Munro, director of the Hong Kong office of Human Rights Watch Asia, said the trial was extraordinarily short for what was deemed the most serious offence in China's criminal law.
""By any legal standards, today's trial of Wang Dan was a farce. Clearly, its sole purpose was to put Wang Dan behind bars for as long as possible with the minimum legal fuss and bother,"" Munro told Reuters.
""What more evidence does the international community now need before it will wake up to the fact that (Beijing) is not advancing towards a more liberal regime...but is becoming less tolerant of peaceful political opposition and absolutely determined to silence critics by any means possible?"" he said.
While Hong Kong has been promised a high degree of autonomy for the next 50 years under a Sino-British handover treaty, many doubt whether the freedoms now enjoyed will be preserved.
Munro said his organisation would lobby the United States and Europe to pass a resolution at the United Nations condemning the human rights situation in China.
Hong Kong activists also planned a demonstration in front of China's mission on Wednesday night, and another on Sunday.
",45
"China on Wednesday gave Hong Kong a free hand to arrange media coverage of the colony's historic handover to Beijing, ending fears that the country's communist rulers might restrict press access.
Chinese and British negotiators working on details of Hong Kong's transfer of sovereignty announced the agreement after their latest round of talks.
""We very much look forward to as many as possible of the international press and the local press being interested in participating and recording and reporting on the handover ceremony,"" Hugh Davies, British team chief at the Joint Liaison Group (JLG), told reporters.
The JLG negotiates the fine details of the transfer of the territory of 6.4 million people to Chinese rule.
Many in Hong Kong, including human rights activists and pro-democracy politicians, had voiced fears that China would not consent to a media invasion without the right to vet which journalists attended.
In a joint statement both countries said arrangements for media coverage would be made by the Hong Kong government.
""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 statement said.
Application forms for media accreditation will be distributed by the Hong Kong government's Handover Ceremony Coordination Office from March 15 and should be returned before April 7.
Hong Kong, a British colony for over 150 years, reverts to Chinese rule at midnight on June 30, and the government expects 6,000 foreign and local media representatives to cover the event.
Asked if the Hong Kong government would set any special conditions for accreditation, Davies said he did not envisage applicants being turned down.
""There will be no criteria applied ... provided you don't turn out to be a terrorist,"" he told reporters.
",45
"Britain and China have agreed to work on a new anti-espionage law in Hong Kong, to take effect after the colony is handed back to Beijing next year, a Chinese official said on Friday after three days of negotiations.
Chinese Ambassador Zhao Jihua, China's team leader in the Sino-British Joint Liaison Group (JLG) talks, said the countries agreed that Britain's official secrets act would be localised.
""The official secrets act is a British law...which was extended to Hong Kong. Hong Kong has not got its own official secrets act so we are talking about the localisation of the act in Hong Kong,"" Zhao told a news conference.
But Beijing also warned Britain not to rock the boat by making any major legal changes on its own before the territory of 6.3 million people reverts to China next July 1.
Speaking amid heightened anxiety over the handover of Hong Kong to Chinese rule, Zhao also tried to reassure local people they would continue to have complete freedom of movement after 1997.
""For Hong Kong residents, they can rest assured that the freedom of entry and exit into and out of Hong Kong will continue to be guaranteed,"" Zhao said.
But Zhao said Chinese negotiators had protested to Britain about a draft anti-subversion bill unveiled by the colonial administration last week, a law that sets legal markers against China-style jailings of dissidents.
China reacted angrily to the move when it was announced. Britain has accused China of blocking efforts to draft laws on subversion, sedition and treason for the handover.
Zhao said Britain had violated the 1984 Joint Declaration, the Sino-British handover treaty, and Hong Kong's future constitution, the Basic Law.
""During the plenary session, the Chinese side pointed out to the British side that the British action is in fact unilateral change in the law previously enforced in Hong Kong without consultation and consensus with China.
""This is a breach of the Joint Declaration. This act is attempting to legislate on behalf of the future Hong Kong Special Administrative Region of China. In essense this is an act which is in contravention of the Basic Law.
""Such an act will never be acceptable to the Chinese side and the British side has to bear full responsibility for all the consequences,"" Zhao said.
He said Beijing hoped there would be no more ""disturbances"" because it ran against the aim of having a smooth transition.
""We certainly hope it won't affect our relations. But I can't deny that it will definitely affect future discussions.""
",45
"Lehman Brothers and state-owned China International United Petroleum and Chemicals Co Ltd (Unipec) on Monday announced settlement of a 22-month foreign-exchange trading quarrel and resolved to get on with business.
The US$44 million dispute over currency and swap option trading had been broiling since November 1994.
The settlement means that only one of Lehman's three high-profile disputes with Chinese state-owned companies remains to be resolved.
A joint statement by Unipec and Lehman said only that their foreign exchange trading dispute had been resolved.
""Unipec plays a vital role in China's economy as the largest importer of crude oil...with this situation behind us, Lehman Brothers is keen to get on with developing our business in China,"" Lehman said.
Unipec returned the compliment, saying that it anticipated working with Lehman in the future.  
Lehman filed a US$44 million lawsuit in New York in November 1994 claiming that the Chinese trader had reneged on obligations over certain foreign exchange and swap transactions after incurring losses.
Unipec had hit back with a counterclaim saying Lehman had taken orders from certain Hong Kong firms with which Unipec was not affiliated
""Unipec and Lehman have come to a settlement agreement. Lehman has cancelled the lawsuit, and we have cancelled our counterclaim,"" said a senior Unipec manager by telephone.
The quarrel brought unwelcome attention to Unipec and illuminated the sometimes unorthodox ways in which Chinese companies deal with foreign counterparts.
Oil industry watchers said the case had hurt the reputation of the Chinese oil trader, which was set up only in January 1993, and it would be a while before it regained the confidence of its peers.
""Damage has already been done to Unipec, and it has been suffering especially in the U.S., with everyone asking for letters of credit when the case exploded...it's better for them to close the matter,"" said an oil trading manager with a major oil company in Singapore.  
Another oil industry observer agreed, saying ""it takes a while for people to accept them back.""
Still outstanding is Lehman's US$53 million suit against China's Minmetals International Non-Ferrous Metals Trading Co, which arose in late 1994 in similar circumstances.
Minmetals subsequently filed a US$128 million countersuit, including six counter claims of fraud, alleging Lehman knew the investments were unsuitable for it.
""We would love to reach a settlement (with Minmetals). We are now in negotiations and that's about it,"" a Lehman spokesman in Hong Kong said by telephone.
Lehman in April reached a settlement with the New York branch of oil trader Sinochem, parent of Unipec, of a US$20 million lawsuit concerning losses incurred on US$300 million of securities trades which the Chinese firm refused to recognise.
",45
"Hong Kong's pro-Taiwan community flew Nationalist Chinese flags across the territory on Thursday to mark Taiwan's national day for what could be the last time before China takes over in mid-1997.
As champagne glasses clinked amidst the laughter of hundreds of guests, Taiwanese hosts and well-known artistes flown in for the grand event in the posh Regent Hotel fronting the Victoria Harbour, many wondered if they would be able to celebrate in the same style next year.
""We don't know about next year, we have to see how the future Hong Kong government decides,"" Zheng An Guo, general manager of the Chong Hua Travel Agency, Taipei's de facto mission in Hong Kong, told reporters.
Hong Kong, a British colony for over a century and a half, reverts to Chinese rule on July 1, 1997. Under its Basic Law, a mini-constitution which takes effect from the handover, is a clause that Hong Kong must observe the ""one-China"" principle.
Communist China regards Taiwan as a rebel province since the Nationalist government fled to the island after losing the Chinese civil war in 1949 and has long sought to push the island into diplomatic isolation.
""I'm not sure what the future is for the celebration of the Double-ten event next year but we really want to continue if we can, even (if it is) within some other format,"" said Zhang Su Hui, a Chong Hua spokeswoman.
She added the form of the event next year and the fate of future Hong Kong-Taiwan relations would have to be sorted out through high-level cross-straits negotiations.
Pro-Taiwan sources believe the post-handover authority is likely to prevent flashy celebrations of the event -- known as ""Double-ten"" because it falls on the 10th day of the 10th month -- and to bar public display of Taiwanese flags and gatherings.
While the continued existence of the de facto Taiwanese mission is less in doubt -- so long as it abides by rules -- the raising of the Taiwanese flag, representing clear skies, white sun and the earth flushed with redness of the warrior's blood, would probably not be allowed.
""This is very clear, and the principle is very clear... after 1997, Hong Kong must abide by the 'one China' principle as laid down in the Basic Law,"" said a spokesman with Xinhua, Beijing's de facto embassy in Hong Kong.
Asked if raising of the Taiwan flag after the handover would contravene the Basic Law, he said, ""It should be. After 97, this matter according to the Basic Law would be enforced by the Hong Kong government, the central (Beijing) government would not interfere in this matter.""
",45
"Hong Kong's leader-in-waiting Tung Chee-hwa returned on Thursday from meeting Chinese leaders in Beijing and pledged to get down to the serious work of shaping his administration.
Tung, a former shipping magnate, also said he won reassurances from Beijing that the territory would enjoy a high degree of autonomy after Britain hands it back to China next June 30, after 150 years of British colonial rule.
""After receiving my appointment, I'll have to face many pressing tasks ahead, meeting the governor, the chief secretary Anson Chan, picking my team,"" Tung told reporters.
One of Tung's foremost tasks is to form an advisory cabinet called the Executive Council and to decide which senior civil servants to keep after the handover.
""But I haven't got specific dates as I've just arrived,"" he said, when pressed for details on his future team.
""I'm delighted the Chinese central leadership has time and again assured me...Hong Kong must have a high degree of autonomy and Hong Kong people would truly govern Hong Kong,"" the chief executive designate said.
Tung's popularity ratings have soared since he was picked by the Beijing-controlled Selection Commitee as the territory's Chief Executive.
A poll, conducted by the University of Hong Kong after Tung's selection on December 11, showed his popularity rating at a record high of 70.1 points.
But Tung, flanked at the airport by Zhang Junsheng, a vice director of Xinhua, China's de facto mission in Hong Kong, fought back at critics who say he would merely be Beijing's yes-man.
""I'm not the conquering hero, neither am I subdued"" he said.
Tung hinted he might soon get legal endorsement for a China-backed provisional legislature which Beijing intends to put in place of the territory's current elected legislature.
""I've said many times before I believe the provisional legislature is legal...it would be nice if (China's) National Peoples' Congress could reaffirm this one more time,"" he said.
The legislature is to be formed this Saturday by the 400-member Selection Commitee that is meeting over the border in the city of Shenzhen in case of any legal challenge in the Hong Kong courts.
Tung also urged civil servants to stay on after the handover.
""Many senior Chinese leaders are concerned about civil servants staying on, to have a stable transition. I myself have said I hope they can stay on,"" he said.
",45
"A leading Chinese dissident has fled to Hong Kong just days after a colleague in Beijing was sent to a labour camp and is reported to be seeking asylum in the United States, government-funded radio said on Sunday.
Radio Television Hong Kong quoted an unidentified source close to veteran democracy activist Wang Xizhe as saying he had seen Wang in Hong Kong and he appeared to be in good health.
Wang, who would be the second Chinese dissident to escape to the United States via Hong Kong this year, was expected to arrive there within the next 24 hours, a source aligned with the democratic movement in Hong Kong said.
Another Hong Kong source earlier said Wang could leave Hong Kong for the United States as early as Sunday night.
Wang has been missing from his home in the southern Chinese province of Guangdong since fellow activist Liu Xiaobo was arrested in Beijing last Tuesday and ordered to serve three years in a labour camp.
""The source said Mr Wang started planning his departure as soon as Mr Liu was arrested,"" Radio Television Hong Kong said.
""He confirmed that he had seen the dissident in Hong Kong and that his health was good,"" it said.
Wang had approached members of the pressure group, the Hong Kong Alliance in Support of the Democratic Movement in China, for help, the radio said.
They in turn had asked the Hong Kong government to help the democracy activist to seek political asylum in the United States, it said. A government spokesman declined to comment.
Dissident Liu Gang fled last May following months of police harassment at his home in northeastern Liaoning province since his release after serving a six-year prison term as a leader of the 1989 student-led demonstrations for more democracy.
Wang Xizhe had been active in recent months, sending several daring open letters to the government.
On September 30, Wang joined activist Liu Xiaobo in issuing a statement urging China's communist authorities to honour a promise in 1945 to give people freedom of the press and speech and to form political parties and stage demonstrations.
In a bold move, the two demanded Communist Party chief Jiang Zemin be indicted, impeached and step down for violating the constitution for saying the People's Liberation Army was under the ""absolute leadership"" of the party instead of the state.
Wang was paroled in 1993 after serving 12 years of a 14-year term for sedition and remains deprived of his political rights and thus is not permitted to issue such public statements.
Wang, one of China's most outspoken proponents of democracy, began his activities in 1974 when he has one of three authors of a renowned pro-democracy article that was pasted up as a wall-poster in Guangzhou, capital of Guangdong province.
Wang and his two co-authors served several years in jail for his audacity in challenging the authoritarian rule of Chairman Mao Zedong but was released in 1979.
That same year he took part in the Democracy Wall movement in Beijing, but was not arrested until 1981.
His reported escape comes amid a renewed crackdown on China's tiny, struggling democracy movement.
Detained dissident and former student leader Wang Dan faces the capital charge of plotting to subvert the government in a trial that could take place as early as this week based on evidence such as writings critical of the state and accepting funds from abroad, a human rights group said.
",45
"Hong Kong lined up on Thursday to pay its respects to China's dead leader Deng Xiaoping.
Colonial Governor Chris Patten was one of the first to be escorted inside the Xinhua news agency, Beijing's de facto mission in Hong Kong, to offer his condolences. Deng died late on Wednesday at the age of 92.
""I have written to director Zhou Nan, the head of the New China News Agency (Xinhua), expressing my condolences and of course if there is a condolence book opened I will want to sign that with the senior members of my administration,"" Patten told reporters before going in.
Asked if he would sent flowers, he replied: ""I don't think that would be appropriate.""
There has been little love lost between Government House and Xinhua during Patten's four-and-a-half-year tenure as the 28th and last British Governor of Hong Kong.
China denounced Patten as a political prostitute, a criminal for one thousand years and worse for spearheading democratic reforms in the twilight of British rule.
China plans to undo his reforms by dissolving Hong Kong's elected legislature and replacing it with an interim appointed chamber.
Patten was followed on Thursday by the man who will step into his shoes when the colony is handed over to China at the stroke of midnight on June 30, now just 131 days away.
Future leader Tung Chee-hwa, flanked by members of his inner cabinet, bowed three times to a large black and white photograph of Deng.
Hong Kong's politically powerful billionaires and new generation of pro-Beijing politicians turned up in force and were reverently ushered in.
An elderly couple, however, jumped the gun.
They turned up early in the morning, before Xinhua had managed to make arrangements for mourners for the man whose reforms transformed China from a weak, impoverished nation to an emerging economic powerhouse.
They were told to come back in the afternoon.
Five demonstrators staged a brief protest against Deng who they described as ""the Butcher of Beijing"" for his role in the brutal crushing of the student-led pro-democracy movement centred on Beijing's Tiananmen Square on June 4, 1989.
""One man has just died, but so many are mourning for him. Don't forget the number of people who died on June 4,"" they said.
",45
"China is keen to see a smooth resumption of sovereignty over Hong Kong because it will pave the way eventually for reunification with Taiwan, an expert on Chinese security policy said on Thursday.
Jonathan Pollack, a senior advisor on international policy at the Rand think-tank in the United States, also said he expected the People's Liberation Army (PLA) to gain more clout as the country's new leader Jiang Zemin needed its support.
""After the Hong Kong transition, we're going to see (China) putting some pressure on Taiwan to accelerate some kind of discussions, if not an overt negotiation,"" said Pollack, a specialist on Chinese political and security affairs.
""The Chinese do believe that it will serve as an example if they are able to effect this transition in an uneventful fashion. It will serve as an example that will help...their seeking more cooperation from Taiwan in the future,"" he told reporters after presenting a seminar in Hong Kong.
Hong Kong, a British colony of more than 150 years, reverts to China at midnight on June 30. Under Sino-British handover treaties, the territory of 6.4 million people is guaranteed autonomy for 50 years, except in foreign affairs and defence.
The imminent return of Hong Kong to China's fold, in just 103 days, under a ""one country, two systems"" policy allowing it a high degree of autonomy, is held up by Beijing as a model for Taiwan's eventual reunification with China.
Beijing regards Taiwan as a renegade province since a civil war split them in 1949 and has warned the Nationalist-ruled island against any aspirations for formal state independence.
Pollack also said the death of China's leader Deng Xiaoping in February would result in a higher profile for the PLA, mainly because the country's new leader needed its political backing.
""It will give the PLA more resources...enhanced budgetary clout, only because Jiang Zemin's own position depends to a significant extent on the military support he has,"" he said.
""Deng was in a position to say no to different people in the PLA. I don't think Jiang is quite in the same position.""
Pollack said that how the PLA would use its new leverage remained to be seen, but he thought it was unlikely to flex its muscles in an ""assertive or aggressive fashion.""
",45
"Chinese flags flew at half mast across Hong Kong, Thursday morning newspapers were delayed and pupils at ""patriotic"" pro-Beijing schools stood in silence after news that China's patriarch Deng Xiaoping had died.
""Deng Dead,"" screamed banner headlines in Hong Kong's Hong Kong's newspapers when they eventually appeared. All devoted acres of newsprint to the life and times of China's paramount leader, who had wanted to visit Hong Kong after it was reunited with China in July this year.
""Come later. Lots of papers are changing their main sections,"" a newspaper hawker told early commuters en route to Hong Kong's Central business district.
Deprived of reading matter many plugged in their headphones and switched between different Hong Kong radio stations.
Some expressed grief but many inhabitants of the British colony of Hong Kong took Deng's demise in their stride.
""I couldn't sleep well the whole night. He was a great leader of our nation. He improved China,"" said Ko Chiu, 80, who was among a group of elderly practioners of Tai Chi, or Chinese shadow boxing.
But another elderly resident Auyeung Pak, 85, paused from his slow jog in a Hong Kong park to shrug off Deng's death.
""It's normal for a man of that old age. I'm not too sad.""
Chinese flags at China's de facto mission in Hong Kong, the Xinhua News Agency, flew at half-mast.
Pupils at the Piu Kiu Middle School, which follows a mainland Chinese curriculum, observed a minute's silence.
Some analysts have predicted Deng's death will create uncertainty in Hong Kong, threatening stability during its delicate transition to Chinese rule at midnight on June 30, 1997, a date now 131 days away.
But there was scant sign of much emotion in the business district.
""It's business as usual,"" said an employee of the state-owned bank of China as he hurried into the bank's futuristic highrise headquarters.
He's lucky to have lived for so long,"" said a 55-year-old women, pausing briefly in her tai chi regime.
A camera-toting Taiwanese tourist, accompanied by her two young daughters, said she did not care.
""I don't feel anything. I heard it early this morning.""
",45
"China's Foreign Minister Qian Qichen was greeted by angry protesters on Friday when he arrived to open a historic meeting to choose Hong Kong's future leaders.
Police scuffled with demonstrators when they blocked access to the Convention Centre, where Britain will formally return its colony to China in 228 days' time.
Qian will preside over the 400-member Selection Committee, which began its month-long mission to select the Chief Executive and 60 members of a replacement legislature.
A group of about 30 police surrounded a handful of student activists and herded them towards barricades where other protesters were sequestered. Many had spent the night on a protest fast outside the building.
Hong Kong's pro-democracy lobby has attacked the process and refused to take part in the selection committee which they have branded as undemocratic.
They are adamantly opposed to China's plan to dissolve the elected legislature and replace it with an interim provisional chamber until new elections are staged.
One student was pushed to the ground before being hauled over the barricades into the cordoned-off area by other protesters. ""I am very frightened,"" the university student said. ""I don't know why they pushed me.""
Waving banners and using loud hailers, about 40 demonstrators chanted ""We want a directly elected legislature"" and ""We reject the deterioration of democracy"".
Police flung themselves against the barricades to hold back surging demonstrators, some of whom held up a large black box.
""This is a coffin. It represents the death of democracy and freedom in Hong Kong,"" one demonstrator said.
Members of the Democratic Party had planned to pass a letter to Qian but were unable to get past police lines.
""We hope you would exchange views with Hong Kong people on the setting up of the Provisional legislature and selection of the Chief Executive,"" the letter to Qian said.
The Selection Committee is due to hold a first round of voting on Friday to narrow down the list of candidates to step into the shoes of colonial governor Chris Patten when British rule draws to a close at midnight on June 30 next year.
To enter the final run-off for the job, a candidate must be nominated by at least 50 members of the committee.
Two business magnates and two former judges are regarded as the frontrunners in the race.
The Selection Committee meets again on December 11 to pick the winner.
",45
"Parcels giant DHL Worldwide Express, which has had its foot through the door of Eastern and Central Europe since the mid-1980s, was braced to break even on growing regional business by 2000, a senior executive said.
""I would say that certainly by the year 2000 we would be in a breakeven position as a region in its own right,"" said Peter Davies, regional director of the European rim, during an interview with Reuters on Monday.
Turnover generated from DHL's business in Eastern and Central Europe, including the Commonwealth of Independent States (CIS), would total US$155 million in 1996 compared with US$110 million in 1995, and hit US$200 million in 1997.
The breakeven comes after years of losses from the late 1980s when the region plunged into massive changes with the fall of the Berlin Wall and the break up of the former Soviet Union.
Davies, responsible for Eastern and Central Europe including the CIS, said DHL was well aware of short-term difficulties but had maintained operations in the region with its sights set on the long term.
""If you go into the market to make a fast buck, then you are in there for the wrong reason...you have to have a long term view to that,"" Davies said.
""DHL doesn't make a profit as such, but it's okay, we know that. We have a long-term investment plan,"" he said.
But staying power of the company, which employs some 3,500 people in the region, might just be starting to pay off having captured 75 percent of market share there.
Growing foreign investments by its clients in the more mature economies of Poland, Hungary and the Czech Republic as well as the CIS have meant more business, Davies said.
And in places like the former Yugoslavia where basic infrastructure and services were not well in place, delivery services were seen as particularly critical, he said.
The company has invested some US$46 million through expanding facilities and aircraft purchases in 1996 for Eastern and Central Europe and topped off another seven percent of the amount in training.
It now operates in 165 locations in the region and would add another 35 stations in 1997, Davies said.
""We have invested much, especially in the countryside and the next stage would be expansion of facilities,"" he said.
--HONG KONG NEWSROOM (852) 28436441
",45
"Britain's Home Office has warned ethnic minority residents in Hong Kong that they will not get British passports when the colony is handed over to China if they relinquished other passports in order to qualify.
In a statement made available late on Friday, the British government said applicants should be solely British before February 4, when the plan to grant full passports to 8,000 ethnic minority Hong Kong residents was announced.
""This means that anyone voluntarily renouncing another nationality on or after that date will not qualify,"" it said.
Hong Kong's ethnic minorities had previously faced the threat of becoming stateless when China resumes sovereignty over the British colony of over 150 years at midnight on June 30.
While they will have residency rights in Hong Kong after the handover, it was unclear whether they would be entitled passports of the future Hong Kong Special Administrative Region.
But the condition set down by Britain is widely seen as an attempt to plug a loophole after local newspapers reported some ethnic minority residents were ditching their other passports in the hope of qualifying for full British ones.
A prominent business leader in Hong Kong's Indian community on Saturday slammed the February 4 cut-off.
""This is not the right attitude of the British government. They shouldn't give conditions to it. They should give full passports without any clauses,"" Nari Dadlani told Reuters by telephone.
Dadlani, a naturalised Hong Kong resident of 38 years who holds no other passport, said he would stay on in Hong Kong even if he was to be granted full British citizenship.
""What we need is only an insurance, when emergencies arise. We are not going to take the first flight to London with this passport...we are much more happy here in Hong Kong,"" he said.
""And even when it comes to that, the Indian community is going to take a lot of capital to the U.K. We are not going to ask for social security and such things,"" Dadlani said.
In its statement, the British Home Office said necessary legislation would first need to be enacted before those concerned, mostly Indians and Pakistanis, could apply to become British citizens.
Applicants should be ordinarily resident in Hong Kong and they, including spouses and children, must qualify in their own right, it said
Successful applicants would be granted full British citizenship from July 1, the statement said.
",45
"The sentencing of Chinese dissident Wang Dan to 11 years in prison in Beijing on Wednesday sparked fears in Hong Kong about curbs on freedom when the territory reverts to China next year.
More than 100 demonstrators marched to China's diplomatic mission in Hong Kong to protest against the verdict and a human rights group vowed to lobby for a resolution to be passed at the United Nations condemning China's human rights record.
""Wang Dan is innocent. Release Wang Dan,"" protesters shouted as they marched to the headquarters of Xinhua news agency, Beijing's de facto embassy in the British colony.
There they joined other campaigners in a candle-lit gathering.
A Beijing court found the 27-year-old Wang guilty of conspiring to subvert the government after a trial lasting only four hours. Xinhua said the trial proved he had received funds from hostile overseas forces, aided the families of jailed dissidents and set up an ""opposition force"" by uniting illegal organisations.
Wang had earlier served four years for his role in the 1989 pro-democracy demonstrations in Beijing crushed by the army with heavy loss of life.
""We worry that the Chinese government (would) apply a similar standard in Hong Kong,"" legislator Bruce Liu of the Association for Democracy and People's Livelihood said.
Hong Kong Governor Chris Patten said: ""I recognise the very considerable concern that many people in Hong Kong, and many people around the world, feel about a sentence imposed on a young man for activities which in most places, including Hong Kong, would be entirely legal.""
""By any legal standards, today's trial of Wang Dan was a farce,"" said Robin Munro, director of the Hong Kong office of Human Rights Watch Asia.
""Clearly, its sole purpose was to put Wang Dan behind bars for as long as possible with the minimum legal fuss and bother.""
While Hong Kong has been promised a high degree of autonomy for the next 50 years under a Sino-British handover treaty, many doubt whether the freedoms now enjoyed will be preserved.
Munro said his organisation would lobby the United States and European countries to pass a resolution at the United Nations condemning the human rights situation in China.
",45
"When outgoing Chief Justice Sir Ti Liang Yang joined the contest to become Hong Kong's first local leader, he opened up a competition which had been seen as a clash of business titans.
Yang, 67, resigned in September as Chief Justice in a bid to become Hong Kong's Chief Executive and step into Governor Chris Patten's shoes when the British depart at midnight next June 30.
A prim, avuncular figure, he dropped his knighthood title ""Sir"" in October, choosing to be addressed as ""Mister"".
He was knighted in 1988, the year he became the first Chinese to head the judiciary under British rule.
The former judge's nearest rival is regarded as shipping magnate Tung Chee-hwa who, until Yang joined the fray, had faced a rival businessman, Peter Woo. The latest public popularity poll gave Yang 42.6 percent, well ahead of Tung's 32.9 percent.
Woo, rated third, and former appeals court judge Simon Li, rated fourth, are regarded as unlikely winners in the eyes of the Hong Kong public, who see the two laggards more as spoilers than odds-on favourites for the leadership mantle.
However, it is not the public who will be casting the votes when the winner emerges on December 11, but the 400 members of a China-controlled Selection Committee.
Trying to prove he has the common touch, Yang made a show recently of moving out of his palatial official residence on Hong Kong's Peak, along with his chauffeur-driven Jaguar, and moved into a rented apartment.
He then went on a demonstrative jaunt around the territory on public subways and ferries. But days later when he went to tour slums, he arrived in a chauffeur-driven Mercedes.
""I never imagined they were so poor,"" he said after visiting a ""cage home"", a small room with rented caged-in bedspace that can be home to a dozen people.
Yang stresses his ""neutral"" background. ""I have no business affiliation. I have no direct official connection with the civil service,"" he said.
""To that extent, I am very neutral and therefore I think I shall be able to adopt an independent view on matters and judge matters on their merits,"" Yang said.
Born in a privileged family and remembered by his former teachers in Shanghai as a thoughtful, intelligent student, Yang and his family moved to Hong Kong after the 1949 communist takeover on the mainland.
The soft-spoken, bespectacled Yang has promised a ""moderately conservative"" style of rule, without drastic changes.
""If I were to become Chief Executive, I'm at the head of a moderate, relatively conservative government,"" Yang said.
""I don't want to see more great challenges or great reforms over the initial couple of years after 1997,"" he said.
He apparently had in mind the political landscape before Patten arrived and spearheaded democratic reforms to the approval of many in Hong Kong but to China's utter fury.
Yang, a self-declared Chinese patriot, provoked a storm late last year when his misgivings about the territory's much-coveted Bill of Rights, spoken in private conversation to a senior Chinese official, were leaked to the media.
It pushed him into the limelight and attracted accusations of toadying to Beijing. Some pressure groups called for him to resign, which he promptly rejected.
Yang, who once described himself as a ""bridge between the East and the West"", appears to have ridden that storm, as the popularity polls indicate.
",45
"China rejected a British challenge to take it to the World Court and staged a vote on Saturday to set up a Hong Kong parliament that will oust elected lawmakers when Beijing recovers the territory next July.
Under heavy security and in a hall decked with red curtains and the Chinese communist red crest with five stars, an elite of 400 carefully chosen Hong Kong electors met in the Chinese city of Shenzhen to pick new legislators for the territory.
The members of the China-controlled Selection Committee cast ballots for the 60-seat legislature in big red envelopes.
They were choosing from 130 pro-Beijing candidates who had been screened by China's representatives in Hong Kong before the selection ballot.
Each elector could list up to 60 names from among the 130 hopefuls, who include 34 incumbent lawmakers.
The result, to be announced later on Saturday, is likely to be denounced by Britain and some of its allies as a travesty of democracy and a breach of handover agreements.
Britain is handing Hong Kong back to China at midnight next June 30 under a treaty that promises the territory of 6.3 million people can keep for 50 years its capitalist system.
Presiding over the gathering in Shenzhen, Chinese Foreign Minister Qian Qichen attempted to shoot down Britain's World Court threat and said London should wake up to reality.
""What is regrettable is that Britain has lacked the courage to face reality,"" Qian said in a speech before the voting.
""This election should have been held in Hong Kong, but because of Britain's refusal to cooperate we had no choice but to hold it here in Shenzhen.""
On Friday, British Foreign Secretary Malcolm Rifkind challenged China to go to the International Court of Justice in The Hague to prove the legality of its so-called provisional legislature.
Hong Kong's colonial Governor Chris Patten also attacked the proposed legislature, calling it a ""rubber stamp"" and an ""echo chamber"".
China is creating the body in retaliation for democratic reforms introduced by Patten. The reforms enlarged the mass franchise when the present Legislative Council (Legco) was elected last year with a landslide for pro-democracy forces.
Saturday's vote was a turning point in Hong Kong's future and moved Legco a step closer to oblivion.
Events are moving apace, with less than 200 days to go before the change of flag. Ten days ago the Selection Committee chose Tung Chee-hwa, a 59-year-old shipping magnate with strong pro-Beijing loyalties, to succeed Patten next July 1.
The Hong Kong public has had no say in who should be their first Chinese leader and lawmakers after the British withdrawal. Nor have they had a say in the removal of their elected legislators.
A survey this week showed only a third of Hong Kong people backed the provisional legislature and only a quarter trusted China.
The creation of the interim lawmaking body in Shenzhen was conducted amid tight security.
Trucks towed away suspicious cars hours before the meeting began and guards with binoculars were posted atop the building across the street from the voting hall.
Some of more than 100 journalists, many of whom arrived on Friday, were detained for up to an hour while their travel documents were verified by Chinese border guards.
",45
"Air China, China's largest carrier, plans to increase its international routes next year and will boost its fleet with the addition of five passenger planes, a senior manager said on Wednesday.
""We would be concentrating on expanding our international routes within the ninth five-year plan (1996-2000),"" said Zhang Jinming, general manager of the airline's publicity centre, told Reuters at the China Airshow '96.
The carrier would be starting flights from Beijing and Shanghai to Los Angeles on June 29, 1997, and planned to start routes next year from Beijing to Fushan in South Korea and to Brazil, Zhang said.
The five-day airshow at Zhuhai airport in southern Guangdong province is touted as China's largest and costliest aviation and aerospace exhibition to date, bringing together domestic and foreign aircraft and parts producers.
Increasing demand for domestic and international travel since the start of rapid economic reforms has also boosted China's civil aviation industry. The country now has 30 passenger carriers.
Air China, established in 1955 and China's longest-running carrier, currently flies 44 international and domestic routes, Zhang said.
Flights from China to Los Angeles would either be two or three times a week, he said, adding that the launch dates for service to South Korea and Brazil have yet to be finalised.
The airline, which has a fleet of 64 Boeing passenger jets, would also be taking delivery of three Airbus A340 passenger planes and two Boeing 747s in 1997, Zhang said.
Zhang said the proliferation of Chinese carriers in recent years had given way to cut-throat competition.
""Because of competition, some companies have slashed prices. For us, we have cut by similar amounts, "" he said. But he added that the company, given its long and proven track record, was more keen to conduct business based on reputation.
-- Hong Kong Newsroom (852) 2843 6441
",45
"Hong Kong Governor Chris Patten told a meeting of central bankers on Friday that the territory's economic prosperity was due to its increasingly democratic government.
In remarks aimed as much at official audiences over the border in China as at the central bankers attending the financial conference he was addressing, Patten said Hong Kong people had developed the institutions and values of a civil society.
""The government has responded (positively) to that process and to the changes in aspirations which have accompanied it, by welcoming ever wider public participation in the process of government,"" he told the conference, organised by the Hong Kong Monetary Authority and the International Monetary Fund (IMF).
He drew attention to China's commitment, in the Sino-British accords covering the British colony's return to China this July 1, to allow the development of democracy in the territory.
Hong Kong, a territory of 6.4 million people on the south China coast, reverts to China after more than 150 years as a British colonial possession, under a 1984 Sino-British treaty.
The treaty, the Joint Declaration, guarantees the territory will have a high degree of autonomy and keep its freewheeling capitalism for a further 50 years after the handover.
The territory is one of the world's economic marvels. It is the eighth largest trading economy and sits on one of the world's biggest pots of foreign reserves -- US$66 billion.
However, China has launched moves over the past year to scrap Hong Kong's elected legislature, reverse Patten's reforms that widened the democratic franchise and roll back laws on civil liberties, when Beijing resumes sovereignty.
Beijing's moves have stirred outrage among the territory's pro-democracy groups and opposition from Britain and the United States, undermining a smooth transition.
""Democracy, as promised and pledged in the Joint Declaration and in the Basic Law, 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.
He said Hong Kong's stability in the next century would need what he called ""responsive government"". Economic and social change would put huge strains on society, Patten said.
""Those pressures demand sophisticated and responsive institutions of public administration to channel them productively into communal progress rather than letting them build up to the detriment of political and economic stability.
""Hong Kong has responded creatively to the pressures that it's faced, preparing itself for all the challenges which, like all the developing economies of Asia, it will face in the coming century. That's not a process which should or could be stopped.""
",45
"Hong Kong's future leader Tung Chee-hwa said on Monday the Beijing-approved body set up to replace the existing elected legislature in mid-1997 would soon hold its first sitting -- not in Hong Kong, but in China.
Tung was speaking after his first informal meeting with the post-colonial deputies who will take up lawmaking in Hong Kong after Britain hands back the territory at midnight next June 30.
The new chamber will soon hold its first official session most likely across the border in the southern Chinese city of Shenzhen, Tung told reporters.
""The provisional legislature must meet for the first time. It'll probably be in Shenzhen. It would be very soon,"" he said.
""We also discussed very unofficially the tasks ahead for the provisional legislature,"" Tung said.
The 60-member chamber was selected this month by a 400-strong selection committee comprised of Hong Kong people vetted by China.
The same panel earlier chose Tung to run the territory after colonial Governor Chris Patten departs in 183 days' time.
The provisional legislature is stiffly opposed by Hong Kong's Democratic Party, which emerged from 1995 elections for the present Legislative Council with the most votes of any party but will lose its seats next July 1.
The party calls the provisional body a travesty of democracy that will be illegal if it functions before the change of flag. Their threats of legal action have forced the body to meet in China.
The colonial government has agreed to cooperate with Tung on issues regarding the transfer of sovereignty but not with the provisional legislature.
On Monday Tung who has promised to respect the neutrality of Hong Kong's 180,000 civil servants, urged them to face the reality of the provisional legislature.
""The political neutrality of the civil service is very important, we must respect that. But after 1997, the provisional legislature will work with the civil service. That's a reality.""
Many in Hong Kong are worried that stable government and the rule of law will evaporate when communist-ruled China takes back the capitalist territory of 6.3 million people.
On Saturday Tung persuaded Hong Kong's top civil servant, Chief Secretary Anson Chan, to stay in her post after the handover. But he has yet to decide the fate of other top officials.
In one of the first signs of cracks in the top echelon of officials, chief graft-buster Michael Leung, head of the Independent Commission Against Corruption, last week announced he would not serve beyond the handover.
Tung, who met Leung on Monday, said he failed to persuade Leung to change his mind. ""It is a real pity. I wish he would stay...but he explained that it was for personal reasons he was leaving,"" he said.
",45
"Hong Kong's lawmaking chamber suffered a blow last week when its speaker broke ranks to vie for a seat in an interim body Beijing plans to install in the territory next year, political analysts said on Sunday.
Andrew Wong, Legislative Council president, made an about-turn when he said he was seeking a seat in the Provisional Legislature, a body he denounced during 1995 elections.
But his move to join 31 colleagues seeking seats in the provisional body, which China will put in place of the Legislative Council, threatens to widen schisms already dividing the chamber, commentators said.
""Cracks which have already emerged within the Legislative Council over the bid by some members for a seat on the Provisional Legislature will widen in the next six months,"" said Chris Yeung, political commentator with the Sunday edition of the South China Morning Post newspaper.
Yeung warned of a flurry of motion debates, adding that ""the normal operation of the Legislative Council will be adversely affected to a great extent, if not paralysed"".
China, angered by a string of democratic reforms implemented by colonial Governor Chris Patten, has vowed to disband the present elected legislature and replace it with the provisional assembly when Hong Kong returns to Chinese rule in mid-1997.
On Wednesday, the Selection Committee, carefully assembled by China, is expected to choose the man who will succeed Patten as the territory's first post-colonial leader.
The committee's next task is to name the 60-member Provisional Legislature on December 21.
Wong, denounced by some fellow legislators, would not say whether he supported the Provisional Legislature, but he tried to convince reporters he would remain an impartial leader of the existing chamber.
""You ought to wait until I act partially -- and when that happens, criticise me and I will retract my decisions and previous rulings,"" Wong told reporters on Saturday.
While it is not yet clear how and where the future Provisional Legislature will meet and operate before it actually assumes office next July 1, observers said the existence of two lawmaking bodies cannot auger well for the territory.
""In any country, when you have two bodies from which laws emanate at the same time, there's going to be some confusion and dispute,"" said Michael DeGolyer, associate professor at Hong Kong's Baptist University, who is in charge of a long-term study on the transition.
""For the next six months, we're obviously going to be in a very confused state. Normally this causes all kinds of political and economic chaos.""
",45
"Commercial sponsors have flocked to the Portuguese enclave of  Macau to back Sunday's annual Grand Prix despite fears that China wants to steal the show.
Fans of Asia's answer to Monte Carlo fear a Formula One track, recently constructed just across the border in the southern Chinese city of Zhuhai, will seduce sponsors and signal the death knell for Macau's Formula Three race.
Macau has no special track with the race run through the enclave's twisting streets.
But the concerns have not materialised this year at least and Macau is festooned with banners, kiosks and giveaways from sponsors including French oil concern Elf, Budweiser and Corona beer, watchmaker Omega and Japanese tyre manufacturer Yokohama.
""Zhuhai hasn't really affected Macau because most of its sponsors are here for very specific reasons,"" said Stephanie de Kantzow, an organiser of the Macau Formula Three Grand Prix.
The annual event, about 60 kilometres west-southwest of Hong Kong, started in 1954 and many of the world's top drivers have cut their teeth on the tricky 6.2 km (3.8 miles) Guia street circuit. Double Formula One world champion Michael Schumacher, and current Formula One champion Damon Hill are past Macau competitors.
China also insists it is not seeking to edge Macau out of hosting international motor racing.
""We won't affect Macau. Macau's speciality is in the Formula Three, our aim is to host Formual One and the GT (Global Touring) Rally,"" Yu Binglin, vice-mayor of Zhuhai, said in a recent interview.
Elf, one of the event's major sponsors, said there was no reason for it to pull out of Macau even though another race track has sprung up in China.
""Macau has a history of automobile racing. As long as Formula Three Grand Prix exists in Macau, Elf will be present in Macau. Business and selling products is one thing, sport is another,"" Michael Bonnet, Elf's director of commercial activities told Reuters.
""What we wish to build in Asia are several (motor racing) schools to develop young drivers from Macau and rest of Asia ... we want to find potential champions in Asia.""
Elf sponsored a Formula Campus Challenge in early November at the China Zhuhai 1996 International Race.
Royal/Dutch Shell, which lost its bid as fuel sponsor to Elf in 1995, said it would tender for the 1997 Macau race.
""Macau and Zhuhai have their individual merits, like individual tenders. Macau belongs to our Hong Kong business (budget) rather than China. We'll try to do it next year,"" Albert Wong, a spokesman for Shell, said earlier last week.
But China, which is determined to muscle its way into the glamourous circuit of international motor racing, is expected to give Macau a good run for its money.
Zhuhai, just 15 km (9 miles) northeast of Macau, boasts a 4.32 km dedicated racing circuit.
The Federation Internationale de L'Automobile (FIA) is conducting a study on whether its is up to standard for endorsement as a suitable Formula One venue.
FIA is also discussing with Chinese officials Zhuhai's possible hosting of a Formula One race in 1997, a senior Zhuhai government said.
""What Zhuhai has done is that it has opened up a whole new area of sponsorship. People who hadn't sponsored car racing before seem to be coming to Zhuhai to see if there's a possibility of being involved in sponsorship,"" de Kantzow said.
",45
"The United States envoy in Hong Kong reminded China on Tuesday of its pledge to preserve Hong Kong's ""vital"" freedoms after Britain hands the colony over to China next year and said Washington would be watching.
Richard Boucher, the U.S. Consul-General in Hong Kong, stopped short of saying what his government could do for the territory if China reneged on its promises after it resumes sovereignty over Hong Kong on July 1.
""As Hong Kong heads towards the transition, the handover has been assuming higher visibility as a factor in U.S. foreign policy... It is one of the key events in Sino-U.S. relations over the next few years,"" Boucher said.
""We have our voice, interest and participation in China and Hong Kong. It is not a threat...but we want to first see what happens,"" he said in a speech to the Foreign Correspondents' Club of Hong Kong.
The freewheeling British colony of over a century and a half is promised far-reaching autonomy for 50 years under a Sino-British treaty and related documents.
Quoting the ancient Chinese sage Confucius, Boucher said a measure of whether Hong Kong was well ruled after 1997 would be if ""its subjects are content and foreigners are attracted"".
He reminded Beijing of its promises made about Hong Kong -- the survival of freedom of speech, press, assembly, movement, travel, religion, among others. ""That is a sweeping, vital and unrestricted pledge,"" he said.
With only 203 days left under the British flag, Hong Kong people are nervous over the future of these freedoms and about China's plan to replace their elected Legislative Council with a provisional legislature, to be chosen this month, overseen by Beijing.
Boucher, echoing criticisms made previously by other senior U.S. diplomats, described the provisional body as ""unnecessary and unjustified"".
""It is important for Hong Kong to have a legislature that is constitutionally elected.""
Boucher refrained from commenting on whether Hong Kong Chinese residents holding U.S. passports would enjoy U.S. consular protection after the handover.
""We do in every case offer consular protection when we can but the question of dual nationality is very complicated...and I can't give details now,"" he said. Some 37,200 U.S. citizens live in Hong Kong, many of them dual nationals.
Boucher also said China had signalled to Washington that U.S. Navy ships could continue to make recreational port visits to Hong Kong after 1997, although details had to be worked out.
About 70 U.S. warships call in at Hong Kong each year.
",45
"China endorsed Hong Kong's Tung Chee-hwa on Thursday as the man to lead the territory after it reverts to Chinese rule in 1997.
The 59-year-old shipping magnate proved the overwhelming choice of a Beijing-vetted panel to lead the territory after the British pull down the flag, ending more than 150 years of colonial rule.
The Preparatory Committee, the 150-strong body of prominent Hong Kong and Chinese citizens established to manage the handover, extended China's recognition of Tung's new role at a session in the southern China boomtown of Shenzhen.
The endorsement was proposed by Preparatory Committee vice-chairman Wang Hanbin. ""If you don't have any objection, then approve it by applauding,"" Wang said.
The delegates, who include some of Hong Kong wealthiest and most powerful tycoons and deal-makers, dutifully clapped in unison.
Tung, whose father fled the Chinese communist revolution in 1949, will take over the helm when the colony reverts to China in 201 days' time, at midnight on June 30.
Tung said on Thursday that China's role in bailing out his family shipping empire when it ran into trouble a decade ago would not affect his leadership.
""Gratitude is one thing. Being the chief executive is another. The chief executive has to put interests of Hong Kong people before anything else,"" Tung said in an interview with Cable Television.
Hong Kong newspapers, many of which had prepared celebratory issues ahead of Wednesday's poll in which Tung eclipsed his two rivals by taking 80 percent of votes cast, heralded him as proof that Hong Kong people could run Hong Kong.
Tung has said he will take a hard line against meddling by provincial bosses who may seek to disregard Beijing's edict that Hong Kong will be a Special Administrative Region of China with considerable autonomy in governing its own affairs.
Hong Kong's Economic Times newspaper said China was expected to rank the future chief executive equal in status to a state councillor.
This position, one level below vice-premier, would mean he outranks provincial governors and would help ensure against interference in Hong Kong affairs by regional cadres, it said.
Tung's victory was considered a foregone conclusion in Hong Kong, where he has been regarded as China's man since President Jiang Zemin singled him out for a pointed handshake in January.
The Preparatory Committee is scheduled to address during the afternoon session what promises to be its most controversial task -- setting the ground rules for a Provisional Legislature in Hong Kong to replace the existing elected chamber.
China, angered by the reforms spearheaded by British Governor Chris Patten, vowed to neutralise them by dissolving Hong Kong's legislature when it takes control.
Navigating this potential minefield could prove Tung's biggest immediate headache.
Opposition in Hong Kong to the new chamber is stiff and many people are deeply concerned about the confusion that may arise if two rival legislatures jockey for power in the final six months of British rule.
",45
"One of Hong Kong's best-known pro-democracy politicians, Emily Lau, was dragged away kicking and screaming by police after lying down on a road to protest against China's methods of choosing a post-colonial leader.
Up to 40 pro-democracy activists scuffled with riot police outside the Hong Kong Convention Centre, where a committee of 400 chosen by Beijing voted for a chief executive to rule Hong Kong after Britain hands the colony back to China at midnight next June 30.
Police said 29 demonstrators were arrested for obstruction and would be released on bail later in the day.
A dozen activists shouting ""oppose the phoney election"" lay down on the road and were dragged away by police.
Lau, an independent democrat fiercely critical of China's communist rulers, was among those carried off, witnesses said. It was not immediately clear whether Lau was among those arrested.
Fellow legislators Andrew Cheng of the Democratic Party and trade union leader Lee Cheuk-yan were also hauled away.
""It's a sad day for Hong Kong. What can ordinary Hong Kong citizens do -- they cannot vote,"" John Wing-ling Tse, a legislator of the Democratic Party, said.
Earlier, protesters erected a ""tomb of democracy"" outside the building and condemned the voting as the end of freedom and the rule of law in the territory.
A panel of 400 chosen by China voted for the future leader. None of the rest of Hong Kong's 6.3 million people had a vote, causing the democracy lobby to dismiss the process as a sham.
Several hundred pro-democracy activists demonstrated on Tuesday evening and 20 diehards camped out overnight with an imitation tomb in front of the Grand Hyatt Hotel.
The first thing in the line of sight when Selection Committee members arrived was the imitation ancient Chinese-style grey arched tomb, constructed from wood.
The structure faced the Hong Kong Convention Centre with the inscription ""Tomb Of Hong Kong Democracy And Rule Of Law"". Candles flickered in the wind beside it.
The committee was convened to carry out the first of two historic tasks -- to elect the man who will step into the shoes of Governor Chris Patten when Britain pulls out. The clear favourite, shipping magnate Tung Chee-Hwa, emerged victorious.
The committee's second task, on December 21, is to choose a provisional legislature that will replace the current elected Legco (Legislative Council) on July 1.
The scuffles erupted after police urged the demonstrators, from the United Front Against the Provisional Legislature, to move to a cordoned-off area.
Occasionally the group marched a short distance bearing the tomb aloft, as in a funeral procession. In front of the tomb a banner was posted saying ""Death of Hong Kong Rule Of Law"".
""We are against the Selection Committee's so-called election of the first chief executive,"" said Cheng. ""The selection is not real because it is done by Beijing,"" the legislator said.
The protesters brandished a colourful banner with the slogan ""Oppose the False Election Of The Chief Executive, Oppose The Provisional Legislature"" and denounced China for not allowing Hong Kong's electorate to vote.
",45
"Hong Kong's future leader Tung Chee-hwa met a political opponent on Monday he has accused of badmouthing Hong Kong abroad in the run-up to Chinese rule, holding talks that appeared to strike a conciliatory note.
However, Tung and Democratic Party leader Martin Lee, a fierce critic of China, remained poles apart on key issues at the heart of the democratic camp's worries about Hong Kong's return to Chinese rule at midnight on June 30.
In a meeting he described as ""cooperative"" and ""good"", the second since the shipping magnate was selected in December as Hong Kong's future leader, Lee said his party allowed Tung to clarify his position if he believed he had been misinterpreted.
""If he thinks we have misunderstood him, he can tell us, so we can clear any misunderstanding,"" Lee told reporters.
Lee said he gave Tung a ""position paper"" highlighting issues Lee would be discussing with political and business leaders in an upcoming trip to the United States, Canada and Europe.
The paper stated what the Democrats saw as Tung's stance on key issues about Hong Kong's handover, giving the future leader a chance to clear up any misunderstandings over his position.
Lee, who has made many trips overseas to lobby against the provisional legislature and China's plans to roll back on rights and civil liberties at the handover, has been attacked by Tung in recent weeks for criticising Hong Kong abroad.
But the long-time champion of democracy in the territory, who will receive the National Endowment for Democracy's 1997 Democracy Award on Washington's Capitol Hill on April 9, said he would continue to go on his overseas lobbying trips.
He also dismissed suggestions from the media that the party would censor itself in the future.
""No, we will still speak (overseas), but if Mr Tung says he has been misunderstood, we will consider his views, we will definitely not be censoring ourselves,"" Lee said.
The party also stood firm against the provisional legislature.
""I told Mr Tung so long as this provisional legislature were to have its first, second, third readings on any bill before July 1, we will have no option but take it to court,"" he said.
With the handover just 106 days away, Hong Kong is awash with concerns over the impending end of its elected legislature and Beijing's plans to repeal or amend a string of laws protecting human rights and civil liberties.
",45
"Norwegian engineer Kvaerner ASA has set its sights on increasing its Asia Pacific portfolio in coming years where burgeoning economies are taking on more sophisticated technology, a senior official said on Friday.
""Our turnover would be up by about 10 percent in 1997, and 50 percent (of the increase would be) generated by Asia,"" said John Fletcher, chairman and managing director of Kvaerner Corporate Development, the group's corporate development arm.
Total turnover in 1996 would hit US$10 billion, of which 35 percent would be generated from Asia, Fletcher said in an interview. Asia made up less than 10 percent of the company's annual turnover in the early 1990's, he added.
Kvaerner's half-year results in August showed a sharp 56 percent fall in pre-tax profit to 706 million crowns on turnover of 22.94 billion crowns.
Kvaerner, Norway's second largest listed company and an employer to 60,000 worldwide, took over British conglomerate Trafalgar House in April and moved promptly to integrate Trafalgar's engineering and construction units.
Its new organisation framework revolves around six core areas of shipbuilding, process engineering, oil and gas engineering, construction, metals and pulping.
Fletcher said Kvaerner's business was currently very strong in India, Indonesia, Thailand and China.
Kvaerner's involvement in China goes back 40 years and partook in developing the country's steel industry over the decades, Fletcher said.
On hand now are over 30 projects in China -- spanning industrial hardware, power generation, and steel for mostly joint venture companies led by international shareholders -- worth some US$500 million, and the amount was set to increase to US$750 million in 12 months' time, he said.
The company is eyeing a tender expected to open by end 1997 to build hydro-turbine engines for the giant Three Gorges dam project, which would be awarded at the end of 1997.
""Kvaerner is involved in a (proposed) consortium on the Three Gorges project whereby the first set of turbines would be manufactured by Kvaerner and the second set would have local manufacturers involved,"" Stephanie Chick, business development manager said at the interview.
Fletcher dismissed China's ongoing austerity measures and credit clampdown as ""cyclical"" and believed the country was now poised to move to some ""good years"".
The company also has about 30 orders on hand in Indonesia and is involved in building a US$450 million, 120,000 tonne per year facility in Thailand to produce refined copper wire that is scheduled to come on stream in 1998, Fletcher said.
-- HONG KONG NEWSROOM (852) 28436441
",45
"China on Monday responded coolly to a request for talks from Hong Kong's populist Democratic Party, insisting the party first play by Beijing's rules.
Beijing told the party it had to abide by rules governing the creation of the Selection Committee, a 400-member body which will chose Hong Kong's post-handover leader and provisional legislature, replacing the present elected chamber.
""The Preparatory Committee secretariat...welcomes the Democratic Party's posture and willingness to communicate with us (Beijing),"" said a statement from Xinhua news agency, China's de facto embassy in Hong Kong.
The Preparatory Committee is an influential panel of members handpicked by China that is overseeing the transfer of sovereignty.
""We hope the Democratic Party...can abide by the Basic Law and rules governing the setting up of the Selection Committee as laid down by the National People's Congress and the Preparatory Committee,"" Xinhua said. The agency was referring to Hong Kong's post-handover constitution, promulgated in 1990.
""At the same time, (this statement) clearly points out that this is the first step towards communication between the Democratic Party and us and the rest of Hong Kong people,"" Xinhua said.
The British colony reverts to China at midnight on June 30, 1997.
China's reply follows a letter from the party in mid-August seeking dialogue with Beijing after China's Foreign Minister Qian Qichen opened the door a crack by suggesting that dissenting views would be permitted on the Selection Committee.
Xinhua on Monday did not mention any time nor venue for talks but Beijing's latest move was seen as positive by the Democratic Party.
""We welcome it,"" vice-chairman Yeung Sum told reporters on Monday.
The Democratic Party's long-standing advocacy of democracy has angered Beijing which has dubbed its leaders as subversives and pointedly excluded it from the Preparatory Committee.
",45
"British Foreign Secretary Malcolm Rifkind met future Hong Kong leader Tung Chee-hwa on Sunday for the first time since Tung was chosen but failed to narrow the gulf between the outgoing and incoming governments.
Tung told reporters after the talks that London had refused to budge from its objections to Chinas plans to install an interim appointed legislature and dilute Hong Kongs civil liberties laws, policies Tung endorses and Hong Kongs pro-democracy lobby vociferously opposes.
Rifkind later lashed out at sceptics who argued Britain was impotent against Chinas plans for Hong Kong after the handover at midnight on June 30, a date now just 19 weeks away.
""We will not only maintain maximum pressure until June 30. Through our involvement (in Hong Kong), we will be able to continue to monitor and make public our opinion on the compliance by the Chinese authorities with the Joint Declaration,"" he told a news conference.
The 1984 Sino-British Joint Declaration binds Britain to restoring Hong Kong to China in mid-1997 and China to maintaining Hong Kongs freedoms and capitalist way of life intact for 50 years.
Tung said he still harboured hopes the British would relent and cooperate with Chinas provisional legislature which will replace an elected chamber returned under the auspices of recent democratic reforms spearheaded by the colonial governor, Chris Patten.
""Britains position has always been clear, but I hope they will reconsider,"" said Tung, a billionaire shipping magnate who was anointed by Beijing in December.
Britain argues that the formation of the provisional legislature, which reverses the Patten reforms, is illegal under the terms of the Joint Declaration.
Rifkinds brief visit, perhaps his last to Hong Kong before the flag comes down on more than 150 years of British colonial rule, was cut short to let him return early to London for a key vote in the British parliament on the ""mad cow"" crisis.
A loss could trigger a vote of no confidence in the ruling Conservative Party, which is lagging in public opinion polls. A British general election must be held no later than May 22.
Hong Kongs South China Morning Post newspaper, miffed that Rifkind was putting domestic concerns ahead of Hong Kongs problems, headlined its Sunday editorial: ""When mad cows matter more than Hong Kong"".
With 135 days to the handover, Hong Kong is awash with conflicting emotions which have pitted the pro-Beijing and pro-democracy camps against each other and sparked acrimonious exchanges and counter-accusations.
Tung last week hit out at the Democracy Party, accusing it of blackening Hong Kongs name overseas by spreading doomsday predictions about the loss of freedoms.
He argued that Hong Kongs economy was buoyant, its people upbeat, and he described Chinas plans as mere technicalities.
""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.
Rifkind said Tung would need to show his independence of mind if he wanted to keep the confidence of Hong Kong people.
""He (Tung) is very emphatic that he is not under any direction from the Chinese government that they have not sought to influence his views or to tell him how to behave,"" Rifkind said of Hong Kongs future leader.
""Wherever his views might differ from those of the Chinese authorities, if they do differ, it would be in his own interest to make that clear, so that his independence is well understood,"" he added.
",45
"China, in a bid to boost the its aerospace industry, this week put on what has been touted as the biggest and costliest airshow it has ever held.
""It has been a dream for years for China's aerospace community to host a grand international airshow,"" Liang Guangda, vice-chairman of the organising committee of Airshow China '96 said on Wednesday.
""(It) will demonstrate the great success of China's reform and opening-up and improve understanding between China and aeronautical communities around the world,"" Liang said.
The six-day airshow at Zhuhai airport in southern Guangdong province, which started on Tuesday, is estimated to have cost China 350 million yuan ($42 million), organisers said.
The show brought together 300 domestic and foreign aircraft and parts producers, including heavyweights like Boeing, Airbus and McDonnell Douglas.
Held over a 53,000 square metre site overlooking the South China Sea, China put on show its premier jet fighter the China F-8II, and the Russian SU-27 fighter jet, of which China is known to have sizeable numbers.
And standing prominently in the large open grounds was China's space rocket, the Long March Number 2.
The event has been a venue for local and foreign aviation companies to sign joint venture agreements.
Collins Avionics & Communications Division, a unit of Rockwell International Corp said on Wednesday that it signed a deal with two Chinese parties Shanghai Avionics Corp and Shanghai Broadcast Equipment Factory to develop a tracking system, normally used in aircraft, for ships and cars.
They would form a new joint venture company Shanghai Rockwell Collins Navigation and Communications Equipment Co Ltd in Pudong, Shanghai, to develop the product.
The device, called a global positioning system (GPS), can be used to track location, read tide changes and fuel consumption.
China, eager to make the airshow a biennial event, has left little to chance. Work started in May this year, beginning with building of two large exhibition halls and thousands have been recruited to put together the show, organisers said. (US$1 = 8.33 yuan)
",45
"British Foreign Secretary Malcolm Rifkind met future Hong Kong leader Tung Chee-hwa on Sunday for the first time since Tung was chosen but failed to narrow the gulf between the territory's outgoing and incoming governments.
Tung, a shipping magnate anointed by Beijing in December, told reporters after the talks that London had not budged in its refusal to aid a provisional legislature that China would install when the British leave later this year.
""On the work of the provisional legislature, I've urged the Hong Kong government to give assistance and help,"" Tung said.
""Britain's position has always been clear, but I hope they will reconsider.""
Britain argues that the formation of the provisional legislature, set up by a China-appointed panel to replace the elected chamber, is illegal under the terms of the 1984 Sino-British handover treaty on Hong Kong.
Hong Kong reverts to China at midnight on June 30.
Rifkind's brief visit, perhaps his last to Hong Kong before the flag comes down on more than 150 years of British colonial rule of the territory, was cut short to let him return early to London for a key vote in Parliament on the ""mad cow"" crisis.
A loss could trigger a vote of no confidence in the ruling Conservative Party, which is lagging in the polls. But Hong Kong's South China Morning Post, miffed that Rifkind was putting domestic concerns ahead of Hong Kong's problems, headlined its Sunday editorial: ""When mad cows matter more than Hong Kong"".
Britain is to hold a general election before May 22, and it is not known who will be at the helm at the time of the handover. But whoever holds the foreign secretary's portfolio in the final days of the countdown can be assured of a bumpy ride.
With 135 days to go until the transition, Hong Kong is awash with conflicting emotions that have pitted the pro-Beijing and pro-democracy camps against each other and sparked acrimonious exchanges.
Tung last week hit out at the Democracy Party, accusing it of blackening Hong Kong's name overseas by spreading doomsday predictions about the loss of freedoms.
He argued that Hong Kong's economy was buoyant, its people upbeat, and described China's plans as mere technicalities.
His comments have hit a raw nerve with the vocal pro-democracy movement in Hong Kong, which argues that a tide of opinion has been rising against what they describe as Tung's increasingly authoritarian policy statements.
""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.""
Another symbol of Hong Kong's British heritage passed into the history books during Rifkind's visit.
The 115-year-old Royal Observatory, given its ""royal"" prefix by King George V in 1912, dropped the royal coat of arms from its emblem. Its new logo has spiralling cloudbanks symbolising typhoons, the fierce storms that periodically pound Hong Kong.
",45
"Emaciated refining margins and soaring demand have forced China to raise domestic prices on gasoil effective Friday, Chinese oil sources said.
Sinopec earlier confirmed the ex-refinery price for diesel, or gasoil, was being raised to 1,990 yuan per tonne from 1,900 yuan.
This is the first time prices have been raised since ceilings on domestic refined product prices were introduced in May 1994 to lock in margins for domestic refiners.  
""If prices are not raised, refineries, especially those along the coast cannot survive,"" a trader with state refiner Sinopec said by telephone.
""Refineries have lobbied for a long time for prices to be raised,"" he said, adding mainland refiners had been reeling from soaring crude bills this year.
Chinese refiners have been holding back importS of crude oil in international markets this year.  
Prompt prices of North Sea Brent, a global benchmark, are currently $24.20 per barrel. Earlier this week they hit a five-year high of $25.06 per barrel -- representing a 57 percent rise in prices from the low of this year of $15.93.
Asian benchmark Tapis crude is currently valued at five-year highs of $26.40 per barrel -- a 35 percent increase on the 1996 low of $19.45.
Chinese refineries have also been afflicted by a 110 yuan increase in domestic crude prices since January to between 864 and 794 yuan per tonne.  
Sources said it was not immediately clear whether prices of other petroleum products would move up in tandem as Beijing had initially been reluctant to approve the diesel increase due to fear of causing an inflationary backlash.
Other Sinopec sources said the move may be intended to encourage domestic production of more gasoil, over higher-valued products such as gasoline.
""Sales of gasoil are very brisk, the moment it's out it's sold, refineries are just not producing enough to satisfy demand,"" a source with the coastal Fujian refinery said.
--Hong Kong Newsroom (852) 28436441
",45
"British Foreign Secretary Malcolm Rifkind on Saturday flies earlier than expected to Hong Kong where he can expect a tough reception on what may be his last visit before it is handed back to China in July.
Legislators in the territory are gearing up to grill Rifkind on Sunday on the fate of Hong Kong's freedoms and human rights laws after the British colony of more than 150 years reverts to Chinese rule at midnight on June 30.
Rifkind, who was in Singapore this week for a meeting of Asia-Europe meeting, is arriving in Britain's last major Asian outpost on a shortened visit before leaving for London for a key parliamentary vote.
A spokesman for the British Foreign Office mission in Hong Kong said Rifkind's timetable in the colony had been moved forward and he was expected to leave on Monday morning.
On Sunday, Rifkind was expected to meet Hong Kong's future leader, Tung Chee-hwa, Governor Chris Patten's team of executive councillors, legislators and other senior officials.
If he had kept to his orginal schedule, Rifkind would have missed an important parliamentary vote on Monday called by the opposition Labour Party over Agriculture Minister Douglas Hogg's handling of the ""mad cow"" disease.
But Rifkind's visit to Hong Kong, although short, will be far from easy.
Just 136 days before the handover, Hong Kong is beset with worries over China's plans to replace its elected chamber on July 1 with a provisional legislature, which was formed last December under close Chinese supervision.
The freewheeling territory of 6.3 million people is also concerned about threats to cut back its civil liberties.
""We want Rifkind to clarify on whether there would be two legislatures operating before July 1,"" said Yeung Sum, deputy head of the Democratic Party, Hong Kong's largest.
""I think he should make a strong statement on it, because...it is the British and Hong Kong government running the place before July 1. If there are two legislatures running at the same time...it will be very confusing,"" Yeung said.
The Democratic Party has threatened to sue the provisional chamber should it try to enact laws or operate on Hong Kong soil before July 1.
Britain has also said the move is illegal under a 1984 Sino-British handover treaty on Hong Kong and has challenged China to let the world court rule on the legality of the body.
A pro-China Hong Kong newspaper on Saturday slammed the idea as ridiculous.
""Rifkind recommends letting the world court arbitrate on the provisional legislature. That is ridiculous and laughable,"" the Wen Hui Pao newspaper said.
It said whatever happened in Hong Kong after July 1 was a matter entirely for China to handle.
",45
"China's state refiner Sinopec is pushing through a series of measures to alleviate diesel shortages that have sparked a bizarre rise in prices in the country since late 1996, Chinese oil sources said this week.
After two successive rises in official diesel prices in the fourth quarter of 1996, Sinopec's Beijing headquarters is now urging its almost 40 refineries to increase the cut of diesel from every barrel of crude they refine.
""Gas oil (diesel) has been in short supply in the country as a whole since the fourth quarter of last year,"" a well-placed Sinopec source said by telephone from Beijing.
""As for Sinopec, we are trying to regulate the production of gas oil as against gasoline to meet market demand,"" he said.
The current gasoline/diesel production ratio stands at 1:1.3 for almost all of China's refineries. But Sinopec in Beijing is pushing for a more suitable ratio of 1:1.4, the source said, adding that the change would take some months to materialise.
Diesel import quotas, which were not fully utilised in 1996 due to high international prices, might also have exacerbated the shortage in the supply chain, and China might be forced to import more this year, the Sinopec source said.
He declined to estimate the amount of diesel likely to be imported this year.
The plan to raise domestic diesel output comes after two officially sanctioned price rises in late 1996 to encourage refiners to produce more diesel, Chinese oil sources said.
Domestic diesel prices had been frozen at 1,900 yuan per tonne since May 1994, when Beijing imposed strict price ceilings to crack down on profiteering. Prices were raised to 1,990 yuan per tonne in October 1996 and 2,190 yuan per tonne in December.
While Beijing, fearful of inflation, keeps a watch on prices, Chinese oil sources admit there is little central authorities can do to prevent flagrant price spikes in far-flung provinces hit by shortages.
""In situations of shortage, provinces can raise prices, it is difficult for Beijing to control,"" the Sinopec source said.
However, some Chinese sources said earlier this week that shortages might only be isolated to some inland provinces as some coastal regions were still enjoying high inventories.
""Storage levels are healthy in some areas,"" said a Singapore-based trader with Chinese state oil trader Sinochem.
Storage terminals at some coastal regions were at full capacity after importers sucked in a massive 1.9 million tonnes that started arriving from mid-January, a Sinopec source in Singapore said.
""Central authorities were afraid there wouldn't be enough for spring and even refiners were urged to crank up their gas oil production,"" he said.
Authorities might have frozen import quotas for now -- until the bottleneck clears -- but it was likely to be short term because China was short of diesel for this year, he added.
A Chinese oil trader from the southern Maoming refinery, China's second largest, said diesel prices had hit as high as 5,000 yuan per tonne in some provinces suffering shortages.
""Prices were between 4,000 and even 5,000 yuan in December in places like Hunan and Sichuan,"" the trader said by telephone earlier this week. Refineries raised prices because their net costs had increased.
Chinese refiners have had sharply reduced profit margins since Beijing raised domestic crude prices by about 110 yuan in January 1996 to between 864 and 794 yuan a tonne on 80 percent of its crude sold within the country.
Fearful of an inflationary backlash, Beijing had, until October, kept prices of all oil products unchanged. Sinopec, which made exceptional profits in 1995 and 1994, bore the brunt of the rise in crude prices.
""Refining margins last year, compared with the earlier two years, were very bad. A lot of our profit went to our upstream companies,"" the Sinopec source said.
-- Hong Kong Newsroom (852) 28436934
",45
"Taiwan's call for a ""Greater China"" joint-venture bank on Wednesday was greeted with caution in Hong Kong, where analysts and businessmen said more details were needed to convince the industry of its feasibility.
""It's a good idea. There's certainly a good deal of cross-border trade through Hong Kong,"" said Carmel Wellso, regional banking analyst with ING-Barings.
""But most large corporations would probably have established relationships with existing banks,"" he added. ""What value is this new company going to have?""
A leading Taiwan business leader said on Wednesday in Taipei that Taiwan, China and Hong Kong business heavyweights were considering forming a joint-venture bank in Hong Kong to promote commercial links across the Taiwan Strait.
""We have proposed the idea to our Hong Kong and mainland Chinese counterparts to jointly set up a bank in Hong Kong,"" Hsu Sheng-fa, chairman of Taiwan's Chinese Chamber of Commerce and Industry, was quoted by an aide as saying.
While most people in Hong Kong contacted by Reuters acknowledged the political significance behind the idea, they said business and profit were what mattered.  
""This idea is very grandiose...but in business, the priority is making money because we have to put in investments,"" said a Hong Kong-based businessmen with strong links to Taiwan.
""Mainland Chinese banks have many restrictions, what will this bank deal in?""
Taiwan's Hsu made the proposal in a meeting with visiting business delegations from Hong Kong and the communist mainland, Taiwan's arch-rival since a civil war split them in 1949.
The Hong Kong and China entrepreneurs were in Taipei for an unofficial economic forum, the first large-scale cross-strait contact since the Taiwan government's November announcement of a freeze on cooperative initiatives with China.
Taiwan has banned direct contact -- including banking communications -- with China since the civil war. Contacts must be conducted through a third region, usually Hong Kong.
Despite the ban and a 17-month-old deadlock in unofficial Taiwan-China talks, some 30,000 Taiwan-funded businesses have poured more than US$20 billion into investments in China since relations began to thaw in the late 1980s.
Hong Kong, a British colony for more than 150 years, will revert to Chinese control at midnight next June 30.
-- Hong Kong Newsroom (852) 2843 6441
",45
"Canadian nickel giant Falconbridge Ltd has a growing appetite for expansion and is poised for growth through acquisition and exploration, the company's new chief executive officer said in an interview.
""The appetite of this company is much higher than what it used to be,"" Oyvind Hushovd told Reuters on Wednesday. ""Falconbridge is in very good shape financially today, which means that we have the ability to grow.""
Hushovd, 46, replaced Frank Pickard as chief executive this month after Pickard died suddenly at the age of 63 during a business trip in Chile this September.
Hushovd, originally from Norway, has worked for Falconbridge for more than 22 years.
He spent the past year and a half working closely with Pickard in the position of executive vice-president and was chairman of the steering committee that put together a strategic plan to carry Falconbridge into the next century.
""I don't see a need to revolutionize Falconbridge,"" he said. ""The backbone of Falconbridge is nickel, and copper is another leg of Falconbridge. It will probably be like that in the future.""
However, Hushovd is not content simply to sit back and let the long-term strategic plan unfold.
The plan calls for Falconbridge to double its annual nickel production to 200,000 tonnes and triple its copper production to about 500,000 tonnes a year, within 15 years.
To do that, Falconbridge needs to find growth opportunities, especially since the company lost a bid to take over the huge Voisey's Bay nickel, copper and cobalt deposit in remote Labrador, said Hushovd.
Ongoing work in New Caledonia, Ivory Coast and Zambia should complement plans to start producing nickel by the end of next year at the Raglan project in Quebec and plans to produce copper by 1998 at the Collahuasi joint venture project in Chile, Hushovd said.
In Zambia, Falconbridge joined a consortium in November to develop the Konkola Deep copper mine, in which Falconbridge is partners with South Africa's Gencor Ltd and Anglo American Corp of South Africa Ltd.
In New Caledonia in the South Pacific, Falconbridge is poised to gain access to nickel reserves to supply a nickel plant planned in the north of the country. The board of France's Eramet on Thursday said it had agreed to reallocate its mining reserves in New Caledonia, which would give Falconbridge access to Eramet's Koniambo field.
Hushovd does not intend not stop there.
""Falconbridge has always been very strong in exploration,"" he said. ""We felt we lacked the business development infrastructure.""
So last summer, the company set up a business development group, to search out growth opportunities either through exploration or acquisition.
While Hushovd would not hint at specific acquisition targets, he stressed, ""I want properties that are not only profitable today but are also profitable in the future.""
In any future acquisitions, Falconbridge can probably count on support from its powerful majority shareholder, Noranda Inc, which owns 46 percent.
""We have a big owner, which means that hopefully we can pursue things that might be tough to pursue on our own,"" Hushovd said. ""We can have a bigger appetite than the company on its own would have.""
Hushovd said he had no immediate plans to boost the company's share price, which peaked at C$32.75 in May but is currently trading around C$29.15.
He noted that the stock normally reflects the nickel price, which has failed to meet expectations in 1996.
""I think we all had very high hopes for nickel this year, and the market did not turn out the way that we had forecasted,"" he said.
As for next year, ""I feel it's difficult to give a prediction at the present time. Fundamentally I do believe we're going to see better prices in 97 than we did in 96,"" Hushovd said.
((Reuters Toronto Bureau 416 941-8100))
",12
"Everything old is new again in the ageing gold zone near Timmins in northern Ontario.
Exploration has exploded in the area, which has been mined since the early 1900s.
While most Canadian exploration companies are off making inroads in South America and Asia, a handful of innovative and optimistic junior companies are staying behind, hoping to strike gold on their home turf.
Established producers in the area, 438 miles (700 km) north of Toronto, are expanding and sinking millions of dollars into new exploration.
""We've had lots of speculative money coming in. It's got a lot of people interested,"" said Lorne Luhta, geologist for the Ontario Ministry of Northern Development and Mines. What better place to look but around Timmins, where there's been a history of gold.""
Junior explorer Band-Ore Resources Inc. has attracted the most attention, after hitting mineralisation last February just outside the traditional mining camp.
""We kind of went against the trend,"" said Bruce Durham, vice president of Band-Ore. As everyone else was going off to Chile and Mexico and Africa and Asia, we sat here in Timmins and put together a large land position.""
Band-Ore's find inspired other exploration companies to set up in the area and a couple of them have drilled some ""interesting"" holes, said mining analyst Barry Allan with Gordon Capital.
Major companies with established mines in the area have also been exploring and expanding.
Royal Oak Mines Inc. said this autumn it discovered more gold on its Timmins and nearby Matachewan holdings and decided to expand production. It is now reshaping operations to put Timmins at the centre of its production.
Echo Bay Mines Ltd. is considering an open pit mine at nearby Night Hawk Lake and Kinross Gold Corp. has been steadily increasing its reserves at its Hoyle Pond Mine and it has set up a separate exploration company to search out more prospects in the area.
Gold giant Placer Dome Inc. is turning its old underground deposit into a huge, low-cost, low-grade open-pit.
""One of the things that's rejuvenating the area is Placer Dome looking at their operation as a large, low-grade open pit as opposed to an underground operation,"" said Band-Ore's Durham.
A new emphasis on large, low-grade deposits has changed the way Placer Dome approaches mining in the area, confirmed Paul Burchell, senior geologist for Placer Dome in Timmins. ""Our ideas have changed, and certainly the economics have changed for us.""
The major producers have created an intricate infrastructure in the Timmins area that makes it attractive for exploration companies, said Durham. ""We've got roads, workforce, cheap power and reliable workers. It can really help to keep the cost down.""
But new technology has been the biggest boost for exploration in Timmins. Most of the old discoveries in the area were found where mineralised rock lies near the ground surface, said Burchell.
The areas being explored are covered with a thick layer of sand, gravel and clay. ""It acts as a very effective mask. The gold has no signature,"" said Burchell.
With new exploration equipment, junior mining companies -- their pockets lined with the riches of the ongoing boom in exploration stocks -- can find fresh drilling targets.
But exploration in the area is expensive. And it takes more than money and persistence drilling to hit gold.
Band-Ore disregarded the traditional beliefs about geology in the area and explored in new directions.
""We kind of went contrary to that, reinterpreted some geophysical data and some of the old work done in the area, and came up with some new ideas,"" said Durham.
""It's one of those ideas that paid off.""
",12
"Weak metals prices will undermine third-quarter earnings for many North American metals producers, analysts surveyed by Reuters said.
""In most cases, we'll see they're going to be down, either year over year or quarter over quarter,"" said Manford Mallory, analyst for Research Capital. ""Metal prices are down a long way and volumes in some cases are down too. The conditions are not as good as they were a year ago.""
Copper is in the doldrums after having fallen sharply since mid-June, while nickel and aluminum have slid steadily.  
Gold has been anemic, hovering around US$380 an ounce.
""It's not going to be a buoyant trend,"" Mallory said. ""Most of them are going to be reporting profits, but there will be a few losses as well.""
Earnings in the mining sector were disappointing in the first quarter and dropped off in the second quarter when the copper scandal at Japan's Sumitomo Corp sent base metals downward.
The third quarter will be even worse, said base metals analyst David Davidson with Wood Gundy. He estimated earnings would be 10 to 15 percent lower than in the second quarter.  
""The more leverage you have to copper, the bigger the loss,"" he said in a phone interview.
Phelps Dodge Corp led the way on Thursday when it reported third-quarter net income of US$80.2 million or US$1.22 a share, compared to US$211.8 million or US$3.03 a share a year earlier.
Most large gold companies hedge part of their production, curbing their exposure to the low gold prices of the third quarter this year, said Davidson.
""But those who haven't much in the way of hedging are certainly suffering in the market,"" said Mallory.  
Investors should keep their eyes on Inco Ltd, said Davidson, who predicted ""the earnings are not going to be great.""
""You're going to have the impact of diluted earnings with the Diamond Fields Resources purchase,"" he said. Inco, the western world's largest nickel producer, completed the C$4.3 billion takeover of Diamond Fields Resources Ltd in August.
The takeover, along with a 10-day lockout at its Thompson, Manitoba facility and a smelter out of commission in Indonesia, will hurt earnings.
",12
"The world's gold producers will likely pay dearly for the steep fall in the bullion price and the deep uncertainty overhanging the gold market.
If the bullion price weakness continues or worsens, gold miners face lower profits, money-losing operations, closed mines, slashed exploration budgets and plunging share prices.
Analysts predict smaller companies will be increasingly vulnerable to takeovers as industry conditions get rougher.
""Earnings are going to be terrible,"" said gold analyst Michael Fowler at Levesque Beaubien Geoffrion in Toronto. ""There have already been some mines that have shut and there could be a few more. And consolidation is likely to continue.""
Gold, which was fixed at $358.55 an ounce in London on Friday, has lost more than $13 since the start of the new year, and few analysts believe the decline is finished.
The low price has already taken its toll on Canadian gold stocks, knocking the Toronto Stock Exchange's heavily weighted gold index down more than nine percent since Dec. 30.
At least two companies have announced shutdowns of marginal mines recently. Toronto-based TVX Gold Inc. said earlier this week it would close its Casa Berardi gold mine in Quebec. In December, Vancouver-based Placer Dome Inc. said it would sell two small mines in Quebec and stop work at its high-cost Paymaster mine in Northern Ontario.
""That can certainly happen again,"" said Jim Taylor, mining analyst with Yorkton Securities in London. ""The high-cost producers are certainly vulnerable.""
The effect will begin to show in fourth-quarter earnings, and earnings in the first quarter of 1997 will certainly reflect the low bullion price, according to analysts.
If Merrill Lynch's predictions of an average 1997 gold price of between $370 and $375 an ounce hold true, it could spell earnings trouble for many producers.
Merrill Lynch analyst David Christensen predicted that U.S. gold firm Homestake Mining Co.'s earnings for the year would drop to about 13 cents a share if gold averaged $370. Homestake would earn 22 cents a share at a gold price of $385.
Companies that do not hedge their gold sales -- such as Homestake, Echo Bay Mines Ltd., Battle Mountain Gold Co. and Agnico Eagle Mines Ltd. -- were especially vulnerable, Christensen said. Other analysts mentioned Royal Oak Mines Inc. and Pegasus Gold Inc. as prime victims of a lower price.
""A surprisingly large number of these companies are marginal -- companies that you wouldn't traditionally think of being marginal producers,"" he said.
Companies that rely on the spot price of gold ""are fully exposed to a decline in the gold price,"" Christensen noted. ""They're all either spot sellers or don't have significant forward selling. They'll all be negatively affected in terms of earnings and cash flow.""
One exception was U.S.-based Newmont Mining Corp., which would likely see earnings rise in 1997 because of projects ready to start this year, he added. His projection did not take into account the potential acquisition of Santa Fe Pacific Gold Corp..
Even companies with solid hedging programs, such as Canada-based Barrick Gold Corp., will likely find their share prices hit along with the gold price.
""This is a sentiment swing,"" said gold analyst Manford Mallory with Research Capital in Toronto. Investors do not usually differentiate between hedgers and non-hedgers when the gold price starts to drop, he added.
Although some analysts believe a few more marginal projects could bite the dust if the gold price stays low, most say the production effects of lower gold prices will become apparent in decisions to delay development.
""Most of these companies will continue to produce as long as they are cash flow positive as opposed to earnings positive,"" said Christensen.
But as earnings start to drop, one of the first casualties will likely be exploration budgets. While some 1997 exploration commitments have been made, high-cost companies could find themselves slashing any flexible plans in order to cut their losses.
Exploration companies will become more vulnerable to takeover moves from larger companies with strong cash flow, analysts said. As the low price of gold discourages investors, junior companies will find it more difficult to raise money for exploration programs.
""The capital is drying up,"" said analyst Daniel McConvey of Lehman Brothers in New York.
The smaller companies may well see their share prices drop, making it cheaper for companies laden with cash to swallow them.
Toronto-based Kinross Gold Corp. a mid-tier producer, said it plans to take advantage of the sector weakness to expand.
""I would classify us as a predator,"" Kinross spokesman Gord McReary said in an interview. ""We think we're in a very privileged position. We're in the kind of strange situation where maybe some of the bad news for the sector can be good news for us,"" he said.
Gold equities in Australia may also be knocked down by lower gold prices, said analyst Taylor. But since many Australian companies hedge their sales, earnings will not be hurt as much as among some companies in North America.
In South Africa, however, analysts expect first-quarter earnings to be trampled by low gold prices.
In Mexico, mining giants Industrias Penoles and Grupo Mexico will probably not alter their expansion plans for polymetallic mines with high gold contents but will see slightly differing bottom-line impacts.
",12
"Canada's Bre-X Minerals Ltd could face a multi-billion-dollar lawsuit over the ownership of its spectacular Busang gold deposit in Indonesia.
The young Calgary-based company said Friday that one of its Indonesian partners, PT Krueng Gasui, threatened it and 19 others with legal action in Canadian courts, claiming damages of US$1.9 billion.
""I find it curious that PT Krueng Gasui has chosen to threaten a lawsuit in Canada relating to matters that allegedly occurred in Indonesia,"" Bre-X chief executive David Walsh said in a statement. ""However, we will sit down with them and listen to what they have to say.""
Krueng Gasui owns an undisputed 10 percent of one section of the Busang discovery. It claims it owns up to 40 percent of the entire deposit, but Bre-X says the Indonesian company does not have the documentation to back up its claims.
Bre-X, which closed down C$1 at 20.90 in heavy trading on the Toronto Stock Exchange, said Friday it had received a letter from its Indonesian partner demanding a meeting before November 22 to resolve the dispute. If Bre-X refuses or does not make an attempt to settle the argument, Krueng Gasui will sue, the letter said.
Bre-X said it has asked its lawyers to arrange a meeting.
""In my opinion, this (threat of a lawsuit) appears to be a last minute act of desperation,"" said gold analyst Chad Williams of Research Capital Corp.
""My question is, why have they waited so long? And why did they choose to do this in Canada?""
The dispute between Bre-X and Krueng Gasui, who is backed by Australia's Golden Valley Mines NL, became public at the beginning of October.
The argument prompted the Indonesian government to delay issuing vital contracts of work until the two parties worked out their difficulties. Without the contracts, Bre-X cannot proceed with work on Busang and has had to stall its search for a major gold producer to operate or buy the discovery, analysts say.
""The key is how the Indonesian government will react"" to the lawsuit, said Williams.
The threat of a lawsuit gives Bre-X a strong incentive to settle with Krueng Gasui and Indonesian businessman Jusuf Merukh, who controls Krueng Gasui, said gold analyst Catherine Gignac of Deacon Capital.
While most analysts said it was too early to tell whether the Indonesian case would stand up in Canadian court, they said the threat of a lawsuit will definitely force Bre-X to treat the claims more seriously.
""It reinforces the uncertainty with respect to Bre-X,"" said gold analyst John Ing of Maison Placements. ""My sense is this thing is not going away. This is more of a manoeuvring than an actual threat, but it does not look like this will end any time soon.""
Krueng Gasui said in its letter that it will also sue the other Indonesian partners of Bre-X, some Bre-X officers and Canada's Minorca Resources Inc., which has a small stake in the discovery.
Minorca president Roland Horst said his company has no reason to be involved.
Exploration at Busang has outlined 47 million ounces of gold so far, and some analysts predict there could be up to 100 million ounces.
",12
"No final deal was in sight Wednesday for Bre-X Minerals Ltd. and Barrick Gold Corp., which are in the midst of forging a deal on one of the world's biggest gold deposits -- Indonesia's Busang.
As a Wednesday deadline slid by, Bre-X and Barrick said they were still trying to hammer out several issues, leaving the market to speculate about the status of negotiations.
A few issues remain to be solved, and Bre-X will have more news on the negotiations ""shortly,"" Chief Executive David Walsh said in an interview from New York.
He said the main issues that stand in the way of a full agreement with Barrick are ""regulatory"" but maintained he was prevented by a confidentiality agreement to give details.
""We need certain additional comfort in any agreement that would satisfy the regulatory authorities and our shareholders,"" he said.
The Indonesian government directed Bre-X to form a joint venture with Barrick by Dec. 4, with Barrick getting 75 percent of Bre-X's stake in the rich gold discovery and Bre-X keeping 25 percent. The companies were invited to consider giving the Indonesian government 10 percent of the rich find.
As the clocked ticked, Bre-X issued a statement saying no new deadline had been set by the Indonesian Mines Ministry. It said it expected the Ministry of Mines to clarify its stand on the outstanding issues ""in due course.""
The direction of negotiations is in the hands of the Indonesian government, Walsh said.
""We are waiting on the answers we get from the Minister of Mines,"" he said.
Sources close to the talks said Indonesian mining officials had left Jakarta and would not be back until Dec. 9.
""I think both sides are probably worried about the so-called deadline, which has come and gone,"" said gold analyst John Ing with Maison Placements Canada Inc. ""It's back in the lap of the Indonesians.""
In Jakarta, a senior Indonesian mines official said the government of President Suharto would explore other possibilities to develop Busang if the two companies fail to clinch a deal.
""If they cannot reach an agreement, the government will take the necessary and appropriate action ... to expedite the development of Busang's resouces,"" Umar Said, secretary-general of the Mines Department, told a news conference in Jakarta.
""What the action will be ... I have to get back to the government. This is not my playground,"" he added.
Meanwhile, investors pushed up Bre-X's stock C$1.30 to close at C$20.10 ($14.84) in heavy trading in Toronto Wednesday, while Barrick rose C$1.45 to C$39.30 ($29.01).
""People think there's an agreement that will come out sooner rather than later,"" said gold analyst Catherine Gignac of Deacon Capital in Toronto.
But she noted that the uncertainty surrounding the negotiations was preventing Bre-X's stock from rising to meet the level of rumoured offers of about C$25 ($18.50) a share from Barrick.
""We're actually hearing that (the deal) is done and they're just dotting the i's and crossing the t's,"" Gignac said. ""Everything has been set. We just don't know the details.""
But a source close to the negotiations said he understood that the two companies did not have a deal and were trying to get a deadline extension from the Indonesian government.
The latest deadline is the second the two companies missed. They let a deadline at the end of November slip by too, sources said.
Possible stumbling blocks in the talks include price, how to pay for the deal and a series of threatened lawsuits over Bre-X's claims, analysts said.
Waiting to pounce on the deposit if the Indonesian government does open the door to outside bidding is another North American gold giant -- Placer Dome Inc., which seemed to be positioning itself in case the Barrick, Bre-X talks fail.
""I don't think today's deadline had any great significance,"" Placer spokesman Hugh Leggatt said in Vancouver, British Columbia. He added that the company still hoped to be allowed to form a partnership with Bre-X to develop Busang.
""We're not discouraged. It's going to be a long process,"" he said.
Newmont Mining Corp. and Teck Corp. also expressed an interest in Busang, which is located deep in the jungle in East Kalimantan on the island of Borneo.
",12
"A chill swept through the Canadian village of Nain this month when a small plane carrying two mineral explorers disappeared in a snow squall.
Prospectors passing through the town near the huge Voisey's Bay nickel deposit, believed to be one of the largest in the world, spoke quietly about the missing men from Vancouver-based Castle Rock Exploration Corp., speculating about what happened, imagining themselves in their position.
""I fly a lot over this area, and you just never know,"" said Capt. Luc Plourde at the military base in Goose Bay, Labrador. ""It's a rugged terrain. You can't imagine what it's like to survive out there.""
Two hundred exploration companies are active in Labrador, staking more than 250,000 claims in the past two years and investing about C$85 million ($62.9 million U.S.) so far this year. About 184,000 diamond drill holes have been plunged into the dome-shaped hills that dot the sparse landscape, and only one site, Voisey's Bay, has revealed anything significant.
The nickel, copper and cobalt deposits at Voisey's Bay are among the biggest base metals discoveries ever. The world-class finds boosted stock in Vancouver-based Diamond Fields Resources Inc. from pennies to more than C$42 ($31) before the company was taken over by Toronto-based nickel giant Inco Ltd.
Exploration companies and investors from all over Canada want their own Cinderella story. The discomforts at most camps are tempered by hot running water, radio, videos, laundry facilities and good, hearty food, but stories of people being blown off cliffs, tents torn by the wind, and bad exploration luck persist.
""The feeling is another Voisey's Bay will be found, but at great depth,"" said geologist Kevin Brewer, who heads an exploration management service and works with several companies in the area.
The Voisey's Bay deposit was discovered in late 1993 by a pair of explorers who initially set out to look for diamonds. As the story goes, they spotted a rusty outcrop of mineralised rock, tested it and hit the jackpot.
No one else has been that lucky, noted Brewer.
""When you fly over the country, you see hundreds of really large rusty zones,"" he said in an interview in St John's, Newfoundland. ""You see similar brilliant rusty hills, oxidised rocks that look tremendous. But there's nothing in them.""
Many of the mining companies are giving up, but a few have made long-term financial commitments to continue drilling.
""It's really hard for a junior mining company now,"" observed Brewer. ""You have to have more than a really good showing on the surface. People want drill results.""
But David Barbour, in charge of exploration for Vancouver-based NDT Ventures Ltd., is still optimistic.
""There's lots of mineralisation kicking around out there,"" he said in an interview in the warm and spacious kitchen tent at one of NDT's snowy sites near Nain.
""The biggest setback to actually finding something is there's not much known about the geology of the area. There's so much land that hasn't been touched,"" said Wayne Jenkins, a Nain-based expediter for exploration companies.
The millions of dollars and influx of people in this forgotten patch of Canada have changed the isolated region permanently.
Residents of Nain and Goose Bay, about 250 miles (400 km) away, have started investing in junior mining stocks. Housing starts and new businesses in Goose Bay are booming.
In Nain, rents have soared. Expansion of the village is impossible because of a border of huge cliffs and hills as well as a shortage of municipal money for water, sewerage and electricity. What little space is available can command thousands of dollars a month in rent.
Helicopters and aircraft fly into Nain in a constant stream. Some new businesses have appeared along Nain's pot-holed, muddy streets.
The noise and activity have offended many of the Inuit, or Eskimos, who live in Nain. ""There is the mindset that when you come to Labrador, you can do anything you want,"" said William Barbour, president of the Labrador Inuit Association, which acts as a regional government.
The Inuit have been trying to negotiate a land claim with the provincial government for 19 years, but mining companies seem to get permission to lay claims as a matter of course, he complained.
""It seems like the mining companies come first, not the community,"" added Fran Williams, who heads a local aboriginal radio station.
The Labrador Inuit Association has started issuing report cards to exploration companies as a reminder that they are under close scrutiny.
",12
"The world potash market is churning, and Canada's huge Potash Corp of Saskatchewan Inc is in the middle of the upheaval.
Since Potash Corp, the world's biggest potash producer, said last week it had entered into talks to buy a controlling stake in a major European potash firm, its stock has zigzagged as the market comes to terms with a quickly changing picture of the potash world.  
""You're getting into an interesting part of the fertilizer world, and I don't know what will happen,"" said James Searls, a potash analyst for the U.S. Geological Survey in Virginia.
""It's going to be really curious.""
Potash Corp wants to acquire a 51 percent interest in Kali und Salz AG from German chemical conglomerate BASF AG. If it succeeds, Potash Corp would control 25 percent of Germany's four-million-tonne-per-year potash market.
The deal would boost the Saskatchewan company's share of world production capacity to about 50 percent from 35 percent, analysts have said.  
But there is another player waiting in the wings, promising to make Potash Corp's consolidation plans more intriguing.
Asia Pacific Resources Ltd of Vancouver has made an important potash discovery in Thailand. The company says exploration so far has shown at least one mine is economical.
""We believe we've got the potential for than one,"" Asia Pacific president Gerry Wright said in an interview. ""It may be two, it may be three or whatever.""  
Wright believes the property will be producing about two million tonnes of potash by the turn of the century and between four and six million tonnes by 2005 -- a sizable chunk of the world's current production of about 40 million tonnes last year.
While Asia Pacific plans to take develop the mines itself, it has signed confidentiality agreements with eight companies in the hopes of finding a partner, said Wright.
Potash Corp is not among them, he said.  
He hopes three of the eight will sign non-binding agreements with Asia Pacific by October and one will emerge as a partner by the first quarter of 1997.
The attraction of Asia Pacific's find is its location, said analyst Sam Kanes with ScotiaMcLeod in Toronto.
""These mines appear to have twice the margin per tonne that Saskatchewan Potash gets, because it's so close to the market that imports all of it,"" Kanes said.
China and the Pacific Rim are growing potash consumers, he said, and the Thai deposits are convenient.  
But Wright has no plans to take on Potash Corp for its market share.
""We have no interest in getting into a tussel with existing suppliers to that region,"" he said.
The growing market will be big enough for everyone, he said.
But market growth depends on healthy economic growth in Asia, said Michel Prud'homme, senior minerals analyst for federal department Natural Resources Canada.
In 1995, the type of potash produced by Potash Corp had a surplus supply capacity of about 7.5 million tonnes, he said.  
""Any new major project would be jeopardizing current supply arrangements.""
The recent developments have the stock market in a tizzy. Potash Corp shares soared on news of its negotiations in Germany, but it has been a volatile ride for the stock since then.
The stock dropped off Wednesday after a U.S. brokerage downgraded it from a buy to an outperform. But it was up C$2.50 to C$104 on Thursday, due to hedge buying by fertilizer distributors trying to sidestep an expected potash price increase, analysts said.  
""It will remain volatile until this deal with Germany is settled and until APQ is settled,"" said Kanes.
Asia Pacific lost C$0.10, falling to C$10.15, but the stock has been climbing steadily on news from Thailand.
-- Reuters Toronto Bureau 416 941-8100
",12
"Investors were on edge on Wednesday, anxiously awaiting the outcome of talks between Canada's Bre-X Minerals Ltd. and Barrick Gold Corp. aimed at forging a deal on Indonesia's huge Busang gold deposit.
As a Dec. 4 deadline slid by, Bre-X and Barrick said they were still trying to work out several issues, leaving the market to speculate about the status of negotiations.
""Several points remain outstanding,"" Barrick spokesman Vince Borg said. ""An overall deal has not been reached.""
The Indonesian government directed Bre-X to form a joint venture with Barrick by Dec. 4, with Barrick getting 75 percent of Bre-X's stake in the rich gold discovery and Bre-X keeping 25 percent. The companies were asked to consider giving the Indonesian government 10 percent in the rich find.
As the clocked ticked, Bre-X issued a statement saying no new deadline had been set by the Indonesian Mines Ministry.
In Jakarta, a senior Indonesian mines official said the government of President Suharto would explore other possibilities to develop Busang if the two companies fail to clinch a deal.
""If they cannot reach an agreement, the government will take the necessary and appropriate action ... to expedite the development of Busang's resouces,"" Umar Said, secretary-general of the Mines Department, told a news conference in Jakarta.
""What the action will be ... I have to get back to the government. This is not my playground,"" he added.
Meanwhile, investors pushed up Bre-X's stock by C$1.40 to C$20.10 ($14.90) in heavy trading in Toronto Wednesday, while Barrick rose C$1.10 to C$38.95 ($28.85).
""People think there's an agreement that will come out sooner rather than later,"" said gold analyst Catherine Gignac of Deacon Capital in Toronto.
But she noted that the uncertainty surrounding the negotiations was preventing Bre-X's stock from rising to meet the level of rumoured offers of C$25 ($18.50) a share from Barrick.
""We're actually hearing that (the deal) is done and they're just dotting the i's and crossing the t's,"" Gignac said. ""Everything has been set. We just don't know the details.""
But a source close to the negotiations said he understood that the two companies did not have a deal and were trying to get a deadline extension from the Indonesian government.
The latest deadline, if passed, would be the second the two companies missed. They let a deadline at the end of November slip by too, sources said.
Possible stumbling blocks in the talks include price, how to pay for the deal and a series of threatened lawsuits over Bre-X's claims, analysts said.
Waiting to pounce on the deposit if the Indonesian government does open the door to outside bidding is another North American gold giant -- Placer Dome Inc., which seemed to be positioning itself in case the Barrick, Bre-X talks fail.
""I don't think today's deadline had any great significance,"" Placer spokesman Hugh Leggatt said in Vancouver, British Columbia. He added that the company still hoped to be allowed to partner with Bre-X to develop Busang.
""We're not discouraged. It's going to be a long process,"" he said.
Newmont Mining Corp. and Teck Corp. also expressed an interest in Busang, which is located deep in the jungle in East Kalimantan on the island of Borneo.
",12
"Before the huge nickel, copper and cobalt deposits at Voisey's Bay were discovered two years ago, the mainly aboriginal population of Nain did not know much about mining.
But as hundreds of prospectors flooded their snug coastal village in the northern Canadian province of Labrador, the inhabitants figured they had better learn fast.
""It fell on us like a ton of bricks in 1994,"" said William Barbour, president of the Labrador Inuit Association, which represents the Inuit -- or Eskimos -- who populate the frozen territory, which is on the Canadian mainland but is part of the Atlantic province of Newfoundland.
""There was panic. We felt completely ignored. So we educated ourselves in terms of the mining industry,"" Barbour told Reuters.
Now, even people with little education can keep up a steady conversation about massive sulphides and tailing ponds.
But that does not mean everybody sees things the same way as Inco Ltd, the Toronto-based nickel giant that owns the deposit. The tight-knit community of 1,200 is split over whether mining will help their remote town.
Adam Igloliorte, a 32-year-old Inuit from Nain, sees development as a chance for a good job. He has worked his way up to general labourer from janitor at the Voisey's Bay site.
Steady work and decent pay are hard to come by in the poor and troubled northern coast of Labrador, especially if, like Igloliorte, you only have six years of schooling.
""I got suspended (from school) and never went back,"" he said. Now he wants to upgrade his skills to land a permanent job with Inco once it takes over management of operations in January. ""That would be excellent.""
Igloliorte has improved his standard of living, is able to support his girlfriend and his one-year-old son and buy spare parts for his snowmobile.
He said he trusts Inco to be responsible as it develops the huge metals deposit that sits hidden underneath the moss which caribou graze on.
COMMUNITY FEARS OF WHAT MINING WILL BRING
Others are not as optimistic. They fear mining in the area will bring disease and drugs, destroy their aboriginal culture, eradicate their language, corrupt their daughters and upset the delicate balance of the vital ecosystem.
""Everybody sees some economic benefit. All the talk has been jobs,"" said Fran Williams, the director of an aboriginal radio station and local activist. ""But there's still no focus on what the impact is on culture and tradition.""
The effects are already starting to show in Nain, a town accessible only by plane, boat or snowmobile.
The community has struggled since the 1970s, when fish, the main resource, became scarce. Residents have experimented with a fish plant, commercialised caribou hunting and a nearby quarry, but so far nothing has overcome the dependence on government assistance or solved the alcohol and drug abuse, violence and suicide that so often stem from isolation and hardship in the region.
Williams feels mining and exploration are pulling her community further from a solution. Young men have been leaving to work in exploration camps, while women and the older generation stay behind to care for the huge number of children.
The men are too busy to hunt for the winter's supply of caribou, forcing their families to shop for the tasteless, outdated and costly canned food at the Nain grocery store.
""It's already having an impact on women,"" said Williams. ""They are the ones with the least to gain and the most to lose. This activity will be a big disruption of family life.""
The older people complain about the constant drone of airplanes and helicopters overhead.
Many of those earning large salaries at Voisey's Bay and other exploration camps have not learned how to handle the money. ""We're not wage earners,"" said Williams. ""We get it, we spend it.""
While social services and courses may resolve some of the problems, the long-term effects of mining could be devastating.
""Drug abuse is already on the rise,"" said Williams, adding that she expects an increase in unwanted pregnancies, sexually transmitted diseases and violence as strangers bring their bad habits to town.
""It's incredible how all of Labrador has all of a sudden become dots of mining claims,"" she said. ""You no longer feel like you're an inhabitant of your own land.""
One 25-year-old from Nain who has worked at the Voisey's Bay site for about two years, is in an ideal position to gain from the development.
The man, who preferred not to be named, said he was kicked out of school, fathered two children when he was in his teens and has a criminal record for a string of alcohol-related assaults.
He was glad to get a position at Voisey's Bay after years of drifting between odd jobs. But he has no plans to make a career of it.
He does not trust Inco to treat him properly or respect the land, he said. And he resents the tight controls of managers, who ban liquor and keep close tabs on the workers.
He said he has seen an influx of drugs on the site, and he has become part of a chain of people who smuggle alcohol into Voisey's Bay for the workers.
Nain's transition to a mining town from a troubled, dependent community is bound to be bumpy, noted John Igloliorte, an elected elder and Adam's father. But he feels the results will be positive for his people.
""In the community, a lot of young people had nothing to do,"" he said in his native Inuktitut. ""They were doing mischief, break and enters. That seems to have stopped a bit now that they have jobs.""
Igloliorte and the other elders were opposed to exploration and development when it started, but most have changed their minds as they become better informed, he said.
""The companies are doing a good job. They're looking after the land and the environment,"" he said. ""If they keep doing that, everything will be all right.""
",12
"Canada's gold giant Placer Dome Inc said it is poised to become a more powerful player in the Asia-Pacific region with its late Wednesday US$600 million takeover bid for Highlands Gold Ltd and the rest of its subsidiary, Placer Pacific Ltd.
A takeover of Papua New Guinea's Highlands would make Placer the main company involved in the rich Porgera gold deposit in that country,  Placer Dome spokesman Hugh Leggatt said in an interview from Vancouver.
""We think exploration at Porgera will be very prospective in the future,"" he said.
""It simplifies our structure and we believe it gives us more bang for the buck in terms of future exploration.""
Highlands owns 25 percent of the Porgera joint venture. Placer Pacific also owns 25 percent of the gold deposit and is the mine's manager. The takeovers would give Placer Dome a 50 percent stake.
If the takeovers are successful, Placer Dome's yearly gold production would be boosted by 430,000 ounces to more than three million ounces a year by 1998, Leggatt said.
Reserves would go up by four million ounces to a total of 30 million ounces, he said.
""It clearly consolidates Placer's position in Porgera,"" said gold analyst David Christensen of Merrill Lynch in San Francisco.
""It's a very high quality operation with low production costs.""
But Highlands' initial reaction to the takeover bid was to advise shareholders not to sell their shares.
""At the moment, the advice would be not to sell,"" Highlands company secretary Phillip West told Reuters in Sydney. ""But the directors are considering the offer and are expected to make a statement later today,"" he said.
Placer has offered A$0.75 (corrects from A$0.25) a share for Highlands and has offered one Placer Dome share for every 15 Placer Pacific shares.
""We think it's a very fair bid. We have no intention of changing it,"" said Leggatt.
Placer already owns 75 percent of Placer Pacific and 33 percent of Highlands Gold.
It said its bid for Highlands represents a 36 percent premium to the price of Highlands shares on November 26, and its bid for Placer Pacific has a premium of almost 50 percent.
""This is about growth for Placer Dome shareholders and a golden opportunity for the shareholders of Highlands Gold and minority shareholders of Placer Pacific,"" John Willson, Placer's chief executive, said in a statement.
""We have great confidence in the Asia Pacific region. Placer Dome is consolidating its presence to compete more effectively.""
",12
"Inco Ltd's huge nickel, copper and cobalt property at Voisey's Bay in remote Labrador keeps getting bigger, with 11 drill rigs working around the clock to define three enormous deposits that promise to upset the world's metals markets.  
""There are a couple hundred million tonnes for sure, close to proven,"" said Greg Soper, a drill manager for Archean Resources, which has an exploration contract until the end of the year at the Northern site on a sub-Arctic land mass that is closer to Greenland than to much of the rest of Canada.
""This here is a world class deposit. Every week we're hitting stuff,"" said Soper, waving his arm to point at the vast stretch of bog and thin forest surrounding the round, rocky hill where metals were discovered two years ago.  
Inco's most recent calculations, compiled in an internal report at the end of August, showed 138 million tonnes of resource (corrects from ""proven or probable reserves"") spread out over three different deposits at the Voisey's Bay property. Resources are potential reserves.
On average, the deposits graded 2.09 percent nickel, 1.24 percent copper and 0.99 percent cobalt, the report said.
At the Ovoid deposit, found close to the surface of a bog close to the Labrador Sea, drilling has outlined 37.5 million tonnes. Exploration is finished at the Ovoid and Inco now plans to mine the area through an open pit mine.  
The Eastern Deeps, which lies under a series of hills covered with sparse trees and lush moss, has not yet been defined.
Recent calculations showed 75.5 million tonnes of ore, but the deposit was open in all directions.
To the west of the Ovoid, in the Western Extension, drills are uncovering another rich deposit. The mineralization was uncovered last April, after Diamond Fields Resources Inc, the owner of Voisey's Bay, accepted Inco's C$4.3 billion takeover offer.  
So far, drilling has defined 24.7 million tonnes, but the deposit is growing steadily.
Both the Eastern Deeps and the Western Extension need extremely deep holes to strike significant metal, and each major hole takes about three weeks to drill, said Soper.
More than 340 holes have been completed so far, with a total drilling meterage of more than 135,000 metres, Inco said in its recent mine and mill project description.
""Over half of our holes are good. They're mineralized,"" said 25-year-old geologist Mary Vaughan as she examined a new box of core samples just brought in from the Eastern Deeps.  
""It just blows you away. It's an explorationist's dream.""
Archean Resources plans to keep drilling at a breakneck pace until its contract ends in December.
Inco has not said whether it will extend Archean's contract, but the Toronto-based company has promised to spend C$20 million over the next four years on exploration.
Only five percent of the property has been explored so far, but small exploration companies that have claims surrounding Inco's 495-square-kilometre site have not found anything significant.  
New resource calculations are expected within the next month, Rick Gill, spokesman for Inco subsidiary Voisey's Bay Nickel Co told Reuters in St. John's, Newfoundland.
Mining at Voisey's Bay is expected to last at least 20 years, with a concentrator on site handling 15,000 tonnes of ore a day. Mining will likely continue all year round, despite high winds, extremely cold temperatures and thick ice that locks in the site for a few months every winter.
""The information that we have at this time suggests it will be possible to operate year 'round with ice breaker support,"" said Gill.
-- Reuters Toronto Bureau 416-941-8100
",12
"Falling gold prices have recently drained much of the life from the Toronto Stock Exchange's key gold index and analysts say the bloodletting may not be over.
""Gold stocks are still reflecting a $380 gold price, but look at the price now,"" said gold analyst Mike Jalonen at brokerage Midland Walwyn in Toronto. ""It's awful.""
""I think people are writing the obituary for the Toronto gold index,"" said Vahid Fathi, a mining analyst at Everen Securities in Chicago. ""They've been slaughtered.""
The Comex February gold price has slid steadily since Dec. 30 to $355.70 an ounce on Wednesday from $370.90. Gold was up slightly in London on Thursday at $356.60.
Gold prices have slumped to three-year lows on a strong U.S. dollar, booming financial markets, low inflation, rising mine production and rumors of central bank selling.
Most analysts said the yellow metal was headed further south, but there was no consensus on the extent of the decline or when prices might recover.
The heavily weighted gold index in Toronto, Canada's biggest stock market, has dropped with the price of the metal, losing more than nine percent since Dec. 30.
Canada's biggest gold companies, Barrick Gold Corp. and Placer Dome Inc. have followed suit.
Barrick, the world's third largest gold producer, closed at C$35.55 on Wednesday, down from C$39.50 on Dec. 30. The stock rose slightly on Thursday to C$35.75. In New York, Barrick has fallen to 26-3/8 from 28-7/8 on Dec. 30.
Vancouver-based Placer Dome fell to a 52-week low of C$27.05 on Wednesday from C$30.90 on Dec. 30. It was up C$0.30 to C$27.35 on Thursday. In New York, Placer fell to 20-1/4 on Thursday from 22-5/8 on Dec. 30.
U.S. gold producers have also been hit. Newmont Mining Corp. was trading at 40 on Thursday on the New York Stock Exchange, versus 45-1/4 on Dec. 30. Homestake Mining Co. was at 13 5/8 on Thursday in New York, down from 14-1/4 on Dec. 30.
Traditionally, Toronto gold stocks move up in tandem with the gold price, but do not react as strongly to a price decline.
Discoveries, takeover rumors and news from exploration companies that share the Toronto gold index with major producers generally temper the index's reaction to price slumps.
That is not the case now.
""At this point in time, the market is not even paying attention to special situations,"" said Fathi.
On Wednesday, almost every stock in the Toronto gold index fell except for diamond companies.
Midland Walwyn's Jalonen predicted Toronto golds would lose a further five percent before they stabilized.
Diversified producers such as Vancouver-based Teck Corp. were not as vulnerable as pure gold producers to steep drops in the gold price, Jalonen noted.
",12
"Bre-X Minerals Ltd's hold on the huge Busang gold deposit in Indonesia remained unclear Thursday after a string of statements from the company defending its rights to the find.
Calgary, Alberta-based Bre-X issued three news releases in as many hours early on Thursday about its grasp on Busang, worth at least $21 billion at today's gold prices and one of the world's biggest gold deposits.
Bre-X said its exploration permits and applications for contracts of work on Busang remained in good standing.
""Obviously significant progress is being made on all fronts toward the development of the Busang deposit,"" Bre-X Chief Executive David Walsh said in a statement issued from Jakarta.
Bre-X said its officials had met with Umar Said, Indonesia's secretary general of the Ministry of Mines, to clarify its status with Busang.
The company said Umar apologised for comments relating to the cancellation of permits and contract of work applications for Busang.
""The exploration permits and CoW applications for Busang II and Busang III remain in good standing,"" Bre-X said. Busang II contains most of the gold found so far on the property.
But earlier on Thursday, Umar repeated his comments to Reuters in Jakarta casting Bre-X's status in doubt.
Indonesian mining officials told Reuters in Jakarta that they had stopped processing Bre-X's applications for vital contracts of work on the gold find. Instead, Bre-X and Toronto-based Barrick Gold Corp. must jointly submit new applications for the permits.
""The government has stopped processing the previous application for contracts of work by Bre-X because of various problems,"" Umar said. ""Therefore, the previous application by Bre-X that has been delayed must be stopped and must be said to have been cancelled.""
While mining officials were explaining their position in Jakarta, Bre-X was issuing optimistic statements.
Bre-X said it appeared that the development of Busang was ""possibly open to negotiation"" and that draft documents showed it had exclusive operating rights to Busang.
The Indonesian government encouraged Bre-X in November to form a joint venture with Barrick, with Barrick getting 75 percent of the joint venture, Bre-X keeping 25 percent and the two companies granting the Indonesian government a 10 percent stake.
But Bre-X said on Thursday that ""the government of Indonesia appears to be seriously reconsidering its earlier decision that would have compelled Bre-X into a partnership with Barrick.""
Bre-X cited a published report that suggested Indonesian President Suharto was ready to intervene in the process.
Bre-X and Barrick said last week they reached agreement on some points to form a joint venture for Busang, but outstanding issues remained and no overall agreement had been settled.
But Bre-X was still hopeful on Thursday that the negotiations for Busang could be opened up to an auction process.
""We have believed from the outset that the best interests of the Indonesian people and their economy would best be served by a truly open negotiation process for the development of this extraordinary natural resource,"" Walsh said in a letter to Indonesia's Minister of Mines.
Bre-X shares were still halted on the Toronto Stock Exchange. The company requested a halt on Wednesday so it could clarify statements from Jakarta. The stock closed Tuesday at C$20.50.
",12
"The world's gold producers will likely pay dearly for the steep fall in the bullion price and the deep uncertainty overhanging the gold market.
If the bullion price weakness continues or worsens, gold miners face lower profits, money-losing operations, closed mines, slashed exploration budgets and plunging share prices.
Analysts predict smaller companies will be increasingly vulnerable to takeovers as industry conditions get rougher.  
""Earnings are going to be terrible,"" said gold analyst Michael Fowler at Levesque Beaubien Geoffrion in Toronto. ""There have already been some mines that have shut and there could be a few more. And consolidation is likely to continue.""
Gold, which was fixed at $358.55 an ounce in London on Friday, has lost more than $13 since the start of the new year, and few analysts believe the decline is finished.
The low price has already taken its toll on Canadian gold stocks, knocking the Toronto Stock Exchange's heavily weighted gold index down more than nine percent since Dec. 30.  
At least two companies have announced shutdowns of marginal mines recently. Toronto-based TVX Gold Inc. said earlier this week it would close its Casa Berardi gold mine in Quebec. In December, Vancouver-based Placer Dome Inc. said it would sell two small mines in Quebec and stop work at its high-cost Paymaster mine in Northern Ontario.
""That can certainly happen again,"" said Jim Taylor, mining analyst with Yorkton Securities in London. ""The high-cost producers are certainly vulnerable.""  
The effect will begin to show in fourth-quarter earnings, and earnings in the first quarter of 1997 will certainly reflect the low bullion price, according to analysts.
If Merrill Lynch's predictions of an average 1997 gold price of between $370 and $375 an ounce hold true, it could spell earnings trouble for many producers.
Merrill Lynch analyst David Christensen predicted that U.S. gold firm Homestake Mining Co.'s earnings for the year would drop to about 13 cents a share if gold averaged $370. Homestake would earn 22 cents a share at a gold price of $385.  
Companies that do not hedge their gold sales -- such as Homestake, Echo Bay Mines Ltd., Battle Mountain Gold Co. and Agnico Eagle Mines Ltd. -- were especially vulnerable, Christensen said. Other analysts mentioned Royal Oak Mines Inc. and Pegasus Gold Inc. as prime victims of a lower price.
""A surprisingly large number of these companies are marginal -- companies that you wouldn't traditionally think of being marginal producers,"" he said.  
Companies that rely on the spot price of gold ""are fully exposed to a decline in the gold price,"" Christensen noted. ""They're all either spot sellers or don't have significant forward selling. They'll all be negatively affected in terms of earnings and cash flow.""
One exception was U.S.-based Newmont Mining Corp., which would likely see earnings rise in 1997 because of projects ready to start this year, he added. His projection did not take into account the potential acquisition of Santa Fe Pacific Gold Corp..  
Even companies with solid hedging programs, such as Canada-based Barrick Gold Corp., will likely find their share prices hit along with the gold price.
""This is a sentiment swing,"" said gold analyst Manford Mallory with Research Capital in Toronto. Investors do not usually differentiate between hedgers and non-hedgers when the gold price starts to drop, he added.
Although some analysts believe a few more marginal projects could bite the dust if the gold price stays low, most say the production effects of lower gold prices will become apparent in decisions to delay development.  
""Most of these companies will continue to produce as long as they are cash flow positive as opposed to earnings positive,"" said Christensen.
But as earnings start to drop, one of the first casualties will likely be exploration budgets. While some 1997 exploration commitments have been made, high-cost companies could find themselves slashing any flexible plans in order to cut their losses.  
Exploration companies will become more vulnerable to takeover moves from larger companies with strong cash flow, analysts said. As the low price of gold discourages investors, junior companies will find it more difficult to raise money for exploration programs.
""The capital is drying up,"" said analyst Daniel McConvey of Lehman Brothers in New York.
The smaller companies may well see their share prices drop, making it cheaper for companies laden with cash to swallow them.  
Toronto-based Kinross Gold Corp. a mid-tier producer, said it plans to take advantage of the sector weakness to expand.
""I would classify us as a predator,"" Kinross spokesman Gord McReary said in an interview. ""We think we're in a very privileged position. We're in the kind of strange situation where maybe some of the bad news for the sector can be good news for us,"" he said.  
Gold equities in Australia may also be knocked down by lower gold prices, said analyst Taylor. But since many Australian companies hedge their sales, earnings will not be hurt as much as among some companies in North America.
In South Africa, however, analysts expect first-quarter earnings to be trampled by low gold prices.
In Mexico, mining giants Industrias Penoles and Grupo Mexico will probably not alter their expansion plans for polymetallic mines with high gold contents but will see slightly differing bottom-line impacts.
",12
"Bre-X Minerals Ltd. has been silent since it said last month that it formed a partnership with the son of the Indonesian ruler Suharto, a move that has worried shareholders and prompted regulators to seek more information.
Despite a whirl of rumours and persistent questions that have sent the Canadian mining company's shares on a roller-coaster ride, Bre-X has maintained a dogged silence.
The Calgary-based company that controls one of the world's biggest gold prospects in Indonesia has not talked to the press for weeks. Company officials will take calls only from a handful of favoured analysts, according to market sources.
""I haven't had any calls returned,"" said gold analyst Rick Cohen with Goepel Shields in Vancouver. ""There seems to be a certain number of people they talk to. Everybody's a bit in the dark.""
Bre-X on Oct. 28 announced its alliance with Suharto's son, Sigit Harjojudanto, whose business influence is pervasive in Indonesia.
Since then, instead of directly addressing questions about its business in Indonesia -- many of which are playing havoc with the stock price -- Bre-X has opted instead to leak to the market carefully selected press material.
On Sunday, for example, the company faxed the media, analysts and shareholders a copy of a story from the Far Eastern Economic Review detailing its links with Sigit.
The article referred to Sigit's possible ties with the Indonesian army, stated that one of Bre-X's Indonesian partners has been bought out and asserted that gold giant Barrick Gold Corp. tried to push Bre-X into a bad deal.
Despite questions about the article, Bre-X refused to respond and still has not said whether it endorses the story or puts any faith in the statements.
""I've certainly suggested a few times that they talk to the media and clear things up,"" said Neil Winchester, manager of surveillance for the Toronto Stock Exchange. ""It would be advantageous to the marketplace.""
Rumours have shrouded Bre-X since the Indonesian government said last month it would not issue essential contracts for work on the project until Bre-X cleared up an ownership dispute with some of its Indonesian partners.
The dispute has put a cloud over Bre-X's search to find a major mining partner to help it develop the rich Busang gold deposit in East Kalimantan, but the alliance with Suharto's son was expected to help the company clear up its problems.
""They're optimistic that they can get everything within a couple of weeks,"" said gold analyst Michael Fowler of Levesque Beaubien Geoffrion, who said he spoke with Bre-X on Tuesday.
But he said Bre-X would not comment on the article it distributed. ""They just sent it out for general interest purposes.""
Still, statements in the article and other gossip were taking its toll on shares linked to Bre-X and other exploration companies in Asia have complained the uncertainty has hurt their stocks.
Minorca Resources Inc., a Canadian mining company that has an interest in the Busang deposit through an alliance with Bre-X's Indonesian partner, PT Askatindo Karya Mineral, has found itself on the defensive.
Talk about Askatindo being bought out is unfounded, Minorca President Roland Horst said in an interview. ""They have no intention to sell out,"" he said.
Minorca's chairman is in Indonesia this week meeting with Askatindo officials and verified the company's intentions, Horst said.
Horst said he had a slew of unanswered questions about Bre-X's arrangements with Suharto's son too. ""To be frank, the relationship between Minorca and Bre-X is relatively cool.""
",12
"The Indonesian gold bug is nibbling away at Inco Ltd, the world's biggest nickel company.
The company whose name has become synonymous with nickel is turning its sights to gold, copper and zinc exploration in Indonesia, Africa, Canada's Far North, Turkey and Brazil.
""Our target exploration area is Indonesia,"" Bob Horn, Inco's vice-president of exploration, said in a recent interview.
""We've reassessed what we're doing, we've refocused on our work,"" he said.  
""When we got rid of TVX, it was sold at a substantial profit...It was not a strategic move to get out of gold. It was a strategic move to get out of that particular company,"" Horn said.
""There's nothing wrong with gold. If it makes money, we'll be there.""
Inco does not have any plans to go head-to-head with the world's huge gold producers, however.
""They always pay too much, but if we come across a situation where we find gold, we'll go for it, like we have in Indonesia,"" Horn said.  
The company has budgeted US$24.8 million for field exploration in 1997, slightly less than the US$25 million in 1996. But three recent alliances mean up to an extra US$15 million will be devoted to exploration through the junior partners, Horn said.
In addition to its alliance with Colony Pacific, Inco also has an arrangement with Carlin Resources Corp to explore in Africa, and a third deal in the works.
The company has just about all the nickel it needs with continued exploration in Canada at the huge and expanding Voisey's Bay deposit in remote Labrador as well as growing mines in Thomson, Manitoba and Sudbury, Ontario.
Instead, Inco hopes to grow through an exploration focus on copper, zinc and gold, Horn said.
In 1995, Inco did not produce any zinc, but it produced 240 million pounds of copper, 3.775 million pounds of cobalt, 60,000 troy ounces of gold and 403 million pounds of nickel.  
""We already market copper, so it's no big deal to us,"" said Horn. ""And the technology for zinc is pretty well the same. We don't have to develop any new expertise to get into zinc.""
But gold?
Inco got rid of most of its gold in 1993, when it sold its controlling interest in TVX Gold Inc. Gold production since then has been minimal.
Inco kept many of its gold experts on staff, however, and Horn said the company has all the expertise it needs to mine gold.  
Analysts said Inco is wise to use its solid status and its 28-year history in Indonesia to explore the vast mineral potential there.
Inco, which has a huge nickel operation in Indonesia, has several exploration projects there and recently struck deals with Highlands Gold Ltd and Canadian explorer Colony Pacific Explorations Ltd to step up its search for gold and copper.
Alliances with smaller companies will be key to Inco's exploration in the future, Horn said.
",12
"Canada's Bre-X Minerals Ltd and Barrick Gold Corp are still trying to forge a joint venture to mine the spectacular Busang gold discovery in Indonesia, despite a cloud of uncertainty over the rights to the deposit Bre-X's chief executive David Walsh said.
Progress in the negotiations with Barrick is slow, Walsh told Reuters in a telephone interview on Thursday.
""We're moving ahead, albeit at a snail's pace,"" he said, adding that legal issues stood in the way of a full agreement. ""We're trying to get them to appreciate our views and the legal stance that we've taken,"" he said.
Last month, the Indonesian government advised Bre-X to form a joint venture with Toronto-based gold giant Barrick to operate Busang. The government requested a deal by December 4, but the two companies announced after the deadline that several issues were still outstanding.
Since then, the Indonesian government has raised doubts about Bre-X's grip on Busang, which is estimated to contain at least 57 million ounces of gold, worth around $21 billion at today's prices.
""The government has stopped processing the previous application for contracts of work by Bre-X because of various problems,"" Umar Said, Indonesia's secretary-general of mines, told Reuters in Jakarta on Thursday. ""Therefore the previous application by Bre-X that has been delayed must be stopped and must be said to have been canceled.""
He said Bre-X and Barrick must jointly submit new applications for contracts of work on the deposit.
Without contracts of work granted by the Indonesian government, Bre-X cannot proceed to exploit the find
But Walsh defended his company, saying its permits and applications for the gold property were ""in good standing.""
He said two Bre-X officials met with Umar in Jakarta on Thursday and were assured everything was in line.
""The telephone call that I got from Rolie (Francisco), he was quited pleased with the meeting. He said we're making very good progress in our relationship (with the mines ministry),"" Walsh said.
Bre-X spokesman Steve McAnulty tried to explain the apparent contradiction in Umar's statements. ""What the government wants to do in essence is that if an agreement with Barrick is made, the existing applications will be replaced with new applications,"" he told Reuters
Bre-X earlier said Umar had apologized for the misunderstanding, saying his comments were ""erroneously reported in a December 11 Reuters newswire article.""
Peter Thomas, the Reuters company spokesman in London, said Reuters was confident the quotations in its December 11 story from Jakarta were accurate.
Despite the barrage of news releases from Bre-X on Thursday, Barrick was still seeking clarity on the situation from the Indonesian government.
""We're still seeking clarification and we want to hear directly from the government of Indonesia,"" Barrick spokesman Vince Borg said in Toronto. ""We're not saying anything until we talk directly to the government of Indonesia.""
Bre-X, too, is waiting for the Indonesian government to make a move.
Walsh said he still had high hopes that Indonesian President Suharto would open up an auction for Bre-X, allowing other major mining companies to bid on the Busang project.
He said Bre-X had not made a formal request for an auction, but ""we understand that the president is reviewing the situation.""
An auction would be advantageous for Bre-X shareholders and for Indonesia, he said.
""We're not soliciting offers. We are getting other phone calls,"" Walsh said. ""I am talking to to principals of other companies.""
He said he had spoken to executives at Placer Dome Inc, Newmont Mining Corp and Teck Corp.
In Vancouver, Placer Dome spokesman Hugh Leggatt said any suggestion of an open auction on Busang was encouraging. His company has made a formal request for an open bidding process.
But gold mining analyst Bill Belovay with CIBC Wood Gundy said Barrick's competitors may be trying to make a deal with Bre-X more expensive for Barrick.
""They're playing games,"" he said. ""One has got to read between the lines.""
He said Busang was so fraught with uncertainty that he has a hard time understanding why the major gold producers would be interested. ""One doesn't even know what percentage (Barrick) will end up with. One doesn't even know how to keep Suharto happy,"" he said. ""To me it's a whole big nightmare.""
Investors were thoroughly confused by Thursday's developments, analysts said.
""We're getting so much information, headline after headline,"" said one analyst. ""It's causing anxiety for everyone.""
Bre-X, which has halted all day Wednesday, closed down C$0.85 at 19.80 in rapid trading on Thursday of more than 8.6 million shares. Barrick, which lost C$2.75 on Wednesday, regained C$1 on Thursday to C$39.50 in trading of more than two million shares.
",12
"Canadian nickel giant Falconbridge Ltd has a growing appetite for expansion and is poised for growth through acquisition and exploration, the company's new chief executive officer said in an interview.
""The appetite of this company is much higher than what it used to be,"" Oyvind Hushovd told Reuters on Wednesday. ""Falconbridge is in very good shape financially today, which means that we have the ability to grow.""
Hushovd, 46, replaced Frank Pickard as chief executive this month after Pickard died suddenly at the age of 63 during a business trip in Chile this September.
Hushovd, originally from Norway, has worked for Falconbridge for more than 22 years.
He spent the past year and a half working closely with Pickard in the position of executive vice-president and was chairman of the steering committee that put together a strategic plan to carry Falconbridge into the next century.
""I don't see a need to revolutionize Falconbridge,"" he said. ""The backbone of Falconbridge is nickel, and copper is another leg of Falconbridge. It will probably be like that in the future.""
However, Hushovd is not content simply to sit back and let the long-term strategic plan unfold.
The plan calls for Falconbridge to double its annual nickel production to 200,000 tonnes and triple its copper production to about 500,000 tonnes a year, within 15 years.
To do that, Falconbridge needs to find growth opportunities, especially since the company lost a bid to take over the huge Voisey's Bay nickel, copper and cobalt deposit in remote Labrador, said Hushovd.
Ongoing work in New Caledonia, Ivory Coast and Zambia should complement plans to start producing nickel by the end of next year at the Raglan project in Quebec and plans to produce copper by 1998 at the Collahuasi joint venture project in Chile, Hushovd said.
In Zambia, Falconbridge joined a consortium in November to develop the Konkola Deep copper mine, in which Falconbridge is partners with South Africa's Gencor Ltd and Anglo American Corp of South Africa Ltd.
In New Caledonia in the South Pacific, Falconbridge is poised to gain access to nickel reserves to supply a nickel plant planned in the north of the country. The board of France's Eramet on Thursday said it had agreed to reallocate its mining reserves in New Caledonia, which would give Falconbridge access to Eramet's Koniambo field.
Hushovd does not intend not stop there.
""Falconbridge has always been very strong in exploration,"" he said. ""We felt we lacked the business development infrastructure.""
So last summer, the company set up a business development group, to search out growth opportunities either through exploration or acquisition.
While Hushovd would not hint at specific acquisition targets, he stressed, ""I want properties that are not only profitable today but are also profitable in the future.""
In any future acquisitions, Falconbridge can probably count on support from its powerful majority shareholder, Noranda Inc, which owns 46 percent.
""We have a big owner, which means that hopefully we can pursue things that might be tough to pursue on our own,"" Hushovd said. ""We can have a bigger appetite than the company on its own would have.""
Hushovd said he had no immediate plans to boost the company's share price, which peaked at C$32.75 in May but is currently trading around C$29.15.
He noted that the stock normally reflects the nickel price, which has failed to meet expectations in 1996.
""I think we all had very high hopes for nickel this year, and the market did not turn out the way that we had forecasted,"" he said.
As for next year, ""I feel it's difficult to give a prediction at the present time. Fundamentally I do believe we're going to see better prices in 97 than we did in 96,"" Hushovd said. ((Reuters Toronto Bureau 416 941-8100))
",12
"Some of the world's most influential gold producers are upping the ante as a December 4 deadline edges closer for Canada's Bre-X Minerals Ltd to make a deal with gold giant Barrick Gold Corp.
At stake is the rich Busang gold deposit in Indonesia. New estimates released on Tuesday suggest the discovery contains more than 57 million ounces of gold that can be mined at the low cost of US$96 an ounce.
The Indonesian government has virtually mandated that Bre-X must carve up its find, with Barrick getting 75 percent of Bre-X's stake and Bre-X 25 percent.
And the government of President Suharto has also made it plain it would ""appreciate"" a stake of 10 percent in Busang.
But now, some major figures in the gold mining world are protesting that the deal ordered by Indonesia is unprecedented and unfair. They are pressuring Jakarta to allow rival bids.
""I think it's Bre-X's natural right to have a say who their partner will be,"" John Willson, chief executive officer of Vancouver-based Placer Dome Inc, told Reuters in an interview on Tuesday.
Placer Dome, Canada's second biggest gold company and one of the world's largest, wants to bid on Busang, and Willson said Newmont Mining Corp and Teck Corp have also been at the negotiating table for months.
The three heavyweight mining companies were abruptly shut out of the process last month when Indonesia forced Bre-X into Barrick's arms.
Analysts have suggested Barrick used its business connections with Suharto's eldest daughter, as well as political connections through Barrick advisers former U.S. President George Bush and former Canadian Prime Minister Brian Mulroney, to sway the Indonesian government.
""We were clearly disappointed -- that's a nice way of putting it -- that all of a sudden the thing went away from us,"" Willson said in an interview. ""Something has been going on that is not kosher in the West.""
Willson said he believes the Indonesian government can be persuaded to consider other offers for Busang. Otherwise, the country would face international condemnation and risk losing foreign investment, said Willson.
""This is indeed unusual,"" he said. ""The message to the whole market is we risk our money big time to find gold, and if we really find the jackpot, somebody's going to come along and tell us what to do with it.
""It would put a great big red flag on Indonesia,"" he added.
Placer, Newmont and Teck must now await word from Indonesian government on whether they will be allowed back into the bidding process.
Indonesia's consulate in Toronto declined to comment on the matter on Tuesday. Newmont Mining also would not comment.
Teck's chief financial officer, John Taylor, said the company would consider bidding for Busang if Indonesia opens the door to an auction process, but would likely seek a partner in any bid.
""That's a pretty big bite,"" said Taylor.
Willson, however, noted Placer Dome could comfortably afford to take on Busang alone, despite a recent US$600 million bid for a larger stake in Papua New Guinea's Porgera gold deposit.
He would not say what price Placer was willing to offer, but ""it's clearly worth considerably more that what's being contemplated,"" he said after looking at the new resource calculations for Busang.
The resource calculations are in line with analysts' expectations, said mining analyst Bruno Kaiser with CIBC-Wood Gundy in Toronto, who noted that most analysts believe Busang holds a lot more gold than has already been outlined.
Kaiser said he was not concerned about the December 4 deadline ticking past without news from Jakarta.
""My take on it is that the Indonesian government imposed this December 4 deadline primarily as a means to facilitate bids and get the process moving,"" he said. ""You get everyone who is interested and serious stepping up.""
But analyst Catherine Gignac with Deacon Capital in Toronto expressed doubts about the Indonesian government soliciting more suitors for Bre-X. ""Why should the Indonesian government provide the market with a bidding process just because we want them to?"" she said.
North America's gold miners are not alone in seeking a piece of Busang. Bre-X's Indonesian partner Jusuf Merukh has claimed up to 40 percent of the deposit. And the former Australian owners of the property say they also have rights to part of the riches.
Barrick closed at C$37.85, down C$1.70, on the Toronto Stock Exchange on Tuesday. Bre-X was halted at C$18.70, up 0.95, when trading was halted for the new resource calculation. Placer Dome lost 0.45 to close at 30.60.
",12
"The rights to Bre-X Minerals Ltd.'s huge Busang gold discovery in Indonesia appeared to be up in the air Monday despite an Indonesian government statement declaring Canada's Barrick Gold Corp. the winner.
""We still don't have a deal. There are a number of points that are still being negotiated,"" Bre-X spokesman Steve McAnulty said in a phone interview. ""Negotiations are still ongoing.""
""I can explain to you that we don't have a signed agreement,"" Barrick spokesman Vince Borg said.
The Indonesian government told Reuters in Jakarta Monday that the two companies had agreed to split the deposit, with Barrick getting 75 percent and Bre-X keeping 25 percent.
""They have reported they can both accept the government suggestion,"" of a 75-25 split, said Umar Said, secretary-general of the Mines and Energy Ministry.
""They are also ready to provide a 10 percent stake to the government,"" he said. ""It is good.""
Last month, Indonesia asked Bre-X to form a joint venture with Barrick and announce a deal by Dec. 4. When the deadline passed, the two companies said they had reached agreement on some issues but that others were still outstanding.
""We are negotiating toward an end,"" McAnulty said Monday.
He said legal issues stood in the way of an agreement.
""The whole thing is totally confusing,"" said gold analyst Michael Fowler of brokerage Levesque Beaubien Geoffrion in Toronto.
""I think these guys are close, but there are probably a few things in the way.""
The companies are wrangling over the Busang gold find, which holds at least 57 million ounces of low-cost gold on the island of Borneo.
Neither company would provide details about the terms of a deal, when the terms would be announced, whether shareholders would be able to vote on the agreement or who would be given essential contracts of work granting mining rights to the property.
Bre-X was still hoping the Indonesian government would drop its request for a deal with Barrick and let Bre-X find a partner through an open bidding process, McAnulty said.
""We're getting signals from the consulate, from the embassy, from Mr. Said,"" he said. ""We certainly hope the government allows the process to proceed as originally planned. It would be to the best interest of Bre-X shareholders.""
Vancouver, British Columbia-based gold firm Placer Dome Inc. has complained about being shut out of the process despite months of negotiations.
Placer Dome has said it wanted a chance to put forward a bid, but its status was in limbo as it awaited word from the Indonesian government.
Newmont Mining Corp., which had previously shown interest in Busang, said Monday it was preoccupied with a takeover bid for Santa Fe Pacific Gold Corp.
Bre-X closed down C10 cents (8 cents) to C$20.05 ($14.80), topping the list of most active stocks on the Toronto Stock Exchange. Barrick fell C15 cents (11.7 cents) to C$40.05 ($29.67) in Toronto and by 12.5 cents to $29.375 on the New York Stock Exchange.
",12
"Inco Ltd's huge Voisey's Bay nickel deposit will help turn the company into a 750-million pound a year low-cost nickel producer by the year 2001, company executives said on Monday.
The new discovery will propel the company's growth by 86 percent over 1995 when Inco produced 403 million pounds of nickel, Inco chairman and chief executive Mike Sopko said in a speech to media and analysts.
""We want to remain the world's leading nickel producer in a growing nickel market,"" he said.
Costs will decline by 23 percent because of Voisey's Bay, from $1.30 a pound in 1995 to 0.89, said chief financial officer Tony Munday.
But capital costs for Voisey's Bay will be higher than initially thought, said Stuart Gendron, president of Voisey's Bay Nickel Co, a unit of Inco.
The company now expects to spend US$1.4 billion on facilities until the year 2000, up from earlier estimates of US$1.1 billion, he said. The company expects to finish a feasibility study by the end of this year, he added.
Inco took over Diamond Fields Resources Inc last summer for US$3.3 billion and won control of the giant Voisey's Bay resource. The company expects to be producing 270 million pounds of nickel a year from the property by 2001.
In the near term, Inco said its production should grow in 1997 to 430 million pounds, up from 415 million in 1996. By 1998, nickel production should reach 450 million pounds, the company said.
While world nickel supply and demand were in balance in 1996, nickel demand should slightly outpace supply in 1997, said Peter Salathiel, vice-president of marketing.
""I would argue that in the near term, 97-98, the supply-demand fundamentals for nickel look very good,"" he said.
He said it was mystery to him why nickel prices have been trending down recently, but he pointed to a glut in the stainless steel market.
""The stainless steel industry is going through kind of a crisis right at the moment,"" he said.
He said he did not expect any increase in Russian production of nickel in the next three to four years.
But Salathiel, who will retire at the end of the year, would not predict a nickel price for next year.
""The one thing I've learned is it's impossible to predict nickel prices,"" he said.
Inco plans to spend US$68.6 million on exploration next year, up from an expectedUS$55.1 million this year, said Bob Horn, vice-president of exploration.
((Heather Scoffield, Reuters Toronto Bureau 416 941-8104))
",12
"Canadian mining company Bre-X Minerals Ltd has been in hiding since it announced 17 days ago that it has formed a partnership with the son of Indonesian ruler Suharto, prompting a flurry of comment on its ethics. (Corrects description of Suharto.)
Despite a constant whirl of rumors and persistent questions that have sent the company's shares on a roller coaster ride, Bre-X is maintaining a dogged silence. 
The Calgary-based company that controls one of the world's biggest gold prospects in Indonesia has not talked to the financial press for weeks. Company officials will take calls only from a handful of favoured analysts, according to market sources.
""I haven't had any calls returned,"" said gold analyst Rick Cohen with Goepel Shields in Vancouver. ""There seems to be a certain number of people they talk to. Everybody's a bit in the dark."" 
Bre-X sent out a news release on October 28 about its alliance Suharto's son, Sigit Harjojudanto, whose business influence is pervasive in Indonesia.
Since then, instead of directly addressing material questions about its business in Indonesia -- many of which are playing havoc with its stock price -- Bre-X has opted instead to leak to the market carefully selected press material.
On Sunday, for example, the company faxed the media, analysts and shareholders a copy of a story from the Far Eastern Economic Review detailing its links with Sigit. 
The article referred to Sigit's possible ties with the Indonesian army, stated flatly that one of Bre-X's Indonesian partners has been bought out and asserted that Canadian gold giant Barrick Gold Corp had tried to push Bre-X into a bad deal.
Despite questions about the article, Bre-X refused to respond and still has not said whether it endorses the story or puts any faith in the statements contained in the story.
""I've certainly suggested a few times that they talk to the media and clear things up,"" said Neil Winchester, manager of surveillance at the Toronto Stock Exchange. 
""It would be advantageous to the marketplace,"" he added.
Rumors have surrounded Bre-X since the Indonesian government said last month it would not issue essential contracts of work until Bre-X cleared up an ownership dispute with some of its Indonesian partners.
The dispute has placed a cloud over Bre-X's search to find a major mining partner to help it develop the rich Busang gold deposit in East Kalimantan, but the alliance with Suharto's son was expected to help the company clear up its problems. 
""They're optimistic that they can get everything (the permits) within a couple of weeks,"" said gold analyst Michael Fowler of Levesque Beaubien Geoffrion, who said he spoke with Bre-X on Tuesday.
But he said Bre-X would not comment on the article it distributed. ""They just sent it out for general interest purposes,"" he added.
Still, the rumors in the article and other rampant gossip are taking a toll on shares linked to Bre-X. Other exploration companies in Asia have complained the uncertainty has spilled over and hurt their stocks. 
Minorca Resources Inc, a Canadian junior mining company that has an interest in the Busang deposit through an alliance with Bre-X's Indonesian partner, PT Askatindo Karya Mineral, has found itself on the defensive.
Talk about Askatindo being bought out is unfounded, Minorca president Roland Horst said in an interview. ""They have no intention to sell out,"" he said.
Minorca's chairman is in Indonesia this week meeting with Askatindo officials and verified the company's intentions.
""There were discussions, but they were rebuffed,"" said Horst. 
He added that he also had a slew of unanswered questions about Bre-X's arrangements with Suharto's son.
""To be frank, the relationship between Minorca and Bre-X is relatively cool.""
--Reuters Toronto Bureau 416 941-8100
",12
"North America's major gold companies are waging an expensive battle to win the coveted title of world's biggest gold producer.
""We want more of the action,"" said Hugh Leggatt, spokesman for Vancouver-based gold firm Placer Dome Inc.. ""We want to be positioned in the industry as a bigger player.""
Placer Dome has made a $600 million bid for Highlands Gold Ltd. of Papua New Guinea and the 25 percent of Placer Pacific Ltd.  it does not already own.
The company also plans to raise $300 million through a preferred share issue and sell off some small Canadian mine properties.
Placer also has its eye on Bre-X Minerals Ltd., a Calgary, Alberta-based exploration company that discovered what could become one of the world's largest gold mines, the Busang deposit in Indonesia.
But Bre-X is also crucial to Barrick Gold Corp.'s plan to become the world's biggest gold company.
Toronto-based Barrick is already the the world's most profitable gold company and North America's biggest, but it wants to surpass Anglo American Corp. of South Africa Ltd. and Gold Fields of South Africa Ltd. to be the world's largest.
Barrick, through skilful navigation of Indonesian politics, appears to have Bre-X within its grasp. Jakarta has asked the two companies to form a joint venture to develop the 57 million ounce Busang deposit, with Barrick controlling 75 percent.
Denver-based Newmont Mining Corp. was interested in Bre-X, but when Barrick appeared to gain the upper hand, Newmont turned its sights to Santa Fe Pacific Gold Corp., a mid-tier gold company.
Although Newmont seems to have lost out on its stock swap offer for Santa Fe to a $2.3 billion competing bid from Homestake Mining Co., analysts said Newmont was still hunting for other takeover targets.
""This is a very capital-intensive industry and it's becoming a global industry,"" Newmont spokesman Doug Hock said in an interview.
""In order to compete, you have to have large resources to do that. What you see is the larger players becoming bigger in order to compete.""
Homestake is poised to become North America's second-biggest gold company after Barrick if its takeover of Santa Fe succeeds.
Major gold companies are under pressure from their shareholders to keep gold reserves growing, analysts said.
""If one company gets big, they have a lot of clout in the marketplace to acquire properties or resources,"" said gold analyst Michael Fowler of brokerage Levesque Beaubien Geoffrion.
With gold bullion prices in a steep decline, the share prices of many mid-tier companies have been hit, making takeovers cheaper, Fowler said.
But he said the current leaders of the gold world, the South Africans, were not caught up in the recent consolidation.
""It looks as though they're losing out to the North Americans,"" said Fowler. ""They're behind the eight-ball really.""
North American gold producers were geared to react aggressively and quickly, but the South African producers concentrated more on paying dividends, he said. ""They don't move very fast.""
Analysts said this round of deal-making was far from over as major gold companies fought it out to satisfy their shareholders' thirst for growth.
Analysts said possible future takeover targets included large mid-tier producers such as Dayton Mining Corp., Battle Mountain Gold Co., Cambior Inc. and Echo Bay Mines Ltd..
",12
"Poor metal prices hurt earnings at Canadian base metal miners in the third quarter, with profits down at Inco Ltd., Falconbridge Ltd. and Cominco Ltd.
Nickel giant Inco said on Monday its third-quarter profit fell to $29 million, or 19 cents a share, from $44 million or 33 cents a share a year earlier. The earnings per share for the 1996 third quarter were worse due partly to shares issued in the takeover of Diamond Fields Resources Inc.
Inco's rival, Falconbridge, earned $30.1 million ($22.3 million) or C17 cents (13 cents) a share excluding extraordinary gains, a steep drop from last year's C$84.5 million ($62.7 million) or C47 cents (35 cents) a share.
Vancouver-based Cominco, which produces zinc, nickel, copper and other metals, said earnings were C$5.2 million ($3.86 million) or C6 cents (4 cents) a share, down sharply from C$22 million ($16.4 million) or C25 cents (19 cents) a share last year.
All three cited copper as the main culprit.
The average price for copper on the London Metal Exchange in the third quarter was 90 cents a pound, vs. $1.37 at the same time last year, Cominco said.
The copper price plummeted in June after a copper scandal at Japanese metals giant Sumitomo Corp. The red metal has just begun to regain some of its strength.
All three companies also pointed to lower nickel prices as a major source of weakness in the third quarter.
The average nickel price for the quarter fell to $3.26 a pound from $3.92 at the same time last year, Cominco said.
Analysts said investors were now taking advantage of the lower stock prices to buy more shares.
Inco rose C$1.15 to C$41.90 in Toronto and by $1 to $31.125 in New York in late afternoon trading on Monday. Falconbridge rose 75 cents to C$29 ($21.48) and Cominco gained C45 cents to C$30.65 ($22.70) on the Toronto Stock Exchange.
Copper and nickel have strengthened recently, putting a shine on the fourth quarter, said mining analyst Tony Hayes at the Credifinance brokerage.
""I'm astounded that copper has not already risen. It will go very rapidly when it does move.""
",12
"Canada's Bre-X Minerals Ltd., moved on Monday to resolve a dispute over its huge Busang gold discovery in Indonesia, forging an alliance with a company controlled by the eldest son of Indonesia's President Suharto.
""This is an important first step to the resolution of Bre-X's problems,"" said gold analyst John Ing of Maison Placements Canada.
The stock jumped C$3.50 to C$24.30 on the Toronto Stock Exchange, topping actives on more than 6.4 million shares. On Nasdaq, Bre-X rose $2.625 to $18.25.
Bre-X said it will pay $40 million for a deal with PT Panutan Duta, part of the Panutan group run by Sigit Harjojudanto, Suharto's eldest son.
Analysts said the alliance with Panutan Duta, part of the Panutan group involved in energy, mining and telecommunications, should help Bre-X clear up a widely publicised dispute over the ownership of its glittering Busang gold discovery.
Bre-X stock has taken a beating in recent weeks because of the dispute.
One of Bre-X's Indonesian partners, Jusuf Merukh, is seeking a 40 percent stake in Busang, which has estimated gold reserves of 47 million ounces.
The Indonesian government has said it will delay issuing the crucial contracts of work to Bre-X until the dispute is resolved. Without the contracts, Bre-X cannot advance its work on the Busang deposit.
The dispute has also clouded Bre-X's quest to find a major mining partner to develop and operate Busang.
Panutan will receive a 10 percent interest in the richest parts of the Busang gold deposit on the island of Kalimantan, Bre-X said.
In return, Panutan will act as a consultant for Bre-X in Indonesia and help the Calgary, Alberta-based company deal with administrative and technical matters. The deal is conditional on Bre-X's receiving essential permits from the Indonesian government.
""Having an arrangement with this fellow is a bonus,"" said Ing, the analyst. ""The key in Indonesia is who you know.""
""They seemed to have teamed up with a partner with high standing,"" said mining analyst Michael Fowler of brokerage Levesque Beaubien Geoffrion.
""This should clear up most of the (ownership) claims that are out there.""
Merukh told Reuters in Jakarta on Monday that he was optimistic a deal would be reached in November.
But Bre-X's hold on the Busang discovery is shrinking as it works out its problems, said Ing.
He said Bre-X will probably have to give away another slice of the deposit to Merukh and his Australian supporters, Golden Valley Mines NL.
""Slowly and salami-like, Bre-X is getting cut back,"" said Ing.
Officials at Bre-X did not return phone calls to discuss details of the alliance.
",12
"Canadian gold giant Barrick Gold Corp is the most likely contender to partner junior mining company Bre-X Minerals Ltd in developing its huge Indonesian gold deposit, analysts polled by Reuters said.
""We really only have one potential front runner: Barrick,"" said gold analyst Barry Allan with Gordon Capital.
Barrick has demonstrated its interest in Indonesian gold by investing more than US$10 million in exploration and amassing a large land position in Indonesia, analysts said.  
And Barrick's association with a construction company run by the daughter of Indonesia's President Suharto suggests Barrick is carefully setting up its network to control a piece or all of the Busang, Bre-X's 47-million-ounce discovery in the middle of the jungles of Borneo.
""They're trying to position themselves the best they can,"" said one analyst who did not want to be named.  
Analysts who have been closely watching developments around Busang,said Barrick stands the best chance of bidding successfully for a stake in the property because Barrick's own high-priced stock, relative to the value of its assets, will look attractive to Bre-X shareholders.
""In order to pay the sort of multiples Bre-X is trading at, you have to have a high gold multiple in order to land the company or the property at these prices,"" said Rick Cohen at Goepel Shields in Vancouver.  
Bre-X shareholders will likely look for a combination of cash and shares so they can keep a stake in the fortunes of Busang, analysts said.
Bre-X is looking for a heavyweight mining company to buy all or part of the Busang discovery and act as operator of what is expected to become one of the world's biggest gold mines. But the search has been dogged by a dispute with Bre-X's Indonesian partners over ownership.
The spat has caused the Indonesian government to delay granting Bre-X essential contracts of work needed to develop Busang. Without the contracts, analysts said a bid for Bre-X would be unlikely.  
Bre-X has refused to speak to the media since it forged an alliance with Indonesian President Suharto's son last week. But some analysts said Bre-X told them recently the dispute should be cleared up this month.
While Barrick is at the top of the list of companies who could afford to buy into Bre-X, Vancouver-based Placer Dome Inc also has the resources and the attractive stock price to make a bid, analyst Cohen pointed out.
""The size of this deposit and the potential involved here sort of limits it to those two,"" he said.
Others said the Bre-X play was not Placer Dome's style.  
""Definitely Placer has the capability to do it. I just don't think they have the stomach for it,"" said Allan.
Newmont Gold Co, RTZ Corp PLC, Minorco SA and Freeport-McMoRan Copper and Gold Inc could also be in the running for Bre-X. However, their chances are not as good as Barrick's, analysts said, noting that Newmont, Freeport and RTZ already have large exposure in Indonesia.  
While the Luxemburg-based Minorco, controlled by Anglo American Corp of South Africa  ANGL.J., has recently raised US$400 million, the company's stock lacks the high multiple that would make it attractive to Bre-X shareholders.
Minorco could run into political problems if it were to make a bid for Bre-X, said one South African analyst who follows Minorco closely.
""The South Africans might not want to get into a situation that's so blatantly political,"" he said. ""It might backfire on them.""  
If Barrick does eventually succeed in controlling the Busang deposit, it would go a long way to fulfilling Barrick chief executive Peter Munk's dream of building the world's largest gold company to supplant Anglo American, analysts said.
""It fits very nicely with Munk's strategy,"" said one analyst. ""Munk is not driven by money. He wants to have a legacy. He wants to be able to say he started with nothing and ended with the largest gold company in the world.
",12
"North America's largest gold producer, Toronto-based Barrick Gold Corp, reported lower third-quarter earnings on Tuesday due to an after-tax charge and higher operating costs.
""I think their quarter clearly underscores that Barrick has made the transition from a growth company to one that's trying to maintain its existing base,"" said mining analyst Barry Allan of Gordon Capital.  
Barrick's net income for the quarter fell to US$21 million, or US$0.06 a share, from US$67.7 million, or US$0.19 cents a share, in the same period a year earlier.
Earnings were slightly below analysts' expectations.
Barrick pointed to higher cash costs, which rose to US$203 an ounce from US$194 an ounce a year earlier.
The company also took a US$38 million hit to bail out of its Cerro Corona exploration project in Peru.
And Barrick hiked its exploration budget more than 50 percent, to US$46.4 million for the first nine months of the year, compared to US$30.9 million previously.  
Investors seemed to shrug that off. Barrick's shares rose C$0.50 to C$36.15 in heavy trading on the Toronto Stock Exchange. In New York, the stock rose 3/8 to US$26 7/8.
The market seemed positive to Barrick's plans to develop its Pascua mine in Chile and its new Pierina property in Peru, analysts said.
Barrick bought the Pierina deposit last summer through its US$800 million takeover of Arequipa Resources Ltd, based on a minimum of 4.5 million ounces of gold. According to the company, recent drilling on the property suggests the number was conservative.  
Barrick said production at Pierina should begin in late 1999 at a rate of 500,000 ounces of gold a year. Costs should be below US$100 an ounce thanks to a substantial silver credit and high grade gold.
Capital costs should be about US$200 million, the company said. It has eight drills on the property working to define the deposit.
""They are proceeding very aggressively on Pierina,"" analyst Allan said. However, he cautioned that it was risky to make such claims while drilling was still underway and a feasibility study is still a long way off.
At Pascua in Chile, recent exploration suggests the deposit may extend across the nearby border into Argentina, Barrick said. Production is expected to begin in 1999, totaling 400,000 ounces a year at an operating cost of US$240 per ounce. Capital costs are expected of about US$475 million.
-- Reuters Toronto Bureau 416 941-8100
",12
"Bre-X Minerals Ltd. and Barrick Gold Corp. are trying to forge an alliance to mine the huge Busang gold deposit in Indonesia despite a cloud of uncertainty over the rights to the find, Bre-X's chief executive said Thursday.
But the negotiations with Barrick are progressing slowly, Bre-X Chief Executive Officer David Walsh told Reuters.
""We're moving ahead, albeit at a snail's pace,"" he said, adding that legal issues stood in the way of a full agreement. ""We're trying to get them to appreciate our views and the legal stance that we've taken.""
Last month the Indonesian government advised Bre-X to form a joint venture with Toronto-based Barrick to operate Busang. The government, which also requested a 10 percent stake, set a Dec. 4 deadline, but the two companies announced after that date that several issues remained outstanding.
Since then, the Indonesian government has raised doubts about Bre-X's grip on Busang, estimated to contain at least 57 million ounces of gold, worth about $21 billion at today's prices.
""The government has stopped processing the previous application for contracts of work by Bre-X because of various problems,"" Umar Said, Indonesia's secretary-general of mines, told Reuters in Jakarta on Thursday. ""Therefore the previous application by Bre-X that has been delayed must be stopped and must be said to have been cancelled.""
He said Bre-X and Barrick must jointly submit new applications for work on the deposit. Without contracts of work granted by the Indonesian government, Bre-X cannot proceed to exploit the find.
Walsh defended his company, saying its permits and applications for the gold property were ""in good standing.""
He said two Bre-X officials met with Umar in Jakarta Thursday and were assured everything was in line. ""The telephone call that I got from Rolie (Francisco), he was quite pleased with the meeting. He said we're making very good progress in our relationship (with the mines ministry),"" Walsh said.
Bre-X spokesman Steve McAnulty, explaining the apparent contradiction, said: ""What the government wants to do in essence is that if an agreement with Barrick is made, the existing applications will be replaced with new applications.""
Bre-X earlier said that Umar had apologised for the misunderstanding, saying his comments were ""erroneously reported in a Dec. 11 Reuters newswire article."" But Peter Thomas, a Reuter spokesman in London, said the international news and information company was confident the quotations in its Dec. 11 story from Jakarta were accurate.
Umar's comments to Reuters Thursday were essentially repeating what he said on Wednesday.
Despite a barrage of statements from Bre-X on Thursday, Barrick was still seeking clarification on the situation from the Indonesian government.
""We're still seeking clarification and we want to hear directly from the government of Indonesia,"" Barrick spokesman Vince Borg said in Toronto. ""We're not saying anything until we talk directly to the government of Indonesia.""
Bre-X, too, is waiting for the Indonesian government to make a move.
Walsh said he still had high hopes that Indonesian President Suharto would open up an auction for Busang, allowing other mining companies to bid on the project. He said Bre-X had not made a formal request for an auction, but added: ""We understand that the president is reviewing the situation.""
An auction would be advantageous for Bre-X shareholders and for Indonesia, he said. ""We're not soliciting offers. We are getting other phone calls,"" Walsh said. ""I am talking to principals of other companies.""
He said he had spoken to executives at Placer Dome Inc., Newmont Mining Corp. and Teck Corp.
In Vancouver, Placer Dome spokesman Hugh Leggatt said any suggestion of an open auction on Busang was encouraging. His company has made a formal request for an open bidding process.
But gold mining analyst Bill Belovay of CIBC Wood Gundy said Barrick's competitors may be trying to make a deal with Bre-X more expensive for Barrick. ""They're playing games,"" he said. ""One has got to read between the lines.""
Belovay said Busang was so fraught with uncertainty that he has a hard time understanding why the major gold producers would be interested. ""One doesn't even know what percentage (Barrick) will end up with. One doesn't even know how to keep Suharto happy,"" he said. ""To me it's a whole big nightmare.""
Investors were confused by Thursday's developments, analysts said.
Bre-X, whose stock was halted all day on Wednesday, fell 85 cents to C$19.80 in heavy trading of more than 8.6 million shares. Barrick, which lost C$2.75 on Wednesday, regained C$1 to C$39.50 in trading of more than 2 million shares.
",12
"Confusion whirled around Canada's Bre-X Minerals Ltd on Wednesday after Indonesia's mines minister said the government canceled parliamentary approval for Bre-X's application for essential contracts of work for the huge Busang gold deposit.
Bre-X asked that its stock be halted on the Toronto Stock Exchange on Wednesday morning so company officials could explain the news to the public, said Neil Winchester, head of surveillance at the Toronto exchange.
Trading in Bre-X was also halted on Nasdaq.
Bre-X had not yet released a statement late in Wednesday's trading session, leaving investors and analysts trying to assess the impact of the minister's statements on Bre-X's future.
""Does Bre-X lose everything? We have no idea,"" said gold analyst Catherine Gignac. ""It's very unclear. We have to sit tight and wait for news out of Jakarta. There are many options open to the government right now.""
Earlier on Wednesday, Indonesian Mines and Energy Minister Ida Bagus Sudjana spoke to reporters about Bre-X's application for vital contracts of work for Busang.
""We cancel it. The Bre-X contract of work will be processed from the beginning,"" he said.
The secretary-general of the ministry, Umar Said, told a parliamentary commission hearing that the government was checking into representations Bre-X had made to North American regulatory authorities.
""I don't have an answer on what it means,"" said Vince Borg, a spokesman for Toronto-based Barrick Gold Corp .
Barrick has been negotiating with Bre-X to form a joint venture to operate Busang after the Indonesian government asked the two companies to work out a deal.
The move has irked Bre-X shareholders and other major gold companies wanting to bid on the 57 million-ounce deposit, but there were rumors on Wednesday that the Indonesian government may be considering an open bidding process.
""We need to clarify what this means,"" said Borg. ""We are seeking to asctertain from both Bre-X and the Indonesian Mines Ministry what impact the parliamentary committee will have on our negotations.""
Barrick, the world's third biggest gold producer, fell C$2.35 ($1.70) to C$38.90 ($28.55) on the Toronto Stock Exchange on Wednesday and by 1-7/8 to 28-3/8 on the New York Stock Exchange.
A deal to control Busang would take Barrick a long way to achieving its goal of becoming the world's biggest gold producer.
Bre-X has a contract of work for the Busang I area of the property on the island of Borneo. But Busang I contains only an estimated 2.6 million ounces of gold, with the bulk of the precious metal in two adjoining lots, Busang II and Busang III, for which it needs contracts of work to explore and develop.
The permits were held up this autumn because of an ownership dispute between Bre-X and one of its Indonesian partners over the Busang property.
",12
"Everything old is new again in the aging gold zone near Timmins in Northern Ontario.
Exploration has exploded in the area, which has been mined since the early 1900s.
While most Canadian exploration companies are off making inroads in South America and Asia, a handful of innovative and optimistic junior companies are staying behind, hoping to strike gold on their home turf.
",12
"The fate of one of the world's most glittering gold finds landed back in the hands of the Indonesian government on Monday after two Canadian mining concerns said they finally agreed on a plan of joint development.
Canadian gold giant Barrick Gold Corp. and Bre-X Minerals Ltd. ended weeks of speculation on whether they could work together when they submitted a proposal to develop the huge Busang deposit, which contains at least 57 million ounces of gold.
""We've made a submission...which says we can work together if the government can satisfy requests by both parties on a couple of items,"" Bre-X chief executive officer David Walsh said in a phone interview from New York.
""Within the document, there were certain concerns that we've asked the government to give us guidance on,"" said Walsh. ""They are concerns from both parties.""
He would not say what the concerns were, but he said price was not an issue.
The Indonesian government told the two companies in November to form a joint venture, with Barrick gaining 75 percent and Bre-X keeping 25 percent. The two companies were also asked to give the government a 10 percent cut.
The joint submission ""is in accord with the government parameters,"" said Barrick spokesman Vince Borg. Neither company would say what the terms or structure of the proposed deal were or whether Bre-X shareholders would have a chance to vote on it.
They said a government response was expected in due course.
The government has twice extended a deadline for the two companies, with the latest extension being the end of December.
""This to me looks like they're doing what (Indonesian president) Suharto asked,"" said gold analyst Rick Cohen with Goepel Shields in Vancouver.
""There wasn't much else Bre-X could have done at this point.""
The government's statements have angered Bre-X shareholders and hurt the company's once high-flying stock on Canadian stock exchanges.
One group of shareholders has hired high profile Texas lawyers to make sure shareholders get a fair deal.
""Talk of lawsuits is premature. We've got to see an offer first,"" said Greg Chorny, a retired lawyer who lives near Toronto and is spearheading the initiative. ""We'll see what they have on the table, judge it and react appropriately.""
Until Monday, Bre-X had been optimistic that the Indonesian government would endorse an open bidding process for Busang. Mining giants Placer Dome Inc., Newmont Mining Corp. and Teck Corp. have expressed interest.
But the statements from Barrick and Bre-X on Monday suggested there was little hope of an auction process, analysts said.
""We still remain hopeful,"" Placer Dome spokesman Hugh Leggatt said. ""It's not over till it's over.""
Investors appeared to be dumping Bre-X shares on Monday and picking up Barrick shares to participate in Busang, analysts said.
Barrick stock was up C$1.35 to C$40.15 while Bre-X fell C$1 to C$20 by late afternoon trading on the Toronto Stock Exchange.
",12
"The U.S. Environmental Protection Agency lost a bid on Tuesday to freeze shares in Inco Ltd. worth $152 million belonging to international mining financier Robert Friedland.
The EPA had said that Friedland should be held responsible for environmental problems at a former gold mine in Summitville, Colorado. It requested an injunction on the shares until it could sue Friedland for $152 million in costs to clean up the Summitville site.
But an Ontario Court judge Tuesday shot down the EPA's arguments and scolded the agency for the ""nondisclosure and misrepresentations"" that he said riddled its case.
""The evidence has led me to the conclusion that the liability of Robert Friedland is anything but clear,"" Justice Robert Sharpe of Ontario Court's general division said as he read his decision.
He ordered that the Inco shares be held by Friedland's lawyers until Friday afternoon to give the United States a chance to apply for an appeal.
Lawyers for the United States would not say if they would appeal.
""This is the most devastating judgment they've ever had,"" Friedland lawyer Alan Lenczner said in an interview. ""This is just unprofessional.""
Friedland gained the Inco stock as part of Inco's takeover last August of Diamond Fields Resources, a company run by Friedland, which controlled the huge Voisey's Bay nickel deposit in remote Labrador.
In the 1980s, Friedland founded and ran Galactic Resources Ltd., the company that controlled the Summitville mine and the firm the EPA said was responsible for the pollution.
The EPA wanted Friedland's assets frozen since it said it had a strong case against Friedland in Colorado.
But the Ontario judge said the EPA's case was far from strong. The EPA failed to show that Friedland was directly responsible for any pollution in Summitville, he said.
""In my view there are serious shortcomings in the case of the United States,"" he said.
More important, the United States did not present the court with the full and fair information required for an injunction, making it hard for the judges who granted the injunction to make a fair decision, the judge said.
""This is a serious departure from the fundamental integrity of the judicial process,"" he said.
A previous ruling from Sharpe ordered the United States to disclose all documents related to the case, not just the ones the agency had presented voluntarily.
Those documents showed the EPA had doubts about its ability to win the case against Friedland, the judge said.
""The extent of nondisclosure of the United States in this case is serious and fundamental.""
Galactic mined gold at the Summitville mine in the 1980s, using open-pit heap leaching methods where ore is placed on top of rubber pads and then sprayed with a cyanide mixture. Cyanide leaked through the pads, threatening the area's rivers.
",12
"Canada's Bre-X Minerals Ltd could face a multi-billion-dollar lawsuit over the ownership of its spectacular Busang gold deposit in Indonesia.
The young Calgary-based company said Friday that one of its Indonesian partners, PT Krueng Gasui, threatened it and 19 others with legal action in Canadian courts, claiming damages of US$1.9 billion.
""I find it curious that PT Krueng Gasui has chosen to threaten a lawsuit in Canada relating to matters that allegedly occurred in Indonesia,"" Bre-X chief executive David Walsh said in a statement.
""However, we will sit down with them and listen to what they have to say.""
Krueng Gasui owns an undisputed 10 percent of one section of the Busang discovery. It claims it owns up to 40 percent of the entire deposit, but Bre-X says the Indonesian company does not have the documentation to back up its claims.
Bre-X, which closed down C$1 at 20.90 in heavy trading on the Toronto Stock Exchange, said Friday it had received a letter from its Indonesian partner demanding a meeting before November 22 to resolve the dispute.
If Bre-X refuses or does not make an attempt to settle the argument, Krueng Gasui will sue, the letter said.
Bre-X said it has asked its lawyers to arrange a meeting.
""In my opinion, this (threat of a lawsuit) appears to be a last minute act of desperation,"" said gold analyst Chad Williams of Research Capital Corp.
""My question is, why have they waited so long? And why did they choose to do this in Canada?""
The dispute between Bre-X and Krueng Gasui, who is backed by Australia's Golden Valley Mines NL, became public at the beginning of October.
The argument prompted the Indonesian government to delay issuing vital contracts of work until the two parties worked out their difficulties.
Without the contracts, Bre-X cannot proceed with work on Busang and has had to stall its search for a major gold producer to operate or buy the discovery, analysts say.
""The key is how the Indonesian government will react"" to the lawsuit, said Williams.
The threat of a lawsuit gives Bre-X a strong incentive to settle with Krueng Gasui and Indonesian businessman Jusuf Merukh, who controls Krueng Gasui, said gold analyst Catherine Gignac of Deacon Capital.
While most analysts said it was too early to tell whether the Indonesian case would stand up in Canadian court, they said the threat of a lawsuit will definitely force Bre-X to treat the claims more seriously.
""It reinforces the uncertainty with respect to Bre-X,"" said gold analyst John Ing of Maison Placements.
""My sense is this thing is not going away. This is more of a manoeuvring than an actual threat, but it does not look like this will end any time soon.""
Krueng Gasui said in its letter that it will also sue the other Indonesian partners of Bre-X, some Bre-X officers and Canada's Minorca Resources Inc, which has a small stake in the discovery.
Minorca president Roland Horst said his company has no reason to be involved.
Exploration at Busang has outlined 47 million ounces of gold so far, and some analysts predict there could be up to 100 million ounces.
",12
"Barrick Gold Corp. completed its C$1 billion takeover of the promising smaller exploration company Arequipa Resources Ltd. Tuesday, solidifying its position as the world's third biggest gold producer.
""We are pleased that Arequipa shareholders have chosen so overwhelmingly to accept this offer,"" Barrick Chairman Peter Munk said in a statement. ""We now have the opportunity to realize the potential of Arequipa's excellent assets.""
A total of 93 percent of Arequipa shareholders accepted Barrick's C$30 ($21.94) a share bid overnight, and Barrick said it plans to exercise its right to buy the remaining shares.
Barrick said it will have to spend at least C$512 million ($374 million) and issue about 13.4 million shares to complete the takeover, giving the deal a total value of C$1.02 billion ($745 million) based on the closing price for Barrick stock Tuesday.
The acquisition gives Barrick, North America's largest gold mining company, ownership of Arequipa's prize possession, the Pierina gold deposit in Peru.
While exploration on the property is in its early stages, some experts have speculated the deposit has potential reserves of up to 12 million ounces of high-quality gold.
Barrick originally offered Arequipa shareholders C$27 a share July 11 to take over the Vancouver-based company. Analysts initially saw the offer as generous since exploration at Pierina was preliminary.
But Arequipa recently released a fresh batch of drill results from the property, attracting interest from other potential bidders.
On Aug. 16, Barrick raised its offer to C$30 a share to pre-empt a takeover battle.
More drill results were expected soon.
Hours after Barrick officials got the news that the takeover offer had succeeded, two top executives in charge of exploration left to take a closer look at their new treasure.
""They're on their way to Lima right now, to start work on Pierina,"" said company spokesman Vincent Borg. ""What's next is to get a handle on the ore body.""
Drilling on the property will continue at an accelerated pace, he said. Barrick also plans to send in additional drill rigs and prepare for engineering work leading up to an eventual feasibility study.
""Things will start kicking in,"" Borg said.
Analysts were also on their way to Vancouver to scrutinize data collected by Arequipa that Barrick has not yet seen.
Funding the takeover will not be a problem, Borg added. ""We've got a very strong balance sheet. We've got no long-term debt.""
But the company will have to pay interest on its line of credit and bump up its exploration budget to uncover the metal at Pierina, cutting into earnings, one analyst said.
The Arequipa acquisition was a very ""aggressive"" move for Barrick and signals the start of a bold, new expansion strategy for the gold giant, mining experts said.
""I don't think they'll stop here. I think they'll continue on the acquisition track,"" one said.
Barrick would not say if it had its eye on another property. But the company has said in the past it plans to make more than one acquisition.
",12
"North America's largest gold producer, Barrick Gold Corp., is negotiating with Canada's Bre-X Minerals Ltd. to gain control of Bre-X's huge Busang gold discovery in Indonesia, the companies said Tuesday.
Acquiring a stake in Busang would set Barrick well on its way to becoming the world's biggest gold producer, industry analysts said. It is currently ranked third.
Barrick has become increasingly aggressive in moving toward its goal, analysts said. Last summer, it acquired Arequipa Resources Ltd. including its promising Pierina gold property in Peru, for about $800 million.
The companies were negotiating under the guidance of the Indonesian government, which asked Bre-X to form a joint venture with Barrick, Bre-X said.
Calgary, Alberta-based Bre-X discovered Busang, one of the world's biggest gold deposits, in 1994.
Official estimates of Busang have outlined 47 million ounces of gold so far, but industry analysts have said that number could rise to 100 million ounces.
""This is a result of Barrick working very hard behind the scenes to circumvent Bre-X's sale process,"" one analyst said. Bre-X has been seeking a partnership with a major gold producer to operate Busang.
To satisfy Indonesia, Bre-X would keep 25 percent of its stake and 75 percent would go to Toronto-based Barrick.
Bre-X said the Indonesian government ""would appreciate it if the parties could consider a 10 percent participation being given to the Indonesian government.""
The Indonesian government wants Barrick and Bre-X to reach a deal by Dec. 4, or else the government ""will take steps to prevent a delay in the development"" of Busang, Bre-X said.
Development of Busang has been held up by disputes between Bre-X and its Indonesian partners over ownership of the discovery. Bre-X, which controls 90 percent of Busang, said it asked Indonesia's Mines Ministry if other deals would be acceptable, but had not yet received an answer.
A deal between the two companies was not a sure thing, Barrick spokesman Vince Borg said.
With the Indonesian government guiding the Busang negotiations, Bre-X's powers to negotiate a favourable deal appear to be curbed, analysts said.
""There have been some constraints imposed on Bre-X,"" said analyst Chad Williams at Research Capital Corp. in Montreal. ""That's going to negatively impact on how much Bre-X can receive for its interest.""
Barrick has an international reputation at stake and will have to be seen as treating Bre-X fairly, analysts said.
""Given the possible questions that may be raised over how Barrick obtained this special status, it will be essential that they are viewed as treating Bre-X shareholders fairly in any negotiations going forward,"" said one analyst who asked not to be identified.
Barrick shares soared on the news, gaining C$2.45 ($1.82) to C$39 ($29.05) on the Toronto Stock Exchange. They rose $1.75 to $28.875 on the New York Stock Exchange.
Bre-X shares fell in Toronto before the news and held steady at C$20.35 ($15.16), down C$2.20 ($1.64) afterward. The stock has been volatile lately, clouded by the ownership dispute over Busang.
In 1995, Barrick -- already North America's largest gold miner -- produced 3.1 million ounces of gold and had gold reserves totalling 43.3 million ounces.
",12
"North America's largest gold producer, Toronto-based Barrick Gold Corp, reported lower third-quarter earnings on Tuesday due to an after-tax charge and higher operating costs.
Barrick's net income for the quarter fell to $21 million, or 6 cents a share, from $67.7 million, or 19 cents a share, in the same period a year earlier.
Earnings were slightly below analysts' expectations.
""I think their quarter clearly underscores that Barrick has made the transition from a growth company to one that's trying to maintain its existing base,"" said mining analyst Barry Allan of Gordon Capital.
Barrick pointed to higher cash costs, which rose to $203 an ounce from $194 an ounce a year earlier.
The company also took a $38 million hit to bail out of its Cerro Corona exploration project in Peru.
Barrick hiked its exploration budget more than 50 percent, to $46.4 million for the first nine months of the year, compared with $30.9 million previously.
Investors seemed to shrug that off. Barrick's shares rose C50 cents to C$36.15 in heavy trading on the Toronto Stock Exchange. In New York, the stock rose 37.5 cents to $26.875.
The market seemed positive to Barrick's plans to develop its Pascua mine in Chile and its new Pierina property in Peru, analysts said.
Barrick bought the Pierina deposit last summer through its $800 million takeover of Arequipa Resources Ltd, based on a minimum of 4.5 million ounces of gold. According to the company, recent drilling on the property suggests the number was conservative.
Barrick said production at Pierina should begin in late 1999 at a rate of 500,000 ounces of gold a year. Costs should be below $100 an ounce thanks to a substantial silver credit and high grade gold.
Capital costs should be about $200 million, the company said. It has eight drills on the property working to define the deposit.
""They are proceeding very aggressively on Pierina,"" Allan said. However, he cautioned that it was risky to make such claims while drilling was still underway and a feasibility study is still a long way off.
At Pascua in Chile, recent exploration suggests the deposit may extend across the nearby border into Argentina, Barrick said. Production is expected to begin in 1999, totalling 400,000 ounces a year at an operating cost of $240 per ounce. Capital costs are expected of about $475 million.
",12
"Gold giant Barrick Gold Corp. is negotiating with Canada's Bre-X Minerals Ltd. to gain control of Bre-X's huge Busang gold discovery in Indonesia, the two companies said on Tuesday.
The companies were negotiating under the ""guidance"" of the Indonesian government, which asked Bre-X to form a joint venture with Barrick, Bre-X said.
Calgary, Alberta-based Bre-X discovered Busang, one of the world's biggest gold deposits, in 1994.
Official estimates of Busang have outlined 47 million ounces of gold so far, but analysts have said that number could rise to 100 million ounces.
""This is a result of Barrick working very hard behind the scenes to circumvent Bre-X's sale process,"" one analyst said of the news. Bre-X has been seeking a partnership with a major gold producer to operate Busang.
To satisfy Indonesia, Bre-X would keep 25 percent of its stake and 75 percent would go to Toronto-based Barrick, the world's third largest gold producer.
Bre-X said that the Indonesian government ""would appreciate it if the parties could consider a 10 percent participation being given to the Indonesian government.""
The Indonesian government wants Barrick and Bre-X to reach a deal by December 4 or else the government ""will take steps to prevent a delay in the development"" of Busang, Bre-X said.
Development of Busang has been held up by disputes between Bre-X and its Indonesian partners over ownership of the discovery.
Bre-X, which controls 90 percent of Busang, said it asked Indonesia's Mines Ministry if other deals would be acceptable, but had not yet received an answer.
A deal between the two companies was not a sure thing, Barrick spokesman Vince Borg said in an interview.
He said he had no details about how much money or stock would change hands or when a deal would be reached.
With the Indonesian government guiding the Busang negotiations, Bre-X's powers to negotiate a favorable deal were curbed, analysts said.
""There have been some constraints imposed on Bre-X,"" said mining analyst Chad Williams at Research Capital Corp. in Montreal. ""That's going to negatively impact on how much Bre-X can receive for its interest.""
But Barrick has an international reputation at stake and will have to be seen to treat Bre-X fairly, analysts said.
""Given the possible questions that may be raised over how Barrick obtained this special status, it will be essential that they are viewed as treating Bre-X shareholders fairly in any negotiations going forward,"" said an analyst who did not wish to be identified.
Barrick shares soared on the news, gaining C$2.30 to C$38.85 by mid-afternoon on the Toronto Stock Exchange. They rose 2-1/4 to 29-3/8 on the New York Stock Exchange.
Bre-X shares fell in Toronto before the news and held steady in active trading at C$20.10, down C$2.45, after the market digested the news.
Its stock has been volatile lately, clouded by the ownership dispute over Busang.
Busang would set Barrick well on its way to achieving its dream of becoming the world's biggest gold company.
In 1995, the company -- already North America's largest -- produced 3.1 million ounces of gold and had gold reserves totaling 43.3 million ounces.
It has become increasingly aggressive in moving towards its goal, analysts said.
Last summer, Barrick acquired Arequipa Resources Ltd. and its promising Pierina gold property in Peru for about $800 million.
-- Reuters Toronto Bureau 416-941-8100
",12
"Major mining companies may have second thoughts about teaming up with Bre-X Minerals Ltd in its huge Indonesian gold discovery because of Bre-X's new strategic alliance, analysts said.
Bre-X announced this week an alliance with PT Panutan Duta, an Indonesian company controlled by Sigit Harjojudanto, the son of President Suharto.
Part of the deal forms a support services company to be owned 60 percent by the Bre-X group and 40 percent by Panutan.  
""There will be certain companies that look at this and shake their heads,"" said mining analyst Doug Leishman of Yorkton Securities.
The support services company will provide utilities, petroleum products and limestone for the Busang gold discovery on the island of Kalimantan, Bre-X said.
The new company could have control over major parts of operating and capital costs, said Leishman.
""If these things aren't done at normal world market prices, it could add on unwarranted capital and operating costs,"" he said in a telephone interview from Vancouver.  
Any major mining company considering a bid for Bre-X would have to take into account the potential extra costs and the loss of control over supplies that the new alliance brings, he said.
Bre-X is in the middle of a search for a major mining company to act as its partner to help develop the Busang discovery.
""Certain major companies will not like this. It ties them to a supplier, and no one likes that,"" Leishman said.  
Canadian gold giants Barrick Gold Corp and Placer Dome Inc, both said they needed more details about the supply company before they could judge whether it would be a factor in bidding for Busang.
""Does this change things? Unless you know the details of the agreements, you don't know if this changes things or not,"" Barrick spokesman Vince Borg said in an interview. ""It could and it could not.""
Bre-X would not return repeated telephone calls this week to ask for details of the Panutan agreement.  
Analyst Catherine Gignac at Deacon Capital Corp said the agreement is vital to Bre-X's progress.
""I think it's something they should have done two years ago,"" she said in an interview. ""You need a local company that's on side. You need local connections.""
Bre-X stock shot up C$3.50 to C$24.30 on Monday after the alliance was announced, but has slid back to C$22.40 since then as investors began to realize that the Panutan deal does not solve all Bre-X's problems, analysts said.
Bre-X has been plagued by a dispute over the ownership of Busang. One of its Indonesian partners is claiming up to 40 percent of the discovery and has said he will not back down despite Bre-X's alliance with Suharto's son.
The Indonesian government has vowed not to issue essential contracts of work until Bre-X sorts out its problems. The alliance with Panutan is also contingent on Bre-X receiving the permits.
--Reuters Toronto Bureau 416 941-8100
",12
"Canada's Barrick Gold Corp seems poised to supplant two South African mining giants to become the world's biggest gold producer through an unprecedented deal which will give it a majority share in Indonesia's rich Busang gold discovery.
Barrick, whose high-profile board of directors includes a former U.S. President George Bush, on Wednesday confirmed weeks of rumors it was negotiating with Bre-X Minerals Ltd for a stake in the Busang deposit, which contains at least 47 million ounces of gold, possibly more.
The unusual negotiations were requested by the Indonesian government, which has urged Bre-X to hand over 75 percent of its Busang stake to Barrick and form a joint venture.
""If this thing comes off, it makes Barrick the leading gold producer in the world,"" said Fred Ketchen, vice-president of Toronto brokerage ScotiaMcLeod.
""It indicates the advantages to major companies in having such high profile people on their board as George Bush and (former Canadian prime minister) Brian Mulroney.""
Exploration at the Busang property is still in its early days, but already the potential promises to catapault Barrick's production above that of the world's two leading gold companies, Anglo American Corp of South Africa Ltd and Gold Fields of South Africa Ltd.
Barrick started with basically no gold production in 1983 and grew through acquisition and exploration to produce about 3.1 million ounces a year.
Barrick's flamboyant chairman Peter Munk, a fabulously wealthy risk taker well connected in both business and politics, has made no secret of his ambition to make his company number one.
While neither Barrick nor Bre-X would comment on how Barrick managed to persuade the Indonesian government to virtually mandate a deal with Bre-X, pieces of an intriguing jigsaw are beginning to fit together.
Bre-X bought the Busang properties in 1993 and made the huge gold find in 1995. The discovery propelled the company's stock from pennies to over C$200 before a stock split.
After Bre-X announced it would search for a heavyweight mining partner in Busang, the Cinderella story turned sour.
One of Bre-X's Indonesian partners claimed rights to up to 40 percent of the deposit and threatened to sue. The Indonesian government then delayed granting Bre-X its vital mining permits because of the ensuing disputes. ""It's quite clear that Bre-X did not follow protocol in its ownership issues,"" said an analyst who asked not to be named.
So Bre-X set up a strategic alliance with the eldest son of Indonesia's President Suharto, hoping the alliance would help sort out its problems. At the same time, Barrick was worked behind the scenes to gain the upper hand, sources said.
""Peter Munk is a pretty smart guy,"" said Ketchen. ""No grass grows under his feet.""
Barrick developed a relationship with Suharto's eldest daughter, hiring her construction company for future mining work. It developed ties with the Indonesian government, probably using Bush and Mulroney's influence, sources said.
""They (Barrick) really did the end run. There was lots of arm twisting,"" said an executive at a rival mining company.
Spokesmen for both Bush and Mulroney declined comment.
With the Indonesian government almost forcing Bre-X into Barrick's arms, Bre-X has lost much of its bargaining power. ""The government is God here. It holds most of the cards,"" said Michael Fowler with brokerage Levesque Beaubien Geoffiron.
Jakarta has given the companies until December 4 to come up with an arrangement. If they do not, the Indonesian government could take matters into its own hands.
But on Wednesday Bre-X investors seemed confident that Bre-X would win a reasonable deal. They pushed the stock up C$0.65 to 21.00 in heavy trading. Barrick rose 0.75 to 39.65.
""At the end of the day, I believe Barrick will be fair,"" said Fowler. Barrick has an international reputation to uphold and could face lawsuits from Bre-X shareholders if it tries to undermine Bre-X. Barrick may buy part of Busang and act as operator, rather than bidding for Bre-X, analysts said.
""None of the parties involved here will walk away completely unscathed,"" said analyst David Christensen with Merrill Lynch in San Francisco.
With all the intrigue and rumor clouding the Busang developments, investors will always wonder if they've heard the whole story, he said.
",12
"North America's major gold companies are waging an expensive battle to win the coveted title of world's biggest gold producer.
""We want more of the action,"" said Hugh Leggatt, spokesman for Vancouver-based gold firm Placer Dome Inc..
""We want to be positioned in the industry as a bigger player.""
Placer Dome has made a $600 million bid for Highlands Gold Ltd. of Papua New Guinea and the 25 percent of Placer Pacific Ltd. it does not already own.
The company also plans to raise $300 million through a preferred share issue and sell off some small Canadian mine properties.
Placer also has its eye on Bre-X Minerals Ltd., a Calgary, Alberta-based exploration company that discovered what could become one of the world's largest gold mines, the Busang deposit in Indonesia.
But Bre-X is also crucial to Barrick Gold Corp.'s plan to become the world's biggest gold company.
Toronto-based Barrick is already the the world's most profitable gold company and North America's biggest, but it wants to surpass Anglo American Corp. of South Africa Ltd. and Gold Fields of South Africa Ltd. to be the world's largest.
Barrick, through skillful navigation of Indonesian politics, appears to have Bre-X within its grasp.
Jakarta has asked the two companies to form a joint venture to develop the 57 million ounce Busang deposit, with Barrick controlling 75 percent.
Denver-based Newmont Mining Corp. was interested in Bre-X, but when Barrick appeared to gain the upper hand, Newmont turned its sights to Santa Fe Pacific Gold Corp., a mid-tier gold company.
Although Newmont seems to have lost out on its stock swap offer for Santa Fe to a $2.3 billion competing bid from Homestake Mining Co., analysts said Newmont was still hunting for other takeover targets.
""This is a very capital-intensive industry and it's becoming a global industry,"" Newmont spokesman Doug Hock said in an interview.
""In order to compete, you have to have large resources to do that. What you see is the larger players becoming bigger in order to compete.""
Homestake is poised to become North America's second-biggest gold company after Barrick if its takeover of Santa Fe succeeds. Major gold companies are under pressure from their shareholders to keep gold reserves growing, analysts said.
""If one company gets big, they have a lot of clout in the marketplace to acquire properties or resources,"" said gold analyst Michael Fowler of brokerage Levesque Beaubien Geoffrion. With gold bullion prices in a steep decline, the share prices of many mid-tier companies have been hit, making takeovers cheaper, Fowler said.
But he said the current leaders of the gold world, the South Africans, were not caught up in the recent consolidation. ""It looks as though they're losing out to the North Americans,"" said Fowler.
""They're behind the eight-ball really.""
North American gold producers were geared to react aggressively and quickly, but the South African producers concentrated more on paying dividends, he said. ""They don't move very fast.""
Analysts said this round of deal-making was far from over as major gold companies fought it out to satisfy their shareholders' thirst for growth.
Analysts said possible future takeover targets included large mid-tier producers such as Dayton Mining Corp., Battle Mountain Gold Co., Cambior Inc. and Echo Bay Mines Ltd..
-- Sydney Newsroom 61-2 373-1800
",12
"Three Canadian mining companies are caught up in a quarrel over what do with the Petaquilla copper-gold project in Panama.
Adrian Resources Ltd, a Vancouver-based exploration company, Teck Corp, a big Vancouver-based miner, and troubled Toronto-based Inmet Mining Corp are partners in the deposit.
Adrian, which controls 52 percent of the find, says that a feasibility study on the property done by Teck was ""incomplete and not in compliance with existing arrangements.""  
Teck had an option to acquire up to 26 percent of the development by funding a feasibility study and eventually operating and arranging to fund the mine.
But Adrian said Teck has not filled the first requirement to move forward with its option.
""They had a job to do and they didn't complete it,"" Doug Turnbull, a consulting geologist for Adrian, said in an interview on Tuesday.
""Our stand right now is, they do not have their option until they complete their obligations,"" Turnbull said.  
But Teck says there was nothing wrong with its feasibility study.
""The study was a comprehensive assessment of the project, but...the economics would make a production commitment difficult under present metal price conditions,"" Teck's senior vice president of mining operations, Michael Lipkewich, said in a statement.  
Teck hopes to resolve its difficulties with Adrian and work with the junior company and Inmet to continue exploration on the property in search of higher grade ore, Teck's vice-president of corporate affairs, George Stevens, said in an interview.
The ore at Petaquilla so far is low grade, he said.
""The capital costs are higher than we had both anticipated a couple of years ago,"" he added.
He said Teck's agreement with Adrian allows Teck to defer a production decision twice before Adrian ""can make us walk.""  
""Their problem is they came out with a very optimistic scoping study,"" Stevens said. He said Adrian had not revised its projections.
According to Adrian, the study said the property had a geological resource of 3.74 billion tonnes of ore, including 31.8 billion pounds of copper and 9.8 million ounces of gold. The study said the proven reserves came to 1.46 billion tonnes of ore containing 13.74 billion pounds of copper and 3.17 million ounces of gold.
Teck's numbers were considerably lower but the company had not done sufficient infill drilling, Adrian's Turnbull said.  
The spat has knocked Adrian's stock down from C$3.85 on Friday to C$2.07 by Tuesday on the Toronto Stock Exchange.
Caught in the middle of the dispute is Inmet, which has just written off a series of mining interests and is struggling to regain investor confidence. Inmet controls 48 percent of Petaquilla.
""Under the current metal price conditions, we agree with Teck,"" Inmet's chief financial officer Richard Ross said in an interview.
But he said the company did not have anything to add to the dispute.
((Reuters Toronto Bureau (416) 941-8100))
",12
"Production at the huge nickel deposit at Voisey's Bay in remote Labrador is still years away, but already it risks falling behind schedule because of environmental concerns and pressure from aboriginal groups.
Inco Ltd, the Toronto-based nickel giant that won control over the spectacular nickel, copper and cobalt property after a bidding war last spring, planned to start open pit production by 1998 and full-scale underground mining by 2000.
",12
"Shareholders are troubled about negotiations between Barrick Gold Corp and Bre-X Minerals Ltd over the huge Busang gold deposit in Indonesia.
Some Bre-X shareholders are concerned they may be pushed into a bad deal; while some Barrick shareholders are worried they could emerge from any deal with a poor reputation.
""Shareholders are very vocal at this point,"" gold analyst Michael Fowler of brokerage Levesque Beaubien Geoffrion said Friday. ""And you've got some influential shareholders here.""
Many big institutions hold both stocks, he noted.
""I think it's the responsibility of Barrick to be responsible here, given that Bre-X has a gun to its head.""
Earlier this week, Calgary-based Bre-X said the Indonesian government had told it to negotiate with gold giant Barrick Gold to carve up Bre-X's stake in Busang.
Jakarta wants Barrick to control 75 percent and Bre-X to control 25 percent, while both are to consider giving a 10 percent stake to the Indonesian government, Bre-X said.
""It's got to be a fair deal. Barrick can't screw Bre-X shareholders or there will be hell to pay,"" said Fowler.
If Barrick makes what is seen as a fair deal with Bre-X, shareholders may be prepared to ignore the fact that Bre-X is negotiating with a gun to its head, oberved a portfolio manager at one Canadian institution that has significant holdings in both companies.
""Everybody can sort of hold their nose and say, this thing smells, but it doesn't smell too badly,"" said the source, who asked not to be indentified.
However, if Barrick takes advantage of its favorable position and does not treat Bre-X fairly, ""then it smells very, very bad,"" the portfolio manager said.
""The constraint on Barrick is that they have to go back to the capital markets from time to time doing other deals. ""It's a question of sawing off somewhere where it smells but doesn't smell too bad,"" he told Reuters.
Retail shareholders are expressing their worries too.
One Bre-X shareholder, Gregory Chorny, who said he and his family owned about one percent of Bre-X's issued shares, circulated a letter to other shareholders on Friday, urging them to register their concerns by faxing a form letter to Barrick and Bre-X.
""I wish to register my concern with these developments and put both Bre-X and Barrick on notice that any transaction struck between them must fully represent full and fair value to Bre-X shareholders,"" the letter reads.
""I and other like-minded Bre-X shareholders plan to watch developments closely and are prepared to take appropriate action to ensure the rights of Bre-X shareholders are fully respected.""
The letter demands access to any internal or external resource calculations so that shareholders can better judge the fair value of any deal between the two companies.
""We've had 4 1/2 months of drills working on that site and no published results. How can anyone possibly comment on the value?"" Chorny told Reuters.
While Chorny acknowledged it is too early to judge the success of campaign, he said he had consulted with  ""several dozens"" of concerned Bre-X shareholders.
A fax machine at Bre-X was reportedly spewing out letters from shareholders at full tilt. Barrick spokesman Vince Borg said his company's fax machines were no busier than usual.
",12
"Consolidated Eurocan Ventures Ltd , a small Canadian mining exploration company, was poised to gain control of one of the world's largest unexplored copper-cobalt discoveries on Friday.
The Zaire government agreed to a deal with the Vancouver-based company backed by Geneva-based Swedish financier Adolf Lundin, spokesmen from both sides told Reuters in Zaire. The deal gives Gecamines, Zaire's state-owned mining company, a 45 percent stake in the huge Tenke Fungurume deposit. Eurocan will have a 55 percent stake, sources said.  
A spokeswoman for Eurocan in Vancouver said she expected official confirmation by Monday morning.
Eurocan has said it expected to win the property for US$250 million and a commitment to develop the property.
""It's a very satisfactory deal for Eurocan, if they've got it,"" said Andrew Milligan, president of Cornucopia Resources Ltd, a Vancouver-based company that had also had its eye on Tenke Fungurume.
""It's one of the best projects anywhere in the world.""  
Cornucopia had formed a tentative consortium last spring with metals giants Inco Ltd and Phelps Dodge Corp, hoping to submit a proposal for the project.
But Eurocan's pact freezes Cornucopia out of the running.
The deal gives a hint of some stability in Zaire's business world, said Ken MacLeod, president and chief executive of International Panorama Resource Corp, another Vancouver-based company exploring in Zaire.
""It gives a signal that the government is working and it's in business,"" he said in an interview. ""From an investment perspective, it's a powerful message.  
""It means when Gecamines gets involved in an agreement, the government backs them up.""
But some analysts were concerned about the high risks involved in doing business in Zaire, a country plagued by political uncertainty and overrun by crowds of refugees from neighboring Rwanda.
""Zaire is a basketcase,"" said mining analyst Tony Hayes at brokerage Credifinance in Toronto.
The amount of money Eurocan will have to invest and pay for the project is ""ridiculous"" for the return and the risk the company can expect, he said.
Milligan estimated it would cost about US$300 million for initial development of Tenke Fungurume and up to US$3 billion in total capital costs.
The project was previously explored by a consortium led by Anglo American Corp of South Africa Ltd, which invested almost US$300 million in the project in the 1970s but walked away because of political risk.
-- Heather Scoffield, Reuters Toronto Bureau 416 941-8104
",12
"Investors with ""exploration fever"" have latched onto Black Swan Gold Mines Ltd, hoping drill results expected this week will line their pockets with paper profits.
""There certainly are rumors that the results they've got from their Brazilian exploration are going to be positive,"" said Fred Ketchen, senior vice-president at ScotiaMcLeod.
""It's all part of the current phenomenon -- exploration fever.""
Black Swan was the most active stock on the Toronto Stock Exchange on Tuesday after heavy trading on Monday and last Friday. The stock was down C$0.05 to C$1.45 on volume of 2.6 million shares Tuesday.
But the flurry of speculative interest in the stock is not linked to anything concrete, company spokesman Richard Simpson said from the company's headquarters in Vancouver.
Drilling results from Black Swan's 50 percent-owned gold project in Brazil likely will released until later this week, he said, adding that the results are very preliminary.
""I know there'll be gold in the hole,"" said Simpson. ""As to what grade it will be, whether it will be above or below the expectations of the market, I simply don't know. They're always looking for pretty jazzy stuff.""
The rumor in the market is that the results will be good, and investors, especially institutional investors under pressure to show robust returns, are placing their bets, analysts said.
Mutual funds that burnished their performances on high returns from investments in such high-flying explorations stocks as Bre-X Resources Ltd and Diamond Fields Resources are quick to pile into junior mining shares with any hint of potential.
Although many previously Hot junior mining stocks cooled off quickly in June and July, investors seem to have forgotten their earlier rough ride, said Barry Cooper, a mining analyst at Wood Gundy.
""The 'once burned twice shy' saying doesn't work in junior gold stocks,"" he noted.
The attraction with Black Swan is a limited downside, since the stock has been trading around the C$1.50 mark, added ScotiaMcLeod's Ketchen.
""Whereas the upside potential, if they come up with something, can be rather impressive.""
Black Swan shares its Cata Preta gold project in the Brazilian State of Minas Gerais with Sul America Mineracao Ltda, a Brazilian company.
Black Swan is in the midst of negotiating a takeover of its partner to gain a 100 percent interest in the Cata Preta and acquire Sul America's other Brazilian properties.
The drill results expected this week are from hole 23, the first of a 30-hole series expected to be completed by the end of the year.
Black Swan plans to drill a total of 150 holes to determine how much gold lies beneath a surface deposit already explored.
-- Reuters Toronto Bureau 416 941-8100
",12
"No final deal was in sight Wednesday for Bre-X Minerals Ltd. and Barrick Gold Corp., which are in the midst of forging a deal on one of the world's biggest gold deposits -- Indonesia's Busang.
As a Wednesday deadline slid by, Bre-X and Barrick said they were still trying to hammer out several issues, leaving the market to speculate about the status of negotiations.
""Several points remain outstanding,"" said Barrick spokesman Vince Borg. ""An overall deal has not been reached.""
The Indonesian government directed Bre-X to form a joint venture with Barrick by Dec. 4, with Barrick getting 75 percent of Bre-X's stake in the rich gold discovery and Bre-X keeping 25 percent. The companies were invited to consider giving the Indonesian government 10 percent of the rich find.
As the clocked ticked, Bre-X issued a statement saying no new deadline had been set by the Indonesian Mines Ministry. It said it expected the Ministry of Mines to clarify its stand on the outstanding issues ""in due course.""
Sources close to the talks said Indonesian mining officials had left Jakarta and would not be back until Dec. 9.
""I think both sides are probably worried about the so-called deadline, which has come and gone,"" said gold analyst John Ing with Maison Placements Canada Inc. ""It's back in the lap of the Indonesians.""
In Jakarta, a senior Indonesian mines official said the government of President Suharto would explore other possibilities to develop Busang if the two companies fail to clinch a deal.
""If they cannot reach an agreement, the government will take the necessary and appropriate action ... to expedite the development of Busang's resouces,"" Umar Said, secretary-general of the Mines Department, told a news conference in Jakarta.
""What the action will be ... I have to get back to the government. This is not my playground,"" he added.
Meanwhile, investors pushed up Bre-X's stock C$1.30 to close at C$20.10 ($14.84) in heavy trading in Toronto Wednesday, while Barrick rose C$1.45 to C$39.30 ($29.01).
""People think there's an agreement that will come out sooner rather than later,"" said gold analyst Catherine Gignac of Deacon Capital in Toronto.
But she noted that the uncertainty surrounding the negotiations was preventing Bre-X's stock from rising to meet the level of rumoured offers of about C$25 ($18.50) a share from Barrick.
""We're actually hearing that (the deal) is done and they're just dotting the i's and crossing the t's,"" Gignac said. ""Everything has been set. We just don't know the details.""
But a source close to the negotiations said he understood that the two companies did not have a deal and were trying to get a deadline extension from the Indonesian government.
The latest deadline is the second the two companies missed. They let a deadline at the end of November slip by too, sources said.
Possible stumbling blocks in the talks include price, how to pay for the deal and a series of threatened lawsuits over Bre-X's claims, analysts said.
Waiting to pounce on the deposit if the Indonesian government does open the door to outside bidding is another North American gold giant -- Placer Dome Inc., which seemed to be positioning itself in case the Barrick, Bre-X talks fail.
""I don't think today's deadline had any great significance,"" Placer spokesman Hugh Leggatt said in Vancouver, British Columbia. He added that the company still hoped to be allowed to form a partnership with Bre-X to develop Busang.
""We're not discouraged. It's going to be a long process,"" he said.
Newmont Mining Corp. and Teck Corp. also expressed an interest in Busang, which is located deep in the jungle in East Kalimantan on the island of Borneo.
",12
"Canada's Trade Minister Art Eggleton is in good health and will leave Tuesday night for an international conference in Manila, despite being taken to hospital earlier Tuesday after he collapsed at a meeting here.
""The last thing I heard was he's still going to Manila,"" Eggleton's spokeswoman Elaine McArdle told Reuters by telephone from in Ottawa. ""His health is great. It doesn't appear that anything is broken.""  
Speakers had just finished addressing a luncheon audience of businessmen and trade officials at Toronto's Westin Harbour Castle Hotel when Eggleton, 53, tripped as he got up to leave the head table.
""There was a gap in the floorboards and he went right through them,"" McArdle said.
Other dignitaries helped Eggleton, pale and shaky, to a chair where he waited with his head resting on a table until ambulance attendants arrived. The attendants strapped on an oxygen mask and carried Eggleton out on a stretcher.  
Witnesses said he twisted his ankle as he fell and landed on his knee.
Eggleton had been expected to speak at the luncheon with Chilean President Eduardo Frei. Canada and Chile signed a free trade pact in Ottawa on Monday.
Eggleton plans to leave for Manila on Tuesday night for the Asia Pacific Economic Co-operation (APEC) annual meeting and leaders summit.
He is scheduled to accompany Canadian Prime Minister Jean Chretien to China and Japan after the APEC conference.
",12
"Some of the world's most influential gold producers are upping the ante as Wednesday's deadline edges closer for Canada's Bre-X Minerals Ltd. to make a deal with gold giant Barrick Gold Corp.
At stake is the rich Busang gold deposit in Indonesia. New estimates released Tuesday suggest the discovery contains more than 57 million ounces of gold that can be mined at the low cost of $96 an ounce.
The Indonesian government has virtually mandated that Bre-X must carve up its find, with Barrick getting 75 percent of Bre-X's stake and Bre-X 25 percent.
And the government of President Suharto has also made it plain it would ""appreciate"" a stake of 10 percent in Busang.
But now, some major figures in the gold mining world are protesting that the deal ordered by Indonesia is unprecedented and unfair. They are pressuring Jakarta to allow rival bids.
""I think it's Bre-X's natural right to have a say who their partner will be,"" John Willson, chief executive officer of Vancouver-based Placer Dome Inc., said.
Placer Dome, Canada's second biggest gold company and one of the world's largest, wants to bid on Busang, and Willson said Newmont Mining Corp. and Teck Corp. have also been at the negotiating table for months.
The three heavyweight mining companies were abruptly shut out of the process last month when Indonesia forced Bre-X into Barrick's arms.
Analysts have speculated that Barrick used its business connections with Suharto's eldest daughter, as well as connections through former U.S. President George Bush and former Canadian Prime Minister Brian Mulroney, Barrick advisers, to sway the Indonesian government.
""We were clearly disappointed -- that's a nice way of putting it -- that all of a sudden the thing went away from us,"" Willson said. ""Something has been going on that is not kosher in the West.""
Willson said he thought the Indonesian government could be persuaded to consider other offers for Busang. Otherwise, the country would face international condemnation and risk losing foreign investment, he said.
""This is indeed unusual. The message to the whole market is we risk our money big time to find gold, and if we really find the jackpot, somebody's going to come along and tell us what to do with it.
""It would put a great big red flag on Indonesia.""
Placer, Newmont and Teck must now await word from Jakarta on whether they will be allowed back into the bidding process.
Indonesia's consulate in Toronto declined to comment on the matter Tuesday. Newmont Mining also would not comment.
Teck's chief financial officer, John Taylor, said the company would consider bidding for Busang if Indonesia opened the door to an auction process, but would likely seek a partner in any bid.
""That's a pretty big bite,"" Taylor said.
Willson, however, noted Placer Dome could comfortably afford to take on Busang alone, despite a recent $600 million bid for a larger stake in Papua New Guinea's Porgera gold deposit.
He would not say what price Placer was willing to offer, but ""it's clearly worth considerably more that what's being contemplated,"" he said after looking at the new resource calculations for Busang.
The resource calculations are in line with analysts' expectations, said mining analyst Bruno Kaiser with CIBC-Wood Gundy in Toronto, who noted that most analysts believe Busang holds a lot more gold than has already been outlined.
Kaiser said he was not concerned about the Dec. 4 deadline ticking past without news from Jakarta.
""My take on it is that the Indonesian government imposed this Dec. 4 deadline primarily as a means to facilitate bids and get the process moving,"" he said. ""You get everyone who is interested and serious stepping up.""
But analyst Catherine Gignac with Deacon Capital in Toronto expressed doubts about the Indonesian government soliciting more suitors for Bre-X. ""Why should the Indonesian government provide the market with a bidding process just because we want them to?"" she said.
North America's gold miners are not alone in seeking a piece of Busang. Bre-X's Indonesian partner Jusuf Merukh has claimed up to 40 percent of the deposit. And the former Australian owners of the property say they also have rights to part of the riches.
",12
"Royal Oak Mines Inc is reshaping its operations to concentrate on its low-cost gold deposits in the Timmins area and British Columbia, the company president said Wednesday.
""We have refocused our strategy to bring on very low-cost production,"" Peggy Witte said in an analysts' conference call. ""It's very clear that's where Royal Oak's future lies.""  
The Kirkland, Washington-based gold producer said Wednesday it will close down its mine in Hope Brook, Newfoundland, and write down the reserves at its Colomac mine in the Northwest Territories.
Royal Oak expects to take C$37.4 million in charges because of the Hope Brook and Colomac decisions. After tax, the charges will amount to a decrease in net income of about C$27 million or C$0.19 a share in the fourth quarter of 1996.
The company plans to move most of the mining and mill assets from Hope Brook to its Matachewan project in northern Ontario.  
""It's a very positive story for us being able to redeploy those assets, and we did not want to spread our senior management too thin,"" Witte said, explaining the decision.
Hope Brook will shut down in the third quarter of 1997, while Matachewan is expected to start production in the second half of 1998, Royal Oak said.
The company recently increased its gold reserves at its Timmins and Matachewan properties, decided to expand its Pamour Mill and is putting together a feasibility study for an expanded open pit in the area.  
The northern Ontario mines, along with production expected in 1998 from the Kemess copper and gold mine in British Columbia, will boost production and decrease costs significantly for Royal Oak, said chief financial officer Jim Wood.
The company expects to produce 375,000 ounces at a cash costs of US$325 an ounce in 1997. In 1998, production will rise to 500,000 ounces at a cost of US$250 or US$260 an ounce. By 1999, the company expects up to 750,000 ounces at about US$240 an ounce, and in 2000, production should be almost one million ounces with costs in the low US$200s, Wood said.  
""Although we have closed out Hope Brook cash costs are somewhat disappointing at Colomac, the future of the company, with the Pamour expansion, looks very bright for us in terms of production and our average cash costs,"" he said.
The company reported third quarter profits of C$10.2 million or C$0.07 a share, up from C$6.2 million or C$0.05 a share a year earlier.
Gold production rose 13 percent in the quarter to 104,012 ounces from 92,159 ounces during the third quarter last year.
The increase came from the Pamour mine in Northern Ontario, which produced higher grade ore.  
Revenue was 48 percent higher in the third quarter, mainly because of a successful hedging program. The company realized a gold price of US$543 per ounce, compared to US$418 an ounce at the same time last year.
Royal Oak expects to produce about 400,000 ounces of gold in 1996 at a cash cost of US$335 an ounce. The lower production level and increase in cash cost from previous estimates are a result of lower grade ore at Colomac.
-- Reuters Toronto Bureau 416 941-8100
",12
"Exporters have united to oppose an Ivorian government plan to make them liable for income tax owed and frequently unpaid by upcountry buyers, exporters said on Tuesday.
Tax laws approved by parliament in February allowed for deductions equivalent to about 7.5 percent of commission paid by exporters to agents buying cocoa on their behalf in the 1996/97 season, they told Reuters.
""Because we hold export licences does not mean we are qualified to act as tax collectors. We are in discussions with the government,"" GEPEX exporters' forum president, Rene Ekra, told Reuters on Tuesday.
One exporter said the dispute had contributed to export delays at the start of the 1996/97 marketing season but a decision was expected by the end of the week. ""Banks are ready to finance but we still do not have an export rate to work on and now we are into November,"" he said.
Exporters say the plan means a deduction of about 2.5 CFA per kilo from buyers' commissions. Buyers are currently paid a 1995/96 commission rate of about 32 CFA per kilo of collected cocoa, but Ivory Coast opened its 1996/97 cocoa marketing year October 24 without setting new reference rates for exporters and buyers along the farmgate-to-shipment marketing chain.
Exporters say if the law is applied, tax collection costs should be given by the government to exporters.
""We would also have to find ways of getting buyers to pay up and cover the tax collection costs if it goes through,"" one told Reuters.
Donors say the plan is part of a clampdown on tax evasion by up-country buyers.
""Buyers must pay their income tax and the government has found it difficult to get them to pay. The idea is to get exporters to pay it up front,"" said a bank official.
Exporters say the tax plan is poorly defined as well as misdirected.
""We cannot pay such amounts in advance,"" said one. ""For every thousand tonnes exporters would have to pay the govenment 2.5 million CFA (francs).""
Some up-country buyers said they would avoid the tax by setting up as GVCs, tax-exempt buyers' cooperatives currently under government review for lack of accounting transparency.
""It would be easy to hire someone to set up on that basis,"" said one trader, but cooperatives say laws under consideration could make such a move more difficult.
""Buyers might set up as GVCs but it will be harder in future. Accounting standards might be tightened later this year and licensing could be stricter,"" a UNECACI farm cooperative leader said.
Exporters say the law might not be implemented. ""It is possible. GVCs crop up and disappear overnight. There is talk of tightening up GVC management but no sign of it yet."" said one.
The government has had problems identifying traitants because of the sporadic nature of their work and their locations, said one international banker. ""Exporters usually know whom the buyers are as well as where they are,"" he added.
--Abidjan Newsroom + 225 21 90 90
",32
"Unilever subsidiary Blohorn will overhaul palmoil plantations and nine factories recently bought from Ivory Coast, a senior Blohorn official said.
""The strategic issue for us was to win vertical control of raw supplies as there was a danger of others exporting for overseas revenue,"" group vice-president Martin Rushworth told Reuters in an interview.
The supplies from the plantations and factories, in which Blohorn now holds a 34 percent stake, total 190,000 tonnes of annual oil production, he added.
Ageing plantations on 36,000 hectares would be overhauled as some trees were nearing the end of their 28-year productive life and needed replacing at a rate of 4-6 percent a year.
""In some plantations trees have an average age of 22 years so there will have to be extensive replanting,"" Rushworth said.
Nine crop processing factories would also be refurbished over two years.
Palmoil prices (CIF Europe) averaged around $380 a tonne in 1993, $680 in 1994, $650 in 1995 and $540 in 1996, he said.
""Export prices are now around $560 a tonne but we think they will stabilise at around $540 a tonne in 1997,"" said Rushworth.
Blohorn's tender for leading stakes in the two state-owned Palmindustrie blocks were accepted by Ivory Coast and signed on November 28 and December 27.
Blohorn linked up with competitor SIFCA to complete the purchase along with the Belgian firm SOCFIN SA for its technical expertise in plantation management.
""Output will be used for domestic production of cooking oil and soaps with only consumer goods and refined oil for export,"" he said. Sites would sell palmoil to Blohorn at going-rate transfer prices and operate largely as separate entities.
Other Palmindustrie capacity of 40,000 tonnes was taken by the Belgian firm SIPEF with Ivorian SAFIPAR taking the remaining 35,000 tonnes.
Blohorn, whose main oil-based domestic brands are Dinor cooking oil and Savon de Marseille, bought three sites sold as two large blocks. Shareholders paid a total 64.5 billion CFA and took on 24 billion CFA in staggered government debt.
Palmoil processors are also seen as potential cocoa grinders but Rushworth said Blohorn would only do so from June to August to help with overheads during slack periods.
Ivory Coast's donor-sponsored privatisation programme saw 26 companies sold between 1991 and 1995 and another 10 in 1996.
Blohorn's main 34 percent shareholding is followed by Ivory Coast (30 percent), SIFCA (17 percent), village farmers (11 percent), SOCFIN (5 percent) and employees (3 percent).
-- Abidjan newsroom +225 21 90 90
",32
"Ivorian 1996/97 cocoa arrivals picked up in early January, pushing the total to 640,000-650,000 tonnes by January 13, analysts and exporters said.
This was still down on the 730,000 tonnes recorded by January 13 last year.
The 1996/97 figure includes 50,000 tonnes of arrivals in the first three weeks in October as the season opened three weeks late.
""The problem now is that there is too much cocoa in the port,"" said one exporter with offices in Abidjan and San Pedro.
""Some exporters in San Pedro are slowing down (buying) because there is no storage space left.""
Sources close to the Caisse de Stabilisation marketing board gave an even higher arrivals total -- 707,000 tonnes by December 27, excluding the pre-season 50,000 tonnes. Exporters said the estimate was too high.
One exporter put arrivals lower, with 185,000 tonnes at San Pedro and 450,000 taken to Abidjan.
Other exporters put total arrivals at 555,000 tonnes by the end of December after 450,000 for mid-December.
""Cocoa is coming in at about 60,000 tonnes (a week) so there's a lot of cocoa about,"" said another exporter. ""Quality is still quite good with bean sizes averaging 95-97 (beans per 100 grams),"" he added.
Humidity levels were around 9-10 percent due to a lack of harmattan drying winds usually seen at this time of year, he said. Exportable quality is 7-8 percent.
Up country buyers noted, however, that humidity levels had already fallen from 11 percent noted in December.
""Bean sizes are around 95-97 per 100 grams but humidity is already down to 9-10 percent because of the sun,"" said one Gagnoa buyer, adding that the harmattan had arrived there.
National weather data showed no rains at eight out of 10 monitoring stations in the first 10 days of January. Rain at the other two was negligible.
Up-country buyers said bush tracks had now dried out after late-December problems and collection rates were normal.
""There is still a bit of cocoa out there and we expect February will be a bit better than usual,"" said Husseini Khaled, a buyer working around Gagnoa. ""As for the mid-crop question, we don't know yet,"" he added.
Buyers said they were paying at least the minimum recommended farmgate price of 315 CFA a kilo despite poor world prices and initially poor exporter offtake.
Exporters had originally said they would begin marketing a large coffee crop earlier then usual. ""Some people turned attention back to cocoa as coffee quality turned out to be terrible,"" said one exporter.
San Pedro exporters said they expected strong arrivals to continue at least into early February. Other exporters said they expected a late-January tail-off.
Shipping forwarders said warehouses were filling up but did not give precise warehouse figures. One source said at least 350,000 tonnes of cocoa had been exported since October 1.
""People talk of between 100,000 and 300,000 sitting as stock,"" said the port source. ""A middle figure would be a good working assumption,"" he added.
The industry's focus is now turning to final estimates for the mid-crop, which so far has been put at anything between 70,000 and 200,000 tonnes.
Pod counters were expected to complete up-country tours in January before firming up estimates.
-- Abidjan newsroom +225 21 90 90
",32
"The Inter-African Coffee Organization (IACO) will focus on low world prices at its 1996/97 coffee season annual meeting in Abidjan on November 17-19, IACO's chief economist said on Friday.
""In spite of a world export programme the indicative robusta price is only at 73 cents per pound. This is too low,"" chief economist Donald Kaberuka told Reuters on Friday.
""We do not aim to set a target price but today's composite price for robusta and arabica, 99.29 cents, is also low,"" he said. ""Any recommendations will be sent to the Association of Coffee Producing Countries (ACPC).""
Last May the ACPC, which represents 80 percent of world production, agreed to limit green coffee exports from its 14 members to 53.5 million 60-kg bags in the year to June 1997 after 48.9 million in 95/96.
Africa's total 1996/97 export allocation under the ACPC plan is 12,840,000 bags, or 24 percent of total ACPC target.
The 25-member group of African IACO exporters were very concerned by persistent low prices on the world markets despite a producer plan to limit exports, Kaberuka said in an interview.
""The market could be in balance this year as there is only a small production surplus. We are perplexed by the low prices and want the plan to have an impact,"" he added.
Kaberuka, who is in charge of ACPC target management for IACO, said IACO provisions allowed a review of the export plan after six months, meaning December.
IACO's 25 members would study the situation and then decide if action was needed. Full agenda details are not yet available.
IACO last met in Gabon in November 1995 to review volatile world markets, coffee rehabilitation plans and financing deals for exporters.
This time last year the world export plan aimed to stabilise market prices at 135 cents/lb for robusta and 165 cents for arabica. Prices then were 114 and 128 cents respectively.
The current export targets were set at the May ACPC review of the export plan, now in its second year (July 96-June 97). In 1995/96 the ACPC set total world exports at 60.4 million bags, including non-ACPC producers. --Abidjan Newsroom + 225 21 21 90
",32
"Shipments of cocoa from Ivory Coast's main port of Abidjan are matching arrivals, leaving intact a standing stock of about 90,000 tonnes reported at the end of October, shipping sources said on Tuesday.
""The majority of transporters are shipping cocoa but some are still cautious as freight rates have not been agreed,"" one port source told Reuters. ""Total stocks have not really changed since last week,"" he added.
Port sources said arrivals seemed to be picking up with increasing numbers of trucks arriving.
Shipping companies and exporters last week said delays in issuing freight rates and export licences had blocked some cocoa at Abidjan. Exporters now expect 1996/97 export licences to be issued this week.
""The Caistab (marketing board) told me licences would be out this week"" said one exporter. ""Some exporters have decided to wait for their licences and bank finances before buying anything but some are going ahead.""
Shipping companies say they would continue shipping at the 1995/96 reference freight rates agreed with the Caistab last November.
Shipments at the start of the 1995/96 cocoa marketing season were delayed from early October to mid-November when shipping companies refused to cut their freight rates by 25 percent as requested by the Caistab. A cut of seven percent was evenutally agreed.
""So far we have avoided a repeat. Shipments have carried on so far but we will just wait see what happens,"" said one port source.
Rates for this year are widely expected to remain unchanged.
Shipping companies have been asked by government agencies to submit detailed information on freight rates and projected volumes for next year but say prices are confidential business information.
Caistab spokesmen were not immediately available for comment and no date has been set for fixing the reference freight rates for the 1996/97 cocoa season.
--Abidjan newsroom +225 21 90 90
",32
"A prolonged dry spell In Ivory Coast has stretched into the small rainy season, but its impact on mid-crop cocoa pod setting and main crop growth may not be clearer until later this year, crop and weather analysts said on Wednesday.
""The weather is very, very strange. We have a mixture of harmattan (hot, dry) conditions in some places but light rains nearby,"" said one crop analyst. ""Pod setting and progression could be affected. It just depends on rains before December as the front passes,"" he added.
Weather analysts said the front that usually heads southwards in September, giving Ivory coast a light rainy season between September and December, had finally moved south over the weekend. But rains were still far below average.
""It is now over Dimbokro (seventh northern parallel) but rains are well over a month late. So far we have not had a small rainy season,"" said one weather analyst.
Weather data showed less than 50 percent of average October rains fell in Ivory Coast. Data for early November were not available to build a clear picture of the overall rainfall pattern in early November, said analysts.
""Flowering and soil moisture vary greatly between regions but cherelle (early pod) setting should be clearer later in November,"" said a crop analyst who recently toured Ivorian farms.
Up-country buyers around Daloa told Reuters intermittent rains had started in the centre-west cocoa region but more rain was needed for late main and early mid-crop development.
Ivory Coast opened its 1996/97 cocoa marketing season late on October 24 after rain deluges in July and August. Bean moisture was no longer a problem, they said.
""Now there is a nice mixture of rain and sun but we need more rain up to the end of the year to avoid small mid-crop bean sizes,"" said one buyer. Beans sizes of over 110 per 100 grammes are not considered to be of export quality.
Crop analysts said soil moisture levels were low in some areas and could affect pod sizes if sunny weather continued. One crop analyst told Reuters he had only seen rain on two out of his 10 days of treking around the whole cocoa belt.
Official weather data showed average or above rains in Man and Gagnoa, but rain deficits elsewhere, particularly south of Gagnoa, around Sassandra, Abidjan and Adiake.
Sunny conditions had prevailed in the south as monsoon air was at higher altitudes south of Gagnoa than usual, said the weather analyst.
""The sun is burning off low clouds,"" he said.
Elsewhere, one crop analyst said the danger in Ghana of blackpod, a fungus hitting cocoa pods in prolonged cool and damp spells, had gone after regional attacks in September. Rains there had been heavier than in Ivory Coast.
--Abidjan Newsroom +225 21 90 90
",32
"Foreign Minister Saleh Kebzabo defended Chad's new policy of summarily executing alleged criminals, saying it was justified because the country's courts systematically freed wrongdoers.
Human rights groups say scores of Chadians have already been executed by security forces, including 11 people shot in public on New Year's eve.
""The policy has worked. We no longer see the levels of violence before it was introduced,"" Kebzabo told Reuters in an interview in the capital N'Djamena on Saturday.
His comments were the most senior official confirmation of a decree issued by President Idriss Deby. An order to police commands in the country to forget the courts when dealing with criminals caught in the act was leaked to reporters last week.
""It came to force around the beginning of November,"" Kebzabo said. ""If you want to know how effective it has been, ask a white woman in the market. Before they couldn't even go there without being attacked for their jewellery.""
Deby justified the policy, saying the courts were corrupt and systematically freed criminals.
Insecurity is a major problem in Chad, which was gripped by civil war or conflict with Libya for more than two decades until 1990. The vast but largely desert country also borders the volatile states of Sudan and Central African Republic, with whom it is seeking a common strategy against cross-border banditry.
Kebzabo, a former journalist and close political associate Deby, dismissed critics who say the shoot-at-sight policy is a gross human rights violation.
""While the situation continued there was no question of human rights for those attacked,"" said Kebzabo, who heads the National Union for Development and Renewal party.
He said there were no official figures for those executed so far, but he did not directly dispute the Chad Human Rights League's reports of scores killed.
""Some people, if they heard 10 people had been killed, they would say 100. There are no figures. But when the League makes a statement it is usually pretty true,"" said Kebzabo, himself a former activist who had brushes with authorities before joining the government.
In one crackdown, nine people accused of theft and banditry were executed at Fianga in the southwestern region of Mayo-Kebbi on Christmas Eve, campaign group Chad Non-Violence said in a report submitted to the Human Rights League on Friday.
""Nine people were arrested on December 22 and kept at the Fianga gendarmerie. On December 24 they were tied up and executed in a public market in the presence of administrative, political and military authorities,"" said the report signed by Chad Non-Violence president Lazare Serge Tikri.
""Also in Fianga, 11 others were arrested and received the same treatment on December 31,"" it added.
A League spokesman said it was not unusual for reports to reach N'Djamena two weeks late because of poor communications.
A December 26 League report listed some of the people killed since November, including a pregnant woman, streetchildren and suspected thieves.
""A docker accused of breaking into an empty container was executed in the market. The shooting caused one pregnant woman at the scene to miscarry under emotional shock,"" it said.
""It is quite open but the total numbers killed are not,"" an aid worker said. ""We are called out to scenes of executions and we talk with relatives of those killed.""
Many ordinary Chadians interviewed about the shoot-to-kill policy said they initially supported it because of rampant crime but that they now feared it could get out of hand.
",32
"Ivory Coast's 1996/97 coffee is likely to be well up on last season but rising volumes are bringing quality problems, regional buyers and exporters' agents said.
They expect coffee marketing, sluggish for the time of year, to pick up in February.
""There's a lot of coffee about but quality is poor,"" said one buyer based in the Man region. ""We could see well over 230,000 tonnes but exporters have bought little so far and made large quality adjustments.""
Port forwarding agents said they had noted no major quality problems with coffee received for export. One quality inspector suggested that as little as 150,000 tonnes could be shipped out this season.
Ivory Coast opened its 1996/97 coffee season late on November 14 amid plummeting prices, and forecast output at 230,000 tonnes against 180,000 last year.
Farmgate prices were cut by 200 CFA to 500 CFA a kilo.
""Farmers have been waiting for a price rise hoping it will be a sellers' market,"" said one buyer. ""Little care has been taken over sorting as farmers have less time, but exporters want better quality than last year.""
Farmers face a higher than normal January cocoa harvest as well.
""This season will be twice a long as usual,"" said one buyer north of San Pedro, commenting on the slow start.
""We should be busy into April,"" said a buyer around Soubre.
Buyers expected to be at their busiest in February and March with port forwarders slating peak arrivals in April and May.
Large amounts of coffee could be seen along roadsides around buyers' stores this week with stocks said to be rising.
Buyers in most regions pointed to high percentages of black beans, fragments and bean husks.
""Humidity is around 16 percent,"" said one buyer in San Pedro, against a 13 percent export standard. ""Exporters are rejecting around 10 percent even after sorting,"" he added.
One buyer in Sassandra in the south said some farmers were delivering sacks with 50 percent of problem beans.
Quality is widely seen as better in more productive northern areas around Man, where weather had been more favourable.
""Farmers are only now getting the message about quality but we have been buying since November,"" said the manager of a new buying unit in Man opened by a processor.
The unit was advertising 30 CFA above guideline prices for top grades but paid 477 CFA for lower grades. Margins of up to two percent for quality variation applied within each grade.
About one thousand tonnes had been bought by the end of January. Around 420 tonnes had left for Abidjan, with the rest, including 299 tonnes of low grade stocks, in Man warehouses.
Other buyers in the Man area, which is expected to produce 30 percent (corrects from 80 percent) of Ivory Coast's coffee, said they could not match the prices paid by processors.
""They can buy directly and save on transport and lower middleman charges,"" said one. Farmers had got into the habit of not sorting coffee in the past two years, he added.
Banks have been reluctant to fund exporters' buying operations out of concern that the Caistab would not pay up price support to its clients.
Buyers said some large exporters had not bought any crop.
A French coffee scientist based in Man said coffee bush flowering was good in many areas but dry Harmattan conditions could kill new fruits if rain did not fall.
-- Abidjan newsroom + 225 21 90 90
",32
"African robusta producers will meet discuss to export limit quotas on February 26-27 after a January world agreement in Rio de Janeiro to shore up prices, Ivory Coast's Commodities Minister told Reuters on Friday.
Gauze, who is also chairman of the Interafrican Coffee Organisation, gave no venue details but said African robusta exporters would afterwards seek to meet other producers.
""There will be a meeting to decide how to divide export limits between African producers,"" said Gauze. ""The meeting will be for two days, on February 26 and February 27,"" he added.
""We will then call on other producers for a meeting,"" he said without giving agenda details.
Gauze on February 5 called off talks in Bali with Asian robusta producers.
The world Association of Coffee Producing Countries (ACPC) decided on January 23 to cut robusta exports by one million bags (60 kg) after low prices seen in late 1996.
The limitation was expected to be shared between African and Asian producers.
""The talks have been postponed,"" Gauze said after returning to Ivory Coast to attend cocoa sector reform with International Cocoa Organisation and donor officials.
Indonesian officials told Reuters export cut sharing between Africa and Asia had not been discussed as the Bali meeting.
Gauze said African producers would discuss how to divide Africa's export limitation share, which he said was 850,000 bags, between exporting countries.
IACO chief economist this week delined to comment on African sharing arrangements saying the decision was an internal IACO matter.
Indonesia has decided to reduce its exports by 150,000 bags in the January to June 1997 period covered by the volutary export restraint.
ACPC members are concerned that rising production from non-ACPC member such as Vietnam will undermine their own export restraint policy.
Indonesia's ACPC representative Paian Nainggolan said informal discussions had taken place after Gauze cancelled his trip. No ACPC export cut sharing cut talks took place, he said.
Ivory Coast, Africa's largest exporter, expects to produce 230,000 tonnes in 1996/97 but local quality inspectors say quality problems mean not all of it will be exportable.
--Abidjan newsroom +225 21 90 90
",32
"As Chad's odyssey to oil production from 2001 enters financing and tender stages, senior officials are asking for guarantees that benefits will trickle down to the impoverished population.
""I am afraid about the oil because the experience of other African countries shows that it is always mismanaged,"" Chad's Foreign Minister Saleh Kebzabo told Reuters in an interview.
""It will change people's mentality for the worse. No preparations have yet been made at political and management levels and there has been no public debate,"" he said.
After decades of civil strife or conflict with neighbouring Libya, Chad held its first multiparty legislative elections on January 5, marking a symbolic transition to peace.
Other political party leaders, who like Kebzabo, contested the elections, voiced similar concerns.
""We must have laws to ensure all interests are served, with Chad at the centre,"" said Lol Mahamet Choua, who draws support near the smaller Sedigi oilfield on the shores of Lake Chad.
Exxon's unit Esso Exploration and Production Chad Inc., a 40 percent-share consortium member with Shell's Chad unit (40 percent) and Elf (20 percent) in November sealed a deal with Chad on finance and legal terms for Chad's main field 350 miles (560 km) south of N'Djamena.
Doba, due on stream in 2001, is forecast to yield 900 million barrels, or 200,000-250,000 bpd over 15-20 years, at a cost of $3 billion, according to Exxon, Houston. Cheaper electricity is expected from power stations using Sedigi crude.
""There are some milestones needing to be resolved but something could happen next month,"" Exxon spokesman Ed Burwell told Reuters last week as Chad's finance minister left for discussions in Washington and officals held talks on a pipeline through Cameroon.
Chad's Gross National Product per capita income at $237 in 1995 is one of Africa's lowest. It is dependent on cotton, livestock and gum arabic revenue and badly needs foreign currency after 30 years of war since independence from France in 1960 and devaluation of the regional CFA franc in 1994.
Investors hope Moslem President Idriss Deby, once dubbed ""Cowboy of the Sands"" for lightning jeep-based warfare against Libya, can both welcome oilmen to his country -- twice the size of Texas -- and heal North-South, Moslem-Christian strife.
The consortium is nearing the end of exploration and engineering studies, despite logistics problems in the sprawling Sahel state with only 300 km (170 miles) of paved roads.
Doba's geological profile is such that horizontal flow and recovery of oil is small, meaning costly vertical well-drilling.
Most financial aspects of Doba remain unclear. ""Chadians are told nothing at all about what is going on,"" Assistant Government Secretary Saleh Makki told Reuters. ""Royalties are a closely guarded secret, but if there is no transparency people will find other ways to express themselves.""
Production slipped back from 1998 to 2001, partly due to rebel activities in southern areas led by Moise Kette. The group wants an autonomous Chrisitan region in the south where Chad's cotton, and soon oil, wealth is concentrated.
Chad buys oil from southern neighbours Nigeria and Cameroon.
""Oil has not made people's lives much better in those countries, despite United Nations figures. Our oil money should not also disappear abroad,"" former National Assembly leader and ex-prime minister Jean Bawayou Alingue told Reuters.
Compared with Chad's per capita income of $237, that for oil-producer Cameroon is $813 and Gabon -- with Elf dominating offshore oil production -- $4,400. Chad has appealed for food aid for 1997.
""There will be enough money in government coffers for them to do some smart things,"" said Louis Adande, vice-president at the Abidjan unit of Citibank, reviewing finance options for the consortium. ""But Chad is obviously still looking for stability and has an interest in promoting it.""
A private Swiss firm, Cotecna, hired to manage Chad's treasury funds, recently ended a two-year contract. Opposition parties fear political use of future revenues.
The half-desert central African state of 6.5 million has held talks with the World Bank over partial funding of a 30-inch (76 cm), 650 kilometre (404 mile), pipeline with four pumping stations to take landlocked Chad's oil to French-built refineries, and marine terminals, at Kribi port in Cameroon.
An airport for supply planes is planned for Doba along with roads to N'Djamena and 300 long-term jobs are expected.
",32
"Delegates to Ivory Coast's cocoa Consultative Committee focused on bean quality and marketing on Thursday, the mid-point of their review of industry reforms.
""I would prefer to get down to talking about cocoa quality and continuity of supply,"" Cacao Barry managing director Alain Leblond said before the second day of the talks, which end on Friday.
Ivory Coast's Consultative Committee, a tripartite group of Ivorian, industry and donor officials, was set up in 1996 to monitor cocoa sector reforms since 1990.
After opening the talks on Wednesday, International Cocoa Organization Chief Executive Edouard Kouame said changes must benefit farmers and other local players.
""At the same time the legitimate interests of others in the sector must be safeguarded,"" he added, referring to foreign traders, cocoa butter manufacturers, and chocolate and confectionary industries.
An electronic export contract auction set up in May 1996 to increase market transparency is widely seen as encouraging overbidding and concentrating export contracts in a few hands.
Local exporters, allocated 85 percent of contracts, and foreign traders, allocated 15 percent, have complained they cannot win export contracts at favourable prices.
""The question needs to be asked how some people can bid as much as they have (been bidding),"" Cocoa Association of London Chief Executive Philip Sigley told Reuters.
Industry concerns have been voiced about quality since the state marketing monopoly was ended.
""Quality has to do with liberalisation and the auction system,"" Netherlands Cocoa Association Managing Director Louis Bensdorp told Reuters. ""The lack of quality checks is the major problem. That and the second thing, the education of farmers.""
Industry watchers are wondering whether strong arrivals so far in 1996/97 means that output will rival the 1995/96 (Oct-Sept) record of 1.2 million tonnes.
""There is a very good crop coming in which suggests that last year was not a fluke of nature,"" said Bensdorp.
Commodities Minister Guy-Alain Gauze declined to confirm whether buoyant cocoa arrivals would mean an adjustment of the Caistab state marketing board's 1996/97 production forecast of 950,000 tonnes. Industry forecasts are increasingly putting total output at more than one million tonnes.
Industry delegates said mid-crop forecasts for April to September had not yet been finalised.
""It is still too early to talk about the mid-crop but it tends to be bigger and bigger,"" said Bensdorp.
Ivory Coast wants to process 50 percent of its output by 2000 to shore up world prices and add value the cocoa sector's output.
At least two cocoa processors have expressed interest in building factories in Ivory Coast.
-- Abidjan newsroom +225 21 90 90
",32
"Rains ended abruptly throughout most of Ivory Coast in the second 10 days of December, allowing crops to dry after the extended rain, upcountry buyers and weather analysts say.
Weather data showed average rain down to 8mm from about 45 mm at the start of December, with little or no rain falling at six of eight stations monitored in the 10 days to December 20.
A total of 65 mm fell compared to 400 mm at nine stations in the first 10 days of the month. Only the northern Daloa area, with 21.8 mm, and the far southwest around Tabou, with 42.5 mm, received noticeable amounts.
Around 250 mm fell in San Pedro and Tabou alone in early December during a late, small rainy season usually seen in October and November.
""The inter-tropical weather front has still not brought down Harmattan (drier conditions usually seen in early December and on through January after rains),"" said one weather analyst.
Farmers visited by Reuters over Christmas had begun drying beans but some exporters in Abidjan were rejecting moist beans, some of which had sat uncollected in villages before mud tracks solidified.
Heavy rains fell in early December, leading to deterioration of bushtracks and raising cocoa bean humidity levels to up to 11 percent, compared to exportable levels of about eight percent.
One crop analyst said before the latest figures that mid-crop (April-September) prospects would be boosted by another 20mm rain by January. Sporadic rains have fallen upcountry since December 20 but month-end rainfall figures were not immediately available.
Midcrop flowers are expected to give cherelles (small cocoa pods) as insect activity gets underway after rains end. Crop analysts will be looking for clear indications of prospects in early January.
Crop analysts see the rains as beneficial for pods still on trees as a preceding small dry season had also been late and wetting would cushion the effects of coming dry Harmattan winds.
The data, from Ivory Coast's national weather station, shows rainfall for the second 10 days of December in the following key growing areas -
Dalao 21.8mm, Gagnoa 0 mm, San Pedro 0.7 mm, Tabou 42.5 mm and Man 0 mm, Dimbokro 0 mm, Yamoussoukro 0 mm, Adiake 0 mm.
No data was available for Abidjan and Sassandra but sporadic rains have been seen by Reuters in south coast areas, including Abidjan, since Dec 20. --Abidjan Newsroom + 225 21 90 90
",32
"Bulk cocoa shipments from West Africa will more than double to 325,000 tonnes in 1996/97, solidifying a cost-cutting trend sparked by recent trial shipments, exporters and shippers said.
""West African shipments will reach at least 325,000 tonnes this year (1996/97),"" said one trader, with most going to large Amsterdam-based buyers. ""And that is only a start."" he added.
Bulk shipments include beans stuffed directly into containers or poured loose into ship's holds, replacing traditional stacks of 60 kg jute bags.
Ivory Coast would ship about 270,000 tonnes in bulk this year. The world's largest producer blazed the trail by shipping 120,000 tonnes in 1995/96 as bagged cocoa lost favour with large buyers, said the source.
Of this year's total, about 260,000 tonnes would be shipped for two Amsterdam-based clients out of an expected crop of 900,000 to one million tonnes, said the trader.
Less than half, about 120,000 tonnes, would be shipped loose on holds against the same tonnage for all forms of bulk shipments in 1995/96. The remainder would be leave in twenty-foot bag-lined containers packed with drying agents.
Additional shipments of about 5,000 tonnes for trials to Germany, and less for Mediterranean ports would take the total of both bulk methods to around 270,000 tonnes.
Ghana is also expected to build on small shipments with 25,000 tonnes possibly leaving in December. Volumes from Nigeria and Cameroun are widely expected to rise.
Little was shipped in bulk from other West African ports last year but shipping companies say that will change.
Dutch transporters Spliethoffe completed three successful trials from Ivory Coast in 1995/96 totalling about 10,000 tonnes followed by another 110,000 tonnes for processors Gerkens and Cacao De Zaan.
The loading and shipment methods developed then has prompted an expected 100 percent plus jump in overall regional tonnages for 1996/97, say shippers.
Shipping lines Nedlloyd, Compagnie Maritime Belge (CMB) and Delmas (SDV) are already taking bulk cargos from forwarders SAGA and Delmas, and Ivorian exporters/forwarders Jean-Abile Gal and SIFCA.
""Each have loading systems (total of 8) in Abidjan and San Pedro (Ivory Coast's second port) but only direct users have reception facilities,"" a West Africa region shipping manager said. ""Not everyone has a 4,000 tonnes a day capacity plant with storage facilities,"" he added, referring to large processors in Amsterdam.
""In future, about  25 percent of all cocoa will leave in bulk,"" said one shipping manager, depending on the size of the reference crop
The manager of another shipper handling large volumes put the figure at 40 percent by 2000 for Ivory Coast.
""The economics are simple. What used to be shipped in four containers is now shipped in three,"" he said, or 100 tonees per six 20 foot containers.
Shipping companies had gained a 25 percent freight space saving and exporters would expect rebates in return, he said.
A typical charter on FIOS (free in and out, stowed) rates would be 55 dollars, with another 25 dollars in handling to be added depending on terms, said one shipping line.
The marginal cost of loading a container was about 3,750 CFA a tonne with 55,000 CFA for positioning a container, but labour and time savings more than compensated. Conveyor belts, silos and tip-up containers are all used for loading.
Plans to build a new bulk reception warehouse in Amsterdam unveiled by Dutch Cocoa Association (NCV) president Louis Bensdorp on Friday would encourage bulk cocoa advocates, said local exporters.
-- Abidjan newsroom + 225 21 90 90
",32
"Chad held much-delayed multi-party parliamentary elections on Sunday but there was little enthusiasm in the sprawling and volatile African nation for its fourth round of voting in less than a year.
Some polling stations in the capital opened late as voting materials were not ready for the scheduled 7 a.m. (0600 GMT) start. Few queues formed in the shimmering heat of the day and those that did were small.
Some opposition candidates denounced incidents of fraud but the 30 or so international observers reserved judgment and there were no immediate reports of electoral unrest in the majority Moslem nation with a lively southern Christian minority.
President Idriss Deby, the former northern guerrilla leader who seized power in a French-backed coup in 1990, paid tribute to Chad's democratic progress after voting in the capital.
""We have made a non-negligible step in the democratic process set up in 1990,"" he told reporters.
Others took a different view. ""Turnout will be low because people know the fraud apparatus is still in place and nothing much will change,"" said former national assembly leader Jean Bawoyeu Alingue, a defeated presidential hopeful.
More than 650 candidates from 49 parties contested the 125 seats in the national assembly, which will convene on March 31 to end the former French colony's transition to democracy.
Chad has known coups, civil war or conflict with northern neighbour Libya for much of its life from independence in 1960.
After repeated electoral delays, Deby won a multi-party presidential election in July after a run-off against southern rival and fellow general Wadal Abdelkader Kamougue.
Almost 68 percent of voters took part in the first round of that poll, which followed a March constitutional referendum. Voter interest tailed off in the second round.
A total of 3.5 million people were eligible to vote on Sunday in the nation on the fringes of the Sahara Desert. An estimated 300,000 nomads started voting on Thursday.
Deby's Patriotic Salvation Movement, leading member of the 27-party Republican Front coalition, started favourite to win or to be able to cobble together a working majority after the poll.
The opposition, which called a boycott of the presidential runoff alleging first-round fraud, has a 17-party coalition.
Election issues tended to be local or ethnic but diplomats said that all parties were looking for a fair distribution of any wealth from oil, which is expected to come on stream by the year 2000. Chad has about 100 ethnic groups.
""Oil is really what is at stake. Christian and Moslem differences have calmed,"" one diplomat said.
""It does not take much to make people feel better off,"" Alingue said. ""We don't want to see the money vanish abroad.""
Polls were to close at 6 p.m. (1700 GMT). Election officials expected provisional results within 10 days and final results by January 25, once the appeal court had checked them. Any run-offs will be held on February 23.
",32
"Demands for commodity auction rule changes to stop overbidding for cocoa export contracts will dominate talks in Abidjan next week on progress with Ivorian agriculture reforms, donor and industry delegates say.
""We are now ready to revisit the issue and the possibility of amending rules,"" a World Bank official told Reuters.
Ivory Coast's Consultative Committee, set up in October to review progress on a World Bank Agricultural Sector Adjustment Credit (ASAC) timetable, meets in Abidjan on February 5-7.
A clear agenda was expected to emerge after intitial meetings between the Ivorian government, industry and international trade officials.
Exporters want immediate changes to the auction, which is aimed at ensuring price competition and market transparency.
""Exporters have to pay too much, sell at a loss and get into (contract) positions they don't really want,"" one told Reuters.
The World Bank sponsored the auction as part of a $150 million ASAC loan dating back to 1994 on condition that rules and penalties were applied.
""The problem is that the Caistab (Caisse de Stabilisation marketing board) has not given us sales data since September,"" said one bank official.
Contract allocation was previously handled by the Caistab as a state commodity marketing monopoly.
Donors in September agreed to two modifications but said initial overbidding and concentration of export rights in a few hands had waned since the system was put in place in May 1996.
""We cannot wait until next year (Oct-Sept 1997/98) for changes,"" one exporter told Reuters. ""Two thirds of each year is sold forward so new rules would not bite until 1999.""
""Support for the system is disappearing, especially for physicals traders,"" another said. ""There's a lot of forward buying for 1997/98 to ensure smooth debloquage.""
Ivorian ministry officials along with International Cocoa Organization, World Bank, International Monetary Fund, European Union, industry and trading representatives will attend talks.
""The market has certainly fallen below the price of some people's contracts,"" said one exporter. Auction rules were partly the problem but recent low world demand and price could also mean some would hold on to stocks for a March premium.
Warehouses at Ivorian ports are full to normally operating capacity estimated to be at least 380,000 tonnes.
There is also discord over auction penalty rules.
""Penalties are not being applied so the system is really not working,"" one European-based buyer told Reuters.
Exporters say penalties are unclear. ""The rules are too blurred and are being applied when they shouldn't,"" said one.
Export contracts are auctioned in two daily sessions but exporters are banned for five sessions if they fail to put up a bank guarantee of 25 CFA per kilo within three days of bid confirmation by the Caistab.
""We are still in disageement with the Caistab about the levels of interest rates,"" said one exporter. Before the reforms, the Caistab put up guarantees on behalf of exporters.
The World Bank in late 1996 agreed to a proposal for an 85-15 percent split between sales to local exporters and by the Caistab directly to international traders.
""If international traders' bids do not at least match the best local exporters' bid they should not be allowed to buy,"" said one exporter.
The World Bank has not agreed to parts of a GEPEX exporters' forum proposition to spread contracts more widely, between five highest bidders in each session.
""We have agreed the principal of differentiated prices and the 85-15 rule but not the five bidders proposal,"" said a World Bank official.
The World Bank wants bidders held to the price they bid, rather than winning contracts but at the second highest bid price -- a rule which it says encourages overbidding.
($1=551 CFA francs)
-- Abidjan newsroom + 225 21 90 90
",32
"Sporadic rain showers up to the end of November have continued to water Ivory Coast's cocoa belt but mid-crop campaign prospects are not yet clear, say weather and crop analysts.
A weather front expected to bring hot dry weather southwards over the whole of Ivory Coast had backtracked to the country's northern border with light rains taking hold in dried out areas.
""It has moved up to Korhogo (10th northern parallel) from Dimbokro (8th),"" said one weather analyst. Rains usually fall in a sweep 200 km to the south of the front's position, he added.
Crop analysts said the front's retreat meant no dramatic changes in cocoa pod development but they welcomed continuing rains.
""We are now seeing the first fruits for the mid-crop ,"" said one crop analyst. ""December weather will now determine the full potential. It is too early too draw conclusions,"" he addded.
Weather data show variable rains for the last 10 days of November with 650 percent of normal levels falling around Bondoukou in the north-east, put down to local effects, compared to 53 percent for San Pedro and Tabou in the southwest.
An average of 30mm fell at ten weather stations monitored in the last ten days of November with heavy showers concentrated around Abidjan and Yamassoukro. In the preceeding ten days the average was 42mm, also boosted by heavy showers in Abidjan.
Overall November rains in three successive ten day periods rose from 104mm to 423mm before dropping to 295 mm in the last third of the month.
Light rains fell in Daloa and Man, after none in the first ten days of November. More southern cocoa belt areas received 53 percent of end-November average rains around San Pedro, and 62 percent around Gagnoa. Rains around Abidjan and Yamassoukro were 200 percent above average.
""November rains moved into surplus in the south towards the end of the month but we are still in deficit in the north,"" said a weather analyst.
Crop analysts said the latest weather picture was highly variable and mid-crop development would depend on December's pattern. Rains last year continued into December, they said.
""This year, dry weather up to early November slowed down mid-crop development but we could still be heading towards a reasonable crop,"" said the crop analyst.
""It is too early to draw conclusions as last year's weather picture was different,"" he said.  ""We had twice the normal rains for December but then a strong mid-crop.""
One crop analyst said on November 20 a long dry spell pushing into the year's short rainy season could slightly affect young cocoa fruits. The degree would depend on an extension rains seen since early November which would cushion the drying effect of Harmattan conditions, he said then.
Up-country buyers welcomed rains after dry weather in September and October but said drying problems had increased harvested cocoa humidity levels to up to 10 percent.
""Drying has slowed deliveries a bit, but overall quality is still good,"" said one.
Abidjan newsroom +225 21 90 90
",32
"Cocoa producers broadly agree on output management and have struck a compromise to unite against use of non-cocoa fats in chocolate in the European Union while accepting the change in other markets, Ivory Coast's commodities minister said on Monday.
""Europeans are rich consumers who can afford to carry on buying pure chocolate,"" Gauze, outgoing head of the Cocoa Producers Alliance (CPA) ministerial council, said on the sidelines of a two-day council meeting in Gabon.  
But Gauze added that world cocoa demand could rise by allowing use of vegetable fats in some countries.
""Residual markets needs dynamising,"" he said after palm-oil and cocoa producer Malaysia dropped its blanket acceptance of non-cocoa fat use as part of the compromise.
""Malaysia has moderated its position,"" he said. ""It has adopted the same line as the CPA.""
The ministers, who wrap up their meeting on Tuesday, were reviewing a 1993 International Cocoa Agreement and plans to cut member output by 90,000 tonnes by the year 2000.  
Gauze, current chairman of the International Cocoa Organisation Council, predicted that members would resolve differences over CPA output projections for the next three years by Tuesday.
""The differences are slight,"" he said after objections from Brazil, Ghana and Malaysia during preliminary talks among experts last week.
He said Malaysia had put forward a 1996/97 output proposal of 120,000 tonnes against a 130,000 tonne CPA projection. Malaysia's 1997/98 projection was 140,000 tonnes compared to the CPA's 137,000 tonne forecast.  
Gauze said Ghanaian and CPA projections for Ghana's 1996/97 output differed by only 20,000 tonnes.
""I do not want to leave here with any outstanding differences,"" Gauze said, adding that member output agreements were likely to be available late on Tuesday.
Gauze said efforts would continue to persuade the largest non-CPA producer Indonesia to join and to persuade Mexico to reconsider a decision to quit the alliance. Colombia would also be asked to join, he said.  
Ivory Coast, the world's top producer, has spearheaded opposition to European Union plans to allow use of up to five percent of non-cocoa fats in chocolate throughout the EU next year. It says this would cut demand for cocoa by 200,000 tonnes and harm cocoa-producing economies.
A Dutch study in September put the drop in demand at just 33,000 tonnes.  
Ministers from producing nations agreed in September at an ICCO meeting to cut output by 15,000 tonnes in 1996/97 and by 30,000 tonnes and 45,000 tonnes respectively in the two following seasons to balance world supply and demand and boost cocoa prices.
-- Abidjan newsroom +225 21 90 90
",32
"Port arrivals of 1996/97 Ivorian cocoa ranged between 745-755,000 tonnes by January 27 compared to 800,000 tonnes in 1995/96 as exporters cut up-country buying for lack of storage space, industry sources and exporters say.
""There's cocoa all over the place,"" said one Abidjan exporter. ""I have trucks waiting to unload but no space or pallets until I ship 5,000 tonnes next week,"" he added.
Crop analysts returning from upcountry reported heavy pod loads in southwestern Ivorian hybrid plantations. Upcountry store managers told Reuters their stocks would rise into February.
All eyes are focused on weather data as favourable showers before April could swell mid crop cocoa volumes.
""The trees need about 10 mm a week between now and then,"" said one plantation owner, giving a rough mid-crop forecast of 150,000-175,000 tonnes. ""That of course depends on rain.""
Others put the figure at over 100,000 tonnes, with one local crop forecaster more bullish at 200,000 tonnes. Ivory Coast notched up a record 1.2 million tonnes crop in 1995/96 after an unexpectedly strong 200,000 tonne mid-crop. The government has forecast 950,000 tonnes for 1996/97.
This season's arrivals were expected to be more strung out than last season's.
One crop analyst said,""When arrivals figures pick up again and reflect what is out there arrivals could be closer to a million before the mid crop starts.""
His estimate was higher than most others.
Exporters in Ivory Coast's two main ports are battling to find warehouse space with many cutting purchasing until shipments leave.
A late February surge is expected at San Pedro.
""Everything will be off the trees by the end of February so a wave of cocoa will leave Ivory Coast against March contracts,"" said the Abidjan exporter. ""San Pedro has been very busy.""
Port forwarders and inspectors reported improving bean quality with grain sizes below 100 beans per 100 grammes. Bean humidity levels had dropped to 6-8 percent from 8-10 percent in December and early January.
Export standard is 105 beans and under per 100 grammes and eight percent and under for humidity.
San Pedro exporter Jean-Abile Gal (JAG) has reported two drying plant fires.
Full warehouses were surrounded by drying beans and lines of palleted cocoa fresh from trucks.
A JAG cocoa and coffee plantation manager said a dryer might be sent down from his Gagnoa area site to speed up conditioning.
San Pedro processor SACO has full warehouses and more cocoa under awnings at the front of its plant.
""January is definitely busier than last year but I don't have the figures immediately to hand,"" said one exporter. Warehouse space at San Pedro is set to rise from 1998 with forwarders SAGA building a 12,000 tonne capacity shed and an Ivorian maritime firm, SIVOM, planning another, smaller unit.
Bulk shipments loading improvements are also set to improve evacuation of cocoa from the port with forwarder SAGA planning to raise loading rates from 40 to 100 tonnes an hour.
One bulk ship, Pantelis K, left Ivory Coast last week with 7,000 tonnes.
Industry sources said upcountry buyers were transporting cocoa to port in 40 tonne loads on trucks designed for 23 tonnes.
Tilting and bent trailers, some being repaired along roadsides, were making their way to port through numerous police and army checkpoints.
-- Abidjan newsroom + 225 21 90 90
",32
"Ivory Coast and other African coffee nations will hold talks with Vietnam on Tuesday on robusta output ahead of an emergency meeting of coffee producers in Rio de Janeiro on January 23, InterAfrican Coffee Organisation (IACO) officials said on Monday.
""The Vietnam meeting is a seminar to convince Vietnamese at the highest level to join the ACPC,"" IACO Secretary General Aregu Worku told Reuters, referring to the Association of Coffee Producing Countries (ACPC).
""There will also be a fact-finding mission with tours to plantations to see developments in Vietnamese production and techniques,"" he said by telephone.
Ivorian Commodities Minister Guy-Alain Gauze, also IACO's chairman, has already left Abidjan for Vietnam where the Asia International Coffee Conference '97, organised by IBC Singapore, is being held in Ho Chi Minh City from January 14 to 18.
Gauze was accompanied by IACO's chief economist Donald Kaberuka, Worku said. Ivory Coast's new Caistab marketing board coffee department director Avi Adroh will also attend.
Gauze in November blamed non-ACPC member exporters, including Vietnam, for instability in the world robusta price. He called for an urgent ACPC review.
""The real talks will take place in Rio de Janeiro (at the January 23 meeting) when proposals made by the African group will be discussed,"" said Worku.
African producers would renew demands for an additional 2.5 million bags export quota cut for the first six months of 1997.
""That is the area we have been talking about,"" said Worku, adding that Ivory Coast had stuck to its ACPC quota while non-members had increased production.
""Indonesia has insisted on Vietnam joining and we will have to come up with something in Rio to be able to stick with our strategy after June,"" said Worku.
Gauze and Kaberuka were expected to arrive in Ho Chi Minh City on Monday night or Tuesday morning for the Vietnam talks, an IACO secretary said.
-- Abidjan newsroom + 225 21 90 90
",32
"Cocoa arrivals in Ivory Coast at the start of the 1996/97 season are slower than normal with exporters awaiting financing and warehouses filling up at the main port, Abidjan, exporters and shipping sources say.
""There is a problem of finding space in the port,"" the head of the exporters' trade body, GEPEX, Rene Ekra, told Reuters.
He and others say delays in issuing export licences and freight rates had blocked shipments of cocoa. Large consignments of cotton were also taking up port space, they added.
Exporters were also unable to secure bank finance without export licences and contracts.
""Some are financing buying operations themselves but up-country buyers are keeping busy,"" said a San Pedro exporter.
Ivory Coast opened its 1996/97 cocoa marketing season on October 24 with its farmgate price unchanged at 320 CFA per bagged kilo and the cocoa export tax down 10 CFA to 150, but has yet to set reference exporter rates and buyer commissions as well as freight rates.
""Arrivals are lower than normal but we should get back into a rhythm in the next couple of weeks,"" said the San Pedro exporter.
""We are hoping all rates will be out within a fortnight,"" said GEPEX President Ekra. He said 31 exporters were given licences last year but 1996/97 applicants were still waiting for government approval.
About 600 buyers were expected to be approved, he added.
Yves-Marie Koissy, new head of the Caistab cocoa marketing agency which grants licences and sets reference exporter and buyers' commission rates is expected to return from the United States in early November.
Precise arrival figures remain unclear. Market estimates range from 8,000 to 9,000 for San Pedro in the week to October 25 and over 7,000 tonnes for Abidjan.
""It is too early to get a clear picture of quantities. Wait until mid-November,"" said one exporter. ""Last year, arrivals were 180,000 tonnes in November. I think it will be less this year but 950,000 tonnes for the whole year cannot be discounted,"" he added. ""Bean sizes and quality are very good, around 95 per 100 grammes.""
Early arrivals were also greater at San Pedro.
""Liberalisation of transport means it is cheaper to go to the nearest port. If San Pedro exported 30 percent of cocoa last year, it could well be 35 to 40 percent this year (1996/97),"" said the San Pedro exporter.
Buyers around Daloa and Gagnoa said rains were regular with good sunshine. ""There are plenty of flowers. But we need regular showers between now and December for a good April and March crop,"" said Daloa-based buyer Makkram Haddad.
Up-country buyers around Gagnoa and Daloa said some stocks were still held up-country because heavy rains in July, August and in some areas, September had made bush tracks impassable.
""We are buying 20 new three-tonne covered trucks to get through to farmers who cannot move their stocks,"" said Gagnoa buyer Hussaini ""Some tracks have been repaired but there is a lot of damage and 15-tonne trucks are too big.""
Buyers say they usually replace their trucks every two years. One truck importer told Reuters sales were rising.
Sunny weather south of Gagnoa in the past couple of weeks had dried many areas, Khaled and others said. Intermittent rain has continued north of Gagnoa.
Up-country sources said stocks of cocoa being held by buyers in centre-west and south-west areas around Soubre, Daloa, Duekoue and Guilgo would be taken to port when the full scale of marketing costs was known.
-- Abidjan Newsroom, + 225 21 90 90
",32
"French chocolate manufacturer Cantalou will sign a deal by 1998 on building a cocoa processing plant in Ivory Coast, a Cantalou official said on Monday.
""There will be a signature by the end of this year,"" public relations manager Catherine Poirier told Reuters by telephone.
Cantalou said investment plans had not been finalised despite recent reports that the Perpignan-based manufacturer of ""Cemoi"" brands was going ahead with plans.
But Poirier added that plans were solid and very likely to be confirmed in coming months.
Speculation about new market entrants had already risen following a decision by Cargill to open an office in Abidjan in late 1996 to explore processing and other options.
Cargill's new Ivory Coast-based representative has already begun negotiations on setting up a processing plant with decisions expected from March, industry sources close to the discussions told Reuters recently.
Talk of new entrants to Ivory Coast's expanding local processing industry intensified in December after an official visit to Ivory Coast by Cantalou representatives in late 1996. Officials from Cantalou, which has European turnover of 2.9 billion French francs and owns 15 other plants, discussed setting up a 160 million French franc cocoa processing plant.
Cantalou's plans for a 60,000 tonne per year capacity processing plant resurfaced last week in the French business daily La Tribune Defosses but Poirier, quoted in the report, told Reuters plans had still not been finalised.
Other aspiring processors are also still in discussion stages.
Ivorian exporter SICC in December outlined to Reuters its own plans for processing up to 50,000 tonnes a year of cocoa. Plans for a $2 million investment were expected to be finalised in early 1997 after talks with potential partners.
SICC, which also has shipping plans, expects to handle a total of 200,000 tonnes of cocoa exports in 1996/97 for clients including Cargill's Netherlands processing subsidiary Gherkens.
Other firms are also said to be in discussions about starting processing. More are waiting on the sidelines.
""We badly want to get into processing,"" a manager for British development firm Commonwealth Development Corp told Reuters last week.
Cocoa processing in Ivory Coast is dominated by Abidjan-based processor UNICAO and rival Callebaut-Barry. Factory bean processing capacity stands at 180,000 tonnes but Ivory Coast aims to add more value to exports by raising this to 50 percent of annual output - which varies widely each year.
Local industry sources had expected Cargill or Dutch group Cacao De Zaan to buy into UNICAO in December. But minority 30 percent shareholder U.S-based W.R. Grace then sold its stake in UNICAO's parent, SIFCA, to rival Archer Daniels Midland (ADM).
A UNICAO spokesman said plans to add 21,500 tonnes of processing capacity to take production potential to 86,000 tonnes by late 1997 were unchanged by the deal.
""They (ADM) have still not visited companies with a shareholding (in UNICAO),"" UNICAO factory production director Kanga N'Ze told Reuters on Monday. ""There has been no contact.""
UNICAO's only main rival Callebaut-Barry has three plants grinding up to 80,000 tonnes of beans a year.
Ivory Coast posted a record 1.2 million tonne crop in 1995/96 but has forecast closer to a million tonnes for 1996/97. It expects cheaper energy from offshore gas to encourage investment in cocoa processing but critics have said investors are more interested in winning short-term government incentives gains than long-term commitment.
-- Abidjan newsroom + 225 21 90 90
",32
"Ivorian 1996/97 cocoa arrivals stood at 330,000 to 350,000 tonnes by early December, analysts and exporters said.
The December 7 figures were down from an estimated 410,000 tonnes by December 3 last year, but some analysts said a further 50,000 tonnes should be added to this year's figures for comparative purposes as the season had opened three weeks late.
""The gap from last year will widen in December but February and March look good,"" one exporter said. ""Arrivals are down from about 60,000 last week to probably 35-40,000 tonnes by the end of this week.""
Ivory Coast opened its 1996/97 marketing season (October-September) three weeks later than usual on October 24 and initially expected a total crop of around 950,000 tonnes.
About 285,000 tonnes had arrived from October 24 to the end of November 1996.
The sources said that 100,000 tonnes had been taken by Ivory Coast's second port, San Pedro, so far this season. Ivory Coast's two main ports usually take less cocoa over the Christmas and New Year holiday periods.
Some cocoa is likely to be delayed by drying problems. Weather analysts point to rain in early December, normally a dry month.
But cocoa inspectors say quality is good, with humidity levels of 8-10 percent and widely ranging bean sizes averaging 90 per 100 grammes -- well within the export standard of 105 per 100 grammes.
""Some people are also concentrating on buying coffee,"" said one exporter. A large and slightly earlier 1996/97 coffee crop was diverting attention from cocoa, exporters said.
Last year's cocoa crop rose to a December peak before dropping off in January, with arrivals in 1995/96 reaching 668,000 tonnes by the end of December before the season ended with a record 1.2 million tonnes.
An unexpectedly strong mid-crop (April-September) boosted 1995/96 output, so analysts are now scouting cocoa plantations to calculate the prospects for this season as flowering begins.
A different 1996/97 cocoa crop profile is expected.
""The curve is flatter but more sustained than last year. February and March arrivals will push figures up again,"" said one analyst. Mid-crop forecasts are expected between now and January.
Port stock levels are unknown, but one set of figures showed exports since October 1 totalling 220,000 tonnes. Port sources said large shipments of up to 50,000 tonnes had since left but updated figures were not available.
Large stores of cocoa could be seen around Abidjan and San Pedro ports early this week.
""There is plenty of cocoa around and stocks now just depend on when and if contracts are going to be met,"" said one port source. ""People either have cocoa but no contracts or they simply have not shipped yet.""
Some companies said tallying arrivals had been more difficult since personnel changes in the Caistab cocoa marketing agency made by its new managing director, Yves-Marie Koissy.
""Information is thinner on the ground,"" said one exporter.
Exporters said continuing arguments with the Caistab over some of its official cocoa and coffee marketing and reference shipping freight rates, as well as its new electronic cocoa contract auctioning system, could also have slowed activity.
""The GEPEX (exporters' trade body) is still in discussions (with the Caistab),"" said one exporter.
-- Abidjan newsroom +225 21 90 90
",32
"Ivory Coast opened three days of cocoa sector reform talks on Wednesday aimed at fine-tuning donor-sponsored liberalisation policies, with bean quality high on the agenda.
""Liberalisation is about reducing the role of the state. We need less state but a better state,"" said Philippe Mian, president of Ivory Coast's Consultative Committee, which is hosting the talks which end on Friday.
Dutch Cocoa Association president Louis Bensdorp told Reuters two issues would dominate the talks.
""The main issues are the quality of the cocoa and the assurance of contracts,"" he said before going into talks.
Ivory Coast's Consultative Committee, grouping Ivorian officials, loan donors and international cocoa industry bodies, was set up in October under the terms of a World Bank Agricultural Sector Adjustment Credit (ASAC).
Ivory Coast has liberalised internal and some external cocoa marketing functions since 1990 but there have been industry concerns over cocoa quality and the functioning of a new commodities auction system in place since May 1996.
Other agenda items include an overall review of reforms, cocoa quality issues, local processing of cocoa and policy revision recommendations.
Ivory Coast's commodities minister, Guy-Alain Gauze, said reform revisions would help Ivory Coast's competitiveness.
""A problem remains with importers about quality,"" Gauze told reporters before going into the private talks.
""The proposals forming part of the sector reforms deal with quality and security of supplies for European and American importers,"" he added, referring to complaints by exporters that some firms were overbidding on the auction system to win contracts.
Revisions to the auction system would be discussed but were not officially on the agenda, Mian told Reuters.
""Nothing is perfect and the auction system could well have weak points which could be corrected and for which proposals could be made,"" he said during a midday break in talks.
Further cuts in the role of the Caistab marketing board would also be discussed, he added.
Dutch Cocoa Association president Bensdorp said industry would argue for changes to the auction system and seek better quality controls.
""What we do not like is the 85 to 15 percent rule as there is too little chance for foreign companies to buy cocoa directly,"" he added.
Under auction rules 85 percent of Ivorian cocoa export rights are auctioned to local exporters, with the remaining 15 percent reserved by the Caistab for direct sale to traders abroad.
""The problem is that, of the 15 percent, 10 percent is sold to Phibro so only five percent is available for the rest of international trade,"" he added.
U.S.-based trader Phibro has a long-standing cocoa contract with the Caisab which is due to expire this year.
Bensdorp also referred to concerns over cocoa quality.
""Usually we see a deterioration of quality after the main months, in fact about now. The main problem is a lack of proper quality checks,"" he said.
World Bank, International Monetary Fund, European Union, International Cocoa Organization, France's development agency and Ivorian officials will issue their findings on Friday. -- Abidjan newsroom +225 21 90 90
",32
"Ivory Coast's 1996/97 coffee season has begun amid slow buying and reports of variable quality, industry sources said.
""SIFCA (the largest Ivorian buyer) has started buying, so we are likely to see others follow,"" said one large exporter. ""You could say that marks the real start of the season.""
Buying had been limited in December although up-country agents had been active with larger than usual volumes.
Output is put at 230,000-250,000 tonnes for 1996/97, against 180,000 in 1995/96.
The season was officially opened on November 14, rather than early October, as the Caistab marketing agency struggled to set a recommended price closer to falling world market levels.
""It will be a very large crop,"" said one local analyst. ""The coffee is now mainly off the trees and being sat on by farmers at village level.""
Buyers reported variable quality and humidity up to 15 percent in some areas, against export limits of 13 percent. ""Quality is particularly good around (northwestern) Man but elsewhere you will find opinion dependent on who you talk to,"" said one.
One source put arrivals by January 10 at San Pedro port at 3,337 tonnes, but figures for Abidjan were less clear.
Bank sources said in December they were reluctant to put money into coffee because of fears borrowers would not receive transfer payments from Caistab and would default on loans.
""That remains the case,"" said one exporter. ""Banks are certainly reticent, so purchasing is still low."" Continuing low world market prices added to the uncertainty, others said.
Bush tracks had dried out and some farmers were profiting from January sun to dry produce that was still damp because of the failure of harmattan desert winds to arrive in some areas in late December.
""Some farmers are also being paid below offical, recommended (500 CFA) a kilo prices,"" said one buying source.
Prices ranging between 300 and 500 CFA per kilo were being offered, depending on area and quality, the source said. But others said they were offering up to 540 for top quality grades.
One industry analyst said 44 exporters were licensed, against 32 last year, so some would struggle to balance accounts amid more acute internal price competition.
Attention is also turning to a report on further coffee sector liberalisation expected to be with donor market reform sponsors by the end of January.
Private British consultant Landell Mills and Co will submit its report amid donor calls for an end to cross-subsidies to the coffee sector from cocoa profits from the beginning of 1997/98.
""The price support is running at around 100 CFA a kilo based on current world prices,"" said one source.
The focus is also turning to Association of Coffee Producing Countries (ACPC) talks on January 23 which will focus on pushing up world prices through voluntary export restraints.
",32
"Ivory Coast's 1996/97 cocoa crop is likely to top one million tonnes after good January harvests and abundant flowering for the mid-crop (April-Sept), crop analysts and buyers say.
""The total crop will be at least one million tonnes,"" said one crop analyst returning from an upcountry tour of cocoa farms. ""The flowers and cherelles (early pods) are there and with a little more rain we could see well over a million.""
One source estimated arrivals by January 27 at over 750,000 tonnes. Industry estimates of arrivals up to January 20 from October 1, were in the 710,000 to 720,000-tonne range. This compares with around 800,000 in the previous season.
Attention is now focused on rainfall figures and pod survival rates in coming weeks for a firmer indication of midcrop tonnage.
Ivory Coast posted a record 1.2 million tonnes crop in 1995/96 after an unexpectedly strong 200,000 tonne mid-crop and has forecast 950,000 tonnes for 1996/97.
Crop analysts said pod loads were heaviest in younger hybrid tree farms in southwestern areas where rainfall had also been more favourable for late main crop and mid-crop development.
""Canopies are in reasonable shape and there are plenty of one to four inch cherelles and pods,"" said one analyst.
Farms north of San Pedro seen by Reuters still bore noticeable late main crop pod loads but older trees, around Daloa and Gagnoa, generally had few flowers and pods.
Upcountry buyers' stores were surrounded by large amounts of drying January cocoa, with more arriving from village farms.
""Cocoa is coming out fast. Farmers have no incentive to stock so we are seeing fresh crop,"" said one store owner in Meadji. ""Exporters are not buying but we expect things to get (cocoa) moving again in February and March."" Stocks would rise in some areas for a short period, he added.
""January has been better than last year,"" said one buyer at in Issia. ""Our November estimates were too low."" He and others agreed that February and March harvests would be down on 1995/96.
Buyers around Gagnoa and Daloa said most main crop pods had been harvested by mid-January but large amounts of cocoa still up-country would not be seen at ports until mid-February.
Harmattan wind conditions had returned to cocoa areas a week ago making drying of cocoa easier, but farmers said they expected rains to return after a brief wave of showers in mid-January.
A new manager at Ivory Coast's largest plantation near Gagnoa said care of trees would be more determinant for pod and flower survival rates away from hybrid areas.
""Farmers have not kept up maintenance and canopy trimming around here and the results are clear,"" he said.
He pointed to plantation trees at one side of a bush track with late main crop pods, and plenty of cherelles and flowers.
On the other side of the track, more densely planted and villagers' untrimmed trees on similar soil were largely bare.
Exporters' agents and buyers say cocoa purchasing has dropped off now that Ivory Coast's warehouses are full.
Shipments remain low on weak overseas demand.
""There are no shipments so exporters have cut purchasing,"" said one exporter. ""At San Pedro, arrivals are coming in at 10,000 tonnes a week compared to 30,000 in December.""
Exporters said port stocks estimated at upwards of 380,000 tonnes would shrink in February and especially March when they expect export contract deadlines to boost shipment levels.
Cocoa humidity levels of 6-8 percent were being recorded upcountry. Buyers said they would mix new arrivals with 8-10 percent cocoa stored in San Pedro stores waiting for an upswing in demand. Only 15 exporters out of 44 were actively purchasing, one said.
Shipping forwarders at San Pedro said empty warehouse space would rise from February. ""Contracts will pick up next month but March will be a boom (for shipments).""
-- Abidjan newsroom + 225 21 90 90
",32
"One of Ivory Coast's largest cocoa and coffee exporters, SIFCA, will appoint a liquidator for its loss making up-country buying subsidiary, SOGEPAG, but exporters and buyers say port arrivals will not be affected.
""Our cost calculations were wrong and farmers never really caught on to our new ideas,"" Pierre-Dominique Blind, spokesman for SIFCA, owners of the SOGEPAG buying subsidiary, told Reuters in an interview. ""We lost too much money and could not go on refinancing debts.""
""Purchase volumes were too small and farmers' debts became a vicious circle,"" said Blind, managing director of UCEPAG, a holding company set up by SIFCA to run SOGEPAG.
SOGEPAG's warehouses could be empty for the rest of the season after a liquidator is named this week, and SIFCA would probably take back assets it wanted, he added.
Liquidation is expected to take at least three months.
Minority 33 percent shareholder DAFCI, an Ivorian exporter, was not immediately available for comment.
UCEPAG figures show cocoa purchases of 46,000 tonnes of cocoa and 9,741 tonnes of coffee in 1995/96, but other exporters said the figure was underestimated. In 1994/95 the amounts were shown as 43,000 and 9,000 tonnes.
SOGEPAG was set up in 1991 and guaranteed farmers fixed farmgate prices when world prices dipped. It paid official reference prices while other buyers paid less, said Blind.
""Our operation was based on protection against prices going down, but prices went up after 1991,"" he said. ""The aim was to take 20 percent of the market in three years but our sales only rose by about seven percent a year.""
The total Ivorian cocoa crop in 1995/96 was about 1.2 million tonnes.
Up-country buyers said SOGEPAG had not understood buying strategy upcountry. It paid cash but sometimes three days late.
""Our strategy was wrong. Farmers preferred immediate cash in hand, even if less than our prices,"" said Blind. ""We gave prefinancing and logistical support to farmers on good terms and then they would sell to someone else.""
SOGEPAG built up the number of its sites to 17 from four at its inception.
Other exporters said SOGEPAG's closure would have no effect on the market. ""SIFCA and DAFCI will probably take control of the key assets and others will step in to buy whatever is sold,"" said one.
""We will buy some of their trucks,"" said one buyer. ""No cocoa will be left in the bush.""
SOGEPAG has 120 vehicles, mainly collection trucks and tractors it used to hire to farmers and GVCs -- farmers' cooperatives which aim to sell directly to exporters.
SIFCA's parent SIFCOM is a main distributor of Nissan vehicles.
Blind said SOGEPAG was owed 160 million CFA francs for vehicle hire at one point but only 60 million had been repaid. ""Farmers saw us as a cash cow,"" he said. ""Variable cost inflation after depreciation of the CFA also got out of hand.""
He said many modern trucks on the market were too sophisticated and expensive for farmers.
Some industry analysts said farmers had made money out of SOGEPAG but did not see why a decision had been taken to close operations at this point.
""It is a pity for the farmers.  The World Bank had just approved funding for us to give them more training,"" said Blind. ""Now they will be paid less than reference prices and many GVCs have poor little logistical expertise.""
Ivory Coast, the world's largest cocoa producer, opened its 1996/97 cocoa marketing season on October 24, setting farmgate cocoa prices unchanged at 320 CFA per bagged kg but delaying an announcement on guideline buyers and exporters rates.
($1=512 CFA francs)
-- Abidjan newsroom +225 21 90 90
",32
"Voters in Chad, who showed little apparent enthusiasm for Sunday's election to end their much-delayed transition to democracy, face a long wait before they know the shape of their new national assembly.
""Provisional results are set for January 15 and final results for January 25 after approval by the court of appeal,"" the president of the Independent National Electoral Committee, Pascal Yaodamnadji, told Reuters.
Runoffs are scheduled for February 23.
Polling for the 125-seat assembly, which began last Thursday for nomads in the sprawling and volatile African country with a Moslem majority and lively southern Christian minority, passed off calmly with no reports of major incidents.
A total of 658 candidates from 49 parties stood for the assembly, which will convene on March 31 to end the former French colony's transition to democracy.
Chad has known coups, civil war or conflict with northern neighbour Libya for much of its life from independence in 1960.
President Idriss Deby, a former northern guerrilla leader, seized power in the arid nation in a 1990 French-backed coup.
After repeated electoral delays, he won a multi-party presidential election in July after a runoff against southern rival and fellow general Wadal Abdelkader Kamougue.
Almost 68 percent of voters took part in the first round of that poll, which followed a March constitutional referendum. Voter interest tailed off in the second round, which many opposition parties urged their supporters to boycott.
About 3.5 million of Chad's 6.4 million people were eligible to vote on Sunday but there was little enthusiasm for the poll in the capital, which accounts for 10 percent of all voters and where turnout appeared well down on previous polls.
Some opposition candidates denounced instances of fraud.
Former national assembly leader Jean Bawoyeu Alingue, a defeated presidential contender, cited three types of fraud.
""Electoral cards were copied, pre-stuffed envelopes were taken into booths by voters and nomads have been allowed to vote in an uncontrolled manner,"" he told Reuters.
The 30 or so international observers, many of whom were yet to return from monitoring polling in the provinces, were expected to report their findings on Wednesday.
British European Parliament member Michael McGowan praised the organisation of polling in the capital. ""On the whole the elections seemed to me to be well-organised and thorough.""
Deby's Patriotic Salvation Movement heads the 27-party Republican Front coalition. The opposition, which alleged fraud in the presidential poll, has a rival 17-party coalition.
Election issues tended to be local or ethnic but diplomats said all parties sought fair distribution of any wealth from oil, expected to come on stream by the year 2000.
",32
"Port dues at Ivory Coast's main port of Abidjan will rise by up to 6.4 percent from January 1 to fund expansion projects, a government statement said.
Rates would increase by 6.3 percent for ships, 6.4 percent for container gantry cranes, 5.8 percent for containers and 2.5 percent for cargo and other items, it said.
The charges, which caught shipping companies off guard, were agreed by Abidjan Port Authority in September but awaited government blessing. ""The cabinet has approved the new rates,"" the statement said.
Shipping companies said the costs would probably have little impact but were awaiting more details from Port Authority.
""We have not done our calculations yet but if this is just a port charge rather than a direct handling charge it will passed straight on to the consumer,"" said one container line manager.
Others said growing competition on West Africa-European routes would mean some companies might choose to absorb some costs to attract business.
""Competition determines what costs are passed on,"" said another shipping manager. More ships had been deployed in the West Africa region recently as freight rates were higher than on Far Eastern routes.
""Port costs are a hell of a lot higher than in the Far East but freight rate earnings are also better,"" said the manager. ""We will wait for clearer details.""
International donors have been pushing for efficiency measures rather than investment in infrastructure as a way to boost cargo handling capacity. In December 1995 the government urged port operators to meet efficiency targets to attract private sector development loans from the World Bank.
""Things have definitely improved. Container throughput time at the port for imports was 17 days,"" said a container shipping manager. ""Now it is only 11 and the target was set at seven.""
The efficiency drive began last December but shippers say export cargo efficiency targets have been less successful. A target of three days was set for export container throughput.
""For exports we are talking about rapid documentation for transit cargo. Bureaucracy there has not changed much,"" said another line manager. This is mainly cotton from the Sahel.
Measures include shortening times for declaring ships' manifests to customs, under the threat of port fines, and avoiding duplication of paperwork.
Gantry cranes, plagued by downtime, were expected to be in use 90 percent of the time and handle 16 containers an hour.
Local shipping agents said they were also concerned by talk of a bunker surcharge. Large customs fines for non declaration of ships' bunkers have been levied over the past year.
""It's a problem. But the port needs money and still competes well with others in the area,"" said one. ""Other ports in the area have applied all kinds of add-on charges.""
Projects put on hold after devaluation of the CFA franc in 1994 included new gantry cranes, renovating a fruit terminal, building a fish wharf, dredging and a new container park.
Increasing quantities of Ivory Coast's principal cocoa and coffee exports are being shipped in containers. --Abidjan newsroom +225 21 90 90
",32
"Ivory Coast must boost quality controls, improve farmer training and market different grades of cocoa separately, to retain its quality image, Netherlands Cocoa Association (NCV) head Louis Bensdorp said on Friday.
""Ivory Coast produces extremely good cocoa but somewhere along the line the bad 10 percent is bringing down the quality of the rest,"" NCV Managing Director Bensdorp told Reuters in an interview.
""Quality is the name of the game but it is easily lost.""
Amsterdam, Europe's cocoa processing hub, imports cocoa mainly from Ivory Coast and increasingly in bulk form.
Bensdorp was speaking as Ivorian Consultative Committee cocoa sector reform talks continued. Cocoa quality and teething problems with a new export contract auction system have topped the agenda.
""There is a total lack of quality control,"" Bensdorp said, outlining three corrective measures he put before International Cocoa Organization, industry, donor and Ivorian government committee delegates.
He cited an urgent need for quality checks at all stages of the marketing chain and an increased role for farmers' cooperatives in training and quality checks.
""The third quality issue is what I call government interference,"" said Bensdorp. ""The government has in the past said the mid-crop (April-Sept) would be kept off the market. In practice that means it is kept in upcountry stores.""
Poor storage meant a risk of middlemen mixing deteriorated cocoa and smaller beans usually seen in midcrops with the larger main crop (Oct-Mar) beans preferred by industry for its higher fat content.
""About 15 to 17 percent of chocolate is cocoa butter so it is very important for the shelf life of products,"" Bensdorp said, adding that long storage and poor quality bean pushed free fatty acid levels above the European legal food standard of 1.75 percent.
""There is no specific trade condition on free fatty acids so we as an industry are thinking about what to do with existing cocoa bean contracts (to change that),"" he said.
""That does not necessarily mean a free fatty acid clause but we need better checks on quality than we have today,"" he added.
""Good cocoa should be separated from bad cocoa and sold separately. There is a market for everything.""
Ivory Coast has in the past announced it would withold mid-crop cocoa and process it at home to add value to its cocoa exports.
""Usually it is mixed in with main crop cocoa,"" said Bensdorp. He said poor quality at the end of the 1995/96 season had partly been due to a flow of cocoa from farmers in the southwest who were using a new hybrid tree but who lack the expertise of farmers in the less productive but long-standing eastern plantations.
Bensdorp said buyers of bulk cocoa, increasingly favoured by some processors over cocoa in jute bags, had put in place their own origin port quality checks. Most of these buyers were Dutch.
Consultative Committee president Philippe Mian, technical advisor to Ivorian Prime Minister Daniel Kablan Ducan, told Reuters more checks from village level downwards were needed.
""The only administrative control is at the port of loading,"" he said. ""We are now preoccupied with quality and there have been discussions with who should be responsible for contracts, the industry or the state.""
Other delegates feared that cocoa in Ivory Coast's full-to-capacity warehouses could deteriorate if not shipped by March.
Stocks have risen as exporters who bid too high for export contracts wait for better prices.
""I do not see the auction as the cause of quality problem but the rules have been discussed,"" said Bensdorp.
Ivory Coast's Caistab marketing board has pulled back from a monopoly internal and external marketing role and closed upcountry buying centres and quality checkpoints.
Export contracts are now allocated by auction as part of a donor-sponsored market liberalisation policy.
--Abidjan newsroom +225 21 90 90
",32
"After years of war-induced poverty, gum arabic is offering drought-stricken Chad's rural poor a lifeline to the production plants of the world's food and beverage giants.
The name gum arabic may mean little to most people but the sticky acacia tree sap balls are a valued commodity in companies as diverse as Coca Cola Co, drug manufacturer Hoechst and bubble gum factories around the globe.
For impoverished sub-Saharan states producing the bulk of world demand, gum arabic simply means export currency.
""Gum arabic is one of nature's best emulsifiers but the industry has suffered from low prices in recent years,"" a senior U.N. Food and Agriculture Organisation (FAO) official said.
""But with synthetic food-substitutes losing favour prices could move up again as quality is improved,"" FAO's programme director Mahamat Ali Hassam told Reuters in the capital N'Djamena.
Soft drinks makers now consume 30 percent of world output but it is also used in sweets such as pastilles and chewing gum. The food industry uses it as a stabiliser and a preservative.
Chad, neighbour of the world's largest gum arabic producer, Sudan, is planning a quality blitz to win markets after years of falling yields and bloody turf disputes between foraging nomads and commercial farmers.
""About 70-80 percent of world output (about 35,000 tonnes) is African with Sudan producing 25,000 to 30,000 tonnes,"" said FAO Chad director Pierre Gence. ""But Chad has the potential to match Sudan's output.""
The FAO and the French aid agency Caisse Francaise de Developpement (CFD) are both working on projects to propel Chad's output to 30,000 tonnes from around 3,000 tonnes today.
Some experts say Chad has the capacity to produce 160,000 tonnes a year but that world demand would have to increase dramatically to accomodate that.
Gum arabic has a history dating back to ancient times. Arab traders brought it north from Africa in caravans to Middle Ages Europe and the Middle East along with gold, ivory and slaves.
It is also highly prized as a soluble food fibre because, unlike other strong vegetable emulsifiers with thickening and gelling qualities, it can be used in foods and beverages without altering texture.
It is used in everything from indelible ink for Chad's Koranic schools to textile dyes, glues, pastilles, perfumes and pharmaceutical products.
Despite traces of arsenic it is also nutritious, with 90 percent sugar and 2.5 percent each of fat and protein in addition to copper, calcium, sodium and magnesium.
Hungry nomads pluck gum arabic as they pass with grazing goats and cattle.
But state land rights for Chad's 25,000 producers are poorly defined. ""People get killed over this,"" said one French worker.
""Our studies aim to entirely review and reform the whole sector so everyone's interests are respected and output can grow,"" said a spokesman for the French CFD development agency.
Trees take five years to mature yielding about 150 grams in each of two main harvests between November and March.
""Some super-trees yield eight kg per harvest so we are trying to find out their genetic code and plant more,"" said the FAO's Mahamat Ali.
Gum arabic is dried from squash-ball sized yellow blobs of sap into quartz-like chunks and split into top grade Kitir followed by Tarlah grades before it enters a highly secretive marketing chain in 2.5 kg Corlo lots.
Marketing data is kept secret.
Commercial planting has not got underway but existing trees have suffered from 20 years of drought. Rains of 300-500 mm are needed whereas some areas are only forecast to get little over 100 mm in 1997. Chad has already appealed for food aid.
Chad's four-year ""Gum Arabic Project"" to 1999 seeks to improve knowledge of the sector and its practices -- from commercial tree bleeding, tooling, drying, sorting, stocking, transporting to dealing along the murky marketing chain.
The FAO's two-year $285,000 project up to 1997 on inventory assessment, mapping, training and standards completes the picture of sectoral reform.
Neighbouring countries are also planning more output, from Senegal, Burkina Faso, and across the arid Sahel desert fringe to strife-torn Central African Republic.
Nigeria is already second only to Sudan in terms of production. India is the main producer outside Africa.
",32
"Light rains in Ivory Coast after a dry start to January will help mid-crop (April-Sept) cocoa crop development, particularly if they extend into February, a crop analyst said on Thursday.
""We have seen around average rain levels for January so far but a little more now and in February would help,"" another local crop analyst told Reuters.
Distribution of rains was patchy.
Most fell in central and northern cocoa and coffee areas, particularly around Man, Daloa, Yamoussoukro and Gagnoa, the data showed. Little fell in coastal areas around San Pedro and Abidjan.
""The front (associated with rain) is now over central areas,"" said one weather analyst. ""Central areas have seen a surplus for the period but southern areas are in deficit,"" he added.
One crop analyst told Reuters rains seemed to have reached most cocoa and coffee areas.
""There seem to have been good light showers in most cocoa areas,"" said the crop analyst after returning from an up-country tour. ""There is no dust on most bush tracks.""
Dry harmattan conditions from the Sahara had now retreated northwards after failing to reach southern Ivory Coast as usually expected in late-December or early January.
Exporters and crop inspectors said cocoa humidity levels remained around 8-10 percent against exportable quality of eight percent, despite drying efforts
Coffee farmers have also had drying problems but export activity remained low after shipments put by port sources at 10,492 tonnes for October to December, exporters said.
Quality inspectors said a better picture of coffee humidity and quality after rains would emerge as arrivals picked up.
The data, from Ivory Coast's national weather station, showed the following rainfall for the second 10 days of January in key growing areas plus the commercial capital Abidjan:
Dalao 47.5 mm, Gagnoa 7.8 mm, San Pedro 0.1 mm, Tabou 6.2 mm and Man 0 mm, Dimbokro 4.6 mm, Yamoussoukro 44.8 mm, Aidjan 6 mm, Sassandra n/a, Adiake n/a, Korhogo 0 mm.
No data were available for Adiake and Sassandra.
-- Matthew Bunce Abidjan Newsroom +225 21 90 90
",32
"Ivory Coast might cut cocoa freight slightly for 1996/97 but a decision on rates is not likely to hold up shipments as it did last October, exporters and shipping lines said.
Shipments should start when export licences and finances are in place, they added.
""We have already written last year's (1995/96) rates into our costs for next year's (1996/97) accounts. Any change will be small,"" one major shipping line manager told Reuters.
""The government might choose to cut a bit as (shipping) costs have gone down since liberalisation,"" said a large fleet manager. He added, ""You never can tell. I don't think they will cut, but certainly not much more than one and a half percent.""
But there was uncertainty over how to fill in official forms, due to be in by October 15, requesting data on import and export cargo this year and rates to be applied in 1996/97.
""We have to get this done quickly and there still has not been a meeting (of trade body FEDERMAR) to decide how to fill in the forms and what to argue with the Caistab,"" said one shipping line marketing manager.
""We don't know if they want separate freight rates or the conference guide rate,"" he said. Shipping managers were trying to arrange a meeting, he added.
Cocoa shipments in 1995 were blocked from early October to mid-November when shipping lines rejected a 25 percent cut in cocoa and coffee freight rates to Europe set by Ivory Coast's Caistab marketing board. A rate of seven percent was eventually agreed.
Fob rates of 415,836 CFA per tonne for cocoa and 856,732 CFA for coffee were set for 1995/96.
""We have heard from the Caistab that rates should not change between this season and last season. But it is still open, there may be a change of one and a half percent in either direction,"" said another shipping manager.
The exporters' forum GEPEX foresees at most a small rate change. ""I think after last year's problems it will be difficult to make much of a change to the rates,"" said one exporter.
A transport ministry official said 1996/97 rates would be stable. ""It will be difficult to rock the boat again after last year. Liberalisation does not mean rates should be forced down artificially."" The decision rested with the Caistab, he added.
The seven percent cut in the 1995/96 rate to northern Europe and an unchanged price for shipments to Mediterranean, British and French ports was agreed in November last year.
Freight rates were cut by 12 percent in 1992/93 but were left unchanged in 1993/94 and 1994/95.
Another government transport official said he was sceptical about the benefits of shipping liberalisation, which is part of wider donor-sponsored reforms aimed at increasing commodity market efficiency and transparency.
""All prices are set behind close doors. The Caisse pays to exporters the price set in the bareme but exporters are pocketing money by getting lower freight rates and rebates from shipping lines,"" he said.
An announcement of other 1996/97 marketing rates, including farmgate prices is expected this week, but some industry sources think the season might not get going until October 21 or 23.
Cocoa farmer prices are broadly expected to rise only in line with inflation, if at all, from 320 per kilo of bagged cocoa in 1995/96.
Coffee producer prices are expected to fall to 500-600 CFA per kilo, from 700 CFA in 1995/96, in line with lower world prices.
Export taxes are expected to remain stable for cocoa at 160 CFA per tonne.
""The coffee tax (150 CFA) is likely to be slashed,"" said an international banker, pointing to earlier World Bank advice to that effect.
- Abidjan newsroom +225 219090
",32
"Ivorian 1996/97 cocoa arrivals stood at around 390,000-410,000 tonnes by mid-December, after a slow start to the month, analysts and exporters say.
Exporters blamed a combination of crop profile and demand factors for the dip in December -- usually the strongest month.
The figures to December 16 were down from an estimated 540,000 tonnes by that date last year, but some analysts said a further 50,000 tonnes should be added to this year's total for comparative purposes as the season had opened three weeks late.
An averaged figure plus the 50,000 tonnes would put arrivals since October 1 at 450,000. Various sources put arrivals at San Pedro since October 1 at 130,000-140,000 tonnes with the rest going to the main port of Abidjan.
""Arrivals were slower than usual for December but in the past week arrivals have overtaken last year's (weekly) rate,"" said one exporter. ""People are completing December contracts but January will be strong,"" he added.
Subsequent arrivals up to December 22 were said by exporters to be around 50,000 tonnes per week. They expected the deficit in arrivals compared to last year to grow in December before narrowing sharply in January, when arrivals pick up again.
Difficulty in obtaining export contracts from the Caistab marketing board and problems with bean drying after rains upcountry had accentuated the usual Christmas period drop-off.
Rains had damaged bushtracks, delaying collection and raising humidity and moisture to above acceptable levels in some areas.
""We are refusing some cocoa. There is a lot more coming down now the sun is out,"" said one Abidjan-based exporter.
Drying problems and poor fermentation had raised bean humidity to 11 percent in some areas, extending both normal and machine drying times.
""Humidity levels are slipping back down from anything up to 11 percent,"" said one San Pedro-based buyer, and the guideline farmgate price of 315 CFA per kilo had on the whole been paid to growers.
Upcountry buyers visited by Reuters over Christmas had taken the chance to dry out large quantities of fresh through to greyish moist beans as a wet early December gave way to usual dry sunny weather ahead of the holiday.
""It's patchy, but sunny days are here again,"" said one buyer. ""Whatever was cut off in village stores or too wet can now be properly dried out,"" he added.
San Pedro received over 15,000 in the week from December 16, exporters there said.
Reports of smuggling to Guinea continue to surface but one Western diplomat recently returning by road from Conakry said road conditions were appalling and few covered trucks had been seen.
Large shipments in the past weeks are expected to cut into port stocks.
""Port area stocks are unclear but there are a lot of bulk shipments,"" said one exporter.
-- Abidjan Newsroom +225 21 90 90
",32
"Chad's cotton monopoly Cotontchad is forecasting rises in output and processing capacity in the 1996/97 November-October season, thanks in part to higher world prices.
At the same time, it is looking to new markets in China and Russia to boost sales of what is currently the nation's main source of foreign exchange.
But company administrative director Mahamet Tahi Kherallah says that despite the optimistic outlook, the industry remains hostage to external factors beyond its control.
""The future depends on the problems of world cotton price fluctuation, rain levels, and the exchange rate for sales in dollars,"" he told Reuters in an interview.
Africa's fifth largest cotton producer, majority state-owned Cotontchad limited the impact on production of a 1996 drought.
""The threat of drought has been overcome by enlarging the area under cultivation,"" Kherallah said. ""Rains in (southern Chad) cotton areas were largely sufficient. We needed four months of good rain between May and September.""
Rain in other areas was up to 50 percent below average.
Cotontchad sees its seed cotton purchases rising to a record 204,600 tonnes in 1996/97 from 157,476 tonnes in 1995/96. It projects the area under cultivation rising to 264,557 hectares from 209,750 in 1995/96.
Africa produces no more than five percent of world cotton.
Chad's National Office for Rural Development (ONDR) in November raised Grade 1 cotton farmgate prices for 1996/97 by 30 CFA francs a kg to 170 CFA to pass on world market price increases to farmers and encourage production.
The rise followed a 20 CFA increase in 1995/96, a move that had already encouraged farmers to plant cotton and use insecticides and fertilisers.
Total seed cotton processing capacity at Cotontchad's eight southern factories, which handle all the annual crop, has been increased to cope with the projected production increase.
In 1995/96 they produced 61,808 tonnes of fibre. In 1996/97, officials expect them to produce 83,991 tonnes.
""We recently added capacity to an existing factory at Pala, which is now our most modern facility,"" Kherallah said. ""Quantities and quality are particularly good around Pala.""
Processing capacity has also been boosted to 40,000 tonnes of seed cotton a year at Moundou and Kelo, with plans to do the same at Koumra over the next two to three years, he added.
Exports could be boosted, with China and Russia showing interest. Traditional markets for Grade 1 cotton are Portugal, Germany, Japan and France -- plus Nigeria for Grade 2.
With world average per capita consumption expected by some experts to rise to 7.24 kg in 1997 from 7.12 kg in 1995, Cotontchad says demand for its produce is already increasing.
""Our cotton is sold throughout the world but we are getting a lot of interest in people setting up business with us,"" Paris-based Marketing Director Ibrahim Malloum told Reuters.
Cotontchad hopes oil revenue, expected from 2000, will be used to improve dirt bush tracks. Road construction is under way in southern cotton belt areas but some tracks are closed to large trucks by law during two to four months of rains.
Cotton thrives in Chad's wetter southern areas. It was not farmed commercially until French colonisers gave Coton Fran, later Cotontchad, a monopoly on cotton purchasing and ginning.
Cotontchad is owned by Chad (75 percent), the CFDT French textile development board (17 percent), banks (six percent) and the CFD French Development Board (two percent).
An estimated two million of Chad's 6.4 million people depend directly on cotton, but textile manufacturing is still a minor industry.
The country's one textile plant, the partly French-owned Cotex factory at Sahr, took only 500 tonnes from Cotontchad in 1995/96, Kherallah said. The plant has a 1,000-tonne capacity.
($1=530 CFA francs)
-- Abidjan newsroom +225 21 90 90
",32
"Delayed export financing is slowing Ivory Coast cocoa arrivals but shipments for existing contracts will continue ahead of an imminent government decision on licences and marketing rates, exporters and shipping sources said on Friday.
""The central bank has stopped backing private lenders,"" said one exporter. ""Buying activity has slowed down in the past two days.""
No immediate figures on  latest arrivals were available on Friday.
At least one major bank has stopped financing, and exporters expect others to follow suit unless rates are published soon.
""Exporters with licences from 1995/96 and enough money are carrying on buying and shipping. November contracts are fewer than December but still have to be met,"" said one exporter.
Ivory Coast opened its 1996/97 cocoa marketing season on October 24 but delayed an announcemement on guideline buyer and exporter marketing rates. ""They have never been so late,"" said an exporter.
Almost no cocoa trucking activity was visible at Abidjan on Friday. But large consignments of cocoa can be seen in warehouses and total port stocks are now estimated by shippers to be over 100,000 tonnes.
One banker financing some large exporters said many of their clients had no cocoa in port and the owner of the stocks was not clear. A large shipment to Amsterdam from Ivory Coast is expected within two weeks.
""Port stocks will probably slip before cocoa arrivals pick up after licensing,"" said one exporter. ""Activity will probably pick up after November 15 when licence finances have been sorted out.""
Exporters are expecting total arrivals for November of between 150,000 and 180,000 tonnes, rising to a December peak before a slow January tail-off. Exporters' total year crop estimates pivot around 900,000 tonnes.
Shipping companies expected licences to be out by Friday but are now waiting for an announcement next week.  ""Many companies we deal with were saying licences would be out by the weekend but we have heard nothing about rates,"" said one source.
Licences are usually announced by the Ministry of Agriculture but no date has been set.
Caistab sources said this week a list of approved cocoa exporters had been drawn up by Wednesday but still had to be signed by the Minister of Commerce. The list had been expected by exporters on Wednesday.
Caistab president Yves-Marie Koissy is still in the U.S, but could return next week, said Caistab sources.
Exporters have rejected Caistab requests to them to argue for a cut in freight rates. They have also rejected a government plan to make exporters responsible for collecting buyers' unpaid income taxes.
""The Caistab is also trying to get exporters to pull down freight rates but they (exporters) are refusing to approach shipping lines,"" said another port source.
""Exporters want the rates set the same, so their rebate from the Caistab is not cut,"" the source added.
Pod counters recently up country said large quantities of cocoa were seen along roadsides and moving through warehouses.
""November arrivals will be strong as soon as the uncertainty is over,"" said one.
--Abidjan Newsroom +225 21 90 90
",32
"African coffee producers will meet before the end of February to discuss implementation of world export cuts set in Brazil on January 23, Ivory Coast's commodities minister Guy-Alain Gauze told a news conference on Thursday.
""A meeting will be held by the end of February,"" said Gauze who is also chairman of the Interafrican Coffee Organisation (IACO) producer group.
African and Asian states agreed at the end of emergency talks of the Association of Coffee producing Countries (ACPC) in Rio de Janeiro on Janaury 23 to cut robusta exports by one million 60-kg bags between January and June 1997.
A meeting in Bali on February 6 on sharing out the export cuts between the two regions would follow 10 days of informal discussions since January 23, an ICO spokesman told Reuters.
""We are satisfied by the results at Rio and the idea now is to put together control and verification mechanisms to ensure measures succeed,"" said OIC chief economist Donald Kaberuka.
Gauze did not specify the basis on which export curbs would be distributed between Asian and African regions, or between individual countries.
Arabica producers at the Rio talks also agreed to cut their output by a total of 300,000 (18,000 tonnes).
African producers had complained that previous export restraints had been ineffective in shoring up sagging coffee prices in late 1996, calling on non-member producers to join the ACPC.
((--Abidjan newsroom + 225 21 90 90))
",32
"Ivory Coast-based firms and new investors aim to boost local cocoa processing in 1996/97 but will not reach the country's 50 percent of production target by 2000, industry sources and analysts say.
""The 50 percent is usually understood to mean about 400,000 tonnes (beans) but we're still way off that,"" said a spokesman for Abidjan-based processor UNICAO, one of Ivory Coast's top processors with rival Callebaut-Barry.
The country can already process around 180,000 tonnes but the industry sources said other potential investors might lift the total by at least another 110,000 tonnes to nearer 300,000 tonnes from 1997 if plans are completed.
Ivorian exporter SICC told Reuters its first processing project is 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 Gerkens.
""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.
He said plans partly hinge on government incentives.
""A minimum of 50,000 tonnes (of beans could be processed) at Abidjan or San Pedro depending on space availability,"" said Guillaume, adding that Ivory Coast's second port San Pedro offered better tax advantages.
""It (the plant) would cost about $2 million and we will do it, one way or another,"" he said.
At least four other exporters and foreign traders are said to be interested in processing in Ivory Coast.
French group CEMOI restated in December its interest in processing up to 60,000 tonnes a year in Ivory Coast but has not detailed plans.
""We thought Cargill or (Cacao) De Zaan would buy into UNICAO,"" said one exporter. Others said they were waiting to see whether Cargill or its subsidiary Gerkens would boost its presence in Ivory Coast after its supplying trader Phibro's cocoa purchase contract with Ivory Coast's Caistab marketing body ended in late 1997.
UNICAO says its own 1997 processing expansion plans will go ahead despite the December sale of a 30 percent holding of its parent, largest Ivorian exporter SIFCA, to Arthur Daniels Midland by rival W.R. Grace.
A third 21,500 tonne capacity production line would be ready by October with production under way around January 1998.
""Capacity (bean grinding) will then be 86,000 three lines,"" said UNICAO's deputy director Kanga N'Ze, producing 50 percent cocoa butter and cake and 50 percent liquor. Capacity in 1995 was 43,000 tonnes.
UNICAO's only main rival Callebaut-Barry has three plants operated by its subsidiaries SACO and Chocodi, grinding up to 80,000 tonnes of beans a year.
Analysts, who see 30 percent as a more realistic processing target, say the aim of adding value to exports might be hi-jacked by short-termism.
""It takes a year to build a plant from scratch but is everyone committed for the long-term?"" said N'Ze. ""Running, especially energy costs, are still high so why would a European firm move?""
Ivory Coast produced a record 1.2 million tonnes in 1995/96 but has forecast closer to a million tonnes for 1996/97.
Commodities Minister Guy-Alain Gauze said earlier this year fiscal reforms, a new investment code, various incentives and the prospect of cheaper energy from offshore gas should encourage investment in cocoa.
",32
"Cocoa buyers in central Ivory Coast say their purchases are down by 30 percent from this time last year and expect the country's total 1996/97 cocoa output to be under 850,000 tonnes.
""The estimates have been too high. The crop will be about 800-850,000 tonnes for the whole year,"" said one buyer. Most other buyers in the area visited by Reuters agreed.
""We have had two strong years but now we are going back to normal levels,"" said one buyer with nine purchasing centres. ""Our business is running at 65 percent of last year.""
The state of cocoa farms between the main central towns of Gagnoa and Daloa seen by Reuters varied widely with cocoa pod deterioration strongest in the north around Daloa.
Ivory Coast exporters said this week cocoa arrivals were down 25 percent on this time last year.
Exporters and buyers in southwest Ivory Coast expect arrivals of the 1996/97 crop to be no more than 900,000 tonnes.
Private forecasters last summer projected a main crop alone of 850-900,000 tonnes. The 1996/97 season opened on October 24.
Prime Minister Daniel Kablan Duncan said recently he expected his country's total cocoa crop to shrink to 950,000 tonnes in 1996/97 from a record 1.2 million tonnes last year.
Buyers in Daloa told Reuters production from older trees in their area would pull down average Ivorian cocoa production figures boosted by higher yields from young hybrids around Soubre and San Pedro in the southwest.
They said bean sizes varied widely from farm to farm and between trees, with a range of 90-100 per 100 grammes and 9-10 percent humidity.
Beans totalling no more than 105 per 100 grammes are considered exportable.
""The trees here are older and have not recovered from giving a massive mid-crop last year,"" said the biggest cocoa buyer in Daloa. ""Overall quality is good but the beans are smaller and mid crop beans might be too small for export.""
Several buyers said they would close their stores in June.
""Crop forecasts have been too high while pod survival has been poor. There is little on trees for the rest of the year,"" said the main Gagnoa buyer.
Pods had wilted on trees because of sparse rains since September and insects had thrived in the dry conditions as farmers could not afford treatments early in the harvesting season, said one plantation owner.
Six farms visited by Reuters between Daloa and Gagnoa showed plenty of wilted, deformed or undersized pods with insect damage and occasional ""black pod"" fungal disease.
Mature but discarded November and December-harvest pods lay in heaps on some farms with mid-crop flowering rare.
However, the situation south of Gagnoa was markedly different with little disease, insect damage or pod wilting.
""If farmers could afford to spray (treatments) other plantations would be in much better shape,"" said one farmer.
Several farms had good pod sizes and age distribution with flowering concentrated on some trees.
""Rains south of Gagnoa have been more spread out so the situation is better there,"" said the manager of one well-kept plantation.
He said Harmattan season sun mixed with some cloud cover and daily showers would help flowering for mid-crop pods.
Buyers said most cocoa had now been brought out of the bush with few village stores remaining full. Transportation to port would not be delayed much by road conditions, they said.
The up-country buying operations of recently liquidated SOGEPAG, a subsidiary of large Ivorian exporter SIFCA, have been taken over by Daloa-based private buyer Enza Diaby -- an associate of SIFCA.
Larger SOGEPAG stores have stopped receiving cocoa but smaller centres were operating. The firm offered cooperative-like terms and logisitical help to farmers.
""Diaby is running the small stores. He has enough trucks for collecting cocoa,"" said other buyers.
One farmer said long-term output around Gagnoa was set to decline as trees aged and government agencies encouraged farmers to plant rubber and diversify agricultural production.
-- Abidjan bureau +225 21 90 90
",32
"Ivory Coast's coffee industry faces more Caistab market reforms and fresh uncertainties over its returns in 1997, exporters and analysts said.
""The Caistab has a battle on its hands to keep farmers interested while meeting obligations to liberalise the sector to meet (World Bank) loan conditions,"" said one analyst. ""There could be a lot of changes in store and not all of them welcome.""
Ivory Coast slashed its reference farmgate price to 500 CFA per kilo from 700 CFA and opened its 1996/97 marketing season late on November 14.
Prices were set high in 1995/96 to encourage rehabilitation of plantations, but world prices slid to levels well below prices guaranteed by the Caistab.
The World Bank fears a repeat in the coming year. It wants a rapid end to cross-subsidies to the coffee sector from cocoa earnings and is waiting for new Caistab chief Yves-Marie Koissy to unveil plans early in 1997.
One export bank risk manager doubted whether all subsidies to the coffee sector would be paid this year.
Some exporters project coffee output to exceed the 230,000 tonnes forecast by Caistab, which could mean higher-than-budgeted subsidies.
""We are not funding (exporters) until we are sure the Caistab will keep its word,"" the risk manager said. ""It (Caistab) has funds but export margins are already non-existent.""
Industry opinion is split on what action the World Bank should take when British consultant Landell Mills (LMC) presents its ideas for market liberalisation in January.
Ivory Coast no longer guarantees a set coffee price to farmers, using instead to a guideline minimum price.
""Internal prices have been liberalised but it is still not clear if you would be jailed for paying below that level. The law is not clear,"" said a buyer. ""What is clear is the government exerts a quasi-monopoly on external marketing by its allocation of export contracts and export licences.""
""We have nothing to fear if quality checks are kept in place along with some back-seat stabilisation functions,"" said one.
Thin up-country buying this month has seen merchants paying farmers less than the reference price. Farmers were being paid only 300 to 340 CFA per kilo, one crop analyst said.
One large coffee processor operating in Ivory Coast said it was now paying 40 CFA above the reference price for premium quality coffee, even though other buyers paid less.
""We are for a completely free market with quality checks,"" said a manager.
Exporters said they were generally satisfied with trading via a new electronic auction system introduced in May to make dealings more transparent. Cocoa traders using a similar system have complained about contract sizes and excessive bidding to win contracts.
Exporters expect no changes to the 1996/97 list of coffee marketing prices issued by Caistab in November.
",32
"Europe's cocoa industry will shortly issue a draft contract document for increasingly popular loose-bean bulk cocoa shipment techniques, according to the head of the Dutch cocoa industry.
""We will put forward very shortly Netherlands Cocoa Association ideas on a bulk contract,"" Association Managing Director Louis Bensdorp told Reuters on the sidelines of a cocoa conference in Ivory Coast which began on Wednesday.
""We are in discussions with the AFCC (the French cocoa and coffee industry body) and the Cocoa Association of London,"" said Bensdorp. ""It (bulk) requires changes in the contract conditions. We are thinking about how to write a new bulk cocoa contract for mega-bulk."" he added. The contract would be on cost, insurance and freight (CIF) terms.
Mega-bulk, an industry term for the recent trend of loading cocoa ships with loose beans rather than 60 kilo jute bag-loads, gained favour after trial shipments from the Ivory Coast in 1996.
Another bulk technique involves pouring beans into containers packed with drying agents to prevent water condensation damage as ships steam from tropical origin to consumer country climates.
""It has revolutionised the industry,"" Bensdorp told Reuters. ""We will receive 250,000 tonnes to 300,000 tonnes of cocoa at Amsterdam this year but next year we expect 350,000,"" he added. Amsterdam is Europe's cocoa processing hub.
Labour and time savings, as well as better quality, favoured the growth of bulk techniques.
""There is a struggle to keep costs down and bulk means everything is cheaper,"" said Bensdorp. Quality was better because of tighter origin port quality checks than for bagged cargo and selection of quality ships, he added.
One problem was that bulk ships could not get close enough to some Amsterdam receivers unloading facilities, meaning costly road transport by container trucks.
""I think containers are an intermediate step,"" said Bensdorp. ""In future it will be done by transhipment to barges,"" he told Reuters at cocoa sector reform talks ending on Friday.
Bensdorp said large Amsterdam-based industry processors, including Cargill subsidiary Gherkens and Dutch processor Cacao de Zaan, still dominated demand for bulk.
""Soon you will see more bulk going into Hamburg and Hull "" said Bensdorp. British trader E D and F Man has a new processing plant in Hull.
Bulk cocoa is not tenderable on London's LIFFE terminal market.
""It is useless to set up a separate exchange in Amsterdam so we have to find a way of doing it through LIFFE,"" said Bensdorp.
Cocoa exporters and receivers in Ivory Coast have put in place bulk loading facilities at both Abidjan, and the second Ivorian port, San Pedro port.
Ivory Coast's largest cargo forwarder, SAGA, told Reuters it plans raise bulk loading rates from 40 tonnes an hour to 100 tonnes to match rising demand for the technique.
Local exporters and European industry officials expect Ivory Coast to ship 270,000 tonnes in bulk in the 1996/97 (Oct-Sept) season, mainly to Amsterdam. West African shipments could reach well over 300,000 tonnes.
Ivory Coast exported aboput 120,000 tonnes of bulk cocoa in its record 1.2 million tonne output 1995/96 season.
-- Abidjan newsroom + 225 21 90 90
",32
"Shipments of cocoa from Ivory Coast's two main ports are estimated to have risen to around 120,000 tonnes by end-November but official figures would not be ready until later this month, shippers and exporters said.
""About 120-130,000 tonnes sounds right,"" said one. Others agreed and said Abidjan and San Pedro port stocks had risen over the past week.
Official statistics for October and November are not yet available but about 100,000 tonnes had been exported by the same date in 1995/96. Shipments then had been delayed in a shipping freight rate dispute, making year-on comparisons difficult.
Under 10,000 tonnes were exported in October 1996 and volumes for this year are expected to be small as the marketing season opened over two weeks later than usual on October 24.
Exporters said arrivals in 1996/97 had reached 285,000 tonnes by end-November. Some put the figure at closer to 300,000.
""That would leave stocks of around 150,000 tonnes, which sounds a bit high,"" said one. But large shipments in early December would have already cut into that volume, he added.
Shippers looking ahead expected arrivals to slacken from mid-December to end-January before a steady flow until the end of March.
""There's also plenty of coffee to deal with this year. Cocoa should take off again in February and March,"" said one exporter. ""There's not much demand and plenty of stocks in Europe.""
Cocoa crop analysts said an extension of light rains well into December would greatly improve mid-crop prospects. Drying could slow arrivals but only marginally. Shipments would rise again from February.
""The trees are flushing now and large pods have been taken off. That gives trees more reserves for flowering,"" said one.
Peak 1996/97 harvesting is expected in late December and early January, boosting early February arrivals for shipments to meet benchmark March contracts.
Harvested cocoa usually takes about 21-27 days to reach ports for shipment, after fermenting, drying, sorting, bagging and transport.
""The year will certainly be drawn out until March,"" he said.
Mid-crop volumes from March onwards still unpredictable but will be favoured by continuing light rains.
Some shipping freight rate elements were still under discussion this week but those set on October 24 in the 1996/87 Caistab marketing agency price list were largely accepted. No delays to shipments were expected, said exporters.
Some exporters said they had negotiated cheaper rates for some destinations than last year, especially for U.S.-bound cargo, as premiums on space had dropped with arrivals volumes down.
-- Abidjan newsroom + 225 21 90 90 REUTER MPB
",32
"An Ivory Coast liberalisation study focusing on quality, competition and less bureaucracy will be ready as planned by January 31, according to sources close to reforms.
""Four options have to be reviewed,"" said one source. ""Price stability while making each year self-financing (with no carryovers between years) will be looked at,"" the source added.
The donor-sponsored study by private British firm Landell Mills Consultants (LMC) would also seek to avoid pitfalls seen in countries such as Cameroon where unfettered liberalisation led to coffee quality problems and loss of premium.
Ivory Coast embarked on a series of coffee and cocoa sector reforms in 1995 as conditions for a three-tranche $150 million World Bank Agricultural Sector Adjustment Loan.
Although the guideline farmgate coffee price was cut by 200 CFA a kilo to 500 CFA when the 1996/97 season opened in November, exporters point to continuing low world prices and the need for further support for the sector out of cocoa revenues.
""We are in favour of complete liberalisation but with good quality controls kept in place,"" said one industry buyer. ""The Caistab's role should be limited to a hands-off marketing role giving quality assurance and statistical information.""
Coffee exporters expect support for coffee to run at around 100 CFA a kilo, as world prices remain low, until recommended prices are reset or entirely scrapped for 1997/98.
The Caisse de Stabilisation (Caistab) marketing board sets a guide price for farmers whereas once it dictated prices. Donors have already demanded further streamlining of its operations and increased transparency about a shadowy set of costs referred to in accounts as ""Delta"" costs.
Delta expenditures for 1996/97, which will partly determine stabilisation fund levels for coffee, are due to be set from January when the Caistab gives details of coffee forward sales.
""The problem is that the Caistab has not released any (forward sales) data since October,"" said one source. ""That puts everyone in a very difficult position.""
The Delta cost for both coffee and cocoa is budgeted to be largely unchanged in 1996/97 from 53 CFA a kilo in 1995/96.
The Caistab, whose new managing director Yves-Marie Koissy was appointed in September but did not formally take over until October, declined immediate comment on the planned report.
The Caistab employs over 900 people but with its role reduced it is expected to cut staff levels after overruning many budgeted running cost items in 1995/96.
""The real number of employees in unclear,"" said on source.
The report will also look at how the Caistab can cut marketing margins through competition to below levels in competitor countries.
""Some exporters who were expected to be off the list in 1996/97 for debts were let back in through the window this year,"" said one source.
Advice for further competition in transportation, quality control and coffee bean hulling is also under review.
Forward sales policy amid volatile world market prices and an increasingly spot-driven world market are also expected to be considered in the LMC report.
Ivory Coast aims to encourage plantation rehabilitation and boost output to closer to 300,000 tonnes a year from a forecast 230,000 tonnes in 1996/97.
The Caistab phased out purchasing centres from 1995/96 to speed up the flow of produce to Ivory Coast's main ports.
It has also ended its monopoly over the import and distribution of collection sacks for coffee upcountry, but provides protection to local manufacturers against cheap imports from Asia.
($1= 542 CFA francs)
-- Abidjan newsroom +225 21 90 90
",32
"Ivory Coast will only market its midcrop cocoa (April-Sept) if world price levels are right, Ivory Coast Commodities Minister Guy-Alain Gauze said on Friday after a three-day cocoa sector review.
""We will market the midcrop if prices are right,"" he told Reuters at the end of a Consultative Committee cocoa review with International Cocoa Organisation, industry, donor and Ivorian officials.  
Cocoa stocks around Ivorian ports in January filled warehouses to a capacity estimated by trade sources to be close to 400,000 tonnes.
Cocoa futures in London LIFFE terminal market trading slumped to 18-month lows on February 6. May contracts were trading at 871 stg but by Friday's close had edged up to 886 stg after an afternoon high of 893 stg.
Traders noted slowing origin selling activity.
Ivory Coast's midcrop is usually of poorer quality than main crop cocoa, tempting some buyers to mix it in with main crop cocoa to get a better price. Industry buyers say this undermines quality.
The meeting of Ivory Coast's cocoa Consultative Committee reviewed sector reforms ranging from quality, export contract auction rules, security of supply for buyers and farmgate prices paid to farmers.
Industry delegates said they wanted better quality controls put in place after market liberalisation, separate marketing of good and bad grades of cocoa and rules to prevent overbidding at auctioning of export contracts.
Ivory Coast aims by the year 2000 to process 50 percent of an annual cocoa output at home and wants to stabilise its production at 900,000 tonnes.
Midcrop forecasts for 1996/97 are still not clear as flower survival rates after dry weather have not been assessed.
Pod counters said initial prospects seemed good after early pod setting on hybrid trees in south-west Ivorian plantations around San Pedro.
Ivory Coast produced an unexpectedly large 200,000 tonne midcrop in a record 1995/96 season of 1.2 million tonnes.
""It would be unwise for the government to interfere in a crop of this size,"" said one industry delegate. ""The government has said in the past it would withold midcrop and has then used it.""
-- Abidjan newsroom +225 21 90 90 (c) Reuters Limited 1997
",32
"Cocoa arrivals at Ivory Coast's ports this season could be 25 percent below last season's record 1.2 million tonne because of erratic weather and insect damage starting in July, buyers and exporters around San Pedro say.
They predict cumulative arrivals to the end of November of around 250,000 tonnes and of up to 300,000 for December.
""Mid-December to February will dip because of the rains in July,"" said one exporter in the southwestern port. ""Harvests will now be later and more prolonged, but not over 900,000 tonnes.""
Buyers said heavy July and August rains hurt flowers for December and January pods. Sunshine after August had helped the outlook for March while lighter rains, which started in early November, would boost flowering for mid-crop pods.
Widespread wilting of smaller pods was noted this week on on southwestern farms east and north of San Pedro last visited in September. Insect damage and ""black pod"" fungus had also been noticeable.
The Ivory Coast has slated 950,000 tonnes for its total 1996/97 output after private forecaster estimates of 850-900,000 for the main crop alone. The 1995/96 season hit a 1.2 million tonnes record after a higher than expected mid-crop of 200,000 tonnes.
But one San Pedro exporter said, ""There will be no more than 900,000 tonnes for the whole year. It could have been better but pod deterioration, insects and maybe even the trees' natural cycle have had an effect.""
Local buyers and other exporters in the southwest agree, some putting the output at even less, but they say mid-crop predictions are unreliable.
Few flowers and pods were seen on coastal farms and little cocoa was drying along roadsides. Tree pods and village stores were more plentiful in productive Meadji and Soubre areas.
Exporters and buyers in the southwest now matching cocoa arrivals data with last season's say volumes are down, with humidity higher at 8-10 percent and smaller bean sizes of between 93 and 100 per 100 grammes, against 85-90 last year.
""There is less cocoa than last year. It takes twice as long to fill a truck driving around the bush and it needs a lot of drying,"" said a buyer in Sassandra. Buyers elsewhere agreed.
Cumulative arrivals to end-November could be 250,000 tonnes, the sources said. One put registered cumulative arrivals at 213,000 to November 24, with 85,000 arriving in the week up to then. November arrivals last year topped 300,000.
Buyers and exporters foresee arrivals of around 250,000- 300,000 for December against about 400,000 in 1995/96.
A San Pedro exporters' agent said he had taken in 22,800 tonnes of cocoa this season with 10,000 still in stores and room for 25,000 more. Many San Pedro warehouses were full this time last year.
Another said their cumulative year-on arrivals were down 15 percent at November 24 and expected the gap to widen in December.
San Pedro's largest port handler expects up to 30 percent less volume this year and said arrivals to November 17 totalled 70,000 tonnes. The port expects to handle a third of this year's crop.
Cocoa quality is good but some mouldy, moist and deteriorated beans were being mixed in the rush to supply exporters.
""Some buyers can charge higher prices as export contracts have been sold up to March and have to be met,"" said one. Mould levels were around four percent, he added.
Some buyers have supplied farmers with insecticides and say dry Harmattan weather moving southwards will help drying. One 15-tonne capacity dryer was out of action after a fire at a San Pedro plant on Saturday.
Exporters said they now accept the 1996/97 list of marketing prices set by the government this month after a late start to the season. But they said the Caistab marketing board had not altered its auctioning system to prevent overbidding.
Smaller exporters say some people have been laid off until March as they cannot match prices bid over opening calls.
""About 750,000 tonnes have been sold to highest bidders but the Caistab has not sold the 15 percent it retains. Maybe they are waiting for higher world prices,"" one exporter said.
A San Pedro factory said it aimed to process 25-30,000 tonnes of cocoa this year.
-- Abidjan newsroom +225 21 90 90
",32
"Ivory Coast's 1996/97 coffee crop is set to return to the 250-300,000-tonne levels seen before farmers neglected their trees in the early 1990s, exporters and up-country buyers say.
Coffee output in 1995/96 was around 180,000 tonnes and experts see the increase as part of a new good-moderate-weak cycle that tends to dominate the sector.
""It is a very good crop although there are some quality problems,"" one San Pedro exporter told Reuters.
""I think the crop will be at least 250,000 tonnes,"" said a large buyer visited in the coffee-rich areas around Man and Vavoua. ""Exporters are not yet buying and the world price is still very low.""
Prime Minister Daniel Kablan Duncan last week said the crop would exceed 200,000 tonnes after a 32 billion CFA franc rehabilitation plan, favourable weather and better maintenance.
The government set a higher 1995/96 price to encourage production, but reference farmgate coffee prices were set lower this year to lessen government subsidisation of the sector.
Ivory Coast slashed its 1996/97 farmgate price to 500 CFA from 700 CFA for unhulled green coffee cherries, with lower prices for hulled cherries.
Most buyers and exporters visited by Reuters in a tour this week have not yet seen a full 1996/97 marketing list detailing their commissions, but they said they would have to accept rates shown in a copy obtained by Reuters.
""Buyers will lose out on commission,"" said one. Exporters said operations would go ahead in spite of some objections.
The new marketing season opened on November 14, delayed from early October.
Coffee marketing would get underway from mid-December as usual after cocoa harvests tail off, San Pedro exporters said.
""Most coffee is now held in village stores and the weather means drying and sorting will take more time,"" said one buyer.
Good yields meant some farmers had stripped ripe and unripe beans and mixed them together, they said.
Large amounts of coffee, both green and ripe red cherries, were this week seen by Reuters drying, some mixed together, along roadsides and in bush clearings, particularly in the north. Green cherries are bought at discounted prices.
Well-managed plantations visited were harvesting once a month but many trees around villages showed signs of unselective stripping, buyers said.
""Farmers take less care when quantities rise so we will have to consider the price,"" said a Daloa buyer. ""Exporters have not put in orders yet so we are not buying.""
One Abidjan-based exporter who went up-country this week also said quality was down. ""It is pretty bad in some places but the quantities are excellent,"" he said.
One crop analyst recently forecast 1996/97 production at 230,000 tonnes but most buyers and exporters said the figure was too low. Some up-country buyers said output could even be higher than 250,000 tonnes.
One expected 300,000 tonnes this year but most estimates put 1996/97 yields at one-third higher than the previous season, matching expected percentage drops in cocoa output.
A mild dry season favouring flowering and the natural production cycle of coffee trees had lifted the crop from a relatively poor 180,000 tonnes range in 1995/96, said Jean Toullec, a plantation manager in Gagnoa.
""I think 250,000 tonnes is possible as farms are being well maintained,"" he said. ""We are seeing 600 kg of coffee per hectare each harvest instead of 450.""
-- Abdidjan newsroom +225 21 90 90
",32
"Revisions to Ivory Coast's coffee and cocoa auction system have been finalised in line with donor loan conditions and need only government blessing to come into effect, donor sources and exporters say.
""It could be done in 12 hours if the government wanted it,"" one exporter told Reuters on Tuesday.
Talks with the World Bank and the Caistab cocoa and coffee marketing board to boost transparency and prevent overbidding were concluded in September, he said.
""There will be a weighted allocation among the highest bidders in proportion to the size of each bid,"" said a banker close to the reforms.
The Caistab launched an electronic screen auction system to replace telephone dealing six months late in May to meet World Bank loan conditions, but it has been under review since July after complaints.
Bankers said the final touches needed ministerial approval before $45 million of a three-tier $150 million World Bank loan to Ivory Coast could be disbursed in mid-October.
""There will be changes in management rules when Yves-Marie Koissy (the new Caistab president) arrives but the management will have to be approved by the government rather than the Caistab,"" one told Reuters.
The exporter confirmed that the Caistab would award export contracts for the price and quantity bid by the five highest bidders, but bids would be downscaled pro-rata if they outstripped total sales slated for that session.
One source close to the market said the system had been flawed. ""If you knew the quantity on sale at a particular time you place a high bid for the right amount and walk away with the lot. Apart from that it was a matter of speculation with the best information to hand or who you knew,"" said another.
Smaller exporters, cooperatives and unions say exporters with less financial clout in international markets were pushed aside by overbidding.
Caistab staff said Koissy, appointed in September but yet to finish his contract with the International Monetary Fund in Washington, was due in Ivory Coast on October 9-10.
This raised expectations that the 1996/97 cocoa marketing season would open as announced on October 15 despite some doubts in the market. Koissy would then leave again to return at the end of the month.
Exporters had complained that two European-backed firms had priced others out of the market earlier this year to win contracts under a rule that rewarded the highest bidders.
Under the existing system the Caistab offers to sell an undisclosed quantity of produce in two daily sessions.
The highest bidder in terms of price gets the quantity he requests at the second highest bid price provided there is enough produce on offer. Anything left over goes to the next highest biddder at his price and subsequent buyers thereafter.
Donor sources say $60 million of the $150 million loan have been granted already as the auction system was in place even though about 600,000 tonnes of the 1996/97 had been sold forward by telephone before the auction opening in May.
""We expect next year's crop to be entirely sold through the auction. This year the only condition was for it to be operational,"" a source close to the negotiations said.
He said a third, $45 million, part of the loan would be given in 1997 depending on the auction's success. London trader ED & F Man in a September report put the total forward sale of 1996/97 crop by the end of August at 590,000 tonnes, 65,000 up on the previous year.
""I would say the figure, which is not really known, is closer to 500,000,"" said the source close to the negotiations. ""Next year all the cocoa should be sold on the system.""
($1=515 CFA francs)
--Abidjan Newsroom +225 21 90 90
",32
"Revised rules for Ivory Coast's electronic cocoa and coffee auction system have been agreed to stop overbidding, a source close to discussions on the issue said.
Changes agreed between marketing board Caistab, exporters and the World Bank were expected to be put in place but no date had been set.
""Bidders will be held to the price they offer rather than the second highest bid price now applied,"" said the source.
""There are two main changes we have agreed which should now be applied quickly,"" he told Reuters, pointing to a date in late December or early 1997.
The second rule change would allow exporters to buy 15 percent of contracts previously reserved for Caistab direct sales to traders abroad if prices were right, said the source.
Existing rules mean the Caistab's 15 percent is withdrawn and submitted for later auction even when exporters are prepared to pay more than outsiders.
The rules were originally designed to ensure lots could be held back in the hope of higher offers later.
""Direct sales only act as a safety valve when traders bid more than exporters,"" said one observer. ""The changes on that point will favour the exporters as more will remain on offer.""
Contracts would also be awarded to the five highest bidders rather than one and scaled down pro rata if total demand outstripped supply. Bids are made without knowing what quantities are on offer for a particular session.
The donor-backed auction was launched on May 2 as part of a $150 million World Bank loan deal, but Commodities Minister Guy-Alain Gauze said at the time it could lead to distortion of contract prices.
""There is a double speculation here because the futures
market is a type of speculation and the same goes for the auctioning system,"" he said.
Up to 115,000 tonnes of cocoa is estimated by exporters and industry analysts to have been sold forward for 1996/97, plus another 100,000 tonnes for 1997/98, since the new screen-based system replaced telephone trading.
About 660,OOO tonnes of 1996/97 cocoa was sold before the auction opened.
Exporters told Reuters average quantities now offered at each auction session were too small.
Others said exporters had bought cocoa on the spot market but lacked Caistab contracts for shipping to clients abroad.
About 2,500 tonnes are auctioned daily, or about 20,000 tonnes in each of 50 trading weeks after allowing for about 15-20 percent destined for local production, one said.
""We would prefer two weekly sessions of 10,000 tonnes to make sure we can secure whole contracts in one go,"" he said. ""Coffee contracts are smaller so the same problem doeen't arise there.""
""Support for the system is disappearing, especially for physicals traders. Most of this year's crop is sold so we are really talking about contracts for next year,"" said one exporter.
The exporters' GEPEX trade body was still in talks with the Caistab this week after claims that a few firms had won too many contracts by bidding unrealistically high prices.
Exporters have said they lack the financial clout of foreign operators and face higher costs.
""It (the auction) is completely unworkable,"" said one exporter.
The Caistab has estimated a total of 950,000 tonnes of cocoa and 230,000 tonnes of coffee for the 1996/97 season.
",32
"Ivory Coast 1996/97 cocoa marketing season began on Thursday with the farm-gate price unchanged, the export tax lower, but confusion over freight rates.
Agriculture Minister Lambert Kouassi Konan told a news conference late on Wednesday that the farm-gate price would remain at 320 CFA francs per bagged kilo.  
Kouassi Konan, whose comments were broadcast on Ivorian state television on Thursday, said the Droit Unique de Sortie (DUS) export tax would be cut from 160 CFA francs to 150.
""To maintain the price, the government itself had to agree to a sacrifice of about 10 billion CFA francs, through the lowering of the Driot Unique de Sorti for cocoa,"" he said.
""If we had not made this cut we would have had to touch the price. The head of state insisted that the price of 320 CFA be maintained for our producers.""
Exporters had been expecting no significant price change.
Shipowners spoke of disagreements with officials over an indicative freight rate for 1996/97.
The Office Ivoirien de Chargeurs had requested detailed information on proposed freight rates on shipments for 1996/97, they said.
""We cannot give that kind of information now that markets have been liberalised. This is a part of our business strategy,"" one said.
""Normally (the Ivorian shipping industry forum) FEDERMAR would organise a meeting to discuss matters but we have been waiting.""
Kouassi Konan said the government had approved on Wednesday without amendment a decision taken by the Caisse de Stabilisation marketing board on the campaign.
Noting that the 1995/96 campaign was ending on Wednesday, he added, ""As a result, remaining stocks must be declared to the Caistab.""  
The opening of the season had been delayed by about three weeks. The government had given no explanation but some exporters linked the delay to the appointment only last month of new Caistab head Yves-Marie Koissy.
Koissy, who previously worked for the International Monetary Fund in Washington, has formally taken over but is not expected back in Ivory Coast until mid-November.
The 1995/96 season produced a record of around 1.2 million tonnes but a dispute over shipping rates blocked exports from early October to mid-November.
Export financers say bank liquidity was good with interest rates down on last year after Ivory Coast repaid some external debt.
""When exporters present their licences and backing contracts we can go ahead. Export licensing should be no problem,"" said an international banker.
Commodities Minister Guy-Alain Gauze, speaking on the sidelines of a two-day ministerial review in Gabon of the 1993 International Cocoa Agreement, said on Monday that Ivory Coast's 1996/97 cocoa production would be between 900,000 and 950,000 tonnes.
--Abidjan newsroom +225 21 90 90  
(c) Reuters Limited 1996 (c) Reuters Limited 1996
",32
"Chad holds much-delayed parliamentary elections on Sunday with voters hoping that democratic reforms and oil development will bring a lasting end to sometimes bloody ethnic rivalry.
An estimated 300,000 nomads in the sprawling arid nation on the edge of the Sahara Desert started voting on Thursday, three days before the rest of the 3.5 million voters throughout the Moslem north and centre and largely Christian south.
A total of 658 candidates from 49 parties will be vying for the 125 seats in a new national assembly which will convene on March 31 when the former French colony's democratic transition finally draws to an end.
""Oil is really what is at stake. Christian and Moslem differences have calmed although Islamic fundamentalism is rising,"" one diplomat told Reuters.
Polls open from 7 a.m. (0600 GMT) to 6 p.m. (1700 GMT).
French troops, stationed in Chad under a defence pact, will help fly voting materials and the 30 international observers to far-flung polling stations.
President Idriss Deby, the former northern guerrilla leader who seized power in a French-backed coup in 1990, won a long-delayed presidential election in July against southern rival and fellow general Wadal Abdelkader Kamougue.
Deby's Patriotic Salvation Movement, leading member of the 27-party Republican Front coalition, starts favourite to win Sunday's election or to be able to cobble together a working majority after the poll.
Election officials expect vote counting to end by Wednesday, provisional results a week later and final results by January 25, once the appeal court has checked them. Any run-offs will be held on February 23.
Many opposition parties disputed the first-round results of the presidential poll and urged their supporters to boycott the runoff but polling passed off peacefully. The opposition are grouped in a 17-party coalition.
The capital was calm on Saturday following a peaceful campaign, which ended on December 31.
Election issues tended to be local or ethnic but diplomats said that all parties were looking for a fair distribution of any wealth from oil, which is expected to come on stream by the year 2000. Chad has about 100 ethnic groups.
""People still largely vote on local grounds and Deby is not president of all Chadians,"" former national assembly leader, Jean Alingue, another defeated presidential hopeful, told Reuters.
""Turnout will be low because people know the fraud apparatus is still in place and nothing much will change,"" he predicted.
Chad has known coups, civil war or conflict with northern neighbour Libya for much of its life from independence in 1960.
It had a 57-member interim legislature under a 1993 transitional charter. Elections were repeatedly delayed, the parliamentary poll at least twice in 1996. Election officials cited organisational delays.
",32
"Security forces in Chad have summarily executed scores of people since a November official decree sanctioned instant justice for criminals caught in the act, local human rights officials said on Friday.
A pregnant woman, streetchildren and supected thieves are among victims of public executions reported, but human rights groups fear scores of other killings were carried out secretly.
""The policy has been carried out since November. It is quite open but the total numbers killed are not,"" a charity worker who gave her name only as Marie-Odile told Reuters.
""We are called out to scenes of executions and we talk with relatives of those killed,"" she said.
Officials confirmed the shoot-at-sight decree, but refused to go on the record. Instead they cited a public statement by President Idriss Deby whose office issued the order to paramilitary gendamrie commanders nationwide.
""N'Djamena is being held hostage by real organised gangs which, when they are apprehended by the law, are systematically freed again by the justice system. After they are freed they continue to give law enforcers problems,"" Deby told a news conference after meeting rights groups on November 23.
Insecurity is a major problem in Chad, which has been gripped by internal conflict or war with Libya for more than two decades until 1990.
""Crime is a huge problem. The whole place is run by the army and bandits and roads outside N'Djamena are subject to roadblocks by robbers,"" a Western resident said.
The vast but largely desert country also borders the volatile states of Sudan and Central African Republic, with whom it is seeking a common strategy against cross border banditry.
A transport worker at a dock on Lake Chad was among victims of the shoot-to-kill order listed by the human rights groups.
""A docker accused of breaking into an empty container was executed in the market. The shooting caused one pregnant woman at the scene to miscarry under emotional shock,"" the Chadian Human Rights League (LTDH) said in a December 26 report.
A Paris-based human rights group, in its account of the executions, said a pregnant woman suspected of stealing grain in a market was shot dead on the spot by gendarmes on November 16. A boy was put in a bag and shot dead on the banks of the Chari river in similar circumstances two days earlier.
Three suspected livestock thieves were shot in public on December 26, the International Federation of Human Rights Leagues told Paris daily Liberation.
A copy of the November 14 order to security forces seen by Reuters in N'Djamena read in part:
""We remind you once again that robbers must not be the object of normal procedures (of arrest). If one is caught in the act, you must immediately proceed with his physical elimination.
""Non-application of this order will result in very severe punishment including possible loss of rank and sacking from the force.""
LTDH workers say two gendarmerie officers who leaked the order were taken into custody and had not been seen since. The two, named as Job Mbaibougue and Abel Djimong were arrested on November 23 and taken to Faya Largeau prison, they said.
",32
"Federal Reserve Chairman Alan Greenspan on Friday urged Congress to modernise U.S. financial laws but warned that some government oversight must be maintained to avert financial catastrophes.
A top priority of regulators, Greenspan said after a speech at a Federal Reserve Bank of Atlanta conference here, is to prevent ""systemic risk,"" where a problem in one firm or market spreads through the financial system and ultimately undermines the entire economy.
If a bankruptcy or market crash cannot be contained, it could behave like a chain reaction spreading through all markets, he warned.
The failure of Drexel Burnham Lambert in the 1980s, for example, raised fears that its collapse would cause a cascade of failures among large Wall Street firms and commercial banks that had lent funds to Drexel. But the firm was liquidated in an orderly fashion and losses did not spread.
Using its existing authority to oversee banks and provide loans, the Federal Reserve has been able to contain previous crises, Greenspan said. ""There have been occasions when we have been on the edge of a significant breakout,"" he said, but declined to name the institutions involved.
The Fed's actions and other rules governing financial firms ""turned out to be adequate to stem the atomic erosion,"" he said, returning to the nuclear analogy.
""Regulation, by its very nature, becomes increasingly obsolete,"" Greenspan said. ""Regulation imposed in an earlier period would be wholly or partly inappropriate for something that evolves at a later date.""
Congress is currently considering several bills to reform laws governing banks, which would affect the Fed, which is one of the nation's primary bank regulators. Legislators have also introduced a measure to modernise rules on derivatives, financial instruments whose value is based on the value of something else such as a commodity, stock or currency price.
""It is important for Congress to periodically review"" such laws, Greenspan said. ""Regulators are required to do that.""
For example, in a recent review of Regulation Y, governing non-bank interests of bank holding companies, the Fed found that ""some of that stuff is just unbelievable because the markets have changed so much,"" the Fed chairman said, without elaborating.
If Congress alters the Fed's responsibilities, it should not strip the central bank of its ability to contain systemic risk, Greenspan argued. ""Having seen the inner workings of these things, a lot of the things we do actually are quite effective,"" he said.
""I would be very chagrined to see some of these powers disappear ... I say that from someone who believes the less you interfere in the market, the better.""
Under one proposal before Congress, the Federal Reserve would remain a primary regulator of financial institutions such as banks. But under other proposals, that authority could be divided among many regulators or entrusted to a new committee of federal regulators.
The Fed offered to provide loans following the stock market crash of 1987, for example, preventing a liquidity crisis that could have caused wider problems for the economy.
Greenspan also appeared to side with the Treasury Department in its long-running dispute with the Commodity Futures Trading Commission over the appropriate scope of U.S. laws governing futures trading.
Under a 1974 amendment to the Commodity Exchange Act, trading of foreign currency and certain other instruments is exempt from CFTC oversight. But federal courts have made contradictory rulings about the scope of the amendment, especially as it relates to derivatives, and the Supreme Court is expected to deliver a ruling on the issue soon.
Greenspan said Congress did not need to impose new regulations on trading of derivatives over-the-counter by sophisticated institutional investors. ""There appears to be no need,"" he said. Regulation under the commodity act ""seems an inappropriate framework,"" he added.
Even trading by less-sophisticated retail investors ""is more appropriately regulated"" by bank regulators and the Securities and Exchange Commission, not the CFTC, he said.
Greenspan's comments were significant and could affect lawmakers' decisions when they consider related legislation, an Association executive said.
""If you're going to vote on these issues and you've been kind of on the fence with respect to pro-market or expansion of CFTC (Commodity Futures Trading Commission) power, etcetera, I have to believe that his comments influence that person who's on the fence,"" said John Frawley, chairman of the Managed Futures Association.
""So if you're looking for a Good Housekeeping seal of approval, he just sort of stamped it on those who are looking for such a thing,"" Frawley told reporters at a briefing.
",0
"The Clinton administration will modestly revise controversial export rules for computer encoding technology after a private meeting Wednesday with computer and telecommunications companies, a top Commerce Department official said.
""This is a work in progress,"" Under Secretary of Commerce William Reinsch said in a telephone interview after the hour and a half long meeting. ""There will be some changes that will be more than technical.""  
The administration circulated a draft this week of new rules that would overhaul Cold War era export limits on products containing encryption, computer programs that scramble information and render it unreadable without a password or software ""key.""
With the growth of the Internet and online commerce, demand for encryption-capable products is growing worldwide. Coded messages can keep a business' e-mail confidential or protect a consumer's credit card number sent on the Internet.
Reinsch and others who attended Wednesday's meeting said the tone was civil.  
""We had a long meeting but it was actually quite a constructive one and actually also a polite one,"" Reinsch said.
Industry officials argued at the meeting that the draft rules were unclear or unworkable on a number of points.
""In some cases we could tell them what we meant which made them feel better and now we'll go off and try to fix it,"" Reinsch acknowledged. ""In other cases we're going to have to think a little more about what they said and in some cases I'm not sure there is a way to fix it.""  
""We are not optimistic that these (rules) will be turned around and we feel going to Congress is our only option,"" Smiroldo said. The alliance includes a dozen large software firms including Microsoft Corp and International Business Machine Corp's Lotus Development.
Several bills that would dramatically ease encryption export limits were introduced in the last Congress and are expected to be revived next year.
Ambassador David Aaron, appointed by President Clinton as special envoy for cryptography last month, also attended the meeting, Reinsch said.
The draft rules implement an executive order signed by President Bill Clinton last month. Under the order, limits on export of products containing strong encryption would be eased if the products allowed the government to decode encrypted messages by recovering the keys.
The draft rules detail for the first time the government's definition of acceptable key recovery features and other aspects of the revised export approval process.
For example, until 1999, companies will be allowed to export some products that do not include key recovery if the companies promise to include key recovery in future products. -- 202-898-8312
",0
"U.S. banks will be able to significantly increase their securities underwriting activities under a rule adopted Friday by the Federal Reserve, but that will only add pressure on Congress to overhaul the entire regulatory system, market participants said.
The Fed voted unanimously to allow so-called section 20 subsidiaries of banks to derive as much as 25 percent of their revenues from underwriting and dealing in securities such as stocks, corporate bonds and commercial paper.
The new rule takes effect in 60 days, the Fed said.  
At the meeting, Fed governors called for Congressional action to reform the 1933 Glass-Steagall Act and other laws separating banks from non-bank financial services industries.
""We hope that the next move will be up to the Congress in this whole area,"" Fed vice chair Alice Rivlin said.
""Legislation is needed but I think this is a constructive step and it is appropriate for us to interpret the existing legislation,"" Governor Susan Phillips said.
While the Glass-Steagall Act prohibits banks from engaging in non-bank activity, under section 20 of the Act banks may affiliate with firms not ""engaged principally"" in such areas.  
The Fed said it currently authorizes 41 bank subsidiaries to deal and underwrite securities, ranging from stocks and bonds to commercial paper and mortgage-backed securities.
Banks were already allowed to handle other sorts of financial instruments, including Treasury securities and over-the-counter derivatives.
Both the Fed's action and an even broader move last month by the Comptroller of the Currency will raise the pressure on Congress to scrap the Glass-Steagall Act, according to Robert Litan, director of economic studies at the Brookings Institute.  
In the past, banks led the charge to change the law because they wanted to get into other businesses, like selling insurance and underwriting. Insurance companies and securities firms generally opposed the banks, creating legislative gridlock.
Now, all industries will press for change, Litan said. ""The tables have been turned,"" he said. ""But it's not a two-way street. Other industries will want to level the playing field.""
Banking industry representatives said they were elated by the Fed vote.  
""This is a tremendous boost for banks that already underwrite securities and an incentive for banks considering this business,"" American Bankers Association managing director Larry LaRocca said.
""By lifting the 10 percent revenue cap to 25 percent for Section 20 ineligible securities, the Fed has begun chipping away at the antiquated barriers handicapping banks for years,"" LaRocca added.
Securities industry groups had written to the Fed strongly opposing the proposal and restated their position after the vote.  
""It's as if Santa Clause delivered all the gifts to only one house in the neighborhood,"" Steve Judge, senior vice president for the Securities Industry Association, said.
Judge also called for Congress to act. ""Nothing could benefit consumers and our economy more than a modernization of federal laws governing the financial services industry,"" he said.
((202-898-8312))
",0
"Fast running out of options, federal credit unions are hoping the Supreme Court will decide Friday to wade into the midst of their six-year legal battle with the banking industry.
The Supreme Court's nine justices are expected to decide whether or not to hear the credit union case, lawyers involved in the case said.
The banks, who filed suit to challenge a 1982 policy adopted by the National Credit Union Administration (NCUA) relaxing previous membership limits, have urged the court not to take the case.
Lower courts have agreed with banks that membership should be sharply limited at thousands of credit unions, cooperative non-profits that offer bank-like services.
If the court decides not to hear the case, membership limits could force many credit unions to be dissolved or broken up into smaller, less-efficient institutions, according to Tim Pryor, federal regulatory counsel to the National Association of Federal Credit Unions.
""It would be kind of like a court-ordered savings and loan crisis,"" Pryor said. ""This case is extremely important to the safety and soundness of the industry.""
If at least four justices favour taking the case, the credit unions would have a final chance to erase the limits.
Oral arguments could be scheduled for later this term, with a decision likely by the summer.
""This is about settled law,"" said Michael Crotty, counsel for the American Bankers Association. If credit unions want to change the membership limits, they should go to Congress and ask for legislation, he said.
""The policy of who gets to be a member of a credit union is not a judicial issue but a legislative one,"" added Crotty.
Until 1982, credit unions were limited to having members with a single common bond, people who worked for the same employer or lived in the same neighbourhood. But that year, the NCUA began allowing credit unions to include members from multiple, distinct groups.
That angered banks, which contended that some of the larger tax-exempt credit unions posed unfair competition. In 1990, the banks sued a North Carolina credit union that had grown to encompass more than a hundred groups.
The case wound its way through the system, reaching the federal appeals court for the District of Columbia last year. The court ruled the NCUA had exceeded its authority and that members of each credit union must share a single common bond.
A lower court then ordered credit unions to stop accepting members from more than one group, although the order was partially suspended until the Supreme Court makes a decision or declines to hear the case.
The case, First National Bank and Trust Co. v NCUA et al, is on a list of cases the Supreme Court justices are scheduled to discuss Friday.
It is possible that the justices might not get to the case Friday, and then it would likely be discussed at a conference next month, lawyers said.
",0
"The Internet could provide a huge boost to the U.S. economy if the federal government pursues ""free market"" policies in cyberspace, a group of President Clinton's top advisers says in a draft report obtained by Reuters.
The group, an interagency task force headed by senior presidential adviser Ira Magaziner, recommended that the administration work globally to protect the Internet from new taxes, censorship and other onerous forms of regulation.
After seven months of deliberations, the task force is preparing to issue for public comment a report of principles and policies the Unites States should pursue, Magaziner said in an interview.
""One of the things we're trying to do with this paper is as much say what government should not do as say what they should do,"" Magaziner said. ""A lot of what industry is concerned about is that governments are already beginning to take actions around the world that would inhibit commerce.""
The growth of Internet commerce could help boost U.S. exports of everything from movies and news to software and consulting services. Exports of such products totalled $40 billion in 1995, the draft report noted.
The idea is to hitch U.S. exports to the speeding Internet commerce train. Sales of goods and services online are projected to grow to $7 billion in the year 2000, from about $1 billion this year, according to market researchers at Jupiter Communications.
""Companies have told us there would be a tremendous potential to increase world trade across the Internet if we could provide the right kind of environment,"" Magaziner said.
The draft report, called ""A Framework for Global Electronic Commerce,"" covers nine issues, from taxation and customs to privacy and security.
On taxation, the draft report echoes a report issued by the Treasury Department last month by stating no new taxes should be imposed. Acting through the World Trade Organisation, the United States should push for the Internet to be designated a duty-free zone, the draft said.
Some consumers worry that their privacy will be violated when they shop online. The report said governments should push vendors to disclose what will be done with information about consumers rather than dictate to merchants what they can or cannot do with the data.
On some issues, such as encryption -- encoding information in a scrambled format to provide a measure of security or privacy -- existing administration policies may be seen as conflicting with the free market approach of the draft report.
Magaziner said policies will evolve over time, ""but the paper will reflect where we are now.""
Magaziner headed Clinton's failed effort to reform the U.S. health care system, an initiative critics said favoured government over the private sector.
While disagreeing with his critics' characterisation of the health care plan, Magaziner said the Internet ""is a wholly different animal.
""I'm a problem solver, not an ideologue,"" he said.
",0
"Legislators introduced two bills Thursday to overturn the Clinton administration's export limits on computer encryption technology, a key component of online commerce and global communications.
Encryption products, which scramble information and render it unreadable without a password or software ""key,"" were once the realm of spies and generals.
But with the booming growth of the Internet, secret coding is now used for everything from keeping a business's e-mail confidential to protecting a consumer's credit card number if it is transmitted online.
Senators said export restrictions on encryption products were hindering the development of the Internet and making it impossible for U.S. companies to compete with foreign firms.
The bills ""roll back current restrictions on the export of strong cryptography so that high-tech U.S. firms are free to compete in the global marketplace and meet the demand of customers,"" Sen. Pat Leahy, a Vermont Democrat and co-sponsor of both bills, said at a Capitol Hill news conference.
""Online commerce will never reach its full potential under the policies of this and past administrations,"" said Sen. Conrad Burns, a Montana Republican , also a co-sponsor.
The bills would generally allow a U.S. company to export a product with strong encryption features if similiar products were being offered for sale by a foreign supplier. Leahy and Burns introduced similiar measures in the last Congress.
Under the current Clinton administration policy, a company may export strong encryption only if the product also includes a feature to allow the U.S. government to crack the code by recovering the software ""key"" when acting under a court order or similiar authority. The administration says it must be able to crack the codes to catch international criminals and terrorists.
If the bills became law, mandatory key recovery would be banned but the government would still be permitted to restrict the export of encryption for military use or to countries posing terrorist threats.
The legislation would also write into law the current policy permitting unrestricted domestic use of encryption -- but one bill would criminalize the use of codes to obstruct justice.
The Clinton administration signalled its displeasure with the new bills.
""We continue to be disappointed with Senator Burns' approach because it does not balance the needs of individual privacy and economic growth with national security and public safety,"" Undersecretary of Commerce William Reinsch said. ""We believe there is a market for key recovery products from businesses who recognise the need for a back door to their own corporate data.""
Computer companies and privacy advocates hailed the bills.
""Both bills promote the freedom of this nation's fastest-growing industry to provide customers here and abroad with products they demand,"" said Robert Holleyman, president of the Business Software Alliance. The group includes Microsoft Corp., International Business Machines Corp.'s Lotus Development and Apple Computer Inc., among others.
""This is the most important privacy legislation before the Congress today,"" said Jerry Berman, executive director of the Centre for Democracy and Technology.
Berman, who strongly opposes mandatory key recovery, said the policy ought to be ""my lock, my key.""
",0
"The growing mass of Internet users have paid their fair share to local telephone companies and pose little threat to the phone system, according to a study released on Wednesday by a coalition of Internet and computer companies.
The coalition presented the report to counter studies by local phone companies released last year seeking to justify new access fees on Internet usage. The phone company studies found that Internet usage threatened to overwhelm the system.  
""The Internet is not crashing the telephone network,"" Information Technology Association of America President Harris Miller said at a news conference here.
""We are bringing the real facts to bear on a 'problem' that the phone companies have anecdotally created to protect their own interests,"" said Miller, whose group is a member of the Internet Access Coalition.
On December 24, the Federal Communications Commission said it had tentatively decided not to impose access fees on Internet providers similiar to those paid by long distance companies to local phone companies.  
But the commission also asked for comments about the effect of the Internet on the phone system.
""Our findings clearly show that claims of phone network 'congestion' resulting from Internet traffic and predictions of a 'meltdown' are greatly exaggerated,"" said Lee Selwyn, one of the study's authors.
Further, ordinary consumers using the Internet already pay the phone companies more than enough to cover the cost of increased use, said Selwyn, who is an expert on telecommunications regulation.  
The study found, for example, that in 1995 consumers paid more than $1.4 billion for installation and use of six million second phone lines devoted to accessing the Internet or other online services. The study said another eight million second lines were not primarily used for Internet access.
Local phone companies, some of which had not yet seen the new study, disputed Selwyn's conclusions.""To suggest that there is no real problem here is mind-boggling,"" Bell Atlantic spokesman Harry Mitchell said. As Internet companies add huge numbers of phone lines to meet growing demand, ""it does impact the capacity of the public telephone network.""  
America Online, for example, said recently it would double the number of modems it has to connect with subscribers from 200,000 to 400,000 by June.
But phone company studies considered only a few pieces of the phone system, focusing on switches between Internet service providers and the rest of the network, Selwyn said. While those few switches might be congested, capacity could be added inexpensively, he said.
The study also cited speeches by some phone company executives who have bragged about the additional revenues generated by increased Internet usage.  
""Sales of secondary lines at Bell Atlantic increased more than 50 percent, fueled by surging demand for Internet and telecommuting applications,"" company CEO Raymond Smith told Wall Street analysts last March. The revenue generated substantial profit because ""we were able to provision new lines and services from idle capacity in an existing plant.""
Company spokesman Mitchell said charges from second lines ""were not designed to subsidize Internet service providers.""
However, all sides agree that a technological solution could eliminate most congestion problems by separating calls carrying voice and data.
SBC Communications, parent of Southwestern Bell, announced last week it would introduce such splitting technology at a cost of less than $100 million.
""Technological solutions are readily available,"" Paul Misener, chairman of the Internet coalition's steering committee said.
((--202-898-8312))
",0
"The Federal Communications Commission has tentatively decided not impose fees on Internet service providers for use of local telephone lines, an official said Thursday.
On Tuesday, the commission issued a notice of proposed rulemaking setting out two possible plans for reducing the $23 billion a year that long-distance telephone companies pay to local service providers in access fees.
""The commission raised the specific question of whether ISPs (Internet service providers) should pay access charges as we currently understand them,"" Kevin Werbach, counsel for new technology at the commission said. The FCC ""tentatively concluded that the answer is no.""
Local phone companies had pressed to have the access fee applied to Internet service companies. The phone companies argued that consumers using the Internet were getting a free ride and tying up local lines with lengthy calls.
Internet companies countered that such fees would smother the growth of the booming online industry.
""We think they did exactly the right thing,"" said Jill Lesser, deputy director of law and public policy at America Online, the largest online service in the world. ""It means the FCC is thinking in the right way about this. They're thinking for the growth of the Internet.""
The commission did issue a ""notice of inquiry"" asking for comments on the issues involved, Werbach said.
The arguments of both sides raise ""legitimate issues, so the commission initiated the notice of inquiry to develop a record on that,"" he said.
A notice of inquiry seeks comment but does not give the commission authority to then adopt a rule. The commission would have to first issue a notice of proposed rulemaking before applying access fees to Internet service providers, Werbach said.
The Internet notice is ""more foward looking"" than the proposed rules for long distance access fees, Werbach said. ""Once we have an idea what replaces the access charge system then we can take a look at that,"" he said.
",0
"A computer scientist barred from exporting a floppy disk containing computer encryption programming asked a federal court Friday to strike down the export limits as a violation of his right to free speech.
Philip Karn challenged the rules after the State Department in 1994 denied his request to export the programming on disk but allowed him to export the identical material contained in a book.
U.S. law treats many kinds of encryption, computer coding and decoding programs, under the same category as munitions.  
The Clinton administration recently issued new rules relaxing the export limits, but most existing encryption programs remain classified as munitions and are subject to strict export limits.
The limits infringed on Karn's constitutional rights to free speech and due process, his attorney, Kenneth Bass, told a three judge panel of the U.S. Court of Appeals for the District of Columbia on Friday.
The First Amendment of the Constitution ought to apply equally to computer code written in a book or saved in text form on a floppy disk, Bass argued.  
""It just cannot be that the Constitution doesn't recognize progress,"" Bass said.
Karn did not attempt to export ""object"" computer code, a working program that could be run on a computer to encrypt and decrypt data. Karn's disk contained ""source"" code, or directions that could be used to write such software.
In another case, Federal district court Judge Marilyn Patel held last month that source code should be considered a protected form of speech. But the ruling, in the Northern District of California, is not binding on the D.C. Appeals court.
",0
"A group of leading trademark specialists plans to release recommendations aimed at minimizing disputes over Internet address names.
The International Trademark Association is working on a white paper that will be completed in the next few months, David Maher, co-chair of the association's Internet issues committee, said in a telephone interview.
",0
"If the Board of Governors of the U.S. Federal Reserve System does as expected early Friday and votes to expand banks' non-banking activities, it will only heighten the drive in Congress to overhaul U.S. banking regulations completely, analysts and industry officials said.
The Fed is expected to vote to allow banks' section 20 subsidiaries to derive 25 percent of their revenue from non-banking activities such as securities underwriting, up from the current 10 percent ceiling.  
The section 20 proposal was released for comment in July, but since then another bank regulator has stolen some of the Fed's thunder. Comptroller of the Currency Eugene Ludwig said his office will begin approving bank affiliates moving into an assortment of non-banking businesses.
Both the Fed's proposal and the Comptroller's actions will raise the pressure on Congress to scrap the Glass-Steagall Act, according to Robert Litan, director of economic studies at the Brookings Institute.  
In the past, banks led the charge to change the law because they wanted to get into other businesses, like selling insurance or underwriting stock deals. Insurance companies and securities firms generally opposed the banks creating legislative gridlock.
""Now the tables have been turned,"" Litan said. ""But it's not a two-way street. Other industries will want to level the playing field.""  
Both moves also reflect current market realities. The financial services industry, from banks to insurance companies to mutual funds, is converging. Mutual funds already offer checking account-like money market funds and some of the leading stock and bond underwriters are commercial banks.
In the words of one top regulator, the Fed's move from 10 to 25 percent, ""is not material."" The Fed has required banks to take certain steps to prevent problems in the subsidiaries from affecting the bank itself, and its government-insured deposits.
Competitors in other fields fret that the banks insured deposits are a form of government subsidy giving the banks an unfair advantage when they venture into other fields.
Comptroller Ludwig disagreed. Speaking to reporters after delivering a speech here Thursday, Ludwig said that walling off the subsidiary ""basically eliminates any subsidization.""
He opposes efforts by some in Congress to keep banks out of certain fields, such as real estate or merchant banking, entirely. ""It's a mistake to set product limits, particularly in this day and age when we have such a dynamic marketplace,"" he said.
((--Aaron Pressman, 202-898-8312))
",0
"The U.S. Postal Service announced Wednesday a plan to boost online commerce by enhancing the security and reliability of electronic mail traveling on the Internet.
Under the plan, businesses and consumers can verify that e-mail has not been tampered with and use services now available for ordinary mail like sending a certified letter.
""The leap from trading messages to buying and selling goods has been blocked by the fear of security threats,"" Robert Reisner, vice president of stategic planning, said.  
""To expand from local area networks and bilateral secure communications to wide use of electronic commerce will require a new generation of security services,"" Reisner said.
Cylink Corp is developing a system for the Post Office to use to verify the identity of e-mail senders. The system will enable people to register a digital ""signature"" with the Post Office that can be compared against electronic mail they send.
If any tampering is discovered, the Postal Service would investigate, just like it investigates tampering with regular mail, Reisner said.  
The Post Office is also using the Internet to enhance non-electronic mail delivery.
In conjunction with Sun Microsystems, the Postal Service has also developed a new online system for bulk mailers that relies on Sun's Java computer language, Reisner said.
Instead of manually calculating postage rates for bulk mailings, possibly using outdated forms, a bulk mailer will be able to add up the charges using a software application written with Java and posted on the Internet.  
Eventually, the Post Office plans to offer hybrid services involving both kinds of mail, Reisner said.
Electronic mail could be converted to paper and delivered within one business day, for example. Or someone who moves could register a change of address with the Post Office over the Internet.
Critics of the Post Office's Internet plans have said the service is usurping functions that could be better performed by the private sector. But Reisner rejected those arguments, maintaining that the Post Office has often facilitated the spread of new technologies, such as railroads and aircraft.  
""Remember the pilots who returned from World War I and then risked their lives in an even more dangerous duty,"" Resiner said refering to early airmail delivery efforts.
""To keep these daring pilots alive, the Postal Service had to create parts of what we know as the weather service today. Navigation aids had to be developed. We are watching many of these same dynamics today. Earlier experience tells us that this is a public and private job.""
--202-898-8312
",0
"Several U.S. legislators are planning to introduce measures soon to relax export restrictions on encryption technology, an increasingly essential part of global communications and online commerce.
Last year, the Clinton administration relaxed some of the Cold War era export limits on the technology, specialized computer programs that scramble data and render it unreadable without a password or software ""key.""
But computer companies said the administration did not go far enough, locking them out of the growing global market.  
Rep. Bob Goodlatte, Republican of Virginia, plans to reintroduce a bill on Wednesday that would go well beyond the Clinton administration's approach, staff people in his office said.
Goodlatte's bill would allow computer companies like Netscape Communications Corp or Microsoft Corp to export products with powerful encryption features if foreign competitors were selling similiar technology.
In the Senate, Montana Republican Sen Conrad Burns is also planning to reintroduce his encryption bill from last year.  
At an informal gathering of the Congressional Internet Caucus Tuesday night, Burns said he expected to put forth the bill, known by the acronym PRO-CODE, in late February.
At one time, the Senator had said the 1997 bill would be identical to last year's bill which did not get a vote in the Commerce Committee.  But staffers said the Senator is still tweaking the bill to draw more supporters.
""It's about ready to go,"" Burns said Tuesday night.
Goodlatte's bill, under the jurisdiction of the House Judiciary Committee, had already garnered 54 co-sponsors by Tuesday night.  
Staff said the bill almost had the backing of a majority of the members of the Judiciary Committee.
Others are also considering introducing bills, some seeking a middle approach between the administration and the Burns and Goodlatte bills, which would remove nearly all export restrictions.
Sen. Patrick Leahy, the Vermont Democrat and co-chair of the Internet Caucus, may have a bill and Rep Rick White, Pennsylvania Republican and also co-chair, is considering weighing in, staff people said.
Some lobbyists involved in the debate said that the administration was considering introducing its own legislation.  But they were unsure about the contents of the legislation, since the administration implemented its new policy by a Presidential executive order in November.
Administration officials were not immediately available for comment.
((--202-898-8312))
",0
"The Commodity Futures Trading Commission, one of the nation's primary regulators of derivatives, has no authority over most foreign currency transactions, the Supreme Court said Tuesday.
In a unanimous decision, the court ruled that a 1974 law exempting some transactions in foreign currency from CFTC oversight also exempted some foreign exchange derivatives, financial instruments whose value is based on the value of currencies like the dollar or Japanese yen.
The CFTC regulates trading of derivatives such as futures and options on everything from wheat and corn to interest rates and electricity. By law, such trading must occur on a recogized exchange, such as the Chicago Board of Trade or the New York Mercantile Exchange.
But when Congress created the commission in 1974, it added an amendment permitting off-exchange trading in foreign currency and a few other items without CFTC regulation. The amendment was requested by the Treasury Department, which believed that the developing market in foreign currency among large banks and securities firms would be overregulated by CFTC oversight.
The CFTC stayed away from the inter-bank foreign exchange market, which has grown to $40 billion a day in total trading. The commission did, however, prosecute small-scale fraudulent foreign exchange investment peddlers, often called ""bucket shops.""
But when the CFTC pursued William Dunn, whose $180 million foreign currency fund lost $95 million in 1993, Dunn argued that the 1974 Treasury amendment should also apply to his trading of foreign exchange options.
On Tuesday, the Supreme Court agreed with the bulk of Dunn's argument.
""We think it plain that foreign currency options are 'transactions in foreign currency' within the plain meaning of the statute,"" Justice John Paul Stevens wrote. ""We are not persuaded by any of the arguments advanced by the CFTC in support of a narrower reading.""
That pleased banks and Wall Street trade groups, which had sided with Dunn. They argued that subjecting their off-exchange foreign exchange trading to CFTC oversight would be too costly, forcing them to shut down U.S. operations and move overseas.
""We're obviously delighted at the result,"" said Ken Raisler, an attorney for several of the trade groups.
""It supports our view that the amendment should be read broadly,"" Raisler, a former general counsel of the CFTC added.
Dunn's lawyer and the banks suggested that any wrongdoing in the foreign exchange area could be dealt with under existing law by other federal agencies, but the Supreme Court did not address the issue. Most off-exchange derivatives trading is not directly regulated, although most participants in such markets are overseen by bank, securities and insurance regulators.
The CFTC still has jurisdiction over foreign currency derivatives traded on an exchange, which include futures contracts. But that market is dwarfed by the over-the-counter market among banks and similiar institutions.
In a lower court case last year, the CFTC argued unsuccessfully that a fraudulent ""bucket shop"" constituted an exchange.
On Tuesday, the commission maintained that the Supreme Court had decided only the narrow issue of whether the Treasury amendment covered options trading.
""While we are disappointed in the outcome of the case, we note that the Supreme Court's opinion was limited to the narrow issue of whether the Treasury amendment treats futures and options the same,"" CFTC general counsel Dan Waldman said. ""The court's decision does not affect the commission's ongoing efforts to police fraud against the public in foreign currency trading.""
Congress is already discussing amending the 1974 Treasury amendment. The Supreme Court's decision ""underlines the need for Congress to make decisions about what financial products should or should not be subject to the CFTC's jurisdiction,"" said Andy Fisher, spokesman for the Senate Agriculture Committee.
Sens. Dick Lugar, R-Ind., Pat Leahy, D-Vt., and Tom Harkin, D-Iowa, introduced a Senate bill to overhaul futures regulation. ""It makes the case to proceed with that bill as quickly as we can,"" Fisher said.
The court invited congressional action. Recognising an ""important public policy dispute"" underlying the case, the court suggested ""these arguments are addressed to the Congress, not the courts.""
",0
"When a company in California sells a book to a consumer in Canada from a Web site hosted on a computer in England, what laws govern the transaction?
As sales of all kinds of goods over the Internet continue to grow, questions are multiplying about basic regulations covering consumer protection, taxation and other issues.
""Most commercial law has built in a hidden assumption of geographical boundaries within which certain kinds of actions will occur,"" said Jerry Kaplan, who runs an Internet site called OnSale that auctions electronic merchandise. ""Now the legal system is facing a medium which is inherently boundary-less.""
For example, some states tax transactions that originate within their borders while others hope to collect so-called use taxes when their residents buy from out-of-state merchants. ""Sin"" laws on obscenity, gambling and sales of alcohol also differ from state to state and apply to some Web merchants.
With the potential for so much confusion, some online mavens argue the federal government should step in and set clear policies.
""The role of the federal government is to set national standards or national policy,"" said Gary Arlen, president of Arlen Communications and a leading analyst of online companies. ""A lot of what we're talking about online transcends state borders and even national borders.""
A top priority is protecting consumers' private information.
""More regulation is really needed on the privacy issues compared to other areas,"" said Jonathan Rosenoer, an attorney and author of the online ""Cyberlaw"" column. Existing laws protect some kinds of records, like medical data, but not other information, Rosenoer said.
Both real and imagined privacy violations are feeding public sentiment in favour of reform. Lexis-Nexis was deluged with protests last month after word spread that the database company was selling personal information such as social security numbers and maiden names over the Internet.
The company responded that its P-TRAK product no longer provided social security numbers and never contained maiden names. But it withdrew the names of thousands of individuals that asked to be deleted.
Following the controversey, the Federal Trade Commission asked Congress to amend the Fair Credit Reporting Act, a law governing personal financial information held by credit agencies. The commission suggested the law be extended to cover nonfinancial information like social security numbers.
In many cases, however, the federal government is still deciding what steps to take.
The Treasury Department, which has a hand in tax policy, banking regulation and international trade, has several groups studying online commerce issues but has not reached any conclusions yet.
Top Treasury officials and banking regulators have expressed a desire not to intrude on the nascent market for electronic money. Some banks would like federal rules barring non-banks from issuing electronic money.
""Heavyhanded, pre-emptive attempts to regulate these products before any social risks have been demonstrated would handicap innovation,"" Federal Reserve Gov. Edward Kelley said earlier this month.
There is little confusion about criminal scheming online, however. The Federal Trade Commission, Commodity Futures Trading Commission and the Securities and Exchange Commission are all prosecuting online crooks and collecting complaints at their Web sites.
""It's not an area where we need new laws or new authority,"" John Stark, special counsel of Internet projects at the SEC said. ""It's the same swindles, just in a different medium.""
",0
"The growing business of doing business on the Internet poses a major challenge to tax collectors, but no special taxes should be imposed in cyberspace, the government said in report released Thursday.
""Treasury believes that these new technologies should not be used to justify new taxes,"" the Treasury Department draft report said. ""Accordingly, Treasury is not considering any type of value added tax, 'bit tax,' or other new excise tax on electronic commerce.""
Instead, the current system should evolve to tax income from all sources in a consistent manner, the department said.
""Our overall tax policy goal in this area should emulate policy in other areas -- maintain neutrality, fairness and simplicity -- a policy which serves to encourage all desirable economic activity new and old,"" the report said.
Businesses are already struggling with tax proposals from state and local governments, according to Kent Johnson, head of sales and transaction tax practice at KPMG Peat Marwick.
""State governments don't feel the same way as the federal government, but this report may be a good starting point for discussing all the issues,"" Johnson said.
This year, about $1 billion of goods and services will be sold online, growing to over $7 billion by the year 2000, according to market researchers at Jupiter Communications.
But the myriad tax laws and regulations affecting businesses may not keep pace with the fast-paced, often chaotic growth of the worldwide computer network.
Buyers and sellers on the Internet can be in different states or even different countries, complicating the task of collecting tax at the ""source"" of a transaction.
The department also said it was worried that tax evaders could use the anonymity provided by the Internet as a mask to avoid reporting income or to transfer money to offshore bank accounts.
But the report made no recommendations about how the government should deal with tax evasion issues. ""Treasury intends to study, and requests comments on these issues,"" the report said.
The report is available on the Treasury's web site, http://www.ustreas.gov.
The report on taxation is likely to be followed by reports on other aspects of online commerce that the department is studying, including consumer protection, electronic money, bank regulation and law enforcement, officials said.
",0
"An international task force working to resolve the simmering controversy over desirable addresses on the Internet released a draft plan Friday for a substantial expansion of the total number of destinations.
The International Ad Hoc Committee on domain names, formed by the Internet Society in October, recommended that seven new so-called top-level domains be added to the Internet.
Top-level domains are the three-letter designations most Internet sites end with, such as ""com"" in http://www.gm.com and other commercial sites, ""gov"" in government sites and ""edu"" for sites run by schools.
The committee recommended that an unlimited number of firms be authorised to register the new addresses, although the panel said it hoped to initially approve 20 to 30 new registration services.
Addresses for most sites are currently handed out by Network Solutions Inc. of Herndon, Va., which charges $100 for each registration.
At first, Network Solutions would continue to have a monopoly on the domain names it already controls but the committee said its ""ultimate goal"" is to have all names handled by all qualifed firms.
""The IAHC members were faced with a formidable challenge,"" said Donald Heath, president of the Internet Society and chairman of the committee. ""We accomplished our goal, in no small part, because we were able to bring people together from around the world, via the Internet.""
The full text of the recommendations was posted on the Internet at http://www.iahc.org, Heath said. The proposal will be open for public comment until Jan. 17 and a final report is expected by Feb. 3.
New names and competing registration services should help quell disputes over popular or trademarked names.
Disputes are arising more frequently, usually when the holder of a trademark discovers that someone else is using their trademark as the name of an Internet site.
For example, Viacom Inc.'s MTV music channel fought with one of its employees, who had registered ""mtv.com,"" eventually regaining control of the name in an out-of-court settlement.
In another case, a journalist tweaked McDonald's Corp. by registering ""mcdonalds.com"" before the fast-food giant did and before the Web had attained its current prominence. The address now belongs to McDonald's.
Once new top-level domain names are available, 10 people or organisations could register similar names. The new top-level domains will contain three to five letters but have not yet been selected.
The committee included members from the Internet Society, which helps coordinate and develop Net standards; the Internet Assigned Number Authority, which oversees certain of the standards, and the Internet Architecture Board, which helps draft and promulgate new technical standards.
The committee also included representatives from the International Telecommunications Union, the World Intellectual Property Organisation and the International Trademark Association.
",0
"An influential Internet organisation has backed away from a proposal to dramatically expand the number of addresses available on the global computer network.
The Internet Society, which helps develop and coordinate Internet standards, announced this week that instead of moving ahead with the proposal it would form a nine-member committee to study the issue.
Unveiled in August, the proposal was an attempt to quell the growing number of disputes over desirable address names.
""There has been considerable international debate on various aspects of the proposal with no consensus,"" Don Heath, president of the society, said in a statement. ""It is in the best interest of the continued beneficial evolution of the Internet that these issues be aired and resolved.""
Disputes over Internet names are occuring with increasing frequency as more companies seek to publicise and market their products over the Net.
For example, Viacom Inc.'s MTV cable music channel fought with one of its employees who had registered ""mtv.com,"" eventually regaining control of the name in an out-of-court settlement.
Every site on the World Wide Web must have a unique address name. Most addresses end with one of a few three letter designations, known as top-level domains, including ""com"" for private sites, ""gov for government sites and ""edu"" for sites run by schools.
In August, Internet Assigned Numbers Authority said it would oversee the creation of up to 150 new top level domains, easing the squeeze, especially for names in the private sector category.
The authority, operating under charter from the society and the Federal Network Council, is the central coordinator of Internet addresses and other standards.
The society's board of trustees voted in June to accept a preliminary version of the numbers authority proposal, with the proviso that the business aspects of proposal be fleshed out.
But with the ensuing controversy, the society decided a committee was needed to reexamine the proposal, Heath said.
The committee will include two members appointed by the society, two by the numbers authority and two by the Internet Architecure Board.
The International Telecommunication Union, the World Intellectual Property Organisation and the International Trademark Association will each appoint one member.
",0
"Internet access providers and others who met with Net-savvy lawmakers said they fear Congress will wreak havoc on cyberspace but are also heartened by the growing number of legislators who understand the global computer network.
Company representatives met Tuesday night at the Capitol with members of the Congressional Internet Caucus, about 85 legislators with a common interest in the Net, to express their hopes and fears about efforts to make laws governing cyberspace.
""I think it's inevitable that there will be bills introduced that attempt to legislate the content of everything on the Internet,"" Tom Evslin, vice president of AT&T Corp.'s WorldNet Internet service, said after the meeting.
Evslin said it would be as difficult to keep Congress from making wrong moves as it would be to get the legislature to act to head off problems.
Bill Schrader, president of Internet provider PSINet Inc., was more blunt. ""Be very careful or you will destroy this industry,"" he warned.
The members of Congress who attended the meeting pledged to try to protect the Internet.
""We have a lot of pretty tough work ahead of us,"" Representative Rick White, R-Pa., and a co-chairman of the caucus conceded. ""We have many, many issues coming down the pike from encryption to privacy, to copyright and taxation.""
Encyrption is the use of software to encode and decode information.
Sen. Conrad Burns, also a co-chairman, warned that, despite the caucus, legislation will always trail developments in the private sector.
""The government making policy is never ahead of the curve,"" the Montana Republican said. ""If we do the right thing now, I guarantee you that by the time it's passed and the president signs it, we'll be behind the curve.""
Last year was a mixed bag for the Internet in Congress.
Legislators passed the Communications Decency Act, opposed by online companies and civil libertarians as an infringement on free speech rights, but also defeated measures that would have imposed liability on Internet providers for copyright infringement.
Sun Microsystems Inc.'s chief scientist, John Gage, fretted that, with only 85 pro-Internet legislators out of 435 in the House and 100 in the Senate, most in Congress remained ignorant of the Net. ""We've got a long way to go,"" he said.
Companies interested in the Internet offered some conflicting goals for Congress. Jack Valenti, president of the Motion Picture Association of America, urged the legislators to impose new laws protecting Hollywood products.
""Congress cannot avoid that all intellectual property has to be protected -- this can't be Dodge City without a sheriff,"" Valenti said. But he also praised the Internet as ""the most valuable and spacious information greenhouse that's ever been built.""
PSINet's Schrader countered that existing laws already protected movies, books and other works. ""Everything is not new,"" he said. ""It's the same-old, same-old.""
",0
"A scuffle breaking out between a top U.S. bank regulator and the state of Rhode Island could foreshadow an increasing number of disputes as more national banks begin selling insurance products, market participants said.
The Office of the Comptroller of the Currency said last month it is considering overriding a new Rhode Island insurance law that imposes different requirements on banks selling insurance than those imposed on on insurance agents.  
While national banks have long had the legal right to sell insurance in small towns, state insurance regulators often imposed onerous rules on the banks.
But last year, the Supreme Court rejected discriminatory state insurance laws and ruled that states cannot ""significantly interfere"" with national banks conducting permissible activities.
Banks said that states are now trying to evade the court's ruling. They charged that an insurance agents trade group is pushing states to adopt laws like the Rhode Island measure.  
""The Rhode Island statute is their first successful effort to pass such restrictive legislation,"" James McIntyre, counsel to Association of Banks-in-Insurance, said in a letter this week to the OCC.
""Many other states are considering similiar legislation or regulations at this time. Guidance from the OCC is urgently needed if we are to avoid wasteful legislation and avoid pointless litigation,"" McIntyre added.
Major states such as Texas, Pennsylvania and Illinois are expected to consider similiar legislation, bankers said.  
The Independent Insurance Agents of America fired back in their own letter to the Comptroller's office. Preempting the Rhode Island law would be ""wholly inappropriate"" because the law does not significantly interfere with a national bank's ability to sell insurance, the group said.
The agents added that an override would be premature. Although the law was enacted in August, the state has not finished writing the implementing regulations.
Banks said the law on its face is more burdensome to banks than to others selling insurance.  
For example, bank personnel involved in teller activities or making loans would be restricted from selling insurance, forcing banks to have two different sales forces, McIntyre said.
The Comptroller's Office is reviewing the comments it received and will issue an opinion, but has not set a deadline for making a decision, a spokesman said.
",0
"A leading software industry group is backing away from its early support of the Clinton Administration's new policy to ease export rules on computer encoding technology.
In a letter to vice president Al Gore, the Business Software Alliance, which includes Microsoft Corp and International Business Machine Corp's Lotus Development, warned that rules implementing the new encryption export policy appeared to be flawed.  
""It appears that significant backtracking has occurred since the October 1 announcement,"" the alliance wrote.
""Therefore, we seriously doubt that the regulations will work, meet consumer demands or be accepted by the private sector unless the administration radically changes its approach immediately,"" the alliance added.
A spokeswoman for Gore said Greg Simon, the vice president's chief domestic policy adviser, and other administration officials working on the rules have met with the software group to discuss the criticism.  
""There is still an internal decision making process going on,"" spokeswoman Heidi Kukis said. Final rules are expected by January 1, she said.
The administration is attempting to craft a compromise on export sales of products containing encryption, computer programs that use mathematical formulas to scramble information and render it unreadable without a password or software ""key.""
Under current laws dating from the Cold War, products for export can only include very weak coding features.  
But with the growth of the Internet and online commerce, encryption is spreading as a means to ensure secure communication between businesses and to safeguard consumers' credit card numbers.
U.S. software companies argue they are losing substantial overseas sales to foreign companies not bound by the export laws.
U.S. law enforcement and intelligence officials counter that the spread of sophisticated encryption will make their jobs far more difficult.  
Under the compromise policy announced in October and enacted in an executive order last month, companies would be able to export strong encryption but only if the products also contained a feature known as ""key recovery"" that would permit the government to decode scrambled data.
The software alliance said in October that the new policy was a ""step in the right direction."" In its letter this week, however, the alliance said it was not happy with the rules being drafted to implement the policy. ""Everything we have seen and heard to date reveals that the government is headed in the absolute wrong direction,"" it said.  
Part of the debate revolves around the definition of key recovery. The alliance said key recovery should consist of products which allow the government to decode stored communications, such as an E-mail message saved on a computer hard drive. But products should not be required to allow government decoding of real-time communications.
""There is little if any commercial demand for key recovery function in real-time communications,"" the alliance wrote. ""Our members have seen nothing to suggest that any product developed to date can work on a mass market scale or that there is significant commercial demand for such products.""
A number of companies, including Microsoft and IBM, have announced products designed to meet the new export policy. But not all of them easily allow real-time key recovery.
Although Microsoft is trying to create products to meet the export policy, ""we still feel government should liberalize the policy more,"" John Browne, head of the company's Internet commerce group, said.
-- 202 898-8312
",0
"An international task force charged with resolving the simmering controversey over desirable Internet address names released a draft plan Friday to expand the total number of addresses substantially.
International Ad Hoc Committee on domain names, formed by the Internet Society in October, said seven new ""top level domains"" should be added to the Internet.
Most Internet addresses end with one of a few three letter designations, including ""com"" for private sites, ""gov"" for government sites and ""edu"" for sites run by schools.  
Addresses for most designations, or top level domains, are given out by Network Solutions Inc of Herndon, Va., which charges $100 for each registration.
The committee also recommended that an unlimited number of firms be able to register the new addresses, although the committee said it hoped initially to authorize 20 to 30 new registration services.
At first, Network Solutions would continue to have a monopoly on the domain names it already controls but the committee said its ""ultimate goal"" is to have all names handled by all qualifed firms.  
""The IAHC members were faced with a formidable challenge,"" Donald Heath, president the Internet Society and chair of the committee, said. ""We accomplished our goal, in no small part, because we were able to bring people together from around the world, via the Internet.""
The full text of the recommendations was posted on the Internet at http://www.iahc.org, Heath said. The proposal will be open for public comment until Jan. 17, 1997 and a final report is expected by Feb. 3, 1997.
New names and competing registration services should help quell disputes over popular or trademarked names.  
Disputes are arising more frequently, usually when the holder of a trademark discovers that someone else is using their trademark as the name of an Internet site.
For example, Viacom Inc's MTV music channel fought with one of its employees, who had registered ""mtv.com,"" eventually regaining control of the name in an out-of-court settlement.
Once new top-level domain names are available, 10 people could register similiar names.  The new top level domains will contain three to five letters but have not yet been selected.  
The committee included members from the Internet Society, the Internet Assigned Number Authority, which oversees certain Internet standards, and the Internet Architecture Board, which helps draft and promulgate new standards.
The committee also included representatives from the International Telecommunications Union, the World Intellectual Property Organization and the International Trademark Association.
((--202-898-8312))
",0
"The Federal Communications Commission proposed Tuesday to trim the $23 billion a year that long-distance telephone companies pay to local service providers in access fees.
But the commission ducked the contentious issue of whether such charges should be imposed on Internet service providers, asking for comment on the issue without offering any proposals.
In a notice of proposed rule-making, the commission said it could cut the access fees in either of two ways: it could impose a schedule of long-distance access charge reductions or wait to allow market forces to drive fees lower.
The access charges, which make up a substantial portion of local phone company revenues, were adopted after the break-up of AT&T Corp. in 1984 that led to the creation of the regional ""Baby Bell"" local service companies.
New telecommunications rules signed into law in February are supposted to foster more competition for local and long-distance service and drive prices lower.
Long-distance companies, which say the access fees are excessive, favour deep, government-mandated cuts.
""We recommend the FCC to move as quickly as possible to squeeze the $10 billion in excess access fees out of the local exchange industry and put it back in the pockets of consumers,"" AT&T said in a statement.
Local phone companies concede that the fees exceed their actual costs for carrying long-distance calls but would prefer a gradual reduction based on competition and market forces.
The FCC ""must not allow the long-distance companies to continue to benefit at the expense of consumers,"" said Roy Neel, president of the U.S. Telephone Association, which represents local service providers.
While local providers have already cut access fees by $9 billion, ""the long-distance oligopoly has raised rates in lockstep more than six times,"" he said.
Under the FCC's market-based approach, new entrants in the local market would compete with the Baby Bells to connect long-distance calls. The FCC would gradually relax and ultimately remove price caps and access fee schedules while relying on competition to drive the fees down.
The alternate approach would specify the nature and timing of changes in existing rate levels. Ultimately, the FCC said it could adopt parts of both approaches.
Local phone companies also connect Internet users to Internet service providers over local phone lines, but they receive no access charges for those calls.
Recently, several Baby Bells complained that Internet users were getting a free ride, tying up local lines with often lengthy calls.
The FCC did not take a position on whether Internet service providers should be required to pay access fees. In a less formal ""notice of inquiry,"" the agency asked for comment on possible reform ""relating to interstate information services and the Internet.""
Comments are due by Jan. 27 on the long-distance access fee proposals and by Feb. 21 on the Internet issue.
",0
"House Banking Committee chairman Jim Leach introduced a bill on Tuesday aimed at remaking the regulatory landscape for banking and other financial services in the United States.
A similiar bill Leach introduced in the previous Congress foundered last June amid opposition from the insurance industry and House Democrats.  
Analysts have said this year's bill might have a better chance of passage, but that was before Leach decided to oppose Newt Gingrich's reelection as Speaker of the House, a move that could turn the leadership against his bill.
""This bill provides expanded powers for the banking, securities and insurance industries,"" Leach said in a statement. ""The ultimate beneficiaries of this legislation, however, are consumers.""  
""Not only will there be more products available to banking customers who are looking to maximize their savings, but efficiencies should lower industry costs and therefore costs to consumers,"" Leach said.
If passed, the bill would break down the legal barriers enacted after the Great Depression between banks, securities firms and insurance companies.
Bank regulators have already begun eroding the barriers for banks, putting pressure on Congress to level the playing field, analysts said.  
The Federal Reserve voted Dec 20 to allow bank subsidiaries to garner a greater share of revenue from underwriting activity. And a month earlier, the Comptroller of the Currency's office said it would allow banks to enter an array of non-bank markets.
Leach said his bill would repeal Section 20 of the Glass-Steagall Act and amend Section 32 to allow for the merger of commercial and investment banks.  
Bank subsidiaries would be allowed to engage directly in securities dealing and other activities considered ""part of and incidental to"" banking. Affiliates of bank holding companies, would be allowed to engage in insurance activities as principal, agent or broker.
The bill would also abolish the federal charter for thrifts while grandfathering existing thrift holding companies. National thrifts would have the option of transferring to a national or state bank charter or a state savings and loan charter.
The Iowa Republican's bill would continue to prohibit commercial companies outside the finance sector from owning banks.
The bill was also sponsored by three other Republican members of the Banking Committee: Rep Marge Roukema of New Jersey, Mike Castle of Delaware and Rick Lazio of New York.
The full committee will hold hearings on the bill and any related legislation in early March, Leach said.
The text of Leach's bill is available under the ""daily update"" section of the Banking Committee's World Wide Web site, http://www.house.gov/banking/.
((202-898-8312))
",0
"Internet access providers and others who met with Net-savvy lawmakers said they fear Congress will wreak havoc on cyberspace but are also heartened by the growing number of legislators who understand the global computer network.
Company representatives met Tuesday night at the Capitol with members of the Congressional Internet Caucus, about 85 legislators with a common interest in the Net, to express their hopes and fears about efforts to make laws governing cyberspace.
""I think it's inevitable that there will be bills introduced that attempt to legislate the content of everything on the Internet,"" Tom Evslin, vice president of AT&T Corp.'s WorldNet Internet service, said after the meeting.
Evslin said it would be as difficult to keep Congress from making wrong moves as it would be to get the legislature to act to head off problems.
Bill Schrader, president of Internet provider PSINet Inc., was more blunt. ""Be very careful or you will destroy this industry,"" he warned.
The members of Congress who attended the meeting pledged to try to protect the Internet.
""We have a lot of pretty tough work ahead of us,"" Representative Rick White, R-Pa., and a co-chairman of the caucus conceded. ""We have many, many issues coming down the pike from encryption to privacy, to copyright and taxation.""
Encryption is the use of software to encode and decode information.
On Wednesday, White co-sponsored one of the first Internet-related bills in the 105th Congress. The bill, authored by Virginia Republican Rep Bob Goodlatte, would relax export restrictions on computer hardware and software containing encryption features.
Sen. Conrad Burns, also a co-chairman, warned that, despite the caucus, legislation will always trail developments in the private sector.
""The government making policy is never ahead of the curve,"" the Montana Republican said. ""If we do the right thing now, I guarantee you that by the time it's passed and the president signs it, we'll be behind the curve.""
Last year was a mixed bag for the Internet in Congress.
Legislators passed the Communications Decency Act, opposed by online companies and civil libertarians as an infringement on free speech rights, but also defeated measures that would have imposed liability on Internet providers for copyright infringement.
Sun Microsystems Inc.'s chief scientist, John Gage, fretted that, with only 85 pro-Internet legislators out of 435 in the House and 100 in the Senate, most in Congress remained ignorant of the Net. ""We've got a long way to go,"" he said.
Companies interested in the Internet offered some conflicting goals for Congress. Jack Valenti, president of the Motion Picture Association of America, urged the legislators to impose new laws protecting Hollywood products.
""Congress cannot avoid that all intellectual property has to be protected -- this can't be Dodge City without a sheriff,"" Valenti said. But he also praised the Internet as ""the most valuable and spacious information greenhouse that's ever been built.""
PSINet's Schrader countered that existing laws already protected movies, books and other works. ""Everything is not new,"" he said. ""It's the same-old, same-old.""
",0
"Hewlett-Packard Co. unveiled a new plan Monday to boost sales of computer encoding technology, considered a key component of global communications and the development of commerce over the Internet.
The plan is intended to foster the growth of online commerce worldwide while still abiding by strict U.S. export laws limiting the sale of encryption products abroad.
Sales of goods and services over the Internet are booming but still lag well behind traditional sales by telephone or in person. Some businesses say that consumers are nervous about sending credit card numbers or other sensitive information over the Internet, where it could be intercepted by criminals.
Encryption scrambles information, such as a credit card number, while in transit so that it can be read only by the intended recipient using a password or a software ""key.""
""The bad news is that, unless you encrypt your information, it's very easy for electronic eavesdroppers to have a look at what you're transmitting,"" said Brad Silverberg, senior vice president at Microsoft Corp., a Hewlett-Packard partner in the new encryption framework.
The Hewlett-Packard plan is ""the first government-approved encryption framework removing a significant barrier to making the Internet secure for business transactions and electronic communications,"" company Chief Executive Officer Lewis Platt told a news conference in Washington.
Intel Corp., another partner in the effort, said it plans to incorporate encryption into its market-leading computer hardware products.
Federal export laws prohibit the sale of strong encryption technology outside the United States. Last week, President Clinton signed an executive order liberalising but not eliminating the export rules.
Companies will be allowed to sell products with strong, built-in encryption features but only if the products also contain a feature that allows the government to break the codes when acting under a court order or similiar authority.
The administration said law enforcement authorities need the ability to decode messages by having access to the software keys, a system called key recovery or key escrow, in order to keep tabs on criminals and terrorists.
Under the Hewlett-Packard framework, powerful encryption features in a new computer or software could be automatically disabled if the product is sold abroad and does not permit government decoding.
That may not be enough to satisfy those opposed to the administration's policy, including some businesses and civil libertarians.
""It's not a solution for us,"" said Shari Steele, staff attorney at the Electronic Frontier Foundation, a civil liberties group that focuses on cyberspace issues. She said people should have the right to use encryption free of government-mandated escrow.
""The government is just strong-arming some companies by saying if you want to use strong encryption at all, you have to have key escrow,"" Steele said.
",0
"Internet access providers and others who met with Net-savvy lawmakers said they fear Congress will wreak havoc on cyberspace but are also heartened by the growing number of legislators who understand the global computer network.
Company representatives met Tuesday night at the Capitol with members of the Congressional Internet Caucus, about 85 legislators with a common interest in the Net, to express their hopes and fears about efforts to make laws governing cyberspace.
""I think it's inevitable that there will be bills introduced that attempt to legislate the content of everything on the Internet,"" Tom Evslin, vice president of AT&T Corp.'s WorldNet Internet service, said after the meeting.
Evslin said it would be as difficult to keep Congress from making wrong moves as it would be to get the legislature to act to head off problems.
Bill Schrader, president of Internet provider PSINet Inc., was more blunt. ""Be very careful or you will destroy this industry,"" he warned.
The members of Congress who attended the meeting pledged to try to protect the Internet.
""We have a lot of pretty tough work ahead of us,"" Rep. Rick White, R-Pa., and a co-chairman of the caucus conceded. ""We have many, many issues coming down the pike from encryption to privacy, to copyright and taxation.""
Encyrption is the use of software to encode and decode information.
Sen. Conrad Burns, also a co-chairman, warned that, despite the caucus, legislation will always trail developments in the private sector.
""The government making policy is never ahead of the curve,"" the Montana Republican said. ""If we do the right thing now, I guarantee you that by the time it's passed and the president signs it, we'll be behind the curve.""
Last year was a mixed bag for the Internet in Congress.
Legislators passed the Communications Decency Act, opposed by online companies and civil libertarians as an infringement on free speech rights, but also defeated measures that would have imposed liability on Internet providers for copyright infringement.
Sun Microsystems Inc.'s chief scientist, John Gage, fretted that, with only 85 pro-Internet legislators out of 435 in the House and 100 in the Senate, most in Congress remained ignorant of the Net. ""We've got a long way to go,"" he said.
Companies interested in the Internet offered some conflicting goals for Congress. Jack Valenti, president of the Motion Picture Association of America, urged the legislators to impose new laws protecting Hollywood products.
""Congress cannot avoid that all intellectual property has to be protected -- this can't be Dodge City without a sheriff,"" Valenti said. But he also praised the Internet as ""the most valuable and spacious information greenhouse that's ever been built.""
PSINet's Schrader countered that existing laws already protected movies, books and other works. ""Everything is not new,"" he said. ""It's the same-old, same-old.""
",0
"Just days after a U.S. graduate student cracked the most powerful computer encryption system allowed out of the country, the Commerce Department announced it would allow three companies to export an even stronger system.
Until this year, computer encryption programmes, which scramble information and render it unreadable without a password or software ""key,"" were classified as munitions and stronger programmes could not be exported.
But under a controversial new Clinton administration policy that took effect Jan. 1, companies may recieve permission to export stronger programmes.
""I'm happy that we've been able to do this within the first month without rancour or difficulty,"" Under Secretary of Commerce for Export Administration William Reinsch said in a telephone interview.
To export stronger programmes immediately, companies must agree to incorporate features within two years allowing the government to decode encrypted messages by recovering the software keys.
The adminstration's policy has been widely criticised as not relaxing the export limits enough and some companies feared the requirement for a two-year plan would substantially delay export approvals.
The quick approvals should quell some of the criticism and encourage more applicants, Reinsch said.
""As a result of this, you will have more companies taking it seriously and we will expect more plans over the next couple of months,"" he said.
Encryption was once the realm of spies and generals. But with the explosion of online commerce on the Internet, encryption has become a vital tool for protecting everything from a business' e-mail message to a consumer's credit card number sent over the Net.
The amount of protection afforded by encryption is largely a function of the length of the software key measured in bits, the smallest unit of computer data.
Companies said products with just 40-bit long keys, the old limit, were too easy to crack. The approvals came just days after Ian Goldberg, a graduate student at the University of California, cracked a message encoded with a sofware key 40-bits long.
The government did not name the companies on Friday given permission to export stronger, 56-bit programmes, but Glenwood, Maryland-based Trusted Information Systems acknowledged that it was one of the three.
""Recent attacks on 40-bit encryption have shown that a global move to at least 56-bit (U.S. government standard) security must come soon,"" Trusted Information Executive Vice President Steven Lipner said.
",0
"The Commerce Department will issue final rules on Dec. 30 to implement its new policy on export of computer encoding products, but the proposal is unlikely to mollify the software industry and privacy advocates who objected to a draft version.
Some changes were made in the final rules, available Friday at a government printing office, from the earlier draft. But the bulk of the proposal remains the same, including portions strongly criticized by the software industry that applied to real-time communications.
Commerce undersecretary William Reinsch had said two weeks ago that the draft rules would be modestly revised, but warned that some objections could not be addressed.
Under the previous rules dating from the Cold war, the administration severely limited the export of products containing encryption, programs that use mathematical formulas to scramble information and render it unreadable without a password or software ""key.""
In the past, products could be exported using ""keys"" as long as 40 digital bits, a string of forty ones and zeros. But as the speed of computers has grown, 40-bit keys have become easy to crack and longer keys have come into general use.
At the same time, with the growth of the Internet and online commerce, demand for encryption-capable products is growing worldwide. Coded messages can keep a business' e-mail confidential or protect a consumer's credit card number sent on the Internet.
The Commerce Department rules were intended as a compromise, allowing U.S. companies to compete in the encryption market while protecting the interests of law enforcement officials.
The policy relies on so-called key recovery features which allow government officials to decode encrypted messages when acting under proper legal authority.
Under the policy to be issued Monday, products containing key recovery features will be eligible for export after a one-time review.
Software firms had hoped the key recovery exception would only apply to stored data, like a document on a hard drive. But the final rules, like the draft rules, also require key recovery for real-time data transamission such as coded phone calls.
Non-key recovery software with keys of up to 56 bits will be exportable under six-month, renewable licenses until the end of 1998, but only if the manufacturer commits to producing software with key recovery by then.
Some companies had complained that the government was asking for too much information about their future plans, but the final rules still require submission of detailed plans and committments.
All other encryption products, such as state-of-the art 128-bit software without key recovery features, would continue to be treated as munitions. Such products include ordinary e-mail programs and even the recently introduced set-top box for surfing the Internet with a television.
The rules deleted a draft provision allowing keys to be stored with a recovery agent located outside of the United States.
The final rules also made clear that an applicant's public support of the administration's policy would not be a factor in export license decisions. Rather, helping build the necessary infrastructure would be a factor, the final rules said.
A criteria listed as ""public support for a key management infrastructure,"" was changed to ""or other support for the key management infrastructure.""
",0
"The Supreme Court said Monday it would decide whether a federal regulator had properly allowed credit unions to expand their membership over the past 15 years, settling a long-running legal dispute between the cooperative non-profits and banks.
Credit unions praised the court's action to reconsider an Appellate court decision last July in favour of the banks. But bank representatives said the court was only delaying the inevitable.
The 1934 Federal Credit Union Act creating credit unions ""was not meant to delineate and protect bank markets at the expense of the consumer,"" said Marc Schaefer, president of AT&T Family Federal Credit Union, the credit union being sued by banks in the case.
""Consumers everywhere will be the winners when banks compete in the marketplace instead of the courts and on Capitol Hill,"" Schaeffer added.
American Bankers Association executive vice president Donald Ogilvie countered that ""the facts and law weigh overwhelmingly in our favour.""
""We are disappointed at the prospect of delay in the enfocement of a law we believe is quite clear,"" he said.
The Supreme Court will hear arguments in the case in its upcoming term, which begins in October. A decision is likely early next year.
The case affects about 3,600 federal credit unions serving 32 million customers, Justice Department lawyer Walter Dellinger said.
The appeals court ruling in favour of the banks ""threatens nationwide instability and losses in the credit union industry affecting millions of persons,"" Dellinger said.
Until 1982, credit unions were limited to having members with a single common bond, such as people who worked for the same employer or lived in the same neighbourhood. Owned by their members, non-profit credit unions paid no federal taxes and were able to offer bank-like services often at lower prices than banks.
But in 1982, concerned about a lack of diversification, the National Credit Union Administration decided to allow credit unions to accept members from multiple distinct groups.
As many previously tiny credit unions diversified and grew substantially larger, banks complained of unfair competition. In 1990, they sued AT&T Family Federal, a North Carolina union that had grown to encompass over 150 different groups.
After the Court of Appeals for the District of Columbia struck down the 1982 policy change last July, a lower court imposed strict membership limits on multi-group credit unions.
Those limits have since been put on hold until the Supreme Court makes a decision. But if the banks win, their next move could be to ask the courts to force multi-group credit unions to throw out members from all but one group.
Credit unions said they will ask Congress to amend the law if they lose in the Supreme Court.
""Congress never intended the 1934 Federal Credit Union Act to limit credit union growth or to protect banks from competition,"" said Daniel Mica, president of Credit Union National Association, a leading trade group. ""If the court does not see it this way, we think Congress will recognise consumers' need for credit unions.""
((202-898-8312))
",0
"U.S. laws governing the trillion dollar futures markets could be rocked by the Supreme Court's interpretation of the word ""in"" in a case to be argued Wednesday. But a legislative solution is in the offing.
At issue is a 1974 amendment to the Commodity Exchange Act, the primary law regulating trading of futures contracts on everything from wheat and corn to interest rates and electricity.  
Futures exchanges say a broad reading of the amendment would put them out of business, while major banks argue a narrow reading would force them to move vast operations out of the United States.
Whatever the outcome, Congressional action is expected next year. ""It's certainly significant, but I suspect that at the end of the day, legislation will overtake this,"" said Howard Schneider, former Commodity Futures Trading Commission general counsel.  
When Congress expanded the commodity act in 1974 to cover futures on non-agricultural commodities and created the Commodity Futures Trading Commission to police the markets, some big banks objected.
They argued the law should not apply to trading of foreign currency, government securities and similiar items already flourishing among banks and securities firms.
The Treasury Department agreed and in a letter to Congress suggested an amendment to the law that became known as the Treasury Amendment.  
The amendment says ""transactions in"" foreign currency, security warrants, repurchase options, government securities and a few other items are exempt from the Commodity Exchange Act unless they involve sale for future delivery conducted ""on a board of trade.""
The banks continued to trade foreign currencies unimpeded but the CFTC began to encounter a new problem. Unscrupulous ""bucket shops"" that peddled off-exchange commodity contracts to rip off unsuspecting investors were expanding into foreign currency schemes.  
The CFTC shut down the forex shops but lawyers for the shops argued forex investment contracts should be considered transactions ""in"" foreign currency and exempt from CFTC rules.
Lower federal courts took up the issue but reached conflicting conclusions. Some said ""transactions in foreign currency"" exempted dealings only with actual currencies, not derivatives on the currencies like futures and options. Others decided that ""in"" exempted all trading involving currencies.
The Supreme Court will likely resolve that conflict in Wednesday's case concerning William Dunn, the manager of a $180 million hedge fund investing in foreign currencies.  
In November, 1993, Dunn told his investors he had lost $95 million. The CFTC soon charged Dunn with fraud under the Commodity Exchange Act. A lower court agreed.
Asking the Supreme Court to uphold that decision, CFTC lawyers argue that Congress would have used the word ""involving"" rather than ""in"" if it had wanted to exempt forex derivatives.
But Dunn's lawyers and four banks that dealt with his fund maintain that the CFTC has no jurisdiction to prosecute under the commodity act.  
Affirming the earlier decision would undermine the $40 billion a day global currency market by subjecting it to unworkable regulation, the banks said. And Dunn, if guilty of any misconduct, could be prosecuted under wire fraud or securities laws, the banks said.
At the other extreme, the Chicago futures exchanges appear terrified the court will strike down the lower court ruling.  
Chicago Board of Trade, in an amicus brief written in part by Kenneth Starr, the independent counsel in the Whitewater investigation, warned that a broad reading of the exemption would create havoc, allowing unregulated dealings in all kinds of futures contracts now traded on exchanges.
""The idea that someone could clone the Board of Trade's principal products, trade them off-exchange and not be subject to any regulation is pretty darn troublesome,"" Mark Young, another exchange attorney, said.
A ruling is not expected for months, but the banks and exchanges will have to continue their struggle in the legislative venue almost immediately.
Congress could resolve the dispute through legislation, which would render the decision moot. One bill was introduced in the last Congress to amend the Treasury Amendment and Senator Richard Lugar (R-IN) has said he will likely offer a new bill early next year.
-- 202-898-8312
",0
"Prospects for comprehensive reform of U.S. banking and financial services laws remain bright despite a far-reaching proposal being considered by the Clinton Administration that has upset some banks.
Most in government and the industry now agree that the 60-year-old Glass-Steagall Act separating banking from other financial activities like insurance and securities dealing should be scrapped.
But there is little consensus about removing the barriers between financial firms and other commercial companies, a position the administration is actively considering for its reform proposal expected in the next two months.
""The feeling is still very, very good that everyone wants Glass-Steagall reformed,"" former Congressman and bank lobbyist Larry LaRocco said.
With almost two years left for the 105th Congress, legislators should have sufficient time to come to agreement, added LaRocco, managing director of the American Bankers Association's securities section.
""There's tremendous momentum building. Maybe it won't be in 1997 but certainly within the 105th,"" he said.
Federal courts and regulators spurred the momentum last year by lifting many restrictions on banks' non-banking activities, LaRocco noted.
As previously reported, Treasury Secretary Robert Rubin is weighing the recommendations of a task force headed by Under Secretary John Hawke to remove all barriers between financial and non-financial companies. Under the plan, a company like General Electric Co. or Microsoft Corp. could own or be owned by a financial services company like Citicorp or Aetna.
""There has been an enormous amount of movement on the whole issue in the last two months,"" a person familiar with the administration's deliberations said.
Among various bills in Congress and the administration, the commerce issue ""is the last issue that's left, which is an indication of how far we've come. For the first time, the omens are good and this is the only hang-up,"" the person said.
The remaining ""hang-up"" has raised strong opposition from House Banking Committee Chairman Jim Leach along with smaller banks and consumer groups.
""There is no public support and no economic need for the conglomeration of financial institutions and other businesses,"" the Iowa Republican said. ""The nation needs to be concerned about creating jobs, not simply consolidating ownership.""
If the administration pushes ahead with the Hawke plan, it would create a ""much longer debate and prolong the process,"" one Leach staffer added. ""This is an issue which (Leach) feels has not been fully debated,"" the staffer said.
Small bankers agree. ""It's a proposal that would essentially change and concentrate not only the financial structure of the United States but the whole economic and financial structure,"" said Ken Guenther, executive vice president of the Independent Bankers Association of America.
Such concentration would be bad for the economy, Guenther added. ""It is based on very debatable assumptions.""
One bill in Congress includes a possible compromise approach, lobbyists noted. Representative Marge Roukema's bill would allow banking, insurance and securities firms to merge and would allow such companies to derive up to 25 percent of their revenues from non-financial activities.
The New Jersey Republican, chairwoman of the House Banking Committee's Financial Institutions subcommittee, has lined up some big guns behind her bill. The Alliance for Financial Modernisation, a coalition representing most the large trade groups involved in financial services, broadly endorsed the bill.
",0
"Elementary school students with access to the Internet learned more than kids who lacked access, an indepedent research group concluded after conducting a comparative study in seven urban school districts.
""This study dramatically illustrates the positive effects of online use on learning,"" said Michael Casserly, executive director of the Council of Great City Schools, an association of 49 large inner city public school districts which co-sponsored the study along with Scholastic Corp.
",0
"An international Internet group released its plan Wednesday to dramatically increase the number of available addresses in cyberspace while quelling disputes over the use of trademarks in those address names.
The International Ad Hoc Committee, which includes members of Internet standards-setting bodies and legal and communications experts, proposed seven new ""top-level domains,"" the last block of letters at the end of every Internet address.
If the plan is adopted, Net surfers will see addresses ending in ""web"", ""store"", ""info"", ""firm"", ""arts"", ""rec"" and ""nom"", joining ""com"", ""edu"", ""gov"" and other existing top-level domains.
Each new domain reflects a particular type or category of Internet site. For example, ""rec"" would be for sites emphasising recreation and entertainment, while ""nom"" would be for those desiring individual or personal nomenclature.
In drafting the plan, the group received more than 4,000 comments from around the world. The consensus-building approach followed an outcry that arose when a few Internet bodies unveiled a similiar plan last August.
""We are very pleased with the acceptance and broad consensus that we have achieved in this process,"" said Donald Heath, president of the Internet Society and chair of the ad hoc committee. ""To attain its fullest potential, the Internet requires true self-governance.""
Heath said the plan should be approved by Internet standard setters within a few weeks, allowing new domains to come online about three months later.
The plan includes provisions to resolve disputes arising over the use of trademarked names as Internet addresses.
Last year, for example, toymaker Hasbro Inc. won a lawsuit to regain control of the Internet address ""candyland.com,"" which was being used for an adult Web site with nude photographs.
But more complex disputes are arising where both parties may have a legitimate claim to an Internet address.
Under the committee plan, anyone applying for an Internet address will have to agree to resolve disputes through online mediation under the rules of the World Intellectual Property Organisation. Mediation will be provided by panels composed of international experts on intellectual property, trademarks and the Net. Challenges initiated within 60 days of an address registration would be resolved within 30 days.
All challenges and proposed decisions would be made public and time allowed for comment before a final decision was rendered.
The plan will not completely eliminate court battles, attorneys said. ""It's much better than the policies we've seen in the past, but, just by the nature of how valuable these domains have become, litigation will continue,"" said Paul Terry, Internet law specialist at Winthrop, Stimson, Putnam & Roberts.
The plan also calls for establishing up to 28 competing registration firms to dole out the new addresses. The firms will operate under the auspices of a Council of Registrars, to be established as a non-profit association in Switzerland.
Currently, one firm, Herndon, Va.-based Network Solutions Inc., hands out addresses in the most popular domains, charging $100 for a two-year registration.
Network Solutions, which registers over 80,000 new Internet addresses a month, had no comment on the plan, but a spokesman raised doubts about its viability. ""We're concerned with the stability and integrity of the registration process,"" spokesman Christopher Clough said.
The complete proposal is posted on the World Wide Web at http://www.iahc.org/draft-iahc-recommend-00.html.
",0
"The Internet may be overflowing with new technology but crime in cyberspace is still of the old-fashioned variety.
The National Consumers League said Wednesday that the most popular scam on the Internet was the pyramid scheme, in which early investors in a bogus fund are paid off with deposits of later investors.
The league, a non-profit consumer advocacy group, tracks web scams through a site it set up on the world wide web in February called Internet Fraud Watch at http://www.fraud.org.
The site, which collects reports directly from consumers, has been widely praised by law enforcement agencies.
""Consumers who suspect a scam on the Internet have critical information,"" said Jodie Bernstein, director of the Federal Trade Commission's Bureau of Consumer Protection. Internet Fraud Watch ""has been a major help to the FTC in identifying particular scams in their infancy.""
In May, for example, the commission used Internet reports to shut down a site run by Fortuna Alliance that had taken in over $6 million, promising investors they could earn $5,000 a month from an initial deposit of $250. Instead, Fortuna kept most of the money, the commission charged.
Fraud reports from the league's site, which has been visited over 370,000 times, are forwarded to local, state and federal authorities.
The second-most-popular Internet scam, the league said, was the sale of bogus Internet services, such as custom designed web sites or Internet access accounts.
In third place were crooks who sell computer equipment, such as memory chips or sound boards, over the net and then deliver significantly lower quality goods or nothing at all, the league said.
Other top scams involve business opportunities. Con artists may offer shares in a business or franchise using unreasonable predictions or misrepresentations. One popular scheme promised to let consumers get rich while working at home.
The League also announced Tuesday that NationsBank had donated $100,000 to become a sponsor of the Fraud Watch site.
",0
"Supreme Court justices Wednesday sharply questioned rules governing so-called derivative investments and foreign currency trading in a case that could have wide repercussions for both markets.
The Commodity Futures Trading Commission has traditionally prosecuted crooks who ripped off the public with fraudulent investments. But sophisticated investors such as big banks have been allowed to trade similiar financial instruments with little direct regulation, market participants said.
That distinction has been blurred in recent years, as defendants accused of fraud by the CFTC have sought to rely on an exemption from regulation, relied on by the bigger players, in a 1974 amendment to the Commodity Exchange Act.
The amendment was added at the request of the Treasury Department to ensure that sophisticated investors trading in foreign currency and a few other markets would not be subject to uneccessary regulation by the CFTC.
Lower courts have made conflicting rulings about the 1974 amendment and the Supreme Court decided last year to hear the case of William Dunn, a foreign currency investment advisor charged with fraud by the CFTC after losing $95 million of his clients' money.
Jeffrey Minear, assistant to the Solicitor General -- the federal government's representative before the Supreme Court -- defended the CFTC's prosecution of Dunn before the court Wednesday. Minear argued that the 1974 exemption for ""transactions in foreign currency"" did not cover Dunn's trading in foreign currency options, one type of derivative. A derivative is an investment whose value is derived from a stock, bond, currency, commodity or other instrument.
But justices questioned Minear's distinction, which relied heavily on the particular meaning of the word ""in.""
Congress was ""not using consistent language"" in the commodity laws passed in 1974 and since then, Justice Antonin Scalia said. ""They use in, they use on, they use involving.""
Minear drew a sharp rebuke from Chief Justice William Rehnquist when he later argued that Congress expressed greater concern about fraudulent use of options than other types of investments under a 1922 commodity trading law.
""Perhaps it was true in 1922 but that doesn't prove it's true now,"" the chief justice interjected.
Gary Stumpp, Dunn's lawyer, argued that other federal agencies such as the Securities and Exchange Commission might have jurisdiction over fraudulent foreign exchange trading but not the CFTC.
Several Wall Street trade groups and big banks filed friend-of-the-court briefs in support of Dunn's position. They warned that if the court upheld the CFTC's position, the burden of additional regulation might drive the gigantic $40 billion a day foreign exchange market in the United States might overseas.
On the other side, Chicago futures exchanges said they could be put out of business by unregulated competitors if the court throws out the CFTC's case against Dunn.
Brooksley Born, chairwoman of the CFTC, attended the argument but declined to comment afterwards.
A decision is not expected for at least a few months. Several members of Congress have said they may introduce legislation early next year to change the 1974 amendment, possibly rendering the verdict in the Dunn case moot.
",0
"An influential global research group is preparing guidelines on encryption policy for its member countries but will duck some of the most contentious issues involved, according to a draft of the report obtained by Reuters.
The Clinton administration, seeking to rally support at home and abroad for its controversial encryption export policy, got some discussion of its approach in the Organization for Economic Cooperation and Development guidelines but not an endorsement.  
On perhaps the most difficult issue, the draft guidelines do not favor or oppose a requirement in the U.S. policy that data-scrambling encryption programs provide a means for law enforcement officials to obtain keys to crack the codes when necessary.
After indicating that governments should carefully weigh the costs and benefits of imposing so-called key recovery, the draft states ""this principle should not be interpreted as implying that governments should, or should not, initiate legislation that would allow lawful access.""  
On all the controversial areas in the draft, ""the member countries of the OECD have strongly held views but they don't always coincide,"" said John Dryden, head of the group's Information, Computer and Communications Policy division, in a telephone interview from Paris.
Some countries see widespread use of encryption as a means to protect the privacy of computer users and businesses, thereby encouraging global commerce, Dryden observed.
But others see encryption as possibly thwarting law enforcement's efforts to catch criminals and global terrorists, he said.  
The guidelines suggest that encryption users should have ""access to cryptography that meets their needs.""  Government controls should be ""no more than are essential to the discharge of government responsibilities.""
Instead of reconciling the different views, the draft guidelines lay out competing interests and possible approaches.
""It's not in itself a cryptography policy and it's not a attempt to draft a model national law that we're encouraging people to adopt,"" Dryden said.  
The guidelines also suggest encryption standards and usage should be ""determined by the market in an open and competitive environment.""
""There's a strong view that the private sector should have the possibility to use information networks to the best of their potential in order to create growth and jobs,"" Dryden said.
U.S. officials who have seen the preliminary draft praised its approach.  ""They're an important and helpful step forward,"" Under Secretary of Commerce William Reinsch said.  
""They're helpful because they put down on paper the proper foundation for getting into this,"" he added
Reinsch maintained that most countries will follow the U.S. lead and require so-called key recovery features for law enforcement.  Under the Clinton policy, domestic use of encryption is not regulated but the strongest coding products cannot be exported unless they include key recovery.
The draft guidelines, approved by a group of government and private sector experts at a meeting at the end of January, still must be approved by the top-level OECD council.  
The council is composed of ambassadors from the 29 member countries.
U.S. companies that have opposed the Clinton policy, contending it stifles their ability to compete with unfettered foreign firms, drew little solace from the OECD draft.
""This is not helpful,"" Netscape Communications Corp's public policy counsel Peter Harter said.  Netscape and other companies preferred stronger language endorsing free market policies, he said.
((--202-898-8312))
",0
"An influential economic research group is preparing guidelines on computer encryption for its member countries but will duck some of the most contentious issues involved, according to a draft obtained by Reuters.
The Clinton administration, seeking to rally support for its controversial policy on exporting encryption products -- which encode and decode e-mail and other computerized messages -- failed to win an endorsement from the Organisation for Economic Cooperation and Development (OECD), although the group did discuss the administration's approach.
On perhaps the most difficult issue, the draft guidelines do not favour or oppose a requirement in the U.S. policy that data-scrambling encryption programmes provide a way for law enforcement officials to obtain keys to crack the codes when necessary.
After indicating that governments should carefully weigh the costs and benefits of imposing so-called key recovery, the draft report said, ""this principle should not be interpreted as implying that governments should, or should not, initiate legislation that would allow lawful access.""
On all the controversial areas in the draft, ""the member countries of the OECD have strongly held views but they don't always coincide,"" John Dryden, head of the group's Information, Computer and Communications Policy division, said in a telephone interview from Paris.
Some countries see widespread use of encryption as a way to protect the privacy of computer users and businesses, thereby encouraging global commerce, Dryden said. But others see encryption as possibly thwarting law enforcement's efforts to catch criminals and global terrorists, he said.
The guidelines suggest encryption users should have access to products that meet their needs. Government controls should be ""no more than are essential to the discharge of government responsibilities.""
Instead of reconciling the different views, the draft guidelines lay out competing interests and approaches.
""It's not in itself a cryptography policy and it's not an attempt to draft a model national law that we're encouraging people to adopt,"" Dryden said. Cryptography refers to products and systems used in encryption.
The guidelines also suggest encryption standards and usage should be ""determined by the market in an open and competitive environment.""
""There's a strong view that the private sector should have the possibility to use information networks to the best of their potential in order to create growth and jobs,"" Dryden said.
U.S. officials who have seen the preliminary draft praised the guidelines. ""They're an important and helpful step forward,"" Undersecretary of Commerce William Reinsch said.
""They're helpful because they put down on paper the proper foundation for getting into this,"" he added.
Reinsch said most countries will follow the U.S. lead and require so-called key recovery features for law enforcement. Under the Clinton policy, domestic use of encryption is not regulated but the strongest coding products cannot be exported unless they include key recovery.
U.S. companies that have opposed the Clinton policy, contending it stifles their ability to compete with unfettered foreign firms, drew little solace from the draft guidelines.
""This is not helpful,"" said Netscape Communications Corp.'s public policy counsel, Peter Harter. Netscape and other companies preferred stronger language endorsing free-market policies, he said.
The draft guidelines, approved by a group of government and private-sector experts at a meeting at the end of January, still must be approved by a top-level OECD officials from the group's 29 member countries, including the United States, Japan and Germany.
",0
"The Federal Reserve Friday rebuffed a request by the Justice Department to allow U.S. banks to collect data about borrowers as part of an effort to discourage racial discrimination in lending.
The unanimous decision put the central bank's board in the unusual position of being at the center of a national debate about how best to discourage discrimination.
On the one side: those who see the collection of data on race, gender, age, religion and other charecteristics as a way to ferret out discrimination. On the other: opponents who view such collection as discriminatory on its face.
Backed by banking regulators at the Office of the Comptroller of the Currency, the Justice Department urged the Fed to change a regulation that prohibits banks from collecting such data except in the case of mortgage lending.
The department argued that the lack of data was hindering its ability to evaluate charges of racial discrimination in lending to small businesses.
In an unanimous decision, the central bank's board voted against changing Fed Regulation B, saying it might lack the authority to act without new legislation from Congress.
""The issue ... is not some technical matter of law or economics,"" Fed Governor Lawrence Lindsey said.
""Rather, it is at the center of a heartfelt and ongoing debate in America about the direction of public policy with respect to individual characteristics,"" he added.
The regulation, which was established in 1977, was designed to discourage discrimination by race, gender and age by prohibiting banks from collecting such data from borrowers.
Fed Governor Edward Kelley described the proposed change in the regulation as ""social policy of the most profound sort"" and said it ""provides no answer to the social conundrum that's before us.""
That is not the way the Justice Department sees it. In a letter to Fed Chairman Alan Greenspan Friday, Associate Attorney General John Schmidt said changes in the regulation would help combat discrimination.
""Allowing credit providers to collect certain basic data seems to us to be a useful step toward getting a better handle on the extent of this problem,"" he said.
Existing studies, though limited, ""do appear to provide some support for the widespread view ... that minority-owned businesses face unusually difficult barriers in obtaining this type of credit,"" Schmidt added.
Creditors and their trade associations had opposed the regulation change, which was first released for comment by the Fed in April, 1995.
",0
"An influential Internet organisation has backed away from a proposal to dramatically expand the number of addresses available on the global computer network.
The Internet Society, which helps develop and coordinate Internet standards, announced this week that instead of moving ahead with the proposal it would form a nine-member committee to study the issue.
Unveiled in August, the proposal was an attempt to quell the growing number of disputes over desirable address names.
""There just seems to be no consensus at all,"" said Don Heath, president of the society. A variety of objections and questions have been raised about the August proposal, from technical networking issues to concerns about protection for trademarks and intellectual property.
""We thought we should try to pull it all together and have a good cross-section of people to discuss it and see if we can't reach a consensus,"" he said.
The new committee ought to finish its work by early next year and new names could be doled out four to six months later, Heath said. The committee could decide not to go forward with any address expansion, but Heath said that was an unlikely outcome.
""The facts of life are that people want descriptive names and vanity plates,"" Heath said.
Disputes over Internet names are occuring with increasing frequency as more companies seek to publicise and market their products over the Net.
For example, Viacom Inc.'s MTV cable music channel fought with one of its employees who had registered ""mtv.com,"" eventually regaining control of the name in an out-of-court settlement.
Every site on the World Wide Web must have a unique address name. Most addresses end with one of a few three letter designations, known as top-level domains, including ""com"" for private sites, ""gov for government sites and ""edu"" for sites run by schools.
In August, Internet Assigned Numbers Authority said it would oversee the creation of up to 150 new top level domains, easing the squeeze, especially for names in the private sector category.
The authority, operating under charter from the society and the Federal Network Council, is the central coordinator of Internet addresses and other standards.
The society's board of trustees voted in June to accept a preliminary version of the numbers authority proposal, with the proviso that the business aspects of proposal be fleshed out.
But with the ensuing controversy, the society decided a committee was needed to reexamine the proposal, Heath said. The committee will meet confer mostly by telephone and online, though an open forum is planned for mid-December in California.
The committee will include two members appointed by the society, two by the numbers authority and two by the Internet Architecure Board.
The International Telecommunication Union, the World Intellectual Property Organisation and the International Trademark Association will each appoint one member.
",0
"The Internet continued to grow in leaps and bounds this year while online services found it much harder to add new customers, a new survey says.
An estimated 35 million adults in the United States had used the Internet, according to the poll by Louis Harris and Associates conducted in late September, up from 27 million at the beginning of the year.
""Although the number of people who use computers has fluctuated around just over half of the adult population, the number of adult Americans using computers for cyber-activities is growing,"" said Humphrey Taylor, chairman of the polling organisation.
While online services like America Online Inc. and Compuserve Corp. could lay claim to almost 41 million subscribers, that was the same level Harris found back in January.
Online services, which provide private online content in addition to Internet access, have faced greater competition this year from companies like AT&T Corp., which provide cheaper Internet-only access.
Businesses, which are looking to the Internet as a potential source of new revenue, are intensely interested in figures on its usage. Differing surveys have come up with widely varying numbers.
The Harris poll found that, although more people are getting wired, they are on average spending less time in cyberspace.
Home users said they were online 2.8 hours a week, down from three hours a week in an April survey. Business and other users said they were online for 1.8 hours, down from two hours in April.
The poll also reinforced findings of earlier studies showing that more educated people were more likely to use computers and access the Internet.
People with college and graduate degrees were twice as likely to use computers and four times more likely to access the Internet as people who only graduated from high school, the poll found.
The poll's results were based on a telephone survey of 1,032 adults at the end of September and have a margin of error of plus or minus 3 percentage points, according to Harris.
",0
"The Internet continued to grow in leaps and bounds this year while online services found it much harder to add new customers, a survey said Friday.
An estimated 35 million adults in the United States had used the Internet, according to the poll by Louis Harris and Associates conducted in late September, up from 27 million at the beginning of the year.
""Although the number of people who use computers has fluctuated around just over half of the adult population, the number of adult Americans using computers for cyber-activities is growing,"" said Humphrey Taylor, chairman of the polling organisation.
While online services like America Online Inc. and Compuserve Corp. could lay claim to almost 41 million subscribers, that was the same level Harris found back in January.
Online services, which provide private online content in addition to Internet access, have faced greater competition this year from companies like AT&T Corp., which provide cheaper Internet-only access.
Businesses, which are looking to the Internet as a potential source of new revenue, are intensely interested in figures on its usage. Differing surveys have come up with widely varying numbers.
The Harris poll found that, although more people are getting wired, they are on average spending less time in cyberspace.
Home users said they were online 2.8 hours a week, down from three hours a week in an April survey. Business and other users said they were online for 1.8 hours, down from two hours in April.
The poll also reinforced findings of earlier studies showing that more educated people were more likely to use computers and access the Internet.
People with college and graduate degrees were twice as likely to use computers and four times more likely to access the Internet as people who only graduated from high school, the poll found.
The poll's results were based on a telephone survey of 1,032 adults at the end of September and have a margin of error of plus or minus 3 percentage points, according to Harris.
",0
"The growing mass of Internet users have paid their fair share to local telephone companies and pose little threat to the phone system, a study by a group of Internet and computer companies said Wednesday.
The coalition presented the report to counter studies by local phone companies released last year seeking to justify new access fees on Internet usage. The phone company studies found that Internet usage threatened to overwhelm the system.
""The Internet is not crashing the telephone network,"" said Harris Miller, president of the Information Technology Association of America, at a news conference here.
""We are bringing the real facts to bear on a 'problem' that the phone companies have anecdotally created to protect their own interests,"" Miller, whose group is one member of the Internet Access Coalition, said.
The Federal Communications Commission said on Dec. 24 that it had tentatively decided not to impose access fees on Internet providers similiar to those paid by long-distance companies to local phone companies.
But the commission also asked for comments about the effect of the Internet on the phone system.
""Our findings clearly show that claims of phone network 'congestion' resulting from Internet traffic and predictions of a 'meltdown' are greatly exaggerated,"" Lee Selwyn, one of the study's authors, said.
Further, ordinary consumers using the Internet already pay the phone companies more than enough to cover the cost of increased use, said Selwyn, an expert on telecommunications regulation.
The study found, for example, that in 1995 consumers paid more than $1.4 billion for installation and use of 6 million second phone lines devoted to accessing the Internet or other online services. The study said another 8 million second lines were not primarily used for Internet access.
Local phone companies, some of which had not seen the new study, disputed Selwyn's conclusions.
""To suggest that there is no real problem here is mind boggling,"" Bell Atlantic Corp. spokesman Harry Mitchell said. As Internet companies add huge numbers of phone lines to meet growing demand, ""it does impact the capacity of the public telephone network.""
America Online Inc., for example, said recently it would double the number of modems it has to connect with subscribers from 200,000 to 400,000 by June.
But phone company studies considered only a few pieces of the phone system, focusing on switchs between Internet service providers and the rest of the network, Selwyn said. While those few switchs might be congested, capacity could be added inexpensively, he said.
The study also cited speeches by some phone company executives who have bragged about the additional revenues generated by increased Internet usage.
""Sales of secondary lines at Bell Atlantic increased more than 50 percent, fuelled by surging demand for Internet and telecommuting applications,"" company Chief Executive Raymond Smith told Wall Street analysts last March.
The revenue generated substantial profit because ""we were able to provision new lines and services from idle capacity in an existing plant,"" he said.
Company spokesman Mitchell said charges from second lines ""were not designed to subsidise Internet service providers.""
In the end, all sides agree that a technological solution could eliminate most congestion problems by separating calls carrying voice and data.
SBC Communications Inc., parent of Southwestern Bell, announced last week it would introduce such splitting technology at a cost of less than $100 million.
""Technological solutions are readily available,"" Paul Misener, chairman of the Internet coalition's steering committee said.
",0
"A break-in at the U.S. Justice Department's World Wide Web site last week highlighted the Internet's continued vulnerability to hackers.
Unidentified hackers gained access to the department's web page on August 16 and replaced it with a hate-filled diatribe labelled the ""Department of Injustice"" that included a swastika and a picture of Adolf Hitler.
Justice officials quickly pulled the plug on the vandalised page, but the security flaws that allowed hackers to gain entry likely exist in thousands of other corporate and government web sites, security experts said.
""The vast majority of sites are vulnerable,"" said Richard Power, senior analyst at the Computer Security Institute. ""The Justice Department shouldn't be singled out.""
Justice Department officials said the compromised web site was not connected to any computers containing sensitive files. The web site (http://www.usdoj.gov) included copies of press releases, speeches and other publicly available information.
The security breach ""is just like graffiti on the outside of the building,"" spokesman Bert Brandenburg said.
Other organisations have been targeted in the past. Last year, the Nation of Islam's Million Man March web site was vandalised. And hackers make 250,000 attempts annually to break into U.S. military computers, according to a General Accounting Office report.
Windows Magazine recently found security flaws at web sites of a dozen major corporations. ""The web is spectacularly insecure,"" editor Mike Elgan said. Relying on security holes that had been documented by software manufacturers months earlier, the magazine's specialists were able to gain various degrees of unauthorised access at the different sites.
Elgan said hackers who are exploiting some of the same flaws are motivated by anger over the growth and commercialization of the Internet. ""A common theme is that hackers are fed up with non-hackers on the Internet,"" he said.
The battle is not completely hopeless. ""You can secure a web site,"" Richard Power said. ""There's all kinds of measures you can take. Most corporations and institutions don't take them simply because nothing bad has happened to them yet.""
Some sites are using multiple layers of security, well beyond simple password protection, to keep hackers out.
One site mentioned by Windows Magazine was Fidelity Investments. Fidelity's site advertises its mutual funds and disseminates information about personal finance but does not contain confidential customer information.
Fidelity officials immediately closed the loophole identified by the magazine, a spokeswoman said. But multiple security measures previously in place would have prevented a security breach despite the hole, the spokeswoman added.
",0
"The debate over reforming America's financial services sector, a top priority for Congress and the Clinton administration, began in earnest Tuesday.
As major industry representatives sat down at a House Banking subcommitee hearing on two pending reform bills, word came that Senate Banking Committee Chairman Alfonse D'Amato, R.-N.Y., had introduced his own version of comprehensive reform.
The bills introduced so far, as well as an administration proposal expected late next month, begin with the same premise: the time is right to scrap the Glass-Steagall Act enacted during the Depression to separate banking from other financial activities like securities underwriting and insurance.
Most in Congress agree. And, for the first time, most financial service company seem to agree as well.
At the hearing of the Subcommittee on Financial Institutions, representatives of banking, insurance, securities and mutual funds all agreed Congress should allow a single entity to span all financial services businesses.
But, as subcommittee Chairwoman Marge Roukema, a New Jersey Republican, observed, ""The devil is in the details.""
Those who had opposed tearing down Glass-Steagall, mainly insurance and securities companies, have seen federal courts and regulators slowly roll back the law -- but only for banks.
Last March, the Supreme Court freed banks from many state insurance restrictions.
The Federal Reserve also decided to allow banks to derive up to 25 percent of a subsidiary's revenue from securities activity, an increase from the previous limit of 10 percent. In November, the comptroller of the currency said he would start allowing national banks to enter a host of non-banking businesses.
Banks got substantial new authority, but others got nothing.
""For too long, important policy issues have been addressed by regulatory agencies or the courts rather than by Congress,"" Metropolitan Life Insurance Co. Vice President Roy Albertalli testified at the hearing. Albertalli spoke on behalf of the American Council of Life Insurance, which had opposed mixing banks and insurance.
All the proposals before Congress would level the playing field to some degree and recognise the changes that have shaken modern finance.
""This banking reform legislation will reform the current patchwork of laws and allow the market to operate freely within the financial services industry,"" D'Amato said as he introduced his bill.
While a broad consensus has been achieved, several important issues remain to be addressed. Perhaps the most controversial is the extent to which non-financial companies should be allowed to own or be owned by financial companies.
Under existing law, mutual funds, insurance companies and savings and loans can combine with so-called commercial firms while banks cannot.
Smaller banks and consumer groups staunchly oppose mixing the two, which would be permitted under the D'Amato bill, limited under the Roukema bill and forbidden under a bill introduced by House Banking Chairman Jim Leach, R.-Iowa.
Joseph Bracewell of the Indepedent Bankers Association of America laid out the opposition. Citing former Federal Reserve Chairman Paul Volcker, Bracewell said such mergers could ""distort lending decisions, be anticompetitive and threaten the safety and soundness of the banking system.
Banks said they could live with Roukema's compromise approach, but were undecided about the D'Amato plan. Others heartily endorsed the unlimited approach.
Mutual funds have been ""knee-deep in affiliations"" and ""they've never proved a problem in 57 years,"" said Matt Fink, president of the Investment Company Institute.
Differences also remain regarding regulation of new, diversified financial services companies, although most favoured an approach having various, specialised agencies regulate the relevent portion of each firm's activities.
",0
"With the Clinton administration busily reworking its 1995 proposal overhauling the U.S. financial services sector, one faction in the Treasury Department is recommending a more far reaching plan this time around, people familiar with the matter said.
Under Secretary of the Treasury John Hawke, who oversees an administration working group on bank reform, is pressing for a plan allowing commercial companies to own financial companies, they said.  
The Hawke plan is said to be in front of Treasury Secretary Robert Rubin, who carries great weight with the President on financial policy issues.
Most in the administration and on Capital Hill agree that the 60-year-old laws separating banking from other financial activities like insurance and securities dealing should be scrapped.
But there is still widespread disagreement about letting outside companies into financial businesses. ""There's a major war brewing,"" one lobbyist familiar with the plan said. ""People are choosing up sides and getting to the White House.""  
A spokesman for the Treasury did not have an immediate comment.
Two years ago, the Clinton plan took a middle path on the issue between House Banking chairman Jim Leach's bill and a proposal put forward by Senate Banking Committee chairman Sen. Alfonse D'Amato.
Leach remains strongly opposed to allowing non-financial firms into the financial services sector. The Iowa Republican introduced a bill last month that would allow banks, insurance companies and securities firms to affiliate only amongst themselves.  
A second House bill, backed by Rep. Marge Roukema, would allow a financial services company to derive up to 25 percent of its revenue from non-financial activities.
Sen. D'Amato, by contrast, favors lifting all limits, allowing a company like General Electric or Ford to own and operate a bank. D'Amato is expected to reintroduce his bank reform measure in the next few weeks, a spokesman said.
The notion of allowing commercial companies into banking alarms consumer advocates and small banks.
Veteran consumer advocate Ralph Nader wrote a letter to Secretary Rubin last week opposing the Hawke recommendations.
Common ownership ""would create powerful conglomerates that would dominate the nation's economy,"" Nader warned in the letter obtained by Reuters.
""The distortion of the allocation of bank credit ultimately would have a substantial adverse effect on competition and the overall productivity of the economy,"" Nader wrote.
Small bankers also oppose the plan, which could lead to further consolidation and concentration in the banking industry, lobbyists said.
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",0
"The Federal Reserve took another step Friday toward eliminating the barriers between banking and other financial service industries, voting to allow banks to further invade the turf of Wall Street securities firms.
The Fed Board of Governors voted unanimously to increase the percentage of revenue bank subsidiaries may earn from underwriting and dealing in securities to 25 percent from 10 percent.
Bank subsidiaries have been bumping against the 10 percent limit and earlier this year the Fed cited Swiss Bank Corp. for exceeding the cap.
Banks were elated by the new rule.
""This is a tremendous boost for banks that already underwrite securities and an incentive for banks considering this business,"" American Bankers Association managing director Larry LaRocca said.
Securities firms, however, were not pleased.
""It's as if Santa Clause delivered all the gifts to only one house in the neighbourhood,"" said Steve Judge, senior vice president for the Securities Industry Association.
For decades, securities underwriting was the exclusive purview of firms like Merrill Lynch & Co. and Salomon Brothers. But since 1987, when the Fed first allowed bank subsidiaries to earn 5 percent of their revenues from underwriting, big banks like J.P. Morgan & Co. and Bankers Trust have made dramatic inroads.
While the 1933 Glass-Steagall Act generally prohibits banks from engaging in non-bank activity, under section 20 of the Act banks may affiliate with firms not ""engaged principally"" in such areas. Currently, 41 bank ""Section 20"" subsidiaries have permission to engage in underwriting.
The Fed's action will add to pressure on Congress, which was already planning to review the entire scope of financial sector regulation next year.
Securities firms, insurance companies and others who opposed lifting restriction on banks in the past will likely favour reform this time around, according to Robert Litan, director of economic studies at the Brookings Institute.
Raising the revenue cap, and an announcement last month by the Comptroller of the Currency allowing banks another avenue for entering unrelated fields, only go halfway, Litan said.
""It's not a two-way street. Other industries will want to level the playing field,"" he said.
At Friday's meeting, Fed governors called for Congress to follow their lead and and revise the laws.
""We hope that the next move will be up to the Congress in this whole area,"" Fed Vice Chairwoman Alice Rivlin said.
",0
"A U.S. District Court judge Wednesday barred new federal regulations that allow credit unions to expand their membership beyond workers at one company, saying this would exceed the legal limits of the institutions.
The rules have raised the ire of banks who, fearing the loss of customers, have been battling in court since 1990 to keep credit unions to their traditional role of serving members of just ""one"" community or occupation.
The new rules, which the National Credit Union Administration adopted last month after an unfavorable court ruling, redefined ""a single common bond"" that is the basis of credit union membership.
On Wednesday, Judge Thomas Jackson issued an injunction blocking the new rules, saying they were merely an attempt to circumvent earlier court rulings.
Earlier court rulings limited members of a credit union to a single company or organization. The court actions struck down a 1982 NCUA decision allowing credit unions to draw members from multiple companies.
Under the latest NCUA rules, credit unions could include members of a single trade, industry or profession even if the members worked for different companies.
Jackson chastised the NCUA and said the federal credit union regulator was acting more like a trade association.
Jackson also said the agency must rescind 31 applications that it had already approved for credit union charters under the new rules.
The judge said he might refer the matter to the attorney general for further investigation of what he termed collusive behavior among the agency and credit unions.
""Why did you go about it in such a surreptitious, collusive, underhanded way?"" Jackson asked lawyers for the agency at a hearing Wednesday.
Eric Goulian, a lawyer for the Justice Department, denied the agency had acted improperly and said the new rules were a response to emergency conditions.
The fireworks were the latest development in a six-year-old case before Jackson pitting the American Bankers Association against the agency and the credit union industry.
In 1990, the ABA and five North Carolina banks filed suit againt AT&T Family Federal Credit Union, which had grown to encompass members from more than 150 different occupational groups.
In July, a U.S. Court of Appeals handed the banks a major victory in the case, ruling that the NCUA had exceeded its statutory authority in allowing single credit unions each to serve members of more than one employer.
Jackson issued injunctions in October implementing the ruling. The injunctions limited more than 3,500 non-profit credit unions nationwide to members who share a ""single common bond.""
The credit union industry has said the injunctions will result in millions of people being expelled from credit unions, with some unable to afford similiar but more expensive services from banks.
Two weeks after Jackson issued the injunctions, the credit union agency adopted new rules, now set aside, to dramatically expand the definition of a single common bond.
The new rules also allowed credit unions to have as many as 1 million members, up from 25,000 under the old rules.
After the hearing, Brenda Furlow, general counsel for the Credit Union National Association, said the industry was considering an appeal.
""Clearly, we're disappointed with the ruling,"" she said. ""Basically, banks are trying to aggressively protect their competitive interests and the American consumer loses.""
Paul Schosberg, president of the trade association America's Community Bankers, praised Jackson's ruling. ""The NCUA has clearly stretched the law's common bond requirement beyond all recognition,"" he said.
",0
"The various sectors of the U.S. financial services industry will spar over bank reform proposals at a hearing on Tuesday before the House Banking Committee's subcommittee on financial institutions.
With most in Congress and industry ready to scrap the Depression-era laws separating banking from other financial services, one of the hottest topics is likely to be whether even broader reform is required.
Treasury Secretary Robert Rubin is considering a proposal to allow combinations between commercial and financial firms.  
While savings institutions and insurance companies can already own or be owned by non-financial companies, banks operate under much tighter restrictions.
A Treasury Department task force recommended that the administration's bank reform proposal, expected in about a month, allow mixing of commerce and banking, permitting Ford Motor Co or Microsoft to own Citicorp or BankAmerica.
Rubin told a group of bankers at a private meeting last week that the administration has not yet made a decision on the contentious issue, people familiar with the meeting said.  
The high-level private-sector group, known as the Federal Reserve's Federal Advisory Council, also met with House Banking Committee chairman Jim Leach last week.
Leach, who strongly opposes mixing commerce and banking, told the group of CEOs that their banks could be taken over by larger capitalized companies.
""They'll be at the working end of the food chain,"" Leach reportedly told the bankers according to one person familiar with the meeting. Spokesman for Leach and Rubin declined to comment on the meetings.  
At Tuesday's hearing, insurance and savings groups will oppose restrictions on commercial and financial combinations. The mutual fund industry also opposes restrictions.
Small banks, represented by the Independent Bankers Association of America, will take the opposite position, in favor of imposing legal barriers.
Federal Reserve officials, along with some consumer, agricultural and union groups favor restrictions but will not be heard from on Tuesday. The Fed will testify on Thursday along with other government agencies, while consumer gropups will testify at a Feb 25 hearing.  
The AFL-CIO recently sent a letter to the Clinton administration charging that allowing unlimited mergers would drag the U.S. economy back into the 19th century with a ""reinstatement of trusts and monopolies,"" a person who read the letter said.
Leading Democrats, including ranking minority members of House and Senate banking panels Rep Henry Gonzalez and Sen Paul Sarbanes, also favor restrictions.
Not all Republicans agree with Leach and the Democrats. Rep. Marge Roukema, chairwoman of the financial institutions subcommittee, has introduced a bill that would allow financial companies to do 25 percent of their business in non-financial markets.
And in the Senate, Banking Committee chairman Alfonse D'Amato has opposed restrictions and plans to introduce his own bank reform measure soon.
Rep Gonzalez is likely to raise questions about the possible risks to federal deposit insurance funds, some lobbyists said. Gonzalez has said conglomerate combinations should have limited access to deposit insurance.
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",0
"The Federal Reserve took another step Friday toward eliminating the barriers between banking and other financial service industries, voting to allow banks to further invade the turf of Wall Street securities firms.
The Fed Board of Governors voted unanimously to increase the percentage of revenue bank subsidiaries may earn from underwriting and dealing in securities to 25 percent from 10 percent.
Bank subsidiaries have been bumping against the 10 percent limit and earlier this year the Fed cited Swiss Bank Corp. for exceeding the cap.
Banks were elated by the new rule.
""This is a tremendous boost for banks that already underwrite securities and an incentive for banks considering this business,"" American Bankers Association managing director Larry LaRocca said.
Securities firms, however, were not pleased.
""It's as if Santa Clause delivered all the gifts to only one house in the neighbourhood,"" said Steve Judge, senior vice president for the Securities Industry Association.
Bruce Thompson, director of government relations at the nation's largest brokerage firm, Merrill Lynch and Co., said he hoped the greater latitude given to banks would not reduce the banks' previous support for Congressional action.
""We hope this does not reduce their incentive,"" he said. ""The time really is coming for having everyone put aside their own particular interests and support comprehensive reform.""
Officials at leading banks said they still wanted Congress to take more dramatic action.
""We need complete financial reform,"" Rachel Robbins, general counsel of J.P. Morgan & Co, said. ""This addresses one piece of it and doesn't address it completely but until Congress can act this is a welcome action.""
For decades, securities underwriting was the exclusive purview of firms like Merrill Lynch and Salomon Brothers.
But since 1987, when the Fed first allowed bank subsidiaries to earn 5 percent of their revenues from underwriting, big banks like J.P. Morgan & Co. and Bankers Trust have made dramatic inroads.
While the 1933 Glass-Steagall Act generally prohibits banks from engaging in non-bank activity, under section 20 of the Act banks may affiliate with firms not ""engaged principally"" in such areas. Currently, 41 bank ""Section 20"" subsidiaries have permission to engage in underwriting.
The Fed's action will add to pressure on Congress, which was already planning to review the entire scope of financial sector regulation next year.
Securities firms, insurance companies and others who opposed lifting restriction on banks in the past will likely favour reform this time around, according to Robert Litan, director of economic studies at the Brookings Institute.
Raising the revenue cap, and an announcement last month by the Comptroller of the Currency allowing banks another avenue for entering unrelated fields, only go halfway, Litan said.
""It's not a two-way street. Other industries will want to level the playing field,"" he said.
At Friday's meeting, Fed governors called for Congress to follow their lead and and revise the laws.
""We hope that the next move will be up to the Congress in this whole area,"" Fed Vice Chairwoman Alice Rivlin said.
",0
"Netscape Communications Corp., said Tuesday its quarterly revenues hit a record $100 million in the third quarter, demonstrating the surging popularity of its Internet software among companies setting up internal networks known as intranets.
Netscape, which pioneered the popular Netscape Navigator browser software for cruising the Internet's World Wide Web, said its third quarter net income was $7.7 million, or 9 cents a share. A year ago, the fledgling company earned $175,000 on sales of $23.3 million.
""The third quarter of 1996 was another landmark quarter for Netscape, as Netscape server and client software solutions made significant inroads into the global enterprise market,"" said Netscape President and Chief Executive Jim Barksdale.
Wall Street, which had been expecting Netscape to report revenues of roughly $85 million to $90 million, had not expected the company to hit the $100 million quarterly revenue milestone until the second quarter next year, analysts said.
""I think the $100 million mark really shows significdant growth,"" said Hambrecht and Quist analyst Daniel Rimer, noting revenues grew 33 percent sequentially. ""This is major league revenue for a quarter.""
The quarterly revenue was well above the $80.7 million it posted for the whole of 1995. For the first nine months, Netscape earned $12 million, or 14 cents a share, on sales of $231 million. A year earlier, the company lost $7 million, or 10 cents a share, on sales of $44 million.
In after-hours dealing, shares of Netscape were firm, changing hands as high as $44.875, up from its closing level of $44.50 in Nasdaq market trading.
Barksdale said in an interview after the results that the indirect sales through third parties such as computer makers and systems integrators had accounted for 60 percent of overall sales, and 100 percent in Europe and Asia.
""We think it's a very efficient channel for us,"" he said. ""More and more we're seeing our job as demand creation through our direct sales force. We just think it's a more efficient way for these kind of products (to be sold).""
""I'm very proud we have gotten to that as quickly, because we're very dependent on these people,"" he said.
Barksdale outlined a broad range of companies which had chosen Netscape software to build applications for their computer networks, or ""intranet"" applications.
Analysts said the rapid growth of the market will help Netscape continue to grow in competition with rivals like Microsoft Corp. and International Business Machines Corp.'s Lotus Development Corp.
Barksdale said he remained concerned that competitors will be confused by the competitive frenzy, although he said key Netscape products remain lower in price those of Microsoft and Lotus, for example.
",41
"Diamond Multimedia Systems Inc plans this week to unveil a series of advances in its marketing of enhanced video and audio technologies.
On Monday, the company will launch a deal with Toshiba Corp's Toshiba America Information Systems unit to deliver what will be among the first DVD-ROM products to hit the retail market, Chief Executive Bill Schroeder said.
Diamond will also announce new proprietary 3-D audio software and plans for moving into the market for machines running Microsoft Corp's Windows NT system.  
On Tuesday, the San Jose, Calif. maker of multimedia accelerators, modems and adapters also plans to launch a new plug-and-play video conferencing product, including a color camera and a microphone, at an estimated retail price of $399.
Amid the flurry of introductions ahead of the annual Comdex computer industry trade show beginning November 17, Schroeder told Reuters in an interview the company is on track to increase revenues and margins in its current fourth quarter.
",41
"In the true spirit of the lightning-fast world of the Internet, the browser wars which peaked in late summer have now been replaced by the battle for delivering content efficiently over the Web.
The coming months will see an intensifying battle between products that deliver information directly to a computer, rather than stumbling around looking for it with often lengthy and cumbersome Web addresses.
The competition centers on tranforming the Internet from a ""pull"" model, in which people actively search the Web for information or use software agents to do that for them, to a ""push"" model, in which people can choose once what they want to be sent and it is published to them continuously.
""Everybody knows who they want to get information from. The real problem is: When is it that they have information that I care about?"" said Eli Barkat, chief executive of BackWeb Technologies, a San Jose, Calif.-based start-up.
""What people want is to build relationships,"" he said.
Vivek Ranadive, president of Reuters Holdings Plc's Tibco Inc. unit, likens the initial enthusiasm for surfing the Net to Sunday drives in the early days of the automobile, a pleasant but passing phenomenon.
Electronic commerce over the Internet, which is expected to gather steam in 1997, requires a more efficient way of navigating the information superhighway, executives say.
More than a dozen companies, mostly small high-tech start-ups, have been busily seeking to define the space, much as search engines like Yahoo Inc., Infoseek Corp., Excite Inc. and Lycos Inc. have done in helping people search out what they want.
""As it was for search engines six months or a year ago, this is an area that has been more or less discovered by venture capitalists and others as something that has to be dealt with,"" said Jack Wilson, managing editor of Technologic Partners' ComputerLetter.
In addition to the impracticality of aiming to find real-time information in the more than 50 million Web pages that search engines catalog, many companies would like to be able to update customers and suppliers directly.
""There are some obvious problems with today's browse-and-pull technique for getting at information when you need it,"" Wilson said. ""So there is a proliferation of new companies and new products from old companies aimed at solving this.""
More than a dozen companies are now vying for attention, including Ex Machina, which is providing a wireless news alerting system made by Global Village Communication Inc., and New York City-based Ifusion Com.
So far, the category has been dominated by one pioneering entry, Cupertino, Calif.-based PointCast Network, which burst onto the scene in the spring with a screen saver display which offers customized and updated news, data and advertising.
""The biggest application that's got the visibility with this type of technology is PointCast,"" said Phil White, chief executive of Informix Software Inc.. ""PointCast has got everybody now aware of how I can subscribe to things.""
Another hot Silicon Valley start-up in the sector is Marimba Inc., founded by Kim Polese and three colleagues from the Sun Microsystems Inc. team which created the popular new Java programming language.
Industry executives say competition is vital to expanding the marketplace, but it also creates confusion as companies vie for a share of the action.
""I think there's a lot of confusion in the market,"" said Barkat. ""You hear a lot of names when people talk about this space, and the reason is the space is huge.""
Technologies that transform the way information is delivered on the Web, such as those which Tibco Inc. will announce Monday, may help expand the market, according to industry analysts and executives.
""We are essentially a plumbing company, so we do plumbing software, and people like Marimba and BackWeb and PointCast can actually make use of our software,"" said Ranadive.
""Now the technology they presently use to do this is a pull technology and so you can emulate a push by going out and asking a lot of questions,"" he added. ""But you're tying up the network, you're tying up the server by doing that.""
",41
"Netscape Communications Corp. stock was battered for the second time in less than a week on Tuesday following cautionary comments by a Wall Street analyst regarding the Internet software company.
Merrill Lynch analyst Bruce Smith said in a research note that Netscape had scrambled to make its fourth-quarter goals in a way that could hurt its current first quarter and the outlook for all of 1997.
Netscape stock tumbled more than 10 percent, dropping $4.50 to $42.25 on the Nasdaq market on volume of more than 6.5 million shares. The stock was one of the most actively traded on the exchange.
The stock of the Mountain View, Calif.-based company has lost more than a quarter of its value since the end of 1996, including a drop of around 19 percent after another analysts' warning last Wednesday.
Smith said he remained neutral on the stock but cited industry sources as saying Netscape had scrambled to meet its fourth-quarter numbers at the end of 1996, which he said did not bode well for its current quarter and all of 1997.
""They closed a significant amount of business on Dec. 31 just to make the quarter, which they've never had to do before,"" he said. In his research note, Smith wrote, ""We have heard of two major deals that were closed on Dec. 31, one of which apparently closed late in the evening.""
But a spokeswoman for Netscape rebutted this.
Speaking after the market closed, she said the company did complete some of its deals toward the end of the quarter, but she denied it was pushing down to the wire to lock up deals that would make a major impact on its financial results.
""We did no deals that were of materially significance on Dec. 31,"" she said.
""Sure, we did deals towards the end of the quarter, like everyone does,"" the spokeswoman added.
Last Wednesday, the stock tumbled after Deutsche Morgan Grenfell analyst William Gurley cut his rating on the stock to ""accumulate"" from ""buy"" and cited risks from its transition to a new business plan and new pricing.
Several other analysts, including Goldman Sachs's Michael Parekh and Morgan Stanley & Co.'s Mary Meeker, have put ""buy"" or ""strong buy"" ratings on the stock, recognising near-term risks but remaining upbeat on the stock in the longer term.
",41
"U.S. high tech venture fund investment soared 50 percent in the seasonally-slow third quarter vs. overall U.S. venture investment growth of 25 percent from year-ago levels, according to a survey released by Price Waterhouse Monday.
""It is so hot it's scary,"" Kirk Walden, who compiles the quarterly Price Waterhouse LLP National Venture Capital Survey, said in an interview.
Venture investment in high technology industries, from computer software and semiconductors to medical instruments, rose to $1.32 billion in the third quarter, accounting for two-thirds of the $2 billion invested during the period, the survey found.
Software investments alone more than doubled from year-ago levels to $596 million, and in the first nine months of 1996 alone reached $1.74 billion, more than the $1.34 billion recorded for the sector in all of 1995.
For the first nine months of 1996, total venture-backed investments in the country reached $7 billion, nearly the $7.5 billion reported for the full year last year.
""Based on the current rate of venture capital investments, 1996 will certainly be another record year,"" Donald McGovern, chairman of the Price Waterhouse Technology Industry Group, said in a statement accompanying the results.
The third quarter total figure of $2 billion was a sequential drop from the blistering $2.8 billion pace the industry recorded in the second quarter.
""Third-quarter numbers are traditionally lower than second-quarter numbers because deal flow slows considerably in the summer months,"" said Carl Thoma, president of the National Venture Capital Association.
""But the venture capital industry still remains strong. Good deals are being made across the country in all industries.""
Companies in the start-up and early stages attracted the greatest level of venture capital investment, the study found, with these comprising 46 percent of the 444 companies receiving funds and accounting for $600 million invested.
On average start-up companies received more than $3.1 million in funding and, communications firms accounted for nearly 56 percent of the total invested in this category.
Funding for Internet-related companie continued at the high level set in the second quarter of 1996, with 62 Internet-related companies receiving funding in the quarter exceeding the year-ago period by six times.
In a new trend, third quarter venture investment activity appeared to expand beyond the traditionally dominant Silicon Valley and New England areas, whose combined share of investment fell to 33 percent of value invested.
Typically the two regions account for some 40 percent to 45 percent of the total amount invested by venture funds, and experts said it confirms atriend towards more even distribution.
""Nobody in Silicon Valley is going to panic,"" because of the increase in funding outside the key areas, Walden said.
- sam.perry@reuters.com +1415 846 5400
",41
"Netcom On-Line Communication Services Inc has decided to shift its focus to higher-value business services in search of profits, leaving the consumer sector to others.
""We've been growing at dizzying rates, what we're saying is we're going to focus more on quality here -- quality of earnings, quality of service to subscribers,"" Netcom Chairman and Chief Executive David Garrison said in an interview.
Despite the San Jose, Calif. company's blistering pace -- it has grown some sixfold in three years -- the sharper focus will allow it to target annualized growth in the 40-50 perent range and seek to attract customers to higher-value services.
Netcom executives said they will release further details of their new pricing plans in February, but levels will be above its current $19.95 access fee, which it is scrapping.
""We are discontinuing a line we don't think is a good deal for our customer or a good deal for our shareholders and we will replace it with other products we will announce in February. They will be at higher price points,"" Garrison said.  
The new services may be aimed at providing higher quality access, which Garrison noted was a source of customer concern throughout the industry, and may also include offerings which bundle software tools or online Web-hosting services.
Most consumer-oriented Internet access providers offer unlimited access to the global network for $19.95 a month -- a price that analysts say leaves little room to generate profits -- or to help offer differentiated products.
""There's so much attention around a service (at $19.95) that's getting more and more marginalized,"" Garrison said, adding he will leave Microsoft Corp America Online Inc and AT&T Corp to wage battle over consumers.
""Seventy-five percent of our business is from people who say I want to use this as a productivity tool to help my business learn more, be faster, be more competitive,"" he said. ""I'm going to focus on that segment instead of the consumer.""
Netcom also said it expects to gain 20,000 to 30,000 new paying customers in the fourth quarter, bringing its total to about 580,000, a slower pace of growth than in the past.  
Netcom On-Line Communication Services Inc earlier said it expects to report an unspecified profit in its current, fourth quarter domestic earnings before deducting interest expense, taxes and depreciation (EBITDA).
The figure tops what Wall Street analysts had projected. Netcom Chief Financial Officer Thomas Weatherford said the year-ago fourth quarter results for the company as a whole, including overseas operations, was an EBITDA loss of $2.4 million, the majority of which was domestic.
Netcom has focussed on bringing its domestic business to profitability, while timing and extent of overseas investments make profitability of those regions hard to predict.
Wall Street consensus fourth quarter estimates had been for EBITDA for the whole company of negative $6.4 million, or an EBITDA loss of 55 cents a share, the company said.
""We have been told by analysts that they would expect that we would beat that, based on today's announcement,"" Garrison said. Analysts had previously expected EBITDA to turn positive in the first or second quarter of 1997.
According to First Call, analysts' mean estimate for per share final results for the fourth quarter was $1.18 prior to Wednesdays announcement, which came after the market close.  
Netcom had said after reporting third quarter results two months ago that it saw ""a great opportunity"" to sell to its customer base by enticing them by higher levels of service.
",41
"Silicon Valley executives and venture capitalists are turning into political sharks, spending millions of dollars to defeat a California ballot measure that they claim threatens American capitalism and could send stock prices reeling.
Normally the region, which is the birthplace of such industry stalwarts as Hewlett-Packard Co. and Intel Corp., is more obsessed with Internet software tools and microchips than with politics.
But so widespread is the fear that California's Proposition 211 could make the state a haven for shareholder lawsuits that once politically neutral executives have been jolted into action -- hanging anti-211 banners on buildings and encouraging employees to vote against the initiative.
Proposition 211 is a far-reaching measure that would eliminate certain safeguards and immunity currently given corporate officers and staff members. For instance, it would hold them liable if they made projections about future results and they turned out to be wrong.
Opponents of the measure fear that corporate officers would stop making any projections about how their business was doing, making it more difficult to make investment decisions and leading to a decline in share prices.
Proponents argue it will help victims of fraud recover losses. Opponents charge it is an ""insidious"" bid by securities lawyers to line their own pockets.
There were signs the campaign against 211 could affect the outcome. A Los Angeles Times poll published Friday found 52 percent of likely voters now oppose it, up 10 percentage points from a similar Times poll five weeks ago.
Securities and Exchange Commission Chairman Arthur Levitt has urged California voters to reject the measure, warning it would use the state's legal system to roll back the federal Private Securities Litigation Reform Act passed last year.
""California state courts could become a magnet for class action suits,"" he wrote in a letter of opposition.
Both President Bill Clinton and Republican presidential rival Bob Dole have come out against the measure and a recent study said its passage could result in a loss of up to 1.8 million jobs and a $102 billion drop in U.S. domestic output.
The study, by trade economist Clyde Prestowitz, also projected a subsequent rise in ""frivolous lawsuits"" could result in as much as a 24 percent drop in stock market prices.
This, he concluded, ""would far outweigh the 4 cents per dollar compensation, or less, that shareholders would receive from settlements and judgments"" under the measure.
High-tech companies are considered more vulnerable to shareholder suits because their stocks typically are owned by demanding investors seeking fastest-growing companies, which can make their stock prices more volatile.
A recent survey by the American Electronics Association of its members found nearly half would consider leaving the state if 211 passes. Some economists estimated it would eliminate 150,000 jobs and cost $1.3 billion in California alone.
Even companies outside California, like International Business Machines Corp. and software giant Microsoft Corp. have opposed the measure, concerned that a single California shareholder could bring suit against them.
If it passes, high tech leaders like venture capitalist John Doerr, who is leading the $30 million-plus battle against 211, and Cypress Semiconductor Chief Executive T.J. Rodgers, have said they expect outside company directors to quit.
""If it passes, my net worth, my house, will be on the line,"" Rodgers said at a recent public debate on the issue here. ""It's a sleazy trick,"" he added.
Proponents of 211, including lawyers who bring shareholder lawsuits and stand to benefit directly from it, said they drew up the measure after a business-led initiative in the spring was opposed by nearly 60 percent of California voters.
""Americans are disgusted by corporate greed,"" said Richard Alexander, an attorney speaking in favour of the measure recently. ""People are angry about massive layoffs.""
But in Northern California, where high tech businesses have thrived, executives said the proposition was more geared to forcing corporations to settle shareholder suits up front.
",41
"Netscape Communications Corp., said Tuesday its quarterly revenues hit a record $100 million in the third quarter, demonstrating the surging popularity of its Internet software among companies setting up internal networks known as intranets.
Netscape, which pioneered the popular Netscape Navigator browser software for cruising the Internet's World Wide Web, said its third quarter net income was $7.7 million, or 9 cents a share. A year ago, the fledgling company earned $175,000 on sales of $23.3 million.
""The third quarter of 1996 was another landmark quarter for Netscape, as Netscape server and client software solutions made significant inroads into the global enterprise market,"" said Netscape President and Chief Executive Jim Barksdale.
Wall Street, which had been expecting Netscape to report revenues of roughly $85 million to $90 million, had not expected the company to hit the $100 million quarterly revenue milestone until the second quarter next year, analysts said.
""I think the $100 million mark really shows significdant growth,"" said Hambrecht and Quist analyst Daniel Rimer, noting revenues grew 33 percent sequentially. ""This is major league revenue for a quarter.""
The quarterly revenue was well above the $80.7 million it posted for the whole of 1995. For the first nine months, Netscape earned $12 million, or 14 cents a share, on sales of $231 million. A year earlier, the company lost $7 million, or 10 cents a share, on sales of $44 million.
In after-hours dealing, shares of Netscape were firm, changing hands as high as $44.875, up from its closing level of $44.50 in Nasdaq market trading.
Barksdale said in an interview after the results that the indirect sales through third parties such as computer makers and systems integrators had accounted for 60 percent of overall sales, and 100 percent in Europe and Asia.
""We think it's a very efficient channel for us,"" he said. ""More and more we're seeing our job as demand creation through our direct sales force. We just think it's a more efficient way for these kind of products (to be sold).""
""I'm very proud we have gotten to that as quickly, because we're very dependent on these people,"" he said.
Barksdale outlined a broad range of companies which had chosen Netscape software to build applications for their computer networks, or ""intranet"" applications, and said the company was moving towards sales of complete systems.
Analysts said this focus and the rapid growth of the market will help it continue to grow in competition with rivals like Microsoft Corp and International Business Machines Corp's Lotus Development Corp.
Barksdale said he remains concerned that competitors will be confused by the competitive frenzy, although he said key Netscape products remain lower in price those of Microsoft and Lotus, for example.
Barksdale told analysts in a conference call that customers were using its Internet technology for a variety of functions, such as human resources administration, in addition to the order tracking feature for which it is known.
""What becomes clear is that people are not only deploying intranets, but they're expanding the utility of their intranets,"" Rimer said.
",41
"A Silicon Valley company has developed a new technology designed to turn the World Wide Web from a random, hit-or-miss quest into a highly targeted personal service that it says can change to suit your mood.
The new service, known as The Angle, is available immediately as a showcase for Los Altos, Calif.-based BroadVision Inc.'s One-to-One technology for personalizing the World Wide Web.
The technology enables a person to set up an individual profile, or ""angle,"" combining personal interests and preferred style to customise the ""look and feel"" of the Web service.
Users can also chose from several ""personalities"" to try out different ways of viewing information on the Internet, or choose different profiles for different moods -- such as one for the business day and another for use at home.
""We give the user the remote control,"" Broadvision said in materials prepared for the formal unveiling Tuesday of The Angle site, at the URL  http://www.theangle.com.
""We put you in the driver's seat. As you change, so do your information needs,"" the company said.
Use of the site is free of charge and requires no registration. Profiling information is stored only for the benefit of users, the company said, to ensure privacy and enable them to change their profile at any time.
Pehong Chen, the founder, president and chief executive of BroadVision, said the technology would serve not only as a showcase, but would enable large organisations to develop co-branded sites based on the BroadVision product.
""Seeing is believing,"" he told Reuters in an interview. ""People can choose a personality, somebody they can relate to, or disguise themselves as sombody else ... This makes it fun and easy to understand.""
Chen said the company is targeting a Global 1000 list of large companies for developing both co-branded services and for using the technology internally in private networks known as Intranets to communicate with individual employees.
It has already begun collaborating with Web partners and formed a new division, the Content Services Group, to provide software products, consulting services and original content for both consumers and consumer-oriented businesses.
The Angle is the first application developed by the group, which is also releasing a Web-based distributed multi-user Intranet application called WebPoint, which handles calendar, workflow and communications among publishers and editorial staff involved in creating and maintaining Web sites.
Editors in the group also provide a Web Site rating system which can point users to sites with a ""Look Before You Link"" feature providing data on how easy a site is to use, its graphics intensity, level of innovation and interactivity and update frequency before even entering the site.
BroadVision has signed a charter co-branding partnership agreement with Virgin Communications of London. Branded as ""The Virgin Angle"", the service will include additional UK perspectives and is due to be available in the fourth quarter.
The new division is also advising Minneapolis-based Netradio Networks on ""The Netradio Angle,"" which is designed to be a music Web site recomendation service.
BroadVision completed an initial public offering of stock in June and Chen said the company is currently ahead of its business plan.
",41
"Stocks of high-tech companies soared Wednesday after a potentially costly ballot proposal was voted down in California, and top executives found themselves relishing their roles as political activists.
A group of top-level entrepreneurs and executives met behind closed doors Wednesday to work on a broader political alliance after the ballot measure, which would have made it easier for shareholders to file lawsuits, was defeated by a 3-1 margin.
""A year ago, this (Silicon) valley politically was naive, not involved, not organised and not effective,"" said John Doerr, the partner at venture capital firm Kleiner Perkins Caufield & Byers who led opposition to the ballot measure, known as Proposition 211.
The measure was promoted by a group of securities lawyers including San Diego attorney William Lerach, whose lawsuits brought on behalf of shareholders after a company's stock plunges irritate corporate executives.
But California's high-tech firms jumped into action, raising an estimated $38 million and mobilising 5 million employees, shareholders and customers in a major grass-roots campaign in the months before election day.
That amount, coupled with $13 million spent by proponents of 211, rivaled the money spent by labour groups nationwide as they sought to put friendly legislators, mostly Democrats, in Congress.
It was also more than was needed to start up Sun Microsystems Inc., Cisco Systems Inc., and Intel Corp. combined.
Final returns show the measure lost by a 3-1 margin, which brought relief to Wall Street investors who were nervous that passage would bring a raft of shareholder lawsuits to California.
Shares of high-tech companies surged on the news, with Intel soaring $4.75 to an all-time high of $118.75 on Nasdaq. After the market closed, the company released bullish news on its fourth quarter business trends.
Texas Instruments jumped $4.25 to $53 on the New York Stock Exchange and Microsoft added $3 to $144.50 on Nasdaq.
""We defeated the jackals of Proposition 211, the carrion feeders who take away our profits,"" James Cramer, principal of money management firm Cramer Partners in New York, said of the stock rally.
Silicon Valley executives, who had warned of wide-scale resignations of officers and directors in California if the measure had passed, applauded its defeat and said they would support continued political activism.
John Young, acting chairman of Novell Inc., said the campaign was unprecedented among high tech firms, and could be the start of a multi-year corporate commitment.
Cisco Systems Chief Executive John Chambers said his company and others had been so focused on fast-changing high-tech markets that they had neglected politics.
""We were concerned with just doing our business and we were letting other people fight our fights for us, which is wrong,"" he said.
While political activism could be a distraction, it was also important to address political issues before they got out of control, he said.
""It's 'pay me now or pay me later,'"" he said in an interview, predicting continued political engagement.
Doerr told chief executives, corporate lawyers and venture capitalists gathered at a celebration late on Tuesday that he expected executives now to focus on issues of fostering growth, education, legal reform and economic opportunity.
He said the anti-211 effort demonstrated Silicon Valley to be ""a state of mind, not a place,"" which due to the spread of high-tech businesses, in effect, extends from Massachusetts to California and from Florida to Washington state.
Executives here are already talking about the prospect of another battle with plaintiff's lawyers, who are rumoured to be mulling new ballot initiatives in other states, or the possibility of targeting high tech firms more narrowly.
",41
"Seasoned computer industry executive John Young on Friday begins the search for a strong manager to take the helm of Novell Inc who can drive the company back to growth at the speed of the Internet.
Young, 64, was selected by Novell's board of directors on Tuesday to recruit fresh leadership for the struggling maker of computer network software after the board decided it should set a different course than that taken by Robert Frankenberg, its well-liked chairman and CEO of two years.  
""The board has asked me to be chairman, and to work with the management team and recruit a new CEO,"" said Young, who had himself served as chief executive of Palo Alto-based Hewlett- Packard Co for 15 years through 1992.
No quick fixes are expected, and Young made clear in an interview with Reuters at Novell's offices here late Thursday that he has no intention of serving in the role of chairman once he has completed the search for a chief executive.
""My experience with an executive search of this type is that four to six months is (a realistic time frame) when everything goes right, longer when it doesn't,"" he said.  
""That's as close to a time frame as I can give you and I do not expect to be involved other than as a director at the end of that period.""
Nevertheless, the company already has an ambitious plan to revamp its corporate image, with a $20 million worldwide brand and product advertising campaign due to start next week, and to unveil a string of updated products.
Young and other top Novell executives believe the company now needs a hard-driving top executive who can operate on ""Internet time"" -- pushing the company to develop products more swiftly and better pinpoint customers' needs.  
Although the company aims to build the near-mania zeal around Internet technologies into its own business plans, it is looking more for a ""street savvy"" executive who can speed the pace of business than a self-annoited Web hound, he said.
In fact, he said, while the executive must be able to act extremely quickly and turn technologies into products, he said he was ""not fond of the idea of regularly turning around product after product after product"" with the rapidity that Microsoft Corp and Netscape Communications Corp are launching new browsers, every few months.  
Ironically, Young is charged with replacing the man who had come to him 18 months ago, based on their two decades as business associates at Hewlett-Packard, and recruited him to joint Novell's board of directors.
""He asked me to join the board,"" Young said. ""He thought I would add some management expertise and perspective to the directors. So, yes, he recruited me.""
Young and other executives said the departure was agreed on amicable terms, and had been subject of board-level discussion prior to Tuesday, so it had not been a hasty act.  
""These discussions had been under way. They were mutually agreed,"" one board member said. Young said the board had decided it needed to take ""a different way.""
""It was quite amicable,"" he added. ""This wasn't some screaming match ... Bob is an enormously talented guy.""
In fact, Frankenberg was credited with others in the industry for having taken difficult decisions in disposing of many assets his predecessor, patriarch Ray Noorda, had acquired in a virtually singular fixation that he was going to use Novell as a vehicle to outdo Microsoft chief Bill Gates.  
Noorda had bought a string of operating systems and PC applications businesses, and was rumored in the industry to have funded additional secret development projects, as part of what was broadly viewed as an anti-Microsoft agenda.
Assets were sold at fire sale prices. For example, WordPerfect Corp., purchased in 1994 for $1.4 billion in stock, was sold to Corel Corp  .TO early this year for stock worth about $130 million.  
As one example of new Internet prospects, Novell executive vice president Steve Markman said the company may work with Corel on technologies related to Corel's efforts to break its massive suite of products, many obtained from Novell, to create smaller Java language applications, or ""applets"".
""It's a tremendous opportunity to move the installed base to the Intranet space,"" he said, noting that Novell still enjoys a 63 percent share of the worldwide Network market, despite recent inroads by fiercely competitive Microsoft.
Novell also will begin shipping three major product upgrades -- IntraNetWare, which includes the next version of its flagship NetWare product, Managewise 2.1 network management software, and its Groupwise 5 groupware applications -- within about a month.
Nevertheless, analysts said a real test for Novell would be whether it will be able to motivate its own employees, after years of transitions, and generate the excitement in the marketplace over its products which many rivals have created.
",41
"WebTV Networks Inc. on Wednesday unveiled a new technology it said enables full-screen, television quality video to be delivered from the Internet through conventional telephone lines.
Steve Perlman, co-founder and chief executive of WebTV, said in an interview the new technology will be deployed in upcoming versions of its Internet service, which lets people access the global computer network using their television sets.
The privately held company numbers among its equity investors Microsoft Corp., Citicorp, VeriFone Inc., Times Mirror Co. Inc. and Lauder Partners.
Perlman said the advance, which was being demonstrated publicly for the first time at the Consumer Electronics Show in Las Vegas, speeds download times significantly and greatly increases the quality of video compared with existing systems.
WebTV said the new technology, which it has dubbed VideoFlash, has impressed officials from companies that might use it to show television and movie previews, news clips and advertising and animation through the WebTV Internet service.
Publisher National Geographic, known for producing quality videos and photographs, said the technology was the first to provide acceptable quality video over an Internet link.
""VideoFlash is the first Internet video technology that will allow National Geographic to deliver a visual experience on the Internet comparable to the imagery, drama and depth we offer with our television programming,"" said Larry Lux, vice president of National Geographic Interactive.
VideoFlash can achieve three to 10 times the video compression rates of existing compression technologies, such as MPEG, which itself can compress video data by a factor of around 100, Perlman said.
Even with the fastest modem connections now available, previous technology could take up to half an hour to download a 30-second video clip which could be played on a small window on a computer with generally grainy, shaky quality.
VideoFlash provides much faster downloading and higher-quality display with little perceptible distortion, according to WebTV.
Perlman said the software would be licensed at no charge to content providers to make videos available to WebTV subscribers. He said he expected major suppliers of video content over the Internet to adapt VideoFlash this year.
The technology is software-based and relies on the WebTV reference design, which takes advantage of WebTV server capabilities as well as its proprietary TV set-top box, and will not be available on other systems, at least initially.
But Perlman said he would expect at least one on-line Internet service provider may license the capabilities by the end of 1997.
WebTV terminal units, introduced in September, are currently manufactured and distributed by Philips Electronics NV and Sony Corp.
",41
"A few years ago, one company led the market for an exciting new technology called groupware, which enabled workers at different locations to use computers to collaborate on business projects.
But the rise of the Internet has changed all that, creating new opportunities for using such software more widely and setting the battleground for a clash for a share of one of the fastest-growing markets in the personal computer industry.
The market is driven by corporations' desire to use cheaper, easier-to-use Internet technologies to tie together far-flung and incompatible computing systems, a market some now estimate may reach $10 billion by the year 2000.
The trend has helped fuel the explosive growth of Netscape Communications Corp., which burst onto the public market in August 1995 and has been turning its focus to using Internet technologies in the lucrative corporate market for building the internal networks known as intranets.
Intranets use relatively inexpensive software to link together people across an organisation and allow access to information via a common interface, or browser.
Netscape's abrupt rise jolted software giant Microsoft Corp., which has been rushing to incorporate Internet technology throughout its products, and International Business Machines Corp.'s Lotus Development Corp., which pioneered the groupware market with its Lotus Notes products.
At Comdex, the computer industry's largest trade show, all three companies have unveiled strategies aimed at attracting major corporate customers to their products.
Lotus, which is trying to revive its early lead with its Domino computer network software and a package of collaborative programmes like spreadsheets and word processors, promises to use IBM's deep pockets to fund its campaign.
The battle next year is expected to be even more intense than the skirmish last summer between Microsoft and Netscape over Microsoft's entry into the Web browser market, in which Netscape retains a nearly 80 percent stake.
""If they thought the browser war was bloody, just wait,"" Lotus President Jeff Papows said earlier this week. ""This will be a whole new level of bloodiness.""
Although Lotus has moved to add Internet features while slashing prices on its software for the Notes market, the roughly $700 million in research and development spending it touts is only a fraction of Microsoft's $2 billion-plus total research and development budget in fiscal 1997 alone.
And while Lotus officials privately say they would rather have the problem of reducing prices dramatically than having to build sophisticated corporate networke systems from scratch, new Internet technology offers compelling savings.
Netscape Chief Executive Jim Barksdale, in his keynote address at Comdex on Wednesday, identified some corporate customers who he said had reported up to 2063 percent return on investment by deploying intranets using Netscape products.
Microsoft Chief Executive Bill Gates said his company will focus its resources on lowering the cost of corporate computing this year with the same intensity it applied last year in adapting Internet technologies.
Analysts said that by bundling many of its Internet-based technologies with its latest operating systems, Microsoft may have an upper hand in releasing new products and with customers who are committed to remaining on the leading edge.
But even in the personal computing market where Microsoft's operating systems dominate, fewer than one-third of company machines run the latest versions of Microsoft Windows software needed to fully utilize its groupware features, they add.
""It's less a competition for (software) suite sales than it is for corporate dollars,"" said Morgan Stanley & Co. analyst Mary Meeker, who sees two paths for corporate customers.
One set may chose to upgrade all its software to the latest Microsoft products, including Microsoft's newly launched Office 97 suite.
Meeker said this option is costly.
Another set of customers, Meeker said, could chose to keep their investment in existing computers and, using Netscape's products on the 17 different systems it supports, build a system combining these machines relatively quickly.
",41
"The Silicon Valley entrepreneur who founded Atari Corp. and created Chuck E. Cheese restaurants wants to put high-tech jukeboxes and video games linked to the Internet in bars, hotels and other public places -- and eventually make billions of dollars.
""Do you think 'Bubba' can surf the Net? I do,"" Nolan Bushnell told reporters at a news briefing Thursday in a wood-paneled room of his Woodside, Calif., mansion about 30 miles south of San Francisco.
Reporters got a look at three devices that will enable people to play video games with opponents in another location, order music as well as hear it and access the Internet with the drop of a coin or the swipe of a credit card.
Aristo International Corp. plans to roll the machines out worldwide early next month.
Bushnell, who is director of strategic planning for Aristo and has a minority stake in the New York-based company, said he and Aristo have invested more than $10 million to develop the machines, dubbed TeamNet, MusicNet Plus and TouchNet.
The company has gathered about 75 of the approximately 100 distributors of coin-operated games this week to unveil the machines and generate orders. Aristo wants to put the devices in sports bars, hotels, restaurants, airports and other public locations.
The TeamNet machine, which is the size of a small billiard table, allows two teams of up to eight players each to compete against each other or against teams elsewhere through an Internet connection.
Aristo said it is already seeking corporate sponsors for its tournament games.
Another product, TouchNet, allows people to use a compact, coin-operated countertop touch-screen computer to play games and send messages via the Net.
The U.S. market for coin-operated games alone has reached $6.8 billion a year, and studies for Aristo indicate this could grow to $20 billion, said Bushnell.
Bushnell, 53, is no stranger to video games. He founded the Atari video game company in 1972 and sold it in 1976. A year later, he opened the first of a chain of Chuck E. Cheese restaurants, which combine pizza with video games.
The MusicNet Plus product plays high-quality digital music and enables customers to buy recordings and merchandise from bands as well as tickets to events.
Aristo Chief Executive Mouli Cohen declined to say how much the machines would cost, but said hotel and club proprieters should expect a price that is competitive with current coin-operated vending machines, which generally sell for a few thousand dollars.
Company officials also declined to make sales projections.
The products are based on computers using high-speed Intel Corp. Pentium processors and use Microsoft Corp.'s Windows NT operating system.
The machines are being manufactured by vending machine maker Streak Technology Inc. and other California manufacturers. Cohen said Aristo was also in talks with Taiwanese computer maker Acer on manufacturing.
Cohen said in an interview at Bushnell's estate that Aristo has a development lead of at least six to eight months over would-be rivals.
He said the company has invested $15 million in cash and stock worth $10 million to build the company. The stock was unchanged at $7.50 Friday afternoon on Nasdaq.
With 13.5 million shares outstanding, Aristo is gearing up for a secondary offering of up to 2 million shares around October.
Cohen and Bushnell declined to discuss individual shareholder stakes, adding that Aristo has been working with investment bankers Allen & Co. to evaluate potential strategic partners and investors.
",41
"A fast-selling product that allows grannies all across America to exchange electronic mail securely with their families may become a key weapon in challenging the U.S. government's tight encryption policies.
Computer industry executives said the strong encryption which startup USWeb Networks is delivering on hundreds of thousands of television-based Internet browsing devices is still prohibited from export by U.S. Cold War munitions laws.
Executives at Palo Alto, Calif.-based WebTV said they chose to use the strongest coding standard available to give consumers the assurance their communications would be kept confidential.
""The only way we felt we could guarantee the level of security we felt was uncrackable by anyone...was if we were essentially using CIA-class security procedures,"" said Steve Perlman, co-founder and chief executive of WebTV Networks.
WebTV uses 128-bit encryption, based on coded 'keys' with 128 characters of information, the same level of coding used in some of the most secretive U.S. government communications.
""It's very similar to what they use when they're communicating with cruise missiles,"" Perlman said.
This is a useful fact to point out in reassuring potential customers they can both communicate and pay for goods and services securely over the Internet, he added.
""They love it. They really love it, beause now they can just relax and forget about it,"" he said. Using a credit card number over WebTV's encrypted communications is safer than reading it over a telephone, which can be tapped, he argues.
""While the FBI can get your credit card that way (over the telephone), they can't get it through WebTV,"" he said.
Perhaps equally excited about the decision by WebTV to use such strong encryption is the Silicon Valley high tech business community, which has been deadlocked in a battle with the Clinton administration over encryption restrictions.
Laws against the export of encryption date back to the start of the Cold War, when earlier versions of coding were considered vital to national security and were classified as munitions explicitly barred from export.
Top computer executives now say the use of encryption in relatively normal, consumer-oriented applications such as WebTV is a perfect example why they feel the government's efforts to restrict the technology should ultimately fail.
""Without commenting specifically on WebTV, I can tell you that the government is fighting essentially a losing battle here,"" said Eric Schmidt, chief technology officer at Sun Microsystems Inc.
""What's happened is that the technology is now so ubiquitous and there are so many people using it that the current law...really needs to be scrapped.""
In addition to the need for U.S. businesses to have strong encryption to secure their own systems when operating overseas, the computer industry argues that competitors in other countries are being given an open market to sell higher levels of encryption U.S. companies are barred from selling.
But Washington insists that law enforcement authorities must have a means of breaking into encoded messages to investigate criminal activity.
The Administration recently offered a compromise where companies could export modestly strong 'keys,' less powerful than those used by WebTV, as long as they could be recovered by authorities to crack codes after obtaining a court warrant.
Industry is not pleased with the idea.
It would be difficult, and unduly expensive, to administer and is unlikely to be acceptable to foreign customers who might not consider the U.S. government to have a right to break into their confidential communications, many argue.
""Our personal view is that the notion of key recovery is something that's not going to be very acceptable, particularly to other countries -- the notion that the U.S. government would be able to recover the keys,"" said Deborah Triant, chief executive of Check Point Software Technologies, Inc.
In the meantime, however, WebTV will be prohibited except by special license from exporting its devices, which are being sold by consumer electronics manufacturers Sony Corp. and Philips Electronics NV through retail stores.
In fact, the issue came to light publicly following a letter from one of the manufacturers to its distributors, warning not to export the machines due to the munitions laws.
""It would definitely be unfortunate if sombedy was to carry one over the border,"" said Perlman, adding the WebTV boxes have more computing power than the world's most powerful supercomputer -- Cray Reasearch's XMP-48 -- did in 1987.
""That was a $50 million computer in 1987. This is a $300 computer and it outperforms the Cray,"" he said.
WebTV has attracted investments from Microsoft Corp. and a unit of US West Inc..
""This WebTV is the first of many we're going to see where legitimate customers really do need very strong encryption for things involving really normal day-to-day use,"" said Schmidt.
",41
"Moving to capitalize on enormous growth in the use of laser departmental printers, Hewlett-Packard Co. on Monday will launch a new genre of printers it calls the ""mopier,"" to steal work from the copy machine.
The new device, dubbed the HP LaserJet 5Si Mopier, reduces the need to use copiers by allowing workers to make multiple original prints -- or ""mopies"" -- from their own desktop.
HP, which is already a market leader in printers, faxsimile machines and scanners, hopes the new model will help it capture a share of the $18.5 billion a year copier market.
Analysts expect the printers will present a challenge to copy machine giant Xerox Corp. and other copier makers, as sales revenues of midrange, 20-30 pages per minute copiers is projected to drop by $300 million to $1 billion by 2000.
""Xerox is a dominant copier and printer vendor. This is a challenge and an opportunity for Xerox,"" said Robert Fennell, industry analyst at the market research firm Dataquest.
The market for midrange printers based on Canon Inc.'s 24-page per minute engine, until recently a relatively small segment of the market, is projected to surge by some 500 percent this year from 1995, he said.
With a U.S. list price of $9,549, the machine is more expensive than other departmental laser printers, but it contains more features and it is priced less than midrange copiers costing between $13,000 and $20,000.
Executives at Hewlett-Packard's LaserJet Solutions Group in Boise, Idaho, said the Mopier is part of its recently-unveiled Digital Workplace strategy aimed at addressing work flow and document management problems at work.
""Our customer research found that people are already mopying today,"" one of the executives said in an interview.
The new machine is based on HP's existing LaserJet 5Si models, but adds finishing tasks -- such as stapling and collating of documents.
A user-friendly interface to help guide technologically-challenged workers through the printing options and tells them when their job is completed.
The Mopier is designed to cut down on the time office workers spend running between printers and copy machines, waiting for others to copy, and fixing paper jams.
It contains a 420 megabyte hard drive and reduces network traffic as well by storing each print task once and printing the number of copies specified, rather than requiring each print job to be sent down the network one at a time.
Copies can be stored in mailbox bins until picked up.
The initial Mopier model may pave the way for a whole family in the future, if it lives up to its expectations.
The introduction is timed to take advantage of a major shift towards network printing -- International Data Corp. reported the number of pages printed on printers in 1995 for the first year exceeded those printed of photocopy machines.
",41
"Five major high tech giants, including Compact Disk inventors Philips Electronics NV and Sony Corp. will on Wednesday unveil details of a new ""CD-ReWriteable"" (CD-RW) technology.
The technology is due to bring re-recordable CD devices to the market in the early months of 1997 at prices below $1,000, and should begin being built into top-end computers next year.
The new format will enable users to store 450 times as much data, including video and audio recordings, as a 3.5 inch floppy diskette and is designed to be compatible with new CD-ROM readers and upcoming DVD-ROM drives.
""ReWritable removes the single biggest barrier to greater market acceptance of CD writing technology,"" said Dave Deane, Future CD Writer Product Manager at Hewlett-Packard Co.'s HWP. Colorado Memory Systems division in Loveland, Co.
Hewlett-Packard, Mitsubishi Chemical Corp. and Ricoh Co. Ltd. are the other companies unveiling the new technology, which has been 18 months in the works.
Analysts said the CD-ROM technology could eventually pressure other storage companies like Iomega Corp. whose revenues have soared on the popularity of its 100 megabyte Zip drives and other storage products, and struggling removeable hard drive maker SyQuest Technology Inc..
""I think this would put some pressure on SyQuest type products,"" said Ray Freeman, president of Freeman Associates Inc. a Santa Barbara market research firm.
""This is a higher-capacity product, so it's not going head-to-head,"" he said, noting that Compact Disks store up to 650 megabytes of data, a larger capacity than Iomega and SyQuest offer on their lower-end consumer-oriented models.
Because the new technology standard is designed to work with common CD-ROM readers and the new DVD-ROM technology, Freeman said its introduction was ""an important step in a continuum,"" following CD-Recordable, a technology on the market since 1991 that allows once-only recording.
Freeman projects the CD-Recordable market will hit 1.3 million units this year, and the combined CD-Recordable and CD-ReWriteable market will more than double to 2.9 million units in 1997 and, combined with DVD systems, grow to 10.65 million in 2000.
Rob van Eijk, director of strategic marketing at Philips' Philips Laser Optics North America, in San Jose, Calif., said the new CD technology is aimed more at the space occupied by 100 million CD-ROMs than the floppy disk space.
The small office home office market and the high end home or small office markets are viewed as key markets for the technology as well, he added, saying the compatibility with other media made it a versatile technology.
Both Philips and Hewlett-Packard expect to offer devices in the first quarter of 1997 which would be under the $1,000 price point, but at a sizeable premium to the CD-Recordable write-once equipment now selling for as low as $499.
Hewlett-Packard's Deane said his company had reached the conclusion that without the new CD-ReWritable technology, ""the potential market would top out at a fairly low number.""
",41
"Silicon Valley executives and venture capitalists are turning into political sharks, spending millions of dollars to defeat a California ballot measure that they claim threatens American capitalism and could send stock prices reeling.
Normally the region, which is the birthplace of such industry stalwarts as Hewlett-Packard Co. and Intel Corp., is more obsessed with Internet software tools and microchips than with politics.
But so widespread is the fear that California's Proposition 211 could make the state a haven for shareholder lawsuits that once politically neutral executives have been jolted into action -- hanging anti-211 banners on buildings and encouraging employees to vote against the initiative.
Proposition 211 is a far-reaching measure that would eliminate certain safeguards and immunity currently given corporate officers and staff members. For instance, it would hold them liable if they made projections about future results and they turned out to be wrong.
Opponents of the measure fear that corporate officers would stop making any projections about how their business was doing, making it more difficult to make investment decisions and leading to a decline in share prices.
Proponents argue it will help victims of fraud recover losses. Opponents charge it is an ""insidious"" bid by securities lawyers to line their own pockets.
There were signs the campaign against 211 could affect the outcome. A Los Angeles Times poll published Friday found 52 percent of likely voters now oppose it, up 10 percentage points from a similar Times poll five weeks ago.
Securities and Exchange Commission Chairman Arthur Levitt has urged California voters to reject the measure, warning it would use the state's legal system to roll back the federal Private Securities Litigation Reform Act passed last year.
""California state courts could become a magnet for class action suits,"" he wrote in a letter of opposition.
Both President Bill Clinton and Republican presidential rival Bob Dole have come out against the measure and a recent study said its passage could result in a loss of up to 1.8 million jobs and a $102 billion drop in U.S. domestic output.
The study, by trade economist Clyde Prestowitz, also projected a subsequent rise in ""frivolous lawsuits"" could result in as much as a 24 percent drop in stock market prices.
This, he concluded, ""would far outweigh the 4 cents per dollar compensation, or less, that shareholders would receive from settlements and judgments"" under the measure.
High-tech companies are considered more vulnerable to shareholder suits because their stocks typically are owned by demanding investors seeking fastest-growing companies, which can make their stock prices more volatile.
A recent survey by the American Electronics Association of its members found nearly half would consider leaving the state if 211 passes. Some economists estimated it would eliminate 150,000 jobs and cost $1.3 billion in California alone.
Even companies outside California, like International Business Machines Corp. and software giant Microsoft Corp. have opposed the measure, concerned that a single California shareholder could bring suit against them.
If it passes, high tech leaders like venture capitalist John Doerr, who is leading the $30 million-plus battle against 211, and Cypress Semiconductor Chief Executive T.J. Rodgers, have said they expect outside company directors to quit.
""If it passes, my net worth, my house, will be on the line,"" Rodgers said at a recent public debate on the issue here. ""It's a sleazy trick,"" he added.
Proponents of 211, including lawyers who bring shareholder lawsuits and stand to benefit directly from it, said they drew up the measure after a business-led initiative in the spring was opposed by nearly 60 percent of California voters.
""Americans are disgusted by corporate greed,"" said Richard Alexander, an attorney speaking in favor of the measure recently. ""People are angry about massive layoffs.""
But in Northern California, where high tech businesses have thrived, executives said the proposition was more geared to forcing corporations to settle shareholder suits up front.
",41
"Sun Microsystems Inc's newly launched Javastation network computer is its first machine to compete directly with low-end personal computers, but analysts aren't expecting runaway sales just yet.
""Maybe a couple of years from now it will begin competing with low-end PCs,"" said Evan Quinn, an analyst at International Data Corp, noting Sun's network computing strategy is tied to future expansion of its Java technology.
An entry-level NC will be available in December.  
Earlier Tuesday, the Mountain View, Calif.-based provider of network computing products and powerful workstations, introduced the JavaStation, a scaled-down PC designed to access corporate networks and the Internet, with an entry price of $742.
The company said the entry-level model would contain eight megabytes of memory and will ship beginning in December. A fully configured system, which includes memory, a keyboard, a mouse and fourteen-inch monitor will ship for $995.  
Sun officials are hoping the device will appeal to corporate clients looking to cut their costs for upgrading and maintaining office PC's.
However, given the entry of long-time NC doubter Microsoft Corp into the market with plans for a light version of its Windows operating system, the market will be hotly contested.
International Business Machines Corp launched its first NC model last month.  
Redwood City, Calif.-based Oracle Corp, which has been beating the drum for creating a new NC standard for 18 months, is leading a further effort to build network computers for broader markets.
""This is just beginning to heat up and could potentially start getting very interesting,"" one analyst said of the brewing slugfest between computer industry titans.
Sun Microsystems's machines are more highly targeted than many of its adversaries', however, and it has linked them together with a Java-centric model of future computing.  
Java, a hot new technology introduced by Sun in May 1995 as a programming language initially, has since been expanded into a whole computing architecture for both hardware and software as Sun moved aggressively to proliferate its use.
Sun has licensed Java to the suppliers of nearly all major computer operating systems, including Microsoft and its popular Windows operating systems. One of Java's most compelling features is that it can be used across rival systems.  
This feature should enable software developers in the future to write one version of their software that could work on nearly all systems, known as ""write once, play anywhere.""
Initially, the market will be to replace very basic computer terminals, such as IBM's 3270 terminals or IBM AS/400 midrange character-based terminals, in very simple, dedicated functions such as entering data into a company's network.
International Data Corp projects there are ""a couple of million"" such terminals in use currently, and perhaps as many as 10 million personal computers used for such activities.  
The market for the NC is likely to build sales gradually, according to IDC, which expects a million to be sold around the world in 1997, still dwarfed by the tens of millions of personal computers sold annually.
Some industry analysts have questioned whether the NC will ever really catch on, and many believe it will not do so for at least some 18 months or so, by which time Sun's partners should be producing microprocessors optimized for Java.
Ed Zander, president of Sun Microsystems Computer Company, said in an interview that Sun realistically expects acceptance to be a gradual process, but to lead to a new computing epoch.
""We worked long and hard about not just producing a cheap box, but (also addressing the question) 'How does that box work in a corporate environment?',"" he said. ""'How do you administer it? How do manage it? How do you develop it? How do you deploy it?'""
He acknowledges Sun's approach produced a system that is ""markedly different"" from the NCs that Oracle and IBM are talking about, or even that of Microsoft's NetPC.
Sun is targeting cost savings, claiming large organizations can reduce the three-year cost of ownership using its Java systems to around $7,500, or as much as one fifth of three-year networkedPC costs projected at up to $36,000.
--sam.perry@reuters.com, Palo Alto Bureau, +1415 846 5400
",41
"KLA Instruments Corp. and Tencor Instruments said Tuesday they will merge in a stock deal that would create a semiconductor capital equipment powerhouse with combined revenue exceeding $1 billion.
Analysts said the deal creates a powerhouse in the critical market for semiconductor capital equipment that can be used to closely monitor production and improve yields. This capability has become ever more important as the cost of computer chip-making plants soars into billions of dollars.
""This company in their particular segment of the equipment market is just invincible,"" said Gus Richard, Hambrecht and Quist semiconductor capital equipment analyst. ""KLA's been the dominant player and Tencor's been a very, very strong second.""
The new company will be able to provide essentially one-stop shopping for chip process and diagnostics equipment.
Richard said the combined product offerings will enable semiconductor manufacturers to augment incremental capacity by identifying and eliminating scrap earlier in the process.
At current prices, with a total of 85.6 million shares outstanding after the stock swap transaction, the deal is worth roughly $3.4 billion, or nearly 3.5 times revenues, which analysts said was a reasonable valuation.
The companies said the deal, subject to regulatory and shareholder approval, will be accounted for as a pooling of interests and set up to qualify as a tax-free reorganization.
Under terms of the merger agreement, the companies said shares and options for KLA Instruments common stock will be exchanged for outstanding shares and options of Tencor on the basis of one KLA share for each Tencor share.
The combined company, which aims to provide the most comprehensive measurement and analysis systems for yield management available to the semiconductor industry, will employ more than 3,900 people worldwide.
The companies said the deal was expected to close during the quarter ending June 30, 1997.
The new company, to be called KLA-Tencor,  aims to combine complementary product lines to create a full-line supplier of yield management products and services. KLA is based in San Jose and Tencor in nearby Milpitas, Calif.
The merger comes as semiconductor equipment stocks have been rebounding from a cyclical downturn in mid-1996, when tumbling prices for memory chips due to sharply increased capacity and insufficient demand chilled the sector.
KLA's stock hit a 52-week intraday high of $41.625 before closing at $40.875, up 87.5 cents on the day. Tencor also hit a year intraday high of $31.25 before before closing at $30.50, up 43.75 cents.
The merger was announced after the close of trading in the Nasdaq market.
After hours, shares of Tencor were reported soaring as high as $37, while KLA fell as low as $39 on the news.
""It's one of the most rapidly-growing segments of the equipment market,"" Richard said. ""These two players are the dominant players in the market and what's amazing is their product offerings are almost completely complementary.""
Analysts said executives of the companies told them in a conference call that their lawyers anticipate no regulatory obstacles, although the analysts said in some areas the companies control some 60 percent to 70 percent of certain markets.
KLA Chairman Kenneth Levy will become chairman of KLA-Tencor, while Tencor Instruments Chairman, President and Chief Executive Jon Tompkins will be Chief Executive of the new combination, the companies said.
",41
"High technology venture fund investment soared 50 percent in the third quarter as overall U.S. venture investment rose 25 percent in the seasonally slow period from year-ago levels, according to a recent survey.
""It is so hot it's scary,"" Kirk Walden, who compiles the quarterly Price Waterhouse LLP National Venture Capital Survey, said in an interview. The survey was released Friday.
High technology industries, from computer software and semiconductors to medical instruments, rose to $1.32 billion in the third quarter, accounting for two-thirds of the $2 billion invested during the period, the survey found.
Software investments alone more than doubled from year-ago levels to $596 million, and in the first nine months of 1996 reached $1.74 billion, more than the $1.34 billion recorded for the sector in all of 1995.
For the first nine months of 1996, total venture-backed investments in the country reached $7 billion, nearly the $7.5 billion reported for the full year last year.
""Based on the current rate of venture capital investments, 1996 will certainly be another record year,"" Donald McGovern, chairman of the Price Waterhouse Technology Industry Group, said in a statement accompanying the results.
The third-quarter total figure of $2 billion was a sequential drop from the blistering $2.8 billion pace the industry recorded in the second quarter.
""Third-quarter numbers are traditionally lower than second-quarter numbers because deal flow slows considerably in the summer months,"" said Carl Thoma, president of the National Venture Capital Association.
""But the venture capital industry still remains strong. Good deals are being made across the country in all industries.""
Companies in the startup and early stages attracted the greatest level of venture capital investment, the study found, with these comprising 46 percent of the 444 companies receiving funds and accounting for $600 million invested.
On average, startup companies received more than $3.1 million in funding and communications firms accounted for nearly 56 percent of the total invested in this category.
Funding for Internet-related companies continued at the high level set in the second quarter, with 62 Internet-related companies receiving funding in the quarter, exeeding the year-ago period by six times.
In a new trend, third-quarter venture investment activity appeared to expand beyond the traditionally dominant Silicon Valley and New England areas, whose combined share of investment fell to 33 percent of value invested.
Typically, the two regions account for some 40 to 45 percent of the total amount invested by venture funds, and experts said it confirms a trend towards more even distribution.
",41
"Intel Corp President and Chief Executive Andy Grove said on Monday that by the year 2011, microprocessors may be capable of holding one billion transistors and delivering 100,000 million instructions per second (MIPS).
Grove, delivering the opening keynote address at the personal computer industry's Comdex trade show celebrating the 25th anniversary of the first microprocessor, said such advances were possible withing current technological know-how.
Microprocessors are the semiconductors, invented by Intel engineers in 1971, that serve as the brains of PCs.  
Grove said that by 2011, the microprocessors the industry could be producting, given current understanding of the laws of physics, could run at 10 gigahertz, or four times the frequency of a microwave oven.
This is roughly 50 times the frequency of the current top-of-the-line microprocessors.
Speeds of 100,000 MIPS, a standard measure of computing power, would be 100,000 times the speed of Digital Equipment Corp's VAX 1180s, a line of refrigerator-size midrange computers popular in the 1980s.  
In a summary text of his speech issued in advance, Grove said the microprocessor of 1996 delivers 400 MIPS, running at a frequency of 200 megahertz (Mhz) with 5.5 million transistors. This, he noted, meets or exceeds a 1989 projection by Intel engineers of 100-MIPS machines at 150 Mhz.
The microprocessor of the year 2011 might fit on a die the size of a half dollar, or 1.8 inches, three times the current 0.6-inch die size, the Intel executive added.  
The line width resolution of computer microprocessors, which is critical to the ability to add transistors and power, may -- through projected improvements in photolithographic and process technology -- reach 0.07 micron, compared to 0.35 today.
But Grove also said the industry must be prepared to meet consumer expectations, including those formed over a half century by the medium of television.
""We are in competition for these consumers, for their dollars and their leisure time,"" he said in the summary text. ""That competition is the TV.""
He said TVs outnumber PCs worldwide by about three to one.  
""In this war, he who captures the most eyeballs wins,"" he said. ""In our battle for eyeballs, user experience on the PC must not only meet the expectation levels set by TV viewing, it must exceed them.""
Grove provided demonstrations of the concept of visual computing, one comparing 1992 technology with state-of-the-art technology today, and another showing the high-end Pentium Pro Processor at current performance levels and simulating what will be available in the year 2000.
In his address, Grove demonstrated how Starbucks Inc uses connected personal computers to enable its chief executive, Howard Shultz, to communicate directly with the company's remote store locations.
""We need to be relentless in our concern and efforts to grow the number of users and uses of our technology as we are in our efforts to develop and build the technology,"" he said.
""Just as we are investing in technology for the long term, we need to target the new users of the future today.""
",41
"In the true spirit of the lightning-fast world of the Internet, the browser wars which peaked in late summer have now been replaced by the battle for delivering content efficiently over the Web.
The coming months will see an intensifying battle between products that deliver information directly to a computer, rather than stumbling around looking for it with often lengthy and cumbersome Web addresses.
The competition centers on transforming the Internet from a ""pull"" model, in which people actively search the Web for information or use software agents to do that for them, to a ""push"" model, in which people can choose once what they want to be sent and it is published to them continuously.
""Everybody knows who they want to get information from. The real problem is: When is it that they have information that I care about?"" said Eli Barkat, chief executive of BackWeb Technologies, a San Jose, Calif.-based start-up.
""What people want is to build relationships,"" he said.
Vivek Ranadive, president of Reuters Holdings Plc's Tibco Inc. unit, likens the initial enthusiasm for surfing the Net to Sunday drives in the early days of the automobile, a pleasant but passing phenomenon.
Electronic commerce over the Internet, which is expected to gather steam in 1997, requires a more efficient way of navigating the information superhighway, executives say.
More than a dozen companies, mostly small high-tech start-ups, have been busily seeking to define the space, much as search engines like Yahoo Inc., Infoseek Corp., Excite Inc. and Lycos Inc. have done in helping people search out what they want.
""As it was for search engines six months or a year ago, this is an area that has been more or less discovered by venture capitalists and others as something that has to be dealt with,"" said Jack Wilson, managing editor of Technologic Partners' ComputerLetter.
In addition to the impracticality of aiming to find real-time information in the more than 50 million Web pages that search engines catalog, many companies would like to be able to update customers and suppliers directly.
""There are some obvious problems with today's browse-and-pull technique for getting at information when you need it,"" Wilson said. ""So there is a proliferation of new companies and new products from old companies aimed at solving this.""
More than a dozen companies are now vying for attention, including Ex Machina, which is providing a wireless news alerting system made by Global Village Communication Inc., and New York City-based Ifusion Com.
So far, the category has been dominated by one pioneering entry, Cupertino, Calif.-based PointCast Network, which burst onto the scene in the spring with a screen saver display which offers customized and updated news, data and advertising.
""The biggest application that's got the visibility with this type of technology is PointCast,"" said Phil White, chief executive of Informix Software Inc.. ""PointCast has got everybody now aware of how I can subscribe to things.""
Another hot Silicon Valley start-up in the sector is Marimba Inc., founded by Kim Polese and three colleagues from the Sun Microsystems Inc. team which created the popular new Java programming language.
Industry executives say competition is vital to expanding the marketplace, but it also creates confusion as companies vie for a share of the action.
""I think there's a lot of confusion in the market,"" said Barkat. ""You hear a lot of names when people talk about this space, and the reason is the space is huge.""
Technologies that transform the way information is delivered on the Web, such as those which Tibco Inc. will announce Monday, may help expand the market, according to industry analysts and executives.
""We are essentially a plumbing company, so we do plumbing software, and people like Marimba and BackWeb and PointCast can actually make use of our software,"" said Ranadive.
""Now the technology they presently use to do this is a pull technology and so you can emulate a push by going out and asking a lot of questions,"" he added. ""But you're tying up the network, you're tying up the server by doing that.""
",41
"An outspoken computer security expert, citing his just-completed study, says up to two-thirds of certain Web sites, including reputable institutions like banks and the media, are vulnerable to hacker attacks.
Dan Farmer -- who stirred controversy in 1995 as co-author of software dubbed SATAN that enables people with basic skills to infiltrate computer systems -- surveyed more than 2,200 Web sites.
The survey released last week covered a relatively small portion of the sprawling Web but focused on sites where security is more of a concern.
Farmer probed 660 bank sites around the globe, 312 North American online newspaper sites, 274 credit union sites, 47 U.S. federal government sites and 451 Internet sex clubs.
In a summary, Farmer said that, out of his sample of about 1,700 Web sites he selected, ""over 60 percent could be broken into or destroyed."" As a control, he probed a random sample of 469 sites.
Farmer said he used relatively crude, non-intrusive methods and did not actually break into the sites. He also said he would not publish the names of the sites he surveyed.
""I barely electronically breathed on these (computer) hosts,"" he said in his report, adding that, considering more intrusive tests, some 70 percent to 80 percent of sites may have security flaws.
Other computer security experts found Farmer's results credible and authoritative, David Kennedy, director of research, education and consulting at the National Computer Security Association, said in a telephone interview Monday.
Experts and computer industry executives said the study shed more light on a problem well known within the industry but insufficiently understood by the public at large.
The threat of hacker attacks was highlighted earlier this year when intruders broke into the Justice Department and Central Intelligence Agency Web sites and altered them, prompting the CIA to close its site temporarily.
Farmer stressed that Web sites are being used primarily for marketing and advertising purposes and that, although some bank sites may allow visitors to look up balances, the sites do not provide access to internal financial systems.
Deborah Triant, president of CheckPoint Software Technologies Ltd.'s U.S. operating unit in Redwood City, Calif., said banks routinely keep Web sites on separate computer systems.
""Our experience is the banks are so paranoid that they won't even allow the access that they should be able to allow and would be quite safe if you had a modern firewall"" protecting their networks from intruders, said Triant, whose company is the market leader in firewall technology.
""So, if their Web site is vulnerable, that doesn't mean that anything else at the bank is vulnerable, or that their customers' accounts or the transactions their customers are doing are vulnerable,"" she said.
Nevertheless, with the advent of electronic commerce over the Internet expected to gain momentum in 1997, lax security remains a critical issue, experts said.
Farmer separated security flaws into two categories -- a red category where he said a site was ""essentially wide open to any potential attacker"" and a yellow category deemed less serious but with potential for disastrous consequences.
Of the 660 bank sites, 68 percent were deemed vulnerable and nearly 36 percent were in the red category.
Some 51 percent of credit unions were vulnerable, 62 percent of the federal sites, nearly 70 percent of newpapers and 66 percent of sex clubs. Sites in the red category ranged from 20 percent for credit unions to 38 percent for federal sites and 39 percent for online newspapers.
Of the random sample of 469 Web sites used as the control, a far smaller percentage -- 33 percent -- were found to be vulnerable, and 17 percent of the group was in the red category.
Farmer said part of the problem is that Web sites are trying to do too much at once, increasing their complexity and making security far more difficult to achieve.
But, even with security concerns, credit card transactions over the Net are much safer than those carried out in shopping malls, said the security association's Kennedy.
Farmer also said he plans to incorporate some newer testing tools into a new version of SATAN, which stands for Security Administrator Tool for Analysing Networks, early next year.
The programme enables people who manage corporate networks to locate weaknesses and fix them. But it has been controversial because it can also easily be used by malevolent intruders trying to cause damage.
Triant said there have been no reported security breaches at any of the more than 15,000 institutions with CheckPoint network security installed and said such precautions should provide adequate protection.
",41
"For many computer owners, 1997 will be the year when Internet users will begin to see more features aimed at making the Net more lifelike. But it is also likely to be marked by frequent communications breakdowns caused, in part, by increased demand.
""I wrote a year ago about a collapse, but it's really collapses, getting more frequent, deeper and longer,"" said Robert Metcalfe, the inventor of the Ethernet computer networking technology and founder of 3Com Corp. who is now vice president of technology at International Data Group, of Boston, Massachusetts.
Metcalfe said the congestion that causes many people to call the World Wide Web the ""World Wide Wait"" is only one of many problems that can prompt it to crash.
Major outages have been caused by such seemingly minor events as a rodent chewing a power cable or an ampersand typed in the wrong place in software on central Internet devices.
Over the summer, more than six million customers of America Online Inc., the world's largest online computer service, were without service for 19 hours because of a software problem.
In October, a failure at Internet service provider BBN Corp.'s Stanford University Internet facility cut off access for 400 top high tech firms for nearly a day.
MORE OUTAGES AS PROVIDERS TRY TO KEEP UP WITH DEMAND
Experts such as Metcalfe predict similar types of outages next year as telecommunications companies and Internet providers struggle to keep up with demand.
Still, Web surfers are also likely to see many new features in 1997, from advanced graphics to slick ways to communicate with each other using animated characters in virtual chat rooms and high-tech games.
Dozens of companies, including the Germany-based Black Sun Interactive which recently opened an operation in San Francisco, have been developing new virtual worlds based on a technology called Virtual Reality Modelling Language (VRML).
The technology, pronounced ""ver-mul"", enables creators of multi-player computer games, for example, to design lifelike characters and three-dimensional settings that will exploit new 3-D computer chip designs and speeded-up microprocessors with added multimedia features due next year.
New capabilities include interactive, three-dimensional fly-over cities created by the startup Bigbook, which allows users to swoop down on a building and click on it with a mouse to see who the occupants are.
SHOWDOWN OVER ONLINE PORN LIKELY
But as the Net becomes more lifelike, the prospects for a showdown between regulators and free-speech advocates over the issue of online pornography is likely to increase.
In October, the U.S. Federal Bureau of Investigation said it was investigating an electronic mail message sent to thousands of Internet users offering child pornography for sale.
The question of whether to regulate the content of the Internet, both within a country's borders and internationally, comes as officials in Washington are pressing for reductions in sexual and violent content in film and television.
One solution offered by some software firms is a device like television's V-chip, which allows parents to restrict access to certain programmes.
Next year will also see new electronic communities in which people can participate as consumer, customer, contributor or even investor in enterprises over the Web.
Although 1997 will not be the year people rush out to do all their shopping on line, it will be a critical year for deploying the technologies that will make electronic commerce widely available in 1998 and 1999, according to analysts.
Michael Parekh, Internet analyst at Goldman Sachs, expects companies to continue using Internet technology both in internal networks, known as Intranets, and to create what are known as Extranets, to reach customers and suppliers.
""The big thing for 1997 is going to be the way users think of the Web goes from a pull paradigm to a push paradigm,"" he said, referring to the goal of being able to send data to individuals rather than waiting for them to seek it.
In the United States, only about one third of the country's 97 million households have a personal computer, and just 11 percent of U.S. households are estimated to have the modem devices necessary to link them to the Internet.
Faster, 56-kilobit modems are due next year, but analysts expect a battle over standards will slow their spread.
",41
"Some of the Internet startups due to make their debut at next week's Comdex computer industry show have little more to their name than a few ambitious entrepreneurs, business cards and a Web site.
But the 60 or so companies scheduled to make presentations to prospective investors at the first Comdex Venture Outlook represent the cutting edge of high-technology investment in the mushrooming Internet market.
""There are dozens, maybe a few hundred, new companies that are being created every day that have to do with the Internet,"" said Richard Shaffer, principal of New York-based Technologic Partners, who assembled the executives.
""It's the biggest thing to hit computing in at least 20 years,"" he said, which is why Comdex organisers Softbank Corp. engaged Shaffer's group to bring young private companies at the centre of Web innovation to the largest U.S. trade show.
Included in the presentations will be the heads of some of the hottest Internet companies, including Kim Polese, the chief executive of Palo Alto-based Marimba Inc., who by some accounts is credited with naming Sun Microsystems Inc.'s hot new Java computer programming platform.
Formed in February by four members of Sun's original Java team, Marimba a month ago unveiled its Castanet package of software development tools for sending out applications and content over the Internet.
Other speakers include NetAngels Chief Executive Mark Goldstein, whose company is backed by such high-profile investors as high-tech guru Esther Dyson and former Time Warner Inc. chief executive Nicholas Nicholas.
Also speaking is David Arnold, head of InterMind, a Seattle-area startup backed by mobile phone pioneer Craig McCaw, which recently launched its InterMind Communicator linking people anonymously to Web sites of their choice.
Shaffer said the list includes access, content and tools companies which are primarily looking at ways to apply Internet technologies to the internal corporate networks known as intranets.
Some companies have no more than five or 10 people at the moment, and most have received some venture capital. Many, though, are at such an early stage of financing that the $50,000 fee for a booth at Comdex would have been too costly.
Although there was an abrupt slowdown in Internet initial public offerings over the summer, analysts and investors expect the market to heat up again.
The pace of venture investment may not continue at its red-hot rate of the second quarter, when Price Waterhouse LLP reported 556 firms received $2.8 billion in venture capital, up 32 percent from a year earlier. But new investment appears poised to top the 1995 record of $7.5 billion.
""Judging by preliminary numbers, it is virtually assured that 1996 is going to be a record year,"" said Kirk Walden, who is compiling the firm's third-quarter venture capital survey.
Walden said venture capital funds invested $5.2 billion in the first nine months of 1995.
""The technology category continues to be what's driving overall investment,"" he added.
Technologic Partners' Shaffer admits it remains a difficult task for investors to sort out which companies will be a success in markets that may take years to develop despite the intense interest and hype surrounding the Internet.
Furthermore, many startup companies have been forced to reinvent themselves with frequently updated business plans as the fast-paced Internet market evolves.
""It's initially going to be a very big market for a lot of players, and it will be quite some time before we know what the best business models are,"" Shaffer said. ""Developing the Internet and electronic commerce ... is going to be a decades-long process. We're just at the beginning.""
",41
"A senior executive of Netscape Communications Corp said the company sees no sign of any reduction in the dramatic growth in the market for Internet and intranet, and expects to hold onto a good share of the market.
Mike Homer, vice president of marketing, also said in an interview the company currently has around 50 million users of its Netscape Navigator software for browsing the Internet, comprising roughly 75 percent of the total browser market.
Critical approval for its new Communicator software now being publicly previewed has topped expectations, he added.  
""We're holding market share. The market's growing very dramatically, we see no signs of that abating,"" Homer said in a telephone interview. ""We have a great new product coming, so it gives us every reason to believe that we're going to continue to do really well.""
Homer declined to comment on the company's expected results for the fourth quarter, ending December 31, or on the current quarter, citing the quiet period ahead of the earnings report that is expected to be released on January 28.
Shares of Netscape tumbled 10-7/8 earlier to close at 47-7/8 following an analyst's downgrade of the stock.  
The analyst, Deutsche Morgan Grenfell's William Gurley, said in a research report he trimmed his rating to accumulate from a buy due partly to the stock's proximity to his target of $60 and partly to concern over its major product transition, and its shift to a new pricing model and a longer sales cycle.
Homer declined to talk about revenue expectations, but said that of the reviews to date for the Communicator product first shown on December 23, ""95 percent are incredibly positive.""  
""It's a better reception than any product we've ever done so far. It's going to be a smash hit product,"" he predicted.
Homer also projected the electronic mail component of the product will overtake rival e-mail products this year.
He said around 90 percent of Netscape's enterprise customers are on a yearly subscription basis.
""There's really no delaying (of revenue) based on these product cycles,"" he said. ""It may be the case that a new product will bring in new users because customers get excited about it, so there's definitely upside.""  
The Communicator is expected to undergo substantial preview testing, before being finalized in the second quarter.
""The most important indicator of our success is our new product acceptance, and Communicator has exceeded all of our best expectations, so I think that's all a good picture for the next couple of quarters,"" he added.
Homer said he expects SweetSpot server products to continue growing rapidly and repeated he sees no price pressure on the browser product despite Microsoft Corp's free distribution of its Internet Explorer browser software.
Goldman Sachs analyst Michael Parekh said the consensus revenue estimate for the fourth 1996 quarter is around $115 million, with his own estimate slightly below that at $114.5 million, rising slightly to $115.8 million in the March quarter.
""The fundamentals continue to be intact,"" he said.
Gurley warned he did not see the upside surprise in the December quarter that Netscape has shown in recent quarters.
((-- Palo Alto Bureau +1 415 846 5400))
",41
"Hewlett-Packard Co. is expected to extend its role as a leading supplier of computer printers next week by unveiling the first of a family of devices designed to allow people to bypass the copy machine.
Industry sources familiar with details of the new models said they can be used instead of a copier to make multiple printouts of a document, posing a threaten to copy machine makers such as Xerox Corp. and Canon Inc.
""This is the first direct attack at the copier market,"" said one of the sources, who declined to be identified. ""This is the announcement that is going to make Xerox begin to sweat.""
Another of the sources said the initial adaption of the technology will likely be targeted for relatively modest printing jobs, three or four copies of a document, for example, rather than for dozens of hundred-page documents.
A spokesman for Hewlett-Packard was not immediately available for comment on the new product, which one of the sources said could be unveiled as early as Monday.
The new ""Mopier"" machine, as Hewlett-Packard has dubbed it internally, is expected to be based on the LaserJet 5Si family and to come with a stapler, a multiple-slot stacker and secure, password-protected ""mailboxes"" into which printouts of confidential documents can be placed.
In a related announcement Wednesday, Hewlett-Packard said it planned to triple production of toner cartridges used in its LaserJet 5Si family of network printers ""to alleviate a temporary shortage of the cartridges in the United States.""
Analysts said the move may have been partly motivated by the company's new multiple copy initiative, as cartridges for printers are an extremely profitable area of HP's printer strategy, and will be needed to supply the new machines.
In fact, Hewlett-Packard said Wednesday its own research shows that pages formerly duplicated on copiers are increasingly being printed on HP printers already, resulting in a greater demand for the cartridges.
The mopier can be expected to have similar performance to the LaserJet 5Si printers, which can print 24 pages a minute and cycle up to 100,000 pages a month, the sources said.
""With these new methods of business printing, HP estimates that customers are printing about 24 percent more pages a month than with previous printers in the same class,"" said Doug Johnson, marketing manager of HP's LaserJet Supplies Operation, in a statement.
Computer Reseller News in September reported that the new HP ""mopier"" would be priced somewhere above $5,000.
",41
"Sun Microsystems Inc. said Wednesday its profits rose 41 percent in the latest quarter and its revenues jumped to record levels, driven by sales of the company's server computer and power desktop systems.
Sun said its net income for the fiscal second quarter ended Dec. 29 rose to $178.3 million from $126 million in second quarter a year ago. Earnings per share rose to 46 cents from 32 cents.
Revenues rose nearly 19 percent to $2.08 billion.
The per share earnings beat Wall Street expectations of 42 cents, according to First Call, which tracks analysts' earnings estimates.
""The current fiscal year continues to yield strong financial results,"" Sun Microsystems Chief Financial Officer Michael Lehman said in a statement. ""Sun is winning big in corporate intranets, the Internet, and the extranet.""
So-called intranets are in-house networks modeled on the Internet, while extranets, which are secure networks outside a company, such as a private network.
Lehman said the company's investments in research and development and sales and support infrastructure were paying off as it moved to broaden its global presence.
The company said gross profit margins rose to 50.4 percent, up more than 5 percentage points from the comparable period the previous year.
Sun Microsystems Chief Executive Scott McNealy told analysts in a conference call that it was difficult to say whether the strong gross margins were sustainable.
Sun's order backlog rose to $470 million from $407 million in its first quarter, but it was still much less than the $522 million backlog at the end of its 1996 fiscal year last June.
McNealy said the company planned to announce new high-end computers, codenamed Starfire, next week as it seeks to offer computers that can be used for the most intensive corporate computing tasks, like databases and network management.
Lehman said initial market data showed Sun appeared to be taking market share from its traditional rivals, and he said Sun will continue to make further significant price cuts.
The executives said Sun was deriving increasing amounts of revenues from storage products, professional services and licensing of products based on the Java programming language, which is used to develop Internet applications.
",41
"Sun Microsystems Inc said on Wednesday its profits rose 41 percent in the latest quarter and its revenues jumped to record levels, driven by sales of the company's server computer and power desktop systems.
Sun said its net income for the fiscal second quarter ended Dec. 29 rose to $178.3 million from $126 million in second quarter a year ago. Earnings per share rose to 46 cents from 32 cents.
Revenues rose nearly 19 percent to $2.08 billion.
The per share earnings beat Wall Street expectations of 42 cents, according to First Call, which tracks analysts' earnings estimates.
""The current fiscal year continues to yield strong financial results,"" Sun Microsystems Chief Financial Officer Michael Lehman said in a statement. ""Sun is winning big in corporate intranets, the Internet, and the extranet.""
So-called intranets are in-house networks modelled on the Internet, while extranets, which are secure networks outside a company, such as a private network.
Lehman said the company's investments in research and development and sales and support infrastructure were paying off as it moved to broaden its global presence.
The company said gross profit margins rose to 50.4 percent, up more than 5 percentage points from the comparable period the previous year.
Sun Microsystems Chief Executive Scott McNealy told analysts in a conference call that it was difficult to say whether the strong gross margins were sustainable.
Sun's order backlog rose to $470 million from $407 million in its first quarter, but it was still much less than the $522 million backlog at the end of its 1996 fiscal year last June.
McNealy said the company planned to announce new high-end computers, codenamed Starfire, next week as it seeks to offer computers that can be used for the most intensive corporate computing tasks, like databases and network management.
Lehman said initial market data showed Sun appeared to be taking market share from its traditional rivals, and he said Sun will continue to make further significant price cuts.
The executives said Sun was deriving increasing amounts of revenues from storage products, professional services and licensing of products based on the Java programming language, which is used to develop Internet applications.
",41
"Microsoft Corp. Chairman Bill Gates on Tuesday swept aside doubts about the future of the personal computer, saying this type of computer system was going to be in the forefront for many years to come.
The Microsoft co-founder used his keynote address at the annual Comdex industry trade show in Las Vegas to illustrate how the PC had survived criticisms over its shortcomings and will continue to be used in a wide range of devices, from home computers to cellular phones.
Microsoft earlier this week unveiled the first line of handheld PC devices running on its new Windows CE operating system. Gates said Microsoft is working on advances that in 1997 should give its new high-end Windows NT programme the same sort of scalability -- the ability to add vast numbers of computing configurations -- as Windows CE.
These technologies, designed for high-end computers, are able to store terabytes, or 1 trillion bytes, of data to eventually process billions of transactions a day.
Gates said only around 15 companies now store terabytes of data and the billion-transaction level is more than phone companies, credit card firms or airlines currently process on such systems.
But, with transactions and communications using World Wide Web technology, the tetrabyte level is not far off, he said.
Touting the virtues of the PC, Gates said, ""The strength of the PC is what you take for granted,"" he said. In recent years, for example, Microsoft and the industry have introduced features that allow PC users to easily plug in new devices and multimedia features such as video and audio.
The personal computer industry has grown dramatically, he said, with more than 200 million PC users worldwide. Although sales volume is approaching 70 million units a year, it will be hard to keep unit sales growth worldwide above the 10 percent figure in future years, Gates said.
""It's hard to grow at greater than 10 percent. There will probably be some years where you won't see any growth at all,"" he said, adding that, nonetheless, ""people are doing more and more with the PC.""
Gates outlined an array of pending technologies, including three-dimensional graphics, and sophisticated methods of transmitting information to computers such as speech recognition and visual clues such as gestures or expressions.
At some point, he said, recipients of intelligent ""junk mail"" may actually be able to transmit their facial expressions upon reading it back to the organisation that sent the mail.
In future operating systems, Gates predicted that ""90 percent of the code will relate to these new input systems.""
Gates, using videos to illustrate his point, poked fun at the Silicon Valley adversaries who are increasingly touting a new, low-price network computer, or NC, as the solution to escalating computing costs.
One of the videos depicted a variety of individuals being interviewed in New York City streets on their thoughts on a series of complex computer terms in a mock survey illustrating how little the public knows about computer technology.
One features Scott McNealy, the chief executive of Sun Microsystems Inc., who has been thumbing his nose at Microsoft and touting his Java technology and NCs as a means to eliminate Microsoft's lock on the industry.
Without being aware of what may have been asked, McNealy stares into the camera, and says, ""I'm not sure. I'm not a computer scientist. I majored in golf.""
In a briefing following the speech, Gates and other Microsoft executives repeated that Microsoft was spending over $2 billion on research and development in fiscal 1997, and has budgeted $600 million in product support and $400 million toward partnerships.
Microsoft on Monday introduced the new Office 97 applications, which include word processing and spreadsheets, and said Tuesday that 1 million desktops users have signed up to receive it.
Office 97 software will cost around $199 for the standard edition and $299 for the professional product, similar to the prices of Microsoft's Office 95 versions.
",41
"Softbank Chief Executive Officer Masahoshi Son said the company will focus over the next year or two on growing its businesses organically and on preparing for the launch of JSkyB.  
""For the next couple of years -- a year or two -- we will focus more on growing what we have already acquired and also prepare for JSkyB launch. That's my focus,"" he told Reuters in an interview at the Comdex industry trade show here.
Son also said the company has completed commitments to 51 Internet startup companies from its venture capital fund which totalled $350 million, including some $170 million from investment partners and the remainder from Softbank itself.
Softbank in the summer launched a 50-50 joint venture with Rupert Murdoch's News Corp in a digital satellite system known as Japan Sky Broadcasting, or JSkyB. The two in June acquired 21.4 percent of Asahi National Broadcasting of Japan.  
Through a string of bold investments, Softbank has become the world's largest computer-related magazine and book publisher and the largest producer of high tech exhibitions and trade shows. It is also Japan's largest computer software, peripherals and systems distributor.
Son's comments mark at least a temporary halt to a buying spree which culminated in the purchase in September of an 80 percent stake in Kingston Technology Corp, a leading supplier of memory modules, for cash and stock worth some $1.5 billion.
Within the past year, Softbank closed on the $2.1 billion acquisition of Ziff-Davis Publishing, and last year it spent some $800 million for the Interface Group, whose trade show portfolio includes Comdex, the largest U.S. trade show.
""After the launch of JSkyB, and after we have good enough management infrastructure for the synergy that we create in the U.S., then we would do a lot more things,"" he said of the prospects for further major acquisitions.
On the venture funding front, Son said the 51 venture investments his company has led over the past nine months put it at the top ranks of recent Internet venture investment.  
""We became very quickly an important player in the venture capital market,"" he told Reuters, adding that Softbank was able to rely on assistance from its various operating firms.
""They helped in identifying the startup companies on the Internet, and identifying which one is the good one and the winning horses,"" he said.
Furthermore he said startup companies, such as the branded Internet media company Yahoo! Inc, have been able to benefit operationally from Softbank as well as financially.
Softbank took a 35 percent stake in Yahoo! and established Yahoo! Japan, in which Softbank retained a 65 percent stake. This is just one of a series of rapid moves by Yahoo! which has extended its brand from its original role as a search engine to find information on the Internet.
""Yahoo Japan was established in February this year and started service April 1,"" Son said. ""Only two months, from scratch, and it has been profitable from the first month of operations and every month it is profitable.""
In the Internet area, where many startups produce steady streams of red ink as they attempt to grow their business as rapidly as possible, Son said he considers the joint venture's profits to be somewhat of a record-breaking achievement.  
Yahoo Inc went public on the Nasdaq market in April.
A little more than a dozen of the investments by the $350 million venture fund have yet to be completed, he said, and Softbank is likely to form an additional investment fund as early as next year. Son, however, declined to elaborate.
Internet service companies, such as Yahoo!, and Internet content companies are likely to be the smallest but fastest growing opportunities for investment, he added.
Softbank recently reported first half pre-tax profit for the six months to the end of September rose 77 percent to $78.1 million as revenue grew 46.1 percent to $804.3 million, against a pre-tax profit of $43.9 million on $550.4 million of revenues for the year-earlier period.
Son spoke after he and other senior Softbank executives made a presentation to media and industry analysts at a briefing at the annual Comdex show.
-- sam.perry@reuters.com, Palo Alto Bureau +1415 846 5400
",41
"The semiconductor industry said Monday its key indicator rose last month to the highest level in almost a year, reflecting a surge in new orders for computer chips.
The so-called book-to-bill ratio, which measures the value of new orders compared with shipments over a trailing three-month period, jumped to 1.10 in October from a revised 0.98 in September, marking the first time it has been over 1 since December 1995.
The index, widely regarded as a sign of the computer industry's health, means that manufacturers received $110 in new orders for every $100 in shipments.
The Semiconductor Industry Association said new chip orders in October rose 17.9 percent to $3.84 billion while shipments increased by 5 percent from the previous month to $3.39 billion.
Analysts said the surge was likely a one-time phenomenon as vendors sought to catch up with increasing demand after having pared back inventories sharply early in the year when prices of memory chips in particular were tumbling.
""These strong numbers for new orders in the Americas market should reinforce our industry's cautious optimism for a solid fourth quarter,"" said Douglas Andrey, director of Information Systems and Finance at the Securities Industry Association.
Analysts said they expect computer chip stocks, which had been firm ahead of the announcement on the expectation the ratio would rise modestly to somewhere between 0.99 and 1.03, to advance further following the upbeat data.
Shares of Intel Corp, the world's largest maker of semiconductors, surged as high as $124.69 in after-hours trade, 6 cents below its all-time trading high last week. Earlier, it closed up $1.625 at $123.875 on the Nasdaq market.
""I think it's an overall positive for stocks tomorrow,"" said Charles Boucher, semiconductor analyst at UBS Securities.
""The Street got possibly a little better than they were looking for, so I think you've got a chance to add on to this rally tomorrow,"" he said. ""The danger here is in investors getting too enthusiastic about the size of this number.""
Separately, the trade group said it was planning to phase out the North American semiconductor index and replace it with a global index that would help industry watchers keep better track of demand for computer chips.
The industry group said it was making the change because the current figure only tracks sales and orders in the Americas, representing only a third of the total world market, and provided disproportionate data on certain chip sectors.
While both industry and analysts have criticized the wide fluctuations and frequent revisions in the data -- even the September number was revised to 0.98 from 0.99 -- the move taken by industry consensus met with mixed reviews.
""I think it's a good idea,"" said Intel spokesman Howard High. ""The book-to-bill hasn't really reflected the true health of the industry, good or bad, for quite a while.""
""As the business turned very global in its nature, the book-to-bill flash report was a U.S.-based number,"" he said. ""If you take it to the global market, it's really not done the job that people have been using it for.""
But some analysts said the decision to drop aggregate bookings data altogether would only increase the amount of market uncertainty, as investors would have to rely on far more speculative estimates of new orders.
""I think it's going to blow up in their face,"" one top analyst said. ""It's going to be a lot more speculative. We're all going to be trying to do the analysis but we're going to be doing it based on our own independent surveys.""
Key semiconductor makers had argued, however, that bookings data was imprecise and subject to varying inventory strategies of distributors without any uniform reporting methods.
",41
"Sun Microsystems Inc. stock took a beating Wednesday despite reporting a sharp rise in earnings that topped Wall Street's average forecasts and set milestones for its typically weak first fiscal quarter.
The Mountain View, Calif.-based computer maker said late Tuesday that its profits jumped 45 percent in its fiscal first quarter to $123.4 million, or 63 cents a share, from $84.7 million, or 42 cents a share, in the 1995 quarter. It cited continued strong sales of its computer workstations.
The profits were a shade above Wall Street analysts' average forecast of 61 cents a share as compiled by First Call, which tracks earnings estimates, but investors started taking profits in after-hours trading Tuesday.
Traders noted the stock had run up ahead of the report, and that while Sun's numbers were strong, they were not as strong as had some on Wall Street had been expecting.
Furthermore, some analysts expressed concerns over whether Sun will be able to match the performance in the future in an increasingly competitive market for workstations as rivals introduce new models of their own.
The stock of the Mountain View, Calif.-based computer maker touched its all-time high of $70.25 Tuesday before the earnings report and ended regular trading at $70. But it fell $4 in after-hours trading following the report.
The freefall continued Wednesday, with the shares off as much as $7.625 at one point at a session low of $62.375 and closing the day at $63.125, down $6.875 on Nasdaq trading volume of nearly 18 million shares. It was the most actively traded stock on the exchange.
""We've got to believe there's some profit-taking going on,"" Sun Chairman Scott McNealy told reporters in a conference call Tuesday when informed of the after-hours decline.
A number of analysts trimmed their ratings on the 14-year-old computer maker, mostly saying the stock's price had already soared to near their 12-month trading targets and that the downgrades were based on valuation rather than fndamentals.
Morgan Stanley analyst Steve Mulunovich, for example, cut his rating to ""outperform"" from a ""strong buy"", with a price target of $75 on the stock. However, he also raised his fiscal 1997 earnings estimate to $3.35 a share from $3.30.
The company reported record earnings per share of $2.42 in its 1996 fiscal year, which ended in June.
Alex. Brown analyst Phil Rueppel also cut his rating, to a ""buy"" from a ""strong buy"" and Ferman Selz removed the stock from its recommended list after it hit its $70 price target.
A few analysts also expressed concern that although Sun has received a great deal of publicity over its Java technology, it also will face stiff competition from rivals Hewlett-Packard Co. and Silicon Graphics Inc., which have just introduced speedy new computer models.
Other competitors, like personal computer maker Compaq Computer Corp., are also expected to jump into the market with workstations to compete in the high-end market for machines which has long been dominated by a handful of firms.
""His new competitors are Compaq and Dell Computer. The enemy isn't the traditional competitor but a new class of people that can compete in this space,"" said David Wu, an analyst at Chicago Corp.
Sun scored a small coup Wednesday by hiring Mark Canepa -- a Hewlett-Packard veteran who was just named by Compaq last month to head up its newly formed workstation division -- to instead be vice president of Sun's Workgroup Server Products Group.
Stock in Compaq, whose third quarter earnings also surpassed Wall Street estimates, also fell, closing down $1.50 ato $73.625 in New York Stock Exchange trading.
Some analysts said they saw the weakness in Sun's stock as a buying opportunity.
Dean Witter analyst Jay Stevens said he raised his earnings estimates for Sun and reiterated a buy rating.
""They delivered a very fine quarter,"" Stevens said.
",41
"Wired magazine remains one of the publishing world's hottest 1990s startups, but on the brink of its parent's initial stock offering some analysts are warning the chronicle of the digerati of the Internet age may prove a better read than investment.
""It's a great read, off Wall Street, but the balance sheet is not quite as neo-designed as the magazine,"" said Steve Harmon, senior investment analyst at Mecklermedia's iWORLD.
The initial public offering of Wired Ventures Inc., the publisher of the magazine, were due to be priced late on Thursday, according to lead underwriter Goldman Sachs.
The offering had been initially due in July but was pulled at the last minute as the market for technology and Internet stocks was tumbling.
Now Internet stocks, most of which have only gone public since the Netscape Communication Corp.'s milestone offering in August 1995, have rebounded nearly 10 percent from their July lows.
Wired Ventures' revised offering has reduced the company's projected market capitalisation by some $200 million, or 42 percent, from its initial plan, according to Harmon, who calculated the company's new market capitalisation at some $300 million based on an IPO price of $13 a share.
Wired intends to sell up to 4.75 million shares at a range of $12 to $14 a share to raise gross proceeds of $61.75 million. This compares with its earlier plan to raise $76 million from sale of 6.3 million shares.
IPO analysts said the company was wise to hold off on its initial offering, enabling it to take advantage of the current pickup in new share offerings coming to market.
Some Internet analysts also said the offering faces a market that is becoming more discerning than in the past, when investors snapped up shares of companies which had minimal operating history and little promise of near-term profits.
""I think they're going to have a little bit of a challenge with this one. It's just fundamentals,"" said one analyst. ""A couple of years ago, when the Internet was just starting, you could have taken your dog named 'Net' public.""
Many investors and analysts compare Wired with traditional print media, since some 90 percent of its revenues are still derived from its high-tech monthly, which since 1993 has been promoted as the magazine of the digital revolution.
Early investors in Wired have included high tech guru Nicholas Negroponte, who heads the Massachusetts Institute of Technology's Media Labs, and publisher S.I. Newhouse.
Wired continues to be among the fastest-growing publishing properties, growing in circulation from 90,000 at the end of 1993, its first year of publication, to an estimated 325,000 in August, according to the company's offering documents.
The company also runs HotWired, a hip Web site geared for those who want to keep on the leading edge of digital developments, and the search engine HotBot.
But IPO experts note the business plan for the Internet operations was still in early development and the company continues to post heavy losses, with a net loss for the first six months of 1996 of $34.7 million, including a $20.5 million writeoff, more than double its revenues of $15.63 million.
At an expected price of some 7.3 times estimated 1996 revenues, the valuation would be cheaper than recent Internet content companies like CNET Inc., which has traded at 20 times 1996 revenues, or Yahoo! Inc., which has been trading at more than 40 times estimated 1996 revenues.
But this is pricey compared to more conventional print media valuations, where two times revenues is often the norm, and four to five times for properties exhibiting strong growth in an otherwise maturing sector, analysts said.
""Wired changed journalism, especially high-tech journalism, and made it cool,"" said Harmon, adding that investors may have difficulty valuing this in financial terms.
""I think Wired expected everybody to just assume it was the emperor emeritus of the digital world and that everything they did turned to gold,"" he said.
",41
"Even before the personal computer era's foremost figures donned togas and circus suits for the traditional extravaganzas of the industry's annual gala summit, industry titans were jockeying for the limelight.
Although the 25th anniversary of the microprocessor is among the high points of this year's show, the next 25 years of the industry are likely to prove even more fast-paced, and bitterly competitive, according to senior executives.
The week promises a flurry of new products -- and whole new categories of products ranging from hand-held Windows PCs to new species of the controversial new Network Computer to fast new computer modems and the launch of DVD, digital video disk.
The latter technology holds many times the amount of data available on the conventional CD-ROM devices which now come as standard on many desktops, and is likely to appear next year on machines ranging from laptops to home theatre televisions.
Not only will people be able to play full-length movies on their laptop devices, but the new medium is expected to unleash a whole new genre of computer games using sophisticated three dimensional animation and hot new 3-D computer chips.
Although the annual event is prone to hyperbole -- and it is expected to draw nearly a quarter of a million executives, analysts, customers and media people this year -- some high- profile executives believe the time has finally arrived for the long-heralded convergence of television, computers and telecommunications into one vast, interconnected business.
""I think this convergence is starting to redefine itself as collision,"" Carl Wankowski, president and chief operating officer of Sony Electronics Inc., the U.S. operating unit of Sony Corp. told Reuters on the eve of the show.
Sony expects to showcase a variety of products, including DVD technologies and its WebTV set-top box, which turns a television into a simplified Internet browsing device.
The opening keynote of the week-long event will be Intel Corp. Chief Executive Andy Grove, who under the theme ""A Revolution in Progress,"" will trace the history of the microprocessor which turned Intel from a fledgling chip company into the world's largest semiconductor company.
Grove will also provide live demonstrations of how personal computers can already be used for sophisticated applications today for complex graphics displays. He will outline goals and challenges facing the PC industry over the next 15 years, with projections for the next quarter century.
On Tuesday, Microsoft Chairman and Chief Executive Bill Gates promises to issue a challenge to the industry in a keynote speech whose title harkens back to Gates' ""Information at Your Fingertips"" address here six years ago.
Gates, who recently republished his book, ""The Road Ahead,"" in paperback, has said the industry is too optimistic about what it can produce within a short, two-year time frame, but far too pessimistic about what can be achieved in a decade.
Netscape Communications Corp. Chief Executive Officer Jim Barkesdale on Wednesday will make the third of a trio of keynotes that day, providing insight on how the pioneer of Web browsers sees competition moving to internal corporate networks based on Internet technology, known as intranets.
But the celebrations begin already on Sunday night, as International Business Machines Corp.'s Lotus Development Corp. officially launches its SmartSuite 97 for Windows 95 and Windows NT at a lavish gathering to be followed by IBM's famous Toga Party.
Microsoft Corp. is due to unveil the Handheld PC (HPC) devices running its Windows CE consumer electronics version of its system at a Treasure Island Hotel bash complete with a Cirque du Soleil performance.
A handful of major computer companies, including Compaq Computer Corp., NEC Corp. and Hitachi Ltd., are due to unveil mobile Windows CE-based handheld devices.
On Monday, Microsoft is due to show off the master version of its lastest productivity suite Office 97, enabling a direct comparison between its offering and Smartsuite 97.
Apple Computer Inc., still seeking to recover from huge losses over the last year, is expected to counter the Windows CE launch with more industry-focused adaptations of its three-year-old Newton handheld technology.
The company may also seize the opportunity to provide more details of its future technology plans, as rumours continue to swirl over discussions it has had with startup Be Inc., which has been working on a speedy new operating system.
",41
"Microsoft Corp Wednesday launched electronic commerce software and a wide array of partners aimed at enabling consumers and businesses to buy and sell products over the World Wide Web.
At the core of the announcement is Microsoft's Merchant Server, software which will enable businesses to set up electronic storefronts on the Internet, and a plan to build a new channel of service providers to help businesses do this.
Analysts said the strategy was similar to that successfully used by Novell Inc to sell networking software.
""We believe there will be explosive growth (in use of the Web for shopping),"" Microsoft Chairman and Chief Executive Bill Gates said at a news conference unveiling the company's electronic commerce strategy.
Microsoft also revealed 40 companies that are in the process of building Merchant Server sites and Henry Vigil, general manager of electronic commerce services at Microsoft, said he expects 300 sites using the software by year-end.
The product competes with an array of prior offerings, including those of Netscape Communications Corp and Internet startup Open Market, as well as Oracle Corp and International Business Machines Corp.
As part of the deal, Microsoft and VeriFone Inc brought together financial institutions and payment processors to provide a secure Internet retailing and payment system.
The financial institutions involved include BankAmerica Corp, Wells Fargo & Co, Citicorp's Citibank Card Acceptance Europe, First USA Paymenteck Inc , NOVUS Services and Royal Bank of Canada.
Much of the technology was made available to partners for testing in August and was developed by eShop, which Microsoft acquired in June, company officials said.
In addition to the infrastructure partners, Vigil said a key priority was ""trying to get this new channel built where we see a range of hosting service providers who are really going to be the ones who lease the T1 lines and run the servers on behalf of merchants who are not technologists.""
One such company, Boca Raton, Fl.-based Internet Communication Network, Corp., has been in business less than a year and already has some 50 customer Web sites in operation, including one using the Merchant Server, according to David Finkelstein, president of ICA.
James Dee, a specialist New York City photographer, said he had chosen to go through a networking service and support firm using the Merchant Server product to start up a new gallery to sell original contemporary artwork on the Web.
The site was set up in less than a month, he said, and Sarala Dee said the cost of getting the cyberspace gallery under way would amount to some $30,000 to $40,000.
But analysts said the market still may take a long time to develop into the multi-billion dollar market some Internet enthusiasts project.
""As Gates said clearly this is a beginning market,"" said Kathey Hale, an analyst at Dataquest.
Gates cited Microsoft and industry estimates that the number of consumers on the World Wide Web would more than triple between now and the year 2000, to 48 million.
The number of businesses on the Web is projected to grow four-fold by the year 2000 to two million from 500,000 currently, Gates said.
David Cuursey, who publishes the Coursey.com newsletter on the Internet, said estimates the minimum price for a decent store using the software is $100,000.
""The point of it is that for a lot of people setting up a virtual store it will be also as expensive to create and maintain as a real store,"" he said. ""You're not going to use this technology to take advantage of it for less than $100,000.""
",41
"Sun Microsystems Inc. on Tuesday will unveil the long-awaiting stripped-down network computer it claims will cost companies up to 80 percent less to own and operate than a personal computer connected to a network.
Sun's Java Computing initiative, including the JavaStation network computer that Sun plans to sell for as little as $750, is the company's challenge to the PC market dominance of Microsoft Corp. and Intel Corp.
The formal unveiling at a New York City news conference is the culmination of months of preparation, and the fruition of a strategy that investors consider sufficiently risky to have prompted a sell-off in the company's stock earlier this month.
Microsoft and Intel announced plans Monday to develop a competing product.
Scott McNealy, chairman and chief executive of Sun, recently told analysts he believed Sun's recent strong financial results were related to its focus on network computing.
Sun Microsystems' approach to the Network Computer -- in contrast to those of allies Oracle Corp. and International Business Machines Corp. -- is to target major corporate customers for fixed-function applications.
Early applications will include such tasks as airline and hotel reservations, kiosks, health care systems and stock trading, and Sun expects to highlight a dozen corporate allies, including British Telecommunications Plc, CSX Corp., Federal Express Corp., and FTD Inc.
Sun also is expected to announce support of top systems integrators, including Andersen Consulting and EDS, and nearly 450 independent software developers.
The basic JavaStation itself, which had been code-named ""Mr. Coffee,"" will have the dimensions of an 8.5 by 11 inch piece of paper, weigh four pounds and have no slots, no hard disk, no CD-ROM and no floppy disk drive.
""A fully-configured system, with keyboard mouse and good resolution display will be under $1,000 dollars,"" said Ed Zander, president of Sun Microsystems Computer Co. He said an under-desk machine and a desktop model will be sold.
Sun estimates the machines may cost as little as $2,500 per year to own and administer, or $7,500 over three years, compared with independent estimates of PC costs of up to $11,900, or $35,700 over three years.
The JavaStation family will begins shipping in late December to developers and large customers, with volume shipments beginning in 1997.
Sun is also shipping the Netra j server line, with prices ranging from a U.S. list of $7,695 to more than $200,000. Servers are computers that link personal computers in a network.
Sun's JavaSoft unit, which is charged with expanding use of the company's Java technology, also will demonstrate HotJava Views, a method of viewing electronic mail, World Wide Web pages and scheduling software.
Executives declined to say how much HotJava Views will cost, but added it will be priced similar to other software packages on the market, with volume discounts for large sales.
Separately in Washington, D.C. on Tuesday, the company's SunSoft unit is due to provide details of its next-generation Java Workshop system.
These include Project Studio, which enables users to create interactive content without writing code, Project Speedway, which speeds up Java applications, and Project ICE-T, which helps connect Java machines to other computer architectures.
",41
"For many computer owners, 1997 will be the year when Internet users will begin to see more features aimed at making the Net more lifelike. But it is also likely to be marked by frequent communications breakdowns caused, in part, by increased demand.
""I wrote a year ago about a collapse, but it's really collapses, getting more frequent, deeper and longer,"" said Robert Metcalfe, inventor of Ethernet computer networking technology and founder of 3Com Corp who is now vice president of technology at International Data Group of Boston.
Metcalfe said the congestion that causes many people to call the World Wide Web the ""World Wide Wait"" is only one of many problems that can prompt it to crash. Major outages have been caused by such seemingly minor events as a rodent chewing a power cable or an ampersand typed in the wrong place in software on central Internet devices.
This summer, more than 6 million customers of America Online Inc., the world's largest online computer service, were without service for 19 hours because of a software problem. In October, a failure at Internet service provider BBN Corp's Stanford University Internet facility cut off access for 400 top high tech firms for nearly a day.
Experts such as Metcalfe predict similar types of outages next year as telecommunications companies and Internet providers struggle to keep up with demand. Still, Web surfers are likely to see many new features in 1997, from advanced graphics to slick ways to communicate with each other using animated characters in virtual chat rooms and high-tech games.
Dozens of companies, including Germany-based Black Sun Interactive, which recently opened an operation in San Francisco, have been developing new virtual worlds based on a technology called Virtual Reality Modelling Language (VRML).
The technology, pronounced ""ver-mul,"" enables creators of multi-player computer games, for example, to design lifelike characters and three-dimensional settings that will exploit new 3-D computer chip designs and speeded-up microprocessors with added multimedia features due next year. New capabilities include interactive three-dimensional fly-over cities created by the startup Bigbook, which allows users to swoop down on a building and click on it with a mouse to see who is inside.
But as the Net becomes more lifelike, the prospects for a showdown between regulators and free-speech advocates over the issue of online pornography is likely to increase. In October, the FBI said it was investigating an electronic mail message sent to thousands of Internet users offering child pornography for sale.
The question of whether to regulate the content of the Internet, both within a country's borders and internationally, comes as officials in Washington are pressing for reductions in sexual and violent content in film and television. One solution offered by some software firms is a device like television's V-chip, which allows parents to restrict access to certain programmes.
Next year will also see new electronic communities in which people can participate as consumer, customer, contributor or even investor in enterprises over the Web.
Although 1997 will not be the year people rush out to do all their shopping on line, it will be a critical year for deploying the technologies that will make electronic commerce widely available in 1998 and 1999, according to analysts.
Michael Parekh, Internet analyst at Goldman Sachs, expects companies to continue using Internet technology both in internal networks, known as Intranets, and to create what are known as Extranets, to reach customers and suppliers.
""The big thing for 1997 is going to be the way users think of the Web goes from a pull paradigm to a push paradigm,"" he said, referring to the goal of being able to send data to individuals rather than waiting for them to seek it.
In the United States, only about one third of the country's 97 million households have a personal computer and just 11 percent of U.S. households are estimated to have the modem devices necessary to link them to the Internet.
Faster, 56-kilobit modems are due next year, but analysts expect a battle over standards will slow their spread.
",41
"Microsoft Corp Wednesday launched electronic commerce software and a wide array of partners aimed at enabling consumers and businesses to buy and sell products over the World Wide Web.
At the core of the announcement is Microsoft's Merchant Server, software which will enable businesses to set up electronic storefronts on the Internet, and a plan to build a new channel of service providers to help businesses do this.
Analysts said the strategy was similar to that successfully used by Novell Inc to sell networking software.
""We believe there will be explosive growth (in use of the Web for shopping),"" Microsoft Chairman and Chief Executive Bill Gates said at a news conference unveiling the company's electronic commerce strategy.
Microsoft also revealed 40 companies that are in the process of building Merchant Server sites and Henry Vigil, general manager of electronic commerce services at Microsoft, said he expects 300 sites using the software by year-end.
The product competes with an array of prior offerings, including those of Netscape Communications Corp and Internet startup Open Market, as well as Oracle Corp and International Business Machines Corp.
As part of the deal, Microsoft and VeriFone Inc brought together financial institutions and payment processors to provide a secure Internet retailing and payment system.
The financial institutions involved include BankAmerica Corp, Wells Fargo & Co, Citicorp's Citibank Card Acceptance Europe, First USA Paymenteck Inc, NOVUS Services and Royal Bank of Canada.
Much of the technology was made available to partners for testing in August and was developed by eShop, which Microsoft acquired in June, company officials said.
In addition to the infrastructure partners, Vigil said a key priority was ""trying to get this new channel built where we see a range of hosting service providers who are really going to be the ones who lease the T1 lines and run the servers on behalf of merchants who are not technologists.""
One such company, Boca Raton, Fl.-based Internet Communication Network, Corp., has been in business less than a year and already has some 50 customer Web sites in operation, including one using the Merchant Server, according to David Finkelstein, president of ICA.
James Dee, a specialist New York City photographer, said he had chosen to go through a networking service and support firm using the Merchant Server product to start up a new gallery to sell original contemporary artwork on the Web.
The site was set up in less than a month, he said, and Sarala Dee said the cost of getting the cyberspace gallery under way would amount to some $30,000 to $40,000.
But analysts said the market still may take a long time to develop into the multi-billion dollar market some Internet enthusiasts project.
""As Gates said clearly this is a beginning market,"" said Kathey Hale, an analyst at Dataquest.
Gates cited Microsoft and industry estimates that the number of consumers on the World Wide Web would more than triple between now and the year 2000, to 48 million.
The number of businesses on the Web is projected to grow four-fold by the year 2000 to two million from 500,000 currently, Gates said.
David Cuursey, who publishes the Coursey.com newsletter on the Internet, said estimates the minimum price for a decent store using the software is $100,000.
""The point of it is that for a lot of people setting up a virtual store it will be also as expensive to create and maintain as a real store,"" he said. ""You're not going to use this technology to take advantage of it for less than $100,000.""
",41
"International Business Machines Corp's Lotus Development Corp unveiled the company's next productivity suite, SmartSuite 97, and said the product will begin shipping in January.
Lotus President Jeff Papows said on Sunday night the company will continue to add Internet functionality, with a further upgrade planned in the first quarter of 1998.
He took a shot across the bow of Netscape Communications Corp's aspirations in challenging Lotus's share of the corporate marketplace.
""If they thought the browser war was bloody, just wait,"" he said of Netscape's ambition to expand its role in supplying corporate internal networks, or intranets.
""This will be a whole new level of bloodiness,"" he told reporters after the launch of the new SmartSuite package on the eve of the Comdex annual computer show here, the largest industry trade gathering in the United States.
Lotus executives made clear Lotus plans to continue building new features into its applications suite, while undercutting the prices charged by market leader Microsoft Corp, which dominates the market with nearly 70 percent share.
Although the new Lotus SmartSuite carries an estimated retail price of $399, current Lotus applications users, or those using competing products, may upgrade for just $149.
Those buying the current SmartSuite edition through year-end 1996 will receive a free upgrade and a $50 rebate, bringing the effective price to $99.
Users of certain recent Corel applications packages will be allowed to trade these in for a free CD upgrade to the current SmartSuite for Windows 95 or Windows 3.1 by year-end.
Papows cited a 1996 International Data Corp survey showing the size of the suite application market growing from around $4.4 billion in 1997 to around $6 billion by the year 2000.
Lotus achieved a 26.3 percent share of unit volume in the third quarter, according to IDC data, and has benefited from nine million units sold through computer makers worldwide in the first year of its preloading program.
Online registrations in this program have been rising 600 percent quarter over quarter this year, and retail sales have soared 65 percent, the Lotus executive said.
Lotus aims to differentiate its productivity suite by providing the ability to easily find, share and collaborate, as well as publish, using Internet technology.
SmartSuite 97 works on Microsoft's 32-bit Windows 95 and Windows NT 4.0 operating systems, and permits users to drag and drop Internet information for use on the desktop, dynamically update spreadsheets and conduct searches over the Web.
Lotus product managers also gave previews of Lotus Components for the Internet ""applet,"" due to be released in 1997, to create spreadsheets, charts and diagrams within applications. An applet is a small program, written in the Java environment developed by Sun Microsystems Inc.
Lotus said it currently has some 300 to 400 programmers working in Java -- roughly equivalent to the numbers that Sun's JavaSoft unit itself has had, although Sun now plans to accelerate its number of Java programmers to around 700.
-- Silicon Valley Bureau ""1 415 846 5400
",41
"Intel Corp. President Andrew Grove said the $400 billion personal computer industry must serve up more than just television-like features to impress its most demanding customers: 10-year-old kids.
In an opening speech at the Comdex trade show in which he hailed the 25th anniversary of the microprocessor which Intel invented, Grove demonstrated how PCs with his company's next-generation microchips will be able to deliver full-screen video with theater-like, surround-sound stereo.
But, he said, this would only bring the PC to parity with the television as an entertainment device.
The industry must focus on satisfying ""our most demanding users: 10-year-old kids,"" he said.
Using Intel chips and graphics technology from Salt Lake City-based Evans & Southerland Computer Co., Grove demonstrated how graphics could improve by the year 2000 to provide a more lifelike ""flythrough"" down a quiet English village street.
Demonstrating Intel's renewed emphasis on increasing consumer use of products based on its chips and technologies, Grove said the entire industry needs to focus on satisfying customers with aggressive output of new products.
""My fear is that some day that (product) cycle might sputter,"" he told reporters after his address. The industry should aim to grow by 15 percent to 17 percent a year, as it has for the last decade or more, he said.
""Just as we are investing in technology for the long term, we need to target the new users of the future today.""
This is particularly important as the cost of building a semiconductor plant has risen dramatically from $3 million in 1973 to $2.5 billion for its latest plant and will reach as much as $10 billion entering the next millennium.
Grove said the industry must be prepared to meet consumers' expectations, including those formed over a half century during which the television defined visual experience.
""We are in competition for these consumers, for their dollars and their leisure time,"" he said, arguing that time especially was a ""finite"" commodity and computers needed to compete with TV for consumer share.
Grove said there are only about one-third as many personal computers as TVs installed worldwide, even though the numbers of PCs sold annually is starting to outpace the number of new televisions sold on a worldwide basis.
""In this war, he who captures the most eyeballs wins,"" he said. ""In our battle for eyeballs, user experience on the PC must not only meet the expectation levels set by TV viewing, it must exceed them.""
Grove projected that microprocessors could by the year 2011 be capable of holding 1 billion transistors and deliver 100,000 million instructions per second, or MIPS.
Grove said these advances are possible with current technology. Microprocessors are the semiconductors, invented by Intel engineers in 1971, which serve as the brains of personal computers.
",41
"Netscape Communications Corp. President Jim Barksdale Wednesday unveiled new software that will allow users to receive personalized information anywhere on a computer network.
The new software, code-named Constellation, will also allow users to merge and customize information on computer desktops and networks, posing a fresh challenge to archrival Microsoft Corp..
In a keynote speech at the annual Comdex computer trade show in Las Vegas, Barksdale described Constellation -- due for release in mid-1997 -- as part of an Internet ""third wave"" of information that can be displayed according to individual preferences.
""While the first waves of the Internet focused on users being able to easily find information, the mark of this third wave is that information finds the user,"" he said. ""Our new products will have the intelligence to help you focus on the information you care about.""
Constellation, which will be part of Netscape's next-generation Netscape Communicator corporate software, will allow users to log on or off computers throughout a network -- or even across the Internet -- and see a computer desktop with the user's personal setup.
This ""roaming"" capability, like using mobile telephones in cities outside one's home base, can free people to work in different locations using the same basic tools and calling up application software such as spreadsheets and word processors.
That provides a different approach than the one used currently by Microsoft, which requires computer makers using its Windows operating systems, for example, to show the Windows logo first.
Although Microsoft has moved aggressively over the last 11 months into the Internet market, and produces a rival browser called Internet Explorer, Netscape has so far retained the leading role in the browser market.
Microsoft, however, holds 90 percent of the market for the operating systems that run computers.
Barksdale said that with 48 million copies of Netscape's browser software sold, it is the most popular application ever, and he said recent data shows Netscape with 78 percent of all browsers.
Contrary to speculation since Netscape's red-hot stock offering in August 1995 that it would one day compete with Microsoft in operating systems, company executives said Netscape was deliberately focusing on the ability to work across some 17 different operating systems instead.
""Constellation is not an operating systems, but is a new user interface,"" Netscape Senior Vice President Mike Homer told reporters.
Although Netscape executives acknowledged there was some difficulty in making its software run on some environments, such as Windows 3.1, the company was succeeding and committed to continuing to support a variety of operating systems.
Analysts have said this is a major distinction from Microsoft, which earlier used the Comdex show to unveil a new operating system for hand-held computers, Windows CE, and its new Office 97 software package.
Although Microsoft demonstrated powerful features and Web capabilities for its new Office package, analysts said companies would only get the full benefit of it if they chose to deploy it throughout departments or the company.
The problem of distributing information to individuals in the fast-growing Internet, with its tens of millions of sites, has increasingly captured the attention of Silicon Valley's sharpest engineers.
Two start-up companies widely regarded in this area -- Marimba Inc. and PointCast Inc.'s PointCast Network -- will have their products integrated into Constellation, Netscape said.
",41
"Lotus Development Corp. Chief Executive Officer Michael Zisman said Wednesday the company will focus its attention on what could become a $1 billion market for collaborative Internet software by 1999.
Lotus, acquired by International Business Machines Corp. last year in a deal valued at more than $3 billion, should not try to be all things to all people, he said, but to concentrate its core business of software for groups, or so-called groupware.
""Collaboration is clearly our sweet spot,"" he said in a keynote address at a three-day Internet & Electronic Commerce conference here organised by the Gartner Group.
A new version of the company's popular Lotus Notes software due out in the fourth quarter, version 4.5, will offer Notes server software to host collaboration over the Internet. Servers are computers that manage the flow of data in a network.
This latter feature is provided by new Lotus technology dubbed Domino, which is currently being tested.
Zisman said too much attention was now devoted to browsers, software that lets users help navigate the Internet.
""The browser market is being eclipsed by the server market today as we speak,"" he said, noting browsers will most likely be offered as part of the operating system, as with Windows.
""The action, I believe, is going to be in the server market,"" he said, adding that server software for collaboration through Internet sites alone is projected to be a $1 billion market by the end of the decade.
The market for servers at the hub of Web sites will likely segment into at least three distinct classes -- content, collaboration and commerce -- and larger organisations will likely mix ""best of breed"" applications from different suppliers, he said.
Lotus Development is concentrating helping people work together electronically, he said, because ""content without collaboration is useless ... the value is not in the content.""
He noted as an example Web sites which not only carried information, but enabled people to communicate interactively with the Web site or other individuals using the Internet.
""The borders are blurry. I don't believe that we will see pure content sites and I don't believe that we will see pure commerce sites,"" he said. ""We will obtain and retain customers if we engage them.""
",41
"U.S. high-tech venture fund investment soared 50 percent in the third quarter as overall U.S. venture investment rose 25 percent in the seasonally-slow period from year-ago levels, according to a survey released on Friday.
""It is so hot it's scary,"" Kirk Walden, who compiles the quarterly Price Waterhouse LLP National Venture Capital Survey, said in an interview.
High-technology industries, from computer software and semiconductors to medical instruments, rose to $1.32 billion in the third quarter, accounting for two-thirds of the $2 billion invested during the period, the survey found.
Software investments alone more than doubled from year-ago levels to $596 million, and in the first nine months of 1996 alone reached $1.74 billion, more than the $1.34 billion recorded for the sector in all of 1995.
For the first nine months of 1996, total venture-backed investments in the country reached $7 billion, nearly the $7.5 billion reported for the full year last year.
""Based on the current rate of venture capital investments, 1996 will certainly be another record year,"" Donald McGovern, chairman of the Price Waterhouse Technology Industry Group, said in a statement accompanying the results.
The third quarter total figure of $2 billion was a sequential drop from the blistering $2.8 billion pace the industry recorded in the second quarter.
""Third-quarter numbers are traditionally lower than second- quarter numbers because deal flow slows considerably in the summer months,"" said Carl Thoma, president of the National Venture Capital Association. ""But the venture capital industry still remains strong. Good deals are being made across the country in all industries.
Companies in the startup and early stages attracted the greatest level of venture capital investment, the study found, with these comprising 46 percent of the 444 companies receiving funds and accounting for $600 million invested.
On average startup companies received more than $3.1 million in funding and, communications firms accounted for nearly 56 percent of the total invested in this category.
Funding for Internet-related companie continued at the high level set in the second quarter of 1996, with 62 Internet- related companies receiving funding in the quarter exeeding the year-ago period by six times.
In a new trend, third quarter venture investment activity appeared to expand beyond the traditionally dominant Silicon Valley and New England areas, whose combined share of investment fell to 33 percent of value invested.
Typically the two regions account for some 40 to 45 percent of the total amount invested by venture funds, and experts said it confirms atriend towards more even distribution.
""Nobody in Silicon Valley is going to panic,"" because of the increase in funding outside the key areas, Walden said.
",41
"Stocks of high-tech companies soared Wednesday after a potentially costly ballot proposal was voted down in California, and top executives found themselves relishing their roles as political activists.
A group of top-level entrepreneurs and executives met behind closed doors Wednesday to work on a broader political alliance after the ballot measure, which would have made it easier for shareholders to file lawsuits, was defeated by a 3-1 margin.
""A year ago, this (Silicon) valley politically was naive, not involved, not organized and not effective,"" said John Doerr, the partner at venture capital firm Kleiner Perkins Caufield & Byers who led opposition to the ballot measure, known as Proposition 211.
The measure was promoted by a group of securities lawyers including San Diego attorney William Lerach, whose lawsuits brought on behalf of shareholders after a company's stock plunges irritate corporate executives.
But California's high-tech firms jumped into action, raising an estimated $38 million and mobilizing 5 million employees, shareholders and customers in a major grass-roots campaign in the months before election day.
That amount, coupled with $13 million spent by proponents of 211, rivaled the money spent by labor groups nationwide as they sought to put friendly legislators, mostly Democrats, in Congress.
It was also more than was needed to start up Sun Microsystems Inc., Cisco Systems Inc., and Intel Corp. combined.
Final returns show the measure lost by a 3-1 margin, which brought relief to Wall Street investors who were nervous that passage would bring a raft of shareholder lawsuits to California.
Shares of high-tech companies surged on the news, with Intel soaring $4.75 to an all-time high of $118.75 on Nasdaq. After the market closed, the company released bullish news on its fourth quarter business trends.
Texas Instruments jumped $4.25 to $53 on the New York Stock Exchange and Microsoft added $3 to $144.50 on Nasdaq.
""We defeated the jackals of Proposition 211, the carrion feeders who take away our profits,"" James Cramer, principal of money management firm Cramer Partners in New York, said of the stock rally.
Silicon Valley executives, who had warned of wide-scale resignations of officers and directors in California if the measure had passed, applauded its defeat and said they would support continued political activism.
John Young, acting chairman of Novell Inc., said the campaign was unprecedented among high tech firms, and could be the start of a multi-year corporate commitment.
Cisco Systems Chief Executive John Chambers said his company and others had been so focused on fast-changing high-tech markets that they had neglected politics.
""We were concerned with just doing our business and we were letting other people fight our fights for us, which is wrong,"" he said.
While political activism could be a distraction, it was also important to address political issues before they got out of control, he said.
""It's 'pay me now or pay me later,'"" he said in an interview, predicting continued political engagement.
Doerr told chief executives, corporate lawyers and venture capitalists gathered at a celebration late on Tuesday that he expected executives now to focus on issues of fostering growth, education, legal reform and economic opportunity.
He said the anti-211 effort demonstrated Silicon Valley to be ""a state of mind, not a place,"" which due to the spread of high-tech businesses, in effect, extends from Massachusetts to California and from Florida to Washington state.
Executives here are already talking about the prospect of another battle with plaintiff's lawyers, who are rumored to be mulling new ballot initiatives in other states, or the possibility of targeting high tech firms more narrowly.
",41
"Hewlett-Packard Co. said Friday that it will unveil technology Monday that will provide a breakthrough in the long-deadlocked debate over use of software encoding for secure data traffic.
If the encryption technology has won the backing of industry and the U.S. and other governments -- which Hewlett-Packard officials say is the case -- the development could eliminate a key obstacle to the growth of electronic commerce via the Internet.
Hewlett-Packard Chairman Lewis Platt will provide details on the technology, which includes technology patented by the Palo Alto computer giant as well as other technologies, a company spokesman said.
Technology from RSA Data Corp. the de facto standard-setter for Internet security, will be involved Hewlett-Packard officials said.
Hewlett-Packard stock closed up $1.375 at $50.875 on the New York Stock Exchange.
Senior Microsoft Corp. and Intel Corp. executives were also scheduled to attend Monday's news briefing at the National Press Club in Washington, Hewlett-Packard officials said.
The technology will make it possible to export products containing so-called ""strong encryption,"" which cannot be exported under national security laws dating back to the Cold War.
Under national security law, the U.S. government has allowed the export of software and other computer products containing only weaker data encryption technologies.
Encryption has been classified as a munition because of its potential for use by terrorists, spies or other criminals to conceal messages.
Encryption programmes use mathematical formulas to scramble information, such as electronic mail messages or credit card numbers, to render them unreadable to computer users without a password or ""software key"" that can unlock the coded material.
For years the domestic computer industry has complained that such restrictions have hampered its competitiveness in world markets, and that its customers did not necessarily want the government to be able to decode internal data.
The industry says the laws have prevented it from offering some of the most recent Internet technologies, even within the United States, because it is impossible to prevent computer users outside U.S. borders from gaining access to technologies publicly available on the Internet.
Companies and their customers want to use encryption to protect confidential communications and electronic commerce.
Silicon Valley executives recently noted that consumer devices, such as WebTV Network's Web browsing television device that hit store shelves this autumn, use the same levels of strong encryption as used in military systems.
WebTV said it is using keys comprised of 128 bits, or characters, of data to encode and decode its communications to its set-top boxes to provide consumers with the best level of security available over the Internet.
The government recently proposed that the roadblock be eliminated by providing a key recovery system, in which authorities could recover keys to crack messages if they received a court warrant to do so.
Industry has rebuffed this as difficult to manage.
The solution being offered by Hewlett-Packard would be flexible, allowing customers to use the levels of encryption required by different governments, the company said.
""This is going to allow very strong encryption,"" said a spokeswoman.
Hewlett-Packard said its technology would provide a means of ""solving the data security and integrity issues that have impaired and frightened users and companies from exploiting the full power of the Internet.""
Data Security Inc., the computer security pioneer acquired this year by Security Dynamics Technologies Inc. is also expected to be involved in Monday's announcement.
RSA Data has become a de facto standard-setter for security over the Internet by licensing rights and technology to use its encryption systems. Hewlett-Packard declined to identify other companies or technology that may be involved.
",41
"Calendar third quarter returns for hotly-competitive Internet stocks will reflect the sacrifice of near-term profits for longer-term growth, analysts said.
Many Internet startups are still fighting to build market share and are expected to continue posting quarterly losses.
""Everything's moving quickly, but people still have to digest the technology, and pay for it...sorting out the winners from the losers and the also rans,"" said Steve Harmon, senior investement analyst at Mecklermedia's iWORLD.  
Typical of the scurry to capture market share by making targeted investments early is Yahoo! Inc.
Yahoo!, started by two venture-backed Stanford University students two years ago to help people navigate the far-flung World Wide Web, has been building on its branded media model during its second full quarter after its initial offering.
The search engine pioneer is due to report after the market close today on its results for the third quarter, and analysts expect a $0.07 a share loss, according to First Call.  
Yahoo! has begun opening metropolitan services in U.S. cities and internationally in Japan and Britain; subject-area services such as quotes and map or individual lookup pages; and demographic offerings like Yahooligans for kids.
Yahoo! has already supplied clues to its quarterly performance potential.  Last week it released traffic figures showing it had one billion full-page ""hits"" in the quarter.
Also expanding internationally, in league with overseas media firms such as Bertelsmann AG, is navigator firm Lycos Inc, which last month reported a loss of $0.16 a share for its fourth fiscal quarter ended in July.  
Infoseek Corp, which has tuned its speedy search technology to target business users in particular, is due to report a third quarter loss of $0.18 a share on October 21.
And on the same day, Excite Inc, which bought out rival McKinley Group this summer and which like Yahoo! and Infoseek has been expanding personalized searching, is expected to post a $0.35 a share loss for the quarter.
Like other subgroups of the Internet sector, financial analysts expect further consolidation in the sector over time.
Netscape Communications Corp is prominent among the handful of Internet-linked shares seen reporting profits.  
By shifting from browsers to tools, Spyglass has racked up steady profits.
Among Internet service providers, First call consensus estimates for Netcom On-Line Communications Inc are for a loss of $1.25 in its third quarter, wider than $0.49 a year ago, while PSINet Inc is expected to narrow its loss to $0.29 from $0.40 in the year-earlier third quarter.
Open Market Inc, which Tuesday unveiled a deal with AT&T Corp, is seen posting a $0.23 a share third quarter loss.  
""This convergence of capital, creativity and opportunity is unprecedented in at least 15 or 20 years and that makes for some hot growth, top and bottom line, but it still takes time to build that bottom line,"" said Harmon.
    COMPANY    QTR    FIRST CALL CONSENSUS EPS  YEAR-AGO
    Yahoo! Corp	   Q3 $0.07 loss    n/a
Netscape Comms Corp Q3 $0.08 profit $0.02 profit
    Spyglass Inc	  Q4 $0.08 profit $0.06 profit
    NETCOM On-Line	Q3 $1.25 loss   $0.49 loss
    PSINet Inc	    Q3 $0.29 loss   $0.40 loss
    Open Market	   Q3 $0.23 loss    n/a
Raptor Systems Inc  Q3 $0.03 profit $0.10 loss
    Check Point	  Q3 $0.09 profit $0.05 profit
    America Online Inc   Q1 $0.18 profit $0.08 profit
*consensus estimates/comparables calculated by First Call
NOTE: Check Point Software Technologies Ltd.
Having completed its initial public offering in August 1995, six months before the search engine firms, Netscape had just emerged as a winner from the first round of battles for browser market dominance only to find software giant Microsoft Corp muscling into the market this year.
Netscape, which is expected to unveil new alliances and technology at its developers' conference next week, is seen on October 22 reporting a third quarter profit of $0.08 a share.
Also according to First Call, Spyglass Inc is on November 1 expected to report a per-share profit of $0.08 for its fourth fiscal quarter to the end of September. -sam.perry@reuters.com, Palo Alto Bureau, +1 415 846 5400
",41
"Moving to capitalise on enormous growth in the use of laser printers, Hewlett-Packard Co on Monday will launch a new genre of printers it calls the ""mopier"" to steal work from the copy machine.
The new device, dubbed the HP LaserJet 5Si Mopier, reduces the need to use copiers by allowing workers to make multiple original prints -- or ""mopies"" -- from their own desktop.
HP, which is already a market leader in printers, faxsimile machines and scanners, hopes the new model will help it capture a share of the $18.5 billion a year copier market.
Analysts expect the printers will present a challenge to copy machine giant Xerox Corp and other copier makers, as sales revenues of mid-range 20-30 pages per minute copiers is projected to drop by $300 million to $1 billion by 2000.
""Xerox is a dominant copier and printer vendor. This is a challenge and an opportunity for Xerox,"" said Robert Fennell, industry analyst at the market research firm Dataquest.
The market for midrange printers based on Canon Inc's 24-page per minute engine, until recently a relatively small segment of the market, is projected to surge by some 500 percent this year from 1995, he said.
With a U.S. list price of $9,549, the machine is more expensive than other departmental laser printers, but it contains more features and it is priced less than midrange copiers costing between $13,000 and $20,000.
Executives at Hewlett-Packard's LaserJet Solutions Group in Boise, Idaho, said the Mopier is part of its recently-unveiled Digital Workplace strategy aimed at addressing work flow and document management problems at work.
""Our customer research found that people are already mopying today,"" one of the executives said in an interview.
The new machine is based on HP's existing LaserJet 5Si models, but adds finishing tasks -- such as stapling and collating of documents.
A user-friendly interface to help guide workers through the printing options and tells them when their job is completed.
The Mopier is designed to cut down on the time office workers spend running between printers and copy machines, waiting for others to copy, and fixing paper jams.
It contains a 420 megabyte hard drive and reduces network traffic as well by storing each print task once and printing the number of copies specified, rather than requiring each print job to be sent down the network one at a time.
The initial Mopier model may pave the way for a whole family in the future, if it lives up to its expectations.
The introduction is timed to take advantage of a major shift towards network printing -- International Data Corp. reported the number of pages printed on printers in 1995 for the first year exceeded those printed of photocopy machines.
",41
"For managers at the trendy specialty juicer Odwalla Inc., the revelation that their apple juice products were associated with a potentially deadly outbreak of E. coli food poisoning has come as a shock.
The company, headquartered in the easy-going coast community of Half Moon Bay, was founded 16 years ago on the premise that fresh, natural fruit juices nourish the spirit.
Company executives were morose as they met reporters for the first time on Thursday in the parking lot of the company's modest building, across a creek from the town center.
""It is very tough, to be honest, to be focused on health and nutrition all of your life and have this incident happen,"" Greg Steltenpohl said. He founded the business with a childhood friend in Santa Cruz in 1980, using a used juicing machine in a shed behind their house.
Odwalla has grown by more than 40 percent a year, with annual sales in its fiscal year to Aug. 31, 1996, surging 65 percent to $59.2 million. It is now estimated to account for more than 70 percent of the fresh-juice market in the seven Western states it serves, together with Vancouver, British Columbia.
The company prides itself on using cold processing, which it says leaves vegetable and other biological nutrients intact, and on a rapid store distribution system. Its marketing emphasizes freshness and the absence of pasteurization and artificial additives or preservatives.
Even its name, from a song poem by the Art Ensemble of Chicago jazz group, displays a sense of mission. The Odwalla is a leader who guided the ""lost people of the sun"" out of the ""gray haze"" -- of ""overprocessed foods"" in this case.
Steltenpohl and Chief Executive Officer Stephen Williamson said Odwalla had mobilized its 175 trucks and drivers, armed with hand-held computers, to recover recalled bottles from the shelves of more than 4,600 outlets in California, Washington, Oregon, Colorado, New Mexico, Nevada, Texas and Vancouver.
Executives immediately offered to refund the purchase price of any of the company's drinks, even those not among the 16 out of 23 fruit varieties recalled. They also said the company would pay for medical treatment for anyone found to have become ill through drinking an Odwalla product.
Although Williamson said the company had product liability insurance that he believed would cover the incident, the executives declined to answer questions about the financial impact of the recall and any subsequent actions.
Odwalla shares were up $1.13 at $13.25 by Friday afternoon after shedding roughly a third of their value on Thursday.
Jean-Michel Valette, an analyst at Hambrecht & Quist, said publicity surrounding the recall would hurt sales but with insurance and $14 million in cash, ""Odwalla has the resources to weather the storm.""
Odwalla, which takes the precaution of keeping samples of each batch of juice it produces, is working with the Food and Drug Administration and Washington state authorities to determine how contamination might have occurred and how widespread it was.
But company officials said it was too soon to question their philosophy.
",41
"Shanghai-born tycoon Tung Chee-hwa claimed victory for himself and for the Chinese nation on Wednesday when he won the race for Hong Kong's future leader.
""For the past 100 years, Hong Kong has been a colony. Now we are in charge of ourselves. I believe most Hong Kong people have confidence in the future,"" said Tung.
""Some people still have worries, but I want to remind them that people walk the road together, success lies with the people and comes from their efforts,"" he said.
""I believe everyone should be clear that we want a better Hong Kong, a better future,"" Tung said.
Tung was elected by the Selection Committee, a panel of 400 members handpicked by Beijing, to be Hong Kong's Chief Executive once the colony reverts to Chinese rule on July 1, 1997.
In a short, prepared victory speech, Tung, 59, stressed pragmatism and stability and downplayed democracy.
While noting Hong Kong's rule of law, spirit of freedom and strong civil service, Tung said it was important to secure a smooth transition for the colony from British to Chinese rule.
""I believe we can do better than before, based on the one country-two systems policy and under the protection of the Basic Law,"" Tung said.
He was referring to Beijing's policy for letting Hong Kong's capitalist system continue after it comes under the communist government's jurisidiction, and to its post-1997 constitution.
That Tung would be the man to take on Hong Kong's leadership yoke after the departure of the last British governor, Chris Patten, had been widely seen as a foregone conclusion.
The shipping magnate heads a family empire that was bailed out of financial difficulties by China a decade ago.
In the first round of voting by the 400-member Selection Committee, Tung took 206 votes. On Wednesday, he won 320 votes.
His speech was delivered at Hong Kong's Convention Centre immediately after his victory was declared by Chinese Foreign Minister Qian Qichen, who said Tung had become Hong Kong's most democratically elected leader to date.
The voting process, long criticised as undemocratic and unrepresentative of Hong Kong's six million people, was a step forward on the colony's road to democracy, Tung said.
""People may have differing opinions about the pace of democratic change in Hong Kong, but today, under the Basic Law, I believe we are making the first step towards democracy and this is most suitable for Hong Kong's situation,"" Tung said.
""This is a good start,"" he said. ""Today we elect our own chief executive and in the future, we will follow the Basic Law and the actual situation of our society, step by step, to push democracy forward,"" he said.
He called on Hong Kong's political parties not to politicise issues but to work together for the sake of their country and for all Chinese people.
Demonstrations were part of Hong Kong culture, he said, but people should instead sit down and discuss their grievances.
Tung emphasised public welfare reform and called for a long-term re-examination of education, welfare for the elderly and industry policy.
He was leaving for Shenzhen, a Chinese special economic zone on Hong Kong's border, later on Wednesday, where he was expected to receive China's official blessing as Hong Kong's next leader.
",27
"Up to 100,000 tonnes of copper held in Shanghai bonded warehouses, confounding the world market as to its source and ultimate fate, probably belongs to China's strategic state reserve, industry sources said on Friday.
Around 40,000 tonnes of the copper have already been moved to warehouses near the northern port of Yingkou, where some of the strategic stockpile was stored, they said.  
Just who owns the copper is a question that has kept traders and industry analysts guessing since the metal was channelled into Shanghai by the China National Nonferrous Metals Import and Export Corp (CNIEC) in June and July.
It was unclear whether or not the 40,000 tonnes had cleared customs -- which would provide some concrete indication that the strategic reserve, administered directly by the central government's State Planning Commission, owned the copper.
Traders have said the reserve could negotiate concessions on duties -- three percent import tax and 17 percent value-added tax -- that made the copper prohibitively expensive otherwise.  
But one source, the head of a Hong Kong trading house, said it made no difference if the copper was customs cleared or not.
""If they spend all this money moving the copper to Yingkou, it will be sitting there for years,"" he said.
""Once it arrives in Yingkou, it is subject to monitoring by the State Planning Commission, which has to give permission for any more movement; it is out of the hands of traders,"" he said.
Mystery has surrounded the Shanghai stockpile in recent months, with traders unsure not only of who owns it, but of its exact size and what its owner planned to do with it.  
Trading sources generally agreed it would be cost-effective to take the copper back into a depleted central reserve as it had already served its purpose in taking advantage of long-term backwardation on the London Metal Exchange (LME).
A backwardation occurs when the spot price of a metal is higher than the forward price.
CNIEC lent around 85,000 tonnes of copper onto the LME between April and June 1995 on behalf of the state reserve, running the state stockpile down to 115,000 tonnes from 200,000 tonnes previously.  
Traders in Asia said CNIEC could well have lent it to the market at around US$2,700 a tonne, and then paid somewhere between $2,200 and $2,400 a tonne when it started taking the metal back earlier this year.
This would have cleared CNIEC a healthy profit, which could then have been used to finance storage and other costs.
Word that CNIEC had offered the copper to European trading houses in a series of secret meetings unnerved an already jittery market.  
Industry analysts Bloomsbury Minerals Economics (BME) said on Wednesday the motivation of the owners of the 85,000 tonnes, ""whoever they are, is the most important short-term fundamental"" in an already tight world market.
BME repeated in its latest review rumours of involvement by Sumitomo Corp, with CNIEC said to be helping the Japanese trader unload its copper positions after it revealed in June losses of $1.8 billion in a decade of unauthorised deals.
Sumitomo and CNIEC have made no comments on the talk and Chinese traders said they know nothing of such an arrangement.  
Traders in Shanghai said on Thursday they were unaware of movements out of the Shanghai bonded warehouses. They reported more arrivals that were probably spot purchases.
They also expressed concern that the tonnage in bonded warehouses would move onto the domestic market.
But these concerns were irrelevant, a Singapore trader said, despite a forecast that domestic Chinese copper demand could hit one million tonnes this year.  
As with many commodities, ""there is a desire (by the Chinese government) to keep a stockpile of the metal,"" he said. ""You don't keep it to help industry, you keep it in case of emergency.""
-- Hong Kong newsroom (852) 2843-6470
",27
"Falling world metal prices have spooked Asian aluminium traders who said on Monday up to 80,000 tonnes of the metal was sitting in Chinese ports, having been ordered by consumers who now want to pay the lower prices.
""A lot of people have aluminium stuck in China,"" a trader based in Hong Kong with a European firm said.
""There's more than 80,000 tonnes that I know of,"" he said.
Another industry source in Hong Kong said 35,000 to 40,000 tonnes of aluminium was stuck in Hong Kong and the nearby south Chinese port of Shantou, having been destined for Chinese end-users who refused to pay for it.
Chinese trading companies have earned poor reputations in recent years for reneging on deals when world prices of the commodity they are buying fall between the date the order was placed and the date of its arrival.
Metal traders in Hong Kong and Beijing said they had been waiting for news of distressed cargoes as they watched prices fall.
Another trading source said figures of up to 80,000 tonnes of distressed aluminium were believable given the amount in Hong Kong and Shantou, as material was also being shipped to other ports such as Shanghai and Tianjin.
""People will stop selling to China until the price goes up again,"" he said. ""And the price won't move up again until the LME (London Metal Exchange) stocks fall. There's just too much there.""
On top of this has been a general slowdown in metals business to China, traders said. None polled by Reuters saw business improving before the end of 1996.
Latest LME figures show aluminium stocks at 961,450 tonnes. The LME's aluminium price has been hitting long-term lows in recent trading weeks.
Prices picked up from 2-1/2-year lows on Friday as news emerged that some Russian smelters were considering cutting production.
LME three-months aluminium ended at US$1,337 a tonne, not much different from Thursday but firmer than before the news and somewhat above a low hit on Thursday of $1,305.
A year ago, the price was $1,742.
""Some people are forecasting the price will move to $1,250,"" another Hong Kong trader said. But he added: ""There is good support at the $1,300 level.""
LME warehouses in Singapore had plenty of metal, he said, but it was commanding a premium over the LME cash price of $30 to $40, and ocean freight rates to China were $65 a tonne.
""This is the main problem -- no trader can afford it. No one can afford it,"" he said.
Chinese consumers were mostly buying hand-to-mouth, waiting for prices to reach rock-bottom, traders said.
""Once the price starts to move up again they will buy, because they will see the bottom has been hit,"" the European trader said.
Traders said world metals markets would probably spend the fourth quarter of 1996 defining a direction for 1997, when fundamentals should begin to play a role in firming the price.
Latest Hong Kong indications of premium or discount in US$/tonne over LME cash prices on a CIF basis:
					Oct 14	  Oct 7
    COPPER			 60-65	   60-65
    ALUMINIUM  Western	 30-70	   70
		   CIS		 N/A	   60
    LEAD (Chinese brands)	N/A	   N/A
	   (LME registered)	N/A	   75
    ZINC			     N/A	   70
($1=8.3 yuan)
-- Hong Kong newsroom (852) 2843-6470
",27
"Some Chinese traders are moving to take advantage of a sharp rally in world copper prices by selling the red metal back to the market, Far East metal industry sources said on Wednesday.
A rise in copper stocks held in London Metal Exchange (LME) warehouses in Singapore was attributed in part by some trading sources to Chinese selling.
""With such high LME prices, I believe some (copper) will be brought out of China,"" a Singapore trader said.  
He said stocks in Singapore rose 5,000 to 6,000 tonnes late last week -- after hovering at extremely low levels for the past couple of months -- as Chinese buyers sold material recently taken from LME warehouses elsewhere.
Asian traders have said China is adding substantial tonnages -- up to 300,000 tonnes -- to its central stockpile, with a third of that amount now passing through customs in Shanghai.
These reports have helped fuel a rally in three-month LME copper, which has climbed almost 20 percent in recent weeks on tight physical supply.  
Three-month LME metal hit a five-month high of $2,232 a tonne on Tuesday, up from $1,900 at the end of October.
Whether or not the copper now in China has completed customs formalities is not an issue, sources said.
""This is the government, they do what they like,"" said one.
There was a feeling, however, that Chinese government departments, mired in bureaucratic red tape, would be unable to move fast enough to take advantage of rapid market movements.
This would be the province of minor trading companies using hot money to buy small lots for speculative purposes.  
At least one Asian trader reported small parcel offerings from Chinese companies wanting to pick up between $200-$300 a tonne in profit.
Prices are at their highest since June 14 when Japan's Sumitomo Corp announced that one of its copper traders had wracked up losses in unauthorised deals now said by the company to be US$2.6 billion.
Reports from Europe last week of a hidden hoard of 600,000 tonnes of copper in Rotterdam were shot down by Asian traders.  
Tight global supply is now driving prices, with LME copper stocks below 100,000 tonnes for the first time since 1990 and representing less than a month's demand.
Traders in the Far East, polled in recent days, told Reuters this fundamental shift in the world supply/demand picture should keep prices buoyed at least in the short term.
""It's a volatile market and it is impossible to know what is going to happen,"" a South American source said.
""Is it going to stay over $1/lb next year? Absolutely, I have no doubt about that. It won't be for a couple of days, I'm talking for maybe a quarter and I think it will then stay there.  
""Why? Consumption. Don't forget consumption. It is much more important than people think. The fundamentals really call for a higher price,"" he said.
Shanghai and surrounding areas alone use upwards of 45,000 tonnes of copper a month, a European source in Hong Kong said.
But physical copper on the Shanghai Metal Exchange has also been tight as traders there liquidate their positions on the rising LME prices.
""Prices have gone up so fast it is a little bit hard to digest,"" a trader in Shanghai said.
""It could be beneficial to export,"" she said.  
""On the other hand, anyone who wanted to buy could be afraid the price will start to go the other way. It's close to year-end, book-squaring time, so everyone will want to sit back and wait.""
($1=8.3 yuan)
-- Hong Kong newsroom (852) 2843-6470
",27
"Chinese grain sellers are cutting the price they are willing to accept to export corn but are still a good US$12 a tonne over prevailing world prices, Far East trading sources said on Wednesday.
Chinese corn was being offered at $150 a tonne FOB (free on board), traders in Hong Kong and China said, while U.S. corn is selling into Asian ports at $138 c&f (cost and freight) a tonne.
""There is no point because no one is going to pay that price,"" said a trader in Hong Kong.
He said Chinese sellers could be coming under pressure to move old crop as the new crop -- expected to be a bumper of between 115 million and 120 million tonnes -- comes on stream.
Traders who bought corn earlier in 1996 in the hope of making huge profits had been paying storage costs for more than six months and could now be trying to cut their losses, he said.
An industry source in Beijing said the offers were being made by state-owned traders in Jilin and Heilongjiang, China's major corn-growing provinces in the far northeast.
""At 1,250 (yuan per tonne, or $150) there won't be any takers unless China starts selling forward -- March, April, May -- which would see them possibly being more competitive,"" he said.
Wednesday's March futures price on the Dalian Commodity Exchange was 1,550 yuan ($186) per tonne.
Prices on the Chicago Board of Trade (CBOT) fell in Tuesday trading after the release of official U.S. figures predicting an enormous U.S. corn crop.
The U.S. Department of Agriculture said the 1996 crop would total 9.265 million bushels, far above previous estimates. The announcement pushed December corn down 1/4 cents to $2.68 and March down 1-1/4 cents to $2.70-1/2.
Asian traders said they expected U.S. corn to fall further in the immediate term, leaving Chinese corn in its dust.
Traders reported last week that China had already given the green light to corn exports -- lifting a ban in effect since December 1994 -- but authorities had set a minimum price of $170 a tonne when the world price was $140-150.
Trading sources said they were receiving offers from provincial branches of Beijing's central food buying arm China National Cereals, Oils and Foodstuffs Import/Export Corp (COFCO) and some Chinese trading companies with export permits.
The general feeling among traders polled by Reuters was that the price had been set with the intention of stifling exports.
Permission had to come from vice premier and economic tsar Zhu Rongji, who would be loathe to take any steps that could be inflationary, said industry sources who have met with Zhu over the issue.
With U.S. corn prices seen falling -- one Hong Kong trader predicted $130 a tonne c&f Asian ports -- industry sources doubted any Chinese corn would leave home within the next six months.
-- Hong Kong Newsroom (852) 2843-6470
",27
"Wheat is unlikely to become a casualty of the row between Beijing and Washington over U.S. arms sales to Taiwan since higher grain production in China is slashing the need for imports, traders said on Tuesday.
""As far as we see business, we could well not have anything with China for the rest of this year,"" a U.S. trader said.
""The (Chinese) domestic crop looks good, they have cancelled a lot of orders already. Canada has enough to hold China if they do need to get into the market,"" she said.
China's 1996/97 wheat production was expected to hit a record 107 million tonnes, the U.S. Department of Agriculture said ealier this month, raising its estimate from 104 million tonnes.
As a result, total imports were also revised downward by one million tonnes to eight million tonnes.
A new war of words broke out between Beijing and Washington this month after the Pentagon said Taiwan wanted to buy missiles and other weaponry worth around US$420 million.
Beijing has regarded Taiwan as a renegade province since Nationalists fled there after losing the civil war in 1949. It opposes the sale of weapons to the island.  
China has demanded the United States cancel plans for these latest arms sales to prevent ""new damage"" to bilateral ties.
Sino-U.S. ties have see-sawed in recent years over disputes ranging from human rights abuses and widespread copyright piracy in China to alleged nuclear proliferation by Beijing.
Ties had been slowly recovering after reaching a nadir in June 1995 with a U.S. visit by Taiwan's President Lee Teng-hui.
China had cancelled around 1.4 million tonnes of wheat orders from the United States since early June, the USDA said.
While some trading sources have speculated that the cancellations could be in retaliation for stalled bilateral negotiations over a fungus called tilletia controversa kuhn, or TCK smut, others put them down to the good Chinese crop outlook.
China is expected, however, to maintain its traditonal level of wheat imports from Canada of around five million tonnes a year. Canadian trade sources have said China's buying programme has already begun.
None of this has deterred U.S. Agriculture Secretary Dan Glickman from his optimism that China will remain a committed buyer of U.S. wheat.
""I think the key issue myself with China is supplies in China,"" Glickman said in Chicago on Monday.  
""The Chinese have pulled their grain purchases to some degree, but I do not perceive that we will see China out of the U.S. market. I think they will be in the market, but I can't tell you for how much,"" he said after a fund-raising meeting of the Congressional Hunger Center.
The United States was not the ""preferred"" supplier of wheat to China, he said, and the two countries had issues to resolve. He expressed concern that problems such as TCK smut could be used as trade barriers.
China does not accept wheat from the U.S. Pacific northwest because it cannot be guaranteed to be free of the fungus, which it fears could spread through its own wheat crop and cut yields.
Washington claims officially that TCK is harmless, though quarantine officials have said privately that it can indeed cut yields and that treatments are ineffective.
China imported 11.59 million tonnes of wheat in 1995, up 58.7 percent from the 7.3 million tonnes the year before.
U.S. wheat accounted for 3.8 million tonnes of the 1995 total, U.S. figures show.
",27
"U.S. experts are striving to assure China their chicken is safe, but it is impossible to tell if poultry exported to China comes from areas hit by dangerous diseases, government and industry sources said on Monday.
Poultry is processed on such a massive scale in the United States there was no way of knowing where the birds originated, a U.S. agriculture expert told Reuters.
""So it would be impossible to identify in a shipment of meat from Arkansas which chickens came from Oklahoma or Missouri,"" the expert, speaking on condition of anonymity, said.
A senior U.S. diplomatic source said, however, poultry shipments could be certified as not having come from regions where quarantinable diseases were an issue.
U.S. poultry exports to China, worth around US$500 million a year, were hit by a disease scare last week when the Chinese press reported a ban on poultry from Oklahoma and Missouri.
Chinese quarantine officials confirmed the ban, linking it to a deadly poultry flu called viscerotropic velogenic Newcastle disease or VVND, discovered in the two states during the summer.  
A Chinese quarantine official in Beijing said he was aware of U.S. claims the disease had been confined to pet birds, but said the ban would stand.
The Chinese official contradicted U.S. sources by saying there were no plans to hold bilateral talks on the issue.
A U.S. source told Reuters he met with Chinese quarantine officials on Monday morning.
""They know it is not of real consequence,"" he said, adding that talks were slated to take place on this and other agricultural issues in California in late January.
The diplomatic source said banning poultry from those two states would be like banning pineapples from Beijing.
""Pineapples don't come from Beijing and chicken does not come to China from Oklahoma and Missouri,"" the source said.
Missouri and Oklahoma together produce less than five percent of the total U.S. poultry output, said Phillip Holloway, representative in Hong Kong and China for the Oklahoma state agriculture department.
The disease was found in parrots imported from Mexico for sale in Oklahoma pet shops, Holloway said.  
Federal U.S. veterinarians eradicated the birds and all trace of the disease, he said, adding that it had no contact with commercial flocks.
VVND kills all birds that come into contact with it, and necessitates the eradication of entire commercial flocks.
It is carried principally by psittaciformes -- parrots, parakeets, budgerigars and macaws, Holloway said.
Parrots introduced the disease into California in the 1970s, leading to the destruction of the state's entire poultry flock.
Gus Schumacher, of the U.S. Department of Agriculture's Foreign Agriculture Service, said U.S. experts were working to reassure Chinese quarantine officials the disease had no effect on U.S. poultry.
""It is not at all linked to American poultry so we're reassuring the Chinese quarantine officials and working through this in an explanatory, technical way, so the trade will continue on an active basis,"" he said.
Schumacher, in Hong Kong last Friday, said chickens were not now being shipped to China from these two states, but trade from other areas of the U.S. had not been affected.  
However, cheap land and labour in the two rural states was attracting contract production from major producers that pay for labour and feed, and then purchase all chicks produced, the agriculture expert said.
""Most of the birds produced in these two states are shipped elsewhere for processing, like Arkansas or Mississippi...so it is generic chicken and there is no way to tell,"" he said.
",27
"Chinese and U.S. scientists are making good progress in meetings on China's decision to ban poultry imports from the United States, a U.S. source said on Thursday.
The Chinese government banned all imports of poultry and poultry products from 10 U.S. states earlier this month for fear it carried a virus called highly pathogenic avian influenza (HPAI).
Although the ban has yet to be implemented -- China wanted to hear what the U.S. experts had to say first -- it threatens an export market worth around US$500 million a year.
""The first set of meetings on Wednesday were frank, candid and held in a positive atmosphere,"" the source, who refused to be identified, said by telephone from Beijing.
The meetings are between Washington's Animal and Plant Health Inspection Service (APHIS) and China's Administration of Animal and Plant Quarantine (CAPQ).
Two APHIS experts arrived in Beijing on Tuesday night and would stay in Beijing for as long as it took to solve the problem, the U.S. source said.
""There is no timetable,"" the source close to the talks said. ""We are willing to take as much time as is needed in order to make sure the Chinese have as much information as they can to make an informed decision based on good science.""
Meetings had already been scheduled for Thursday and would, if necessary, continue on Friday, he added.
APHIS experts, U.S. diplomats and meat industry executives say HPAI does not exist in commerical flocks in the United States, having been eradicated in the mid-1980s.
U.S. sources have said Chinese quarantine officials seem to have confused HPAI with the less-virulent avian influenza, or AI, which one APHIS source likened to the common cold.
Sources have said CAPQ officials would be joined by experts from other government departments for what sounded like a series of lectures and presentations by the APHIS team.
The U.S. source in Beijing said the Chinese had so far been receptive and were taking a ""very positive approach"".
U.S. sources said the plan was to concentrate initially on the technical side of the dispute before raising trade issues.
If the dispute goes beyond the differences the two countries have in interpreting science, Beijing could find itself accused of using bad science as a non-tariff trade barrier.
This is the case with wheat. China refuses to import wheat from specific areas of the United States because it cannot be guaranteed free of a fungus called TCK smut.
Washington says the fungus is harmless and that Beijing's policy of zero tolerance is a barrier to an extra 500,000 tonnes of U.S. wheat sales a year to China.
-- Hong Kong Newsroom (852) 2843 6470
",27
"China has given the green light to corn exports but has set a minimum selling price so high above world levels that the grain is going nowhere and farmers are missing out on much-needed cash, traders said on Tuesday.
The selling price for a tonne of Chinese corn has been set at US$170 at a time when the world price is hovering around $140-150 a tonne, sources in Hong Kong and China said.
""The market is dropping so there is no reason for anyone to buy Chinese corn,"" an agent working in Hong Kong on behalf of Beijing's food trading arm China National Cereals, Oils and Foodstuffs Import/Export Corp (COFCO), told Reuters.
Another veteran trader in the region said COFCO executives had told him the government had agreed in principle to the export of two million tonnes of corn.
""But there is nothing in writing,"" he said. ""We have given them bids at world price levels and they won't touch it.""
Neither COFCO nor the State Planning Commission, which issues the licences, were available for comment.
Asian traders said U.S. corn was now arriving at some Asian ports at $145 a tonne inclusive of cargo and freight (c&f).
""It's nonsense to issue such licences -- why not issue them 10 months ago when Chinese corn was cheap and buyers would have lined up,"" a Shanghai trader said.
""The new (Chinese) crop is coming and the farmers are complaining that they don't have money to buy fertiliser. But still they effectively won't allow exports.""
Traders in Asia saw corn prices falling further. Expectations of a huge U.S. harvest totalling more than nine billion bushels or 228.6 million tonnes has pushed prices down by 18 percent since September.
Talk on Monday among traders on the Chicago Board of Trade (CBOT) that China was looking for U.S. corn seemed misplaced, given that China is heading for a record crop of 115-120 million tonnes and has around 30 million tonnes of corn in storage.
CBOT corn closed one to 3-1/2 cents per bushel lower in Monday trading, with December down 1-1/4 to $2.61-3/4.
The lowest offers foreign traders and agents said they had received from Chinese corn sellers, predominantly COFCO and some Chinese trading companies with export permits, was $165 a tonne.
But traders such that price was believed to be just exploratory and was not necessarily an indication that Chinese exporters would undercut the new official price to make sales.
""But so far there is no business concluded and unless the international market price is improving, there will not be,"" another trader in Hong Kong said.
The FOB (free on board) price at Dalian was $165, they said.
The export permits had been issued with the tacit approval of Vice Premier Zhu Rongji, trading and industry sources said.
Zhu had also set the price, sources close to the process said, though one of them added: ""He's no fool, he knows he won't sell a pound at that price ($170 a tonne) today"".
Corn exports were discussed earlier this year and spurred farmers and traders to ship up to two million tonnes to Dalian to await the green light.
Fear of fuelling inflation and of leaving reserves low in case of an emergency stopped Zhu short of allowing exports, Western grain industry executives who have met with Zhu said.
This saw China miss out on the chance of earning enormous amounts of money -- $175-180 a tonne -- and buying back if necessary in the current cheaper market.
""It's great for the feed industry,"" the Chinese source said of the prevailing situation, echoing other sources who say Chinese feed mills are buying corn hand-to-mouth as prices drop.
""And for American farmers -- they must love the Chinese government,"" he said.
",27
"Casualties are starting to mount as Chinese buyers of soybeans and soybean meal default or cancel contracts in the wake of falling international prices, Asian trading sources said on Thursday.
""We have stopped doing Chinese business for now,"" said a trader in Hong Kong with a major international house.
""We're waiting for the market to stabilise and are staying away from the possibility of defaults,"" he said.
Traders in Hong Kong, Singapore and China reported hearing of Chinese soymeal buyers delaying finance arrangements for orders in an attempt to force sellers to lower their prices.
Another Hong Kong source reported that Chinese buyers had defaulted on three to four cargoes, each of 50,000 tonnes, since last week when international prices began to fall.
""They are defaulting because PRC buyers delayed opening LCs (letters of credit) in the hope of squeezing another two or three dollars from their sellers,"" he said.
Traders have said these tactics are next to useless as physical soymeal for prompt delivery is tight, and would command a premium that would wipe out any extra profit.
Since entering the international trading arena earlier this decade, Chinese traders have earned themselves a reputation for dubious practices when it comes to paying for their orders.
In some cases, traders have reported, a Chinese buyer will default on or cancel an order for a commodity if the price falls after the order is placed and before it is delivered.
The Chinese company will then attempt to replace the commodity at the cheaper rate.
As a result, when prices of a commodity that is a hot item in China begin to fall, some international traders simply exit the market.
Others insist on deposits, and others grade Chinese traders according to their record of paying up and charge higher premiums accordingly.
Soybean meal has been the hot Chinese commodity of 1996, traders said, with arrivals from South America around 1.2 million tonnes since February.
Traders said maximum Chinese orders of U.S. meal in the past two weeks were 300,000 tonnes.
One trader claiming to have done 400,000 tonnes of beans and meal business in the past two weeks said he had letters of credit from his buyers for 350,000 tonnes.
His sales would show up in U.S. Department of Agriculture figures this week, he said.
The price of soybean meal on the Chicago Board of Trade (CBOT) has been on a rollercoaster ride since late September, and initially dipped while China was on holiday from September 30 to October 3 celebrating National Day.
On October 4, Chinese buyers scooped up more than 600,000 tonnes of beans and meal, mostly of U.S. origin, some South American, paying $300 to $310 a tonne, traders said.
But last Friday, prices started to fall again, by Tuesday coming off another $10 or so a tonne -- and word of Chinese cancellations and defaults began to circle.
Reports from Chicago on Wednesday described the market as perplexed over rumours China had bought or cancelled export orders for U.S. and South American soybeans and soymeal.
CBOT October soymeal closed at $236.30 a tonne, after Tuesday's $235.30.
-- Hong Kong newsroom (852) 2843-6470
",27
"Wheat is unlikely to become a casualty of the row between Beijing and Washington over U.S. arms sales to Taiwan since higher grain production in China is slashing the need for imports, traders said on Tuesday.
""As far as we see business, we could well not have anything with China for the rest of this year,"" a U.S. trader said.
""The (Chinese) domestic crop looks good, they have cancelled a lot of orders already. Canada has enough to hold China if they do need to get into the market,"" she said.
China's 1996/97 wheat production is expected to hit a record 107 million tonnes, the U.S. Department of Agriculture said earlier this month, raising its estimate from 104 million tonnes.
As a result, total imports were also revised downward by one million tonnes to eight million tonnes.
A new war of words broke out between Beijing and Washington this month after the Pentagon said Taiwan wanted to buy missiles and other weaponry worth around US$420 million.
Beijing has regarded Taiwan as a renegade province since Nationalists fled there after losing the civil war in 1949. It opposes the sale of weapons to the island.
China has demanded the United States cancel plans for these latest arms sales to prevent ""new damage"" to bilateral ties.
Sino-U.S. ties have see-sawed in recent years over disputes ranging from human rights abuses and widespread copyright piracy in China to alleged nuclear proliferation by Beijing.
Ties had been slowly recovering after reaching a nadir in June 1995 with a U.S. visit by Taiwan's President Lee Teng-hui.
China had cancelled around 1.4 million tonnes of wheat orders from the United States since early June, the USDA said.
While some trading sources have speculated that the cancellations could be in retaliation for stalled bilateral negotiations over a fungus called tilletia controversa kuhn, or TCK smut, others put them down to the good Chinese crop outlook.
China is expected, however, to maintain its traditonal level of wheat imports from Canada of around five million tonnes a year. Canadian trade sources have said China's buying programme has already begun.
None of this has deterred U.S. Agriculture Secretary Dan Glickman from his optimism that China will remain a committed buyer of U.S. wheat.
""I think the key issue myself with China is supplies in China,"" Glickman said in Chicago on Monday.
China imported 11.59 million tonnes of wheat in 1995, up 58.7 percent from the 7.3 million tonnes the year before.
",27
"International copper prices are likely to stick to the high road for some time yet, pricing the metal out of the key China market, Far East metal traders said on Monday.
""The LME (London Metal Exchange) will move higher and will test US$2,100 (a tonne),"" a base metal trader in Hong Kong said.
""We want it to go down. $1,800 to $1,900 is workable.""
Copper prices on the LME rallied through the psychological barrier of US$2,000 a tonne on Friday, hitting $2,027 in late afternoon trading.
This rally pushed the international price above the domestic Chinese price, rendering imports senseless, traders said.
On the Shanghai Metal Exchange, the most active February 1997 contract opened at 19,550 yuan ($2,355) a tonne, consolidating around that level within the first half-hour.
China levies a three percent import duty and a 17 percent value-added tax (VAT) on copper imports, killing margins at current prices, traders said.
Soggy Chinese business would be further dampened, traders said. One source at a Chinese listed company said he had 200 tonnes of the red metal to sell at a premium of $100 over the LME spot price.
The premium on copper, CIF (cost, insurance and freight) to Hong Kong and Chinese ports, was $150 last week, traders said.
""We will not have any import business (with China) with such high LME prices,"" another trader in Hong Kong said. ""We are getting calls from Chinese offering copper back to the market.""
""Premiums are not the issue, the total price is the concern -- and even with no premium it is difficult,"" he said.
Among the bears, the head of a trading house in Hong Kong bullishly noted signs the central government was attempting to stimulate the property market could see copper and aluminium users stocking up.
Cancellation of interest rate subsidies, interest rate reductions and the removal of private car purchase quotas were aimed at stimulating the sluggish economy, he said.
""I think the whole picture will change,"" he said.
""We have been waiting for a very long time and we have known they (Chinese authorities) are moving in this direction. It will restart cash flow and that will re-stimulate the economy very, very quickly,"" he said.
He and other traders said Chinese consumers' stocks, usually kept at one month's supply or around 100,000 tonnes, have been run down.
""Consumers have nothing and if they have to accumulate investory in their warehouses because of the change of sentiment, the damage to the market will disappear,"" he said.
Other sources said the Shanghai Metal Exchange had around 15,000 tonnes of copper in stock.
Drawdowns from LME warehouse stocks over the past couple of months indicated demand in Europe was picking up, traders said.
""If it continues, we will not have enough material, especially as there is no scrap around at the moment and LME stocks are down (to 145,825 tonnes),"" said the trading house boss.
""The situation could become critical by the end of the year,"" he said.
",27
"Around 300,000 tonnes of copper is in the process of being added to the stocks of China's central reserve authorities with about a third of that quantity now clearing through customs, Asian traders said on Monday.
Metals trading and industry sources polled in recent days by Reuters generally agreed that Shanghai bonded warehouses have held up to 100,000 tonnes of copper.
""The copper in the Shanghai (bonded) warehouses has been settled and is moving into China,"" a Chinese metals trader said.  
The copper's ownership and purpose have been contentious since it was channelled into China in the wake of Japanese Sumitomo Corp's revelation in June of massive copper-trading losses now said by the company to total US$2.6 billion.
Many market and industry sources have said the copper was bought by Beijing's metals trading arm China National Non-ferrous Metals Import/Export Corp (CNIEC) possibily in conjunction with Sumitomo.
Neither CNIEC nor Sumitomo have made any official comment.  
A Chinese source, who trades for a state-owned company, said central authorities bought the copper now moving through customs to cover the 85,000 tonnes of the red metal lent to the market in March 1995 and which had to be taken back.
But a European trader in Beijing said the 85,000 tonnes was additional to the tonnages now undergoing customs formalities.
He also noted the earlier movement of between 40,000 to 50,000 tonnes of copper which was shipped from Shanghai to bonded warehouses in north China for the state reserve.  
Another 50,000-60,000 tonnes had been taken from London Metal Exchange (LME) warehouses and would be delivered to Chinese ports in January or early February, he said.
The European source's total figure of 285,000-295,000 tonnes tallies with reports from other sources, Western and Chinese, who have said China, either through major state-owned trading companies or smaller firms with hot money, is due to take delivery of substantial amounts of copper.
As the London Metal Exchange (LME) copper price plummeted in June on Sumitomo's news, China was said to be taking advantage of prices below $2,000 a tonne to stock up.  
Arbitrage opportunities are narrowing, however, and trade sources said they were relieved the Shanghai hoard was destined for central government reserves.
""This will keep it off the market,"" a Shanghai trader said.
The European source in Beijing said: ""These tonnages are worth US$1 billion and only the central reserve authorities have the capacity to put out this sort of money.
""It could even be part of the Three Gorges Dam budget -- that project could easily use 100,000 tonnes of copper and the reserve's stocks are very low,"" he said.  
A large gap between LME and Shanghai Metal Exchange prices gave Chinese arbitragers a stab at healthy profits and a chance to take their money out of domestic equities.
This fuelled fears that massive amounts of copper could be channeled onto the domestic Chinese market.
A South American source who regularly visits Chinese copper smelters said many of his contacts had recently expressed fears that 300,000 tonnes of copper would soon arrive in China and kill the market for domestic product.  
Beijing's plan to dam the Yangtse River is one of the world's biggest infrastructure projects, costing around $30 billion and due for completion in 2009.
Five different departments of Shanghai Customs contacted by Reuters said they did not know of the copper movements.
A number of government departments, as well as Beijing's metals production arm China National Non-ferrous Metals Corp (CNNC) and CNIEC also said they were not aware of or had no comment on the market talk.
China is traditionally guarded about its reserves, treating all relevant figures as a state secret.  
Copper futures on the Shanghai Metal Exchange breached the key resistance level of 20,000 yuan ($2,409) per tonne in early Monday trading, after sharp gains on the LME on Friday.
LME copper rode a roller-coaster on Friday, finally settling at $2,148 a tonne, a gain of $117 over Thursday as the market shook off rumours of huge stocks held in Rotterdam and focused on the lowest LME copper stocks in 6-1/4 years.
The latest Hong Kong indications of premium or discount in US$/tonne over LME cash prices on a CIF basis:
				    Nov 18		    Oct 11
    COPPER			 100			100
    ALUMINIUM Western	   65-75		    65
		  CIS		 N/A			N/A
    LEAD			    N/A		     135
    ZINC (Chinese)		N/A			70-90
	   (Western)		N/A		     120
($1=8.3 yuan)
-- Hong Kong Newsroom (852) 2843 6358
",27
"China has emerged from the cocoon of last week's National Day celebrations to swoop on the world's soybean and soymeal markets, snapping up a total of between 600,000 and 800,000 tonnes, traders said on Tuesday.
One trader in the region took the credit for a full half of 800,000 tonnes of beans and meal business that he said had been done with Chinese buyers in the past four trading days.
""There has been a chunk of business going on,"" he said.
""I guess total meal and beans done since last Wednesday is 800,000 tonnes, with 200,000 to 300,000 of it beans and 500,000 to 600,000 tonnes of it meal,"" he said.
Chinese buyers jumped into the market as soon as the National Day holiday was over, he said, expressing his surprise at how fast the usually cautious Chinese reacted to price falls.
China celebrated the 47th anniversary of the founding of the communist-ruled People's Republic on October 1 with an extended public holiday that saw government, business and trade closed for three weekdays last Monday, Tuesday and Wednesday.
During that time, soy product prices fell significantly on the Chicago Board of Trade (CBOT) on trade concerns that the U.S. crop would be higher than previously thought.
Talk of Chinese interest has helped CBOT values move up a little in the past week.
Reports that China last week bought between 120,000 and 150,000 tonnes of soymeal for November/December delivery from the United States, South America and India helped propel CBOT soy product futures higher on Monday. Soymeal was $2.10 per tonne higher to $0.10 lower, with October up $2.10 at $246.20 a tonne.
The price falls coincided with one of China's peak buying periods for soybeans, soybean meal and vegetable oil.
The regional trading source claiming half the recent business as his own said he sold meal at $300 c&f (cost and freight) and beans at $5 to $10 a tonne above that.
The soybeans were of U.S. origin, he said, meal spread between the United States and South America. Shipments would begin in October/November for December/January arrival.
Buyers were numerous, he said, and all the purchases were for consumption.
While the other half of the business could not be immediately confirmed, one other Asian trader said he believed a total of 600,000 tonnes of beans and meal business had been done with China since the National Day break.
Chinese buyers were looking for low protein meal at $290 a tonne, and beans at between $290 and $300 a tonne, he said.
""I don't think this price will fly, but as usual PRC buyers start off low and see how low they can get it,"" he said.
Meal business concluded since last Wednesday was 400,000 to 500,000 tonnes, he said, with beans 100,000 to 200,000 tonnes.
Competitive freight rates in a tight market were helping keep c&f values down, trading sources said, adding vessels could be found at $18 to $20 a tonne from the United States to China.
China had been expected to buy up to 500,000 tonnes of soybeans before December, and up to 400,000 tonnes after March 1997, a Chinese trader said.
""That's to make sure they have enough in stock before new-crop meal comes into the market, which will be January at the earliest. And then enough in stock before Chinese New Year (in February 1997),"" he said.
""So we're right on target,"" he said.
-- Hong Kong News Room (852) 2843 6470
",27
"Copper stored in Shanghai warehouses -- the murky ownership of which has cast a pall of concern over the world market -- is being offered in small lots to European trading houses, industry sources said on Thursday.
The copper is been offered for sale at a high premium in order to set a benchmark price for its eventual sale to China's strategic stockpile, one Chinese trader said.  
Traders said that estimates of copper reserves brought into China in recent months range between 100,000 and 150,000 tonnes. A European trader in Beijing said he had been offered copper by the China National Non-ferrous Metals Import and Export Corp (CNIEC) at around $2,100 a tonne -- a level reflecting the London Metal Exchange (LME) cash price plus a premium of $130.
CNIEC has declined to comment on the market talk.
The copper was said to be owned by Chinese trading firms which had shipped it to Shanghai in the expectation that the central stockpile would buy this amount to square its position on metal previously lent to the market, before the end of 1996.  
""They are hoping that it is the right tonnage in the right place, but as far as we know, the stockpile has so far not confirmed they will buy it,"" a Chinese trader with a state-owned Chinese firm, said.
Traders said last week the copper probably belonged to China's state reserve, which lent around 85,000 tonnes of copper, through CNIEC, onto the LME between April and June 1995.
In March this year, CNIEC's former president Fang Dachang said China was likely to take it back in the fourth quarter.  
But when copper began to move back to China in June and July, from LME warehouses in Rotterdam, Singapore and Long Beach, California traders assumed the central reserve was taking the copper back earlier than planned.
Not so, said the Chinese trader, though he added: ""Who owns it is anyone's guess.""
The metal was taken from LME warehouses at about $2,400 a tonne, a Hong Kong trader said, with the price set before three month LME copper prices slid below $1,800 on news in June of $1.8 billion in copper trading losses by Japan's Sumitomo Corp.  
Three month copper was indicated at $1,942/45 a tonne in late LME trade on Wednesday.
""It (the copper) has been sitting there for a couple of months, so someone has to pick up the loss,"" a trader said.
""Whether the stockpile takes this tonnage from this owner, or if they buy it themselves and arrange another shipment themselves, is up to them,"" the Chinese trader said.
""But it depends on the price. If they (the stockpile) can get a premium lower than $100, maybe they will take it. They won't pay $150, or $120, especially on this sort of tonnage.""  
A trader in Shanghai said CNIEC would ""dearly love someone to take the whole lot, but that is unrealistic"".
But the Chinese source said: ""This copper can only be taken by the stockpile"" because no other buyer could afford it.
China levies a three percent import duty and a 17 percent value-added tax on copper imports, which traders said made it prohibitively expensive.
Freight, warehousing and other costs would put the Shanghai copper in the same cost bracket as copper shipped to the region from LME warehouses in Europe or the Americas if the premiums being asked were paid, traders said.  
""The whole market is still being manipulated by somebody,"" a Chinese source said. ""The game is not over.""  
Other traders, in Asia and in Europe, have told Reuters that CNIEC had offered them copper in a series of secret meetings held in major Chinese cities since June.
About 40,000 tonnes was said by traders in China to have been shipped already to warehouses near the northern port of Yingkou, where the strategic stockpile has some warehouses. This has not been confirmed.
Another 20,000 tonnes of copper was stored in Shanghai Metal Exchange warehouses in the eastern port city, and the remainder of the metal was in other Shanghai stores, traders said.
",27
"China has banned imports of poultry from 10 U.S. states because of fears the meat carries a fowl plague, a U.S. embassy official in Beijing said Wednesday.
The ban threatens an export market worth about $500 million a year.
""China has placed a ban on imports of all poultry and poultry products from 10 states,"" the official said.
Chinese authorities had voiced fears the poultry products carried a virus called highly pathogenic avian influenza, or HPAI, he said.
The states affected are Arkansas, Florida, Maryland, Utah Minnesota, New Jersey, New York, North Carolina, Texas and Wisconsin.
The U.S. embassy official, who asked not to be identified, said there seemed to be some confusion on the part of Chinese quarantine officials over the difference between HPAI and avian influenza, or AI.
""HPAI has not been found in the U.S. since 1984 and we believe there has been some confusion about the type of AI virus found in the United States and noted by China,"" he said.
A U.S. quarantine official based in China told Reuters last week that the virus could not be transmitted to people who ate the meat of infected birds.
China is the second-biggest market in the world, after Russia, for U.S. poultry products. It is the only market for U.S. chicken feet.
U.S. poultry exports to China in 1995 totalled 330,000 tons transshipped through Hong Kong alone, worth $445 million, according to the U.S. Poultry and Egg Export Council.
Every day 30 23-ton containers of U.S. chicken feet crossed the border from Hong Kong into China, according to the council's spokeswoman, Sarah Li.
The AI virus could be found worldwide, particularly in wild fowl, the embassy official said, and had not been isolated from commercial poultry flocks in the United States.
Another U.S. official told Reuters the AI virus may have been detected in ostriches imported from the United States as breeding stock on Chinese ostrich farms.
""Ostrich raising in China has become very popular and a lot of the breeding stock is brought in from the U.S.,"" the marketing official said.
""We heard that some of the ostrich breeding stock had been found to have AI,"" said the official, who requested anonymity.
News of the ban surfaced last week and was confirmed by Chinese quarantine officials to the U.S. embassy on Friday.
Officials of China's Administration of Animal and Plant Quarantine and the U.S. Embassy in Beijing met Tuesday in an effort to resolve the issue, the embassy official said.
""It was a frank, candid and open meeting -- they listened to us and agreed that we should talk more about it, which we will as soon as possible,"" the official said.
""Basically, we said we think there's been a misunderstanding, but they said what if it (the AI virus) mutates? We said it didn't and they rejected that,"" he said.
Officials of the U.S. Animal and Plant Health Inspection Service were to travel from the United States to meet their Chinese counterparts, but no date had been fixed.
",27
"Demand is the engine that will drive China's metals markets in 1997, said analysts and traders who expect a modest flow of money to keep consumption of base metals such as aluminium and copper ticking over.
""Consumption, don't forget consumption. It is much more important than people think,"" a South American industry executive told Reuters.
""The fundamentals really call for a higher price,"" he said of copper.  
While some trading and production firms are convinced an increase in total worldwide copper production capacity could lead to a supply glut after the first quarter of 1997, and a subsequent price spike, the Chilean source disagreed.
Buoyant global demand should ensure copper prices stay above the ""magic US$1 a lb figure"" for a good part of the year, he said, adding that Chinese consumption would make up an important proportion of the total.  
A senior metal trader in Shanghai said the city's metal futures exchange was becoming more reflective of real underlying fundamentals in the country's base metal market and reducing the opportunity to arbitrage between cash and futures prices.
""If they (traders) don't think (copper) imports are necessary, the (futures) price will stay low, but if consumption needs pick up, the exchange price will go up,"" she said.
Arbitraging had been a feature of the Shanghai exchange in 1996, the Shanghai trading source said.  
""It looks like there will be efforts to control arbitraging (in 1997) -- though if the demand is there and stock is low, then the price will go up anyway,"" she said.
The Shanghai Metal Exchange had enough copper stocks to see end-users through to Chinese New Year in February, she said.
Daryl Ho, senior economist in Hong Kong with Jardine Fleming Asia Research, said the effects of Beijing's easing of credit restrictions would be seen more clearly in 1997 as money began filtering through to such sectors as construction.  
Traders have complained since mid-1996 that a near-halt to construction throughout China, based on a lack of available cash to keep projects going, has stifled metals use and purchasing.
This slowdown would be reflected in China's overall 1996 economic growth figure, expected to come in at eight to nine percent after 10.2 percent in 1995, an aluminium trader said.
""Eight to 10 percent growth for 1996 is a beautiful rate for Europe, but China is looking at having had 13 percent in recent years, so it is a setback,"" he said.
""We think it is a healthy setback, setting the scene for more stable growth and it is quite encouraging.""  
Aluminium in China had bucked the year's international trend of de-stocking -- one that will see the rest of the world's end-users, having run down their stockpiles, re-stocking in 1997 -- much to the delight of producers.
China's official figures would probably show aluminium imports for 1996 at around 400,000 tonnes, the trader, speaking on condition of anonymity, said.
""But I think a lot of that has to do with cargoes delayed from 1995 and that actual net imports will be around 300,000 tonnes,"" not much changed from 1995, he said.  
And for 1997? ""We see no change in the pattern in 1997, China will be pretty much business as usual,"" he said.
Jardine Fleming's Ho said the easier availability of money might not translate immediately into higher base metal imports as extra domestic production had to be absorbed first.
The main sticking point for the industry in 1997 and beyond will be how the government deals with the myriad state enterprises that continue to bleed cash.
The state-owned enterprises were effectively shouldering the government's social welfare burden, Ho said.  
The metals industry provides some startling examples of this excess, with smelters and factories employing in some cases hundreds of thousands of people, subsidising for them everything from housing and schooling to health care and food.
At the same time, Ho said, management had no incentive to work for profit ""so money keeps flowing out of the government's pockets"".
""It is not an impossible problem to solve if the government can encourage the development of the private sector -- and that's a slow process,"" Ho said.  
China's communist leaders are anxious to avoid the problems of unemployment and bankruptcy that followed the collapse of the Soviet Union and now plague Russia's attempts at reform.
A German source saw these problems of over-employment and under-performance as the metal industry's Nemesis.
""Look at the zinc smelters -- a total disaster. They are all bankrupt. This is just a big black hole, overstaffed, totally overstaffed -- which is also a result of the system,"" he said on condition of anonymity.  
""It's all the system -- look at Russia, look at East Germany, they all had the same problem,"" he said, echoing many other traders and industry executives polled by Reuters.
He cited the example of China Steel in Taiwan, which produces 5.65 million tonnes a year of crude steel with 13,000 employees.
Compare these figures to one of China's biggest steel producers, Baotou Iron and Steel in Inner Mongolia, which employs 160,000 people for annual crude steel output of just four million tonnes.  
""This is such a classic example, it tells you everything. This is China's problem. And it will only get worse,"" he said.
Problems of corruption and inefficiency aside, it is a rare international metals company that feels it can afford not to be in China.
""China is becoming a more important market,"" the Chilean source said.
""For instance, in 1992/93 only 200,000 tonnes of (copper) concentrate was being imported. Now it is double and I don't see this trend stopping any time,"" he said.
-- Hong Kong newsroom (852) 2843-6470
",27
"Chile, the world's biggest copper exporter, hopes to forge close trade and technical support ties with China, the world's biggest copper importer, Deputy Minister of Foreign Affairs Mariano Fernandez said.
""There is Chinese interest in participating in some mining projects in Chile, and we have an interest in participating in service and technology in copper mining in China,"" Fernandez told Reuters in a recent interview.
Of Chile's total 1995 mining exports worth US$7.85 billion, $280 million was earned from selling copper to China, he said.
""It is not only potential ... this is reality,"" he said. ""If we look ahead, there are some forecasts that in five years we will produce almost one-third of the world's total copper.
""But looking at 1.2 billion (Chinese) people and the rush for development in China, we should not exclude China as a very important client for Chilean copper.""
Chile, with 25 percent of world copper reserves, mined 2.512 million tonnes of the red metal in 1995, far ahead of its closest rival the United States, with 1.8 million, and fifth placed China with 435,000 tonnes, Chilean figures show.
Copper accounted for 36.4 percent of Chile's total exports in 1995 of $16.5 billion, the figures show.
China's 1996 demand for copper has been officially put at one million tonnes.
Its copper imports for 1996 were expected to be 200,000 tonnes, the president of China Non-ferrous Metals Industry Corp, Wu Jianchang, said in May.
Trade and industry sources have speculated recently about China's interest in buying copper properties in Chile, along similar lines to recent investment by major Chinese corporations in Peru's iron ore industry.
But one source with a major regional producer said the high price of Chilean copper mines, combined with a cash squeeze in China and the poor international reputation of Chinese buyers, would keep Chilean producers reluctant to forge long-term ties.
""I don't see China guaranteeing long-term supply contracts,"" the industry executive, based in Hong Kong, said.
""It is not the way they work because if the prices fall, they are then very reluctant to pay,"" he said. He was referring to the practice of some Chinese importers of refusing to pay for commodities if the price falls between order and delivery.
Fernandez did not elaborate on the details of cooperation Chile was hoping for with China. ""We are at the beginning (of discussions),"" he said.
He was in Hong Kong after a four-day trip to Beijing where he met with senior Chinese officials, including Minister for Foreign Affairs Qian Qichen and Minister for Foreign Trade and Economic Cooperation Wu Yi.
The purpose of his visit was to lay the groundwork for a visit to Chile on November 6 and 7 by Chinese Premier Li Peng, he said.
Fernandez said he asked Chinese officials to consider recognising Chile as free of Mediterranean fruit fly, as Japan had already done, and free of foot-and-mouth disease.
""The Chilean dream is to sell one apple, one bunch of grapes and one bottle of wine a year to every Chinese person,"" he said.
",27
"Copper is dribbling out of China in small lots as some Chinese traders try to take advantage of higher world prices to cash in, Far East metals traders said on Monday.
In an otherwise catatonic market, copper movements out of China were the only ripples on a glassy pond.
""The market is very dull, but we are getting some calls from people asking us to help them ship to LME (London Metal Exchange) warehouses in Singapore,"" said the manager of a state-owned Chinese metals trading firm in Hong Kong.
""They bought the metal a long time ago and pretty cheap, and they want to take advantage of the higher LME market now.""
The Chinese selling was in small lots only, nothing more than 1,000 tonnes at a time, as small-time traders sought to liquidate, square the books for year-end and fill their pockets with some much-needed cash, traders said.
The copper market has been abuzz with little more than Chinese copper movements in recent months as the red metal has plied the waters between Shanghai and Singapore and back again.
Movements in stock levels in LME warehouses in Singapore have been attributed to Chinese buying and selling, though movement out has been to Chinese central reserves and in small lots, metals industry sources said.
Copper prices on the LME closed easier on Friday after a half-hearted rally based on some short-covering.
Traders and analysts said early in London's Monday that copper prices were likely to fall towards support at US$2,120 a tonne, after Friday's close of $2,162/64.
In the zinc market, prices could climb to as high as $1,200 a tonne in the first half of 1997, a Hong Kong trader said.
A fall last week in LME zinc stocks had caused some concern, she said, as metal buyers have long been used to picking up material when they need it and at long stable prices.
Figures released on Friday show a drawdown in stocks of 3,050 tonnes -- not an unhealthy level -- to 523,925 tonnes. Some liquidation was seen in Friday trading, with the price ending $17 a tonne easier at $1,048.
News that Spain's Austriana de Zinc liquidated its entire zinc futures position on the LME, announced in mid-November, had been absorbed by the market, she said, adding that the move was important for its value as information rather than its impact.
Nevertheless, she said, ""the information scared the market"".
""Manufacturers are saying they will be looking at levels of $1,200 in the first quarter, possibly the first half (of 1997),"" she said.
China's zinc alloy business was the best bet, she said, adding that she had locked in long-term contracts and was looking forward to a happy and prosperous 1997 as the dye-casting industry in southern China thrived.
Aluminium remained dead, traders said, as Chinese consumers turned to domestic stocks rather than imports to meet their meagre needs.
A narrow differential between LME and Shanghai Metal Exchange prices made imports unworkable and could keep China off the world market until after Chinese New Year in February.
""I'm looking for higher domestic aluminium prices,"" a trader with a European firm said.
LME aluminium closed at $1,526 a tonne on Friday. The Shanghai December price ended last week at 13,480 yuan ($1,667).
""Imported aluminium must pay nine percent duty and 17 percent VAT (value-added tax) -- though of course people don't pay that. And even without paying it and you just have the price and the premium, they still cannot afford to import,"" the trader said.
""We are getting no inquiries from extruders,"" said another source recently returned from China's Hainan Island.
""They are getting domestic material. As they use up domestic stocks, this could lead to a demand next year -- we are praying every day for that,"" said another trader. ""Otherwise, it's going to be a long and quiet holiday.""
The latest Hong Kong indications of premium or discount in US$/tonne over LME cash prices on a CIF basis:
				Dec 9			   Dec 2
    COPPER		   100			     100
    ALUMINIUM Western    80-85			   65-75
		  CIS	  N/A			     N/A
    LEAD		     N/A			     130
    ZINC (Chinese)	 N/A			     N/A
	   (Western)	 120-130			 120-130
(US$1 = 8.3 yuan)
-- Hong Kong Newsroom (852) 2843 6470
",27
"International trading companies are rebelling against a contractual stipulation by Chinese traders demanding the right to reinspect and reject some cargoes arriving in China, traders said on Wednesday.
""No way, there is absolutely no reason for any trading company to accept these terms,"" a Singapore grain trader said.
Chinese companies named by trading sources were unavailable to comment on reports the new contracts gave them the right to re-inspect soybean and soybean meal cargoes on their own terms.
Those terms allowed the Chinese buyer to inspect the cargo once it arrived at a Chinese port, even though it had already passed inspection before leaving for China, another trader said.
Ostensibly, the terms were to protect the buyer in case a quarantinable bug or disease was found in the cargo -- such as TCK smut, which affects wheat and is barred from China.
But traders were concerned the new terms could exposure them to further risk if some buyers used them as an excuse to renege on deals as prices dropped.
Traders polled by Reuters said their companies were refusing to accept the new contracts.
""They are taking positions themselves,"" a veteran trader said of the Chinese trading houses involved. ""And you are always increasing your risk in dealing with speculative buyers.""
China has bought between 1.5 million and two million tonnes of soybeans and soybean meal in the past three months, traders said. Much of it is being loaded or is on the way and due to arrive in China before year-end.
Prices have fallen dramatically, especially since China's October 1 National Day holiday, after which most orders came. Since then, Asian traders have been on tenterhooks awaiting letters of credit from the Chinese buyers guaranteeing payment.
Earlier, soybean cargoes were purchased above US$300 a tonne. Chicago Board of Trade November soybean futures closed on Tuesday at $6.70 a bushel, or $263 a tonne.
Some Chinese traders have earned themselves a reputation in recent years for reneging on deals if the price of the commodity they are buying drops between the order and the delivery.
Few Asian traders have reported washed-out deals since the price decline began.
But some said the re-inspection terms, which began appearing on contracts in the past two or three weeks, could be attempts by the Chinese buyers to squeeze discounts out of the sellers.
International trading companies have previously been stung when Beijing's food trading arm, China National Cereals, Oils and Foodstuffs Import/Export Corp (COFCO) altered contractual terms.
In May, COFCO informed the trading companies that they would have to bear responsiblity for the rejected cargo and all costs if TCK smut was found on wheat shipments arriving in China,
Traders in Asia said they refused to do business with China on those terms and the matter was dropped.
""After the TCK debacle, we're not willing to take any risks. It's not the way international trade is done,"" one source said.
-- Hong Kong News Room (852) 2843 6470
",27
"Genetically-altered soybeans at the centre of an international environmental furore are causing little concern in China, a major soybean importer with its own bio-engineering programmes, industry sources said on Wednesday.
""China is a very public and vocal supporter of our technology,"" said a source at Monsanto Co, the developer of the first genetically-altered U.S. soybeans.
""The Chinese have been heavily involved in their own programmes to produce insect-resistant cotton and genetically-altered soybeans, corn and rice,"" the source in Hong Kong, who spoke on condition of anonymity, told Reuters.
Monsanto has been targeted in the United States and now in Europe by environmental groups opposed to genetic engineering.
The soybeans have been developed with a resistance to a widely-used weed killer called Roundup, also a Monsanto product.
""I would think they would be very happy in China to get their hands on some of this product if they are pest-resistant,"" an industry executive in China said.
""They have a lot of their own problems with insects, especially in their soy and corn crops,"" he said.  
The Monsanto source said Chinese research, while a good decade behind his own company's, mirrored Monsanto's efforts at developing pest and insecticide resistant crops.
""So I wouldn't expect there to be any concern in China about this product,"" he said.
He said Monsanto was negotiating for co-operative projects in China, but would not give further details.
Greenpeace and other environmental campaigners were preparing on Tuesday to picket the arrival in Hamburg of a ship believed to be carrying some of the Monsanto soybeans.
Greenpeace activists in Hong Kong, however, said on Wednesday that despite concerns, they had no plan to campaign against the sale of the genetically-altered beans in Asia.
""The problem is we don't know what form it is in -- in powder form, in animal feed, mixed into hamburger meat -- so we have no way of knowing if we are eating it,"" said Clement Chan, spokesman for Greenpeace in Hong Kong.
""The beans have not been extensively tested before being made available to the public so we don't know what we are doing to human or animal bodies,"" he said.
Other than providing information on request, Greenpeace had no plan of action against the beans in Asia, Chan said.  
The beans have been approved for use in Japan, the biggest buyer of U.S. soybean products, the Monsanto source said.
User-groups in other countries, such as the Food and Drink Industry Association of the Netherlands, have also said they will use the genetically-altered U.S. soybeans.
Grain traders and industry executives in Asia said they had received no expression of concern from potential buyers in the region about the altered soybeans and did not expect to.
""They represent a very small proportion of the U.S. crop at this stage,"" a grain trader in Singapore said, adding the beans could account for 10 percent of the total U.S. crop in 1997.
The U.S. soybean crop, now more than 70 percent harvested, is expected to be more than 64 million tonnes, according to the American Soybean Association. Of that, 24.8 million tonnes will go to export markets.
While not among the biggest customers for U.S. soybean products, China is expected to buy around one million tonnes of beans in calendar 1996, and up to two million tonnes of meal.
-- Hong Kong newsroom (852) 2843-6470
",27
"China has agreed not to enforce a ban on imports of U.S. poultry until after top-level quarantine talks scheduled to take place in Beijing next week, U.S. business and diplomatic sources said on Tuesday.
""We understand they (the Chinese authorities) have not issued any letter to the field banning imports, and that they will not until discussions are held,"" a senior diplomat in Beijing said.
China last week confirmed a ban on imports of poultry and poultry products from 10 U.S. states because of fears of a fowl plague known as highly pathogenic avian influenza (HPAI).
China is the second biggest market in the world, after Russia, for U.S. poultry products and is its only market for chicken feet.
U.S. poultry exports to China in 1995 totalled US$445 million, according to the U.S. Poultry and Egg Export Council. The states affected are Arkansas, Florida, Maryland, Minnesota, New Jersey, New York, North Carolina, Texas, Utah and Wisconsin.
A two-man delegation from Washington's Animal and Plant Health Inspection Service (APHIS) would arrive in Beijing on Monday for talks with China's Administration of Animal and Plant Quarantine (CAPQ) on Wednesday, the diplomatic source said.
""We have been told they will hold off on any action until then,"" he said of the ban.
News of the ban surfaced on October 10, when the U.S. agriculture attache in Beijing confirmed to his head office that China feared U.S. poultry products bore the HPAI virus.
U.S. officials say U.S. poultry is free of HPAI virus and that Chinese quarantine personnel are confused about the difference between HPAI and avian influenza, or AI.
""We don't know what they identified,"" an APHIS official told Reuters.
""All we can say is that HPAI is not found in the U.S. The last time it was found (in 1984) it was eradicated and since then we have had no reports of HPAI at all.""
AI is prevalent the world over, especially in wild fowl, and had not been isolated in commercial U.S. poultry flocks, he and other U.S. sources said.
""AI is not a concern for vets -- it's like the common cold and is not quarantinable,"" the APHIS source said.
U.S. and meat industry sources said the HPAI virus had been detected in ostrich breeding stock in the United States destined for ostrich farms in China.
During a trip to Texas by CAPQ personnel to look at U.S. ostriches, 22 birds had tested positive for HPAI, a U.S. source said.
A positive test did not necessarily mean the bird was ill with HPAI, he said, likening it to a tuberculosis skin test which, if positive, did not indicate definitively the presence of TB.
-- Hong Kong Newsroom (852) 2843-6352
",27
"China is not expected to be in the international market for sugar before mid-1997 as stocks are high and domestic prices are recovering in the lead up to the harvest, traders and Western industry sources said on Wednesday.
But a lack of cash among state-run sugar processors could affect farmers' willingness to keep growing sugar cane and pressure the industry in the long-term, they said.
China had up to two million tonnes of processed sugar in reserve after massive imports in 1995 that have yet to be fully absorbed, a Hong Kong trader said.  
""No one knows the actual figure because it's a state secret,"" he said of China's sugar reserves.
""I would think there is something between one and two million tonnes, because they imported 3.3 million tonnes in 1995 and it takes a long time to use up,"" he said.
China's sugar demand had not increased by very much over the eight million tonnes of recent years, traders said.
""China's economy in 1996 has not been that good, so consumption has not really gone up,"" another Asian trader said.
""Sugar is not an essential item in China and people can go without it when money is tight,"" he said.  
The bulk of the Chinese market is industrial, traders said.
Central authorities are expected to maintain tight control over the sugar industry, encouraged by the success of an ongoing crackdown on smuggling, traders said.
Millions of tonnes of sugar were smuggled into China in 1994 and 1995 on false or altered import licences, flooding the market and pushing ex-factory prices below break-even point.
The crackdown, which was long and severe, brought some control back to the sugar industry, traders said, and prices are finally starting to move up.
No licences had been issued this year, traders said.  
A tonne of processed sugar in major production areas in the southwest of the country is now fetching 4,100 to 4,200 yuan (US$494-$506), up from 3,800 yuan (US$458) a tonne a few months ago, traders and industry executives said.
The head of a Western company with joint venture interests in Guangxi province said this was ""putting a smile on our faces for the first time in months"".
Government-set cane purchasing prices in Guangxi, China's major sugar grower, have not been raised from last season's 250 to 280 yuan ($30-33) a tonne, he said.  
But many state-run sugar processors lacked cash to pay farmers for the cane they grew last season, and had either been late in paying or had handed over IOUs instead, he said.
China News Service, a semi-official agency in Hong Kong, reported in August the Agricultural Bank of China's Guangxi branch had been ordered to lend 400 million yuan ($48 million) to the province's sugar industry to buy 100,000 tonnes of sugar.
Many farmers had already planted cane for the current season when the cash shortages began to bite, but they might be discouraged from planting again if the same happens this year, the Western industry source said.  
China's sugar harvest begins in mid-November and according to the official Xinhua News Agency could climb two million tonnes over 1995's 5.65 million tonnes.
Customs figures released in late September show China's sugar exports in the first eight months of 1996 were up 310.1 percent on the same year-ago period to 462,459 tonnes.
Imports fell 54.9 percent in that time to 830,000 tonnes, the figures show.
China permits raw sugar imports for the purpose of tolling, or processing and re-exporting.
(US$1 = 8.3 yuan)  
-- Hong Kong newsroom (852) 2843-6470
",27
"Casualties are starting to mount as Chinese buyers of soybeans and soybean meal default or cancel contracts in the wake of falling international prices, Asian trading sources said on Thursday.
""We have stopped doing Chinese business for now,"" said a trader in Hong Kong with a major international house.
""We're waiting for the market to stabilise and are staying away from the possibility of defaults,"" he said.
Traders in Hong Kong, Singapore and China reported hearing of Chinese soymeal buyers delaying finance arrangements for orders in an attempt to force sellers to lower their prices.
Another Hong Kong source reported that Chinese buyers had defaulted on three to four cargoes, each of 50,000 tonnes, since last week when international prices began to fall.
""They are defaulting because PRC buyers delayed opening LCs (letters of credit) in the hope of squeezing another two or three dollars from their sellers,"" he said.
Traders have said these tactics are next to useless as physical soymeal for prompt delivery is tight, and would command a premium that would wipe out any extra profit.
Since entering the international trading arena earlier this decade, Chinese traders have earned themselves a reputation for dubious practices when it comes to paying for their orders.
In some cases, traders have reported, a Chinese buyer will default on or cancel an order for a commodity if the price falls after the order is placed and before it is delivered.
The Chinese company will then attempt to replace the commodity at the cheaper rate.
As a result, when prices of a commodity that is a hot item in China begin to fall, some international traders simply exit the market.
Others insist on deposits, and others grade Chinese traders according to their record of paying up and charge higher premiums accordingly.
Soybean meal has been the hot Chinese commodity of 1996, traders said, with arrivals from South America around 1.2 million tonnes since February.
Traders said maximum Chinese orders of U.S. meal in the past two weeks were 300,000 tonnes.
One trader claiming to have done 400,000 tonnes of beans and meal business in the past two weeks said he had letters of credit from his buyers for 350,000 tonnes.
His sales would show up in U.S. Department of Agriculture figures this week, he said.
The price of soybean meal on the Chicago Board of Trade (CBOT) has been on a rollercoaster ride since late September, and initially dipped while China was on holiday from September 30 to October 3 celebrating National Day.
On October 4, Chinese buyers scooped up more than 600,000 tonnes of beans and meal, mostly of U.S. origin, some South American, paying $300 to $310 a tonne, traders said.
But last Friday, prices started to fall again, by Tuesday coming off another $10 or so a tonne -- and word of Chinese cancellations and defaults began to circle.
Reports from Chicago on Wednesday described the market as perplexed over rumours China had bought or cancelled export orders for U.S. and Latin American soybeans and soymeal.
CBOT October soymeal closed at $236.30 a tonne, after Tuesday's $235.30.
",27
"U.S. officials are confident a China visit by senior agricultural experts will break an impasse that threatens a multi-million dollar Chinese market for U.S. poultry products, a U.S. agriculture official said on Tuesday.
""Things are looking good,"" the official in Beijing told Reuters on condition of anonymity.
""I would say we have all the evidence we think we need to convince them (the Chinese) there is no problem,"" he said.
Two senior U.S. agriculture officials would arrive in Beijing from Washington on Tuesday evening for meetings with Chinese quarantine and agriculture officials, he said.
The talks starting on Wednesday afternoon would focus on a ban China slapped on imports of poultry and poultry products from 10 U.S. states because of fears they carry a fowl plague known as highly pathogenic avian influenza (HPAI).
China's ban came to light on October 10 but has not yet been implemented as, U.S. sources said, Chinese officials decided to wait and hear first what the U.S. experts had to say.
The talks would initially centre on the technical and scientific aspects of the dispute, the Beijing source said.  
""We're trying to keep it that way so the trade issue does not come into it until the technical side has been presented,"" he said.
It would become a trade issue if the Chinese side did not accept U.S. scientific evidence ""and if we feel they'll enforce a ban that has no technical or scientific basis,"" he said.
The U.S. side viewed as a favourable sign China's recent approval of two bovine semen centres and nine embryo transfer centres to import U.S. veterinarian technology, he said.
Bilateral meetings were also set for November on plant health, covering fruit imports, and on the long-simmering issue of wheat imports and a wheat fungus called TCK smut.
""And the secretary of state (Warren Christopher) is coming in November, so all of this is helping us negotiate better,"" the source said.
U.S. diplomats, agriculture officials and meat industry executives say HPAI does not exist in commercial U.S. flocks, having been eradicated in the mid-1980s.
They say China's Administration of Animal and Plant Quarantine (CAPQ) is confused about the difference between HPAI and avian influenza, or AI, which one source equated with the common cold.  
The HPAI virus was apparently detected in ostrich breeding stock in Texas destined for ostrich farms in China, and which were being inspected by CAPQ personnel.
Detection of the virus did not mean the bird was diseased, said a U.S. diplomat, likening it to a tuberculosis skin test.
The dispute threatens the United States' second biggest market after Russia for poultry and poultry products, and its only market for chicken feet, considered a delicacy in China.
U.S. poultry exports to China in 1995 totalled 330,000 tonnes trans-shipped through Hong Kong alone, worth US$445 million, according to the U.S. Poultry and Egg Export Council.
The council's representative in Hong Kong, Sarah Li, told Reuters that every day about 700 tonnes of U.S. chicken feet cross the border from Hong Kong into China.
-- Hong Kong News Room (852) 2843-6470
",27
"Fears China has been cancelling soybean and soybean meal orders in the wake of tumbling world prices came as no surprise to Asian grain traders on Tuesday.
""Prices have dropped US$10 (a tonne) since Friday -- there is the incentive,"" a Hong Kong trader said.
""If you can buy cheaper material, then you probably will, no matter who or where you are,"" he said. ""But there is no unsold cargo in the market. Most has been committed. We're sold out.
""So the CBOT (Chicago Board of Trade) drops $10, can you buy cheaper? No. There is no physical available,"" he added.
CBOT soymeal prices closed lower on Monday on fears China might have been cancelling soybean and soymeal purchases following the recent price slides, traders there said.
Soymeal closed unchanged to $4 a tonne lower, with October down $1.60 to $235.10 a tonne.
Asian grain traders could not confirm the rumours.
Traders last week reported total soybean and soybean meal purchases by China of up to 800,000 tonnes. The sales would show up in U.S. Department of Agriculture figures this week.
The Chinese swoop on the market followed an extended public holiday while China celebrated National Day on October 1.
During those three weekdays of rest -- September 30 to October 3 -- CBOT soy product prices fell on worries among traders the crop would be bigger than expected.
China scooped up between 600,000 and 800,000 tonnes of beans and meal. Traders reported c&f (cost and freight) prices at between $300 and $310 a tonne.
On Tuesday, however, traders said Chinese buyers, notorious for their price consciousness, would be keen to get even better prices and to increase their profit margins.
""Now that Chinese buyers are responsible for their own profit and loss, this is becoming more frequent,"" another Hong Kong trader said.
The shortage of physical availability would see Chinese buyers who wanted to increase their margins by cancelling previous orders missing out altogether, he said.
""They are still waiting for the dust to settle down, and maybe the price will stabilise in one or two days,"" he said.
""The price today is affordable for the Chinese but they are wanting prompt delivery and there is none around for them.""
China is in the midst of the peak soymeal consumption season and has been expected to import significant quantities before the end of 1996.
The possibility that a new import tax regime will be introduced from January 1, 1997, would serve to dampen orders in December, traders said, and orders for delivery before year-end should be high.
Ideally, imports should arrive before new crop soybean products start coming on to the market in January, a Chinese trader said.
Before then, China should have imported 300,000 to 400,000 tonnes of soybean meal to make sure the larders are full for Chinese New Year, which in 1997 falls in February.
""Feed industry demand will go down seasonally after February, so we will see increased domestic supply and decreased demand from February to April,"" he said.
""Then from April/May demand will go up again so they will need more imports.""
This year's soybean crop is expected to be two or three percent down on the 13 million tonnes harvested in 1995.
-- Hong Kong newsroom (852) 2843-6470
",27
"Hundreds of thousands of tonnes of copper have moved through Chinese customs into central stocks and are staying put, despite fears the metal could be sold to take advantage of current high prices, traders said on Monday.
""It was a good decision to buy good quality metal at 85 to 90 (U.S.) cents a pound; now they are feeling smug,"" a South American industry executive said of China's central authorities.
""It is central buying, there is no doubt about that because none of it is moving out,"" he said.
China recently boosted central copper reserves by 300,000 tonnes, with most of it now having cleared customs formalities, although a lag in Chinese customs reporting may keep the figures off the books for a couple of months, trading sources said.
Few Chinese trading companies would have the financial resources to buy and then store substantial amounts of copper, a Shanghai trader said.
The recent surge in world spot prices had been expected to fuel a flow of Chinese material on to the world market.
But a modest rise last week in stocks held in London Metal Exchange (LME) warehouses in Singapore -- traders said about 3,000 tonnes -- indicated the Chinese material was staying home.
""It's a piddling amount,"" a trader in Hong Kong said of the increase in stocks in Singapore.
LME copper trading has been volatile in recent weeks, with a moderate rise in stocks on Friday, the first since early September, pushing prices down on profit-taking and liquidation.
Three months copper finished Friday at US$2,242, bouncing off support around $2,220 in the afternoon ring, dealers said.
Losses were kept to a minimum, they said, as market jitters centred on the upcoming December options declaration. The main concern was if December copper came close to $2,600, where there was a large concentration of open interest on calls.
With LME stocks at 92,475 tonnes and the spot price at 2,470.50, the LME does not have enough copper to cover calls with a strike price of $2,600, which total 168,750 tonnes.
Traders in Asia seemed largely uninterested in the Wednesday options expiry as China is seen to be flush with copper and not interested in selling.
What little movement there has been out of China, some of which was possibly included in the 3,000-tonne hike in Singapore, was in small lots of probably no more than 1,000 tonnes at a time, the Shanghai trader said.
While China was neither actively buying nor selling now, it would have to boost imports to keep pace with demand next year, traders said.
""The market is physically tight so it is very good for the producers,"" a marketing executive with a major producer said.
He said China's crackdown on scrap imports, coupled with expected casualties among domestic smelters, would lead to total Chinese copper imports in 1997 of 830,000 tonnes.
The opening in February or March of a new smelter in Anhui province near the top-of-the-line Tongling smelter would account for an increase over 1996, he said.
Official customs figures show January to October 1996 imports of cast and unwrought copper were up 28.8 percent on 1995, to 549,571 tonnes, with October imports 82,655 tonnes.
The new smelter, a joint venture between Tongling and Japan's Itochu Corp and Sumitomo Corp had already booked 210,000 tonnes of concentrate imports for the year, the marketing executive said.
""They are looking at smelting 330,000 tonnes of concentrate, and producing 110,000 tonnes of metal,"" he said.
In other base metal markets, premiums to Hong Kong remained largely unchanged. The latest Hong Kong indications of premium or discount in US$/tonne over LME cash prices on a CIF basis:
				Dec 2			   Nov 25
    COPPER		   100			     100
    ALUMINIUM Western     65-75			   65-75
    CIS N/A N/A
    LEAD		     130			     130
    ZINC (Chinese)	   N/A			     N/A
	   (Western)	 120-130			 120-130
($1=8.3 yuan)
-- Hong Kong newsroom (852) 2843-6470
",27
"China is not expected to be in the international market for sugar before mid-1997 as stocks are high and domestic prices are recovering in the lead up to the harvest, traders and Western industry sources said on Wednesday.
But a lack of cash among state-run sugar processors could affect farmers' willingness to keep growing sugar cane and pressure the industry in the long-term, they said.
China had up to two million tonnes of processed sugar in reserve after massive imports in 1995 that have yet to be fully absorbed, a Hong Kong trader said.
""No one knows the actual figure because it's a state secret,"" he said of China's sugar reserves.
""I would think there is something between one and two million tonnes, because they imported 3.3 million tonnes in 1995 and it takes a long time to use up,"" he said.
China's sugar demand had not increased by very much over the eight million tonnes of recent years, traders said.
""China's economy in 1996 has not been that good, so consumption has not really gone up,"" another Asian trader said.
""Sugar is not an essential item in China and people can go without it when money is tight,"" he said.
The bulk of the Chinese market is industrial, traders said.
Central authorities are expected to maintain tight control over the sugar industry, encouraged by the success of an ongoing crackdown on smuggling, traders said.
Millions of tonnes of sugar were smuggled into China in 1994 and 1995 on false or altered import licences, flooding the market and pushing ex-factory prices below break-even point.
The crackdown, which was long and severe, brought some control back to the sugar industry, traders said, and prices are finally starting to move up.
No licences had been issued this year, traders said.
A tonne of processed sugar in major production areas in the southwest of the country is now fetching 4,100 to 4,200 yuan (US$494-$506), up from 3,800 yuan (US$458) a tonne a few months ago, traders and industry executives said.
The head of a Western company with joint venture interests in Guangxi province said this was ""putting a smile on our faces for the first time in months"".
Government-set cane purchasing prices in Guangxi, China's major sugar grower, have not been raised from last season's 250 to 280 yuan ($30-33) a tonne, he said.
But many state-run sugar processors lacked cash to pay farmers for the cane they grew last season, and had either been late in paying or had handed over IOUs instead, he said.
China News Service, a semi-official agency in Hong Kong, reported in August the Agricultural Bank of China's Guangxi branch had been ordered to lend 400 million yuan ($48 million) to the province's sugar industry to buy 100,000 tonnes of sugar.
Many farmers had already planted cane for the current season when the cash shortages began to bite, but they might be discouraged from planting again if the same happens this year, the Western industry source said.
China's sugar harvest begins in mid-November and according to the official Xinhua News Agency could climb two million tonnes over 1995's 5.65 million tonnes.
Customs figures released in late September show China's sugar exports in the first eight months of 1996 were up 310.1 percent on the same year-ago period to 462,459 tonnes.
Imports fell 54.9 percent in that time to 830,000 tonnes, the figures show.
China permits raw sugar imports for the purpose of tolling, or processing and re-exporting.
(US$1 = 8.3 yuan)
-- Hong Kong newsroom (852) 2843-6470
",27
"China has banned imports of poultry from 10 U.S. states, threatening an export market worth about $500 million a year, because of fears it carries a fowl plague, a U.S. embassy official in Beijing said on Wednesday.
""China has placed a ban on imports of all poultry and poultry products from 10 states,"" the official said.
Chinese authorities had indicated fears the poultry products carried a virus called highly pathogenic avian influenza (HPAI), he said.
The states affected are Arkansas, Florida, Maryland, Utah Minnesota, New Jersey, New York, North Carolina, Texas and Wisconsin.
The U.S. embassy official, speaking on condition of anonymity, said there seemed to be some confusion on the part of Chinese quarantine officials over the difference between HPAI and avian influenza (AI).
""HPAI has not been found in the U.S. since 1984 and we believe there has been some confusion about the type of AI virus found in the United States and noted by China,"" he said.
A U.S. quarantine official based in China told Reuters last week the virus could not be transmitted to people who ate the meat of infected birds.
China is the second biggest market in the world, after Russia, for U.S. poultry products and is its only market for chicken feet.
U.S. poultry exports to China in 1995 totalled 330,000 tonnes transshipped through Hong Kong alone, worth US$445 million, according to the U.S. Poultry and Egg Export Council.
Every day 30 23-tonne containers of U.S. chicken feet crossed the border from Hong Kong into China, the council's spokeswoman Sarah Li said.
The AI virus could be found worldwide, particularly in wild fowl, the embassy official said, and had not been isolated from commercial poultry flocks in the United States.
Another U.S. official told Reuters the AI virus may have been detected in ostriches imported from the United States as breeding stock on Chinese ostrich farms.
""Ostrich raising in China has become very popular and a lot of the breeding stock is brought in from the U.S.,"" the marketing official said on condition of anonymity.
""We heard that some of the ostrich breeding stock had been found to have AI,"" the official said.
News of the ban surfaced last week and was confirmed by Chinese quarantine officials to the U.S. embassy on Friday.
Officials of China's Administration of Animal and Plant Quarantine (CAPQ) and the U.S. Embassy in Beijing met on Tuesday in an effort to resolve the issue, the embassy official said.
""It was a frank, candid and open meeting -- they listened to us and agreed that we should talk more about it, which we will as soon as possible,"" the official said.
""Basically, we said we think there's been a misunderstanding, but they said what if it (the AI virus) mutates? We said it didn't and they rejected that,"" he said.
The rejection threatened U.S. poultry markets in China and had also been extended to poultry and poultry meat imports from the Netherlands for the same reason, he said.
Officials of the U.S. Animal and Plant Health Inspection Service would travel from the United States to meet their Chinese counterparts. No date had been fixed.
-- Hong Kong newsroom (852) 2843-6470
",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.
",27
"China's decision to ban imports of some U.S. chicken meat due to concerns about a fowl plague could hit a multi-million dollar export business, although U.S. officials said on Friday their chickens do not have the disease.
""We don't have highly pathogenic avian influenza in the U.S.,"" a U.S. quarantine official told Reuters.
""There is no record of it being found in domestic poultry,"" he said. It had been eradicated after an outbreak in the 1980s.
""It affects the birds but not the meat, the meat does not transmit anything to people,"" he said.
Washington's agriculture attache in Beijing confirmed by fax to his head office on Thursday that China had blocked imports of chicken meat from 10 U.S. states because of concerns about highly pathogenic avian influenza.
U.S. sources in Beijing said nothing had been received in writing about the ban from China's Administration of Animal and Plant Quarantine (CAPQ).
""It came out of the blue,"" a senior diplomatic source said.
Embassy officials hoped to meet Ministry of Agriculture officials on Friday or Monday, an embassy source said.
Asked to confirm reports of the block on chicken imports, a quarantine official in Beijing told Reuters by telephone: ""It is true."" He declined to give details.
Officials of the China National Cereals, Oils and Foodstuffs Import and Export Corporation (Ceroils) said they had heard of the ban but also declined to give further information.
Customs officials said they were unaware of the ban.
The ban could have a major effect on U.S. poultry exports to China, which in 1995 totalled 330,000 tonnes trans-shipped through Hong Kong alone, and worth US$445 million, according to the U.S. Poultry and Egg Export Council.
China is the second largest market for U.S. poultry products after Russia, the council's Hong Kong director Sarah Li said.
""It is the only market to take paws,"" she said, referring to chicken feet. ""People say U.S. chickens need wheelchairs because all their feet are going to China.""
Thirty containers a day of chicken feet moved from Hong Kong into China, she said. Any hold-ups would cost importers dearly because of the high cost of storage in Hong Kong.
U.S. Agriculture Department (USDA) official John Reddington told a meeting of U.S. poultry producers on Thursday the industry should diversify its export markets as it was vulnerable to changes in sanitary rules such as one that halted shipments to Russia earlier this year.
The drop in prices following the changes in Russia could have put some U.S. producers out of business had it continued, he said.
The Chinese chicken ban is the latest headache for U.S. agriculture officials in China who have been dealing with fears of importing potentially tainted products for over 20 years.
Wheat is an on-going issue, with China refusing to import the grain from the U.S. Pacific northwest because it cannot be guaranteed to be free of a fungus called TCK smut.
Washington claims the fungus is harmless, that the ban is not based on good science, that it cuts annual U.S. wheat sales to China by 500,000 tonnes and is a non-tariff trade barrier.
China, on the other hand, says TCK smut could cut domestic wheat yields if it got into the domestic growing areas.
U.S. officials on Friday said any ban that China might place on U.S. chicken meat imports because of avian influenza was not based on sound scientific evidence.
""It comes down to good science versus bad science,"" a senior official said on condition of anonymity.
Poultry meat was not a likely vehicle for transmission of the virus, he said, and U.S. poultry meat exports posed no threat to the international poultry industry.
-- Hong Kong News Room (852) 2843-6470
",27
"China's decision to ban imports of some U.S. chicken meat due to concerns about a fowl plague could hit a multi-million dollar export business, although U.S. officials said Friday American chickens do not have the disease.
""We don't have highly pathogenic avian influenza (A.I.) in the U.S.,"" a U.S. quarantine official told Reuters. ""There is no record of it being found in domestic poultry,"" he said, adding that the disease had been eradicated after an outbreak in the 1980s.
""It affects the birds but not the meat. The meat does not transmit anything to people,"" the official said.
Washington's agriculture attache in Beijing notified his head office on Thursday that China had blocked imports of chicken meat from 10 U.S. states because of concerns about highly pathogenic avian influenza.
U.S. sources in Beijing said China's Administration of Animal and Plant Quarantine, or CAPQ, had confirmed the ban by telephone on Friday and was preparing notification, which was expected some time next week.
""We initially heard about a ban on the import of poultry chicks, but no one at CAPQ has been able to confirm or deny that,"" a senior diplomatic source said.
""Now, if poultry chicks aren't banned for reasons of A.I., why is poultry meat banned? It makes no sense,"" he said.
Asked to confirm reports of the block on chicken imports, a quarantine official in Beijing told Reuters by telephone: ""It is true."" He declined to give details.
However, Customs officials said they were unaware of the ban.
U.S. officials in Beijing said any ban China might place on U.S. chicken meat imports because of avian influenza was not based on sound scientific evidence. ""It comes down to good science versus bad science,"" one senior official said.
The ban could have a major impact on U.S. poultry exports to China. In 1995, 330,000 metric tons worth $445 million was trans-shipped through Hong Kong alone, according to the U.S. Poultry and Egg Export Council. China is the second-largest market for U.S. poultry products after Russia, the council's Hong Kong director, Sarah Li, said.
""It is the only market to take paws,"" she said, referring to chicken feet. ""People say U.S. chickens need wheelchairs because all their feet are going to China.""
The Chinese chicken ban is the latest headache for U.S. agriculture officials in China. Wheat is a continuing issue, with China refusing to import grain from the Pacific northwest because it cannot be guaranteed to be free of a fungus called TCK smut.
Washington claims the fungus is harmless, that the ban is not based on good science, that it cuts annual U.S. wheat sales to China by 500,000 tons and is a non-tariff trade barrier. China, on the other hand, says TCK smut could cut domestic wheat yields if it got into the domestic growing areas.
",27
"Chile, the world's biggest copper exporter, hopes to forge close trade and technical support ties with China, the world's biggest copper importer, Deputy Minister of Foreign Affairs Mariano Fernandez said.
""There is Chinese interest in participating in some mining projects in Chile, and we have an interest in participating in service and technology in copper mining in China,"" Fernandez told Reuters in a recent interview.
Of Chile's total 1995 mining exports worth US$7.85 billion, $280 million was earned from selling copper to China, he said.
""It is not only potential ... this is reality,"" he said. ""If we look ahead, there are some forecasts that in five years we will produce almost one-third of the world's total copper.
""But looking at 1.2 billion (Chinese) people and the rush for development in China, we should not exclude China as a very important client for Chilean copper.""
Chile, with 25 percent of world copper reserves, mined 2.512 million tonnes of the red metal in 1995, far ahead of its closest rival the United States, with 1.8 million, and fifth placed China with 435,000 tonnes, Chilean figures show.  
Copper accounted for 36.4 percent of Chile's total exports in 1995 of $16.5 billion, the figures show.
China's 1996 demand for copper has been officially put at one million tonnes.
Its copper imports for 1996 were expected to be 200,000 tonnes, the president of China Non-ferrous Metals Industry Corp, Wu Jianchang, said in May.
Trade and industry sources have speculated recently about China's interest in buying copper properties in Chile, along similar lines to recent investment by major Chinese corporations in Peru's iron ore industry.
But one source with a major regional producer said the high price of Chilean copper mines, combined with a cash squeeze in China and the poor international reputation of Chinese buyers, would keep Chilean producers reluctant to forge long-term ties.
""I don't see China guaranteeing long-term supply contracts,"" the industry executive, based in Hong Kong, said.
""It is not the way they work because if the prices fall, they are then very reluctant to pay,"" he said. He was referring to the practice of some Chinese importers of refusing to pay for commodities if the price falls between order and delivery.  
Fernandez did not elaborate on the details of cooperation Chile was hoping for with China. ""We are at the beginning (of discussions),"" he said.
He was in Hong Kong after a four-day trip to Beijing where he met with senior Chinese officials, including Minister for Foreign Affairs Qian Qichen and Minister for Foreign Trade and Economic Cooperation Wu Yi.
The purpose of his visit was to lay the groundwork for a visit to Chile on November 6 and 7 by Chinese Premier Li Peng, he said.
Fernandez said he asked Chinese officials to consider recognising Chile as free of Mediterranean fruit fly, as Japan had already done, and free of foot-and-mouth disease.
""The Chilean dream is to sell one apple, one bunch of grapes and one bottle of wine a year to every Chinese person,"" he said.
",27
"Protectionist policies practised by a major Chinese soybean producing province are keeping prices for the grain throughout the country artifically high, Far East traders said on Thursday.
Heilongjiang, in China's far northeast, will not allow soybeans to leave the province in any but value-added form, a policy which traders said had been enforced for three years.
""This means the bean price is being kept artificially low in Heilongjiang and artificially high in other provinces,"" a trader in Hong Kong said.
Despite the recent arrival on the market of a soybean crop of between 10 and 12 million tonnes, domestic prices had not fallen, trade and industry sources said.
Heilongjiang grows one-third of China's annual soybean crop.
Officials there confirmed to Reuters in September that the ""policy of appropriate control"", which traders characterise as a ban on sale of beans outside the province, would stay in place.
The policy aimed to meet demand from local crushing mills, which crush the beans to produce oil and meal, an official said by telephone from the provincial capital of Harbin.
But China's crushing industry is not concentrated in Heilongjiang, and traders said crushers in other regions were having to pay inflated prices for their raw material.
The National Grains and Oils Information Centre in Shanghai reported on Wednesday that grade three beans in Heilongjiang were fetching 2,840 yuan (US$342) a tonne.
By contrast, beans elsewhere were priced at up to 3,320 yuan a tonne.
Traders with western companies in the region agreed with these figures, saying beans smuggled out of Heilongjiang were commanding a hefty premium.
""Outside the province (Heilongjiang), there is a premium of 100 or 200 renminbi (yuan) a tonne for smuggling the beans,"" another trader said.
""There are road blocks in Heilongjiang to checks loads on trucks, people even use post office trucks to carry beans -- and they've been caught,"" he said.
""It is costing other provinces more money for beans.""
Another industry executive said the price of domestically produced soybean meal, used to make animal feed, had also remained high despite the recent soybean harvest.
""Prices for meal are not coming down, they are still 2,900 to 3,100 renminbi per tonne,"" he said, levels that have prevailed for some months.
High soybean meal prices would in turn lead to high meat prices, the executive said, adding his organisation believed pork prices in China's coastal areas had risen 20 percent in the past two to three months as a result.
This year's soybean crop had been expected to drop two to three percent on the 1995 figure of 13 million tonnes, said traders who toured growing regions.
Heilongjiang's output was 4.3 million tonnes in 1995.
Traders and industry experts who visited the province in September put output there this year at 3.5 to four million tonnes.
One industry expert based in Shanghai said China's soybean supply shortfall would be 2.5 million tonnes in the coming year.
China's total soybean imports for 1996 should be around one million tonnes, traders said.
($1-8.3 yuan)
-- Hong Kong News Room (852) 2843-6470
",27
"China's decision to ban imports of some U.S. chicken meat due to concerns about a fowl plague could hit a multi-million dollar export business, although U.S. officials said on Friday their chickens do not have the disease.
""We don't have highly pathogenic avian influenza (A.I.) in the U.S.,"" a U.S. quarantine official told Reuters.
""There is no record of it being found in domestic poultry,"" he said. It had been eradicated after an outbreak in the 1980s.
""It affects the birds but not the meat, the meat does not transmit anything to people.""
Washington's agriculture attache in Beijing notified his head office on Thursday that China had blocked imports of chicken meat from 10 U.S. states because of concerns about highly pathogenic avian influenza.
U.S. sources in Beijing said China's Administration of Animal and Plant Quarantine (CAPQ) had confirmed the ban by telephone on Friday and was preparing notification which was expected some time next week.
""We initially heard about a ban on the import of poultry chicks, but no one at CAPQ has been able to confirm or deny that,"" a senior diplomatic source said.
""Now, if poultry chicks aren't banned for reasons of A.I., why is poultry meat banned? It makes no sense,"" he said.
U.S. Department of Agriculture (USDA) representatives would probably meet Ministry of Agriculture officials on Tuesday in a bid to resolve the issue, an embassy source said.
Asked to confirm reports of the block on chicken imports, a quarantine official in Beijing told Reuters by telephone: ""It is true."" He declined to give details.
Officials of the China National Cereals, Oils and Foodstuffs Import and Export Corporation (Ceroils) said they had heard of the ban but also declined to give further information.
Customs officials said they were unaware of the ban.
U.S. officials in Beijing on Friday said any ban China might place on U.S. chicken meat imports because of avian influenza was not based on sound scientific evidence.
""It comes down to good science versus bad science,"" a senior official said on condition of anonymity.
Poultry meat was not a likely vehicle for transmission of the virus, he said, and U.S. poultry meat exports posed no threat to the international poultry industry.
The ban could have a major impact on U.S. poultry exports to China. In 1995, 330,000 tonnes worth US$445 million was trans-shipped through Hong Kong alone, according to the U.S. Poultry and Egg Export Council.
China is the second largest market for U.S. poultry products after Russia, the council's Hong Kong director, Sarah Li, said.
""It is the only market to take paws,"" she said, referring to chicken feet. ""People say U.S. chickens need wheelchairs because all their feet are going to China.""
Thirty containers a day of chicken feet moved from Hong Kong into China, she said. Any hold-ups would cost importers dearly because of the high cost of storage in Hong Kong.
The Chinese chicken ban is the latest headache for U.S. agriculture officials in China who have been dealing with fears of importing potentially tainted products for over 20 years.
Wheat is a continuing issue, with China refusing to import grain from the U.S. Pacific northwest because it cannot be guaranteed to be free of a fungus called TCK smut.
Washington claims the fungus is harmless, that the ban is not based on good science, that it cuts annual U.S. wheat sales to China by 500,000 tonnes and is a non-tariff trade barrier.
China, on the other hand, says TCK smut could cut domestic wheat yields if it got into the domestic growing areas.
-- Hong Kong News Room (852) 2843-6470
",27
"Smiles are coming back to the faces of Asian sugar traders and industry executives, who are smacking their lips at the prospect of a stabilised Chinese market and decent profits for sugar mills there.
Prices for sugar in China were starting to move to levels not only covering factory costs but providing some profits, trade and industry sources said on Wednesday.
White sugar prices in Beijing and Shanghai were around 4,400 yuan (US$530) a tonne, reflecting prices of three or four months ago, trading sources said.
Ex-factory prices in the growing regions, however, were now a good 300-400 yuan higher, the sources said.
""The lowest price in 1996 was 3,650 renminbi a tonne in the producing areas,"" a Chinese trader in Hong Kong said.
Transport to the major cities added 150 to 200 yuan, plus handling costs, he said. So current prices were indicative of when the sugar was purchased and stored.
Prices in the producing areas, notably Guangxi and Guangdong provinces in the south, had moved to between 4,500 and 4,700 yuan a tonne.
""The Chinese sugar market is still a very attractive market,"" an industry executive who runs a number of joint venture sugar factories in southern China said.
""It is not yet fully mature and there will be an inbalance between supply and demand for a long time,"" he said on condition of anonymity.
He put annual Chinese demand at eight to nine million tonnes.
""The government has stopped imports for the last three months, so I see the market getting back to normal,"" he said.
Imports in 1995 were 3.3 million tonnes. This year's harvest, which begins next month, is expected to be more than 7.5 million tonnes, over last year's 5.65 million.
Signs the market in China was beginning to stabilise were evident in the recent rise in wholesale prices for processed white sugar, he and other trade and industry sources said.
The tightness reflected in the rising prices would last until the beginning of the crushing season in November.
""The price could go to 5,000 (yuan per tonne),"" a trader in Shanghai said.
Stocks of 1.5 to two million tonnes represented two months' consumption at the current peak consumption time, he said.
Even so, traders and industry sources did not see China having to import sugar before the middle of 1997.
Some rumours that China had recently purchased five to 10 cargoes -- or a maximum of 120,00 tonnes -- of Thai sugar were seen as an attempt to push up faltering Thai raw sugar premiums.
""I find it hard to believe because there are no sugar import licences,"" a Hong Kong trader said.
""The Thai premium was falling below $60 (per tonne) two weeks ago and I suspect people are spreading this rumour to push the premium back up,"" he said.
The premium on Thai sugar to China had recovered to around $70 for March-May contracts, he said.
Another trader in Hong Kong reported a secret deal in which a monastery in rural Tibet was granted sugar import licences, which it then sold to raise money for restoration work.
He said 50,000 tonnes of import quota was involved, and had been used to purchase raw Cuban sugar at US$3,000 a tonne.
""The central government gave the quota to the lamasery, then the monks sold the quota to raise money,"" he said.
The only other detail he would provide was that the Cuban sugar was not part of the annual 500,000-tonne barter deal between Beijing and Havana, and that it would arrive in China before the end of 1996.
-- Hong Kong newsroom (852) 2843-6470
",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.
Cold-rolled steel was fetching between $400 and $430 a tonne, he said, galvanized steel up to $100 less than that.  
He and other sources repeated reports of hundreds of thousands of tonnes of galvanized steel stacked up at Chinese ports, but these could not be confirmed.
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 has 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, he said, and so should not dent China's need for high quality product.  
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, industry 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 their 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.""
China's annual steel demand was around 95 million tonnes, trading sources said.
China's Ministry of Metallurgical Industry said in July that steel demand would reach an annual 120 million tonnes by 2000.
The Ministry set an annual output target of 130 million tonnes by 2000, and said production would increase by five million tonnes a year between 1996 and 2000.
-- Hong Kong newsroom (852) 2843-6470
",27
"Asian traders raised their eyebrows on Monday at reports that China had bought hundreds of thousands of tonnes of soybean oil, saying authorities had issued import licences for only a fraction of that.
""Total quota issued (for soybean oil imports) were a little over 100,000 tonnes,"" a trader in Shanghai said.
""People with quota are not in a hurry to import,"" he said, because c&f (cost and freight) prices to China were still too high for local buyers.
A Chinese trader in Hong Kong concurred, saying high domestic stocks and a near-record domestic rapeseed crop of eight million tonnes meant there was as yet no demand in China for imported vegetable oil.
Rumours swept the Chicago Board of Trade (CBOT) on Friday that China may have bought 173,000 to 200,000 tonnes of South American soybean oil in the previous few days.
Argentine soybean oil was trading on Thursday at US$500 a tonne FOB (free on board) for October delivery while U.S. soybean oil was $510 a tonne, sources in the U.S. said.
Asian traders said these levels were still a good $40 away from prices Chinese buyers would be willing to pay.
But an official of Beijing's food trading arm China National Cereals, Oils and Foodstuffs Import Export Corp (COFCO) told Reuters China had not yet issued new soybean oil quota or import licences for 1996.
Quotas for 1995 had expired at the end of June, she said. Palm oil import quotas had been issued in July, she said, but declined to give more details.
China could come into the market for vegetable oil late in 1996 or early in 1997 to make sure there was enough in stock for Chinese New Year in February, traders said.
A Chinese source said 140,000 tonnes of soyoil import licences were issued by central authorities in August.
He said 50,000 tonnes of soyoil had already been imported on that quota, and 40,000 tonnes of quota had been allocated to Tibet so licences could be sold there for cash.
Authorities in Tibet, contacted by telephone, said they were unaware of this.
One trading house source in the region reported a busy day on the telephone on Monday, fielding Chinese inquiries for soybean oil. He thought perhaps this was an indication quota had been issued.
Relevant officials with the Ministry of Agriculture could not be immediately reached for comment.
An executive with an international marketing organisation who met Shanghai grain bureau officials last week said they had no indication of when import quotas for vegetable oil would be issued.
""They said they were going to apply for licences, but they had no idea when they were likely to be issued,"" she said by telephone.
Prices quoted last Thursday by the National Grains and Oils Information Centre in Shanghai put grade one soybean oil in northeastern Jilin province at 7,000 yuan ($843) a tonne, and grade two in Tianjin at 7,200 yuan ($867) a tonne.
Freight information from Brazil details 18,000 tonnes of vegetable oil due to be loaded for China in early October. No other details were available.
Soyoil imported into China without an import licence carries a 120 percent import tax. Importers with licences must pay 13 percent import duty and a 13 percent value-added tax on top of that.
-- Hong Kong newsroom (852) 2843 6470
",27
"Chinese importers are expected to make incremental use of import quotas for 1.3 million tonnes of palm oil to avoid driving up the world price and pushing down the domestic price, Far East traders said on Friday.
China still has significant stocks of edible oil -- reported in official media to be 2.8 million tonnes by the end of October 1995 -- which could even keep China out of the palm oil market until early 1997, traders said.
A flurry in Malaysian palm oil futures prices on Friday, as speculators reacted to news the Chinese government had approved imports of 1.3 million tonnes of palm oil, was a knee-jerk reaction, trading sources around the region said.
""This is just panic short-covering and speculative interest,"" a Singapore trader said.
""People are just looking at the volume of 1.3 million tonnes, they are not looking at the market reality,"" he said.
Import licences could be extended, said another trader, as those issued in 1995 had been for six months.
""This is just the normal annual allocation,"" he said. ""Unless China buys a couple of hundred thousand tonnes a month, there is no justification for a market move, this is just on the news.
""People have been talking about it for a month or more. There is no need (for China) to hurry,"" he said.
Malaysian Primary Industries Minister Lim Keng Yaik said on Thursday China had approved imports of 1.3 million tonnes of palm oil between August 1996 and March 1997.
Malaysia would provide 80 percent of China's palm oil, Lim said, with the remainder coming from Indonesia.
At midday, the benchmark third position November crude palm oil futures contract was up 20 ringgit to 1,180 riggit (US$473.33) a tonne. Among refined products, November/December RBD palm olein was traded at $550 a tonne FOB Malaysia.
Traders said domestic Chinese palm oil prices were around 6,500 yuan ($783) a tonne.
Using the November/December bulk palm olein FOB Malaysia price as a benchmark, traders said importing did not make economical sense for China as costs, freight, insurance, and import and value-added taxes would push the price up to 7,552 yuan ($910) a tonne.
""They are not likely to use the quotas straight away,"" another trader said.
Annual per capita consumption of edible oil in China is six kg (13.2 lb), compared with the average 16 kg (35.2 lb) in developed countries.
Traders said China had been importing about 100,000 tonnes a month of palm oil, mostly as bulk palm olein, up to June.
Palm olein is used by the food industry for manufacture of ice cream and cakes; palm oil is used for frying in the production of instant noodles.
Customs figures released this week show China's edible oil imports, including palm oil, in the first seven months of 1996 were 1.74 million tonnes, down 26.9 percent from the same period in 1995. July vegetable imports were nil, the figures show.
Palm oil imports for the first seven months of 1996 totalled 582,000 tonnes, trading sources said, down 40 percent on the same 1995 period.
Overbuying in 1995 was still hanging over the market, traders said. Some sources have predicted that current vegetable oil stocks could last until the end of 1996, and they point to soft domestic prices as proof.
Indeed, prices indicated in Shanghai on Wednesday showed vegetable oil prices falling to as low as 6,700 yuan ($807) a tonne, from 7,000 ($843) a tonne two weeks ago.
Soyoil fell to 7,200 a tonne, from around 7,500 two weeks ago, according to figures from the National Grains and Oils Information Centre.
",27
"China's zinc industry is fast succumbing to the rigours of reform, as mines and smelters find that surviving without government grace is difficult and the ways of the world are tough, Far East traders said on Monday.
Withdrawal of government subsidies, combined with tight credit, expensive infrastructure and utilties, and over-manned mines and smelters mean the industry is struggling to compete.
Chinese zinc exports have slowed as Chinese sellers are unwilling to lower their prices to world levels, traders said.
""The Chinese are asking high premiums -- LME (London Metal Exchange) plus US$70 to Hong Kong and Taiwan,"" one said.
Three month LME zinc was quoted at $1,036/$1,038 a tonne in early trade on Monday up slightly from Friday's $1,033 close.
Many Asian customers bought zinc heavily in late 1995 and still have stock to consume before they look to China, a Hong Kong trader said.
Nor is China importing much zinc, as a 10 percent import duty and a value-added tax of 17 percent made it too expensive for cash-starved smelters, traders said.
July customs figures show China's exports of unwrought zinc and zinc alloys dropped to 117,293 tonnes in the first seven months of 1996, down 7.1 percent on the same year-ago period.
The January-May export figure of 86,494 tonnes was down 25.5 percent on the corresponding period in 1995.
An executive with an Australian firm said the problems faced by the Chinese industry would take a long time to resolve.
Expansions planned some years ago had not been costed on world terms, he said, but on the local supply of raw materials that were sold at a set price.
So when mine depletion and rising demand became evident and forced China to look outside for raw materials, ""they found it was very expensive, much more expensive than they expected.""
As China's economy has grown at about 10 percent a year, zinc consumption is maintaining a growth rate of about eight percent, the Commodities Research Unit (CRU) said in a report.
Zinc output has risen faster than consumption and enabled China to become a net exporter of about 200,000 tonnes of slab in 1995 -- after being an importer 10 years earlier of 200,000 tonnes, CRU figures show.
U.K.-based CRU put China's 1994 mine output at 949,000 tonnes of zinc.
China's influence on the world market is expected to continue, despite reduced exports, an analyst at Billiton Metals in London said in July.
China's refined zinc exports in 1995 totalled 164,000 tonnes, compared with 222,000 tonnes in 1994, the analyst, Karen Norton said. London brokers T Hoare & Co put China's average yearly exports in the previous five years at 70,000 tonnes.
The Chinese government is gradually withdrawing subsidies to mines and smelters in line with requirements for membership of the World Trade Organisation (WTO), trading sources said.
""The zinc price is down, but the Chinese are getting a double whammy with subsidies disappearing,"" the Australian source said.
""They can't lay people off, but they have to make money -- so what can they do?"" he said.
""The real issue is that the smelters have to become competitive, and this means redundancies... So even though they are free to run the smelters as free enterprises, it would be a brave man to be the first to stick his hand up and say he is going to lay off a couple of thousand workers.""
Capacity in China will remain under-utilised, while expansion elsewhere will further pressure the industry.
""The Chinese will have to compete, and their competitors will be leaner and meaner,"" the Australian source said.
",27
"The rise in the London Metal Exchange (LME) zinc price to a five-month high in Asia on Thursday will benefit China, one of the major sources of the metal throughout the Far East, regional traders said.
""It would be good for China because they have a lot of physical metal and they have a lot to sell from producers on the hedge side,"" a trader with a Chinese company said.
""They might buy from time to time to speculate a bit but basically they are a producer,"" he said.  
Three month LME zinc hit a five-month high of $1,064/$1,069 a tonne on Thursday, up from the metal's close at $1,054 in London on Wednesday boosted by rumours that famed financier George Soros was making a speculative play in the market.
Few traders in the region expressed surprise at the talk that a large, losing long position once held by the Spanish producer Asturiana de Zinc had been liquidated or transferred and that Soros had bought zinc or zinc-related equities.  
One trader said he heared rumours months ago Soros was buying shares in zinc producers, and had been expected to buy into the metal once his share positions were finalised.
""I think that if Soros is involved the price will move,"" the source in Singapore said.
And as the world price moves up, so will the Chinese price as regional consumers have few other sources, traders said.
China's exports of unwrought zinc and zinc alloys in the first nine months of 1996 were up 16.7 percent on the same period of 1995, to 153,660 tonnes, according to customs figures.
September's exports alone were 19,165 tonnes, they show.  
China's official base metals industry newspaper, China Nonferrous Metals News, estimated late last year that total 1995 zinc production would be 1.05 million tonnes.
With domestic demand expected to be 700,000 tonnes and essential exports to reach 300,000 tonnes, the market should be kept in balance, it said.
China National Nonferrous Metals Industry Corp (CNNC) said earlier this year that domestic zinc demand would reach 900,000 tonnes by 2000, from 881,600 in 1994 and 465,700 in 1990.  
Supply annually outstripped demand for the metal, CNNC said, with a surplus in 1994 of 142,800 tonnes. Chinese zinc smelter capacity is around 1.2 million tonnes a year.
Traders said Chinese zinc goes to Taiwan -- a big user with total imports of around 200,000 tonnes a year -- Indonesia, Japan, Malaysia, South Korea and Thailand.
Trading sources in Hong Kong, China and Singapore said demand throughout the region remained strong, riding the back of rampant economic development.  
The official China Daily reported last week that domestic Chinese zinc prices would probably drop below 9,000 yuan (US$1,084) a tonne this month, due to oversupply.
However, traders polled by Reuters said the lack of alternative suppliers, other than Australia, would keep export demand for Chinese zinc healthy.
""Far East consumers can only take the Chinese material, because if you ship anything from Europe, the premiums would be even higher,"" the Chinese trading source said.  
Chinese HX brand zinc sold out of Singapore warehouses at a fixed price of $1,100 or $1,120 a tonne, he said. Higher prices meant lower, more flexible premiums (over LME cash prices).
""When the price is $1,020, the premium is $80, $90, $100 and no one buys. Now the premium (in Singapore warehouses) is $50 for HX brand,"" he said.
""I think with the LME price coming up so much, with the price coming nearer to $1,100, they will easily let it go at a $50 premium,"" he said.
Other traders said the premium on Chinese zinc to Indonesia is currently $120 a tonne and to Hong Kong $75-$85.  
Taiwan's construction sector had slowed recently and some traders on the island had been trying to take a position and offer the metal at premiums lower than the $90-$100 levels that prevailed until recently. This has pushed the Taiwan premium down to $70 a tonne, an industry executive said.
-- Hong Kong newsroom (852) 2843-6470
",27
"China has agreed not to enforce a ban on imports of U.S. poultry until after top-level quarantine talks scheduled to take place in Beijing next week, U.S. business and diplomatic sources said Tuesday.
""We understand they (the Chinese authorities) have not issued any letter to the field banning imports, and that they will not until discussions are held,"" a senior diplomat in Beijing said.
China last week confirmed a ban on imports of poultry and poultry products from 10 U.S. states because of fears of a fowl plague known as highly pathogenic avian influenza, or HPAI.
China is the second-biggest market in the world, after Russia, for U.S. poultry products and is its only market for chicken feet.
U.S. poultry exports to China in 1995 totalled $445 million, according to the U.S. Poultry and Egg Export Council.
The states affected are Arkansas, Florida, Maryland, Minnesota, New Jersey, New York, North Carolina, Texas, Utah and Wisconsin.
Officials from Washington's Animal and Plant Health Inspection Service were to arrive in Beijing next Monday for talks with China's Administration of Animal and Plant Quarantine on Wednesday, the diplomatic source said.
""We have been told they will hold off on any action until then,"" he said.
News of the ban surfaced on Oct. 10, when the U.S. agriculture attache in Beijing confirmed to his head office that China feared U.S. poultry products bore the HPAI virus.
U.S. officials say U.S. poultry is free of HPAI virus and that Chinese quarantine personnel are confused about the difference between HPAI and avian influenza, or AI.
""We don't know what they identified,"" an APHIS official told Reuters. ""All we can say is that HPAI is not found in the U.S. The last time it was found (in 1984) it was eradicated and since then we have had no reports of HPAI at all.""
AI is prevalent the world over, especially in wild fowl, and had not been isolated in commercial U.S. poultry flocks, he and other U.S. sources said.
""AI is not a concern for vets -- it's like the common cold and is not quarantinable,"" the APHIS source said.
U.S. and meat industry sources said the HPAI virus had been detected in ostrich breeding stock in the United States destined for ostrich farms in China.
During a trip to Texas by CAPQ personnel to look at U.S. ostriches, 22 birds had tested positive for HPAI, a U.S. source said.
A positive test did not necessarily mean the bird was ill with HPAI, he said, likening it to a tuberculosis skin test which, if positive, did not definitively indicate the presence of TB.
",27
"Copper stored in Shanghai warehouses -- the murky ownership of which has cast a pall of concern over the world market -- is being offered in small lots to European trading houses, industry sources said on Thursday.
The copper is been offered for sale at a high premium in order to set a benchmark price for its eventual sale to China's strategic stockpile, one Chinese trader said.
Traders said that estimates of copper reserves brought into China in recent months range between 100,000 and 150,000 tonnes. A European trader in Beijing said he had been offered copper by the China National Non-ferrous Metals Import and Export Corp (CNIEC) at around $2,100 a tonne -- a level reflecting the London Metal Exchange (LME) cash price plus a premium of $130.
CNIEC has declined to comment on the market talk.
The copper was said to be owned by Chinese trading firms which had shipped it to Shanghai in the expectation that the central stockpile would buy this amount to square its position on metal previously lent to the market, before the end of 1996. ""They are hoping that it is the right tonnage in the right place, but as far as we know, the stockpile has so far not confirmed they will buy it,"" a Chinese trader with a state-owned Chinese firm, said.
Traders said last week the copper probably belonged to China's state reserve, which lent around 85,000 tonnes of copper, through CNIEC, onto the LME between April and June 1995.
In March this year, CNIEC's former president Fang Dachang said China was likely to take it back in the fourth quarter.
But when copper began to move back to China in June and July, from LME warehouses in Rotterdam, Singapore and Long Beach, California traders assumed the central reserve was taking the copper back earlier than planned.
Not so, said the Chinese trader, though he added: ""Who owns it is anyone's guess.""
The metal was taken from LME warehouses at about $2,400 a tonne, a Hong Kong trader said, with the price set before three month LME copper prices slid below $1,800 on news in June of $1.8 billion in copper trading losses by Japan's Sumitomo Corp.
Three month copper was indicated at $1,942/45 a tonne in late LME trade on Wednesday.
""It (the copper) has been sitting there for a couple of months, so someone has to pick up the loss,"" a trader said.
""Whether the stockpile takes this tonnage from this owner, or if they buy it themselves and arrange another shipment themselves, is up to them,"" the Chinese trader said.
""But it depends on the price. If they (the stockpile) can get a premium lower than $100, maybe they will take it. They won't pay $150, or $120, especially on this sort of tonnage.""
A trader in Shanghai said CNIEC would ""dearly love someone to take the whole lot, but that is unrealistic"".
But the Chinese source said: ""This copper can only be taken by the stockpile"" because no other buyer could afford it.
China levies a three percent import duty and a 17 percent value-added tax on copper imports, which traders said made it prohibitively expensive.
Freight, warehousing and other costs would put the Shanghai copper in the same cost bracket as copper shipped to the region from LME warehouses in Europe or the Americas if the premiums being asked were paid, traders said.
Other traders, in Asia and in Europe, have told Reuters that CNIEC had offered them copper in a series of secret meetings held in major Chinese cities since June.
About 40,000 tonnes was said by traders in China to have been shipped already to warehouses near the northern port of Yingkou, where the strategic stockpile has some warehouses. This has not been confirmed.
Another 20,000 tonnes of copper was stored in Shanghai Metal Exchange warehouses in the eastern port city, and the remainder of the metal was in other Shanghai stores, traders said.
""The whole market is still being manipulated by somebody,"" a Chinese source said. ""The game is not over.""
",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.""
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.
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.
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.
",27
"China's ban on poultry imports from two U.S. states, aimed at preventing a deadly epidemic, is unlikely to be mired in the politics of Beijing's bid to join the World Trade Organisation, a U.S. official said on Tuesday.
""They (Chinese authorities) are very sensitive to any sort of disease profile,"" Phillip Holloway, representative in Hong Kong and China for the Oklahoma state agriculture department, told Reuters.
China's Ministry of Agriculture and the State Bureau of Animal Plant and Quarantine said the ban on poultry products from Oklahoma and Missouri went into effect on Monday.
Official news reports said the ban was slapped on poultry products from the two rural states because five cases of a deadly poultry flu were discovered between July and September.
China's Xinhua news agency described this virus, known as viscerotropic velogenic Newcastle disease, or VVND, as an ""extremely harmful contagious epidemic disease"". Holloway agreed. ""It's a very, very dangerous disease -- the most feared of poultry diseases,"" he said. ""The symptoms are like influenza, and once one bird gets the disease, all the poultry will die.""
But Holloway said he had not heard of any recent cases of VVND in Oklahoma.
The U.S. embassy in Beijing issued a statement confirming the Chinese ban but would not elaborate. Other U.S. agricultural officials were not immediately available for comment.
Some U.S. industry sources suggested the ban could be connected with Beijing's tit-for-tat trade disputes with Washington and timed to coincide with the first ministerial meeting of the 128-member World Trade Organisation in Singapore.
But Holloway said this was unlikely.
The last major outbreak of VVND in the United States occurred in California in the 1970s and led to the eradication of the state's entire poultry population, he said.
The poultry industries of Oklahoma and Missouri were far down on the list of top U.S. producers and exporters, he said.
""My estimate is that Oklahoma and Missouri account for less than five percent of U.S. poultry exports to China,"" he said.
Arkansas is the country's biggest poultry producer and home of industry giant Tyson Foods Inc.
A source at Tyson's Hong Kong office said VVND was known to exist in China, but this could not be confirmed.
The United States exports around US$500 million of poultry and poultry products a year to China, its biggest market after Russia.
Canada reported one case of VVND, found in a wild cormorant, in October, a Canadian embassy official in Beijing said.
Under existing protocols between Ottawa and Beijing, Canadian poultry exports to China did not cease, and neither volume nor value was affected, the embassy source said.
But all Canadian poultry must be now certified as not coming from the area where the dead bird was found, he said.
The current Chinese ban comes only weeks after the resolution of another dispute that saw Beijing ban all U.S. poultry imports because of fears they carried highly pathogenic avian influenza or HPAI.
U.S. officials said Chinese authorities had mistaken HPAI for the less-virulent avian influenza, or AI. The United States flew in experts to meet with Chinese officials.
That ban was lifted before being implemented.
-- Hong Kong Newsroom (852) 2843 6470
",27
"Talks aimed at averting a Chinese ban on imports of United States poultry have been hailed as a success by U.S. officials, who said on Friday they expected the issue to vanish without any disruption to a major market.
A Chinese ban on imports of poultry and poultry products from 10 U.S. states, worth nearly US$500 million a year, was now unlikely to be implemented, official U.S. sources said.
""I'm optimistic that the issue has been resolved,"" a U.S. diplomat in Beijing said by telephone.
""Hopefully, this thing will now be dropped. I'm not expecting any correspondence or a list -- sometimes no news is good news,"" he said, speaking on condition of anonymity.
A two-man team from Washington's Animal and Plant Health Inspection Service (APHIS) spent two days in meetings with China's Administration of Animal and Plant Quarantine (CAPQ) and scientists from other government departments and universities.
The aim of the talks was to convince CAPQ that U.S. poultry does not carry a virus called highly pathogenic avian influenza (HPAI), contrary to Chinese fears that led to the ban.
""We are hopeful this issue has been resolved,"" said Ray Miyamoto, the APHIS area director in Beijing. ""We feel their (CAPQ's) primary concerns were adequately addressed.""
Miyamoto added that CAPQ planned to write a report that may or may not be made available to APHIS.
The meetings ended on Thursday. CAPQ was not immediately available for comment.
U.S. sources described the talks as ""frank, open and candid"" and said they augured well for other discussions slated for November on plant quarantine issues.
Wheat, however, remains shrouded in politics. Washington claims a Chinese ban on accepting wheat from specific U.S. areas because it cannot be guaranteed free of a fungus called TCK smut is, in effect, a non-tariff trade barrier.
A top-level Chinese delegation is due to leave for the United States this weekend for a two-week TCK fact-finding trip.
The poultry ban came to light on October 10 after U.S. chicken meat imports were blocked. CAPQ confirmed it to U.S. Embassy officials in Beijing the next day in a telephone call.
Nothing was ever received in writing from CAPQ, a source at the embassy said on Friday, and the ban was not implemented as CAPQ wanted first to hear what the U.S. experts had to say.
What the experts said, according to sources close to the meetings, was that HPAI, while widespread in wildfowl, was eradicated from commercial U.S. flocks in the mid-1980s.
The U.S. side seemed convinced that CAPQ had confused HPAI with the less-virulent avian influenza, or AI, which an APHIS source likened to the common cold.
Another U.S. source said the Chinese fears had been fuelled during a visit to Texas by CAPQ personnel to check on ostrich breeding stock destined for farms in southern China.
A number of birds there tested positive for HPAI, the source said, though this did not necessarily mean they were afflicted with the virus.
China is the second-biggest market in the world, after Russia, for U.S. poultry products and its only market for chicken feet.
U.S. poultry exports to China in 1995 totalled 330,000 tonnes trans-shipped through Hong Kong alone, worth US$445 million, according to the U.S. Poultry and Egg Export Council.
The council's representative in Hong Kong, Sarah Li, told Reuters about 700 tonnes of U.S. chicken feet are transported across the border from Hong Kong into China every day.
-- Hong Kong News Room (852) 2843 6470
",27
"China's ban on poultry imports from two U.S. states aimed at preventing a deadly epidemic, is unlikely to be mired in the politics of Beijing's bid to join the World Trade Organisation, a U.S. official said on Tuesday.
""They (Chinese authorities) are very sensitive to any sort of disease profile,"" Phillip Holloway, representative in Hong Kong and China for the Oklahoma state agriculture department, told Reuters.
China's Ministry of Agriculture has confirmed a ban on poultry products from Oklahoma and Missouri which came into effect on Monday.
Official news reports said the ban was slapped on poultry products from the two states because of five cases of a deadly poultry flu discovered between July and September.
Some U.S. industry sources suggested the ban could be connected with Beijing's tit-for-tat trade disputes with Washington and timed to coincide with the first ministerial meeting of the 128-member World Trade Organisation (WTO) in Singapore.
But Holloway said this was unlikely.
The virus in question, known as viscerotropic velogenic Newcastle disease, or VVND, is deadly, Holloway said.
""It's a very, very dangerous disease -- the most feared of poultry diseases,"" he said. ""The symptoms are like influenza, and once one bird gets the disease, all the poultry will die.""
But Holloway said he had not heard of any recent cases of VVND in Oklahoma.
The last major outbreak of VVND in the United States occurred in California in the 1970s and led to the eradication of the state's entire poultry population, he said.
The poultry industries of Oklahoma and Missouri were far down on the list of top U.S. producers and exporters, he said.
Arkansas is the country's biggest poultry producer and home to Tyson Foods Inc and Simmons.
The United States exports around US$500 million of poultry and poultry products a year to China, its biggest market after Russia and its only market for chicken feet.
Canada reported one case of VVND, found in a wild cormorant, in October, said an official with Canadian embassy in Beijing.
Under existing protocols between Ottawa and Beijing, Canadian poultry exports to China did not cease, and neither volume nor value was affected, the embassy source said.
But all Canadian poultry must be now certified as not coming from the area where the dead bird was found, he said.
The current Chinese ban on U.S. poultry imports comes only weeks after the resolution of a ban Beijing slapped on all poultry products from the United States because of fears over highly pathogenic avian influenza or HPAI.
U.S. officials said Chinese authorities had mistaken HPAI for the less-virulent avian influenza, or AI. The United States flew in experts to meet with Chinese officials.
That ban was lifted before being implemented.
-- Hong Kong Newsroom (852) 2843 6470
",27
"Genetically-altered soybeans at the centre of an international environmental furore are causing little concern in China, a major soybean importer with its own bio-engineering programmes, industry sources said on Wednesday.
""China is a very public and vocal supporter of our technology,"" said a source at Monsanto Co, the developer of the first genetically-altered U.S. soybeans.
""The Chinese have been heavily involved in their own programmes to produce insect-resistant cotton and genetically-altered soybeans, corn and rice,"" the source in Hong Kong, who spoke on condition of anonymity, told Reuters.
Monsanto has been targeted in the United States and now in Europe by environmental groups opposed to genetic engineering.
The soybeans have been developed with a resistance to a widely-used weed killer called Roundup, also a Monsanto product.
""I would think they would be very happy in China to get their hands on some of this product if they are pest-resistant,"" an industry executive in China said.
""They have a lot of their own problems with insects, especially in their soy and corn crops,"" he said.
The Monsanto source said Chinese research, while a good decade behind his own company's, mirrored Monsanto's efforts at developing pest and insecticide resistant crops.
""So I wouldn't expect there to be any concern in China about this product,"" he said.
He said Monsanto was negotiating for co-operative projects in China, but would not give further details.
Greenpeace and other environmental campaigners were preparing on Tuesday to picket the arrival in Hamburg of a ship believed to be carrying some of the Monsanto soybeans.
Greenpeace activists in Hong Kong, however, said on Wednesday that despite concerns, they had no plan to campaign against the sale of the genetically-altered beans in Asia.
""The problem is we don't know what form it is in -- in powder form, in animal feed, mixed into hamburger meat -- so we have no way of knowing if we are eating it,"" said Clement Chan, spokesman for Greenpeace in Hong Kong.
""The beans have not been extensively tested before being made available to the public so we don't know what we are doing to human or animal bodies,"" he said.
Other than providing information on request, Greenpeace had no plan of action against the beans in Asia, Chan said.
The beans have been approved for use in Japan, the biggest buyer of U.S. soybean products, the Monsanto source said.
User-groups in other countries, such as the Food and Drink Industry Association of the Netherlands, have also said they will use the genetically-altered U.S. soybeans.
Grain traders and industry executives in Asia said they had received no expression of concern from potential buyers in the region about the altered soybeans and did not expect to.
""They represent a very small proportion of the U.S. crop at this stage,"" a grain trader in Singapore said, adding the beans could account for 10 percent of the total U.S. crop in 1997.
The U.S. soybean crop, now more than 70 percent harvested, is expected to be more than 64 million tonnes, according to the American Soybean Association. Of that, 24.8 million tonnes will go to export markets.
While not among the biggest customers for U.S. soybean products, China is expected to buy around one million tonnes of beans in calendar 1996, and up to two million tonnes of meal.
-- Hong Kong newsroom (852) 2843-6470
",27
"Canadian and Australian sales of malting barley to China could be limited by weather woes and disease concerns, which are cutting the amount of quality grain available for export this year, industry sources said on Monday.
Canada was hit by early snow that damaged the barley crop and would keep sales to China of the higher quality malting variety below 300,000 tonnes, a Canadian marketing source said.
Canada had already sold close to 300,000 tonnes of malting barley to China in the current marketing year (August-July), he told Reuters.
""We won't do more than 300,000 tonnes (to China),"" he said. ""We will be lucky if we hit 300,000. It's a very tight market.""
That tightness could work to Australia's advantage, but farmers there had shown a preference this year for disease-resistant strains of feed barley, Barry Marshall, deputy general manager of the Australian Barley Board (ABB), said.
Frost in Victoria and South Australia could cut the board's availability of malting barley by 100,000 tonnes from earlier expectations of 920,000 from the two southern states, Marshall said by telephone from his Adelaide office.
The ABB, which markets Victorian and South Australian barley, could thus have 400,000 tonnes of malting barley to sell domestically and the same again for export.
""We would hope 300,000 to 350,000 tonnes will go to China,"" Marshall said.
Official Chinese figures show total barley imports from January to September 1996 were 959,138 tonnes, and 37,267 tonnes in September alone. No comparative figures were available.
Australia's total crop would be in the range of 6.03 million tonnes, Marshall said, up from last year's 5.5 million and possibly the best ever.
The harvest should begin in about 10 days, he said, and exports could start moving in early December.
Canada's shipments of two-row malting barley to China last marketing year were around 400,000 tonnes, selling at around US$240 a tonne, the marketing source in Hong Kong said.
He said Canadian wheat began the marketing year to China at around $230 a tonne C&F China, after the Canadian Wheat Board (CWB) and China National Cereals, Oils and Foodstuffs Import/Export Corp (COFCO) agreed on the price.
""The CWB is trying to compete because the Australians have such a large crop,"" he said.
The ABB's Marshall said Australian malting barley was US$194-195 FOB Australian ports, arriving C&F China at about US$220 a tonne.
Earlier sales went for around $200 a tonne FOB, he said, adding that Canada's earlier FOB prices were around $210.
China's beer market is one of the most dynamic in the world, with 1995 year-on-year growth of 10.8 percent for total output of 15.46 million tonnes, according to official figures.
China produced 13.71 million tonnes of beer in the first nine months of 1996, up 5.45 percent on the year-ago period, State Statistical Bureau figures show.
China grows around four million tonnes of barley each year but little of malting quality.
Canada's exports of malting barley to China have averaged 300,000 to 400,000 tonnes a year in recent years.
Australia and the European Union share much of the remainder of the market, though Australia was out of the trading loop in 1994 because drought cut barley output to 2.4 million tonnes.
-- Hong Kong Newsroom (852) 2843 6470
",27
"While China's leaders peppered 1996 with assurances they can attain their Holy Grail of feeding a fifth of the global population on a tiny patch of its arable land, outside China the calls for a reality check grow louder.
Grain and oilseed production is increasing, but the economics of China's agricultural sector remain patchy and official figures can sometimes leave much to the imagination.
As a result, Western analysts and grain industry leaders are sceptical about China's ability to achieve its stated goal of grain self-sufficiency.
Many industry sources say China's communist leadership must overcome its need to keep state grain reserves secret and give the world notice of its growing food needs.
""They should get it together on real need, announce it and let other growing nations know and plan and grow for supply to China,"" said a consultant to the Chinese and U.S. grain industries.
""If it becomes apparent that China is importing, you'll see Argentina, Brazil gearing up to meet demand, the U.S. will expand, India might try... so there'll be competition for the China market -- which should in turn act to stabilise prices,"" he said on condition of anonymity.
Official projections that 1996 grain output will be yet another record, hitting 485 million tonnes after 1995's bumper 465 million tonnes, are ""high even for ministry officials,"" says China Agribusiness, an analytical newsletter published in Hong Kong by China Concept Investment (BVI) Ltd.
""Increased domestic supply has reduced import needs, and could cause (domestic) prices to fall and 1997 production to suffer,"" the newsletter's third quarter 1996 issue says.
Grain supply has grown in China by 55 million tonnes in the past two years. The government predicts it will grow to 550 million tonnes a year by 2010, to feed a population which will expand from the current 1.2 billion to more than 1.4 billion.
China's net grain imports in the first nine months of 1996 were 7.4 million tonnes, with industry experts expecting total imports for the year to total eight to nine million tonnes.
This is well down on 1995's imports of around 17 million tonnes, mostly on the back of the bumper harvests, a ban on some grain exports, and a conscious official effort over the past couple of years to boost strategic grain reserves.
This has brought a much-needed confidence boost, coming after alarming predictions by American environmentalist Lester Brown that China's rising population and diminishing land and water resources will lead to enormous grain import needs.
""There's a bit more confidence on the part of China now,"" a grain industry executive based in Beijing with a U.S. organisation said in a recent interview.
""More than two years after Lester Brown came up with his scare-mongering, a lot of people (in China) are looking at these last two years as evidence that 'We can feed China, that's who',"" he told Reuters by telephone from Beijing.
""The more realistic people here are saying imports will be a significant part of China's needs, that perhaps five to 10 percent of needs will be covered by imports annually,"" he said. Like other observers of China's agriculture sector, he sees 1997's grain imports falling significantly.
The Chinese government said in a recent agriculture policy white paper that grain imports could be limited to five percent of need over the coming 35 years.
Indeed, China has already frozen wheat import permits for next year because of an expected bumper crop.
Corn is in such oversupply in the northeastern growing regions that questions are being asked about how the crop, currently under harvest, be stored -- though exports, banned since December 1994, could help.
The one problem China seems unable to deal with is that of price stability.
Chinese farmers, long permitted to grow what they choose, will plant what they think will bring them the most money. With little or no planning, this leads to famine-and-feast cycles.
the coming year, 1997, will be no exception. With corn exports banned and a bumper crop on the way, corn is heading for oversupply that will push prices down.
This will in turn discourage farmers from planting corn next year, instead looking for a crop that will bring them a profit -- probably soybeans, the current short-supply crop.
""The danger -- and one that Chinese people just cannot get through their heads -- is if there is a domestic switch from corn to soy, the soy price will drop on higher supply, farmers will then stop growing soy, corn will go up in price on tighter supply and the whole boom-bust cycle begins again,"" a senior marketer of U.S. grains to China said.
He says China is heading for a 2.5 million-tonne soybeans shortfall in 1997 because just a couple of years ago soybeans were in oversupply, prices dropped and farmers headed for corn.
What would help?
China Agribusiness suggests the current high-supply period could be a good time to reform the grain price system, bringing the government's procurement price -- that paid for a set quota of each farmer's grain -- and the higher market price into line.
The grain marketer and others advocate a continuation of the current import policies, based on need, and an end to the secrecy that keeps the world guessing.
""Looking at it from the point of view of announcing state reserves, it would definitely help China,"" he said, though he pointed to the fears among China's communist leadership of panic buying and hoarding if reserves were low.
Without more openness, expert sources say, the world has no way of knowing if China will need as much as Lester Brown says -- 369 million tonnes of grain imports a year by 2030.
Or if, as the Chinese Agriculture Ministry's white paper says, import needs will be kept below 40 million tonnes by then as technology brings greater production efficiency, the population peaks and dependence on grain as a staple diminishes.
-- Hong Kong newsroom (852) 2843-6470
",27
"New evidence about British Biotech Plc's anti-cancer treatment Marimastat next week will provide important clues about its potential as a blockbuster product, analysts said on Friday.
British Biotech is using a meeting of the European Society of Medical Oncologists (ESMO) in Vienna to make five presentations, including Marimastat's effects in ovarian, colo-rectal, pancreatic and gastric cancer. It will issue a general update on Monday morning.
The Oxford-based group has become the bellwether for the increasingly crowded biotech field in the U.K, with sentiment towards Marimastat having a disproportionate impact on the sector.
Millions of pounds of investors' money has been placed on the bet that Marimastat will turn out to be Europe's first big-selling biotech product, with forecasts for annual sales ranging from a few hundred million dollars to up to $4 billion.
Monday's data comes from patients who continued to use the drug beyond the period necessary for completion of Phase II clinical trials. The company said this meant there would be a further six months of extra information.
Yamaichi International analyst Erling Refsum said he hoped to see the first hard evidence that patients were living longer as a result of taking Marimastat. Refsum said the surrogate marker data provided so far ""is like the indicator board at the train station rather than the train actually coming.""
In a note on the trials Lehman Brothers analyst Ian Smith, who will attend the ESCO meeting, said it might be possible to glean indications of the effect of Marimastat on patient survival in ovarian and pancreatic cancer.
There will also be interest in Marimastat's impact on gastric cancer, where little information has so far been available. And analysts are keen to see how serious the side effects caused by the drug are. The main problem reported so far is joint pain.
Yamaichi's Refsum said the results are ""not definitive as to whether it works or not, but it is another indication as to whether it will sell or won't sell, and that is the bottom line."" Lehman's Smith added that the results ""won't prove Marimastat's efficacy but will raise the probabilities.""
British Biotech will announce late-stage data on another key product, pancreatitis drug Lexipafant, on November 27.
Smith said that favourable news on both drugs could lift the group's share price to 300 pence by the end of the month from 230 at Friday's close. But Refsum is more sceptical about the potential impact of Marimastat and said 150 pence is ""reasonable value"" for the shares.
A British Biotech spokeswoman said Phase III Marimastat trials are likely to take two years to complete, meaning that the first results would not be available until 1998 at the earliest. But she said British Biotech would probably make academic presentations at conferences like ESMO from time to time to keep the market up to date.
Late stage trials on pancreatic cancer started in June, and trials in small-cell lung cancer, ovarian cancer, gastric cancer and a form of brain cancer are being set up, she added.
",19
"Chemicals group Courtaulds Plc is targeting sales growth of at least 10 percent a year up to the end of the century at its key coatings business as it reaps the fruits of a major modernisation drive and Far Eastern expansion.
Speaking to journalists at a recent presentation, Courtaulds European Coatings finance director Bob Wheeler said the group's multi-million pound restructuring of its European and U.S coating operations launched in 1994 was starting to pay off.
""The profits coming through now are...partly because of our Far East expansion, but also because of the restructuring programmes we have got in place in Europe and the U.S,"" he said.
Courtaulds will have spent around 75 million pounds ($125 million) on reorganising and updating its European manufacturing base -- centred in Britain, France, Germany, Sweden and Spain -- by the end of 1998.
Wheeler said a similar amount was being spent in the United States.
The coatings and sealants division supplies specialist paint and protective products to the marine and aerospace sectors as well as powder coatings for a wide range of products including cars, buildings and washing machines.
In the six months through September 30, sales at the division rose 4.6 percent to 501 million pounds. This represented around 47 percent of the group's total.
But Wheeler said the group had much greater ambitions.
""I think we would be disappointed if we weren't growing the business by 10 percent per annum through organic growth ... up to the end of the century,"" Wheeler said.
He said the division was also benefiting from Courtauld's decision in the early 1990s to get out of low margin businesses such as general industrial coatings and household paints and to exploit its long-standing presence in fast-growing Asia.
Courtaulds has built on its presence in Hong Kong, where it has been represented since the 1950s, to the point where it is involved in every major market in the region.
Asian growth was a major factor behind the rise in the division's first-half sales.
Courtauld's Coatings had chosen its marine and yacht coatings site at Felling in northeast England as one of six prototype factories for improvements in quality, productivity and safety which it planned to roll out across the division's 70-plus sites around the world, Wheeler said.
Using U.S. chemicals giant EI Du Pont de Nemours as its benchmark for safety standards and Nippon Paint for best practise in working methods, Courtaulds said it had already transformed the operation at Felling.
Wheeler said investment at the site, which is expected to total around 10 million pounds, had resulted in output doubling to 400 litres of paint per man hour in just two years, while wastage had more than halved.
Last month the site won an award sponsored by corporate advisers KPMG for most improved British factory in competition with more than 200 other British plants.
Wheeler said the transformation of the site, which Courtaulds had operated for more than 100 years, ""was about people, training and the equipment we use."" He said Felling was now ""a genuinely world class site.""
($1=.5995 Pound)
",19
"Zeneca Group Plc said on Wednesday that it expected ""substantial"" peak sales in excess of $400 million for its new asthma treatment Accolate and schizophrenia drug Seroquel.
In an interview with Reuters, chief executive David Barnes said: ""Our benchmark for a substantial product is one that has sales of $400 million plus, and both of those have that potential.""
Barnes also painted an upbeat picure of prospects for Zomig, the migraine treatment obtained last year by Zeneca from its newly-merged rival Glaxo Wellcome Plc.
Some analysts had questioned whether Seroquel and Accolate -- which represent treatment breakthroughs in their repsective categories but also face potentially stiff competition -- would prove to be major sellers.
Accolate is the first of a new generation of asthma drugs taken in tablet form which will aim to erode the market share of inhaled steroids. The drugs, known as leukotreine antagonists, are designed to prevent or reduce the severity of asthma attacks rather than relieve existing attacks.
""The Holy Grail for the treatment of asthma has been simple tablet formulation,"" said Barnes.
Accolate was launched in the U.S, where steroid-based inhaled asthma drugs have never been as accepted as in Europe, in October. Although he declined to give details of sales, Barnes said ""experience has been encouraging,"" and added ""sales are fully up to our expectations.""
""One of the most gratifying things has been the level of physician interest generated by the launch of Accolate,"" said Barnes, adding that the company had received ""a large number"" of inquiries from U.S. doctors about Accolate.
Earlier today Zeneca announced a 21 percent expansion of its U.S. sales force to help it deal with a rush of product launches, including the possible launch of Seroquel and Zomig later this year.
""The migraine market is growing very fast indeed, it's a substantial market, and so far as one is able to judge from clinical data Zomig has faster onset of action and maybe more consistent results than the leading product , (Glaxo Wellcome's) Imigran. I think it has substantial potential.""
Barnes said Zeneca's new prostate cancer drug Casodex continued ""to make very exciting progress"" in the second half of 1996, taking more than 50 percent of new prescriptions in the U.S. and was ""ahead of our forecasts.""
Some $35 million worth of Casodex was sold in the first six months of 1996. The drug, which is currently approved for combination therapy, is being tested for use as monotherapy and for use at earlier stages of the disease.
""We now know that Casodex will be a bigger product than we thought in 1993 (when Zeneca was demerged from Imperial Chemical Industries Plc ) and it will be a substantially bigger product than most analysts thought in 1993,"" said Barnes.
--London Newsroom +44 171 542 7717
",19
"Shares in British-based drugs group Medeva Plc raced ahead on Thursday following encouraging results from tests of a potential new vaccine and treatment for hepatitis B.
Shares in Medeva, which have climbed steadily this week on the expectation of good news, jumped almost six percent to 296 pence before easing to 289-1/2 pence in early afternoon trading, up 10 pence on the day. The stock has risen more than 13 percent since the start of the year.
In an update of its product portfolio, Medeva also announced a tie-up with small drug discovery group Peptide Therapeutics Plc which could see painful injections against illnesses such as influenza, typhoid and tetanus replaced by nasal sprays or capsules.
The two are also investigating a vaccine against the E-coli bacteria, which has killed 17 people in a recent outbreak in Scotland. Medeva said it spent three million pounds ($4.90 million) taking a 2.5 percent stake in Peptide, whose shares soared nearly 20 percent to 289 pence.
But the market's main focus was on prospects for the hepatitis B vaccine, Hepagene, which many analysts see as a huge potential money-spinner. In an interview with Reuters, Medeva chief executive Bill Bogie said Hepagene could eventually sell ""millions of doses"" a year, and carry a three-figure price tag.
The vaccine is targeted at a significant group of people who do not respond to existing Hepatitis B vaccines, such as SmithKline Beecham Plc's Engerix-B.
Medeva sees a large market for it, especially among health workers and police who are routinely protected against the infection.
Still more exciting is the drug's potential to treat people who are already infected with Hepatitis B, which is 100 times more infectious than HIV and kills two million people a year around the world. Bogie said tests on people who do not respond to the current treatment, Interferon, showed a 38 percent response rate.
Medeva will decide later this year whether to expand production capacity for Hepagene at its plant in Speke in northwest England or to look elsewhere for extra output.
A major surprise was Medeva's declaration that it would seek regulatory approval for Hepagene in Europe and the United States in 1998, opening up the prospect of first sales in 1999. Bogie said this was a sign of confidence that Medeva would win outstanding battles over patents on both sides of the Atlantic.
It won a key judgement in Britain's House of Lords against U.S. rival Biogen Inc last year. Bogie said Medeva would not be seeking marketing partners for Hepagene beyond its existing agreement with Johnson & Johnson to sell Hepagene in southeast Asia.
""We are not looking for a partner. That does not mean they won't happen but we are fairly confident we can do it ourselves,"" he said.
Medeva, whose executives spent Thursday morning with analysts, also announced plans to go ahead with development of a purified form of its most profitable product, the behaviour-controlling drug Methylphenidate.
Bogie said the new version of the drug being developed by Chiroscience Group Plc would give Medeva important patent advantages over rivals and cut down the number of times a day Methylphenidate is taken.
The drug is used to control attention deficit disorder in children and young adults. It is widely used in the United States but Bogie said it was starting to be more accepted in Britain and Europe. ($1=.6119 Pound)
",19
"Biotechnology star British Biotech Plc published fresh evidence on Monday that its cancer drug Marimastat worked, but analysts said there was still a long way to go before its potential could be confirmed.
British Biotech's shares ended the day 19 pence lower at 210 after its keenly-awaited announcement appeared to provide comfort for both bulls and bears on Marimastat.
Some predicted that Marimastat, a new class of cancer drug, could one day have sales of $4 billion a year and project British Biotech into the blue chip FT-SE 100 index.
Some analysts said presentations on the drug's effectiveness in gastric, colo-rectal, ovarian and pancreatic cancer to a science conference in Vienna were a rehash of data published in May, which sent the share price soaring to record levels.
""Those who were sceptical in May will remain sceptical and those who were bullish in May will remain bullish,"" said one.
Finance director James Noble told Reuters the company had been deliberately cautious about its statement on Monday, because it was ""extremely concerned not to raise patients' hopes of the drug.""
But he said there was ""significant"" evidence that Marimastat increased the chances of survival in cancer patients and added ""in many ways I think it is the most impressive data since the company was founded.""
The studies, based on 381 cancer patients who continued taking the drug after the 28-day period required for Phase II trials, confirmed Marimastat's ability to reduce the rate of rise of cancer antigens, one measure of how much cancer is present in the body.
""Those patients who continued to take it for more than 28 days lived ... significantly longer"" than those who stopped taking it, Noble said.
One of the supporters of the drug, Greig Middleton analyst John Savin, agreed, saying that ""on this information today we can say that ... 37 percent (of patients) had a real overall response which improved their survival chance significantly.""
However, others expressed disappointment that British Biotech failed to provide more detailed analysis of side-effects caused by Marimastat. The Oxford-based group confirmed that it caused joint pain, mainly in the arm and shoulder, with around 30 percent of patients affected after three to five months.
Yamaichi International analyst Erling Refsum said the side effect profile would be crucial to Marimastat's potential.
""Drugs become top sellers because of their side effect profile rather than because of their efficacy profile,"" he said.
Noble played down concerns about side effects, saying ""they are not a serious problem. They are reversible.""
Patients who suffered badly could interrupt their treatment from time to time without adverse impact.
Analysts said credible estimates of exactly how big Marimastat will turn out to be would be impossible until final, Phase III trials were completed.
This means investors will have to wait until 1998 at the earliest for hard evidence about whether their optimism about Marimastat and British Biotech is well founded.
",19
"Ethical Holdings Plc, the UK-based drug delivery company listed on the U.S. Nasdaq index, said on Wednesday it expected research and development spending to continue to rise sharply as it targets the key U.S. market. The company said earlier that a 32 percent rise in R&D spending to 10.4 million stg helped to push it into the red in the year ended August 31.
Ethical, which specialises in controlled oral release and skin patch drugs, posted a pre-tax loss of 11.0 million stg after a profit of 3.4 million a year before.  
The results were also affected by a one-off payment of 7.9 million stg for the repurchase of product rights from Drug Royalty Corp Inc.
In a telephone interview with Reuters, chairman and chief executive Geoffrey Guy said the sharp rise in R&D spending was likely to continue over the next couple of years, ""and probably at a greater rate"".
The company has decided to target the U.S, where it has had a relatively low profile despite its Nasdaq listing.  
This involves taking a number of products, including a once-daily morphine tablet used by cancer patients and a Hormone Replacement Therapy (HRT) skin patch, through late-stage trials.
""We took the view that to get the major markets and royalties of the U.S. we have to go back into an investment phase,"" Guy said.
Ethical, which is based near Ely in Cambridgeshire, southern England, has 16 products on the market. It focuses on four core areas -- hormone replacement therapy (HRT), cardiovascular disease, asthma and analgesia. Its technology is useful for producing generic versions of off-patent drugs.  
As well as targeting the U.S, Guy said the company had consolidated its position in Europe during the year, acquired a South American skin patch company and put a foot in the potentially lucrative Japanese market through agreements on its morphine and cardiovascular drugs.
Guy said Ethical had strong hopes for its once-daily pain-killing morphine tablet, which offers advantages over current drugs which have to be taken twice a day.
He said the Ethical product is about 18 months behind its main competitor and estimated the global market for morphine tablets at $250 to $350 million a year ""and still growing"".  
Ethical has also applied for a U.K. licence for an HRT skin patch which it claims will eliminate monthly bleeding caused by existing treatments in some women.
--London Newsroom +44 171 542 7717
",19
"British building materials group Blue Circle Industries Plc produced tentative signs of a turnaround at its troubled European heating operations on Tuesday, and promised a ten-fold increase in heating profits over the next three years.
The company also launched a blistering attack on the government, blaming ""disgracefully low"" infrastructure spending for a slide in its British cement sales.
The recovery in heating, together with continued strong performances in the highly profitable Chile and Malaysia markets and the USA, helped lift Blue Circle's interim pretax profit by 11.7 percent to 116.3 million pounds ($181.5 million), at the top end of analysts' forecasts, with the interim dividend rising by 6 percent to 4.25 pence.
Against a background of a weak stock market Blue Circle shares closed down 5 pence at 372 pence.
The heating operations, which are undergoing a major restructuring focused on France, Germany and Britain, posted operating profits of nine million pounds in the six months to June, up from just 100,000 pounds a year before.
But Britain's biggest cement producer also warned that it saw ""no significant signs of recovery"" in the key British cement market, and said it expected 1996 sales to be down four percent from 1995's depressed performance.
Ian McKenzie, chief executive of the group's British cement business Blue Circle Cement, blamed poor housing starts and low government infrastructure spending, warning that if the underspend continued ""the damage done to the competitiveness of British industry would be very great indeed.""
Worries about cement were offset by strength overseas and signs of early progress in turning around heating, which encouraged analysts to maintain full-year profit forecasts.
Chief executive Keith Orrell-Jones told Reuters the group's aim of achieving annual cost savings of 25 million pounds at the division is ""well up to programme,"" with nine million pounds coming through this year and the full benefit seen in 1997.
Orrell-Jones said he was confident Blue Circle could achieve a 15 percent return on its 600 million pound investment in the struggling division, or some 90 million pounds, within three years, despite sluggishness in Germany and France.
""We are disappointed with the performance of the economies of both those countries, and we think it is not likely to ease very rapidly,"" said Orrell-Jones, adding ""that is why we set a three-year time horizon"" for recovery.
With gearing a miniscule 1.5 percent at the end of June, Orrell-Jones said Blue Circle was actively looking for opportunities to expand.
""We'd like to grow our cement business: it depends on where the opportunities crop up. In the U.S. it's a question of waiting for the right opportunity and the right time in the cycle,"" he said.
Blue Circle is ""actively looking in South-East Asia, and we are taking a very careful look at India,"" he said, adding that it was also interested in expanding its south American operations beyond Chile and into Argentina.
($1=.6406 Pound)
",19
"Expertise ranging from crisp packet design to nuclear waste and the destruction of chemical weapons was put up for sale Monday as the UK government embarked on what may be its last privatisation venture, the sale of AEA Technology Plc.
Trade and industry secretary Ian Lang will be hoping to swell Treasury coffers by around 200 million stg through the disposal of 100 per cent of the Oxfordshire-based group, which is a spin-off from the Atomic Energy Authority, at the end of September.  
With a general election looming the sale immediately ran into a political row over the government's decision to keep its ""golden share"" in AEA Technology, allowing it to veto an unwelcome takeover attempt, for just three years.
The opposition Labour Party cited ""security implications"" over AEA Technology's role in monitoring UK nuclear submarine safety, and sources told Reuters Labour will consider extending the veto if it wins power.  
At a distinctly low-tech launch for the pathfinder prospectus, AEA Technology chief executive Peter Watson shrugged off the embarrassment of a malfunctioning slide projector to explain that the group ""is all about taking technology to market and converting science to profit.""
Watson could easily have a sign on his desk reading ""no job is too big or too small"" for AEA Technology, whose interests have spread far beyond the state-owned nuclear industry which spawned it in the 1940s.  
Work such as decommissioning nuclear plants and offering safety expertise worldwide, including at the site of the 1986 Chernobyl disaster in the Ukraine, accounted for just over half its 253.3 million stg of sales in the year to March.
But Watson is keen to stress success in using the group's 3,500 employees to solve a plethora of scientific conundrums, including doubling the life of batteries for Sony Corp mobile phones, helping Subaru win the World Rally Championship and assisting the U.S. with the destruction of chemical weapons.
""And we are helping a client to research an improved crisp packet,"" Watson added.  
AEA Technology hopes to persuade would-be investors, expected to be institutions rather than the army of small investors which bought into the likes of British Gas Plc and British Telecom Plc, that sales growth is about to take off after three static years, which it attributes to a drop in reliance on government contracts.
With most cost-cutting behind it, Watson told Reuters he wants to lift foreign sales to one-third of the total from just over one-fifth and take advantage of a growing trend for major companies like SmithKline Beecham Plc to outsource research to help drive pretax profit up from the 15.8 million pounds seen in the year to March.
-- Jonathan Birt London Newsroom +44 171 542 7717
",19
"British household products group Reckitt & Colman Plc pleased shareholders on Tuesday with a 152 million pound ($242 million) handout.
The group, known for brands ranging from Mr Sheen polish to Dettol disinfectant, announced a special Foreign Income Dividend (FID) of 35.65 pence per share, combined with plans to take one in every 20 of its shares out of circulation.
It said it hoped the novel scheme, which is funded from earnings made outside Britain, would avoid the tax problems which had hit other share buybacks recently.
News of the plan sent Reckitt shares soaring 18 1/2 pence to 735 by midmorning.
Reckitt said it was taking the opportunity of sharp falls in its debt to clean up its balance sheet.
The company splashed out $1 billion in 1994 to buy the U.S. household products group L&F, maker of America's best-selling disinfectant, Lysol.
Since then sales of many of its non-core businesses, including the famous Colman's mustard brand, have brought in more than 430 million pounds.
""We have been looking for some time at ways to organise our balance sheet to enhance shareholder value,"" chief executive Vernon Sankey said in an interview.
Sankey said that the move was a clear signal to share markets that it had no major takeover target on the scale of L&F in its sights.
But he added that it would not be embarrassed about going back to shareholders for cash if an opportunity came up to boost its ambition to become world number one in household products.
For the time being, Reckitt & Colman is content to pursue its strategy of acquiring smaller business which fit in with its product range and extend its global reach.
These ambitions can be fulfilled from the group's strong cash generation of around 150 million pounds a year.
Sankey said the purchase of an insecticide business earlier this year with strength in China, the Middle East and Africa was a good example of this strategy and added that Reckitt had similar moves ""up our sleeves."" Asia, Latin America and ""conceivably Africa"" are favoured targets, he added.
Sankey said the choice of foreign income dividend, which is paid from the 92 percent of Reckitt's business now done outside Britain, was not influenced by Chancellor Kenneth Clarke's recent decision to restrict repayment of tax credits on special dividends which are linked to share consolidation.
""We have had to make no alterations because this is in line with the Chancellor's indications,"" Sankey said. ""It doesn't use U.K. money, it uses money from outside the U.K."" ($1=.6270 Pound)
",19
"Health and industrial gases specialist BOC Group Plc said on Tuesday that its troubled healthcare business is likely to turn in a flat performance in the current year to Sept 1997 before recovering.
In a telephone interview with Reuters following publication of the group's best-ever full-year profit figures, chief executive Danny Rosenkranz said the Ohmeda health business faced another challenging 12 months in tough U.S. markets.  
The anaesthetic gas and machinery supplier will be ""flat this year, but starting next year this thing ought to start climbing,"" said Rosenkranz.
The health division, hit by continued falls in the price of BOC's once top-selling anaesthetic gas Forane and weak U.S. demand for anaesthetic machinery, was the only BOC unit to see operating profits fall, dropping 11 percent to 53.1 million stg.
Solid gains in the rest of BOC's business saw full-year pre-tax profits rise by 10.6 percent to 444.9 million stg, right at the top of analysts' forecasts, while sales climbed 6.7 percent to just over 4.0 billion stg.  
The strong pound cut the advance in fourth-quarter pre-tax profits by three percentage points to around nine-percent, and Rosenkranz warned that stronger sterling ""is bound to hit profits"" if it continues.
Despite its laggardly performance, the fall in profits at healthcare was less steep than many analysts had feared after a warning from BOC at the end of the third quarter, which led to a rash of earnings downgrades.
Rosenkranz said the division, which accounted for less than 13 percent of BOC's 4.0 billion stg of sales, had performed ""much better"" in the fourth quarter.  
""You can go from being a bum to a hero very fast,"" he said.
The market had also been braced for a poor performance at Edwards Vaccum Products, whose machinery creates super-clean environments for industry, because of a downturn in the overcrowded semi-conductor market.
In the event the loose alliance of business known as vaccuum and distribution posted a 28 percent gain in full-year operating profit to 90.3 million stg, although the gain in the fourth-quarter had slowed to just eight percent as the impact of a fall-off in semi-conductor orders started to bite.  
Rosenkranz pointed to tentative signs of a pick up in the computer industry, such as a rise in the October U.S. industry book-to-bill ratio. But he said the vacuum business ""will see a decline in profits this year"", but did not predict its extent.
In the core industrial gases business, where operating profits rose 9 percent to 408.3 million stg on sales up 6.8 percent to 2.8 billion stg, Rosenkranz said he expected profit margins to rise by about 2 percentage points over the ""next three to four years.""
Margins edged up to 14.5 percent of sales in the year ended in September from 14.2 percent.  
A major factor behind the improvement will be the huge increase in the number of 15-year supply contracts BOC has won in the U.S. These entail BOC building gas-making plants next to customers such as steel works, in return for guaranteed sales.
The up-front costs involved in these contracts helped to push BOC's capital spending up to 708 million stg in the year just ended, and Rosenkranz said ""I think it will be higher this year.""
Outside the U.S, BOC is targeting investment in the Pacific region, notably in Malaysia, Thailand and Indonesia. Rosenkranz said BOC is also ""looking pretty hard at India"" where it could invest several hundred million pounds over the next few years.
--London Newsroom +44 171 542 7717
",19
"Milumil babymilk powder, used by around 25,000 mothers in Britain and Ireland, was withdrawn from from stores and clinics on Friday after a scare over Salmonella poisoning.
Milupa, part of the Dutch specialist food producer Nutricia NV, said it was withdrawing its Milumil milk powder in Britain because of an unconfirmed link with 12 cases of a rare form of the Salmonella bug.
The company later followed suit in Ireland after consultations with the Irish government, despite saying that no incidents had been reported there.
The company was forced to launch a damage limitation exercise after it was contacted by Britain's Department of Health on Thursday afternoon.
Government scientists had identified 12 cases of Salmonella anatum infection, leading to gastro-enteritis, in children under 12 months old which followed consumption of the French-made milk, sold as ""Milumil for Hungrier Bottle Fed Babies.""
The Health Department said that only two of the children involved were admitted to hospital and all had since recovered. However it told parents and other carers to stop using the product immediately and ordered the withdrawal of all stocks.
""There is no direct, incontrovertible proof that (the cause) is Milumil. It is a statistical association but we have to take every precaution,"" a company spokeswoman told Reuters.
Shares in Nutricia were suspended for around an hour in Amsterdam after falling sharply. However they later recovered much of their losses, closing down 9.70 guilders at 267, above a low of 260.50 guilders.
Milupa said it would hold a thorough investigation at the French plant where the milk was made, and added that production of the product had been suspended.
Sales of Milumil milk powder total between six and seven million pounds a year, and the product has a market share of around five percent. Another Milumil product, Milumil Ready to Feed, is not affected.
Dutch-based Nutricia, which also owns the Cow & Gate brand, is no stranger to controversy.
In June 1993, it withdrew all of its powdered baby food products in the United States because of possible Salmonella contamination.
And 140 million guilders were wiped off the value of the company in November of the same year after it recalled batches of its Olvarit baby food when excessive levels of disinfectant were found in some samples.
",19
"SkyePharma Plc, one of Britain's most unusual and fastest-growing drugs companies, said on Thursday 1998 would be ""the magic year"" for proving to investors that its unique growth strategy was paying off.
SkyePharma chairman and chief executive officer Ian Gowrie-Smith, the Australian entrepreneur behind the creation of Medeva Plc, promised that by then there would be ""a lot of products filed"" for approval, plus news on product launches and collaborations with drug giants.  
""1998 is the magic year. I can't wait for that, because it seems like a lifetime away,"" he said in a telephone interview.
Earlier SkyePharma, which has the distinction of being formed out of former tent hire company Black & Edgington, announced a narrowing of pretax losses in the six months to July to 6.0 million stg from 10.0 million a year before.
The company is being built out of two key acquisitions, Krypton Ltd, which holds a portfolio of generic drugs to be launched in the U.S. as patents expire, and Jago Holdings AG of Switzerland, which specialises in controlled-release drug delivery.  
The U.S. generic drug market is expected to expand rapidly in the next few years, with new versions of tried and tested drugs much easier and cheaper to get on the market than entirely new products.
Gowrie-Smith said SkyePharma, which is 50 percent owned by its directors, has never been ""an investment for short-term punters."" The group's share price reached an all-time high of 96 pence in May and fell to a low for the year of 69 pence in July. It was trading at 73 1/2 pence, up 1 1/2, late afternoon.  
""There is a very mature base of investors,"" he said, adding he hoped to give them a near-term ""steer"" about the company with a flow of news about the progress of products. SkyePharma said it had two drugs in Phase III trials, with two more about to go in ""in the near future."" Clinical trials on a non-CFC asthma inhaler developed by Jago are due to start next year.
Gowrie-Smith said these developments were a ""signpost"", adding that current sales of drugs totalled $2.5 billion annually. The company is reformulating its drugs with Jago's Geomatrix technology which it believes makes them more effective and more easily absorbed by the body.  
The U.S. will dominate expansion plans over the next 18 months, with the workforce of SkyePharma's Brightstone marketing subsidiary gradually rising to 60 from 15. Brightstone is to target the U.S.'s rapidly-expanding managed healthcare sector.
SkyePharma had net cash of 24.3 million stg at the end of July, and Gowrie-Smith said it had no plans to return to the market for cash, unless it saw the opportunity of adding new technology to its existing portfolio.
--London Newsroom +44 171 542 7717
",19
"British chemicals group Albright & Wilson Plc said on Monday that a keenly-awaited drop in raw materials prices had failed to emerge.
In an interview with Reuters, Albright & Wilson chief executive Robin Paul said although costs had stabilised after sharp gains last year ""there has still been a small net increase, which has meant that any improvement in our performance has had to come from our own efforts, whereas we had been hoping for some reduction.""  
Cost increases have affected the performance of the whole industry, and added an extra 40 million stg to Albright & Wilson's bills in 1995. The Birmingham-based group is the world's biggest and lowest-cost producer of wet phosphoric acid, used in a wide range of processes from putting the tang into fizzy drinks to making soap powders. Rises in phosphorous prices, especially in China and the rest of Asia, partly eroded gains from strong demand for phosphates in the first half.  
Paul, who steered Albright & Wilson back onto the stock market last year after 17 years as a subsidiary of U.S. giant Tenneco Inc, said another threat on the horizon was the continued strength of sterling, which could raise the cost of exports from the UK and reduce foreign earnings.
""Where this isn't expected to have a substantial effect on 1996 results, because most of the contracts are in place, it is causing us to look very hard at the 1997 budget because of inevitable pressures on translation and transaction,"" Paul said.  
He added it was difficult to quantify the impact of the pound continuing at current high levels, although he said strength against the dollar would act as a ""net hedge"" by lowering raw material costs.
Although phosphorous-derived products have driven profits since its foundation in 1851, Albright & Wilson also produces specialty chemicals, including flame-retardants for protective clothing and furniture, and surfactants, foaming and wetting agents used in detergents and soaps.  
Paul said in some ways the company's relaunch had come at a difficult time, with its first set of interim results as a newly independent company in 1995 heralding a worldwide downturn in the chemical industry as higher costs ate into profits.
The group's share price has clawed its way back from a low of 152 pence last November to stand at 177 pence early Tuesday afternoon after touching a peak of 207 1/2 pence in September. But Paul warned that shareholders and analysts should not expect ""one-year spectaculars,"" especially in terms of a share buyback.  
News at the start of the year that the group had sought authority for a share buyback caused some excitement, particularly given its low gearing, which stood at just 14 percent at the end of June. ""The directors got permission to buy back shares, but without plans to do so,"" Paul said. ""People read rather more into it than was justified.""
Nor will cash be used for acquisitions, unless they ""tidy up"" shareholdings in associates or offer technological benefits. Paul said growth would be organic, with a reinvigorated research and development program producing a range of new products, including improved water treatment and flame-retardant chemicals and a breakthrough to stop paints from flaking.
""We are not looking for one-year spectaculars at Albright & Wilson. We have been around for 145 years and and even Tenneco's ownership (from 1978) could be seen in retrospect as a phase in the history of the company,""said Paul. ""Our aim is to build up a solid performance year-on-year-on-year.""
--London Newsroom +44 171 542 7717
",19
"British health and industrial gases giant BOC Group Plc reported its best-ever set of full-year profits on Tuesday, dispelling some of the gloom which has settled over its share price in recent months.
BOC, one of the world's biggest suppliers of specialist gases, saw profits surge 11 percent to 444.9 million pounds ($745 million) despite problems caused by a stronger pound and a deterioration in the performance of its health-care business.
Sales climbed seven percent to just over 4.0 billion pounds.
The outcome was at the top-end of analysts' forecasts, which had been pared down after BOC issued cautious noises about its two non-core operations, health and industrial vacuums, along with third-quarter results on August 13.
Shares in the group, which have fallen from more than 940 pence since mid-June and touched 12-month lows on Monday ahead of the results, climbd 29 pence to 865 in early afternoon trading.
Industrial gases, which are used in industries as varied as foods, chemicals, metallurgy and water purification, saw operating profits rise nine percent to 408.3 million pounds on sales up 6.8 percent to 2.8 billion pounds.
In an interview with Reuters, chief executive Danny Rosenkranz said he expected profit margins in gases to improve by about two percentage points over the ""next three to four years"" from the 14.5 percent achieved in the year ended in September.
He said a major factor behind the improvement would be the huge increase in the number of 15-year supply contracts BOC has won in the U.S, which entail building gas-making plants next to customers such as steel works in return for guaranteed sales.
The Ohmeda health division, hit by continued falls in the price of BOC's once top-selling anaesthetic gas Forane and weak U.S. demand for anaesthetic machinery, was the only BOC unit to see operating profits fall, dropping 11 percent to 53.1 million pounds.
Rosenkranz said Ohmeda would continue to have a difficult time in the six months to March 1997 but should turn in a flat performance for the year as a whole, and ""...starting next year this thing ought to start climbing.
The market had also been braced for a poor performance at Edwards Vacuum Products, whose machinery creates super-clean environments for industry, because of a downturn in the overcrowded semi-conductor market.
In the event the loose alliance of business known as vacuum and distribution posted a 28 percent gain in full-year operating profit to 90.3 million pounds, although the gain in the fourth-quarter had slowed to just eight percent as the impact of a fall-off in semi-conductor orders started to bite.
Rosenkranz pointed to tentative signs of a pick-up in the computer industry, such as a rise in the October U.S. industry book-to-bill ratio. Nevertheless he said the vacuum business ""will see a decline in profits this year"", but did not predict its extent.
Uncertainty also remains over the impact of sterling, whose newfound strength ate into the gain in fourth-quarter profits, trimming their advance by three percentage points to around nine-percent.
Rosenkranz warned that stronger sterling ""is bound to hit profits"" if it continues. ($1=.5970 Pound)
",19
"British Biotech Plc published further evidence on Monday that its cancer drug Marimastat worked, but analysts said there was still a long way to go before its potential as a blockbuster product can be confirmed.
Shares in the company slipped back after its keenly-awaited announcement appeared to provide comfort for both bulls and bears on Marimastat, a new class of cancer drug which some predict could one day have sales of $4 billion a year.
The stock was down 14 1/2 pence at 217 pence in early afternoon trading. But analysts noted that it rose sharply last week ahead of publication, while the decision by Morgan Grenfell to sell a sizeable chunk of its holding on October 29 had mopped up much of the buying interest in advance.
Oxford-based British Biotech used a cancer conference in Vienna to make a number of presentations on trials of the drug in gastric, colo-rectal, ovarian and pancreatic cancer.
It said the studies, based on cancer patients who continued taking the drug after the 28-day period needed for Phase II trials, confirmed Marimastat's ability to reduce the rate of rise of cancer antigens, one measure of how much cancer is present in the body. It also provided evidence of succcess in gastric cancer, where a large scale trial is now underway.
Some analysts said there was little new in the statement, which was largely a confirmation of Phase II, or intermediate stage, data published in May.
""Those who were sceptical in May will remain sceptical and those who were bullish in May will remain bullish,"" said one analyst who asked not to be named.
Finance director James Noble said the company had been deliberately cautious in its comments to avoid raising false hopes among cancer sufferers. Nevertheless he told Reuters that ""In many ways I think this is the most impressive data since the company was floated.
One of the bulls, Greig Middleton analyst John Savin, said the real news was hidden in presentations made by doctors at the Vienna conference. He said that despite the ""mishmash"" of data from the trials, which covered 381 patients, there was ""very compelling"" evidence that Marimastat had improved chances of survival.
""On this information today we can say that...37 percent (of patients) had a real overall response which improved their survival chance significantly,"" Savin said.
However, others expressed disappointment that British Biotech failed to provide more detailed analysis of side effects caused by Marimastat. British Bitoech confirmed that it caused joint pain, mainly in the arm and shoulder, with around 30 percent of patients affected after three to five months.
Yamaichi International analyst Erling Refsum said the side effect profile will be crucial to Marimastat's potential. ""Drugs become top sellers because of their side effect profile rather than because of their efficacy profile,"" he said.
Noble played down concerns about side effects, saying ""they are not a serious problem. They are reversible."" He said patients who suffer badly will be able to interrupt their treatment from time to time without any adverse impact.
Analysts pointed out that no real estimate of just how big Marimastat will be could be made until Phase III trials were completed. This means investors will have to wait until 1998 at the very earliest for hard evidence that their optimism about Marimastat and British Biotech is well founded.
-- London Newsroom +44 71 542 7717
",19
"British building materials group Blue Circle Industries Plc produced the first tentative signs of a turnaround at its troubled European heating operations on Tuesday and set out ambitious plans for a ten-fold increase in operating profits at the division over the next three years.
The recovery in the heating sector, together with continued strong performance in the highly profitable Chile and Malaysia markets and the USA, helped lift Blue Circle's interim pretax profit by 11.7 percent to 116.3 million pounds ($181.5 million), at the top end of analysts' forecasts, with the interim dividend rising by 6 percent to 4.25 pence.
The heating operations, which are undergoing a major restructuring focused on France, Germany and the Britain, posted operating profits of nine million pounds in the six months to June, up from just 100,000 pounds a year before.
However, Britain's biggest cement producer also warned that it sees ""no significant signs of recovery"" in the key British cement market, and against a backdrop of a weak stock market Blue Circle shares slipped 5.5 pence to 373.5 pence by 1105 GMT.
Blue Circle chief executive Keith Orrell-Jones told Reuters the group's aim of achieving annual cost savings of 25 million pounds from restructuring heating is ""well up to programme,"" with nine million pounds coming through this year and the full benefit seen in 1997.
Orrell-Jones said he is confident the group can achieve a 15 percent return on its 600 million pound investment in the struggling division, or some 90 million pound, within three years, despite sluggish economic performance in Germany and France.
""We are disappointed with the performance of the economies of both those countries, and we think it is not likely to ease very rapidly,"" said Orrell-Jones, adding ""that is why we set a three-year time horizon"" for recovery.
Blue Circle blamed a 24 percent drop in operating profit at the British cement operations on low infrastructure investment and ""weak new housing starts."" Orrell-Jones said the full-year outcome will be better than the first half, but he does not expect any real upturn until next spring.
With gearing a miniscule 1.5 percent at the end of June, Orrell-Jones confirmed Blue Circle is actively looking for opportunities to expand.
""We'd like to grow our cement business: it depends on where the opportunities crop up. In the U.S. it's a question of waiting for the right opportunity and the right time in the cycle,"" he said.
Blue Circle is ""actively looking in South-East Asia, and we are taking a very careful look at India,"" he said, adding that it is also interested in expanding its south American operations beyond the fast-growing Chile market.
($1=.6406 Pound)
",19
"Shares in perennial bid favourite Zeneca Group Plc spiralled higher once more on Thursday, but analysts said it was on the thinnest of pretexts.
The stock touched a new record of 17.25 pounds during the morning session, with the rise once more triggered by speculation about the intentions of Swiss drugs giant Roche Holding AG. -- hotly tipped by takeover theorists as the only company rich enough to buy Zeneca.
News that Roche had named Franz Humer as chief operating officer combined with talk in the press that Humer is keen to ensure Roche does ""not play second fiddle"" to his old employer Glaxo Wellcome fuelled the latest rise, traders said.
With few people willing to sell Zeneca stock in case they miss out on any takeover, which could be worth $30 billion, the stock is being continually squeezed higher.
Societe Generale Strauss Turnbull (SGST) analyst Peter Laing said Zeneca shares, which have gained 37 percent this year, are now at ""eye-popping"" levels. SGST believes that a hostile bid is implausible at current valuations, and, without this, the stock's current rating is increasingly hard to justify.
""Is it valid for a stock which is only two-thirds a drug stock and the rest agro-chemicals and specialty chemicals to be on the same premium as Pfizer?"" said Laing, who argued that the current gains are a story of ""supply and demand.""
Cash-rich Roche is widely believed to want to make a large acquisition, both to reassert its position as number one in Switzerland and to counteract the shortfall in new drugs coming through the industry's pipeline.
But some analysts and industry executives believe that Zeneca would not necessarily be its chosen target.
One industry source said he believed Roche would be much more interested in the U.S. company Schering-Plough Corp, which had a similar market capitalization to Zeneca. He said Roche had eyed Schering Plough on a number of occasions.
Schering-Plough would offer Roche a much stronger footing in the key U.S. market than Zeneca, and it would plug gaps in Roche's existing infrastrucure, offering the Swiss group badly-needed muscle in the non-hospital and U.S. over-the-counter sectors.
However, analysts said Zeneca had a more attractive pipeline of new drugs than Schering-Plough. And as the world's second-biggest cancer drug company after Bristol Myers Squibb Co it would also boost Roche in a key therapeutic area.
""I am quite sure that at the right price several companies would like to acquire Zeneca,"" said Panmure Gordon analyst Robin Gilbert, adding that good quality medium-to-large businesses like Zeneca and Schering-Plough are few and far between.
But Gilbert said Zeneca, which is ""firing on all cylinders"" since its split from chemicals group ICI Plc in 1993, is determined to remain independent.
""They believe they have a future as an independent company, and obviously they don't agree with the size philosphy of people like Glaxo Wellcome,"" Gilbert said.
",19
"A bullish Zeneca Group Plc set out its declaration of independence on Wednesday, predicting years of strong profit growth on the back of robust sales of new drugs and agro-chemicals.
Chief executive David Barnes, in his last interview before the group announces 1996 results on March 11, told Reuters he was confident Zeneca would meet his ""inspirational target"" of effectively doubling profit by the end of the century.
All three key businesses, pharmaceuticals, agro-chemicals and speciality chemicals, would contribute to the improvement.
Zeneca's share price has jumped by more than 50 percent in the past 18 months, closing at 1631 pence on Wednesday, as takeover rumours swirled around it. Speculation has linked Zeneca with a dizzying number of partners, including Switzerland's Roche Holdings AG, Germany's Bayer AG and France's Sanofi.
While Barnes said a takeover bid was ""most unlikely,"" he added that shareholders would have to compare any offer with the average annual growth of 15 percent in earnings per share promised by Zeneca between 1996 and 2000.
Despite its debt-free balance sheet, Barnes said the company had little interest in getting on the acquisition trail itself, preferring to buy in new products and technologies on a case-by-case basis.
""I am not against acquisitions per se but they have to offer value and quality, and most of the opportunites that have come up have failed on one or both criteria,"" Barnes said.
The company's main focus is the roll-out of a raft of new products, including the asthma drug Accolate and the new agro-chemical fungicide Amistar, which Barnes described as ""the biggest single product we've got in the Zeneca portfolio"".
On Wednesday the company announced that it was expanding its drug sales force in the United States by more than 20 percent to cope with the rush of new products, including the potential launch later this year of a ground-breaking schizophrenia drug, Seroquel, and a new migraine drug, Zomig.
Barnes forecast significant sales for Accolate and for Seroquel, squashing fears from some analysts that either drug might turn out to be a disappointment.
""Our benchmark for a substantial product is one that has sales of $400 million plus, and both of those have that potential,"" he said.
A lot of hopes are riding on Accolate, the first of a new generation of asthma drugs in which tablets take the place of steroid-based inhalers.
""The Holy Grail for the treatment of asthma has been simple tablet formulation,"" said Barnes. Since the drug's launch in the key U.S. market last October, Barnes said, sales had been ""fully up to our expectations"" with a lot of interest shown by doctors.""
Another new drug, the prostate cancer treatment Casodex, is also making rapid progress in the United States, accounting for more than 50 percent of all new prescriptions.
But Barnes said he was aware that in line with the rest of British industry, Zeneca would have to work harder for its profits in 1997 as the strong pound bites into overseas earnings. He acknowledged that the exchange rate could wipe around 70 million pounds off Zeneca's 1997 profits, which are still expected to top 1.1 billion pounds.
""I don't think the level of sterling is such that our products will be uncompetitive,"" said Barnes, but he added: ""I do think the pound is getting very fully priced now.""
",19
"A revolution in the treatment of HIV and AIDS is proving a godsend not just for patients but for drug companies which have poured millions of pounds into fighting the epidemic.
Cocktails of new and old drugs are resulting in dramatic improvements in both quality of life and life expectancy, with some patient groups forecasting that death rates from AIDS in Europe next year could fall by 50 percent.
And as patients live longer and more people seek treatment at earlier stages of illness, drug companies like Britain's Glaxo Wellcome Plc are looking forward to a quantum leap in sales, with global turnover of AIDS and HIV products forecast to treble by the end of the century.
Analysts at Lehman Brothers expect sales of AIDS drugs at Glaxo Wellcome, which by a mixture of luck and good judgement holds two of the cornerstone drugs for combination therapy, to soar to around $2 billion by the end of the century from just $300 million in 1995.
Keith Alcorn, who writes for the influential British newsletter AIDS Treatment Update, used by both patients and doctors, said: ""This year has been the most exceptional year in AIDS treatment yet, and the effects are very, very tangible. People are going back to work after being very ill and that in itself is quite unexpected.""
ADVANCES REVIVE AZT
Advances have led to an extraordinary revival in the fortunes of Glaxo Wellcome's Retrovir. The drug, also known as AZT, was launched with a great fanfare in 1987, but its erratic performance disappointed patients and shareholders alike.
Doctors have found that using Retrovir, which stops the HIV virus from replicating, in combination with other treatments such as Bristol Myers Squibb Co's Didanosine, Hoffmann-La Roche's Zalcitabine and above all a new Glaxo Wellcome drug called Epivir can radically cut levels of HIV in the blood.
And preliminary evidence suggests the addition of a whole new class of drug, known as protease inhibitors, to the cocktail can produce even more sensational results, with the virus brought below detectable levels.
Lehman Brothers analyst Ian Smith said: ""Use of Retrovir alone had a relatively minimal and transient effect on CD4 cell levels (key cells which HIV destroys, undermining the immune system) and viral load. But in combination the impact on viral load and CD4 was nothing short of stunning compared to what we saw a few years ago.""
The progress has electrified an industry that just two years ago was mired in gloom over prospects for a breakthrough in treating AIDS. Anita Kidgell, Glaxo Wellcome's antivirals product communication manager, said that when scientists, activists and drug companies met at the 11th International Conference on AIDS in Vancouver, Canada, in July the atmosphere had been transformed.
""We were seeing that one could reduce the levels of the virus in patients' blood to undetectable levels,"" Kidgell said.
For the moment Glaxo Wellcome seems to have cornered the AIDS drug market, with Lehman predicting sales of Retrovir will double to $600 million by 1998 and that sales of Epivir, which Glaxo shrewdly licensed from Canada's BioChem Pharma Inc in 1990, will hit $750 million by 2000 from just $12 million in 1995.
But other companies are ahead of the British giant in developing protease inhibitors, the third element in the cocktail, which block an enzyme crucial to the spread of the HIV virus within the body.
Some 20 protease inhibitors are being developed, and Merck & Co, Abbott Laboratories Inc and Roche Holdings AG have all rushed versions on to the market this year. The three companies are cautious about giving sales figures, but anecdotal evidence from patient groups together with U.S. sales data suggests that Merck's Crixivan is far outselling its rivals. Sales of this class of drug are likely to reach around $300 million this year.
NOTE OF CAUTION
But while there is understandable euphoria over the progress made to date, Robin Gorna, director of health promotion at Britain's leading AIDS charity the Terrence Higgins Trust, said: ""We must be very cautious about saying everything is OK, we have got a cure."" She said the mix of drugs taken by AIDS patients carry a raft of side effects and enforce a strict and life-changing dietary regime and timetable.
The explosion in effective treatment also has serious consequences for overstetched health and insurance budgets.
The Terrence Higgins Trust estimates that costs to the British taxpayer in the year to March 1998 of treatment with Retrovir alone would be 10.3 million pounds ($17.29 million). Treatment with a combination of three drugs would bump this up to around 50 million. And if, as expected, more people are encouraged to come forward and seek treatment before they develop AIDS, this could rise to around 74 million pounds.
Gorna said stories already abounded of patients being unable to get the drugs they need, either though lack of funds or ignorance on the part of doctors. AIDS support groups and companies, who cooperate increasingly, say they have to persuade governments that extended treatment with drugs is much cheaper than costly hospital care and dealing with the multiple complications of AIDS.
""We are all very hopeful,"" said Gorna. ""It is looking good, but it really isn't over yet and we need drugs that are effective in the long term.""
",19
"Home decorating giants ICI Paints and Black & Decker hope their new product to be launched on Wednesday won't make a splash.
The two companies have invested two years and millions of pounds in developing the Black & Decker Paintmate, a battery-operated roller system they claim will take the pain out of painting.
The Paintmate, which will be sold in DIY (do-it-yourself) stores across Britain from April for 39.99 pounds ($65), uses an air-filled bellow system to squeeze the contents of a two-litre refill bag of Dulux paint down a tube and onto a roller, with the flow controlled by a trigger.
The small, cylindrical Paintmate can be strapped on to the back to eliminate tiresome bending over. Black & Decker spokesman Richard Sanderson told Reuters, ""It is a long time since the DIY market saw a product of such significance.""
Sanderson said the companies hoped to sell 500,000 of the British-designed, Chinese-made Paintmates in the first full year in Britain, together with a million bags of paint.
If all goes well in Britain, which Sanderson said was ""quite a sophisticated DIY market"", Paintmate will be rolled out across western Europe next year, after which attention would switch to the huge U.S. home improvement market.
ICI, which sells enough paint in the UK to decorate five million homes a year, hopes the product will revolutionise the way people decorate.
""It's quick, it's easy and I think people will find it fun,"" said ICI Decorative Paints international marketing director Chris Harris.
Harris said the whole system could be flushed out with water. ""We think people would redecorate more regularly if the painting process was quicker and easier,"" he added.
The Paintmate's promoters hope to benefit from a surge in DIY sales, fuelled by an upswing in Britain's temperamental housing market.
The product's launch will be backed by a 10 million pound promotional campaign in Britain and Europe, with television adverstising starting in April. ($1=.6199 Pound)
",19
"Expertise ranging from snack packaging design to nuclear waste disposal and the destruction of chemical weapons was put up for sale Monday as the UK government embarked on what may be its last privatisation venture, the sale of AEA Technology Plc.
Trade and industry secretary Ian Lang will be hoping to swell Treasury coffers by around 200 million pounds ($312.7 million) through the disposal of 100 per cent of the Oxfordshire-based group, which is a spin-off from the Atomic Energy Authority, at the end of September.
With a general election looming the sale immediately ran into a political row over the government's decision to keep its ""golden share"" in AEA Technology, allowing it to veto an unwelcome takeover attempt, for just three years.
The opposition Labour Party cited ""security implications"" over AEA Technology's role in monitoring UK nuclear submarine safety, and sources told Reuters that Labour will consider extending the veto if it wins power.
At a distinctly low-tech launch for the pathfinder prospectus, AEA Technology chief executive Peter Watson shrugged off the embarrassment of a malfunctioning slide projector to explain that the group ""is all about taking technology to market and converting science to profit.""
Watson could easily have a sign on his desk reading ""no job is too big or too small"" for AEA Technology, whose interests have spread far beyond the state-owned nuclear industry which spawned it in the 1940s.
Work such as decommissioning nuclear plants and offering safety expertise worldwide, including at the site of the 1986 Chernobyl disaster in the Ukraine, accounted for just over half its 253.3 million stg of sales in the year to March.
But Watson is keen to stress success in using the group's 3,500 employees to solve a plethora of scientific conundrums, including doubling the life of batteries for Sony Corp mobile phones, helping Subaru win the World Rally Championship  and assisting the U.S. with the destruction of chemical weapons.
""And we are helping a client to research an improved crisp (potato chip) packet,"" Watson added.
AEA Technology hopes to persuade would-be investors, expected to be institutions rather than the army of small investors which bought into the likes of British Gas Plc and British Telecom Plc, that sales growth is about to take off after three static years, which it attributes to a drop in reliance on government contracts.
With most cost-cutting behind it, Watson told Reuters he wants to lift foreign sales to one-third of the total from just over one-fifth and take advantage of a growing trend for major companies like SmithKline Beecham Plc to outsource research to help drive pretax profit up from the 15.8 million pounds seen in the year to March. ($1=.6396 Pound)
",19
"Shareholders in tiny British healthcare group Enviromed Plc staged a bloodless coup on Friday, toppling the embattled company's board.
The gentlemanly storming of the barricades around Enviromed's Knightsbridge headquarters was led by Ron Zwanziger, chief executive officer of Enviromed's biggest shareholder, U.S. company Selfcare Inc.
Zwanziger has watched the value of Selfcare's 29 percent stake in Enviromed dwindle as the share price plummeted from around 112 pence per share in December 1994 to around 25 pence, in line with a collapse in the group's profitability.
Selfcare, which produces tests for pregnancy and infectious diseases, asked shareholders to back its plans to remove four members of the board, led by managing director Thomas Murphy, at an extraordinary meeting on Friday.
But after weeks of charge and counter charge by both sides, the expected showdown in the unlikely setting of Dean's Yard, next to Westminster Abbey, turned out to be a sedate rubber stamping exercise.
The board of Enviromed, which produces specialist enzymes and diagnostic equipment, spiked the guns of its opponents by conceding defeat after proxy votes showed 49 percent backing for Selfcare and just under 39 percent supporting the status quo.
A brief show of hands was sufficent to confirm the handover of power and the new board, with Selfcare's Zwanziger as non-executive chairman, was already holding its first meeting as individual shareholders continued to drift in.
This was Zwanziger's second attempt to get rid of the board, which he quit in April 1995 over differences involving a joint venture between Selfcare and Enviromed. Resolutions demanding the board step down were withdrawn just before the start of another extraordinary general meeting in February 1996.
Zwanziger accused Enviromed of eroding shareholder value through poor management and of holding firesales of assets, including the disposal of a dental distribution business and veterinary diagnostic operation, as it sought to cut debts.
In turn Enviromed accused Zwanziger of trying to gain control of the company ""via the back door"", and challenged him to launch a full takeover bid.
Enviromed's value began to plunge in December 1994, the month that Murphy was appointed, as a pretax profit of 2.2 million pounds ($3.68 million) in the year to September 1994 turned into a loss of 8.2 million a year later. The company's market capitalisation fell from around 28 million pounds to just over 6.0 million.
Murphy vehemently rejected blame for the collapse, saying he had inherited a pile of problems he and other board members had worked hard to resolve.
Peter Jones, who follows Enviromed for brokers Peel Hunt & Co, said Murphy had been dealt a ""bum hand,"" and criticism of him was ""unreasonable.""
Jones said the company was now at the point where its value should start to rise again, particularly through the group's ""nicely profitable"" enzyme business Biozyme. ""There are some genuinely good products and a good business inside Enviromed which should be capable of providing serious returns for investors,"" he said.
($1=.5979 Pound)
",19
"Daewoo Cars Ltd, the British motoring arm of Korean conglomerate Daewoo Corp, is considering transferring its unique UK marketing strategy to new markets.
In an interview with Reuters at this week's British International Motor Show in Birmingham, Daewoo UK Ltd managing director Tong Won Rhie said: ""We are now reviewing the performance over the past two years, and the UK strategy has proved a good model.""
He said adapting the policy of cutting out car dealerships by selling directly to customers, which has rapidly carved Daewoo a significant slice of Britain's highly competitive car market, ""is a big possibility.""
Daewoo already operates in 12 European countries and is preparing to launch its models, which are revamped versions of old General Motors Corp cars, in five more.
In its first nine months of operation in Britain last year Daewoo sold more than 13,000 cars. And by October 8 this year Rhie said it had already sold another 18,500 units.
""Our target when we launched was one percent market share in three years. We have already reached that,"" Rhie said.
Daewoo, which likes to advertise itself as breaking the mould of car supply in Britain, launched itself through cleverly targeted publicity, including surveys of customer likes and dislikes.
Rhie summed up customers' pet hates as ""too much hassle"" from salesmen and poor aftercare once the sale was complete.
""It is like a wedding, with the customer as the bride. Before, they say I love you, darling,' and all that, but after the marriage they forget,"" Rhie said.
Daewoo was the first company to offer three years' free servicing on all models and packed its cars with extras including airbags and mobile phones.
It has also led a revolution in all-inclusive pricing, a trend followed this week by GM unit Vauxhall Motors and by Porsche AG with its new Boxster sports car.
But Rhie said its U.K. strategy was not applicable to all markets, particularly those where the relationship between car producers and dealers is even more entrenched than in Britain.
""The UK market is more sophisticated than many other countries. The level of (consumer) awareness is higher.""
Daewoo has encountered severe criticism from rivals, some of whom are alarmed at the speed with which it has penetrated the British market, where it has overtaken longer-established names like Saab, Mitsubishi and Hyundai.
Some question whether its pioneering servicing agreement with the Halfords superstore chain can provide the level of support for customers that it claims.
Daewoo's response to criticism that its current range of models is outmoded will be to launch three entirely new cars at the end of 1997. Rhie said one of these, known as the J Car, had been developed largely by its U.K. R&D operation in the southern town of Worthing, which employs nearly 1,000 people.
Rhie declined to state Daewoo's next target for U.K. market share. ""Quantity is very important but that is not the final goal,"" he said. ""Our aim is a customer focus and how to continuously follow up customers' requirements.""
",19
"Rumours Swiss drugs group Roche Holding has designs on Anglo-American group SmithKline Beecham Plc need to be treated with intense caution, analysts said on Wednesday.
Shares in SmithKline Beecham Plc rose sharply in late trading, closing up 30 1/2 pence at 788, while in Zurich shares in Roche dropped 140 Swiss francs to 9,830 francs.
Analysts said rumours that Roche was trying to put together a funding package of up to 50 billion Swiss Francs had fueled the late buying of SmithKline.  
But one analyst with a European bank who asked not to be named said rumours about Roche, which has most commonly been cited as a suitor for another British company, Zeneca Group Plc, have become a regular feature of the market.
Both Roche and SmithKline declined to comment on the speculation.
SmithKline had a market capitalization of around 21.3 billion stg at the close of trading on Wednesday and analysts said a hostile bid would probably lead to a 30 to 40 percent premium on top of this.  
Roche, which is worth 95.1 billion Swiss francs, already has a cash pile of around six billion Swiss francs to fund any ambitions it might have.
Societe Generale Strauss Turnbull's director of equity research Paul Diggle said: ""Don't hold your breath, but it isn't that stupid."" But Diggle said an agreed merger between the two companies was more feasible than a takeover. He noted that Roche and SmithKline, which are both in the world's top 10 in terms of sales, have made no secret of their desire to be bigger in a rapidly consolidating drugs market and a merger could ""satisfy the ambition of both companies.""  
A merger would give Roche and SmithKline Beecham a combined world market share of over five percent, putting them on a par with current world leader Glaxo Wellcome Plc.
SmithKline would also offer Roche a much firmer footing in the key U.S. market, where it lacks critical mass. Roche's vitamin business, which is the biggest in the world, would provide a useful fit with SmithKline' consumer healthcare and over-the-counter drugs operations.
In terms of drugs, both companies have strong portfolios of central nervous sytem drugs and antibiotics.
However, a UK brokerage analysts, who also declined to be identified, said that, beyond size, a merger with SmithKline would offer little in the way of attractions for Roche.
""If I was the finance director of Roche I would look at SmithKline and see there was a lot of stuff I didn't want,"" he said. SmithKline's involvement in the U.S. pharmacy benefit management business would offer few attractions to Roche, whose drugs are targeted largely at hospitals, he added.
",19
"New evidence about British Biotech Plc's anti-cancer treatment Marimastat next week will provide important clues about its potential as a blockbuster product, analysts said on Friday.
British Biotech is using a meeting of the European Society of Medical Oncologists (ESMO) in Vienna to make five presentations, including Marimastat's effects in ovarian, colo-rectal, pancreatic and gastric cancer.
It will issue a general update on Monday morning.  
The Oxford-based group has become the bellwether for the increasingly crowded biotech field in the U.K, with sentiment towards Marimastat having a disproportionate impact on the sector.
Millions of pounds of investors' money has been placed on the bet that Marimastat will turn out to be Europe's first big-selling biotech product, with forecasts for annual sales ranging from a few hundred million dollars to up to $4 billion.  
Monday's data comes from patients who continued to use the drug beyond the period necessary for completion of Phase II clinical trials. The company said this meant there would be a further six months of extra information.
Yamaichi International analyst Erling Refsum said he hoped to see the first hard evidence that patients were living longer as a result of taking Marimastat. Refsum said the surrogate marker data provided so far was like ""the indicator board at the train station rather than the train actually coming.""  
In a note on the trials Lehman Brothers analyst Ian Smith, who will attend the ESCO meeting, said it might be possible to glean indications of the effect of Marimastat on patient survival in ovarian and pancreatic cancer.
There will also be interest in Marimastat's impact on gastric cancer, where little information has so far been available. And analysts are keen to see how serious the side effects caused by the drug are. The main problem reported so far is joint pain.  
Yamaichi's Refsum said the results are ""not definitive as  to whether it works or not, but it is another indication as to whether it will sell or won't sell, and that is the bottom line."" Lehman's Smith added that the results ""won't prove Marimastat's efficacy but will raise the probabilities.""
British Biotech will announce late-stage data on another key product, pancreatitis drug Lexipafant, on November 27.
Smith said that favourable news on both drugs could lift the group's share price to 300 pence by the end of the month from 230 at Friday's close. But Refsum is more sceptical about the potential impact of Marimastat and said 150 pence is ""reasonable value"" for the shares.
A British Biotech spokeswoman said Phase III Marimastat trials are likely to take two years to complete, meaning that the first results would not be available until 1998 at the earliest. But she said British Biotech would probably make academic presentations at conferences like ESMO from time to time to keep the market up to date.
Late stage trials on pancreatic cancer started in June, and trials in small-cell lung cancer, ovarian cancer, gastric cancer and a form of brain cancer are being set up, she added.
",19
"Healthcare group Smith & Nephew Plc reassured analysts on Monday that it was set to report a solid performance for 1996, despite continuing tough market conditions and the impact of a strong pound.
The company, which is due to announce full-year results on March 4, told an analysts' meeting that little had changed from its last update in October, when it reported that operating conditions and price pressures in the key U.S. market remained difficult.
Analysts who attended Monday's meeting said Smith & Nephew, which reported a 7.4 percent rise in first-half sales to 540 million stg, was likely to report an increase in full-year sales of between six and seven percent from the 1.03 billion stg achieved in 1995.
They said there were also signs that profit margins could have turned out better in the second half of the year than the first.
Another positive aspect of the meeting was a signal that sales in the highly competitive U.S. market, which accounts for around 40 percent of turnover, had seen a two percent improvement in the second half of the year after gaining just one percent in the first half.
Prices in the U.S. for Smith & Nephew's products in areas including orthopaedic implants and wound management are being forced down by increasingly powerful health providers.
Shares in the company, which had been trading close to their 12-month lows of 174 3/4, rose 4 3/4 pence to 182 3/4 in early afternoon trading. The stock had reached record highs of 217 1/2 pence in June amid hopes for a novel skin replacement product, Dermagraft, currently being developed with Advanced Tissue Sciences Inc of the U.S.
BZW analyst Steve Plag said the shares had taken a ""phenomenal pounding"" in recent months as over-optimistic predictions for Dermagraft had been reined back, and had taken some support on Monday from the absence of bad news.
""There are signs that the second-half revenue performance was a bit stronger, which is encouraging, and there was some reassurance on Dermagraft, but the full picture (on Dermagraft) won't be available until April.""
Another analyst, who asked not to be identified, said Smith & Nephew had been ""very upbeat"" about the the skin replacement product, which would initially be targeted at foot ulcers.
""I think Dermagraft is potentially a very significant product for the company,"" he added.
Analysts said the technology, which enables cells derived from babies' foreskins to grow on a naturally-absorbable scaffold across wounds, could add up to 20 pence per share to Smith & Nephew's value if it succeeded.
SocGen analyst Alyson Coates said she was happy with the current value of the shares, which reflected a balance between limited growth prospects in the next 12 to 18 months and ""the promise of the pipeline,"" including Dermagraft.
SocGen believes that in addition to Dermagraft and similar high-tech products, Smith & Nephew will use its financial strength for acquisitions to help lift growth above the ""pedestrian"" in the medium term.
Coates said she might shave 1 million stg off her full-year pre-tax profit forecast of 185 million stg to take account of the impact of sterling's strength on the group in the last three months of 1996.
BZW's Plag said full-year pre-tax profit forecasts in the range of 183 to 186 million stg ""would be sensible.""
--London Newsroom +44 171 542 7717
",19
"Austin Reed Group Plc supplier of pinstriped suits to generations of British businessmen, said on Wednesday that a return to favour with women executives helped to boost its first-half profits and sales.
The group, which has around 50 stores in the UK and sells its classic-cut styles in Europe, Japan and the U.S., saw first half profits jump 64 percent to 2.3 million pounds ($3.6 million) while sales climbed 7.0 percent to 38.9 million pounds.
New chief executive Chris Thomson said in an interview that a turnaround in womens' clothing, which now accounts for around 20 percent of sales, was a key factor behind the gains.
He said the 1995 spring collection for women had been a ""bit of disaster,"" when Austin Reed's ranges ""didn't sell and we had to substantially discount to get rid of stock, so we are delighted by the way it's come back so successfully.""
Austin Reed, which began life in 1900 as a gentlemen's outfitters in Fenchurch Street in the heart of the City, said there are encouraging signs of a rise in UK consumer activity.
""We are trading in a very competitive market,"" Thomson said, but he added that the group's autumn sales are ahead by around nine percent so far from a year ago.
The company plans to step up sales of its branded clothing through German, French and Italian retailers in particular.
""The Austin Reed brand is well known in Europe, being a quintessentially British brand, and I think there are tremendous opportunities to expand that,"" Thomson said.
It is also looking to expand its UK retail chain, with new outlets in the heart of London's financial district, a new shopping centre in Dartford and the upmarket Manchester dormitory town of Wilmslow all in its sights. ($1=.6401 Pound)
",19
"Shares in Britain's pharmaceutical industry were sharply higher across the board on Thursday, bouyed by sterling's weakness, continued takeover speculation, positive broker comment and upbeat news from Medeva Plc.
Shares in the ""big three"" of Glaxo Wellcome Plc, SmithKline Beecham Plc and Zeneca Group all rose.
Glaxo Wellcome added 3.3 percent or 31 pence to 955, SmithKline Beecham was up 4.4 percent or 37 pence at 880 1/2 and Zeneca rose 3.0 percent or 50 1/2 pence to 1,723.
Traders said sterling's sharp falls on the foreign exchanges overnight had been a major factor behind the gains, easing some of the anxiety over the effect of a strong pound on crucial overseas earnings.
Shares in the major companies fell earlier this month after analysts at NatWest Securities cut 1997 earnings estimates because of the currency impact.
""Currency is very important,"" said Panmure Gordon analyst Robin Gilbert. ""There is a general view that the sector has lagged a bit because of currency, and we had something of a rebound.""
Speculation that Roche Holding AG is preparing to announce a merger or takeover may also be buoying Zeneca and SmithKline Beecham, analysts said, although scepticism about such a move is widespread.
The two were further helped by Salomon Brothers' decision to place a buy stance on their stocks, with a hold on Glaxo Wellcome.
Shares in Medeva, which has long traded at a discount to other large drug stocks, rose 8 1/2 pence to 288 pence on the back of ""positive"" trial data from its hepatitis B vaccine Hepagene, which the company hopes will act both to stop people getting the disease and to help those already infected.
News that Medeva had formed a collaboration with Peptide Therapeutics Plc, one of the smallest stocks in the sector, made it the biggest gainer, jumping nearly 20 percent or 46 1/2 pence to 288.
The two companies hope to develop a range of non-injectable vaccines, and Medeva cemented the link by taking a 2 1/2 percent stake in Peptide for 3 million pounds.
Other strong biotech performers included the flagship British Biotech Plc, which was squeezed up 11 percent or 23 1/2 pence to 232 as several sell positions finally unwound.
Celltech Group Plc also continued to benefit from optimism about its two lead drugs, for septic shock and leukaemia, rising 17 1/2 pence to 637 1/2.
",19
"Dominion Resources Inc. ended a day of speculation Wednesday by declaring it might bid for British regional utility East Midlands Electricity Plc in a deal that could be worth about $2 billion.
The bid would mark the lastest in a a line of U.S. utilities companies seeking to buy into the privatised British power supply business.
But in a statement published after the close of London trading, Richmond, Va.-based Dominion, which owns electric utility Virginia Power, said it would not make an offer at a price ""much in excess"" of East Midlands' closing price.
Sources close to the situation said that if the price ""runs away tomorrow, then Dominion will run away.""
East Midlands' share price leaped 70.5 British pence to close at 608 pence ($9.97) on Wednesday, lifting the Nottingham, England-based group's value to more than 1.2 billion pounds ($1.97 billion), as rumour swirled around it.
Dominion stock gained 75 cents to $39.75 on the New York Stock Exchage.
The sources said East Midlands had already cut costs ""to the bone,"" adding that ""the comapny needs investment to grow again.""
East Midlands declined to comment on the Dominion statement.
Rumours that another bid was about to claim one of the few remaining independent regional electricity companies in England and Wales sent their shares soaring.
Besides East Midlands, Yorkshire Electricity Group Plc.'s shares rose 15.5 pence to 754 ($12.37), while Southern Electric Plc. jumped 21.5 pence to 669 pence ($10.97), and London Electricity Plc. gained 12.5 to 618 pence ($10.14).
The names of any likely bidders remained a mystery.
Dominion Resources is a medium-sized company in the United States, with a market capitalisation of around $6.6 billion and annual sales of around $4.7 billion.
In addition to Virginia Power, its main subsidiary, Dominion has a number of joint generation ventures in the United States and internationally, notably in South America. It also has an interest in gas and real estate.
If Dominion's board proceeds, the bid would be the latest in a series of U.S. companies that has turned up recently in the privatised British power supply business. Last week, a unit of U.S.-based CalEnergy launched a hostile 650 million pound ($1.07 billion) bid for Northern Electric Plc.
Northern Electric, which is due to release strong half-year results early in an attempt to attract a higher bid, saw its shares rise 1.5 pence to 634 pence ($10.40) on Thursday, adding to recent sharp gains.
Out of the 12 privatised cash-rich regional electric companies, seven have already changed ownership -- four of them to U.S. companies.
",19
"Britain's chemical industry faces a period of steady growth in 1997, helped by improvements in European economic prospects and lower stock levels, the industry's trade body said.
In an interview with Reuters, Chemical Industries Association (CIA) director-general Elliot Finer said that after an erratic performance over the past 18 months, stock of chemicals ""are fairly low...and as a result of that we see prospects for pretty steady growth over the next 12 months.""
Speaking ahead of a two-day conference on the outlook for the industry next week, Finer said prospects in the rest of Europe, which takes more than a quarter of British output and half of all exports, ""are better than one might have thought a few months ago.""
Finer said he believed the disruption caused by German reunification was now easing, while problems linked to the struggle to meet Maastricht convergence criteria for a single currency was also nearing its climax.
""Those two large factors mean that there are some quite good times ahead,"" Finer said.
But he warned that concern about the recent sharp rise in the value of sterling was causing concern among chemical companies, describing the current level of around 2.67 Deutsche marks and $1.69 as ""unpalatable.""
""$1.50 was nice, $1.60 we could live with but $1.70 is too much,"" Finer said, but he added that sterling's strength should not undermine the ""steady, warmish prospects for the coming year.""
He said Britain's chemical industry, which is the third largest in Europe after Germany and France with annual sales of 40 billion stg, was in a strong position.
Access to North Sea oil feedstocks gives the UK an advantage in bulk chemicals, while British companies also produce a wide range of high-performance specialty chemicals in fast-growth areas like ink-jet colour printing.
But Finer said he was concerned about levels of research and development spending by parts of the industry. British chemical companies spend around three percent of turnover on R&D compared with 21 percent for pharmaceuticals and an average of 5.3 percent in Europe's chemical business as a whole.
""I think there are some middle-ranking companies in the industry whose expenditure on R&D is less than some...might consider sensible given the hotting up of international compeition,"" said Finer.
Finer said innovation would also be a key theme of next week's business outlook conference on January 15 and 16, and was vital if the industry was to meet the challenge of competition from southeast Asia, India and the United States.
""We are still a very inventive country,"" said Finer. ""Despite all the moaning we are still pretty good at fundamental science, and in our industry we are pretty good at bridging the gap between fundamental science and products.""
--London Newsroom +44 171 542 7717
",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
"Dominion Resources Inc of the United States ended a day of rampant speculation on Wednesday by declaring it was interested in bidding for British power supply company East Midlands Electricity Plc.
But the U.S. group, which owns power generator and distributor Virginia Power, made clear it would walk away from making a bid if East Midlands' share price continued to rocket on Thursday.
East Midlands' share price leaped 70 1/2 pence to close at 608 pence on Wednesday, lifting the Nottingham-based group's value to more than 1.2 billion pounds, as rumour swirled around it.
In a statement published after the close of London trading, Dominion said it did not intend to make an offer at a price ""much in excess"" of East Midlands' closing price
Sources close to the company said that if the price ""runs away tomorrow then Dominion will run away"".
The sources said East Midlands had already cut costs ""to the bone"", adding that ""the comapny needs investment to grow again"".
East Midlands declined to comment on the Dominion statement.
Rumours that another bid was about to claim one of the few remaining independent regional electricity companies (RECs) in England and Wales had sent shares in the sector soaring on Wednesday.
Besides East Midlands, Yorkshire Electricity Group Plc's shares rose 15.5 pence to 754, while Southern Electric Plc jumped 21.5 pence to 669, and London Electricity Plc gained 12 1/2 to 618.
However the name of any likely bidder remained a mystery.
Dominion Resources Inc is a medium-sized player in the U.S., with a market capitalisation of around $6.6 billion and annual sales of around $4.7 billion.
As well as Virginia Power, its main subsidiary, Dominion has a number of joint generation ventures in the U.S. and internationally, notably in South America. It also has an interest in gas and real estate.
If Dominion's board does decide to go ahead with a bid it will be the latest in a line of U.S. utilities to buy into the privatised British power supply business.
Last week a unit of U.S.-based CalEnergy launched a hostile 650 million pound ($1.07 billion) bid for Northern Electric Plc.
Northern Electric, which is due to release sparkling half year results early in an attempt to attract a higher bid, saw its shares rise 1 1/2 pence to 634 pence on Thursday, adding to recent sharp gains.
Out of the 12 privatised cash-rich RECS, seven have already changed ownership -- four of them to U.S. companies.
",19
"General Motors Corp's decision to invest 300 million stg in its U.K. operations reflected confidence in its Vauxhall Motors unit and international prospects for the Astra model, Vauxhall said on Tuesday.
Vauxhall said the three-year investment will be used to modernise its Ellesmere Port plant in north-west England, which makes Astra cars and vans.
The announcement, made at the British International Motor Show, guarantees the livelihoods of the 4,200 people employed at the plant and will create at least 200 new jobs.
Vauxhall Motors chairman and managing director Nick Reilly told Reuters in an interview that a decision on increasing the number of shifts worked at the plant to three from two to be taken over the next two years could create hundreds more jobs.
Any decision would depend on ""what the market is then and the demand for the model is at the time.""
The Astra model has been consistently one of Britain and Europe's top five sellers since its launch five years ago, with the development of an estate model boosting its position.
Reilly said the 300 million stg investment was won against intense competition within GM and reflected the transformation of Ellesmere Port from a domestically-oriented plant to ""a very important source of manufacturing within General Motors.""
He forecast strong growth for the Astra in Latin America and Asia Pacific.
Reilly said the British car market is currently ""the most competitive in Europe"", with a number of importers using huge U.K. fleet sales as a way of offloading cars that remain unsold in sluggish domestic markets. Europe remained ""flat,"" he added.
Vauxhall hoped to keep its market share at around 14.5 percent in 1996, and Reilly said its profitablity is ""going in the right direction"" after a tough 1995.
Last year, a stagnant car market saw the GM unit's profits slump to three million stg from 79 million in 1994. ($1=.6317 Pound)
",19
"British Petroleum Co Plc (BP) extolled the virtues of ""self help"" on Tuesday as it reported its best-ever third quarter earnings despite pressure on profit margins in some key businesses.
Third-quarter net earnings jumped by 22 percent to 650 million pounds ($1.07 billion), towards the top end of forecasts, while in the first nine months of the year they were up 28 percent to a record 1.93 billion pounds.
BP said strong oil prices, which have recently been at their highest levels since the 1991 Gulf War at around $22 a barrell, boosted earnings by between $400 million-$500 million in the third quarter.
But it added that the gains were more than offset by weaker profit margins in refining, marketing and chemicals, which accounted for about 27 percent of group net earnings.
Group chief executive John Browne said BP was enjoying the benefits of a raft of cost-cutting and efficiency drives, which were adding $150 million to profit every quarter.
""What we see here has not come about as a result of high oil prices, it has come about as a result of self help,"" he said.
The market took the results calmly, with BP shares adding two pence to close at 640.5 pence after touching a high of 647p. However, trading in BP shares on the options market was active.
""People are still speculating on a fairly sharp rise in BP shares,"" one options specialist said.
""In a sense BP have spoilt us,"" said Societe Generale Strauss Turnbull analyst Irene Himona.
""We've got used to them coming out with a good set of numbers at the top of the range, and unfortunately with (rival) Shell it is the other way around.""
BP's results contrasted with disappointment last week at third-quarter figures from rival Royal Dutch/Shell Group, where profits fell on the back of low refining margins and a weak chemicals market.
BP also emphasised the relative stability in its earnings, partly as a result of the vigorous cost-cutting at its exploration and production activities.
""They are very much on the ball and very focused. They have achieved a lot of efficiency improvements and delivered a lot of savings,"" said Himona.
BP was upbeat about near term propsects, with oil demand expected to remain strong into 1997. But it said its long-term view that the oil price would settle back into arange of $16 to $18 a barrell had not changed. ""The question is how we get from here to there,"" said Browne.
Morgan Stanley analyst Chris Buckley said the oil price was always the greatest uncertainty, but added that lower prices tended to mean margins could improve in downstream activities like chemicals and refining.
",19
"Yorkshire-based chemicals group Allied Colloids Plc said on Tuesday that its strategy of growing organically remained unchanged, despite the $390 million acquisition of CPS Chemical Co Inc of the U.S.
Chief executive David Farrar said Allied Colloids ""has not been acquisitive"" by tradition.
""We saw this as an opportunity that does not come along very often,"" Farrar said in a telephone interview with Reuters following the announcement of the purchase and interim results.  
""This is a good strategic fit for us. CPS are in the same business as us, the chemistry is similar. We have had a long association with them and have been major customers of theirs for eight years.""
The move will substantially increase Allied Colloids' sales in the U.S, which already accounts for more than 30 percent of its annual turnover. CPS, which has plants in Arkansas and New Jersey, had sales of $157 million last year, some 75 percent of which were in the domestic market.  
Farrar said Allied, which provides chemicals for a wide range of industries including paper-making, minerals, textiles, oil and pharmaceuticals, remained committed to expansion in other key marekts, notably Europe and the Far East. But this would be achieved ""by organic growth.""
Allied Colloids believes the acquisition of CPS, which is partly being financed by a two-for-seven rights issue to raise 173 million stg, will be earnings enhancing in its first full financial yuear. It said it also expected to benefit from substantial U.S. tax credits.  
Farrar said the combined group would have a workforce of around 3,500 following the addition of CPS' 360 employees. He said CPS, which makes chemical intermediates and finished polymers for industry, will complement Allied in a number of areas, notably in coatings, paper and pollution control.
It will also add to Allied's technological base and provide new products to market through its existing 400-strong salesforce.
The rights issue and acquisition were accompanied by an upbeat statement on prospects, with Allied Colloids predicting a continued improvement in second-half sales and profits.  
First-half pretax profits rose 3.8 percent to 21.1 million stg on sales up 9 percent at 207.6 million stg.
Farrar said sharp falls in raw material costs earlier this year started to feed into second-quarter results, but their full impact would be felt in the second half. He predicted that gross profit margins would increase by 1 percentage point in the second half from the 37.5 percent seen in the first half and the 36.2 achieved in the 12 months to March.
Allied is also predicting a further pick-up in sales growth in the second half of the year, implying full-year sales of more than 430 million stg compared with 393 million a year earlier.
-- London Newsroom +44 171 542 7717
",19
"Supermarket group Budgens Plc said on Monday that it expected to open 10 new wholly-owned stores in 1997, as well as continuing to build up its presence on petrol station forecourts.
In a telephone interview with Reuters after the company announced an 18 percent rise in first-half pretax profit to 5.04 million stg, chief executive John von Spreckelsen said the group continued to be ""well-placed as a small operator in this niche where we are complementary to the superstores and the discounters.""  
""The successful companies will continue to take market share from the less successful ones,"" he said.
Budgens saw sales rise by 8.1 percent to 183.0 million stg in the 28 weeks to November, while on a like-for-like basis they climbed 4.5 percent.
Spreckelsen said that sales growth in the run-up to Christmas slowed down as large stores pulled in trade, but had picked up again in January.
Shares in the group were virtually unchanged after the results, trading just 1/4 pence higher at 46 1/2 in early dealing on Monday.
--London Newsroom +44 171 542 7717
",19
"Shareholders in tiny British healthcare group Enviromed Plc staged a bloodless coup on Friday, toppling the embattled company's board.
The gentlemanly storming of the barricades around Enviromed's Knightsbridge headquarters was led by Ron Zwanziger, chief executive officer of Enviromed's biggest shareholder, U.S. company Selfcare Inc.
Zwanziger has watched the value of Selfcare's 29 percent stake in Enviromed dwindle as the share price plummeted from around 112 pence per share in December 1994 to around 25 pence, in line with a collapse in the group's profitability.
Selfcare, which produces tests for pregnancy and infectious diseases, asked shareholders to back its plans to remove four members of the board, led by managing director Thomas Murphy, at an extraordinary meeting on Friday.
But after weeks of charge and counter-charge by both sides, the expected showdown in the unlikely setting of Dean's Yard, next to Westminster Abbey, turned out to be a sedate rubber-stamping exercise.
The board of Enviromed, which produces specialist enzymes and diagnostic equipment, spiked the guns of its opponents by conceding defeat after proxy votes showed 49 percent backing for Selfcare and just under 39 percent supporting the status quo.
A brief show of hands was sufficent to confirm the handover of power and the new board, with Selfcare's Zwanziger as non-executive chairman, was already holding its first meeting as individual shareholders continued to drift in.
This was Zwanziger's second attempt to get rid of the board, which he quit in April 1995 over differences involving a joint venture between Selfcare and Enviromed. Resolutions demanding the board step down were withdrawn just before the start of another extraordinary general meeting in February 1996.
Zwanziger accused Enviromed of eroding shareholder value through poor management and of holding firesales of assets, including the disposal of a dental distribution business and veterinary diagnostic operation, as it sought to cut debts.
In turn Enviromed accused Zwanziger of trying to gain control of the company ""via the back door"", and challenged him to launch a full takeover bid.
Enviromed's value began to plunge in December 1994, the month that Murphy was appointed, as a pretax profit of 2.2 million stg in the year to September 1994 turned into a loss of 8.2 million stg a year later. The company's market capitalization fell from around 28 million stg to just over 6.0 million.
Murphy vehemently rejected blame for the collapse, saying he had inherited a pile of problems he and other board members had worked hard to resolve.
One of the new board's first goals will be to appoint a finance director. In a letter to shareholders ahead of the extraordinary meeting Zwanziger said the new board would focus on the development of the enzyme buisness Biozyme which it said was already profitable.
",19
"U.S. power utility Dominion Resources Inc will have to reconsider the price it is prepared to pay for East Midlands Electricity Plc if it is realistic about acquiring it, analysts said on Thursday.
On Wednesday Dominion's interest in East Midlands was flushed out by U.K. stock exchange regulators after East Midland's share price jumped by 13 percent.
But Dominion said it would not go much above Wednesday's closing price of 608 pence, valuing East Midlands at just over 1.2 billion stg ($1.97 billion), and industry sources said it would ""run away"" if the market drove the price up further.
Investors seemed to take Dominion at its word on Thursday, and with no bid on the table East Midlands' share price slipped back 21 pence to 587 in midafternoon trading.
But analysts said an offer would be most unlikely to succeed at 610 pence, valuing East Midlands less highly than Northern Electric Plc, which is subject of a 659 million stg bid from U.S. energy group CE Electric.
SG Strauss Turnbull analyst Marshall Whiting said Dominion was being ""very cheeky.""
Dominion's declaration of interest follows hard on the heels of CalEnergy Co Inc unit CE Electric's 630 pence offer for Northern last week.
Using median forecast figures gathered by Edinburgh Financial Publishing, CE Electric's offer represents a P/E ratio of 9.3 against Northern's prospective year through March 1997 earnings and 8.6 times year through March 1998 earnings.
",19
"Biotechnology company Celltech Group Plc said late on Tuesday that it expected to post a pre-tax loss of around 10 million stg in the year to September 1997 before moving firmly into profit.
Finance director Peter Allen said in an interview with Reuters that a further 10 million stg receipt next December from the 1996 sale of the Biologics business to Alusuisse-Lonza Holding AG would push the group back into the black the following year. Analysts said around half of the payment would go to Celltech's bottom line.
And a successful launch of Celltech's septic shock treatment, being developed with Germany's Bayer AG, and leukaemia drug, with American Home Products Corp should see the Slough-based group post an operating profit in 1999.
""I think that 1997/1998 will be a better year. Providing both products launch when we expect them to launch we will start to get some contribution from the septic shock product in 1998,"" he said.
With the Biologics sale swelling cash in the bank to more than 46 million stg at the end of last September, Allen said Celltech would have no need to seek fresh funding for its day-to-day operations. A cash-call would only have to be made if there were problems with the two lead drugs or Celltech decided to make an acquisition.
Cash burn for the current year would be just under 10 million stg, Allen said, with spending on research and development rising by around a fifth to 21 million stg. He predicted that milestone payments would be at similar levels to last year, totalling 5.5 to 6.0 million stg.
Allen added that analysts' forecasts of 3.5 million stg of royalties from the Centocor/Eli Lilly product ReoPro were ""fairly conservative.""
Chief executive Peter Fellner told Reuters that Celltech remained committed to its strategy of collaborating with major drug companies, but was considering taking more products through to later stages of development itself. He said the group's psoriasis drug, currently in Phase II trials, would be a prime candidate for such a move.
""We can see that by doing it ourselves, at least in Europe, we can control the timetable better ... and probably get a larger slice of the cake,"" he said.
The chief executive also told Reuters that Celltech could be interested in making an acquisition in the right circumstances. He praised rival Chiroscience Group Plc's $120 million acquisition of U.S. gene technology company Darwin last November as ""very creative.""
""I think if we could identify a particular set or sets of technology, or alternatively one or two pipeline products, then potentially we would have an interest..but we wouldn't simply go and buy something with a view to making ourselves that bit bigger.""
--London Newsroom +44 171 542 7717
",19
"General Motor Corp's decision to invest 300 million pounds ($474.9 million) in Vauxhall Motors reflected confidence in its British operation and the international prospects for its Astra model, Vauxhall said on Tuesday.
The company said the three-year investment would be used to modernise its Ellesmere Port plant in north-west England, which makes Astra cars and vans.
The announcement, made at the British International Motor Show, guarantees the livelihoods of the 4,200 people employed at the plant and will create at least 200 new jobs.
Vauxhall Motors chairman and managing director Nick Reilly said in an interview that a possible decision on increasing the number of shifts at the plant to three from two could create hundreds more jobs.
Any decision, likely to be taken over the next two years, would depend on the market and demand for the model at that time.
The Astra model has been consistently one of Britain and Europe's top five sellers since its launch five years ago, with the development of an estate model boosting its position.
Reilly said the 300 million pound investment was won against intense competition within GM and reflected the transformation of Ellesmere Port from a domestically-oriented plant to ""a very important source of manufacturing within General Motors.""
He predicted strong growth for the Astra in Latin America and Asia Pacific.
Reilly said the British car market is currently ""the most competitive in Europe,"" with a number of importers using huge U.K. fleet sales as a way of offloading cars which remain unsold in sluggish domestic markets. Europe remained ""flat,"" he said.
He said Vauxhall hoped to keep its market share at around 14.5 percent in 1996, and said its profitablity was ""going in the right direction"" after a tough 1995.
Last year a stagnant car market saw the GM unit's profits slump to three million pounds from 79 million in 1994. ($1=.6317 Pound)
",19
"International specialty chemicals group BTP Plc said on Wednesday it expected profit margins at its key adhesive and textile coatings business to recover fully over the next 18 months.
Raw material price rises and intense competition pushed margins as low as three percent in the year to March. Divisional operating profit slumped 37 percent to 3.8 million stg.
But in a telephone interview with Reuters, finance director Rob Martin said, ""There is no reason why over the next 12 to 18 months they can't be restored to six or seven percent.""  
Weakness at adhesives and textile coatings and at the performance chemicals division helped hold BTP back in the year to March, with group pretax profit rising just 0.7 percent to 37.5 million stg.
The group is busy restructuring its adhesives manufacturing operations in France and Germany, and Martin said all group operations, which range from making preservative chemicals for cosmetics and toiletries to safety harnesses for people who work at heights, ""are going quite well"".
On a regional basis, Martin said, ""The tougher markets are continental Europe, but there are signs of life even there.""  
Sluggishness in France and Germany, which account for around 15 percent of group sales, continues to be a problem. ""But things are getting better even there,"" Martin added.
BTP is a major supplier of agrochemical intermediates in the U.S., which accounts for about 30 percent of group sales, and Martin said there was no sign of a slowdown there.
The Manchester-based company underlined its committment to growth in the U.S. on Wednesday by announcing the acquisition of a small leather chenmical manufaturer from Henkel Corp for $7.5 million.  
With low gearing, which stood at just seven percent at the end of March, Martin said BTP could comfortably make an acquisition of up to 100 milllion stg.
""The general strategy is to add on to existing businesses. We are not going to leap into the dark in other arease,"" said Martin, who said any acquisitions must meet strict financial criteria. ""They have got to fit and be earnings enhancing.""
London Newsroom +44 171 542 7717
",19
"Zeneca Group Plc set the scene for record profits on Tuesday, telling investors that its 1996 performance was expected to be in line with market expectations.
Analysts are forecasting a leap in pre-tax profit for the year to around 1.0 billion pounds ($1.62 billion) from 619 million pounds in 1995 when Zeneca unveils results on March 11.
With a strong set of results already factored into the share price, Zeneca stock settled back four pence to 1689-1/2 pence in early trading.
Bumper pharmaceutical sales will help to drive profits forward, with 1996 sales volumes likely to be ahead by around 14 percent year-on-year.
Sales of the group's biggest-selling product, cardiovascular drug Zestril, are tipped to rise at a similar rate to 1995's 12 percent growth, despite increased competition from rival Merck & Co MRK.L 's Prinivil and Cozaar.
Established prostate cancer treatment Zoladex also ""continued to grow strongly,"" Zeneca said, while a decline in sales of its ageing breast cancer product Nolvadex slowed.
In a quarterly trading statement, Zeneca highlighted the performance of new drugs, with sales of prostate treatment Casodex and Nolvadex back-up Arimidex beating expectations. The recent launch of a novel tablet asthma drug Accolate in the U.S. has ""gone well,"" the group said.
Sales of agro-chemicals last year ""were close"" to the 14 percent rise reported at the nine-month stage, with record sales of herbicides and of the insecticide Karate.
Operating profits at the slimmed-down specialities business were likely to be above 1995 levels after ""a particularly strong second-half performance,"" Zeneca said.
Full-year results will be affected by a 35 million reorganisation charge on speciality disposals, signalled at the half-year stage, while reorganisation of the seeds joint venture should cost Zeneca around 20 million pounds.
($1=.6161 Pound)
",19
"Two very different Cambridge biotechnology companies set out their plans to join the stock market on Monday.
Cambridge Antibody Technology Group Plc (CAT), which uses human antibodies to discover new drugs, and the Bioscience Innovation Centre, which aims to ""incubate"" new biotech businesses, both hope to raise millions of pounds to fund their work.
Sources close to CAT said its listing later this year should raise between 30 and 35 ($48-57 million) through a placing of its shares with institutional investors, valuing the company at around 85 million pounds.
Kleinwort Benson Ltd has been appointed as sponsor to the flotation, with Cazenove & Co as broker.
CAT, which has been operating since 1990, is working to find drugs to tackle inflammation, fibrosis, cancer and obesity.
It said two drugs were expected to enter human clinical trials this year. CAT plans to develop drugs on its own up to intermediate stage clinical trials, and then find partners to help fund the costly business of late-stage trials, registration and marketing.
The strategy would enable the company to keep a higher percentage of profits from drug sales than if it introduced a partner early on, but will also increase its costs.
The Bioscience Innovation Centre (BIC) said it hoped to raise up to 6 million pounds through a share placing and open offer, and to list its shares on the Alternative Investment Market (AIM).
The money will go towards the construction of a 20,000 square foot building in Cambridge which will act as a ""business incubator"", offering technical and commercial skills to budding biotechs.
""In the U.S, sector-specific business incubators have been shown to have a positive and dramatic effect on the success rate and growth of start-up businesses,"" BIC said.
It added that the planned centre would give suitable companies access to ""professionals in the fields of intellectual property, commercial management, licensing, marketing, regulatory affairs and finance.""
Teather & Greenwood have been appointed as advisers and brokers for BIC's flotation.
Cambridge is growing rapidly as a biotechnology centre. Companies already established in the city include Chiroscience Group Plc, Peptide Therapeutics Plc, Cantab Pharmaceuticals Plc and Celsis International Plc. ($1=.6161 Pound)
",19
"Investors in the fast-growing British biotechnology sector can look forward to another roller-coaster ride in 1997, with serious profits still there to be made by investors who pick their stocks carefully.
Although sharp falls in the value of the sector since its peak last May have underlined the riskiness of biotechs as an investment, analysts said 1997 should be the year when a host of companies publish data which will start to prove that the underlying technology can produce drugs that really work.
It should also see a number of businesses step out of the long shadow cast by British Biotech Plc, which continues to ride high on hopes that its cancer treatment Marimastat will be the sector's first wonderdrug.
Among those most keenly tipped for success next year are Biocompatibles International Plc, Celltech Group Plc, Chiroscience Group Plc, Cortecs International Ltd and Scotia Holdings Plc.
And there are growing signs that other countries, notably France and Germany, will start to challenge Britain's domination of the European biotech industry. Britain currently has more biotech companies than the rest of Europe combined.
STOCKS STILL AHEAD DESPITE 1996 SETBACK
Analysts at Lehman Brothers said the end of a 14-month long run of gains by Britain's biotech stocks in May, since when prices have dropped by around 40 percent, jolted investors, leading many to question the real value of biotechs.
But the Lehman Brothers UK/Europe Biotechnology Index also shows that even after this setback, biotech stocks are still showing an overall gain of around 150 percent compared with the start of their bull run in February 1995.
And in a note on the sector, Lehman said investors could buy into drug discovery and development in biotechs at a fraction of the cost of buying into the pipelines of mature companies like Glaxo Wellcome Plc and Zeneca Group Plc.
Nomura Equity Research analyst Nick Woolf also disputed another claim of recent months, that UK biotech stocks are vastly overvalued compared with the much larger U.S. sector.
Woolf said a ratio of market capitalisation to five years of spending on research and development showed U.S. biotechs are valued at four to five times accumulated spending and British companies at between four and six times.
""We are not overvalued compared to the U.S,"" he said. ""When people say the U.K. is overvalued they are looking at British Biotech, but second place companies like Chiroscience, Celltech and Cortecs are all looking very good value.""
Woolf and Yamaichi International analyst Erling Refsum said investors had become much more choosy about which stocks to buy, but there was now a danger that people were being too cautious. Where a year ago people would put money into almost any biotech that could type out a prospectus, in recent months a number of small flotations and fundings have been scaled down or dropped.
Even British Biotech was forced to turn to underwriters to rescue its 143 million pounds ($236.5 million) cash call in July.
Refsum said the market was focusing too much on the 50 percent chance that a drug in Phase II trials would fail to get to market rather than the equal chance it would succeed. Woolf added ""I think it is the wrong way of looking at it. You should evaluate risk, but across a portfolio of companies where you are spreading the risk.""
ISSUES TO WATCH IN 1997
Among key stocks to watch in 1997 will again be British Biotech, where clinical trials of Marimastat are entering the final phase. Although trials will not be completed until 1998 at the earliest, the company plans detailed updates on the drug, probably in May and November. Bad news is still expected to have a disproportionate effect on the whole of the sector.
Celltech is singled out by Nomura, Yamaichi and Lehman. Nomura said Celltech is ""very good value,"" and Lehman have a target valuation of 10 pounds per share for the company by the end of this year compared with a price of 485 pence on Friday afternoon. Optimism about a septic shock drug, being developed with Germany's Bayer AG, and progress on a therapy for Acute Myeloid Leukaemia are seen as key drivers.
Cambridge-based Chiroscience, which Lehman values at 600 pence per share compared with last Friday afternoon's price of 312, is also favoured, amid hopes that a new local anesthetic will provide a flow of cash for an ambitious pipeline of novel drugs including cancer and arthritis treatments.
UK-Australian group Cortecs is strongly tipped by Yamaichi's Refsum, who believes oral osteoporosis and insulin drugs could turn out to be $1 billion-sellers, while he also favours Scotia, which is in the unusual position of having three drugs nearing the market. Tiny Scottish group Shield Diagnostics Plc could be sitting on a product worth around $200 million a year if data due to be published in the first half of 1997 prove its diagnostic kit is an accurate forecaster of heart attacks.
And Lehmans said contact lens and medical devices company Biocampatibles had ""enormous upside potential"". It said the stock could be worth 16 pounds by the end of 1997 compared with 693 pence on Friday.
($1=.6047 Pound)
",19
"British Biotech Plc published further evidence on Monday that its cancer drug Marimastat works, but analysts said there was still a long way to go before its potential as a blockbuster can be confirmed.
British Biotech's shares ended the day 19 pence lower at 210 after its keenly-awaited announcement appeared to provide comfort for both bulls and bears.
Some forecast that Marimastat, a new class of cancer drug, could one day have sales of $4 billion a year and make British Biotech a FT-SE 100 company.
But some analysts said presentations on the drug's effectiveness in gastric, colo-rectal, ovarian and pancreatic cancer to a science conference in Vienna were just a rehash of data published in May, which sent the share price soaring to record levels.
""Those who were sceptical in May will remain sceptical and those who were bullish in May will remain bullish,"" said one.
Finance director James Noble told Reuters the company had been deliberately cautious about its statement on Monday, because it was ""extremely concerned not to raise patients' hopes of the drug.""
But he said there was ""significant"" evidence that Marimastat increased the chances of survival in cancer patients and added ""in many ways I think it is the most impressive data since the company was founded.""
The studies, based on 381 cancer patients who continued taking the drug after the 28-day period required for Phase II trials, confirmed Marimastat's ability to reduce the rate of rise of cancer antigens, one measure of how much cancer is present in the body.
""Those patients who continued to take it for more than 28 days lived...significantly longer"" than those who stopped taking it, Noble said.
One of the bulls of the drug, Greig Middleton analyst John Savin, agreed, saying that ""on this information today we can say that...37 percent (of patients) had a real overall response which improved their survival chance significantly.""
But others expressed disappointment that British Biotech failed to provide more detailed analysis of side effects caused by Marimastat. The Oxford-based group confirmed it caused joint pain, mainly in the arm and shoulder, with around 30 percent of patients affected after three to five months.
Yamaichi International analyst Erling Refsum said the side effect profile will be crucial to Marimastat's potential.
""Drugs become top sellers because of their side effect profile rather than because of their efficacy profile,"" he said.
Noble played down concerns about side effects, saying: ""They are not a serious problem. They are reversible.""
He said patients who suffered badly could interrupt their treatment from time to time without adverse impact.
Analysts said credible estimates of exactly how big Marimastat will turn out to be would be impossible until final, Phase III trials were completed.
This means investors will have to wait until 1998 at the very earliest for hard evidence that their optimism about Marimastat and British Biotech is well founded.
-- London Newsroom +44 71 542 7717
",19
"British Petroleum Co Plc (BP) extolled the virtues of ""self help"" on Tuesday as it reported its best-ever third quarter earnings despite pressure on profit margins in some key businesses.
Third-quarter net earnings jumped by 22 percent to 650 million pounds ($1.07 billion), towards the top end of forecasts, while in the first nine months of the year they were up 28 percent to a record 1.93 billion pounds.
BP said strong oil prices, which have recently been at their highest levels since the 1991 Gulf War at around $22 a barrel, boosted earnings by between $400 million-$500 million in the third quarter.
But it added that the gains were more than offset by weaker profit margins in refining, marketing and chemicals, which accounted for about 27 percent of group net earnings.
Group chief executive John Browne said BP was enjoying the benefits of a raft of cost-cutting and efficiency drives, which were adding $150 million to profit every quarter.
""What we see here has not come about as a result of high oil prices, it has come about as a result of self help,"" he said.
The market took the results calmly, with BP shares adding two pence to close at 640.5 pence after touching a high of 647p. However, trading in BP shares on the options market was active.
""People are still speculating on a fairly sharp rise in BP shares,"" one options specialist said.
""In a sense BP have spoilt us,"" said Societe Generale Strauss Turnbull analyst Irene Himona.
""We've got used to them coming out with a good set of numbers at the top of the range, and unfortunately with (rival) Shell it is the other way around.""
BP's results contrasted with disappointment last week at third-quarter figures from rival Royal Dutch/Shell Group, where profits fell on the back of low refining margins and a weak chemicals market.
BP also emphasised the relative stability in its earnings, partly as a result of the vigorous cost-cutting at its exploration and production activities.
""They are very much on the ball and very focused. They have achieved a lot of efficiency improvements and delivered a lot of savings,"" said Himona.
BP was upbeat about near term propsects, with oil demand expected to remain strong into 1997. But it said its long-term view that the oil price would settle back into a range of $16 to $18 a barrel had not changed. ""The question is how we get from here to there,"" said Browne.
Morgan Stanley analyst Chris Buckley said the oil price was always the greatest uncertainty, but added that lower prices tended to mean margins could improve in downstream activities like chemicals and refining.
($1=.6051 Pound)
",19
"Britain's Imperial Tobacco Group Plc took advantage of its new-found independence on Tuesday to buy the world's biggest maker of handrolling tobacco papers.
Imperial, which was demerged from conglomerate Hanson Plc last October, said it was paying 168 million pounds ($272.7 million) for Netherlands-based Rizla International BV, as well as acquiring 17 million pounds of Rizla's debt.
Chief executive Gareth Davis told Reuters that Rizla, which employs more than 700 people in France, Belgium and Wales, would enhance the group's international expansion.
""Imperial Tobacco is a relatively late entrant to international markets but is making some very fast strides in growth,"" Davis said.
Rizla has a large market share in seven or eight European countries, he said.
Shares in Imperial, which will finance the deal out of bank borrowings, rose 9.5 pence to 394 as traders greeted the news.
Founded in 1796, Rizla is the world's largest producer and seller of the thin papers used for handrolling cigarettes. It has around 66 percent of world market share in branded products.
Davis said the company was active in more than 60 countries, adding: ""Obviously we are looking to extract the potential we see at Rizla for increased profitability and productivity.""
Davis said Imperial had been able to take advantage of its new-found independence from Hanson.
""It is a company we have been interested in for many years,"" he said, adding that the acquisition was ""very much in line with our strategy at demerger of focusing on tobacco and tobacco-related products.""
No job losses are anticipated as a result of the acquisition. ""We do see scope for productivity improvements but the plants are working at capacity,"" Davis said.
Imperial said Rizla, which is based in Breda, would continue to be run as a separate division, with the existing management remaining in place.
In 1996, Rizla posted a trading profit of 23 million pounds on sales of 74 million pounds, and had net tangible assets of around 17 million pounds.
($1=.6161 Pound)
",19
"Drug discovery specialist Chiroscience Group plc said on Monday it is testing two anti-cancer compounds before deciding which will go forward into human trials before the end of the year.
Both are MMP inhibitors, the same novel class of drug as British Biotech Plc's potential blockbuster Marimastat, which are believed to stop cancer cells from spreading.
In an interview, chief executive John Padfield said Chiroscience hoped to have its own competitor to Marimastat in early trials next year and Phase III trials in 1998.
",19
"British Biotech Plc said on Wednesday that a rethink on the way drug giants form alliances with fledgling biotechs was ""desperately required"".
British Biotech chief executive Keith McCullagh told the IIR's Pharma Summit conference that many product partnerships failed because small drug discoverers were forced to relinquish control of their projects too early.
He said a project that might be very important to a biotech was ""one of many at an early stage of development"" for a large company ""and is usually not regarded with any great sense of uniqueness or urgency.""
McCullagh said biotech projects often got clogged up in bureaucracy, rarely achieved the same priority as in-house discoveries and often fell victim to changes in management.
""The consequences of this are that the majority of biotech-pharma alliances fail, not as a consequence of product failure but as a result of a change of will on the part of the partner,"" he said.
British Biotech's deals over several years had been affected by changes in research and development management, complete R&D reorganisation and changes in overall control of the partner through merger and acquisition, said McCullagh.
""Success is more likely to be achieved, as judged by product progress to market, if the originating company continues to play an important role in ongoing development,"" he said.
The chief executive said this could be achieved by the biotech company continuing to control development of a drug in-house with funding from its partner, or by establishing a joint venture ""to progress the project with equal input into its management.""
A third way could be for large companies to invite biotech staff to sit on project teams and management committees.
""By allowing the originator greater control over the outcome of the development, not only is the chance for success for the project enhanced but (the large company) is also more likely to achieve a return on its investment,"" he added.
British Biotech is unusual among its peers in choosing to develop and market its cancer portfolio, including its lead cancer drug Marimastat, on its own, although it has formed alliances in other key areas.
-- London newsroom 44 171 542 7717
",19
"Milumil babymilk powder, used by around 25,000 mothers in Britain and Ireland, was withdrawn from British stores and clinics on Friday after a scare over Salmonella poisoning.
Milupa, part of the Dutch specialist food producer Nutricia NV, said it was withdrawing its Milumil milk powder because of an unconfirmed link with 12 cases of a rare form of the Salmonella bug.
Dennis Segal, managing director of Milupa UK, told reporters the company was also in talks with the Irish government, although no incidents had been reported there.
The company launched a damage limitation exercise after it was contacted by Britain's Department of Health on Thursday afternoon.
Government scientists had identified 12 cases of Salmonella anatum infection, leading to gastro-enteritis, in children under 12 months old which followed consumption of the French-made milk, sold as ""Milumil for Hungrier Bottle Fed Babies.""
The Department of Health said that only two of the children involved were admitted to hospital and all had since recovered. However it told parents and other carers to stop using the product immediately and ordered the withdrawal of all stocks.
""There is no direct, incontrovertible proof that (the cause) is Milumil. It is a statistical association but we have to take every precaution,"" a company spokeswoman told Reuters.
Shares in Nutricia were suspended for around an hour in Amsterdam after falling sharply. However they later recovered some of their losses, trading down 9.70 guilders at 267, above a low of 260.50 guilders.
Milupa said it would hold a thorough investigation at the French plant where the milk was made, and added that production of the product had been suspended.
Sales of Milumil milk powder total between six and seven million pounds a year, and the product has a market share of around five percent. Another Milumil product, Milumil Ready to Feed, is not affected.
Dutch-based Nutricia, which also owns the Cow & Gate brand, is no stranger to controversy.
In June 1993, it withdrew all of its powdered baby food products in the United States because of possible Salmonella contamination.
And 140 million guilders were wiped off the value of the company in November of the same year after it recalled batches of its Olvarit baby food when excessive levels of disinfectant were found in some samples.
",19
"A strike at General Motors Corp.'s Indianapolis metal stamping plant is expected to force two more GM truck assembly plants to shut down Thursday night, ratcheting up the United Auto Workers union's bargaining pressure on the automaker.
A GM source said the two truck plants will run out of parts from Indianapolis late Thursday night during their second production shifts, joining a plant in Fort Wayne, Ind., that shut down Wednesday night.
The Fort Wayne plant laid off about 2,250 of its 2,600 workers as it halted production of GM's popular full-size Chevrolet and GMC pickup trucks.
The official declined to identify the plants, but said they will be among several still-operating truck facilities that receive hoods, fenders and other large body panels from Indianapolis, including Pontiac and Flint, Mich.; Oshawa, Ontario; Linden, N.J.; Shreveport, La.; Moraine, Ohio; and Silao, Mexico.
The strike by 2,750 workers at Indianapolis and a second walkout by 4,800 workers in Janesville, Wis., have formed a two-pronged effort to squeeze GM's highly profitable light truck operations.
Meanwhile, GM and the UAW continued a more than 24-hour bargaining session Thursday in an effort to hammer out a new national labour contract covering 215,000 GM hourly workers.
The marathon session, which started at about 10 a.m. EST, was the longest so far between the union and the world's largest automaker, said GM spokesman Charles Licari.
He declined to comment on any progress being made.
Typically, negotiators in labour contract talks for Detroit's Big Three automakers meet for long periods to work out final details just before reaching a tentative agreement.
But analysts say the dollar cost of lost truck production due to the Indianapolis and Janesville strikes could mount quickly, shutting off GM's biggest source of profits.
The shutdown of the Janesville plant alone could cost GM $50 million a week in pre-tax profits, adding to pressure on GM for national and local contract settlements, said David Healy, an auto analyst with Burnham Securities.
The southern Wisconsin factory is the sole source for GM's popular four-door, full-size Chevrolet Tahoe and Suburban and GMC Yukon sport utility vehicles. Analysts estimate that GM makes an average of $9,000 in variable profits on each of the trucks.
As its truck operations grind toward a halt, the company's U.S. car assembly plants affected by a three-week strike in Canada earlier this month are starting to come back to life.
GM said Thursday that 4,200 idled workers returned to their jobs at car plants in Flint, Mich., and Fairfax, Kansas, cutting the total number of U.S. workers laid off due to the Canadian Auto Workers walkout to 19,958.
The future of 12 domestic parts plants that GM considers uncompetitive has been a major sticking point in the negotiations. GM wants to exclude several of the plants from union demands that it guarantee employment for 95 percent of UAW workers over the next three years.
Ford Motor Co. and Chrysler Corp. have already granted such guarantees, but GM, the least efficient of Detroit's Big Three automakers, wants changes to the pattern to allow it to cut costs.
GM has already put two of the 12 plants on the sale block -- a door hinge plant in Flint, Mich., and an interior trim plant in Livonia, Mich., that together employ 2,100 workers.
GM's stock was off 50 cents at $52.875 in midday trading on the New York Stock Exchange.
",7
"Chrysler Corp., planning for a future without fear of financial crisis, said Tuesday it can boost its annual production capacity past 4 million vehicles and grab 20 percent of the U.S. car and truck market.
Chrysler's top executives, in a series of briefings Tuesday, said the automaker was poised to boost its financial performance further through cost cuts, engineering innovations, new products and other initiatives.
Chrysler Chairman Robert Eaton said the automaker has not made market share a goal, but said an 18 percent to 20 percent share of the U.S. car and truck market ""is not unrealistic"" for Chrysler.
Detroit's third-largest automaker held 16.2 percent of the market during the first nine months of 1996 -- roughly its highest share ever.
After working to rebuild Chrysler's product line, operations and balance sheet after financial crises in 1980 and 1991, the automaker's management team is now focusing on long-term growth.
""For the first time in its history, this company doesn't have to spend every waking moment looking over its shoulder and worrying about its future,"" said Chrysler President Bob Lutz. ""We've moved beyond saying 'never again' to 'Why not?'""
Indeed, Eaton said he now believes that Chrysler can withstand a 10 percent to 20 percent drop in production and remain profitable -- something that was impossible five years ago.
With a string of hit products, especially Jeeps and minivans, under its belt, the automaker is planning to boost capacity to 3.765 million vehicles by the year 2000 from 3.2 million this year.
Included in those figures are a new Dodge sport utility vehicle that will go on sale in the fall of 1997. Industry analysts have said the vehicle will be called the Dodge Durango and will be based on the new Dakota compact pickup truck.
The automaker could build up to 4.2 million vehicles annually in its current assembly plants if it adds third production shifts, said manufacturing Executive Vice President Dennis Pawley.
That does not include the possible replacement of Chrysler's Toledo, Ohio, assembly plant.
Eaton confirmed that the automaker was working with state and local officials to study replacement options for the 86-year-old facility, but has made no firm plans.
Much of Chrysler's increased capacity will be aimed at overseas markets. The executive vice president of international operations, Thomas Gale, said Chrysler expected to double its international vehicle sales to 500,000 vehicles over the next three years from 250,000 this year.
Gale said he believed Chrysler can ultimately sell more than 1 million vehicles overseas but did not offer a timetable.
He showed off a prototype of a proposed ultra-low-cost car for emerging markets such as China, which features an all-plastic body and a two-cylinder, 0.8-litre engine made by Briggs & Stratton Corp.
The bare-bones car, which would not meet U.S. emissions and safety regulations, resembles France's discontinued but much-loved Citroen 2CV and could sell for $5,000 to $6,000.
Eaton, who Monday announced surprisingly strong third-quarter earnings of $680 million, up from $365 million a year ago, outlined several financial goals for the automaker, without giving a timetable. They include:
-- Boosting production by 6 percent a year.
-- Cutting research and development spending to 2.5 percent of revenues from 2.7 percent. Ford Motor Co.'s spending rate is 5.9 percent of revenues, General Motors Corp. is at 5.5 percent and Toyota Motor Corp. is at 5.0 percent, Chrysler said.
-- Cutting marketing costs to 6.3 percent of sales from 6.5 percent currently.
-- Boosting return on sales to 8.0 percent from 6.5 percent for the first nine months of 1996 and 3.7 percent for the same period of 1995.
",7
"In a sign that agreement on a labour contract between General Motors Corp. and the United Auto Workers may still have significant hurdles, the union said Friday it cancelled a meeting of its National GM Council that was scheduled here for Saturday.
The council, made up of about 250 plant-level leaders at GM locals across the country, was expected to vote on a tentative agreement covering GM's 215,000 UAW workers.
UAW spokesman Reg McGhee declined to give a reason for the cancellation, but said the council will meet instead on Wednesday, Nov. 6, in Chicago, if the union reaches an agreement with GM in the next few days.
One official close to the talks said the meeting was cancelled because the union did not reach a deal in time to print up summaries for the GM council members to review on Saturday. He did not rule out reaching an agreement on Friday.
""They're working on trying to resolve the final issues,"" GM spokesman Gerry Holmes said.
Still, the cancellation was viewed as a negative sign for the GM contract talks, which had resumed Friday after bargainers rested up before making another push for a tentative agreement. They bargained for 32 hours on Wednesday and Thursday, fuelling optimism that a settlement was near.
The two sides have been haggling over the total number of hourly workers that GM will guarantee to maintain over the next three years.
Ford Motor Co. and Chrysler Corp. have agreed to guarantee jobs for 95 percent of their current hourly workforces, but GM wants to exclude several parts plants from the guarantees.
GM, the least efficient of Detroit's Big Three, wants changes to the pattern to allow it to cut costs and shift more parts work to outside suppliers.
GM is expected to match the Ford and Chrysler wage package, which calls for a $2,000 bonus in the first year, and 3 percent base wage increases in the second and third years.
Meanwhile, the toll of lost profits and idled workers from local strikes in Janesville, Wis., and Indianapolis continued to mount for GM.
Including 2,750 strikers at the Indianapolis metal stamping plant and 4,809 at the Janesville truck assembly plant, GM said the walkouts had idled a total of 13,309 workers by midday Friday.
Another 2,400 were scheduled to be sent home from GM's Shreveport, La., plant later Friday afternoon, and up to 2,500 workers in Linden, N.J., were told not to report to work on Monday.
The two factories are among nine GM truck plants in North America that receive fenders, hoods, roofs and other major body panels from Indianapolis.
Michael Ward, an auto analyst at Paine Webber, said the Janesville, Fort Wayne and Moraine shutdowns alone will cost GM $10 million a day in after-tax lost profits.
""We're looking at $10 million a day right now, and that could easily expand to $20 million by Monday,"" Ward said.
About 3,500 workers were idled at GM's Moraine, Ohio, compact sport utility vehicle plant Thursday night, while 2,250 workers were laid off at GM's Fort Wayne, Ind., full-size pickup truck assembly plant on Wednesday night.
In addition, 900 workers who build V-8 engines for trucks assembled in Janesville and Fort Wayne were idled on Friday.
A full-size truck plant in Flint, Mich., had been expected to be idled Thursday night, but union officials said GM diverted enough parts to keep it running several more days.
""GM'll start funnelling the parts around to the plants that they want to keep going,"" said Doug Bellamy, vice president of UAW Local 598 in Flint.
Layoffs from the UAW strikes are increasing as GM's U.S. car operations are still staggering from the effects of the three-week Canadian Auto Workers strike, which ended Oct. 23.
GM said it still had 18,958 workers idled by continuing shortages of Canadian-made parts at six car assembly plants, six engine and transmission plants and four metal stamping facilities.
",7
"Boosting the pressure on General Motors Corp. for a new labor agreement, the United Auto Workers union Friday set a Sunday night deadline for a strike against the world's largest automaker.
UAW President Stephen Yokich said in a statment that union negotiators were not optimistic that a new contract deal could be reached by the deadline of 11:59 p.m. EST Sunday (0459 GMT Monday).
While he did not say if the union's 215,000 GM hourly workers would actually strike, Yokich said the UAW had notified GM that it will terminate its extended 1993 contract with the automaker if the deadline passes with no agreement. The union typically does not work without a contract.
""UAW members have been advised to continue to work unless notified by their local union,"" Yokich said.
""The UAW bargaining team will continue to make serious efforts to achieve a new agreement. While we are not optimistic, we remain hopeful that this can be accomplished prior to the expiration of the current contract at 11:59 p.m. on Sunday,"" he added.
The move comes just three days after GM settled a contentious, 20-day strike with the Canadian Auto Workers union that caused parts shortages that are still forcing the auto giant to shut down some U.S. assembly plants.
Although the UAW talks had been moving quickly before the strike in Canada, people close to the negotiations said the two sides remain at odds over the union's demand for employment guarantees and GM's desire for flexibility to shift more parts work to outside, usually non-union suppliers.
Both Ford Motor Co. and Chrysler Corp. have agreed to guarantee jobs for 95 percent of their current work forces over the next three years. GM has resisted the pattern, saying it wants to exclude certain components plants from the employment guarantees.
A GM spokesman said full-scale UAW negotiations at GM's Detroit headquarters will continue throughout the weekend for the first time since the strike in Canada began on Oct. 2.
In a statement, GM chief negotiator Gerald Knechtel said, ""We remain committed to entering into agreement that balances the needs of our employees and the UAW with the flexibility GM needs to continue to improve our competitiveness.""
""We've had open and constructive dialogue with the UAW since the talks began and we're hopeful we can focus with the UAW on concluding these negotiations as soon as possible.""
Meanwhile, GM continued to run out of Canadian-made parts at U.S. assembly plants. In Flint, Mich., local UAW officials said GM told more than 6,600 workers not to report to work at the automaker's massive Buick City complex on Monday.
The facility makes Buick LeSabre, Oldsmobile 88 and Pontiac Bonneville sedans, as well as V-6 engines and other components.
Buick City is the largest of several facilities to cut back production due to shortages of parts following the end of the Canadian Auto Workers' strike this week.
On Thursday, GM laid off about 5,000 workers at its Lordstown, Ohio, assembly plant in a shutdown that will last two weeks. The plant builds the popular Chevrolet Cavalier and Pontiac Sunfire small cars.
Also on Friday, GM notified some of the 2,926 workers at the nearby Lordstown metal stamping plant they would be idled next week. Another 474 workers at a components plant in Vandalia, Ohio, will be idled next week, GM said.
Excluding the layoffs that will start next week, GM said it had a total of 23,340 workers idled in the United States and Mexico on Friday.
GM's 26,000 Canadian Auto Workers members began returning to work on Wednesday after they ratified a new contract that puts some limits GM's ability to shift work to outside suppliers but allows the automaker to sell two contested parts plants.
",7
"Adding to the controversy over the safety of automobile air bags, the federal government's auto safety agency said Thursday it was stepping up an investigation into spontaneous air bag deployments in several General Motors Corp. cars.
The National Highway Traffic Safety Administration said it has received five reports of air bags deploying without a collision in 1996-model GM mid-size sedans, due to corrosion in the air bag sensing and diagnostic module. In each case, water was spilled or leaked onto the floor of the vehicle.
The probe involves 395,994 cars currently on the road, including the 1996 Chevrolet Lumina and Monte Carlo, Buick Regal, Pontiac Grand Prix and Oldsmobile Cutlass Supreme.
In its monthly defect investigation report, NHTSA said three of the ""inappropriate deployments"" resulted in injuries, but none resulted in death. Four of the five cars were travelling between 10 and 40 mph when the bags inflated.
News of the probe comes as the NHTSA is fielding growing numbers of calls from consumers worried about reports of child deaths caused by air bags.
Air bags have saved the lives of more than 1,136 adults since 1986, said NHTSA spokeswoman Liz Neblett. But with inflation speeds of up to 200 mph, they also have killed 28 children since 1990.
Earlier this week, NHTSA Executive Director Ricardo Martinez said the the agency advised that all children under the age of 12 should ride in the back seats of cars and trucks equipped with dual front air bags.
The agency raised that age after 5-year-old Frances Ambrose was killed by an air bag in a Nashville, Tenn., crash despite properly wearing lap and shoulder belts.
The NHTSA is now considering several remedies to the situation, including an auto industry request to reduce the inflation pressure of passenger air bags.
Other alternatives include requiring ""smart"" air bag systems that have the ability to detect the size and weight of the occupant and adjust inflation accordingly.
In the probe of the GM cars, NHTSA said all of the vehicles use an air bag sensing and diagnostic module that is located underneath the front passenger seat on top of the carpeting. It is not sealed, making it susceptible to moisture intrusion.
NHTSA said owners of the vehicles reported that they:
-- Spilled a glass of water on the vehicle floor.
-- Drove through a car wash.
-- Spilled a bucket of water on the vehicle floor.
-- Spilled soapy water on the vehicle floor.
-- Discovered a trunk leak in the vehicle.
In addition, the agency said it was investigating two other instances of unexplained air bag deployment, one when a driver was backing out of a driveway and another when the car was driving at 20 mph.
A GM spokesman said the automaker was cooperating with the probe.
The company also uses the same air bag sensor on 1994 and 1995 model versions of the same cars, but reported only two instances of airbag deployments due to corrosion.
In one case, GM said the vehicle was apparently flooded by an ocean tide, and in another case, the entire rear end of the vehicle was severely corroded.
The investigation was upgraded to an engineering analysis, in which the agency will examine and physically test the components in question.
",7
"General Motors Corp. workers remained on the job without a contract Monday as United Auto Workers President Stephen Yokich refrained -- for now -- from calling a strike against the auto giant.
Negotiations on a new national labor contract covering GM's 215,000 UAW hourly workers recessed early Monday after a midnight strike deadline passed. Yokich said some bargainers would resume talks later in the day.
""The only place you can settle these agreements is at the bargaining table,"" Yokich told a news conference early Monday. ""We feel that with or without a contract in place, we can continue (working). It's open-ended.""
The union plans to bring its plant-level leaders to Detroit for a meeting on the talks on Saturday, a move that typically comes after a tentative agreement is reached.
Although Yokich played down the threat of a strike on Monday, he said some of the more than 100 local unions at GM plants may resort to walkouts unless the automaker meets union demands in separate negtiations for local labor agreements.
The local talks have become a sticking point for the national negotiations, Yokich said, because only a few of the locals have signed agreements with GM.
The local pacts typically cover plant-specific issues such as work rules and health and safety standards, while the national contract covers wages, benefits, job security and other common issues.
""We decided that some of these locals need to work on these issues probably before we can ever get a settlement,"" Yokich said, declining to identify specific plants or issues.
Nevertheless, he urged anxious UAW members who watched their Canadian counterparts strike for three weeks this month to stay on the job for the time being.
""We hope that everyone understands that we can't do it in the street. It isn't weakness -- we have to do it at the bargaining table,"" he said.
Negotiations at GM's headquarters building here continued for 17 hours until about 2 a.m. EST on Monday, when bargainers began leaving, carrying their overnight bags.
Although some talks were scheduled to resume Monday afternoon, Yokich and other top UAW officers do not plan to return to the bargaining table until Tuesday morning.
In a written statement in response to Yokich's comments, GM Vice President of Personnel Gerald Knechtel said the talks have been constructive.
""We have had open and constructive dialogue with the UAW since these talks began and have made significant progress on many of the issues,"" Knechtel said.
Yokich chided GM's hard-headed negotiating style as ""typical GM,"" and noted that the union has consistently had a better relationship with Ford Motor Co. and Chrysler Corp.
The UAW wants GM to agree to the same job guarantees granted by Ford and Chrysler, which call for the two companies to guarantee employment for 95 percent of their combined 171,000 UAW members in the United States.
GM has 12 North American parts plants that it considers uncompetitive and wants to exclude several of those facilities from the job guarantee pledges, including a door hardware plant in Flint, Mich., and an interior trim plant in Livonia, Mich., that it wants to sell.
Although GM is viewed as the least efficient of Detroit's Big Three automakers, Yokich insisted that the auto giant can live with the pattern.
""I think Ford and Chrysler understood when we said we're preparing ourselves and our union to enter the 21st Century with you as partners in the corporation,"" he said. ""I'm not too sure GM understands that. They've always been late bloomers. Maybe they'll get the message sooner or later.""
The UAW's strike threat comes less than a week after GM settled a 20-day strike by the independent Canadian Auto Workers union. The CAW struck over many of the same issues -- job security and shifting jobs to outside suppliers.
UAW Vice President Richard Shoemaker said the U.S. union did not feel pressure to get the exact same provisions that GM agreed to in Canada.
GM's stock slipped 12.5 cents to $54 in early afternoon trading on the New York Stock Exchange.
",7
"General Motors Corp. and the United Auto Workers union reached a tentative agreement early on Saturday for a new national labor contract, ending months of contentious bargaining.
""I think we said back in June that it would be a difficult negotiation, and I think we fulfilled that expectation,"" said a visibly tired GM Chairman Jack Smith. ""Like any negotiation, you never get everything you want.""
The three-year deal, which covers 215,000 hourly UAW workers, will not end local strikes that started on Tuesday night in Indiana and Wisconsin, where local grievances remain unresolved, UAW President Stephen Yokich said.
He also held out the threat of additional strikes among GM's 123 UAW locals that have not yet reached plant-specific agreements with the automaker.
""I would suggest that the company work hard and get their locals cleaned up,"" Yokich said. ""Quite frankly the two that walked out have a heavy agenda on the table and they have a lot of work.""
Yokich declined to say when the agreement would go to rank-and-file members for ratification, but about 250 local leaders from GM plants around the country would meet in Chicago on Wednesday Nov. 6 to consider the pact.
Instead of the traditional joint statements and handshakes between company and union officials, Yokich insisted that the two sides hold separate news conferences to announce the agreement shortly after 2 a.m. CST (0700 GMT) Saturday.
Details of the agreement were not released, but Gerald Knechtel, vice president of personnel, said it fits within the pattern that the UAW set at Ford Motor Co and Chrysler Corp.
Both of those companies agreed to guarantee jobs for 95 percent of their current hourly workforces.
""The UAW presented its objectives to us and we talked about the objectives that we had and we found a way to address those within the pattern that was so important to the UAW,"" he said, adding that the deal allows GM to make competitive improvements.
The talks were said to hit several snags over the past week over several plants that GM wanted to exclude from the 95 percent employment guarantees. Among those were a door hinge plant in Flint, Mich., and an interior trim plant in Livonia, Mich., that GM has put on the sale block.
The proposed exceptions to the pattern were aimed at allowing GM, the least efficient of Detroit's Big Three automakers, to cut costs and boost productivity.
Although all three of the companies pay a base wage of about $19 an hour, Ford and Chrysler buy more of their parts from lower-cost outside suppliers than GM does. GM wanted the ability to ""outsource"" more of its parts work.
Economic provisions of the GM contract were expected to follow those at Ford and Chrysler, offering workers a $2,000 bonus in the first year of the contract, followed by 3 percent increases in base wages during the second and third years.
The deal came as GM's production losses due to strikes at a metal stamping plant in Indianapolis and a truck plant in Janesville, Wis., mounted on Friday.
By late Friday, more than 19,000 workers at seven plants were idled, including 2,750 strikers in Indianapolis and 4,800 in Janesville.
",7
"Ford Motor Co. said Friday it will pay $40 million for the right to put its name on the future home for the National Football League's Detroit Lions, a new domed stadium to be built in downtown Detroit.
Ford, which has not yet chosen a formal name for the facility, will pay the fee over several years to Detroit's newly created stadium authority, which is developing the $225 million, 70,000-seat stadium for the Lions, other athletic and entertainment events and conventions.
The facility is expected to be built on the edge of downtown Detroit, adjacent to a new, $240 million, open air ballpark for the Detroit Tigers baseball team.
The deal follows a growing trend for major sports facilities to sell naming rights to corporations for millions of dollars.
""The value of having your company's name associated with a high-profile athletic facility is extraordinary,"" said Ford Chairman Alex Trotman.
The deal leaves stadium backers about $10 million short of their fund-raising goals for the project. They face a Nov. 1 deadline to secure land purchases and raise $50 million in private and corporate contributions.
""I believe we will able to meet those conditions before Nov. 1,"" Detroit Mayor Dennis Archer told a news conference.
Detroit area voters will be asked on Nov. 5 to approve new taxes on hotel rooms and car rentals to help finance the project through an $80 million bond issue.
William Clay Ford Jr., a member of Ford's board of directors who is an owner of the Lions, said both he and his father, William Clay Ford, did not participate in any board discussions on the deal.
""It was truly an arm's length deal,"" said the younger Ford, who is leading the stadium project.
Ford, 39, said the Lions and the stadium authority did not expect to get much of the remaining $10 million in funding from General Motors Corp. and Chrysler Corp. Instead, they will seek funds from other companies, including automotive parts suppliers.
Ford also said if the referrendum passes, the Lions will begin discussions with the city of Pontiac, Mich., for an early termination of the team's lease on the Pontiac Silverdome, which expires in 2004.
The Silverdome, opened in 1975, would be the youngest U.S. major league sports facility to be replaced with a new venue.
",7
"Negotiators for General Motors Corp. and the United Auto Workers union were back at the bargaining table on Saturday in an effort to reach a new national labor agreement before a Sunday night strike deadline.
Bargainers, led by UAW President Stephen Yokich, reconvened about 8 a.m. (noon GMT) at GM's Detroit headquarters following a night off after the union's decision late on Friday to cancel its contract with the automaker at 11:59 p.m. EST Sunday (0459 GMT Monday).
The deadline marks the first time the UAW threatened a strike in its 1996 negotiations with Detroit's Big Three automakers, which up to now have been marked by an unusually conciliatory tone and extremely secretive discussions.
It also came days after GM's 26,000 Canadian Auto Workers members began returning to work on Wednesday following a three-week strike against the automaker's Canadian operations.
In the U.S. talks the two sides were at odds over the same issues that caused the walkout in Canada -- the union's demand for job security and GM's desire to sell several parts plants and maintain flexibility to shift components work to outside suppliers, a practice known as outsourcing.
In the U.S. negotiations GM wanted to modify the UAW contract pattern set by Ford   Motor Co. and Chrysler
Corp., which agreed to guarantee jobs for 95 percent of their UAW  workforces over the next three years.
GM, the least efficient U.S. automaker, wanted to exclude certain components plants from the employment guarantees, including a door-hardware plant in Flint, Michigan, and an interior trim plant in Livonia, Michigan.
Ford and Chrysler buy more of their parts from outside suppliers than GM does, often from firms that paid their workers significantly less than the $19-an-hour base wage paid in Big Three factories.
Yokich said in a statment Friday that he was not optimistic that a deal could be reached before the deadline, but told workers to remain on the job until further notice.
On Saturday UAW spokesman Reg McGhee declined to say whether the union was still pessimistic about the talks.
""That was yesterday's statement,"" McGhee said. ""We're just saying that the talks are continuing and we're not characterizing the progress.""
GM spokesman Charles Licari said the automaker was prepared for round-the-clock negotiations, but declined to provide further details of the talks.
GM's chief negotiator, Gerald Knechtel, said Friday that the automaker was ""committed to entering into agreement that balances the needs of our employees and the UAW with the flexibility GM needs to continue to improve our competitiveness.""
GM flush with $14 billion in cash on its balance sheet and operating earnings that more than doubled in the third quarter to $1 billion, showed much willingness this year to sustain costly strikes in its continued quest for competitiveness.
Industry analysts estimated the cost of the Canadian strike at $150 million to $450 million, while a 17-day strike at two Dayton, Ohio, brake plants in March reduced GM's first quarter profit by $900 million.
In Dayton, GM preserved its right to buy a future brake system from an outside supplier, while in Canada, GM won the right to sell two parts plants in return for recognizing some limits on outsourcing.
But the effects of the Canadian strike continued to linger last week, as more of GM's U.S. assembly plants plants ran out of Canadian-made parts.
In Flint, Michigan, local UAW officials said GM told more than 6,600 workers not to report to work at the automaker's massive Buick City complex on Monday.
The facility makes Buick LeSabre, Oldsmobile 88 and Pontiac Bonneville sedans, as well as V-6 engines and other components.
On Thursday GM laid off about 5,000 workers at its Lordstown, Ohio, assembly plant in a shutdown scheduled to last two weeks. The plant builds the popular Chevrolet Cavalier and Pontiac Sunfire small cars.
Also on Friday GM notified some of the 2,926 workers at the nearby Lordstown metal stamping plant they would be idled next week. Another 474 workers at a components plant in Vandalia, Ohio, will be idled next week, GM said.
Excluding the layoffs that will start next week, GM said it had a total of 23,340 workers idled in the United States and Mexico on Friday.
",7
"Labor negotiations between General Motors Corp. and the United Auto Workers went around the clock into early Saturday morning as pressure from strike-related production losses mounted on the world's largest car maker.
Bargainers at GM's world headquarters were said to be haggling over a list of plants that GM wants to exclude from employment guarantees in the three-year national contract covering 215,000 hourly workers.
Ford Motor Co. and Chrysler Corp. have already agreed to guarantee jobs for 95 percent of their current hourly work forces, but GM wants to exclude several parts plants from the guarantees, including a door hinge plant in Flint, Mich., and an interior trim plant in Livonia, Mich., now on the sale block.
""It ain't done yet,"" one union negotiator at GM's Detroit headquarters said on Friday night.
GM spokesman Gerry Holmes declined to rule out a settlement early on Saturday, but would not characterize the progress of the discussions.
Bargainers struggled for nearly 45 hours from Wednesday through Friday over the proposed exceptions to the pattern, which was aimed at allowing GM, the least efficient of Detroit's Big Three automakers, to cut costs and boost productivity.
Although all three of the companies pay a base wage of about $19 an hour, Ford and Chrysler buy more of their parts from lower-cost outside suppliers than GM does.
On Friday, the UAW signaled that the talks had hit a snag when it canceled a Saturday meeting of plant-level leaders here.
The UAW said its 250-member National GM Council is now scheduled to meet on Wednesday, Nov. 6, in Chicago if the union reaches a tentative agreement in the next few days. The cancellation was viewed as a negative sign for a quick settlement because it buys significantly more time to craft a deal.
Meanwhile, pressure from local strikes in Indiana and Wisconsin mounted early Saturday as the number of workers idled by the walkouts exceeded 19,000.
By late in the evening, workers at seven plants were idled, including 2,750 strikers in Indianapolis and 4,800 in Janesville, Wis.
The Indianapolis plant feeds fenders, doors, hoods and other steel body panels to nine of GM's 11 North American light truck plants, including Janesville.
GM's Shreveport, La., compact pickup truck plant also shut down Friday, idling 2,400 workers, while GM's Linden, N.J., plant, which employs about 2,500 workers, was expected to run out of parts Friday night. Linden produces Chevrolet and GMC compact pickups and sport utility vehicles.
About 3,500 workers were idled at GM's Moraine, Ohio, compact sport utility vehicle plant Thursday night, while 2,250 workers were laid off at GM's Fort Wayne, Ind., full-size pickup truck assembly plant on Wednesday night.
In addition, 900 workers who build V-8 engines for trucks assembled in Janesville and Fort Wayne were idled on Friday.
Michael Ward, an auto analyst at Paine Webber, said the Janesville, Fort Wayne and Moraine shutdowns alone will cost GM $10 million a day in after-tax lost profits.
""We're looking at $10 million a day right now, and that could easily expand to $20 million by Monday,"" Ward said.
Full-size pickup truck plants in Flint and Pontiac, Mich., and Oshawa, Ontario, could run out of parts within the next several days, while a GM truck plant in Silao, Mexico, was believed to have a greater supply of parts on hand.
Layoffs from the UAW strikes were increasing as GM's U.S. car operations are still staggering from the effects of the three-week Canadian Auto Workers strike, which ended Oct. 23.
GM said it still had 18,958 workers idled by continuing shortages of Canadian-made parts at six car assembly plants, six engine and transmission plants and four metal stamping facilities. Lost profits associated with the Canadian walkout are estimated at more than $350 million.
",7
"Strong demand for light trucks and relatively few production headaches boosted the combined profits of the Big Three U.S. automakers to nearly $2 billion in the third quarter, exceeding year-ago results by a healthy margin, analysts said.
The third quarter is traditionally the industry's weakest, with summer vacations and model changeovers, but strong minivan and truck output helped buoy profits at Chrysler Corp and Ford Motor Co, they said.  
General Motors Corp operating earnings were held back by a significant increase in U.S. incentives, analysts said.
In the third quarter of 1995 the three automakers earned a combined total of $1.35 billion.
""It'll be a good quarter overall for the Big Three,"" said Dean Witter Reynolds Inc analyst Kenneth Blaschke. ""The issue that remains is how long the strike in Canada against GM will last.""
GM is expected to report third quarter net income of about $850 million, or $1.02 a share, according to First Call.  
The results will include an after-tax gain of $250 million, or $0.33 a share, from the reversal of GM's decision to close its Wilmington, Del., plant and build a new Saturn model there at the end of the decade.
In the year-ago third quarter GM earned $642 million, or $0.42 a share, including $246 million in earnings from Electronic Data Systems Corp, the computer services unit spun off by GM in June.
Burnham Securities analyst David Healy said GM's worldwide car and truck production rose 11 percent in the third quarter over a year ago.  
But a heavier mix of less-expensive vehicles and a $230 increase in incentives per vehicle squeezed GM profit margins, which likely resulted in a small pretax loss in North America during the period, he said.
GM is to report third quarter results on October 15.
On an operating basis, Ford's third quarter profits are expected to increase 78 percent, to $637 million, or $0.51 a share, from $357 million, or $0.28, a year earlier, marking the biggest rebound of the Big Three. Ford results are due October 16.  
The strength at Ford largely rides on the fact that it is not paying the enormous product launch costs for the Taurus sedan and F-Series pickup truck that dragged down year-ago results.
Ford also is beginning to reap profits from the F-Series and the Expedition full-size sport utility vehicle, which have brightened the automaker's outlook.
""We think Ford's new products will enable it to gain an increased share going forward, and as a result Ford's earnings momentum should continue,"" Blaschke said.  
Ford's profits would have been even better but for losses in Brazil and Argentina that the automaker warned about in September.
Ford is scambling to put its Fiesta small car into production in Brazil following the breakup of the company's Autolatina joint venture with Volkswagen AG in 1995.
Chrysler's third quarter profits, scheduled for release October 14, are expected to increase 41 percent, to about $500 million, or $0.69 a share, from $354 million, or $0.48, a year earlier.
Chrysler also experienced launch problems in the year-ago period in its all-important minivan product lines.
This year, it is churning out minivans and Dodge Ram pickup trucks and has raised its share of the U.S. vehicle market to record levels. The launch glitches have not returned, and the company's new Dodge Dakota compact pickup truck is proceeding ahead of schedule, analysts said.
""Chrysler has everthing going for it right now and it should be reflected in the earnings,"" said Bear Stearns & Co analyst Nicholas Lobocarro.
He said he would not be surprised if the automaker's results exceeded Wall Street estimates.
",7
"Ford Motor Co., which reported a $472 million loss in Europe this week, faces a long and difficult job to cut costs and jump-start its product line to deal with a sluggish European market and tough competition, analysts said Friday.
Ford executives this week disclosed that they plan a broad effort to cut costs in Europe, including product costs, material costs, and personnel and plant costs.
""We need to restructure and we need to reduce our costs,"" Ford Vice President of Finance David McCammon told reporters.
The cuts will include an early retirement programme that is expected to eliminate more than 2,000 jobs in Europe, he said.
The initiatives, to be announced within the next three months, follow Ford's actions in 1993 to eliminate about 13,000 jobs from its Euoprean operations.
Ford's $472 million European loss compared with a $320 million deficit a year ago, and was due partly to product launch costs.
But analysts said there are no quick fixes to Ford's problems in Europe, which include high costs for its smaller cars and the lack of a competitive, high-volume large car.
""I don't think it's something that's corrected in one or two quarters,"" said PaineWebber analyst Michael Ward. ""We probably have another year or two where the news from Ford's European operations is not very good.""
The automaker's production and parts suppliers are heavily concentrated in Germany, where costs are high and the company is more susceptible to fluctuations in currency exchange rates. General Motors Corp.'s assembly operations and suppliers are spread more evenly throughout Europe, giving the automaker a competitive advantage.
Although the third quarter is typically the weakest period of the year because of vacations and model changeovers, GM's European operations earned $75 million during the third quarter, compared with a year-ago loss of $98 million -- a performance analysts attribute to extremely low investment costs and strong product acceptance.
Shifting Ford's supplier base is a long-term task, as is cutting investment costs in new products. The first new cars developed under Ford's more efficient ""Ford 2000"" structure are not expected to be on the market for at least two more years, analysts said.
The new Ford Ka minicar, developed for $250 million using off-the-shelf components, is a step in the right direction, but is expected to bring only razor thin profit margins, due to its low price, analysts said.
Unlike in the United States, Ford in Europe cannot count on highly profitable light trucks and sport utility vehicles to make most of its money. It must rely on mostly small cars, including the Fiesta, Escort and the mid-size Mondeo.
Ford's Scorpio large car, which was widely panned two years ago when it was last redesigned, has performed poorly against the likes of Bayerische Motoren Werke AG's 5-Series, GM's Opel Omega and the Mercedes-Benz E-Class.
""They have no money spinner in Europe,"" said Lehman Brothers auto analyst Joseph Phillippi.
Ford's Mondeo, a strong seller, is still handicapped by its initial $6 billion development cost, which also included the Ford Contour and Mercury Mystique in the United States.
Although the Mondeo received exterior and interior changes for the 1997 model year, competition in that segment of the market is much tougher than it was when the car first debuted in 1993.
Opel's new Vectra, Audi AG's A4 and Volkswagen AG's new Passat are expected to draw many buyers away from the Mondeo.
Making matters worse is the sluggish market. Analysts estimate that automakers have enough capacity to build 16 million cars in Europe, but sales this year will be only about 12.5 million, forcing deep price cuts.
""What's happening is there's an overcapacity situation in Europe,"" Ford's McCammon said. ""Everybody's fighting it out for market share and spending a lot of money for marketing incentives.""
He said all European automakers, except for GM, have been struggling through the same problems. A decade ago, it was GM that was struggling in Europe and Ford was the top performer.
""I guess things switched,"" McCammon said. ""We had a great position of leadership and we're unhappy that we don't have that any more.""
",7
"Negotiators for General Motors Corp. and the United Auto Workers adjourned their talks on Saturday evening with less than 30 hours to go before a midnight Sunday strike deadline.
Bargainers, led by UAW President Stephen Yokich, took their second consecutive night off since the union announced on Friday that it will cancel its contract with the automaker at 11:59 p.m. EST Sunday (0359 GMT on Monday).
GM spokesman Charles Licari declined to say whether the adjournment was a sign of poor progress in the talks aimed at a new national labor agreement covering the automaker's 215,000 UAW workers. Typically bargaining runs around the clock when a settlement is near.
The deadline marks the first time the UAW has threatened a strike in its 1996 negotiations with Detroit's Big Three automakers, which up to now have been marked by an unusually conciliatory tone and extremely secretive discussions.
It also came two days after GM's 26,000 Canadian Auto Workers members began returning to work on Wednesday after a three-week strike against the automaker's Canadian operations.
In the U.S. talks, the two sides are still at odds over the same issues that caused the walkout in Canada -- the union's demand for job security and GM's desire to sell several parts plants and maintain flexibility to shift components work to outside suppliers, a practice known as outsourcing.
GM wants to modify the UAW contract pattern set by Ford Motor Co. and Chrysler Corp., which have agreed to guarantee jobs for 95 percent of their current UAW work forces over the next three years.
GM, the least efficient U.S. automaker, wants to exclude certain components plants from the employment guarantees, including a door hardware plant in Flint, Michigan and an interior trim plant in Livonia, Michigan.
Ford and Chrysler buy more of their parts from outside suppliers than GM does, often from firms that pay their workers significantly less than the $19-an-hour base wage paid in Big Three factories.
Yokich said in a statement on Friday that he was not optimistic that a deal could be reached before the deadline but told workers to remain on the job until further notice.
On Saturday UAW spokesman Reg McGhee declined to say whether the union was still pessimistic about the talks.
""That was yesterday's statement,"" McGhee said. ""We're just saying that the talks are continuing and we're not characterizing the progress.""
GM spokesman Charles Licari said the automaker was prepared for round-the-clock negotiations, but declined to provide further details of the talks.
GM's chief negotiator, Gerald Knechtel, said on Friday that the automaker was ""committed to entering into agreement that balances the needs of our employees and the UAW with the flexibility GM needs to continue to improve our competitiveness.""
GM, flush with $14 billion in cash on its balance sheet and operating earnings that more than doubled in the third quarter to $1 billion, has shown willingness to sustain costly strikes to continue its quest for competitiveness.
Industry analysts estimate the cost of the Canadian strike at $150 million to $450 million, while a 17-day strike at two Dayton, Ohio, brake plants in March reduced GM's first quarter profit by $900 million.
But the effects of the Canadian strike continued to linger last week, as more of GM's U.S. assembly plants plants ran out of Canadian-made parts.
In Flint, local UAW officials said GM told more than 6,600 workers not to report to work at the automaker's massive Buick City complex on Monday.
",7
"Rested negotiators for General Motors Corp. and the United Auto Workers met again Friday to make another push for agreement on a new national labour contract before a Saturday meeting of UAW leaders.
The bargainers went home without a deal Thursday night after meeting for nearly 32 hours, although some officials said the talks were grinding toward a settlement.
The negotiating session on Wednesday and Thursday was the longest since talks began between the automaker and union in June. Bargainers typically meet for long periods just prior to a tentative agreement.
""They're working on trying to resolve the final issues,"" GM spokesman Gerry Holmes said Friday.
Talks ""have snagged several times in the past week,"" said Harley Shaiken, a professor of labour relations at the University of California-Berkeley. ""The pressure's been increased considerably by the two plants that are out on strike.""
The toll from local strikes in Janesville, Wis., and Indianapolis continued to mount as more plants shut down because of parts shortages.
GM's compact sport/utility plant in Moraine, Ohio, halted operations late Thursday night, idling 4,000 workers.
Seven other GM truck plants were expected to run out of doors, fenders and hoods made at the Indianapolis plant in the next few days. They include plants in Flint and Pontiac, Mich.; Shreveport, La.; Linden, N.J., Oshawa, Ontario, and Silao, Mexico.
Some states may determine that the laid-off workers will not be eligible for state unemployment benefits because they were idled by a strike.
The strikes on Tuesday by 2,750 workers at Indianapolis and 4,800 workers in Janesville, Wis., have formed a two-pronged effort to squeeze GM's highly profitable light truck operations, increasing pressure for national and local settlements.
Meanwhile, other UAW locals sought to join the Indianapolis and Janesville walkouts. GM's Kokomo, Ind., electronics plant requested permission to send about 5,500 workers out on strike.
A walkout at that facility would be particularly damaging to GM because it supplies all of the automaker's North American assembly plants with engine electronics, audio systems and other parts.
The future of 12 domestic parts plants that GM considers uncompetitive remained a major sticking point in the negotiations. GM wants to exclude several of the plants from union demands that it guarantee employment for 95 percent of UAW workers over the next three years.
Ford Motor Co. and Chrysler Corp. have already granted such guarantees, but GM, the least efficient of Detroit's Big Three automakers, wants changes to the pattern to allow it to cut costs.
",7
"General Motors Corp. can shrink its workforce under a United Auto Workers pact that differs significantly from contracts with Ford Motor Co. and Chrysler Corp., the union disclosed Wednesday.
But the three-year GM agreement also contains tougher restrictions on using outside companies for parts, aimed at curbing job losses to lower-cost outside suppliers.
Following a unanimous approval by about 250 plant-level leaders gathered here Wednesday, GM's 215,000 rank-and-file UAW members are expected to ratify the pact by Nov. 17.
Despite the differences, most local officials said they were pleased with the pact.
""This agreement definitely sells itself,"" said Duane Zuckschwerdt, president of UAW Local 659 in Flint, Mich. ""I don't foresee a problem with ratification.""
In documents distributed to the leaders, the union said the contract calls for GM to follow Ford and Chrysler in maintaining employment at 95 percent of current levels, but contains certain key exceptions.
The pact allows GM to halt replacements of retiring workers when it makes efficiency gains in its factories -- a point that will be especially helpful to the automaker as it introduces new cars and trucks that can be built with fewer workers over the next several years.
Another provision allows GM to adjust workforces in plants and business lines located in larger geographic groupings than at Ford and Chrysler.
For example, GM's 13 factories in Flint, Mich., which employ nearly 28,000 workers, constitute a single grouping. As such, GM does not have to guarantee 95 percent of the jobs in each facility, only 95 percent of the total, which would allow the automaker to exit certain uncompetitive businesses.
Some plants in the Flint grouping remain at risk. GM's V-8 engine plant there is still scheduled to close in the third quarter of 1999, and the contract did not address the future of the Buick City assembly plant, which has been assigned no new product beyond the 1999 model year.
UAW officials say they hope to persuade GM to commit to new products to those plants.
GM wants to exit such labor-intensive businesses such as ""cut-and-sew"" interior trim operations because it maintains it cannot be competitive at base wage rates that will reach $21.59 an hour for the average assembly and parts worker by the end of the contract. Including benefits, GM's hourly labor costs exceed $43 per worker.
GM is currently negotiating to sell an interior trim plant in Livonia, Mich., and a door hinge plant in Flint, but UAW Vice President Richard Shoemaker said the contract gives no consent to the sale and does not exclude any other plants.
""We have not agreed they can sell those plants,"" he said. ""If they do sell them, there isn't any question that they're covered by the GM national agreement.""
However, Jim Macbride, a UAW international representative, warned that Livonia is among several plants that may wage local strikes against GM. ""There's going to be a line in the sand drawn somewhere,"" he said.
Workers at GM's Janesville, Wis., truck plant began returning to work on Wednesday after a ratifying a deal to end a week-long strike. Most of GM's 123 locals are still in contentious negotiations over local agreements.
To help cushion the blow for workers that may be idled by productivity improvements and discontinued businesses, the UAW said GM has pledged to spend up to $3.75 billion to pay idled workers -- a $400 million increase over the company's committment under the previous contract.
Chrysler agreed to increase its income security committment by $200 million to a total of $551 million, while Ford did not add to its $1.156 billion income security fund.
GM faces more stringent outsourcing restrictions than Ford and Chrysler do. For example, when GM is contemplating a decision to put a product up for bid by outside firms, it must notify the union sooner in the process.
If GM selects an outside supplier to make the part, it must give the UAW at least 30 additional days to match the supplier bid. And the company also will now povide the union with a quarterly master list of parts made by outside firms.
Most other provisions in the agreement are identical to the Ford and Chrysler contracts. The pact calls for workers to receive $2,000 in the first year, followed by base wage increases of 3 percent in the second and third years.
The pact also includes a 13 percent increase in pension payments for workers under 62 with 30 years of service who retire during the agreement. Elimination of a cap on outside income earned by retirees is viewed as an incentive for older workers to retire.
",7
"General Motors Co. and the United Auto Workers recessed contract negotiations early Monday, several hours after their existing contract expired, but union officials said talks were likely to resume later in the day.
Union members continued working despite the impasse and UAW President Stephen Yokich said the union and GM officials planned to resume their talks, possibly later Monday.
Bargaining between the two sides recessed about 3 a.m. EST after the contract expired. The pact covers 215,000 UAW members who work at GM's U.S. facilities.
At a news conference Monday, Yokich made no mention of possible selective strikes at some GM plants, as had been speculated Sunday.
""We hope that everyone understands that we can't do it in the street. It isn't weakness -- we have to do it at the bargaining table,"" he said.
Yokich said a small number of bargainers may return to GM later Monday. Negotiators talked for about 17 hours Sunday and early Monday morning trying to reach a new agreement.
In a written statement in response to Yokich's comments, GM vice president of personnel Gerald Knechtel said the talks have been constructive.
""We have had open and constructive dialogue with the UAW since these talks began and have made significant progress on many of the issues,"" Knechtel said.
The UAW has already reached a new three-year contract with Ford Motor Co. and Chrysler Corp. covering about 171,000 UAW members in the United States.
Ford and Chrysler both agreed to guarantee jobs for 95 percent of their current UAW workforces. Forcing GM to accept that pattern has been a sticking point for the UAW. The world's largest automaker has said it needs to shed about 12 North American parts plants that it says are uncompetitive, and wants to exclude those plants from any job guarantee pledges.
There was speculation Sunday the UAW may hit GM with selective strikes at plants that build GM's high-profit full-size pickup trucks and sport/utility vehicles, including facilities in Janesville, Wis., Pontiac and Flint, Mich., and Fort Wayne, Ind.
Yokich, who said he is disappointed with the progress of the talks, said some of the UAW's locals have ""sticky"" issues that are not yet resolved.
""We decided that some of these locals need to work on these issues probably before we can ever get a settlement,"" he said, declining to identify the locals.
The previous national labor agreement expired Sept. 14, but the UAW said in September it would extend the contract. Last week Yokich said the contract extension for GM would end at midnight Sunday.
Yokich defended his tactics against critics who say the union, which is facing a shrinking membership base, has not been tough enough on the Big Three automakers, whose profits and sales are both increasing.
GM has 12 parts plants that it considers uncompetitive and wants to exclude several of those facilities from the job guarantee, including a door hardware plant in Flint, Mich., and an interior trim plant in Livonia, Mich., that it wants to sell.
GM's stock slipped 12.5 cents to $54 in morning trading on the New York Stock Exchange.
",7
"General Motors Corp.'s board of directors will likely delay an increase in the company's quarterly common stock dividend if it fails to reach a contract deal with the United Auto Workers union before Monday, analysts said Friday.
GM's board is scheduled to meet on Monday and will consider the automaker's fourth quarter dividend, but Dean Witter analyst Ron Glantz said an increase will send the wrong message to the union.  
""Unless a settlement is reached by Sunday, the board is not going to throw gasoline onto the fire,"" said Dean Witter Reynolds Inc. auto analyst Ron Glantz.
A dividend hike now could jeopardize the long-running UAW talks because the automaker is trying to win concessions aimed at cutting costs and allowing it sell off unprofitable parts plants. The two sides are crafting a complicated agreement that is expected to maintain job guarantees set by Ford Motor Co and Chrysler Corp, but may exclude a number of GM facilities.  
Nevertheless, analysts say GM is due for an increase because of the company's improving cash position and stronger earnings.
The quarterly payout rate on GM's $1-2/3 par-value stock has been unchanged since February, when it was raised to $0.40 a share from $0.30.
Glantz's anticipation of an increase in the dividend and a possible share buyback program was predicated upon having an agreement in hand.
Lehman Brothers analyst Joseph Phillippi agreed but he noted that GM needs to increase its payout to improve its dividend yield. GM's yield is now 2.98 percent, compared with 4.93 percent for Ford Motor Co and 4.16 percent for Chrysler Corp.
""Shareholders might be better served by letting that sleeping dog lie,"" Phillippi said of a possible dividend increase.
He added that he expects shareholders to remain patient with GM, because the automaker has more to gain by negotiating a UAW contract that allows it reduce its cost disadvantage compared with Ford and Chrysler.
Once a contract is signed, Phillippi said he is looking for GM to raise its dividend by 50 percent, or $0.20 a share, in two increments.
GM shares were up 1/8 at 54.
",7
"Negotiators from General Motors Corp. and the United Auto Workers union appeared to be grinding toward a national contract deal Thursday as a local strike at a metal stamping plant threatened the automaker with As a marathon bargaining session that started at 10 a.m. EST Wednesday wore on, UAW officials said the two sides were closer to an agreement, but disagreements over job guarantees and plants on the selling block remained an obstacle.
UAW President Stephen Yokich was meeting in Detroit Thursday with members of the union's executive board, a body that would have to approve any deal. He was expected to return to the talks at GM's headquarters later Thursday.
""The feeling I had around here this morning was that there was some progress made last night,"" said UAW spokesman Reg McGhee. He declined to characterise the pace of talks Thursday afternoon.
Meanwhile, plant-level union officials said the number of workers idled by local strikes in Indianapolis and Janesville, Wis., could reach nearly 21,000 by Saturday.
GM truck plants in Moraine, Ohio, and Flint, Mich., were expected to run out of fenders, hoods, and other sheet-metal parts from GM's strikebound Indianapolis stamping plant by late Thursday night, officials at the plants said.
Flint employs about 2,000 workers and builds crew-cab and heavy-duty full-size pickup trucks, while Moraine employs about 4,000 and builds Chevrolet Blazer and GMC Jimmy compact sport/utility vehicles.
""B-crew will come in tonight and that'll be it,"" said George Dunaway, vice president of International Union of Electronics Workers Local 801 in Moraine. Although his union is not involved in the UAW talks, he supports the strikers in Indianapolis and Janesville, Wis.
""A lot of their concerns are our concerns,"" he said.
The remainder of the nine GM truck plants fed by Indianapolis are expected to halt operations soon. GM's Shreveport, La., compact pickup truck plant is scheduled to shut down during the day Friday, idling 2,500 workers, and the Linden, N.J. plant, which employs 2,500 and builds both compact pickups and sport/utility vehicles, will shut down Friday night.
GM's Fort Wayne plant laid off about 2,250 of its 2,600 workers as it halted production of GM's popular full-size Chevrolet and GMC pickup trucks Wednesday night. GM's other full-size truck plants in Pontiac, Mich., Oshawa, Ontario, and Silao, Mexico, are expected to follow close behind.
The strikes on Tuesday by 2,750 workers at Indianapolis and 4,800 workers in Janesville, Wis., have formed a two-pronged effort to squeeze GM's highly profitable light truck operations, increasing pressure for national and local settlements.
The shutdown of the Janesville plant alone could cost GM $50 million a week in pre-tax profits, adding to pressure on the automaker for national and local contract settlements, said David Healy, an auto analyst with Burnham Securities.
The southern Wisconsin factory is the sole source for GM's popular four-door, full-size Chevrolet Tahoe and Suburban and GMC Yukon sport utility vehicles. Analysts estimate that GM makes an average of $9,000 in variable profits on each of the trucks.
Meanwhile, other UAW locals sought to join the Indianapolis and Janesville walkouts. GM's Kokomo, Ind., electronics plant requested permission to send about 5,500 workers out on strike.
A walkout at that facility would be particularly damaging to GM because it supplies all of the automaker's North American assembly plants with engine electronics, audio systems and other parts.
The future of 12 domestic parts plants that GM considers uncompetitive remained a major sticking point in the negotiations. GM wants to exclude several of the plants from union demands that it guarantee employment for 95 percent of UAW workers over the next three years.
Ford Motor Co. and Chrysler Corp. have already granted such guarantees, but GM, the least efficient of Detroit's Big Three automakers, wants changes to the pattern to allow it to cut costs..
GM's stock gained 50 cents to close at $53.875 on the New York Stock Exchange.
",7
"General Motors Corp. and the United Auto Workers resumed contract negotiations Wednesday under the threat of additional strikes as local walkouts continued in Wisconsin and Indiana.
Bargainers reconvened at GM's headquarters here Wednesday morning but GM spokesman Charles Licari declined to say if GM Chairman Jack Smith was directly involved in the talks.
""Talks are taking place at all levels,"" Licari said.
About 2,750 members of United Auto Workers Local 23 struck GM's Indianapolis metal stamping plant Tuesday night and 4,800 workers also walked off the job at GM's Janesville, Wis., truck assembly plant.
UAW spokesman Reg McGhee said no other local strikes had started as of Wednesday morning, but said the union was not ruling out other actions. UAW President Stephen Yokich raised the threat of local strikes on Monday after the union's national contract with GM expired.
""Steve made it clear that without a national contract, the locals are on their own,"" McGhee said, noting that they do not have to provide GM with the typical five-day notice before a walkout.
Although UAW officials said the strikes were called over local issues, the actions increased pressure on GM for a national agreement by threatening to paralyse much of the lucrative light truck operations at the world's largest automaker.
The local walkouts thus may nudge GM into a tentative national agreement before Saturday, when the UAW's 250-member National GM Council is scheduled to meet in Detroit. The council, made up of plant-level leaders, would have to approve any agreement.
A major sticking point in the national talks covering 215,000 workers is the future of 12 domestic parts plants GM considers uncompetitive. GM wants to exclude several of the plants from union demands that it guarantee employment for 95 percent of UAW workers over the next three years.
Ford Motor Co. and Chrysler Corp. have already granted such guarantees, but GM, the least efficient of Detroit's Big Three automakers, wants changes to the pattern to allow it to cut costs.
A national agreement probably would also require the signatures of Smith and Yokich. McGhee said Yokich was not at GM headquarters Wednesday morning but was involved in the talks. ""His physical presence is not demanded for every meeting we have with GM,"" McGhee said.
Workers at all of GM's truck and truck parts plants have been working heavy overtime in recent months, putting a strain on workers and leading to union demands for relief. For example, at the Janesville plant, which makes the Chevrolet Tahoe, Suburban and GMC Yukon sport utility vehicles, UAW Local 95 has pressed GM to hire a third shift of workers.
The Indianapolis plant supplies doors, fenders, hoods and other parts to nine of the automaker's 11 North American truck assembly plants. At least some of those plants likely will have to halt operations within days due to parts shortages.
Only a handful of GM's 123 local units have signed new local contracts with the automaker. The pacts typically cover items such as work rules, staffing levels and health and safety standards, while the national agreement covers wages, benefits, job security and other broad issues.
While GM has refused to identify the plants it wants to sell, the list includes a door hinge plant in Flint, Mich., and an interior trim plant in Livonia, Mich., officials said. Together, the plants employ 2,100 UAW members.
The local strikes mark a departure in Yokich's bargaining strategy, which until last week had been marked by unusually conciliatory remarks and virtually no strike threats.
The walkouts also came less than a week after Canadian Auto Workers members returned to work following a three-week strike over the issues of job security and shifting work to outside contractors.
",7
"With the strike against General Motors in Canada headed for a second week, the automaker's losses will start mounting as its U.S. plants are forced to shut down, delaying the launch of important new models, analysts said Wednesday.
The walkout by the Canadian Auto Workers union is set to spread to two key components plants in Windsor, Ontario, Wednesday at midnight, which could cause the first shutdowns of GM's U.S. assembly plants by early next week. Much of GM's core North American automotive business could be crippled in about two weeks if the strike is not resolved.
""Once you start shutting assembly plants, the other plants start shutting very quickly,"" said Wesley Brown, an analyst at CSM Forecasting, an automotive consulting firm in Farmington Hills, Mich.
The expected first casualties will be GM's Cadillac luxury car plant in Hamtramck, Mich., which uses trim components made in Windsor, and GM's small and mid-size car plants in Lansing, Mich., Lordstown, Ohio, and Oklahoma City, Okla., which use transmissions from Windsor.
The Oklahoma City plant is in the midst of launching two important new mid-size sedans, the 1997 Chevrolet Malibu and Oldsmobile Cutlass.
The cars, slightly smaller than the Ford Taurus and expected to be priced in the $15,000-$17,000 range, could help GM regain a sizeable piece of the mid-size car market, a segment it once dominated.
GM also is launching an all-new Pontiac Grand Prix sedan and a trio of new minivans that are viewed as the automaker's first serious challenge to Chrysler Corp.'s dominance of the segment.
Analysts said the Canadian strike, if it continues, will wreak havoc on the production and marketing launches of the products and hand market share gains to Chrysler, Ford Motor Co. and import manufacturers. The only new car to reach dealers in significant volume has been the Grand Prix.
""There was some very strong opportunity for them to gain share with some of the new vehicles,"" Brown said. ""This will push back their launches.""
Dean Witter auto analyst Kenneth Blaschke estimates that a three-week Canadian strike will cost GM about $700 million in profits. A 17-day strike at two Dayton, Ohio, parts plants in March reduced the automaker's first quarter profits by $900 million.
But Wall Street analysts maintain the costs, both in profits and lost market share, are worth it if GM can retain the right to shift parts work to outside suppliers and sell unprofitable plants.
Lehman Brothers analyst Joseph Phillippi said investors would be extremely disappointed if GM caves in to the Canadian Auto Workers' demands to restrict outsourcing.
""They've got to do whatever it takes to get competitive,"" he said. ""They cannot be focused on short-term considerations of market share.""
He also noted that with $13 billion in cash reserves, virtually no debt and a fully funded pension plan, GM is in a strong position to take a longer strike. ""They aren't the financial cripple they were in 1993,"" he said.
James Harbour, an automotive manufacturing consultant based in Troy, Mich., said he believes GM is finally determined to retain control of its sourcing decisions.
""This is a battle for the right to run their company,"" Harbour said. ""It's going to be a long cold winter.""
",7
"Ford Motor Co. is in talks with the Detroit Lions on a multi-million dollar deal to purchase naming rights to the football team's proposed new stadium in downtown Detroit, Ford Chairman Alex Trotman said Thursday.
The deal, expected to be signed in the next few days, comes as little surprise, since the Lions are owned by Ford board members William Clay Ford and his son, William Clay Ford Jr.
Trotman, speaking to reporters following a Ford board of directors meeting at the automaker's Dearborn, Mich., headquarters, said reports that Ford would pay $30 million to $40 million for the rights ""aren't far off"" from the deal Ford is discussing with the National Football League team.
Trotman said the company wants to have exclusive rights with the Ford name prominently featured on the domed structure, but has not yet decided on a specific name.
""It would be big-time Ford something -- we don't know what -- either Ford Stadium or Ford Dome,"" Trotman said.
William Clay Ford Jr., who holds the Ford board's purse strings as chairman of its finance committee, abstained from board discussions of the project, as did his father. The new stadium project is largely viewed as the younger Ford's brainchild.
A contribution of $30 million to $40 million would help the $225 million domed stadium meet a major financing hurdle -- the Lions face a Nov. 1 deadline to gain committments for $50 million in corporate and private contributions.
The proposed 65,000-seat football stadium would be built near the end of the decade next to a new $240 million, open-air ballpark for the Detroit Tigers on the edge of downtown Detroit that would seat about 45,000 people.
The Lions would leave the Pontiac Silverdome in suburban Pontiac, Mich., where they have played for the past 21 years, but have pledged to honour terms of their current lease, which expires in 2004.
The 80,000-seat Silverdome, opened in 1975 at a city-financed cost of $50 million, would become the youngest major league sports facility in the United States to be replaced with a new venue.
",7
"General Motors Corp. may face mounting losses as the strike against its Canadian operations heads for a second week, but GM Chairman Jack Smith Wednesday vowed not give up his quest for competitiveness.
The last of 26,000 Canadian Auto Workers members are set to strike GM plants at midnight Wednesday, bringing the automaker closer to parts shortages and assembly plant shutdowns in the United States.
The strike will inevitably affect GM's U.S. plants, but they can ""run for a while"" before a shutdown, said G. Richard Wagoner, president of GM's North American Operations.
But Smith, who met with reporters at GM's Technical Center to receive a new J.D. Power and Associates award, said some of the union's demands on outsourcing -- the shifting of work to outside, often non-union companies -- are unacceptable.
""We've got certain things that will cripple the company if we don't get fixed right,"" Smith said. ""There's a couple (items) on the table that we need to work our way through, otherwise we will not be competitive.""
He said GM, the least efficient U.S. automaker, needs to sell certain parts plants, despite the CAW's objections, because their wage structures are too high for GM to compete effectively.
Smith also said GM was in a strong financial position to handle the strike, with $13 billion in cash, and a fully funded pension plan.
Adding to its wherewithal, GM also on Wednesday filed a shelf registration statement with the Securities and Exchange Commission that would allow it to sell up to $1.3 billion in debt securities.
Despite the labor strife, Smith credited both U.S. and Canadian workers for helping GM win J.D. Power's first-ever Chairman's Award, which recognizes its gains in quality and customer satisfaction.
Smith also said GM continued to have a ""constructive dialogue"" with the United Auto Workers hoped to reach a labor agreement coviering 215,000 U.S. hourly workers soon.
Although GM so far has been able to avoid major U.S. shutdowns from the Canadian strike, analysts said the first casualties may be the company's Cadillac luxury car plant in Hamtramck, Mich., which uses trim components made at a Windsor, Ontario, plant set to go on strike Wednesday.
GM's small and mid-size car plants in Lansing, Mich., Lordstown, Ohio, and Oklahoma City, Okla., also are in danger of shutdowns, because they use transmissions from another Windsor plant to be struck Wednesday.
The Oklahoma City plant is in the midst of launching two important new mid-size sedans, the 1997 Chevrolet Malibu and Oldsmobile Cutlass.
The cars, slightly smaller than the Ford Taurus and expected to be priced in the $15,000-$17,000 range, could help GM regain a sizeable piece of the mid-size car market, a segment it once dominated.
GM also is launching an all-new Pontiac Grand Prix sedan and a trio of new minivans that are viewed as the automaker's first serious challenge to Chrysler Corp.'s dominance of the segment.
Analysts said the Canadian strike, if it continues, will wreak havoc on the production and marketing launches of the products and hand market share gains to Chrysler, Ford Motor Co. and import manufacturers. The only new car to reach dealers in significant volume has been the Grand Prix.
""There was some very strong opportunity for them to gain share with some of the new vehicles,"" said Wesley Brown, an analyst with CSM Forecasting, an automotive consulting firm in Farmington Hills, Mich. ""This will push back their launches.""
Dean Witter auto analyst Kenneth Blaschke estimates that a three-week Canadian strike will cost GM about $700 million in profits. A 17-day strike at two Dayton, Ohio, parts plants in March reduced the automaker's first quarter profits by $900 million.
But Wall Street analysts maintain the costs, both in profits and lost market share, are worth it if GM can retain the right to shift parts work to outside suppliers and sell unprofitable plants.
",7
"The United Auto Workers union unleashed two local strikes against General Motors Corp.'s truck operations Tuesday night in bids to boost pressure on the automaker for new national and local labor agreements.
About 2,750 members of UAW Local 23 walked off the job at GM's Indianapolis metal stamping plant at about 6 p.m. EST, followed an hour later by 4,800 workers who struck the automaker's Janesville, Wis., truck assembly plant.
The negotiations at GM's Detroit headquarters were scheduled to resume Wednesday morning after adjourning for the night around 9 p.m. EST Tuesday.
GM spokesman Jerry Holmes said the automaker had no formal response to the walkouts, which threaten to paralyze much of GM's light truck production, the automaker's biggest source of profits.
The Janesville plant builds GM's popular Chevrolet Tahoe, Suburban and GMC Yukon sport utility vehicles. The Indianapolis plant supplies doors, fenders, hoods and other sheet-metal stampings to nine of the automaker's North American truck assembly plants.
All of GM's truck-related plants have been working heavy overtime in recent months, and the increasing workload has put a strain on workers.
UAW President Stephen Yokich had raised the threat of local strikes Monday after intense negotiations over the weekend failed to produce an agreement. He also chided GM for a lack of progress in local negotiations at individual plants.
He said the expiration of GM's national contract covering 215,000 UAW workers Sunday meant that local units were free to strike to get local issues resolved.
Union officials also said there could be other local walkouts in the near future.
""I'm the one who called this strike,"" Ron Gettelfinger, UAW regional director, said of the Indianapolis walkout. He added that the action was aimed solely at resolving local issues, which he refused to identify.
In Janesville, UAW Local 95 said in a statement that it, too, struck over local issues because 44 bargaining sessions failed to produce an agreement with the automaker.
Only a handful of GM's 123 local units have signed new local contracts with the automaker. The pacts typically cover items like work rules, staffing levels and health and safety standards, while the national agreement covers wages, benefits, job security and other broad issues.
Bargainers in the national talks reconvened at GM's headquarters here Tuesday after a day off Monday. Still on the table is the future of 12 U.S. parts plants that GM considers uncompetitive, the company's top components executive confirmed Tuesday.
J.T. Battenberg, president of GM's Delphi Automotive Systems division, told reporters at an automotive supplier conference here that none of the 12 factories have improved their performance enough in recent months to be dropped from the company's list of troubled facilities.
GM has refused to identify the plants, but the list includes a door hinge plant in Flint, Mich., and an interior trim plant in Livonia, Mich., that the automaker intends to sell. Together, the plants employ 2,100 UAW members.
The automaker wants to exclude several of the plants from the union's demand that it guarantee employment for 95 percent of its UAW workforce over the next three years.
Ford Motor Co. and Chrysler Corp. have already granted such guarantees, but GM, the least efficient of Detroit's Big Three automakers, wants changes to the pattern that allow it to cut costs.
The strikes mark a major departure in Yokich's bargaining strategy, which until last week had been marked by unusual conciliation and virtually no strike threats.
The walkouts could help pressure GM into a tentative national agreement before Saturday, when the UAW's 250-member National GM Council is scheduled to meet in Detroit. The council, made up of plant-level leaders, would have to approve a plant.
The walkouts also came less than a week after Canadian Auto Workers members returned to work following a three-week strike over the issues of job security and outsourcing, or the shifting of work to outside contractors.
GM also said Tuesday that 22,913 workers in its U.S. assembly, powertrain and stamping operations remained idle because of lingering shortages of Canadian-made parts.
The automaker said it laid off an additional 465 workers at its Lordstown, Ohio, metal stamping plant Tuesday, one of four such plants still affected by shortages.
",7
"With a contentious, 20-day strike by the Canadian Auto Workers now behind it, General Motors Corp. could reach a U.S. labor agreement with the United Auto Workers in a matter of days, union officials said Wednesday.
The UAW talks, which affect some 215,000 hourly workers, were moving quickly when the strike in Canada started on October 2 and stole the spotlight.  
""I think without question they would have settled by now, but the UAW did not want to undermine the Canadian union's negotiating stance,"" said Harley Shaiken, a professor of labor relations at the University of California-Berkeley. ""The (UAW) negotiations will move very quickly.""
UAW president Stephen Yokich remains directly involved in the talks, and major unresolved issues are much the same as those that sparked the walkout in Canada: the shifting of work to outside suppliers, the sale of several parts plants and the UAW's demands for job guarantees for 95 percent of GM's workers.  
Sources close to the talks said they believe GM will agree to guarantee jobs for 95 percent of its workforce -- nominally the same terms that rivals Ford Motor Co. and Chrysler Corp. agreed to -- but that level may exclude certain plants and may contain other exceptions.
In addition to the two parts plants GM won the right to sell in Canada are two U.S. parts plants on the sale block.
The automaker wants to sell a door hardware plant in Flint, Mich., and an interior trim plant in Livonia, Mich., which together employ 2,100 UAW members.  
UAW officials have identified the buyer for all four of the U.S. and Canadian plants as Joseph, Littlejohn and Levy, a New York-based investment firm that owns other auto parts companies.
But GM also wants to sell other components factories. Its Delphi Automotive Systems division has about 12 plants that it considers ""troubled.""
And the automaker in August disclosed that was evaluating restructuring plans for parts plants other than the four now on the sale block.  
A GM spokesman declined to discuss the talks, other than to say that GM and UAW negotiators were meeting Wednesday, as they have each weekday during the Canadian strike.
""We reamin hopeful we can get this resolved as soon as possible,"" UAW spokesman Reg McGhee said Wednesday.
Shaiken said he believes that the GM-UAW agreement will largely continue the tradition of pattern bargaining for each of Detroit's Big Three automakers. Many analysts and even Yokich had downplayed the importance of maintaining a strict pattern for all three companies.
""What we're seeing is the continuation of pattern bargaining, and nonetheless, GM will be able to compete effectively under the agreement,"" Shaiken said.
",7
"The United Auto Workers union unleashed two local strikes against General Motors Corp.'s truck operations Tuesday night in a bid to increase pressure for new national and local labor agreements.
About 2,750 members of UAW Local 23 walked off the job at GM's Indianapolis metal stamping plant at about 6 p.m. EST, followed an hour later by 4,800 workers who struck the automaker's Janesville, Wis., truck assembly plant.
The strikes threaten to paralyze much of GM's light truck production, the automaker's biggest source of profits.
The Janesville plant builds GM's popular Chevrolet Tahoe, Suburban and GMC Yukon sport utility vehicles. The Indianapolis plant supplies doors, fenders, hoods and other sheet-metal stampings to nine North American truck assembly plants.
GM spokesman Jerry Holmes said the automaker had no formal response to the walkouts, but said negotiations were continuing Tuesday night.
UAW President Stephen Yokich raised the threat of local strikes on Monday after intense negotiations over the weekend failed to produce an agreement. He also chided GM for a lack of progress in local negotiations at individual plants.
The expiration of the GM's national contract covering 215,000 UAW workers on Sunday meant that UAW locals were free to resort to strikes to get local issues resolved, Yokich said.
""I'm the one who called this strike,"" UAW regional director Ron Gettelfinger said of the Indianapolis strike. He added that the walkout was aimed solely at resolving local issues, which he refused to identify.
All of GM's truck-related plants heen working heavy overtime in recent months, which has put a strain on workers.
""General Motors are hard people to deal with,"" said Henry Summerville, a worker at the plant. ""They don't like to give up anything.""
In Janesville, UAW Local 95 said in a statement that it also struck over local issues because 44 bargaining sessions failed to produce an agreement.
Only a handful of GM's 123 locals have signed new local contracts with the automaker. The pacts typically cover items like work rules, staffing levels and health and safety standards, while the national agreement covers wages, benefits, job security and other broad issues.
Bargainers in the national talks reconvened at GM's headquarters here Tuesday after a day off Monday.
Still on the table in the talks is the future of 12 U.S. parts plants that GM considers uncompetitive, the company's top components executive confirmed Tuesday.
""We're talking about them in negotiations and I really don't want to talk about any labor issues at this time,"" said J.T. Battenberg, president of GM's Delphi Automotive Systems division.
Battenberg told reporters at an automotive supplier conference here that none of the 12 factories have improved their performance enough in recent months to be dropped from the company's list of troubled facilities.
GM has refused to identify the plants, but the list includes a door hinge and hardware plant in Flint, Mich., and an interior trim plant in Livonia, Mich., that the automaker intends to sell. Together, the plants employ 2,100 people.
The automaker wants to exclude several of the plants from the union's demand for employment guarantees. The UAW wants GM to follow a pattern set by Ford Motor Co. and Chrysler Corp. and guarantee jobs for 95 percent of its UAW work force over the next three years.
The strikes mark a major departure in Yokich's bargaining strategy, which until last week had been marked by unusual conciliation and virtually no threats of strikes.
The walkouts could help pressure GM into a tentative national agreement before Saturday, when the UAW's National GM Council is scheduled to meet in Detroit. The 250-member council is made up of the top local officials from each GM local and plant bargaining unit.
Earlier Tuesday in New York, GM Chairman Jack Smith told reporters that he hoped there would be no local strikes.
The walkouts also came less than a week after Canadian Auto Workers members returned to work following a three-week strike over the issues of job security and outsourcing, or the shifting of work to outside contractors.
GM said Tuesday that 22,913 workers in its U.S. assembly, powertrain and stamping operations remained idle because of lingering shortages of Canadian-made parts.
The automaker said it laid off an additional 465 workers at its Lordstown, Ohio, metal stamping plant Tuesday, one of four such plants affected.
",7
"General Motors Corp.  has packed its new EV1 electric vehicle with exotic materials and sophisticated, unproven technology, but is taking a cautious approach to introducing it to the public.
GM officials said Tuesday they plan to offer the two-seat car only on three-year leases and will hold the customer's hand virtually every step of the way.
""Our total focus is to provide a hassle-free experience and comprehensive customer care,"" said Joseph Kennedy, vice president of sales and marketing for GM's Saturn unit, which will sell the EV1 under the GM nameplate.
The first modern production car designed from the ground up to be an electric vehicle, the EV1 will roll into Saturn dealerships sometime this fall in the Los Angeles, San Diego, Phoenix and Tucson, Ariz., areas. Colder climates would shorten the vehicles' already limited range, which is a maximum of 70 to 90 miles under ideal conditions, GM says.
California, which recently eased its 1998 mandate for electric vehicles, is expected to offer consumer incentives for the vehicle.
Depending on such incentives, monthly lease payments on the car will probably fall between $400 and $500, about the same as a $30,000 luxury car, GM officials said at a news briefing.
Customers will have to add another $50 a month or so to lease a 220-volt charging unit and pay to have it mounted in their garage. But the electricity to run the EV1 is a bargain -- about a penny a mile, versus gasoline costs of four to five cents a mile for an average normal car.
GM executives will not discuss production plans or sales targets for the vehicle and say they plan to let market dictate demand. But Kennedy said he expects the initial demand to outstrip supply due to the vehicle's novelty.
So far, about 1,000 people have called a toll-free telephone number, and dealers have taken names of 300 serious customers, including Tonight Show host Jay Leno, he said.
Customers who want performance won't be disappointed with the EV1. The whisper-quiet vehicle offers neck-snapping acceleration and sports-car like handling, although a heavy foot will quickly drain the battery, requiring a three- to four-hour recharge.
""We can keep up with a Nissan 300ZX from zero to 30"" miles an hour, said Sean McNamara, marketing manager for GM's Advanced Technology Vehicles group.
The car's aerodynamic tear-drop shape, considerably narrower in the rear than in the front, slips through the wind easily and looks unlike anything else on the road.
GM could have built a spartan small boxy car but wanted its first electric vehicle to have some flair, said Robert Purcell, general manager of GM Advanced Technology Vehicles.
""This is the car that gets the market started,"" he said. ""We wanted to put out a car that was very exciting so that people would fall in love with it.""
The sporty configuration was aimed at highly educated customers with incomes of $125,000 a year who like high technology, GM said. The customers also likely own two other vehicles for longer trips or heavy hauling.
Saturn, which won't necessarily sell all future GM electric vehicles, plans to emphasise its customer-friendly sales practices more heavily for the EV1.
The decision to lease the vehicle was made in part to protect consumers from the inevitable march of technology. The automaker does not want EV1 customers to be stuck with obsolete cars in a few years, as personal computer owners often are.
At the end of the lease, GM is considering refitting the plastic and aluminum-bodied cars with newer technology and leasing them again, Purcell said.
The division also is training about 14 EV1 ""product specialists"" to handle sales of the vehicle at 26 designated dealerships in California and Arizona.
The specialists will come to a prospective customer's home, office, or elsewhere to explain the details of the car and the charging unit.
They'll work with the utility companies and arrange municipal permits for the installations, Kennedy said, adding that it will probably take about a week to set up a customer with a car and charger.
GM has invested $350 million in developing the EV1, which it does not expect to recoup through sales of the first generation vehicle, Purcell said. But the car does pioneer a wide range of exotic materials and new technology that could find its way to other GM vehicles.
Magnesium and other lightweight materials counteract the weight of batteries, and the cars have braking systems that transfer power back to the battery.
Despite the technology, the cars are largely hand-built at a Lansing, Mich., plant that produced the now-defunct Buick Reatta in the late 1980s. The operation employs 54 production workers but could be expanded quickly, GM officials said.
",7
"General Motors Corp. and the United Auto Workers union reached a tentative deal for a job-preserving labour contract early Saturday, but the accord failed to halt costly local strikes in Wisconsin and Indiana.
The three-year national agreement, which covers wages, benefits and job security for GM's 215,000 hourly UAW workers, did little to resolve contentious plant-specific issues that remain unresolved at most of the carmaker's 123 locals.
UAW President Stephen Yokich, announcing the pact at a 2 a.m. EST (0700 GMT) news conference, held out the threat of ""We can't tell you what's going to happen in the other locals,"" Yokich said. ""I would suggest that the company work very hard and get their locals cleaned up.""
President Clinton applauded the agreement. ""I am very hopeful that the tentative agreement will be ratified, and that the outstanding local issues will quickly be resolved so that everyone can get back to work,"" he said.
On Tuesday night, about 2,750 workers walked off the job at GM's Indianapolis metal stamping plant and 4,800 struck the company's Janesville, Wisconsin, truck assembly plant over local grievances, including demands for more workers to deal with increasing workloads.
The strike at Indianapolis cut off supplies of fenders, hoods, roofs and other steel body panels to nine GM North American truck plants. It threatened to paralyse much of GM's highly profitable light truck operations by early next week.
On Saturday, more than 19,000 workers at seven GM assembly and components plants were idled because of the two strikes. That comes on top of 18,958 U.S. workers still on layoff status because of lingering parts shortages from a three-week Canadian Auto Workers strike that ended Oct. 23.
Analysts estimate the UAW-related shutdowns will cost the carmaker $20 million a day in lost profits, on top of a $350 million loss from the Canadian walkout.
But the national UAW accord Saturday appeared to push negotiations in Janesville and Indianapolis forward. ""I think they've intensified their talks a bit,"" said an official at UAW Local 95 in Janesville.
UAW Local 292 officials also reported progress in local talks at GM's 5,500-employee Delco Electronics plant in Kokomo, Indiana. On Thursday, the unit sought Yokich's permission to join the other locals on strike.
The UAW-GM national agreement will be submitted to rank-and-file members for ratification after about 250 UAW leaders meet to consider the pact on Wednesday in Chicago.
The deal was unanimously approved by the union's national GM bargaining council.
Details of the pact were not released Saturday, but Gerald Knechtel, GM vice president of personnel, said it fits within the pattern that the UAW set at Ford Motor Co. and Chrysler Corp.
Both of those companies agreed to guarantee jobs for 95 percent of their current hourly workforces and will give workers a $2,000 bonus in the first year of the contract, followed by three percent raises in the second and third years of the contract.
Knechtel said GM will depend on its UAW workforce to gain efficiencies over the next three years. The company had been seeking the flexibility to shift more work to lower-cost outside suppliers.
""We feel we have the ability to make competitive improvements in the company. We will need to do that with the UAW,"" he said.
In a sign that contentious issues remain, company and union officials did not announce the pact in a joint news conference with the traditional handshakes and smiles. Instead, they held made grim-faced separate statements to reporters gathered at GM's Detroit headquarters building.
""I think we said back in June that it would be a difficult negotiation, and I think we fulfilled that expectation,"" said a visibly tired GM Chairman Jack Smith. ""Like any negotiation, you never get everything you want.""
The talks were said to hit several snags during the past week over plants that GM wanted to exclude from the 95 percent employment guarantees. Among those were a door hinge plant in Flint, Michigan, and an interior trim plant in Livonia, Michigan, that the company has put on the sale block.
The proposed exceptions to the pattern were aimed at allowing GM, the least efficient of Detroit's Big Three automakers, to cut costs and boost productivity.
Although all three of the companies pay a base wage of about $19 an hour, Ford and Chrysler buy more of their parts from lower-cost outside suppliers than GM does.
",7
"Boosting the pressure on General Motors Corp. for a new labour agreement, the United Auto Workers union Friday set a Sunday night deadline for a strike against the world's largest automaker.
UAW President Stephen Yokich said in a statment that union negotiators were not optimistic that a new contract deal could be reached by the deadline of 11:59 p.m. EST Sunday (0459 GMT Monday).
While he did not say if the union's 215,000 GM hourly workers would actually strike, Yokich said the UAW had notified GM that it will terminate its extended 1993 contract with the automaker if the deadline passes with no agreement. The union typically does not work without a contract.
""UAW members have been advised to continue to work unless notified by their local union,"" Yokich said.
""The UAW bargaining team will continue to make serious efforts to achieve a new agreement. While we are not optimistic, we remain hopeful that this can be accomplished prior to the expiration of the current contract at 11:59 p.m. on Sunday,"" he added.
The move comes just three days after GM settled a contentious, 20-day strike with the Canadian Auto Workers union that caused parts shortages that are still forcing the auto giant to shut down some U.S. assembly plants.
Although the UAW talks had been moving quickly before the strike in Canada, people close to the negotiations said the two sides remain at odds over the union's demand for employment guarantees and GM's desire for flexibility to shift more parts work to outside, usually non-union suppliers.
Both Ford Motor Co. and Chrysler Corp. have agreed to guarantee jobs for 95 percent of their current work forces over the next three years. GM has resisted the pattern, saying it wants to exclude certain components plants from the employment guarantees.
A GM spokesman said full-scale UAW negotiations at GM's Detroit headquarters will continue throughout the weekend for the first time since the strike in Canada began on Oct. 2.
In a statement, GM chief negotiator Gerald Knechtel said, ""We remain committed to entering into agreement that balances the needs of our employees and the UAW with the flexibility GM needs to continue to improve our competitiveness.""
""We've had open and constructive dialogue with the UAW since the talks began and we're hopeful we can focus with the UAW on concluding these negotiations as soon as possible.""
Meanwhile, GM continued to run out of Canadian-made parts at U.S. assembly plants. In Flint, Mich., local UAW officials said GM told more than 6,600 workers not to report to work at the automaker's massive Buick City complex on Monday.
The facility makes Buick LeSabre, Oldsmobile 88 and Pontiac Bonneville sedans, as well as V-6 engines and other components.
Buick City is the largest of several facilities to cut back production due to shortages of parts following the end of the Canadian Auto Workers' strike this week.
On Thursday, GM laid off about 5,000 workers at its Lordstown, Ohio, assembly plant in a shutdown that will last two weeks. The plant builds the popular Chevrolet Cavalier and Pontiac Sunfire small cars.
Also on Friday, GM notified some of the 2,926 workers at the nearby Lordstown metal stamping plant they would be idled next week. Another 474 workers at a components plant in Vandalia, Ohio, will be idled next week, GM said.
Excluding the layoffs that will start next week, GM said it had a total of 23,340 workers idled in the United States and Mexico on Friday.
GM's 26,000 Canadian Auto Workers members began returning to work on Wednesday after they ratified a new contract that puts some limits GM's ability to shift work to outside suppliers but allows the automaker to sell two contested parts plants.
",7
"The president of the Canadian Auto Workers held out little hope on Friday for a quick end to a 10-day-old strike against General Motors Corp and said his counterparts at the United Auto Workers are having similar problems reaching a labor pact with the automaker.
Basil ""Buzz"" Hargrove told reporters in a conference call that GM is trying to resist the U.S. pattern agreement set at Ford Motor Co and Chrysler Corp, which guarantee employment levels at 95 percent of the companies' current hourly workforces.  
The provision is aimed at curbing the automakers' ability to shift work to outside suppliers, known as outsourcing, which also is the major sticking point in the CAW talks.
""I'd be quite happy if Steve were to get a settlement,"" Hargrove said of UAW President Stephen Yokich. ""He's having the same problem -- getting the pattern agreement with GM.""
He said GM has ""agreed to the principle of limiting the outsourcing"" in the U.S."", but doesn't want to meet the 95 percent employment guarantee and wants to exclude parts plants it has on sale from the guarantee.  
Talks between the UAW and GM have been low key during the Canadian strike. Negotiators have met only during normal business hours and do not plan to meet over the weekend.
UAW spokesman Reg McGhee declined to characterize progress of the discussions, only to say bargainers were ""down to the larger issues.""
But Hargrove has not asked Yokich to delay a U.S. settlement with GM during the Canadian strike.
The CAW launched an escalating strike on October 3 and all the union's 26,000 GM workers were on the picket line by midnight on Wednesday.  
The UAW has about 215,000 U.S. hourly workers at GM and, so far, only about 2,000 have been idled at an engine plant and a transmission plant.
The strike may affect some of GM's U.S. plants next week, although the automaker canceled most overtime work this week.
Hargrove said he saw no progress in talks with the automaker.
""I don't want to kid anybody,"" he said. ""It hasn't been very productive last few days, I do not believe it will be productive today.""
Hargrove wanted the Canadian walkout to have as little effect on GM's U.S. production as possible so as to protect UAW workers and the profit-sharing checks they expect to receive this year. Prolonged shutdowns in the U.S. due to lack of Canadian-made parts could seriously hurt GM's profits and reduce profit sharing for employees.
",7
"Adding to the controversy over the safety of automobile air bags, the federal government's auto safety agency said Thursday it was stepping up an investigation into spontaneous air bag deployments in several General Motors Corp. cars.
The National Highway Traffic Safety Administration said it has received five reports of air bags deploying without a collision in 1996-model GM mid-size sedans, due to corrosion in the air bag sensing and diagnostic module. In each case, water was spilled or leaked onto the floor of the vehicle.
The probe involves 395,994 cars currently on the road, including the 1996 Chevrolet Lumina and Monte Carlo, Buick Regal, Pontiac Grand Prix and Oldsmobile Cutlass Supreme.
In its monthly defect investigation report, NHTSA said three of the ""inappropriate deployments"" resulted in injuries, but none resulted in death. Four of the five cars were traveling between 10 and 40 mph when the bags inflated.
News of the probe comes as the NHTSA is fielding growing numbers of calls from consumers worried about reports of  child deaths caused by air bags.
Air bags have saved the lives of more than 1,136 adults since 1986, said NHTSA spokeswoman Liz Neblett. But with inflation speeds of up to 200 mph, they also have killed 28 children since 1990.
Earlier this week, NHTSA Executive Director Ricardo Martinez said the the agency advised that all children under the age of 12 should ride in the back seats of cars and trucks equipped with dual front air bags.
The agency raised that age after 5-year-old Frances Ambrose was killed by an air bag in a Nashville, Tenn., crash despite properly wearing lap and shoulder belts.
The NHTSA is now considering several remedies to the situation, including an auto industry request to reduce the inflation pressure of passenger air bags.
Other alternatives include requiring ""smart"" air bag systems that have the ability to detect the size and weight of the occupant and adjust inflation accordingly.
In the probe of the GM cars, NHTSA said all of the vehicles use an air bag sensing and diagnostic module that is located underneath the front passenger seat on top of the carpeting. It is not sealed, making it susceptible to moisture intrusion.
NHTSA said owners of the vehicles reported that they:
-- Spilled a glass of water on the vehicle floor.
-- Drove through a car wash.
-- Spilled a bucket of water on the vehicle floor.
-- Spilled soapy water on the vehicle floor.
-- Discovered a trunk leak in the vehicle.
In addition, the agency said it was investigating two other instances of unexplained air bag deployment, one when a driver was backing out of a driveway and another when the car was driving at 20 mph.
A GM spokesman said the automaker was cooperating with the probe.
The company also uses the same air bag sensor on 1994 and 1995 model versions of the same cars, but reported only two instances of airbag deployments due to corrosion.
In one case, GM said the vehicle was apparently flooded by an ocean tide, and in another case, the entire rear end of the vehicle was severely corroded.
The investigation was upgraded to an engineering analysis, in which the agency will examine and physically test the components in question.
",7
"Local strikes in Wisconsin and Indiana began taking their toll on the rest of General Motors Corp.'s truck production Wednesday, clouding the automaker's national contract talks with the United Auto Workers.
GM said the day-old walkout at its Indianapolis metal stamping plant would force it to halt production of full-size Chevrolet and GMC pickup trucks at its Fort Wayne, Ind., assembly plant Wednesday night.
The Indianapolis walkout on Tuesday has halted shipments of major steel body panels to nine of GM's 11 North American truck assembly plants, threatening to shut them down within days.
Analysts said Wednesday the cost of the strikes by 2,750 workers in Indianapolis and 4,800 workers at its Janesville, Wis., truck assembly plant could mount quickly, eating into profits from GM's lucrative light truck operations.
The shutdown of the Janesville plant alone could cost GM $50 million a week in pre-tax profits, said David Healy, an auto analyst with Burnham Securities.
The southern Wisconsin factory, which employs 4,800 workers, is the sole source for GM's popular four-door, full-size Chevrolet Tahoe and Suburban and GMC Yukon sport utility vehicles. Analysts estimate that GM makes about $9,000 in variable profits on each of the trucks.
In addition to Janesville and Fort Wayne, the Indianapolis plant supplies facilities in Pontiac and Flint, Mich.; Oshawa, Ontario; Linden, N.J.; Shreveport, La.; Moraine, Ohio, and Silao, Mexico.
""It really starts to add up quickly when you add in all of the other big C/K pickups they can lose,"" said Lehman Brothers analyst Joseph Phillippi.
The UAW strikes came as GM is still staggering from a three-week strike in Canada that curtailed production at a number of U.S. plants and may cost up to $450 million.
On Wednesday, GM said it still had 23,158 U.S. workers idled due to shortages of Canadian-made parts, but added that 3,200 workers at its Buick City assembly plant in Flint, Mich., were scheduled to return to work on Thursday.
No other UAW strikes had started on Wednesday, but UAW spokesman Reg McGhee said the union was not ruling out other walkouts. UAW President Stephen Yokich raised the threat of local strikes on Monday after GM's national contract covering 215,000 UAW workers expired.
""Steve made it clear that without a national contract, the locals are on their own,"" McGhee said, noting that they do not have to provide GM with the typical five-day notice before a walkout.
Some UAW officials speculated that other stamping and parts plants may also be struck, because they would force shutdowns at other facilities.
National contract talks continued Wednesday at GM's Detroit headquarters, but officials declined to say whether progress was being made.
""Talks are taking place at all levels,"" said GM spokesman Charles Licari.
Although UAW officials said the strikes were called over local issues, analysts said it was clear that the actions were aimed at pushing GM into a tentative national agreement.
That may take place before Saturday, when about 250 UAW leaders from GM plants across the nation are scheduled to meet in Detroit to discuss the status of the talks.
The future of 12 domestic parts plants that GM considers uncompetitive remained a major sticking point in the negotiations Wednesday. GM wants to exclude several of the plants from union demands that it guarantee employment for 95 percent of UAW workers over the next three years.
Ford Motor Co. and Chrysler Corp. have already granted such guarantees, but GM, the least efficient of Detroit's Big Three automakers, wants changes to the pattern to allow it to cut costs.
GM has already put two of the 12 plants on the sale block -- a door hinge plant in Flint, Mich., and an interior trim plant in Livonia, Mich., that together employ 2,100 workers.
""We know the sale is going to happen. We're concerned about what's going to happen to us,"" said Whitey Hale, president of UAW Local 326 in Flint.
",7
"Workers at a key General Motors Corp. metal stamping plant in Indianapolis began returning to work on Sunday after ratifying a deal to end a five-day strike that threatened to paralyze most of the automaker's light truck production.
But a similar settlement eluded negotiators at GM's Janesville, Wis., truck assembly plant, where a strike over local issues by 4,800 workers entered its sixth day.
Janesville, which builds GM's popular Chevrolet Tahoe, Suburban and GMC Yukon sport/utility vehicles, is one of the automaker's most profitable factories.
The deal for 2,750 workers in Indianapolis, which came hours after GM and the UAW announced a tentative agrement for a new national labor contract early Saturday morning, calls for the hiring of 200 new workers at the plant.
It also leaves seniority rules for skilled trades workers intact and provides thousands of dollars in back pay for workers to settle grievances.
""I regret we did have to call a strike here,"" said UAW regional director Ron Gettlefinger in Indianapolis. ""I'm hoping other General Motors plants I'm responsible for will heed the seriousness of local agreements.""
The Indianapolis strike shut off shipments of fenders, doors, hoods and oher steel body panels to nine of GM's North American light truck plants. By the weekend, parts shortages due to the strike had caused GM to shut down truck plants in Fort Wayne, Ind., Shreveport, La., Moraine, Ohio and Linden, N.J.
Including the strikers at Janesville and Indianapolis, the UAW walkouts had idled over 19,000 workers, in addition to 18,858 GM workers still on layoff because of lingering parts shortages from a three-week Canadian Auto Workers strike that ended Oct. 23.
UAW officials said stamping operations would resume Sunday night, with the plant back to full production by Monday, but that may not prove soon enough to keep other plants from running out of parts, including GM's full-size pickup truck plant in Pontiac, Mich., which employs nearly 6,000 people.
Other threatened plants that receive parts from Indianapolis are located in Flint, Mich., Oshawa, Ontario and Silao, Mexico.
On Saturday, UAW President Stephen Yokich put GM on notice that some of the automaker's GM's 123 other locals may go on strike over lack of progress in local negotiations.
A clearer picture of the UAW-GM national agreement, which covers some 215,000 U.S. hourly workers, began to emerge Sunday. The contract meets the pattern set by Ford Motor Co. and Chrysler Corp. on most major issues, including a guarantee that GM will maintain jobs for 95 percent of its current hourly work force.
But the pact contains exceptions that will allow GM to sell some unprofitable parts plants, including a door hinge plant in Flint, Mich., and an interior trim plant in Livonia, Mich.
On economics, the pact gives wokers a $2,000 bonus in the first year of the contract, followed by 3 percent raises in the second and third years of the contract. It also provides generous gains in pension benefits, including the elimination of a cap on outside earnings for retirees, which is viewed as a major incentive for older workers to leave the company.
Like Ford and Chrysler, GM will be able to pay workers in new auto parts businesses that it enters a lower wage than the standard $19 an hour paid by the Big Three.
GM has been trying to shed parts businesses as it tries to catch up to Chrysler's and Ford's efficiency levels. But analysts say the pact could slow GM's progress in trying to shrink its work force through attrition.
""GM is not going to get the competitive lift from labor in this contract,"" said Eugene Jennings, a retired Michigan State University professor of management who is close to Detroit's Big Three automakers. ""They have to find  enough efficiencies to support excess labor.""
",7
"United Auto Workers bargainers reconvened at General Motors Corp.'s headquarters Tuesday following a day off Monday, but talks between the two sides maintained a low profile, UAW and company spokesmen said.
UAW workers continued to report to their jobs at GM's U.S. factories, despite the expiration of their national labour agreement with the automaker at 11:59 p.m. EST Sunday.
GM spokesman Charles Licari said there were no major ""main-table"" meetings scheduled Tuesday, but key negotiators were communicating in small groups and by telephone.
""Discussions are taking place, but there is no set timetable regarding the negotiations,"" Licari said, adding that such communications still may prove fruitful.
A person close to the talks said, however, that he did not expect the situation to change much before Saturday, when the union's key local GM plant-level leaders are scheduled to meet in Detroit.
UAW President Stephen Yokich recessed the talks on Monday and expressed disappointment with the lack of progress toward a settlement, but he refrained from calling a strike against the world's largest automaker.
Still, Yokich said some of the union's GM locals may resort to strikes if progress in local negotiations does not improve. In addition to the national contract, GM is negotiating with more than 100 UAW locals for pacts that cover plant-specific issues.
In New York on Tuesday, GM Chairman Jack Smith said little about the UAW negotiations, but told reporters that he hoped there would be no local strikes.
The threat of additional strikes comes less than a week after Canadian Auto Workers members returned to work following a three-week walkout over the issues of job security and outsourcing, or the shifting of work to outside contractors.
Smith, speaking at a news conference on alternative fuel vehicles, declined to specify the dollar cost of the strike.
""We lost quite a few cars,"" he said.
GM said Tuesday that 22,913 workers in its U.S. assembly, powertrain and stamping operations remained idle because of lingering shortages of Canadian-made parts.
The automaker said it laid off an additional 465 workers at its Lordstown, Ohio, metal stamping plant Tuesday, one of four such plants affected.
GM's nearby Lordstown, Ohio, assembly plant remains completely idled, as does its Buick City assembly plant in Flint, Mich. Five other assembly plants remain partially idled, bringing GM's laid off assembly workers to 15,284.
GM has 5,702 engine and transmission workers laid off, with six such powertrain plants partially idled.
In the UAW talks, which cover a total of 215,000 U.S. hourly workers, GM has resisted the union's demand that it follow a pattern set by Ford Motor Co. and Chrysler Corp. and guarantee jobs for 95 percent of current work force over the next three years.
GM wants to exclude from the guarantee several parts plants that it wants to sell. The automaker has identified 12 facilities that it considers uncompetitive.
GM's stock gained 50 cents to $54.375 in afternoon trading on the New York Stock Exchange.
",7
"General Motors Corp. Tuesday  reached a tentative deal to end a week-long strike at its truck plant in Janesville, Wis., the last of a recent wave of local walkouts against the automaker.
About 4,809 members of United Auto Workers Local 95 were scheduled to vote on the tentative local labor agreement at a 1 p.m. EST Wednesday meeting.
Production of Chevrolet Tahoe and Suburban and GMC Yukon full-size sport-utility vehicles at the Janesvillle plant could resume shortly thereafter if the deal is ratified, said GM spokesman Thomas Beaman. The trucks are among GM's most popular and profitable vehicles.
The resumption would mean that by Thursday, all of GM's North American car and truck operations would be operating normally for the first time since Oct. 3, when about 26,000 members of the Canadian Auto Workers went on strike.
GM was still reeling from the Canadian strike when workers at Janesville and GM's Indianapolis metal stamping plant walked off the job last week. By last weekend, the auto giant had nearly 40,000 U.S. workers idled by the two local UAW strikes and lingering Canadian parts shortages.
However, the UAW has threatened GM with additional local walkouts if the automaker drags its feet in plant-specific negotiations with the rest of its 123 locals.
Neither GM nor officials for Local 95 would discuss details of the agreement. The union's members walked off the job Oct. 29 over plant-specific issues, including demands for more workers to ease the burdens of heavy overtime and an increasing production rate.
""We're confident we've got a fair and equitable agreement for our membership,"" said Buford Beleau, a spokesman for Local 95 in Janesville. ""We just want to get back to work building trucks and provide for our families, like everybody else.""
To settle the Indianapolis strike, GM agreed to hire 200 more workers, pay thousands of dollars in back pay to workers and drop plans to change job classifications for skilled trades workers.
GM truck plants in Shreveport, La., and Linden, N.J., which were shut down by a lack of fenders, doors, and other steel body panels from Indianapolis, will be back to their normal work schedules by Thursday.
But the automaker's Wentzville, Mo., plants which halted one of two production shifts because of the Canadian strike, will keep 1,100 workers on temporary layoff for nearly two more weeks. The extended layoff is aimed at reducing dealer inventories of GM's all-new, full-size vans, Beaman said.
Despite an all-new design for 1997 and a complete renovation of the Wentzville factory, he said the new Chevrolet Express and GMC Savana were falling victim to lower demand for all full-size vans.
Also on Wednesday, about 250 UAW local leaders from plants around the country will meet in Chicago to review details of the union's tentative, three year national contract with GM. They must approve the pact to send it to GM's 215,000 U.S. hourly workers for ratification.
The contract is expected to give GM flexibility to exit some unprofitable parts businesses and reduce its workforce through attrition and early retirements, while nominally guaranteeing that the automaker will maintain hourly employment at 95 percent of its current level.
The 95 percent job guarantee was a cornerstone of the UAW's contracts with Ford Motor Co. and Chrysler Corp., which also offered workers a $2,000 bonus in the first year of the pact, follwed by 3 percent raises in the second and third years.
",7
"General Motors Co. and the United Auto Workers recessed contract negotiations early Monday, several hours after their existing contract expired, but union officials said talks were likely to resume later in the day.
Union members continued working despite the impasse and UAW President Stephen Yokich said the union and GM officials planned to resume their talks, possibly later Monday.
Bargaining between the two sides recessed about 3 a.m. EST after the contract expired. The pact covers 215,000 UAW members who work at GM's U.S. facilities.
At a news conference Monday, Yokich made no mention of possible selective strikes at some GM plants, as had been speculated Sunday.
""We hope that everyone understands that we can't do it in the street. It isn't weakness -- we have to do it at the bargaining table,"" he said.
Yokich said a small number of bargainers may return to GM later Monday. Negotiators talked for about 17 hours Sunday and early Monday morning trying to reach a new agreement.
In a written statement in response to Yokich's comments, GM vice president of personnel Gerald Knechtel said the talks have been constructive.
""We have had open and constructive dialogue with the UAW since these talks began and have made significant progress on many of the issues,"" Knechtel said.
The UAW has already reached a new three-year contract with Ford Motor Co. and Chrysler Corp. covering about 171,000 UAW members in the United States.
Ford and Chrysler both agreed to guarantee jobs for 95 percent of their current UAW workforces. Forcing GM to accept that pattern has been a sticking point for the UAW. The world's largest automaker has said it needs to shed about 12 North American parts plants that it says are uncompetitive, and wants to exclude those plants from any job guarantee pledges.
There was speculation Sunday the UAW may hit GM with selective strikes at plants that build GM's high-profit full-size pickup trucks and sport/utility vehicles, including facilities in Janesville, Wis., Pontiac and Flint, Mich., and Fort Wayne, Ind.
Yokich, who said he is disappointed with the progress of the talks, said some of the UAW's locals have ""sticky"" issues that are not yet resolved.
""We decided that some of these locals need to work on these issues probably before we can ever get a settlement,"" he said, declining to identify the locals.
The previous national labour agreement expired Sept. 14, but the UAW said in September it would extend the contract. Last week Yokich said the contract extension for GM would end at midnight Sunday.
Yokich defended his tactics against critics who say the union, which is facing a shrinking membership base, has not been tough enough on the Big Three automakers, whose profits and sales are both increasing.
GM has 12 parts plants that it considers uncompetitive and wants to exclude several of those facilities from the job guarantee, including a door hardware plant in Flint, Mich., and an interior trim plant in Livonia, Mich., that it wants to sell.
GM's stock slipped 12.5 cents to $54 in morning trading on the New York Stock Exchange.
",7
"Workers at a key General Motors Corp. metal stamping plant in Indianapolis began returning to work on Sunday after ratifying a deal to end a five-day strike that threatened to paralyze most of the automaker's light truck production.
But a similar settlement eluded negotiators at GM's Janesville, Wis., truck assembly plant, where a strike over local issues by 4,800 workers entered its sixth day. Janesville, which builds GM's popular Chevrolet Tahoe, Suburban and GMC Yukon sport/utility vehicles, is one of the automaker's most profitable factories.
The deal for 2,750 workers in Indianapolis, which came hours after GM and the UAW announced a tentative agreement for a new national labor contract early Saturday morning, calls for the hiring of 200 new workers at the plant.
Due to strong demand for GM's trucks, the plant has been working heavy overtime, which has put a strain on workers, causing them to seek relief.
GM also dropped its plans to change job classifications and seniority rules for skilled trades workers and will pay thousands of dollars to workers to settle grievances.
""I regret we did have to call a strike here,"" said UAW regional director Ron Gettlefinger in Indianapolis. ""I'm hoping other General Motors plants I'm responsible for will heed the seriousness of local agreements.""
The Indianapolis strike shut off shipments of fenders, doors,hoods and other steel body panels to nine of GM's North American light truck assembly plants. By the weekend, strike-caused parts shortages forced GM to shut down factories in Fort Wayne, Ind., Shreveport, La., Moraine, Ohio and Linden, N.J.
Including the strikers at Janesville and Indianapolis, the UAW walkouts had idled over 19,000 workers, in addition to 18,958 GM workers still on layoff because of lingering parts shortages from a three-week Canadian Auto Workers strike, which ended Oct. 23.
UAW officials said stamping operations would resume Sunday night, with the plant back to full production by Monday. But that may not prove soon enough to keep other plants from running out of parts, including GM's full-size pickup truck plant in Pontiac, Mich., which employs nearly 6,000 people.
Other plants that receive parts from Indianapolis are located in Flint, Mich.; Oshawa, Ontario; and Silao, Mexico.
On Saturday, UAW President Stephen Yokich put GM on notice that some of the automaker's GM's 123 other locals may go on strike over lack of progress in local negotiations.
A clearer picture of the UAW-GM national agreement, which covers some 215,000 U.S. hourly workers, began to emerge Sunday. The contract meets the pattern set by Ford Motor Co. and Chrysler Corp. on most major issues, including a guarantee that GM will maintain jobs for 95 percent of its current hourly workforce.
But the pact contains exceptions that will allow GM to sell some unprofitable parts plants, including a door hinge plant in Flint, Mich., and an interior trim plant in Livonia, Mich.
The pact also is believed to contain complicated formulas that allow GM to shrink employment in certain businesses as workers retire.
""On the surface, it looks as though as it ought to be viewed by the investor community in a positive light."" said Lehman Brothers auto analyst Joseph Phillippi. ""GM's primary focus was to gain the ability to ride the attrition curve.""
On economics, the pact gives wokers a $2,000 bonus in the first year of the contract, followed by 2 percent raises in the second and third years of the contract. It also provides generous gains in pension benefits, including the elimination of a cap on outside earnings for retirees, which is viewed as a major incentive for older workers to leave the company.
Like Ford and Chrysler, GM will be able to trim jobs when it makes productivity improvements, and can pay workers in new auto parts businesses that it enters a lower wage than the standard $19 an hour paid by the Big Three.
GM has been trying to shed parts businesses as it tries to catch up to Chrysler's and Ford's efficiency levels. But the contract probably will not allow GM to shrink employment as much as it would like, said Eugene Jennings, a retired Michigan State University professor of management who is close to Detroit's Big Three automakers.
""GM is not going to get the competitive lift from labor in this contract,"" he said.
",7
"Lear Corp., furthering its quest to supply complete car interiors, said Friday it agreed to buy the instrument panel and trim parts unit of Denmark-based Borealis Holding AB.
Lear said it signed a memorandum of understanding to acquire Borealis Industrier AB for undisclosed terms.
Based in Gothenburg, Sweden, Borealis Industrier manufacturers instrument panels, door panels, climate systems, exterior trim and various other components for the European car and truck industry.
Borealis Industrier had 1995 sales of about $230 million and owns five plants in Sweden that employ about 1,800 people.
Primary customers for the business include Swedish carmakers AB Volvo and Saab Automobile AB and truckmaker Scania AB.
Borealis Holding is owned by Finnish state-controlled oil and energy group Neste Oy and Norwegian state-owned oil group Statoil AS.
Completion of the transaction is subject to approval by the Swedish competition authority and other conditions.
Lear said the acquisition supports its strategy of having in-house capability to provide total automotive interior systems, including instrument panels.
""Not only does this acquisition strengthen relations with our European customers, but it positions Lear as the only independent automotive supplier in the world with in-house capabilities in all five interior systems -- broadening the appeal of our already strong one-stop-shopping competitive advantage,"" Lear Chairman Kenneth Way said in a statement.
The deal is the latest of a series of consolidation moves in the automotive interior market. Lear earlier this year purchased carpet and floor-mat maker Masland Corp. for $384 million, and last year bought door panel and console maker Automotive Industries Inc for $626 million.
Lear's U.S. operations include the manufacturing of a wide range of automotive interior components.
The company's stock was unchanged Friday at $38 a share on the New York Stock Exchange.
Lear's competitors are also pursuing the same acquisition strategy.
Johnson Controls Inc., which has a strong seating business, recently acquired interior parts maker Prince Automotive, based in Holland Mich., for $1.35 billion in cash.
Canada's Magna International Inc., one of the ""Big Three"" automotive interior firms along with Lear and Johnson Controls, recently acquired seat maker Douglas & Lomason Co. for $135 million.
",7
"General Motors Corp cut a deal to end a costly strike at an Indianapolis metal stamping plant on Saturday, about 14 hours after it announced a tentative national contract agreement with the United Auto Workers union.
The five-day Indianapolis strike had threatened to paralyze most of GM's North American light truck production by early next week. Along with a second, still-unresolved walkout at GM's Janesville, Wisconsin, truck plant, the dispute was responsible for the idling of more than 19,000 workers.
But the 2,750 Indianapolis strikers could be back on the job stamping out fenders, doors, hoods and other truck body parts by Sunday night following a ratification vote scheduled for Sunday morning, said Patrick Morrissey, a spokesman for GM's Metal Fabricating Division.
However, GM's full-size pickup truck plant in Pontiac, Michigan, may still shut down on Monday due to shortages of Indianapolis-made parts, joining four other idled truck plants and an crippled engine plant.
Ronald Gettelfinger, UAW regional director in Indianapolis, said the new local labor agreement, reached at about 6:15 p.m. EST (2315 GMT) on Saturday, was not influenced by the national GM-UAW labor accord, which covers 215,000 U.S. hourly workers.
The national contract defines wages, benefits, job security and other broad issues, while local pacts cover plant specific issues like work rules and staffing levels.
""We've got great negotiators at the top,"" Gettelfinger said. ""This was local issues.""
He declined to discuss the grievances that sparked the strike. They were believed to include demands for more jobs to cope with an increasing workload and protections for skilled trades workers.
UAW President Stephen Yokich, who announced the national pact at a 2 a.m. EST (0700 GMT) news conference, held out the threat of more local strikes to keep GM from dragging its feet in negotiations with its 123 locals.
""We can't tell you what's going to happen in the other locals,"" Yokich said. ""I would suggest that the company work very hard and get their locals cleaned up.""
President Bill Clinton applauded UAW-GM agreement on Saturday. ""I am very hopeful that the tentative agreement will be ratified and that the outstanding local issues will quickly be resolved so that everyone can get back to work,"" he said.
About 4,800 workers in Janesville remain on strike, although UAW Local 95 officials said local talks intensified on Saturday. The plant, which builds GM's popular Chevrolet Tahoe, Suburban and GMC Yukon sport-utility vehicles, is one of the automaker's most profitable factories.
Analysts estimate the UAW-related shutdowns will cost the carmaker up to $20 million a day in lost profits, on top of an estimated $350 million loss from a Canadian walkout that ended on Oct. 23.
The UAW-GM national agreement will be submitted to rank-and-file members for ratification after about 250 UAW leaders meet to consider the pact on Wednesday in Chicago. The deal was unanimously approved by the union's national GM bargaining council.
Details of the pact were not released on Saturday, but Gerald Knechtel, GM vice president of personnel, said it fits within the pattern that the UAW set at Ford Motor Co and Chrysler Corp
Both of those companies agreed to guarantee jobs for 95 percent of their current hourly workforces and will give workers a $2,000 bonus in the first year of the contract, followed by 3 percent raises in the second and third years of the contract.
One union official said the pact maintains the 95 percent job guarantee but allows GM some flexibility to exit certain unprofitable businesses and to allow employment at some factories to fall below that threshold.
In a sign that contentious issues remain, company and union officials did not announce the pact in a joint news conference with the traditional handshakes and smiles. Instead, they made grim-faced separate statements to reporters gathered at GM's Detroit headquarters building.
""I think we said back in June that it would be a difficult negotiation, and I think we fulfilled that expectation,"" said a visibly tired GM Chairman Jack Smith. ""Like any negotiation, you never get everything you want.""
",7
"Strike-fueled production losses mounted for General Motors Corp. Friday as the United Auto Workers signaled a snag in labor contract talks by canceling a Saturday meeting of plant-level leaders here.
The UAW said its 250-member National GM Council was now scheduled to meet Wednesday, Nov. 6, in Chicago if the union reaches a tentative agreement covering 215,000 GM workers in the next few days.
Although GM officials declined to rule out an agreement on Friday, the UAW's move was viewed as a negative sign for the talks because it buys more time. The council, made up of local leaders from across the country, must approve any contract deal.
Meanwhile, pressure from local strikes in Indiana and Wisconsin mounted Friday as the number of workers idled by the walkouts exceeded 19,000.
In a two-pronged effort to deprive GM of profits from its light truck operations, 2,750 workers walked off the job at the company's Indianapolis metal stamping plant and 4,809 struck the Janesville, Wis., truck assembly plant Tuesday.
The Indianapolis plant feeds fenders, doors, hoods and other major body panels to nine of GM's 11 North American light truck plants, five of which are now idle, including Janesville.
GM's Shreveport, La., compact pickup truck plant shut down Friday, idling 2,400 workers, while GM's Linden, N.J., plant, which employs about 2,500 workers, was expected to run out of parts Friday night. Linden produces Chevrolet and GMC compact pickups and sport utility vehicles.
About 3,500 workers were idled at GM's Moraine, Ohio, compact sport utility vehicle plant Thursday night, while 2,250 workers were laid off at GM's Fort Wayne, Ind., full-size pickup truck assembly plant on Wednesday night.
In addition, 900 workers who build V-8 engines for trucks assembled in Janesville and Fort Wayne were idled on Friday.
Michael Ward, an auto analyst at Paine Webber, said the Janesville, Fort Wayne and Moraine shutdowns alone will cost GM $10 million a day in after-tax lost profits.
""We're looking at $10 million a day right now, and that could easily expand to $20 million by Monday,"" Ward said.
GM's board of directors on Monday is expected to delay an anticipated increase in the company's quarterly common stock dividend if a deal is not reached soon. The company's quarterly payout rate of 40 cents a share is unchanged since February, despite strong profits.
Rewarding shareholders could jeopardize the talks, especially when GM is seeking concessions that would allow it to cut costs and sell off unprofitable plants, said Dean Witter Reynolds auto analyst Ronald Glantz.
""Unless a settlement is reached by Sunday, the board is not going to throw gasoline into the fire,"" Glantz said.
Full-size pickup truck plants in Flint and Pontiac, Mich., Oshawa, Ontario could run out of parts within the next several days, while a GM truck plant in Silao, Mexico, was believed to have a greater supply of parts on hand.
Layoffs from the UAW strikes are increasing as GM's U.S. car operations are still staggering from the effects of the three-week Canadian Auto Workers strike, which ended Oct. 23 and is estimated to cost the automaker $350 million to $375 million.
GM said it still had 18,958 workers idled by continuing shortages of Canadian-made parts at six car assembly plants, six engine and transmission plants and four metal stamping facilities.
The two sides have been haggling over the total number of hourly workers that GM will guarantee to maintain over the next three years.
Ford Motor Co. and Chrysler Corp. have agreed to guarantee jobs for 95 percent of their current hourly workforces, but GM wants to exclude several parts plants from the guarantees.
GM, the least efficient of Detroit's Big Three, wants changes to the pattern to allow it to cut costs and shift more parts work to outside suppliers.
GM is expected to match the Ford and Chrysler wage package, which calls for a $2,000 bonus in the first year, and 3 percent base wage increases in the second and third years.
",7
"Investors pushed General Motors Corp. shares higher Monday, a sign that Wall Street is pleased that the auto giant signed a new national labour agreement that allows it to shed some workers.
GM's shares traded up $1.50 at $55.50 in late trading on the New York Stock Exchange after the company signed the tentative agreement with the United Auto Workers union early Saturday morning.
""The Wall Street reaction reflects some belief that GM didn't cave in,"" said Burnham Securities auto analyst David Healy. ""GM appears to have retained its right to manage and indulge in some outsourcing.""
Analysts said the pact will allow GM to reduce its 215,000-member hourly work force by 30,000 or more during the next three years through normal retirements.
The pact contains a nominal guarantee that GM maintain employment of about 95 percent of its current work force -- a pattern set in the Ford Motor Co. and Chrysler Corp. agreements -- but it also allows GM to exit some unprofitable parts businesses and sell certain components plants.
David Cole, director of the University of Michigan's Office for the Study of Automotive Transportation, said he believes the pact will help GM to to boost efficiency.
""GM can use attrition to shrink its work force and take advantage of productivity improvements,"" Cole said. ""The UAW has as much interest in a competitive General Motors as the shareholders do.""
But the positive reaction was tempered by a continuing strike at GM's Janesville, Wis., truck assembly plant, where 4,809 workers walked off the job Oct. 29 over demands for more jobs.
The plant makes the Chevrolet Tahoe, Suburban and GMC Yukon sport/utilities, which are among GM's most popular -- and most profitable -- vehicles. UAW Local 95 wants GM to hire more workers in Janesville to reduce the strain of heavy overtime and an increasing workload.
On Sunday, members of UAW Local 23 returned to work at a key metal stamping plant in Indianapolis after ratifying a settlement on a new local contract.
The union members had struck for five days, shutting off shipments of fenders, doors, hoods and other steel body panels to nine of GM's 11 North American light truck assembly plants.
By the weekend, strike-caused parts shortages forced GM to shut down factories in Fort Wayne, Ind., Shreveport, La., Moraine, Ohio, and Linden, N.J.
GM said the Fort Wayne and Moraine plants are scheduled to resume normal operations Tuesday, while Shreveport and Linden will be running again by Thursday.
Last week, the UAW walkouts and lingering parts shortages from last month's Canadian Auto Workers strike had idled nearly 38,000 GM workers in the United States.
GM did not say how many workers were still idle, but added that four car plants stricken by the CAW strike will be back to full production by Tuesday, including Detroit; Lordstown, Ohio; and Lake Orion and Lansing, Mich.
Healy estimated that between the two walkouts, GM's production losses will total 175,000 cars and trucks, which will slash the company's fourth-quarter profits by $600 million to $650 million.
In contrast to the tense atmosphere that continues to surround the GM labour situation, UAW President Stephen Yokich and Chrysler Chairman Robert Eaton signed a new three-year contract in an historic ceremony at the union's Detroit headquarters.
The signing marked the first time that a Big Three automaker has signed a new labour accord at the UAW's Solidarity House.
Yokich and Eaton were in a jovial mood as they signed the pact -- a stark contrast to the separate, grim-faced news conferences where the UAW and GM announced their deal early Saturday morning.
Yokich told reporters the Chrysler signing ""shows that this company recognises the union and wants to work with them.""
Meanwhile, GM declared an unchanged quarterly dividend of 40 cents a share on its $1-2/3 par value common stock.
Some analysts had expected GM's board of directors to increase the annual payout to $2 a share from $1.60 because of its growing cash pile. But Lehman Brothers analyst Joseph Phillippi said the board did not want to disrupt the UAW pact's ratification by giving more cash to shareholders.
",7
"Chrysler Corp. said Monday it rode strong sales of its pickup trucks, minivans and sport/utility vehicles to a 92 percent jump in third-quarter profits, soundly beating Wall Street's optimistic forecasts.
Detroit's No. 3 automaker earned $680 million, or 93 cents a share, in the July-September period, setting records for both net income and earnings per share for the third quarter.
A year earlier, when Chrysler was struggling through the slow production launch of its current-generation minivans, the company earned just $354 million, or 45 cents a share.
""Chrysler's performance in the third quarter was outstanding,"" Chairman Robert Eaton said in a statement. ""It was fuelled by record-setting demand for our products, which led to a new third-quarter U.S. retail unit sales record and produced the best model year for U.S. retail unit sales in the company's history.""
The results included an after-tax charge of $55 million, or 7 cents a share, to cover costs of an early retirement programme. About 531 salaried employees opted to leave the company under the programme during the quarter.
Excluding the charge, Chrysler earned $735 million, or $1 a share, from operations, solidly exceeding Wall Street estimates. According to First Call, which tracks earnings estimates, analysts had expected Chrysler to earn about $520 million, or 71 cents a share.
Chrysler shares jumped $1 to $32.75 after touching $33 on the New York Stock Exchange.
""I think it was all in the sales mix,"" Burnham Securities analyst David Healy said of Chrysler's strong performance. ""They've raised prices and the mix has shifted to trucks. They're selling not so many Neons and a lot more Jeep Grand Cherokees and Town & Country minivans.""
Indeed, light trucks -- which typically carry higher profit margins than passenger cars -- made up 66 percent of Chrysler's sales mix, versus 62 percent in the 1995 quarter. The automaker had full availability of its new minivans, and a St. Louis plant that had just started building Dodge Ram pickup trucks in August 1995 is now churning the vehicles out.
Chrysler earned a profit of $982 on each vehicle in the quarter, almost double the $492 earned per vehicle a year earlier. Incentive spending fell to $685 per vehicle from $870 a year ago, but was up from $625 in the second quarter.
Chrysler Chief Financial Officer Gary Valade said he expected similar conditions in the fourth quarter, and added that Chrysler next year plans another big increase in truck-building capacity.
He told reporters on a conference call that the automaker will be able to build 190,000 more trucks in 1997 than in 1996, including the launch of a new Dodge sport/utility vehicle at Chrysler's Newark, Del., plant.
The four-door vehicle is expected to be based on the new Dodge Dakota pickup truck that Chrysler is launching and will give Dodge dealers their first sport/utility vehicle since the two-door Ram Charger was discontinued in 1993.
Valade said Chrysler will end the year with about 16.2 percent of the North American car and light truck market, but cautioned the company will be prudent when adding capacity.
""We don't feel ourselves share constrained at this 16 percent share level, but neither are we hell-bent to get to 20 (percent) at any cost,"" he said.
Sales climbed to $14.4 billion, a third-quarter record and up 20 percent from $12.0 billion in the 1995 quarter.
The automaker said it shipped 650,529 cars and trucks, up from 581,853 in the year-ago period, boosting its share of the combined U.S. and Canadian retail car and truck market to 15.5 percent from 13.6 percent in the third quarter of 1995.
In the international market, Chrysler's retail sales were 57,209 vehicles, up 19 percent over the 48,207 vehicles it sold in the third quarter of 1995.
In Europe, Chrysler vehicle sales rose 28 percent.
The automaker said it bought back $452 million of its common stock in the quarter, bringing the total for 1996 to $1.6 billion, out of a $2 billion programme. The company bought back $1 billion worth of stock in 1995 and under its five-year peace accord with billionaire investor Kirk Kerkorian, has pledged to buy back another $1 billion in 1997.
For the nine months, earnings were $2.72 billion, or $3.65 a share, nearly triple the $985 million, or $1.28 a share, in the first nine months of 1995.
",7
"A midnight Sunday strike deadline for General Motors Corp expired without a walkout as talks between the car maker and the United Auto Workers continued into the early morning hours on Monday.
A GM spokesman declined to provide further details of the negotiations, saying the automaker would make a more detailed statement later on Monday morning.
""They're still on the job,"" said Norman Harp, a union commiteeman for UAW Local 14 at GM's Toledo, Ohio, transmission plant, which started its third shift shortly before midnight Sunday.
""The deadline's here and gone and they're still talking,"" Harp said of the negotiators at GM's Detroit headquarters.
Local UAW officials at other GM plants also said they were told to stand by for further instructions.
The UAW cancelled its national contract covering 215,000 GM hourly workers one minute before midnight Sunday in a move to increase pressure on GM for tentative agreement.
However, there was speculation among UAW officials late Sunday that instead of a national strike, the union could strike selected plants that make GM's high-profit light trucks. Top on the list of such facilities were GM's Janesville, Wis., plant, which makes Chevrolet Tahoe and GMC Yukon and Suburban full-size sport/utility vehicles, and the Pontiac, Mich., plant, which makes GM's popular full-size pickup trucks with extended cabs.
A selective strike at those facilities would inflict pain on GM while minimizing the drain on the UAW's strike fund, which pays each UAW worker $150 a week. It also would blunt some of the political fallout from a massive strike close to the U.S. presidential election.
UAW officials say the two sides remain at odds over the union's demand that GM follow the pattern set at Ford Motor Co and Chrysler Corp by guaranteeing employment for 95 percent of its current UAW workforce.
GM, which has 12 parts plants that it considers uncompetitive, wants to exclude several of those facilities from the guarantee, including a door hardware plant in Flint, Mich., and an interior trim plant in Livonia, Mich., that it wants to sell.
In settling the Canadian strike last week, GM was able to secure a deal that included the selling of two parts plants in Windsor and Oshawa, Ontario and retained some flexibility to outsource more products. However, GM agreed to guarantee pensions for workers in the two plants or up to nine years and to allow them to transfer back to jobs that open up in other GM facilities.
GM still has more than 20,000 workers in the United States and Mexico idled because of lingering parts shortages associated with the Canadian strike.
",7
"Lear Corp., furthering its quest to supply complete car interiors, said Friday it agreed to buy the instrument panel and trim parts unit of Denmark-based Borealis Holding AB.
Lear said it signed a memorandum of understanding to acquire Borealis Industrier AB for undisclosed terms.
Based in Gothenburg, Sweden, Borealis Industrier manufacturers instrument panels, door panels, climate systems, exterior trim and various other components for the European car and truck industry.
Borealis Industrier had 1995 sales of about $230 million and owns five plants in Sweden that employ about 1,800 people.
Primary customers for the business include Swedish carmakers AB Volvo and Saab Automobile AB and truckmaker Scania AB.
Borealis Holding is owned by Finnish state-controlled oil and energy group Neste Oy  and Norwegian state-owned oil group Statoil AS.
Completion of the transaction is subject to approval by the Swedish competition authority and other conditions.
Lear said the acquisition supports its strategy of having in-house capability to provide total automotive interior systems, including instrument panels.
""Not only does this acquisition strengthen relations with our European customers, but it positions Lear as the only independent automotive supplier in the world with in-house capabilities in all five interior systems -- broadening the appeal of our already strong one-stop-shopping competitive advantage,"" Lear Chairman Kenneth Way said in a statement.
The deal is the latest of a series of consolidation moves in the automotive interior market. Lear earlier this year purchased carpet and floor-mat maker Masland Corp. for $384 million, and last year bought door panel and console maker Automotive Industries Inc for $626 million.
Lear's U.S. operations include the manufacturing of a wide range of automotive interior components.
The company's stock was unchanged Friday at $38 a share on the New York Stock Exchange.
Lear's competitors are also pursuing the same acquisition strategy.
Johnson Controls Inc., which has a strong seating business, recently acquired interior parts maker Prince Automotive, based in Holland Mich., for $1.35 billion in cash.
Canada's Magna International Inc., one of the ""Big Three"" automotive interior firms along with Lear and Johnson Controls, recently acquired seat maker Douglas & Lomason Co. for $135 million.
",7
"The United Auto Workers union is discussing the possibility of an extended five- or six-year contract with the nation's largest automakers, UAW and company officials said Monday.
The union is open to the idea of a contract longer than the typical three-year pact if it offers significant job security guarantees, officials said.
""It has surfaced in the subcommittees,"" said Carl Dowell, president of UAW Local 862 in Louisville, Ky. ""There was no problem with a longer-term agreement if it's fruitful for our people. Job security is the key.""
Contract talks with General Motors Corp., Ford Motor Co. and Chrysler Corp. resumed Monday after meetings late last week between UAW President Stephen Yokich and the automakers' chairmen.
The UAW has not yet chosen which company it will negotiate a pattern agreement with. Yokich said last week that he delayed the union's traditional choice of a ""strike target"" to allow the negotiating progress to continue at all three companies.
A UAW spokesman said no decision on a target company is expected this week.
Traditionally, the target is threatened with a national strike on the contract expiration date if no agreement is reached by then. The current pact, covering about 400,000 U.S. hourly workers at the three automakers, expires September 14.
Ford spokesman Jon Harmon said the automaker suggested to the UAW about three weeks ago that both sides should examine possibly negotiating a longer-term contract.
He said a longer agreement would stabilise Ford's future costs, allowing it to evaluate future product and investment decisions more accurately. ""It gives you more of a known quantity,"" he said.
Yokich has said he would be open to a longer contract if the automakers ""want to buy it.""
However, many UAW officials remain sceptical about a longer-term pact and say that removal of a strike threat every three years could invite abuses by the automakers.
""The question is how can GM live up to a five-year agreement when they can't live up to a three-year agreement?"" said Ed McNulty, president of UAW Local 14 at GM's Toledo, Ohio, truck transmission plant.
Such an agreement would have to provide a mechanism for enforcement of the contract and for revisions to resolve local issues over sourcing and staffing levels that are sure to arise over the life of the contract, he said.
GM has been hit by several strikes at individual plants over the current three-year contract over sourcing and jobs.
""You're going to have to have some good job security and outsourcing provisions for the membership to go for it,"" McNulty said.
",7
"After meeting for nearly 32 hours, most bargainers for General Motors Corp. and the United Auto Workers union adjourned talks without a national contract deal Thursday night as several more truck plants headed for strike-related shutdowns.
""Talks in several specific areas will continue tonight,"" said GM spokesman Charles Licari. ""Full negotiations will resume Friday morning as bargainers continue their efforts to reach a tentative agreement.""
He declined to identify the areas to be discussed Thursday night.
Talks ""have snagged several times in the past week,"" said Harley Shaiken, a professor of labor relations at the University of California-Berkeley. ""The pressure's been increased considerably by the two plants that are out on strike.""
Indeed, plant-level union officials said the number of workers idled by local strikes in Indianapolis and Janesville, Wis., could reach nearly 21,000 by Saturday.
GM truck plants in Moraine, Ohio, and Flint, Mich., were expected to run out of fenders, hoods, and other sheet-metal parts from GM's strikebound Indianapolis stamping plant by late Thursday night, officials at the plants said.
Flint employs about 2,000 workers and builds crew-cab and heavy-duty, full-size pickup trucks, while Moraine employs about 4,000 and builds Chevrolet Blazer and GMC Jimmy compact sport utility vehicles.
""B-crew will come in tonight and that'll be it,"" said George Dunaway, vice president of International Union of Electronics Workers Local 801 in Moraine. Although his union is not involved in the UAW talks, he supports the strikers in Indianapolis and Janesville, Wis.
""A lot of their concerns are our concerns,"" he said.
Some states may determine that the laid-off workers won't be eligible for state unemployment benefits because they were idled by a strike.
The remainder of the nine GM truck plants fed by Indianapolis are expected to halt operations soon.
GM's Shreveport, La., compact pickup truck plant is scheduled to shut down Friday, idling 2,500 workers, and the Linden, N.J. plant, which employs 2,500 and builds both compact pickups and sport utility vehicles, will shut down Friday night.
GM's Fort Wayne plant laid off about 2,250 of its 2,600 workers as it halted production of GM's popular full-size Chevrolet and GMC pickup trucks Wednesday night. GM's other full-size truck plants in Pontiac, Mich., Oshawa, Ontario, and Silao, Mexico, are expected to follow close behind.
The strikes on Tuesday by 2,750 workers at Indianapolis and 4,800 workers in Janesville, Wis., have formed a two-pronged effort to squeeze GM's highly profitable light truck operations, increasing pressure for national and local settlements.
The shutdown of the Janesville plant alone could cost GM $50 million a week in pre-tax profits, adding to pressure on the automaker for national and local contract settlements, said David Healy, an auto analyst with Burnham Securities.
Meanwhile, other UAW locals sought to join the Indianapolis and Janesville walkouts. GM's Kokomo, Ind., electronics plant requested permission to send about 5,500 workers out on strike.
A walkout at that facility would be particularly damaging to GM because it supplies all of the automaker's North American assembly plants with engine electronics, audio systems and other parts.
The future of 12 domestic parts plants that GM considers uncompetitive remained a major sticking point in the negotiations. GM wants to exclude several of the plants from union demands that it guarantee employment for 95 percent of UAW workers over the next three years.
Ford Motor Co. and Chrysler Corp. have already granted such guarantees, but GM, the least efficient of Detroit's Big Three automakers, wants changes to the pattern to allow it to cut costs..
GM's stock gained 37.5 cents to close at $53.625 on the New York Stock Exchange.
",7
"Second-shift workers at General Motors Corp. 's Cadillac assembly plant here will not report to work on Monday because of the Canadian Auto Workers strike and thousands more U.S. assembly employees may be laid off this week, GM said on Sunday.
The Cadillac plant on the outskirts of Detroit will operate with only one shift on Monday and Tuesday, when it is expected to halt production completely unless the strike is resolved, GM spokesman Thomas Klipstine said.
""Once they run out of parts, that's it,"" he said.
The plant employs more than 3,000 hourly workers represented by the United Auto Workers union, but Klipstine said he did not know the exact number of workers on each shift.
The sprawling factory, which builds Cadillac's DeVille, Seville and Eldorado luxury cars, depends on interior trim parts made at a strike-bound plant in Windsor, Ontario, just across the Detroit River.
GM's Canadian workers began an escalating strike on Oct. 3, shutting down all of the automaker's operations in Canada by late on Oct. 9.
The company and union have been unable to reach an agreement for a new national labor contract for GM's 26,000 CAW members because of disagreements over the thorny issue of shifting parts work to outside suppliers, known as outsourcing.
The union wants tough restrictions on outsourcing to protect its members' jobs, while GM, the least efficient automaker in North America, says it needs flexibility on parts purchases to become more competitive.
So far, GM's U.S. operations have been relatively untouched by the strike in Canada, largely because the CAW gave the automaker ample warning that it was preparing to strike. That, coupled with the slow escalation of the strike over a week-long period, allowed GM to build up stocks of some parts and prepare for the walkout.
""The bottom line is there was no surprise with this strike,"" Klipstine said. ""We did as much as we could, but we don't have huge amounts of parts stockpiled.""
Klipstine said he did not know how much longer GM could operate its U.S. plants.
Industry analysts have said some of GM's plants may be able to continue to operate until the end of the month, particularly those that build GM's popular full-size pickup trucks and sport-utility vehicles.
On Friday, Ford Motor Co. President Alex Trotman said he did not believe his company would be able to gain a significant amount of market share due to the strike, because there has been ""little evidence"" that GM's hottest-selling truck lines will be affected.
Most GM dealers have sufficient car inventories to weather the strike without turning away customers, he said.
Thus far, the CAW has been responsible for the idling of only 2,000 U.S. workers.
The walkout forced the layoff of 1,050 workers at an engine plant in Tonawanda, N.Y., near Buffalo, and 950 at a transmission plant in Ypsilanti, Mich., near Detroit.
By contrast, a UAW strike in March at two Dayton, Ohio, brake plants had forced more than 55,000 of GM's workers off the job just one week after that walkout began.
No formal talks were scheduled between GM and the CAW, although CAW President Buzz Hargrove was expected to be in contact with GM's chief negotiator, Dean Munger.
Canada celebrates its national Thanksgiving Day holiday on Monday.
Meanwhile, in the United States, negotiators working towards a contract for GM's 215,000 United Auto Workers members also took the weekend off.
The UAW talks have taken a low profile during the Canadian strike.
",7
"Strong demand for light trucks and relatively few production headaches will boost the Big Three U.S. automakers' combined profits to nearly $2 billion for the third quarter, exceeding year-ago results by a healthy margin, analysts said Tuesday.
The quarter is traditionally the weakest of the year with summer vacations and model changeovers, but Chrysler Corp. and Ford Motor Co., are expected to post strong gains from minivan and truck output.
General Motors Corp.'s earnings were held back by a significant increase in incentives, analysts said.
In the third quarter of 1995, the three automakers earned $1.35 billion.
""It'll be a good quarter overall for the Big Three,"" said Dean Witter Reynolds Inc auto analyst Kenneth Blaschke. ""The issue that remains is how long the strike in Canada against GM will last.""
GM, the nation's largest automaker, on Oct. 15 is expected to report third quarter net income of about $850 million, or $1.02 a share, according to the First Call financial information service.
The results include an after-tax gain of $250 million, or 33 cents a share from the reversal of the automaker's decision to close its Wilmington, Del., plant and build a new Saturn model there at the end of the decade.
In the year-ago period, GM earned $642 million, or 42 cents a share. The third quarter 1995 results also included $246 million in earnings from Electronic Data Systems Corp., the computer services unit that the automaker spun off in June after 12 years of ownership.
Burnham Securities auto analyst David Healy said GM's worldwide car and truck production rose 11 percent in the third quarter over a year ago. But a heavier mix of less-expensive vehicles and a $230 increase in incentives per vehicle squeezed GM's profit margins, resulting in a small pretax loss in North America during the period.
On an operating basis, Ford's third quarter profits, are expected to increase 78 percent to $637 million, or 51 cents a share, from $357 million, or 28 cents, a year earlier, marking the biggest rebound of the Big Three. Ford results are scheduled for release on Oct. 16.
The strength at Detroit's No. 2 automaker largely rides on the fact that it is not paying the enormous product launch costs for the Taurus sedan and F-Series pickup truck that dragged down year-ago results.
Ford also is beginning to reap profits from the F-Series, and the Expedition full-size sport utility vehicle, which have brightened the automaker's future outlook.
""We think Ford's new products will enable it to gain an increased share going forward, and as a result Ford's earnings momentum should continue,"" Blaschke said.
Ford's profits would be even better had it not been for losses in Brazil and Argentina that the automaker warned analysts about in September.
Ford is scambling to put its Fiesta small car into production in Brazil following the breakup of the company's Autolatina joint venture with Volkswagen AG in 1995.
Chrysler's profits for the July-September period, scheduled for release Oct. 14, are expected to increase 41 percent to about $500 million, or 69 cents a share, from $354 million, or 48 cents, a year earlier.
No. 3 Chrysler also experienced launch problems in the year-ago period in its all-important minivan product lines.
This year, the company is churning out minivans and has raised its share of the U.S. vehicle market to record levels. The launch glitches have not returned, as the company's new Dodge Dakota compact pickup truck is proceeding ahead of schedule, analysts said.
""Chrysler has everthing going for it right now and it should be reflected in the earnings,"" said Bear Stearns & Co. auto analyst Nicholas Lobocarro, who added that he would not be surprised if Chrysler's results exceeded Wall Street estimates.
",7
"Local strikes in Wisconsin and Indiana began taking a larger toll on General Motors Corp. truck operations Wednesday, increasing pressure on the automaker for a new national contract with the United Auo Workers union.
GM said the walkout that started Tuesday night at its Indianapolis metal stamping plant forced the company to lay off 2,250 workers at its Fort Wayne, Ind., plant and halt production of full-size Chevrolet and GMC pickup trucks.
The plant ran out of hoods, doors, fenders and other major body panels made by striking workers in Indianapolis, said GM spokesman Jeffrey Kuhlman.
No other plants were in immediate danger of halting production Wednesday night, but the strikebound Indianapolis plant has stopped shipments to nine of GM's 11 North American truck assembly plants, threatening more shutdowns within days.
Meanwhile talks between GM and UAW bargainers continued late into the night Wednesday in an effort to reach a new national agreement covering 215,000 GM hourly workers. Company officials declined to comment on progress of the negotiations.
Analysts said Wednesday the cost of the strikes by 2,750 workers in Indianapolis and 4,800 workers at its Janesville, Wis., truck assembly plant could mount quickly, eating into profits from GM's lucrative light truck operations.
The shutdown of the Janesville plant alone could cost GM $50 million a week in pre-tax profits, said David Healy, an auto analyst with Burnham Securities.
The southern Wisconsin factory, which employs 4,800 workers, is the sole source for GM's popular four-door, full-size Chevrolet Tahoe and Suburban and GMC Yukon sport utility vehicles. Analysts estimate that GM makes about $9,000 in variable profits on each of the trucks.
In addition to Janesville and Fort Wayne, the Indianapolis plant supplies facilities in Pontiac and Flint, Mich.; Oshawa, Ontario; Linden, N.J.; Shreveport, La.; Moraine, Ohio, and Silao, Mexico.
""It really starts to add up quickly when you add in all of the other big C/K pickups they can lose,"" said Lehman Brothers analyst Joseph Phillippi.
The UAW strikes came as GM continued to stagger from a three-week strike in Canada that curtailed production at a number of U.S. plants and may cost up to $450 million.
On Wednesday GM said it still had 23,158 U.S. workers idled due to shortages of Canadian-made parts, but added that 3,200 workers at its Buick City assembly plant in Flint, Mich., were scheduled to return to work on Thursday.
No other UAW strikes had started on Wednesday, but UAW spokesman Reg McGhee said the union was not ruling out other walkouts. UAW President Stephen Yokich raised the threat of local strikes on Monday after GM's national contract covering 215,000 UAW workers expired.
""Steve made it clear that without a national contract, the locals are on their own,"" McGhee said, noting that they do not have to provide GM with the typical five-day notice before a walkout.
Some UAW officials speculated that other stamping and parts plants may also be struck but others expressed concern that widespread walkouts so close to next week's national election would hurt Democratic candidates.
Although UAW officials said the strikes were called over local issues, analysts said it was clear that the actions were aimed at pushing GM into a tentative national agreement.
That may take place before Saturday, when about 250 UAW leaders from GM plants across the nation are scheduled to meet in Detroit to discuss the status of the talks.
The future of 12 domestic parts plants that GM considers uncompetitive remained a major sticking point in the negotiations Wednesday. GM wants to exclude several of the plants from union demands that it guarantee employment for 95 percent of UAW workers over the next three years.
Ford Motor Co. and Chrysler Corp. have already granted such guarantees, but GM, the least efficient of Detroit's Big Three automakers, wants changes to the pattern to allow it to cut costs.
GM has already put two of the 12 plants on the sale block -- a door hinge plant in Flint, Mich., and an interior trim plant in Livonia, Mich., that together employ 2,100 workers.
""We know the sale is going to happen. We're concerned about what's going to happen to us,"" said Whitey Hale, president of UAW Local 326 in Flint.
",7
"Second-shift workers at General Motors Corp. 's Cadillac assembly plant here will not report to work on Monday because of the Canadian Auto Workers strike and thousands more U.S. assembly employees may be laid off this week, GM said on Sunday.
The Cadillac plant on the outskirts of Detroit will operate with only one shift on Monday and Tuesday, when it is expected to halt production completely unless the strike is resolved, GM spokesman Thomas Klipstine said.
""Once they run out of parts, that's it,"" he said.
The plant employs more than 3,000 hourly workers represented by the United Auto Workers union, but Klipstine said he did not know the exact number of workers on each shift.
The sprawling factory, which builds Cadillac's DeVille, Seville and Eldorado luxury cars, depends on interior trim parts made at a strike-bound plant in Windsor, Ontario, just across the Detroit River.
GM's Canadian workers began an escalating strike on Oct. 3, shutting down all of the automaker's operations in Canada by late on Oct. 9.
The company and union have been unable to reach an agreement for a new national labour contract for GM's 26,000 CAW members because of disagreements over the thorny issue of shifting parts work to outside suppliers, known as outsourcing.
The union wants tough restrictions on outsourcing to protect its members' jobs, while GM, the least efficient automaker in North America, says it needs flexibility on parts purchases to become more competitive.
So far, GM's U.S. operations have been relatively untouched by the strike in Canada, largely because the CAW gave the automaker ample warning that it was preparing to strike. That, coupled with the slow escalation of the strike over a week-long period, allowed GM to build up stocks of some parts and prepare for the walkout.
""The bottom line is there was no surprise with this strike,"" Klipstine said. ""We did as much as we could, but we don't have huge amounts of parts stockpiled.""
Klipstine said he did not know how much longer GM could operate its U.S. plants.
Industry analysts have said some of GM's plants may be able to continue to operate until the end of the month, particularly those that build GM's popular full-size pickup trucks and sport-utility vehicles.
On Friday, Ford Motor Co. President Alex Trotman said he did not believe his company would be able to gain a significant amount of market share due to the strike, because there has been ""little evidence"" that GM's hottest-selling truck lines will be affected.
Most GM dealers have sufficient car inventories to weather the strike without turning away customers, he said.
Thus far, the CAW has been responsible for the idling of only 2,000 U.S. workers.
The walkout forced the layoff of 1,050 workers at an engine plant in Tonawanda, N.Y., near Buffalo, and 950 at a transmission plant in Ypsilanti, Mich., near Detroit.
By contrast, a UAW strike in March at two Dayton, Ohio, brake plants had forced more than 55,000 of GM's workers off the job just one week after that walkout began.
No formal talks were scheduled between GM and the CAW, although CAW President Buzz Hargrove was expected to be in contact with GM's chief negotiator, Dean Munger.
Canada celebrates its national Thanksgiving Day holiday on Monday.
Meanwhile, in the United States, negotiators working towards a contract for GM's 215,000 United Auto Workers members also took the weekend off.
The UAW talks have taken a low profile during the Canadian strike.
",7
"Negotiators for General Motors Corp. and the United Auto Workers adjourned their talks on Saturday evening with less than 30 hours to go before a midnight Sunday strike deadline.
Bargainers, led by UAW President Stephen Yokich, took their second consecutive night off since the union announced on Friday that it will cancel its contract with the automaker at 11:59 p.m. EST Sunday (0359 GMT on Monday).
GM spokesman Charles Licari declined to say whether the adjournment was a sign of poor progress in the talks aimed at a new national labour agreement covering the automaker's 215,000 UAW workers. Typically bargaining runs around the clock when a settlement is near.
The deadline marks the first time the UAW has threatened a strike in its 1996 negotiations with Detroit's Big Three automakers, which up to now have been marked by an unusually conciliatory tone and extremely secretive discussions.
It also came two days after GM's 26,000 Canadian Auto Workers members began returning to work on Wednesday after a three-week strike against the automaker's Canadian operations.
In the U.S. talks, the two sides are still at odds over the same issues that caused the walkout in Canada -- the union's demand for job security and GM's desire to sell several parts plants and maintain flexibility to shift components work to outside suppliers, a practice known as outsourcing.
GM wants to modify the UAW contract pattern set by Ford Motor Co. and Chrysler Corp., which have agreed to guarantee jobs for 95 percent of their current UAW work forces over the next three years.
GM, the least efficient U.S. automaker, wants to exclude certain components plants from the employment guarantees, including a door hardware plant in Flint, Michigan and an interior trim plant in Livonia, Michigan.
Ford and Chrysler buy more of their parts from outside suppliers than GM does, often from firms that pay their workers significantly less than the $19-an-hour base wage paid in Big Three factories.
Yokich said in a statement on Friday that he was not optimistic that a deal could be reached before the deadline but told workers to remain on the job until further notice.
On Saturday UAW spokesman Reg McGhee declined to say whether the union was still pessimistic about the talks.
""That was yesterday's statement,"" McGhee said. ""We're just saying that the talks are continuing and we're not characterising the progress.""
GM spokesman Charles Licari said the automaker was prepared for round-the-clock negotiations, but declined to provide further details of the talks.
GM, flush with $14 billion in cash on its balance sheet and operating earnings that more than doubled in the third quarter to $1 billion, has shown willingness to sustain costly strikes to continue its quest for competitiveness.
Industry analysts estimate the cost of the Canadian strike at $150 million to $450 million, while a 17-day strike at two Dayton, Ohio, brake plants in March reduced GM's first quarter profit by $900 million.
But the effects of the Canadian strike continued to linger last week, as more of GM's U.S. assembly plants plants ran out of Canadian-made parts.
",7
"Jacques Maillot, the chairman of travel group Nouvelles Frontieres who dropped out of bidding for Air Liberte, is now talking to acquire airline AOM, a spokeswoman for his travel group said.
Maillot on Wednesday announced that he and partner Royal Air Maroc had withdrawn their participation in talks to rescue Air Liberte, in administration since September 26, because of the size of the financial commitment required.
A 780 million franc bid by British Airways Plc French TAT unit and bank Rivaud is now the only remaining on the table and expected to be approved by the Creteil commercial court on Friday.
But Maillot, also chairman of small French airline Corsair, told La Tribune that his withdrawal did not mean he had given up his ambitions to create a private French airline group.
""I remain a candidate for the takeover of AOM, that remains my priority,"" he told the paper. He was not immediately available for comment on Thursday.
Maillot had planned to buy Air Liberte with the help of Royal Air Maroc, holiday resorts group Club Mediterranee and Rivaud. In a second stage he had planned to enlarge his consortium to acquire AOM and merge Corsair, Air Liberte and AOM in a big French group to rival the state-owned Air France group.
AOM, created in 1991 by the merger of Air Outre Mer and Minerve, is owned by the Consortium de Realisation (CDR), a state entity charged with selling former assets of the Credit Lyonnais bank.
AOM is worth about one billion francs, according to industry sources. Maillot said that talks with the CDR had already started but he added that no timetable had been fixed.
""Before anything, we need to know the price of AOM. That is not the case today,"" he told La Tribune.
This summer, former AOM chairman Alexandre Couvelaire had been in talks with Air Liberte chairman and founder Lotfi Belhassine about a merger.
But the deteriorating financial situation at Air Liberte led to a break-up of talks. The CDR has since fired Couvelaire.
Couvelaire had a 10 percent stake in Air Liberte and previously headed small airline Euralair. He was appointed in June 1996 to replace Mark Rochet who had jumped ship to TAT.
In his statement on Wednesday, announcing his withdrawal from Air Liberte, Maillot said his ambitions were unchanged.
""The first tourist group in France, Nouvelles Frontieres, which is active in air transport since many years through its Corsair subsidiary, the only airline in France with systemic postive results since the takeover in 1990, remains available to participate in the constitution of a a private group of which the necessity seems, at least as far as words are concerned, to be felt unanimously and which has become more urgent today than yesterday,"" he said in the statement.
""It is necessary not to compromise the success of such an ambition which implies the both restucturing of the Groupe AOM and, later, the privatisation of Groupe Air France,"" he said.
""It is totally clear that there is urgency and there is no more time for hesitations,"" he added.
",29
"Cie Generale des Eaux on Tuesday launched its bid to become the main rival to state-owned France Telecom with the start a fixed telephone network in a residential quarter in the southern city of Nice.
Philippe Glotin, managing director of Generale's telecoms unit Cegetel, said the group aims to have a market share in 2003 yielding 40 billion francs ($7.9 billion) in annual sales, of which more than half would come from mobile communications.
In mobile telecommunications, Generale already competes with France Telecom with its SFR unit and it is allied to British Telecom Plc and MCI for business services.
The local residential market is expected to grow at a moderate pace but nevertheless represent 55 billion francs in 2003.
Glotin said he aimed at gaining a 40 percent share in mobiles, 20 percent in long-distance and 10 percent for so-called local loops, or small networks.
Cegetel, which counts BT, Mannesmann and SBC of the United States among its owners, has received permission from the French authorities for a telecoms experiment in Nice and from the start of 1997 it will offer residential telecoms services, using the DECT technology.
DECT, digitally-enhanced cordless telephone, uses radio waves to connect buildings to a telephone switch, while the connections inside the building are of the classical type using a telephone socket.
DECT is also available in totally wireless versions but the Nice experiment will not use this. DECT can handle high capacities and is relatively secure as far as privacy of calls is concerned.
Glotin said that Nice was the precursor of Cegetel's assault on France Telecom and the company would invest three billion francs in Nice and somewhere in central France to hone its skills ahead of the liberalisation of the market in 1998.
Cegetel is aiming to start its business in some 30 towns which will add up to a population of some 10 million inhabitants.
To part finance this five-year plan, Cegetel shareholders will inject 6.8 billion francs into the company at the start of 1997.
In business services, Cegetel is considering putting a local loop in the La Defense office complex on the Paris outskirts -- where parent Generale des Eaux is the main building developer.
In that area, MFS Communications Ltd already offers business services with a local loop in competition to France Telecom.
Glotin said that the success of Cegetel, or any other rival to France Telecom in France, depended to a large extent on the interconnection costs and other payments telecom operators have to make to France Telecom to use its installations.
Telecommunications minister Francois Fillon has started a wide consultation, set to end on November 30, in order to establish in early 1997 a price list of the services France Telecom can provide to its rivals.
""The level of the interconnection costs for us means either the right to live of the right to die,"" Glotin said.
Other future rivals for France Telecom are building and communications group Bouygues which has teamed up with Italy's STET. Bouygues started France's third mobile telecommunications service earlier this year.
AT&T has also expressed a desire to become a major force in the France market. ($ = 5.080 French Francs)
",29
"France announced plans to create a major new force in the world defence industry on Wednesday, by selling state-owned defence and consumer electronics group Thomson SA to Lagardere Groupe for a symbolic franc.
The government said it had preferred the bid by Lagardere, which owns defence company Matra, to the rival offer of largely civilian industrial group Alcatel Alsthom SA.
""The choice I made yesterday and which has been made public today is entirely based on a defence industrial logic,"" Prime Minisiter Alain Juppe told parliament
""We have opted for the offer which was the best to further our defence interest and which would constitute a world leading industrial group with strong export capacities,"" he said.
""The offers were comparable on a financial level. They both needed a capital increase,"" Finance Minister Jean Arthuis told a news conference. The state will make an 11 billion franc ($2.1 billion) cash injection to Thomson SA prior to the sale.
Challenged in parliament about the cash injection, Arthuis said that ""Both Alcatel and Lagardere valued Thomson SA at minus 11 billion francs""
Loss-making Thomson SA owns 58 percent of defence electronics company Thomson-CSF and 100 percent of consumer electronics maker Thomson Multimedia which specialises in digital television and decoders and has Saba and RCA as brands.
Lagardere said it is bidding 156 francs a share, or 7.8 billion francs in total, to buy the minorities in Thomson-CSF which it will then merge with Matra. Lagardere will keep 60 percent of Thomson Matra while the French state will have a golden share to safeguard national security interests.
Lagardere will sell Thomson Multimedia to Daewoo Electronics of South Korea.
The government said Daewoo was a well known investor in France and had knowledge of mass production techniques. Daewoo has made commitments on jobs -- creating 3,000 new jobs in France -- technology and investments.
Thomson Multimedia management will remain French-based.
Arthuis said the European Commission would have to approve the cash injection and study competition issues. He said the sale would take place before the end of the year and the cash for the injection would come from other privatisations.
The independent privatisation commission, which has an important say in the sale of state assets, still has to give its advice on the sale. Arthuis said the government had not wanted to keep its choice secret, as would have been usual, until the privatisation commission's advice ""to avoid insider trading"".
The decision was a surprise as markets and the media had gambled Alcatel's no-nonsense chairman Serge Tchuruk would take the prize over self-made entrepreneur Jean-Luc Lagardere, 69, who is preparing to hand over power to his son, Arnaud.
Lagardere also owns publishers Hachette and Filipachi.
Thomson SA lost 1.379 billion francs in 1995 and has 25 billion francs of debt. Wholly-owned Thomson Multimedia lost three billion in the first half of 1996, but Thomson-CSF is profitable and had 1995 earnings of 1.01 billion francs.
The government said Lagardere wanted to leave the share capital of microelectronics maker SGS-Thomson Microelectronics NV by selling its 20 percent stake to the other main shareholders. France Telecom said it and CEA Industries were ready to buy that stake and keep French interests at the same level as the stake of Italian companies .
Alcatel's shares rose sharply on Thursday morning on market relief. Analysts doubted its capacity to finance the Thomson deal. Lagardere shares were suspended for the day.
",29
"The planned sale of state-owned Thomson Multimedia to Daewoo Electronics has whipped up a storm of protest which on Monday drove down shares in the Korean company's French partner Lagardere Groupe.
Lagardere shares were down more than five percent at midday on investor worries about the backlash of the Thomson sale that risks clouding the outlook for future French privatisations.
French opposition parties, labour unions and most French people, according to polls, are unhappy with the government's plan to sell Thomson, the world's fourth biggest television set maker, to Lagardere and Daewoo for one franc.
Thomson Multimedia workers protested against the deal on Friday and plan a demonstration in November against what they have likened to an enforced ""fire sale"".
The mounting opposition, and the strongly nationalist tone, could augur badly for foreign buyer interest in future privatisations as the government prepares to sell insurer GAN, Credit Lyonnais and Air France.
The backlash also took the steam out of a rally in shares in Lagardere, which had risen as much as 32 percent after the government announced on October 16 that it had selected it over rival Alcatel Alsthom to buy Thomson Multimedia (TMM)- also a leader in the new digital technology.
""Lagardere is down because of the recent news articles that put in doubt the Thomson deal,"" a dealer said.
French Finance Minister Jean Arthuis said on Monday the procedure followed by the government was ""sheltered from all politicial criticism"".
Thomson owns 58 percent of defence firm Thomson-CSF and 100 percent of TMM.
The government tilted toward Lagardere's bid because of the defense connection. Lagardere plans to merge its Matra unit with Thomson-CSF and sell TMM to Daewoo -- also for one franc.
""The public authorities focused on the military aspect of the Thomson deal. They neglected the civilian (consumer electronics) aspect...it's now sticking in their throats,"" said the newsletter La Lettre de l'Expansion.
A survey of 1,004 voters published by the newspaper La Tribune found 72 percent disapproved of the sale price, saying it did not reflect TMM's value. Only 12 percent agreed with the government that the price was right given the group's debts.
TMM is saddled with the bulk of Thomson's debt, expected to reach 28 billion francs ($5.44 billion) by the end of the year.
Loser Alcatel broke its silence on Friday and said it would not have sold control of TMM to a foreign group but put together a 50-50 joint venture with an Asian partner.
""This new group would have formed the basis of a global industrial project in which French interests would have been solidly represented,"" Alcatel said in a statement.
The newspaper Les Echos said in an unsourced report on Monday that Alcatel had also pledged to transfer to the state any capital gain on the sale of part of TMM.
The deal hinges on the approvals of France's Privatisation Commission and the European Commission, and speculation is rising that the privatisation commission -- which had been expect to make only a procedural review -- may turn into a more serious stumbling block.
The commission, a body of seven independent experts chaired by Pierre Laurent, has the mandate to ensure that any deal reflects the value of the company.
""Of course they can disagree with the government,"" a Finance Ministry official said. ""If they agree, the deal can go ahead. If they disagree, the privatisation procedure has to be started over again,"" he added.
($1=5.151 French Franc)
",29
"French chemicals and drugs group Rhone-Poulenc SA on Friday announced a larger than expected 13 percent rise in third quarter profits.
The company, which reported net income of 756 million francs ($147 million) versus 669 million at the same stage last year, said the rise in earnings would have been 25.1 percent but for an expensive product recall.
Operating profit was 2.05 billion francs in the third quarter compared with 1.83 billion. Net sales were 20.47 billion francs, up from 19.62 billion.
The share market cheered the earnings figures, encouraged by a good rise at its pharmaceuticals unit and the limited impact of the product recall. At midday, Rhone shares were nearly two percent higher at 145.30 francs.
Rhone-Poulenc and its Rhone-Poulenc Rorer U.S. drugs unit issued a profit warning on October 10 after their Centeon joint venture with Germany Hoechst recalled albumin products due to the risk of bacterial infection.
The company is still working on replacing recalled stocks of the blood plasma products. Rhone-Poulenc took a 81 million franc charge in the third quarter and will take a total 1996 charge of 100 to 200 million francs.
Finance director Jean-Pierre Tirouflet reaffirmed the recall would cut six to seven percent from analysts' forecasts for the 1996 results.
Asked to comment on 1996 forecasts going as high as 2.75 billion francs, Tirouflet said: ""I have lower forecasts in my head.""
According to Jacques Chahine Finance, the market consensus for 1996 is 2.631 billion francs, rising to 3.426 billion in 1997, after 2.134 billion in 1995.
For the first nine months, net income was up 10.5 percent at 2.17 billion francs.
""This progress is a consequence of an improvement in results in the pharmaceutical, animal health and agro businesses,"" the company said.
""The figures are better than we had forecast,"" said analyst Guy Phillips at BZW in London. ""Especially the operating profit at life sciences, pharmaceuticals pleased. It was an encouraging set of results.""
Phillips said he may increase his profit per share forecast from eight francs to 8.5 francs. Brokers Leven in Paris said it saw no reason to make any adjustments to its forecast.
Rhone said the agro sector recorded a 14.7 percent increase in sales and a 54.9 percent rise in its profit contribution, due to a good global economic climate and the successful marketing of new products, especially Fipronil.
In chemicals and the fibres and polymers divisions, a rise in volumes failed to compensate for falling prices.
Operating profit on the chemicals side was relatively steady at 281 million francs versus 278 million, while in fibres and polymers it took a dive to 115 million from 248 million.
The company said it had completed sales of non-strategic assets to the tune of six billion francs by September 30 and that its net debt-to-equity ratio had fallen to 0.63 versus 0.72 at the end of 1995.
Tirouflet said Rhone expected assets sales to reach seven to nine billion francs by the end of the year.
Pharmaceutical earnings would grow in the fourth quarter as the synergy savings of the 1995 Fisons acquisition came through and because of new products, such as the June launch of anti-cancer drug Taxotere in the United States. ($1=5.141 French Franc)
",29
"The former long-time head of Britain's General Electric Plc said in a newspaper interview on Wednesday the group was ready to deal with whoever won ownership of state-owned Thomson SA.
The comments to the Les Echos newspaper by Lord Weinstock, GEC's chairman emeritus since September, followed a statement by Alcatel Alsthom chairman Serge Tchuruk that he was ready to make a new offer for the state electronics group if a December 31 validity deadline for current offers passes.
Tchuruk added he was willing to adjust his company's bid to recent developments and suggested the state might want to spread the privatisation of Thomson SA out over time.
In October, the French government decided to sell Thomson SA for one franc to Lagardere Groupe after a 11 billion franc ($2.1 billion) cash injection, instead of to Alcatel.
This decision awaits approval of the European Commission (EC) as well as France's Privatisation Commission.
While the EC decision could be due in the first half of December, the Privatisation Commission will not render its decision until after the Brussels' stance is known.
The French Finance Ministry has conceded that the entire operation may not be finished before December 31, a date after which theoretically both the Lagardere and Alcatel bids expire.
The announcement of a possible new Alcatel bid caused a slide in the company's shares, down 1.5 percent at 455.20 francs at midday, because investors did not like the new uncertainty.
Lagardere plans to merge Thomson's 58 percent-owned defence unit Thomson-CSF with its Matra Defence Espace unit while selling consumer electronics group Thomson Multimedia to Daewoo Electronics of South Korea for one franc.
The second sale has caused a public outcry and thousands of Thomson employees have protested in France's main cities, fearing for their jobs and severe Korean working conditions, despite job creation promises by Daewoo.
A group of Thomson workers in the western town of Angers are currently walking to Paris in a protest action, aiming to arrive in the capital in time for a December 6 shareholders meeting.
Part of Alcatel's plans were to combine the Thomson-CSF business with its own defence activities and then merge these with GEC's Marconi to create a defence electronics giant.
Weinstock said that neither Lagardere's plan to merge Matra with Thomson-CSF, nor Alcatel's defence activities with Thomson-CSF, would give spectacular effects.
""Only a merger between Thomson-CSF and Marconi would produce the necessary economies of scale and a good combination of products,"" he said, adding the combined company would have about $11 billion of annual sales.
Alcatel had said it intended to find a European industrial partner for Thomson-CSF. While the company has long standing links with GEC through GEC-Alsthom, Tchuruk did not want to exclude a link with Germany's Deutsche Aerospace.
In a statement, Foreign Affairs minister Herve de Charette formally denied his staff would have handed a report to President Jacques Chirac about an alleged dinner conversation between Weinstock and GEC chief executive George Simpson in which they allegedly planned to seize control of the new defence grouping.
Weinstock told Les Echos such a conversation had not taken place but said a report which contained a summary of the alleged conversation existed.
""Yes, that report exists and has been very damaging for the Alcatel position, people told us,"" Weinstock said.
",29
"French carmakers Renault SA and Peugeot PSA said on Wednesday that they were in talks with the government on a long-term plan to rejuvenate their workforce.
But the companies did not confirm a newspaper report they were seeking approval for a five-year plan to cut 40,000 jobs in an early retirement scheme in exchange for hiring 14,000 young people. Newspaper Les Echos said the cost of these operations could be 30 billion francs ($6 billion).
""Our chairman Louis Schweitzer and Peugeot chairman Jacques Calvet have written a letter to Prime Minister Alain Juppe in July with a proposal,"" a Renault spokeswoman said.
""There have been discussions since but the government has not yet replied,"" she added.
At Peugeot, officials declined to comment on the existence of the letter but a spokesman said that the French car industry needed to rejuvenate its work force.
""In France, the average age of a car worker is 42 to 43 years but our competitors, especially Asian, have an average age of below 30 years,"" the Peugeot spokesman said.
He said that this gave Peugeot and Renault a competitive handicap at a time when the markets are increasingly being opened up -- from 1999 a quota system limiting Japanese car imports in Europe will be lifted.
Younger workers are not only cheaper but also more flexible and open to new techniques such as ""empowerment"" - a management idea giving workers more responsibility for their own work, the Peugeot official said.
At Renault the average age is 45 years. ""We have old factories, the oldest is at Flins which dates from the war, and therefore the average age is rather high,"" the Renault spokeswoman said.
Renault had a worldwide staff of 139,950 people at the end of 1995. Of them, 72,163 were involved in car production in France.
At PSA Peugeot Citroen, the group number is 139,900 of whom 122,600 are in car production in France.
French car makers are experiencing difficulties and a two-year government old-for-new car incentive scheme has not helped to overcome market problems.
($1=5.057 French Franc)
",29
"Jet Multimedia aims to take on both Netscape Communications and Microsoft and have its France Explorer browser become the French standard instead of Netscape Navigator or Microsoft Explorer.
A spokeswoman for the small Lyon-based company said on Friday that France Explorer would be distributed for free at the start of 1997 and the programme would allow access to the Internet, to existing multimedia servers as well as to France's Minitel on-line database from a home personal computer.
She declined to give many details ahead of an official launch of the programme by Jet Multimedia's founding chairman Eric Peyre on December 12.
But the software programme, using a new France Telecom service for Internet access, could become a challenge to existing Internet Access Providers. It could also impact content providers in France such as AOL -- a joint-venture of America Online and Bertelsmann -- CompuServe and smaller Infonie by drawing away new customers.
France Telecom, which launched its own Wanadoo online service in association with Havas in May and which uses a French language version of the Microsoft Explorer, will in January open a service that it calls ""The Internet Kiosk"".
These are special telephone numbers which give access to the Internet using the France Telecom backbone telecommunications infrastructure. These numbers can obtained by companies such as Jet Multimedia and a caller will pay for use by duration.
France Telecom will charge the amount on the telephone bill and will pay the service company a part of the money.
""Jet Multimedia is not aiming to make money on the software. They want people to use their phonenumber and their existing servers,"" the spokeswoman said.
The system of paying for the use of Internet time, instead of paying a monthly subscription to an Internet Access Provider for a fixed number of hours of usage, could be attractive to people who are not great travellers in cyberspace.
These subscribers are currently served with subscriptions to AOL, the cheapest at 49 francs per month, CompuServe, Microsoft's MSN or Club Internet run by Hachette.
Jet Multimedia was founded under the name Jet Lag in 1989 and specialises in electronic publishing and multimedia technology. The company acquired telecommunication technology specialist Computer Answer Line (CAL) in September.
Jet Multimedia raised 43 million francs in April when it was listed on the small-cap market Second Marche at an issue price of 400 francs.
The company, 64 percent owned by management among which Peyre has 16 percent, had higher 1995 sales of 165 million francs but its net profit slipped to 7.2 million francs from 12.5 million francs due to acquisitions.
The group is France's third-biggest telematic services company -- offering database services via the Minitel -- after Axime and Assistance Genie Logiciel (AGL).
On Friday, Jet Multimedia shares were trading 17 francs or 2.34 percent lower at 710 francs at midday while the blue-chip CAC-40 index was down 1.9 percent. The number of regular users of Internet in France is currently estimated at between 300,000 and 500,000 people.
",29
"French Telecommunications Minister Francois Fillon has granted a telecoms operating licence to state-owned railroads group Societe Nationale des Chemins de Fer (SNCF) as a further step towards the sector's liberalisation.
In a decree published in the Official Journal on Monday, Fillon said he was granting a 15-year licence to SNCF's Telecom Developpement unit to offer telecommunications services in an alternative to the France Telecom network.
SNCF still has to detail what assets it is going to put in the Telecom Development unit and also needs to get vetting for its tariffs. The operating licence sets technical standards, privacy issues and interconnection obligations.
The SNCF licence is the second such licence for a so-called ""alternative infrastructure"" in France. The first, for Eurotunnel unit TransManche to offer telecom links between London and Paris, was granted late last month.
A spokesman for the ministry said that ""in the next few days"" licences would be granted to MFS Communication Co of the U.S. and Colt Telecom Group of Britain, owned by financial group Fidelity Investments.
MFS and Colt will specialise on business networks in highly-populated areas but the SNCF licence covers the railroads' existing network of 8,000 kilometres of optic fibre all over the country, as well as radio links, which will be expanded to some 12,000 kilometres in the next six years, SNCF sources said.
The licence also allows Telecom Developpement to use other means beyond its own network.
SNCF aims to decide before the end of the year which company will operate the network. It has at least three offers from interested companies.
One is from CEGETEL, the Generale des Eaux unit in which British Telecommunications Plc and Mannesmann of Germany have a stake and which aims to become France's second biggest operator. It already runs the SFR mobile network.
Another is Bouygues which teamed up with Italy's STET for the SNCF offer and is also talking with Germany's VEBA.
A third offer is by the Unisource consortium of Dutch KPN, Telia AB of Sweden, Swiss Telecom PTT and Spain's Telefonica.
AT&T of the U.S. is keeping silent about its intentions but the operator, aiming to play an important role in France, is rumoured to be playing several cards at the same time -- industry sources said it bid both with its usual European ally Unisource as well as on its own account and there are also rumours it is in talks with Bouygues.
Bouygues and AT&T had no comment on the rumours.
SNCF declined to name the bidders and said it had recently asked them for more details on their bids before taking a decision.
The SNCF network could be a vital part in any operator's plans, cutting the time to set up a network in time for the 1998 start of competition as well as reducing investment needs.
Telecom Developpement, like any future rival to France Telecom, will have to contribute to the costs of running the public service of telecommunications which will remain assured by the national operator.
A first tranche of 20 percent in France Telecom is expected to be floated on the share market this spring.
",29
"French Finance Minister Jean Arthuis said on Monday the procedure followed in the planned sale of Thomson SA was beyond criticism.
France's independent privatisation commission, however, always had the right to block the deal, he added.
""It is my conviction that the procedure followed by the government is unassailable. The law has been respected,"" Arthuis told Reuters on Monday.
""The privatisation commission is an independent body. It has full authority and I cannot prejudge the decision it will take. It is sovereign,"" he said.
Thomson's planned privatisation has raised a storm of criticism in France. The opposition Socialists and Communists in the National Assembly have called for a committee of inquiry into the conditions of Thomson's privatisation.
The French privatisation commission, comprising seven ""wise men"", is currently assessing the value of Thomson SA and its proposed sale to Lagardere Groupe and Daewoo Electronics. The commission is expected to issue its decision early December.
Commission members are appointed by decree for five years during which they cannot hold any other function.
The commission is currently chaired by Pierre Laurent, a former section chairman at the country's highest constitutional authority, the Conseil d'Etat or State Council.
Its members are Pierre Alby, a honorary chairman of Gaz de France, Andre Blanc, Daniel Deguen, honorary chairman of bank Credit Commercial de France, Daniel Hua, honorary managing director of bank Societe Generale, Jean Serise and Jean Pineau.
The Bank of France's Francoise Pallo-Guillabert is the commission secretary general.
The commission has the task of determining the value of state assets which are being sold, and to express an opinion about the government's choice.
A spokeswoman for the Finance Ministry said that the goverment always made its preference clear to the commission but sofar has never publicly stated its preference.
In the case of Thomson, however, Arthuis judged it necessary to publish the government's preference to avoid insider dealing because both bidders, Lagardere and Alcatel Alsthom, are quoted companies.
There is only one case known where the privatisation commission did not agree with the government -- at the start of 1996 the commission opposed the sale of the state's 83.3 percent stake Radio Monte Carlo (RMC) because it considered the bids too low.
""The first thing the commission has to do is to establish the value of Thomson and see whether indeed it is worth minus 11 billion francs, as both bidders say,"" a ministry official said.
""After that they will have to express their opinion on the government's choice,"" he added.
If the privatisation commission's decision, expected by the end of the year, would be in line with the government's preference there still remain hurdles.
The European Commission in Brussels has to agree with the planned state capital injection of 11 billion francs and has to consider the competition aspects of the deal.
",29
"Market talk persists about a possible demerger of Rhone-Poulenc into a chemicals company and a pharmaceuticals group, with a leading French broker saying it would boost share value by a third.
""Intrinsically, Rhone-Poulenc is worth no more than 40 to 45 billion francs ($7.89 billion to $8.88 billion) due to the weight of underperforming chemical activities and their important debts,"" Jean Borjeix, chief analyst at Jean-Pierre Pinatton, wrote recently.
He said that if the pharmaceutical activities -- Rhone-Poulenc Rorer, Fisons, Merieux and Connaught -- were separated from the chemical activities, total group value could be 60 billion francs.
""An asset gain of such a size would allow (an investor) to wait until the (demerger) operation takes place,"" Borjeix said, adding that the 1996 and 1997 results forecasts limited the downside.
Pinatton expects Rhone-Poulenc to report a stable 1996 net attributable profit of 2.05 billion francs, rising to 2.5 billion in 1997. Rhone published a net attributable profit of 2.13 billion in 1995.
Demerger rumours were first fuelled by May 28 comments by managing director Igor Landau, during a luncheon at the Roland Garros tennis tournament, saying the company had studied the possibility but had, for the time being, decided against it.
Borjeix believes the company will decide to split because management has become concerned about share holder value and also because an asset disposal policy is coming to an end.
Other analysts are less sure.
""I don't think it will happen. They will concentrate on improving margins themselves for the time being,"" said an analyst at a U.S. brokerage in London.
He also dismissed a suggestion, aired in Business Week in June, of Rhone selling its 68 percent stake in Rhone-Poulenc Rorer. ""There would be no immediate benefit to that.""
Rhone shares have been rising recently, partly on the back of 9.2 percent higher first half profits and on recurring speculative rumours of a split or possible merger of the chemical activities with Atochem of Elf-Aquitaine.
Shares rose from 122.3 francs in May to 136 on June 18 on initial speculation and then fell back to 120.8 on July 24. They have resumed their rise to 131 francs, but this is still below the institutional privatisation price of 146 francs in November 1993 and a price for individuals of 135 francs.
Les Echos newspaper said on July 29 that the company's board meeting of July, where the first half profit figures were approved, had also discussed the group's vulnerability to a takeover bid.
The paper said chairman Jean-Rene Fourtou was worried the insufficent profitability of the chemical sector would make the group a cheap buy for a rival.
Fourtou has made the restructuring of the chemical sector a key part of his strategy, next to a pharmaceutical expansion drive and a 10-billion-franc two-year asset sale plan.
Board member Philippe Desmarescaux was recently given control of the chemicals sector in a move which was seen as signalling that restructuring of the division would accelerate.
Rhone-Poulenc took 223 million francs in provisions for the chemicals sector in the first half and expects total 1996 group provisions to be 500 million francs.
The rumours about a chemical link-up with Elf-Aquitaine are in line with many market stories about big French combinations to stave off competition in world markets -- the same reasoning caused rumours Elf would merge with Total SA.
At Elf, where chairman Philippe Jaffre is also trying to boost profitability with cost cuts and asset sales, the Atochem unit is doing fine, even though sales fell in the first half.
Jacques Puechal, the pipe-smoking chairman of the division, has embarked on a selective acquisition policy bolstered by a surge in 1995 net attributable profit of five billion francs, against 1.8 billion in the previous year.
On Wednesday, Paris broker Leven SA issued a ""speculative buy"" advice on Rhone Poulenc shares, after having been ""neutral"". Leven said the company's debt remained a worry but it appreciated developments in the drugs division and noted rumours of a demerger. ($1=5.068 French Franc)
",29
"South Korea's Daewoo Electronics staged a charm campaign on Wednesday with newspaper advertisements after fierce criticism about its plans to buy state-owned loss-making Thomson Multimedia.
Under a banner ""Do you know the dwarf Daewoo?, the 34th biggest world company"" the group tried to counter a growing resentment in France that a ""tiny"" South Korean company was set to buy a ""leading"" French group for one symbolic franc.
France's Privatisation Commission will state in early December whether its agrees with a government plan to sell defence and consumer electronics Thomson SA to Lagardere Groupe for one franc after an 11 billion franc capital injection.
Lagardere will sell Thomson Multimedia, a maker of televisions and video recorders and a leader in digital video technology, to Daewoo.
Prime Minister Alain Juppe, giving in a little to opposition from the Socialist Party and some members of his majority, last week said there would be a parliamentary debate before the final government decision on the deal. But the debate will not be followed by a parliament vote on the proposal.
In full-page advertisements in most French newspapers on Wednesday, Daewoo said that its electronics arm had about the same sales figure as Thomson Multimedia, at some 40 billion francs, although with a big profit which the French company lacks.
It said that its global sales network, especially in Asia, would allow better market access for Thomson's new products such as flat screen television sets and televisions that can be connected to the Internet computer network.
The company also said that ""Daewoo believes in France"" and said it had made investments in the country and had close ties with a number of French companies.
""Contrary to all other competitors who have based themselves or moved to neighbouring countries, Daewoo has chosen France. Simply because it believes in France"".
Parliamentarians of the Communist Party are organising a seminar on the privatisation of Thomson on November 13. They want the promised parliament to be televised and join a call by the Socialist Party for an inquiry commission to study the way the government came to its decision.
The European Commission, meanwhile, is studying the Lagardere bid as well as a rival offer by Alcatel Alsthom and could make its findings on competition issues and the state cash injection known by December 4.
Dutch Philips Electronics has sounded out Commission officials about the posibility of lodging a complaint agaisnt the capital injection for its rival Thomson Multimedia but a spokesman in Eindhoven said the company was at the moment not planning such a complaint.
French media keep speculating that some minisiters, mainly Industry Minister Franck Borotra, are hoping for the Privatisation Commission to declare the bid void because of the size of the capital injection.
Le Nouvel Economiste, a two-weekly paper, said that Philips, Samsung and Toshiba had all turned down offers from Lagardere to acquire Thomson Multimedia.
In the case of Philips this was because of competition concerns, the paper said.
",29
"French state-owned Air France said on Thursday it was ready to take on the tougher competition posed by the planned foray into the French domestic market of British flag-carrier British Airways Plc (BA).
BA's TAT French unit on Wednesday announced a joint 780 million franc bid ($151.2 million) with French private bank Rivaud for domestic carrier Air Liberte that will double its share of takeoff and landing slots at Paris' busy second airport Orly to 20 percent.
An Air France spokeswoman acknowledged BA's increased presence in France aviation would have an impact.
""It certainly has consequences for us. But we will continue with improving our product and service while cutting our costs and prices,"" she said.
BA, one of the world's most profitable airlines, will in first instance manage its French assets from a distance. TAT and Air Liberte will operate separately at least until 1999 when the latter should have returned to profit.
The Creteil commercial court will meet on Friday to study the BA/Rivaud offer while an Air Liberte creditors meeting has the final say. Such a meeting is due within a month.
But the way to the finishing line is not without obstacles.
In Brussels, Richard Branson's Virgin Express said it planned to raise its bid for Air Liberte, in administration since September 26. The court-appointed administrator, Maitre Baronnie, reacted sceptically.
""I have never seen any bid by Virgin so I do not see how they can increase a bid,"" he told Reuters by telephone.
""Strictly theoretically, a new bid could be made just up to the moment that the creditors meet and accept the offer on the table. In the end the creditors decide,"" he added.
The pilot's union of Air France's domestic unit Air France Europe urged the government and chairman Christian Blanc to join the bidding battle for Air Liberte.
""It will allow our country to remain master of its skies. Otherwise, there will not be any French competition because there will be no French air transport industry left,"" the SNPL pilots union said in a statement.
Air France is constrained from expanding in France until 1997, under conditions imposed by the European Commission for state rescue capital injections.
Air Inter dominated French domestic routes and Orly airport until as recently 1995 when the French government decided to open some major domestic routes to competition ahead of full liberalisation from April 1997.
A spokesman for Air Inter, now renamed Air France Europe, said the company had at the moment a 60 percent share on the total French market.
Domestic airlines Air Liberte, AOM and TAT have all tried to carve out market share ahead of liberalisation with a price war. As a result they have suffered financially.
Industry sources said Air France could strike back in 1997 and make a bid for AOM to prevent another foreign airline from setting foot in France alongside British Airways.
",29
"French diversified conglomerate Bouygues on Thursday said Italy's STET was joining its efforts to become a leading player in France's telecommunications market after full liberalisation of the sector in 1998.
Bouygues, active in construction, television and communication, said STET would take a 49 percent stake in a new joint venture with Bouygues, called Bouygues-STET, in which the French group would hold 51 percent.
This company, together with German partner VEBA, plans to bid to run the telephone infrastructure of French state railways group SNCF.
Bouygues will compete in French telecommunications with state-owned France Telecom, of which a 20 percent stake will be floated in April, and with CEGETEL the telecoms company majority owned by Generale des Eaux.
STET will also buy into the BDT holding company which is 51-percent owner of Bouygues Telecom. Bouygues said that BDT was valued at 13.75 billion francs and STET would during 1996 and 1997 pay 1.71 billion francs to buy new shares in BDT.
After this increase, Bouygues will have 59.5 percent of BDT, Jean-Claude Decaux International 20.9 percent and STET 19.6 percent.
VEBA has a 15 percent direct stake in Bouygues Telecom. Other stake holders are Cable & Wireless Plc, US West International and banks BNP and Paribas.
Last month, Generale des Eaux said it was forming a telecoms unit CEGETEL with British Telecommunications Plc, SBC of the United States and Mannesman AG of Germany.
Analysts have said they are also awaiting a move by AT&T on the French market.
France Telecom has Deutsche Telekom and Sprint Corp as partners.
Bouygues in May started France's third mobile telecommuncitions network, aiming at a 20 percent market share in the year 2000.
The activity in the French telecommunications sector are similar to alliances forming in Germany.
British Telecom Plc is allied to German utility Viag AG. On Wednesday, RWE dropped their company from an alliance with Veba and Cable and Wireless.
",29
"Cie Generale des Eaux on Tuesday launched its bid to become the main rival to state-owned France Telecom with the start a fixed-line telephone network in a residential area in this southern city.
""Local telecommunications are for CEGETEL a major strategic axis,"" Philippe Glotin, managing director of Generale's telecoms unit CEGETEL, told a news conference.
He said the group aims to have a market share in 2003 yielding 40 billion francs ($7.9 billion) in annual sales, of which more than half would come from mobile communications.
In mobile telecommunications, Generale already competes with France Telecom with its SFR unit and it is allied to British Telecom Plc and MCI for business services.
SFR expects to have one million customers by March 1997, Glotin said, against some 725,000 at the moment.
The local residential market is expected to grow at a moderate pace but nevertheless represent 55 billion francs in annual sales by 2003.
Glotin said he aimed at gaining a 40 percent share in mobiles, 20 percent in long-distance and 10 percent for so-called local loops, or small networks.
CEGETEL, which counts BT, Mannesmann and SBC of the United States among its owners, has received permission from the French authorities for a telecoms experiment in Nice and from the start of 1997 it will offer residential telecoms services, using DECT technology.
The version of DECT, digitally-enhanced cordless telephone, applied in Nice uses radio waves to connect buildings to a telephone switch while the connections inside the building are of the classical type using a telephone socket.
DECT is also available in totally wireless versions.
The Nice experiment is small, with Glotin expecting 1,000 to 3,000 subscribers by the end of 1997, but it is a precursor of CEGETEL's assault on France Telecom and the company would invest three billion francs in local loops with radio links in the coming years to hone its skills ahead of market liberalisation in 1998.
A DECT service in Paris is expected to be ready in 1998 as the biggest part of an initial series of 30 towns which will add up to a population of some 10 million inhabitants.
In Nice, subscribers pay between 20 and 50 francs per month for a subscription, get a 10 percent discount on calls using the France Telecom network and pay about 0.22 francs per minute for local calls.
The CEGETEL shareholders will inject 6.8 billion francs at the start of 1997 to fund investments. Glotin said that the final make-up of CEGETEL's sharecapital would be known by year-end but he said it would be very close to the October agreement with BT taking 25 percent, SBC 15 percent and Mannesmann 10 percent.
""Changes are within the five percent limit,"" he said.
Glotin said that the success of CEGETEL, or any other rival to France Telecom in France, depended to a large extent on the interconnection costs and other payments telecom operators have to make to France Telecom to use its installations.
Telecommunications minister Francois Fillon has started a wide consultation, set to end on November 30, in order to establish in early 1997 a price list of the services France Telecom can provide to its rivals.
""The level of the interconnection costs for us means either the right to live of the right to die,"" Glotin said.
Another future rival to France Telecom is building and communications group Bouygues which has teamed up with Italy's STET.
",29
"Cie Generale des Eaux on Tuesday launched its bid to become the main rival to state-owned France Telecom with the start a fixed telephone network in a residential quarter in the southern city of Nice.
Philippe Glotin, managing director of Generale's telecoms unit Cegetel, said the group aims to have a market share in 2003 yielding 40 billion francs ($7.9 billion) in annual sales, of which more than half would come from mobile communications.
In mobile telecommunications, Generale already competes with France Telecom with its SFR unit and it is allied to British Telecom Plc and MCI for business services.
SFR expects to have one million customers by March 1997, Glotin said.
The local residential market is expected to grow at a moderate pace but nevertheless represent 55 billion francs in 2003.
Glotin said he aimed at gaining a 40 percent share in mobiles, 20 percent in long-distance and 10 percent for so-called local loops, or small networks.
Cegetel, which counts BT, Mannesmann and SBC of the United States among its owners, has received permission from the French authorities for a telecoms experiment in Nice and from the start of 1997 it will offer residential telecoms services, using the DECT technology.
DECT, digitally-enhanced cordless telephone, uses radio waves to connect buildings to a telephone switch, while the connections inside the building are of the classical type using a telephone socket.
DECT is also available in totally wireless versions but the Nice experiment will not use this. DECT can handle high capacities and is relatively secure as far as privacy of calls is concerned.
Glotin said that Nice was the precursor of Cegetel's assault on France Telecom and the company would invest three billion francs in Nice and Paris to hone its skills ahead of market liberalisation in 1998. The Paris service is expected to be ready in 1998.
Cegetel is aiming to start its business in some 30 towns which will add up to a population of some 10 million inhabitants.
To part finance this five-year plan, Cegetel shareholders will inject 6.8 billion francs into the company at the start of 1997.
In business services, Cegetel is considering putting a local loop in the La Defense office complex on the Paris outskirts -- where parent Generale des Eaux is the main building developer.
In that area, MFS Communications Ltd already offers business services with a local loop in competition to France Telecom.
Glotin said that the success of Cegetel, or any other rival to France Telecom in France, depended to a large extent on the interconnection costs and other payments telecom operators have to make to France Telecom to use its installations.
Telecommunications minister Francois Fillon has started a wide consultation, set to end on November 30, in order to establish in early 1997 a price list of the services France Telecom can provide to its rivals.
""The level of the interconnection costs for us means either the right to live of the right to die,"" Glotin said.
Other future rivals for France Telecom are building and communications group Bouygues which has teamed up with Italy's STET. Bouygues started France's third mobile telecommunications service earlier this year.
AT&T has also expressed a desire to become a major force in the French market.
",29
"France's state-owned electricity utility Electricite de France (EDF) said on Wednesday it had made a 850 million franc asset gain selling its 10 percent stake in Sweden's Sydkraft AB to Norway's Statkraft SF.
""It allows us to realise a big asset gain and the deal is also the start of an alliance with Statkraft,"" EDF chairman Edmond Alphandery told a news conference.
EDF officials said the alliance with Statkraft, also a state-owned utility, would mainly be in the form of cooperation in hydroelectric projects in southeast Asia.
EDF is selling its 6.808 million class A and 12.395 million class C shares in Sydkraft AB to Statkraft for a sum of 2.130 billion francs. This allows the Norwegian firm to increase its stake in Sydkraft to 15 percent. The formal transfer of ownership will take place in November.
EDF took its stake in Sydkraft, Sweden's biggest power firm, two years ago but it changed its strategy in April when its Northelec unit obtained a 25 percent stake in Graningeverkens AB, Sweden's number six power group. It later raised the stake.
Northelec is a joint venture with Skanska.
""It's better to have a big stake in a small company than to have a small stake in a big company,"" Alphandery said.
""At Sydkraft we did not even have a seat on the board, at Graninge we have a shareholders' pact allowing us to effectively control the company,"" he added.
EDF has a shareholders pact with Sweden's industrial family Versteegh and jointly they own 54 percent of Graninge.
""We saw the strategic value of the Nordic market and we have been able to cash in on the asset gain because the value of Sydkraft shares has risen a lot,"" he said.
Alphandery, a former economics minister named to EDF in November to replace Gilles Menage who was an appointee of the former Socialist government and an aide to Francois Mitterand, said the sale was proof of EDF's willingness to ""realise an asset gain when there is one.""
He did not expect further sales from EDF's international portfolio. The French utility in 1996 alone has made commitments totalling 4.6 billion francs in foreign stakes and Alphandery said EDF would continue its expansion mainly in the Mercosur area in Latin America and in southeast Asia including China.
EDF obtained a stake in Brazil's Rio de Janeiro power utility Light and Edenor in Argentina. Last year, it obtained stakes in two Hungarian companies. It als has investments in Italy, Spain, Portugal, Ivory Coast and South Africa.
""We can use the asset gain on Sydkraft to finance our international expansion,"" Alphandery said.
""This refocusing of Northern European strategy shows EDF's desire to be a major international and industrial operator, actively managing its investment portfolio,"" EDF said.
EDF's decision to leave Sydkraft makes Germany's Preussen Elektra AG, a unit of Veba AG, the biggest shareholder with 17.6 percent of shares and 27.1 percent of votes. The city of Malmo is second biggest with 11.8 percent of shares and 18.9 percent of votes, followed by Statkraft and some pension funds.
Sydkraft has a 20 percent stake in Graninge and Veba's Preussenelektra 12.4 percent.
",29
"Storage Technology Corp on Tuesday said it had signed a deal with the Swedish patent office for the sale of a disc-based storage system and was in talks with the Chinese patent office about a similar deal.
The two events follow an earlier system sale to the European Patent Office, based in The Hague.
""It's too early to talk about the details of the Chinese deal, we are still in discussions. It can still take some time before we have a contract,"" Campbell McGarvie, vice-president Europe, Africa and Midle East, said in an interview.
He gave no financial details of the Swedish deal.
StorageTek, based in Louisville, Colorado, specialises in the storage and retrieval of digital information and increasingly is moving away from digital documents to bit-map images. Bit-map images are digital pictures. Bit-map images open up the possibility of storing medical scans or video images. Potential users of StorageTek's new products are members of the medical profession or broadcasters.
StorageTek has disc-based products as well as tape-based products. In tape, it makes products for such companies as Siemens and Cie des Machines Bull.
On August 19, the company signed a deal with AT&T Corp's NCR unit under which NCR will market its Timberwolf tape system, a system for storing information.
But the NCR deal is less far reaching than a June 10 deal with International Business Machines Corp under which StorageTek will make IBM branded products.
The U.S. Justice Department is investigating the deal and in particular is looking at the possibility of anticompetitive practices in the direct-access storage devices industry. Pending completion of the probe, the deal cannot be finalised. Earlier this month, both StorageTek and IBM have said the inquiry was routine and expected.
Financial analysts say that, should the deal go through, it could add hundreds of millions of dollars to StorageTek's revenues.
""That was a major deal, it was big change for IBM. Never before had IBM allowed another company to build such major components as storage facilities,"" McGarvie said.
According to the IDC research buro, StorageTek had an 11 percent share of the disc-based storage market in the first quarter of 1996 while IBM had a 30 percent stake.
Should the deal go through, the two companies would hold just under half of the market, estimated for 1997 at 3,500 terrabytes (one thousand mega bytes), valued at $3.5 billion. The combined market share could grow to more than 50 percent in the next few years.
EMC Corp is currently market leader with 43 percent, and Japan's Hitachi Ltd Hitachi Data has a share of over 11 percent.
""The deal is mutually exclusive. IBM will also fund our research and while we begin with the Iceberg product it will also involve new products,"" McGarvie said. The Iceberg, a StorageTek product, is a storage system for discs.
StorageTek's Toulouse facility in France, opened in June 1995, will make IBM-branded products and the deal is expected to speed up the unit's expansion.
At Toulouse, some 100 people work on manufacturing and research and development. Storagetek is committed to increase this to 470 people within four years and McGarvie said that this would now easily be met, probably sooner than in four years.
In the medical imaging and video market, StorageTek sees a lot of opportunities but for the moment it has not yet signed big deals. ""We are in discussions for some deals which could be concluded next year,"" French marketing manager Eric Debray said.
On a horizon of five to 10 years, McGarvie believes the company could reap benefits from the Internet and Intranet online network services, coupling its storage facilities to online retrieval systems.
StorageTek acquired the company Network Systems about a year ago. This company offers network solutions as well as security products such as Borderguard, which is a ""firewall"" products.
A firewall shields sensitive internal computer information from the public internet and aims to prevent hackers from breaking into commercially vital information data bases.
""It's one of the main worries at the moment. Many companies want to go on the net but they fear that they will open up their internal systems to possible intrusion,"" McGarvie said.
-- Paris newsroom +33 1 4221 5452
",29
"French carmakers Renault SA and Peugeot PSA said on Wednesday that they were in talks with the government on a long-term plan to rejuvenate their workforce.
But the companies did not confirm a newspaper report they were seeking approval for a five-year plan to cut 40,000 jobs in an early retirement scheme in exchange for hiring 14,000 young people. Newspaper Les Echos said the cost of these operations could be 30 billion francs ($6 billion).
""Our chairman Louis Schweitzer and Peugeot chairman Jacques Calvet have written a letter to Prime Minister Alain Juppe in July with a proposal,"" a Renault spokeswoman said.
""There have been discussions since but the government has not yet replied,"" she added.
At Peugeot, officials declined to comment on the existence of the letter but a spokesman said that the French car industry needed to rejuvenate its work force.
""In France, the average age of a car worker is 42 to 43 years but our competitors, especially Asian, have an average age of below 30 years,"" the Peugeot spokesman said.
He said that this gave Peugeot and Renault a competitive handicap at a time when the markets are increasingly being opened up -- from 1999 a quota system limiting Japanese car imports in Europe will be lifted.
Younger workers are not only cheaper but also more flexible and open to new techniques such as ""empowerment"" - a management idea giving workers more responsibility for their own work, the Peugeot official said.
At Renault the average age is 45 years. ""We have old factories, the oldest is at Flins which dates from the war, and therefore the average age is rather high,"" the Renault spokeswoman said.
Renault had a worldwide staff of 139,950 people at the end of 1995. Of them, 72,163 were involved in car production in France.
At PSA Peugeot Citroen, the group number is 139,900 of whom 122,600 are in car production in France.
French car makers are experiencing difficulties and a two-year government old-for-new car incentive scheme has not helped to overcome market problems.
The French auto industry is hit by increased competition from Asian rivals as well as by the strength of the franc.
Renault expects to end 1995 in the red after posting a net attributable profit of 2.1 billion francs in 1995 while Peugeot reported a drop in first half net attributable profits to 602 million francs against 1.22 billion last year.
Renault is cutting 1,650 jobs in 1996 through early retirement and partial early retirement schemes and will in January start negotiations with its labour unions about the 1997 restructuring plan.
At Peugeot, there is a reduction of 3,000 to 4,000 in the job numbers each year and there too, new negotiations are due to start early 1997.
""French carmakers have a record of trying to adapt to the market conditions without resorting to mass lay-offs, like for instance our German neighbours have done,"" the spokesman said.
($1=5.057 French Franc)
",29
"Shares in French sports equipment maker Groupe Salomon SA fell sharply for the second day in a row on Thursday after a long and steady rise which saw the share more than double in value this year.
Dealers said that the company, headed by Jean-Francois Gautier and based in the mountain region of Annecy in the east of France, had become the victim of a number of rumours which cast a pall over the dynamic picture of the company.
Salomon executives were in London on Thursday on the second day of an investors' road-show, discussing the recent first half sales figures.
""There are two rumours in the market. One is that a Japanese distributor has gone bankrupt, which could cost the company money, and the other is that the roadshow is going badly,"" a share dealer said.
Salomon was down 17 francs, or 3.83 percent, at 427 francs at 1141 GMT after having given in 26 francs on Wednesday.
""In fact one of our distributors in Japan, Olympic Sports Co has gone bankrupt. But that is already in the first half figures and it will not change anything on the group level,"" Salomon spokeswoman Linda Champtenois told Reuters.
Olympic Sports applied for court mediation with creditors on September 20 with debts of 34.83 billion yen and the Japan Securities Dealers Association (JSDA) cancelled the company's Over-the-Counter registration.
Salomon's Champtenois said that ""everybody knows about the difficult market for winter sport equipment in Japan"" and brushed off the effect on Salomon's results.
Meanwhile Salomon's Japanese subsidiary Salomon & Taylor Made Co was trading in Tokyo at 810 yen, just above its life low of 790 yen and far below its year high of 1,790 yen. It was introduced on the OTC market in November 1995 at 1,800 yen.
On November 5, the Japanese unit reduced its parent six-months net results forecast to 288 million yen from 620 million yen and a comparable figure of 556 million.
Champtenois said that the roadshow in London had been long planned, followed on a September 30 visit to Edinburgh and was ""going fine"".
French dealers said that even if the rumours were unfounded and the Japan effect limited, they were a catalyst for profit-taking, especially now that the French market has hit a year high at a level not seen since in 1994.
Salomon has been a stock market darling. From a low of 171.50 francs on March 14 in 1995, Salomon rose to an all-time high of 494 francs on October 22 this year.
On October 30, it said its first half sales to end September, at constant currency rates, rose by 21.8 percent to 2.021 billion francs.
While hiking equipment -- walking boots and mountain gear -- was up by 68 percent and the Taylor Made golf equipment brand had a 77 percent increase in sales. Winter equipment, however, was down 16 percent. The Mavic cycle brand was up 4.1 percent.
Salomon had earlier forecast that its operating results for the 1996/97 year would be stable due to the cost of further diversification into snowboards with the aqcuisiion of Bonfire and the planned launch of new boards, shoes and fixtures in 1997 as well as new roller skates in 1998.
In the year to March 1996, Salomon made a net attributable profit of 308 million francs against 161 million last year.
-- Paris newsroom +33 1 4221 5452
",29
"French state-owned airline Air France said on Thursday it was ready to take on the toughening competition in its domestic market posed by British Airways Plc (BA).
BA's TAT French unit on Wednesday announced a joint 780 million franc bid ($151.2 million) with bank Rivaud for domestic carrier Air Liberte that will double its share of takeoff and landing slots at Paris' busy second airport Orly to 20 percent.
An Air France spokeswoman acknowledged BA's increased presence in France aviation would have an impact.
""It certainly has consequences for us. But we will continue with improving our product and service while cutting our costs and prices,"" she said.
After approval by the Creteil commercial court, scheduled to meet on Friday, and an Air Liberte creditors meeting due within a month, BA would take a 70 percent stake in loss-making Air Liberte.
A spokesman for Air France Europe, the domestic wing of the Air France operation, said the company had an 80 percent market stake on the routes it operates and 60 percent on the total French market.
But from April 1997, European liberalisation of the airline industry will fully throw open French airspace to competition.
The French government moved the door ajar at the start of 1996 by allowing competition on the busy Paris-Toulouse and Paris-Marseille routes which were controlled by state-owned Air Inter, part of the Air France group.
Other French airlines had been allowed to fly less busy domestic routes as well as European and international routes.
British Airways bought its first 49.9 percent stake in TAT in 1993 and obtained the remainder last July.
Air Liberte, AOM and TAT have all tried to carve out market share ahead of liberalisation with a price war against Air France Europe, the renamed Air Inter. As a result they have suffered financially.
AOM, headed by Alexandre de Couvelaire, had been in talks with Air Liberte with an eye to a merger but the worsening financial situation at Air Liberte, which sought creditor protection on September 26, made a deal impossible.
AOM, 99 percent owned by the Consortium de Realisation (CDR) which was set up to sell assets of bank Credit Lyonnais, is now going it alone with some 10 percent of the slot at Orly.
But industry sources said Air France could strike back in 1997 and make a bid for AOM to prevent another foreign airline from setting foot in France alongside British Airways.
Air France Europe plans to launch its ""Shuttle"" service between Paris and Toulouse next Monday, offering more departure times and a ""turn up and go"" service without reservations, as a major plank in its new commercial approach.
Other airlines in France are Air Littoral, owned by the Dufour family, the Dubreuil family's Regional airlines, Xavier Leclerq's Brit Airlines as well as Nouvelles Frontieres' Corsair and Euralair.
For Air France, these domestic lines are important potential feeder operations for its international operations.
Last week the company signed cooperation pacts with Continental Airlines and Delta Airlines Inc of the U.S. and Air France aims to sign a similar deal with an Asian ailrine in 1997.
These pacts are based on the ""hub and spoke"" theory in which airlines boost traffic by taking passengers from a smaller airport to a big ""hub"" for long distance flights to another hub. From the second hub another smaller plane can be used to take the passenger to the final destination. ($1=5.157 French Franc)
",29
"European governments and industry on Thursday launched a high-technology programme aimed at staying among the leaders of the world technology race.
Microelectronic Developments for European Applications (MEDEA), a two billion ecu programme for the 1997-2000 period, takes over from the Joint European sub-micron semiconductor initiative (JESSI).
Horst Nasko, Austrian chairman of JESSI and now MEDEA, said that while Europe had closed the technology gap in the past eight years, the new programme was aimed at forging ahead.
""In terms of concrete results, the technology gap that had been growing at the end of the 80s at an alarming rate between Europe and the rest of the world has been substantially closed,"" Nasko said.
""The most important thing is that we can't be complacent. The race is getting faster and fiercer, new countries like Korea and Taiwan have joined and sitting still means falling behind,"" he told Reuters at the launch of MEDEA.
MEDEA, which will be based in Paris, will coordinate industry research programmes in six main areas. Three of them, getting half of the funds, are applications in the areas of multimedia, communications, and automobile and traffic systems.
The other three are more basic technologies, as covered by JESSI, in semiconductor design and manufacturing techniques. At stake is a frontline industry on which eight milllion jobs in Europe depend and in which the technology changes with a new generation of chips every three years and a doubling in processing power every 18 months.
""When we started in 1988, Europe was running two generations behind,"" said Jurgan Knorr of the Siemens AG semicondiuctor group. ""We are now among the leaders.""
Arthur van der Poel, chairman of Philips Semiconductors which is part of Philips Electronics, said that the three large European chip groups -- Seimens, Philips and SGS Thomson Microelectronics NV -- were among the most financially healthy in the world.
Asked whether Europe needed to continue to put money into an industry that has become strong, Nasko pointed out that the United States, Japan and other regional blocs spend ""at least the same, and probably more"" on the strategic semiconductor industry, be it through defence programmes or tax breaks.
With JESSI, Europe managed to become independent as far as its chip requirements was concerned. With MEDEA, Europe wants to go further, making even finer chips and bigger silicon wafers to cut costs per chip.
""There is one area where we lag, that is microprocessors. But that situaiton is the same for everybody whose name is not Intel,"" Nasko said.
",29
"French chemicals and drugs group Rhone-Poulenc SA on Friday announced a larger than expected 13 percent rise in third quarter profits but said the increase would have been 25.1 percent but for a product recall.
Investors cheered the figures, encouraged by a good rise at its pharmaceuticals unit and the limited impact of the product recall. Rhone shares closed up 3.16 percent at 147 francs.
The company, which reported net income of 756 million francs ($147 million) versus 669 million at the same stage last year, said the earnings rise would have been almost twice as big but for the product recall.
Operating profit was 2.05 billion francs in the third quarter compared with 1.83 billion. Net sales were 20.47 billion francs, up from 19.62 billion.
Rhone-Poulenc and its Rhone-Poulenc Rorer U.S. drugs unit issued a profit warning on October 10 after the Centeon joint venture with Germany Hoechst recalled its albumin products due to the risk of bacterial infection.
Finance director Jean-Pierre Tirouflet reiterated that the recall would cut six to seven percent from analysts' forecasts for 1996 results.
Asked to comment on 1996 forecasts going as high as 2.75 billion francs, Tirouflet said: ""I have lower forecasts in my head.""
According to Jacques Chahine Finance, the market consensus for 1996 is 2.631 billion francs, rising to 3.426 billion in 1997, after 2.134 billion in 1995.
For the first nine months, net income was up 10.5 percent at 2.17 billion francs.
""This progress is a consequence of an improvement in results in the pharmaceutical, animal health and agro businesses,"" the company said.
""The figures are better than we had forecast,"" said analyst Guy Phillips at BZW in London. ""Especially the operating profit at life sciences, pharmaceuticals pleased. It was an encouraging set of results.""
Phillips said he may increase his profit per share forecast from eight francs to 8.5 francs. Brokers Leven in Paris said it saw no reason to make any adjustments to its forecast.
Rhone said the agro sector recorded a 14.7 percent increase in sales and a 54.9 percent rise in its profit contribution, due to a good global economic climate and the successful marketing of new products, especially Fipronil.
In chemicals and the fibres and polymers divisions, a rise in volumes failed to compensate for falling prices.
Operating profit on the chemicals side was relatively steady at 281 million francs versus 278 million, while in fibres and polymers it took a dive to 115 million from 248 million.
The company said it had completed sales of non-strategic assets to the tune of six billion francs by September 30 and that its net debt-to-equity ratio had fallen to 0.63 versus 0.72 at the end of 1995.
Tirouflet said Rhone expected assets sales to reach seven to nine billion francs by the end of the year.
Pharmaceutical earnings would grow in the fourth quarter as the synergy savings of the 1995 Fisons acquisition came through and because of new products, such as the June launch of anti-cancer drug Taxotere in the United States. ($1=5.141 French Franc)
",29
"French Prime Minister Alain Juppe said on Tuesday he wanted a public debate on the planned privatisation of electronics group Thomson SA after an outcry over an earlier government decision.
""Once the (privatisation commission) has delivered its ruling, and whatever its content, I will ask for a public debate on all the issues of this case, financial, industrial and social, so that we can have all the cards on the table before the government decides and everybody takes their responsibilities,"" Juppe told parliament during question time.
The government said on October 16 it wanted to sell loss-making and indebted Thomson SA to books-to-missiles conglomerate Lagardere Groupe instead of to industrial and telecommunications group Alcatel Alsthom.
The government planned to sell Thomson for a symbolic franc after an 11 billion franc ($2 billion) capital increase.
Lagardere plans to merge Thomson's 58-percent owned Thomson-CSF defence electronics group with its own Matra Defence Espace into the world's second-biggest defence electronics group.
As part of its plan, it agreed to sell Thomson's wholly-owned consumer electronics group Thomson Multimedia to Daewoo Electronics of South Korea, also for a franc.
Juppe told parliament on Tuesday that he personally made the decision to favour Lagardere because it was in the best interests of the country's defence industry and job market.
The Privatisation Commission, a body of seven independent experts, is currently studying both offers and has to state whether the bids reflect the true value of Thomson and whether it agrees with the government's preference.
Its decision is expected in early December.
Normally, a privatisation can go ahead if the commission agrees with the government preference, but the sale procedure has to be restarted if the commission does not agree.
The government normally does not announce its preference but Finance Minister Jean Arthuis said he decided to do so to avoid any insider dealing in shares of Lagardere, Alcatel or Thomson-CSF.
""I don't see them turning back on their decision,"" a share trader said about the debate. ""I think they're doing this to allow them to respond to criticism and explain their decision.""
Thomson Multimedia's labour unions are upset by declarations by Juppe that their company was not worth one franc, but minus 14 billion francs, the level of its debts.
Thomson Multimedia chairman Alain Prestat told Le Monde on Tuesday the company would be automatically profitable from 1998 due to technology licensing rights.
The company made a 2.8 billion franc loss in the first half of 1996, Prestat said.
Another criticism also emerged about the way the government announced its preference before the Privatisation Commission had studied the offers.
Lionel Jospin, first secretary of the Socialist Party and rival to Jacques Chirac in last year's presidential elections, openly wondered whether the government had acted illegally.
""I was shocked by the method, which was despicable and perhaps even illegal,"" he told a television interviewer on October 20.
($1=5.113 French Franc)
",29
"British Airways Plc (BA) on Wednesday boosted its position in France when French bank Groupe Rivaud joined its bid for ailing French regional airline Air Liberte.
Rivaud, a founding shareholder in Air Liberte and a former partner in a rival consortium, agreed to join BA after marathon talks that began on Tuesday afternoon and ended this morning.
It is the only bid left on the table and the commercial court in Creteil is expected to approve the offer on Friday. Richard Branson's Virgin Express and commercial pilot Fernand Denan had also been working on takeover offers.
The BA/Rivaud proposal still needs the blessing of Air Liberte's creditors and French authorities.
Air Liberte has a 12 percent stake of the domestic French market, while BA's TAT unit has eight percent. The market is still dominated by the state-owned Air France group.
""The situation is delicate,"" said Mark Rochet, chairman of TAT, adding he hoped the court would take a quick decision.
""Our partnership with the Groupe Rivaud offers the ideal solution for Air Liberte's very poor financial position. To save it requires swift action,"" BA chief executive Robert Ayling said in a statement.
""It's an excellent solution. We keep all the assets. I do not see another French solution, the last deadline was Friday,"" Air Liberte founder and chairman Lotfi Belhassine told Reuters.
British Airways will make a 440 million franc equity investment for a 70 percent stake in Air Liberte and Rivaud will put up 190 million for the remaining 30 percent.
In addition, Rivaud will also write off existing convertible debt of just over 500 million francs and will provide Liberte with 50-60 million francs of new loan capital.
Both companies will also pay the costs of running Air Liberte during administration, estimated at 150 million francs.
Rochet told a news conference that Air Liberte's debt now stands at 800 million francs. Creditors can either get 20 percent of their money in cash or get fully paid over 10 years.
Rivaud, headed by industrialist Vincent Bollore, had originally been part of a consortium of travel groups Nouvelles Frontieres, Club Mediterannee and Royal Air Maroc.
Nouvelles Frontieres chairman Jacques Maillot said he and the Moroccan airline had withdrawn because of what he described as the ""extraordinary, disastrous financial situation"" of Air Liberte.
Bollore is chairman of the shipping and financial group Bollore. He was made the chairman of Rivaud last week and the bank is increasing its capital especially for Air Liberte.
A Bollore official said Rivaud had changed camps on Tuesday after Nouvelles Frontieres and other partners said they were unwilling to provide the money needed for a two-thirds stake.
Rivaud, Club Med and airplane leasing company ILFC were among the original backers of Air Liberte eight years ago.
The BA/Rivaud plan is based on the three-year busines plan for Air Liberte drawn up by BA. It will safeguard 1,250 out of 1,400 Air Liberte jobs and aims for break-even in 1999.
Air Liberte owns about a quarter of the landing and take-off slots at Orly airport, Paris' second airport specialising in domestic flights.
It lost 650 million francs in the first nine months of 1996 due to an air fare war and insufficient passenger numbers in the run-up to full liberalisation of French airspace in 1997.
",29
"Daewoo Electronics on Tuesday tried to placate French critics of its planned purchase of Thomson Multimedia with job and investment promises while calling a counter-bid ""not realistic""
But Bae Soon-hoon, chairman of the South Korean company, declined to discuss financial details of the proposed takeover until the French government's decision to sell the world's fourth-biggest television maker became final.
Both the French Privatisation Commission and the European Commission still have to approve the deal.
The French government announced last week it had selected Lagardere Groupe over Alcatel Alsthom to buy state-owned Thomson SA for one franc after an 11 billion franc ($2.12 billion) capital injection.
Lagardere plans to merge its Matra Defence Espace unit with defence electronics group Thomson-CSF and sell off Thomson Multimedia (TMM) to Daewoo, also for one franc.
The French financial newspaper La Tribune on Monday suggested a rival French bid for TMM could still emerge. The Liberation daily on Tuesday said Sagem, which fell out of the race earlier on, was preparing such a bid.
Sagem denied planning a bid, however, and the idea was dismissed by Bae.
""I saw the newspaper article. I thought it was a joke,"" he said. ""We have been working with the government for six months and have been respecting the rules of the procedure. Unless the government changes the procedure, nobody can make a proposal at the present time.""
Bae said he planned to make Thomson Multimedia, reported to have made a three billion franc first half loss and to have debts of at least 14 billion, ""very profitable and prosperous.""
He confirmed a pledge to create 5,000 French jobs at TMM in five years, saying French labour conditions were competitive.
The partnership between Thomson Multimedia and Daewoo, which will create the world's biggest maker of televisions, video recorders and cathode ray tubes, would allow a 13 billion franc worldwide investment plan between now and 2000.
Daewoo said that would create a total of 6,600 jobs in final assembly and 2,500 jobs in component production.
Bae declined to indicate how much of Thomson Multimedia's debt Daewoo would assume but said he expected some of the state capital injection to go to TMM.
""The Daewoo group will keep a significant part of the TMM debts and has the means to do so,"" said Michel Jacob, managing director of Daewoo's French financial advisers Rothschild's.
Daewoo said it would keep the Thomson identity and French headquarters and would continue research and development in the French city of Rennes. It said all the group's products would be sold under Thomson brand names in Europe and the U.S.
The digital television know-how of Thomson will be put in a special joint venture with Lagardere. Bae said the joint-venture would be 50/50 owned, while Jean-Luc Lagardere said on Saturday his group would have a 51 percent majority.
The government decision to sell TMM indirectly for one franc to Daewoo has attracted fierce criticism, with Socialist Party leader Lionel Jospin saying he was ""shocked"".
Jacques Delors, former president of the European Commission, said at the weekend: ""I would have preferred to maintain a European pole in consumer electronics.""
Some Thomson labour unions have also attacked the sale of ""French technology"" to a South Korean company. ($1=5.199 French Franc)
",29
"The French government said on Tuesday it was to complete the privatisation of computer-maker Cie des Machines Bull by selling another stake of at least five percent.
The sale, after a capital increase of ""several hundreds of millions of francs"" will reduce the government's share in the company, both directly and through the national telecoms company France Telecom to below 50 percent.
The Paris Bourse said it had suspended Bull's shares, which last traded at 33 French francs ($6.36), at the company's request until after completion of the operation which will take several weeks.
Japan's NEC, Motorola of the U.S. and France Telecom have a 17 percent Bull stake each and are expected to subscribe to the capital increase.
The state, with a 36 percent stake, will first subscribe to the capital increase and then sell the shares to private investors.
IBM, which has 1.6 percent, is expected not to join in the capital increase. It had also passed at two previous occasions. Japan's Dai Nippon Printing, 3.3 percent, has been invited to join in the capital increase.
The Finance Ministry said in a statement it will decided on the issue price and the identity of the buyers after advice by the independent Privatisation Commission.
Interested parties have 15-days to express their interest in blocks of at least 1.4 million shares, or one percent of Bull.
Thierry Breton, managing director, told Reuters the operation would give Bull the freedom to decide on any mergers or acquisitions while it played its role in the restructuring of the European computer industry.
""With the support of our private shareholders, we can do that either by a market operation, by a merger or acquisition or by both,"" he said.
Jean-Marie Descarpentries, the former McKinsey consultant made chairman in 1993, said earlier this year that the company wanted the state to sell a 20 percent stake to a fourth industrial partner, preferably European, and financial investors.
""Rather than to wait for when the opportunity presented itself before doing anything, the shareholders have decided to put us in a position so that we could act as a private company when the time is ripe,"" Breton said when asked whether today's announcement meant the industrial plans had changed.
Breton said the other companies invloved in the restructuring of the European computer industry were Italy's Olivetti, Philips Electronics of the Netherlands and Siemens AG of Germany. ""There are also the European units of U.S. companies that may be interested in participating in the restructuring,"" he said.
Bull came back to the black in 1995 after combined losses of 22 billion francs since 1990. Breton said the company kept its profit forecast of higher 1996 profits, after 306 million in 1995, but he declined to confirm the group aimed at more than 600 million.
""We keep our forecast, we are on line to deliver on our promise,"" Breton said.
Bull in February effectively withdrew from the troubled personal computer market by merging its Zenith Data division with Packard Bell Electronics Inc of the U.S. ($1=5.190 French Franc)
",29
"The 1,400 staff of ailing French regional airline Air Liberte, which is under bankruptcy protection, published a full-page newspaper advert on Sunday demanding that they be shown takeover bids made to the administrators.
""How is it possible that a company which has been fighting with success for eight years to improve the quality of air transport could disappear today,"" staff said in an ""open letter"" advert in the Journal du Dimanche main French Sunday paper.
British Airways Plc, Richard Branson's Brussels-based Virgin Express, a consortium headed by Nouvelles Frontieres chairman Jacques Maillot, and commercial pilot Fernand Denan have made offers for Air Liberte.
The commercial court of Creteil, a southeastern Paris suburb, is expected to decide early this week which of the options will be pursued. Air Liberte went into administration on September 26 with debts of about 1.5 billion francs.
In an ad paid for by the airline's works council, staff of Air Liberte blamed the French authorities for much of the companies' woes.
""By multiplying the obstacles to its development -- difficulties to obtain slots, difficulties to get ground handling services equal to those of the state airline (Air France /Air Inter ) -- the public authorities have pushed Air Liberte into a dead-end,"" the advert read.
They also blamed certain Air Liberte shareholders for ""abandoning"" the company at the eve of a recapitalisation and said they feared the final solution would be liquidation.
""We staff of Air Liberte, we cannot accept anymore to lose our jobs, put our families in distress nor to interrupt the service we have to give to passengers,"" the advert said.
The ad said the staff wanted to see the bids made for the company and were ready to take on responsibilities.
Ousted chairman and founder Lotfi Belhassine had been preparing a last-minute capital increase in which staff would put six weeks' pay into the company.
""Today, some people seem to wish the liquidation of Air Liberte rather than the arrival of a European company. Who has interest in seeing the return of a monopoly?,"" the ad asked.
British Airways plans to pay 25 million francs for Air Liberte and aims to merge it with its French TAT unit. The British airline said on Friday it had plans to spend 440 million francs on getting Air Liberte back into profit in three years.
Air Liberte owns about a quarter of the landing and take-off slots at Orly airport, Paris' second airport specialising in domestic flights, and this would dramatically boost BA's presence and competitiveness in France.
Air Liberte lost 650 million francs in the first nine months of 1996 due to an air fare war and insufficient passenger numbers. Since the start of the year the main French domestic routes are open to competition ahead of full liberalistaion in 1997. Air Liberte and other regional group AOM have been fighting to take market share from former monopolist Air Inter.
Jacques Maillot, also chairman of smaller airline Corsair, counts the Rivaud bank, travel group Club Mediterranee and Royal Air Maroc in his consortium.
Maillot has not given financial details but he plans to merge Air Liberte with AOM, which is for sale.
The Rivaud bank, a very secretive and influential financial group, is headed since last week by entrepreneur Vincent Bollore and the bank is close to the ruling RPR party.
The Le Monde newspaper said last week Prime Minister Alain Juppe was pushing for a domestic buyer for Air Liberte.
",29
"The French Industry Minister on Wednesday angrily reminded the chairman of Britain's General Electric Co Plc of his conditions for an Anglo-French nuclear merger on the day the plan was set to go ahead.
Franck Borotra issued a statement saying French interests needed to keep a majority in a merged combination of the GEC Alsthom joint-venture and state-controlled Framatome in reaction to the publication of an interview with GEC chairman Lord Weinstock in which he said he wanted at least 50 percent.
In a supervisory board meeting on Wednesday, Framatome shareholders are set to appoint Dominique Vignon as chairman and chief executive, replacing Jean-Claude Leny who had openly criticised the plan.
""The Minister of Industry, Post and Telecommunications, Franck Borotra, would like to recall that the study of a merger of GEC-Alsthom and Framatome, undertaken at the behest of GEC and Alcatel, can only be completed if five conditions are respected,"" the Industry Ministry said in a statement.
The conditions are that the state keep control of strategic decisions concerning nuclear activities, the continuation of Franco-German cooperation on the future EPR power station, preservation of the identity of Framatome's nuclear activities, the predominance of French interests in the new combination and clear provisions for nuclear risks.
Framatome has a technical alliance with Siemens to develop the future European nuclear power station.
""These conditions are non-negotiable because they constitute French control over its nuclear activities. They (the conditions) should notably lead to a shareholders' pact between the French parties,"" the statement said.
Weinstock told French financial daily Les Echos the merger talks should not change the balance of power in the joint Anglo-French venture with Alcatel Alsthom.
""The operation concerns mainly the relations within GEC-Alsthom...the balance in the company should not be changed,"" he said. ""We should have the same stake as Alcatel Alsthom. Not more and not less. Even if we have to pay a dowry for it.""
Alcatel has a 44 percent stake in Framatome and its chairman Serge Tchuruk has said in the past that he expected French interests to have a majority in the new enlarged group.
In a second phase, Tchuruk wanted to float a part of GEC-Alsthom Framatome on the share market in order to focus the venture's management on financial performance.
The French state gave a green light to the planned merger in August after years of opposition to Alcatel taking a majority stake in Framatome.
""Framatome is an important operation because nuclear power will become an alternative again. There are going to be new nuclear construction programmes even though there are none at the moment. GEC Alsthom will have a good card to play with Framatome,"" Weinstock said.
Framatome is currently controlled by the government through state owned energy holding group CEA-Industrie, with 36 percent, electricity utility EdF with 11 percent and the Consortium de Realisation (CDR) with four percent.
Asked by Les Echos whether he accepted the French idea of a shareholders' pact, Weinstock said, ""No. We want to maintain our partnership. We do not want to become a minority that can be manipulated.""
",29
"South Korea's Daewoo Electronics staged a charm campaign on Wednesday with newspaper advertisements after fierce criticism about its plans to buy France's state-owned loss-making Thomson Multimedia.
Under a banner ""Do you know the dwarf Daewoo?"", the 34th biggest world company"" the group tried to counter growing resentment in France that a ""tiny"" South Korean company was set to buy a ""leading"" French group for one symbolic franc.
France's Privatisation Commission will state in early December whether it agrees with a government plan to sell defence and consumer electronics Thomson SA to Lagardere Groupe for one franc after an 11 billion franc ($2.1 billion) capital injection.
Lagardere will sell Thomson Multimedia, a maker of televisions and video recorders and a leader in digital video technology, to Daewoo.
Prime Minister Alain Juppe, giving in a little to opposition from the Socialist Party and some members of his majority, last week said there would be a parliamentary debate before the final government decision on the deal. But the debate will not be followed by a parliament vote on the proposal.
In full-page advertisements in most French newspapers on Wednesday, Daewoo said that its electronics arm had about the same sales figure as Thomson Multimedia, at some 40 billion francs, although with a profit which the French company lacks.
It said that its global sales network, especially in Asia, would allow better market access for Thomson's new products such as flat screen television sets and televisions that can be connected to the Internet computer network.
The company also said that ""Daewoo believes in France"" and said it had made investments in the country and had close ties with a number of French companies.
""Contrary to all other competitors who have based themselves in or moved to neighbouring countries, Daewoo has chosen France. Simply because it believes in France"".
Parliamentarians of the Communist Party are organising a seminar on the privatisation of Thomson on November 13. They want the promised parliament debate to be televised and joined a call by the Socialist Party for an inquiry commission to study the way the government came to its decision.
The European Commission, meanwhile, is studying the Lagardere bid as well as a rival offer by Alcatel Alsthom and could make its findings on competition issues and the state cash injection known by December 4.
Lagardere finance dirtector Philippe Camus said on Wednesday that a change in the government's decision would be a ""total catastrophe in the international financial community"".
Speaking to a seminar organised by brokers Ferri, Camus said he did not understand the hostility toward Daewoo.
""Daewoo has made commitments on jobs and people say to them, Out! France is going to have a big credibility problem,"" he said.
Camus said Lagardere had had ""37 contacts in the whole world. Everybody ran away from the deal, except the Korean group Daewoo,"" he said. ($1=5.143 French Franc)
",29
"France Telecom chairman Michel Bon said on Tuesday the French operator wanted to grow internationally in order to offset the impact of competition in France.
""We will not enjoy all the market growth in France,"" Bon told a news briefing.
From 1998, France Telecom will lose its monopoly position entirely and both Generale des Eaux and Bouygues have formed international alliances to take it on.
France Telecom officials said the group aimed to generate at least 10 percent of its sales abroad.
Bon, in Belgium for the inauguration of the country's second mobile telecommunications operator, Mobistar, said France Telecom's international policy was based on three main goals.
Firstly, the group wanted to answer the international needs of its clients. This is mainly done through the Global One joint venture with Deutsche Telekom and Sprint Corp of the United States.
Secondly, the group wants to use its know-how in building modern infrastructure networks and is setting up such networks in Latin America and Indonesia.
Thirdly, the group is looking for ""new growth areas"" to compensate for the impact on sales of the new competition in France, Bon said.
Mobistar, in which France Telecom has a majority stake, is part of this policy. The Beglian operator started six weeks ago and has 20,000 subscribers, aiming for a 25 percent market share in 2005.
France Telecom hopes to hear in November that a consortium it leads has won a GSM licence in Romania and the group is in negotiations with the government of Poland.
In Poland, France Telecom is operator of an analogue network but was excluded from getting a GSM digital licence. After a state visit by French President Jacques Chirac, the situation has improved for France Telecom, but negotiations are still continuing.
In Italy, France Telecom has no ambitions in mobile telecommunications, because of the presence of state-owned TIM Omnitel, which is run by Olivetti.
France Telecom is talking with Olivetti about co-operating in Infostrada, a fixed-line venture which is bidding for the network of the Italian railways.
",29
"French state-owned Air France said on Thursday it was ready to take on the toughening competition in its domestic market posed by British Airways Plc (BA).
BA's TAT French unit on Wednesday announced a joint 780 million franc bid ($151.2 million) with bank Rivaud for domestic carrier Air Liberte that will double its share of takeoff and landing slots at Paris' busy second airport Orly to 20 percent.
An Air France spokeswoman acknowledged BA's increased presence in France aviation would have an impact.
""It certainly has consequences for us. But we will continue with improving our product and service while cutting our costs and prices,"" she said.
BA, one of the world's most profitable airlines, will in first instance manage its French assets from a distance. TAT and Air Liberte will operate separately at least until 1999 when the latter should have returned to profit.
The Creteil commercial court will meet on Friday to study the BA/Rivaud offer while an Air Liberte creditors meeting has the final say. Such a meeting is due within a month.
But the way to the finish line is not without obstacles.
In Brussels, Richard Branson's Virgin Express said it planned to raise its bid for Air Liberte, in administration since September 26. The court-appointed administrator, Maitre Baronnie, reacted sceptically.
""I have never seen any bid by Virgin so I do not see how they can increase a bid,"" he told Reuters by telephone.
""Strictly theoretically, a new bid could be made just up to the moment that the creditors meet and accept the offer on the table. In the end the creditors decide,"" he added.
The pilot's union of Air France's domestic unit Air France Europe urged the government and chairman Christian Blanc to also make a bid for Air Liberte.
""It will allow our country to remain master of its skies. Otherwise, there will not be any French competition because there will be no French air transport industry left,"" the SNPL pilots union said in a statement.
Air France is constrained from expanding in France until 1997, under conditions imposed on European Commission for state rescue cas.
Air Inter dominated mestic routes and Orly airport until as recently 1995 when the French government decided to open some major domestic routes to competition ahead of full liberalisation from April 1997.
A spokesman for Air Inter, now renamed Air France Europe, said the company had at the moment a 60 percent share on the total French market.
Air Liberte, AOM and TAT have all tried to carve out market share ahead of liberalisation with a price war. As a result they have suffered financially.
Industry sources said Air France could strike back in 1997 and make a bid for AOM to prevent another foreign airline from setting foot in France alongside Brr airlines in France are Air Littoral, owned by the Dufour family, the Dubreuil family's Regional airlines, Xavier Leclerq's Brit Airlines as well as Nouvelles Frontieres' Corsair and Euralair.
",29
"British Airways Plc on Wednesday joined with French bank Groupe Rivaud to bid for ailing French regional airline Air Liberte, the airlines' administrator told Reuters on Wednesday.
""It's a bid to continue the company. British Airways will have 70 percent, Rivaud 30 percent. It's a bid which satisfies my conditions, assures the jobs and is also good for the creditors,"" Maitre Baronnie said by telephone.
Rivaud, headed by industrialist Vincent Bollore, had originally been part of a consortium of travel groups Nouvelles Frontieres, Club Mediterannee and airline Royal Air Maroc.
Nouvelles Frontieres chairman Jacques Maillot said he was now withdrawing his bid. The BA/Nouvelles Frontieres bid was the only one remaining, Nouvelles Frontieres said.
Bollore is also the chairman of a shipping and financial group with his name. He was made the chairman of bank Rivaud last Friday and the bank was increasing its capital especially for Air Liberte.
Rivaud, Club Mediterrannee and airplane leasing company ILFC were among the original financial backers of Air Liberte, founded eight years ago.
Baronnie said that creditors could chose to either get cash now with a discount to the outstanding amount, or wiat for a maximum of ten years to get fully paid.
Air Liberte has debts of some 1.5 billion french francs ($290.7 million).
He said there was no price attached to the bid, as was the case with the former TAT bid of 25 million francs, because it was a bid to continue running the company, instead of an offer to buy the assets.
He said that 1,250 jobs at Air Liberte were safeguarded.
He said that the Creteil commercial court would meet on Friday to discuss the offer and a meeting with creditors was schduled within a month.
Meanwhile Air Liberte could dispose of its cash funds.
""I think this is the best we could get for the company and the creditors,"" Baronnie said, speaking from Air Liberte headquarters.
Air Liberte founder and chairman Lotfi Belhassine will keep his post, he added.
Air Liberte went into administration on September 26 with debts of about 1.5 billion francs.
Apart from British Airways and Maillot there were bids from Richard Branson's Brussels-based Virgin Express, and commercial pilot Fernand Denan.
British Airways planned to merge Air Liberte with TAT and said last Friday it had plans to spend 440 million francs on getting Air Liberte back into profit in three years.
Air Liberte owns about a quarter of the landing and take-off slots at Orly airport, Paris' second airport specialising in domestic flights, and this would dramatically boost BA's presence and competitiveness in France.
Air Liberte lost 650 million francs in the first nine months of 1996 due to an air fare war and insufficient passenger numbers.
Since the start of the year the main French domestic routes have been open to competition ahead of full liberalistaion in 1997.
Air Liberte and other regional group AOM have been fighting to take market share from former domestic monopolyt carrier Air Inter, part of Air France. ($ = 5.16 French Francs)
",29
"A decision on the fate of ailing airline Air Liberte is not due until the start of next week and no bidder has yet formally submitted an offer to acquire the company, the president of the Creteil commercial court said.
""At the moment, no bid has been submitted,"" Dominique Leveque told Reuters by telephone. He denied newspaper reports that there was a 1400 GMT deadline for the bids.
""Bids have to be in today. That can be this afternoon or this evening. We are not going to close the mailbox,"" Leveque said.
He said the court would on Tuesday afternoon at the earliest make a statement about the bid or bids. After that it would study the offers.
""According to the law we have six months to study the situation. But it is clear that the company's cash position cannot hold another six months,"" he said.
""We will do all we can but the court cannot decide in 48 hours,"" Leveque said, adding a decision was due at the start of next week at the earliest.
British Airways is preparing a bid for the regional airline, proposing to merge it with its French TAT unit.  
A spokesman for British Airways in London said the company feared the French government would like a French company to acquire Liberte to prevent BA or another foreign airline from obtaining the carrier and its valuable slots at Orly airport.
Air Liberte owns between 20 and 25 percent of the slots at Orly, Paris' second largest airport specialising in domestic routes, which represents 20,000 take-offs and landings per year.
Air Liberte lost 650 million francs in the first nine months of 1996 and has debts of 1.5 billion francs. The company was placed under bankruptcy protection on September 26 after merger talks with other French airline AOM failed.  
Jacques Maillot, head of French travel company Nouvelles Frontieres and charter airline Corsair, said he planned to bid for both Air Liberte and AOM.
AOM, formerly Air Outre-Mer, is being put on sale by the state agency Consortium de Realisation (CDR) which is divesting former Credit Lyonnais assets.
Richard Branson, chairman of Virgin Atlantic, said last week he might also bid for Air Liberte if BA did so. But a Virgin executive told Le Monde on Monday that the company was not yet sure whether a bid for Air Liberte was the best way to develop its business in France.  
Air Liberte is owned 32.3 percent by Groupe Rivaud. Banque Indosuez has 13 percent, International Lease Finance Corporation (ILFC) 12 percent, Euralair 10 percent, Club Mediterranee has 8.5 percent, Lyonnaise de Banque 6.2 percent and SAE five percent.
Chairman and founder Lotfi Belhassine has six percent and other interests have the remaining seven percent.
Air Liberte expanded its network rapidly in the past year, making full use of the opening up of the big national routes such as Paris-Marseilles, Paris-Toulouse, Paris-Nice and Paris-Bordeaux.
Air France unit Air Inter, renamed Air France Europe, previously had a monopoly over these routes.
Air Liberte, AOM, Eurolair, BA's TAT and others cut their prices in order to win market share on the routes prior to the complete opening up of the French -- and European -- air market in 1997.
But Air Liberte was unable to fill its planes and posted losses. The company also claimed it suffered from a forced regrouping of its activities to Orly Sud terminal, while Air France and Air France Europe remained based in Orly Ouest.
-- Paris newsroom +33 1 4221 5452
",29
"The planned sale of state-owned Thomson Multimedia to Daewoo Electronics has whipped up a storm of protest, which on Monday drove down shares in the Korean company's French partner Lagardere Groupe.
Lagardere shares closed nearly seven-percent lower on Monday on investor worries about the backlash of the Thomson sale that risks clouding the outlook for future French privatisations.
French opposition parties, labour unions and most French people, according to polls, are unhappy with the government's plan to sell Thomson SA, the world's fourth biggest television set maker and a leading defence group, to Lagardere and Daewoo for a symbolic one franc.
Thomson Multimedia workers protested against the deal on Friday and plan a demonstration in November against what they have likened to an enforced ""fire sale.""
The mounting opposition and the strongly nationalist tone, could augur badly for foreign buyer interest in future privatisations as the government prepares to sell insurer GAN, Credit Lyonnais and Air France.
The backlash also took the steam out of a rally in shares in Lagardere, which had risen as much as 32 percent after the government announced on October 16 that it had selected it over rival Alcatel Alsthom to buy Thomson.
Thomson has a 58-percent stake in defence group Thomson-CSF and 100-percent of Thomson Multimedia (TMM), a leader in new digital images technology.
""Lagardere is down because of the recent news articles that put in doubt the Thomson deal,"" a dealer said.
French Finance Minister Jean Arthuis said on Monday the procedure followed by the government was ""sheltered from all politicial criticism.""
The government tilted toward Lagardere's bid because of the defense connection. Lagardere plans to merge its Matra unit with Thomson-CSF and sell TMM to Daewoo -- also for one franc.
""The public authorities focused on the military aspect of the Thomson deal. They neglected the civilian (consumer electronics) aspect...it's now sticking in their throats,"" said the newsletter La Lettre de l'Expansion.
A survey of 1,004 voters published by the newspaper La Tribune found 72 percent disapproved of the sale price, saying it did not reflect TMM's value. Only 12 percent agreed with the government that the price was right given the group's debts.
TMM is saddled with the bulk of Thomson's debt, expected to reach 28 billion francs ($5.44 billion) by the end of the year.
Loser Alcatel broke its silence on Friday and said it would not have sold control of TMM to a foreign group but put together a 50-50 joint venture with an Asian partner.
""This new group would have formed the basis of a global industrial project in which French interests would have been solidly represented,"" Alcatel said in a statement.
The deal hinges on the approvals of France's Privatisation Commission and the European Commission, and speculation is rising that the privatisation commission -- which had been expected to make only a procedural review -- may turn into a more serious stumbling block.
The commission, a body of seven independent experts chaired by Pierre Laurent, has the mandate to ensure that any deal reflects the value of the company.
""Of course, they can disagree with the government,"" a Finance Ministry official said. ""If they agree, the deal can go ahead. If they disagree, the privatisation procedure has to be started over again,"" he added.
($1=5.151 French Franc)
",29
"French state-owned airline Air France said on Thursday it was ready to take on the toughening competition in its domestic market posed by British Airways Plc (BA).
BA's TAT French unit on Wednesday announced a joint 780 million franc bid ($151.2 million) with bank Rivaud for domestic carrier Air Liberte that will double its share of takeoff and landing slots at Paris' busy second airport Orly to 20 percent.
An Air France spokeswoman acknowledged BA's increased presence in France aviation would have an impact.
""It certainly has consequences for us. But we will continue with improving our product and service while cutting our costs and prices,"" she said.
After approval by the Creteil commercial court, scheduled to meet on Friday, and an Air Liberte creditors meeting due within a month, BA would take a 70 percent stake in loss-making Air Liberte.
A spokesman for Air France Europe, the domestic wing of the Air France operation, said the company had an 80 percent market stake on the routes it operates and 60 percent on the total French market.
But from April 1997, European liberalisation of the airline industry will fully throw open French airspace to competition.
The French government moved the door ajar at the start of 1996 by allowing competition on the busy Paris-Toulouse and Paris-Marseille routes which were controlled by state-owned Air Inter, part of the Air France group.
Other French airlines had been allowed to fly less busy domestic routes as well as European and international routes.
British Airways bought its first 49.9 percent stake in TAT in 1993 and obtained the remainder last July.
Air Liberte, AOM and TAT have all tried to carve out market share ahead of liberalisation with a price war against Air France Europe, the renamed Air Inter. As a result they have suffered financially.
AOM, headed by Alexandre de Couvelaire, had been in talks with Air Liberte with an eye to a merger but the worsening financial situation at Air Liberte, which sought creditor protection on September 26, made a deal impossible.
AOM, 99 percent owned by the Consortium de Realisation (CDR) which was set up to sell assets of bank Credit Lyonnais, is now going it alone with some 10 percent of the slot at Orly.
But industry sources said Air France could strike back in 1997 and make a bid for AOM to prevent another foreign airline from setting foot in France alongside British Airways.
Air France Europe plans to launch its ""Shuttle"" service between Paris and Toulouse next Monday, offering more departure times and a ""turn up and go"" service without reservations, as a major plank in its new commercial approach.
Other airlines in France are Air Littoral, owned by the Dufour family, the Dubreuil family's Regional airlines, Xavier Leclerq's Brit Airlines as well as Nouvelles Frontieres' Corsair and Euralair.
For Air France, these domestic lines are important potential feeder operations for its international operations.
Last week Air france signed cooperation pacts with Continental Airlines and Delta Airlines Inc of the U.S. and it aims to sign a similar deal with an Asian airline in 1997.
These pacts are based on the ""hub and spoke"" theory in which airlines boost traffic by taking passengers from a smaller airport to a big ""hub"" for long distance flights to another hub. From the second hub another smaller plane can be used to take the passenger to the final destination. ($1=5.157 French Franc)
",29
"The chairman of Daewoo Electronics on Tuesday tried to placate French critics of a planned acquisition of Thomson Multimedia with repeated job and investment promises and said a counter-bid was ""not realistic""
But Bae Soon-hoon declined to discuss financial details of the proposed takeover until the government's decision to sell the world's fourth-biggest television maker to the South Korean company is final. Both the French Privatisation Commission and the European Commission still have to approve the deal.
The French government on Wednesday announced it had selected Lagardere Groupe over Alcatel Alsthom to buy state-owned Thomson SA for one franc after an 11 billion franc capital injection.
Lagardere plans to merge its Matra Defence Espace unit with defence electronics group Thomson-CSF while selling Thomson Multimedia (TMM) to Daewoo, also for one franc.
Bae said he would make Thomson Multimedia, reported to have made a three billion franc first half loss and to have debts of at least 14 billion francs, ""very profitable and prosperous.""
He confirmed a vow to create 5,000 French jobs at TMM in the five years, saying French labour conditions were competitive.
Bae said that the partnership between Thomson Multimedia and Daewoo would allow a 13 billion franc world-wide investment plan between now and the year 2000, creating 6,600 jobs in final assembly and 2,500 jobs in component production.
He declined to indicate how much of Thomson Multimedia's debt Daewoo would assume but said he expected some of the state capital injection to go to TMM.
""The Daewoo group will keep a significant part of the TMM debts and has the means to do so,"" said Michel Jacob, managing director of Daewoo's French financial advisers Rotschild's.
The Daewoo/Thomson combination would be the world's biggest maker of television, video recorders and cathode ray tubes.
Daewoo said it would keep the Thomson identity and French headquarters and would continue research and development at Rennes, France. It said all the group's products would be sold under Thomson brand names in Europe and the U.S.
The digital television know-how of Thomson will be put in a special joint venture with Lagardere. Bae said the joint-venture would be 50/50 owned while Jean-Luc Lagardere said on Saturday that his group would have a 51 percent majority.
The government decision to sell TMM indirectly for one franc to Daewoo has attracted fierce criticism. The leader of the Socialist Party, Lionel Jospin, said on Sunday he was ""shocked"" by the Thomson privatisation.
Jacques Delors, former president of the European Commission, said the same day, ""I would have preferred to maintain a European pole in consumer electronics.""
Some Thomson labour unions also attacked the sale of ""French technology"" to a South Korean company.
French financial newspaper La Tribune on Monday suggested a rival French bid was being prepared and newspaper Liberation on Tuesday said Sagem, who fell out of the race earlier on, was preparing such a bid. Sagem denied planning a bod.
""I saw the newspaper article. I thought it was a joke,"" Bae said. ""We have been working with the government for six months and have been respecting the rules of the procedure. Unless the government changes the procedure, nobody can make a proposal at the present time,"" he said.
",29
"The 1,400 staff of ailing French regional airline Air Liberte, under bankruptcy protection, on Sunday published a full-page newspaper advert demanding to get a look at the takeover bids made to the administrators.
""How is it possible that a company which has been fighting with succes for eight years to improve the quality of air transport could disappear today,"" staff said in an ""open letter"" advert in the Journal du Dimanche main French Sunday paper.
British Airways Plc, Richard Branson's Brussels-based Virgin Express, a consortium headed by Nouvelles Frontieres chairman Jacques Maillot, and commercial pilot Fernand Denan have made offers for Air Liberte.
The commercial court of Creteil, a southeastern Paris suburb, is expected to decide early this week which of the options will be pursued. Air Liberte went into administration on September 26 with debts of about 1.5 billion francs.
In the advert paid by the airline's works council, staff of Air Liberte (Air Liberty in English) blamed the French authorities for much of the companies' woes.
""By multiplying the obstacles to its development -- difficulties to obtain slots, difficulties to get ground handling services equal to those of the state airline (Air France /Air Inter ) -- the public authorities have pushed Air Liberte into a dead-end,"" the advert read.
They also blamed certain Air Liberte shareholders for ""abadoning"" the company at the eve of a recapitalisation and said they feared the final solution would be liquidation.
""We staff of Air Liberte, we cannot accept anymore to lose our jobs, put our families in distress nor to interrupt the service we have to give to passengers,"" the advert said.
Staff asked in the advert it wanted to see the bids made for the company and was ready to take its responsibilities -- ousted chairman and founder Lotfi Belhassine had been preparing a last-minute capital increase in which staff would put six weeks' pay into the company.
""Today, some people seem to wish the liquidation of Air Liberte rather than the arrival of a European company. Who has interest in seeing the return of a monopoly?,"" the ad asked in a reference to political unease about BA's bid.
British Airways plans to pay 25 million francs for Air Liberte and aims to merge it with its French TAT unit. The British airline said on Friday it had plans to spend 440 million francs on getting Air Liberte back into profit in three years.
Air Liberte owns about a quarter of the landing and take-off slots at Orly airport, Paris' second airport specialising in domestic flights, and this would dramatically boost BA's presence and competitiveness in France.
Air Liberte lost 650 million francs in the first nine months of 1996 due to an air fare war and insufficient passenger numbers. Since the start of the year the main French domestic routes are open to competition ahead of full liberalistaion in 1997. Air Liberte and other regional group AOM have been fighting to take market share from former monopolist Air Inter.
Jacques Maillot, also chairman of smaller airline Corsair, counts the Rivaud bank, travel group Club Mediterranee and Royal Air Maroc in his consortium.
Maillot has not given financial details but he plans to merge Air Liberte with AOM, which is for sale.
The Rivaud bank, a very secretive and influential financial group, is headed since last week by entrepreneur Vincent Bollore and the bank is close to the ruling RPR party.
The Le Monde newspaper said last week Prime Minister Alain Juppe was pushing for a domestic buyer for Air Liberte.
",29
"The French government has started a wide consultation on one of the thorniest issues in the future liberalised telecommunications sector -- the costs of interconnection charged to operators by France Telecom.
With Germany's Deutsche Telekom starting share trading on Monday, France is taking a further step in preparing its own telecommunications operator for the share market.
Francois Fillon, minister for Post and Telecommunications, has written to the main current and future players in the field soliciting their comments before November 30.
In a statement, the ministry said it was preparing two decrees to be published at the start of 1997.
One will set up the general conditions and tarification principles for interconnection agreements and another will set the time limit for the litigation procedures. The ministry is proposing a period of three months, which could be extended to six months if the complaining party agrees.
Both decrees concern the new French telecommunications regulatory authority, which will be in place in early 1997 but has not yet been named.
Under the French plans for market liberalisation, France Telecom will keep running the national infrastructure and will be responsible for the public service of telephone access for all French people.
While other operators can use alternative networks, there needs to be agreement on the prices of interconnection for a call from a subscriber to one operator to the receiver who subscribes to another operator, or the price for carrying this call over a stretch of the territory.
This price for interconnection is very important for the business models of new rivals in fixed telecommunications such as the Cegetel venture of Generale des Eaux, Mannesmann, SBC and British Telecommunications and the grouping of Bouygues and Italy's STET.
At the moment, Generale des Eaux's SFR mobile telecommunications operator says it is the biggest client of France Telecom.
For France Telecom, currently France's most profitable company, the pricing decision is also of the biggest importance for its future profit streams and therefore for the market valuation for its pending partial privatisation in April.
The French government is expected to float a first tranche of 25 percent in France Telecom in April.
By deciding on the interconnection costs in early 1997, the ministry takes away a major uncertainty for financial analysts in calculating their cash flow models for France Telecom and, thus, its value.
Brokers Barclays de Zoete Wedd, in a June report on France Telecom, estimated that interconnection revenues for France Telecom could rise from an estimated 311 million francs ($61.1 million) in 1996 to 2.024 billion francs in 1998 and 4.598 billion francs in 2000.
-- Paris Newsroom +331 4221 5452 ($ = 5.086 French Francs)
",29
"Analysts were mixed on the Rhone-Poulenc SA third quarter results and some said they might raise full-year forecasts while others left forecasts unchanged.
""The figures are better than we had forecast,"" said analyst Guy Phillips at BZW in London.
""Especially the operating profit at life sciences, pharmaceuticals pleased. It was an encouraging set of results,"" he said.
Phillips said he was considering raising his profit per share forecast from eight francs to 8.5 francs.
But Brokers Leven in Paris said there was no reason to adjust estimates.
Shaw Bridges at Merill Lynch said that while health care earnings were better than expected, the performance of fibres and chemicals had been weaker. He kept his forecast for 1996 net attributable profit of 2.7 billion francs, against 2.134 billion in 1995.
He also maintained his ""hold"" rating for the shares because they were ""fairly valued"". He said the company was an attractive long-term investment.
Bridges said he expected a full-year provision of 500 million francs at Rhone-Poulenc, mainly at chemicals and fibres. Rhone took 1.73 billion in provisions in 1995.
""The results are in line with expectations. They confirm that Rhone-Poulenc is a company pulled forward by its pharmaceuticals and agro,"" said Liliane Gauffre at Paris brokers BNP Du Bouzet.
Rhone-Poulenc reported a third quarter net income of 756 million francs versus 669 million at the same stage last year and an operating profit of 2.054 billion francs versus 1.828 billion previously.
Net sales were 20.468 billion francs versus 19.621 billion.
For the first nine months, net income was up 10.5 percent at 2.166 billion francs.
The operating profit at health sciences, which includes pharmaceuticals and animal health, jumped to 1.583 billion francs from 977 billion.
Finance director Jean-Pierre Tirouflet said the increase was in line with the company's forecasts about the synergy effects of the acquisition of Fisons in 1995 and was also due to new products.
He cited the anti-cancer drug Taxotere, Lovenox, Granocyte as well as Hepatitis A and B vaccines as examples.
Tirouflet also said there had been good sales in anti-fever vaccines in the United States.
But brokers Lehman Brothers said Taxotere and Rilutek were taking off slowly. It downgraded the share to neutral from outperform, after a good recent run.
Thierry le Francois of Massonaud said he expected a 1996 net income of 2.5 billion and further charges for the recall of albumin products. He re-itereated his buy advice on the share.
-- Paris newsroom +33 1 4221 5452
",29
"France announced plans to create a major new force in the world defence industry on Wednesday, by selling state-owned defence and consumer electronics group Thomson SA to Lagardere Groupe, which owns missile maker Matra.
The government said in a statement it preferred Lagardere's bid to the rival offer of largely civilian industrial group Alcatel Alsthom SA.
Prime Minister Alain Juppe's office said the Thomson Matra giant thus created would be a leading force in the world military industry.
""The merger is an important stage in the reinforcement of the European professional electronics and defense industry,"" it said in a statement.
The government said it would pump 11 billion francs into loss-making Thomson, which is a leading maker of televisions under brand suchs as SABA and RCA, as well as a specialist in defence electronics such as missile guidance sustems.
The decision was a surprise as the stock market and the media had gambled Alcatel's no-nonsense chairman Serge Tchuruk would take the prize over self-made entrepreneur Jean-Luc Lagardere, 69, who is approaching retirement and soon to hand over power to his son, Arnaud.
Lagardere's conglomerate also owns publisher Hachette.
The government did not spell out exactly how it had reached the choice, but its statement stressed the importance of a merger between Lagardere's Matra and Thomson's majority-owned defence unit Thomson-CSF.
It said it was sending both offers for Thomson SA to the independent Privatisation Commission, which has an important say in the sale of state assets, while recommending Lagardere's bid.
After advice from this consultative body, which reviews the terms of bids, and clearance from European Commission, the sale is expected to be concluded before the end of the year.
The government said it would raise Thomson's capital by nearly 11 billion francs, blaming past Socialist administrations for leaving the group undercapitalised after nationalisation in 1982 and for the excessive debts of the early 1980s.
France will keep a golden share to safeguard defence interests, it said.
Thomson SA lost 1.379 billion francs in 1995 and has 25 billion francs of debt. Fully-owned Thomson Multimedia lost three billion in the first half of 1996, but Thomson-CSF is profitable and had 1995 earnings of 1.01 billion francs.
Political sources had said President Jacques Chirac was determined to pick a bidder who kept Thomson's key defence technologies firmly in French hands.
Lagardere has in the past said that British Aerospace Plc, with which is has a missiles joint-venture, and Germany's Daimler Aerospace could also be involved.
The government said Lagardere wanted to leave the share capital of microelectronics maker SGS-Thomson Microelectronics NV by selling to the other main shareholders.
Thomson-CSF has a 20 percent stake in SGS-Thomson which is controlled by an Anglo-Italian shareholder group including state entities such as CEA and IRI.
Thomson Multimedia, one of the world's leading television set and decoders makers with brands suchs as RCA, SABA, GE, will be sold to Daewoo Electronics of South Korea.
The government said Daewoo was a well known investor in France and had knowledge of mass production techniques. It said Daewoo has promised to maintain Thomson Multimedia jobs in France and even create new jobs.
Alcatel's shares rose sharply on Thursday morning on market relief. Analysts doubted its capacity to finance the Thomson deal. Lagardere shares were suspended for the day.
On Tuesday, Alcatel closed down 2.22 percent at 444.90 francs on rumours its bid would prevail while Lagardere closed up 2.94 percent at 133.10 francs.
",29
"British Airways Plc (BA) on Wednesday boosted its position in France when French bank Rivaud joined its bid for ailing French regional airline Air Liberte.
Rivaud, a founding shareholder in Air Liberte and a former partner in a rival consortium, agreed with BA after marathon talks started on Tuesday afternoon and ending at this morning.
It is the only bid left on the table and the commercial court in Creteil is expected to approve the offer on Friday. Richard Branson's Brussels-based Virgin Express and commercial pilot Fernand Denan had also been working on takeover offers.
The BA/Rivaud proposal still needs the blessing of Air Liberte's creditors and French political authorities.
Air Liberte has a 12 percent stake of the domestic French market and BA's TAT unit eight percent. The market is still dominated by the state-owned Air France group.
""The situation is delicate,"" said Mark Rochet, chairman of TAT, adding he hoped the court would take a quick decision.
""Our partnership with the Groupe Rivaud offers the ideal solution for Air Liberte's very poor financial position. To save it requires quick action,"" BA chief executive Robert Ayling said in a statement.
""It's an excellent solution. We keep all the assets. I do not see another French solution, the last deadline was Friday,"" Air Liberte founder and chairman Lotfi Belhassine told Reuters.
British Airways will make a 440 million franc ($85.3 million) equity investment for a 70 percent stake in Air Liberte and Rivaud will put up 190 million for the remaining 30 percent. On top of that Rivaud will make a write down on 500 million francs of its old stake and also on some 60 million francs in loan stocks.
Both companies will pay the costs of running Air Liberte during administration, estimated at 150 million francs.
Rochet told a news conference Air Liberte's debt now stands at 800 million francs. Creditors can either get 20 percent of their money in cash or get fully paid over 10 years.
Rivaud, headed by industrialist Vincent Bollore, had originally been part of a consortium of travel groups Nouvelles Frontieres, Club Mediterannee and Royal Air Maroc.
Nouvelles Frontieres chairman Jacques Maillot said he and the Moroccan airline had withdrawn because of the ""extraordinary disastrous financial situation"" of Air Liberte.
Bollore is chairman of a shipping and financial group with his name. He was made the chairman of Rivaud last week and the bank is increasing its capital especially for Air Liberte.
A Bollore official said Rivaud had changed camps on Tuesday after Nouvelles Frontieres and other partners said they were unwilling to stump up the money needed for a two-third stake.
Rivaud, Club Med and airplane leasing company ILFC were among the original backers of Air Liberte eight years ago.
The BA/Rivaud plan is based on the three-year business plan for Air Liberte drawn up by BA. It will safeguard 1,250 out of 1,400 Air Liberte jobs and aims for break-even in 1999.
Belhassine will continue to run Air Liberte which owns about a quarter of the landing and take-off slots at Orly airport, Paris' second airport specialising in domestic flights.
It lost 650 million francs in the first nine months of 1996 due to an air fare war and insufficient passenger numbers in the run-up to full liberalisation of French airspace in 1997. ($1=5.157 French Franc)
",29
"There is a discreet battle raging in France over whether future competitors of a privatised France Telecom will be able to make a living or whether the playing field will be tilted against them.
With billions of francs at stake, analysts are scutinising the abstruse technical details of interconnection charges and the cost of public service.
The government expects to dispose of about 20 percent of France Telecom next April and plans eventually to selloff 49 percent of the state-owned-company.
French telecommunications minister Francois Fillon said on Tuesday that French interconnection charges would have to be ""comparable to other countries, in particular countries where there is already competition.""
Interconnection charges are the payments telecom rivals have to pay to France Telecom for the use of its network.
France Telecom confirmed a leaked document showing it planned a charge of 0.16 francs per minute for local calls, 0.18 francs for regional calls and 0.26 francs for national calls.
France Telecom says these are among the lowest in Europe, with only Britain having cheaper local interconnection charges.
But its future rivals, however, say these prices are still too high and claim they are higher than what the state-owned company uses as internal charges.
On top of the interconnection charges comes the cost for the ""public service"" -- telecoms available to everyone, everywhere in France. By law, France Telecom will run this public service and its rivals will have to share the costs.
The newspaper Les Echos recently cited a study by the Analysis research bureau showing the the costs of such a service would be nine billion francs ($1.76 billion) per year.
France Telecom's rivals, using another research bureau, arrive at a figure of 4.5 billion francs at most.
""The total interconnection charges and public service payments for a local call would be some 0.21 to 0.22 francs per minute, or some 80 percent of the current price and nearly two to three times as high as in other countries where there is competition,"" a confidential document said.
The new French telecommunications regulator, ART, which will be in place in January 1997, is expected to decide on the charges in February.
And during the first three months of the year the future telecommunications operators will apply for their licences in order to be ready for competition in 1998.
Two groups have announced intentions to become national operators. One is CEGETEL, a joint venture of Generale des Eaux, British Telecom Plc, SBC Communications Inc, and Mannesmann of Germany. The other is headed by Bouygues in association with Italy's STET and Germany's VEBA.
AT&T also wants to be active in the French market, with the help of a partner, but a spokesman for the U.S. group in France declined to comment whether it was in talks with Bouygues or preparing a fourth consortium.
AT&T is in talks to combine it forces in Europe with Unisource -- a joint venture of the Dutch PTT, Telia of Sweden, Swiss Telecom PTT and Spain's Telefonica.
Unisource had previously teamed up with Generale des Eaux but the latter preferred BT.
Other companies will operate on a smaller scale, targetting either a region or a specific market. Eurotunnel's Trans Manche has received a licence for Paris to London lines. Fillon said he would sign in the next few days telecom operating licences for railroad company SNCF, Colt of Britain and MFS Ltd.
($1=5.118 French Franc)
",29
"Jacques Maillot, the chairman of travel group Nouvelles Frontieres who dropped out of bidding for French regional airline Air Liberte, is planning to buy airline AOM and expects formal talks to start in weeks.
""I have had several talks with CDR executives and we have started to exchange information,"" Maillot said. ""We have not talked about a price or anything. There is an old valuation by bank Warburgs and I have asked bank Paribas to look at the company,"" he told Reuters by telephone.
AOM, created in 1991 by the merger of Air Outre Mer and Minerve, is owned by the Consortium de Realisation (CDR), a state entity charged with selling former assets of the Credit Lyonnais bank.
Maillot announced on Wednesday he had withdrawn from talks on the rescue Air Liberte, in administration since September 26, because of the size of the financial commitment required.
A 780 million french franc ($151.2 million) bid by British Airways Plc French TAT unit and bank Rivaud is now the only remaining one on the table and expected to be approved by the Creteil commercial court on Friday.
Maillot had planned to buy Air Liberte with the help of Royal Air Maroc, the Moroccan national airline, holiday resorts group Club Mediterranee and Rivaud.
In a second stage he had planned to enlarge his consortium to acquire AOM and merge it with Air Liberte in a big French private company to rival the state-owned Air France group.
""First there will be talks between Paribas and Warburgs, then we will start official talks with CDR,"" Maillot said.
""Because CDR is part of the state there have to be discussions with Bercy (the Finance Ministry) and the privatisation commission,"" he added.
Maillot said Warburg had put a value of one billion francs on AOM but he noted the study was a bit outdated as much had changed in the market since.
A spokesman for the CDR confirmed that there had been informal contacts with Maillot but no formal sale procedure had been started.
""We have had informal contacts,"" Jean-Michel Raingeard, spokesman at the CDR told Reuters. ""But we have not started a sale procedure, which is a very strict procedure,"" he added.
""The financial situation at AOM is better than at many other airlines,"" he said. CDR would only decide to start a sale procedure for AOM ""When we feel that the time is ripe.""
""We always planned to sell AOM at the time of the liberalisation of French airspace (in 1997),"" Raingeard said.
""What we need now is a period of calm. A lot has happened recently and at a quick pace. We need to wait at least a few weeks to see the new lie of the land,"" he said.
This summer, AOM chairman Alexandre Couvelaire had been in talks with Air Liberte chairman and founder Lotfi Belhassine about a merger. But the deteriorating financial situation at Air Liberte led to a break-up of talks.
A spokeswoman for AOM said the company would now go it alone.""There's British Airways, Groupe Air France and us. We have 10 to 12 percent of slots at Orly and we will go it alone,"" she said.
",29
"Several thousand employees of French consumer electronics company Thomson Multimedia held protest marches in Paris and other towns on Wednesday against the planned sale of the group to South Korea's Daewoo.
Workers of the state-owned company came in busloads to Paris to demonstrate in front of the group's headquarters in the centre of the capital before heading to the parliament buildings. There were also protest marches in Rennes, Bordeaux, Nice and Grenoble.
Thomson staff are angry that they have not been involved in the decision and say they do not understand the economic logic behind it.
""The sale of Thomson Multimedia to the Korean group Daewoo is unacceptable,"" said a protesting Thomson worker in Rennes, the capital of the western Britanny region where police said 1,200 people marched.
""This company is running fine and makes top quality products, we do not want to make low quality products,"" he added.
In Grenoble in the east about a thousand people marched, some shouting ""Daewoo, mechant loup"" (Daewoo, big bad wolf).
Industry Minister Franck Borotra told parliament during question time that privatisation was the only way to secure the future of Thomson Multimedia.
""This company is in a situation of a serious financial disaster,"" he said about the loss-making and indebted French state-owned group.
Workers, however, maintain the company is fundamentally profitable.
""Thomson is sold for one franc and the buyers will hit a 20 billion franc jackpot,"" said a slogan carried in the Rennes march.
The French government said last month it planned the sell the Thomson SA group to Lagardere Groupe for one franc after an 11 billion franc ($2.17 billion) capital injection.
Lagardere will keep Thomson SA's 58 percent stake in defence electronics group Thomson-CSF and sell television set and video recorder maker Thomson Multimedia to Daewoo Electronics, also for one franc.
France's Privatisation Commission and the European Commission still have to approve the deal.
""What we want is a halt to the privatisation procedure and the start of serious discussions about the future of the electronics industry in this country,"" a labour union spokesman told France 2 television.
The Communist-led CGT wants to see a public sale of the Thomson Multimedia company on the market, with Lagardere taking a big stake.
Soon-hoon Bae, chairman of Daewoo Electronics, told a French parliamentary commission on Tuesday that the South Korean group could float part of Thomson Multimedia on the share market when it had returned to profit.
He said Daewoo planned to invest 13 billion francs in Thomson Multimedia, of which five billion would be invested in the next five years in France.
",29
"French computer maker Cie des Machines Bull now has the freedom to deal with any other computer group in Europe following the sale of some five percent of its shares held by the government.
Thierry Breton, managing director of Bull, told Reuters in a telephone interview that the company still planned to be part of a restructuring of the European computer industry.
""With the support of our private shareholders, we can do that either by a market operation, by a merger or acquisition or by both,"" he said.  
""Rather than to wait for when the opportunity presented itself before doing anything, the shareholders decided to put us in a position so that we can act as a private company when the time is ripe.""
Breton said others involved in the restructuring of the European computer industry included Italy's Olivetti, Philips Electronics of the Netherlands and Siemens AG of Germany.
""There are also the European units of U.S. companies that may be interested in participating in the restructuring,"" he added.  
Jean-Marie Descarpentries, the former McKinsey consultant who became chairman in 1993, earlier this year said Bull wanted the state to sell 20 percent to a fourth industrial partner, preferably European, and to financial investors.
Bull returned to profit in 1995 after posting combined losses of 22 billion francs since 1990.
The French government has said it plans to privatise Bull before the end of 1997.
Breton said the state share sale would take place after a capital increase amounting to ""several hundreds of millions of francs.""  
The state will subscribe to its portion of the capital increase, but resell its shares to private investors.
Motorola of the U.S., NEC of Japan and France Telecom, which each have a 17 percent stake, are expected to subscribe to their part.
""They are on our strategic commission. They come here every three months for two days. I think I can say that we have the support of our shareholders,"" Breton said.
IBM, which has 1.6 percent, is not expected to join in the capital increase. It has passed up two previous opportunities.  
Japan's Dai Nippon Printing, with 3.3 percent, has been invited to join the capital increase.
Bull in February effectively withdrew from the personal computer market by merging its Zenith Data division with Packard Bell Electronics Inc.
Breton said the company was standing by its profit forecast of higher profits in 1996 compared with a 306 million profit in 1995, but he declined to confirm the group was aiming for more than 600 million.
""We keep our forecast, we are on line to deliver on our promise,"" Breton said.
-- Paris newsroom +33 1 4221 5452
",29
"Jean-Luc Lagardere, chairman of Lagardere Groupe, said on Saturday that his group was not going to sell Thomson's prized digital television know-how to South Korea's Daewoo Electronics.
Lagardere, adressing students at the Sorbonne university during a weekend seminar on industry, said in his first public comments after winning the bidding for state-owned Thomson that he had selected Daewoo as partner because it was the best guarantee for jobs at Thomson's French production units.
The French government on Wednesday announced it had selected Lagardere to buy state-owned Thomson SA for one franc, after an 11-billion francs capital injection.
Lagardare had been bidding against telecommunication equipment and industrial engineering group Alcatel Alsthom.
Lagardere Groupe plans to merge its Matra defense business with Thomson's 58-percent unit Thomson-CSF, after buying out the minorities on the Paris Bourse, and has agreed to sell Thomson Multimedia to Daewoo -- also for a symbolic franc.
Lagardere heard the news that his group had won the bidding, -- against expectations as the French media expected Alcatel Alsthom and its no-nonsense chairman Serge Tchuruk to be the winners -- on Tuesday evening during an official dinner at the start of a Picasso exhibition in Paris.
""I did not feel like I received the golden medal,"" Lagardere said. ""I felt like I was selected to play for France,"" the 69-year old businessman said.
""In four year's time, while I will then still be involved in our business, I hope that people like (Matra boss) Noel Forgeard can celebrate the award of a golden medal. We will have a good team in an industry where competition is without pity,"" he said.
Lagardere, a Gascogne farmer's son who built a worldwide books-to-missiles business empire from a small company he joined 32-years ago, is facing criticism by some French media and labour unions for selling the Multimedia business to Daewoo.
The critics blame him for selling French technology to a South Korean company and they also expect massive job losses.
Lagardere said these remarks were not true.
He said that back in February when President Jacques Chirac first mentioned the privatisation, he believed the state was only going to sell Thomson-CSF as part of a defence overhaul.
""But then the Finance Ministry came from behind and integrated Multimedia into the deal,"" Lagardere said.
""So I went to look for partners. I searched in Europe, the U.S., Japan and Korea. I choose Daewoo because I thought they were the best guarantee for jobs, "" he said.
Daewoo Electronics plans to create 5,000 jobs in France at Thomson Multimedia, the world's fourth biggest maker of televisions which employs some 49,500 people world-wide.
""I give my personal guarantee to those (French) jobs. Daewoo has made commitments to the government and to us,"" he said.
While Daewoo is taking over the television and video recorder production activities. Thomson Multimedia's digital television know-how will be put into a special joint-venture.
""We took the technology out of the company and put it in a joint venture (with Daewoo) in which we have 51 percent,"" Lagardere said. While he used the past tense on Saturday, the French Privatisation Commission and European Commission still have to approve the deal, which is scheduled for completion at the end of the year.
",29
"The future of French electronics group Thomson SA could be decided later on Monday when the government will say whether Alcatel-Alsthom or the Lagardere Groupe can buy the group.
Sources close to the government said that the decision, prepared in close consultation with President Jacques Chirac, could be announced late on Monday, or at the latest on Wednesday after a cabinet meeting.
The timing of the announcement could be brought forward due to a planned journalists strike on Tuesday over tax increases.
At stake is more than the identity of the industrial group that can take an indebted and loss-making firm off the state's hands. The decision also has consequences for of France's defence industry and its consumer electronics sector.
French newspapers suggest that Alcatel-Alsthom, headed by former arms engineer Serge Tchuruk, stands a better chance of winning than the Lagardere Groupe and its foreign allies.
Thomson SA is 76 percent owned by the state while 20 percent is held by telecommunications operator France Telecom.
Thomson SA has full ownership of Thomson Multimedia, one of the world's leading television set companies, as well as a 58 percent stake in Thomson-CSF which is among the top five world defence electronics companies.
Thomson SA made a 1995 loss of 1.379 billion francs ($266 million) and has debts of some 25 billion francs, of which 14 billion are at the multimedia arm which made a 1995 loss of 1.09 billion francs.
Thomson-CSF returned to the black in 1995 with a profit of 1.01 billion francs. Thomson-CSF has a 20 percent stake in semiconductor group SGS-Thomson Microelectronics NV.
Both bidders have unveiled the main lines of their business plan for Thomson but neither has detailed the financial elements of their bids. French newspapers speculate the state may have to pump billions of francs into Thomson prior to the transfer.
Lagardere Groupe, led by its founder Jean-Luc Lagardere, is a conglomerate with interests spanning from the media business to its Matra defence business.
Lagardere plans to control Thomson-CSF while British Aerospace Plc, GEC Plc and perhaps Daimler-Benz Aerospace GmbH (DASA) could take minority stakes.
This deal, in which Lagardere would merge its Matra Defense Espace arm with Thomson-CSF, would be a major restructuring of Europe's sprawling defence industry.
Lagardere has lined up South Korea's Daewoo to run Thomson Multimedia. Daewoo's chairman said he saw synergies in components and he has promised to create jobs in France.
Alcatel-Alsthom unveiled its Thomson plans on September 18.
For Tchuruk, the acquisition of Thomson is part of a programme to make Alcatel a large French group capable of competing globally.
Tchuruk said he wanted to hoist Thomson-CSF to the number two spot of the world defence industry, behind Lockheed Martin but ahead of GM Hughes Electronics Corp.
For that, Tchuruk planned a ""wide-scale partnership with another major industrial player"" in Britain, Germany or both.
Tchuruk said he plans to restructure Thomson Multimedia and would seek an Asian partner to bring market access to the rapidly growing southeast Asian markets.
Despite the planned deals with unnamed foreign groups, Tchuruk said he did not want to be commited prior to a Thomson decision. ($1=5.182 French Franc)
",29
"South Korea's Daewoo Electronics on Thursday defended a proposed controversial deal to buy France's Thomson Multimedia by pledging to make investments in the company.
The head of Daewoo Electronics and the founder of its parent company tried to allay French fears through interviews in two leading French newspapers, promising hefty investment and a long term commitment to the country.
The chairman of Daewoo Electronics, Bae Soon-hoon, was trying to counter criticism about a South Korean company acquiring leading-edge French digital television technology cheaply. He said his company would spend at least 10 billion french francs ($1.9 billion) on TMM.
French Finance Minister Jean Arthuis meanwhile reaffirmed that the government was set on selling defence and consumer electronics group Thomson SA to Lagardere Groupe and Daewoo even if Prime Minister Juppe wanted a public debate on the sale of the state group.
Juppe told parliament on Tuesday he would call a debate on the sale, for one symbolic franc, after an 11 billion franc ($2.2 billion) capital injection, in reaction to a public outcry and criticism from opposition parties and also from within his own coalition.
Arthuis dismissed criticism on the government's decision to sell the company by way of a private placement instead of a public sale.
""This is a company that could not be privatised through a public offer,"" Arthuis told reporters at a press briefing on Thursday. ""How could we ask several investors to bid on a company with a negative net value.""
Thomson has debts of some 14 billion francs.
Lagardere wants to merge Thomson SA's 58-percent-owned and profitable defence group Thomson-CSF with its Matra unit and sell loss-making consumer electronics group Thomson Multimedia (TMM) to Daewoo Electronics.
The state's Privatisation Commission is currently studying both the preferred bid by Lagardere/Daewoo and one by Alcatel Alsthom and is expected to give its opinion in early December.
The chairman of Daewoo Electronics said his company would spend at least 10 billion francs on TMM in an effort to still the rising criticism about the deal.
""In total, the immediate cost of acquisition and recapitalisation of Thomson Multimedia for Daewoo is some 10 billion francs. But these 10 billion are only a first stage,"" Bae Soon-hoon told the La Tribune Desfosses newspaper, breaking his self-imposed silence on Daewoo's bid details.
He said South Korea and France had increasingly direct links, adding that French companies had sold the TGV high-speed train and nuclear power stations to his country and were planning to sell battle planes and other weapons.
France's trade minister Yves Galland is due to travel to South Korea on Monday to promote the country's economic interests during a trip lasting until Thursday.
France hopes to sell Dassault Rafale combat planes to South Korea to monitor its northern Communist neighbour.
Kim Woo-choong, chairman and founder of the Daewoo conglomerate, told France's Liberation newspaper in Seoul that big Japanese companies would want to see the Thomson deal fail.
""Certain big international electronics companies are against ths deal because they believe that the merger would make Daewoo too competitive,"" Woo-choong said, adding, ""These big companies are perhaps busy lobbying the French government.""
Liberation said he referred to Japanese companies.
""The French government cannot come back on its decision if there is not an important reason to do so,"" Woo-choong said.
($1=5.102 French Franc)
",29
"Market talk persists about a possible demerger of Rhone-Poulenc into a chemicals company and a pharmaceuticals group, with a leading French broker saying it would boost share value by a third.
""Intrinsically, Rhone-Poulenc is worth no more than 40 to 45 billion francs ($7.89 billion to $8.88 billion) due to the weight of underperforming chemical activities and their important debts,"" Jean Borjeix, chief analyst at Jean-Pierre Pinatton, wrote recently.
He said that if the pharmaceutical activities -- Rhone-Poulenc Rorer, Fisons, Merieux and Connaught -- were separated from the chemical activities, total group value could be 60 billion francs.
""An asset gain of such a size would allow (an investor) to wait until the (demerger) operation takes place,"" Borjeix said, adding that the 1996 and 1997 results forecasts limited the downside.
Pinatton expects Rhone-Poulenc to report a stable 1996 net attributable profit of 2.05 billion francs, rising to 2.5 billion in 1997. Rhone published a net attributable profit of 2.13 billion in 1995.
Demerger rumours were first fuelled by May 28 comments by managing director Igor Landau, during a luncheon at the Roland Garros tennis tournament, saying the company had studied the possibility but had, for the time being, decided against it.
Borjeix believes the company will decide to split because management has become concerned about share holder value and also because an asset disposal policy is coming to an end.
Other analysts are less sure.
""I don't think it will happen. They will concentrate on improving margins themselves for the time being,"" said an analyst at a U.S. brokerage in London.
He also dismissed a suggestion, aired in Business Week in June, of Rhone selling its 68 percent stake in Rhone-Poulenc Rorer. ""There would be no immediate benefit to that.""
Rhone shares have been rising recently, partly on the back of 9.2 percent higher first half profits and on recurring speculative rumours of a split or possible merger of the chemical activities with Atochem of Elf-Aquitaine.
Shares rose from 122.3 francs in May to 136 on June 18 on initial speculation and then fell back to 120.8 on July 24. They have resumed their rise to 131 francs, but this is still below the institutional privatisation price of 146 francs in November 1993 and the price for individuals of 135 francs. (Corrects privatisation date to November 1993 from 1994 and makes clear 146 franc price was for institutional shareholders.)
Les Echos newspaper said on July 29 that the company's board meeting of July, where the first half profit figures were approved, had also discussed the group's vulnerability to a takeover bid.
The paper said chairman Jean-Rene Fourtou was worried the insufficent profitability of the chemical sector would make the group a cheap buy for a rival.
Fourtou has made the restructuring of the chemical sector a key part of his strategy, next to a pharmaceutical expansion drive and a 10-billion-franc two-year asset sale plan.
Board member Philippe Desmarescaux was recently given control of the chemicals sector in a move which was seen as signalling that restructuring of the division would accelerate.
Rhone-Poulenc took 223 million francs in provisions for the chemicals sector in the first half and expects total 1996 group provisions to be 500 million francs.
The rumours about a chemical link-up with Elf-Aquitaine are in line with many market stories about big French combinations to stave off competition in world markets -- the same reasoning caused rumours Elf would merge with Total SA.
At Elf, where chairman Philippe Jaffre is also trying to boost profitability with cost cuts and asset sales, the Atochem unit is doing fine, even though sales fell in the first half.
Jacques Puechal, the pipe-smoking chairman of the division, has embarked on a selective acquisition policy bolstered by a surge in 1995 net attributable profit of five billion francs, against 1.8 billion in the previous year.
On Wednesday, Paris broker Leven SA issued a ""speculative buy"" advice on Rhone Poulenc shares, after having been ""neutral"". Leven said the company's debt remained a worry but it appreciated developments in the drugs division and noted rumours of a demerger. ($1=5.068 French Franc)
",29
"Guinness Flight Asia said on Thursday that the selection of Hong Kong's new chief executive next month could give further support to the territory's soaring Hang Seng Index, which it expects to rise to 14,000 points soon.
""Once the chief executive is chosen, the direction of economic policy after the handover will be clearer,"" the fund manager said in an Asian quarterly outlook.
""Since it is clearly in China's interest that the handover should proceed smoothly, China will seek to ensure that it does nothing to adversely affect sentiment. Investors are increasingly coming to regard the handover as a positive rather than a negative.""
The British territory returns to Chinese rule on July 1, 1997. The chief executive, who will govern Hong Kong as a special administrative region of China following the transition, will be announced on December 11.
Guinness Flight is maintaining a heavily overweight position on the Hong Kong stock market, and investment director Nerissa Lee said she holds a three-month target of 14,000 points for the Hang Seng Index.
""Hong Kong has done very well and we're still very bullish,"" she said. ""I think it will continue to do well for some time because money will flow into Hong Kong as the preferred market (in Asia) and will stay here for some time.""
Lee said Hong Kong will benefit from the credit easing in China, which will offset any interest rate hike in the United States this year or next, with additional support from subdued inflation and a strong property market.
Guinness Flight is also overweight in China, where it expects company profits to recover strongly as the effects of the austerity programme ease.
""It's time to take a look at China,"" Lee said. ""We are at the start of a cyclical uptrend.""
She forecasts Chinese economic growth of 9.8 percent this year, rising to 10.2 percent next year, in a context of a carefully controlled credit easing that will be channelled into selective sectors and industries.
While exports are expected to recover from this year's weakness, China's economy will also benefit from an increase in investment and consumption, she said.
""The last cycle of growth was led by exports but in this cycle we believe it will be very much more broadly based,"" Lee said, who favours power, automobiles and consumer products as China's most promising sectors in the short term.
Huaneng International Power Company is her top power stock, thanks to an aggressive capacity expansion, while Qingling Motors Co Ltd leads the automobile pack.
Qingling stock is trading in single digit multiples, despite a 20-percent share of China's expanding car market that is expected to rise to 30 percent next year.
Earnings at Guangnan Ltd, an integrated food distributor poised to exploit a boom in Chinese supermarket consumption, could rise 30 percent each year for the next three years, Lee said.
Goldlion Holdings Ltd remains Guinness Flight's favoured retail stock, reporting an annual net profit growth of more than 40 percent each year for the past seven years.
""This is an excellent track record and proof of the quality of management at the company,"" Lee said.
",42
"An uneventful week of sideways trade is expected on most Asian markets following news that China's paramount leader Deng Xiaoping had died on Wednesday.
Although many of the smaller Asian markets virtually ignored the news, Hong Kong and Taiwan surprised some investors by trading higher.
A strong week in Tokyo is not expected to last and regional traders said quality buying had yet to surface in Bangkok, this week's surprise performer.
The Stock Exchange of Thailand index has gained seven percent in the past eight trading days, recovering from the previous week's sharp slide on news of a debt rating review by Moody's Investors Service Inc.
Most of the other small Asian markets expect a week of sideways trade, although some could suffer from trader reports of fund flows out of Asia into Latin America.
""They can't find anything in Asia to buy,"" said one head trader. ""In Singapore and Malaysia, the earnings growth isn't massive and elsewhere it's not great. (Investors) expect better value in Latin America.""
- - - -
HONG KONG - Stocks are expected to refocus on fundamentals in the week ahead and could trade sideways for much of the time although hopes of healthy corporate earnings may provide a positive bias, analysts said.
The market had a rocky ride last week, quaking on concerns about the health of China's paramount leader Deng Xiaoping before rallying after his death cleared the uncertainty.
The Hang Seng Index rose 331.59 points, or 2.53 percent, over the week to close at 13,444.85 on Friday. The rise included a 305.01-point surge on Thursday following Deng's death.
""On the fundamental side there is not much change,"" said Kelvin Tang, an analyst at ImPac Asset Management.
- - - -
TOKYO - The Japanese stock market's key index is likely to struggle to find a firm foothold at the 19,000 level in the coming week, after it ended above that threshold on Friday for the first time this year.
""The benchmark has reached a stage where it is getting close to retracing one-third of its worth from the January 10 low of 17,303 and the high of 22,666 marked on June 26,"" said Okasan Securities general manager Akihiro Naemura.
On Friday, the Nikkei average of 225 leading shares ended down 17.17 points or 0.09 percent at 19,034.54. In the course of the week, the barometer rose 312.54 points or 1.67 percent.
- - - -
BANGKOK - The Stock Exchange of Thailand (SET) Index is expected to post further gains in the week ahead as foreign and local investors follow through on a strong two-day rally, analysts said.
But buying is likely to be short-term and selective ahead of a central bank release of balance of payments data due on Thursday.
The Stock Exchange of Thailand (SET) index gained 4.8 percent from last Friday to 747.70 points on Thursday as speculative pressure on the currency eased.
Markets were closed on Friday for a Buddhist holiday.
- - - -
TAIPEI - Taiwan share prices are seen rising further in the week ahead on widespread expectations of continued economic recovery and on easing fears of political instability after the death of Chinese paramount leader Deng Xiaoping, brokers said.
The government statistics agency announced on Thursday that Taiwan's gross domestic product growth was 6.62 percent in the fourth quarter of 1996, higher than a forecast of 6.58 percent.
""Investors are confident that the index will continue to reflect the economy's sound fundamentals,"" said David Yu, vice-president for International Investment Trust Co.
The index slid 51.25 points or 0.66 percent to 7,739.94 against last week's close of 7,598.93.
- - - -
KUALA LUMPUR - Malaysian blue chips could trend higher in the week ahead on an influx of local and foreign buyers targeting lower-valued main board stocks, dealers said.
""I think it will be a good week,"" said Ralph Dixon, of TA Securities' international division.
Corporate earnings and economic data including December trade figures will take centre stage, dealers said.
Kuala Lumpur's benchmark Composite Index of 100 big-cap stocks closed 15.95 points or 1.28 percent higher at 1,262.86 on Friday.
- - - -
SEOUL - Consolidation combined with worries about rising interest rates will pressure the Korean market in the week ahead, brokers said.
""Many investors are worried about gradually rising interest rates and they believe there will be further rises,"" said Hwang Chang-joong of LG Securities.
Much worse-than-expected corporate results, due to be announced in the coming week, will also hurt the market.
The composite stock index fell 41.08 points or 5.7 percent to 681.24 on Saturday against last Saturday's 722.32.
- - - -
MANILA - Manila shares are expected to trade sideways with an upward bias next week on slow buying in selected blue chips and continued attention to small cap issues, traders said.
Friday's news of Standard & Poor's upgrading of the Philippines' foreign debt rating from BB to BB-plus could perk up the market, said Helen Alvarez, research head of All Asia Securities.
But Raul Ruiz, vice-president at Sun Hung Kai Securities, said a political row over the ruling party's efforts to change the constitution to enable President Fidel Ramos to run for a second term could make foreign investors cautious.
The main index closed down 8.45 points at 3,301.98 on Friday, shedding 20.32 points to 3,322.30 week-on-week.
- - - -
JAKARTA - Indonesian shares are expected to be mixed with the index moving around the 695-700 points level in the coming week, brokers said.
Brokers said several secondaries and some medium-sized counters were likely to be active on news and speculation of corporate action such as stock splits, bonus share issues and 1996 earnings.
On Friday, the Jakarta composite index closed 2.17 points lower at 696.50 points, against last Friday's close of 704.48 points.
- - - -
SINGAPORE - The Straits Times Industrial (STI) Index will trade in a range of 2,150 and 2,300 points in the coming week, with a trend towards the higher end of the range, traders said.
Expectations of flat to weaker 1996 results announcements, notably by property and marine companies, would continue to weigh on some blue chips, they added.
Continued retail and punting interest would underpin small and recently listed stocks, dealers said.
The STI index ended 10.70 points or 0.47 percent lower at 2,241.28 on Friday against 2,252.46 on February 14.
- - - -
SYDNEY - Australian shares were seen mixed in the near term with the focus remaining on individual corporate results as the reporting season continues apace.
The All Ordinaries index closed at 2,475.3, barely changed from Thursday and down 0.3 percent over the week.
While major moves on Wall Street would still dictate the early tone, individual company performance was seen as the key.
""The market will look at the fundamentals and see which stocks have had the earnings to justify price movements and those that haven't may succumb to a bit of profit-taking,"" said Derek Bond, director at brokerage Burrell and Co.
- - - -
WELLINGTON - Corporate earnings are again set to take centre stage on the New Zealand share market in the week ahead, while brokers keep a close watch on Telecom's sliding share price.
It shed 25 cents to NZ$6.60 on Friday on fears of a weaker earnings outlook.
Next up on the reporting schedule are the Fletcher Challenge divisions, which should prove a mixed bag when they report on Wednesday.
The NZSE-40 Capital Index ended the week at 2,301.53, down 24.32 points. The index has lost 21.65 points (0.94 percent) from 2,323.18 a week ago.
- - - -
BOMBAY - Shares at Indian bourses are expected to trade in volatile territory ahead of the 1997 budget to be presented on February 28, dealers said.
""It's a crucial week. Market focus will be on budget expectations,"" a local dealer said.
The 30-share index of the Bombay Stock Exchange fell 54.91 points, or 1.57 percent, to end at 3,439.49 in the week ending Friday.
",42
"Zero tax and limited regulation are luring billions of dollars into offshore mutual funds, spurring a growth industry in famed tax-free locations such as the Cayman Islands, according to a mutual fund legal expert.
""I think every indication is that the offshore part of the mutual fund industry will grow. In the offshore jurisdiction you have no taxation and a more appropriate level of regulation as a rule of thumb,"" said Anthony Travers, senior partner at Maples and Calder in Hong Kong.
Anecdotal evidence suggests these advantages have drawn nearly US$900 billion into offshore mutual funds so far out of an entire industry sometimes valued at US$5 trillion, he said.
A lack of professional infrastructure is often a compelling disincentive to authorising funds in countries offering the greatest returns, while high taxation levels deter mutual funds from setting up in promising developed markets, he said on Friday.
The alternative is to authorise the fund in an offshore region, avoiding tax while reaching into some of the world's most rewarding investment regions.
There are, however, drawbacks.
""If you go offshore and you invest into the onshore jurisdiction from your mutual funds, you have things like withholding tax and tax treatments that may be imposed on your profits, and marketing is very much an issue,"" Travers said.
Certain double tax treaty networks can allow investors to avoid some onshore tax requirements, but these treaties vary from country to country, as do marketing restrictions, he said. For example, offshore mutual funds are prevented from marketing to more than 100 investors in the United States, while the United Kingdom prohibits marketing of offshore retail mutual funds unless they are based in designated jurisdictions, such as Bermuda, Jersey and Guernsey.
It is possible to market a Cayman Islands-registered mutual fund in the United Kingdom, but only as a private placement and not as a retail fund, Travers said.
Despite their obvious benefits, Travers warned that investing in offshore mutual funds is not for everyone.
The lack of regulation gives greater flexibility in the establishment and administration of mutual funds but it also provides little recourse for unsophisticated retail investors, which partly explains why these funds cannot be marketed freely in the United States or the United Kingdom.
""You are essentially talking about mutual funds which are established by institutions for other institutions or very high net worth and sophisticated individuals, in which case it is felt additional layers of regulation are not appropriate or necessary,"" he said.
It is possible to market offshore retail funds in Europe, but funds must meet the requirements of the ""Undertakings of Collective Investment and Transfer of Securities"" (UCITS) directive, which ensures certain standards are met.
""They are supposed to be able to sell UCITS cross-border in Europe but in fact the European Union is still something of a myth when it comes to cross-border marketing,"" Travers said.
""And you find in these jurisdictions commensurately higher fees. Three to six basis points on net asset value is the price you pay to market to the retail sector,"" he said.
",42
"Ambitious plans to establish Islamic mutual funds in Indonesia include the ""cleansing"" of profits disallowed under Islamic law, a senior fund manager told a mutual funds conference on Tuesday.
Islamic law prohibits Moslems from earning interest on bank deposits or investing in certain types of equities.
But Nik Ezar Nik Bolia, chief executive officer of Malaysia's DCB-RHB Unit Trust Management Berhad, said the company had come up with a tried and tested method of working around the rules.
""The cleansing process takes out the impact of the interest earned,"" he said. ""It's against Islam to gain interest on a deposit, so we remove and give to charity a proportion of the total profit.""
DCB-RHB's efforts have lured US$80 million into a domestic Islamic fund in Malaysia, where 54 percent of the population is Moslem, he said.
More than 85 percent of Indonesia's population of nearly 200 million is Moslem, suggesting an equally promising future awaits any fund that appeals to the nation's religious principles.
""Southeast Asia has a combined population of 220 million Moslems,"" Nik said. ""Therefore any product based on Islamic principles will be highly successful.""
To allay concern about stock market investments, Malaysia's Bank of Islam has set up panels of scholars to vet individual stocks to ensure they are ""halal"", or comply with Sharia law by avoiding liquor, gambling, pornography or footwear, Nik said.
""Then we look at the core business,"" he said. ""If it is halal that is fine, but if a subisidiary is not halal, the parent company will be rejected. However, if the subsidiary is halal and the parent company not, the subsidiary is halal and will be accepted.""
The same system will be set up in Indonesia by DCB-RHB's subisidiary, P.T. Rashid Hussain Asset Management, Nik said.
However, there are substantial obstacles blocking the path to Moslem mutual fund investment in Indonesia. Among the most obvious is a relatively casual approach to religion.
""In Malaysia, the law is enforced. If you are not fasting the police can come and catch you, but in Indonesia, religion is encouraged but if you don't do it no one really cares,"" said one delegate to the conference.
Nik countered that 40 percent of Indonesia's Moslems are observant, but conceded that a 1,000-person survey disclosed that most were already investing in prohibited bank deposits.
""Earning interest on bank deposits is a no-no under Sharia law and 61 percent said they knew that, but there is no alternative investment,"" Nik said.
He admitted that persuading these investors to switch into lower-yielding stock market funds subject to profit-cleansing presented a formidable challenge. But he said that savings put towards the Moslem pilgrimage to Mecca offered hope.
""That will be the trick that we have to perform...but every year Indonesia has a high proportion of people going to Mecca,"" he said.
""This is my target market. If one of them were to save from ground zero to seven million rupiah into our fund before they redeem to go to Mecca, it is a captive market.""
Each year 195,000 Indonesian Moslems pay 7.55 million rupiah to participate in the government-organised pilgramage to Mecca.
(US$1 = 2,327 rupiah)
",42
"Investing in Asian telecommunications stocks is full of hazards as the region grapples with a general lack of sophistication and wide discrepancies in demand and regulation, analysts say.
Views differ greatly on the potential of individual stocks and countries, but analysts generally agree that telecom regulation is the most important determinant to future performance.
""Understanding the regulators is essential as regulatory issues were the main determinant of Asian telecom stock performance last year,"" Jardine Fleming said in a recent report.
Asian telecom bulls say the global information revolution, combined with the region's rapid economic growth, have swamped the capacities of state-run operators, forcing a confrontation between regulators determined to meet demand and monopolistic state enterprises anxious to maintain market share.
""Asian telecom regulators, usually under-empowered, have promoted liberalisation, often taking on strong political and economic forces,"" Jardine Fleming said.
So far, regulators have responded by issuing licences -- a politics-fraught move that usually diminishes the prospects of the primary telecoms firm.
This is acceptable in low-penetration countries with untapped demand, analysts say, but more dicey in high-penetration markets, such as Hong Kong and Singapore.
""This is why deregulation in Hong Kong did not really make sense on the fixed-line side if the new licensees could not access the lucrative IDD sector, which they can,"" Jardine Fleming said.
DEREGULATION DAMPENS OUTLOOK ON HK, SINGAPORE TELECOMS
Continuing deregulation in Hong Kong and Singapore, two places with a high dependence on IDD traffic, has prompted a negative outlook on Singapore Telecom and Hongkong Telecom, it said.
In low-penetration countries such as Indonesia and the Philippines, regulators have issued concessions to build fixed lines, giving contractors the right to receive local revenues and perhaps a portion of those from domestic long distance.
Because the new local lines stimulate long-distance demand, this arrangement fails to attract the ire of primary telecoms which reap the benefit, analysts said.
This has worked well in Indonesia and the Philippines, where new local fixed lines are expected to boost earnings in both PT Telkom and Philippine Long Distance Telephone Co (PLDT) rather than eroding their market position.
The situation is very different in the cellular sector, where major market players are complaining that too many licences have been issued as they lose market share to strong second-tier players which are aggressively undercutting tariffs.
Because of this primary/secondary interplay, Jardine Fleming said it has turned negative on Advanced Info Services Plc and neutral on Piltel. But it remained positive on Total Access Communications Plc.
Malaysia's Technology Resources Industries Bhd has been battered down too hard, the brokerage believes, and it has been upgraded to a buy.
BROKERAGE BULLISH ON INDONESIA, PHILIPPINES
Deutsche Morgan Grenfell (DMG) is similarly optimistic on the outlook for PT Telkom and PLDT, but it adopts a much less optimistic overall view of Asia's telecom sector.
""The Asia-Pacific telecommunications industry is undergoing a period of rapid transition from a relatively underdeveloped and protected industry to one which is becoming increasingly saturated and highly competitive,"" DMG said in a recent report.
An overall increase in competitive pressures is not being made any easier by governments' liberal approach to the issue of licences and the lack of any industry consolidation, DMG said.
""In an environment of increasing saturation and rising competitive pressures, EPS (earnings per share) will continue to come under pressure,"" DMG said. ""We believe that we are already witnessing signs of industry maturity.""
DMG estimates that less than 10 percent of the population in the Philippines, Thailand and Indonesia can afford telecom services.
DMG is positive on Indonesia and South Korea, but for different reasons.
Indonesia's lower telephone density combined with a restrictive and non-competitive regulatory structure are attractive, it said. In South Korea, a large middle class more than compensated for the higher number of phones.
""Although competitive pressures are rising, the combination of low, effective teledensity rates, a wide middle class and exceptionally aggressive capex and depreciation policy should ensure that Korea Mobile Telecom Co will continue to deliver above-average EPS growth rates,"" DMG said.
EVEN TOUGHER TASKS AHEAD FOR REGULATORS
Analysts said regulators have done the easy part -- issuing new licences. Now it gets tricky as new licensees demand better terms on geography, interconnection and IDD rights. Cellular licensees are also demanding more spectrum.
""What will be interesting to watch is how quickly these number two companies demand that they compete on fair terms with the primary telecoms,"" Jardine Fleming said.
",42
"NatWest Markets, the investment banking arm of National Westminster Bank, said on Tuesday it had agreed to buy out Wheelock and Company Ltd's stake in their 50-50 joint venture, Wheelock NatWest.
The announcement ends a short and bumpy association between one of the world's biggest banks and Wheelock, a Hong Kong-based conglomerate led by Peter Woo Kwong-Ching, one of the leading candidates for the post of chief executive following Hong Kong's return to Chinese sovereignty next year.
NatWest Markets said recent trading scandals around the world have made it more difficult for joint ventures to operate under British rules in Asian markets with the highest growth, such as equity and derivatives trading.
""We did recognise at a very early stage that there was a certain amount of risk we could accommodate within the joint venture vehicle,"" said NatWest Markets' newly appointed chairman for Asia Pacific, John Howland-Jackson.
""We were perhaps not bargaining on a series of events around the world in a variety of traded markets that would cause such scrutiny of trading businesses,"" he said. ""The whole environment has tightened up considerably.""
Terms and details of the deal were not disclosed, but Howland-Jackson said both partners had contributed US$125 million in capital towards the joint venture before the shareholders went their different ways.
The move followed last month's announcement that NatWest Markets was pulling out of the fund management arm of the joint venture because of its acquisition of British pension giant Gartmore Plc  earlier in the year.
""I think that might have caused some disagreement between the shareholders,"" said Vincent Kwan, analyst at Vickers Ballas.
But representatives of both companies denied that termination clauses in the original joint venture deal signed in May 1994 were enacted.
Nicholas Sibley, managing director of Wheelock Capital, said his company had no immediate plans to replace the joint venture with another financial services subsidiary, but instead would focus on its goal to act as a bridge between China and the rest of the world.
""Financial services isn't the first thing that comes to mind,"" he said, but declined to elaborate.
Analysts warned that although the break-up will not affect Wheelock's earnings, it could signify a substantial strategic setback for a company with stated plans to diversify its earnings base away from Asia's volatile property sector.
""They've always said they wanted four major operating divisions by the year 2000 and financial services was going to be one of them,"" said another analyst, who declined to be identified.
""Now that the joint venture is gone some people may be wondering what the commitment is to diversifying the earnings base.""
Some analysts said the joint venture had failed to perform as well as expected, and company projections of a break-even date by the end of 1997 were unduly optimistic.
""Investment banking in Asia is a very competitive market,"" one analyst said.
-- Hong Kong Newsroom (852) 2843 6441
",42
"As Hong Kong speeds towards its return to Chinese rule, questions are being asked about the fate of its largest expatriate community -- tens of thousands of Filipina maids, or amahs.
Hong Kong relies upon its army of Filipina ""domestic helpers"". There were 140,000 of them at last count among the territory's 6.2 million population, and many people are heavily dependent upon their gentle and kind child-care.
""The help is so cheap you may as well have a few sprogs (children) while you're here,"" said one British banker with three young children, two Filipina maids and a very pregnant wife.
The Filipinas' contribution to their home nation is even more important. Most of the women are supporting families, and their monthly remittances account for a sizeable proportion of that nation's gross domestic product each year.
The arrangement works well, but it could be under threat. Concern is growing that once Hong Kong reverts to Chinese rule, the Filipinas will be booted out in favour of mainland Chinese women keen to earn hard currency in wealthy Hong Kong.
Recent statements of support for the status quo by Chinese president Jiang Zemin and Tung Chee-hwa, Hong Kong's chief executive-designate, have failed to reassure those concerned for the well-being of these women, who face unemployment and an uncertain future in their home country.
""They have said the status quo will be maintained, but realistically there are going to be changes going into the handover,"" said Dennis Suico, chairman of the Philippine Association of Hong Kong.
""There will be a steady inflow of workers from the mainland. It may not be drastic, it may not happen overnight, but there is going to be change.""
SUNDAY GATHERINGS
The dark-haired women -- many of them college graduates, teachers and nurses -- are known in Hong Kong as the sparrows of Statue Square for their lively Sunday gatherings in the downtown plaza of that name.
Huddled underneath the imposing Hongkong Bank building, spilling out from overpasses humming with traffic, perched on plastic sheets on the ground at the Star Ferry terminal, thousands of chattering Filipinas crowd into the Central district each Sunday, forcing police to cordon off roads and redirect traffic.
""We have to do this, we have to,"" said Maria, 30. ""We work six days; on Sunday we have to enjoy ourselves.""
Wedged tightly between friends on a ledge outside Central subway station, Maria said she came to Hong Kong in order to support her 10-year-old daughter and unemployed husband, who can no longer work after an accident.
""I send back 7,000 pesos (US$270) each month,"" she said.
The money, a small fortune in impoverished Philippines, comes at a price. Most Filipinas' lives are marked by loneliness and separation from the people they care most about, and their working conditions are often hard.
""My employers are so selfish,"" said another Filipina. ""I have one day off every month, I have to get up at six o'clock and I cannot end until 11 o'clock. Please can you help me? Please help me leave here, to go to Canada or America.""
MINIMUM STANDARDS
The Hong Kong government sets minimum standards for domestic helpers in a standard two-year contract, which requires free room and board, minimum pay of about US$500 per month and one week's holiday a year.
But the Filipinas said that many employers, particularly the Chinese, are extremely demanding within those guidelines. The government recently announced random checks on employers to prevent the worst abuses, such as bedrolls in corridors.
Competition is keen for jobs with Western families, who tend to pay above the minimum rate, give two days off each week rather than one and offer a food allowance so that the Filipinas can avoid a foreign diet.
But when asked what they find most difficult about Hong Kong life, most Filipinas cite the separation from family. Many see their husbands and children for just one week a year.
Their situation is unlikely to improve much. Suico said that after the handover on July 1, many Chinese families and businessmen are likely to prefer a Chinese-speaking maid for better communication.
A number of business groups also support easier labour movement between Hong Kong and the rest of China, but government officials are on the record as having expressed concern about how best to handle the immigration implications of the handover.
Suico said the Filipinas are probably in a good position with younger families where both parents work and want their children to grow up speaking both Cantonese and English.
""And if you add to that the considerable numbers of the expatriate community here in Hong Kong, the senior executives, I think there is an overwhelming preference for an English-speaking domestic helper at home,"" he said.
But the number of expatriates on luxury packages is dwindling and the demand for domestic helpers is on the decline.
Filipinas are starting to ask where they should go next.
WHERE TO GO NEXT?
There is a huge migrant workforce of four million Filipinos the world over, most of them in the Middle East, but the case of Sarah Balabagan has confirmed that region as a potentially dangerous place for female workers.
Balabagan, 15, was convicted of murder in the United Arab Emirates after she stabbed to death an 84-year-old employer trying to rape her. ""The Middle East is not a good option for Filipinas,"" said Suico.
Instead, they are being encouraged to look for work in the affluent and emerging societies of Asia, such as Japan, Singapore, South Korea and Malaysia.
",42
"Foreign investors seeking access to China could consider the road industry, which needs more than US$6 billion in foreign money to complete four national highways by 2000, SBC Warburg said.
Low rates of investment are considered largely responsible for clogged highways in China, where 1,500 counties and 190,000 villages had no road access at the end of 1994.
Road building has not kept pace with the growth in civilian vehicles, which has risen a compound 13.4 percent each year between 1978 and 1995 -- roughly in line with the country's rapid economic expansion.
By comparison, the total length of highways over the same period has increased only by an average 1.6 percent a year.
""The main reason behind this slow development in China's highway network is the insufficient investment in the sector,"" SBC Warburg said recently.
Investment is a pressing problem with China's ambitious plan to build a network of 12 national trunk routes totalling 30,000 km by the 2010, with the first four highways to be completed by 2000.
Total construction cost is estimated at 540 billion yuan ($65 billion) over 10 years, most of which will come from domestic funding, the World Bank and the Asian Development Bank.
""However, it is estimated that as much as $6 billion will have to come from foreign investors,"" SBC Warburg said.
Foreign investors first started entering China's road industry during the Eighth Five Year Plan, and the resulting investment helped to accelerate the expansion of highways 12.6 percent to 1.15 million km between 1991 and 1995.
Among the better-known foreign-invested higways are Hopewell Holding's Guangzhou-Shenzhen Superhighway; New World Infrastructure's Guangzhou Northern Ring Road, which opened in 1994; Road King Infrastructure, which signed its first toll road joint venture in December 1993; Cheung Kong Infrastructure and CITIC Pacific.
Guangdong Investment and Guangzhou Investment are also active players.
Most projects are toll roads, which SBC Warburg warned can be difficult to set up and operate in China. Central and provincial approvals are required and collection can be fraught with ""natural"" hazards such as traffic accidents and robberies.
""It does not seem to us, however, that such irregularities are damaging the investment merits of Chinese toll roads, if the investor can work closely with the local authorities on containing the leakage at some pre-determined levels,"" the broker said.
There are clear signs that China is actively encouraging foreign investment in this sector.
Expressways, tunnels and bridges are open to 100 percent foreign ownership and there is no limit in foreign participation in Chinese joint ventures on first and second-class highways.
Experiments with various types of funding sources and investment structures are being encouraged.
And, as part of the central government's efforts to promote a more standardised build-operate-transfer structure for infrastructure projects, it is preparing to offer a bridge in Wuhan for international tender.
""We expect the market to be increasingly open to foreign participation, as additional funding sources help attract more investors and reduce financing costs,"" SBC Warburg concluded.
-- Hong Kong Newsroom (852) 2843 6470
",42
"Asia will suffer only minor damage from an anticipated shake-out in Thailand's banking sector, analysts said on Wednesday.
""That's not a very healthy market and it's not a reflection on any of the others,"" said Carmen Welso, banking analyst with ING Barings in Hong Kong.
But some countries could take some precautionary steps to prevent the same thing happening within their borders, another analyst said.
The Thai government's public acknowledgement that its banks and finance companies are grappling with a huge liquidity problem caused by bad debts, many linked to a besieged property sector, prompted tough new provisioning rules on Monday.
The country's central bank, the Bank of Thailand, ordered banks and finance companies to raise provisions for sub-standard loans and asked 10 cash-strapped finance firms to boost capital.
Many analysts said on Wednesday they now expected to see a wave of consolidation sweep through Thailand's financial services sector.
For example, Thailand needed about five finance companies rather than the 90 that currently exist, one analyst said.
""People are going to look at Thailand and say 'we don't want that happening here',"" said a banking analyst.
Indonesia and the Philippines could follow Malaysia's lead and restrict property lending rules to avoid Thailand's experience, he said.
""They'll try to control property bubbles, which is what Malaysia did a few years ago,"" he added.
Most analysts said it was too early to identify obvious candidates in Thailand for merger or takeover apart from the list of 10 finance firms ordered to raise capital immediately.
But foreign banks with stakes in some of the companies already affected by the shake-out would feel some immediate pain, she said.
One example was Development Bank of Singapore, which owns part of Thai Danu Bank.
Thai Danu announced a merger with Finance One Plc over the weekend. Finance One is Thailand's largest finance company.
Another analyst said that although it was too soon to identify obvious targets, some of Asia's biggest banks would soon start cherry-picking their way through the debris in Thailand, looking for possible takeover targets.
Citibank, HSBC Holdings Plc and ING Barings were considered likely buyers, although foreign restrictions could be a disincentive. Foreigners are restricted to holding only 25 percent of banks or finance companies, effectively preventing them from gaining control.
""I think they'll be under pressure to admit foreign banks to take control of bigger slices of Thai banks and especially Thai finance candidates,"" the analyst said.
But Thailand was in a relatively good position to confront these problems, with the economy forecast to grow about 6.5 percent this year, he said.
""Unlike Japan, they don't have economic contraction,"" he said. ""My guess is if they shift their seat they can get out of it fairly quickly. They're not going to persist for four or five years like the banking problem in Japan.""
-- Hong Kong bureau (852) 2843 6470
",42
"Indonesia's infant mutual funds industry is poised for rapid growth with far-reaching consequences for the country's financial markets and economy, a mutual funds conference in Jakarta was told on Monday.
""There is enormous potential for change,"" John Booth, Asia managing director for the mutual funds services firm DST International, told fund management experts.
The adoption of a Capital Markets Law earlier this year paved the way for the creation of open-ended mutual funds in Indonesia, which, until recently, offered only one closed-end fund.
""These are sweeping changes which, if successful, could change the savings profile of the country, deepen the secondary market significantly and have a profound effect on the banking and mutual funds industries,"" Booth said.
Indonesia's population of nearly 200 million people, combined with the forecast economic growth rate of 7.5 percent this year and a high savings rate typical of most Asian nations, promise lucrative returns to mutual fund trailblazers, he said.
Seven open-ended mutual funds, or ""reksa dana,"" have been established so far with a value of US$640 million, and five more are in the pipeline.
Most, however, will focus on fixed income instruments rather that equities because of high-yielding bank deposits and uneven returns from Jakarta's illiquid stock market, where four large stocks account for 25 percent of volume and foreign investors account for about 70 percent of trading value.
""Obviously, equity markets are more volatile, and if people invest in them initially and they have a bad experience, it could harm the industry,"" Booth said.
He declined to predict how long it would take for mutual funds to boost liquidity on the Jakarta Stock Exchange. But exchange director Felia Salim suggested a guaranteed return to first-time mutual fund investors would speed up the development of a domestic funds industry and, hence, market efficiency.
""If we are to produce a domestic investor base, this would be something of a short-cut,"" Salim said. ""If we rely on education it will take forever. The best pull is to experience an immediate capital gain.""
Salim noted a guaranteed return was successfully used by Malaysia, which has set up two state funds in an attempt to even out socio-economic disparities. Malaysia has a domestic investor base of 3.31 million compared with Indonesia's tiny base of under 400,000, or less than one percent of the population.
Salim said Indonesia was unlikely to follow precisely the same model, adding that the country has an upper class of 1.2 million households with an average of 2.5 million rupiah in savings per year. However, surveys have shown a very low awareness of mutual funds within this group.
She added that while Indonesia's potential as a mutual fund investing nation remains spectacular, the stock exchange faces a substantial hurdle in education: only 17 percent of the population knows what a stock exchange is.
DST's Booth said the stock exchange and financial market regulators would also have to work hard to enhance transparency.
",42
"Thailand's banking sector crisis brought repeated calls for an upgrade of Asia's immature financial infrastructure at an International Monetary Fund-Hong Kong Monetary Authority meeting on Friday.
""Asia needs a stronger, more dynamic financial infrastructure,"" IMF managing director Michel Camdessus told the conference on financial integration in Asia.
The region's banking system has not kept pace with its economic development, and the speedy pace of economic reform has created an urgent need for an overhaul, delegates said.
""In many countries, in Asia and elsewhere, prudential regulation and supervision have not kept pace with the new complexities of the banking business,"" Camdessus said.
""If left unaddressed, this gap could pose dangers for domestic and external stability. Indeed, all countries must be vigilant about the strength of their banking systems, so that the monetary authorities can tighten policy when needed, without fear of aggravating banking sector problems.""
Asset quality problems forced Thailand to intervene earlier this week to demand better provisioning by its banks.
Thailand was hampered in dealing with the situation by its monetary policy. Its currency, the baht, is pegged to a basket of currencies dominated by the dollar, but was under pressure from speculators who were encouraged by Thailand's poor economic picture and weak financial sector.
Lower rates would have eased liquidity -- but would also have lowered the cost of borrowing for currency speculators.
Higher interest rates to ward off the speculators would have increased the cost of borrowing for the cash-strapped banks.
While most speakers stopped short of calling for regional banking regulation and supervision to prevent the same situation occurring elsewhere -- an idea mooted by Australia recently -- some experts recommended frequent and regular gatherings of central bankers and finance ministers.
""Most countries need to take steps to strengthen the official supervisory oversight of financial institutions and markets,"" said Gerald Corrigan, managing director at Goldman Sachs and a former president of the New York and member of the Federal Open Market Committee.
Key to the debate are capital inflows, which have widened current account deficits across Asia with serious implications for external balances and interest rates.
Corrigan warned that while many Asian nations with wide current account deficits have taken comfort from large foreign exchange reserves, the capital inflows responsible for much of their foreign exchange can evaporate overnight.
""Deregulation has also led to a greater exposure of credit and foreign exchange risk, and increased the danger of banks being inadequately capitalised with consequent incentives to offer above-market interest rates and engage in less prudent lending,"" said Mahmood Pradhan, a senior economist with the IMF.
The situation is becoming more urgent as more and more nations in the region seek financing for the sort of huge infrastructure projects on which their future depends, he said.
""The challenge is for many of these countries to address their infrastructure needs, including environmental requirements, without putting undue strains on public finances or on external positions,"" Pradhan said.
Although many Asian nations have successfully raised capital through privatisations, the amount of capital raised through privatisation in Asia was relatively small compared with Latin America, he said.
",42
"Hong Kong's embarrassment of riches will take centre stage on Wednesday when Financial Secretary Donald Tsang finally reveals the exact size of the territory's surplus and reserves.
The magnitude of wealth lining the coffers of Hong Kong is one of the budget's last and most sensitive secrets following a series of official leaks during the past two weeks.
Speculation about the size of the surplus has also led to controversy about how Hong Kong chooses to spend its wealth in this year of great change.
Hong Kong ends life as a British colony on July 1, returning to China as a Special Administrative Region.
Despite an attempt by the government to inhibit budget controversy it seems certain that debate will erupt on Wednesday when the full size of Hong Kong's cash pile is revealed.
China already has been accused of applying the brakes to welfare spending, a key element of colonial governor Chris Patten's thorny relationship with Beijing.
Tsang on Friday denied any Beijing budget pressure.
""In formulating our expenditure programme we had not been overly influenced, we have not been affected, by whatever they called political pressure,"" he told a group of central bankers.
With a budget surplus projected by many experts at HK$20 billion (US$2.56 billion), Hong Kong can certainly afford to better meet the needs of its disadvantaged, said the Democratic Party, Hong Kong's largest and most vociferous political group.
""It appears social security growth will be insufficient for our elderly and disabled,"" Huang Chen-ya of the Democratic Party told Reuters.
Spending estimates, already revealed, disclosed only a 9.1 percent increase in welfare spending in the coming fiscal year compared to a 20.1-percent rise in 1996/97.
But others say a tax cut is more appropriate, and might even become inevitable as the government struggles to comply with demands for fiscal balance contained in the Basic Law, the mini-constitution that will govern Hong Kong after July 1.
Still others argue that Hong Kong requires a hefty war chest of reserves in the year it reverts to Chinese control.
""The point is, now, whether the present level of fiscal reserves is adequate or not to secure Hong Kong from attack, from speculators, or from any shock to the system,"" said George Leung, economic adviser to Hongkong Bank.
""I cannot say whether that is enough, but I think more is better. Right now, it's 1997 and we still need money to secure the Hong Kong situation. It is a little more sensitive now.""
Leung warned that either a tax cut or aggressive social spending in Hong Kong, with its nascent inflationary pressure, would be more destabilising than no action at all.
But there is no doubt that Hong Kong confronts the handover in robust economic shape.
In one of a carefully orchestrated series of leaks following 12 months of budget talks with China, Tsang recently told an influential group of institutional fund managers that economic growth will rise a sturdy 5.5 percent in the coming year, while trade and consumption continue to improve.
Inflation will remain capped at seven percent, and land premiums are expected to rise to a record HK$60 billion (US$7.69 billion) -- the primary cause of the government's sudden increase in its budget surplus and fiscal reserves.
Given this wealth, some question China's readiness to adopt the hands-off approach to future budgets under the Basic Law.
China was allowed to participate in the transition budget, but now must allow Hong Kong to run its own financial affairs for 50 years -- a doubtful prospect, according to Huang.
""This budget certainly has already the fingerprints of intervention,"" he said. ""Certainly, I think the central government can, when it pleases, participate, to put it mildly, in future budgets by giving advice, invited or otherwise.""
-- Hong Kong Newsroom (852) 2843 6470
",42
"Thailand's efforts to boost market confidence by toughening up rules for its finance sector won mixed reviews from foreign investors on Tuesday.
Some welcomed Thailand's willingness to admit -- finally -- to asset quality problems in its finance sector, but others said Monday's announcement came far too late.
""This is fire-fighting,"" said one fund manager, who declined to be identified. ""They should have put the fire extinguishers and the sprinklers in beforehand. And now they've doused the flames, but the damage has already been done.""
On Monday, Thailand's central bank ordered 10 finance companies to raise capital immediately and raise provisioning levels to American standards of 115 percent of doubtful assets for banks and 120 percent for finance companies.
The moves followed months of speculation about asset quality that helped to shave half the value off the stock market while leaving the baht open to talk of a devaluation.
Fund Manager Templeton called for aggressive management of the problem.
""I think the central bank and the authorities need to take a very tough line and they need to be pretty active in the way in which they're going to manage this problem. Because this problem needs management,"" said sales director Stewart Aldcroft.
One fund manager said he was surprised the list of companies required to raise capital immediately was restricted to only 10 names. At least another 10 are in similar straits, he said.
Analysts said on Monday that only four or five banks would have to raise provisions to meet the new requirements, but most of the country's 90 finance companies cannot even meet existing requirements of 100-percent provisioning.
Thailand's willingness to confront the problem won praise from some investors, but most were unimpressed by the Bank of Thailand's tardy approach to a critical problem.
""We were frightened they would try to ignore the problem or gloss over it,"" said another fund manager. ""Now they have realised there is a problem and they're doing something about it, which is positive. But it's early days yet.""
One broker blamed changes in central bank leadership for the criticism. Previously, the Bank of Thailand was respected for its non-interventionist but pre-emptive management style.
""The bank seems to have gone astray in terms of its traditional role as a central bank,"" he said.
Another fund manager said corruption, a major complaint about the previous government, was starting to resurface.
""One of the biggest problems in Thailand is corruption,"" he said. ""The way in which political favouritism occurred in the past has become apparent in the current government.""
Thailand can now expect to begin a lengthy process of consolidation in its financial sector, with most of the activity focused on finance companies.
Most finance companies are heavily exposed to margin lending in investment banking and highly-leveraged in consumer or project finance, said James Wilson, senior associate director at Deutsche Morgan Grenfell.
""One issue that didn't crop up that should have, is most of the funding for finance companies is in the form of promissory notes,"" he said. ""When the risk goes up, so does their coupon and the cost of funding.""
-- Hong Kong Newsroom (852) 2843 6470
",42
"Hong Kong people seemed to forget politics and other worries as the tiny colony geared up to welcome the Year of the Ox, its last Lunar New Year celebrations under British rule.
With the clock ticking towards transition to Chinese sovereignty at midnight on June 30, Hong Kong's 6.3 million people took time out from hectic schedules for the Chinese equivalent of a western Christmas or American Thanksgiving.
Last-minute shoppers dashed through malls, record numbers of travellers flowed across the border to visit relatives in China and children threw empty red ""lai see"" money pockets at each other on Hong Kong harbour's Star Ferry.
""Kung Hei Fat Choi, may you be rich and make more money,"" said resident Ng Chak Kwong. ""Everybody wants this to be a good year. Too many people worry about everything.""
But the cheerful greeting cards, office towers ablaze with lights, strings of red firecrackers and little orange trees offered few clues to Hong Kong's real state of mind on New Year's eve.
This year's festivities were set against a backdrop of rising political tension after China's recent pledge to roll back some civil liberties laws following the handover, plans that sparked an outcry both at home and abroad.
The Democratic Party, the territory's largest party, collected 20,000 signatures opposing the plans while the international community lodged official protests with China.
Chinese Vice-Premier Qian Qichen said on Wednesday Hong Kong's return to the motherland would end ""the disgrace and humiliation China has suffered from for more than 150 years"".
Chief Executive-designate Tung Chee-hwa, the man who takes over from colonial Governor Chris Patten after the handover, last week defended Beijing's proposed changes as misunderstood, but few were convinced.
Patten, in a televised new year address, said he would leave Hong Kong with ""a good deal of nostalgia, a good deal of feeling for one of the finest places in the world, one of the greatest cities in the world"".
""I'm sure that Mr Tung -- when he becomes Chief Executive... will be committed to doing all he can to keep things that way,"" he said.
Most Hong Kong people seemed determined to ignore politics during the holiday. Four days of parades and fairs were planned, and spectacular fireworks were to light up the sky on Saturday.
According to Chinese astrologers, the coming year offers Hong Kong plenty of promise but obstacles as well.
Unlike Western astrology, where months of the year are grouped into separate star signs, Chinese astrology hinges on the year of birth.
That could mean bad news for Tung, who was born in 1937, the Year of the Ox.
According to the astrologer at the South China Morning Post newspaper, Tung faced a difficult year marked by envy and accident and he was advised to seek compromise.
""He is likely to be caught between Hong Kong people and the Chinese government and may be the object of envy by mainland officials,"" warned astrologer Sung Siu-kwong.
Patten, born under the sign of the Monkey in 1944, was warned about the emergence of a rival in mid-year and cautioned to draw a line between private and public involvements.
""He will need to overcome obstacles that can stand in the way of the glorious withdrawal,"" Sung said.
",42
"Hong Kong conglomerate Wheelock & Co Ltd has launched a search for a new partner for its fledgling Hong Kong fund management company following NatWest Group's decision to pull out.
""We've got nobody on the hook but there are people with whom we're having discussions,"" said Nicholas Sibley, deputy chairman of Wheelock NatWest Ltd, a 50-50 joint venture between Wheelock and Britain's National Westminster Bank Plc.
Wheelock NatWest revealed last week that NatWest wants to dispose of its stake in the fund management division following its acquisition of British pension giant Gartmore Plc in February for 472 million stg.
""The decision to buy Gartmore meant the support and distribution and all of that that had been hoped for from NatWest in support of Wheelock NatWest Investment Management obviously weren't going to be available. They were going to use Gartmore as their fund management arm instead,"" Sibley said.
Sibley expressed disappointment at NatWest's decision, but rejected speculation that the remaining divisions under the joint venture -- corporate finance and equity stockbroking -- could also become vulnerable to NatWest pulling out.  
""Yes, obviously we're disappointed,"" he said. ""But there's no question of the equity and corporate finance business breaking up or anything like that. That is running along perfectly satisfactorily.""
The joint venture, which offers corporate finance and equity stockbroking services as well as investment management in Hong Kong, became fully operational one year ago.
Sibley said he understood why NatWest wanted Gartmore.
""They had a very weak fund management side themselves and they needed to make a sort of quantum jump in that activity, which is what the acquisition of Gartmore did for them.""
However, NatWest's decision to pull out comes at a particularly sensitive time for the new fund manager.
Wheelock NatWest Investment Management is experiencing rising commissions but the completion of its research division, considered essential to attract major institutional clients, has only just been completed, Sibley said.
""It takes a long time to build up a research product, which we only just got about a month ago,"" he said.  
""The commission figures go up and up and up every month. They haven't had a single down month since we started. But the big jump comes over the next six months when you can offer the full service to the major institutions and hope that we can attract them to deal with us through the quality of our research and execution service.""
Wheelock now hopes to find a European or North American partner, said Wheelock NatWest chief executive David Miller.
He said he hoped a decision would be made by Christmas.
-- Hong Kong Newsroom (852) 2843 6441
",42
"The longer-term interests of a US$1 billion stake in Russian equity markets dictated last week's decision to unwind a controversial fund that planned to invest in Russian gas monopoly Gazprom, Regent Pacific Group Ltd said on Monday.
""We've had to sacrifice the smaller interest in Gazprom to the much bigger interest we've got in Russia overall,"" Jim Mellon, Regent Pacific's managing director, told Reuters.
Hong Kong-based Regent Pacific decided to back away last week from a dispute with Gazprom over a US$200 million fund designed to invest in the domestic shares of the gas giant.
""We don't want to get into a lengthy legal battle and jeopardise our (other) Russian funds,"" Mellon said.
""Gazprom is the biggest company (in Russia) and we certainly don't want to go up against them,"" Mellon said.
Gazprom restricts foreign investment to nine percent of share capital, which it issues in the form of American Depositary Shares.
These ADRs trade at four times the value of the domestic shares, which Regent's fund hoped to purchase because it was incorporated in Russia -- even though all the fundholders were foreign institutions.
Mellon defended the scheme on Monday as ""completely legal"" but said Regent backed away from a dispute with Gazprom after it asked Regent not to buy the domestic shares.
""There was never any question of foreigners getting their direct hands on the shares,"" said Mellon.
""If you consult any lawyer they'll tell you our scheme is absolutely watertight, completely legal, but from a practical point of view it's all very well for Regent to go up against Hambros Bank but it would be very foolish of us to go up against Gazprom,"" he added.
Regent owns between three and four percent of Hambros and has been arguing forcefully that the bank is better broken up.
Mellon said that while Hambros might enjoy prestige as one of Britain's last remaining independent merchant banks, it cannot compare with Gazprom which numbers Russia's current prime minister and energy minister among its former executives.
Regent's Gazprom fund hoped to attract fundholders keen to arbitrage the ADRs and the domestic share prices.
""I suppose the worry that Gazprom had was that people might sell the ADRs or alternatively not buy the next issue of ADRs and buy our fund instead, which was the same issue but at a much lower price,"" said Mellon.
""Or alternatively, if you were a hedge fund, you might go short the ADRs and long our fund and seek to exploit the gap.""
So far, only 1.5 percent of the foreign allotment of nine percent of share capital have been issued, Mellon said.
However, Mellon argued that the fund was Gazprom's idea in the first place and based on an arbitrage long-practiced by Russian brokers.
Timing was probably the root cause of the difficulty.
""Only once we got the money did they come out against it,"" Mellon said. ""One suspects its definitely in their interest longer-term to have the local share price higher versus the offshore price. In the immediate term it's not in their interest because they wanted to raise more ADRs.""
Gazprom's domestic shares were trading at about US$0.645 on Monday against US$0.53 last week. The London-traded ADRs, equivalent to 10 underlying shares, at US$17.35 against more than US$20.00 last week.
-- Hong Kong Newsroom (852) 2843 6470
",42
"Thailand's banking sector crisis brought repeated calls for an upgrade of Asia's immature financial infrastructure at an International Monetary Fund-Hong Kong Monetary Authority meeting on Friday.
""Asia needs a stronger, more dynamic financial infrastructure,"" IMF managing director Michel Camdessus told the conference on financial integration in Asia.
The region's banking system has not kept pace with its economic development, and the speedy pace of economic reform has created an urgent need for an overhaul, delegates said.
""In many countries, in Asia and elsewhere, prudential regulation and supervision have not kept pace with the new complexities of the banking business,"" Camdessus said.
""If left unaddressed, this gap could pose dangers for domestic and external stability. Indeed, all countries must be vigilant about the strength of their banking systems, so that the monetary authorities can tighten policy when needed, without fear of aggravating banking sector problems.""
Asset quality problems forced Thailand to intervene earlier this week to demand better provisioning by its banks. Thailand was hampered in dealing with the situation by its monetary policy. Its currency, the baht, is pegged to a basket of currencies dominated by the dollar, but was under pressure from speculators who were encouraged by Thailand's poor economic picture and weak financial sector.
Lower rates would have eased liquidity -- but would also have lowered the cost of borrowing for currency speculators.
Higher interest rates to ward off the speculators would have increased the cost of borrowing for the cash-strapped banks.
While most speakers stopped short of calling for regional banking regulation and supervision to prevent the same situation occurring elsewhere -- an idea mooted by Australia recently -- some experts recommended frequent and regular gatherings of central bankers and finance ministers.
""Most countries need to take steps to strengthen the official supervisory oversight of financial institutions and markets,"" said Gerald Corrigan, managing director at Goldman Sachs and a former president of the New York and member of the Federal Open Market Committee.
Key to the debate are capital inflows, which have widened current account deficits across Asia with serious implications for external balances and interest rates.
Corrigan warned that while many Asian nations with wide current account deficits have taken comfort from large foreign exchange reserves, the capital inflows responsible for much of their foreign exchange can evaporate overnight.
""Deregulation has also led to a greater exposure of credit and foreign exchange risk, and increased the danger of banks being inadequately capitalised with consequent incentives to offer above-market interest rates and engage in less prudent lending,"" said Mahmood Pradhan, a senior economist with the IMF.
The situation is becoming more urgent as more and more nations in the region seek financing for the sort of huge infrastructure projects on which their future depends, he said.
""The challenge is for many of these countries to address their infrastructure needs, including environmental requirements, without putting undue strains on public finances or on external positions,"" Pradhan said.
Although many Asian nations have successfully raised capital through privatisations, the amount of capital raised through privatisation in Asia was relatively small compared with Latin America, he said.
",42
"Now that China's Deng Xiaoping is dead, Hong Kong faces a future without the figurehead who helped to assure the territory's confidence and stability, among the two most important words in the investor's lexicon.
As the architect of the ""One country, two systems"" policy, Deng provided the framework that will guide Hong Kong's return to China on July 1 this year.
His open-door policy also transformed the territory's economy from an industrial and manufacturing hub into a service centre geared to China's emergence.
Deng's passing last week was an important milestone for the city-state he helped to shape.
The immediate impact of his death would be small, as the paramount leader's nuts-and-bolts involvement in Hong Kong affairs was limited.
But the longer term effect would be significant, particularly as Hong Kong prepared for its July 1 transition into a Special Administrative Region (SAR) of China, after more than 150 years of British colonial rule.
""To all intents and purposes, he was inactive but while he was there, his standing allowed large numbers of people to move and shake on the basis of his authority,"" said David Dodwell, author and director at Jardine Fleming Holdings.
""That is the biggest imponderable: to what extent could the people promoting economic reform become vulnerable.""
ECONOMIC REFORM TO CONTINUE REGARDLESS
Few doubt that the economic reforms Deng initiated and upon which Hong Kong depends so heavily will proceed.
Too much change has already become entrenched, and China's growing number of jobless will require continued progress as the private sector, most of it built and supported by foreign investment, is the nation's only job creator, Dodwell said.
That is a positive factor for Hong Kong, which has been the primary investment gateway into China. In 1995, Hong Kong accounted for $80 billion of direct investment in China, or 60 percent of a total realised foreign direct investment of $133 billion.
Rising foreign investment also would imply increased demand for services, which would at least guarantee steady economic growth, albeit at slower rates than 20 years ago.
""We won't see double digit growth rates again,"" said George Leung, economist at Hongkong and Shanghai Bank.
""I would also not see growth slowing sharply, to say one or two percent, because Hong Kong still has the backing of China. If China grows from nine to 10 percent each year you can imagine the demand for services in Hong Kong.""
THE POLITICAL PACE OF CHANGE
The pace of reform -- and of economic growth -- has always been a hot political issue in China, as has management of the industrial sector which is dominated by huge, labour intensive and debt-laden state enterprises.
""There seems to have been a certain policy inertia. What will the next step be?"" asked Michael Martin, economist at the government-funded Hong Kong Trade Development Council.
All eyes will be on China's 15th National People's Congress in October for signs of renewed momentum in policy-making and the collective leadership's commitment to change.
""As that new domestic economic policy and particularly industrial policy emerges it will have implications for what Hong Kong's role will be for the next decade or so,"" Martin said.
Hong Kong can rest assured that the role Deng carved out for it 15 years ago will remain intact for the time being, Martin said. China's absence of basic financial infrastructure, a reliable legal system or even property rights seems to assure Hong Kong's near-term future as the nation's investment gateway.
But as China develops, the territory's role could diminish.
""Its role over time is likely to become more modest,"" said Dodwell. ""Over time, the mainland Chinese economy and companies in the mainland in centres such as Shanghai will become more successful and the economic centres of gravity will shift.""
HONG KONG KEEPS WARY WATCH ON SHANGHAI
Shanghai is viewed with suspicion by many in Hong Kong, who fear its rapid economic progress and close ties to the current collective leadership in Beijing.
""Shanghai has for many years now been given priority by the Chinese leadership as they tried to rebuild strength there but I don't honestly see that those commitments to help Shanghai to grow, will be in any way at the expense of Hong Kong,"" said Dodwell.
Hong Kong's best scenario for the future will depend on a China that succeeds, but not too well, Dodwell said. ""If China really motors and gets really clever, it doesn't need Hong Kong any more.""
But Martin said China is going to need more than one financial centre, one port or one major transportation hub.
""Rather than a situation where they are competing head to head, it will be more a situation of how the two can complement each other for the overall growth of China,"" he said.
HONG KONG MUST KEEP LOOKING OUT, NOT IN....
Martin stressed Hong Kong's international role, partly because the world's trade structure is shifting more quickly than in the past. Production facilities are more mobile, flexible and integrated and Hong Kong's international exposure and expertise will remain crucial to China's success, he said.
""The future of southern China depends on its ability to respond to those shifts and reorient activities into new product areas, or move up the technological ladder,"" he said.
But there are other, more subtle concerns, including a common fear that China will plunder Hong Kong's coffers.
China has pledged its support for Hong Kong's monetary independence, but economic tzar Zhu Rongji in the past has made frequent pleas to the wealthy coastal provinces in favour of China's poorer central areas.
The price of plundering Hong Kong would be high, Dodwell warned. International investors have committed $330 billion so far in China, two-thirds of which came through Hong Kong. Actual investment from Hong Kong is over $100 billion, much of it from overseas Chinese.
""In theory, it's always posible but it would be a one-off gift. Is China really going to cut off its nose to spite its face?"" Dodwell asked. ""If it came in and scooped up the pot, what demonstration does that give to the overseas economy, and particularly the overseas Chinese economy?""
-- Hong Kong Newsroom (852) 2843 6470
",42
"Zero tax and limited regulation are luring billions of dollars into offshore mutual funds, spurring a growth industry in famed tax-free locations such as the Cayman Islands, according to a mutual fund legal expert.
""I think every indication is that the offshore part of the mutual fund industry will grow. In the offshore jurisdiction you have no taxation and a more appropriate level of regulation as a rule of thumb,"" said Anthony Travers, senior partner at Maples and Calder in Hong Kong.
Anecdotal evidence suggests these advantages have drawn nearly US$900 billion into offshore mutual funds so far out of an entire industry sometimes valued at US$5 trillion, he said.
A lack of professional infrastructure is often a compelling disincentive to authorising funds in countries offering the greatest returns, while high taxation levels deter mutual funds from setting up in promising developed markets, he said on Friday.
The alternative is to authorise the fund in an offshore region, avoiding tax while reaching into some of the world's most rewarding investment regions.
There are, however, drawbacks.
""If you go offshore and you invest into the onshore jurisdiction from your mutual funds, you have things like withholding tax and tax treatments that may be imposed on your profits, and marketing is very much an issue,"" Travers said.
Certain double tax treaty networks can allow investors to avoid some onshore tax requirements, but these treaties vary from country to country, as do marketing restrictions, he said.
For example, offshore mutual funds are prevented from marketing to more than 100 investors in the United States, while the United Kingdom prohibits marketing of offshore retail mutual funds unless they are based in designated jurisdictions, such as Bermuda, Jersey and Guernsey.
It is possible to market a Cayman Islands-registered mutual fund in the United Kingdom, but only as a private placement and not as a retail fund, Travers said.
Despite their obvious benefits, Travers warned that investing in offshore mutual funds is not for everyone.
The lack of regulation gives greater flexibility in the establishment and administration of mutual funds but it also provides little recourse for unsophisticated retail investors, which partly explains why these funds cannot be marketed freely in the United States or the United Kingdom.
""You are essentially talking about mutual funds which are established by institutions for other institutions or very high net worth and sophisticated individuals, in which case it is felt additional layers of regulation are not appropriate or necessary,"" he said.
It is possible to market offshore retail funds in Europe, but funds must meet the requirements of the ""Undertakings of Collective Investment and Transfer of Securities"" (UCITS) directive, which ensures certain standards are met.
""They are supposed to be able to sell UCITS cross-border in Europe but in fact the European Union is still something of a myth when it comes to cross-border marketing,"" Travers said.
""And you find in these jurisdictions commensurately higher fees. Three to six basis points on net asset value is the price you pay to market to the retail sector,"" he said.
",42
"Indonesia's nascent funds industry will remain dormant until the government steps in and provides a boost, experts attending a mutual fund conference said on Monday.
""There needs to be somebody giving them a push. The push can come not just from banks, not just from private institutions, but from the government,"" said Venkatagiri Mudeliar, deputy general manager of Dresdner Thornton Asset Management in Singapore.
Despite its obvious promise, Indonesia's mutual funds industry faces substantial obstacles, including unbeatable returns from bank deposits offering up to 17 percent per annum.
One speaker said that more than 60 percent of pension fund assets valued at US$2.4 billion were held in bank deposits. Seven newly-established mutual funds with assets of about US$642 million were similarly invested.
Among recommended measures at the conference were tax benefits for mutual fund investors, permission to allow domestic savings to flow offshore and a major educational drive.
Felia Salim, director of the Jakarta Stock Exchange, told the conference that government discussions to provide a tax break to mutual fund investors were underway, and more than 40 percent of the bourse's budget for 1997 was dedicated to educating the public about the benefits of mutual fund investment.
But delegates said with international investment prohibited and foreign investment restrictions of 49 percent, incentives to setting up investment management subsidiaries in Indonesia were limited despite the industry's promise.
""Internationally, it's always a nervous position for a foreign fund manager to be in when it appears investment is a one-way street,"" said Paul Smith, managing director at the Bank of Bermuda in Hong Kong.
Foreign fund managers would be more likely to establish fund management subsidiaries in Indonesia if there were opportunities to manage Indonesian money offshore, he said.
""It's a hard call to make for a foreign fund manager to come down here and set up shop just to manage Indonesian domestic mutual fund business, which at the moment is a very small pie,"" Smith said.
Mudeliar said Indonesia is clearly committed to speeding up the establishment of its financial infrastructure, and catching up with its more developed Southeast Asian neighbours.
""Yes, they have lost out for a number of years but as you know nowadays knowledge is so freely available that they don't have to wait a full 15 years or 20 years,"" Mudeliar said.
""(They can make a) quantum leap in another five years. They can buy expertise, they can buy information ... I think Indonesia will be something to reckon with in the next 10 years.""
-- Jakarta Newsroom
",42
"With the World Bank forecasting a 20-percent increase in Asian energy demand each year for the next decade, one could be forgiven for viewing the entire Asian power stock sector as a good bet.
Wrong.
Uncertainty in the form of rapid change looms over one of Asia's most important equity sectors, making short-term value hard to find, analysts say.
Just some of the wild cards include the privatisation of state utilities, a plethora of new, independent power producers (IPPs) and a diverse and government-controlled tariff structure.
""There is an escalation of the risk/reward ratio of power investments, given the massive changes the industry is undergoing,"" said BZW Asia Research analyst Thomas Chesser.
""A number of project-specific, speculative issues are turning once predictable, stable and defensive power investments into high-risk, high-reward plays.""
STOCK SELECTION CRITICAL
Longer-term, many Asian power companies are bound to offer strong returns with estimated demand requiring 2,000 megawatts more capacity each month for a decade, implying annual investment of more than US$35 billion.
But all analysts agree stock selection will be critical to avoid a variety of short-term hazards.
In the past, Asian power stocks tended to track regional markets, but over the next few years up to 40 percent of all new generating assets will be derived from IPPs, creating much greater divergence in share price performance.
Valuations will also come under pressure from a flood of new equity. Within the next two years, the  Electric Authority of Thailand (EGAT) and  National Power Corp in the Philippines are both due for privatization, with another three privatisations in the next four years.
The privatisations will join a slew of new equity from the US$5.5 billion Bakun hydroelectric dam project, YTL Corp Bhd and  Port Dickson Power in Malaysia,  Beijing Datang Power Generation Co and Huaneng Power International in China and Korea Electric Power Corp (KEPCO) in South Korea. In total, a flood of about US$2.5 billion in new paper will hit Asian markets this year.
""While increasing the alternatives available to investors, it is probable that new supply will reduce premiums accorded to already-listed companies,"" Goldman Sachs analyst Hilary Judis wrote in a recent research report.
HIGH PREMIUM STOCKS SET TO FALL
Valuations are also expected to rationalise following Southern Electric's US$2.7 billion acquisition of Consolidated Electric Power Asia Ltd (CEPA) last October.
The deal's premium of 15-percent to net present value provides a new international benchmark that could speed up an evening-out of domestic stock valuations. Many stocks trading at high premiums can expect to fall sharply.
""What CEPA has done is call attention to market transactions. A lot of people will view it as a benchmark for value against domestic valuations,"" Chesser said.
""It's only been three or four months so we haven't seen the trickledown come through yet, but some of the dearer IPPs will see the premiums come down. This is not just intuition but based on a survey of fund managers,"" he added.
KEPCO GETS BUY RECOMMENDATION
While analysts all commend careful stock-picking as the only safe route through this maze, their recommendations vary widely -- with one notable exception: KEPCO enjoys a buy recommendation from virtually every Asian analyst.
As the sole government-owned and operated utility in South Korea, KEPCO enjoys a virtual monopoly on electricity generation and transmission in South Korea, accounting for 95 percent of all electricity generation last year.
The stock, with a 12-percent weighting on the Seoul stock market, fell in line with the broad sell-off in South Korean shares in the second half last year before making a breathtaking recovery this month.
Despite expectations of weak 1996 earnings from higher fuel prices and a punishing foreign exchange rate, KEPCO is now trading at about 27,000 won against a 12-month low of 23,800.
Analysts said the stock appears to have priced in expectations of a 28-percent decline in 1996 earnings and now is trading in anticipation of a much better year in 1997, aided by a tariff increase and improved fuel prices.
""Although any further depreciation in the won will likely not be helpful to KEPCO we expect the decline in oil prices to more than compensate,"" said Caroline Rogers at Merrill Lynch.
CHINA'S HNP FAVOURED, EXPANDING
China's Huaneng Power International (HNP) is also favoured by most analysts, but it does not enjoy KEPCO's universal popularity.
Merrill Lynch said HNP, with the highest valuation among the four Chinese power companies, is known for its strong relationships -- always important in Asia -- and a quality management led by Li Xiaopeng, the son of China's premier Li Peng. Li senior runs the State Council, overseeing capital expenditure and tariff increases.
HNP is expanding its existing four power plants to 6,200 megawatts over the next five years from 1,900 megawatts now, boosting annual earnings growth by a projected 24 percent.
Most analysts also like Hong Kong and China Gas for its stable earnings growth, China exposure and property investments. But Hong Kong Electric and China Light and Power received a mixed response thanks an uncertain regulatory environment, unstable earnings outlook and problems with overcapacity.
Manila Electric Co in the Philippines is also popular as a monopoly with good exposure to an accelerating economy. But some analysts warn the stock's valuation, formerly justified by strong profit growth and positioning, will have to change to reflect no more tariff increases until the year 2000.
And while some expect Meralco to benefit from the privatisation of National Power Corporation, which is run by many ex-Meralco personnel, others see increased investor choice eroding Meralco's share premium.
Analysts are neutral to negative on Malaysia's Tenaga Nasional Bihad, which faces a loss of its monopoly on transmission and distribution, uncertainty surrounding any tariff increases, and the possibility that the government will demand that the company provide a rebate to customers damaged by a recent blackout.
",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
"Economic commentators in Hong Kong are sounding alarms about the unbridled optimism spurring stock and property prices to new highs ahead of the British colony's return to Chinese sovereignty on July 1.
Concerns are mounting that rising price pressures could inflate a collapsible bubble on the assumption that China will support Hong Kong's economy through the transition regardless of any political disruption.
""The term 'moral hazard' refers to the apparently growing belief in local markets that there is little dramatic down-side risk -- as opposed to short-term volatility -- because ultimately China will suppport Hong Kong markets,"" Ian Perkin, chief economist with the Hong Kong Chamber of Commerce, wrote in a column in the South China Morning Post.
In contrast to earlier fears that political uncertainty could torpedo Hong Kong's economy in 1997, domestic confidence in China's determination to keep the economy stable through the transition is so high that an unexpected problem has arisen -- price instability.
INFLATION FORECASTS ON THE RISE
Economists are starting to revise upwards their inflation forecasts for 1997 in response to booming stock and luxury property prices.
""The outlook for 1997 is going to be less good than we thought,"" said Kevin Chan, economist at Salomon Brothers.
Salomon has raised its 1997 forecast for the territory's benchmark consumer price index to seven percent from 6.6 percent late last year, and Chan said further increases are possible.
Sudden strength in Hong Kong's stock market in the middle of last year was welcomed as proof of confidence in the colony's future under China, and evidence of an economic turnaround following an export slump early last year and three years of austerity in China.
But the optimism became concern in November when speculation emerged in the luxury end of Hong Kong's property market.
Citing anecdotal evidence, Perkin argued that overseas and domestic investors confident of China's commitment to economic stability in Hong Kong are rushing to buy high-end properties in anticipation of short-term gains.
The Hong Kong government has since strongly supported a set of anti-speculation measures by the Real Estate Developers Association, and warned it will step in if there are signs that speculation is filtering down to the middle or low end of the property market.
But economists said property price volatility would eventually stimulate overall inflation, even though it has been restricted so far to the high end of the market.
""This will not be good for inflation expectations,"" Chan said. ""In general, people will expect the higher prices in the luxury sector to affect medium and small flats.""
RENTS TO RISE 15 PERCENT THIS YEAR
Chan estimates an overall rise of 30 percent in property prices will translate into at least a 15 percent increase in rents this year, which account for 25 percent of the Hong Kong government's benchmark consumer price index (A).
Food prices, which account for 37 percent of CPI(A), are expected to rise by at least eight percent this year after holding steady last year.
Hong Kong will also suffer from its currency link to the U.S. dollar. If the United States raises short-term interest rates this year by 25 to 50 basis points, as many expect, real rates in Hong Kong -- the difference between nominal rates and inflation -- will fall to about one percent, Chan said.
Such low rates will propel growing momentum in both private consumption and retail sales.
China, with its well-documented aversion to the socially destabilising effects of inflation, has done little to stoke further exuberance over Hong Kong's post-1997 economy beyond saying it backed Hong Kong's currency link.
""There seems little doubt Hong Kong's new sovereign wants to see the local economy prosper throughout the year of transition and in the early years of its resumption of sovereignty,"" Perkin wrote. ""It (is) probably true that it does not want to see the local economy going on a speculative spree that will eventually run out of steam and cause a collapse.""
-- Hong Kong Newsroom (852) 2843 6441
",42
"Central bank independence is not usually a hot topic in Hong Kong but the territory has been debating the subject with vigour just 19 weeks before its return to China.
Remarks by chief executive-designate Tung Chee-hwa stirred up a subject that raises blood pressures around the world when he said changes were possible in the reporting structure at the Hong Kong Monetary Authority.
Tung, who takes over from Governor Chris Patten on July 1 when Britain cedes control of the colony to China, seemed to suggest that at some point, the head of the HKMA could be required to report directly to the chief executive rather than to the Financial Secretary.
""There is now already a structure for the future as to who the head of the Monetary Authority reports to,"" Tung said, when pressed by reporters on Wednesday.
""As to whether this is the right structure for the future, that's something we can really examine.""
Hong Kong's reaction to the comments was largely negative even though most experts acknowledge the HKMA's powers are much more limited than those of central banks in developed nations, where political interference is viewed with high suspicion.
""It struck me that one might want an additional layer between the chief executive and the head of the central bank,"" said Eric Nickerson, head of currency at Bank of America.
Politics, not economics, is driving the debate, said one economist. The HKMA's primary function is not to set monetary policy but to manage the Hong Kong dollar, which is pegged at HK$7.80 to the U.S. currency.
""This is just a political game,"" he said. ""The HKMA is a manager rather than a policy-maker.""
The HKMA has never experienced political interference in monetary management, said HKMA chief executive Joseph Yam.
""If anybody were to come and tell me to do something about, for example, unemployment or inflation or growth in the economy, I would just say 'No,' this is not my responsibility,"" Yam said in a speech in Tokyo on Tuesday.
The HKMA was formed in 1993 by merging the government department responsible for managing Hong Kong's reserves with the Office of the Commissioner of Banking.
With this as its primary function, the influence of the HKMA on the domestic economy is limited.
""I don't see the need to change the existing system. It seems to be working very well,"" said Ken Chan, senior economist at Nikko Securities.
Chan also noted that Hong Kong enjoyed excellent relations with the People's Bank of China, the Chinese central bank, which has repeatedly stated its commitment to the Hong Kong dollar peg and Hong Kong's continued monetary independence.
The lack of any clear advantage of change has led to speculation that personalities are at stake.
By removing the HKMA from the Financial Secretariat, the government would seriously constrain the influence of the outspoken Financial Secretary, Donald Tsang.
Meanwhile, there are reports that Yam will be appointed one of Tung's principal officers in his new Secretariat.
A Hong Kong government spokesman denied that Tsang's relationship with Tung was tense, and said any changes to the reporting structure at the HKMA was something to be decided by the government of the new Special Administrative Region of Hong Kong following the transition.
Tung declined to elaborate on his remarks on Wednesday.
-- Hong Kong Newsroom (852) 2843 6470
",42
"Hong Kong Financial Secretary Donald Tsang painted a rosy picture of an expanding economy on Thursday, just two weeks before he presents the budget that will straddle the territory's handover to Chinese rule.
With economic growth forecast at 5.5 percent this year and the trade picture improving, Hong Kong's economy is well positioned ahead of the territory's transition from British to Chinese sovereignty on July 1, Tsang said.
""Hong Kong will start life as a Special Administrative Region (of China) in sound economic shape, with every prospect that we will remain the most attractive business location in this region,"" Tsang told a Hong Kong Investment Fund Association lunch.
Tsang is due to release the annual budget on March 12.
He revealed the government's economic forecasts but declined to disclose its fiscal reserves or comment on an expected fiscal surplus of up HK$20 billion (US$2.56 billion), substantially higher than a prior government forecast of HK$1.6 billion.
""It makes good sense to separate clearly our economic forecasts from the annual budget,"" he said.
""To maintain our position as a major centre for international business, entrepreneurs and investors need prompt access to the best information on our current performance and our future prospects,"" he said.
Tsang said improvements in foreign trade and rising domestic demand would continue to support Hong Kong's economy through 1997, following a turnaround in the middle of last year.
Consumption and investment were the primary drivers behind last year's recovery, aided by an unemployment rate that fell to 2.6 percent and inflation capped at 6.7 percent, he said.
Private consumption is expected to rise still further by 5.5 percent this year, he said.
The massive airport construction project and public housing programmes boosted investment levels in 1996, as did private sector activity in building and construction, he said.
""The feel-good factor returned in the middle of 1996,"" Tsang told reporters after his speech.
While investment rates are set to fall this year as the Chek Lap Kok airport project nears completion, Hong Kong's economy should continue to leap ahead, thanks to an improving trade picture that will benefit from steady or high growth rates in the United States, Europe and East Asia, he said.
""We expect the economy to perform significantly better than last year,"" Tsang said. ""The improved performance will be generated by faster growth in both domestic demand and foreign trade. We also expect confidence levels to remain high in 1997.""
Exports of goods are forecast to rise 8.5 percent this year against a decline of eight percent last year. Exports of services are expected to grow eight percent in 1997 against a rise of six percent last year.
Although domestic exports should remain static, re-exports should rise 10 percent this year compared with eight percent last year, Tsang said.
Although private consumption growth indicates greater confidence in the territory's future, Tsang warned that Hong Kong was experiencing an increase in price pressure that would push up the benchmark consumer price index (A) by seven percent in 1997 from an inflation rate of 6.7 percent in 1996.
""That is our forecast at this moment,"" he told reporters. ""It will be revised in the middle of the year... I think that seven percent is a reasonable estimate.""
-- Hong Kong News Room (852) 2843 6441
",42
"Hong Kong business groups hit back on Wednesday at U.S. attempts to link China's most favoured nation (MFN) trading perks with how Beijing handles Hong Kong after it reverts to Chinese control later this year.
U.S. Congressman Jim Kolbe, leading a 22-member delegation from the House of Representatives to Beijing, said on Tuesday the United States will probably want to monitor Hong Kong for at least a year before granting China permanent MFN status.
""If MFN were conditioned or taken away, especially during the transition period, it would clearly have a devastating effect and make it much more likely that all the things we want for Hong Kong would not be achieved,"" said Mark Michelson, former chairman of the American Chamber of Commerce.
China currently enjoys MFN, subject to annual review.
Hong Kong commentators noted that permanent MFN, which would allow China the same tariff treatment as other big U.S. trading partners without an annual review, was unlikely in 1997, the year that China takes back Hong Kong from Britain.
""It's unfortunate. Were it not for this being the year of the return of Hong Kong to China, I think it would have been an opportune time for the U.S. Congress to finally extend permanent MFN status,"" said Frank Martin, the American chamber president.
""But it is going to be difficult this year. Many members of Congress are very likely to want to take a wait-and-see attitude.""
Legislation on permanent MFN has been submitted to Congress but has not been voted on.
China, which argues full MFN status is essential for healthy Sino-U.S. relations, granted Kolbe's congressional delegation an interview with President Jiang Zemin on Tuesday.
Political analysts said Kolbe was committed to achieving permanent MFN status for China, but had tried to remind Beijing the United States wants to see a smooth handover in Hong Kong, where many are worried that China might impose repressive rule.
""Would a vote to tie MFN to the transition be a good idea? No,"" said one analyst, who declined to be identified.
""But to kind of use it one last time to signal concern while everyone knows annual MFN is going to go through doesn't hurt.""
As the leading entrepot for China-U.S. trade, the Hong Kong government has always backed China's application for MFN status. But on Wednesday it declined to comment on Kolbe's remarks.
China's annual application for MFN status goes to Congress in May. It has won approval every year since 1990.
However, former U.S. president George Bush was occasionally forced to use his presidential veto to eliminate various conditions that Congress attempted to attach.
U.S. President Bill Clinton, who accused Bush of coddling tyrants in the 1992 U.S. presidential election campaign debates, de-linked the annual review of MFN from China's human rights record in 1995.
",42
"An uproar over the sudden departure of Hong Kong's chief immigration official last July is expected to gather momentum this week, when the territory's top civil servant appears before a Legislative Council enquiry.
Anson Chan, the territory's popular chief secretary, is expected to resist demands by Legislative Council (Legco) committee members that she release confidential reports on former immigration boss Laurence Leung.
Chan's appearance before the committee on Wednesday sets the stage for a showdown between the Hong Kong government, now facing accusations of a political cover-up, and the Legco select committee investigating the Leung affair.
Committee chairman Ip Kwok-him last week threatened to use a powerful ordinance to slap Chan with contempt if she fails to unveil the reports -- statements which drew a sharp response from the government on Sunday.
If the committee uses the Legco (Powers and Privileges) ordinance to open the reports, ""then it will have to be solved in the court"", civil service secretary Lam Woon-kwong told the South China Morning Post newspaper.
At issue are two investigations, one an anti-corruption probe and the other a police integrity check, both performed before Leung left his post where he enjoyed access to highly sensitive information.
British press reports have since alleged that Leung was spying for China, which takes back Hong Kong after 150 years of colonial rule on July 1 this year.
Leung, whose daughter was murdered with a cross-bow in Canada four years ago, has denied being a spy. But a few days ago, Leung contradicted earlier claims that he resigned for personal reasons and announced that he was forced to quit.
The Hong Kong government said on Saturday that no decision had yet been made on whether to release the reports but stressed its concern to uphold the privacy rights of civil servants.
It also noted that witnesses before the select committee enjoy all the rights and privileges of a witness in court.
""If that witness claims public interest immunity in relation to any document, he is entitled to put his reasons before the chairman for a ruling,"" the government said in a statement.
Governor Chris Patten on Sunday reiterated his support for Chan and civil service secretary Lam Woon-Kwong, but declined to comment on how the government would respond to the committee's demands next week.
""Everything that's been done by the Secretary for the Civil Service and others has been with my complete support and endorsement,"" Patten said.
Political commentators said the Leung case had highlighted Legco's power to hold the Hong Kong government accountable.
In so doing, it has drawn attention to the sensitive issue of the future relationship between the executive and legislative branches of government in Hong Kong, and created something of a dilemma for Beijing, which has long argued that Legco became too powerful under Patten.
""The irony is that Beijing might find it extremely difficult to discredit Legco for doing the wrong thing now that the Government is being challenged on all fronts,"" political columnist Chris Yeung wrote in the South China Morning Post.
""But if it gives legislators a pat on the back, it would find itself giving credit to a body which it has decided to scrap on July 1.""
",42
"Rival fund managers in Hong Kong condemned Jardine Fleming Investment Management (JFIM) on Friday and expressed shock at revelations of front-running at the British territory's biggest and most prominent fund manager.
""It's appalling that a leading, well-respected portfolio manager was profiting at the expense of his clients,"" said Gregory Neumann, executive director at Scudder Stevens and Clark Asia Ltd. ""Any institution worth their salt will fire them.""
Most fund managers, including major competitors, said they were stunned to learn of the severity of the JFIM's actions and stressed concern about Hong Kong's regulatory integrity.
""How could this have been an isolated incident when clearly there was a culture there that this was fine?"" asked one competitor. ""Why did one guy have to take the fall? If they're regulating properly they should fire everyone who did that.""
A five-month investigation by the Investment Management Regulatory Organisation (IMRO) in London and the Securities and Futures Commission (SFC) in Hong Kong exposed late allocation of trades by Colin Armstrong, a charismatic and senior member of Hong Kong's fund management community.
The late trades, many involving Armstrong's personal account, allowed for a change in the trading price which Armstrong turned to his benefit, the investigation concluded.
Jardine Fleming was fined 700,000 sterling. JFIM's former chief executive Robert Thomas, who had earlier resigned, has had his registration in the United Kingdom and Hong Kong revoked.
London-based Jardine Fleming Asset Management lost its authorisation.
""I think the disciplinary action was minor given the severity of what they did,"" said one fund manager.
Jardine Fleming declined to respond to the criticism, but the SFC said it was convinced Jardine Fleming would function in the future as a fully compliant firm.
""What people are saying in the market, the scepticism they're voicing, is not unreasonable but I don't think it quite takes into account that these guys have really received the blast of a lifetime,"" said SFC director Deborah Glass. ""They know their credibility is at stake. They know we will be back.""
Another commentator remained unconvinced, suggesting that the Jardine Fleming incident was merely the tip of an iceberg.
""This is rife in Asia. It's rife in all emerging markets,"" said Gary Greenberg, deputy managing director at Peregrine Asset Management. ""But Hong Kong and Singapore are no longer emerging markets and all of a sudden people are paying attention.""
Glass said that Hong Kong's short regulatory history and relatively light reliance on ""black letter law"", or written regulations, should not suggest that its regulation is lax.
She also rejected comparisons between the Jardine Fleming scandal and that of Nick Leeson, the rogue trader who brought down the prestigious Barings bank through unauthorised options trading in Singapore last year.
""There is no parallel between the actions of Nick Leeson in Singapore and the activities of a fund manager in Hong Kong,"" Glass said. ""I understand there is a certain symmetry but one of the enormous differences here is that the regulatory system identified the misconduct, worked with regulators in London and dealt with the problem, unlike Singapore.""
The Jardine Fleming incident should serve as a reminder to all Hong Kong fund managers that a corporate culture of compliance is required and will be enforced, Glass said.
",42
"Regulations issued by Indonesia earlier this year promoting the creation of mutual funds have become a landmark for the local industry, delegates to a conference said on Wednesday.
""The recognition of open-end funds or mutual funds by the Capital Market Law has been quite instrumental in the development of the Indonesian investment fund industry over the past few months,"" said Melli Darsa of the law firm Hadiputranto, Hadinoto and Partners in Jakarta.
Darsa was one of several fund experts attending a mutual fund conference in Jakarta who predicted a bright future for the domestic industry, with seven open-end mutual funds already established and five more in the pipeline.
Indonesia released regulations in May outlining accounting methods, reporting procedures and valuation methods for open-end mutual funds, which were allowed for the first time by the country's 1995 Capital Market Law.
The new legal framework gives Indonesia an edge, placing it half-way between the high risk and reward markets in China and India and the most exciting developed countries, most of which have hostile tax regimes, said Anthony Travers of the Hong Kong law firm Maples and Calder.
""In many respects, Indonesia is a halfway house,"" Travers told the conference. ""Indonesia has a much more developed (financial) infrastructure than China and India.""
But delegates saw significant obstacles ahead, including an almost complete ignorance of mutual funds among Indonesians, high-yielding bank deposits that lure domestic savings away from Jakarta's illiquid stock market, and restrictions on foreign investment.
Although Indonesian pension funds hold nearly US$2.4 billion they are prohibited from investing overseas, prompting some foreign fund managers to question the benefits of establishing Indonesian subsidiaries that will be restricted to managing domestic funds onshore.
But government officials made it clear that the purpose of the new rules was to persuade Indonesians to invest at home to spur development of domestic capital markets.
""We want to enhance domestic self-sufficiency. That is why you can only invest in Indonesian securities or new offerings,"" said Iwan Pontjowinoto, president director of P.T. Danareksa Fund Management, a state-controlled finance company that launched the first of the new open funds.
""We want to have local funds that can help the government by investing in the stock market,"" he said.
The new funds can only invest in domestic securities and are prohibited from selling more than one percent of their shares or units to any one investor, ensuring a wide investor base.
The new rules also ensure the funds are broadly invested, prohibiting them from spending more than 10 percent of their net asset value on any one company or buying securities representing more than five percent of the issuer's paid-up capital.
The conference, which attracted about 40 delegates from fund management companies, law firms, rating agencies and fund custodians around Asia, ended on Wednesday with a workshop on how to structure and price mutual funds.
",42
"A festive calm settled over Hong Kong on Thursday as people prepared to welcome the Year of the Ox, the territory's last Lunar New Year celebration under British rule.
With the clock ticking towards transition to Chinese sovereignty at midnight on June 30, Hong Kong people took time out from hectic schedules for the Chinese equivalent of a Western Christmas or American Thanksgiving.
Last-minute shoppers dashed through malls, record numbers of travellers flowed across the border to visit relatives in China and children threw empty red ""lai see"" money pockets at each other on Hong Kong harbour's Star Ferry.
""Kung Hei Fat Choi, may you be rich and make more money,"" said Ng Chak Kwong. ""Everybody wants this to be a good year. Too many people worry about everything.""
But the cheerful greeting cards, office towers ablaze with lights, strings of red firecrackers and little orange trees offered few clues to Hong Kong's real state of mind on New Year's eve. This year's festivities were set against a backdrop of rising political tension after China's recent pledge to roll back some civil liberties laws following the handover, plans that sparked an outcry both at home and abroad.
The Democratic Party, the territory's largest party, collected 20,000 signatures opposing the plans while the international community lodged official protests with China.
Chief Executive-designate Tung Chee-hwa, the man who will take over from colonial Governor Chris Patten after the handover, last week defended the proposed legal changes as misunderstood, but few were convinced.
Some of the families gathering for traditional New Year banquets on Thursday night said they would watch a televised annual address by Patten, even though the British influence is already considered virtually irrelevant.
The last New Year's address by a British colonial governor could provide Patten with an ideal opportunity to lambast old foes in Beijing.
""What he says has no effect any more,"" said shopper Alice So. ""What he says, what he did, what he's going to do, the Chinese government will not accept. It doesn't matter whether he's right or wrong.""
Most Hong Kong people seemed determined to ignore politics during the holiday. Four days of parades and fairs were planned, and spectacular fireworks would light up the sky on Saturday.
According to Chinese astrologers, the coming year offered Hong Kong plenty of promise but obstacles as well.
Unlike Western astrology, where months of the year are grouped into separate star signs, Chinese astrology hinges on the year of birth.
That could mean bad news for Tung, who was born in 1937, the Year of the Ox.
According to the astrologer at the South China Morning Post newspaper, Tung faced a difficult year marked by envy and accident and is advised to seek compromise.
""He is likely to be caught between Hong Kong people and the Chinese government and may be the object of envy by mainland officials,"" warned astrologer Sung Siu-kwong.
Patten, born under the sign of the Monkey in 1944, was warned about the emergence of a rival in mid-year and cautioned to draw a line between private and public involvements.
""He will need to overcome obstacles that can stand in the way of the glorious withdrawal,"" Sung said.
",42
"Asia can expect to see a long-term inflow of money from a group of huge California pension funds now on an eight-day swing through the region, Asian fund managers said last week.
""The very positive thing is they've come to Asia and issued a clean bill of health in that they've pencilled in large amounts that will come here in the next five to 10 years,"" said Richard Nicholas, managing director at Hambro Pacific Fund Management.
Representatives of seven pension funds with combined assets of $234 billion are scouring the region for investments, taking the opportunity to promote their home region to Asian venture capitalists at the same time.
""This is just an acknowledgment that this region is set for enormous growth and they want to be a part of that,"" said Christopher Ryan, managing director at HSBC Asset Management in Hong Kong.
Ryan said the fund managers' presence reflects renewed interest in Asia after the slumps of 1994 and 1995.
""We are seeing a growing level of inquiry from the United States,"" he said. ""It would be fair to say the peak of activity was during 1993 but it's building up again, that much is clear.""
However, the immediate effect of the visit, which includes Singapore and Taiwan as well as China, will be limited.
William Crist, board president of the California Public Employees Retirement System or CALPERS, said last week that the Shanghai Stock Exchange was too small and opaque to justify investment at this stage.
CALPERS, one of the world's largest pension funds with $107 billion under management, is expected to join other funds opting for private equity stakes in individual projects rather than buying up shares in listed companies.
""We'll see greater interest in private equity funds and while it's not something we find particularly attractive there will probably also be interest in infrastructure-type investments as well,"" Ryan said.
Nicholas said renewed interest by U.S. pension funds signalled an awareness that Asia was healthier economically than many suspected last year, along with the recognition that regional allocation of global portfolios would reach about 12 percent by the early 2000s.
""The recent broad Southeast Asian slowdown is, we believe, a quite natural early stage better described as growing pains,"" Nicholas said.
""We see Asia-Pacific as maybe one-third of the way into its emergence as a global trading power which could span 20 to 30 years -- and that's before fully factoring in China or the Indian sub-continent.""
Over the past 15 years Asia has grown at an average rate of seven percent compared to an average of less than three percent for the developed Group of Seven industrialised nations.
While Nicholas expects Asia's average growth rate to decline to six percent over the next few years, the region will still offer a higher return than developed nations if one assumes a connection between economic growth and market performance.
However, improved knowledge of individual markets will be required to reap the best returns.
""In terms of stock markets, they are maturing faster, and foreign investors and investment bankers are becoming increasingly educated,"" Nicholas said.
""In contrast to the earlier bland and broad asset allocation, we believe that in future each market should be analysed on a more individual basis within the context of its own development.""
",42
"Twentieth Century Fox joined the hunt for a larger slice of the Asia-Pacific video market on Thursday by announcing a new regional office in Hong Kong for its home entertainment division.
""We believe this is an under-developed market and therefore represents one of the best growth opportunities we have,"" said Jeffrey Yapp, president of Twentieth Century Fox Home Entertainment International. Twentieth Century Fox is owned By News Corp Ltd.
The new regional headquarters, which forms a crucial part of Fox's recent restructuring, will oversee marketing and distribution for video subsidiaries in Japan, Korea, Australia and India.
""In the last two years, Fox Home Entertainment International has completely restructured the way we do business,"" Yapp said.
""We set out to establish regional offices to provide a regional focus and give us an opportunity to better coordinate local efforts,"" he said.
About US$2 million has been spent and 15 people hired as part of the expansion into Asia, which accounts for 38 percent of the video division's revenue and contains its largest territory in terms of revenue contribution, Japan.
""It's for sure Japan is our major market and ahead of Hong Kong but this is a regional office and Hong Kong is the place in Asia to put your regional office,"" said Marc Cudennec, senior vice-president at Fox Home International.
The international focus was one of three critical strategies adopted in a drastic overhaul of Twentieth Century Fox 18 months ago, Yapp said.
""Fox realized that to become the premier filmed entertainment company, it had to focus on the international market place,"" he said.
Yapp said Asia's rising revenue contribution played a big role in reinforcing the importance of international expansion, as did an evening out of theatrical revenues from a prior ratio of 30 percent international, 70 percent U.S.
Fox's two other restructuring strategies, setting up four distinct production units and beefing up executive and creative talent, are well underway and reaping rewards, he added.
The number of films in development on the lot has increased from 60 to over 450 while the number of pictures being released by the studio has grown to 23 this year from 14 last year.
Fox also hopes to increase its share of the top 10 all time best selling live action videos from five to six with the video release on December 3 of its new blockbuster, Independence Day, which has grossed US$600 million in box office sales this year.
""Fox Home Entertainment is off to a very strong start on the road to the future,"" Yapp said. ""Our projected revenues will increase 30 percent in 1997 and contribution will increase by 43 percent. The goal has been established our objectives have been set and the path to the future has been charted.""
-- Hong Kong Newsroom (852) 2843 6441
",42
"Hong Kong business groups hit back on Wednesday at attempts to link China's permanent most favoured nation (MFN) trading perks with how Beijing handles Hong Kong after it reverts to Chinese control later this year.
U.S. Congressman Jim Kolbe, leading a 22-member delegation from the House of Representatives to Beijing, said on Tuesday the United States will probably want to monitor Hong Kong for at least a year before granting China permanent MFN status.
""If MFN were conditioned or taken away, especially during the transition period, it would clearly have a devastating effect and make it much more likely that all the things we want for Hong Kong would not be achieved,"" said Mark Michelson, former chairman of the American Chamber of Commerce.
China currently enjoys MFN, subject to annual review.
Hong Kong, which depends heavily on China-U.S. trade, fully supports China's application for full MFN status, which would allow China the same treatment as other big U.S. trading partners without the annual review.
""MFN should be the norm rather than a favour,"" said Selina Yen at the Hong Kong government's trade and industry branch.
""To us, MFN status is not a privilege. It should be granted to everybody as a normal trading basis. This is our position.""
But few in Hong Kong expect to see China win full MFN status in 1997, the year that China takes back Hong Kong from Britain.
""It's unfortunate. Were it not for this being the year of the return of Hong Kong to China, I think it would have been an opportune time for the U.S. Congress to finally extend permanent MFN status,"" said Frank Martin, the American chamber president.
""But it is going to be difficult this year. Many members of Congress are very likely to want to take a wait-and-see attitude.""
Legislation on permanent MFN has been submitted to Congress but has not been voted on.
China, which argues full MFN status is essential for healthy Sino-U.S. relations, granted Kolbe's congressional delegation an interview with President Jiang Zemin on Tuesday.
Political analysts said Kolbe was committed to achieving permanent MFN status for China, but had tried to remind Beijing the United States wants to see a smooth handover in Hong Kong, where many are worried that China might impose repressive rule.
""Would a vote to tie MFN to the transition be a good idea? No,"" said one analyst, who declined to be identified.
""But to kind of use it one last time to signal concern while everyone knows annual MFN is going to go through doesn't hurt.""
China's annual application for MFN status goes to Congress in May. It has won approval every year since 1990.
However, former U.S. president George Bush was occasionally forced to use his presidential veto to eliminate various conditions that Congress attempted to attach.
U.S. President Bill Clinton, who accused Bush of coddling tyrants in the 1992 U.S. presidential election campaign debates, de-linked the annual review of MFN from China's human rights record in 1995.
-- Hong Kong Newsroom (852) 2843 6441
",42
"The architect of Hong Kong's currency link to the U.S. dollar on Wednesday defended the peg's continued existence well beyond the British colony's return to Chinese sovereignty next year.
John Greenwood, the author of the 1983 paper upon which the peg was based, said China must uphold the currency link to comply with the Basic Law, Hong Kong's future constitution.
""If (China is) going to respect and honour the letter and spirit of the Basic Law then it is going to be quite difficult to move from this currency system to anything else, and I think that has tremendous value in terms of stability for the future of Hong Kong,"" said Greenwood, who is now chairman and chief economist at LGT Asset Management.
Greenwood said articles outlined in the Basic Law require China to preserve key features of the existing system, such as maintenance of 100 percent reserves for the Hong Kong dollar float, full convertibility and the existence of private banknote issuers with reserves held by the government.
""In my view, unless the (Chinese) government intends to undermine completely the Basic Law, it will find it very difficult to depart from the linked rate system for the Hong Kong dollar as it operates today,"" Greenwood said.
Although the Basic Law is silent on the mechanism or rate at which the currency should be pegged, most proposals for change are impractical and very risky, he said.
Any change in the rate of HK$7.80 to the U.S. dollar or a switch to another currency or basket of currencies would reduce prized stability created by the existing system, while non-convertibility of China's renminbi would make any integration of the two currencies virtually impossible, he said.
""I would argue that in order to become a reserve currency, the renminbi would be required to be fully convertible with no trade and capital controls,"" he said.
China hopes to attain convertibility of its current account by the end of the century, but broad and deep capital markets will be required before full convertibility of its capital account would become possible, he added.
Greenwood also said the peg's ability to withstand upheavals, such as China's Tiananmen Square crackdown in 1989 and global stock market instability in 1987, suggest a speculative attack before the transition at midnight on June 30 next year was extremely unlikely.
""If for some reason there was political shock, then we might see some kind of speculation. But in the absence of that, I would not expect large-scale speculation,"" he said.
-- Hong Kong Newsroom (852) 2843 6441
",42
"Blink and you missed it.
The much anticipated correction in Hong Kong stocks on Thursday on news of the death of China's paramount leader Deng Xiaoping gave fund managers all of 10 minutes to do some much-anticipated bargain hunting.
""This was not my expectation,"" said Ambrose Chang, chief investment officer at Daiwa Capital Management in Hong Kong.
Traders and fund managers said a huge bout of short-covering was responsible for the quick recovery on Thursday.
""It was futures driven,"" said one fund manager. ""The hedge funds came in and covered their positions and there were a lot of angry fund managers in London being woken up in the middle of the night by their brokers.""
After dipping 92 points at the opening, the Hang Seng index surged 305.01 points or 2.33 percent to close at 13,411.33 while the February index future ended 405 points higher at 13,485.
""The futures tried to open lower but there was no follow-through selling. All of a sudden they (the hedge funds) knew they were in trouble,"" one head trader said.
Clearly, it was the foreign funds, not the local punters, who got caught out.
""This news was in the market the whole week with certain people,"" said the head trader at one local house. ""I knew there was a massive short position in the market and after the first minute of trading, I wasn't at all surprised by what happened.""
Now that the dust has settled, fund managers are offering routine explanations for their near-term forecasts for the Hang Seng, all of them variations on the theme of a range-trade between 13,000 and 13,800.
U.S. interest rates and upcoming corporate earnings are expected to dictate direction, but most market players are expecting consolidation at current levels.
There were few reports of so-called ""top-slicing,"" or rotation of funds into other markets, although traders did report profit-taking in Singapore and Indonesia, both of which fell over the course of the week after recent strength.
Some funds said they had began cutting heavily overweight positions in Hong Kong when the Hang Seng hit 14,000 on January 16 and any further rotation is not justified given this week's strength.
Last week's action also proved the independence of Asian stocks, which were either unchanged or weaker on domestic factors when the Deng news hit.
""They're all completely sucked into their own things,"" one trader said.
Although individual factors helped push many indices lower through the region last week, traders and funds confirmed reports that institutional money was moving out of Asia and into Latin America.
""They can't find anything in Asia to buy,"" said one head trader. ""In Singapore and Malaysia, the earnings growth isn't massive and elsewhere it's not great. (Investors) expect better value in Latin America.""
One foreign fund manager said the flows were understandable given that Latin America is trading at about 12 percent earnings growth on a multiple of 11.5 times - 20 percent below the average Asian earnings multiple.
""And Southeast Asia is still going through this adjustment,"" he said.
""Global asset allocators still look at Asia as a region suffering from cost overruns, squeezed margins and, in some industries, a lack of pricing power.""
",42
"Economic commentators in Hong Kong are sounding alarms about the unbridled optimism spurring stock and property prices to new highs ahead of the British colony's return to Chinese sovereignty on July 1.
Concerns are mounting that rising price pressures could inflate a collapsible bubble on the assumption that China will support Hong Kong's economy through the transition regardless of any political disruption.
""The term 'moral hazard' refers to the apparently growing belief in local markets that there is little dramatic down-side risk -- as opposed to short-term volatility -- because ultimately China will suppport Hong Kong markets,"" Ian Perkin, chief economist with the Hong Kong Chamber of Commerce, wrote in a column in the South China Morning Post.
In contrast to earlier fears that political uncertainty could torpedo Hong Kong's economy in 1997, domestic confidence in China's determination to keep the economy stable through the transition is so high that an unexpected problem has arisen -- price instability.
Economists are starting to revise upward their inflation forecasts for 1997 in response to booming stock and luxury property prices.
""The outlook for 1997 is going to be less good than we thought,"" said Kevin Chan, economist at Salomon Brothers.
Salomon has raised its 1997 forecast for the territory's benchmark consumer price index to 7 percent from 6.6 percent late last year, and Chan said further increases are possible.
Sudden strength in Hong Kong's stock market in the middle of last year was welcomed as proof of confidence in the colony's future under China, and evidence of an economic turnaround following an export slump early last year and three years of austerity in China.
But the optimism became concern in November when speculation emerged in the luxury end of Hong Kong's property market.
Citing anecdotal evidence, Perkin argued that overseas and domestic investors confident of China's commitment to economic stability in Hong Kong are rushing to buy high-end properties in anticipation of short-term gains.
The Hong Kong government has since strongly supported a set of anti-speculation measures by the Real Estate Developers Association, and warned it will step in if there are signs that speculation is filtering down to the middle or low end of the property market.
But economists said property price volatility would eventually stimulate overall inflation, even though it has been restricted so far to the high end of the market.
""This will not be good for inflation expectations,"" Chan said. ""In general, people will expect the higher prices in the luxury sector to affect medium and small flats.""
Chan estimates an overall rise of 30 percent in property prices will translate into at least a 15 percent increase in rents this year, which account for 25 percent of the Hong Kong government's benchmark consumer price index.
Food prices, which account for 37 percent of the index, are expected to rise by at least 8 percent this year after holding steady last year.
Hong Kong will also suffer from its currency link to the U.S. dollar. If the United States raises short-term interest rates this year by one-quarter to one-half of a percentage point, as many expect, real rates in Hong Kong -- the difference between nominal rates and inflation -- will fall to about 1 percent, Chan said.
Such low rates will propel growing momentum in both private consumption and retail sales.
China, with its well-documented aversion to the socially destabilising effects of inflation, has done little to stoke further exuberance over Hong Kong's post-1997 economy beyond saying it backed Hong Kong's currency link.
""There seems little doubt Hong Kong's new sovereign wants to see the local economy prosper throughout the year of transition and in the early years of its resumption of sovereignty,"" Perkin wrote. ""It (is) probably true that it does not want to see the local economy going on a speculative spree that will eventually run out of steam and cause a collapse.""
",42
"Jardine Fleming Holdings Ltd said in Hong Kong on Thursday that clients should be reassured that revelations of front-running by one of its fund managers had prompted much greater emphasis on regulatory compliance.
""Clients must look at this going forward,"" Alan Smith, chairman of Jardine Fleming Holdings Ltd, told Reuters. ""The important thing is to make sure you take the right action, and we've taken the right action.""
A five-month probe by regulators in London and Hong Kong uncovered a series of irregular trades by a former senior fund manager at Jardine Fleming Investment Management Ltd, one of Asia's largest fund houses with US$22 billion under management.
The United Kingdom's Investment Management Regulatory Organisation (IMRO) and the Securities and Futures Commission (SFC) in Hong Kong said fund manager Colin Armstrong delayed processing deals, allowing for changes in the trading price. Some of the deals involved his personal trading account.
In addition to the fines, Jardine Fleming agreed to pay the disadvantaged clients US$19.3 million.
""This incident was regrettable and we've expressed regret for it,"" Smith said. ""Clearly as a result of this incident we've conducted a major review and we have a new emphasis on dealing and compliance procedures.""
The SFC said it revoked the registration of the chief executive at Jardine Fleming Investment Management in Hong Kong, Robert Thomas. It also issued a public reprimand to the company.
""The SFC is committed to maintaining Hong Kong's reputation as an investment management centre in which bad practice will not be tolerated,"" SFC executive director Gerard McMahon said.
London-based Jardine Fleming Asset Management (JFAM) was fined 400,000 sterling and had its authorisation revoked, while three London-based companies in the Robert Fleming group were fined 100,000 sterling each.
The London-based companies delegated fund management to Jardine Fleming Investment Management in Hong Kong, which the SFC said failed to facilitate investigation when misconduct was suspected and lacked an effective audit trail.
""IMRO's investigation has amply illustrated the danger of firms paying insufficient attention to the responsibilities that arise when they delegate business to another entity, whether in the United Kingdom or overseas,"" said Phillip Thorpe, IMRO's chief executive.
Jardine Fleming was taking it on the chin, Smith said, but he noted that the five-month investigation identified problems with only one of about 40 fund managers.
""I'm not seeking to minimise the seriousness of what happened, but I think it's important you're balanced,"" he said.
Jardine Fleming has appointed a new chief operating officer at JFIM and a new head of compliance. The compliance section is being beefed up and centralised dealing structures are being created in Hong Kong and Tokyo.
""I think clients will understand that steps have been taken, and these do include a significant beefing up in the compliance system we have in place,"" Smith said.
",42
"Hong Kong fund managers and life insurers are smacking their lips in anticipation of a very promising pie -- Hong Kong's public pension plan.
Although much uncertainty still hangs over the proposed Mandatory Provident Fund (MPF), Hong Kong-registered pension assets could triple if MPF regulations are passed by July 1, the date China reassumes sovereignty over the British colony.
""By any measure, this is a very substantial market,"" said Terry Smith, chief executive at National Mutual Asia.
Life insurer National Mutual Asia, 69-percent owned by Australia's National Mutual Holdings, is just one insurance company with its eyes on a market traditionally dominated by a handful of large Hong Kong-based fund managers.
""If a particular company were to get 10 percent market share, it would involve the receipt of contributions of HK$3 billion (US$385 million) per annum,"" said Smith.
""To put that in perspective, NMA's current premium and contribution revenue is about HK$5 billion (US$641 million).""
Hong Kong pension assets are now valued at about HK$100 billion (US$12.82 billion), nearly all held in government and corporate funds such as those belonging to the Swire Group, the Jardine Group, Hongkong Electric, Hongkong Telecom and the Hong Kong Jockey Club.
If MPF regulations are approved, those assets will reach HK$300 billion (US$38.46 billion) within five years with annual contributions projected at HK$30 billion (US$3.85 billion), independent adviser Watson Wyatt Hong Kong Ltd said.
Until now, Hong Kong's Big Three fund managers -- HSBC Asset Management, Schroders Investment Management and Jardine Fleming Investment Management -- have dominated the pension scene.
HSBC has US$3.5 billion under management while Schroders, a unit of British investment bank Schroders Plc, manages US$2.5 billion. Jardine Fleming manages US$2.2 billion.
Smaller participants who hope to play a bigger role include Fidelity with US$1 billion, LGT Asset Management, a unit of Liechtenstein Global Trust AG  at US$500 million, and Barclays Global Investors and Invesco with about US$350 million each.
But insurance companies such as NMA and Hong Kong's insurance market leader, American International Assurance, are in a strong position to challenge these fund managers.
Ninety percent of Hong Kong companies employ fewer than 10 people, which will give the insurers' extensive sales and distribution networks the sort of advantage that could quickly build into a stranglehold on the new market.
""Most employers will see MPF as a real pain in the neck. It's a hassle where formerly they didn't have hassle,"" said Andy Budden, investment consultant with Watson Wyatt.
""What they will want to do is buy an off-the-shelf product rather than put something together themselves. The advantage will lie with the provider who can get on the street and sell.""
The market will also be snapped up in the first few years, he said, which explains why these companies are working hard to become the first out of the starting gate.
""Once this initial tranche of business is snapped up, turnover and new business will be low,"" Budden said. ""So you'll have an edge if you can get out quickly and market it.""
Hong Kong's fund managers are sufficiently disconcerted that four of them -- Jardine Fleming, Schroders, LGT and Invesco -- are reported to be considering pooling administrative resources.
However, all this preparation could amount to a waste of time if the Legislative Council fails to enact subsidiary MPF legislation and regulations quickly.
Framework legislation has passed and the MPF office said it hopes to table the legislation by April. But some councillors are opposed to the principle of a public pension plan and have vowed to slow down the process.
Also, a number of regulations have roused debate, including a provision requiring the pensions to hold 30 percent of assets in Hong Kong-dollar denominated instruments.
If this provision holds, it will light a fire under Hong Kong's dormant debt market, which suffers from a government surplus and a negative real rate environment thanks to the Hong Kong dollar-U.S. currency link.
(HK$1=US$7.8)
-- Hong Kong Newsroom (852) 2843 6470
",42
"Stock market gyrations on the rumoured ill-health of China's paramount leader Deng Xiaoping were welcomed by many Asian fund managers on Wednesday.
Although many Asian markets have regained much of the ground lost on Tuesday when the rumours hit, the remaining discount suggests any announcement of Deng's death will now have limited effect, they said.
""This place is rife with rumour,"" said Christopher Day, managing director at Thornton Management (Asia) Ltd. ""By the time an announcement comes, it will have been discounted.""
Some immediate reaction is inevitable, and it may not be restricted to Asian markets, said Stewart Aldcroft, sales director at Templeton.
But that response will not last, particularly in Hong Kong.
""There will be some short-term selling that will reflect the sentiment of the occasion, but ultimately an ideal buying opportunity will have been presented,"" he said.
Tina So, associate director at Schroders Investment Management, said Hong Kong is still trading at a sizable discount to other Asian markets at 13.5-times 1997 earnings.
""When you invest in an equity market you are looking for participation in overall economic growth and profitability, and the undertone of the economy is very positive,"" she said.
Generally, fund managers said Hong Kong could correct to 12,500 but stage a fast recovery within hours. The Hang Seng index closed 3.38 points higher at 13,106.32 on Wednesday after plunging to 12,933.98 when the rumours hit on Tuesday.
In Taiwan, Shanghai and Shenzhen, the picture is a little different, partly because these markets have performed so strongly in recent months, but also because of their direct sensitivity to political factors in China, funds said.
After reaching a six-year high of 7,687.18 on Monday, the Taiwan market dropped sharply when the Tuesday rumours and comments by central bankers prompted a bout of profit-taking.
While local investors expect to see further strength, foreign investors restricted to owning a minority share of the market warned a Deng announcement could signal more weakness.
""Taiwan have been coming up quite nicely, it's a bit overbought, and Taiwan is traditionally very suspicious of political changes in China,"" said So.
Thornton's Day said shares on the Shanghai and Shenzhen exchanges are also likely to take a tumble.
""It's a more direct concern, and an excuse to take profits,"" he said. ""They've both got good excuses because they've gone up so sharply.""
But the rest of Asia will continue marching to its own drumbeat, often ignoring major news and international market action in favour of domestic news and sentiment, funds said.
Compared to much of Asia, China has done an excellent job of managing the political risk associated with the succession issue, said David Semple, regional strategist at Peregrine Asset Management in Hong Kong.
While China, along with many other nations, has no formal mechanism in place for succession, president Jiang Zemin's prominent and clear leadership position has mitigated much of the uncertainty associated with Deng's death, he said.
""The political power has already been transferred. It happened a long time ago. So it's not really going to affect the way we invest our funds -- other than perhaps providing a very short-term buying opportunity,"" Semple said.
While some fund managers suggested the rumours were placed by market players keen to create buying opportunities, others said the timing of an announcement now made sense.
""It's come at a significantly better time than maybe a few years ago, and possibly even 12 months ago when they were lobbing bombs across the Taiwan Strait,"" one fund manager said.
Deng was last seen in public three years ago.
-- Hong Kong Newsroom (852) 2843 6470
",42
"Hong Kong business groups on Thursday lauded Deng Xiaoping as a great leader but said the short-term impact of his passing would be limited.
""He was a great man. We are naturally saddened from a human point of view. But as regards business, I have to say it's business as usual,"" said Brigadier Christopher Hammerbeck, executive director of the British Chamber of Commerce.
The paramount leader won high praise from businessmen in Hong Kong for his economic reforms and for developing the ""one country, two systems"" policy which will prevail when sovereignty of Hong Kong reverts to China at midnight on June 30 under the terms of a 1984 Sino-British treaty.
""He was a great man of vision,"" said Ian Christie, director of the Hong Kong General Chamber of Commerce.
""The 'one country, two systems' approach to the transfer of sovereignty, at that time, in 1984, showed incredible foresight and courage.""
Given his contribution, it would have been better for all concerned if Deng had been able to witness the Hong Kong handover of July 1, said Mark Michelson, past chairman of the American Chamber of Commerce.
""He made it a lot easier for the transition to take place,"" Michelson said. ""At the same time, there has been a leadership succession in place for some time now associated with the transition. So...the practical impact will not be overwhelming.""
The collective leadership now in place, led by President Jiang Zemin, has also been associated with the Hong Kong handover, Michelson said.
""So in the short-term there should be no impact, but in China one can never be sure,"" he said.
Most business groups declined to speculate on the longer term implications of Deng's death.
Hong Kong's South China Morning Post newspaper fretted over a possible power struggle emerging in Beijing.
""Although Deng's death is unlikely to result in a major immediate policy shift over Hong Kong, changes in the corridors of power in Beijing will spill over into the territory,"" the Post said.
Hong Kong's government-funded Trade Development Council said Deng will not be forgotten for his contribution to the territory's ascent up the world trade league tables.
""If one were to take a look in 1979, the year China began economic reform, at that time Hong Kong was number 23 in the world league of trading entities. Today we are number eight,"" said executive director Michael Sze.
Deng is credited with the open door reforms which transformed China from an isolated economic backwater to emerging powerhouse.
""That just shows the tremendous progress we have made during the intervening years.""
Hong Kong trade, now valued in excess of US$350 billion ($44.9 billion), is heavily dependent upon southern China where Hong Kong manufacturers own and operate 50,000 factories employing five million workers.
The gradual shift of Hong Kong's manufacturing base into the cheaper labour regions of southern China transformed the territory into a service-based economy geared to China's economic emergence.
",42
"Foreign cash is holding steady in Thailand, hoping for economic and stock market recovery even though there are few signs of either so far.
""I think a lot of fund managers will be doing a lot of wishful thinking, but at the end of the day I don't think (Thailand) will be going anywhere in a hurry,"" Christopher Day, joint managing director at Thornton Management (Asia) Ltd said.
Most funds appeared to be neutral on Thailand against Morgan Stanley's widely-used Far East Asia ex-Japan free index.
Salomon Brothers said last week that research data suggested funds were neutral to overweight, while Nomura Research Institute said funds were neutral to underweight.
Thailand stock exchange data suggested a one-percent retail fund sell-off in October brought most funds into neutral.
""The worst should be over, both in terms of politics and economics,"" said Stephen Leung, BZW Asia's chief investment officer.
Investor nervousness has abated somewhat following the recent election of a new coalition government headed by the New Aspiration Party. But most commentators agreed the immediate direction of Thailand's SET index, which closed on Friday at 970.30 compared to a year-high of 1,402.81, depends on the announcement of cabinet appointments and new economic measures.
""There's a good chance we'll have a little rally back up to, say, 1,000 if (coalition leader) Chavalit Yongchaiyudh brings good people into his cabinet,"" said Christine Rowley, investment manager with LGT Asset Management in Hong Kong.
Rowley also said the SETI has performed strongly through December and January every year for 10 years.
""There's a very high seasonality element in Thailand,"" she said. ""So we might see some little rally ... but I expect foreigners to sell into that and bring the market back down again, maybe even lower than it has been before.""
Others agreed that more selling can be expected with funds assuming an underweight position while Thailand grapples with gaping trade and current account deficits, a slump in corporate earnings and a weak bank sector.
""Further market downside exists, though the extent of a decline will not be large,"" Nomura said in a research report.
Poor corporate earnings are considered the prime culprit. Jardine Fleming has reduced its corporate earnings forecast for 1996 to four percent from 14 percent, following a decline in price-earnings ratios to 16 from 18 earlier in the year.
Offsetting the bad news are falling inflation, some hopes of improved export competitiveness next year and expectations of better trade and current accounts on a decline in imports.
""Without the new measures, without an improvement in the current account deficit, we think the market will find it difficult to break through the 1,000 level,"" said Patrick Wong, investment director at Jardine Fleming Unit Trusts.
Wong is expecting some turnaround in the first or second quarters of 1997, partly because slower imports will ease the trade deficit and improve the current account deficit.
Most agree improvements in a current account deficit of seven percent of gross domestic product are needed before Thailand can turn around. But there is considerable scepticism about common forecasts of an economic and stock market recovery within six months.
""It's been six months away for a long time now. Lo and behold, the second quarter of 1997 is also conveniently six months away,"" Rowley said.
",42
"The largest electricity provider in the United States marched into Asia on Thursday with a US$2.7 billion deal to buy independent Hong Kong power producer, Consolidated Electric Power Asia Ltd.
Atlanta-based Southern Co said it made a general offer to all CEPA's shareholders after agreeing to buy most of a 60.4-percent stake held by CEPA parent, Hopewell Holdings Ltd.  
""The plan is to use this company as our growth vehicle in Asia,"" Ray Harris, regional director of Southern Electric International Inc, a unit of the Southern Co, told a news conference in the British colony.
""We think we paid a fair price and we see it as completing our geographical diversification from the United States,"" he said.
Hopewell said Southern aims to acquire 80 percent of CEPA's shares through a straightforward cash deal of HK$18.50 per share, or a cash and stock offer, he said.  
Hopewell has already agreed to tender 80 percent of its stake under an alternative cash and stock option, which offers one new CEPA share, cash of HK$69.50 and a contingency payment of HK$8.00 for every five CEPA shares.
The contingency payment depends on the company managing to secure a limited recourse debt for a power plant in Indonesia.
Hopewell will retain between 12.1 percent and 20 percent of the new company depending on which option shareholders choose.  
Southern's planned acquisition of 80 percent of CEPA's shares will effectively privatise the company, reducing its public float below Hong Kong stock exchange requirements and requiring it to de-list.
Shareholders, banks and regulators must still approve the deal, with shareholder meetings slated for November. Closing is expected before the end of the year.
Both Southern and CEPA said the takeover complements each other's strengths, with Southern renowned for its operating ability and CEPA one of the first to exploit Asia's quickening thirst for power.  
""This is, we felt, a very, very good marriage,"" said Stewart Elliott, CEPA's chief executive officer and managing director. ""If we're going to see Asian growth as everyone has predicted, a massive amount of power is required.""
Founded in 1993 as a holding company for Hopewell's power assets, CEPA owns some of southern China's largest power plants.
Its flagship Shajiao B project in Guangdong province was completed in 1987 at a cost of US$4.1 billion followed by the 1994 start-up of the US$1.87 billion Shajiao C power station.  
CEPA also owns substantial assets in the Philippines, and said it is negotiating to build more generating plants in southern China, the Philippines, Indonesia, India and Pakistan.
Harris said Southern was committed to pursuing all CEPA's existing plans, which he hopes will be augmented by Southern's expertise and financial muscle.
""We are very optimistic about the future... We would hope we would have some announcements in relation to new power plants (in the next six to 12 months),"" Harris said.
Elliott and Gordon Wu, CEPA's executive chairman and the founder of Hopewell, will remain in place, he said.
",42
"Fallout from a scandal involving late allocation of trades at Jardine Fleming was still attracting attention in Hong Kong on Wednesday, but the company escaped further sanctions and said business continued as usual.
""We've had some redemptions. We've also had some subscriptions,"" a company spokesman told Reuters. ""The business pattern is very much as usual.""
Jardine Fleming retained its seat on the executive committee of the domestic industry association, the Hong Kong Investment Funds Association, despite media reports that moves were afoot to knock the company off the committee.
In election results released on Wednesday, Jardine Fleming continues as one of 12 member firms with a representative on the board, but the association stressed the election began in early August and ballots were collected by mail.
""There isn't any particular relationship (between the elections and the scandal),"" an association spokeswoman said.
Jardine Fleming did, however, earn a stinging rebuke from the group, which announced a new industry drive towards best professional practice.
""It was felt that some aspects of Jardine Fleming's past practices were unacceptable to the industry's general standards of professional integrity,"" said Andrew Lo of INVESCO, who was reappointed chairman of the association for another year.
Regulators hit Jardine Fleming with heavy fines and revoked the licence of its London-based fund management company, along with the registration of the company's chief executive following last week's revelations of late allocation of trades by a senior fund manager. Some of the trades involved the fund manager's personal trading account.
Lo said a new working group will work with the British colony's chief markets regulator, the Securities and Futures Commission, to establish a code of practice for personal account dealing by its members.
""What the HKIFA must do is to learn from this experience,"" said Lo, who described the punishment meted out to Jardines as ""appropriate"" and ""severe.""
The association will also work with the SFC to set up guidelines for internal controls.
""In light of the concerns on the impact of the case on the industry, we have resolved to work even harder to uphold the highest level of professional integrity in our industry,"" Lo said. ""To be worthy of the high fiduciary trust placed on it, the investment management industry must be able to demonstrate to investors a clean and fair environment.""
",42
"Hong Kong experts helping Beijing establish its funds industry said Chinese planners wanted to use domestic savings to build capital markets rather than offer lucrative opportunities to foreigners.
""I do get the sense they are more keen to mobilise their own domestic savings,"" said Andrew Lo, chairman of the Hong Kong Investment Funds Association on Monday.
Lo had just returned from Beijing where he met Vice-Premier Zhu Rhongji who told him China would release a set of rules and regulations governing a domestic funds industry by the end of the year.
Lo said he also received firm confirmation from Zhu that Hong Kong's position as a strong financial centre will continue following the territory's handover to Chinese rule next year.
""And while China will continue to develop its capital markets in Shanghai and Shenzhen they see this very much as complementary to Hong Kong rather than as competition,"" Lo said.
He said he was convinced that China appreciates the importance of an active funds management industry in the development of a national economy with capital markets.
But China's dearth of investment vehicles, a product of its underdeveloped capital markets, and a currency not yet fully convertible will thwart foreigners seeking early access to China's nascent, but potentially huge, funds industry.
The immediate role of foreign investors will be to provide expertise to allow China's domestic funds industry to develop on the back of domestic savings, Lo said.
""While we would not anticipate immediate direct overseas participation in the mainland's domestic fund markets, we believe that Hong Kong is in a unique position to play a key role in fostering the development of the fund industry,"" he said.
A series of training sessions are being set up in Hong Kong under the auspices of the Hong Kong Investment Funds Assocation and Hong Kong's financial markets regulator, the Securities and Futures Commission, Lo said.
China is studying the feasibility of pilot schemes to allow Sino-foreign joint venture fund management companies to be set up to tap overseas fund management expertise, Lo said.
""This won't happen immediately, it's likely to take some time,"" Lo said. ""Ultimately, they very much see an investment industry as a way to develop their own economy.
""(Zhu) confirmed his understanding that our industry is very open and international and plays a major role fostering development of markets and the economy.""
Investors are already prepared for the moment China unveils the regulations governing the domestic funds industry.
""Once the rules are out, there are quite a few domestically managed funds waiting to start up,"" Lo said. Existing domestic financial markets and yuan-denominated bonds are likely recipients of interest from these funds, he said.
There are already about 70 closed-end funds in China with a total asset size of 5 billion yuan invested in projects, properties, stocks and bonds. ($1 = 8.3 yuan)
",42
"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.
Speaker after speaker at a one-day International Monetary Fund (IMF) meeting stressed the importance of the economic policies that allowed Hong Kong to transform itself from an isolated island in the South China Sea into a teeming metropolis dedicated to wealth, prosperity and commerce.
""The policy framework in Hong Kong now and after the transition of sovereignty could hardly be better,"" IMF managing director Michel Camdessus said in his closing remarks.
And instead of a list of recommendations wrapping up the day's discussion of the difficulties hampering Asia's economic emergence, the day ended with a challenge from Hong Kong Monetary Authority chief Joseph Yam to return after the British-ruled territory returns to China on July 1.
Yam asked delegates to attend the World Bank/IMF annual meeting in September to see for themselves that the ""one country, two systems"" policy guiding Hong Kong's transition to China was actually working.
""You will be able to see for yourselves that the dynamism of Hong Kong has not and will not change,"" Yam said, adding that the IMF's decision to hold its 1997 annual meeting in Hong Kong was ""a resounding vote of confidence"" in its future.
The IMF meeting will be the first major gathering of world leaders in Hong Kong following China's takeover.
More than 50,000 delegates are expected at a venue still under construction. Encased in bamboo scaffolding, Hong Kong's new convention centre only recently gained a partial roof, testament to the territory's speedy construction methods.
The meeting is expected to provide China with a showcase for the handover, which was evident in less obvious ways at Friday's IMF gathering, too.
Departing colonial governor Chris Patten started the day with a sideswipe at Beijing, telling delegates that Hong Kong's economic success was due largely to its increasingly democratic government.
""The government has responded (positively) to that process and to the changes in aspirations which have accompanied it, by welcoming ever wider public participation in the process of government,"" Patten said.
Tung Chee-hwa, the territory's incoming chief executive, ended the day with a reminder of traditional Chinese values of cooperation.
""Within our community of Asian countries we must forge cooperation through dialogue and understanding,"" he said in closing remarks.
To help foster this mood of cooperation, Tung pledged to visit his Asian neighbours soon.
""As soon as possible, I hope to be able to visit our neighbours in Asia to extend my hand of friendship and cooperation.""
Yam cemented the day's upbeat handover theme with a reminder that, in economic terms, the ""one country, two systems"" policy was little more than maintenance of the status quo.
""Under these arrangements there will be one country, two currencies, two monetary systems and two monetary authorities which are to be mutually independent,"" he said.
""These arrangements are admittedly new but definitely not as novel and complex as EMU (European Monetary Union) with one currency for many countries,"" he added.
But as a reminder that things are changing irrevocably after 150 years of British rule, many of Hong Kong's colonial administrators were on their way home after seeing their careers cut short by ""localisation"".
Many expatriates were sailing 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.
",42
"The recent Asian tour by U.S. fund managers representing $234 billion in assets, including the hefty California Public Employees Retirement System (CalPERS), has whetted Hong Kong fund managers' appetites.
""CalPERS has this innate ability of raising everybody's blood pressure because they've got so much money to invest. Get one percent and you double your assets under management,"" said Stewart Aldcroft, sales director for Templeton.
But it appears Hong Kong fund managers might be waiting in vain for a slice of the CalPERS pie.
While expressing a desire to raise their Asian and international weightings, the United States pension funds clearly stated a preference for direct investment over listed equity.
""The amount of transparency that we would expect with the companies is not available at this point,"" CalPERS board president William Crist said of Chinese public companies.
His statement highlighted a significant problem for U.S. money managers seeking increased exposure to Asia.
Foreign access to Asian markets is usually restricted, partly because many countries fear the sort of economic disruption that widened current account deficits after the last wall of foreign money came marching into the region in 1993.
Hong Kong fund managers, pointing to research indicating superior Asian performance by funds managed from within the region rather than from outside, said one option that could meet everybody's needs is private equity funds.
The performance of these funds is private but believed to far exceed that of public mutual funds.
Marcus Thompson, deputy managing director of HSBC Private Equity Management, said his funds hold $560 million, virtually all of it contributed by U.S. pension funds and invested in small companies expected to list within 10 years.
""Over the long term you're likely to get a superior investment performance,"" Thompson said. ""There's a discount for not being able to trade the stock.""
Cesar Zalamea, managing director of AIG Investment Corp (Asia) Ltd, declined to reveal the performance of his funds except to describe it as ""tremendous"".
AIG is the biggest private equity group active in Asia, with $2.38 billion under management -- nearly all of it rumoured to be contributed by one or two very big U.S. pension clients.
Zalamea said AIG's policy is always to hire Western-educated nationals who know the culture and the players in the indigenous business community. Established in Shanghai in 1919, AIG also has long-term relationships with many Asian corporations.
""When these (Asian corporations) decide they want to expand and invite investors outside family and close friends, we are naturals to be invited because (they) already know us,"" Zalamea said. ""CalPERS wouldn't have the kind of relationship.""
But there are disadvantages to private equity funds, the most obvious being their closed-end and long-term nature.
""One of the key issues about investment is to have your money back when you're ready to have it back, not when those in whom you are investing want you to have it back,"" said Aldcroft, who candidly admits Templeton wants to manage CalPERS money.
Another fund manager warned that while many venture capital funds do very well, others do not.
""The risk is higher. You don't have an out. The trick is in knowing how to say no,"" he said. ""If you haven't picked the right companies, how do you get out?""
",42
"Growing numbers of impoverished women from mainland China are flocking to Hong Kong to work as prostitutes following a deportation policy that is driving away Thai and Filipina women, police said on Monday.
Arrest data supplied by the Royal Hong Kong Police show that mainland Chinese now dominate the prostitution workforce in the sex trade centre of Mongkok, and their numbers are rising to meet demand following the departure of other nationalities.
""You can see the supply curve in the figures,"" said chief inspector Jonathon Fraser of the Mongkok vice squad in Kowloon.
""We're getting two-way permit holders being brought in from China. Some want to come in, others are duped into it,"" he told Reuters.
Two-way permits allow Chinese nationals to visit the British colony for strictly limited short periods of time.
Working as a prostitute is not illegal in Hong Kong -- unless the woman is present on a tourist visa. Related activities such as pimping and soliciting are offenses.
The nationality shift in the prostitution workforce is gaining momentum following 1994 policy changes that allowed police to arrest and imprison prostitutes on visitor's visas.
Before 1994, these women -- mainly Thai, Filpina and Malaysian -- were immediately deported but frequently returned to the territory. Fraser said the threat of a prison term is now a powerful disincentive for many of these women to return.
Chinese women are taking their place in the countdown to Hong Kong's return to China on July 1.
Police said they arrested 1,026 two-way permit holders working as prostitutes in Mongkok in 1996 compared with 967 in 1995, 415 in 1994 and 15 in 1993.
Meanwhile, the number of arrests of Filipinas, Thais and Malaysian women fell to 106 in 1996 from 273 in 1995 and 1,196 in both 1994 and 1993.
Many of the mainland Chinese women are supporting families back in China, said Kate Whitehead, a Hong Kong journalist who will have a book about prostitution in the territory published in April.
""They go into prostitution for the money...and the families are very proud of them. They come back with money and the families don't ask any questions,"" Whitehead said.
""Although there are many mainland women in the south doing this there is a great of difference between what they will do in their hometown and what they will do in Shenzhen or Hong Kong.""
Many of the women are from northern China. Prized for their height, slender build, and high cheekbones, these women are making what is, for them, an unimaginable fortune by selling their bodies in Hong Kong.
Police said some women allowed to stay in Hong Kong for only a short period of time try to work as many customers as possible, charging about HK$400 (US$51) an hour.
They take home about half of that amount.
""Some are seeing 20 a day. Obviously, that's a good day and they can't do that every day, but on average they're doing about five a day,"" Fraser said.
Many of the women are brought in by syndicates, paying as much as HK$20,000 for a two-way permit or agreeing to see 100 customers without pay to earn their passage, Whitehead said.
Many make their way into Hong Kong from Shenzhen, just across the border. Those with papers come in by train while illegal entrants pay a fee to ""snakeheads"" operating speedboats to drop them off at remote villages in Hong Kong.
Fraser said it's virtually impossible for immigration officials to identify mainland Chinese prostitutes at the border if they are carrying legitimate papers.
($1=HK$7.8)
",42
"Hong Kong is among the world's most efficient economies but its continued success as a global financial centre and entrepot is far from certain, Harvard-based economic adviser professor Jeffrey Sachs said on Monday.
Uncertainty associated with the British colony's return to Chinese rule next year could compromise Hong Kong's leading position as the world's most competitive economy behind Singapore, said Sachs, whose Harvard Institute of International Development produced the Global Competitiveness Report 1996.
""I'm not predicting doom and gloom,"" Sachs, an adviser on economic reform to governments around the world, told reporters at the World Economic Forum in Hong Kong.
""I'm just saying that if you want to maintain a high-precision, finely-honed, world-class financial and trading centre such as this there isn't that much room for playing around.""
Hong Kong will continue to flourish past the transition only if the rule of law is strictly observed, media freedoms are upheld and the economy remains completely open, he said.
But only time will tell whether the commercial underpinnings of Hong Kong's successful, highly-complex and capitalist economy will be maintained, he said.
""After Chinese sovereignty comes in July 1997 we're going to see whether the judicial system remains independent, whether the media remain free, whether there's ample opportunity for the full flow of financial and economic and political information that is vital for an entrepot of this kind,"" he said.
Sachs also adopted a cautious view of China's economic promise, warning that its economic institutions need drastic overhaul in order to maintain high rates of economic growth beyond the short-term.
""These institutions are not good enough to carry China toward long-term growth. China's dynamism now is undoubted and it's not going to come klunking to a halt, but it's based on the fact the starting point is so low,"" Sachs said.
Cheap labour, low taxation and access to foreign exchange along China's coastal regions have fuelled the world's most impressive exports boom, Sachs said. But in order for that momentum to be maintained, China must clarify property rights, develop financial markets and establish legal certainty.
""The Chinese government is going to have to run very fast and keep very clear sights on its goals in order ... for institutional change to keep up so that the goal of high growth can be sustained in the future,"" Sachs said.
A major obstacle to long-term success is the state enterprise sector, which employs 20 percent of the population. While it is not sufficiently large to submerge the entire economy, the state enterprise sector is a definite drag on the economy and poses a risk to the entire financial system, Sachs said.
Sachs lauded China's efforts so far to privatise businesses at the local and regional levels.
""Parts of China are reforming from the bottom up with local and regional governments making experiments in privatisation that can be models for the rest of China,"" he said.
",42
"Hong Kong funds are expected to erect ""Chinese walls"" between asset management and traders after revelations of unsanctioned trades at the colony's biggest fund manager, Jardine Fleming Investment Management.
Central dealing, a system that prevents fund managers from executing their own trades, is gaining favour in Asia after last week's shocking disclosure of late allocation of trades by one of Hong Kong's most prominent fund managers, Colin Armstrong.
""There is an awareness in the pension (fund) community that this is an issue in Hong Kong,"" said Gregory Neumann, executive director at Scudder Stevens & Clark Asia Ltd. ""I think this could turn out to be a positive for the investment management industry -- no-one will get hired going forward without central dealing.""
Regulators unveiled severe punishment last week for Armstrong's actions, which involved delaying the allocation of his trades until the price had changed. Some of the deals involved his own personal trading account.
London's Investment Management Regulatory Organisation (IMRO) and the Securities and Futures Commission (SFC) in Hong Kong fined Jardine Fleming 700,000 stg, revoked the registration for Jardine Fleming Investment Management's former chief executive and cancelled the authorisation for Jardine Fleming Asset Management in London.
Jardine Fleming, jointly owned by the Jardine Matheson and Robert Fleming groups, also paid US$19.3 million in compensation.
Regulators said they were convinced Jardine Fleming was committed to establishing a culture of regulatory compliance, and that central dealing was one useful step towards that goal.
""Central dealing simply means all the people managing money should place their orders through a central desk,"" said Deborah Glass, senior director at the SFC.
""If a fund manager can run his orders through all the brokers in town it's very difficult to track.""
Placing another layer between the fund manager and his or her client creates a Chinese wall, reducing the opportunity for a fund manager to manipulate his or her orders. Three people are involved the transaction rather than two.
Chinese walls are supposed to be invisible but inviolate divisions between asset management operations that invest for clients, and sister broking and corporate finance departments whose clients are often bought by the funds.
Jardine Fleming said it would have central dealing desks set up in Tokyo and Hong Kong by the end of the year.
Most major investment managers in New York and London employ central dealing, but a quick review of major fund houses in Hong Kong revealed that many here do not.
One of Jardine Fleming's major competitors said all trades were put through different trading desks dedicated to individual markets rather than a central desk. Another competitor said a new automated order input system would eliniate the need for a central desk.
Other fund managers warned that central desks do not eradicate the opportunity for fraud, especially if there is a culture of non-compliance among the organisation's dealers.
It would be possible for fund managers and brokers on a central dealing desk to work together to move markets in a favourable direction before certain trades are executed.
""From time to time people in Hong Kong have had trouble with dealers,"" the fund manager warned. ""It removes one area but it opens up the door to another.""
Regulators last week stressed the importance of a ""culture"" of compliance throughout an organisation, and said they would be carefully watching Jardine Fleming and other fund companies operating in Hong Kong.
""One of the leading asset consulting firms here who was, I believe, acting on behalf of several institutional pension clients, just called to reconfirm that the managers of those various pension clients did have central dealing,"" Neumann said.
""This raises concerns for individuals in any institution,"" said Esther Heathcote, vice-president at BT Fund Management. ""They have to have regard for internal controls and compliance.""
As a subsidiary of an American bank based in Australia, BT Fund Management is regulated by the Australian Securities Commission and the U.S. Securities and Exchange Commission.
",42
"Pegged currencies are common in Asia, with its fondness for order and authoritarianism.
But to peg one's currency is always a drastic step with heavy consequences. While a fixed exchange rate might reassure foreign investors about currency stability, it can also prompt a slew of unruly side effects.
""What you ultimately sacrifice is your control over inflation,"" said Alan Butler-Henderson, regional strategist with ING Barings in Hong Kong.
Hong Kong, Thailand, Indonesia, Vietnam, Philippines, Singapore and China all peg their currencies directly or indirectly to the U.S. dollar, requiring all them to mimic U.S. monetary policy to a greater or lesser extent regardless of domestic conditions.
Most of these economies bear no relation at all to the slow-growth, low-inflation United States. Instead, they are experiencing high growth and a rapid increase in domestic consumption at the same time -- an ideal recipe for inflation.
The lack of traditional inflation-fighting tools is a serious loss for countries anxious to avoid any erosion of often hard-earned economic progress.
SERIOUS PENALTIES
There are other, serious penalties, too.
A lucrative interest rate arbitrage can cause real problems for small Asian countries with fixed exchange rates. Best described as borrow low, lend high, the most common arbitrage tends to attract precisely the sort of capital inflows most small, Asian countries dread: so-called ""hot money.""
Large financial institutions with access to the best international lending rates deposit borrowed funds into Asian banks offering much higher yields and, because of the fixed exchange rate, avoid currency loss when they switch out.
Higher rates offer bigger returns, which attract even larger flows of hot money that swell money supply dramatically. Attempts by central banks to curb money supply by raising rates can have the reverse effect, luring in more hot, volatile money.
Both Thailand and Indonesia are familiar with this danger.
One economist noted that Indonesia has offered one of the best arbitrage opportunities in Asia for as long as it has depreciated its currency by between three and five percent annually, but the returns were particularly spectacular last year.
Speculators and hedge funds borrowed large sums in Japanese yen at about 0.75 percent annually and switched them into Indonesian bank accounts yielding 15 percent -- or more when riots swept through Jakarta in the summer.
""In terms of cost of funds, when you take the currency depreciation of the yen and the mild depreciation of the rupiah into account, you're paying nothing,"" the economist said.
The problem became so acute last year that Indonesia's central bank was forced to widen repeatedly the trading band for the rupiah, taking the market by surprise.
""The point of widening the fluctuation is to impart greater uncertainty so that it's not a freebie,"" said Sun Bae Kim, senior economist at Goldman Sachs in Hong Kong.
Indonesia also ordered its commercial banks to stop lending on occasion, even though soaring rates and strong loan demand offered excellent returns.
THE THAI EXPERIENCE
Thailand, which pegs its beleaguered baht to a basket of currencies including the U.S. dollar, tried to turn this arbitrage to its advantage by setting up the Bangkok International Banking Facility (BIBF) in 1993.
The plan, much admired by Asian experts, back-fired when Moody's Investors Service downgraded Thailand's short-term debt rating, drawing attention to its foreign liabilities.
The negative attention helped to fuel rampant speculation about a devaluation of the baht, forcing massive intervention by Thailand's central bank to keep the unit above a 6-1/2-year low.
Under the BIBF, a number of foreign and domestic banks were allowed to borrow foreign currency overseas, usually in U.S. dollars, and then lend the money in Thailand.
The scheme was a huge success. Foreign investors, already benefiting from competitive rates, also qualified for preferential tax treatment and rushed to invest in Thailand.
""Without those tax incentives and the access to cheap loans - U.S. dollars are by definition cheaper than Thailand (baht) - those companies would not be attracted to Thailand,"" said Clive McDonnell, chief economist at Crosby Group.
BIBF flows were used primarily for long-term investment, but international accounting rules required that they be classifed as short-term. This generated a sudden explosion in Thailand's short-term external debt to 63.3 percent of private sector debt in 1995 compared with 20.5 percent in 1993 -- a situation that quickly came to Moody's attention.
Asian economists defended the scheme while acknowledging its risks. Salomon Brothers noted that Thailand's foreign exchange reserves of US$38 billion far exceed outstanding short-term loans of US$16.1 billion.
And Moody's rival, Standard and Poor's, pointed out that many BIBF loans are backed by foreign banks rather than domestic financial institutions.
""Foreign BIBFs are probably less vulnerable to shifts in investor confidence, because their parent banks are more likely to stand behind them should unaffiliated lenders withdraw their credit lines,"" Standard & Poor's said. ""Moreover, obligations of foreign-owned BIBFs are not a contingent liability of the Thai government, given their foreign ownership.""
There is no question that the BIBF helped to lift foreign liabilities in Thailand's banking sector, but the underlying causes of the banks' asset quality problems were more commonly blamed on a weak property sector, economic recession, political turmoil and a gaping current account deficit.
Recent attacks on the baht were precipitated by concern about how to finance the current account following projections of a fourth-quarter fiscal deficit.
But analysts said the foreign liability created by the BIBF will probably provide further motivation for the central bank to defend the currency. And a sustained defence will require action on those asset quality problems.
""This means shutting down insolvent institutions and building the capital base of viable ones. The longer the delay in formulating such a plan, the greater will be the baht's susceptibility to speculative attacks,"" Goldman Sachs said.
",42
"Australia's Foreign Minister Alexander Downer announced on Friday an agreement with China to expand their security dialogue, saying recent frictions had failed to spoil growing ties between the two Pacific powers.
Disagreement over Taiwan, a coming meeting with the Dalai Lama and Chinese concerns over a Canberra-Washington security pact had not spoiled the atmosphere during meetings with his Chinese counterparts, Downer told a news conference in Beijing.
""I have been able to develop a security dialogue between Australia and China,"" he said. ""What I would like to see happen is us holding, on an annual basis, senior officials' talks about regional security issues.""
Downer said an Australian proposal for broadening existing annual bilateral disarmament talks into such a dialogue had been accepted by Chinese Foreign Minister Qian Qichen, but he gave no details of how they were likely to be organised.
""It's symbolically important because it reaffirms ... that the Australian government does not support a policy of containment of China,"" he said.
Downer's coming meeting with the Dalai Lama, Beijing's arch-rival for the loyalties of the Tibetan people, had not been a sticking point in talks with Premier Li Peng, he said.
Beijing regards the Dalai Lama as an anti-China ""splittist"", and condemns all attempts by Tibet's supreme spiritual leader to gather international support for autonomy in the restive Himalayan region.
Downer said he would meet the Dalai Lama when he arrived in Australia next month, but said the Chinese premier had made no direct mention of the visit.
A defence pact in July between Washington and Canberra that raised hackles in Beijing had not been brought up as a Chinese concern, while a proposal to supply uranium to Beijing's rival Taiwan was far from becoming a reality that could disrupt growing ties, he said.
Australian officials said Downer had fulfilled a pledge made last month in Hong Kong to raise the case of jailed Chinese-born Australian businessman James Peng during his Beijing trip.
Peng, 36, was sentenced to 18 years in a Chinese prison last September after being convicted of embezzling about A$240,000 (US$180,000) in the southern city Shenzhen. He has insisted he was framed by powerful commercial rivals.
Downer had requested that China deport Peng before the end of his scheduled term, but had been told the prisoner's sentence was a matter for the judiciary to decide, officials said.
",34
"China's soaring demand for computer chips is expected to fuel strong growth in a domestic semiconductor industry that has long lagged behind its Asian neighbours, industry and government officials said on Monday.
Beijing hoped to boost the output of advanced integrated circuits (ICs), despite complaints that import tariffs and U.S. technology export restrictions made some vital equipment difficult to obtain, they said.
""In recent years the industry has grown fast,"" said Yu Zhongyu, chief engineer of the Ministry of Electronics Industry. ""In the next five years it will grow even faster.""
Chip production had been identified by Beijing as the first priority of the electronics industry, Yu told Reuters at an industry conference in the Chinese capital.
Demand for ICs would continue to be pushed by China's growing hunger for consumer electronics and telecommunications, with personal computers expected to become a major future source of demand, he said.
The value of China's IC output soared to $550 million in 1995 from $400 million the year before, but production was just one-fifth of demand, said industry group Semiconductor Equipment and Materials International (SEMI).
China was expected to produce 700 million chips a year by 2000, up from 330 million in 1995, SEMI officials said.
The value of equipment imports for the plants needed to make chips was expected to soar to about $700 million in 1997 from an estimated $500 million this year, they said.
China was pulling itself out of a semiconductor swamp created by its attempts during the 1980s to set up small-scale producers around the country, said an official of one U.S. company that supplies semiconductor production equipment.
Beijing was now promoting larger, more advanced fabs, or IC plants, that could match international standards, said the official, who declined to be identified.
""They have made up their mind that they are going to go for it...and believe me, the market is big,"" he said.
Yu said Beijing had decided to build 0.5 micron ICs at the Huahong Microelectronics Ltd in Shanghai as part of moves to develop China's ability to make sophisticated small chips.
Other sub-micron plants were being built or expanded in cooperation with foreign firms, such as Mitsubishi Stone IC Co, a joint venture between China's Stone Group and Mitsubishi Electric and Mitsui & Co Ltd of Japan, he said.
The $1.6 billion Mitsubishi Stone venture was announced in March, with a $100 million 0.35 micron IC fab to be launched next year.
South Korean chipmaker Samsung Electronics Co, which opened a $100 million semiconducter plant in the eastern province of Jiangsu in July, has said it expects the Chinese market to grow an average annual 26 percent until 1999.
Difficulties in importing production equipment were a major obstacle to China's creation of a semiconductor industry that could compete with neighbouring powerhouses such as South Korea and Japan, industry analysts at the conference said.
""China's increased import tariffs and U.S. restrictions on technology exports are the biggest problems,"" said one analyst. ""Companies say they can't bring in the equipment they need.""
",34
"China said on Thursday its jailing of leading dissident Wang Dan for 11 years was not a human rights issue but an ordinary legal matter that would not hurt Beijing's sensitive relationship with the United States.
A Chinese court on Wednesday took less than four hours to condemn former student leader Wang for plotting against the government, in a verdict that prompted quick expressions of deep concern from Washington.
Chinese Foreign Ministry spokesman Shen Guofang said the trial would not cause further damage to cross-Pacific ties, long sorely tested by disputes over Beijing's human rights record.
""The case of Wang Dan has nothing to do with the issue of human rights,"" Shen told a news briefing. ""I don't think the case of Wang Dan will have any effect on Sino-U.S. relations.""
The Beijing Number One Intermediate People's Court sentenced Wang, 27, to 11 years in prison and stripped him of his political rights for a further two years, after a brief hearing hailed by state media as a model of fairness.
International human right activists rushed to condemn the trial as a sham and the verdict as a travesty, while Wang's family said justice had not been served and vowed to appeal.
""Wang Dan's trial was a parody of justice,"" rights watchdog Amnesty International said in a statement. ""It is clear that the verdict and sentence against him had been decided in advance.""
Foreign reporters had been barred from the trial and the speed with which the official Xinhua news agency released a lengthy interview with the chief judge afterwards showed the report had been prepared in advance, Amnesty said.
Police posted outside Wang Dan's home in western Beijing blocked reporters from meeting his family, who plan to appeal as soon as they receive official notification of the verdict.
Two policemen had visited the family on Tuesday morning and others continued to keep constant watch, said the dissident's mother Wang Lingyun, a 61-year-old museum researcher who attended his trial as one of two defence lawyers.
""Wherever I go, they go,"" she said by telephone.
European governments expressed dismay at the severity of the sentence imposed on a dissident renowned abroad for his role as a leader of the 1989 pro-democracy demonstrations in Beijing's Tiananmen Square that were crushed by the army.
Wang, who once promoted free debate on the campus of Beijing University, had already served four years in prison for his role in the 1989 protests. He returned to political activism after his release, before vanishing into detention in May 1995.
Washington officials greeted the verdict against Wang with expressions of concern and high praise for the young dissident, hailing him as one of China's premier voices for human rights.
""We are deeply concerned by the sentence that has been given to Wang Dan,"" White House spokesman Mike McCurry said.
""We urge the Chinese authorities to show clemency to this courageous man, whose championing of democratic values has gained him deserved international recognition,"" said U.S. State Department spokesman Nicholas Burns.
Chinese spokesman Shen said Wang's conviction was purely a domestic legal affair.
""The trial of Wang Dan is entirely a Chinese legal procedure carried out in accordance with the law,"" he said. ""It has no connection with human rights or other issues.""
Sino-U.S. ties have long been strained by disputes over human rights, trade, copyright theft in China and Taiwan, but both sides say tensions have eased in recent months after a series of high-level meetings.
",34
"A long-delayed Japanese mission to discuss the details of Tokyo's huge state loans to China has reached basic agreement on 22 development projects proposed by Beijing, Japanese officials said on Thursday.
Projects involving infrastructure, agriculture and environmental protection were likely to be among the recipients of favourable Japanese loans, said Shiro Sadoshima, director of the loan aid division of Japan's Foreign Ministry.
Final decisions had yet to be made on the 22 projects slated to receive the 180 billion yen ($1.6 billion) earmarked for the first year of the yen loan package, which will run from 1996 to 2000, Sadoshima told a news briefing.
Japanese sources in Beijing say discussions on the projects had been long delayed because of faltering relations and Japanese anger at China's nuclear testing that last year led to the freezing of Japanese grant-in-aid.
The 580 billion yen in Japanese soft loans due to be extended to China between 1996 to 2000 were not formally affected by the protest, but no missions to approve their details had been sent since China conducted a nuclear test in May 1995.
Asked if Chinese nuclear testing was a factor in Tokyo's delay in sending the loan mission, Sadoshima said that did not appear to be the case.
""At least, our government has never said that,"" he said, adding it was incorrect to say work on the loans had been ""resumed"" -- a word used by other Japanese officials.
""It's not a resumption... We never stopped,"" he said.
Relations between Beijing and Tokyo have been strained this year by a controversial visit by Japanese Prime Minister Ryutaro Hashimoto to a shrine to Japan's war dead and by a territorial dispute over an island group in the East China Sea.
While Chinese state media have been quick to condemn what they call resurgent Japanese militarism, diplomats say Beijing is keen not to allow the disputes to harm an economic relationship in which the soft yen loans are an important part.
Chinese Foreign Ministry spokesman Cui Tiankai earlier this week warned Japan not to use financial assistance as a form of political pressure, saying to do so could only harm ties.
The yen loans, widely seen in China as a form of reparation for the suffering inflicted by Japan during World War Two, have themselves been a source of dispute.
The rise of the value of the yen in 1994 and 1995 -- which sent the cost of the loans soaring -- prompted howls of Chinese complaints and demands to be allowed to repay in U.S. dollars.
Tokyo refused, but the yen's later decline helped blunt the issue as a potential cause of conflict and both sides have recently shown new willingness to cooperate on other issues.
Prime Minister Hashimoto has been reported as promising to consider lifting the freeze on grant-in-aid to China, but Sadoshima said that issue would not be discussed by the loan mission.
""That's not my department,"" Sadoshima said.
($1 = 113 yen)
",34
"A Chinese court took less than four hours on Wednesday to convict prominent dissident and former student leader Wang Dan of plotting to overthrow the government and sentenced him to 11 years in prison.
The Beijing Number One Intermediate People's Court found Wang guilty of conspiring to subvert the Chinese government, the Xinhua news agency said. He faced a maximum penalty of death.
""Sufficient evidence, which includes written materials, witness accounts, recorded tape and criminal technical appraisal, were shown at the court,"" Xinhua quoted the judge as saying after the trial.
Wang, 27, was also deprived of his political rights for two years, Xinhua said, quoting the verdict.
""Wang candidly confessed his activities,"" Xinhua said, adding that he received funds from overseas hostile forces, gave financial aid to families of jailed dissidents and tried to set up an ""opposition force"" by uniting illegal organisations.
Charges against Wang were backed by testimony by another dissident, Liu Xiaobo, Xinhua said. It did not elaborate. Liu was sent this month to a labour camp for three years.
""His criminal fact is clear, and the evidence is conclusive,"" Xinhua said quoting the verdict against Wang. ""He instigated people by saying that 'It is time we turn our words into actions'.""
The verdict was issued just four hours after the trial began. Foreign reporters and legal experts were barred from attending the trial in western Beijing.
Security was tight around the court building, with dozens of police preventing the public from approaching the building.
Earlier on Wednesday, the dissident's father said the family would appeal if Wang were convicted.
""We will definitely appeal... We will not give in,"" Wang Xianzeng told reporters just hours before the start of the proceedings.
""He is definitely innocent,"" he said as he left his home with the dissident's mother, Wang Lingyun, to go to the court.
""Speech can't overthrow the government,"" he said.
Wang's mother, a 61-year old museum researcher who has no background in law, attended the trial as one of two defence lawyers. His father and a sister were allowed to sit in.
Wang Lingyun said on Tuesday she expected Wang to receive a harsh sentence although he would plead not guilty.
The mother had said the dissident was calm and mentally prepared for a harsh sentence, although she has said his health had deteriorated since he vanished into detention in May 1995.
Wang Dan faced a minimum 10-year sentence and a maximum penalty of death.
The New York-based Human Rights Watch said last week the chances of acquittal were slim because Wang has not had adequate time to prepare a defence.
Human Rights Watch attacked the trial on Tuesday as a sign of the Chinese leadership's increasing intolerance of dissent.
Wang has already served four years in prison for counter-revolutionary crimes, or subversion, for his role in pro-democracy demonstrations in Beijing's Tiananmen Square that were crushed by the army in June 1989 with heavy loss of life.
He was politically active again after his parole in 1993, defying police surveillance to join a daring appeal to communist leaders for the release of those still jailed for their part in the 1989 protests.
China has recently cracked down on the few remaining dissidents who have not fled into exile or been jailed.
",34
"China released dissident Chen Ziming on Wednesday to allow the ailing activist jailed for his role in ill-fated 1989 pro-democracy protests to seek medical treatment, a family member said.
The release of the leading dissident on medical parole came just seven days after a Beijing court jailed former student leader Wang Dan for 11 years following a brief trial that prompted expressions of concern from around the world.
Chen, 42, arrived home from the Beijing Number Two Prison at around 10.30 pm (1430 GMT), his mother Wu Yongfen said.
""His wife went to meet him... He's at his own home,"" Wu said in a telephone interview.
""Because he is ill, he asked to be released on bail for medical treatment,"" she said, adding it was unclear how long Chen would be permitted to remain at liberty.
The veteran pro-democracy activist was sentenced to 13 years in prison in 1991 for engaging in ""counter-revolutionary"", or subversive, activities during pro-democracy protests centred on Beijing's Tiananmen Square in 1989.
Chen had been singled out by Beijing authorities as a behind-the-scenes ""black hand"" organiser of the demonstrations, which were crushed by the army with heavy loss of life.
He won medical parole in 1994 in a move widely seen as part of a successful bid by Beijing to persuade Washington not to revoke China's Most Favoured Nation trade status on grounds of persistent human rights violations.
Human rights have long been a major irritant in Sino-U.S. ties already strained by disputes over trade, copyright piracy, arms proliferation and Taiwan.
U.S. Secretary of State Warren Christopher is scheduled to travel to Beijing this month for a visit widely seen as a vital step toward rebuilding the cross-Pacific relationship.
It was unclear whether Chen, who has been treated for cancer, hepatitis B, heart disease and other ailments, would be imprisoned again after treatment, his mother said.
""Last time, in 1994, he was also released on bail for medical treatment and later they made him go back,"" she said.
Chen was returned to prison on June 25, 1995, after joining calls for Beijing to release political prisoners and reverse its verdict that the Tiananmen Square protests were seditious.
""Recently he has been suffering from a lot of illnesses,"" said Wu, who last year joined other family members in a bold campaign to demand medical parole for her son.
Chen, who ran a social sciences institute with fellow activist Wang Juntao until the 1989 protests, had been receiving medical treatment twice a month while in prison, she said.
His release by Chinese authorities came amid condemnation from human rights groups over the jailing of Wang Dan after a hearing last Wednesday that lasted less than four hours.
The United States and other nations expressed deep concern over the verdict and sentence. Chinese state media hailed Wang's trial as a model of fairness, but rights activists called it a parody of justice held only to mask a pre-arranged result.
Wang, a dissident also known for his role as a leader of the 1989 pro-democracy protests, had pleaded not guilty to subversion charges carrying a maximum death sentence and a minimum 10 years' imprisonment.
The 11-year sentence imposed on him was the latest in a series of crushing blows to China's embattled band of dissidents, most of whom were already either in exile or serving long terms in administrative detention or prison.
",34
"China's rising foreign debt should not cause anxiety because the economy is booming and foreign exchange reserves are bulging, financial analysts and economists said on Tuesday.
Beijing was being cautious about raising the level of its foreign debt despite strong demand for capital, they said.
Foreign debt rose 6.3 percent to $109.57 billion at the end of June from a year earlier, the State Administration of Exchange Control said on Thursday.
Total foreign debt was up by 2.8 percent, or $2.98 billion, compared with end-1996.
The growth in debt was lagging well behind the expansion of the economy in a sign that Beijing was retaining its tight grip on overseas borrowing, said a foreign analyst in Beijing.
""(The debt increase) is not out of line with the size of the economy... I wouldn't think it is an alarming number,"" he said.
The need to restrain companies hungry for capital and the traditional reluctance of China's communist leadership to be indebted to foreigners were partly responsible for Beijing's tight limits on debt, said a Hong Kong-based financial analyst.
""Basically, the growth in the debt has been very moderate over the last couple of years,"" he said.
Demand for foreign loans and investment has soared as China's economy has boomed and officials and businessmen have pursued ambitious infrastructure and development plans, but Beijing was reluctant to depend too much on foreign finance, the analyst said.
Healthy foreign exchange reserves that reached a record $95.0 billion by the end of September had given Beijing the ability to boost debt levels without damaging lender confidence, but also enabled it to limit borrowing by providing a separate foreign currency source, said the Beijing analyst.
""China tends to be more conservative in borrowing, that's the culture, and this is more on the conservative side,"" he said.
""There is capacity for them to borrow more...without worrying about the underlying fundamentals,"" he said.
A senior Chinese economist under the Ministry of Foreign Trade and Economic Cooperation said the rise in total debt was a response to a slight reduction in foreign direct investment and the continuing demand for capital.
He welcomed the exchange administration's report that the proportion of debt held by foreign-funded enterprises had risen to 18.6 percent, compared with the 30.2 percent accounted for by government debt and a 39.1 percent share for financial institutions.
""It is difficult for foreign-invested companies to raise money in China, so it is normal for them to raise funds overseas,"" the economist said. ""China is not responsible for the debts of foreign-invested companies.""
State media said in June that China intended to borrow more abroad, but would also adjust the foreign currency structure of its debt to make it match exchange income and reserves.
The decision to expand the scale of the national debt had not weakened Beijing's administrative vetting of the quality of overseas loans, which remained strict, the analysts said.
",34
"The family of detained Chinese dissident Wang Dan have found a lawyer willing to defend the leader of 1989 student protests in Beijing's Tiananmen Square at an expected trial, a close relative said on Friday.
Chinese court officials on Thursday informed Wang's mother, Wang Lingyun, she had one day to find him a lawyer, a signal that the dissident had been indicted and a trial was imminent.
""We've already found one,"" a family member said when asked if a lawyer had been hired.
The lawyer had visited the court dealing with Wang's case to begin legal formalities, but there was still no news of when the trial of the former student leader, who has been in detention since May 1995, would begin, the relative said by telephone.
""The next thing is for the lawyer to join in the law case, to understand the testimony and to understand the evidence,"" he said, adding it was not clear when the lawyer would be permitted to meet Wang.
Wang Lingyun said on Thursday that officials of the Beijing People's Intermediate Court had declined to say if the dissident had been indicted, but Chinese legal experts said lawyers are unnecessary in China unless a suspect has been charged.
Wang's relative said the family was concerned about the situation of the 26-year-old dissident, who has been lost in a security limbo since his detention more than 16 months ago.
""We feel pretty anxious. We are just waiting for new developments,"" he said.
Chinese sources have said Wang faces a sentence of up to seven years in prison if convicted of counter-revolutionary incitement, or subversion.
The outspoken activist attracted the ire of China's communist authorities in 1989 when he shot to prominence as a leader of student protests for more democracy centred on Tiananmen Square in the heart of the Chinese capital.
The demonstrations were crushed by the army on June 3-4 with heavy loss of life and Wang, a Beijing University student, served four years in jail for his role.
Wang appears likely to be the next victim of a rash of convictions and detentions of members of China's tiny and struggling pro-democracy movement.
On Tuesday, prominent dissident Liu Xiaobo was ordered to serve three years in a labour camp after he joined veteran activist Wang Xizhe in calling for the impeachment and dismissal of Communist Party chief Jiang Zemin.
Wang Xizhe's whereabouts are unknown.
Hopes that the award of the 1996 Nobel Peace Prize to jailed veteran dissident Wei Jingsheng could revitalise the faltering democracy movement were dashed on Friday when the prize went to campaigners for the former Portuguese territory of East Timor.
Beijing has long dismissed appeals from foreign countries and human rights campaigners for softer treatment of dissidents as interference in China's internal affairs.
Wang Dan had been expected to face new charges since last December, when the court that convicted Wei Jingsheng of plotting to overthrow the government also implicated Wang.
The court's verdict said Wei, who was jailed for 14 years, had links with people ""convicted of counter-revolutionary crimes, including Wang Dan"". It also referred to a tape-recorded conversation between Wang and Wei, but gave no details.
Wang had been active since his release from jail, defying persistent police surveillance and harassment to join in a daring appeal to Communist leaders for the release of all those still in prison for their part in the 1989 protests.
",34
"Swedish Prime Minister Goran Persson said on Monday he had expressed disapproval to his Chinese counterpart over the jailing of dissident Wang Dan.
Persson raised the case of former student leader Wang, jailed last week for 11 years, during a dinner with Chinese Premier Li Peng in Beijing on Sunday, he told a news conference.
A court in the Chinese capital last Wednesday took less than four hours to condemn Wang for plotting against the government, after a trial that sparked expressions of concern from around the world.
""During the official talks of the delegation we talked about human rights in general,"" Persson said.
Asked about the case of Wang Dan he said the 27-year-old dissident had not been discussed in the official talks but had been raised afterwards.
""During the dinner I had the opportunity to have a more private discussion with Premier Li Peng and raised that case you mentioned, Wang Dan,"" he said.
""I told him what we have said before...that we don't like the treament in this case,"" he said.
Persson, who has drawn political fire at home for his decision to carry out the six-day visit despite Wang's jailing, declined to give details of the talks or to describe Premier Li's reaction to the raising of Wang's case.
It was more efficient to raise such cases as Wang's in private at a dinner than during official talks because China considered such matters internal affairs, he said, adding that Sweden firmly believed in continuing dialogue on human rights.
""We...think that China treats its political dissidents and religious dissidents too hard and are also critical towards their frequent use of capital punishment,"" he said.
""We have signed an agreement with China where the Swedish Raoul Wallenberg Institute will arrange human rights seminars in Sweden and China...for officials from the prisons and the judicial system,"" he said but did not elaborate.
The jailing of Wang Dan was latest in a series of crushing blows to China's tiny and struggling pro-democracy movement. Most dissidents have already been forced into exile or are serving long sentences in prison or adminstrative detention.
Sweden and China had signed an agreement on a consulate for Hong Kong, which returns to Beijing rule on July 1, 1997, he said adding that his discussions with Chinese leaders had also touched on international politics and trade.
A delegation of Swedish businessmen was travelling with the prime minister during his visit and was expected to sign a number of deals, Persson said but gave no details.
",34
"China said on Tuesday a visit by U.S. Secretary of State Warren Christopher could help keep Sino-U.S. ties on track but warned differences remained on such sensitive issues as trade and human rights.
Christopher, the highest level U.S. official to visit Beijing for two years, was scheduled to arrive in the Chinese capital on Tuesday evening for meetings intended to give a vital boost to long-strained Sino-U.S. ties.
""We hope this visit by Christopher to China can play a certain role in helping keep Sino-U.S. relations on track for healthy and stable development,"" Chinese Foreign Ministry spokesman Cui Tiankai told a news briefing.
While holding out the hope that ties could continue to grow warmer, Cui also criticised Washington's policies on trade, Chinese human rights and U.S. arms sales to Taiwan.
China has sent Washington mixed signals in the run-up to Christopher's visit, combining conciliatory talk with tough rhetoric on a range of tricky diplomatic issues, but diplomats say both sides are keen to make the visit a success.
Sino-U.S. ties have long been rocked by disputes over trade, human rights, copyright piracy in China, arms proliferation and Taiwan, although both sides say tensions have eased recently.
Differences remained with the United States over trade issues, but these should not be solved by threats of economic force, Cui said.
""There are differences and problems in Sino-U.S. trade and sometimes conflicts; this is the result of increasing trade,"" he said.
""The two sides should resolve possible differences and conflicts on a basis of mutual equality and by consultation rather than with unilateral actions or the imposition (of one side's) views,"" he said.
U.S concerns over China's human rights record, long a major issue in ties, have been heightened by Beijing's rejection last week of former student leader and dissident Wang Dan's appeal against his 11 years sentence for subversion.
Wang's sentence was a heavy blow to China's struggling pro-democracy movement and was widely seen as a slap in the face for Washington, which has touted constructive engagement with Beijing as the best way to boost Chinese human rights.
Cases such as Wang's were not human rights issues and were judicial matters that had nothing to do with Sino-U.S. relations, Cui said.
Washington's annual review of China's Most Favoured Nation (MFN) trade status, necessary to avoid heavy tariffs on Chinese imports, was another unneccesary irritant, he said.
""The U.S. review of China's MFN status every year is inappropriate,"" he said. ""The settling of MFN once and for all is already on the agenda.""
Washington has also been critical of Chinese policies on weapons proliferation, but Cui said the United States was the main offender, with arms sales to Beijing's arch-rival Taiwan.
""Of the so-called weapons proliferation issues, the most sensitive and most important are U.S. weapon sales to Taiwan,"" he said.
Christopher has come under pressure from members of Congress to raise U.S. concerns over the future of human rights in Hong Kong after it returns to Beijing rule next year but Cui said such matters were not Washington's concern.
""Hong Kong issues are totally China's internal affair,"" he said.
",34
"Some of the brightest stars of Chinese pop put on a glittering show in Beijing on Friday, but officials kept politically-suspect rock heroes off the playlist, sources close to the concert said.
A capacity audience of around 18,000 flocked to the Capital Gymnasium to see a showcase event featuring dozens of performers from China's fledgling popular music industry.
State media said the event, the first leg of a double concert in the capital, was intended to celebrate the growth of the pop music industry since it was banned as capitalist poison during the chaos of the 1966-76 Cultural Revolution.
The concerts were intended to capture the flavour of the past decade of Chinese pop, but organisers had been ordered to cut some of the nation's biggest and most influential rock and roll stars from the playlist, sources close to the event said.
The Friday 'A' concert, to be followed by a 'B' performance on Saturday, was a showcase mainly for sugary pop songs largely focused on themes of love and friendship --  a staple diet for state-run music broadcasters.
Harder-edged music -- unpopular among communist authorities keen to promote safe socialist loyalties -- was conspiciously absent.
Beijing has repeatedly ordered campaigns to boost socialist morality weakened in the rush to a market economy, prompting tighter official controls on all forms of cultural activity.
Cui Jian, widely regarded as the father of Chinese rock music, was not scheduled to attend either concert, organisers said.
Sources close to the event said Cui, whose music is a blend of Western rock, Chinese instruments and politically-sensitive lyrics, had originally been intended to play a major part in the event but had been barred by China's musical mandarins.
The classically-trained performer's music is still hugely popular among listeners, but ideologically-suspect anthems such as ""Nothing to My Name' that caught the mood of a generation in the late 1980s are seldom permitted on state-controlled media.
""Cui's basically been banned from performing in Beijing since 1993,"" said a promoter close to the event who declined to be named. ""The higher-ups told the organisers...he couldn't take part.""
Heavy rock group Hei Bao, or Black Panther, which has won the hearts of many younger Chinese despite official disapproval, would also be absent, said concert promoter and radio presenter Zhang Shurong.
Zhang said he had not been told of any ban against Cui or Hei Bao, who have long been forced to seek venues far from the Chinese capital.
Hei Bao had not been banned but were considered unsuitable because they could make the audience too excited, he said, adding the stars still on the playlist were attraction enough.
""They are all very important, all people who can play epoch-making roles in the circle of Chinese singers,"" he said.
",34
"China on Thursday said it was willing to cooperate with other countries to maintain peace on the troubled Korean peninsula, where tensions are high as South Korean troops hunt for infiltrators from the rival North.
""We are paying great attention to the situation on the Korean peninsula,"" Chinese Foreign Ministry spokesman Shen Guofang told a briefing in Beijing.
""China is willing to cooperate with other countries to bring into play positive and constructive action to uphold the peninsula's peace and stability,"" Shen said.
Frosty relations between Seoul and Pyongyang worsened last month when 26 North Koreans landed in the south from a stranded submarine.
Southern troops have since killed or found dead 22 of the infiltrators, have captured one and are carrying out a huge hunt for the remaining three.
Pyongyang has threatened ""merciless retaliation"" for the deaths of its soldiers and demanded Seoul return the submarine along with any survivors and bodies of the dead crew.
Seoul says any provocation will meet ""stern punishment"" and has raised security at airports, ports, diplomatic missions and five vulnerable west coast islands.
China backed the north in the 1950-53 Korean War and remains one of communist Pyongyang's few diplomatic allies, but also considers Seoul an important trading partner.
Shen gave no details of what kind of cooperation China hoped would bolster peace on the heavily-militarised peninsula, where southern forces face a hostile north suffering near-famine after disastrous floods.
South Korea and the United States in April called for four-nation peace talks with the north and China to replace a truce that ended the Korean conflict but left Seoul and Pyongyang technically still at war.
Pyongyang has insisted on bilateral talks with Washington to seek an accord, saying Seoul was not a party to the 1953 truce. China has yet to take a clear stance on the four-way talks.
Beijing had no private interest in the Korean peninsula and only wanted peace and stability, Shen said.
Both North and South should take action to ensure peace, he said but gave no details.
",34
"The child chosen by China to be Tibet's second holiest monk passed the first anniversary of his selection quietly in Beijing on Friday, far from the restive Himalayan region, officals in the capital said.
Officials in Tibet said they had concluded a six-month push to curb separatist sentiment in the deeply Buddhist region's monasteries, a campaign that an overseas watchdog group has reported led to the expulsion or detention of scores of monks.
Seven-year-old Gyaincain Norbu, chosen by China as the 11th incarnation of the Panchan Lama, would not attend any activities on the first anniversary of his selection, an official of the Tibet regional authority's Beijing office said.
""The child is in Beijing, so there will not be any activities in Tibet,"" the official said by telephone.
All planned anniversary celebrations slated for the capital had been completed, he said.
State media have said that Norbu, regarded by many Tibetans as a pretender to the 10th Panchen Lama's spiritual mantle, visited Beijing's Yonghe Lamasery last week to celebrate the anniversary of his enthronement.
Tibet's spiritual leader, the exiled Dalai Lama, has named another boy as the reincarnation of the 10th Panchen Lama, the Himalayan region's second holiest monk who died in 1989.
Chinese sources have said Beijing's choice lives in the capital under state protection against possible assassination attempts by radical Tibetans.
In Tibet, an official of the religious affairs bureau said a six-month campaign to boost patriotism and curb separatist sentiment in the region's monasteries had been concluded.
The London-based human rights watchdog Tibet Information Network (TIN) said this week that official attempts to bring restive clergy to heel had led to at least 150 monks being expelled from their monasteries and possibly 20 arrests.
TIN said many monks had been told to leave because they refused to criticise the Dalai Lama, Beijing's greatest rival for the loyalties of the remote region's people.
Some monks had been sent back to civilian life because they did not behave properly during the patriotism campaign, the religious affairs official said but gave no details.
He dismissed a report from TIN that the campaign left only 300 monks at Ganden monastery near the Tibetan capital.
""Ganden has more than 490 monks...they are all at the monastery,"" he said, but declined to comment on whether there was an official limit on the number of clergy allowed there.
""That is a secret, we cannot talk about it on the telephone,"" he said.
While Beijing says most Tibetans back Chinese rule, a constant propaganda barrage against supporters of the Dalai Lama, exiled since an abortive uprising against Beijing rule in 1959, is testament to his remaining influence.
An edition of the Tibet Daily newspaper seen in Beijing on Friday quoted senior officials as saying all public figures should clearly state their position in the war on separatism.
""Some of our comrades do not sufficiently recognise the Dalai Lama clique's ideological infiltration and do not combat it strongly enough,"" the newspaper said.
",34
"China has ordered two Hong Kong democracy activists to leave the country after they tried to petition Beijing officials over the political future of the colony, Hong Kong sources and Chinese media said on Friday.
Beijing police had told activists Wong Chung-ki and Chui Pak-tai to leave China, the official Xinhua news agency said.
Hong Kong sources said the two had been trying to petition officials over what they called the ""undemocratic"" methods being used by China to select a chief executive to run the British colony after it reverts to Beijing rule on July 1, 1997.
""The Beijing Public Security Department issued a warning to Chui and Wong, asking them to return (to) Hong Kong within a stated time,"" Xinhua said.
It was not clear if the two campaigners, both members of local councils in the British colony, had already left Beijing.
Officials of a Beijing hotel had filed a public disturbance complaint against the two for distributing materials to reporters in the hotel on Thursday evening, Xinhua said.
Anxiety has grown in Hong Kong in recent months over how much political freedom China will allow after it regains control of a colony run from London for more than 150 years.
The jailing of leading Chinese dissident Wang Dan for 11 years by a Beijing court on Wednesday awakened fears that those who criticised the post-handover, Beijing-backed administration could face a similar fate.
Chinese authorities, currently overseeing the selection of a group to choose Hong Kong's first post-colonial chief executive, also barred two other pro-democracy advocates from entering the country on Thursday, activists in Hong Kong said.
Officials at the Sha Tau Kok border post refused entry to Andrew To and Chan Kwok-leung of the Hong Kong Democratic Party after keeping them in a room for two hours, To told Reuters.
All four activists had planned to lobby the China-selected Preparatory Committee that will select the committee to decide the chief executive, and to appeal for a reprieve of Hong Kong's current elected legislature, which Beijing has vowed to scrap.
A copy of a statement by the activists obtained by Reuters accused China of using undemocratic methods to choose the chief executive and condemned the decision to bar their colleagues from entering the country.
Their petition urged Beijing to scrap a plan to appoint a provisional legislature in place of the elected Legislative Council, and demanded the territory's future leader be elected instead of chosen by a China-controlled selection committee.
China, which has bitterly opposed democratic reforms introduced in Hong Kong in recent years, says the official Selection Committee will be well equipped to represent the will of the colony's six million people.
The rules for choosing the chief executive would guarantee a selection that was fair, honest and without corruption, Chinese Vice Premier Qian Qichen told Preparatory Committee members in a speech on Friday.
Analysts said a list of candidates for the Selection Committee released on Friday was dominated by pro-China politicians. The Preparatory Committee was scheduled to vote on the list on Saturday.
China has agreed to retain Hong Kong's capitalist system for 50 years but officials have suggested that freedom of expression in the bustling colony would be limited after the transfer.
A survey published on Thursday said most businessmen in Hong Kong expected press freedom, the political system and human rights to deteriorate after the return to Chinese rule.
",34
"A Beijing court on Wednesday sentenced dissident and former student leader Wang Dan to 11 years in prison, the latest hammer-blow struck by China against its tiny band of pro-democracy activists.
The Beijing Number One Intermediate People's Court took less than four hours to convict Wang of plotting to subvert the government, but the young dissident's family quickly denounced the verdict and vowed to appeal.
""We are angry... He received such a heavy sentence even though he was innocent,"" Wang's father, Wang Xianzeng, said in a telephone interview after a brief meeting with his son at a Beijing detention centre.
""Wang Dan said he wants to appeal,"" he said. ""Wang Dan feels everything that he has done has been above-board... it was all for China's democratisation.""
Wang, 27, was sentenced to 11 years in prison and deprived of his political rights for a further two years, the Xinhua news agency said in a long report hailing the fairness of the trial.
""Sufficient evidence, which includes written materials, witness accounts, recorded tape and criminal technical appraisal, were shown at the court,"" the official agency quoted the trial's chief judge as saying.
""The evidence is conclusive,"" it quoted the verdict as saying. ""(Wang) instigated people by saying that 'It is time we turn our words into actions'.""
Wang, who vanished into detention in May 1995, had faced a maximum penalty of death and a minimum 10-year prison term.
One of the student leaders of the 1989 pro-democracy protests in Beijing that were crushed by the army, Wang had been one of the few members of China's dwindling band of dissidents not in exile or serving a long term in detention or prison.
A spate of arrests and detentions in recent months has left the pro-democracy movement reeling, analysts say.
Wang's conviction was a slap in the face for Western governments that have appealed to Beijing to improve its human rights record, diplomats in the Chinese capital said.
New York-based rights group Human Rights in China denounced the verdict as the result of a show trial that blatantly violated Chinese law and international standards.
Scores of police enforced tight security around the court building in western Beijing, keeping foreign journalists well away from a trial billed by officials as open to the public.
Less than 20 observers had been allowed in the court, said Wang's father, who was allowed to attend along with the dissident's older sister.
""Not one witness was summoned,"" he said. ""The judge did not uphold the justice and dignity of the law... How can writing articles constitute a crime?""
The family would have 10 days to appeal upon receiving official notification of the verdict in about five days' time, he said, adding they were not optimistic the verdict would be overturned.
The 11-year sentence had been no surprise to the family or to Wang, who had been in good spirits during their 30-minute meeting after the trial, said his mother, a 61-year-old museum researcher who attended as one of two defence lawyers.
Wang, who once promoted free debate in the campus of the elite Beijing University, has already served four years in prison for counter-revolutionary crimes, or subversion, for his role in the 1989 Tiananmen Square demonstrations.
He returned to political activism after his parole in 1993, defying police surveillance to join a daring appeal to Beijing's communist leadership for the release of those still jailed for their part in the 1989 protests.
Wang's father said his son's health had deteriorated during more than 15 months in detention, but added the former student activist believed he had done nothing to be ashamed of.
""He has a clear conscience,"" he said.
",34
"Chinese state media on Friday lashed out at a U.S.-funded radio news station, accusing the United States and other Western nations of stepping up ""Cold War propaganda"" against Beijing.
U.S. Radio Free Asia, which broadcasts news to China in Chinese, had been launched by Washington to create chaos and sow dissent in Asian nations, the official China Youth Daily said.
""With the broadcasts of Radio 'Free Asia', the United States is further stretching its gossiping tongue into the Asian region,"" the newspaper said in an article published on the same day a senior U.S. official began a visit in Beijing.
U.S. Undersecretary of State Lynn Davis had arrived in China for talks on arms proliferation and to lay the groundwork for a crucial visit later this month by Secretary of State Warren Christopher, a U.S. Embassy spokesman said.
Christopher's visit is intended to be the latest in a series of moves by Washington and Beijing to mend ties long strained by disputes over human rights, trade, copyright piracy and Taiwan.
Officials on both sides say relations have warmed in recent months after a string of high-level contacts, but articles in the Chinese state press on Friday took a more hostile tone.
""Although the Cold War has been over for years, the United States and other Western nations rely on the superiority of their communication and information technology to increasingly launch Cold War propaganda,"" China Youth Daily said.
""The real goal of setting up Radio 'Free Asia' is to use news media to interfere in the internal affairs of China and other Asian nations, to create chaos, and to destroy the stability of these countries,"" the newspaper said.
Radio Free Asia would only boost people's abhorrence of U.S. power politics and hegemonism, the China Youth Daily said, calling for Asia-wide vigilance against the station.
China last month told Washington to pull the plug on Radio Free Asia, created by the U.S. congress as an Asian counterpart to the anti-communist Radio Free Europe. But U.S. officials have said the local-language news broadcasts were here to stay.
The station announced on Thursday that it planned to begin beaming uncensored news to Tibet this month and to expand Chinese broadcasts next year.
U.S. commentators have suggested the station could become a new irritant in fragile cross-Pacific ties, particularly after U.S. congressmen reversed a change of name to the less contentious Asia Pacific Network.
Another potential stumbling block for Sino-U.S. reconciliation is the case of Chinese dissident Wang Dan, who was jailed for 11 years for plotting against the government after a trial on Wednesday that lasted less than four hours.
Beijing's human rights record has long been a major focus of U.S. concerns and a perennial source of dispute.
While the China Youth Daily focused on the pro-democracy rhetoric of Radio Free Asia, a separate report in the official Legal Daily took aim at the entire U.S. political system.
In a scathing analysis of the current U.S. presidential election, the newspaper said ordinary Americans had little say in the choice of their leadership.
""U.S. democracy is essentially democracy of the capitalist classes or democracy of the rich -- it certainly is not democracy of the whole people,"" it said.
Most voters chose not to turn out for mud-slinging contests between presidential candidates promoted by special interest groups, it said.
While some analysts see the Chinese media's anti-U.S. rhetorical broadsides as evidence of growing nationalist sentiment, Beijing officials say they are keen to mend fences with a nation also seen as a vital economic partner.
",34
"European record business executives on Friday sang the praises of China's crackdown on widespread copyright piracy, saying Beijing appeared sincere in its desire to build a legitimate music industry.
European companies were eager to establish cooperative ventures with local firms that would allow them to supply music to a vast listening audience currently largely supplied from illicit music production lines, the executives said.
""The Chinese market has enormous potential,"" EMI Europe President Rupert Perry told reporters in Beijing, adding that China was making progress in its crackdown on piracy.
Beijing vowed to clamp down on pirates and prise open its cultural markets in a June agreement with the United States that narrowly averted a multibillion dollar cross-Pacific trade war over violations of intellectual property rights.
Analysts and some industry figures have cast doubt on China's commitment to wipe out piracy, but the music executives said they had been encouraged by their talks with Chinese copyright and publishing officials.
""Our conversations with Chinese officials in the last couple of days lead us to believe that they are very cognisant of the problem and doing everything that they can to control it,"" said Perry.
""The laws are in place, they have an understanding of what has to happen and yes, they have had successes in closing certain factories,"" he said. ""We believe that will continue.""
The executives, who are part of a trade delegation to China led by European Commission Vice President Sir Leon Brittan, said they hoped to build an industry that would develop Chinese musical talent for a domestic and international audience.
The multimillion dollar Chinese music market had the potential to grow 10-fold over the next few years, industry officials in the delegation said.
""We... tried to explain to the Chinese what we could do together,"" said Polygram Far East president Norman Cheng, ""They have been pretty receptive to all these ideas.""
""This is our first round of meetings,"" said Michael Smellie, senior vice president of BMG Entertainment International Asia Pacific. ""We were encouraged.""
Music imports into China were still negligible, while pirate sales were estimated at $170 million a year, roughly equivalent to the value of legitimate sales, said Adrian Strain of the International Federation of the Phonographic Industry (IFPI).
European music companies were looking for Chinese partners to develop the local market, with former pirate firms among the potential wedding partners, the executives said.
While it was impossible to wipe out piracy with a single campaign, Beijing's crackdown on illicit production had worried illegal producers and had forced them to shift some production lines to Vietnam and even South America, IFPI officials said.
",34
"The family of jailed Chinese dissident Wang Dan on Friday received official confirmation of his 11-year prison sentence, suggesting the way was now clear for the former student leader to appeal his conviction.
A Beijing court on Wednesday took less than four hours to condemn Wang for plotting against the government after a trial that sparked expressions of concern from around the world.
Wang's family received official notification of the verdict on Friday afternoon, implying the 27-year-old activist was now free to appeal within 10 days, said his mother Wang Lingyun.
""The verdict should be first given to him, with another (copy) given to the family,"" she said in a telephone interview.
""This is an issue for Wang Dan, he has to write an appeal document...for the higher court,"" she said. ""After the court has received it they may inform us.""
Wang, a dissident known for his role as a leader of the ill-fated 1989 pro-democracy protests in Beijing's Tiananmen Square, had pleaded not guilty to subversion charges carrying a maximum death sentence and a minimum 10 years' imprisonment.
During a brief meeting with his family after the trial he vowed to appeal, a decision widely considered to be a symbolic gesture as verdicts imposed on Chinese dissidents in past political trials have almost never been overturned.
The 11-year sentence imposed on Wang was the latest in a series of crushing blows on China's embattled band of dissidents, most of whom were already in exile or serving long terms in adminstrative detention or jail.
It drew immediate fire from international human rights activists, who condemned the trial as a parody of justice masking a pre-arranged result.
Chinese state media called the trial a model of fairness. Officials said it was an ordinary legal matter and an internal affair.
The United States and some European and Asian nations expressed their concern, while Czech President Vaclav Havel -- himself a former dissident against a communist government -- said the verdict was unacceptable and deeply disturbing.
Wang, who once promoted free debate on the campus of Beijing University, had already served four years in prison after the 1989 protests were crushed by the army with heavy loss of life.
The former history student returned to activism after his parole in 1993, defying police surveillance to join a daring appeal to Beijing's communist leadership for the release of those still jailed for their part in the 1989 demonstrations.
He was detained once more in May 1995 and disappeared into legal limbo for almost a year and a half until being formally arrested.
Wang Lingyun, a 61-year old museum researcher who attended the trial as one of Wang's two defence lawyers, said it was unclear when she would be able to meet her son again.
""If he continues to ask me to be his defence lawyer, it's possible we will be able to have a lawyer's meeting, like last time,"" she said. ""It's his decision.""
The family had had little time to discuss the details of Wang's appeal during their 30-minute meeting at a Beijing detention centre on Wednesday, she said.
""Last time we didn't speak much, because the time was so short,"" she said. ""We hadn't seen each other for such a long time, we just talked about family things.""
",34
"China has launched an ideological onslaught on dissent in Tibet, vowing to crack down on pro-independence monks and nuns and calling for tighter controls on religion in the restive Himalayan region.
Beijing's campaign to build ""spiritual civilisation"" -- communist code for a return to socialist values -- was a matter of strategic importance for the region's future, the official Tibet Daily said in an edition seen in Beijing on Wednesday.
The ideological campaign would aim to cut the role of religion in the deeply Buddhist region, as well as wipe out the influence of Tibet's exiled spiritual leader, the Dalai Lama, and curb separatism, the newspaper's November 11 edition said.
""Monks and nuns who follow the Dalai Lama clique's separatist wrecking activities will be dealt with according to the law,"" it quoted Tibet's communist leadership as saying.
""Those who use religion and superstition in...activities threatening the physical and mental health of the masses will be resolutely suppressed,"" it said in a long front-page report laced with references to Marxist ideological struggle.
China has long tried to weed out pro-independence monks and nuns, blaming them for playing a major role in an underground Tibetan campaign against Beijing rule.
The London-based watchdog group Tibet Information Network reported this week that a jailed Tibetan nun had had her sentence doubled to 18 years for defying Beijing's choice as the reincarnation of the region's second holiest monk.
The 10th Panchen Lama died in 1989, and Beijing has anointed a six-year-old boy as his reincarnation. The Dalai Lama has named another six-year-old boy as the 11th Panchen Lama.
The identification of reincarnations of living Buddhas, organisation of major religious activities and construction of religious sites all require local government approval, the Tibet Daily said, adding that management of religious festivals would be tightened.
Monks and nuns would be organised to take part in activities to benefit society and would be directed to become ""patriotic religious professionals"", while Communist Party members who took part in religious events would be disciplined, it said.
Work was needed to establish in Tibetan people's minds the view that their region was an inseparable part of China, it said.
Spiritual civilisation, a watchword touted by China's leadership as a way to revive socialist morality weakened by the nation's rush to a market-style economy, was also needed to combat enemy Westerners, the Tibet Daily said.
""The schemes of hostile Western forces to split and Westernise us will not change,"" it said, without giving details.
The newspaper reserved some of its harshest rhetoric for supporters of the Dalai Lama, who won the Nobel Peace Prize in 1989 for his non-violent campaign for autonomy for his homeland.
Beijing's main rival for Tibetan loyalties has lived in exile since a failed uprising against communist rule in 1959, but he remains revered among the region's devout Buddhists.
""The ideological infiltration of our region by the Dalai Lama clique is still very fierce,"" the Tibet Daily said. ""The splittist forces' war to win ground, win over the masses and the the youth and win command of the monasteries is still intense.""
",34
"China on Tuesday rolled out the memory of long-dead revolutionary leader Sun Yat-sen to strengthen its drive for reunification with Taiwan and defy what it sees as foreign forces trying to split the motherland.
The 130th anniversary of Sun's birth was an occasion for remembering his work for the cause of national unity, said the official People's Daily newspaper in a front-page editorial on a national hero revered by both Beijing and arch-rival Taipei.
Sun had firmly advocated the safeguarding of both China's sovereignty and unity, President Jiang Zemin told an anniversary meeting in Beijing's cavernous Great Hall of the People.
""It was always the unremitting pursuit of Mr Sun Yat-sen to achieve the return of Taiwan at an early date and to fulfil the great cause of the unification of the motherland,"" said the People's Daily, the mouthpiece of China's communist leadership.
While in Sun's day it had been Japanese occupation that kept the Taiwanese apart from their mainland brethren, Sun's unitary zeal was as relevant now as then, it said in an article that also hit out at foreign forces trying to divide China.
In fullsome tributes to Sun issued by the state media, officials rushed to appeal to Taiwan leaders to work for speedy reunification while condemning all moves toward independence.
Sun, who helped lead the 1911 revolution that overthrew China's imperial Qing dynasty, also founded the Nationalist Party which later fled to Taiwan after losing a bitter civil war against the communists in 1949.
While the Communist Party says it took up his banner of revolution after his death in 1925, Taipei's Nationalist leaders see themselves as Sun's true heirs.
The farmer's son turned doctor and radical has long been seen as a potential symbol of unity for politicians on either side of the Taiwan Strait who have walked very different revolutionary roads in the seven decades since his death.
Cross-strait relations have been sorely tested in recent years by Taipei's attempts to break out of the diplomatic isolation imposed by Beijing, which considers the island a rebel province and has vowed to invade, if it ever declares independence.
Separatism was still rampant in Taiwan, while forces both there and abroad still worked to split the Chinese nation, the People's Daily said.
""The activities to split the motherland of the Taiwan authorities have not ceased and forces for 'Taiwan independence' run wild on the island,"" it said.
""Internationally, forces still exist that interfere in our nation's internal affairs and support 'Taiwan Independence'.""
While some Taiwanese politicians have long called for independence, the ruling Nationalist Party dissmisses Beijing allegations that it harbours a hidden ""Two Chinas"" agenda and says it is firmly committed to reunification some day.
Growing detente between Beijing and Taipei ran aground in June 1995, when Taiwan President Lee Teng-hui made a landmark unofficial visit to the United States, enraging Beijing.
Ties cooled further in March when Chinese war games and missile tests in the seas near Taiwan overshadowed the island's first direct presidential election, prompting Washington to send two aircraft carrier battlegroups to the area.
U.S. Navy intelligence specialists have concluded that the war games were rehearsals for a possible all-out invasion of the island in the future, a study made available on Monday showed.
While Chinese state media called on the populace to emulate Sun's revolutionary spirit, local authorities celebrated the anniversary with historical soirees and exhibitions.
Gold and silver stamps bearing his portrait would be issued nationwide soon, the official Xinhua news agency said.
",34
"Chinese leaders on Wednesday denounced Beijing's exclusion from the World Trade Organisation (WTO) as unjust, saying the nation had made great strides in opening its markets to trade and investment.
Protectionism or trade sanctions should not be policy tools in a world increasingly dependent on international trade, said Chinese minister for economic restructuring Li Tieying.
""It is unjust to exclude China from the World Trade Organisation,"" Li told a business summit in Beijing.
""A World Trade Organisation without China is incomplete,"" said Li, who is also a member of the Communist Party's elite Politburo. ""We hope this situation will quickly change.""
Chinese officials say Beijing should be allowed to join the WTO on lenient terms as a developing country and have blamed the United States for blocking their accession with tough demands for more open markets.
Chen Jinhua, chairman of the State Planning Commission, said China was committed to gradually establishing a trade system in line with international practice and had this year already slashed import tariffs to an average 23 percent from 36 percent.
Beijing would continue to open its markets to foreign trade and investment and to push for membership of the global trade club, Chen said in a speech to the business summit.
""We will continue positive negotiation with the members of the World Trade Organisation to regain membership in the organisation at the earliest possible date,"" he said.
Disagreement over the terms of Beijing's admission to the WTO, which Washington says should take into account China's huge and fast-growing economic clout, is just one of a number of disputes that have long troubled Sino-U.S. trade ties.
Rows over copyright piracy, arms proliferation, human rights and Taiwan have all strained relations in recent years, with Washington's annual review of China's Most Favoured Nation (MFN) trade status triggering some of the bitterest rhetoric.
China has urged Washington to make MFN status permanent, and Li warned the United States itself would lose if MFN was revoked.
""If the United States cancels China's Most Favoured Nation treatment, and imported the same goods from other countries, then U.S. consumers would have to spend $14 billion more every year,"" he quoted World Bank statistics as showing.
Beijing and Washington earlier this year went to the brink of a trade war after Washington announced punitive sanctions over widespread copyright piracy in China.
In a pointed reference to such disputes, Li said tough trade tactics should not be overused, but did not mention the United States by name.
""The new international economic order... should not have any kind of trade protectionism or discriminatory policies and the big stick of sanctions should certainly not be wielded at every opportunity,"" he said.
U.S. embassy officials said on Wednesday that the top U.S. textile negotiator had postponed her trip to China for talks in the face of U.S. sanctions on Chinese textiles and a threat by Beijing to retaliate.
China's growing trade surplus with the United States is also widely seen as a barrier to warmer Sino-U.S. relations.
Exports to the United States in the first 10 months had increased by 5.5 percent to $21.3 billion, official Chinese newspapers said on Wednesday. They gave no details for imports.
",34
"Authorities in central China's Anhui province have ordered three pro-democracy activists to stand trial on charges of counter-revolutionary propaganda and incitement, a human rights group said on Monday.
The Hefei Intermediate People's Court in the Anhui capital was scheduled to try dissidents Shen Liangqing, Ma Lianggang and Huang Xiuming on Tuesday, New York-based watchdog Human Rights in China said in a statement.
A court official in Hefei contacted by telephone declined to comment on the case, saying questions related to it touched on matters that had ""not been made public"".
The group said the trial would be the latest step in a state crackdown on dissent that has seen many of the main figures in China's struggling pro-democracy movement disappear into prison or administrative detention.
There was little doubt about the likely result of the trial of Shen, Ma and Huang, all of whom had been detained at least once since they took part in an ill-fated campaign for more democracy in 1989, the U.S. group said.
""Although they must go for trial on (November) 26th, it has already been decided that they are guilty and must be punished,"" it said.
All were unemployed, though Shen had been a government official and Huang a manager at a company. Ma had been a student.
The evidence against the three stemmed from articles written and distributed in 1991, and for which all had already been detained for more than a year, the human rights group said.
""To suddenly try them again now is a typical case in the Chinese government's strict nationwide suppression of dissidents,"" it said.
Earlier this month, a Beijing court took just 10 minutes to reject the appeal of leading dissident Wang Dan and uphold his 11-year prison sentence for subversion.
The trial and failed appeal of the former student leader were part of a series of crushing blows delivered by authorities to China's tiny band of political dissenters.
Visiting U.S. and European officials and politicians have raised the case of jailed dissidents in talks with Chinese leaders, but have said individual human rights cases should not be allowed to disrupt overall ties.
China dismisses criticism of its human rights record as interference in its internal affairs.
Human Rights in Asia said observers were being denied access to the trial of the three Anhui dissidents, although the proceedings were officially open.
""It is believed this is another trial in which society and the free media are not permitted to understand the real situation,"" the group said.
The intermediate court official said he could not confirm any details of the case.
""We cannot answer over the phone, because this concerns a matter that has not been made public,"" the official said.
",34
"China must make real changes to its economy if it wants to join the World Trade Organisation and should replace anti-U.S. rhetoric with international cooperation, a leading U.S. businessman said on Friday.
Beijing should take growing dissatisfaction among foreign investors seriously, said James McGregor, chairman of the American Chamber of Commerce in China. A recent crackdown on dissidents could only harm vital ties with Washington, he said.
""China is always telling foreign investors that we must show sincerity in our business dealings in China,"" McGregor told a meeting of the Beijing Foreign Correspondents Club.
""Perhaps the time has come for China to show some sincerity in getting into WTO (World Trade Organisation),"" he said.
Chinese officials have blamed the United States for blocking their accession to the global trade group, but no other country wanted to ease entry requirements to a point at which they were not commercially viable, he said.
""There is room for compromise on China's WTO entry, but China should be sincerely interested in joining,"" he said.
The terms of Beijing's entry would affect other applicants to the WTO, McGregor said, adding that the group could not lower its standards for China.
Business investors from the United States, already upset by changes in taxes and rules, should pay note to anti-U.S. tirades in China's official press and the hostile stance of a popular book on Sino-U.S. relations called ""China Can Say No"", he said.
""I think that American business people in China really should pay attention to these stirrings of anti-American Chinese nationalism that we're seeing in this book and in the newspapers every day,"" he said.
The solid accomplishments achieved by the Beijing leadership over the past nearly two decades of economic reform could inspire positive nationalism without need to resort to anti-foreign rhetoric, he said.
While some Beijing officials appeared to want foreigners to play a minimal role, what China really needed was more opening to the outside and a bold continuation of economic reforms launched by paramount leader Deng Xiaoping, he said.
""And China should say yes to a more stable and friendlier relationship with America,"" he said.
Sino-U.S. ties have been rocked in recent years by disputes over Taiwan, human rights and copyright piracy, as well as annual battles over the conditions attached by the United States to China's Most Favoured Nation trade status (MFN).
While the American Chamber of Commerce had worked hard to boost relations and assure Beijing's MFN status, China's clampdown on its tiny band of pro-democracy dissidents could only harm ties, McGregor said.
""Our plan for next year is to try to get permanent MFN so we won't have this battle every year, but if China is rounding up dissidents and throwing them in jail...It's disappointing because it's not going to help U.S.-China relations,"" he said.
Beijing should also take account of dissatisfaction among foreign businessmen and investors and take into account their need to make profits, he said.
""China is not at the peak of its goodwill with foreign investors right now... Goodwill matters,"" he said.
",34
"An estimated 50,000 to 100,000 people in China are infected with the HIV virus but many Chinese still know little about the deadly AIDS disease it can cause, health officials said on Wednesday.
China was at a critical stage in its fight against AIDS, but a campaign launched by Beijing's communist leadership to promote ""spiritual civilisation"" -- or puritan Marxism values -- would help cut the cases caused by unsafe sex and drug use, the Xinhua news agency said.
Officials said they also planned to strengthen publicity to promote condom use.
China's official total for the number of people infected with the Human Immunodeficiency Virus (HIV) remained around 3,400.-- up from 3,341 at the end of 1995.
But tens of thousands of other cases went uncounted, a Ministry of Public Health official said.
Experts estimated the actual number of HIV infections at between 50,000 and 100,000 people, she told Reuters by telephone.
China was continuing to clamp down on drug abuse, strengthen controls on blood for medical transfusions and boost anti-AIDS education and was currently holding a three-day national meeting on the disease in Beijing, another ministry official said.
Officials would launch a series of activities in December to promote awareness and knowledge of AIDS (Acquired Immune Deficiency Syndrome), he said.
""Many people do not even know how AIDS is transmitted,"" he said in a telephone interview.
The HIV virus is transmitted through direct contact with the body fluids of an infected person and can be spread through sexual contact, transfusions of infected blood or the use of dirty needles by drug addicts.
AIDS would not spread rapidly in China, although infection by all these routes was already occurring, the official Xinhua news agency quoted Professor Dai Zhicheng, vice president of the National Aids Committee, as saying.
""AIDS is spreading very fast in some neighbouring countries of China, and it is being transmitted through every possible method in our country,"" Dai said.
""China is at a critical point in its AIDS control, but some new measures will be adopted to slow down the spread of the disease,"" he said.
Xinhua said the official count of people infected with HIV was expected to approach 5,000 by the end of 1996, but doctors have warned widespread misdiagnosis amd insufficient reporting mean the real total may have long since passed 100,000.
Officials planned to set up a national AIDS control centre and improve monitoring networks. Regulations or laws on blood administration would also be published, Dai said.
Beijing's campaign to promote ethical progress, regarded by analysts as a bid to bolster the authority of the ruling Communist Party and boost socialist values weakened by economic reforms, would help in China's fight against AIDS, Dai said.
Overseas experience had shown that condoms were an effective way to prevent AIDS and China had launched an experimental campaign to promote condom use in Shanghai in 1994, said the health ministry official.
""The result was not very good,"" he said. ""Many people feel willing to use condoms if they are free... but not if they are sold.""
",34
"China on Sunday used a Long March 2D rocket to fire a scientific research satellite into orbit from a base in the remote northwestern province of Gansu, the Xinhua news agency said.
The successful launch of the remote-sensing satellite followed a string of setbacks for the Chinese space industry that have sent insurance premiums for commercial launches soaring.
""The satellite went smoothly into orbit and all instruments aboard are operating well,"" Xinhua said.
The launch of the satellite, which is designed to spend 15 days in orbit before returning to earth for retrieval, was the third successfully completed by the two-stage, liquid-fuelled Long March 2D rocket, the official agency said.
China's space industry, once much admired for its bargain prices and its strong track record of launch successes, has been plagued by problems in recent years.
In August, a domestic communications satellite launched aboard a Long March 3 rocket from Xichang in the southwestern province of Sichuan failed to reach its proper orbit.
In February, a Long March 3B carrying an Intelsat satellite veered wildly seconds after lift-off before exploding in mid-air near the Xichang space centre.
China said six people were killed, 57 injured and 80 homes destroyed in the incident. Video footage smuggled out of China by an Israeli scientist showed dozens of levelled buildings and suggested the casualties were higher.
Chinese officials said the loss of the rocket and its payload was caused by a failure of the ""inertia platform"" that operates the rocket's directional controls.
In January 1995, a Long March 2E rocket blew up, killing a family of six in a rain of debris and destroying the Hughes-built Apstar 2 satellite it was carrying.
The failures, although hardly exceptional in the high-risk satellite business, have sent insurance premiums for Chinese launches soaring, eroding China's price advantage over Western and Japanese competitors.
Several launch contracts with foreign companies were cancelled following the setbacks, partly because of concerns over delays due to China's launch backlog.
China says it still has a high success rate, with only a handful of the 43 launches carried out by its Long March rocket series going wrong, and officials said this month they had tightened safety measures to prevent further disasters.
Launch vehicles would now self-destruct in the case of failure and officials would ensure people living nearby are evacuated before each launch.
In July, China took a step towards restoration its reputation for reliability when it successfully launched the Apstar 1A satellite.
",34
"After four years of Sino-U.S. ties laced with near-miss trade wars, rhetorical broadsides and diplomatic sparring over human rights, Beijing is hoping for a new post-election approach from Washington.
Bill Clinton's electoral triumph on Tuesday may mean no change of occupant in the White House, but Beijing is hoping for a second-term transformation of the Democratic president's policy on China, diplomats and analysts said on Thursday.
""After this election (Clinton) doesn't need to worry about attracting votes,"" said Tong Tianqi, a international relations researcher at an institute under the State Council, or cabinet.
""We hope he will take a practical approach... it's possible he will change his approach,"" Tong said.
Relations between Beijing and Washington have been badly strained for years by disputes over trade, human rights, arms proliferation and Taiwan, but both sides say ties have warmed recently after a series of high-level meetings.
Beijing's hopes for change in Clinton's China policy are the flip side of the desire for stability in the fragile Sino-U.S. relationship that made Chinese academics and officials welcome his victory as the return of a devil they knew.
""The most important thing for us is stability in U.S. policy,"" said an official of the Ministry of Foreign Trade and Economic Cooperation.
After four years in office Clinton was a familar face to a Beijing leadership that preferred to deal with statesmen it knew, and the U.S. president's understanding of China had also grown, the analysts said.
Chinese officials and state media have spotlighted what they call U.S. obstruction to Beijing's long-coveted accession to the World Trade Organisation (WTO) as a key area of dispute.
China blames Washington for blocking its entry to the global trade body on favourable terms as a developing country, while U.S. officials say Beijing must do more to open its markets.
Chinese hopes for change in Washington's approach could be borne out as U.S. electoral passions faded, but deep-rooted differences meant the path of Sino-U.S. ties over the next four years was unlikely to run smooth, diplomats in Beijing said.
""The Chinese will be thinking: is this the point at which the Americans might kick in with some new set of suggestions on either WTO or human rights cooperation, or both,"" said a Western diplomat. ""I wouldn't be suprised if there were some.""
Clinton's meeting with Chinese president Jiang Zemin in the Philippines later this month on the fringes of a regional economic forum would be a key opportunity to bolster ties, diplomats said.
The presidential face-to-face will be the latest in a string of high-level contacts that officials on both sides hope will set relations on a more stable footing and lead to an eventual exchange of state visits.
While there appeared to be few immediate threats to the new Sino-U.S. cordiality, issues such as copyright piracy in China -- which has twice led both sides to the brink of a trade war -- and Taiwan would continue to dog ties, the diplomats said.
China's growing U.S. trade surplus would continue to raise hackles in Washington, while Beijing's human rights record would remain a major stumbling block -- despite the release on medical parole of dissident Chen Ziming on Wednesday, they said.
Chen's release came just seven days after a Beijing court jailed former student leader Wang Dan for 11 years following a brief trial that prompted U.S. expressions of deep concern.
Wang's sentence was just the latest blow to China's tiny band of pro-democracy dissidents, most of whom were already in exile or serving long sentences in detention or jail.
Washington was tired of scuffling with Beijing over its treatment of dissidents, but China would need to make bigger concessions if it hoped to bring an end to the annual threat of U.S.-backed censure at the U.N. Human Rights Commission in Geneva, said a diplomat.
""I don't think that (Chen's release) would be effective,"" he said. ""It's pretty small compared with what went before.""
",34
"China's economy grew by 9.6 percent in the first nine months of 1996, but many urban family incomes are lagging behind, the State Statistical Bureau said on Wednesday.
Chinese industrial output was up, farmers were on their way to a year of record grain harvests and the scourge of inflation had been tamed to a year-on-year 6.6 percent in the first three quarters, bureau spokesman Ye Zhen said.
""The development of the macro-economy overall appears good,"" Ye told a news conference.
Gross domestic product was 4.5675 trillion yuan ($550.3 billion) between January and September, up 9.6 percent from the same period of 1995, Ye said, but gave no details. China's GDP grew by 10.2 percent in 1995.
The average income for urban Chinese rose to 3,249 yuan ($391) between January and September, an actual year-on-year increase of 3.4 percent, he said.
But the incomes of many urban residents are lagging behind as China's economy booms, Ye said.
A survey of 35 major cities and towns had revealed that the incomes per family member of around 40 percent of households had declined, he said.
Some of the decline was the ordinary result of the birth of children or the retirement of ageing family members, he said.
""The second kind of situation is when the level of income falls or the level of income growth cannot keep up with inflation,"" Ye said, adding such problems were the cause of the income fall in about half the families surveyed.
""The difficulties of some low-income urban families have been aggravated,"" he said.
He gave no explanation of the decline in incomes suffered by some urban wage-earners, but many surplus workers in China's huge and largely stagnant state sector have been sent home on minimum salaries.
Although such workers are not considered unemployed and the state sector is highly reluctant to fire employees, China's urban unemployment rate hit 2.98 percent at the end of September, Ye said.
The number of unemployed in Chinese cities reached 5.3 million, he said, but gave no comparative figures.
China's urban jobless rate was 2.9 percent by end-June, the same as the official figure for 1995, but state newspapers have warned that unemployment, a major bugbear for Beijing's communist leadership, could shoot up to 7.4 percent by 2000.
Optimism over the economy and the success of a continuing policy of tight credit aimed at curbing inflation and reining in runaway growth has been boosted by predictions that 1996 will be a bumper year for China's hundreds of millions of farmers.
Government policies had encouraged farmers to increase the area of land under grain, and grain output this year was forecast to exceed 480 million tonnes, beating the 1995 record harvest by about 15 million tonnes, Ye said.
China had set a target of 465 million tonnes for 1996.
Other figures released by the Statistical Bureau also painted a positive picture of an economy that Beijing says is on target for a ""soft landing"" after years of breakneck growth.
Year-on-year retail price inflation in the first three quarters was curbed to 6.6 percent, down 10 percentage points compared to the same period of 1995, Ye said.
The Xinhua news agency on Wednesday quoted economic tsar Zhu Rongji as forecasting inflation would be below 6.5 percent in 1996 and as saying it would be possible to cut it to six percent next year.
Retail inflation hit 21.8 percent in 1994.
",34
"China congratulated U.S. President Bill Clinton on Wednesday for his election triumph, saying the victory presented a good opportunity to improve ties between Washington and Beijing.
Clinton's sweeping win over Republican rival Bob Dole is good news for a Beijing leadership which prefers to deal with familiar statesmen, Chinese academics and officials said.
""We wish to congratulate President Clinton on his re-election,"" Foreign Ministry spokesman Cui Tiankai said.
""Now, a good opportunity has presented itself for improving and expanding Sino-U.S. relations,"" Cui told reporters. ""Some positive progress has been made in bilateral relations, with a somewhat improved atmosphere.""
China was ready to work with Washington for further progress on the basis of past Sino-U.S. joint agreements, he said.
While Clinton had presided over four years of Sino-U.S. ties often strained by disputes over trade, human rights, arms proliferation and Taiwan, his re-election could help stabilise relations, Chinese academics said.
""The result should be a good thing for Sino-U.S. ties. After four years Clinton now understands China to a certain extent and there is some stability in his China policy,"" said one academic at a U.S.-funded election party in Beijing.
""Another four years should allow some improvement in relations,"" said the specialist in international strategic studies, who declined to be identified.
""Clinton is an opponent we know well,"" said a government official at the reception, where invited U.S. and Chinese guests watched electoral results emerge over satellite television and real time Internet links.
""It's like basketball: if the Chicago Bulls come to play the Beijing team and the two sides have never met before, it won't be a good game,"" said the official who declined to be named.
""Neither side knows what the other can do,"" he said.
Washington and Beijing both say ties have thawed since the two sides narrowly averted a trade war over copyright piracy and exchanged diplomatic fire over Taiwan earlier this year.
Cautious optimism was the tone taken by many of the Chinese specialists and officials at the reception in a Beijing hotel, where cola, hamburgers and live election coverage were served up by U.S. businesses keen to boost cross-Pacific understanding.
""The Chinese leaders... like to deal with U.S. presidents whom they know personally,"" said Professor Xu Cunyao of the Ministry of Culture's Institute for Administrators' Education.
""I think the Chinese leaders will be very happy with this result,"" he said.
Despite the diplomatic spats of recent years, Sino-U.S. economic and trade ties had grown relatively fast during Clinton's tenure, Gu Yuanyang of the Chinese Academy of Social Sciences said in a telephone interview.
""We are all satisfied with this result because it will have a certain positive effect on the recovery and development of Sino-Chinese relations,"" said Gu, director of the academy's Institute of World Economics and Politics.
Relations would not improve automatically, he said, adding Clinton should push for high-level contacts, ensure China's trade status, smooth Beijing's entry to the World Trade Organisation and refrain from creating difficulties on Taiwan.
",34
"A China-wide computer network launched by a subsidiary of the official news agency Xinhua on Monday will take Chinese businesses online and supply them with news and economic information, company officials said.
The China Wide Web (CWW) created by China Internet Corp would provide Chinese customers with online services in their own language and would give overseas subscribers a window on to the Chinese business world, company chairman Ma Yunsheng said.
""Our objective is to increase understanding of China,"" China Internet chief technology officer Chung-Kiu Wong told a news conference in Beijing to announce the service's inauguration.
CWW would use technology developed for the World Wide Web, part of the global Internet computer network, to supply news from international economic information providers such as Reuters Holdings Ltd and Bloomberg, Wong said.
China Internet was a Hong Kong-registered company majority-owned by China's official Xinhua news agency, Ma said. He declined to give details of the other investors in the firm.
In January, Xinhua was appointed the government regulator for foreign suppliers of economic information in China, a role that some analysts say clashes with its involvement in enterprises that supply financial and business data.
Xinhua's regulatory role and China Internet's quasi-monopoly position in the market would help boost the computer company's already bright prospects, said Harry Edelson of Edelson Technology Partners, which has a stake in China Internet.
Unlike the open-access Internet, CWW was modelled on internal company networks or ""intranets"", Edelson said.
""There will be a lot of real-time information available,"" he said. ""I think there's going to be very fast growth from a zero start.""
China Internet would enjoy free use of Xinhua's communications network and already had access agreements with the powerful Minstry of Posts and Telecommunications, he said.
Ma said domestic economic information would also be available through Xinhua news services and databases. He declined to say how many clients were expected to subscribe.
The Internet is viewed by some Chinese officials as a haven for pornography and political dissent but CWW would likely be a politically correct alternative.
""CWW should reflect Chinese culture,"" technology officer Wong said, without giving details.
CWW would build bilingual online home pages for domestic firms and foreign companies in China and would work to boost foreign understanding of the Chinese market, he said.
""If a U.S. company wants to show its wares on the Chinese Internet, we will translate it so the Chinese can understand... and vice versa,"" Edelson said.
",34
"China on Tuesday accused Japan of taking an irresponsible approach to a bitter sovereignty dispute over a group of uninhabited East China Sea islands, saying Tokyo must take action to avoid further damaging ties.
A festering row over the islands, known in China as the Diaoyus and in Japan as the Senkakus, has flared in recent months after Japanese rightwingers moved to buttress Tokyo's claim by building a lighthouse on one of the group.
""The Japanese government has taken very irresponsible actions, particularly by encouraging illegal landings on the Diaoyu islands by rightwing groups, hurting Sino-Japanese relations,"" Chinese Foreign Ministry spokesman Shen Guofang said.
Tokyo should take action to prevent further damage to ties, Shen told a news briefing in Beijing.
Tension over the potentially resource-rich islands soared on Monday when Hong Kong and Taiwan activists pierced a Japanese cordon and planted Chinese and Taiwan flags on one of the islets, claimed by Tokyo and by both Beijing and its arch-rival Taipei.
The brief landings by a handful of the around 300 Hong Kong and Taiwan protesters aboard a 50-boat flotilla were the first time activists had managed to break Japan's maritime blockade.
An earlier attempt ended in failure when Hong Kong activist David Chan drowned after leaping into stormy waters to protest Tokyo's control of the group. A Japanese coastguard medical team failed to revive Chan but saved the life of a fellow protester.
Japan has lamented what it calls the illegal landings and has not ruled out arresting future landing parties. A foreign ministry spokesman said on Tuesday that Tokyo had asked China and Taiwan to prevent further attempts to land on the islands.
Chinese spokesman Shen said Japan was responsible for the revival of the row over ownership of the islands, which Beijing says it has claimed for centuries.
Tokyo's claim dates to 1895 when it defeated imperial China in a war and seized control of a number of Chinese territories.
""The Japanese government didn't take any action to stop the damaging of Sino-Japanese ties by rightwing groups who offended against Chinese sovereignty,"" Shen said. ""This has aroused the strong anger of the Chinese people.
""The will of the people cannot be bullied,"" he said.
Gains by Japanese rightwing forces would force victims of past Japanese aggression in Asia to question the future role Tokyo would play in the region, he said.
Outrage over the Japanese rightwingers' construction of the makeshift lighthouse on the islands has united nationalist sentiment in China, political rival Taiwan and the British colony of Hong Kong, which reverts to Beijing rule next year.
Shen's accusations of Japanese irresponsibility represented some of China's strongest diplomatic language yet in a dispute that both Beijing and Tokyo have sought to put behind them.
Analysts say China has been forced to walk a diplomatic fine line between retaining its nationalist credentials and damaging ties with a vital economic partner.
Shen said China would strengthen security to protect its citizens after Beijing's de facto embassy in Hong Kong reported receiving a threatening letter from Japanese righwingers.
""The Chinese side will take action at home to strengthen our security,"" he said, adding that he hoped other ""relevant"" countries would also protect Chinese citizens.
",34
"Motorola Inc is appealing to Chinese authorities over taxes on capital imports that would boost the cost of a $500 million semiconductor plant being built in the city of Tianjin, a company official said on Friday.
Construction of the plant in Xiqing district, a half an hour's drive from the northern port city's centre, was on schedule and production was expected to begin in the first quarter of 1998, said the official, who declined to be identified.
The U.S. high-technology giant was appealing to China's State Council, or cabinet, over taxes on imports of vital equipment for the semiconductor plant, or fab, he said.
Beijing on April 1 abolished privileges for foreign-funded ventures that had allowed them to import machinery and other capital equipment free of tax. Investors say the move has dramatically increased the cost of many projects.
""There is an appeal committee within the State Council and we are appealing for some tax exemption (for the Xiqing plant),"" the Motorola official said.
He declined to say if the company was optimistic of being granted exemptions, or when a decision was expected.  
An official of the State Council's information office contacted by telephone said he was unaware of an appeal by Motorola over taxes on imports, adding that such matters were the concern of the Ministry of Foreign Trade and Economic Cooperation.
Work on the Xiqing project had already begun, the Motorola official said.
""We have already broken ground...Now we are erecting the buildings,"" he said. ""We are looking at 1998, first quarter (to begin production).""
Initial investment in the venture was expected to be around $500 million, but the cost of such semiconductor plants could easily rise to $1.0 billion, he said but gave no details.
Motorola has been quoted as saying the Xiqing plant will produce 180,000 eight-inch sub-micron wafers a year, making it a major addition to a Chinese semiconductor industry that has long lagged far behind its Asian neighbours.
Motorola, which has vowed to invest $1.2 billion in China, Taiwan and Hong Kong between 1988 and 2000, generated sales revenues in China and Hong Kong of $3.2 billion last year, the official said.  
The company's China plants were considered strategic investments, he said, adding that the local content rate of their products was expected to rise to around 55 percent by 2000 from around 45 percent currently.
Motorola's exports from its China operations accounted for about 30 percent of production value, less than expected because of the breakneck expansion of the domestic market, he said.
""The market here, especially the telecom market, just exploded,"" he said.
State media has quoted Motorola executives as saying the number of Chinese using pagers is likely to rise by around 43 percent this year to more than 40 million people, making China the biggest user of pagers in the world.
Motorola currently supplies more than 50 percent of the domestic pager market, the official said, but declined to give details.
In the competitive mobile phone market -- where Motorola is seen as enjoying less success -- the U.S. firm was hoping development of Code Division Multiple Access (CDMA) cellular technology would help boost market share, he said but gave no details.
",34
"Officials of the six nations of the Mekong river region arrived in southwestern China on Tuesday for a ministerial conference intended to boost cooperation in an area long hobbled by distrust and war.
The sixth meeting of the Greater Mekong Sub-region (GMS) programme would begin in Kunming city on Wednesday, with ministers from Thailand, Laos, Cambodia, Vietnam, Burma and China scheduled to review billions of dollars worth of regional infrastructure projects, officials at the conference said.
Ministers would consider an environmental action plan to curb deforestation on the upper reaches of the Mekong which borders or flows through all six nations, said Norida Morita of the Asian Development Bank (ADB).
The meeting would push forward the GMS programme from planning projects to implementation, Morita told reporters.
""The main thrust of the Greater Mekong activities is to link the six countries with a transport network,"" he said.
A proposed $490 million road to connect Bangkok with Phnom Penh and Ho Chi Minh city in southern Vietnam was one project expected to gain ministerial approval, officials said.
Other joint projects being considered include a $1.8 to $2.1 billion China to Southeast Asia railway and construction of a telecommunications and power transmission network.
Plans to boost infrastructure in the underdeveloped region were only one part of a programme that had helped speed the transformation of the area from wartorn backwater to an attractive investment destination, said GMS consultant David Husband of Global Economics Ltd.
China and Vietnam border troops and naval forces clashed repeatedly in the 1980s after a bloody border conflict in 1959.
Vietnamese troops fought Khmer Rouge guerrillas in Cambodia through the late 1980s, while drug lords and soldiers sparred along the Thai-Burmese border.
""The projects are the tangible results, but sub-regional cooperation is as much as anything about trust and goodwill,"" Husband told Reuters.
""This very coming together is testimony to the world that something is happening here,"" he said. ""It has helped draw attention to the fact that there is peace in the region.""
GMS supporters hope that this trust forged through shared economic and environmental projects will help build stability in the Mekong region, home to almost 230 million people.
Relations between the six nations have seldom been better, despite the Cambodian government's continuing war against the Khmer Rouge and the political divide between Burma's military junta and the country's democratic activists.
A rush of new interest in investment projects in the area was making the coordination of development a key issue at the Kunming conference, ADB's Morita said.
New development initiatives from the Association of Southeast Asian Nations and other countries were welcome, but should be organised to complement the development foundation built by the GMS programme and the ADB, he said.
",34
"The birth in 1970 of what would become one of China's top computer firms could hardly have been less auspicious.
Communist cultural revolutionaries roamed the land, schools and universities were in ferment and the computing breakthroughs of the West were locked far away on the other side of China's ideologically-sealed borders.
But for the Nantian Electronic Information Group Corp. the accidental timing of its birth was as much an opportunity as a stumbling block, senior company officials say.
The group, then known as the Yunnan Electronic Equipment Factory, was cradled in the white heat of the late Chairman Mao Zedong's ultra-leftist 1966-1976 Cultural Revolution but found its fortune in the economic reforms that followed Mao's death.
Nantian now makes healthy profits supplying computer systems to state banks struggling to adapt to the booming market economy built by Mao's successors, said group president Zheng Zhigang.
""Nantian's development has been pretty fast,"" Zheng said in an interview at Nantian's head office in Kunming city, capital of southwestern China's Yunnan province.
Profits in 1995 hit 42.07 million yuan ($5.07 million) on sales that had soared to 927 million yuan from 510 million the year before and from just 100 million yuan in 1990, he said.
Nantian hoped to boost revenues to 1.2 billion yuan in 1996, he said, crediting nimble market footwork and early international cooperation for paving the group's road to national success from a remote frontier province.
""We needed something special to succeed from Kunming,"" he said. ""In 1974 we started to make computers... Even though that was the time of the Cultural Revolution and China was fairly chaotic, we still felt (computers) were important.""
Nantian began building contacts abroad in 1978, just two years after Mao's death and in the earliest days of China's opening to the outside world.
The experience helped to inform a crucial choice in the mid-1980s, when the firm decided to narrow its market focus.
""In 1985, we used our expertise to analyse the Chinese market... and we chose banks,"" Zheng said. ""We chose an excellent market target.""
Computerisation had become essential for China's staid state banks, which for decades had had little need to hustle for business and were still ill-equipped to supply the financial needs of the new market economy.
It was also a market sector in which little competition existed and where there was a strong demand for computer solutions that would match foreign technology with local knowledge, Zheng said.
Nantian had established cooperation with Italian technology group Olivetti and Unisys Corp of the United States in the 1980s, and in 1993 started working with U.S. computer firm Hewlett Packard Co, he said.
""We have a joint venture with Silicon Graphics to sell and service their graphic workstation in China,"" he said.
A vital ingredient in Nantian's growth recipe was the company's ability to focus tightly on its chosen market sector.
""Our main market is state banks and other national financial institutions,"" said Zheng.
""We develop the software with our partners. For the hardware we integrate different companies' equipment with our own for a total solution,"" said Special Project Manager Chen Deying.
Nantian had established a firm presence in the capital Beijing and in China's financial hotspots of Shanghai, southern Guangzhou and booming Shenzhen near the border with Hong Kong, company officials said.
Dozens of joint-venture subsidiaries in major cities gave Nantian a local presence in its key markets, but the state-owned group remained headquartered in scenic Kunming, they said.
Comprehensive support to ease the difficult transition from pen-pushing to terminal-tapping was essential in the financial world, where customers could become hugely reliant on their new technology, Zheng said.
""We established a support system for computerisation,"" he said. ""This is very important for banks, which need good after-sales service.""
Nantian was reported to be keen to issue shares on the Hong Kong stock exchange as early as 1994, but Zheng said the group still had no firm plans and said subsidiaries could float first.
""We have considered (listing) and made some preparations. We will need investment to develop,"" he said. ""We don't have a fixed plan, we will analyse our subsidiaries and choose some of the better ones to consider listing.""
No matter how the group found the funding it needed, it planned to remain firmly in the market niche carved in the nation's banking system, company officials said.
""We already have 10 years of history with the banks,"" said Zheng. ""We feel that bank computerisation has just started.""
",34
"China issued a spirited defence of embattled U.N. Secretary-General Boutros Boutros-Ghali on Friday, accusing the United States of trying to use financial blackmail to stop him from serving a second term.
Boutros-Ghali had helped push forward world development during his five-year term as U.N. chief and his re-election should have been assured, said the People's Daily newspaper, official mouthpiece of China's communist leadership.
The United States should reconsider its lonely stance as the only nation on the U.N.'s 15-member Security Council to oppose the Egyptian's re-election, the newspaper said.
Washington on Tuesday vetoed Boutros-Ghali's candidacy, accusing him of being too slow in pushing U.N. reform and saying his candidacy would further delay U.S. payment of $1.4 billion in membership dues owed to the world body.
""Lumping together Boutros-Ghali's reappointment and the payment of membership dues can only make people feel that someone is trying to blackmail the United Nations,"" People's Daily said in a signed editorial.
All U.N. members, whatever their internal politics, were responsible for paying dues and U.S. opposition to Boutros-Ghali was unjustified, it said in the latest of a series of Chinese affirmations of support for the U.N. chief.
""The United States has absolutely not raised any decent grounds for opposing Boutros-Ghali's renewal, but has just criticised him for being weak on U.N. reform,"" it said.
""You just have to respect facts to be able to see that this kind of criticism of inadequacy is not persuasive.""
Boutros-Ghali's opposition to U.S. attempts to use the United Nations as a cover for policies of hegemony and power politics was a key factor behind Washington's opposition to his re-election, said the Yangcheng Daily newspaper.
The U.S. Republican-dominated Congress is delaying payment of the $1.4 billion U.S. debt to the United Nations, a policy helping to bankrupt the cash-strapped world body.
People's Daily said Boutros-Ghali had worked to push U.N. reform, had paid great attention to the cause of world development and had made a special contribution to development in Africa during his tenure, which ends on December 31.
Diplomats say African nations are currently driving the campaign for Boutros-Ghali's re-election, aiming to keep his candidacy alive as long as possible in the hope of a compromise solution or a change in the U.S. stance.
Boutros-Ghali said on Thursday that he did not wish to see his name submitted to the Security Council for another vote but also that he was not withdrawing from the race.
Washington's reluctance to propose alternatives to Boutros-Ghali was a sign of U.S. insecurity and its knowledge that any candidate it chose would be rejected by other nations, the People's Daily said.
""If the African nations continue to support Boutros-Ghali, the United States will face a difficult decision,"" it said.
""Many people hope the United States that cast the opposing vote will consider its position anew and solve this problem in an appropriate way.
",34
"Changing Chinese tastes and a clutch of new factories have paved the way for spectacular growth in China for Swiss food maker Nestle SA, senior company officials said on Thursday.
Nestle's core portfolio of milk products, instant coffee, chocolate and sugar-based confectionary and prepared foods was all being produced in China, with a new plant producing mineral water scheduled to open next year, they said.
""We expect Nestle's total investment in China to reach five billion yuan ($602 million) by the year 2000,"" Nestle chairman Helmut Maucher told a news conference in Beijing.
Sales in China would grow exponentially, he said.
""We will double every two years, there is no doubt about it,"" he said.
Nestle had so far completed nine of 11 projects planned in its initial 2.8 billion yuan investment in China and expected sales in China, not including Hong Kong, of 1.5 billion yuan in 1996, company officials said.
Maucher said there were no immediate plans to open new factories. Nestle's focus in the short-term in China was on expanding established plants, but up to four new production projects could be established by 2000.
The changing tastes of Chinese consumers meant there was great scope for sales growth, particularly in the instant coffee market where Nestle's Nescafe brand already had a 75 percent share, officials said.
""It's clear the younger generation will increasingly drink coffee,"" said Theo Klauser, chief executive of Nestle (China) Investment Services Ltd, which supplies management services for Nestle's  Chinese joint ventures.
While Maucher was confident sales would double every two years, other Nescafe officials were more cautious.
""I think every two years is a very ambitious target,"" said Klauser, adding that a three-year timescale might be more achievable.
Although Nestle set up shop ahead of many of its multinational rivals in the 1980s, the company had lagged in breaking into China's rapidly growing ice cream market, a company official said.
Joint venture ice cream producers had already established a strong presence on the streets of Beijing and other northern Chinese cities, making it difficult for Nestle to catch up in the short term, said the official who declined to be identified.
($1 = 8.3 yuan)
",34
"China said on Thursday its jailing of leading dissident Wang Dan for 11 years was not a human rights issue but an ordinary legal matter that would not hurt Beijing's sensitive ties with the United States.
A Chinese court on Wednesday took less than four hours to condemn former student leader Wang to 11 years in prison for plotting against the government, in a verdict that prompted quick expressions of deep concern from Washington.
Chinese Foreign Ministry spokesman Shen Guofang said Wang's trial and conviction were entirely legal matters.
""The trial of Wang Dan is entirely a Chinese legal procedure carried out in accordance with the law,"" he said. ""It has no connection with human rights or other issues.""
Shen said the verdict would not cause further damage to cross-Pacific relations that have long been sorely tested by disputes over Beijing's human rights record and other issues.
""The case of Wang Dan has nothing to do with the issue of human rights,"" Shen told a news briefing in Beijing.
""I don't think the case of Wang Dan will have any effect on Sino-U.S. relations,"" he said.
The Beijing Number One Intermediate People's Court sentenced Wang, 27, to 11 years in prison and stripped him of his political rights for a further two years, in a trial hailed by Chinese state media as a model of fairness.
International human right activists rushed to condemn the verdict, while European governments expressed their dismay at the severity of the sentence imposed on the former leader of the ill-fated 1989 pro-democracy demonstrations in Beijing.
Wang, who once promoted free debate in the campus of Beijing University, had already served four years in prison for his role in the 1989 protests that were crushed by the army with heavy loss of life.
Washington officials greeted the verdict with expressions of concern and with strong praise for the jailed dissident, hailing him as one of China's premier voices for human rights.
""We are deeply concerned by the sentence that has been given to Wang Dan,"" White House spokesman Mike McCurry said on Wednesday.
""We urge the Chinese authorities to show clemency to this courageous man, whose championing of democratic values has gained him deserved international recognition,"" said U.S. State Department spokesman Nicholas Burns.
Sino-U.S. ties have long been strained by disputes over human rights, trade, copyright theft in China and Taiwan, but both sides say tensions have eased in recent months after a series of high-level meetings.
",34
"The family of jailed Chinese dissident Wei Jingsheng on Friday welcomed a decision by the European Parliament to award him a prize for freedom of thought, but Beijing slammed the honour as rude interference.
The choice of Wei, who has spent most of the last two decades in jail, as 1996 Sakharov prize laureate would give him encouragement, his family said.
""I feel very happy... we feel grateful to the European Parliament for its support,"" Wei's brother Wei Xiaotao told Reuters in a telephone interview.
The Chinese foreign ministry said the award served as encouragement for action against the Chinese government that had already damaged Sino-European ties.
""It is a rude interference in China's internal affairs and judicial jurisdiction,"" the ministry said. ""We express great regret and anger at this decision of the European Parliament.""
Wei, regarded by many as the father of Chinese pro-democracy dissent and a nominee for this year's Nobel Peace Prize, was jailed for 15 years in 1979 and had been paroled for less than a year before being detained again in April 1994.
Last December he was sentenced to a further 14 years in prison for subversion and for funding democracy activists.
The European Parliament announced on Thursday that Wei had won the 15,000 Ecu ($19,000) Sakharov prize for freedom of thought, to be awarded at a ceremony in Strasbourg in December.
Former winnners of the prize, created to honour the Soviet dissident Andrei Sakharov, include South African President Nelson Mandela and Burmese opposition leader Aung San Suu Kyi.
The award put further strain on ties between the parliament and Beijing, which on Thursday angrily denounced a recent meeting between parliamentary officials and the Dalai Lama, China's exiled arch-rival for Tibetan loyalties.
Wei was a criminal convicted of revealing state secrets and threatening state security who had broken the terms of his release. No country had the right to interfere in his case, the foreign ministry said.
The award had already harmed ties with Europe, it said.
Wei Xiaotao, who recently met his brother in jail at the Nanpu saltworks in the northern province of Hebei, said Wei would have to wait until next month to learn of the award.
""He will have to wait until our next meeting to hear about this prize... that place is very closed to news,"" Wei Xiaotao said. ""There's no chance that anyone there will here about it and tell him.""
China has in recent months cracked down hard on the tiny band of remaining dissidents who have not yet fled into exile or been imprisoned.
Leading critic Liu Xiaobo this month was sent to a labour camp for three years after he co-authored a petition calling for the impeachment of Communist Party chief Jiang Zemin.
Former student leader Wang Dan, who spent four years in jail for his role in 1989 pro-democracy demonstrations in Beijing that were bloodily crushed by the army, is currently awaiting trial in Beijing on the capital charge of subversion.
The award of the Sakharov prize to Wei was unlikely to change Beijing's stance on dissent, his brother said. ""I don't think it will have a big influence,"" he said.
Wei's family had no plans to use the prize money that came with the Sakharov prize, Wei Xiaotao said.
""It's his money... In the future, when he comes out, he can use it,"" he said.
(1 Ecu=$1.2)
",34
"China said on Thursday it could produce more than enough grain to feed its growing population despite frequent natural disasters, rapid industrialisation, long-term droughts and a chronic lack of arable land.
In a draft ""white paper"" released to allay foreign fears that future Chinese grain shortages could overwhelm world markets, agricultural officials said the nation could feed its people for decades to come.
""Instead of forming a threat to the world's grain supply, China will make ever greater contributions to it,"" it said. ""The Chinese government and people have the ability to solve the problem of grain supply by relying on their own efforts.""
Some Western analysts have said China's rapidly expanding economy is swelling the nation's appetite for grain for food and feedstuffs. That in turn could force Beijing to make huge purchases on an international market already stressed by rising global demand.
The draft white paper, issued by the Ministry of Agriculture, dismissed such fears as a repeat of Western scepticism towards China's agriculture that greeted the nation's victorious communist revolutionaries in 1949.
""Some Westerners predicted that the Chinese government would not be able to solve the problem of feeding the country's population,"" the document said.
""History has already shown the futility of such a prediction,"" it said in one of many proud references to China's achievements in feeding 22 percent of the world's population with only about seven percent of its cultivated land.
China could raise output by protecting existing farmland, raising efficiency, improving irrigation, changing consumption patterns and reclaiming wasteland, it said.
By 2000, the Chinese population was expected to reach 1.3 billion, pushing total demand for grain to 500 million tonnes.
By the time the population peaked at 1.6 billion people in 2030, total demand was expected to be around 640 million tonnes, but Beijing was confident output would be able to keep pace even in the face of diminishing returns from the land.
""China can achieve its desired total grain output target if the annual average increase rate of per-unit area yield is one percent from 1996 to 2010 and 0.7 percent from 2011 to 2030,"" the white paper said, adding much bigger increases were likely.
For the next few decades, China planned to reclaim more than 300,000 hectares (741,000 acres) of wasteland each year to make up for land lost to industrialisation.
The proportion of inland and offshore waters used for aquaculture would be increased and the area of irrigated land would be raised to 53.30 million hectares (131 million acres) by 2000 from 49.33 million hectares (122 million acres), it said.
At least 10 percent of China's grain, more than 45 million tonnes last year, was lost annually between planting and consumption. Improved storage and shipping could help make savings of 20 million tonnes a year possible, it said.
China has long been eager to dismiss foreign fears that its demand for grain will spiral out of control, but Beijing has so far failed to convince its most vocal doubters.
China did not have enough land to sustain its economic growth rate and would find it hard to boost grain output, Lester Brown of the U.S.-based Worldwatch Institute said last month.
But the white paper said Beijing would turn to the international market only to make up for local shortages or natural disasters and to adjust the types of grain available.
""If China were to import a great deal of grain from other countries, the international grain market would be under severe pressure, and poorer countries would be unable to obtain enough supplies of cheap grain from it,"" the document said.
",34
"Chinese leaders Wednesday denounced Beijing's exclusion from the World Trade Organisation as unjust, saying the giant Communist nation had made great strides in opening its markets to trade and investment.
Protectionism or trade sanctions should not be policy tools in a world increasingly dependent on international trade, Minister for Economic Restructuring Li Tieying said at a meeting of business executives.
""It is unjust to exclude China from the World Trade Organisation,"" Li told a business summit in Beijing.
""A World Trade Organisation without China is incomplete,"" said Li, who is also a member of the Communist Party's elite Politburo. ""We hope this situation will quickly change.""
Chinese officials say Beijing should be allowed to join the WTO on lenient terms as a developing country. They blame the United States for blocking their accession with tough demands for more open markets.
Disagreement over the terms of Beijing's admission to the WTO, which Washington says should take into account China's huge and fast-growing economic clout, is just one of a number of disputes that have long troubled Sino-U.S. ties.
Rows over copyright piracy, arms proliferation, human rights and Taiwan have all strained relations in recent years, with Washington's annual review of China's Most Favoured Nation trade status triggering some of the bitterest rhetoric.
China has urged Washington to make MFN status permanent, and Li warned Washington that the United States would lose if MFN was revoked.
""If the United States cancels China's Most Favoured Nation treatment, and imported the same goods from other countries, then U.S. consumers would have to spend $14 billion more every year,"" he quoted World Bank statistics as showing.
Beijing and Washington earlier this year went to the brink of a trade war after Washington announced punitive sanctions over widespread copyright piracy in China.
In a pointed reference to such disputes, Li said tough trade tactics should not be overused, but did not mention the United States by name.
""The new international economic order ... should not have any kind of trade protectionism or discriminatory policies and the big stick of sanctions should certainly not be wielded at every opportunity,"" he said.
China's growing trade surplus with the United States is also widely seen as a barrier to warmer Sino-U.S. relations.
U.S. embassy officials said Wednesday that the top U.S. textile negotiator had postponed her trip to China for talks in the face of U.S. sanctions on Chinese textiles and a threat by Beijing to retaliate.
Chinese exports to the United States in the first 10 months had increased by 5.5 percent to $21.3 billion, official Chinese newspapers said Wednesday. They gave no details for imports.
",34
"A China-selected committee on Saturday chose 340 members of the group which will select the first chief executive to lead post-colonial Hong Kong, and said the final appointment would be made in early December.
The Hong Kong Preparatory Committee, a group hand-picked by Beijing to chart the British colony's return to Chinese rule on July 1 next year, chose 340 members of the Selection Committee from a list dominated by pro-China politicians.
The 400-member Selection Committee would make the final selection of the first post-colonial chief executive in a meeting on December 11 in Hong Kong, officials of China's Hong Kong and Macau Affairs Office said.
""The 400 members of the Selection Committee are shouldering a great historic mission, I hope they willl not let down the trust of the nation and will not let down the hopes of six million Hong Kong people,"" said Chinese Vice-Premier Qian Qichen.
The committee should chose a leader capable of maintaining Hong Kong's stability and prosperity, Qian said in a speech to the Preparatory Committee in Beijing's cavernous Great Hall of the People.
The Preparatory Committee meeting chose the 340 Selection Committe members from a prepared list of 409 candidates made up largely of prominent Hong Kong politicians, well-known businessmen and community leaders.
""I think this is a very broad-based representative committee,"" Chen Ziying of the Hong Kong and Macau Affairs Office, when asked why few democrats were in the group.
Preparatory Committee members select 340 of the 400 members. Of the remaining 60 seats, 26 automatically go to 26 delegates on China's National People's Congress, or parliament.
The other 34 members will be appointed by local deputies of the Chinese People's Political Consultative Conference.
The Selection Committee will also choose a provisional legislature to replace the current elected Legislative Council on July 1, 1997.
Anxiety has grown in Hong Kong in recent months over how much political freedom China will allow after it regains control of a colony run by Britain for more than 150 years.
Democratic campaigners in the colony have accused Beijing of using undemocratic methods to shape its future government and have condemned the scrapping of the existing legislature.
China this week ordered two Hong Kong democratic activists to leave the country after they tried to deliver a petition to officials that criticised the selection method and called for a reprieve of the legislature.
Businessmen Peter Woo and Tung Chee-hwa and retired judge Simon Li, who are front-runners in the contest to become Hong Kong's chief executive after the handover, are members of the Preparatory Committee.
Woo and Li voted in the Selection Committee election, while Tung -- regarded by many as China's favourite -- abstained.
Former Chief Justice Ti Liang Yang, another key candidate for the top job, is not a member of the Preparatory Committee.
",34
"A senior U.S. official on Wednesday praised Beijing's approach to international arms control but hinted at continuing concerns over the possible proliferation of Chinese nuclear and missile technology.
The rebirth of an arms control dialogue stalled by Sino-U.S. disagreements over Taiwan over the last year was a major step to bridging differences between Washington and Beijing, said John Holum, director of the U.S. Arms Control and Disarmament Agency.
""Chinese positions have evolved in a very constructive direction,"" Holum told a news conference in Beijing on the third day of a five-day visit to China.
""China genuinely has been playing a much more active and very constructive role in arms control negotiations,"" he said, citing Beijing's role in negotiations towards a global nuclear test ban and for a cut-off of production of nuclear fissile material.
Holum's meetings with Chinese officials are part of a series of high-level talks intended to buttress Sino-U.S. ties, chilled by a 1995 visit to the United States by Taiwan President Lee Teng-hui and by rows over copyright, trade and human rights.
Cross-Pacific relations hit a new low last March when China carried out missile tests and military exercises in the seas near Taiwan, which Beijing considers a rebel province, prompting Washington to send two aircraft carriers to the area.
A July visit to Beijing by U.S. national security adviser Anthony Lake was seen by analysts as a vital step to restoring some sense of stability to a vital diplomatic relationship.
The Sino-U.S. disputes had restricted talks on arms control and proliferation issues, Holum told reporters.
""We've obviously had an interruption of our dialogue in these areas as a result of the Lee visit and the missile activities and so on,"" he said. ""We are starting to get past that and to renew the strategic dialogue.""
Talks with Vice Foreign Minister Li Zhaoxing and other officials had touched on alleged sales of Chinese missile technology to Pakistan and Beijing's civil nuclear cooperation with Iran, he said.
The Washington Post in August said U.S. intelligence officials had concluded Pakistan was secretly building a factory to make medium-range missiles using Chinese blueprints and equipment.
The report was the latest allegation of Sino-Pakistan military cooperation to raise hackles in Washington, which has in the past imposed sanctions on both for alleged missile transfers.
""There have been reports in the press and elsewhere of further missile transfers of technology,"" Holum said.
""We have not made the determination, based on the information that we have, that any further sanctions are warranted, but we routinely raise our concerns about these issues with the Chinese,"" he said.
U.S. concerns over nuclear exports to Pakistan had been much relieved by Beijing's commitment in May not to provide assistance to unsafeguarded nuclear facilities, he said.
Washington continued to believe that no country should share nuclear technology with Iran, a view China did not share, he said, adding that his talks had brought progress in harmonising Chinese and U.S. positions but no concrete deals.
""I didn't come here expecting any specific agreements, I was expecting we would close the gap,"" he said. ""The contact and the discussion is important because it creates a venue and an opportunity for resolving the issues.""
",34
"Beijing accused the United States on Tuesday of pursuing hostile policies towards China and defended a campaign to boost patriotism as a shield against aggressive foreign forces.
""In the last few years the United States has pursued antagonistic policies toward China,"" said the official People's Daily, mouthpiece of China's ruling Communist Party.
""U.S. media circles have spared no effort to attack and sully China,"" it said as disarmament talks between Chinese and U.S. officials entered a second day in Beijing.
U.S. Undersecretary of State Lynn Davis began talks on arms proliferation in the Chinese capital on Monday, part of a visit seen as a vital step towards rebuilding ties long strained by disputes over trade, human rights, copyright piracy and Taiwan.
Both sides, however, say relations have warmed in recent months after a string of high-level meetings. But the Chinese state press has continued to issue harshly worded condemnations of U.S. policies and individuals seen as hostile to Beijing.
In an angry reaction to an article in the New York Times on October 24 by former U.S. ambassador to China James Lilley, People's Daily slammed the U.S. media for unfriendly reporting that was harming vital cross-Pacific ties.
In his signed opinion piece, Lilley wrote that the loss of communism's appeal in China had left a vacuum that was being filled by nationalist xenophobia, but warned that nationalism was a dangerous road to take.
People's Daily said no such warning was required.
""(Some Westerners) see Chinese people's patriotism as being narrow-minded nationalism that will be catastrophic for the West and must quickly be discarded,"" it said.
Over 100 years of abuse at the hands of imperial powers had taught Chinese how to be patriotic without straying into blind xenophobia, it said.
Washington's anti-Chinese actions did not stop at thwarting Beijing's bid to hold the 2000 Olympics or at U.S. threats over human rights, trade or nuclear proliferation, it said.
Chinese feelings had been badly hurt by outrages such as Washington's dispatch of two aircraft carriers to the seas near Taiwan in March, it added.
Washington sent the aircraft carrier battlegroups to monitor intimidatory war games and missile tests carried out by China near Taiwan in the run-up to the island's first direct presidential elections, a decision that infuriated Beijing.
""It is this kind of pressure from the United States and other Western countries that has inspired the enthusiasm of the Chinese people's patriotism,"" People's Daily said.
""This kind of intense spontaneous reaction to interference by foreign forces is an ordinary manifestation of the Chinese people's patriotism,"" it said.
""Only when the motherland is strong and prosperous can the interference and aggression of outside forces be fundamentally resisted and forestalled,"" it said.
Analysts say Beijing is keen to boost nationalist sentiment in China to fill an ideological vacuum caused by the rush from strict communist values to a market-style economy.
Repeated calls for more patriotism have been accompanied by repeated state media diatribes against the United States and by a mass campaign for a return to orthodox socialist values.
",34
"China's economy grew by 9.6 percent in the first nine months of 1996, but many urban family incomes are lagging behind, the State Statistical Bureau said Wednesday.
Chinese industrial output was up, farmers were on their way to a year of record grain harvests and the scourge of inflation had been tamed to a year-on-year 6.6 percent in the first three quarters, bureau spokesman Ye Zhen said.
""The development of the macro-economy overall appears good,"" Ye told a news conference.
Gross domestic product was 4.5675 trillion yuan ($550.3 billion) between January and September, up 9.6 percent from the same period of 1995, Ye said, but gave no details. China's GDP grew by 10.2 percent in 1995.
The average urban income rose to 3,249 yuan ($391) between January and September, an actual year-on-year increase of 3.4 percent, he said.
But the incomes of many urban residents are lagging behind as China's economy booms, Ye said.
A survey of 35 major cities and towns had revealed that the incomes per family member of around 40 percent of households had declined, he said.
Some of the decline was the ordinary result of the birth of children or the retirement of older family members, he said.
""The second kind of situation is when the level of income falls or the level of income growth cannot keep up with inflation,"" Ye said, adding such problems were the cause of the income fall in about half the families surveyed.
""The difficulties of some low-income urban families have been aggravated,"" he said.
He gave no explanation of the decline in incomes suffered by some urban wage-earners, but many surplus workers in China's huge and largely stagnant state sector have been sent home on minimum salaries.
Although such workers are not considered unemployed and the state sector is highly reluctant to fire employees, China's urban unemployment rate hit 2.98 percent at the end of September, Ye said.
The number of unemployed in Chinese cities reached 5.3 million, he said, but gave no comparative figures.
China's urban jobless rate was 2.9 percent by the end of June, the same as the official figure for 1995, but state newspapers have warned that unemployment, a major concern for Beijing's communist leadership, could shoot up to 7.4 percent by 2000.
Optimism over the economy and the success of a continuing policy of tight credit aimed at curbing inflation and reining in runaway growth has been boosted by predictions that 1996 will be a bumper year for China's hundreds of millions of farmers.
Government policies had encouraged farmers to increase the area of land under grain, and grain output this year was forecast to exceed 480 million metric tons, beating the 1995 record harvest by about 15 million tons, Ye said.
China had set a target of 465 million tons for 1996.
Other figures released by the Statistical Bureau also painted a positive picture of an economy that Beijing says is on target for a ""soft landing"" after years of breakneck growth.
Year-on-year retail price inflation in the first three quarters was curbed to 6.6 percent, down 10 percentage points compared with the same period of 1995, Ye said.
The Xinhua news agency on Wednesday quoted economic tsar Zhu Rongji as forecasting inflation would be below 6.5 percent in 1996 and as saying it would be possible to cut it to six percent next year.
Retail inflation hit 21.8 percent in 1994.
",34
"Australia said on Friday it was determined not to let India's veto kill a worldwide nuclear test ban treaty and vowed to lead a push for a United Nations resolution to keep the dream of a global pact alive.
Foreign Minister Alexander Downer said Canberra had launched a campaign at the United Nations to revive the draft Comprehensive Test Ban Treaty (CTBT), after a disarmament conference failed to agree on a text in the face of Indian opposition.
""What we don't want to do is let the CTBT die,"" Downer told a news conference during a visit to Beijing on Friday. ""An enormous amount of effort has gone into it, there has been a very wide measure of agreement on the text.
""We think the best way to take it forward is for us to ... take a resolution to the United Nations General Assembly in support of that text,"" he added.
Government officials in Canberra said Australia would lead the charge to win agreement for the treaty and would look for co-sponsors for a U.N. resolution to allow it to be opened for signing despite the failure to reach a consensus.
""We will work to achieve the treaty's endorsement during the current session of the U.N. General Assembly and its opening for signature at the earliest possible date,"" Downer said in a statement released in Canberra.
The 61-nation Conference on Disarmament in Geneva, which needed a unanimous stance to allow it to approve a draft text, on Thursday decided it could not even agree to report its failure to the General Assembly.
New Delhi, which had demanded nuclear powers commit themselves to move towards total disarmament, was able to block the treaty's progress singlehandedly -- prompting calls for a new way to be found to keep it alive.
Diplomats have said there is little time left for the 51st General Assembly to open the pact for signature at a ceremony in late September.
Australian ambassador for disarmament Richard Starr told Reuters in Geneva that Canberra still believed the treaty could be salvaged after nearly three years of negotiation and ""decades of expectations"".
""There is a clear need for friends of the CTBT to consider action so that the whole international community will be able to consider, endorse and sign this valuable treaty,"" Starr said.
""We would not want to see a treaty text die in a pigeonhole in Geneva,"" he said.
Australia, using its standing as a middle-ranking, non-nuclear power, has sought to play a leading role in the campaign to end nuclear testing.
Diplomats in Geneva said earlier this week the five declared nuclear powers -- Britain, China, France, Russia and the United States -- considered Australia best placed to present the draft treaty to the UN general assembly in the form of a resolution calling for a swift signing ceremony.
Downer said there was still some way to go to ensure the treaty's survival but expressed optimism a resolution would find widespread support.
""This is just the beginning of a process,"" he said. ""I think there will be very strong support for our move.""
",34
"A senior U.S. arms control official said on Tuesday she was encouraged by Chinese efforts to control exports to unsafeguarded nuclear facilities, but Beijing said the key issue in two days of talks was Taiwan.
The United States had been lending its experience to Chinese efforts to place controls on exports, after a pledge in May by Beijing not to repeat sales of nuclear technology to Pakistan, U.S. Undersecretary of State Lynn Davis told a news conference.
""I am encouraged by the steps the Chinese are taking,"" Davis said on the second day of arms proliferation talks in Beijing that are intended to pave the way for a visit to China by U.S. Secretary of State Warren Christopher later this month.
""We have been working with the Chinese to ensure what I call very practical implementation,"" Davis added. ""We have already had some real success in the commitments that China has made in the areas of proliferation and their nuclear assistance to unsafeguarded facilities.""
Chinese Foreign Minister Qian Qichen had urged Washington to stop arms sales to Taiwan during a meeting with Davis on Tuesday, the official Xinhua news agency said.
A Foreign Ministry spokesman said U.S. weapons sales to Taiwan were the main Sino-U.S. arms proliferation issue.
""The most sensitive and important issue is that the United States has violated the August 17 communique by exporting large numbers of advanced weapons to Taiwan,"" spokesman Cui Tiankai told a news briefing.
Cui said Washington had broken its pledge under an August 17, 1982 communique to reduce the quality and quantity of arms sales to Taiwan, which Beijing considers a rebel province.
Xinhua quoted Qian as saying the United States should strictly abide by the August 17 communique to try to reduce and ultimately stop its arms sales to Taiwan.
In August, the U.S. Defence Department notified Congress that it would sell Stinger missiles and launchers to Taiwan, prompting angry Chinese protests.
Disagreement over arms sales and nuclear proliferation have long added to the strains on Sino-U.S. ties, already chilled by disputes over trade, copyright piracy and human rights.
After months of Sino-U.S. negotiations, China said on May 11 that it would not permit the sale of equipment to nuclear facilities not subject to international inspection.
The May exports accord averted possible U.S. sanctions over China's reported sale to Pakistan of ring magnets, which are used in gas centrifuges and can be used in the production of nuclear weapons material.
China and Pakistan have denied that the sales took place.
Washington had said it accepted assurances by Chinese leaders that they did not know about the sales.
Both Beijing and Washington have been keen to resume a ""strategic dialogue"" on security and arms issues as part of efforts to rebuild cross-Pacific relations.
U.S. arms officials say differences remain with China over the export of nuclear equipment to Iran, which Washington considers a rogue state, while Beijing has repeatedly condemned U.S. arms sales to Taiwan.
China does not rule out the use of force to regain control of Taiwan, Beijing's arch rival since the end of the Chinese civil war in 1949, and in March carried out intimidatory missile tests and wargames in the seas near the island.
Davis said Taiwan was discussed during her talks with Chinese officials but declined to give details.
She said U.S. weapons sales to Taipei did not contravene Washington's agreements with Beijing.
",34
"China's power minister vowed Thursday to protect the interests of foreign investors expected to provide one-fifth of the 700 billion yuan ($84 billion) to be invested in power generation between 1996 and 2000.
Foreign investment in the electricity generation sector would be carefully channelled to boost China's domestic industry, power minister Shi Dazhen told a business conference.
""We have established a legal framework to protect foreign investors,"" Shi told reporters at the conference.
Beijing would perfect its laws and regulations to ensure that investor interests were guaranteed, he said.
China's electricity generating capacity would hit 290,000 megawatts by the end of 2000 from 217,000 megawatts at the end of 1995, Shi said.
China would require around 700 billion yuan ($84.4 million) investment in the power sector during Beijing's state-set ninth five-year plan, which runs from 1996-2000, he said.
Foreign investors were expected to come up with 20 percent -- around $17 billion -- while the central government provided 40 percent and local authorities and enterprises shelled out the remaining 40 percent, he said but gave no details.
The investment estimates appeared to be lower than those made by other senior power officials last month, who said China would need $20 billion from abroad.
Shi said he was unaware of the $20 billion figure.
Potential foreign investors have said an effective 15 percent limit on returns on investment from Chinese power plant projects is a major disincentive, but Shi waved aside such concerns, saying any specific limit would be impractical.
Chinese energy officials have consistently denied setting any limit on returns, although they have said the best rate from key projects is around 17 percent.
Chinese electricity prices are fixed by the state, which has kept prices low.
Shi said foreign investors remained keen to put their money behind Chinese efforts to build enough generating capacity to keep up with rocketing economic growth and to raise per capita capacity from the meagre 180 watts achieved by the end of 1995.
""Although the power industry has developed very quickly, because China has a population of 1.2 billion, the power supply is still very tight and the supply level is very low,"" he said.
""There is great enthusiasm among foreigners to invest in this sector,"" he said, adding that such investment should be carefully guided.
""The use of foreign investment must be combined with that of China's own power manufacturing industry, with foreign funds used to buy Chinese-made generating equipment,"" he said.
Foreign funds would be focused on high technology plants with capacity of 300 megawatts or more, he said.
Beijing says it wants to replace inefficient thermal power stations that burn dirty high-sulphur coal with larger new plants and with nuclear and hydro-electric projects.
",34
"The goodwill generated by recent high-level visits may warm a Sino-U.S. presidential meeting this weekend, but lingering disputes mean the two leaders will still have much to talk about, diplomats and analysts said on Friday.
Chinese President Jiang Zemin's meeting with his U.S. counterpart Bill Clinton at a conference of the Asian-Pacific Economic Cooperation forum in the Philippines would be a key chance to bolster recent progress in easing ties, they said.
A visit this week by U.S. Secretary of State Warren Christopher had brought Beijing welcome signs of new U.S. flexibility on such thorny issues as weapons proliferation, trade and Taiwan, said a Chinese specialist on U.S. affairs.
""During Christopher's visit to China there was progress on all the issues,"" said Niu Jun of the North American foreign policy department of the Chinese Academy of Social Sciences.
Both sides had acknowledged a need to boost contacts and exchange state visits, while Christopher had accepted that U.S. arms sales to Beijing's island rival Taiwan were a weapons proliferation issue, Niu said in a telephone interview.
The clearest sign of Washington's desire to repair the battered cross-Pacific relationship was U.S. willingness to consider starting peaceful nuclear cooperation even before a previously signed accord on the issue was implemented, he said.
""This change (on nuclear technology transfer) symbolised the change in the U.S. attitude,"" he said.
""There has to be a belief in the possibility of establishing fairly good relations with China in the future (for the United States to be willing) to transfer this kind of advanced technology,"" he said.
China is eager to buy nuclear reactors from U.S. firms equally keen to tap into its potentially large market, but cooperation has been stunted by U.S. fears that Beijing places few controls on the proliferation of nuclear technology.
While nuclear flexibility is controversial in Washington, mutual interest made nuclear cooperation the issue one that Washington and Beijing could use to ensure a recent improvement in ties did not falter, said a Beijing-based Western diplomat.
""I think that's the big carrot the Americans are trying to hold out for more progress on non-proliferation,"" the diplomat said. ""It's something the Americans would quite like to do anyway because there's money in it.""
While Christopher's visit had helped to boost ties in general, China was still likely to hold out for unilateral concessions from Washington on the terms of its accession to the World Trade Organisation, human rights and trade, he said.
""They don't really seem to have made a lot of progress,"" he said. ""I get the impression that there's still a lot of hard pounding to go.""
A U.S. desire to see more concrete commitments from Beijing before making concessions meant that the Jiang-Clinton meeting could end up achieving little of real substance, he said.
Taiwan, which Beijing has considered a rebel province since the end of the Chinese civil war in 1949, would remain China's main policy focus at the presidential meeting, said Niu.
""For China the most important issue is Taiwan...and the reaffirmation that (the United States) will not sell weapons to Taiwan,"" he said.
While China's stance on most Sino-U.S. bugbear issues was clear, Beijing was unlikely to give any public signal of its intentions on newer issues such as a U.S. push for tax-free imformation technology imports or other APEC proposals, the Western diplomat said.
""I think the Chinese are keeping their powder dry on all these issues,"" he said.
",34
"The head of China's restive northwestern Xinjiang on Friday accused western nations of working with pro-independence activists to try to split the nation, saying no end was in sight in the war on separatism.
Activists in the mainly-Moslem district had fomented riots and carried out political killings, but their struggle against Beijing rule was bound to fail, chairman of the Xinjiang autonomous region, Ablait Abdureschit, told reporters here.
""Against the strategic background of some people internationally engaging in splitting and westernising China, there is a small clique who want to split Xinjiang from China and achieve independence,"" he said.
""To achieve their objectives they take all kinds of actions; they infiltrate, make propaganda, carry out assassinations and create riots,"" he said.
""The vast majority of Xinjiang people resolutely oppose such activities,"" he said, adding western conspiracies to divide China could never succeed.
Separatists stood against the economic progress that Beijing was bringing to a region where development had long lagged behind other areas of China, he said, accusing un-named western nations of conspiring with pro-independence activists.
""In the last few years some western countries have concentrated on engaging in activities to westernise and split China,"" he said. ""...In Xinjiang, the separatists have cooperated with the international conspiracy to westernise and split China.""
Authorities in Xinjiang this year intensified a crackdown on separatists and unauthorised religious activity after a series of violent clashes, bombings and assassinations of officials and Islamic leaders regarded as pro-Beijing.
The arid region, described by officials as a sunny ""Land of Fruit and Melons"", is considered by many Chinese a wild frontier province and has a long history of ethnic unrest between the native Uighur population and members of China's Han majority.
In May, Beijing ordered tighter controls along Xinjiang's long borders to block the smuggling of weapons and subversive materials from nearby central Asian states.
Ablait Abdureschit said only a few people were involved in separatist activities in the region, but acknowledged the struggle against separatism was unlikely to end soon.
""Nationalist separatist activities occurred in the past, occur now, and will occur in the future, abroad and also within the country,"" he said. ""This struggle is long-term and complicated.""
Despite the struggle against separatism, the outlook was bright for the sprawling region, which borders Afghanistan, Pakistan and three mainly-Moslem central Asian states from the former Soviet Union, Ablait Abdureschit said.
Beijing, which provided more than 40 percent of the region's government budget, was working hard to boost the economy and improve Xinjiang's links with the outside world, he said.
The resource-rich region was aiming to become one of the country's top grain producers by the end of the century and had already gathered a record cotton harvest of 1.05 million tonnes in 1996, while oil and gas resources were abundant, he said.
""The general situation in Xinjiang is good,"" he said.
",34
"A huge ethylene venture linking a British Petroleum subsidiary and Shanghai Petrochemical Co Ltd would give BP a major presence in China's downstream petrochemicals, company officials said on Tuesday.
BP Chemicals signed a letter of intent with Shanghai Petrochemical on Thursday to set up a $2.5 billion plant in Shanghai capable of producing 650,000 tonnes of ethylene a year.
""It's a big step forward for our development in China,"" said Zhang Jianning, BP's Beijing manager of government affairs.
He said BP's biggest China project so far also marked a change of focus for the company, which has until recently concentrated most of its Chinese investment in upstream activities such as drilling and exploration.
Analysts have predicted huge growth in China's downstream petrochemicals industry, as booming economic growth sends demand for products such as ethylene soaring.
""At the moment I would think petrochemicals is getting quite exciting,"" Zhang said in a telephone interview.
Officials of Shanghai Petrochemical, which is majority-owned by China Petrochemical Corp, or Sinopec, said the huge project demonstrated the company's confidence in its own future and in China's economic development.
It was too early to say how long a feasibility study for the project would take, but for a project of such a scale preliminary research could reasonably last up to two years, said Shanghai Petrochemical deputy director Lian Xiaolu.
Completion of such projects could take up to eight years, Lian told a news briefing in Beijing, adding it was too early to decide the details of how the venture would operate or of the investment required.
BP will own a 50 percent stake in the ethylene plant with the remaining 50 percent either held by Shanghai Petrochemical or shared with its parent Sinopec, officials said.
The venture is one of six ethylene projects with annual capacity of 600,000 tonnes or more promoted by state planners, the official China Daily said.
Sinopec president Sheng Huaren said last week the state oil refiner planned to more than double ethylene production capacity to around five million tonnes a year by 2000 from the current annual 2.36 million tonnes.
Shanghai Petrochemical officials said they hoped to establish a joint venture company with BP to produce acrylonitrile, used to make synthetic fibres.
The joint venture could then be expanded if all went well with technical studies for the ethylene plant, they said.
""If the market is there we will go ahead very quickly on this one,"" BP's Zhang said. He declined to say when the British firm hoped to begin production.
While the letter of intent showed a major commitment to working with BP, even if the ethylene project developed it did not mean Shanghai Petrochemical would slow cooperation with other foreign firms, said board of directors secretary Cai Hongping.
""It's not like love with a marriage of one husband and one wife,"" he said. ""I think Shanghai Petrochemical will not stop looking for other partners.""
",34
"Chinese officials have called for a war on AIDS, warning that the nation is in danger of losing its last chance to slow the invasion and spread of the disease, state media said on Thursday.
Time was running out to strengthen safeguards against AIDS spreading rapidly through the populations of China's neighbours, minister of the State Family Planning Commission Peng Peiyun told a national meeting on AIDS in Beijing.
""From now until the end of the century is a crucial time for our nation to prevent the spread of AIDS,"" the official Health News quoted Peng as saying.
""If we do not pay close attention to prevention, the AIDS infection will increase geometrically,"" she said.
The spread of drug abuse, prostitution and illegal blood supplies could combine with a drastic increase in sexual disease to speed the AIDS epidemic in China, Health Minister Chen Minzhang told the conference, which closed on Thursday.
Many Chinese still knew little about AIDS or the HIV (Human Immunodeficiency Virus) that causes it, Chen said.
""Now is the prime time for prevention and control of HIV infection,"" the Xinhua news agency quoted him as saying. ""It could be the last chance. We have no time to waste.""
China's official total for the number of people infected with HIV had hit 4,305, up from 3,341 at the end of 1995, and 131 had developed AIDS, the People's Daily newspaper said.
Officials say tens of thousands of cases go uncounted, and quote experts as estimating the actual number of HIV infections at between 50,000 and 100,000.
China has blamed much of the rapid spread of AIDS (Acquired Immune Deficiency Syndrome) in recent years on infection via drug addicts in southwestern provinces close to the ""Golden Triangle"" opium and heroin production area that includes parts of Thailand, Laos and Burma.
""Serious HIV/AIDS epidemics in neighbouring countries may have an impact on the domestic HIV epidemic,"" said Health Minister Chen. ""A large number of migrants provide the opportunity for the spread of HIV infection.""
Chinese health departments would continue to crack down on illegal blood banks to try to ensure the safety of blood transfusions, and would join with educational organisations and the media to spread knowledge of AIDS, Xinhua said.
Law enforcement agencies would clamp down on drug abuse and prostitution to try to cut HIV transmission through contaminated needles and sexual contact, it said.
Prostitution and narcotics abuse have both boomed in recent years as nearly two decades of economic reform weaken China's once-strict social controls.
Officials expect a campaign launched by China's communist leaders to promote puritan Marxist values to help cut infection caused by unsafe sex and drug use, but a Beijing AIDS activist said it was still unclear if the effort would really help.
Authorities should put more emphasis on education and health support for high-risk groups instead of relying on official disaproval and the police to curb their activities, activist Wan Yanhui said in a telephone interview.
China had largely failed to reach out to groups such as sex workers, drug addicts and homosexuals, many of whom still considered AIDS a foreigners' affliction, he said.
""There is not much public understanding (of AIDS)...the work done on the social side has been very weak,"" he said. ""There needs to be a change in thinking.""
",34
"Half-year results from Japan's 20 biggest banks show they have moved back into the black despite hefty write-offs of problem loans.
Analysts said figures released by 10 trust and credit banks Monday showed that all of Japan's big banks had continued actively writing off problem loans resulting from the collapse of Japan's 1980s ""bubble"" economy of over-priced real estate.
The 10 biggest commercial banks announced their interim earnings and loan write-off statistics Friday.
Combined write-offs by the 20 biggest banks totalled about 2.4 trillion yen ($21.4 billion) in the six months ended Sept. 30. Last fiscal year, the 20 big banks disposed of nearly 11 trillion yen ($98.2 billion) worth of problem loans.
At the end of March, the Finance Ministry said the 20 banks had about 25 trillion yen ($223 billion) worth of problem loans, which include loans made to bankrupt companies and those on which interest payments are in arrears by six months or more.
Katsuhito Sasajima, an analyst at Nikko Research Centre, said the 20 banks may dispose of at least five trillion yen ($44.6 billion) worth of problem loans in the current fiscal year in order to cut the size of problem loans to manageable levels.
Analysts said many big banks were now recovering from the difficulties caused by the problem loans, but some financially-weak banks would continue to struggle to dispose of such loans in the coming years.
Yoshinobu Yamada, an analyst at Merrill Lynch Japan, said that major banks should be able to cut their problem loans to manageable levels this financial year, but added that ""some banks are still reeling from the bad loan problem.""
Three long-term credit banks -- Industrial Bank of Japan, Long-Term Credit Bank of Japan and Nippon Credit Bank -- all recorded parent current profits for the first half after posting losses in 1995-1996.
Current profit is pre-tax and includes gains or losses from sales of securities.
The three said they disposed of 255.1 billion yen ($2.27 billion) of problem loans in the first half against a total of 1.93 trillion yen ($17.2 billion) last year.
Japan's seven major trust banks, all of which posted parent current losses in 1995-1996, said they posted combined parent current profits of 316.76 billion yen ($2.82 billion) in the first half after disposing of 1.02 trillion yen ($9.1 billion) of problem loans in the period.
This compared with disposals of 2.69 trillion yen ($24.0 billion) last year.
",10
"Japan's Finance Ministry, which has long resisted calls from employers to reform the country's rigid corporate pension system, has finally decided to relax its tight grip.
However, industry sources say its proposals fall short of what is needed to cope with Japan's rapidly ""greying"" society and the poor financial state of employee pension funds resulting from record-low interest rates and a weak economic recovery.
""Unless Japan undertakes a drastic overhaul of the corporate pension system, it will remain out of step with the rest of the world,"" said an official at an overseas-based investment advisory company.
In the past, the amount of money Japanese corporate pension funds held was so small that authorities could regulate them without too much difficulty. But the amount has grown to about 60 trillion yen ($540 billion) and unless the current system is changed, it will hurt corporate balance sheets, he said.
Yoshihiko Miyauchi, a key member of an advisory panel to the prime minister, said on Thursday that the Finance Ministry had stated in a subcommittee meeting on deregulation that it would abolish restrictions on where employee pension funds managed by trust banks could be invested.
Under the current rules, each trust bank must invest at least half of the funds it manages in fixed-income assets, no more than 30 percent in Japanese stocks, no more than 30 percent in foreign currency-denominated shares and bonds, and no more than 20 percent in real estate.
Japan's corporate pension system is divided into employee pension funds, which are supervised by the Welfare Ministry, and Tax-Qualified Retirement Pension plans (TQPs), which are supervised by the Finance Ministry.
Miyauchi said the Finance Ministry was still considering whether to allow investment advisory firms to manage TQPs. It also told the subcommittee that it was studying whether to allow variable yields and flexible benefits, he said.
The Welfare Ministry has steadily lifted its restrictions on the management on employee pension funds, which have assets estimated at 42 trillion yen ($378 billion), and allowed investment advisory firms to manage the funds.
However, the Finance Ministry has barred investment advisory firms from managing TQPs, which have assets totalling 18 trillion yen ($162 billion). Only trust banks and life insurers are allowed to manage TQPs.
Employers participating in the corporate pension system are required to maintain specified yields, currently 5.5 percent a year, to guarantee predetermined benefits. But the actual return on investments is now only about three percent.
Because of the poor investment environment, many corporate pension funds are facing a shortage of funds to pay benefits to pensioners in the future, industry sources said. If pension funds fall short of meeting future payments, sponsoring companies must cover the shortfall.
Industry sources said that investment advisory firms, especially foreign companies, are keen to manage TQPs.
""Generally speaking, fund managers at Japanese companies are conservative,"" said the official with the investment advisory company.
""They tend to avoid investment risks because they see the risks, which are short-term volatility, as something dangerous. But experienced foreign advisors are well-qualified to manage pension funds as they take reasonable risks in long-term pension fund management over 20- to 30-year periods,"" he said.
He said British pension funds invest about 90 percent of their assets in equities, including about 15 percent in foreign stocks.
Ken Okamura, a strategist at Dresdner Kleinwort Benson (Asia) Ltd, said in a recent report that if Japan completely abolished restrictions on asset management of corporate pension funds, it was likely to see more investment in local stocks.
He estimated that at the moment, life insurers and trust banks put an average of about 20 percent of the pension assets they are entrusted with into local stocks.
""If corporate pension funds increase the weighting of local stocks to 30 percent, about six trillion yen ($54.0 billion) of funds will come to Japanese stock markets."" ($1=111 yen)
",10
"Japan's financial industry is gradually recovering from the bad-debt hangover left by the economic ""bubble"" years, but the pain lingers on for smaller banks and loan institutions.
Analysts say the industry has got over the worst of the bad loan mess after vigorous efforts by the government and major banks over the past year to tackle the problem. Any further serious damage to the system is therefore unlikely, they say.
But the picture is darker for small institutions that lack the financial might of the big banks but were similarly saddled with soured loans from the late 1980s lending boom.
Analysts say it will take years to restore confidence in the banking sector given the lingering problems and exposure to the troubled real estate and construction industries.
The nervousness was highlighted last month by the collapse of financing firm Nichiei Finance Co Ltd with huge debt liabilities, and revelations of losses at a regional bank because of suspected misuse of funds by an ex-employee.
Both these incidents jolted financial markets. In the case of Biwako Bank, the markets were unsettled by vague rumours of dire trouble before the bank said it had lost money due to the suspected misappropration but remained in sound health.
A new restructuring programme unveiled two weeks ago by Tobishima Corp, a contractor and engineering company, also fuelled concerns that banks would face new burdens as ailing firms seek further support while trying to reshape themselves.
Katsuhito Sasajima, an analyst at Nikko Research Center, said the banks are dealing with the problem in stages -- first with their own bad loans, then the problems of affiliated firms and, finally, the issue of other debtors.
""Banks are trying to dispose of problem loans to independent non-banks after mostly completing write-offs of debt held by their non-bank affiliates,"" he said.
Failures of troubled non-banks are already anticipated and it may take one or two years for the big banks to fully recover from the mess, he said.
Non-banks are financial firms which do not take deposits but rely mostly on loans from banks and other deposit-taking bodies such as agricultural credit cooperatives.
Like the ""jusen"" mortgage firms, which were wound up this year, many non-banks are in trouble. They lent to golf-course and resort companies that joined hands with developers looking for easy profits during the free-wheeling ""bubble"" years.
When asset prices began to plunge in the early 1990s, many firms which had relied on borrowed funds for investments were unable to repay the money, causing a ripple effect of bad debt.
The Finance Ministry said this week that outstanding loans by Japan's 249 non-banks fell 4.4 percent to 50.74 trillion yen ($449 billion) at the end of March from a year earlier.
Analysts said Nichiei's main creditors -- Dai-Ichi Kangyo Bank (DKB), Asahi Bank and the Bank of Yokohama -- are expected to give up their claims after the company filed for restructuring under court guidance, a category of business failure under Japan's bankruptcy laws.
As of March, DKB had 56 billion yen ($495 million) ($495 million) in loans to Nichiei Finance, while Asahi had 32 billion yen ($283 million) and Bank of Yokohama 20 billion yen ($176 million) in loans, they said.
James Fiorillo, a ING Baring Securities (Japan) analyst, said the amount these three write off for Nichiei will only be about a fifth of their total disposals this fiscal year.
DKB has predicted an operating profit for 1996/97 to next March of about 320 billion yen ($2.83 billion) and current profit, a form of pre-tax profit including non-operating activities, of 40 billion yen ($353 million). This suggests DKB may use the difference -- 280 billion yen ($2.47 billion) -- to write off problem loans.
Japan's 20 big banks are already planning to dispose of 3.5 trillion yen ($30.9 billion) to 4.0 trillion yen ($35.3 billion) of problem loans in 1996/97 after writing off nearly 11 trillion yen ($97.3 billion) in 1995/96, analysts estimated.
It will, however, take some time for creditor banks to solve the problem of the non-banks including Nichiboshin Ltd and Apollo Leasing Co Ltd.
The search for a solution is complicated by the fact that the non-banks are part of a web of lending, having borrowed from more than 100 creditors including financially weak agricultural credit unions.
""People say that the problem is that losses (stemming from the non-bank liquidation) may break the back of weak agricultural financial institutions,"" one analyst said. ($1=113 yen)
",10
"The collapse of a major real estate company which borrowed heavily from Japan's ""jusen"" mortgage firms would be unlikely to have any major negative impact on the financial industry, analysts said on Tuesday.
Earlier on Tuesday, a semi-governmental body set up to collect problem loans run up by the ""jusen"" companies said it was seeking the involuntary bankruptcy of unlisted real estate firm Sueno Kosan.
The Housing Loan Administration Corp (HLAC) made the request to an Osaka court.  
""The action has been already factored in (to the financial markets),"" said Takakazu Nakamori, an official at credit research firm Teikoku Databank.
He said the Finance Ministry appeared to have recognised the problem and given the go-ahead for the forced bankruptcy.
Yushiro Ikuyo, first vice president at Smith Barney International, said the loan body was taking the right course of action, given the severity of the Sueno Kosan problem.  
Banks which had loans to the failed jusen firms and related companies like Sueno Kosan have mostly made loan loss provisions, as well as forgiving loans under the government's scheme to wind up the firms, he said. Those creditors will not have any problem from the expected insolvency, he said.
The HLAC said in a statement that it had also asked the Osaka District Court to start bankruptcy proceedings for two of Sueno Kosan's affiliates. The court has taken steps to seize their assets in response to the application, it also said.
The application also sought bankruptcy proceedings against three individuals associated with the firm, including president Kenichi Sueno, the HLAC said in its statement.  
The HLAC said it has claims totalling 347 billion yen on Sueno Kosan and two of its group firms. The claims were transferred from the failed jusen firms to the body, it said.
In June, Japan adopted a framework that allowed for the use of 685 billion yen of public money to help wind up the jusen.
The HLAC inherited assets totalling 6.5 trillion yen from the seven failed firms after 6.4 trillion yen worth of unrecoverable loans were written off with the help of financial institutions and public money.
Katsuhito Sasajima, a Nikko Research Centre analyst, said the action by the body was good news.  
""The insolvency of Sueno is not a matter of damage to the financial system... Rather, the market would probably appreciate the action as such legal procedures are transparent,"" Nikko's Sasajima said.
An HLAC official quoted a senior official of the Deposit Insurance Corp of Japan (DIC) as telling reporters in Osaka that the decision to seek the insolvency was taken after consultation with the Finance Ministry and that the move would not greatly affect the financial system as a whole.  
But although the overall damage to the financial system may be slight, analysts said individual non-bank financial institutions with outstanding loans to Sueno could suffer.
""Should Sueno be forced into bankrutpcy and its assets distributed, many of the other lender non-banks will be forced to absorb huge losses relative to their size,"" ING Baring Securities (Japan) analyst James Fiorillo said.
If Sueno Kosan is declared bankrupt, it would be one of the biggest Japanese insolvencies on record, analysts said.
""This will probably force many of them (creditors) into distress or bankruptcy, so the outcome...should be closely watched,"" Fiorillo said. In total, the Sueno Kosan group has liabilities of about 600 billion yen, he added.
Several analysts said that a non-bank institution, Apollo Leasing Co Ltd, may be affected. An official at Apollo said that the company has loans to Sueno Kosan and will try to figure out the impact of its collapse. He did not give further details. Non-bank financial institutions make loans but do not take deposits, borrowing money instead from banks.
There was no immediate comment from Sueno Kosan itself about the move by the loan-collecting body.  
A survey by the Tokyo Commerce and Industry Research Co, a private sector research arm, said Apollo Leasing had 21.13 billion yen in loans to Sueno as of the end of December 1995.
Other major creditors to Sueno at the end of last December included Inter-Lease Corp with claims of 5.35 billion yen, All Corp with 6.0 billion yen and Crown Leasing Corp with 17.6 billion yen, the research body said.
Analysts said the non-bank financial institutions had undertaken restructuring programmes by asking creditors to do such things as cut interest payments on loans and delay principal payments.
",10
"Investors in Asian countries are turning to Tokyo's property market, formerly notorious for high prices, says Richard Mandel, managing director of the Japanese unit of U.S. real estate firm Kennedy-Wilson Inc.
Mandel told Reuters in a recent interview that his California-based company could bring foreign investors into Japan's real estate market, currently suffering from a five-year tailspin, and reactivate trade.
This should also help ease one of the Japanese financial industry's biggest headaches -- selling off land collateral to recover something from the huge bad loans run up by Japan's seven failed ""jusen"" mortgage firms, he said.
""We are probably the only foreign company participating in the Japanese real estate market... Many foreign investors from Asia are coming over here, working with us to try to buy Japanese real estate,"" he said.
Asian investors see Tokyo as a powerful world business centre and believe that real estate prices here have come down to attractive levels after plunging 75 percent from the peak reached in the early 1990s, he said.
Japanese property prices went into a tailspin in the early 1990s when the nation's ""bubble economy"" era of soaring stock market and real estate prices came to an end.
Mandel said that while Kennedy-Wilson has not concluded any deals since it started operations in Tokyo in 1995, negotiations are going on with Asian investors, focusing on commercial buildings and apartment buildings in central Tokyo with values of less than 10 billion yen ($89.2 million).
""You can buy prime Japanese real estate much lower than you can buy in Hong Kong and Singapore,"" he said.
Real estate industry sources say big Japanese investors such as life insurers and developers, which were aggressive buyers of land in the bubble era, are finding it hard to allocate new money for land transactions because they carry huge problem assets left from the collapse of the bubble.
Meanwhile, they say banks and construction firms are reluctant to sell their real estate at current prices, and this has greatly decreased market liquidity.
He said Japan should take a look at taxes on capital gains. Japan's real estate market needs many investors from all over the world to become a truly healthy market, but a major drawback is its capital gain tax on land transactions, he said.
The company took part in helping the Resolution Trust Corp in the United States recover debts following the 1980s crisis at ""savings and loan"" mortgage associations, using its auction-marketing system. Mandel believes the system would be useful for selling jusen property.
Mandel will soon leave Japan for New York. Ryosuke Homma, who will take over the Tokyo operation, said making use of the Internet could be a method of soliciting investors.
In July, Japan set up the Housing Loan Administration Corp to recover, over the next 15 years, more than six trillion yen ($53.5 billion) worth of the jusen firms' problem loans in the form of real estate collateral.
Earlier this month, several Japanese ministries set up a joint panel to work out measures to boost liquidity in the property market to facilitate collection of debt through collateralised real estate.
Mandel said real estate sales by the Housing Loan Administration Corp would happen from the start of fiscal 1997, beginning on April 1, ""and this will firmly set market prices"". ($1=112 yen)
",10
"Investors in Asian countries are turning to Tokyo's property market, formerly notorious for its high prices, says Richard Mandel, managing director of the Japanese unit of U.S. real estate firm Kennedy-Wilson Inc.
Mandel told Reuters in a recent interview that his California-based company could bring foreign investors into Japan's real estate market, currently suffering from a five-year tailspin, and reactivate trade.
This should also help ease one of the Japanese financial industry's biggest headaches -- selling off land collateral to recover something from the huge bad loans run up by Japan's seven failed ""jusen"" mortgage firms, he said.
""We are probably the only foreign company participating in the Japanese real estate market... Many foreign investors from Asia are coming over here, working with us to try to buy Japanese real estate,"" he said.
Asian investors see Tokyo as a powerful world business centre and believe that real estate prices here have come down to attractive levels after plunging 75 percent from the peak reached in the early 1990s, he said.
Japanese property prices went into a tailspin in the early 1990s when the nation's ""bubble economy"" era of soaring stock market and real estate prices came to an end.
Mandel said that while Kennedy-Wilson has not concluded any deals since it started operations in Tokyo in 1995, negotiations are going on with Asian investors, focusing on commercial buildings and apartment buildings in central Tokyo with values of less than 10 billion yen ($89.2 million).
""You can buy prime Japanese real estate much lower than you can buy in Hong Kong and Singapore,"" he said.
Real estate industry sources say big Japanese investors such as life insurers and developers, which were aggressive buyers of land in the bubble era, are finding it hard to allocate new money for land transactions because they carry huge problem assets left from the collapse of the bubble.
Meanwhile, they say banks and construction firms are reluctant to sell their real estate at current prices, and this has greatly decreased market liquidity.
He said Japan should take a look at taxes on capital gains. Japan's real estate market needs many investors from all over the world to become a truly healthy market, but a major drawback is its capital gain tax on land transactions, he said.
The company took part in helping the Resolution Trust Corp in the United States recover debts following the 1980s crisis at ""savings and loan"" mortgage associations, using its auction-marketing system. Mandel believes the system would be useful for selling jusen property.
Mandel will soon leave Japan for New York. Ryosuke Homma, who will take over the Tokyo operation, said making use of the Internet could be a method of soliciting investors.
In July, Japan set up the Housing Loan Administration Corp to recover, over the next 15 years, more than six trillion yen ($53.5 billion) worth of the jusen firms' problem loans in the form of real estate collateral.
Earlier this month, several Japanese ministries set up a joint panel to work out measures to boost liquidity in the property market to facilitate collection of debt through collateralised real estate.
Mandel said real estate sales by the Housing Loan Administration Corp would happen from the start of fiscal 1997, beginning on April 1, ""and this will firmly set market prices"" ($1=112 yen)
",10
"Japan's rule-bound markets must be fully deregulated to ensure that the nation does not fall further behind in the global finance business, an influential reform panel said on Thursday in an interim report.
Establishing markets to effectively manage 1,000 trillion yen ($8.92 trillion) of individual assets through deregulation is particularly important ahead of a rapid rise in the proportion of old people, key panel member Kazuhito Ikeo said.
""Unless Japan speeds up restructuring of the financial system, it will be left behind in global competition even more than now, particularly asset management services,"" Ikeo, a professor at Keio University in Tokyo, told reporters.
The proposal includes abolition of all rules on the range of businesses which units of banks and brokers are allowed to engage in by the end of fiscal 1997/98 year in March.
It also recommended a fundamental revision in the Securities and Exchange Law and liberalisation of commissions on stockbroking, as well as lifting an almost 50-year ban on holding companies, which control one or more companies, often through a majority stake.
Ikeo said the panel, made up of private-sector figures and academics, focused on benefits for consumers and put aside an expected negative impact on existing financial firms.
Although the panel was urging total deregulation in the financial industry, Ikeo said, if there was a need for rules in exceptional cases, they should be clearly written in financial laws so bureaucrats would not need to intervene.
In the past, deregulation plans were drawn up by bureaucrats in powerful ministries such as finance, trade and construction, which have carefully guarded industries they surpervise. But these have been slow in getting results, and criticism from the United States and other major trading partners has continued.
Prime Minister Ryutaro Hashimoto's government has wanted to step up efforts to cut bureaucratic red tape to boost the fragile economy, because its high-cost structure is making the country less attractive to investors.
The panel, set up in July by the Economic Planning Agency, comprises six subcommittees focusing on finance, information technology, distribution, land, employment and medicine.
The subcommittees on land, distribution and medicine presented proposals last week and the two on employment and medicine unveiled recommendations separately on Thursday, all of which called for sweeping reform in each field.
The proposals will become an outline for the advisory council's final recommendation to the prime minister, which will be made in December after the council hears the opinions of bureaucrats on each issue.
Panel chairman Koichi Minaguchi told a news conference that he wanted to ensure that the panel's efforts would not be a ""total waste of energy"".
""The ministries concerned all agree that they are heading in the direction outlined in the reports, but when it comes to specifics, they said they still have different opinions,"" Minaguchi said.
EPA officials were also cautious about the future of the proposals by the panel, however, as any action taken may hinge on the outcome of general elections set for October 20.
""It is not clear how ministers in the new government to be formed will treat those proposals,"" an EPA official said.
Haruo Shimada, also a key member of the panel, said, however, that any delay in overhauling laws relating to employment would be ""suicidal"".
While the number of workers would rapidly fall after 2010, Japan still uses employment laws established half a century ago. ""If we don't start (reform and deregulation), immediately, it would be suicidal,"" Shimada said. ($1=112 yen)
",10
"The Tokyo stock market's recent falls offer a preview of the pain Japan's life insurance industry will face as a result of greater competition from planned ""Big Bang"" financial reforms, industry sources say.
The fall in share prices means some of the insurance companies may have to post losses in the business year to March 31, increasing an already wide gap in financial strength between big and small firms, the sources said.
But the real threat is expected intense competition from other financial sectors such as banking after the Big Bang.
""The Big Bang is the real threat, as it means fierce competition among all financial sectors, including banks and Western asset management firms,"" said an executive at a major life insurance firm.
Prime Minister Ryutaro Hashimoto unveiled plans in November to liberalise Japan's financial markets by 2001 under the Big Bang reforms, in which banks, brokers and insurance companies will be allowed to enter each other's turf.
In the past, Japan's life insurance industry enjoyed spectacular growth as the nation's economic success enabled people to plan for the long-term financial security of their families, analysts said.
But with the maturing of the core life insurance product market, big insurers are focusing on asset management.
The life insurers are already facing increased competition after a revision to the law governing them allowed 11 non-life insurers to set up life insurance subsidiaries last October, raising to 44 the number of life insurers in Japan.
A spokesman for Sony Life Insurance, a subsidiary of Sony Corp, said there were also concerns about how far the big commercial banks would be permitted to enter the insurance business under the Big Bang reforms.
Koya Hasegawa, an analyst at Nikko Research Center, said the life insurance industry needed to increase its efficiency, particularly to fight off a challenge from the banks.
The reforms are expected to allow over-the-counter sales of insurance policies by banks, he said.
But even before that, some life insurers are in for a tough time. ""If stocks remain under pressure until the end of the current business year they will see unrealised profits on their shareholdings wiped out, forcing them to post losses,"" Nikko Research's Hasegawa said.
Falling stock prices reduce their unrealised profits on shareholdings. These unrealised profits are a source of funds to cover sudden losses and write-offs of problem loans and make up for negative spreads between low investment yields and already promised payouts.
The payouts are calculated based on prospective investment yields at the time insurance policies were written.
If the Nikkei average of 225 leading shares is around 19,000 on March 31, when the companies close their books for 1996/97, unrealised profits on shareholdings at three life insurers -- Toho Mutual Life, Nissan Mutual Life and Kyoei Life -- will be wiped out, the sources said.
A Nikkei fall to 18,000 would make the unrealised profits at Tokyo Mutual Life, Nippon Dantai Life and Daihyaku Mutual Life disappear, while the crucial level is 17,000 for Sumitomo Life and Chiyoda Mutual Life, they said.
On Thursday, the Nikkei closed down 471.26 points at 17,864.04. But on Friday morning the index bounced back, rising 570.68 points by midday.
Chiyoda, Nissan, Kyoei, Tokyo, Nippon Dantai, and Daihyaku all posted before-tax current losses in the year to March 31, 1995. Toho also did so, for the second straight year.
",10
"Japan's depressed real estate market is unlikely to get much immediate help for its problems despite market euphoria over possible state purchases of land once owned by troubled financial firms, analysts said.
Tokyo's key stock index surged on Thursday, led by property-related issues, after a newspaper report saying the government was considering using public funds to buy collateralised land formerly owned by failed mortgage firms and other troubled financial firms.
The index, the Nikkei 225, ended up 2.43 percent at 19,051.71, its first close above 19,000 points for more than a month.
A Finance Ministry official told Reuters a government panel was considering using funds already set aside in the next state budget to buy land formerly owned by troubled financial firms.
Vice Finance Minister Tadashi Ogawa later confirmed the possibility, telling a news conference it was possible public-sector firms may purchase such land.
He said the plan would help ease the liquidity crisis affecting real estate.
A government panel, whose members include officials from the ministries of finance, construction and justice and the National Land Agency, was set up last October to tackle the tough issue of collecting problem loans for which land is being held as collateral.
At present, firms cannot afford to sell at market levels since they would realise their huge losses caused by the collapse of the ""bubble"" economy early this decade.
This has led to stagnation in the real estate market and kept the massive problem hanging over the whole financial sector.
""The panel has been discussing how to increase liquidity in the real estate market to facilitate collection of such problem loans,"" said an official at a bank involved in the discussions.
""But we have not talked about any details yet.""
However, he said that if the government decided to buy such collateralised land, it would have a positive impact since the private sector remained reluctant to buy land.
Jesper Koll, an economist at JP Morgan Securities Asia, said public land buying was not a new initiative and no new funds were likely to be allocated for the purchases.
However, he said that more important than any public purchases was Hashimoto's promise to speed up the process of turning real estate into equity assets.
""The faster banks and real estate companies are allowed to securitise property assets, the greater their prospects for increased income generation,"" he said. ""Prime Minister Hashimoto is getting serious about fixing Japan's real estate problem sooner, not later.""
Yoshinobu Yamada, a financial analyst at Merrill Lynch Japan Inc, said that while the move by the government panel on land was not a new initiative, it would have a positive impact in the long-term.
""The government is well aware that it must take steps to stop falling land prices,"" he said, adding that a lack of land liquidity was at the core of Japan's bad-loan mess.
""If the government buys collateralised land formerly owned by jusen, this is likely to give psychological support to the the real estate markets and help the markets bottom out.""
However, he said no concrete policy steps would be available until March so that the current euphoria on the Tokyo's stock market could be only a passing fancy.
",10
"Major Japanese non-life insurance company Yasuda Fire & Marine Co Ltd announced on Monday that it plans to take a majority stake in the Japanese unit of U.S. life insurance giant CIGNA Corp.
Terms of the deal, which would be the first time a Japanese non-life insurance company has purchased a life insurance subsidiary, were not disclosed.
Yasuda said it would boost its business cooperation with CIGNA Corp of the United States by taking a majority stake in CIGNA's Japanese unit, INA Life Insurance Co.
""It is the first time a Japanese non-life insurance company has taken over a life insurance company. We have cooperated over the past 15 years and that experience made this possible,"" Yasuda president Koichi Ariyoshi told a news conference.
Ariyoshi said the relationship between CIGNA and Yasuda was an example of private-sector cooperation between Japanese and American companies even though Washington has protested Tokyo's newly revised insurance law, which it says violates a U.S.-Japan trade agreement.
The companies began cooperating in 1981 and Yasuda acquired 10 percent of INA in July 1993, and now plans to boost that stake to more than 50 percent within the next year or two, Ariyoshi said.
Under Japan's new Insurance Business Law, which took effect on April 1, non-life insurers and life insurers are allowed to enter each other's business sectors through subsidiaries.
Japan and the United States have been at odds over the entry of Japanese insurance firms' subsidiaries into the so-called third-sector market, a lucrative niche market that covers accident insurance products, among others.
Japan's Finance Ministry is likely to put conditions on the entry of domestic insurance companies' subsidiaries into the third sector, industry sources said.
Ariyoshi did not disclose the cost of the planned purchase of INA shares. However, he added the cost was similar to what it had cost non-life insurance companies to establish life insurance subsidiaries.
Japan's 11 other non-life insurers set up life insurance subsidiaries earlier this month with share capital ranging from 10 billion yen to 30 billion yen ($92.5 million to $277 million).
The life insurance subsidiaries are expected to begin operations in October.
($1=108 yen)
",10
"Japanese banks, still struggling under the weight of massive problem loans, now face tough decisions on how to adapt to expected structural changes to the country's economy and financial system, analysts say.
They say it is inevitable the banks will need to shift their focus towards creating new business and offering specific services to boost profits as demand for loans weakens.
Prime Minister Ryutaro Hashimoto's ""Big Bang"" financial reform plans unveiled last month to liberalise Japan's financial markets by 2001 will also accelerate competition.
""To increase profitability, Japanese banks must change the sources of their profits,"" said Koyo Ozeki, a director at international credit rating agency IBCA Ltd.
On Thursday, the Finance Ministry announced sweeping plans to deregulate Japan's foreign exchange market in 1998.
Eisuke Sakakibara, director-general of the ministry's International Finance Bureau, warned that Japanese banks will face intensified competition as a result of the deregulation.
""I hope Japanese financial institutions will be well prepared for severe competition in the future,"" he said.
Tight regulation, dating back to the end of World War Two, has protected Japanese banks from competition and has made them less efficient than Western rivals, analysts say.
And because of that, some analysts such as Shinji Okabe, senior credit officer at rating agency Moody's Japan, are pessimistic about the future of Japanese banks.
""It seems to me that Japanese banks cannot judge which business is profitable... It looks like the banks all think they can do everything with unlimited resources,"" he said.
Since the early 1990s, Japanese banks have written off problem loans resulting from their adventurous lending policies in the late 1980 ""bubble economy"" of inflated asset prices.
But as of the end of September, 20 major banks were still carrying 23 trillion yen ($201 billion) worth of problem loans.
Analysts say it will take two more years on average for the top 20 banks to cut the loans to manageable levels, giving foreign banks further chances to to nudge into the market.
""Foreign banks have expanded and strengthened their business base in the past decade, but Japanese banks were not able to do anything because they had to dispose of the problem loans,"" said IBCA's Ozeki.
Japan's 20 biggest banks, down from 21 after a merger in April between Bank of Tokyo and Mitsubishi Bank, posted 22.85 trillion yen ($200 billion) in parent operating profits in an eight-year period to the end of March this year.
During that time they also disposed of 21.7 trillion yen ($190 billion) in problem loans, Ozeki said.
Even profitability at Bank of Tokyo-Mitsubishi, which many analysts agree is the strongest Japanese candidate to become an internationally competitive bank, is low.
The bank's return on equity, a gauge to show the efficiency of the use of capital, is only about 7.2 percent, compared with Barclays Plc's 13.09 percent and Bankers Trust's 18.32 percent, an IBCA study showed.
Analysts say they expect more bank failures in Japan, particularly among smaller regional banks and credit unions.
In November, Japanese authorities ordered the regional Hanwa Bank to halt business, the third regional bank failure since the end of World War Two. Eleven smaller credit unions and associations have also gone under since December 1994.
Analysts said uncertainty over how to deal with troubled banks has not been entirely removed in Japan, and there remains some concern that larger and stronger banks may be drawn into the support mechanism at some cost to themselves.
Japanese banks to which Moody's has given a bank financial strength rating (BFSR) of ""E"" are financially weak, Okabe said.
Chuo Trust & Banking and Yasuda Trust & Banking, Hokkaido Takushoku Bank and Nippon Credit Bank are the E rated banks.
""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,"" he said. ($1=114 yen)
",10
"A bill to lift a 50-year-old ban on holding companies is expected to be submitted to Japan's next parliament, with passage almost assured because of the government's ""Big Bang"" deregulation plans, economists say.
They added the financial industry would likely be the one which benefits first as the lifting of the ban would help it restructure and bail out troubled financial institutions.
Political haggling has delayed a decision on the holding companies ban for almost a year.
But the economists said Prime Minister Ryutaro Hashimoto's plans to liberalise the financial markets by 2001 and the proposed breakup of telecommunications giant Nippon Telegraph and Telephone Corp (NTT) mean the ban will likely be lifted.
A holding company is a firm which controls one or more companies, often by having a majority of shares in them, but does not engage in a specific business.
Big business has demanded for years that the ban be lifted, and the pressure on the government has increased recently as many companies push for deregulation to help them streamline and compete with overseas rivals.
The plan to break up NTT calls for it to be restructured into three firms under a holding company. The firm had resisted the break-up plans until the holding company option was offered.
U.S. occupation forces introduced the ban on holding companies in 1947 to break up powerful conglomerates, known as ""zaibatsu"", which the United States said had contributed to Japan's war effort.
""I am sure the ban will be relaxed broadly in line with ideas the Liberal Democratic Party (LDP) has been advocating,"" said Hideo Fujiwara, senior research fellow at LTCB Research Institute Inc.
The Fair Trade Commission (FTC), the anti-monopoly watchdog, said last week it plans to submit a bill to end the ban to the session of parliament which starts in January.
Last January, the FTC sought to revise the Anti-Monopoly Law to broadly remove the ban, which had the backing of the pro-business LDP.
But that failed when the Social Democratic Party, a member in the then-ruling coalition, called for only a partial lifting of the ban.
If the bill passes next year, the ban would be relaxed by October 1997 at the earliest.
""Even if the ban is lifted, not many companies will make use of the new corporate structure immediately,"" Fujiwara said.
Companies such as Sony Corp, Canon Inc and Asahi Glass Co Ltd may be able to establish holding companies as they have already split their operations, he said, but many other companies have not.
But financial companies are in a better position to take advantage of the change, some economists said.
""Holding companies will enable banks, brokers and insurers to break down barriers between them,"" said Yushiro Ikuyo, a first vice president at Smith Barney International Inc.
Ikuyo said a holding company would make it easy for a big financial institution to streamline its corporate group, in particular, bailing out an ailing financial firm in the group.
The economists also said regional banks which tie up under a holding company would be able to boost their coverage areas.
Some warn, however, that financial holding companies would not solve all the problems facing the financial industry, in which too many deposit-taking institutions are competing.
""Like the recently collapsed Hanwa Bank, not all failed financial institutions can be bailed out through a holding company,"" LTCB Research's Fujiwara said.
The Finance Ministry last month suspended most operations at Hanwa and will eventually wind down the regional bank, which collapsed under the weight of its problem loans.
",10
"Japan's Finance Ministry pledged on Thursday to lift its controls on management of employee pension funds, a key member of an advisory panel to the prime minister said.
At a meeting of the Administrative Reform Council's subcommittee on deregulation, the ministry clearly stated it would abolish restrictions on where employee pension funds managed by trust banks could be invested, Yoshihiko Miyauchi, chairman of the subcommittee, told reporters.
Under current rules, each trust bank must invest at least half of the funds it manages in fixed-income assets, such as Japanese government bonds, no more than 30 percent in Japanese stocks, no more than 30 percent in foreign currency-denominated shares and bonds, and no more than 20 percent in real estate.
Miyauchi said the Finance Ministry said it would work out details on lifting its regulations on asset allocation by the end of the year.
Japan's corporate pension system is divided into employee pension funds, which are supervised by the Welfare Ministry, and Tax-Qualified Retirement Pension (TQP) plans, which are supervised by the Finance Ministry.
The Welfare Ministry abolished its restrictions on asset management by trust banks in April.
Industry sources currently estimate assets in employee pension funds at about 42 trillion yen ($378 billion) and those in TQPs at about 18 trillion yen ($162 billion).
However, Miyauchi quoted Finance Ministry officials as saying the ministry was still considering whether it would allow investment advisory companies to manage TQP plans.
At the moment, only trust banks and life insurers are allowed to manage them.
The Welfare Ministry has already lifted the rules it had to prevent investment advisory companies managing employee pension funds, although some restrictions remain on the firms.
Japanese corporations have been urging the government to reform Japan's rigid corporate pension system in the face of low returns on investment and to help maintain the international competitiveness of Japanese firms.
Employers participating in the corporate pension system are required to maintain specified yields, currently 5.5 percent a year, to guarantee pre-determined benefits.
However, the actual return on pension funds' investments is now about three percent, due to Japan's record-low interest rates and weak economic recovery, industry sources say.
Miyauchi said the Finance Ministry told the sub-committee it was studying ways to relax specified yields but had not given details.
Securities industry sources said the abolition of restrictions on asset management would encourage fund managers to pump more money into Tokyo's stock market in order to boost returns on investment. ($1=111)
",10
"Japan's big securities houses have come to accept that deregulating commissions on stock transactions is essential if they are to keep their major customers, industry sources say.
""Many Japanese brokers oppose liberalisation, but it is unavoidable if they want to keep the status of the Tokyo stock market from falling,"" one industry source said.
The sources cited an increase in ""black-eyed"" foreigners -- Japanese who buy Japanese stocks through brokers overseas to avoid higher commissions charged by domestic brokers.
However, the sources also said deregulation should be done gradually so as not to jeopardise small brokerages depending on commissions for most of their revenue.
""Big Four brokers will be able to withstand the impact of liberalisation, but smaller brokers will not,"" the source said.
Japan's ""Big Four"" -- Nomura Securities, Daiwa Securities, Nikko Securities and Yamaichi Securities -- are preparing for the liberalisation of broking fees as they fear they will lose customers, who are becoming more aware that it is cheaper to place orders abroad for Japanese stocks than it is in Japan, the sources said.
Japanese brokers charge 535,000 yen ($4,908) for buying or selling a contract worth 500 million yen ($4.58 million), the sources said, while fees overseas would be less than half that.
The Big Four depended on commissions for about 30 percent of their revenue in the fiscal year to March 31, 1995.
But commissions accounted for more than 70 percent of revenues for many of Japan's 230 smaller brokerages, they said.
Earlier this year, the Pension Welfare Service Public Corp (Nenpuku), which manages about 23 trillion yen ($211 billion) in public pension funds, commissioned investment advisory companies to manage its funds.
""Those investment advisory companies set up so-called limited partnerships abroad and placed orders in London,"" said another industry source.
""By trading in the over-the-counter market in London, they saved money as stockbroking fees there are cheap and there is no securities transaction tax.""
This triggered interest from other institutional investors, the sources said.
While no statistics are available, purchases by the so-called black-eyed investors had recently inflated figures for purchases of Japanese stocks by foreigners, they said.
Atsushi Nagano, director-general of the Japanese Finance Ministry's Securities Bureau, told Reuters the ministry was aware of the situation.
""Watching such cases, I feel like there is something wrong in the Tokyo market,"" he said.
When Japan liberalised broking fees for contracts of more than 1 billion yen ($9.1 million) in April 1994, the Finance Ministry said it would consider deregulating fees on smaller lots of stocks after seeing the impact of that liberalisation.
Industry sources said further deregulation would be one of the main topics at a special committee of the Securities and Exchange Council -- an advisory panel to the Finance Minister -- which is supposed to present proposals on how to reform Tokyo's securities market next June.
The second source said that even though no time frame had been set for the complete liberalisation of commissions, abolishing the securities transaction tax would help boost the Tokyo exchange.
Japan lowered the tax to 0.21 percent of the value of a sale from 0.3 percent, except for sales by securities houses, on April 1.
Broking fees were liberalised in New York in 1975 and in London in 1986. ($1=109)
",10
"Japan's biggest life insurer, Nippon Life Insurance Co, plans to set up a joint venture in the Philippines, becoming the first Japanese company to sell life insurance policies abroad.
A spokesman for Nippon Life said on Monday that it and the Yuchengco group of the Philippines' would sign a contract by the year-end to establish a joint venture by next March.
""Japanese insurers have not gone abroad to sell life insurance policies. We plan to sell policies in the Philippines to people in the medium to high income bracket, and also target Japanese firms that have already entered the country,"" he said.
Nippon Life will own 50 percent of the joint venture, which will be based in Manila. The rest will be owned by two Yuchengco group firms -- 30 percent by Great Pacific Life Assurance Corp and 20 percent by Rizal Commercial Banking Corp.
The size of the capitalisation and the number of staff at the new company have not yet been decided, but Nippon Life is expected to send several executives to the venture, he said.
Nippon Life is also looking to tap lucrative markets elsewhere in Asia as the domestic insurance business approaches saturation point, the spokesman said.
The president of Nippon Life, Josei Itoh, said earlier this year that it wants to help build up the life insurance market in the rest of Asia in collaboration with local firms.
Only an estimated five to 10 percent of people in Southeast Asia have life insurance policies, Itoh said, adding that China's biggest insurer, the People's Insurance Co of China (PICC), could be a candidate for a joint venture.
Nippon Life is a giant in the Japanese insurance business and one of the world's top providers of life cover, with assets of about 39 trillion yen ($348 billion), nearly one-fifth of the value of assets held by Japan's 31 life insurers.
Analysts say the insurance business in emerging Asian countries will grow rapidly in the coming decades. Purchase of life insurance policies is closely tied to an individual's affluence and disposable income, they say.
""While Japan's insurance market is reaching maturity, the prospects for growth are enormous in the rest of Asia as countries there have just begun to build up a pool of their own capital,"" said Nikko Research Centre analyst Kouya Hasegawa.
""Japanese banks and other financial institutions are already targeting Asian markets for future opportunities. Nippon Life took action in the region as the first Japanese life insurer to do so, indicating other big life insurance firms will follow,"" he said. ($1=112 yen)
",10
"Japan's financial industry suffered another blow Tuesday when a court was asked to start bankruptcy proceedings against a major realtor that has estimated liabilities of almost $5.5 billion.
But analysts said that while the collapse of Osaka-based Sueno Kosan could affect some individual financial institutions, it was unlikely to have any major negative impact on the overall financial industry.
The Housing Loan Administration Corp., or HLAC, a semi-governmental body set up to collect problem loans run up by seven failed mortgage companies, said it had asked the Osaka District Court to start bankruptcy proceedings against Sueno Kosan and two of its affiliates.
If Sueno Kosan, a privately held real estate company that borrowed heavily from the ""jusen"" mortgage firms, is declared bankrupt, it could become one of Japan's biggest-ever business failures, analysts said.
The HLAC said it has claims totalling 347 billion yen ($3.07 billion) on Sueno Kosan and the two units. The claims were transferred from the failed jusen firms to the body.
Sueno Kosan group's total liabilities are estimated at 620 billion yen ($5.48 billion), said Tokyo Commerce and Industry Research Co, a private credit research body.
Japan's banking industry was also jolted last month when a major financing company, Nichiei Finance Co. Ltd, filed for liquidation with huge debt liabilities. Like the jusen and Sueno Kosan, Nichiei was a casualty of the property-related lending boom in the late 1980s ""bubble era"" and the subsequent dive in asset prices.
Although the overall damage to the financial system may be slight, analysts said individual non-bank financial institutions with outstanding loans to Sueno could suffer. A non-bank financial institution makes loans but does not take deposits, raising funds by borrowing from banks.
""Should Sueno be forced into bankruptcy and its assets distributed, many of the other lender non-banks will be forced to absorb huge losses relative to their size,"" said James Fiorillo, ING Baring Securities (Japan) analyst.
""This will probably force many of them (creditors) into distress or bankruptcy, so the outcome ... should be closely watched,"" he said.
Finance Minister Wataru Kubo did not appear to be that worried, although he told reporters the Sueno Kosan problem might spread to financial firms that had lent it money.
""However, such an impact will be resolved among related financial institutions in accordance with our financial system,"" he said.
In June, Japan adopted a controversial plan that allowed for the use of 685 billion yen ($6.06 billion) in public funds to help wind up the jusen.
",10
"Japan's top banks are touting a plan to lift a 50-year-old ban on holding companies as the cure for what ails their industry, but analysts say it will take more than that to solve their problems.
""We doubt that a simple change in ownership structure will result in aggressive restructuring of financial institutions,"" said Kathy Matsui, a strategist at Goldman Sachs (Japan).
She said restructuring was dependent on the will of managements, and it was doubtful if holding companies alone would spur the necessary changes in the troubled industry.
The banks, groaning under massive bad loan problems, fear that Japan's ""Big Bang"" reforms will lead to a bloodletting that could end in the collapse of financial institutions which are in poor financial health.
Many bank officials see the holding company route as the key to coping with the reforms, which are designed to liberalise the nation's financial markets by 2001.
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 umbrella companies would also allow huge, inefficient corporate giants to split into several leaner operations.
But most analysts are unconvinced about the banking industry's willingness to tackle large-scale streamlining.
""The market has been becoming more critical of Japanese banks in the past one or two months as they have delayed their disclosure of problem loans,"" said Yushiro Ikuyo, a first vice-president at Smith Barney International.
Banks still appear to be hoping for a soft landing scenario and they lack a sense of crisis control, Ikuyo said.
Bankers, meanwhile, say they need a freer hand to establish financial holding companies.
""Concern is growing about Japanese banks' declining international competitiveness, so I would like (the government) to make sure that nothing will be done to reduce the effectiveness of holding companies,"" Shunsaku Hashimoto, the chairman of the Federation of Bankers' Associations of Japan, told reporters this week.
If all goes as planned, Japan will overturn the ban next year. It was imposed by U.S. Occupation forces five decades ago to break up powerful conglomerates known as ""zaibatsu"".
Japan's ruling Liberal Democratic Party and its policy partners are in last-ditch talks on to issue, and if they agree the government will submit a bill to parliament in March.
The Finance Ministry has also begun to work out necessary revisions in financial laws to enable the establishment of financial holding firms.
The corporate structure of a holding company will also make it easier and less costly to combine poorer-performing banks than a corporate merger, banking officials said.
In a merger, Japanese banks find it difficult to smooth relations between two distinct corporate cultures, and layoffs are also hard to justify when two banks merge, they said.
A holding company system would also allow big city banks to team up with regional banks. Regional markets offer the promise of new business for the big banks, they added.
Katsuhito Sasajima, an analyst at Nikko Research Center, said many banks saw holding companies as a tool to give them greater management flexibility. ""I expect big commercial banks will benefit most from holding companies,"" he said.
Analysts and bankers say, however, that there are a number of obstacles involving tax, commercial and securities rules which must be addressed before holding companies can be practically implemented.
Unless Japan introduces a new corporate tax system in which tax is calculated based on the combined profits or losses of group companies, there will not be many cost benefits in setting up a holding company, they said.
",10
"Share trading on the Tokyo Stock Exchange could more than triple to a billion shares a day, once deregulation is decided and implemented, a senior official of the Finance Ministry said.
Atsushi Nagano, director general of the ministry's securities bureau, said he is resolved to make Tokyo a more attractive place to do securities business.
""It is not just a dream to boost the volume on Tokyo's stock market to one billion shares if we make the Tokyo market more attractive,"" Nagano told Reuters in an interview.
Nagano declined to discuss details of possible changes in regulations, but financial industry sources said some of the measures on the agenda are: - deregulation of brokers' commissions on smaller lots, - further breaking down the wall separating banks and securities houses, - allowing sales of investment trusts at bank counters.
On Friday, turnover on the exchange's first section was about 381 million shares, compared with a scant 225 million on Thursday. Daily turnover has averaged 300 million to 400 million in the past two years.
Nagano, whose bureau is responsible for overseeing the nation's securities markets and industry, said the industry has no choice but to open up to all investors from around the world in line with global standards.
Now recovering a little from a slump in business after the collapse of the ""bubble"" economy of inflated stock and asset prices of the late 1980s, the securities industry has begun to consider its future, although it is still somewhat vulnerable, he said.
In the past when turnover on the stock market dwindled, the government had thought of remedies such as increasing public spending, but this would not work any more, he said.
Share trading on the exchange was worth $889 billion last year, while that in New York stood at $3.08 trillion, data from the Finance Ministry show.
Trading volume of Nikkei 225 index futures on the Osaka Securities Exchange (OSE) plunged to 7.22 million lots or contracts in 1995 compared with 21.64 million in 1991, while that on the Singapore Mercantile Exchange (SIMEX) surged to 3.16 million lots from only 361,000 in 1991.
Market sources said declining turnover of Nikkei 225 index futures was attributable to tougher trading rules the Finance Ministry imposed after the bubble burst in the early 1990s.
In June, an advisory panel to the Finance Minister, the Securities and Exchange Council, established a special committee to debate reform in the securities markets, the industry and securities policy management.
Nagano said he wanted the committee to discuss wide-ranging issues which have impeded development of Japan's securities markets. ""I believe there is a lot of room to expand for this (securities) industry. While investors and borrowers need each other, there are some obstacles to matching (the needs of the two sides).""
Nagano said he did not want the committee to go into individual measures hurriedly without deep discussions about the problems facing the markets and the industry.
""It may take one or two months from now before discussions of individual issues start,"" he added.
The committee is expected to make proposals next June.
",10
"Japan's financial industry suffered another blow on Tuesday when a court was asked to start bankruptcy proceedings against a major realtor which has estimated liabilities of almost $5.5 billion.
But analysts said that while the collapse of Osaka-based Sueno Kosan could affect some individual financial institutions, it was unlikely to have any major negative impact on the overall financial industry.
The Housing Loan Administration Corp (HLAC), a semi-governmental body set up to collect problem loans run up by seven failed mortgage companies, said on Tuesday it had asked the Osaka District Court to start bankruptcy proceedings against Sueno Kosan and two of its affiliates.
If Sueno Kosan, an unlisted real estate company which borrowed heavily from the ""jusen"" mortgage firms, is declared bankrupt, it could become one of Japan's biggest ever business failures, analysts said.
The HLAC said it has claims totalling 347 billion yen ($3.07 billion) on Sueno Kosan and the two units. The claims were transferred from the failed jusen firms to the body.
In total, Sueno Kosan group's liabilities are estimated at 620 billion yen ($5.48 billion), said Tokyo Commerce and Industry Research Co, a private credit research body.
Japan's banking industry was also jolted last month when a major financing company, Nichiei Finance Co Ltd, filed for liquidation with huge debt liabilities. Like the jusen and Sueno Kosan, Nichiei was a casualty of the property-related lending boom in the late 1980s ""bubble era"" and the subsequent dive in asset prices.
The Osaka court has taken steps to seize the assets of Sueno Kosan and its affiliates in response to the application, the HLAC statement said. There was no immediate comment from Sueno Kosan on the moves.
Although the overall damage to the financial system may be slight, analysts said individual non-bank financial institutions with outstanding loans to Sueno could suffer. A non-bank financial institution makes loans but does not take deposits, raising funds by borrowing from banks.
""Should Sueno be forced into bankruptcy and its assets distributed, many of the other lender non-banks will be forced to absorb huge losses relative to their size,"" said James Fiorillo, ING Baring Securities (Japan) analyst.
""This will probably force many of them (creditors) into distress or bankruptcy, so the outcome...should be closely watched,"" he said.
Finance Minister Wataru Kubo did not appear to be that worried, although he told reporters the Sueno Kosan problem might spread to financial firms that had lent it money.
""However, such an impact will be resolved among related financial institutions in accordance with our financial system,"" he said.
Noboru Matsuda, governor of the Deposit Insurance Corp of Japan (DIC), which supervises the HLAC, said in a statement that it was inevitable such action would be taken against some ""malignant"" borrowers like Sueno, which he said had repeatedly attempted to hide assets.
In June, Japan adopted a controversial plan that allowed for the use of 685 billion yen ($6.06 billion) in public funds to help wind up the jusen.
The HLAC inherited assets totalling 6.5 trillion yen ($57.5 billion) from the failed firms after 6.4 trillion yen ($56.6 billion) worth of unrecoverable loans were written off with the help of financial institutions and public money. ($1=113 yen)
",10
"First-half results from Japan's 20 biggest banks show they have moved back into the black despite hefty write-offs of problem loans.
Analysts said figures released by 10 trust and credit banks on Monday showed that all of Japan's big banks had continued actively writing off problem loans resulting from the collapse of Japan's 1980s asset ""bubble"".
The 10 biggest commercial banks announced their interim earnings and loan write-off statistics on Friday.
Combined write-offs by the 20 biggest banks totalled about 2.4 trillion yen ($21.4 billion) in the first half of the current financial year to September 30.
At the end of March, the Finance Ministry said the 20 banks had about 25 trillion yen ($223 billion) worth of problem loans, which include loans made to bankrupt companies and those on which interest payments are in arrears by six months or more.
Last fiscal year, the 20 big banks disposed of nearly 11 trillion yen ($98.2 billion) worth of problem loans.
Katsuhito Sasajima, an analyst at Nikko Research Centre, said the 20 banks may dispose of at least five trillion yen ($44.6 billion) worth of problem loans in the current fiscal year in order to cut the size of problem loans to manageable levels.
Analysts said many big banks were now recovering from the difficulties caused by the problem loans, but some financially-weak banks would continue to struggle to dispose of such loans in the coming years.
Yoshinobu Yamada, an analyst at Merrill Lynch Japan, said that major banks should be able to cut their problem loans to manageable levels this financial year, but added that ""some banks are still reeling from the bad loan problem.""
Three long-term credit banks -- Industrial Bank of Japan, Long-Term Credit Bank of Japan and Nippon Credit Bank -- all recorded parent current profits for the first half after posting parent current losses in 1995/96.
Current profit is pre-tax and includes gains or losses from sales of securities.
The three said they disposed of 255.1 billion yen ($2.27 billion) of problem loans in the first half against a total of 1.93 trillion yen ($17.2 billion) last year.
The smallest long-term credit bank, Nippon Credit, said that it hoped to cut its problem loans to manageable levels by the end of 1997/98 at the earliest.
As of the end of September, problem loans at Nippon Credit stood at about 1.4 trillion yen ($12.5 billion) or nearly 14 percent of its total loans.
Japan's seven major trust banks, all of which posted parent current losses in 1996/97, said they posted combined parent current profits of 316.76 billion yen ($2.82 billion) in the first half after disposing of 1.02 trillion yen ($9.1 billion) of problem loans in the period. This compared with disposals of 2.69 trillion yen ($24.0 billion) last year.
A trust bank executive said the banks' combined parent current profit for the first half was a record as Japanese authorities had eased special reserve requirements for trust banks in March to free up funds to dispose of problem loans.
Analysts said the seven banks would use about one trillion yen ($8.9 billion) of the special reserves to write off problem loans in fiscal 1996/97.
Atsushi Takahashi, the managing director of Sumitomo Trust, told reporters that the bank aims to reduce its problem loans to manageable levels in the current financial year.
""We are planning to dispose of a total of 370 billion yen ($3.30 billion) of problem loans in 1996/97,"" he said. ($1=112 yen)
",10
"Japan's biggest brokerage, Nomura Securities, posted a hefty half-year loss on Tuesday but other ""Big Four"" brokers turned in handsome profits due to improving business on the nation's stock market.
Nomura suffered a net parent loss of around $3 billion in the six months to September 30 after ploughing large amounts of money into helping an ailing finance firm in the Nomura group.
However, the three other big brokers posted healthy profits generally in line with their performance for the same period last year, helped by rising turnover on the Japanese stock market. The brokers have troubled affiliates too but have yet to work out detailed strategies for tackling the problem.
Executives at Daiwa Securities, Nikko Securities and Yamaichi Securities all said their firms had benefited from increased stockbroking fees and commission income from bond and stock underwriting.
Despite the net losses, analysts said Nomura was on track for better-than-expected profits this year, which would make it easier to resolve financial woes in the Nomura Group.
In the first half, Nomura's parent current profit stood at 69.87 billion yen ($618 million), more than double its 32.16 billion yen ($284 million) first-half profit a year earlier.
However, it reported a loss of 337.54 billion yen ($2.98 billion) on a net basis after providing financial support worth 371 billion yen ($3.28 billion) to the non-bank affiliate.
Parent current profit is pre-tax, and includes losses and gains on non-operating activities. Net profit is after-tax and includes extraordinary profits or losses.
Nomura's Vice President Atsushi Saito said there were no complaints from customers and shareholders about its decision to support the affiliate. Credit rating agencies have been positive about the decision as it shows a willingness to confront the problem, he said.
Nomura wants to boost its operating profits for the latter half of 1996/97 to offset the half-year net loss, he added.
Meanwhile, Hiromitsu Sogame, vice president of Japan's second-biggest broker Daiwa, said that the company wants to provide support to its non-bank affiliate in the current business year on a lump-sum basis and was working on a plan with tax officials and accountants.
In the first half, Daiwa's parent current profit rose 3.7 percent to 28.55 billion yen ($252 million). It was also in profit on a net basis. Sogame said the affiliate needs to write off more than 100 billion yen ($884 million) worth of bad assets and Daiwa will use profits from sales of shareholdings, internal reserves and current profits to provide the aid.
Masao Yuki, the vice president of third biggest broker Nikko, said the company was also considering financial support to several non-bank affiliates. However, he said one of the troubled units was jointly owned by Asahi Bank and it would take time to work out a plan.
Ryuji Shirai, deputy president at Yamaichi Securities, said his firm is expected to revise an existing restructuring plan for its non-bank financial affiliate to cut the period covered by the scheme from the current 10 years.
Nikko's parent current profits fell slightly to 22.23 billion yen ($196 million) in the first half from 25.53 billion yen ($225 million) in the year-earlier period.
Parent current profits at Yamaichi, the last of the ""Big Four"", rose 23 percent to 6.44 billion yen ($56.9 million) in the April-September period. Its net profit also rose.
Nomura and Daiwa did not give earnings forecasts but Nikko said that it expected a parent current profit of 60 billion yen ($530 million) in 1996/97, and Yamaichi said it projected a profit totalling 19 billion yen ($168 million).
",10
"An influential Japanese government panel on Thursday called for a fundamental change in the nation's land policies, arguing that the old concept of trying to hold down land values was out of date.
Real estate values have plummeted since the bursting in the early 1990s of Japan's ""bubble"" of inflated asset prices.
The panel called for an ""appropriate"" tax on landholdings in line with balanced assessments of value.
To promote more liquidity in real estate holdings it recommended securitisation and promotion of joint ventures.
It also called for steps to encourage small landowners to sell their land or cooperate in development projects in order for large-scale development to take place in big cities.
Analysts and real estate industry sources said, however, that the panel failed to make specific proposals that would help end the long slump in the real estate market.
""Nobody in the government or politicians have yet formed a clear policy to solve the slump in the real estate market and falling land prices,"" said a real estate industry source.
Some experts said a change in taxation is the most important step that needs to be taken.
""While the panel makes wide-ranging proposals, it is somewhat disappointing that the panel did not make specific proposals on taxes on land (holdings and transactions),"" said Keiko Otsuki, a senior analyst at UBS Securities Ltd.
It is Japan's first review of land policy in five years.
The panel said in its proposals to Prime Minister Ryutaro Hashimoto that land prices had fallen to a point where the price surges in the latter half of the bubble had been offset after a five-year slump.
Emergency intervention measures to curb land prices adopted in 1991 are no longer needed as they are still falling, it said.
Banks and non-bank financial institutions have been reeling from property-related bad loans, a factor blocking a smooth supply of funds to the real estate market and strong economic recovery.
The proposals follow a request by Hashimoto in April for a review of Japan's land policy to cope with structural changes such as falling land prices, growing numbers of people leaving the Tokyo metropolitan area and a rapid rise in the proportion of old people in the population.
",10
"Japan's biggest brokerage, Nomura Securities, posted a hefty half-year loss Tuesday, but other ""Big Four"" brokers turned in handsome profits due to improving business on the nation's stock market.
Nomura suffered a net parent loss of around $3 billion in the six months to Sept. 30 after ploughing large amounts of money into helping an ailing finance firm in the Nomura group.
However, the three other big brokers posted healthy profits generally in line with their performance for the same period last year, helped by rising turnover on the Japanese stock market. The brokers have troubled affiliates too but have yet to work out detailed strategies for tackling the problem.
Executives at Daiwa Securities, Nikko Securities and Yamaichi Securities T all said their firms had benefited from increased stockbroking fees and commission income from bond and stock underwriting.
Despite the net losses, analysts said Nomura was on track for better-than-expected profits this year, which would make it easier to resolve financial woes in the Nomura Group.
In the first half, Nomura's parent current profit stood at 69.87 billion yen ($618 million), more than double its 32.16 billion yen ($284 million) first-half profit a year earlier.
However, it reported a loss of 337.54 billion yen ($2.98 billion) on a net basis after providing financial support worth 371 billion yen ($3.28 billion) to the non-bank affiliate.
Parent current profit is pre-tax, and includes losses and gains on non-operating activities. Net profit is after-tax and includes extraordinary profits or losses.
Hiromitsu Sogame, vice president of Japan's second-biggest broker, Daiwa, said the company wants to provide support to its non-bank affiliate in the current business year on a lump-sum basis and was working on a plan with tax officials and accountants.
In the first half, Daiwa's parent current profit rose 3.7 percent to 28.55 billion yen ($252 million). It was also in profit on a net basis. Sogame said the affiliate needs to write off more than 100 billion yen ($884 million) worth of bad assets and Daiwa will use profits from sales of shareholdings, internal reserves and current profits to provide the aid.
Masao Yuki, the vice president of third-biggest broker, Nikko, said the company was also considering financial support to several non-bank affiliates. However, he said one of the troubled units was jointly owned by Asahi Bank and it would take time to work out a plan.
Nikko's parent current profits fell slightly to 22.23 billion yen ($196 million) in the first half from 25.53 billion yen ($225 million) in the year-earlier period.
Parent current profits at Yamaichi, the last of the ""Big Four,"" rose 23 percent to 6.44 billion yen ($56.9 million) in the April-September period. Its net profit also rose.
Nomura and Daiwa did not give earnings forecasts but Nikko said that it expected a parent current profit of 60 billion yen ($530 million) in 1996/97, and Yamaichi said it projected a profit totalling 19 billion yen ($168 million).
",10
"Weak Japanese regional banks face a scramble to clean up their bad loan problems before oversight standards are tightened next year, but their room for manoeuvre may be limited by a sagging stock market.
This squeeze on the struggling players in the banking sector could cause more financial collapses and forced liquidations down the road, analysts and banking sources say.
The introduction of formal capital adequacy standards in April next year means banks must deal with non-performing assets or risk being taken to task or closed down by the authorities for failing the new financial health test.
Banking sources and analysts say this is putting pressure on the banks to raise capital in order to bring their ratio of capital to risk-weighted assets to an acceptable balance.
But a weak stock market raises the chances of institutions flunking the capital adequacy test, as it makes it hard for them to raise capital by issuing new shares.
""Smaller banks with a weak capital base must take measures to raise capital before the new system is introduced,"" said Katsuhito Sasajima, a Nikko Research Centre analyst.
One option which has already proved popular with banks is to issue new shares to existing shareholders at a price pitched midway between the market value and face value. But this is getting harder amid the stock market gloom, Sasajima said.
The slide in the stock market is hurting the banks in a number of ways, eroding the paper profits on their share portfolios that they were using to tackle bad loans, as well as narrowing their options for raising fresh capital.
The new adequacy standards, known as the prompt corrective action (PCA) system, are being introduced to bolster confidence in Japan's banking sector by keeping a closer watch on firms' health and preventing problems spinning out of control.
Under the new system, banks are strictly required to set aside loan loss provisions in line with the global accounting standards. To be classed as ""adequately capitalised"", financial institutions operating only in Japan must have an adequacy ratio of four percent or more, while internationally active banks must have a ratio of eight percent.
A bank can be ordered to take action to improve its health, and can be liquidated if its capital adequacy ratio falls below zero percent and inspectors pinpoint inadequacies.
At the moment there are no clear Finance Ministry standards, which has been cited as one factor in the ballooning bad loan problem after the collapse of the 1980s asset bubble.
""The imposition of a strict write-off system (via the PCA)...would force a large number of  smaller, weaker banks to the wall,"" said Yukiko Ohara, an analyst at UBS Securities Ltd, in a recent report.
At the end of last September, problem loans at Japan's deposit-taking financial institutions totalled 29.23 trillion yen ($247 billion), of which 7.3 trillion yen ($61.8 billion) was estimated to be uncovered loan losses, according to Finance Ministry data. But analysts believe the scale is actually much bigger than that.
To boost capital ahead of the new system, about 10 regional banks announced last year that they would issue new shares by the end of March priced halfway between the market and face value. Among them are Hokuetsu Bank Ltd, Hokkoku Bank Ltd, Miyazaki Bank Ltd, Yamagata Bank Ltd and Awa Bank Ltd.
However, analysts say that there are several regional banks with a more urgent need to increase their capital.
Japan's Nihon Keizai Shimbun reported last week that there were 10 regional banks whose capital adequacy ratio was below four percent at the end of March, 1996.
Among them was Hanwa Bank, whose operations -- except for withdrawals -- were suspended by Finance Ministry last November as it was unable to recover bad loans.
Tokyo-based regional bank Tokyo Sowa Bank Ltd has said it had a capital adequacy ratio of 3.8 percent as of March 31, 1996, compared with 4.35 percent a year earlier after going into the red to dispose of a swathe of problem loans, eroding its capital. It disposed of 130 billion yen ($1.10 billion) in problem loans in 1995/96, much more than its competitors and Tokyo Sowa said the problem was now under control.
In order to clear the four percent hurdle by April 1998, the bank will take such steps as procuring subordinated debts and issuing new shares, a bank spokesman said.
Analysts have said that before the PCA system is introduced, the Finance Ministry may have to pull down the shutters at some ailing banks that are unable to break free of bad loans and cannot boost their capital. ($1=118 yen)
",10
"Two Nomura Securities group asset management firms said on Wednesday that they would merge next October to create a top player with a competitive edge on rivals in Japan's rapidly growing market.
The planned merger of Nomura Investment Management (NIM) which manages corporate pension funds and other large funds, and Nomura Securities Investment Trust Management (NSITM) which manages investment trusts for individuals -- similar to mutual funds -- would yield one of the world's biggest asset management companies, with total assets of 15 trillion yen ($132 billion) under its care, analysts said.
NIM president Tadashi Takubo told a news conference that overlapping operations at the two firms would be streamlined to sharpen the new company's competitive edge as Japan implements broad financial reforms targeted for completion by 2001.
Last month, Prime Minister Ryutaro Hashimoto unveiled plans for a five-year ""Big Bang"" to liberalise Japan's financial markets and recoup Tokyo's status as the key financial centre.
Among Hashimoto's proposals was a call to make effective use of individual financial assets which now total some 1,200 trillion yen ($10.61 trillion).
""We would like to form an internationally competitive system because regulations on asset management are being lifted (in Japan), Takubo said.
Getting good returns on those assets is increasingly vital as Japan confronts a rapid rise in the proportion of elderly people in its population, analysts said.
Foreign rivals are also keen to cash in on the expected growth in Japan's pension fund and investment trust markets. Andrew Simmonds, president of BZW Securities (Japan) Ltd, said last month, ""One of the things I think is exciting is the potential mutualisation of the savings base in Japan.  We're not alone there -- everyone else is excited by that.""
U.S. mutual fund giant Fidelity Investments also plans to enter the Japanese market in a big way next year and hopes to lure Japanese investors now fed up with ultra-low returns by making available its unique U.S.-style services.
An industry source said that outstanding mutual funds in Japan total only about 50 trillion yen ($442 billion) in Japan compared to nearly 200 trillion yen ($1.76 trillion) in the United States.
""The figures show Japan's investment trust market has the potential to grow much bigger,"" the source said.
Some analysts dubbed the planned merger a natural attempt to boost efficiency, but others warned that achieving that goal was not necessarily assured.
""Nomura's asset management companies have already been big compared with competitors, and it is questionable whether they will be able to boost performance through the merger,"" said an official at an overseas-based investment advisory firm.
""Generally speaking, fund managers at Japanese companies are conservative,"" he said. ""They tend to avoid investment risks because they see the risks, which are short-term volatility, as something dangerous. But experienced foreign advisors are well-qualified to manage pension funds as they take reasonable risks in long-term pension fund management.""
Toru Tsuchida, president of NSITM, meanwhile, said the merged company would not cut jobs and in fact might increase its workforce later to improve the quality of asset management and research. ($1=113 yen)
",10
"Japan is expected to lift controls on stock-related derivatives as part of a drive to free up its financial markets, but industry sources have doubts about whether the products can really take off here.
The securities industry sources said Tokyo was lagging so far behind overseas rivals, including Singapore and Hong Kong, that it would be extremely difficult to make a viable and attractive market for stock-based derivatives in Japan.
On Monday, Prime Minister Ryutaro Hashimoto announced a five-year ""Big Bang"" plan to liberalise the nation's markets and catch up with reforms carried out years ago in rival financial centres like London. The aim is to make Japanese markets ""free, fair and global"".
As part of that push, Hashimoto asked for a review of laws relating to derivatives transaction, which currently restrict stock options to those based on indices, rather than on individual stocks.
But even before the ""Big Bang"" announcement, Japan's Ministry of Finance (MOF) had already been looking at lifting restrictions on stock options and equity swap transactions.
A trader at a foreign brokerage said that Japanese participants are already used to offshore trading in derivatives, avoiding the tightly regulated Japanese markets, and it may be hard to generate interest here.
""It is too late to induce market enthusiasm,"" he said. ""Even if the finance ministry deregulates (stock-related) derivatives trading in Japan, it might be difficult to make Tokyo markets attractive,"" he said.
An official at the ministry told Reuters recently that it plans to decide whether to allow the introduction of a variety of stock-related derivatives transactions after an advisory panel delivers its recommendations next spring.
While Japan introduced stock index futures and options in the late 1980s, the ministry has taken a particularly cautious approach to derivatives of individual stocks in order to concentrate equity-related deals on stock exchanges.
Options, which are usually used to hedge against losses due to price fluctuations, allow the holder to buy or sell a specified amount at an agreed price during a set time period.
An analyst at a big brokerage said that the securities industry and the Osaka and Tokyo stock exchanges have made preparations to list individual stock options and are ready to start as soon as the ministry gives the go-ahead.
Such options on individual stocks were introduced in the early 1970s in the U.S. and European markets.
Big Japanese brokers also want to offer stock options which can be traded directly between investors and traders without any stock exchange involvement, he said.
Up until now, trading of individual stock options and equity swap transactions was banned as this was judged to violate the Criminal Code outlawing gambling.
This has pushed lucrative business offshore to less regulated markets, where brokers are able to trade options or warrants based on Japanese stocks if they wish. Market sources say Japan may have to revise the law to clear the way for such derivatives trade.
",10
"More Japanese finance firms braced for the bitter pill of court-protected liquidation on Thursday, but analysts said Japan's banking sector still faces a long road to recovery from its bad loan headaches.
The announcements were no surprise and more were considered likely as the banking sector struggles to get rid of troubled finance firms and regain its credibility.
The collapses highlighted, however, the growing worries that unexpected bad news may lie ahead and that Japan's slumping stock market could set back the recuperation further.
The latest victims were All Corp, with debts on borrowings worth 274.5 billion yen ($2.36 billion), Sanwa Tatemono Sogo Finance Co with debts of 66.4 billion yen ($572 million) and CS Sogo Service with debts of 71.3 billion yen ($614 million).
Ubumi Sagara, president of Tokyo-based non-bank All Corp, told reporters the firm would hold a shareholders' meeting by the end of March to seek approval for a liquidation filing.
The firm's major creditor banks -- Tokai Bank Ltd, Sakura Bank Ltd and Chuo Trust Banking & Co Ltd -- were accepting its special liquidation plan, he said.
All Corp's cumulative debt exceeded its assets by 195.4 billion yen ($1.68 billion) as of September 1996 and it would be hard to improve its business despite recent restructuring efforts, he said.
""All Corp has been well-known as a troubled non-bank,"" said Yoshinobu Yamada, a financial analyst at Merrill Lynch Japan.
""Main creditor banks have already set aside loan loss provisions to prepare for the failure and the liquidation will have no major impact on earnings of those banks,"" he said.
Japan had at least five non-bank failures in 1996, including the collapse of Nichiei Finance Co, which filed for liquidation with debt liabilities of around one trillion yen ($8.6 billion). By one measure, this made Nichiei the largest such insolvency case in Japan in the postwar period.
Katsuhito Sasajima, an analyst at Nikko Research Centre, said banks in general have been well-prepared for possible failures of non-bank companies in recent years.
Banks are major lenders to non-bank institutions, which do not take deposits and largely depend on bank loans as sources of funds for their own lending.
""All Corp is not the end of the problem loan mess at credit firms and people know that. Rather, worries have grown that banks may have to write off bigger problem loans to general contractors than earlier expected,"" Sasajima said.
A new restructuring programme unveiled late last year by Tobishima Corp, a contractor and engineering company, fuelled concerns that banks would face new burdens as ailing firms seek added support in attempting to reshape themselves, he said.
The failures at Sanwa Tatemono Sogo Finance and CS Sogo Service were not surprising, either, as the two firms were subsidiaries of failed parent companies, banking sources said.
Banking sources said that while the impact of All Corp's liquidation would be limited, they were much more concerned about jitters in the Tokyo stock market. The closely watched Nikkei average lost about 11 percent of its value last week.
Declining stock prices whittle away unrealised profits from banks' shareholdings, reducing the amount of money available to write off problem loans and thus protracting the mess in the banking industry, they said. ($1=116 yen)
",10
"Two out of Japan's ""Big Four"" brokers, Nomura Securities and Daiwa Securities, are expected to regain their financial health in the current business year, analysts said on Friday.
Japan's second-biggest broker Daiwa Securities said on Friday that it was considering a restructuring programme for a non-bank affiliate.
While details have yet to be decided, analysts said it would not be surprising if Daiwa announces financial aid later in the 1996/97 business year ending in March.
""We expect Daiwa to post a parent current profit of 67 billion yen ($598 million) in 1996/97 if daily average turnover on the Tokyo exchange hits 430 billion yen ($3.83 billion) and if it does not give any support,"" said Ayako Sato, an analyst at UBS Securities.
Problem loans held by Daiwa's non-bank affiliate are estimated to total 100 billion yen ($892 million) to 150 billion yen ($1.33 billion), and even if the broker decides to help its affiliate write off problem loans in 1996/97, it would have no major impact on Daiwa's financial health, she said.
The ""Big Four"", including Nikko Securities and Yamaichi Securities, are scheduled to announce their business results on Tuesday for the first half of the fiscal year to September 30.
Japanese business daily Nihon Keizai Shimbun reported on Friday that Daiwa was likely to post flat parent net profits in 1996/97 as it has basically decided to provide financial support of about 100 billion yen ($892 million) to a non-bank affiliate.
Daiwa was expected to post a parent current profit of 50 billion yen ($446 million) for 1996/97 and an extraordinary profit of about 50 billion yen ($446 million) from sales of shares, offsetting the special loss stemming from the financial support, the paper said.
In the year ended March 31, 1996, Daiwa posted a parent net profit of 43.69 billion yen ($390 million).
The broker did not issue a profit forecast.
Last month, Nomura said it would provide financial support to its ailing affiliate and post a special loss of 371 billion yen ($3.31 billion) in the half year to September 30.
Nomura said it would post a net loss for the first half because of the special loss, but declined to give an earnings forecast for the half-year and the full year.
However, analysts were unsure whether the other two, Nikko and Yamaichi, which face similar financial problems at their non-bank affiliates, would take action in 1996/97.
A Nikko spokesman said on Friday that the company was considering measures to help its financial affiliates, but no decision had been made.
Ryuji Shirai, deputy president at Yamaichi Securities, said earlier this month that the firm has been reviewing the 10-year programme it launched three years ago to help restructure its non-bank affiliate, and may shorten that period.
UBS's Sato said that it may be difficult for Nikko to quickly decide any course of action for its non-bank affiliates as one of Nikko group's non-bank affiliates is jointly owned by Asahi Bank and its group companies.
Yamaichi's relatively weak capital base compared with the three other big brokers may make it difficult to provide financial aid to its non-bank affiliate in 1996/97, analysts also said.
Nikko projected a parent net profit of nine billion yen ($80.3 million) for the first half and 24 billion yen ($214 million) for the full 1996/97 year.
Yamaichi expected a parent net profit for the half-year of five billion yen ($44.6 million) and for the full year of 16 billion yen ($142 million). ($1=112 yen)
",10
"The introduction of new accounting methods for Japanese banks will not have an immediate impact on their earnings, but it should help boost derivatives trading in Japan, analysts and banking sources say.
Major banks are preparing for the new accounting methods for derivatives and securities trade, which will be introduced from the end of the 1997/98 fiscal year, although the types of financial instruments to be covered by the new methods have not been set.
But the sources said the use of mark-to-market accounting would help increase arbitrage deals in derivatives while also helping reduce potential volatility in swap rates.
""Following the introduction of mark-to-market accounting, we will be able to offer various hedge instruments to clients, and this will help increase business opportunities for us in the long term,"" a bank official said.
In mark-to-market accounting, unrealised gains or losses in the trading accounts must be included in the current income statement.  
Currently in Japan, financial products are basically appraised according to the cost of purchase, and realised gains or losses are posted in current income statements only when the positions are closed.
One analyst said the new accounting methods would not be used for interest rate swaps for long-term holdings.
""Big commercial and trust banks posted bigger operating profitS 1995/96 as they increased profits from interest rate swaps,"" she said.
Even if the big banks take speculative positions in interest rate swaps, the deals are not expected to be covered by the mark-to-market accounting methods as they are not considered as instruments for short-term capital gains, she said.
Naruaki Sonoda, a senior analyst at Nikko Research Centre, said mark-to-market accounting standards would be applied only to short-term trading and banks do not hold shares for that purpose despite their huge stock investments.
Also, unrealised profits or losses in short-term bond dealings are not big enough to influence bank earnings, he said.  
The Japanese parliament passed a special act in June allowing banks and brokerages to include gains or losses from derivatives and short-term securities trading in their income statements from the end of March 1998.
To use mark-to-market accounting methods, however, banks and brokerages must get permission from the Finance Ministry. Not all banks are expected to apply to use the new methods.
A Finance Ministry official said the ministry has been working out details of which securities and derivatives deals will be covered by the new accounting methods.
Deciding which deals go into the trading account will be based on the initial purpose -- whether the deal was aimed at long-term holding or short-term trading, said Takashi Kinoshita, deputy general manager at Fuji Bank's capital markets trading division.
""We are trying to separate trading accounts from non-trading accounts based on business units,"" he said.
Each bank will divide its financial products holdings into two accounts -- one account for hedging risks in holdings of underlying cash instruments and for long-term investments, and the other for short-term operations, the sources said.
",10
"Prime Minister Ryutaro Hashimoto unveiled plans Monday for a five-year ""Big Bang"" to liberalise Japan's financial markets and catch up with reforms carried out more than a decade ago in Europe and North America.
Finance Minister Hiroshi Mitsuzuka told reporters the three main pillars of the reforms would be to make markets ""free, fair and global"" by the year 2001.
The moves would end fixed commissions for stockbrokers, increase the release of financial information and allow banks, securities houses and insurance companies to enter each others' now-protected areas.
""This is going to be Tokyo's 'Big Bang,'"" Mitsuzuka said, referring to British financial reforms in 1986, which removed a myriad of barriers in the financial industry.
Analysts welcomed the move to sweep away rules that date back to the end of World War II, saying that Japan must reform in order to stop its slide as a world financial centre.
""Japanese banks and securities houses are left behind U.S. institutions in financial expertise and innovation,"" said Ken Okamura, strategist at Dresdner Kleinwort Benson (Asia) Ltd.
Tight regulation in Japan's financial markets has only pushed lucrative business offshore to less regulated markets, he said.
Hashimoto formed a new Cabinet Thursday made up solely of Liberal Democratic Party (LDP) lawmakers, the first time the conservative, pro-business party has ruled on its own since being booted out of power in 1993.
Some pundits have wondered how serious Hashimoto and the LDP are about drastic deregulation, although others say the politically astute prime minister is well aware of the need to open Japanese markets to competition to ensure the economy flourishes in the 21st century.
""This is a very good objective, but getting there is going to be extremely difficult,"" said Brian Waterhouse, a James Capel Pacific analyst.
The securities industry is expected to be the hardest hit by the changes, and the nation's big banks are expected to face some bloodletting as well.
The reforms would bring Tokyo into line with rival centres in Europe and the United States, where liberalisation began in the 1960s and culminated in London's ""Big Bang.""
""We think this is the last opportunity to revitalise Tokyo's financial markets,"" a Finance Ministry official told reporters.
Here are the main points of the financial reform plansL:
To create freer markets:
-- Banks, securities houses and insurance companies should be allowed to enter each others' business areas.
-- Banks and other financial institutions should be allowed to deal in more products in a bid to meet investors' wide range of needs.
-- Japan will look into the liberalisation of financial market commission fees.
-- Participation in foreign exchange transactions, currently limited to banks authorised by the government, should be liberalised.
-- Considering the effective use of individual savings, which now total 1,200 trillion yen ($10.81 trillion).
To create fairer markets:
-- Financial institutions should be required to make satisfactory disclosure of information to investors and depositors and clarify relevant rules to make market participants responsible for their investment.
-- Market participants will be more severely punished if they violate the rules regarding their involvement in the markets.
To createe more internationalized markets:
-- Investment in financial derivatives -- securities derived from simpler financial instruments -- should be promoted in Japan by revising Japan's accounting system and relevant laws to meet global standards.
-- A supervisory system on a global scale should be established. The Group of Seven (G7) industrialised nations is working on setting up up such a system. ($1=111 yen)
",10
"One year after its dramatic expulsion from the United States, scandal-hit Daiwa Bank is finding its misfortune may in some ways have been a blessing in disguise, analysts say.
The painful fall-out from its $1.1 billion bond-trading loss in the United States, they say, forced the bank to take some of the bitter but necessary restructuring measures that other Japanese banks have been reluctant to swallow.
""Following its expulsion from the United States and inspections by Japan""s Finance Ministry and the Bank of Japan, Daiwa was able to eliminate management risks from its corporate structure,"" said Yukiko Ohara, a financial analyst at UBS Securities Ltd.
""It (Daiwa) could be a model for restructuring at other banks, which still lack a sense of crisis despite the recent fall in their share prices,"" she said.
By the end of March, 2000, Daiwa""s restructuring efforts are likely to help boost its annual operating profits above 100 billion yen ($800 million), despite the negative impact of asset reductions overseas, Ohara said. In the year to March 1997 Daiwa forecast operating profits of 80 billion yen ($640 million).
A Daiwa official agreed that the harm done by the bond-loss scandal was not as great as initially expected.
""We feared that we might suffer substantial damage from the withdrawal from U.S. markets,"" Daiwa bank director Akiyoshi Otani told Reuters in a recent interview. ""But the damage was not great.... Our customers stayed calm and have been supporting us.""
""The strategies we have taken (since the withdrawal from the United States) have not been wrong,"" he added.
In November 1995, two months after news broke that a Daiwa trader in New York lost $1.1 billion on unauthorised deals, U.S. bank regulatory authorities ordered Daiwa to shut down its U.S. operations. Daiwa pleaded guilty to charges including conspiracy and fraud and paid a record $340 million in fines.
Japan""s Finance Ministry also placed temporary restrictions on Daiwa""s operations and ordered the institution, Japan""s ninth largest commercial bank, to work out a drastic streamlining programme.
Last April, Daiwa announced a two-year plan to focus on its three strengths: the Kansai area around Osaka in western Japan, where it has a strong customer base, the Asian market, and the trust business, which includes pension fund management. Daiwa manages more pension fund money than any other Japanese bank.
It also decided to shut about 36 offices, including 16 overseas, by March 1999, and by the end of last September had cut its assets to 16.30 trillion yen ($130 billion) from 19.36 trillion yen ($154 billion) a year earlier. Daiwa also plans to reduce the number of its employees by about 2,000 by March 2000, from 9,151 last September.
But some analysts insisted the bank""s restructuring had not gone far enough, noting it was still saddled with 790 billion yen ($6.32 billion) in problem loans, or 7.4 percent of loans outstanding, as of last September.
Yushiro Ikuyo, first vice president at Smith Barney International Inc""s Tokyo branch, added that the expulsion from the United States was bound to damage Daiwa""s future business.
""I doubt whether Daiwa can continue to manage its international business without U.S. operations,"" he said. ""The business environment surrounding Japanese banks will become much tougher and Daiwa must make extra efforts to streamline its business, even halving its assets.""
Several analysts have suggested that Daiwa""s woes may force it to combine with another financial institution. Last month, Moody""s Investors Service said Daiwa Bank and Nomura Securities, its largest shareholder, may join under the same holding company.
But Daiwa""s Otani dismissed such talk for now.
""We should not forget that we are still in the process of recovering our creditworthiness.... Although there is talk about mergers or a holding company, this is not an issue for us at the moment,"" he said. ($=125 yen)
",10
"The tentative deal with the United States to open Japan's insurance market will create some convulsions in the industry, but will help pave the way for the financial sector deregulation both sides say is vital.
A basic agreement was reached on Saturday, ending a dispute that U.S. President Bill Clinton had called the biggest trade barrier between the two nations.
While it focuses on such esoteric issues as who can sell cancer healthcare policies and whether auto insurance can be purchased through the mail, the issue had become a major political dispute.
U.S. Secretary of State Warren Christopher even got in on the act, calling his Japanese counterpart to apply some last-minute pressure ahead of the Sunday deadline, and Japanese Prime Minister Ryutaro Hashimoto said he was relieved that the whole thing was over.
Insurance trade groups were less than thrilled, however, saying the agreement ignores the needs of consumers and keeps their firms out of some fast-growing parts of the business.
Under the agreement, Japanese companies will be allowed -- in stages -- to enter the niche ""third sector"" that includes cancer, healthcare and accident coverage. This is the area where foreign firms have gained a foothold.
Foreign firms are expected to benefit from a deregulation of rates in the non-life insurance sector, including fire and auto insurance, to take place by the end of 1998.
Analysts say that even without the U.S. pressure, the changes were coming as part of Hashimoto's drive to revitalise Japan's financial sector.
""It was a matter of when,"" said Kouya Hasegawa, an analyst at Nikko Research Centre.
He said that as with most deregulation, smaller firms will find it tougher to compete in the new world.
""The liberalisation of premiums is a major blow to the non-life insurance industry, particularly medium- to small-sized firms,"" Hasegawa said
Takehito Yamanaka, an analyst at SBC Warburg (Japan) Ltd, agreed: ""It is inevitable that non-life insurers will compete by cutting premiums.""
Medium and small insurers must streamline their network of sales agents to cut costs, he said.
It was not until October that Tokyo removed a ban on mail-order auto insurance under U.S. pressure. Without a network of agents, insurance by mail was seen as an important step for foreign firms.
Income from auto insurance policies account for 40 percent to 50 percent of income at non-life insurance companies, analysts say.
Last month, American Home Assurance Co announced plans for what it says will be Japan's first mail-order car insurance service.
Analysts said the liberalisation of the premiums would eventually result in the disappearance of some financially weak firms and an increase in mergers.
To cope with deregulation, major non-life insurance firm Yasuda Fire & Marine Co Ltd recently announced it would take a majority stake in the Japanese unit of U.S. life insurance giant CIGNA Corp within the next year or two, the first time a Japanese non-life insurer has purchased a life insurance operation.
Under Japan's new Insurance Business Law, which took effect on April 1, non-life and life insurers were allowed to enter each other's business sectors for the first time.
Some in the industry argue that deregulation could create huge problems. They say that higher rates will lead to more uninsured drivers and jeopardise the protection of accident victims.
But no one is predicting that the concerns will stop a deregulation drive across the financial sector that comes to Japan a decade after it hit most industrialised nations.
",10
"A loan-collecting body said on Tuesday it was seeking the involuntary bankruptcy of a major real estate firm, the latest shock to the country's financial system from the long-running ""jusen"" mortgage firm scandal.
If Osaka-based Sueno Kosan were declared bankrupt it would be one of the biggest Japanese business failures on record, financial industry sources said. The firm has estimated total liabilities of 670 billion yen ($5.87 billion).
The sources said the bankruptcy could lead to problems at financial firms that have loaned money to Sueno Kosan.
The bankruptcy request was made to the Osaka District Court by the semi-governmental Housing Loan Administration Corp (HLAC), set up to collect problem loans run up by the ""jusen"" group of home loan firms.
Sueno Kosan is a major borrower from the ""jusen"" mortgage firms, which collapsed under the weight of rash property loans made during the ""bubble"" economy of the 1980s.
Finance Minister Wataru Kubo also said the Sueno Kosan problem was likely to spread to financial firms that had lent it money. ""However, such an impact will be resolved among related financial institutions in accordance with our financial system,"" he said.
Jitters about problems in the banking industry helped push up the price of Japanese government bonds to record levels on Tuesday.
The filing was somewhat expected. Kohei Nakabo, president of the HLAC, told reporters recently the body was considering taking such action.
Japanese media reported recently that the corporation was considering such a move because of alleged attempts to transfer Sueno Kosan assets to affiliates.
In September, Sueno Kosan chief Kenichi Sueno pleaded guilty in the Osaka District Court to charges that he and some aides hid assets to prevent them being seized by creditors.
The Sueno group was the second-largest borrower from the mortgage firms.
Media reports have said it borrowed 236.7 billion yen ($2.07 billion) from five of the seven jusen and about 300 billion yen ($2.63 billion) from 10 other financial institutions.
Noboru Matsuda, governor of the Deposit Insurance Corp of Japan (DIC), which supervises the loan-collecting body, said in a statement that DIC has no intention of seeking the bankruptcy of every borrower from the jusen firms.
But he said that taking such action would be inevitable for some ""malignant"" borrowers like Sueno which he said had repeatedly attempted to hide assets.
Sueno Kosan officials were not immediately able to comment.
Japan's financial industry has made progress in tackling the problem of bubble-era loans gone bad, but analysts say some smaller loan institutions heavily exposed to the real estate and construction industries remain vulnerable.
The collapse of a major financing company last month, Nichiei Finance Co Ltd, with huge debt liabilities also highlighted the continuing fallout from the bad loan problem. ($1=114 yen)
",10
"A small securities house has cracked open Japan's highly regulated stockbroking commission system in a move which industry sources say should accelerate plans to deregulate the stock market.
Matsui Securities Co Ltd said on Friday it would cut its brokerage fees for stocks and convertible bonds traded over the counter by half, starting from March.
It is the first time a broker has said it will deviate from the norm in setting its fees.
Brokerage commissions for stocks listed on Japanese stock exchanges are fixed under the Securities and Exchange Act, while fees for over-the-counter trade can be set within a range fixed by the Japan Securities Dealers' Association.
But brokers have so far charged uniform fees on stocks traded over the counter, the sources said.
After Matsui's announcement, Paribas Capital Markets Ltd said it had cut its brokerage fees for stocks traded on Japan's over-the-counter market by half, effective from Friday.
Matsui said other companies in the industry had tried to pressure it into not making the change.
""Some of them tried to criticise and pressure us, but we decided to help revitalise the market by taking the steps as long as they meet the rules,"" a Matsui statement said.
An executive at a medium-sized Japanese broker said: ""Matsui's decision will accelerate the liberalisation of stockbroking fees.""
He added that both big and small brokers would have to decide by March whether to follow Matsui's example or possibly lose business to it, he said.
But Ichiyoshi Securities Co Ltd, a medium-sized broker with a strong customer base in the OTC market, said it would not cut its fees for now.
""Our strategy is to earn commissions by offering something value-added... We plan to differentiate our service by offering better information,"" an Ichiyoshi spokesman told Reuters.
An advisory panel to the Finance Ministry is currently discussing how stockbroking fees should be deregulated and is due to make a final proposal by June.
Prime Minister Ryutaro Hashimoto unveiled in November a five-year plan for ""Big Bang"" reforms to liberalise Japan's financial markets and catch up with reforms carried out more than a decade ago in Europe and North America.
They include liberalising the stock commission system.
An official at a ""Big Four"" broker said the liberalisation was likely to take place sooner than the industry expected.
""As for stockbroking commissions, the liberalisation may come all at one time, rather than by gradual implementation,"" he said.
Industry sources said that without the deregulation, Japanese institutional investors would go abroad, where it costs less to place orders for Japanese stocks.
",10
"Japan's major commercial banks on Friday said they had returned to the black in the first half of the current business year after many of them posted losses in the previous fiscal year.
Analysts said that aggressive problem loan write-offs in the second half of the previous fiscal year which ended in March led to the losses after the 10 banks posted record profits in the first-half of that business year.
They added the results were close to the previous earnings' forecasts made by the biggest banks, showing that the banks are on schedule in steadily writing off their problem loans.
""The earnings results in the first half of the last business year were extraordinarily good...Interest rates were falling and anybody could earn profits if they sold bonds,"" said Katsuhito Sasajima, an analyst at Nikko Research Centre.
""While operating profits have declined from a year earlier, the business environment is not bad due to the low interest rates, and they will probably post handsome profits for the whole business year,"" he said.
Many of the big banks had losses in the previous business year due to the massive disposal of problem loans, including those to failed ""jusen"" mortgage firms, he said.
The 10 banks said that combined operating profits -- profits from the banking business before loan loss provisions -- totalled 1.19 trillion yen ($10.7 billion) in the first half, down from 1.87 trillion yen ($16.8 billion) a year earlier.
Combined parent current profits -- pre-tax profit including losses and gains on investments -- totalled 391.9 billion yen ($3.53 billion) in the first half, down from 463.2 billion yen ($4.17 billion) a year earlier.
Sasajima said the 10 banks had projected 1.16 trillion yen ($10.4 billion) in combined operating profits and 334 billion yen ($3.00 billion) in combined parent current profits.
Some of the bankers, however, remained cautious.
Akishige Okada, senior managing director at Sakura Bank Ltd, told reporters that a narrowing in the loan spread, which was a main reason for the decline in operating profits, was likely to continue in the second half of the year to March 31.
""I expect the business environment will not be so good, as the current interest rate situation is not expected to change in the latter half,"" Okada said.
The loan spread is the spread between the rates paid on deposits and for other fund-raising, and the rates charged on lending. Japan's interest rates fell to record low levels in the last fiscal year and have remained there.
Of the 10 banks,  Hokkaido Takushoku, Sakura, Fuji, Daiwa, Sanwa, Tokai and Asahi posted current losses in 1995/96.
The 10 banks -- including the Bank of Tokyo and Mitsubishi Bank which merged into the Bank of Tokyo-Mitsubishi on April 1, Dai-Ichi Kangyo Bank, and Sumitomo Bank -- disposed of 6.31 trillion yen ($56.8 billion) worth of problem loans in 1995/96.
Bankers said that they would continue to dispose of problem loans in the latter half of 1996/97 after doing so in the first half by setting aside loan-loss provisions and selling them to a joint problem loan liquidation body.
For instance, Fumio Akanuma, senior managing director at Dai-Ichi Kangyo, said: ""We disposed of 134.6 billion yen ($1.21 billion) of problem loans in the first half...We plan to dispose of a total of 330 billion yen ($2.97 billion) in the full year (to March 31)."" ($1=111 yen)
",10
"A deal with the United States to open Japan's $400 billion insurance market will create some convulsions in the industry, but analysts said Sunday it will help make way for the deregulation of Japan's financial sector.
A final agreement was reached on Sunday, ending a dispute that President Clinton had called the biggest trade barrier between the two nations.
While it focuses on such esoteric issues as who can sell cancer healthcare policies and whether auto insurance can be purchased through the mail, the issue had become a major political dispute.
U.S. Secretary of State Warren Christopher even got in on the act, calling his Japanese counterpart to apply some last-minute pressure ahead of the Sunday deadline. Japanese Prime Minister Ryutaro Hashimoto said he was relieved that the whole thing was over.
The United States, in a statement issued by its embassy here, said the measures ""represent fundamental change in the Japanese insurance market, making it more open and competitive.""
Insurance trade groups were less than thrilled, however, saying the agreement ignores the needs of consumers and keeps their firms out of some fast-growing parts of the business.
Under the agreement, Japanese companies will be allowed -- in stages -- to enter the niche ""third sector"" that includes cancer, healthcare and accident coverage. This is the area where foreign firms have gained a foothold.
Foreign firms are expected to benefit from a deregulation of rates in the non-life insurance sector, including fire and auto insurance, to take place by the end of 1998.
Analysts say that even without the U.S. pressure, the changes were coming as part of Hashimoto's drive to revitalise Japan's financial sector.
""It was a matter of when,"" said Kouya Hasegawa, an analyst at Nikko Research Centre.
He said that as with most deregulation, smaller firms will find it tougher to compete in the new world.
""The liberalisation of premiums is a major blow to the non-life insurance industry, particularly medium- to small-sized firms,"" Hasegawa said
Takehito Yamanaka, an analyst at SBC Warburg (Japan) Ltd, agreed: ""It is inevitable that non-life insurers will compete by cutting premiums.""
It was not until October that Tokyo removed a ban on mail-order auto insurance under U.S. pressure. Without a network of agents, insurance by mail was seen as an important step for foreign firms.
Income from auto insurance policies accounts for 40 percent to 50 percent of income at non-life insurance companies, analysts say.
Last month, American Home Assurance Co. announced plans for what it says will be Japan's first mail-order car insurance service.
Analysts said the liberalisation of the premiums would eventually result in the disappearance of some financially weak firms and an increase in mergers.
To cope with deregulation, major non-life insurance firm Yasuda Fire & Marine Co. Ltd recently announced it would take a majority stake in the Japanese unit of U.S. life insurance giant CIGNA Corp. within the next year or two, the first time a Japanese non-life insurer has purchased a life insurance operation.
Under Japan's new Insurance Business Law, which took effect on April 1, non-life and life insurers were allowed to enter each other's business sectors for the first time.
Some in the industry argue that deregulation could create huge problems. They say that higher rates will lead to more uninsured drivers and jeopardise the protection of accident victims.
But no one is predicting that the concerns will stop a deregulation drive across the financial sector that comes to Japan a decade after it hit most industrialised nations.
",10
"Undeterred by the woes of Japan's debt-laden finance industry, foreign investors have flocked to a new share offering by the nation's fourth-biggest bank.
The strong interest in the preferred shares issued last month by Sakura Bank Ltd, despite the institution's relatively weak financial strength rating, points to greater confidence among foreign investors than domestic ones about the state of the industry, market sources say.
""We received nearly two trillion yen ($18 billion) worth of demand for 150 billion yen ($1.35 billion) of preferred shares,"" said Kazuya Johno, assistant general manager at Sakura Bank's Planning Division.
""Foreign investors are properly assessing each Japanese bank and it seems to me they have acknowledged that the worst of the bad loan problem (at Japanese banks) is over.""
Last month Sakura issued 75 million shares of preferred stock at 2,000 yen ($18) each, becoming the fourth big Japanese bank to launch a convertible offering to boost its capital base in the past year. All of the offerings have been well-received by foreign investors, market sources say.
Payment for Sakura's five-year preferred stock issue was on September 30. Holders of such shares do not get voting rights but generally receive higher dividends than for common shares.
Market sources said foreign investors have grown more positive about Japan's big banks than domestic investors, who are concerned about the idea of banks issuing shares to improve capital adequacy ratios. An official at a major life insurance company said: ""We will not buy new shares even if banks issue them. We are worried about the negative impact of new share issues on bank stocks and the markets.""
Sakura's Johno said that the bank's preferred stock had been repackaged through an overseas trust for selling abroad.
In Japan, issuers cannot force investors to convert preferred stock to common stock during the term period. Through repackaging, Sakura wanted investors to convert preferred shares to common shares in a way that would not jeopardise the bank's stock price or the stability of the overall market.
""If investors converted preferred stock at one time, it could bring some 150 million common shares into the market and have an enormous impact on share prices,"" Johno said.
In the scheme, investors must convert part of their holdings to common stock in stages, with one-third converted three years after the issue and a similar amount four years after the issue. All the preferred shares must be converted by October 1, 2001.
To attract investors, the bank also promised to review the conversion price every year to minimise risks stemming from stock price fluctuations. Under the formula, the lower the conversion price the more common shares investors can have.
The initial conversion price was set at 1,122 yen ($10) with an annual dividend of 15 yen. The conversion price will be reviewed on December 8, 1997, and every October 1 after that. Sakura was trading at 1,070 yen on Tuesday.
Johno said about 70 percent of foreign buyers of the preferred stock were long-term holders such as pension funds.
Sakura aimed to boost its core capital through the stock issue to help its restructuring after it disposed of about 950 billion yen ($8.55 billion) of problem loans in the last fiscal year, which cut its capital adequacy ratio by 0.35 percentage point to 8.37 percent. Under international rules, banks operating internationally are required to hold a minimum eight percent of capital against risk-weighted assets.
Sakura is Japan's fourth-biggest bank in terms of risk-weighted assets. Its financial strength rating of ""D+"" assigned by credit rating agency Moody's Investors Service Inc is among the lower gradings for major Japanese banks. ($1=111 yen)
",10
"Japan's ruling Liberal Democratic Party (LDP) and its allies agreed on Tuesday to lift a ban on holding companies put in place by U.S. Occupation forces shortly after World War Two.
The repeal of the ban will help Japanese firms restructure and boost their international competitiveness, party members said.
""The three parties agreed to lift the ban, as a diversified corporate management is seen as a prerequisite when we consider international competition known as mega-competition,"" said Taku Yamasaki, chairman of LDP's policy-setting committee.
While the anti-monopoly law had played a major role in helping develop Japan's economy in the past 50 years, changes were needed to carry out economic and financial reform, he said.
The agreement among the three parties -- the LDP, the Social Democratic Party (SDP) and the small Sakigake party -- will enable the government to work out necessary changes to the anti-monopoly law and submit them to the current session of parliament in March.
Yamasaki said the revised law could go into effect within a year, possibly next January.
Lifting the ban is also needed to allow implementation of a plan unveiled late last year to restructure telecom giant Nippon Telegraph and Telephone Corp (NTT) into several companies under a holding-company umbrella.
A holding company is a firm which has control of one or more other companies, often by having a majority of shares in each subsidiary, but does not engage in a specific business.
U.S. Occupation forces introduced the ban in 1947 to break up powerful conglomerates known as ""zaibatsu"", which the United States believed had contributed to Japan's war effort.
In the United States and many European countries, however, a holding company is a common corporate structure.
Yamasaki said certain types of holding companies would be banned to avoid an excessive concentration of business strength and to avoid a rebirth of zaibatsu.
Under the agreement reached by the three parties, a holding company that would have assets of 300 billion yen ($2.45 billion) or more would have to notify the Fair Trade Commission, Japan's anti-monopoly watchdog, of its establishment.
The establishment of a holding company which would have total assets of 15 trillion yen ($122 billion) or more would require prior government approval.
Yamasaki said 315 firms in Japan had assets exceeding 300 billion yen ($2.45 billion) on a group basis, while even big firms such as NTT and Tokyo Electric Power Co Inc did not have assets exceeding 15 trillion yen ($122 billion).
Hideo Fujiwara, senior executive research fellow at LTCB Research Institute, said even if the ban was lifted not many firms are expected to change their corporate structure immediately.
Big companies such as Sony Corp and Canon Inc which had already split their operations were likely to set up holding companies soon, but many others were not, he said.
Many bank officials have said that holding companies could be a key to coping with ""Big Bang"" financial reforms, which are designed to liberalise Japan's financial markets by 2001.
Yamasaki said the government still has to work out changes in finance-related laws to enable financial institutions to establish holding companies once the amended anti-monopoly law takes effect. ($1=122 yen)
",10
"One year after the peak of Japan's banking crisis, financial institutions are still reeling from the shock, and some have not escaped bankruptcy, analysts say.
Bankers say the worst of the bad loan nightmare is over, but analysts believe Japan's financial industry remains vulnerable.
""It will take some time for confidence in Japanese banks to be restored -- at least until real estate transactions are reactivated,"" said Yushiro Ikuyo, first vice president at Smith Barney International.
Bad loans largely take the form of land collateral.
""Even for big banks, it will take a few years to write off most problem loans and this will hurt their earnings,"" he said.
Financial analyst Hideichiro Nishimura at Yamaichi Research Institute of Securities and Economics said that despite vigorous efforts by the government and banks to clear the bad loan mess in the past year, confidence in Japanese financial institutions has not improved in international markets.
Currently stable share prices and low interest rates are helping banks dispose of problem loans steadily and on schedule, but their efforts to restructure operations still fall short of boosting their declining asset quality, he said.
August 30 last year saw Japan's first bank failure since World War Two. The financial system was jolted as major regional bank Hyogo Bank and the country's biggest credit union, Kizu Shinyo Kumiai, collapsed due to adventurous lending during the ""bubble economy"" of the late 1980s.
Ahead of that dark day, the biggest credit union in Tokyo, Cosmo Shinyo Kumiai, had collapsed, and then this year, second-tier regional bank Taiheiyo Bank went under.
Several analysts expect more bank failures.
""Everyone knows what has to happen (more financial failures), but no one knows when and how and who pays,"" an analyst at a foreign securities firm said.
To dispose of 10.7 trillion yen ($99.0 billion) of loan losses, many of Japan's biggest banks posted net losses in the fiscal 1995/96, ended March 31.
But counting all deposit-taking institutions, on that date there were still 8.3 trillion yen ($76.8 billion) of loan losses which need to be written off, the Finance Ministry said.
In June, parliament passed bills to clean up the nation's bad loan mess and deal with bank failures, along with a scheme to wind up failed mortgage firms, using taxpayers' money.
Analysts are cool about such efforts, however.
A spokeswoman at international credit-rating agency Moody's Investors Service said it has not much changed its BFSR (bank financial strength rating) since August last year, when it unveiled the BFSR for major Japanese banks for the first time.
Moody's last week warned that some of Japan's seven major trust banks may need external support in order to survive growing competition and the burden of bad debts.
Moody's gave Chuo Trust & Banking and Yasuda Trust & Banking an ""E"" ranking, meaning that they suffer from very weak intrinsic financial strength, and gave only a slightly better ""E+"" rating to Mitsui Trust & Banking and Nippon Trust Bank.
It also kept Hokkaido Takushoku Bank and Nippon Credit Bank at the ""E"" it gave them last August.
""We expect banks with very weak financial fundamentals to ultimately require assistance either from the authorities or from their respective corporate group members,"" Moody's said.
",10
"Japan will set up a panel on Tuesday to tackle the after-effects of the nation's problem loans -- collection of bad loans in the form of land collateral, government sources said on Monday.
The panel will discuss wide-ranging steps to increase liquidity in the real estate market to facilitate collection of such problem loans, a government source said.
""The central issue for the panel will be studying measures to collect problem loans in the form of land collateral run up by (failed) 'jusen' mortgage firms,""  he said.
""We think securitisation of the problem loans is one effective measure to collect problem loans,"" he also said.
Officials from the ministries of finance, construction and justice and the National Land Agency will join the panel, along with officials from the Deposit Insurance Corp of Japan, a semi-governmental body set up to protect depositors from bank failures.
The Housing Loan Administration Corp (HLAC), in charge of recovering the problem loans of failed mortgage firms, known as ""jusen"", and the Resolution and Collection Bank (RCB), which will perform a similar task for troubled credit unions, will also send officials to join the panel.
Officials are now finally aware they must take steps to stimulate the real estate market from a budgetary standpoint, said Yoshinobu Yamada, analyst at Merrill Lynch Japan.
HLAC was set up in July to recover the problem loans of seven failed mortgage firms over the next 15 years. But the government says further losses may arise and that half of any future losses will be covered by public money.
In June, the government adopted a controversial scheme that allows for the use of 685 billion yen ($6.17 billion) in taxpayers' money to help wind up the failed mortgage firms.
The government has also committed itself to meeting any potential shortfalls at the Resolution and Collection Bank with government funds.
The bank was established last month to manage the holdings of failed credit unions and collect their problem loans. The government has given the bank a 10-year period to bail out credit unions and aims to disband the bank thereafter.
Some analysts said, however, that it would be tough for the ministries to agree on steps to boost the sagging real estate market, now in a five-year-long slump following the bursting of the 1980s ""bubble economy"" of inflated asset prices.
For instance, Japan may have to allocate budget funds for public utilisation of assets put up as collateral for problem loans, analysts said. The government should also adopt a flexible taxation system to help securitise problem loans backed by real estate, they said.
Securitising the loans involves selling property to a new special-purpose company, which in turn will issue bonds backed by these assets to procure money. Investors in the bonds would profits from any rise in land prices and from rent income.
The number of investors in Japan is still limited due to fears of further drops in land prices, and financial institutions themselves are reluctant to sell collateralised land at the currently cheap market prices, analysts said.
But Yukiko Ohara, an analyst at UBS Securities, said the setting up of a panel to discuss this dilemma is an important first step. ""It is better than nothing.""
Securitisation worked well in the United States when the U.S. Resolution Trust Corp tried to recover bad debts following the savings and loan crisis of the 1980s. ($1=111 yen)
",10
"Japan faces a number of regional bank failures over the next few years but the nation's financial system should not suffer any major damage, a leading U.S. rating agency said on Tuesday.
Senior executives from Standard & Poors Corp said weaker Japanese regional banks will go to the wall as liberalisation triggers a shake-out in the Japanese financial sector.
They were speaking to reporters after the agency issued ratings on a small number of top Japanese regional banks, which were mostly judged to be a reasonably safe investment.
""We will see some (Japanese) regional bank failures,"" Ernest Napier, an S&P director, told a news conference.
But he said that as long as the process was well-managed, the failures should not cause a crisis of confidence in the financial system.
The credibility of Japan's debt-burdened finance industry has been rocked by a string of banking failures, including the forced closure last month of Hanwa Bank, a second-tier regional bank based in western Japan.
Naoko Nemoto, an associate director at S&P, said it would be hard for some other second-tier regional banks to stay afloat. While some of Japan's top regional banks enjoy higher credit ratings than big commercial banks, smaller regional banks continue to be plagued by poor asset quality and structural problems, she said.
When Japanese authorities stepped in to close Hanwa, it was the first such forced halt of a bank's operations since World War Two, and only the third bank failure since then -- although several small credit unions have folded.
At the time, the authorities said such swift action was essential for the recovery of the financial system.
Nemoto said that this could become a standard method of dealing with future bank failures.
Japan's other two post-war bank failures were dealt with by creating new bodies to take over their business.
James Fiorillo, an analyst at ING Baring Securities (Japan), echoed the S&P view. Second-tier regional banks are likely to be at the sharp end of industry restructuring in the next few years, he said.
""We believe that there are a number of other 'tier two' banks that appear to be equally shaky (as Hanwa),"" he said.
However, the Finance Ministry is honouring a promise it made a year ago to intervene at an earlier stage to close down poorly managed financial institutions, he added.
To meet strong capital market interest in financial institutions, S&P gave public information (pi) ratings to seven first tier regional banks on Tuesday. These are unsolicited credit ratings based on information available to the public rather than lengthy consultations with the issuer.
S&P plans to rate more Japanese banks on a ""pi"" basis, including some of the nation's 20 biggest banks and second-tier regional banks, over the coming months.
Of the seven regional banks given ""pi"" ratings by S&P, Kiyo Bank Ltd got the lowest rating of BBpi while Hachijuni Bank Ltd got the highest at Api. BBBpi ratings were given to five regional banks -- Bank of Yokohama Ltd, Hyakujushi Bank Ltd, Iyo Bank Ltd, Nanto Bank Ltd and Suruga Bank Ltd.
Ratings in the ""AAA"", ""AA"", ""A"" and ""BBB"" categories are considered investment grade, while the ""BB"" category is regarded as having speculative characteristics.
",10
"Faced with persistent market rumours that it is on the verge of collapse, Nippon Credit Bank Ltd went public on Wednesday to say that any such talk is ""totally groundless"".
""In the markets, unsourced rumours such as the suggestion that our bank is practically on the verge of collapse are circulating and are prompting sales of our shares and debentures,"" NCB vice president Shoji Nishikawa told a hastily convened news conference.
""Such rumours are totally groundless and our bank would like to declare that these rumours are not true,"" he said.
Finance Minister Hiroshi Mitsuzuka also came out in support of long-suffering Nippon Credit, whose failure could spark a crisis in the banking industry.
He said the government will fully support the bank, although he added that the ministry is not worried about the financial health of Nippon Credit, the smallest of the nation's three long-term credit banks.
""The ministry has had no worries about the bank. It (the bank) is doing its utmost to improve its management. We don't believe that the bank will collapse as some media reports have said,"" Mitsuzuka told reporters at his regular news conference.
Nippon Credit's latest ordeal began early Wednesday when traders began to sell its shares on vague talk that NCB would hold an emergency news conference. There was also a vague rumour about a possible merger involving NCB, they said.
The dumping of the bank's shares ignited renewed selling throughout the banking sector. The sharp fall in banking shares has been largely to blame for the tumble in the Tokyo stock market since mid-December.
Nippon Credit shares fell 35 yen (28 cents) to close on Wednesday at an all-time low of 181 yen ($1.47).
In the bond market, NCB's latest debentures are selling at a yield of 4.1 percent, a full 2.5 percentage points above bonds issued by other banks, reflecting the perceived risk in its debts.
Nishikawa said the sell-off was influenced by exaggerated media reports which hyped concerns over the health of Japan's financial system.
""We believe the market condition has deviated greatly from the realities of the bank. We hope market participants will calm down,"" he said.
He also said the bank would be able to post a current profit in 1996/97 even after disposing of problem loans as it had planned -- if Tokyo stock prices remain at their current levels.
Like other banks, NCB relies on its own share holdings to help provide needed cash so as the stock market tumbles, its situation worsens. That has created a vicious circle for the Tokyo stock market.
The bank plans to write off problem loans of 130 billion yen ($1.05 billion) in the current fiscal year ending March 31. As of the end of September, such problem loans totalled 1.39 trillion yen ($11.3 billion).
Some analysts said that it is unclear whether the news conference by NCB and the finance ministry's pledge to support the bank would help regain confidence in Japan's banking sector.
""In the long-term, the banking sector will remain under pressure until Japan completes its 'Big Bang' financial reforms,"" said Katsuhito Sasajima, an analyst at Nikko Research Centre. ($1=123 yen)
",10
"Overseas subsidiaries of Japan's top brokerage, Nomura Securities Co Ltd, virtually doubled their combined profits in the half year to September, energised by strong earnings in Europe.
An official of Nomura told Reuters its 66 subsidiaries abroad made a total of 17.7 billion yen ($158 million) in pre-tax profit in the six months, the first half of Japan's fiscal year, almost double the approximately nine billion yen ($80.36 million) in the same period a year earlier.
The main reason was a more than five-fold profit surge at Nomura's European subsidiaries, while results in the Asian and American regions were generally flat, the official said in a telephone interview.
Nomura released its half-year parent and group earnings results on Tuesday but did not give details of earnings in the regions.  Despite the buoyant business overseas, the brokerage tipped into the red on a parent and a group net basis after deciding to put large sums of money into helping an ailing financial affiliate.
In the business year that ended on March 31, 1996, pre-tax profits at Nomura's consolidated subsidiaries overseas totalled 47.1 billion yen ($420 million).
In the April-September period, European subsidiaries led by London-based Nomura International Plc posted current profits of 9.8 billion yen ($87.5 million), more than five times the amount a year earlier, the official said.
Hitoshi Tonomura, a new chairman who arrived at Nomura International in London in the spring of last year, helped to bring operations there back into profit, he said.
Current profits at Asian units were 1.5 billion yen ($13.3 million), slightly up from a year earlier, while those at subsidiaries in the American region totalled 6.4 billion yen ($57.1 million), little changed from a year earlier, he said.
The official said successful asset securitisation business by Nomura International fuelled the sharp increase in the profits there, and profits in the United States came largely from the asset-backed and mortgage-backed securities business.
As for business in Asia, he said: ""We are still in the stage of investment and not getting returns yet, although we are allocating our human and other resources there.""
Nomura used to announce its group results about a month after the parent earnings but has brought the group statement forward to provide more timely information for investors.
In the first half, it posted parent current profit of 69.87 billion yen ($623 million), while group current profit stood at 74.76 billion yen. However, it posted a hefty half-year net loss on both a parent and consolidated basis after providing financial support of 37.1 billion yen ($331 million) for an ailing non-bank financial affiliate in the Nomura group.
The parent net loss was 337.54 billion yen ($3.01 billion) and the group net loss 332.01 billion yen ($2.96 billion).
Current profit is pre-tax, and includes losses and gains on non-operating activities. Net profit is after-tax and includes extraordinary profits or losses.
($1=112 yen)
",10
"Japan's third biggest securities house, Nikko Securities Co, will focus on cutting personnel and other costs as it braces for ""Big Bang"" financial reforms, executive vice president Masao Yuki said on Friday.
""The Big Bang reforms will mean the survival of the fittest,"" he told Reuters in an interview.
""The (Japanese) financial sector must correct its high-cost structure to cope with the Big Bang. If it doesn't, we will lose out to our Western rivals,"" he said.
The most important and urgent issue for Nikko is how to cut personnel costs while raising the salaries of talented young workers and maintaining overall morale, he said.
He acknowledged this would be a very difficult task and he had no specific ideas at this time, but Japan's manufacturers had already made impressive progress in this area.
""(Japanese) manufacturers say that brokerages and financial institutions have been living the good life. That's why they say it will be difficult for us to restructure,"" he said.
Tinkering with personnel practices is widely considered taboo at large Japanese companies.
Prime Minister Ryutaro Hashimoto unveiled plans in November for a five-year ""Big Bang"" set of policy moves to liberalise Japan's financial markets and catch up with reforms carried out more than a decade ago in Europe and North America.
Market sources said that since late last year the Tokyo stock market has focused on the negative impact of the Big Bang reform on Japanese financial institutions, as they would heat up the competition and create losers as well as winners in the financial markets.
On Friday, the key Nikkei average of 225 leading shares ended down 220.10 points, or 1.23 percent, at 17,689.36. The index has shed nearly 2,000 points since the beginning of this year, led by the banking and brokerage sector.
Yuki said that, while Tokyo's Big Bang would eventually provide business opportunities for brokers and help revitalize Japan's financial markets, it would also pressure brokers' earnings in the near term.
""It is inevitable that we'll face a tough fight for profits in the near term,"" he said. ""Such a severe business environment may result in an industry-wide shakeout including mergers and acquisitions.""
Last week, Moody's Investors Service issued a grim rating outlook for Japanese brokerages, noting that the securities industry was faced with the dual challenges of operating in volatile markets and strategically repositioning itself in a deregulated landscape.
The likely elimination of fixed commission rates on stockbroking was cited as one move likely to undermine profitability at many brokerages, it said.
Yuki said that there would be no quick remedies to boost currently sagging bank and brokerage stocks, but policies were need to ensure Japan's economic recovery and implement drastic reforms of the nation's economic structure.
He added that the abolition of Japan's securities transaction tax, as urged by some politicians and business leaders, would also help Japan's stock market.
Japan is the only country with a securities transaction tax.
""I don't advocate any government moves to artificially prop up stock prices ... but announcing the abolition (of the tax by the end of March) would have a good effect on stocks,"" he said.
He said that, since Japan has already announced a sweeping deregulation of foreign exchange transactions beginning in 1998, failure to abolish the transaction tax would encourage institutional investors to go abroad to trade Japanese stocks due to higher costs here.
",10
"A Japanese regional bank said on Wednesday that it could lose up to $26 million due to suspected misuse of bank funds by an employee.
Before Biwako Bank Ltd's announcement, rumours had swirled in Tokyo's markets that the bank was having financial problems, jolting stock and bond prices.
The bank allayed these fears somewhat when it said the suspected fund misappropriation, totalling about 3.4 billion yen ($29.8 million), would do only limited damage to its financial health.
However, analysts said the market jitters highlighted lingering nervousness about the health of Japan's financial industry, which is groaning under the weight of huge problem loans.
The bank said it expects to be able to recover about 400 million yen ($3.50 million) of the misappropriated funds and that it would write off the remaining expected losses in the current financial year ending next March.
The bank, based in Ohtsu City, western Japan, has yet to file a complaint against the former employee but plans to do so on completing an internal investigation, a bank official said.
Some analysts said the news about Biwako shocked markets because the bank had been considered financially healthy.
""The feeling of unease spread rapidly because it was talk about (financial) problems at a bank whose name had never been mentioned among the list of troubled banks before,"" said Yoshinobu Yamada, an analyst at Merrill Lynch Japan Inc.
""If the name was one included in the list, the impact would have been minimal,"" he said.
Fears about Biwako's financial health helped push down the Tokyo stock market's benchmark Nikkei average, which ended the morning session 1.20 percent lower than the previous day close.
The Nikkei ended the day down 276.41 points, or 1.32 percent, at 20,681.67.
The rumours pressured Biwako's share price, which had fallen to 491 yen by the midday close after closing at 549 yen on Monday. It was untraded on Tuesday and the Osaka Securities Exchange (OSE) suspended trading in it on Wednesday afternoon.
The drop in stock prices supported the Japanese government bond (JGB) market and the key December JGB futures contract rose to 125, a record high for any benchmark.
Analysts said the market was particularly nervous about talk about the health of a financial institution after Japanese financing company Nichiei Finance Co Ltd filed for liquidation last week with huge debt liabilities.
Japan's financial industry is still reeling in the aftermath of the late 1980s ""bubble economy"" of soaring stock and property prices.
When asset prices began to plunge in the early 1990s, many companies which had borrowed aggressively to invest during the bubble economy were unable to return the money and their lenders were left saddled with huge problem loans.
While big Japanese banks are expected to clean up their problem loan woes over the next one year or so, many others are likely to be plagued by the problem for longer period, said Katsuhito Sasajima, an analyst at Nikko Research Centre.
However, failures of financial institutions would not jeopardise the system now that Japan had established a framework for handling such problems, he said.
",10
"Japanese banks, already groaning under problem loans, are dangerously exposed to the volatile Tokyo stock market and a further drop in the market may finally force them into a blood-letting reorganisation, analysts say.
They say that if the weaker banks are to survive, they must trim the size of their less-profitable assets, including those overseas, cut their stock portfolios and reduce the number of their employees.
""Weak banks may be thrown into the sector-wide reorganisation unless they take a serious look at reality -- that the market is urging an aggressive restructuring, even if they have to cut the number of employees,"" said Yushiro Ikuyo, first vice-president at Smith Barney International Inc.
""If share prices in (weak) banks fall to very cheap levels, it might be easier for big banks to bail out those weaker banks through cheap mergers,"" he said.
Market sources said the recent Japanese share price plunge has been led by active selling of shares in the banking sector, which represent one-quarter of the Tokyo Stock Exchange's market capitalisation.
On Monday, the key Nikkei average of 225 leading shares closed down 609.70 points, or 3.37 percent, at 17,480.24.
Even though the market recovered slightly last week, the Nikkei is still down close to 2,000 points since the beginning of this year on worries about the economy and a lack of government measures to prop it up.
Japanese banks have traditionally held large chunks of shares in other companies, many of them customers. In the past, the unrealised profits on these holdings have helped burnish the banks' balance sheets and have provided a useful way of getting some of their problem loans off their books.
But the failure to tackle the problem more aggressively has in turn fueled scepticism about the soundness of the Japanese banking system, triggering more selloffs in the stock market, analysts said.
The analysts said banks should try to raise their profitability by focusing on specialised business fields, by developing new financial instruments and by lending to smaller firms with prospects for future growth.
Katsuhito Sasajima, an analyst at Nikko Research Centre, said: ""To convince investors, banks must take the extra step to restructure, but they have made no such effort so far.""
In the three business years to the end of March 1996, Japan's then top 21 banks used 8.01 trillion yen ($68.4 billion) in net capital gains from the sale of equities to help dispose of 18.96 trillion yen ($162 billion) of property-related problem loans, a legacy from the late 1980s economic ""bubble"" era of inflated asset prices.
But the top banks still had 17.4 trillion yen ($148 billion) of problem loans at the end of last September, the Finance Ministry said.
Moody's Investors Service said on Friday that the sharp fall in Japanese shares will affect financially weak banks.
Moody's said while it is confident Japanese authorities will keep the top 20 banks from failing in the short term, it is concerned about a growing gap between the bailout cost and the limited resources available for the protection of depositors and senior debt holders. ($1=117 yen)
",10
"The vulnerability of Japan's banking sector shares to rumour-led selloffs shows that investor confidence in the sector is still thin, brokers and analysts said on Wednesday.
Bank shares tumbled after vague market talk, later denied, that Nippon Credit Bank Ltd (NCB) would hold an emergency news conference reignited worries about Japan's financial system, they said.
""We cannot say that the negative trend in the banking sector has finished,"" Masaaki Higashida, a strategist at Nomura Securities, said. ""Markets are still sensitive about rumours, and this shows that investors remain concerned about the financial health of banks,"" he said.  
It was hard to predict how far bank shares will fall, analysts said, adding that there are no quick remedies to regain the lost confidence in the sector aside from improving asset quality by disposing of problem loans.
Katsuhito Sasajima, an analyst at Nikko Research Centre, said: ""In the long-term, the banking sector may remain under pressure until Japan completes its Big Bang financial reforms.""
""It is also difficult to become positive on the sector near-term, particularly if looking at interest rate prospects,"" he said, adding that interest rates have nowhere to go but up, as they have already fallen to a historically low level.  
Yoshinobu Yamada, an analyst at Merrill Lynch Japan Inc, said that the market's view of banks' financial health may further erode because land prices remain under pressure and this has cast doubts over the economic recovery.
""Financially weak banks must try harder to regain the confidence from investors by cutting non-performing loans and less-profitable assets,"" another analyst said.
One bright factor which may emerge is a move within parliament by some opposition politicians calling for the use of fresh public money to deal with problem loan issue, analysts and brokers said.
""If a system to use public money to bail out big banks is established, it will ease the nerves in the stock market and selective buying of strong banks will emerge,"" a market source said.
Last month, Moody's Investor Service lowered its ratings outlook for NCB and three other Japanese banks -- Hokkaido Takushoku Bank Ltd, Yasuda Trust & Banking Ltd and Chuo Trust and Banking -- to negative from stable.
It attributed the downgrading to serious asset quality problems, and said that their respective earnings, existing capital and reserves might not provide a sufficient cushion to absorb new loan-loss provisions.
",10
"The deal with the United States to open Japan's insurance market will create some convulsions in the industry, but analysts said it will help make way for the deregulation of Japan's financial sector.
A final agreement was reached on Sunday, ending a dispute that U.S. President Bill Clinton had called the biggest trade barrier between the two nations.
While it focuses on such esoteric issues as who can sell cancer healthcare policies and whether auto insurance can be purchased through the mail, the issue had become a major political dispute.
U.S. Secretary of State Warren Christopher even got in on the act, calling his Japanese counterpart to apply some last-minute pressure ahead of the Sunday deadline. Japanese Prime Minister Ryutaro Hashimoto said he was relieved that the whole thing was over.
The United States, in a statement issued by the embassy here, said the measures ""represent fundamental change in the Japanese insurance market, making it more open and competitive.""
Insurance trade groups were less than thrilled, however, saying the agreement ignores the needs of consumers and keeps their firms out of some fast-growing parts of the business.
Under the agreement, Japanese companies will be allowed -- in stages -- to enter the niche ""third sector"" that includes cancer, healthcare and accident coverage. This is the area where foreign firms have gained a foothold.
Foreign firms are expected to benefit from a deregulation of rates in the non-life insurance sector, including fire and auto insurance, to take place by the end of 1998.
Analysts say that even without the U.S. pressure, the changes were coming as part of Hashimoto's drive to revitalise Japan's financial sector.
""It was a matter of when,"" said Kouya Hasegawa, an analyst at Nikko Research Centre.
He said that as with most deregulation, smaller firms will find it tougher to compete in the new world.
""The liberalisation of premiums is a major blow to the non-life insurance industry, particularly medium- to small-sized firms,"" Hasegawa said
Takehito Yamanaka, an analyst at SBC Warburg (Japan) Ltd, agreed: ""It is inevitable that non-life insurers will compete by cutting premiums.""
Medium and small insurers must streamline their network of sales agents to cut costs, he said.
It was not until October that Tokyo removed a ban on mail-order auto insurance under U.S. pressure. Without a network of agents, insurance by mail was seen as an important step for foreign firms.
Income from auto insurance policies account for 40 percent to 50 percent of income at non-life insurance companies, analysts say.
Last month, American Home Assurance Co announced plans for what it says will be Japan's first mail-order car insurance service.
Analysts said the liberalisation of the premiums would eventually result in the disappearance of some financially weak firms and an increase in mergers.
To cope with deregulation, major non-life insurance firm Yasuda Fire & Marine Co Ltd recently announced it would take a majority stake in the Japanese unit of U.S. life insurance giant CIGNA Corp within the next year or two, the first time a Japanese non-life insurer has purchased a life insurance operation.
Under Japan's new Insurance Business Law, which took effect on April 1, non-life and life insurers were allowed to enter each other's business sectors for the first time.
Some in the industry argue that deregulation could create huge problems. They say that higher rates will lead to more uninsured drivers and jeopardise the protection of accident victims.
But no one is predicting that the concerns will stop a deregulation drive across the financial sector that comes to Japan a decade after it hit most industrialised nations.
",10
"Japan, worried about being isolated in global capital markets, is working to harmonise its domestic accounting standards with international methods.
Finance Ministry (MOF) officials and analysts say Japan must comply with international accounting methods amid growing criticism that it is difficult to calculate how much risk a Japanese firm holds.
""To raise funds in international capital markets, financial statements of Japanese firms must be accepted by foreign investors,"" said an official in MOF's securities bureau.
Naruaki Sonoda, Nikko Research Centre's senior analyst, says: ""It is needed to harmonise Japanese standards with international ones as it is costly for Japanese firms which want to raise funds overseas to have to make two financial statements based on domestic and international standards.""
Last month, an advisory body to the ministry started a two-year discussion into whether and how far mark-to-market accounting should be used for companies' financial products holdings, such as securities and derivatives, as well as corporate pension fund accounts.
In mark-to-market accounting, unrealised gains or losses from financial products holdings must be stated in balance sheets and included in income statements.
In Japan, financial products are fundamentally appraised according to the cost of purchase, and only realised gains or losses need to be posted when positions are closed, regardless of the size of the open position a corporation is holding.
Growing financial assets at Japanese corporations and a series of trading fiascos by Japanese firms in the past year has prompted Japanese authorities to set tougher accounting rules.
At the end of March 1995, securities holdings at Japanese corporations, excluding financial industries, totalled 50.11 trillion yen ($463 billion) based on book value, accounting for 16 percent of their total assets, NRC's Sonoda said.
This compared with 21.15 trillion yen ($195 billion) of securities holdings at the end of March 1985, which accounted for 11 percent of their total assets.
Huge losses stemming from securities and derivatives trading have raised criticism for lax Japanese corporate risk management and accounting methods.
Earlier this year, Japanese trading house Sumitomo Corp announced it had lost $1.8 billion through unauthorised trading in copper futures.
Last November, Daiwa Bank said it lost $1.1 billion in unauthorised bond trading at its now-closed New York office.
The MOF also announced last month that it would tighten rules on corporate disclosure, highlighting that corporations will have to disclose unlisted derivatives trading such as swap trading, based on market prices, beginning in April 1998.
Listed derivatives, which are already calculated at market values, cover futures and options traded at the securities exchanges. Unlisted derivatives include swap trading such as interest-rate swaps.
The new rules do not affect corporate balance sheets, but disclosing the data is a step towards introducing mark-to-market accounting for financial products holdings.
Japan is working toward using international standards, said Hirokazu Moriyama, general manager at Yamaichi Research Institute of Securities & Economics.
""I expect Japan to introduce international accounting standards by the end of the fiscal 1998/1999, as the European Commission, and the Securities and Exchange Commission of the United States have stated their support for the IASC process in setting international accounting standards,"" Moriyama said.
IASC, the International Accounting Standards Committee, has been working out principles of international accounting rules that can be applied in consistent ways in different countries.
It is expected to complete the process by March 1998.
The International Organisation of Securities Commissions, comprised of governmental securities authorities, including Japan, decided in July last year that it would take steps towards accepting IASC accountancy proposals.
Sonoda said, however, it was still unclear how far Japan would go in adopting mark-to-market methods in securities holdings and derivatives trading.
The United States basically uses the mark-to-market appraisal for securities holdings.
Sonoda says if international accounting standards follow the U.S. method, the impact would be enormous on Japanese corporations.
""Japanese companies own huge amounts of stocks in unique cross holdings, and they have massive unrealised profits on those holdings as they bought the shares a long time ago at cheap prices.""
If those hidden profits are appraised in balance sheets, the boost in assets would deteriorate the return on equity (ROE) at Japanese companies.
ROE is a common financial yardstick, showing how efficiently a company is using its capital.
""This may reveal how poorly Japanese companies make use of shareholders' capital..."" Sonoda said.
Currently, the ROE for Japanese companies is about 3.8 percent, compared with more than 10 percent for U.S. companies.
",10
"Seven of Japan's eight biggest life insurers said on Wednesday that they experienced a drop in assets in the first half of the current fiscal year, the first such fall in many years.
Executives attributed the decline to a cancellation of pension fund management contracts after the firms cut their guaranteed rate of return in April.
""It was the first time we have seen a drop in assets since we started announcing our interim business reports (six years ago),"" said Taichi Ohtaki, managing director of Asahi Mutual Life Insurance Co. ""It would probably be the first time we have experienced a decline in our assets since World War Two.""
Combined assets at the eight firms totalled 142.8 trillion yen ($1.26 trillion) at the end of September, down 1.2 percent from 144.6 trillion yen ($1.27 trillion) at the end of March.
Only Nippon Life Insurance Co, the biggest life insurer in Japan, increased its assets -- to 39.44 trillion yen ($349 billion) from 39.03 trillion yen ($345 billion).
The other firms are Meiji Life Insurance, Sumitomo Life Insurance, Dai-ichi Mutual Life Insurance, Mitsui Mutual Life Insurance, Yasuda Mutual Life Insurance and Chiyoda Mutual Life Insurance.
Assets of the eight account for about 75 percent of the total assets held by all Japanese life insurers.
The executives said that some corporate pension funds and the Pension Welfare Service Public Corp (PWSPC) -- an affiliate of the Welfare Ministry -- had cancelled fund management contracts in the first half of 1996/97, due to a cutback in the guaranteed rate of return offered by life insurers to 2.5 percent from 4.5 percent.
The PWSPC said earlier this year that it had cancelled about five trillion yen ($44.2 billion) worth of fund management contracts with 18 life insurers.
However, some insurers were optimistic and said the decline in assets was only a temporary phenomenon.
""I think the cancellation of pension funds peaked out in the first half and assets at the end of next March will likely recover to the same level as at the end of last fiscal year,"" said Minoru Mochida, senior managing director at Meiji Life.
Analysts said that despite the decline in assets, the profitability of the insurers was improving.
A serious headache for the insurers has been the negative spread between current low investment yields and already promised payouts, they said. Since the cancellation of pension fund management contracts, the gap has been narrowing.
The payouts are calculated based on prospective investment yields at the time insurance policies were written.
Meiji Life's Mochida said the overall average guaranteed rate of return offered by life insurers would fall to about four percent in 1996/97 from about five percent in 1995/96, while investment yields would remain low at around three percent.
The eight firms also announced a combined 2.15 trillion yen ($19.0 billion) of problem loans as of the end of September, the first time they had revealed such statistics.
They said that at the end of September the amount of this total classified as ""bad loans"" -- loans to bankrupt companies and those on which interest payments are in arrears of six months or more -- was 1.06 trillion yen ($9.3 billion).
An official at Sumitomo Life said the firm would this fiscal year dispose of about 500 billion yen ($4.42 billion) of problem loans made to its non-bank affiliates in an effort to cut them back to a manageable level. At the end of September Sumitomo had 789.9 billion yen ($6.99 billion) of problem loans, more than any of the eight insurers. ($1=113 yen)
",10
"Optus Communications Ltd said on Tuesday its Optus Vision pay-television venture was considering whether to continue to support the Australian Rugby League (ARL) after its court defeat against News Corp last week.
""The decision we have to make is how long we continue to support that, and I think right now our people and Channel Nine people would be talking about those issues,"" Optus Communications chairman Russell Fynmore told Reuters.
Fynmore did not elaborate but said the ultimate fate of the ARL or its News-backed rival Superleague would be decided by the financial backing for the leagues.
""This is really for the ARL and Superleague to determine and in the end it will determined on how much financial support there is for both leagues,"" Fynmore said.
Optus Vision, five percent-owned by Australian magnate Kerry Packer's Publishing and Broadcasting Ltd (PBL), owns the pay-television broadcast rights to the ARL. PBL's Channel Nine has the free-to-air broadcast rights to ARL.
The ARL suffered a major reversal of fortunes last Friday before the full bench of the Federal Court, which unanimously upheld News' appeal against previous rulings banning Superleague till the turn of the century.
Superleague is preparing to kick off its competition next season, creating the prospect of two rival leagues fighting for TV audience share in 1997 unless a compromise is reached.
Earlier on Tuesday, News Ltd executive chairman Ken Cowley said the company's door was open to talks with the ARL.
""You have always got to keep your door open...,"" Cowley told reporters in Melbourne.
""We want to maximise the number of fans watching Superleague and so we will be doing the best we can for the fans and the clubs and the players,"" he added.
He dismissed suggestions, published on Tuesday in News Ltd's The Australian newspaper, that ARL chairman Ken Arthurson could step aside to facilitate a merger of the two leagues.
""The statement by Ken suggesting he might fall on his sword is rather a curious reaction,"" Cowley said.
""He has no authority in the ARL -- he hasn't had for a couple of years. He cannot make any decisions of any consequences regarding to the game, and particularly to Superleague, without the approval of Kerry Packer.""
-- Melbourne bureau 613-9286-1421
",30
"Australian furniture, whitegoods and computer retailer Harvey Norman said on Wednesday it was trailing behind its target for 15 percent annual sales growth and that cool summer weather had impacted on December sales.
Managing director Michael Harvey told Reuters that December sales again grew by ""double digit figures"" on the same month a year ago, but was not matching the robust growth the expanding company traditionally enjoyed.
Excluding sales from new stores, turnover in December, a peak month, rose only about five percent, Harvey said.  
""We are looking for a 15 percent increase (in 1996/97), which will take us from A$1.043 billion, which we posted last financial year, up to A$1.2 billion and at the moment we are falling short of that target,"" Harvey said in an interview.
He described the retail trading environment as the worst in the company's 15-year history, but stuck to his earlier hope that the second half of the current year ending June 30 would compensate for a slow first half.  
Harvey declined to give a profit forecast but said the company was ""definitely not"" heading down the same path as retailers David Jones Ltd, Country Road Ltd and Just Jeans Ltd, all of which have announced steep interim profit downgrades.
""If we have a flat result or if we were indeed between flat and 10 percent down, we are going to be disappointed,"" he said.
""But I can assure you it's our belief that it won't be less than a 10 percent decrease on last year and it's certainly our hope that it will be an increase on last yeaer's profit result.
""But, again, because of the nature of our business, it's just too early to tell,"" he said.  
Harvey Norman reported a dip in net profit after abnormals of A$30.41 million in 1995/96, but told shareholders at its annual meeting in November it looked forward to strong summer months from November to February.
But managing director Harvey said summer had so far been unseasonally cool in its east-coast markets, dampening sales of goods like air conditioners, refrigerators, fans, outdoor furniture and barbecues.
""That's really let us down more than anything else,"" he said. December and January are usually the firm's peak months.  
Harvey Norman is still hoping for a heatwave, but hot weather has its biggest impact on sales before Christmas when a lot of discretionary household expenditure is spent, he added.
The company is also pinning its hopes on a turnaround in consumer spending in the first half of calendar 1997 to enable Harvey Norman to reach its 15 percent sales target, but Harvey said there appeared to be little joy on the immediate horizon.
""Through last year we were basically saying it's got to turn in the second quarter of '97 calendar year, but at moment there's nothing to indicate that's going to happen...,"" he said.  
""My view is that next financial year starting July it will be a better year than this year and last year, but in terms of when it will actually start to turn, we are hoping...it will be the second quarter,"" Harvey said.
""I don't think we are going to see much joy in January, February, but it's our hope that things will turn come March, April, May, June,"" he said.
-- Melbourne Bureau 613-9286-1421
",30
"Australia's biggest company, resources and steel group The Broken Hill Pty Co Ltd (BHP), said on Friday it has agreed to pay its domestic steel workers a 10 percent pay rise over two years.
The Australian Workers Union (AWU), which claims to represent about 80 percent of BHP Steel's 15,000 unionised steel workers, also confirmed the deal, saying it was struck and endorsed by the workforce just before Christmas.  
BHP and the AWU said the annual wage rises, effective from New Year's Day, were for five percent in calendar 1997 and five percent in 1998, paid as three percent instalments in January and two percent in July.
The wage rises include site-specific productivity offsets at steel mills around the country, but also included an adjustment for inflation and took into account other steel industry wage agreements, AWU spokesmen told Reuters.  
""These increases are to take place in the context of the agreement on the specific initiatives for improved performance through the introduction of incentive workplace agreements,"" BHP said in a short statement.
AWU negotiator Mick Eagles said the wage deal did not affect existing performance-related payments, under which workers can earn quarterly bonuses of up to about five percent of salary.
Eagles described the deal as a good outcome given the prospects for continued low inflation and predicted the wages of all Australian blue-collar workers would come under pressure.  
""I think in this environment, with the way the CPI is, I think the trend in the next 12 months and two years is going to put enormous pressure on wages to be kept low,"" he said.
""So a 10 percent outcome over two years is going to be seen as quite an achievement.""  
A BHP spokesman told Reuters the deal was satisfactory.
""Part of the agreement involves union agreement to introduce new types of employment arrangements which eliminate traditional demarcation lines and have novel concepts in terms of employment which provide us with a business benefit,"" the spokesman said.
""We think this is a satisfactory resolution, bearing in mind the benefits of those innovative agreements,"" he added.
The deal was in line with a recommendation made to the company and union last month by Australia's labour tribunal, the Industrial Relations Commission.  
BHP initially offered eight percent over two years, while the AWU entered negotiations seeking 15 percent over two years.
The agreement comes as wages growth continues to be cited by Australia's central bank as a major concern for inflation, now at historically low levels and well within the Reserve Bank's target range of between two and three percent.
The deal averted the threat of strikes at BHP's steel plants around the country, but the group's minerals division continues to feel the effects of industrial strife.  
About 700 workers downed tools on Thursday over wage and benefits disputes, halting construction of a A$1.5 billion iron ore processing plant being built for BHP at Port Hedland in Western Australia.
The striking workers are engaged to independent contractors hired by BHP.
In November, BHP coal miners in New South Wales state called a strike over cuts in accident compensation payouts.
-- Melbourne newsroom 613-9286-1421
",30
"Base-metals producer Pasminco Ltd forecast on Tuesday another tough year of cost-cutting, warning that a weak zinc market and a strong Australian dollar would make its last annual profit hard to beat.
""We are going to have a difficult year,"" chief executive David Stewart told reporters after delivering a subdued earnings outlook to shareholders at the group's annual meeting here.
Pasminco surprised financial markets markets in August by reporting a tripling of net profit to A$41 million for the year to June 30, despite weak prices for its major product, zinc.  
World zinc prices have not moved dramatically since then, but a stronger Australian dollar has made a major impact, dragging first quarter profit for 1996/97 lower, Stewart said.
""In the first quarter, our result...is below last year because of the impact of the (Australian) dollar,"" he said.
For every one-cent rise in the value of the Australian dollar against the greenback, Pasminco suffers a A$7.5 million fall in after-tax profit, Stewart said.
The local dollar on average was five cents stronger in the first quarter than its average throughout 1995/96, he added.
",30
"Diversified manufacturer Pacific BBA Ltd said on Tuesday trading conditions in the second half of calendar 1996 had been softer than expected and it now expected 1996 profits to be around the same level as 1995.
""I've only seen July's results and verbal figures for August, but it will depend on how the rest of the year unfolds,"" Pacific BBA managing director Barry Jackson told Reuters.
""It's looking a bit softer than we would like. We were really budgetting for an economy that was stretching a touch but it doesn't look like it's going to do it,"" Jackson said.  
Jackson said in an interview the 1996 profit would be similar to calendar 1995's net profit of A$15.9 million.
""I think it's going to be much the same figure,"" he said.
Jackson cited the flat Australian economy, relatively weak automotive sales world-wide and the cost of developing new projects as the major constraints on short-term profit growth.
But he said the domestic economy should pick up in 1997 and put the group on track to achieving its goal of 15 to 20 percent annual growth in sales and earnings before interest and tax.  
But Jackson, speaking after the announcement of a A$200 million, five-year contract to supply brake parts to a North American vehicle manufacturer, seemed to be more concerned about coping with rapid growth than with a sluggish local economy.
Pacific BBA, which makes car parts, plastic packaging and construction products, has budgeted to spend around A$60 million in 1996 in capital expenditure, Jackson said.
""I think it (capital expenditure) will be two to three times depreciation (charges) for the next year or so,"" he said, adding that this was around twice the average for manufacturers.  
The group is examining a range of expansion opportunities in Asia and North America, requiring annual capital investments of between as little as A$5 million and A$200 million.
""We have people looking full time at these opportunities,"" he said. But the group must expand cautiously, he added.
""We've just got to be careful we don't over-stretch ourselves,"" he said. ""Growth holds back your short-term earnings,"" he added.
Jackson rued the failure of Pacific BBA's recent bid for fellow Australian manufacturer Azon Ltd, which was acquired instead by U.S.-based Illinois Tool Works Inc.  
Pacific BBA needs to become bigger or find a big partner to seize major new opportunities, especially in the automotive industry where the group wants to become a global niche player, he said.
Asked if its small size in world terms could become a brake on Pacific BBA's growth, Jackson said: ""It's not been yet, but it could become one and we were trying to say to the market when we were trying to buy Azon that this could give us the ability to do anything we want to.""
-- Melbourne bureau 613-9286-1421
",30
"The Broken Hill Proprietary Co Ltd's steel division expects to increase its earnings in the current 1996/97 year due to lower costs and improved operations, BHP Steel chief executive Ron McNeilly told Reuters on Thursday.
But BHP Steel sees no major improvement in its home Australian market until possibly the second quarter of calendar 1997, and expects the world steel market to pick up towards the end of the first half of next year, McNeilly said.  
Asked if BHP Steels profit for the the current year ending May 31 would be higher than the division's 1995/96 profit, he said: ""Oh yeah, yeah, but as I said we don't make any forecasts.""
McNeilly declined to give a forecast for 1996/97 profits but said improvements would be driven by lower costs.
""If there's going to be an improvement in our results -- and I am confident there will be -- it will be an improvement that's driven I think in the near term by better operations and lower costs rather than a market-driven improvement in the short term,"" he added.  
BHP Steel reported a 44 percent slump in profit to A$375 million before abnormals in 1995/96. Its bottom line sunk 76 percent to A$153 million after a A$222 million write-down of the value of its Newcastle raw steel-making plant in Australia.
McNeilly said he expected steel markets in Australia and abroad to pick around mid 1997, as the domestic economy improved and world steel demand, especially in Asia, fed through into a recovery in depressed world steel prices.
""I don't really see any significant improvement in the Australian scene until sort of maybe the second quarter of next year -- so quite flat,"" he said.  
McNeilly described domestic demand as very patchy.
""There are some signs of improved demand in the resource and infrastructure areas but no sign of any improvement whatsoever in domestic housing, in most of the rural sector and in general demand, so it really is quite flat,"" he said.
BHP's export despatches of steel have been increasing, but an intensely competitive steel market has weighed on prices.
McNeilly quoted International Iron and Steel Institute (IISI) forecasts for strong world steel consumption over the next four years and said prices should strengthen between the first half of 1997 and the second quarter of 1998.  
""I think we will see towards the end of the first half of next calendar year, towards the end of the second quarter of 1998, an improvement in demand and prices in Asia and likewise Australia,"" he said.
""But I do think that from now until then, what we see now will be generally the situation.""
The IISI forecasts world steel consumption to grow at close to two percent annually to 714 million tonnes in year 2000, with most of this growth coming from Asia.  
""We are not seeing any improvement that's market derived and I don't think there'll be any improvement that's market derived over the next six months,"" he said.
BHP Steel's major new projects around the world are still being built and will not boost the division's profit until after 1996/97, he said.
""We won't see any major inflow of profitability from new projects, really until the second half of (calendar 1997), which is the first half of next financial year,"" McNeilly said.  
He declined to comment on speculation BHP is considering closing its old, integrated raw steel-making plant at Newcastle, rather than investing in a new electric-arc furnace there.
McNeilly said BHP's Glenbrook steel mill in New Zealand, also now under the spotlight, must slash A$50 million from its cost base. ""It absolutely has to happen,"" he said.
He said was encouraged by the resolve ""of all those involved"" at the 700,000-tonnes-per-year plant to cut costs.
""But if we have sites that don't and won't and can't, and tired assets that can't be rejuvenated, we have to bite the bullet and do the obvious.""  -- Melbourne bureau 613-9286-1421
",30
"Major Australian banks have blown the dust off their Asian strategies and are moving quickly into the region as life gets tough at home.
Three of Australia's biggest banks have publicly renewed their Asian ambitions in the past few months as competition hots up for the local market and earnings begin to suffer. ""It's now you are starting to see them push a bit harder into Asia,"" said Melbourne-based banking analyst Ken McLay, of credit rating agency Standard and Poor's Group.
All of Australia's four big banks are now pursuing opportunities for interest and fee income in the rapidly growing markets of Asia, quietly urged on by the nation's central bank.
Their uniform embrace of Asia comes as two of Australia's biggest life insurers, National Mutual Holdings Ltd and Colonial Mutual, also boost their Asian profiles. Last week, Colonial bought out its Asian joint venture for US$163 million.
But Asia has not always commanded such uniform priority among Australia's financial institutions.
CENTRAL BANK UNHAPPY
Only six months ago, the Reserve Bank of Australia (RBA) expressed disappointment that local banks were not seizing more opportunities to expand into Asia. At that time, the Australia and New Zealand Banking Group Ltd (ANZ) was the only exception.
ANZ has long been Australia's most Asia-focused bank, with a retail network throughout India and operations in 40 other countries, most of them within the region.
In contrast, the most profitable bank, National Australia Bank Ltd (NAB), has focused in recent years on the United States and Europe. Westpac Banking Group virtually withdrew from Asia three and a half years ago to focus on home markets.
For years after the free-wheeling 1980s hit a wall of bad debts in Australia, banks had put expansion plans on hold and Asian strategies gathered dust as they repaired balance sheets.
But since late last year, talk of Asia is again on bankers' lips as interest margins contract in a tight local market where banks and non-bank institutions encroach on each other's turf. ALL EYES ON ASIA
Westpac bounced back into Asia last November, announcing an alliance with British-based Standard Chartered Bank Plc to provide select Asian banking services to Westpac clients.
The venture will focus primarily on Singapore, Hong Kong, Indonesia, Thailand and Malaysia, before expanding into Vietnam and China, said Westpac.
NAB, which owns regional banks in the United States, Britain and Ireland, is also now looking for a partner in Asia.
""We've looked at a few (alliances) with banks and other institutions...It takes time to pull these things off,"" NAB managing director Don Argus told reporters last month.
Australia's fourth big bank, the Commonwealth Bank of Australia Ltd (CBA), also chimed in last week. It said it too would expand its Asian activities and was looking for joint-venture partners in Indo-China.
""Certainly the competition in the domestic market is extremely tough,"" S&P's McLay told Reuters, adding he expected Australian banks' local asset quality and earnings to deteriorate.
""One of the ways to offset this is diversifaction...One way they are trying to diversify is to go offshore and I think that's a prudent strategy, but it has its risks,"" he added.
SMALL FISH, BIG POND
Australian banks, minnows compared with the regional might of banks like Hongkong and Shanghai Banking Corp Ltd, are likely to use geography and trade links to make their mark in Asia.
""They are small in size but the Australian banks do bring a lot of expertise. They are headquartered in the region, so they benefit from that and Australia is a major trading partner with a lot of these countries,"" McLay said.
""Australian banks are pretty well placed to piggy-back on the back of that. I think they will do quite well.""
Australia's central bank cleary hopes so, declaring that ""momentum for involvement in Asia has now clearly re-emerged"".
""The banks' focus has tended to be on the provision of trade finance and treasury services to corporates, although their retail activities in Asia are increasing,"" the RBA said in a written response to a parliamentary committee recently.
Australian banks' largest operations are in Hong Kong, Singapore and Japan, but they are fanning out, it said.
They are now eyeing opportunities in China, Indonesia, Vietnam, Thailand, Burma and Cambodia as these nations open up their banking sectors to foreign entrants, the RBA said.
",30
"Australian life office National Mutual Holdings Ltd will finally put an indicative value on its own shares on Wednesday, removing much of the guesswork that has surrounded the pricing of the group's A$2 billion-plus float.
The group's net tangible asset backing of A$2.36 billion or A$1.39 per share is expected to serve as the pricing yardstick for the offer, with retail investors receiving a discount on the final price paid by institutions, insurance analysts said.  
""I would have thought somewhere around A$1.30 and A$1.35 (per share for retail investors),"" a stock analyst said on Tuesday, noting the demand for shares from National Mutual policy-holders would largely determine the retail price.
Policy-holders own 49 percent of National Mutual Holdings, and French parent Axa the rest.
""Obviously if the demand from policy-holders has been as strong as they say, there's going to be less shares available to institutional investors, so that will push the price up a little.""  
National Mutual, which gave its 1.2 million policy-holders until August 23 to choose between taking shares or cashing out, has so far declined to comment on policy-holder demand for scrip, except to say the phones rang hot with inquiries.
It has also declined to specify the retail and institutional portions of the offer, leaving its ""embedded value"" or net asset backing (NTA) of A$1.39 per share as the only guide to a price.
National Mutual chief executive Geoff Tomlinson has said the group's NTA is an indicator of the final offer price, suggesting the group's earnings are too volatile to use the conventional appraisal valuation method, which accounts for future earnings.  
Under the offer process, Tomlinson will also announce the indicative price range for institutional investors on Wednesday as well as the total number of shares for sale by public offer.
The lack of any hard information on the policy-holders' response has led to some widely varying views on price.
One Sydney-based analyst said the retail price could exceed the group's NTA, suggesting policy-holders who elected to take cash would not want to see the price of the shares they forfeited leap in the secondary market.  
""At the end of the day, the people who took the cash alternative don't want to see the price at 40 or 50 percent above where they took the cash,"" he told Reuters.
At an issue price of A$1.39, National Mutual would list on the Australian Stock Exchange at a price-earnings ratio of 11.8 times, against the average across industrial stocks of 13.4.
""That's at the upper end of where we would expect these guys to trade, but there's some earnings growth to come through in (years ending September 30) 1997 and 1998,"" the stock analyst told Reuters.  
He said the A$1.39 NTA quoted by National Mutual undervalued its real NTA by five to six cents per share, and this implied a maximum offer price of A$1.45 for institutional investors.
""I don't think they (the institutions) are really going to want to pay much of a premium over embedded value,"" he said.
Another Sydney-based analyst said the institutional offer price could reach as high at A$1.60, based on a retail offer price of around the A$1.39 NTA.  
""I think there's going to be a lot of interest, particularly in overseas institutions,"" he said. ""I think there's a lot of value there...,"" he added, citing an improving Australian life insurance market and good growth potential in Asia.
The group's 69 percent-owned National Mututal Asia Ltd, based in Hong Kong, and National Mututal Life in Australia account for the bulk of the group's earnings.
-- Melbourne bureau 613-9286-1421
",30
"Australian resources and steel group The Broken Hill Pty Co (BHP) posted a 9.8-percent fall in first-half profits on Friday, further disappointing the share market after a difficult year.
BHP, whose shares have been hammered since its key markets in steel and copper turned sour six months ago, posted a A$790 million (US$628 million) net profit for the six months to November 30, down from A$867 for the same period last year.
But Australia's largest quoted company had its bottom line boosted by an abnormal gain of A$107 million and investors were not impressed.
The share price climbed 54 cents to a high of A$17.59 just after the result but took a tumble and settled at around A$17.20, still 15 cents higher than Thursday's close.
""It's pretty lousy,"" one fund manager's stock analyst told Reuters.
Though forecast signs of improvement emerged in BHP's battered copper division, with the North American copper operations swinging back into profit, analysts had been tipping a first-half group pre-abnormal result of around A$760 million.
BHP's pre-abnormal net profit of A$683 million was 15.8 percent down on the corresponding 1995/96 period.
But managing director John Prescott said the second quarter figures showed an accelerating improvement in performance.
""We are seeing an improvement in our operations quarter on quarter on quarter and the trend to improvement is accelerating,"" he said in a taped interview released to the media after the result.
""I think we are moving ahead. We have a lot of work to do and we're going to build the company around its high-quality assets and we are starting to see the results of our work.""
Including abnormals, BHP's minerals, copper and steel divisions all contributed increased earnings in the latest three months compared with the August quarter. The steel division was flat.
Petroleum was the biggest earner with A$253 million for the quarter, but this included an abnormal gain of A$107 million from the settlement of a dispute over a gas resource tax.
BHP Petroleum's pre-abormal result also included a A$82 million windfall from asset sales and a larger than expected exploration expense.
""The initial reaction (to the result) was positive but this has been followed by disappointment,"" said Phillip Toop, a dealer at Brisbane broker Lance Jones.
BHP's minerals division, a major world producer of iron ore and coal, doubled its contribution to profit in the second quarter to A$154 million, due largely to higher world prices.
BHP Copper benefitted from a recent firming in the copper price and a cut of seven U.S. cents per pound in its North American operating costs to post a second quarter profit of A$132 million, up from A$85 million in the first quarter.
The U.S. copper operations, acquired last January with the US$2.4 billion purchase of Magma Copper, made a loss on a full-cost basis in the first quarter. Prescott said on Friday Magma had swung back into profit in the second quarter.
BHP Steel's second-quarter profit was flat at A$90 million.
",30
"Australian resources and steel group The Broken Hill Pty Co (BHP) disappointed the share market on Friday with a weaker than expected second-quarter profit to post first-half net earnings of A$683 million before abnormals.
BHP, whose shares have been hammered since its key markets in steel and copper turned sour six months ago, booked an abnormal gain of A$107 million to boost the bottom line for the six months to November 30, but investors were not impressed.
",30
"Australian life office National Mutual Holdings Ltd is expected to make a firm, historic debut on the Australian and New Zealand bourses on Tuesday after its institutional offer closed six times oversubscribed last week.
The final price of A$1.60 per share was higher than indicative bidding range of A$1.35 to A$1.55 initially set for institutions, and gives Australia's second biggest life office a market capitalisation of A$2.7 billion on listing.  
""It was very significantly over-subscribed and at A$1.60 there's no doubt that we could have sold it a number of times over,"" National Mutual managing director Geoff Tomlinson told Reuters on Monday. He described an oversubscription rate of six times as ""not a bad figure"".
Share analysts told Reuters on Monday the shares could climb steeply on Australian and New Zealand exchanges on Tuesday, as institutional bidders which failed to secure enough shares in the offer stepped into the market to lift their stakes.  
Institutions received on average only about 15 percent of the allotments sought in the price-setting institutional component of the offer, a market source said.
""There's certainly keen demand so I think that will certainly still be there (after listing),"" Morgan Stockbroking's director of equities, Bill Chatterton, told Reuters on Monday.
The shares could reach a high of A$1.80, he added.
",30
"Australian-based Foster's Brewing Group Ltd reported on Monday a small rise in interim net profit, but the bottom line result hid a strong performance from the group's home brews.
Foster's posted a 2.4 percent increase in net earnings to A$169.4 million, after booking a A$5.6 million abnormal loss.
The loss was due mainly to ongoing restructuring costs of the group's 40 percent owned Canadian brewer, Molson Breweries, and concealed a 10 percent rise in pre-abnormal net earnings to A$168 million.  
Foster's chief executive Ted Kunkel largely attributed the rise in pre-abnormal earnings to a ""sparkling"" performance from the group's domestic powerhouse, Carlton and United Breweries (CUB), in the six months to December 31.
""CUB had a four percent increase in the volume of beer sold, a remarkable result in a beer market which rose only 0.6 percent,"" he said in a statement.
CUB, which has taken a commanding market lead in Australia over chief rival Lion Nathan, contributed A$187.4 million in earnings before interest and tax, a rise of 11.5 percent over the first half of 1995/96 (July/June).  
The group result came in at slightly below the average forecast for first-half profit of around A$170 million.
The share price dipped a few cents after the announcement, but a Sydney broker said the stock was also moving to the tune of speculation Foster's may buy back the 37 percent stake held by resources giant The Broken Hill Pty Co Ltd.
BHP indicated on Sunday it was in no hurry to sell its Foster's investment. Foster's shares were trading at A$2.60 at 0325 GMT (14.20 p.m.), down five cents on Friday's close.  
Foster's said it expected earnings before interest and tax (EBIT) to be higher in the year to June 30 than the A$371 million reported in 1995/96, but that interest costs and the re-emergence of tax liability on Australian income would have an impact on the overall earnings for the 1996/97 year.
But Foster's said losses at its brewing operation in China widened in the six months ended December 31, 1996.
Foster's said its China operations recorded a loss before interest and tax of A$10.2 million in the first half compared with a loss of A$6.8 million in the 1995/96 first half.  
It said revenues in China for the half rose to A$20.9 million up from A$15.9 million a year earlier, with volumes sold rising to 539,000 hectolitres compared with 392,000 hectolitres.
Foster's wine unit, Mildara Blass, contributed A$33.4 million in earnings before interest and tax (EBIT) on sales of A$115.5 million, while its Rothbury Wines acquisition, completed in July 1996, was on track to achieved targeted first year earnings growth.
-- Melbourne bureau 61-2 9286-1421
",30
"Australia's Foster's Brewing Group Ltd signalled on Monday that it was thirsty for expansion and said it was eyeing possible joint ventures in India and Vietnam to add to its international stable of breweries.
Foster's executives told shareholders at the group's annual meeting in Melbourne that despite hiccups at its Canadian and Chinese operations, the company was well positioned to seize on any growth opportunities both offshore and at home.  
""The first priority after satisfying the cash needs of the current businesses is to seek out new direct investment opportunities with the right return profile,"" Foster's chief executive Ted Kunkel told the meeting.
""Should that not fully utilise the available financial resources, then we would look at additional options,"" he said.
Later, Foster's chairman John Ralph confirmed the group was considering joint venture breweries in Vietnam and India but said it was looking at a wide range of possible investments, including acquisitions. Asia is a major focus, he added.  
He declined to give details but said the Vietnamese opportunity involved an existing plant.
""There's nothing immediate but we are looking across all the areas of our business in fact,"" Ralph told reporters.
""We are involved in looking at a couple of opportunities, but it's early days. Provided we can see it makes sense for us, and we can do it on a basis that's going to earn a satisfactory return, then we are likely to move,"" he said.  
Foster's, which has breweries in Shanghai, Tianjin and Guangdong in China, said the Chinese operations would break even or turn a profit in 1998/99. Foster's China posted a 1995/96 loss of A$17 million before interest and tax.
The group's 40-percent owned Canadian brewer, Molson Breweries  MOL.TO, also performed weakly in its business year ending April 1, but has undergone a major restructure and is focusing on building market share at home, Foster's said.  
Foster's chief executive Kunkel said Molson still delivered a high return on invested capital and forecast higher operating profits from the group's powerhouse Australian brewing unit, Carlton and United Breweries, over the medium term.
Foster's also plans to free up about A$400 million in non-performing assets and is counting on higher returns from its British pub chain, the Inntrepreneur Pub Company Ltd, putting the group in a stong position to pursue growth, Kunkel said.
",30
"Global paper and packaging group Amcor Ltd announced on Monday a rare slide in annual profit, blaming weak world paper prices and flat economic growth at home, but its shares held firm on the promise of recovery.
The result, which was Amcor's first fall in pre-abnormal profit in over a decade, failed to rock the blue-chip's battered share price, which had already fallen heavily in the past six months in anticipation of a weak outcome.  
""Potentially, the worst is over and you are looking forward to increased earnings here on in,"" a Sydney-based broker told Reuters after Amcor reported a six percent drop in net profit to A$338.8 million in the year to June 30.
Amcor's paper division was hit by a roughly 20 percent fall in world paper prices since late calendar 1995, and weak economic activity in Australia and Germany impacted heavily on its packaging operations, the company said.
But Amcor suggested that paper prices had bottomed out and said it hoped to see signs of an upturn in 1997.  
""Paper prices ... appear to have bottomed, all Amcor businesses have restructuring and cost-reduction programmes underway and there are new business opportunities in all regions,"" Amcor managing director Don Macfarlane told reporters.
The stock market, which shaved over A$2.00 off Amcor's year-high share price this year, initially pushed the shares higher on Monday before late selling pulled them to a close of A$7.62, down 12 cents on Friday's close, in a falling market.
""I don't think sentiment towards the stock is going to change in the near term,"" said one Melbourne-based analyst.  
""Profit will be flat towards the end of the (current 1996/97) year and then start to pick up into the new year,"" she added, predicting that a recovery in Australian economic growth will begin to spur Amcor's earnings in 1997/98.
Amcor, one of the world's top-10 paper and packaging companies and for many years a favourite of the local bourse, signalled a major cost-cutting drive and a reduction in capital expenditure to restore margins, especially in packaging.  
The packaging business, which makes products ranging from plastic beverage bottles and breakfast-cereal boxes to carboard boxes, suffered squeezed profit margins in Australia and New Zealand, and poor results in Germany.
Its Holfeder box-making business in Germany posted another undisclosed loss in 1996/97. ""The level of confidence in the German economy is abysmal,"" Amcor's Macfarlane said.
The group's U.S. operations also ""dragged its feet"" but its British packaging business posted excellent results, he said.  
Amcor's Asian packaging operations posted higher profit, despite paper prices in the region ""sinking like a stone"" this year and dragging carboard-box prices with them, he said.
""It's been a rollar-coaster ride on paper prices in Asia,"" he added.
Amcor has long had a target of achieving 15 percent growth in earnings per share, but Macfarlane announced this annual goal had been scrapped, given the difficult trading environment and Australia's new low-inflation environment.
""I think we simply have to for a period pull them (rapid-growth ambitions) down a peg or two...,"" he said.  
""Clearly we have to make sure that the businesses we have already got are earning reasonable returns.""
-- Melbourne Bureau 61-3 9286-1421
",30
"Australia's biggest retailer, Coles Myer Ltd, reported on Wednesday a firm rise in sales revenue, signalling the worst may be over for the country's long-suffering merchants.
Coles announced a 5.4 percent rise in sales revenue to A$9.9 billion (US$7.5 billion) for the six months to January 26, sounding a rare note of optimism in an industry that has been hit hard by a downturn in consumer spending.
Coles, which pockets almost 18 cents in every retail dollar spent in Australia, attributed the result to good management rather than any pick-up in the economy.
""A lot of people have done a lot of work to get where we needed to get,"" Coles chief executive Dennis Eck told Reuters.
But Coles' announcement came a day after another retailer, David Jones Ltd, reassessed its profit outlook, painting a slighter brighter picture than the bleak dive in earnings it forecast just after Christmas.
David Jones, an upmarket department store chain, had told the Australian Stock Exchange early last month it feared a 50 percent fall in interim profit, but changed its mind this week.
""It will not be as bad as that,"" David Jones chief executive Chris Tideman told Reuters on Tuesday.
He did not elaborate but stock analysts said on Wednesday post-Christmas clearance sales helped lift the company's overall sales result to A$783 million for the first half year ending January 25 -- just one percent lower than a year ago.
""I think we have probably gone through the worst in spending, but I would not expect a dramatically big turnaround,"" said retail analyst Simon Shakesheff, of Macquarie Bank.
""The sentiment is still a bit fragile, but at the end of the day, until there's a bit more job creation out there, people are not going to be spending more,"" he told Reuters.
Another Sydney-based analyst agreed that consumers' wallets would be slow to open.
""I think we will (see a recovery) but I don't think we saw it in January,"" the analyst said.
Australian retail sales are at their lowest ebb since the nation's official statistician began counting them 35 years ago. They have fallen in trend terms in each of the past five months.
Employment has also been weak with Australia's jobless rate hovering at 8.6 percent.
Coles confirmed on Wednesday that trading conditions were still tough, especially in clothing and fashion. The group's only specialist apparel chain, Katies, reported a 4.7 percent drop in turnover in the latest sales figures.
But Coles' Eck said profit margins in its underperforming department store chains were improving, as store managers improved the quality of merchandise sold and pared back costs.
In sharp contrast to the group's 33.8 percent fall in net profit in 1995/96, Eck said he expected an increase in bottom-line earnings for the current year ending July 27.
""Our earnings are in line with our plan,"" he said.
Coles reported net profit of A$280 million in 1995/96, and stock analysts are forecasting a modest profit rise in 1996/97.
(A$1 = US$0.76)
",30
"Australian life office National Mutual Holdings Ltd is tipped to make a strong, historic debut on the Australian and New Zealand bourses on Tuesday after its institutional offer closed six times oversubscribed last week.
The final price of A$1.60 per share was higher than the indicative bidding range initially set for institutions, and gives Australia's second biggest life office a market capitalisation of A$2.7 billion (US$2 billion) on listing.
""It was very significantly over-subscribed and at A$1.60 there's no doubt that we could have sold it a number of times over,"" National Mutual managing director Geoff Tomlinson told Reuters in an interview on Monday.
National Mutual is Australia's first listed life office and, at A$1.60 per share, will rank among the market's top 30 firms.
The shares could climb steeply on both the Australian and New Zealand exchanges on Tuesday, as institutional bidders which failed to secure enough shares in the offer step into the market to lift their stakes, share analysts told Reuters on Monday.
Institutions received on average only about 15 percent of the allotments sought, a market source told Reuters.
""There's certainly keen demand...,"" Morgan Stockbroking's director of equities, Bill Chatterton, said. The shares could reach a high of A$1.80, he added.
National Mutual's listing completes its 21-month transition from a mutual company owned by its policy-holders to a listed group free to pursue its strategic focus on Asia, unshackled by a mutual requirement to act solely in policy-holders' interests.
National Mutual will be owned 51 percent on listing by its French parent, the insurance and financial services giant Axa SA, which is prevented under the terms of the float from selling down its stake for six months after the listing.
Axa, which effectively bought into National Mutual last year at around A$1.25 per share, is sitting on an enormous paper profit. It cannot increase its stake in National Mutual unless given the Australian government's go-ahead.
Under the float, National Mutual's 1.2 million policy holders were offered either shares or a cash alternative. Shares not taken up were offered to retail investors and institutions.
Retail investors were offered the shares at A$1.50 each last month, before the final price was set at the close of institutional bidding last Friday, giving mums and dads a strong temptation to take a quick profit on Tuesday, analysts said.
""There's going to be a fair amount of underlying demand from institutions to get the stock, but there may be a little bit of stag profit-taking as well,"" a Melbourne-based analyst said.
National Mutual's Tomlinson said the listing, demutualisation and last year's capital injection of A$1.1 billion by Axa marked the end of a tough four years, especially for life subsidiary National Mutual Life.
""Tomorrow will mark the end of a four-year diffcult period and put us into a new area where we can...finalise the turnaround of National Mutual Life in Australia and New Zealand and try to take further advantage of our opportunities in Asia,"" he said.
A$1 = US$0.79
",30
"Chemicals and plastics group ICI Australia Ltd posted on Wednesday a steep fall in annual net profit, blaming it in part on sharply lower plastics prices, but said the company was poised for major new expansion in Asia.
Managing director Warren Haynes said the group's net profit after abnormals of A$197 million reflected a difficult year to September 30, but the ""pain"" of restructuring and efficiency drives over the period would start to pay off in 1996/97.  
""We have in place a sounder base going into (1996-)'97 in terms of lower fixed costs, better volume in terms of upgrades of plants and lower variable costs...,"" he told reporters here.
Trading profit from the plastic division almost disappeared in 1995/96, plummeting to A$2 million from a record result of A$73 million in 1994/95 and mirroring a similarly sharp drop in world plastics prices from mid-1995, he said.
Plastic prices have fallen on average by US$400 per tonne since their peak of A$1,250 per tonne in June 1995, he said.  
ICI Australia, owned 62.4 percent by British chemicals giant Imperial Chemical Industries Plc, makes about 300 tonnes of plastics each year.
The company's paints, vinyls and chemicals businesses also reported weak results in 195/96, due to sluggish building activity in Australia, but its Incitec Ltd fertiliser subsidiary put in a strong performance in the year.
""That's offset the two very severe effects of the building industry and downturn in plastics prices to some extent,"" Haynes said.  
ICI Australia is not banking on a rise in plastics prices in 1996/97, but believes it is now in a stronger competitive position due to the recent conversion of its Sydney plastics plant to more efficient ethane feedstock.
The switch to ethane from a mixed feedstock of liquified petroleum gas and naphtha has fundamentally changed ""the whole economics for the plastics business for ICI Australia"", he said.
The company also shed 500 jobs in 1995/96, or six percent of its workforce, including about 100 jobs lost due to the closure of vinyl production in Sydney, Haynes said.  
""Whilst we have got ourselves in good shape in terms of costs and capacity, I can't predict what the outcome will be (for 1996/97),"" he said, adding that world prices and domestic demand would determine the direction of profits.
ICI Australia would continue in 1996/97 to run capital expenditure at about A$350 million, but the portion spent in Asia will at least double to about A$50 million, Haynes said.
The group spent around A$20 million in 1995/96 in Asia, where it invested in polyethylene manufactuere in Malaysia, a resin plant in China and explosives production in Indonesia.  
New investments in the region could be much larger, and investments ranging anywhere from A$20 million to A$100 million would be considered, Haynes said.
""We have started to move into Asia in (1995-)'96 and we have plans to move further into Asia in (1996-)'97,"" he said.
""We would expect to step that up in '97 and possibly with investments on a larger scale than in '96, but we also see investment opportunities in Australia,"" he added.
-- Melbourne bureau 613-9286-1421
",30
"Over half a million people insured with Australian life office National Mutual Holdings Ltd have rushed to buy shares in the group in what the insurer said on Wednesday was a ""fabulous"" start to its stock market debut.
National Mutual, which plans to list on the Australian and New Zealand exchanges next month, announced on Wednesday that half of its 1.2 million policy-holders had elected to take up their entitlement to shares in the multi-billion-dollar float.
""National Mutual Holdings will have the largest shareholder base of any company in Australia and New Zealand ... it's a fabulous result,"" National Mutual managing director Geoff Tomlinson told reporters and insurance analysts in Melbourne.
Tomlinson also set an offer price of A$1.50 (US$1.18) per share for retail investors and indicated a price range of between A$1.35 and A$1.55 for institutional investors, which will bid for at least 60 percent of the shares on public sale.
Once listed on the Australian bourse, National Mututal will figure in the top 50 companies by market capitalisation.
The retail price of A$1.50 a share translates to a market capitalisation of about A$2.5 billion ($1.98 billion).
""This excellent response to the offer by our policy-holders has demonstrated a vote of confidence in National Mutual and our strategy for the future,"" Tomlinson said.
National Mutual, the first big Australian life insurer to demutualise and destined also to be the first major life office to list on the Australian market, is floating its shares partly in a bid to become a global player focused on Asia.
National Mututal Asia Ltd is already the second-biggest life office in Hong Kong and is lobbying for a licence to operate in China, the group has said.
National Mutual Holdings will be owned 51 percent on listing by French insurance giant Axa. The float will help National Mutual become ""a member of a truly global financial services group"", Tomlinson said on Wednesday.
Joint lead manager for the issue, brokerage J.B. Were & Son, said the strong demand for shares by policy-holders should ensure good demand from institutional investors.
""I think there will be pretty keen competition for it,"" said J.B. Were group managing director Terrence Campbell.
""There's plenty of Asian interest but as far as we can tell, there's plenty of interest in the (United) States and Europe as well,"" he told reporters in Melbourne.
Tomlinson and other National Mutual executives will leave Australia next week for a two-week roadshow of Asia, Europe and the United States to sell the offer to institutions.
Under the float, retail investors will be offered a refund if the final institutional price is below A$1.50, but they will pay no more if the final price exceeds A$1.50.
""Given the high policy-holder take-up (of shares), it then gives us more confidence ... that at the price of A$1.50, we were pitching at the right level,"" said John Magowan, head of stockbroking at joint lead manager McIntosh Corp Ltd.
Insurance analysts predicted on Wednesday the demand from policy-holders would help to ensure the final price determined by institutional bidding would fall in the upper end of the group's indicative price range.
""That will boost the price just because of the supply and demand situation,"" a Sydney-based analyst told Reuters.
""I think it (the institutional price range) is a realistic price,"" insurance analyst Nick Selvaratnam of brokerage BZW Australia, told Reuters.
The offer prices compare with a net tangible asset backing for the group of A$1.39 per share and an appraisal value, accounting for future profits, of A$1.60 per share.
(A$=US$0.79)
",30
"Australian retailers are heading for a grim round of sharply lower profit results as one by one the major chains announce they have fallen casualty to a sluggish economy and tight-fisted consumers.
Homeware retailer Harvey Norman Ltd added its voice on Wednesday to the chorus of woe, revealing it was trailing its goal of 15 percent annual sales growth amid the worst retail environment in the company's 15-year history.  
The comments, made to Reuters in an interview, follow formal warnings to the stock exchange that big upmarket department store chain David Jones Ltd, and two large clothing retailers, expect steep profit slides.
David Jones and fashion houses Country Road Ltd and Just Jeans Ltd have all warned of 50 percent drops in interim profit for the half-year ending January, confirming that Christmas failed to boost retailers' bottom lines.  
""We are used to posting massive increases (in sales turnover) year after year after year. This is the first year we've ever been caught up in a general market malaise,"" said Harvey Norman managing director Michael Harvey.
""It's basically an indication to us that the market is having its worst year since Harvey Norman began (in 1982).""
Harvey Norman, which is aiming for turnover of A$1.2 billion in the year ending June 30, has enjoyed annual sales growth of up to 58 percent over the past four years.  
It, along with other retailers, had been hoping for a strong December but found Australian wallets were not as easy to prise open as they once were, especially for clothes.
Australia's biggest retailer, Coles Myer Ltd, which accounts for almost 18 cents in every retail dollar spent, declined on Wednesday to give figures for December sales.
But corporate affairs director Peter Morgan said he was ""comfortable"" with Coles' performance. Coles has recently been among the most poorly performed listed retailers and is embarking on a major refocusing of its sprawling businesses.  
Official data released on Tuesday showed that all areas of retailing except for food weakened in the three months to November and that overall retail sales continued to trend down despite two interest rate cuts since July.
The Reserve Bank eased rates again last month, but it was too late to rescue a second dismal Christmas for retailers.
""A shocker"" was how one stock analyst summed up the festive season for the clothing retailers, but she said supermarket chain Woolworths Ltd and other food retailers should have come through the Christmas period relatively unscathed.  
Asked about the outlook for full-year profits in 1996/97, the analyst said: ""Pretty grim."" But she and another analyst said they saw a pick-up in earnings in coming months.
""I think the outlook is reasonable, but not spectacular,"" the second analyst said.
-- Melbourne Bureau 61-3 9286-1421
",30
"Institutional investor National Mutual Holdings Ltd has arranged to meet St George Bank Ltd to discuss its merger with Advance Bank Australia Ltd in a sign of growing disquiet over the deal.
National Mutual's funds management arm, a top-20 shareholder in St George, wants to discuss the bank's decision not to put the merger proposal to a shareholders' vote.  
""We are coming close to having a position on that and we are meeting shortly with St George and we will make some decision at the end of the meeting,"" said National Mutual Funds Management Ltd's domestic equity investments manager, Paul Jennings.
He declined to comment further but market sources said on Monday that National Mutual and at least one other institution were lobbying St George to reverse it decision not to seek shareholder approval for the A$2.65 billion merger.
""Three institutions ... are a little bit up in arms about it and would like to see a meeting,"" a broker said.  
National Australia Bank Ltd, itself seen as a predator in Australia's rapidly consolidating banking sector, has already said it is disappointed at St George's decision, which has been approved by the Australian Stock Exchange.
""We are disappointed there would not be a shareholders' meeting and we were concerned about the level of information out there about a merger proposal,"" NAB spokesman David Upton said.
""Given there hasn't been any details of the merger released as yet, we thought it would be important to have a meeting to give shareholders an opportunity to discuss it and find out more,"" Upton said.  
He declined to comment when asked about a newspaper comment that NAB might have few legal options to oppose the bid.
""We simply wanted to make known that we were disappointed that there wouldn't be a meeting,"" he said.
St George's scrip and cash offer valued each Advance Bank share at A$7.30 -- or nearly three times net asset backing.
The Australian Shareholders' Association, representing small shareholders, said it had met St George last Friday over the question of a shareholders' meeting.
""We are not at all happy,"" association executive officer Tony McLean told Reuters.  
""The principle is that it's a very significant deal for the bank and we believe that shareholders should be involved in approving it,"" he added.
He declined to comment on his talks with St George but said: ""There will be an exchange of information between ourselves and the bank."" McLean declined to elaborate.
Asked if an extraordinary general meeting could be called to pressure St George into reversing its decision, he said: ""I guess that's a possibility.""
-- Melbourne Bureau 61-3 9286-1421
",30
"Australian-based industrial group Pacific Dunlop Ltd painted on Friday a dour outlook of intense competition and low margins, and said it would look to cost cutting and acquisitions to help reignite its share price.
Faced with shareholder anger at the group's weak share price, chairman John Gough fended off suggestions at the group's annual meeting that Pacific Dunlop was vulnerable to a takeover and forecast a profit recovery in the year ending June 30, 1997.  
""We are forecasting an improvement in results for this financial year, although the first six months will be well below the comparative period of last year,"" Gough said.
Gough defended the board against persistent criticism of its aborted forays into the food and cardiac-implant businesses.
Pacific Dunlop still faces litigation related to its former pacemaker subsidiary, U.S.-based Telectronics Pacing Systems Inc, which was forced to halt production for 13 months until last June due to a pacemaker component defect.  
Telectronics was sold last month for A$170 million to medical equipment firm St Jude Medical Inc. Before the sale, Pacific Dunlop booked gross abnormal losses from Telectronics totalling A$340 million in its 1995/96 accounts.
""It was really developing quite visionary things that got us into trouble,"" Gough said as shareholders lined up at microphones to criticise the group's performance.
One pensioner told the meeting the group's share price had roughly halved since hitting a high of A$5.87 in March 1994, describing it as ""not exactly a blue chip performance"".
",30
"Australia's Foster's Brewing Group Ltd. said Monday it was thirsty for expansion and eyeing possible joint ventures in India and Vietnam to add to its brewery holdings around the world.
Foster's executives said at the group's annual meeting in Melbourne that despite hiccups at its Canadian and Chinese operations, the company was well positioned to seize on growth opportunities both overseas and at home.
""The first priority after satisfying the cash needs of the current businesses is to seek out new direct investment opportunities with the right return profile,"" Chief Executive Officer Ted Kunkel told shareholders.
""Should that not fully utilize the available financial resources, then we would look at additional options,"" he said.
Foster's Chairman John Ralph said the group was considering joint venture breweries in Vietnam and India but said it was looking at a wide range of possible investments, including acquisitions. Asia was a major focus, he added.
He declined to give details but said the Vietnamese opportunity involved an existing plant.
""There's nothing immediate but we are looking across all the areas of our business in fact,"" Ralph told reporters.
""We are involved in looking at a couple of opportunities, but it's early days. Provided we can see it makes sense for us, and we can do it on a basis that's going to earn a satisfactory return, then we are likely to move,"" he said.
Foster's, which has breweries in Shanghai, Tianjin and Guangdong in China, said the Chinese operations would break even or turn a profit in the fiscal year ending in 1999. Foster's China posted a loss of A$17 million (US$13 million) before interest and tax in the latest year.
The group's 40-percent owned Canadian brewer, Molson Breweries, also performed poorly in its fiscal year that ended on April 1, but has undergone a major restructuring and is focusing on building market share at home, Foster's said.
Kunkel said Molson still delivered a high return on invested capital and forecast higher operating profits from the group's powerhouse Australian brewing unit, Carlton and United Breweries, over the medium term.
Foster's is also counting on higher returns from its British pub chain, the Inntrepreneur Pub Company Ltd., putting the group in a stong position to pursue growth, Kunkel said.
Kunkel identified Asia as the most attractive region for investment, noting beer volumes there surged 60 percent in the first half of the 1990s and were forecast to rise another 40 percent before the turn of the century.
""Access can be achieved at a sufficiently low cost and the return profile is sufficiently better therefore than in other growing markets such as South America,"" he said.
Foster's has allocated A$200 million ($153 million) for direct investments in Asian markets, deeming this ""prudent exposure.""
The group has spent four years shedding unwanted assets, lightening the burden of debt accumulated in the 1980s when it was part of the sprawling conglomerate known as Elders-IXL Ltd.
",30
"Australia's most profitable casino operator, Crown Ltd, said on Wednesday its long-term ambition lay in Asia where it planned to continue its winning streak with the region's high-rollers.
Crown chairman Lloyd Williams told shareholders in Melbourne, where the company's new casino and hotel complex is nearing completion, that the new A$1.6 billion premises would be a show-case development for Asia.  
""If we are successful in Melbourne, Australia, I think we can be successful in Asia,"" Williams told Crown's annual meeting at the casino's temporary home beside the city's Yarra River, near the new Crown complex due to open in early March.
""I think what we are doing with this project is that we are probably show-casing it to Asia and that's basically what our ambition is as far as that is concerned,"" Williams said.
Crown plans to open another three Asian marketing offices in China, Taiwan and Malaysia. It already has offices in Bangkok, Singapore, Jakarta and Hong Kong, enticing big gamblers there to take their chances at the Melbourne casino.  
Crown derived about 30 percent of its gaming revenue of A$490 million in the year to June 30, which underpinned a 76 percent rise in net profit after abnormals to A$58 million.
Williams told reporters later he hoped to build this up to 40 percent or higher.
""I find it remarkable the wealth creation in Asia. Their principal leisure activity is gaming,"" he said.
""In Asia, comparatively speaking, they (high rollers) treat A$100,000 like A$10,"" he added.  
Crown wants to bed down its new casino and hotel complex before launching a foray into Asia, Williams said, adding he was not interested in small casino licences such as one recently awarded in the Cambodian capital, Phnom Penh.
""There are all sorts of licences available in Asia at the moment....I'm not interested in those licences, not those little licences,"" he said.
""I was talking about a major licence where a government decided to legalise gaming in a genuine way and the only place (in Asia where) that's done that...at the moment is Malaysia.""  
Malaysia's Resorts World Bhd, a subsidiary of Genting Bhd owns and operates that country's only casino in the mountain resort of Genting Highlands.
Williams said that if Thailand, one of Crown's biggest source of high rollers, ever followed suit and awarded an exclusive casino licence, Crown would be a bidder.
""There are gaming jurisdictions that are opening up in Asia, but I don't think they will open up in the short term; I think it's more like the medium term.""  
Crown has been operating for only two years but, partly due to relatively low state-government tax on revenue from international gamblers, it has emerged as the most popular of Australia's listed casino operators.
Williams told shareholders the company's first quarter performance for the three months to September 30 was stronger than the same quarter a year ago, adding that the second quarter was normally stronger again.
But he warned that dividends might not be paid until after the new complex's first year of operation.  
""I would think it would be probably prudent to have 12 months of operation at Southbank (site) before we considered that,"" he told the meeting.
Crown shares were two cents lower at A$2.86 at 2.55 p.m. (0455 GMT).
-- Melbourne bureau 61-3 9286-1421
",30
"Australian resources and steel group The Broken Hill Pty Co. (BHP) posted a 9.8-percent fall in first-half profits Friday, disappointing the share market but avoiding another mauling by investors.
BHP, whose shares have been hammered since its key markets in steel and copper turned sour six months ago, posted a A$790 million ($628 million) net profit for the six months to Nov. 30, down from A$867 ($689.3 million) for the year-ago period.
But Australia's largest-quoted company had its bottom line boosted by an abnormal gain of A$107 million ($85 million) and investors were initially not impressed.
""It's pretty lousy,"" said one fund manager's stock analyst. Another analyst disappointed with the result said the resources giant was still on track for a modest profit recovery for the full year to May 31, 1997.
Though BHP's battered copper division showed improvement, with the North American copper operations swinging back into profit, analysts had expected a first-half group operating profits of around A$760 million ($604.2 million).
Instead, BHP's operating profits fell 15.8 percent from the year-ago period to A$683 million ($543.0 million).
But managing director John Prescott said the second-quarter figures showed faster improvement in performance and that, despite weak copper and steel prices, the group was still investing in future growth.
Citing a sharp jump in exploration expenditure in the half year, he told reporters: ""That's an important part of sustaining our growth.""
Including abnormals, BHP's minerals, copper and steel divisions all contributed higher earnings in the latest three months against the August quarter. The steel division's earnings were flat.
Petroleum was the biggest earner with A$253 million ($201.1 million), but this included an abnormal gain of A$107 million ($85 million) from the settlement of a dispute over a gas resource tax.
BHP Petroleum's operating profits also included a A$82 million ($65.2 million) windfall from asset sales and a larger than expected exploration expense.
BHP's minerals division, a major world producer of iron ore and coal, doubled its contribution to profit in the second quarter to A$154 million ($122.4 million), due largely to higher world prices.
BHP Copper benefitted from a recent firming in the copper price and a cut of 7 U.S. cents per pound in its North American operating costs to post a second-quarter profit of A$132 million ($104.9 million), up from A$85 million ($67.6 million) in the first quarter.
The U.S. copper operations, acquired last January with the US$2.4 billion ($1.9 billion) purchase of Magma Copper, made a loss on a full-cost basis in the first quarter. Prescott said Friday Magma had swung back into profit in the second quarter.
BHP Steel's second-quarter profit was flat at A$90 million ($71.6 million).
",30
"Over half a million people insured with Australian life office National Mutual Holdings Ltd have rushed to buy shares in the group, in what the insurer said on Wednesday was a ""fabulous"" start to its stock market float.
National Mutual, which plans to list on the Australian and New Zealand exchanges next month, announced on Wednesday that half of its 1.2 million policy-holders had elected to take up their entitlement to shares in the multi-billion-dollar float.  
""National Mutual Holdings will have the largest shareholder base of any company in Australia and New Zealand ... It's a fabulous result,"" National Mutual managing director Geoff Tomlinson told reporters and insurance analysts in Melbourne.
Tomlinson also set an offer price of A$1.50 (US$1.18) per share for retail investors and indicated a price range of between A$1.35 and A$1.55 for institutional investors, which will bid for at least 60 percent of the shares on public sale.
Once listed on the Australian bourse, National Mututal will figure in the top 50 companies by market capitalisation.  
The retail price of A$1.50 a share translates to a market capitalisation of about A$2.5 billion ($1.98 billion).
""This excellent response to the offer by our policy-holders has demonstrated a vote of confidence in National Mutual and our strategy for the future,"" Tomlinson said.
National Mutual, the first big Australian life insurer to demutualise and destined also to be the first major life office to list on the Australian market, is floating its shares partly in a bid to become a global player focused on Asia.  
National Mututal Asia Ltd is already the second-biggest life office in Hong Kong and is lobbying for a licence to operate in China, the group has said.
National Mutual Holdings will be owned 51 percent on listing by French insurance giant Axa. The float will help National Mutual become ""a member of a truly global financial services group"", Tomlinson said on Wednesday.
Joint lead manager for the issue, brokerage J. B. Were and Son, said the strong demand for shares by policy-holders should ensure good demand from institutional investors.  
""I think there will be pretty keen competition for it,"" said J. B. Were group managing director Terrence Campbell.
""There's plenty of Asian interest but as far as we can tell, there's plenty of interest in the (United) States and Europe as well,"" he told reporters in Melbourne.
Tomlinson and other National Mutual executives will leave Australia next week for a two-week roadshow of Asia, Europe and the United States to sell the offer to institutions.
Under the float, retail investors will be offered a refund if the final institutional price is below A$1.50, but they will pay no more if the final price exceeds A$1.50.  
""Given the high policy-holder take-up (of shares), it then gives us more confidence ... that the price of A$1.50, we were pitching at the right level,"" said John Magowan, of joint lead manager McIntosh Corp Ltd.
Insurance analysts predicted on Wednesday the demand from policy-holders would help to ensure the final price determined by institutional bidding would fall in the upper end of the group's indicative price range.
""That will boost the price just because of the supply and demand situation,"" a Sydney-based analyst told Reuters.  
""I think it (the institutional price range) is a realistic price,"" insurance analyst Nick Selvaratnam, of brokerage BZW Australia, told Reuters.
The offer prices compare with a net tangible asset backing for the group of A$1.39 per share and an appriasal value, accounting for future profits, of A$1.60 per share.
-- Melbourne bureau 613-9286-1421
",30
"Resources and steel group The Broken Hill Pty Co Ltd is expected to report a fall in half year net profit on Friday, but share analysts say Australia's biggest company is likely to be spared another stock market mauling.
BHP, still licking its wounds with sellers having wiped around A$5 billion off its market value since May, is tipped to post a first-half net profit of around A$760 million, down from A$811 million a year ago, according to analysts' forecasts.  
The result, for the six months to November 30, is expected to include roughly A$100 million in net proceeds from asset sales, but slight improvements in the battered copper and steel divisions are also likely to emerge, the analysts said.
BHP's share price, which hit a year high of A$20.05 in early May, has been on a mostly downward roller-coaster ride for the past six months as copper and steel prices turned sour, and analysts revised down their near-term profit forecasts.  
But the copper price has firmed in recent months, steel markets are thought to have bottomed, and brokerages are again reworking their outlooks. BHP shares have also rebounded, closing on Monday at A$17.31 after hitting A$15.58 in September.
""It's one of the few companies where analysts are revising the results upwards,"" said a fund manager's share analyst.
The five analysts contacted by Reuters on Monday gave widely varying forecasts for interim profit, ranging from A$715 million to a high of A$804 million. The analyst tipping A$715 million said he believed others had forecast even lower numbers.  
But the analysts agreed the interim result would show signs of improved performance in copper and steel, though they would fine tune their estimates after seeing the group's November production data, expected to be released on Tuesday.
""They have definitely had a good two quarters in petroleum and I guess they're struggling in minerals and copper and steel,"" a Melbourne-based analyst said.
""They are doing a good job given the environment.""
Most analysts said they expected a modest profit recovery for full year 1996/97. BHP reported a 20 percent drop in pre-abnormal net profit of A$1.29 billion in 1995/96.  
BHP Petroleum, which in the first half of 1995/96 ranked behind the minerals and steel divisions in terms of profit, will be BHP's biggest earner in the interim result to be released on Friday, said JB Were and Son analyst Neil Goodwill.
""The asset sales are in there though,"" he said.
The analysts expect BHP to book between A$80 million and A$117 million in asset sales as operating profit, due in effect to gains on the sale of BHP's stake in the Mungo/Monan oil and gas fields in the North Sea and of its interest in the Sierra Chata gas field and Chihuidos block in Argentina.  
BHP also made a A$45 million profit from the sale of its 20 percent stake in an undeveloped gold prospect, Sun Prospecting and Mining Co Ltd, in South Africa. But this was offset by the A$45 million loss booked on the sale of its Mali gold assets.
BHP will not book any of these asset sales as abnormal items, deeming them too small to be taken below the line, one analyst said. But another analyst confessed he initially felt they were being taken above the line to mask the core result.  
""I thought that was the case and then the oil price shot up and copper is a bit better, so without that number (for asset sales) they would have had a reasonably good profit number anyway,"" he said.
BHP's Magma Copper operation should creep back into profit in the second quarter after posting a loss on a full-cost basis in the first quarter results, he said.
BHP bought Magma last January for US$2.4 billion, making it the world's second biggest copper producer. But the price tag has come under heavy criticism.  
BHP is expected to book a net abnormal gain of around A$100 million from the settlement of its dispute with the Victoria state government over a federal tax on Bass Strait gas revenues.
-- Melbourne Bureau 61-3 9286-1435
",30
"Australian industrial conglomerate Pacific Dunlop Ltd reported a heavy fall in net profit on Friday but said the group was now ready to ""take off"".
Pacific Dunlop posted a 28 percent drop in net profit to A$84 million for the six months to December 31, within stock market forecasts, and its bullish outlook encouraged investors.
""It's right in the middle of expectations but I think the comments that came with the result about the second half were upbeat enough to ensure the stock will go higher,"" a stockbroker told Reuters.
",30
"Australia has been warned it risks losing face in Asia if it takes its overseas radio and television services off air, as mooted in an official report.
The report's recommendation that the government close its state-owned short-wave service, Radio Australia, and sell off its fledgling satellite broadcaster, Australia Television, have been condemned as near sighted and harmful to Australia's image.
""The recommendation that was made was one of the most stupid I have ever come across in my life,"" Mark Dodgson, an expert on Australian business ties with the region, said on Friday.
""They are absolutely critical for Australian foreign policy and for business and to cut them off for the sake of such a small amount of money is ridiculously short sighted.""
Dodgson, of the Australian National University, is not alone in warning Australia risks losing face with its near neighbours.
Already, Papua New Guinea has offered to take a cut in Australian aid if this money could be used to ensure Radio Australia's future. The service is often the only source of regional news in the mountainous and isolated Pacific country.
A former chairman of Australia's national broadcaster and the opposition have also attacked the recommendations, designed to help the government slash its budget deficit.
The report, prepared after a government-ordered review of the Australian Broadcasting Corporation (ABC), called on Canberra to drop its requirement that the ABC provide overseas broadcasts in favour of better funded local services.
Australia Television, set up four years ago by then Labor prime minister Paul Keating as part of his government's Asian embrace, has so far accumulated losses of about A$7.0 million, an industry source told Reuters.
Radio Australia, set up decades ago under the control of the foreign ministry, airs mainly around the Asia-Pacific in seven Asian languages and English. It costs taxpayers about A$25 million per year, the source said.
Both are operated by the ABC and place heavy emphasis on news and current affairs. They aim to present an ""Australian face"" to the region and to raise Australia's profile in Asia.
No decision has been made on Radio Australia's future until the ABC and the government discuss the recommendations, but Canberra has begun the process of selling Australia Television.
A merchant bank, Turnbull and Partners Ltd, said it had received 50 expressions on interest in taking over Australia Television's assets. These include the remaining four years of a five-year lease on the Indonesian owned Palapa C2 satellite.
Australia Television, which is received in 33 countries across the region, has an option for another five-year lease.
If the station cannot be sold, the government has been urged to shut it down. But Communications Minister Richard Alston has said he personally believes this is unlikely.
In the event of a sale, it is unclear whether Australia Television will remain a window on the nation, offering such obscure programming as Australian Rules Football coverage. One media analyst says it is a commercial dud in its current form.
""Australians will all suffer if the ABC deserts international broadcasting,"" former ABC chairman Mark Armstrong wrote in a newspaper column this week.
""We will be less known and less respected by our neighbours...Our country will lose face in Asia.""
Former industry minister Peter Cook, an opposition senator, said the demise of Radio Australia or Australia Television would be another setback for Australia in the region, especially so soon after a flare-up of anti-Asian sentiment here.
""Our public face has suffered terribly and a cut or a change of this sort will be misunderstood in that context,"" Cook said.
-- Sydney Newsroom 612-9373-1800
",30
"Australian gambling group Tabcorp Holdings Ltd is praying for Melbourne Cup fever to grip the betting public next Tuesday and give the company a chance of winning back some lost turnover from its wagering division.
Tabcorp managing director Ross Wilson told the firm's annual meeting here on Tuesday that total turnover rose 17 percent in its first quarter ended September, due entirely to a 27 percent surge in turnover on its 12,000 slot machines around the state.
In contrast, its wagering division suffered an ""abysmal"" start to the current fiscal year ending June 30, 1997, he said.
",30
"Australian aluminium producer Comalco Ltd is expected to report a nose-dive in net profit for calendar 1996 after prices and exchange rates turned against it.
Comalco, owned 67 percent by RTZ Corp Plc-CRA Ltd, is predicted on average to post a pre-abnormal net profit of A$33 million, a fraction of the A$264.8 million it earned in 1995, according to the Barceps forecasting service.
The bottom line may even dip itself in red ink after a net abnormal loss of A$40 million stemming from Comalco's November decision to end kaolin production, two analysts told Reuters.  
Comalco, which posted a net profit after abnormals of A$232.3 million in 1995, was Asia's biggest supplier of kaolin clay, used in paper manufacturing.
The company has already warned of a dismal second six months of 1996.
In December it forecast a second-half loss and admitted prices and exchange rates were not entirely to blame.
Higher smelting costs also figured in Comalco's warning to the stock market, particularly at its New Zealand plant, which is being upgraded to expand annual production at the Tiwai Point plant by 40,000 tonnes to about 313,000 tonnes.  
""They have seriously screwed up their costs,"" one Melbourne-based analyst told Reuters.
The analyst compared Comalco's performance with a relative minnow, Capral Ltd, which he said earned a profit before interest and tax from a smelting base a third the size.
""And they (Capral) don't have the upstream businesses which Comalco do, which are profitable,"" the analyst said, referring to Comalco's bauxite mining and alumina refining businesses.
But analysts agreed weak aluminium prices and a strong Australian dollar did the overwhelming majority of the damage to Comalco's bottom line in 1996.  
The average LME three-month aluminium price fell 16 percent, or 21 percent in Australian-dollar terms, in 1996. It was 83 U.S. cents per pound over 1995, but slipped to 73 cents for the first half of 1996. It was around 66 cents in the second half.
The market was unkind in other ways.
Comalco's price premiums in Asia also came under pressure as weak demand in Europe prompted European and Middle East smelters to dump aluminium on the company's traditional market, said analyst Umit Safak, of HSBC James Capel.
An appreciating Australian dollar also inflicted pain.  
But analysts are forecasting a strong return to profit in 1997, with the Australia dollar already sitting well below its peak of over 80 U.S. cents in December and the aluminium price back up to around 76 cents per pound.
""The outlook is positive and I am optimistic,"" one Sydney-based analyst told Reuters, citing earnings growth from Comalco's half-owned Boyne Island smelter in Queensland state.
A third pot line is being added to the smelter, adding over 217,000 tonnes to its annual output from mid 1997. Comalco's share of production was 130,157 tonnes in 1996.
Comalco is due to report its results on Monday.  
-- Melbourne bureau 613-9286-1421
",30
"Australia's biggest aluminium producer, Comalco Ltd, plunged into the red on Monday, blaming weak prices, a strong local dollar and higher smelting costs.
Comalco announced a loss of A$16.8 million (US$12.9 million) in calendar 1996, compared with a net profit after abnormals of A$232.3 million in 1995.
Before abnormals, 1996 earnings were in line with market expectations at A$32.9 million, a fraction of the 1995 result.
The result made only a brief dent in Comalco's share price, which was battered in recent months in anticipation of a slide in earnings. The shares fell eight cents on the news, but rebounded to end at A$6.88, up six cents from Friday's close.
Comalco is owned 67 percent by global mining group RTZ-CRA, due to report its annual profit on Thursday.
""The market has pretty much factored in the loss and is now focusing on future earnings prospects,"" one share trader said.
As expected, Comalco's smelting division played a part in the earnings nose-dive. It made a loss for the year, but this paled in comparison with the damage done to Comalco's earnings by the slump in aluminium prices and a strong local currency.
""The 1996 result was severely impacted by lower prices,"" chief executive Terry Palmer told reporters in Melbourne.
The London Metal Exchange (LME) aluminium price averaged 70 U.S. cents a pound in 1996, compared with an average of 83 cents in 1995, the company said. The Australian dollar averaged 78 U.S. cents in 1996, four cents stronger than in 1995, it added.
Comalco's premiums over the LME price also suffered. Together, the aluminium market and the local dollar pared a total of about A$201 from operating profit, overwhelming a rise in total production volumes, the company said.
But Palmer painted a much brighter outlook, assuring investors that Comalco's aluminium production is set to climb and predicting a stronger aluminium price over 1997.
Comalco saw firming global demand for the metal this year, fuelled by economic recovery in Europe and continued growth in the United States. ""Consumption in Asia is not expected to grow in 1997,"" the company said.
Comalco also denied market speculation it might sell off its smelters and abandon its plan to build a A$1 billion alumina refinery in either Queensland state or Sarawak, Malaysia. Alumina, produced from bauxite, is the raw material for making aluminium.
""The current talk about that (withdrawing from smelting) is one hell of a way wide of the mark,"" Palmer said.
""The position with the alumina project remains unchanged,"" he added.
Comalco hopes to start building the refinery, with annual capacity of one million to 1.5 million tonnes, in 1998. Site selection will depend heavily on the kind of power contracts Queensland and Malaysia can offer, Palmer said.
(A$1 = US$0.77)
",30
"Australia's century-old steel maker, The Broken Hill Pty Co Ltd (BHP), has been warned it risks falling behind global rivals unless it restructures its big, ageing plants and maps out a clear offshore strategy.
BHP Steel's long-term strategy came under the spotlight on Monday after credit rating agency Standard and Poor's wrote in a steel industry review that BHP faced its toughest test yet as it positioned itself to tackle rapidly developing Asian markets.
S&P's comments, made in the latest edition of its journal CreditFocus, comes as Taiwan's An Feng Steel Co Ltd plans to build a A$1.4 billion steel mill in Australia in what has been termed a ""wake-up call"" for BHP.
""A wake-up call is not a bad way of looking at it,"" a corporate analyst told Reuters, describing the competition to supply steel into Asian economies as intense.
""It's not that they (BHP) have been flat-footed; it's just that there are (bigger) global players out there with billions of dollars to set these things up,"" he added.
An Feng and its little known minority Australian partner, Kingstream Resources NL, launched last Friday a plan to build a new-technology steel mill expected to produce annually 2.4 million tonnes of steel slab for mainly Asian consumption.
The move has been seen as a direct challenge to BHP, which dominates the Australian market with steel products made from old-technology plants on the country's east and south coasts. The youngest of its three big steel mills opened 56 years ago. These old mills also supply raw steel for BHP's more modern offshore operations, which have so far focused on downstream steel mills in Asia making higher-value products tailored for such industries as car-making and construction.
BHP produces 636 tonnes of steel per worker per year using predominantly coal-fired blast furnaces, but by the year 2000 new-technology mills using electric arc furnaces will enable steel operators to reach 1,000 tonnes per worker, S&P said.
""In many respects, BHP Steel's future earnings quality will depend on the successful implementation of this international growth strategy and the critical selection of steel-making technology for future domestic expansion,"" S&P analyst Brad Scott wrote in the January edition of CreditFocus.
BHP is expected by May to announce the results of a year-long review of the steel division's long-term strategy, begun last year after the group reported a dive in steel profits and a big writedown of its Newcastle mill near Sydney.
BHP has since indicated it is prepared to close the 81-year-old Newcastle mill if need be.
Speculation about the closure of Newcastle, and with it the loss of thousands of jobs, has prompted a parliamentary inquiry into the future of Australia's steel industry -- virtually a synonym for BHP, which supplies 75 percent of the local market.
BHP's local dominance and its production costs, still low in global terms, will give it some comfort over the next few years, but the so-called ""Big Australian"" must rationalise its assets at home to realise its long-term goals in Asia, analysts said.
""BHP will need to define its domestic investment vision over that period or risk falling behind the competitiveness of its global competitors,"" S&P's Scott said.
A stock analyst suggested BHP may even resolve to abandon raw-steel making capacity and begin buying it instead from cheaper producers, but a BHP Steel spokesman doubted this.
""I would not see that,"" spokesman John Devers told Reuters. ""We have got the benefits of relatively low-cost raw materials on our doorstep and good transport arrangements and energy.""
-- Melbourne bureau 61-3 9286-1421
",30
"Australia's Foster's Brewing Group Ltd said on Monday it was thirsty for expansion and eyeing possible joint ventures in India and Vietnam to add to its international stable of breweries.
Foster's executives told shareholders at the group's annual meeting in Melbourne that despite hiccups at its Canadian and Chinese operations, the company was well positioned to seize on growth opportunities both offshore and at home.
""The first priority after satisfying the cash needs of the current businesses is to seek out new direct investment opportunities with the right return profile,"" Foster's chief executive Ted Kunkel told the meeting.
""Should that not fully utilise the available financial resources, then we would look at additional options,"" he said.
Later, Foster's chairman John Ralph confirmed the group was considering joint venture breweries in Vietnam and India but said it was looking at a wide range of possible investments, including acquisitions. Asia is a major focus, he added.
He declined to give details but said the Vietnamese opportunity involved an existing plant.
""There's nothing immediate but we are looking across all the areas of our business in fact,"" Ralph told reporters.
""We are involved in looking at a couple of opportunities, but it's early days. Provided we can see it makes sense for us, and we can do it on a basis that's going to earn a satisfactory return, then we are likely to move,"" he said.
Foster's, which has breweries in Shanghai, Tianjin and Guangdong in China, said the Chinese operations would break even or turn a profit in 1998/99. Foster's China posted a 1995/96 loss of A$17 million (US$13 million) before interest and tax.
The group's 40-percent owned Canadian brewer, Molson Breweries, also performed weakly in its business year ending April 1, but has undergone a major restructure and is focusing on building market share at home, Foster's said.
Foster's chief executive Kunkel said Molson still delivered a high return on invested capital and forecast higher operating profits from the group's powerhouse Australian brewing unit, Carlton and United Breweries, over the medium term.
Foster's also plans to free up about A$400 million in non-performing assets and is counting on higher returns from its British pub chain, the Inntrepreneur Pub Company Ltd, putting the group in a stong position to pursue growth, Kunkel said.
Kunkel identified Asia as the most attractive region for investment, noting beer volumes there surged 60 percent in the first half of the 1990s and were forecast to rise another 40 percent before the turn of the century.
""Access can be achieved at a sufficiently low cost and the return profile is sufficiently better therefore than in other growing markets such as South America,"" he said.
Foster's has allocated A$200 million for direct investments in Asian markets, deeming this amount a ""prudent exposure"".
The group has spent four years shedding unwanted assets, lightening the burden of debt accumulated in the 1980s when it was part of the sprawling conglomerate known as Elders-IXL Ltd.
Foster's sold its British brewing unit, Courage, last year as part of this asset-sale programme. It has since bought two Australian wine-makers, Mildara Blass and Rothbury Wines Ltd.
""The restructuring of the last four years is nearly over,"" he said. ""Where there is more, it will present opportunities for profit.""
Foster's is on track to better its 1995/96 net profit of A$293.3 million in 1996/97, despite higher interest charges and tax payments in the current year, chairman Ralph said.
",30
"The computer software and instruction kit for the death machine used in the world's first legal mercy killing will soon be available on the Internet, the Australian doctor who developed it said on Tuesday.
Dr Philip Nitschke, who last month connected cancer sufferer Bob Dent to the machine in Australia's outback Northern Territory, said Internet users would be able to copy the software and instructions from a home page now being developed.
""We see no reason in restricting it in any way,"" Nitschke told Reuters in Melbourne, where he is due to demonstrate the machine at an euthanasia conference this week.
The death machine used in the Northern Territory, which has the world's only voluntary euthanasia law, enables people to give themslves lethal injections with the tap of computer keys.
On September 22, Nitschke hooked Dent up to the machine with an intravenous tube. Dent, a 66-year-old former carpenter and one-time Christian missionary, started the flow of lethal drugs by entering three simple computer commands.
""Once the intravenous line is put into the patient...then it's simple a matter of the patient pressing the response to the questions on the screen,"" Nitschke said. The computer programme asks three times if the patient wishes to go ahead.
Dubbed Australia's ""Dr Death"" by opponents of assisted suicide, Nitschke said the idea of an euthanasia home page was a response to strong interest in Dent's death and the new law, atlhough he said he was having some logistical problems getting the page up and running.
An estimated 50 million people use the worldwide Internet computer network.
""It's to let people know and give them some idea of the way this is being done in a responsible fashion in the Northern Territory,"" he said, adding he had already sent how-to-do-it kits overseas and around Australia using electronic mail.
A doctor cannot lawfully hook a patient up to the machine anywhere outside the Northern Territory, whether overseas or in Australia's six states and other territory, Nitschke said.
But he dismissed suggestions he could face criminal charges if a machine built from material supplied on the Internet was used in mercy killings outside the remote outback jurisdiction.
""I feel very safe as far as giving the details of the equipment and as far as providing the software and the like,"" he said. The software is a ""trivial"" part of the device, he added.
The software and equipment needed to build the machine are very simple and can be bought for around A$200 (US$160), though the lethal drugs are extremely difficult to obtain, he said.
He said he was now developing another death machine which used carbon monoxide and an oxygen mask, enabling people to end their lives without needing someone to insert intravenous tubes.
""When people get too old and frail it can be very difficult to get access to veins and gas is a much easier way to go, and carbon monoxide is a painless and acceptable way...,"" he said.
Nitschke described his machine as a ""slicker"" version of the suicide device designed by U.S. euthanasia advocate Dr Jack Kevorkian, who has publicly acknowledged attending more than 40 deaths since he began his assisted-suicide crusade in 1990.
(A$1 = $0.80)
",30
"Australia's biggest retailer, Coles Myer Ltd, reported on Wednesday a firm rise in sales revenue, signalling the worst may be over for the country's struggling merchants.
Coles announced a 5.4 percent rise in sales revenue to A$9.9 billion for the six months to January 26, sounding a rare note of optimism in an industry that has been hit hard by a downturn in consumer spending.  
Coles, which pockets almost 18 cents in every retail dollar spent in Australia, attributed the result to good management rather than any pick-up in the economy.
""A lot of people have done a lot of work to get where we needed to get,"" Coles chief executive Dennis Eck told Reuters.
But Coles' sale announcement came after another retailer, David Jones Ltd, reassessed its profit outlook, painting a slighter brighter picture than the bleak dive in earnings it forecast just after Christmas.  
David Jones, an upmarket department store chain, had told the Australian Stock Exchange early last month it feared a 50 percent fall in interim profit, but changed its mind this week.
""It will not be as bad as that,"" David Jones chief executive Chris Tideman told Reuters on Tuesday.
He did not elaborate but stock analysts said on Wednesday post-Christmas clearance sales helped lift the company's overall sales result for the first half year to January 25 to A$783 million, only one percent lower than a year ago.  
""I think we have probably gone through the worst in spending, but I would not expect a dramatically big turnaround,"" said retail analyst Simon Shakesheff, of Macquarie Bank.
""The sentiment is still a bit fragile, but at the end of the day, until there's a bit more job creation out there, people are not going to be spending more,"" he added.
Another Sydney-based analyst agreed that consumers' wallets would be slow to open.
""I think we will (see a recovery) but I don't think we saw it in January,"" the analyst said.  
Australian retail sales are at their lowest ebb since the nation's official statistician began counting them 35 years ago. They have fallen in trend terms in each of the past five months.
Employment has also been weak with Australia's jobless rate hovering at 8.6 percent.
Coles confirmed on Wednesday that trading conditions were still tough, especially in the areas of clothing and fashion where its only specialist apparel chain, Katies, reported a 4.7 percent drop in retail sales for the second quarter.  
But Coles' Eck said profit margins in its underperforming department store chains were improving, as store managers improved the quality of merchandise sold and pared back costs.
In sharp contrast to the group's 33.8 percent fall in net profit in 1995/96, Eck said he expected an increase in bottom-line earnings for the current year ending July 27.
""Our earnings are in line with our plan,"" he said.
Coles reported net profit of A$280 million in 1995/96, and stock analysts are forecasting a modest profit rise in 1996/97.
-- Melbourne bureau 61-3 9286-1421
",30
"Australian casino company Crown Ltd said on Tuesday its earnings were likely to suffer due to lost time at its new casino complex in Melbourne.
Crown, which has seen its share price fall as doubts emerge over its profit outlook, confirmed that a recent heatwave forced workers at the site to down tools for a number of days.
""I don't think we have made a calculation yet on what effect it will have on the bottom line, but it's something you don't need in this part of the project,"" Crown spokesman Gary O'Neill said. ""I think it will (impact profit),"" he added.  
Crown had planned to open its new A$1.6 billion casino, hotel and shopping complex in Melbourne in March. It is now aiming for late April and maybe even May, O'Neill told Reuters.
""We are still hoping to open towards the end of April...but things like this don't help obviously and it could have a small effect on the bottom line. It could put the open date back to May,"" he said.
O'Neill was commenting on a newspaper report which said members of the Electrical Trades Union (ETU) stopped work 10 times this month as the temperature topped 35 degrees Celcius.  
""There were 10 days when the temperature was over 35 degrees, but I don't think we lost all of that time,"" O'Neill said. ""I think we lost a number of working days.""
Crown also rejected a bearish earnings forecast made by accountants Ernst and Young.
The forecast was cited in an  independent report sent to Crown shareholders recently.
It quotes Ernst and Young as forecasting basic earnings per share of 3.76 cents in 1997/98 (July-June), compared with brokers' average forecast of 14.8 cents for the same year.  
The brokers' forecast was based on a mean pre-abnormal net profit of A$87.5 million for 1997/98, according to Barceps forecasting service. Crown reported net profit after abnormals of A$58.38 million in 1995/96.
""We obviously don't agree with it (the Ernst and Young forecast),"" O'Neill said.
""Right at the moment, it's a very highly speculative period of time. It's just prior to our opening and people are tending to jump at shadows a little bit,"" he added.  
Crown's share price has fallen steeply over the past month. It stood at A$2.45 at 0300 GMT (2.00 p.m.) on Tuesday, down from its closing high so far this year of A$2.76 on January 22 and its 12 month high at A$3.06.
Crown is owned 30.9 percent by Hudson Conway Ltd, the operator of Crown casino at its existing premises. Hudson Conway also has options to buy 74.5 million new shares in Crown.
Crown is currently negotiating to buy back the casino management rights from Hudson Conway.
-- Melbourne bureau 613-9286-1421
",30
"The world's biggest mining house, RTZ Corp Plc-CRA Ltd, is set to report a sharp fall in annual profit this week after shouldering a slide in metal prices during the year and battling problems with its U.S. copper smelter, mining analysts said.
The group, which has operations spanning the globe, is on average expected to post a 26-percent fall in net profit before exceptional items to US$1.067 billion for calendar 1996, a Reuter survey of six Australian brokerages revealed.
RTZ-CRA, a dual-listed merger of British-based RTZ Plc and Australian-based CRA Ltd, is due to announce its earnings on Thursday. It made US$1.441 billion in 1995.
Australian analysts' forecasts range between US$1.04 billion and US$1.097 billion, although private forecasting service Barceps quoted much lower numbers in a survey last month.
The culprits behind RTZ-CRA's profit slump are seen as the copper price, which dipped below 90 U.S. cents a pound after the Sumitomo trading scandal erupted in June, a weak aluminium price and problems with the flagship Bingham Canyon copper smelter.
Together, copper and aluminium earned almost 41 percent of RTZ-CRA's total revenue in 1995, and metal prices were promising enough early in 1996 for the group to talk of higher earnings.
But metal prices caught a cold and the prospects of improved profits also began to look sick mid-year, when the Sumitomo Corp trading scandal sent international copper prices crashing.
Yasuo Hamanaka, a star trader who once dominated the copper market, has admitted charges of fraud and forgery and accepted blame for a scandal that cost Sumitomo $2.6 billion and devalued the copper inventories of metals companies around the world.
""Everything peaked ahead of this Hamanaka copper thing,"" said Peter O'Connor of Macquarie Bank.
""Most commodities slid from June on through to about September, October and there's been a bit of recovery in most metal prices since that time.""
RTZ-CRA's iron ore business was also a disappointment, one analyst said, noting that sales for the year dropped six percent despite a lift in annual output.
Adding salt to the wound, the gold price also languished. Gold is a sensitive area for the mining giant, since it is fundamentally opposed to selling its production forward at a fixed price to lock in revenue.
RTZ-CRA's coal mines are also not expected to have relieved some of the pain inflicted on the group by weak prices. One analyst expects coal earnings to fall 10 percent in 1996.
RTZ-CRA's troubled Bingham Canyon smelter in Utah has stirred the deepest concerns among analysts, who have been waiting for the new plant to get it right after 18 months of hobbled operation. The smelter is still not operating at full capacity and soon faces a six-week shut-down soon for major modifications.
Copper division earnings are forecast to plunge by some 40 percent, according to HSBC James Capel's forecast.
Still, the brokerage likes the group's long-term prospects, which include a copper mine in Chile and a copper and gold mine in Indonesia.
""They have a very, very strong organic growth profile,"" said HSBC James Capel analyst Umit Safak. ""They have very substantial expansions coming up,"" he added.
",30
"Australian paper and packaging group Amcor Ltd is expected on Monday to post a heavy slump in annual profit, due to lower paper prices and weak demand in its home market, but analysts feel the worst may soon be over.
The group, which recently warned the stock market its 1995/96 (July/June) results would be down on its 1994/95 record net profit, is tipped to announce a fall of around eight percent in pre-abnormal net earnings.  
Stock analysts are forecasting on average a result of A$372 million pre-abnormal profit in 1995/96, according to BZW Investment Management's BARCEPS forecasting service.
But Amcor, which is highly sensitive to both world paper prices and the Australian economic cycle, is coming off a record year in 1994/95, when a surge in paper prices and a strong local economy lifted the bottom line by 40 percent to A$359.7 million.
In the first half of 1995/96, prices turned against the group, which relies for 45 percent of its turnover on white paper sales, and the domestic economy has remained flat.  
Prices have fallen in the order of about 30 percent since their peak in late calendar 1995, one paper market source said.
In a sign of the times, Amcor's 46-percent-owned paper merchant Spicers Paper Ltd reported last Monday a 35 percent slide in annual net profit to A$16.02 million.
""There's been some pretty tough markets there and I think the Australian economy is flat and the paper cycle has gone against them a bit,"" said Brisbane-based analyst John Clifford, of Morgan Stockbroking Ltd.  
Sales are expected to exceed last year's A$6.6 billion, but margins have been squeezed and are likely to remain tight through at least the first half of 1996/97, the analysts said.
But Clifford and a Melbourne-based analyst told Reuters they saw pre-abnormal net profit stabilising at around A$400 million in 1996/97 and recovering the next year.
""As soon as there is some sort of pick-up in economic growth, you will see it start to improve,"" the Melbourne-based analyst told Reuters on Thursday.
""I am positive in the longer term,"" she added.  
Amcor, one of the world's top ten paper and packaging groups, has paper packaging operations in Europe, the United States, Asia and New Zealand. It has maintained double-digit growth in net profit for all but four of the past five years.
Despite the current downturn, it has continued to expand its offshore operations, buying 51 percent of Belgian UCB SA's flexible packing unit in May for about A$200 million.
It has also allocated A$380 million to expand paper production in Australia, where it commands about 40 percent of the market for fine papers.  
Morgan's Clifford said he believed these and other capital investments -- totalling A$1.5 billion over the past two and a half years -- would begin to bolster the bottom line in 1997/98.
""These sorts of programmes will certainly come through with increased profits through 1998 (1997/98) and especially through 1999 (1998/99),"" Clifford said.
""The four to five-year outlook is pretty strong,"" he added.
-- Melbourne bureau 613-9286-1421
",30
"Australia's biggest company, The Broken Hill Pty Co Ltd (BHP), has agreed to pay its local steel workers a 10-percent pay rise over two years in a wage deal which could set the tone for other labour negotiations.
The deal, which covers over 13,000 workers at BHP steel plants around the country, falls short of pay rises being sought in some other areas of Australian manufacturing and provoked sharp words among rival trade unions.
The Australian Workers Union (AWU), which claims to represent about 80 percent of BHP steel workers, confirmed the deal on Friday, saying it was struck before Christmas and was well below its initial demand of 15 percent over two years.
But AWU organiser Mick Eagles told Reuters that historically low inflation in Australia was putting intense pressure on unions to modify their wage expectations.
""I think in this environment, with the way the CPI (inflation) is, I think the trend in the next 12 months and two years is going to put enormous pressure on wages to be kept low,"" he said.
""So a 10-percent outcome over two years is going to be seen as quite an achievement.""
The Australian Manufacturing Workers Union (AMWU), which wants to make an annual wage rise of over five percent as the benchmark in the metal trades industry, said the BHP deal would weaken unions' position in other wage negotiations underway.
""Obviously when that happens, it always weakens other unions' positions, but that's typical of the AWU,"" Vince Theuma, Victoria state organiser for the AMWU, told Reuters.
""They run in there and reach deals that we're not trying to chase.""
BHP, which has been working to slash costs to compensate for weak international steel prices and sluggish demand at home, described the wages agreement as satisfactory.
""Part of the agreement involves union agreement to introduce new types of employment arrangements which eliminate traditional demarcation lines and have novel concepts in terms of employment which provide us with a business benefit,"" a BHP spokesman said.
""We think this is a satisfactory resolution, bearing in mind the benefits of those innovative agreements,"" he told Reuters.
BHP initially offered eight percent over two years.
The agreement comes as wages growth continues to be cited by Australia's central bank as a major concern for inflation, now sitting well within the Reserve Bank's target range of between two and three percent.
",30
"Australian steelmaker, The Broken Hill Pty Co Ltd, on Thursday raised the prospect of the world's steel giants forging alliances and together building huge steel mills in Asia to meet the region's increasing demand.
BHP Steel, Australia's biggest producer of raw steel, said companies might be tempted to jointly build major, traditional steel mills in the rapidly growing region instead of going ahead as expected with a rash of smaller new-technology plants.  
""We may see some of the major steel players in the world seriously considering international alliances where they come together to build steel facilities in the developing economies of the world,"" BHP Steel chief executive Ron McNeilly said.
Big traditional steel mills are in some ways better suited to Asia than the new-technology electric steel-making furnaces, which use large amounts of steel scrap as a feedstock, he told Reuters in an interview.
""The realities are there is not enough scrap in Asia,"" McNeilly said. But big traditional steel plants required billions of dollars of investment, he added.  
""The funds required ... would just be too large for me to be willing to take that on independently or separately as a single project, totally exposed to all of the risks,"" he said.
""But as a project in company with other people, it's something that we most certainly would consider,"" he added.
McNeilly, who is overseeing more than A$500 million of investment in new value-added steel production in Asia, also described plans by BHP's international rivals for major new steel capacity as ""talk"".  
Asian steel consumption is forecast by the steel industry to underpin strong world demand growth of almost two percent a year for the metal over the next fours year.
BHP's rivals in the Asian region have meanwhile announced plans for major new steel-making capacity, including plans by South Korea's Hyundai Group  for a six million tonnes a year traditional steel mill.
""There's certainly a lot of talk ... but there is not a lot of evidence of that (major new capacity) happening,"" McNeilly said.  
But he predicted competition in world markets for steel products to remain intense as the north Asian steel-makers of Japan, Taiwan and South Korea vied with European and U.S. steel giants for the growth markets of Asia and Latin America.
""The large successful players in the steel industry are looking for growth ...,"" McNeilly said.
""They're the people who are going to be looking for investment opportunities, for partners, for alliances with governments and for project opportunities in the region.
""And I think are also going to be looking more and more for other big players to be part of a project with them.""  
-- Sydney newsroom 61-2 9373-1800
",30
"Australian industrial conglomerate Pacific Dunlop Ltd is set to announce a steep drop in first half earnings on Friday, due to plant problems and tough trading conditions, share analysts said on Wednesday.
The analysts are forecasting the group to report a net profit before abnormals of around A$85 million for the six months to December 31, a 28 percent fall on a year ago.
The full range of forecasts are thought to be between A$80 million and A$95 million before abnormals, two of the analysts contacted by Reuters said.  
Pacific Dunlop reported pre-abnormal net earnings of A$118 million for the first half of 1995/96 (July/June), and went on to post a 35 percent fall in pre-abnormal profit for the year.
Brokerages have been steadily winding back their 1996/97 profit forecasts for Pacific Dunlop since the company first warned of a weak start to the current year, the analysts said.
Pacific Dunlop warned last September it expected first half profit to be down on a year ago, but predicted an improved annual result despite extreme competition in key markets.  
The company -- which has businesses spanning tyres, car parts, batteries, clothing, industrial cables and latex goods -- reported pre-abnormal net earnings of A$162 million for 1995/96.
""The market concern at the moment is that the (first half) result might come out worse than what people were expecting or hoping,"" a Melbourne-based analyst told Reuters.
""There's not an expectation of surprise on the upside.""
Pacific Dunlop's batteries division is the biggest concern, due largely to commissioning problems at its U.S. lead smelter in Georgia, the analysts said.  
Pacific Dunlop said in November the smelter was operating at well below capacity. It was shut down earlier for redesign and modification work.
""The smelter is going to affect them substantially,"" another Melbourne-based analyst said. The batteries division is expected to earn about half what it did in the first half of 1995/96.
Tough trading conditions are likely to weigh on most of the other divisions, especially the tyres business.
""Obviously the consumer economy is difficult. The building environment is difficult -- that will affect cables -- so it will be pretty tough across the board,"" the analyst said.  
""They may get there. They may be a little bit short, but it will be tough,"" a Sydney-based analyst said.
Only Pacific Dunlop's rubber-glove maker, Ansell International, is confidently expected to report an improved performance, but the local dollar could steal some of its glory.
Ansell earns much of its revenue in Europe and the United States, one analyst said. ""The currency has gone against that division a little bit,"" he said.
""The Australian dollar for the half was a little bit higher. That's going to make it tough to report an increase in $A terms.""
Analysts were not confident Pacific Dunlop could fulfill its forecast for a higher full-year profit in 1996/97.  
-- Melbourne bureau 613-9286-1421
",30
"Australia's biggest aluminium producer, Comalco Ltd, plunged into the red on Monday, blaming weak prices, a strong local dollar and higher smelting costs.
Comalco announced a loss of A$16.8 million (US$12.9 million) in calendar 1996, compared with a net profit after abnormals of A$232.3 million in 1995.
Before abnormals, 1996 earnings were in line with market expectations at A$32.9 million, a fraction of the 1995 result.
The result made only a brief dent in Comalco's share price, which was battered in recent months in anticipation of a slide in earnings. The shares fell eight cents on the news, but rebounded to end at A$6.88, up six cents from Friday's close.
Comalco is owned 67 percent by global mining group RTZ-CRA , due to report its annual profit on Thursday.
""The market has pretty much factored in the loss and is now focusing on future earnings prospects,"" one share trader said.
As expected, Comalco's smelting division played a part in the earnings nose-dive. It made a loss for the year, but this paled in comparison with the damage done to Comalco's earnings by the slump in aluminium prices and a strong local currency.
""The 1996 result was severely impacted by lower prices,"" chief executive Terry Palmer told reporters in Melbourne.
The London Metal Exchange (LME) aluminium price averaged 70 U.S. cents a pound in 1996, compared with an average of 83 cents in 1995, the company said. The Australian dollar averaged 78 U.S. cents in 1996, four cents stronger than in 1995, it added.
Comalco's premiums over the LME price also suffered. Together, the aluminium market and the local dollar pared a total of about A$201 from operating profit, overwhelming a rise in total production volumes, the company said.
But Palmer painted a much brighter outlook, assuring investors that Comalco's aluminium production is set to climb and predicting a stronger aluminium price over 1997.
Comalco saw firming global demand for the metal this year, fuelled by economic recovery in Europe and continued growth in the United States. ""Consumption in Asia is not expected to grow in 1997,"" the company said.
Comalco also denied market speculation it might sell off its smelters and abandon its plan to build a A$1 billion alumina refinery in either Queensland state or Sarawak, Malaysia. Alumina, produced from bauxite, is the raw material for making aluminium.
(A$1 = US$0.77)
",30
"Australian publisher Pacific Magazines and Printing Ltd told its shareholders on Tuesday to expect a small rise in earnings as paper prices came back to earth and a recent cost-cutting drive started to pay dividends.
At an annual meeting which unanimously approved the group's name change to PMP Communications Ltd, chairman Ken Cowley said lower paper prices were boosting demand for printing work and that earnings from magazine publishing were also growing.  
""I think it is fair to say it (profit) will be marginally up on this current year we have just finished,"" Cowley told reporters after the meeting in Melbourne.
Cowley forecast a tough economic environment in Australia over the current business year, ending next June 30, but this would be partly offset by a continuing cost-cutting drive.
""We have got to find more efficient ways of operating and that work has started and it will be continuing,"" he said.
",30
"Australia's Foster's Brewing Group Ltd toasted local beer drinkers on Monday for a strong rise in pre-tax earnings, but losses in Canada and China took some fizz out of the half-year result.
Foster's announced a 13 percent rise in pre-tax earnings to A$185 million (US$140.6 million) for the six months to December 31, due largely to what it called a sparkling performance by its home brews.
Carlton and United Breweries (CUB), the group's domestic brewer and earnings powerhouse, recorded an 11.5 percent surge in profit before interest and tax.
""CUB's performance was, again, an absolutely outstanding feature of the result -- a sparkling performance, if you will excuse the pun,"" Foster's chief executive Ted Kunkel said.
CUB, which brews Australia's best-selling beer, Victoria Bitter, now commands 55 percent of the local beer market, up from 53 percent a year ago, Kunkel told reporters.
But CUB's performance was partly overshadowed by Foster's 40-percent-owned Molson Breweries, which was responsible for lowering the group's bottom line to A$169.4 million, just 2.4 percent up on the first half of 1995/96.  
""The result was mixed,"" Kunkel said of the Canadian brewer's performance.
Foster's booked a A$20 million abnormal loss for restructuring costs at Molson, which Kunkel said was beginning to arrest a slide in its share of the Canadian beer market.
The loss, partly offset by smaller profit windfalls in the period, may not be the last from Molson. Foster's is braced for more abnormal losses after Molson late last year lost an arbitrated dispute with Coors Brewing Co.
A Canadian arbitration panel ruled that Molson had breached an agreement to brew and sell the U.S. brewer's brands.
The financial fallout is uncertain, but Kunkel said on Monday it was unlikely to be severe.
""The arbitration panel did not set what the likely level of damages will be, so it's just impossible to tell what they may be,"" he said. A new licensing deal is being negotiated.
Also, Foster's Chinese operation continued to trade in the red, racking up A$10.2 million in losses in the first half from its joint-venture breweries in Guangdong, Shanghai and Tianjin.
But it said Chinese revenue and sales volumes rose in the first half and that the operations in China were on track to break even in around 1999/2000.  
Foster's plans to further expand in Asia and will enter other markets in the region in 1997.
""In Asia, we are close to establishing production in one or two markets, and we will be aiming to do so as quickly as possible as part of or broader Asian strategy,"" Kunkel said.
Kunkel gave no details, but he has said in the past that Foster's is eyeing India and Vietnam.
Foster's first-half result was roughly in line with stock market expectations, but the China losses raised some eyebrows.
""China is eating their profits elsewhere. The other (units) have to make a pretty good performance to offset that all the time,"" said Macquarie Equities analyst Raewyn Ellis-Doff.
Foster's share price ended 11 cents lower at A$2.54 on Monday, falling with the market as it tumbled in late trade.
(A$1 = US$0.76)
",30
"A former chief executive of Australian retail giant Coles Myer Ltd spent millions of dollars of the company's money to renovate his home in a case of 1980s greed and excess, a court heard on Monday.
Brian Quinn, 60, who rose from a junior store assistant to run the country's biggest retailer, went on trial on Monday in the Victoria Supreme Court on a charge of conspiracy to defraud.
Quinn has pleaded not guilty and suggests he was set up.
The prosecution said on Monday that Quinn conspired to spend around A$4.0 million (US$3.0 million) of the group's money on renovations to his Melbourne home from 1982 to 1988, expanding and renovating it and building a tennis court, spa and pergola.
Prosecutor Paul Coghlan accused Quinn of excess, saying one room was painted 10 times, the house was extended by 70 square metres (80 square yards) and the land was levelled using a rock crusher and surrounded by a double-brick fence.
""This is a case...about excess in money wasting, excess as to how much work was down, excess as to the materials used, excess as to the hours spent,"" Coghlan told the jury.
""But most of all it's a case about greed. It's a case about having your employer paying for your excesses,"" he added.
The prosecution said Quinn and another former Coles manager, Graham Lanyon, conspired to ensure Coles paid the bills by pretending the work was being done on stores owned by Coles.
""The expenses were largely concealed from his employer, who was meeting the cost,"" Coghlan said.
Lanyon, as chief of the company's maintenance department, falsified invoices to conceal the fraud but ""he did so in collusion with, or on the orders of, the accused man"", he added.
But defence lawyer Philip Dunn said Quinn was the victim of a corrupt maintenance department headed by Lanyon and corrupt works contractors. Both concealed costs from Quinn who agreed in 1988 to partly reimburse the company, he told the jury.
""He is as much a victim as the company is,"" Dunn said.
Quinn's home belonged to Coles until 1985, when he bought it for what prosecutors estimate was about half market value. Prosecutors said that even while Coles owned the house, the work was done without board approval.
""Brian Quinn is charged with stealing from his employer whilst he was living in a company house, which indicates how much of a nonsense and a load of rubbish we believe this case is,"" Dunn told the jury.
The trial is expected to last eight weeks.
",30
"Australian insurance group National Mutual Holdings Ltd targeted China and Thailand as key markets on Tuesday as it fleshed out its role as the Asian arm of one of the industry's global heavyweights.
National Mutual, owned 51 percent by the recently expanded French insurance giant Axa SA, unveiled plans to double its representation this year in mainland China by opening three more local offices.
National Mutual is sweating over its application for an operating licence in China, along with other insurers eager for exposure to the most populous nation's emerging middle class.
""It is a key objective for the group and every effort is being made to obtain this licence,"" chairman Athol Lapthorne told National Mutual's annual meeting in Melbourne.
The group has applied to open offices in Wuhan, Dalian and Chengdu, initially to conduct market research. It already has offices in Shanghai, Guangdong and Beijing.  
National Mutual has been try to enter China for more than three years, during which it has signed a cooperation pact with Chinese insurer China Everbright-IHD Pacific Ltd and has donated HK$10 million (US$1.3 million) to set up a China education fund.
National Mutual and Axa, which recently merged with rival Union des Assurances de Paris (UAP), launched a US$500 million China investment fund in September.
National Mutual has also applied to operate in Thailand, and is eyeing market entry in India, Vietnam and the Philippines.
Thailand and India are both reopening their insurance markets to foreign competition for the first time in many years, National Mutual managing director Geoff Tomlinson said.
The company is considering taking a stake in an existing insurer in the Philippines, and is taking a long-term view on Vietnam, which now has ""no real market to speak of"", he said. He gave no details on any likely investment in the Philippines.
""We are focusing our attention clearly today on China and Thailand,"" Tomlinson told reporters after the meeting.
""The work we're doing in relation to India, the Philippines and Vietnam is getting acquainted with people and seeing how business is done (there)...,"" he said. National Mutual has aligned itself in Thailand with a local joint venture partner, the General Finance group, but its application for an operating licence has yet to be decided.
National Mutual said it was not fazed by the new Thai government's decision to review the criteria for awarding insurance licences, and expected a decision within six months.
""It's a fertile market,"" Tomlinson said.
National Mutual, which is still powered mainly by its Australia and New Zealand life office National Mutual Life, suggested it could become an overnight force in Asian funds management if it inherits the regional assets of Axa and UAP.
National Mutual's funds management arm has A$2.0 billion (US$1.5 billion) in assets under management in Asia and stands to boost this to A$7.0 billion (corrects from A$7.0 million) if the parent decides to make National Mutual its Asian funds management operation, the company said.
""We will wait till they finalise their merger over there and talks will begin progressively,"" said Sam Kavourakis, National Mutual Funds Management managing director.
(A$1=US$0.75, HK$1=US$7.74)
",30
"A former chief executive of Australian retail giant Coles Myer Ltd spent millions of dollars of the company's money to renovate his home in a case of 1980s greed and excess, a court heard on Monday.
Brian Quinn, 60, who rose from a junior store assistant to run the country's biggest retailer, went on trial on Monday in the Victoria Supreme Court on a charge of conspiracy to defraud.
Quinn has pleaded not guilty and suggests he was set up.  
The prosecution said on Monday that Quinn conspired to spend around A$4 million of the group's money on renovations to his Melbourne home from 1982 to 1988, expanding and renovating it and building a tennis court, spa and pergola.
Prosecutor Paul Coghlan accused Quinn of excess, saying one room was painted 10 times, the house was extended by 70 square metres and the land was levelled using a rock crusher and surrounded by a double-brick fence.
""This is a case ... about excess in money wasting, excess as to how much work was down, excess as to the materials used, excess as to the hours spent,"" Coghlan told the jury.
",30
"The world's biggest mining house, RTZ Corp Plc-CRA Ltd, is set to report a sharp fall in annual profit this week after shouldering a slide in metal prices during the year and battling problems with its U.S. copper smelter, mining analysts said.
The group, which has operations spanning the globe, is on average expected to post a 26 percent fall in net profit before exceptional items to US$1.067 billion for calendar 1996, a Reuter survey of six Australian brokerages revealed.
The Anglo-Australian miner made US$1.441 billion in 1995.  
The analysts' forecasts range between US$1.04 billion and US$1.097 billion, although private forecasting service Barceps quoted much lower numbers in a survey last month.
The culprits behind RTZ-CRA's profit slump are seen as the copper price, which dipped below 90 U.S. cents a pound after the Sumitomo Corp trading scandal erupted in June, a sick aluminium price, down 16 percent in 1996, and problems with the flagship Bingham Canyon copper smelter in Utah.
Together, copper and aluminium earned almost 41 percent of RTZ-CRA's total revenue in 1995, and metal prices were promising enough early in 1996 for the group to talk of higher earnings.  
But metal prices caught cold and the prospects of improved profits also began to look sick mid-year, when the Sumitomo trading scandal involving trader Yasuo Hamanaka sent international copper prices crashing.
""Everything peaked ahead of this Hamanaka copper thing,"" said Peter O'Connor of Macquarie Bank.
""Most commodities slid from June on through to about September, October and there's been a bit of recovery in most metal prices since that time.""  
RTZ-CRA's iron ore business was also a disappointment, one analyst said, noting that sales for the year dropped six percent despite a lift in annual output.
Adding salt to the wound, the gold price also languished. Gold is a sensitive area for the mining giant, since it is fundamentally opposed to selling its production forward at a fixed price to lock in revenue.
RTZ-CRA's coal mines are also not expected to have relieved some of the pain inflicted on the group by weak prices.
One analyst expects coal earnings to fall 10 percent in 1996.  
RTZ-CRA's troubled Bingham Canyon smelter has stirred the deepest concerns among analysts, who have been waiting for the new plant to get it right after 18 months of hobbled operation.
""That's going to knock it (the result) around a bit,"" a Sydney-based analyst said.
The smelter is still not operating at full capacity and now faces a six-week shut-down soon for major modifications.
Copper division earnings are forecast to plunge by some 40 percent, according to HSBC James Capel's forecast.
Still, the brokerage likes the group's long-term prospects.  
""They have a very, very strong organic growth profile,"" said HSBC James Capel analyst Umit Safak. ""They have very substantial expansions coming up,"" he added.
These include expansions of the Escondida copper mine in Chile and the Grasberg copper and gold mine in Indonesia, as well as a stake in new gold mine on Papua New Guinea's Lihir island. Lihir is 22.8 percent owned by Southern Gold, which owned 75 percent owned by RTZ-CRA
""They have a very substantial exploration areas and a lot of very, very profitable projects in the pipeline,"" Safak said.
-- Sydney Newsroom 61-2 9373-1800
",30
"Australia's biggest aluminium producer, Comalco Ltd, plunged heavily into the red on Monday, blaming its loss for calendar 1996 on weak aluminium prices, an adverse exchange rate and higher smelting costs.
Comalco's net profit before abnormals slid to A$32.9 million in 1996 from A$264.8 million in 1995, in line with expectations, but abnormals dragged the bottom line to a A$16.8 million loss.
The result made a small dent in the stock's share price, which dropped eight cents on the news but recovered by 0125 GMT (12.25 p.m.) to A$6.80, down only two cents from Friday's close.  
Comalco is owned 67 percent by global mining group RTZ-CRA.
""The market has pretty much factored in the loss and is now focusing on future earnings prospects,"" a Brisbane dealer said.
As expected, Comalco's smelting division played a part in the earnings nose-dive.
Higher operating costs at its three smelters shaved A$32 million from group operating profit, Comalco said. It blamed this on higher prices for raw materials like fuel, power and coke, and on costs associated with smelter upgrades and expansions.
",30
"Australian resources and steel group The Broken Hill Pty Co (BHP) posted a 9.8-percent fall in first-half profits on Friday, disappointing the share market but avoiding another mauling by investors.
BHP, whose shares have been hammered since its key markets in steel and copper turned sour six months ago, posted a A$790 million (US$628 million) net profit for the six months to November 30, down from A$867 for the same period last year.
But Australia's largest quoted company had its bottom line boosted by an abnormal gain of A$107 million and investors were initially not impressed.
The share price were up 54 cents to a high of A$17.59 just after the result then took a tumble and settled at around A$17.20 in early afternoon trading.
But late buying across the board helped BHP, the market bellwether stock, recover ground and the stock closed at A$17.48, 43 three cents higher than Thursday's close.
""It's pretty lousy,"" one fund manager's stock analyst told Reuters soon after the release. Another analyst disappointed with the result said the resources giant was still on track for a modest profit recovery for the full year to May 31, 1997.
Though forecast signs of improvement emerged in BHP's battered copper division, with the North American copper operations swinging back into profit, analysts had been tipping a first-half group pre-abnormal result of around A$760 million.
BHP's pre-abnormal net profit of A$683 million was 15.8 percent down on the corresponding 1995/96 period.
But managing director John Prescott said the second quarter figures showed an accelerating improvement in performance and that, despite weak copper and steel prices, the group was still investing in future growth.
Citing a sharp jump in exploration expenditure in the half year, he told reporters: ""That's an important part of sustaining our growth.""
""I think we are moving ahead,"" he added. ""We have a lot of work to do and we're going to build the company around its high-quality assets and we are starting to see the results of our work.""
Including abnormals, BHP's minerals, copper and steel divisions all contributed higher earnings in the latest three months against the August quarter. The steel division was flat.
Petroleum was the biggest earner with A$253 million for the quarter, but this included an abnormal gain of A$107 million from the settlement of a dispute over a gas resource tax.
BHP Petroleum's pre-abormal result also included a A$82 million windfall from asset sales and a larger than expected exploration expense.
BHP's minerals division, a major world producer of iron ore and coal, doubled its contribution to profit in the second quarter to A$154 million, due largely to higher world prices.
BHP Copper benefitted from a recent firming in the copper price and a cut of seven U.S. cents per pound in its North American operating costs to post a second quarter profit of A$132 million, up from A$85 million in the first quarter.
The U.S. copper operations, acquired last January with the US$2.4 billion purchase of Magma Copper, made a loss on a full-cost basis in the first quarter. Prescott said on Friday Magma had swung back into profit in the second quarter.
BHP Steel's second-quarter profit was flat at A$90 million.
",30
"Buildings materials group James Hardie Industries Ltd is expected to report on Friday a net profit before abnormals of between A$23 million and A$30 million for the six months ended September 30, 1996.
James Hardie reported a pre-abnormal net profit of A$31.4 million in the 1994/95 first half. In October, it said the depressed local housing market would cause a deterioration in first half profits, while the 1996/97 year would also be lower.  
BT Securities building materials analyst Chris Haynes forecasts James Hardie to report a net profit before abnormals of A$27 million in the first half.
Haynes, who has a hold recommendation for James Hardie, said the building materials supplier was likely to pay a 6.5 cents a share dividend, unchanged from a the 1994/95 first half.
A Sydney-based building material analyst forecast James Hardie to report a net profit before abnomals of A$23 million for the first half and about A$50 million for the year.  
J.B. Were & Son's building materials analyst, John North, forecasts a first half pre-abnormal net profit of slightly below A$30 million.
But he added: ""I would be disappointed if they came in below A$27 (million) or A$28 (million),"" North told Reuters.
North forecast an annual profit of A$55 million.
BZW Australia forecast the Sydney-based group to report a net profit before abnormals of A$26.6 million for the half and about A$54 million for the 1996/97 year.  
ABN AMRO Hoare Govett building materials analyst Fabian Babich estimated James Hardie to report a pre-abnormal net profit of A$26 million for the half.
Analysts said James Hardie results are likely to turn around in the 1997/98 year, with an expected pick up in the Australian housing industry during the 1997 calendar year. The group reported a pre-abnormal net profit of A$58.4 million in 1995/96.
""The market will almost ignore these results, all the focus will be on the future and what they are doing in the U.S.,"" said one building materials analyst. ""People are not buying Hardie for 1997 earnings its a 1998 story,"" the analyst said.  
ABN AMRO's Babich said the market would also welcome any comments on further business divestments, so that the company has a tighter focus on its core fibre-cement operations.
""I think the market would react positively to any comment on the possible sales of the bathroom products and pipeline business and the windows business, all of which are estimated to be operating at a loss at the moment,"" Babich told Reuters.
James Hardie said on Tuesday it had completed the sale of its irrigation business and its fire protection and building automation operations. The sale of these businesses are unlikely to be shown in the first half accounts, analysts said.  
Most building materials analysts have a hold recommendation on James Hardie due to the strong rise in its share price over the past 12 months, although they said the outlook for the group is positive, particularly with its expected grow in the U.S.
James Hardie shares have risen about 66 percent to a record of A$3.50 last week from around A$2.10 in November 1995.
The shares closed three cents up at A$3.43 on Wednesday.
James Hardie is 27.23 percent owned by Brierley Investments Ltd's Australian offshoot Australian Consolidated Investments Ltd.
-- Sydney Newsroom 61-2 9373-1813
",23
"The Australian Stock Exchange's transport sector is likely to see more modest gains over the next year after a sharp rise over the past year, analysts said.
The transport index has risen about 30 percent during 1996, while the broader market has increased six percent this year.
""Brambles and Mayne's have had an extraordinary run over the last eight to 10 months, and the impression of the market is that they have reached their short term value,"" said Paul Xavier, transport analyst at BNP Equities.  
More than half of the sector is made up by Brambles Industries Ltd and Mayne Nickless Ltd.
""In the last 12 months the sector has outperformed quite significantly,"" Pru-Bache Securities transport analyst Andrew Mullholland said.
""It is outperforming because of a lot of stock specific issues,"" Mulholland said.
""You look at Mayne - it's because of Optus and healthcare and if you look at Brambles it's all to do with a turnaround in earnings,"" he said.
""If you look at TNT it is all to do with the bid,"" he said.  
TNT Ltd, which was seen as a laggard among the majors, has been taken over by Dutch post and telecoms group Koninklijke PTT Nederland NV through its friendly A$2 billion bid.
Mayne Nickless plans to sell its 25 percent stake in Optus Communications through the planned float of the telecommunications group in 1997, raising around A$1.0 billion.
Analysts said Qantas Airways Ltd's share price has underperformed the transport sector, with the stock trading for most of 1996 below its A$2.26 price at the start of January.  
""If you look at Qantas they have underperformed, but they represent good value at these levels,"" Mullholland said.
Qantas shares are currently trading just above the A$2.00 price institutional investors paid for the shares in the mid-1995 price.
However, analysts said that given the diverse operations of Mayne Nickless and Brambles the transport index is no longer seen by investors as a leading indicator of economic activity and therefore less attention is paid to the index.  
""I have always seen the transport index as a bit of a misnomer, it is kind of a diversified hybrid,"" Pru-Bache's Mullholland said.
If investors want pure exposure to the domestic transport sector they would have to look at medium sized groups Finemores Holdings Ltd, Scott Corp Ltd and Toll Holdings Ltd, analysts said.
""If you want to be in transport in Australia, you are better off looking at the medium sized players not the big players,"" one Melbourne-based analyst said.  
Analysts said transport companies represent some leverage to a slower growing Australian economy. But this leverage is limited as much as the economic growth is seen in the service sector and not traded goods, which use transport.
""Economy growth is seen in telecommunications, media and entertainment and hardly any growth in the traded sector and that limited growth in the traded goods sector means that there isn't that much growth in the transport side,"" one analyst said.  
Analysts said in the future the transport sector may start to represent more of a transport infrastructure index as Australia's federal and state governments are expected to privatise airports, railways and shipping ports over the next few years.
The Australian government is expected to complete the first phase of its airport privatisation programme in the first half of 1997 with the sale of Melbourne, Brisbane and Perth airports.
-- Sydney Newsroom 61-2 9373-1800
",23
"The Australian Stock Exchange's transport sector is likely to see more modest gains over the next year after a sharp rise over the past year, analysts said.
The transport index has risen about 30 percent during 1996, while the broader market has increased six percent this year.
""Brambles and Mayne's have had a extraordinary run over the last eight to 10 months, and the impression of the market is that they have reached their short term value,"" said Paul Xavier transport analyst at BNP Equities.
Over half of the transport sector is made up by Brambles Industries Ltd and Mayne Nickless Ltd.
""In the last 12 months the sector has outperformed quite significantly,"" Pru-Bache Securities transport analyst Andrew Mullholland said.
It is outperforming because of a lot of stock specific issues,"" Mulholland said.
""You look at Mayne - it's because of Optus and healthcare and if you look at Brambles it's all to do with a turnaround in earnings,"" he said.
""If you look at TNT it is all to do with the bid,"" he said.
TNT Ltd, which was seen as a laggard among the majors, has been taken over by Dutch post and telcoms group PTT Nederland NV through its A$2 billion bid.
Mayne Nickless plans to sell its 25 percent stake in Optus Communications through the planned float of the telecommunications group in 1997, raising around A$1.0 billion.
Analysts said the Qantas Airways Ltd share price has underperformed the transport sector, with the stock trading for most of 1996 below its A$2.26 price at the start of January.
""If you look at Qantas they have underperformed, but they represent good value at these levels,"" Mullholland said.
Qantas shares are currently trading just above the A$2.00 price institutional investors paid for the shares in the airline's float in mid-1995.
However, analysts said that given the diverse operations of Mayne Nickless and Brambles the transport index is no longer seen as by investors as a leading indicator of economic activity and so not much attention is paid to the movement of the index.
""I have always seen the transport index as a bit of a misnomer, it is kind of a diversified hybrid,"" Pru-Bache's Mullholland said.
If investors want pure exposure to the domestic transport sector they would have to look at medium sized groups Finemores Holdings Ltd, Scott Corp Ltd and Toll Holdings Ltd, analysts said.
""If you want to be in transport in Australia, you are better off looking at the medium sized players not the big players,"" one Melbourne-based transport analyst said.
Analysts said that although transport companies represent some leverage to a slower growing Australian economy. But this leverage is limited as much the economic growth is seen in the service sector and not traded goods, which use transport.
""Economy growth is seen in telecommunications, media and entertainment and hardly any growth in the traded sector and that limited growth in the traded goods sector means that there isn't that much growth in the transport side,"" one analyst said.
Analysts said in the future the transport sector may start to represent more of a transport infrastructure index as Australian government's are expected to privatise airports, railways and shipping ports over the next few years.
The Australian government is expected to complete the first phase of its airport privatisation programme in the first half of 1997 with the sale of Melbourne, Brisbane and Perth airports.
",23
"Standard Chartered Plc group chief executive Malcolm Williamson said on Thursday he expected the British-based bank to form more strategic alliances in Asia with U.S. and European banks.
In 1996, Standard formed joint ventures in Asia with Westpac Banking Corp, First Chicago NBD Corp and Massachusetts-based Fleet Financial Services.
""We have another string of deals lined up in Europe and America which we are hoping to execute along similar lines,"" Williamson told Reuters in a telephone interview.  
The bank will make further annoucements on the planned ventures when it releases its 1996 year results in late February or early March, Williamson said.
Standard has a network of branches throughout Asia and Africa along with offices in London, New York and Sydney.
Williamson said it was difficult for foreign banks to enter Asia as bank licences were hard to get from regulatory bodies.
There was no limit to the amount of ventures Standard could set up with banks that want to enter the Asian market as it could offer the services of its bank partner through the Standard Asian branch network, Williamson said.  
However it was unlikely that Standard would do another deal with an Australian bank which could jeopardise its newly-formed relationship with Westpac, said Williamson, who is on a visit to the bank's Australian operations.
Williamson said Standard was not interested in any equity swap with any banks it forms a strategic alliance with.
""Reports there might be about a share exchange with Westpac would not be relevant to us because we wouldn't want to get into a special relationship with one party when you are trying to deal with many parties in other parts of the world,"" he said.  
Williamson said Standard was on track to achieve his target set three years ago to double the bank's profit.
He said three years ago the bank made 400 million stg annual profit.
""We made 400 million (stg) in the first six months of this year (1996), so that puts us well on target for reaching our goal,"" he said.
The bank plans to launch consumer finance operations and credit card services in Asia, where it has had operations since the 1850s, he added. ""There is a lot of investment we want to make in order to protect the bank's future,"" he said.  
The bank had to make more investment into cash management systems and the corporate banking market in Asia, he said.
""We see no surplus of capital in the foreseeable future as we are ploughing so much back into the business,"" he said.
He said Standard had no plans to exit its African business.
""We make good profits out of Africa and we intend on staying there, because we get a very good return for our shareholders,"" Williamson said.
He also said the bank was no longer a takeover target as it was in the early 1990s when its share price was languishing.
-- Sydney Newsroom 61-2 9373-1800
",23
"Sydney Harbour Casino Holdings Ltd said on Wednesday it wanted to grab a slice of the lucrative Asian high-roller market but first had to win a tax break from the state government.
The company holds a 12-year licence to operate the only legal casino in Australia's largest city but has battled with the New South Wales (NSW) government for the past 15 months to receive the same tax concession that its interstate rivals have.
""I am hopeful, but I can't say anything concrete at this stage,"" chief executive officer Neil Gamble told Reuters in an interview. The Sydney casino is 26.3 percent owned by U.S. casino operator Showboat Inc.
(Corrects to add Gamble's first name and title)
Without the 10 percent tax concession on winnings made by the high-rollers, the Sydney casino could only watch as rich Asian customers headed to casinos in Melbourne, Perth and on the Gold Coast, Gamble said.
""As far as the high-rollers are concerned it makes us totally uncompetitive."" Gamble said the high-rollers also required other incentives to be lured to Sydney.
""The professional gamblers would have about A$100,000 (US$80,000) to spend on a weekend, some would go up to A$2 million or A$3 million, some go up to tens of millions of dollars, but that is rare.""
If the Sydney casino could have its big gamblers tax reduced from more than 27 percent at the moment, it would then open a network of marketing offices around Asia, he said, adding to its representation in Hong Kong and Singapore.
So far its revenue from high rollers is negligible as 90 percent of the 12,000 people that visit the casino daily are considered locals.
The Sydney casino currently operates out of temporary premises but plans to open a A$1 billion permanent casino late next year, with 1,500 gaming machines and 200 gaming tables, a hotel and two theatres.
The casino has posted a string of disappointing results since it opened its doors in September 1995, with Gamble largely attributing this to over-optimistic forecasts in the prospectus.
""I think the prospectus forecast was too bullish,"" Gamble said ""I don't think that was a failure of mangement to achieve I think it was an over estimate of reality by any comparsion with other parts of this industry.""
The casino floated on the local bourse in June 1995 and forecast an operating profit after tax of A$37 million for the 1995/96 year. It reported an actual net loss of A$4.68 million in the financial year to June 30, 1996.
The recent sell down by international financier and founding shareholder George Soros was not a vote of no-confidence in the group, Gamble said. Soros now has under five percent down from 9.8 percent at the time of the float.
Since Soros sold down his stake in mid-November, Sydney casino shares have fallen eight percent. Sydney Harbour Casino shares closed steady at A$1.78 on Tuesday.
(A$1 = US$0.80 cents)
",23
"Westpac Banking Corp said on Wednesday it expected rapid revenue growth from the alliance it had formed with Standard Chartered Bank Plc for banking services in Asia.
""We expect it to be a fairly rapidly growing revenue stream,"" said David Morgan, group executive of Westpac's Institutional and International Banking Group.  
However, Morgan said he could not say how much revenue the alliance would produce in its first year of business or how much Westpac had invested in the venture, which officially started on Wednesday.
The banks said earlier there would be no exchange of equity between the two.
""We have made a substantial investment already, but it is going to be a continuing investment as we expand our capabilities across Asia,"" Morgan told Reuters by telephone.  
Westpac has no plans to extend the alliance beyond Asia to the Middle East and Africa, where Standard Chartered also has operations.
""We are going to purely focus it on Asia,"" Morgan said.
The venture would focus primarily on Singapore, Hong Kong, Indonesia, Thailand and Malaysia, before expanding into Vietnam and China in about six months, Morgan said.
",23
"St George Bank Ltd announced on Monday an agreed A$2.65 billion merger with Advance Bank Australia Ltd - its fifth merger attempt in the past two years.
The merger of the two Sydney-based regional banks would create Australia's fifth largest bank, with assets of A$40 billion and a market capitalisation of A$4.5 billion, making its of Australia's top 25 listed companies.  
Analysts said the plan for Advance to pay St George A$100 million if it were taken over by a third party was seen as a way to ward off other bids, making it look like it was fifth time lucky for the St George.
""I think that would make it unattractive for somebody else to come in and make a bid,"" said Linda Lyon, banking analyst at brokers BNP Equities.
St George said it would offer an effective A$7.30 for each share in Advance Bank.  
Advance shareholders would be offered a combination of A$2.10 in cash, a 20 cent special cash dividend and new St George shares up to a value of A$5.00 per Advance Bank.
St George said the total value of the offer was A$7.30 per share, representing a 20 percent increase over the average Advance Bank share price over the previous five trading days.
Advance shareholders will also receive Advance Bank's interim dividend, expected to be 20 cents, payable in February.
St George said it would also raise A$360 million in a new capital raising to help fund the bid. The issue would proceed upon completion of the acquisition, expected to in April.  
St George said the merger was driven by the need to lower costs and a review had found the merger could achieve a reduction of 15 percent in annual combined expenses or A$140 million before tax.
Advance shares soared over 10 percent on the announcement.
Analysts said that although there would be cost savings, the price was still fairly generous.
""My initial reaction is that it looks like Advance Bank shareholders are coming out of the deal quite well, whereas St George shareholders are coming out not so well,"" said one Sydney-based banking analyst.  
""It's a big price. I can't imagine anybody else coming and topping the price St George is offering,"" said BNP's Lyon.
Analysts said the offer valued Advance at 2.8 times net asset backing, well above the 2.0 times asset backing level at which recent Australian bank merger prices had been based.
St George has been desperate to have a friendly merger as it is seen as a takeover target itself.
Australia's largest banking group, National Australia Bank Ltd (NAB), holds a 6.8 percent stake in St George.
NAB has said it has no takeover plans for St George.  
Analysts said the Wallis inquiry into Australia's finance and banking sector might put NAB's acquisition plans on hold until the inquiry reported its findings in March.
St George's bid for Metway Bank Ltd earlier this year was scuttled by the Queensland government, which trumped its offer with a higher bid through its wholly-owned financial services group Suncorp and the Queensland Industry and Development Corp (QIDC). Last year, St George was foiled in its merger bid for Perth-based Challenge Bank Ltd when Westpac Banking Corp made a higher offer.  
St George was also in talks last year to merge with the Bank of Western Australia Ltd, before the Bank of Scotalnd Ltd took control, and the Bank of South Australia, which was takeover by Advance early 1995.
St George shares plunged after the announcement.
At 2.20 p.m. (0420 GMT) Advance Bank shares were 69 cents or 10.99 percent higher at A$6.97 while St George shares were 40 cents or 4.47 percent down at A$8.55.
-- Sydney Newsroom 61-2 9373-1800
",23
"The Australian Gas Light Co (AGL) was interested in looking at the Australian assets of Tenneco Inc if the assets were put up for sale, managing director Len Bleasel said on Tuesday.
Tenneco has announced a restructure that includes a proposed merger of its energy arm with El Paso Energy Corp
""But we haven't got a deal in front of us ... but I can tell you we have had more than one knock on our door and say 'if we could put something together would you be interested,' and we say 'come on back when you have got something',"" Bleasel said.  
""The whole Tenneco story is yet to unfold,"" Bleasel told Reuters in a telephone interview.
""There are a lot of rumours in the market that El Paso may not want to hold onto all of the assets,"" he said.
Bleasel said said AGL, a Australian gas utility and energy group, would wait and see what unfolds with the Tenneco-El Paso restructure, whether assets are sold off or not.
Tenneco's Australian assets include the 1700 km of pipeline in South Australia including the state's primary gas pipeline from Moomba to the Adelaide pipeline system. Tenneco is also building a 760 km gas pipeline in southwest Queensland.  
""I continuously say ... that AGL is interested in every sale whereever it is in the country because we are now a broad based energy company and if the Tenneco assets were to go to the market then we would be interested in how they were going to be presented to the market,"" Bleasel said.
""The silly thing to say is 'no we are not interested or no there is no possible sale,' then if somebody wants to do a little slick sale then they are not going to come and talk to you because you have said publicly you are not interested.""  
However, a Tenneco Australia spokeswoman said Tenneco had made no decision about the future of its Australian assets nor had it told anyone the assets were for sale.
AGL's main market is New South Wales but it has businesses in Victoria, Western Australia and the Nortern Territory.
The Sydney-based group also has interests in China, Poland and Chile. ""When you are trying to grow a company like we are, we are interested in everything,"" Bleasel said.  
Bleasel said he was very optimistic on the company's prospects from Monday's agreement with Santos Ltd and ALISE Energy Australia Pty Ltd for the supply of gas to a proposed cogeneration plant at Botany in Sydney.
""This gives a new revenue stream to AGL,"" Bleasel said.
He said 20-year agreement would not affect the company bottom line until the project is up and running in about two years time.  
AGL earlier held its annual meeting where the former deputy governor of the Reserve Bank of Australia John Phillips was formally appointed the company's new chairman, replacing Richard Mason who retired.
Shareholders also approved the appointments of Charles Allen, the former managing director of Woodside Petroleum Ltd and Carolyn Hewson, a director of CSR Ltd and wife of former Australian liberal party leader John Hewson.
AGL shares ended four cents up at A$6.64.
-- Sydney newsroom 61-2 9373-1800
",23
"Australian mineral sands and base metals miner RGC Ltd reported on Thursday that it had doubled annual operating profit for the 1995/96 year, thanks largely to a boom in demand for aircraft and golf clubs.
RGC, 40 percent owned by British conglomerate Hanson Plc, reported a 101 percent rise in operating profit to A$108.57 million (US$85.99 million) for the year ended June 30.
And it said it was on the lookout for expansion opportunities in Bolivia, India, Sri Lanka and the Ukraine.
The higher profit was due to improved mineral sands demand and prices, together with a stronger tin price and output, chairman Tony Cotton told reporters on Thursday.
""It was a good result and was in line with market expectations,"" Pru-Bache Securities mining analyst Quek told Reuters. ""The mineral sands division did very well and there was an improvement in the tin business too,"" he said.
The higher mineral sands and tin prices helped lift sales 54 percent to A$986.39 million in 1995/96.
RGC, which tussles with South African miner Richards Bay Minerals for the title of the world's largest mineral sands miner, has about 30 percent of the world market for titanium dioxide (Ti02), which is used to make titanium metal.
""With Ti02 we have good news and bad news,"" RGC managing director Mark Bethwaite told reporters. ""The good news is that U.S. growth forecast is very strong, around three to four percent, and there is strong titanium metal demand particularly because of some aviation growth and also of golf clubs.
""Titanium is now a favourite material to make golf driver heads,"" Bethwaite said.
As for the bad news, Bethwaite said: ""In the U.S. and in Asia there is something of a price war going on.
""So prices are taking quite a battering,"" he said.
RGC, which has operations in Australia, the United States, Papua New Guinea (PNG) and Indonesia, was also keen on expanding to other countries, including Bolivia, India, Sri Lanka and the Ukraine, for mineral sands and base metal exploration, he said.
""What we are saying there is that we are ready and able to joint venture particularly with junior (small miners) and governments, where they seek a strong partner in both financial and technical capacity,"" he said.
The Sydney-based miner said it was one of three companies on the short-list to buy the tin assets of the Bolivian state-owned COMIBOL mining corp, which include a tin smelter and two mines.
""We are on the short-list for what is called the capitialisation of COMIBOL tin assets. There were four parties, there are now three, including RGC as one,"" Bethwaite said.
If RGC was successful with its tender to acquire the tin assets in the land-locked South American nation it would become one of the world's largest tin miners, he said.
RGC produced about 16,000 tonnes of tin in concentrate in the 1995/96 year. The two Bolivian tin mines up for sale would increase the group's annual tin output to over 35,000 tonnes.
The world's largest tin miner is Tambang Timah of Indonesia, which is expected to produce 41,500 tonnes in 1996.
Despite the better-than-expected profit, RGC shares rose just one cent to A$5.94 on light volume.
(A$1 = US$0.7920)
",23
"Australia's second largest telephone carrier Optus Communications rang up its first annual profit on Wednesday and is on track for its sharemarket float by the end of the year.
Optus, established at the start of 1992 to compete with Australia's main telephone carrier, state-owned Telstra Corp, reported a pre-tax profit of A$60.3 million (US$47.64 million) in the year to June 30, 1996.
This compares with a loss of A$17.0 million in 1994/95.
""After a tremendous effort during its first few years, Optus is now in a very strong position to capitalise on the many opportunities presented by the rapidly growing telecommunications industry,"" chief executive officer Zygmunt Switkowski said in a statement.
The profit was within expectations. Telecommunications analysts forecast Optus to deliver a profit before abnormals of between A$55 million and A$65 million.
""I don't think the market will be disappointed,"" said one Sydney-based analyst. ""I think the revenue is a little bit down on what they were talking about.""
The results reflected strong revenue growth of 36 percent to A$1.94 billion in 1995/96, with high revenue increases from its three main businesses of mobile telephones, long-distance calls and services to the corporate and government sector, chief operating officer Phil Jacobs said on Wednesday.
Optus, 24.5 percent owned each by U.S. BellSouth Corp and Britain's Cable and Wireless Plc, said in February it expected to achieve A$2.0 billion in revenue in 1995/96.
The Sydney-based group is still expected to make its sharemarket debut by the end of 1996, Switkowski said.
""The float's planned to occur this side of Christmas and the prospectus is progressing to plan, but it is not done,"" he told reporters after the results anouncement.
The float is expected to raise around A$1.5 billion, making it the largest telecommunications company to list on the Australian Stock Exchange, with up to 40 percent of the company shares to be listed.
Optus will later be joined by Telstra on the stock exchange.
The Australian government plans to raise A$8.0 billion from the sale of one-third of Telstra in 1997/98, which will be just after full deregulation of Australia's telecommunications industry on July 11, 1997.
Despite chalking up its first annual profit, Optus incurred increased losses from its 46.5 percent-owned pay television and local telephone call operator Optus Vision.
Optus said its share of losses from Optus Vision was A$74.0 million, which were mainly due to the start-up of the offshoot, which is spending A$3.0 billion rolling out its nationwide fibre optic cable network to provide pay TV and telephone services.
Optus Vision, which includes Australia's richest man Kerry Packer amongst its shareholders, reported a loss of A$1.54 million in 1994/95, in its first year of operation. The company has not announced its 1995/96 results.
Switkowski was coy about 1996/97 forecasts. Optus Communications was completing its prospectus for the sharemarket float, which would contain revenue and profit forecasts.
However, Switkowski predicted that revenue from its mobile telephone business would exceed revenues from its long-distance calls due to strong local demand, as Australia has one of the highest penetration rates for mobile phones in the world.
(A$1 = US$0.79)
",23
"U.S.-owned express freight carrier United Parcel Service (UPS) could start flying its own planes to Australia if growth in the Australian market continued at the current rate, a senior company official said on Friday.
UPS, which started serving Australia in 1991, currently uses commercial airlines to carry packages in and out of the country, UPS general manager Australia Terry Hales said in an interview.
""If things continue the way they are I could see very quickly the realisation of that ..."", Hales said.
""It is certainly not beyond the terms of possibility at all. I would say that we have a plan that it would happen in the next five years,"" he said.
UPS does not use its own planes, which currently total 300 worldwide, to fly to Australia as there was not enough export business from Australia, he said.
""We don't fly planes into Australia. The market is not yet large enough to warrant bringing in an airplane every day full up and then turn them around and fly them back,"" Hales said.
""We have no problems filling them up coming in. Going out is another matter on a regular basis,"" he said.
Hales said Australia imports four times as much air freight as it exports. However, he said UPS projects large export growth, albeit from a low base in Australia.
""Our volume of revenue forecasts are in the region of 34 percent (growth) in calendar 1997,"" he said.
The import business is seen growing at a more modest pace.
""We still feel fairly bullish that we will still grow in the (import) market, probably seven or eight percent which is reasonable for the business,"" he said.
UPS uses Australia as a service centre rather than a hub for the Asia Pacific. Hales said UPS was spending US$400 million on its Asia Pacific hub terminal in Taiwan, which was chosen due to its proximity to other Asian nations and the United States.
""When you sit down and work out the best location to service the customers, in our case we came out with Taiwan as the best location for the Asia Pacific,"" Hales said.
However, he did not rule out Australia becoming an Asian Pacific hub in the future.
UPS currently uses Honolulu as a connection point for freight bound for Australia.
Cargo is transferred to a Qantas Airways Ltd flight to carry it the rest of the way to Australia.
But this could change in the future if growth continued at the current pace, Hales said.
Atlanta-based UPS is privately owned.
-- Sydney Newsroom 61-2 9373-1800
",23
"Sydney Harbour Casino Holdings Ltd chief executive officer Neil Gamble said on Tuesday he was still hopeful the casino would receive tax concessions on earnings from big-betting foreign gamblers, despite previous knock-backs.
The casino operator, which holds a 12-year monopoly to operate the only legal casino in Australia's largest city, has battled with the New South Wales state government for the past 15 months to get a similar tax rate to other Australian casinos.
""I am hopeful, but I can't say anything concrete at this stage,"" Gamble told Reuters in an interview.  
Gamble, appointed to his current position in mid-October after leaving struggling pay television operator Australis Media Ltd, said he had held talks with NSW state premier Bob Carr, who planned to make a decision early 1997.
He said that without the 10 percent tax rate concession it wanted from the government, the Sydney casino was unable to compete in the high-roller market with rival casino operators Crown Ltd, Jupiters Ltd and Burswood.
""As far as the high-rollers are concerned it makes us totally uncompetitive,"" Gamble said. He added the high-rollers require incentives to be brought into play at a casino.  
""The professional gamblers would have about A$100,000 to spend on a weekend, some would go up to A$2 million or A$3 million, some go up to tens of millions of dollars, but that is rare,"" the South African-born executive said.
Gamble said the high-roller market was worth about A$200 million to Australian casinos with Sydney's share about A$100 million and A$10 million to the casino's bottom-line profit.
Australia's share of the worldwide high-roller market could potentially be worth about A$300 million, Gamble said.
But he added this would be dependent on Sydney getting the tax concessions its desires.  
If the Sydney casino was to get the go-ahead from the NSW government to lower the tax rate from the current rate of around 27 percent, it would open up a string of marketing offices around Asia to attract high-rollers to its casino, he said.
The Sydney casino currently has marketing offices in Hong Kong and Singapore. But so far the casino's revenue from high rollers is negligible, as 90 percent of the 12,000 people that visit the casino daily are considered locals, Gamble said.
The rest of the casino's patrons are tourists, but Gamble said this part of the market would grow once the A$1 billion permanent casino opens in late 1997.  
The permanent casino would be complete with 350 hotel rooms, 140 serviced apartments, lyric and showroom theatres.
Gamble said the Sydney casino was not in a saturated market. Last week international ratings agency Standard and Poor's said the local casino industry had reached saturation point.
""We are sitting here with a 12-year monopoly in a city of 3.5 million people. With two million tourists a year I don't see it as a particular issue for us,"" Gamble said.  
Gamble said it was too early for him to comment on whether the Australian gaming industry would have a debt profile similar to that of the U.S. gaming industry, where 80 percent of the gaming company ratings fall within the 'BB' and 'B' category.
U.S.-based Showboat Inc  owns 26.3 percent of Sydney Harbour Casino and has a contract to run the casino, which is located on the outskirts of Sydney's central business district.
-- Sydney Newsroom 61-2 9373-1800
",23
"Australia's information technology and telecommunication industry (IT&T) on Tuesday welcomed a decision by Asia-Pacific leaders that would lead to a substantial reduction in tariffs.
""It is certainly welcome, as the telecommunications area has some very strong barriers in many markets,"" said Fleur Bayley, export manager of the Australian Informational Industry Association (AIIA).  
Bayley told Reuters that Australia has no trade barriers on IT&T equipment, whereas local companies have to compete in markets that have high tariff barriers.
The meeting in the Philippines of 18 leaders of Asia-Pacific Economic Cooperation (APEC) economies endorsed a United States plan to free the annual US$500 billion global trade in computers, memory chips and telecommunications equipment.
However, most IT&T observers wanted more details about the tariff plan before they could assess its implications for the Australian sector.  
One computer industry analyst said the APEC plan is likely to benefit Australian IT&T exports, but is unlikely to stimulate growth of technology imports into Australia.
""One would have thought with the relative maturity of our market that exports could increase faster than imports,"" the analyst said.
He said there could be a mild boost in demand from home users of computers, but it is unlikely to affect the demand in the corporate market.  
But another analyst said most of Australia IT&T exports are from multinational corporations with operations in Australia and these companies are the ones that are most likely to benefit.
Australia exported more than A$2.5 billion in IT&T goods in the 12 months to September this year but imported around A$9.6 billion worth of IT&T goods over the same period.
U.S. computer giant International Business Machines Corp lBM exports about A$500 million of its computers from Australia to Asia, making it the country's single largest technology exporter.  
French telecommunictaions equipment maker Alcatel Alsthom is another multinational with large export volumes from Australia.
AIIA's Bayley said the association has a target of A$10 billion in IT&T exports by the year 2000.
A decade ago, Australia's IT&T exports were negligible.
-- Sydney newsroom 61-2 9373-1800
",23
"The aggressive cost cutting programmes planned by Australia's two major airlines Qantas Airways Ltd and Ansett Airlines Ltd can be achieved without affecting services, analysts said.
Both Qantas and Ansett face pressure on profits because of the stronger Australia dollar, higher fuel prices, a soft domestic market and competition in the international market.
""Australian airlines are seen as high cost operators compared with the rest of world,"" said Peter Harbison, managing director of the Centre for Asia Pacific Aviation consultancy service.
""So I suppose there is scope there to reduce the cost base,"" Harbison told Reuters.
Qantas, which is 25 percent owned by British Airways Plc, announced at its annual meeting last month that it will increase its cost cutting programme by about A$100 million for the 1996/97 year on the previous target of A$330 million.
Ansett, which is a joint venture between News Corp Ltd and Air New Zealand Ltd, said three months earlier that it plans to cut A$150 million from its annual cost base of A$3 billion.
""They will have to reduce their costs along with every other airline in the world and that will continue to happen for some time,"" Harbison said.
Investors are focusing on Qantas, which is cutting costs more aggressively so that it can meet profit estimates.
Qantas has said it aims to cut costs right across the airline, without specifying particular areas.
Analysts said Qantas will have plenty of scope to cut costs, using its alliance with major shareholder British Airways to share facilities.
""They have got a lot of inefficiences, they can outsource some of their engineering and maintenance,"" said Greg Ward, aviation analyst at First Pacific Stockbroking.
Analysts said the Australian flag carrier will also cut costs in areas where it is not so noticeable to customers, such as in the accounts and marketing and sales departments.
""It's the tail that Qantas will hack into, Qantas will not hack into the sharp end,"" said David Turner, analyst at Shaw Stockbroking, referring to accounts and sales areas as the tail, while the sharp end was the flight services.
He said Qantas is very competitive with other world airlines in terms of its pilot performance and aircraft ultilisation, so there is little change seen in those areas.
Analysts said Qantas has to focus on cutting costs in order to grow profits and release funds for the expansion of services and purchase of new aircraft.
""They haven't got the capacity to go out and buy planes and fill them up and fly hundreds more routes so the focus is on improving their balance sheet and generating more profits to do that,"" one Melbourne-based aviation analyst said.
However, analysts said both Qantas and Ansett run a risk in cutting costs as it may affect staff morale, which in turn affects customer service and in turn customer loyality.
-- Sydney newsroom 61-2 9373-1800
",23
"Canadian gold giant Placer Dome Inc on Tuesday agreed to a deal with Papua New Guinean (PNG) miner Highlands Gold Ltd that gives Placer control of the giant PNG Porgera gold mine and ends a bitter feud between the two miners.
The deal also keeps the Highlands group as a listed company free to develop base metal and gold projects in the resource rich South Pacific nation.
Under the complex plan the Vancouver-based miner would pay Highlands A$316.1 million (US$249.7 million) to buy Highlands' 25 percent stake in the Porgera mine, which is estimated to have produced 850,000 ounces of gold in calendar 1996.
Placer had previously offered Highlands A$276.8 million for its Porgera stake after building up a 40-percent stake in Highlands through a hostile takeover bid.
""We are pleased that Placer has accepted our offer,"" Highlands managing director Ian Goddard said in a statement.
The restructuring plan involves all shares in Highlands other than those held by Placer being cancelled and holders receiving a capital return of 65 cents cash per share and one share in Highlands Pacific.
""It's good for Placer Dome because it gets what it really wanted, it's good for Highlands shareholders because they get more than 75 cents, they get 65 cents cash plus they have the share in the new company,"" one source close to the deal said.
Highlands will spin-off a new company, Highlands Pacific Ltd, which would hold the Ramu nickel/cobalt and Frieda-Nena copper/gold projects as well as its exploration porfolio in PNG and Indonesia.
""There has been strong institutional interest in our proposal, which unlocks the value of Ramu, Frieda-Nena and Highlands' extensive exploration interests,"" Goddard said.
Under the restructure of the Highlands group about A$160 million would be raised through a mixture of new equity and the planned sale by Placer Dome of the shareholding it would inherit in Highlands Pacific.
The new equity issue in Highlands Pacific would be at 30 cents per share, Highlands Gold said. The newly-formed company would have a market capitalisation of about A$250 million when it lists on the Australian Stock Exchange in March.
Placer Dome already has effective control over the 25 percent stake in Porgera through its Australian offshoot Placer Pacific Ltd, which the Canadian miner plans to buy-out the remaining 24.6 percent stake in the Australian miner.
Placer Dome's orginal bid of 75 cents per Highlands share launched on November 28, 1996 was rejected by the PNG miner, which valued Highlands at A$423 million. Highlands had also threaten Placer with court action over its initial bid.
Investors welcomed the new deal.
In early afternoon trade Highlands shares were two cents up at 81 cents on active trade of about 14 million. While fellow Porgera partner Orogen Minerals Ltd touched a record high of A$3.05 on the news. Orogen holds 15 percent of Porgera.
(A$=US$0.7900)
",23
"Australian oil and gas companies are being snapped up by foreign companies with an eye for undervalued stocks, but analysts said the sector faces a bright future with higher oil prices and a deregulated gas market.
During 1996, there has been about A$2.5 billion worth of takeovers announced in Australia's shrinking oil and gas sector and another A$600 million worth of asset sales as some non-oil and gas players quit the local oil and gas market.  
Analysts said local oil groups with low share prices and overseas assets have struck the eye of hungry foreign companies.
""Overseas people appreciate the value of oil and gas assets, particularly in southeast Asia, but I don't think the market is fully valuing these assets through the share prices,"" Timothy Savage, an oil and gas analyst at Hartley Poynton, told Reuters.
Mobil Corp's A$1.78 billion tilt for Ampolex Ltd in February was the largest bid made this year in the sector. British oil producers are also keen on local oil firms.  
Crusader Ltd was taken over mid-year by Clyde Petroleum Plc, while in the past month Premier Oil Plc has made a bid for Discovery Petroleum NL and Cairn Energy Plc has made a offer for Command Petroleum Ltd.
BT Securities oil and gas analyst Stuart Baker said most of the Australian oil groups that have attracted predator attention have been producers with oil assets offshore.
""It is no coincidence at all that the companies that have disappeared have been always companies that have endeavoured to build an overseas presence, and they have all without exception been taken over,"" Baker told Reuters.  
Analysts said the rise in the oil price this year had not been a reason for the corporate activity. NYMEX oil futures prices have risen almost 50 percent over the past five months to current levels of about US$25.50 a barrel.
""Takeovers have been a feature of this sector for years and it doesn't seem to matter if the oil price is up or down,"" Baker said.
Baker said oil companies making the bids have a double positive effect from the oil price rise with increased cash flow and a boost in share prices making it easier for companies to raise equity and debt.
Analysts said rationalisation might continue in the sector for some time, but most of the short-term activity had occured.
""I think it is possibly going to clam down now,"" one Sydney-based oil analyst said.
Analysts said remaining potential targets in the oil and gas sector were Cultus Petroleum Ltd and Petroz NL, which have assets in the prospective Timor Sea area.
Woodside Petroleum Ltd and Santos Ltd were unlikely bid targets, analysts said. Woodside, which accounts for nearly 50 percent of the A$12 billion sector, is controlled by oil giant Royal Dutch/Shell Group.
Santos is seen to have a restrictive share ownership structure making it difficult for takeovers, analysts said.
Santos has also been keen on purchases, buying A$250 million worth of oil assets this year from groups quitting the sector.
Analysts said the takeover activity has raised the focus on the sector, particularly in gas exploration and development.
They said reforms in the local gas industry has opened up opportunities for gas supplies to major mines in remote areas and the set up of co-generation projects around the country.
""There is a lot of money coming over here and finding their way into all sorts of corners of the industry. So it looks like it is going to be a fairly buoyant period again, irrespective of whether we have further takeovers ahead,"" Baker said.
Australia's oil and gas index hit a record high of 1459.5 on Tuesday, but fell slightly to close at 1432.9 on Wednesday.
-- Sydney newsroom 61-2 9373 1800
",23
"Media mogul Rupert Murdoch said on Tuesday he intended to use sports broadcasting rights as a ""battering ram"" for dominance of pay television markets in Asia and throughout the world.
He said the purchase of those rights would also buy his way into the world's sporting establishment.
""Sport absolutely overpowers film and everything else in the entertainment genre,"" Murdoch told shareholders at the annual meeting of News Corp, his global media group.
""We have the long-term rights in most countries to major sporting events and we will be doing in Asia what we intend to do elsewhere in the world, that is, use sports as a ""battering ram"" and a lead offering in all our pay television operations,"" said Murdoch, News' chairman and chief executive.
News Corp has spent big money on acquiring sports programming rights worldwide over the last five years and has set up sports programme distribution deals with some of the industry's biggest players in the past 12 months.
Murdoch's global media and entertainment group set up a worldwide sports programming joint venture with U.S. cable television giant Tele-Communications Inc (TCI) and Liberty Media of the United States in January.
Two weeks ago, News Corp formed an Asian sports programming joint venture with its former competitor Walt Disney Inc's sports broadcaster ESPN.
""Sport will remain very important and we will be investing and acquiring long-term rights and becoming part of the world sports establishment,"" said Murdoch, News' chairman and chief executive.
""Football, of all sports, is number one,"" said Murdoch, who sails as a sporting pastime.
News Corp has spent millions on football programming rights over the past few years. It has bought the rights for the National Football League (NFL) in the U.S. and Premier League soccer in the United Kingdom and is setting up its rebel rugby league competitions in Australia and Europe.
""We expect the next three World Cups will have a significant place on our platforms,"" said Murdoch referring to the soccer and Rugby Union world cups.
Murdoch received a boost to his Australian sports broadcasting plans two weeks ago, when the Australian Federal Court overturned a Court ruling in March that banned the launch of News' rebel rugby league competition, Super League. News Corp's Australian offshoot has spent A$273 million (US$216 million) on setting up Super League.
""There has been an unfortunate hold-up, but it (Super League) is going to be a wonderful asset to have now that we are free to get that competition under way,"" said Murdoch, who is Australian-born, but now holds U.S. citizenship.
The group's sports programmes are broadcast through its vast television operations, which reach accross the United States and into parts of Latin America.
In Europe, News Corp's main TV interest is through its 40-percent stake in British Sky Broadcasting Plc (BSkyB), which announced sharply-increased pre-tax profits of 257 million pounds sterling (US$406 million) for the year to June 30.
News Corp operating profits for the same period were A$1.26 billion. Television, which contributed A$549 million, was the most profitable sector.
In Asia, News' satellite TV operator STAR TV broadcasts throughout Asia from Saudi Arabia to Japan. In Australia, News Corp has a 50-percent stake in the Foxtel cable TV joint venture and a 15-percent stake in TV broadcaster Seven Network Ltd.
(A$=US$.7900, 1 pound sterling = $1.58)
",23
"The international partners in Australia's largest gas project said on Thursday they plan to spend A$6.0 billion to double production, making it Australia's largest single resources investment.
Australian oil and gas producer Woodside Petroleum Ltd said the partners in the North West Shelf gas project offshore Western Australia plan to double production capacity to 14.5 million tonnes of liquefied natural gas (LNG) a year.  
The decision by the North West Shelf partners was unlikely to boost the much-touted prospect of a co-operative development with the nearby Gorgon gas field, which has the capacity to produce six million tonnes of LNG a year, analysts said.
""The North West shelf partners have their own plans for expansion, but if the Gorgon partners have a good proposal that we can work together then we will certainly have a look at it,"" said Woodside's corporate affairs manager Geoff Wedgwood.
""But to date we have not seen a plan from them that fits within our plans,"" Wedgwood told Reuters.  
Last month an executive of Royal Dutch/Shell Group, a partner in both projects, raised hopes that the two projects could be developed together and questioned the expansion of the Shelf on a stand-alone basis.
Cor Herkstroter, chairman of Royal Dutch/Shell's committee of managing directors, then told Reuters in an interview that expansion of the North West Shelf could not be justified without integrating it with another project and that the development of both projects was a viable option.
Royal Dutch/Shell also owns 34 percent of Woodside.  
Woodside, the project operator, said the expansion plan was submitted to the project's eight Japanese power and gas utility customers at a meeting in Osaka this week.
""It is a significant step for the expansion of the North West Shelf project,"" Wedgwood said. The partners have spent A$12 billion on the project since it started in the early 1980s.
Woodside is an equal one-sixth shareholder in the project along with some of the world's major oil producers.
The Osaka meeting followed indications from buyers in June of their interest in an expansion of the project, said Woodside.  
However, work on the expansion would not start for another two years at least, Wedgwood said.
""The next thing that is likely to be a letter of intent in late 1997 for the development of this expansion proposal,"" Wedgwood said. He said between now and then there are lots of talks on technical issues surrounding the proposal.
""Following that would be a purchase agreement between the North West shelf partners and the Japanese buyers, which would be around late 1998,"" Wedgwood said.  
Only after this agreement would work start on the expansion. Besides Woodside and Shell, the other equal partners in the Shelf are The Broken Hill Pty Co Ltd, The British Petroleum Co Plc, Chevron Inc and a partnership of Mitsui & Co Ltd and Mitsubishi Corp.
Shell and Chevron are also partners in Gorgon along with U.S. oil giants Texaco Inc and Mobil Corp.
-- Sydney newsrooom 61-2 9373-1800
",23
"Building materials, aluminium and sugar group CSR Ltd is expected to report on Monday a net profit before abnormals of between A$146 million and A$160 million for the six months to September 30, analysts said on Friday.
On October 14, CSR said that its 1996/97 first half profit was likely to be 20 percent lower, with the full year down by the same amount if the first half trend continued.  
Analysts have cut their 1996/97 year profit estimates for CSR after last month's profit warning. Annual forecasts now range between A$250 million to A$272 million, compared with around the A$300 million level before the warning.
CSR reported a nine percent fall in net profit before abnormals of A$193.4 million in the 1995/96 first half.
Sean Cooney, a building materials analyst at ANZ Securities, forecast CSR to report a first half pre-abnormals net profit of A$156.6 million. Cooney forecast CSR to report an annual net profit before abnornals of between A$255-A$260 million.  
Greg Burns at BZW Australia forecast A$160 million for the half and A$260 million for the year to March 31, 1997.
Mark Cotton, building materials analyst at Prudential Bache Securities, forecast CSR to report a pre-abnormal net profit of A$160 million for the half and A$272 million for the year.
Michael Brown at McIntosh Securities forecast a net profit before abnormals of A$146 million for the half and around A$250 million for the year. Brown has a hold recommendation on CSR.  
ABN AMRO Hoare Govett's building materials analyst Fabian Babich forecast CSR to report a pre-abnornmal net profit between A$145 million and A$150 million for the half and about A$260 million for the year.
Analysts said the second half for the Sydney-based group was cyclically lower than the first half, as the Australian housing industry slows over December and January for the holiday season. CSR said last month intense price competition and low volumes continued in the Australian building products market were some of the main reasons for the expected profit fall.  
It said in the United States its operation was achieving record profits, but the aluminium group which was a strong performer last year would achieve lower earnings in 1996/97 due to falling metal prices.
It also said sugar profits for the year would be close to that achieved last year despite lower raw sugar prices.
CSR reported a net profit after abnormals of A$330.8 million in 1995/96, compared with A$392.60 million in 1994/95.  
Analysts are forecasting CSR's profit to start to turnaround in the 1997/98 year, on the back of an improving domestic housing market in calendar 1997. The local housing market has been in the doldrums since the end of 1994.
BZW's Burns said the housing market was still on for a turnaround in 1997. ""Building approvals seem to be improving from where they were, housing affordability has improved immeasurably, all we need now is a bit of confidence,""
At 11.15 a.m. (0015 GMT), CSR shares were a cent down at A$4.30. They have traded between A$4.06 and A$4.72 this year.
-- Sydney Newsroom 61-2 9373-1800
",23
"Australia's largest listed aluminium producer Comalco Ltd reported on Monday a 72 percent slide in net profit for the first half of 1996, due to a weaker metal price and a stronger Australian dollar.
The lower than expected result saw metal analysts trim back their 1996 full-year profit estimates for Comalco, while investors wiped over five percent off the miner's share price.
Comalco, 67 percent owned by the world's largest mining group CRA Ltd/RTZ Corp Plc, reported a net profit of A$43.9 million (US$34.7 million) for the six months to June 30, 1996, down from A$155.1 million a year earlier.
""Lower primary aluminium prices, movements in the exchange rate, softer alumina markets and weaker alumina spot prices affected profit,"" Comalco chief executive Terry Palmer said in a statement.
The three-month aluminium contract traded on the London Metal Exchange has fallen nearly 13 percent to its current level of US$1,479.0 from the start of the year, while the Australian dollar has risen seven percent to around US$0.7900.  
Comalco's sales fell 31.6 percent to A$806.9 million for the half, due mainly to lower metal prices. The tough market conditions would continue into the second half, Palmer said.
""I think we are already a third of the way through the second half and I think we have got to expect it to be tough because even if the prices (of aluminium) improve next month it would be hard to get much gain out of it,"" Palmer told Reuters.
Shareholders are likely to be disappointed with the result, as the Melbourne-based miner slashed its dividend to three cents a share for the first half, from 12 cents a year ago. This was well below expectations of five to six cents a share dividend.
""It is a lot lower than what people were expecting,"" Macquarie Equities metals analyst Peter O'Connor told Reuters.
Investors reacted to the weak result by slicing five percent or 33 cents off Comalco's share price. The stock closed at A$7.10 on Monday, its lowest level since August 1.
Australian aluminium analysts said they would further cut their 1996 full-year profit forecast for Comalco, which produces about 17 percent of the nation's primary aluminium, 10 percent of the country's alumina and 21 percent of its bauxite.  
At the start of 1996, analysts forecast Comalco to report a net profit of between A$255 million and A$265 million for 1996, compared with the 1995 profit of A$232.3 million.
Lower metal prices and a stronger Australian dollar saw analysts trim their full-year forecast to around A$130 million prior to the half-year result.
But in light of Monday's six-month result, analysts further lowered their forecast to around A$90 million for the 1996 year.
""You would have to expect that numbers would be coming down to at least double of what the first half was,"" O'Connor said.
",23
"Westpac Banking Group, the second largest bank in Australia, announced plans on Wednesday to expand its Asian activities through an alliance with British-based Standard Chartered Bank Plc.
The move signals Westpac is ready to expand in the region again after putting most of its Asian activities up for sale 3-1/2 years ago to focus on Australasia.
At the time a recession was biting deeply into profits and the share register held potential predators such as Australia's richest man Kerry Packer and Lend Lease Corp Ltd.  
Westpac chief executive Bob Joss said in a statement the deal with Standard Chartered was of major importance.
""It is a good strategic fit for our future growth,"" he said. Standard Chartered group chief executive Malcolm Williamson said his bank was committed to ""ensuring this new relationship with Westpac is of significant long term benefit to both companies"".
The venture would focus primarily on Singapore, Hong Kong, Indonesia, Thailand and Malaysia, before expanding into Vietnam and China in about six months, said David Morgan, group executive of Westpac Institutional and International Banking.
",23
"Australian oil and gas companies are being snapped up by foreign companies with an eye for undervalued stocks, but analysts say the sector faces a bright future with higher oil prices and a deregulated gas market.
During 1996, there has been about A$2.5 billion (US$1.98 billion) worth of takeovers announced in Australia's shrinking oil and gas sector and another A$600 million worth of asset sales as some non-oil and gas players quit the local market.
Local oil groups with low share prices and overseas assets have struck the eye of hungry foreign companies, analysts said.
""Overseas people appreciate the value of oil and gas assets, particularly in southeast Asia, but I don't think the market is fully valuing these assets through the share prices,"" Timothy Savage, an oil and gas analyst at Hartley Poynton, told Reuters.
The A$1.78 billion tilt by U.S. oil giant Mobil Corp for Sydney-based Ampolex Ltd in February was the largest bid made this year in the sector, while British oil producers are also showing an active interest in Australian oil firms.
Brisbane-based Crusader Ltd was taken over mid-year by Clyde Petroleum Plc of the UK, while in the past month Premier Oil Plc has made a bid for Discovery Petroleum NL and Cairn Energy Plc has made a offer for Command Petroleum Ltd.
Most of the Australian oil groups that have attracted predator attention have been producers with oil assets offshore, said Stuart Baker, an oil and gas analyst with BT Securities.
""It is no coincidence at all that the companies that have disappeared have been always companies that have endeavoured to build an overseas presence, and they have all without exception been taken over,"" Baker told Reuters.
However the rise in the oil price this year had not been a reason for the corporate activity, analysts said. The main oil futures contract traded in New York has risen almost 50 percent over the past five months to about US$25.50 a barrel.
""Takeovers have been a feature of this sector for years and it doesn't seem to matter if the oil price is up or down,"" Baker said.
Baker said oil companies making the bids have a double positive effect from the oil price rise with increased cash flow and a boost in share prices making it easier for companies to raise equity and debt.
Remaining potential targets in the local oil and gas sector were medium-sized groups like Cultus Petroleum Ltd and Petroz NL which have assets in the prospective Timor Sea area.
The sector's largest listed companies, Woodside Petroleum Ltd and Santos Ltd, were unlikely bid targets, analysts said. (A$1 = $0.79)
",23
"Sydney Harbour Casino Holdings Ltd, which has posted a string of disappointing results since it listed in June 1995, was too optimistic in its prospectus, chief executive officer Neil Gamble said on Tuesday.
""I think the prospectus forecast was too bullish,"" Gamble told Reuters in an interview. ""I don't think that was a failure of management to achieve, I think it was an over-estimate of reality by any comparsion with other parts of this industry.""  
The company is 26.3 percent owned by U.S. casino operator Showboat Inc and holds a 12-year monopoly to operate the only legal casino in Australia's largest city.
It forecast an operating profit after tax of A$37 million for 1995/96 but reported an actual net loss of A$4.68 million in the year to June 30, 1996.
The casino, which opened a temporary site in September 1995 and plans to open a permanent casino late 1997, changed its balance date to December 31 from June 30 earlier this year.
Gamble said the casino was recording a slow and steady improvement in results, but would not give any forecasts.  
In October, the Sydney casino said it expected the December quarter profit to be higher than the September quarter.
""Basically we are building the business and there is not a exponential increase, there is a slow steady improvement in the results each month as we go along,"" Gamble said
""We think that the actual threshold leaps will start during the first and second quarter of next year,"" he said.
Gamble said the casino had expected the recent sell down by international financier and founding shareholder George Soros and was not a vote of no-confidence in the group.  
But investors have taken a contrary view, with the share price falling eight percent since Soros sold down his stake in mid-November.
Gamble said he met with George Soros representative on the Sydney casino board Steven Gilbert, who had said that Soros was a trader and would sell out from time to time. Soros now has less than five percent from a high of 9.8 percent at the time of the float.  
""He sold 25 percent of his holding, which is very prudent and was totally expected on our part, he still owns 30 million shares, which is very sizeable and he is still very much involved with the company,"" Gamble said.
He said the largest shareholder, Showboat, had no plans to sell its stake, despite frequent rumours about a takeover for either the Sydney casino operator or its parent.
""If the price is right, Showboat could sell, but I don't see any sign of that at this point in time,"" said Gamble, who joined joined the casino in October.  
""If an operator wanted to take over the casino, they would have to take over the management contract and if that were to happen Showboat is the gatekeeper,"" said Gamble, the former chief executive officer of Australis Media Ltd.
Showboat has the management contract to operate the Sydney casino. Australian newspapers have speculated that the nation's richest man and biggest gambler Kerry Packer was keen on buying the Sydney casino or Showboat.
""The rumour about Packer came around the time I joined. That has dissipated now, but that will probably come around another time,"" Gamble said.  
Packer lost to the Showboat-Leighton Holdings Ltd consortium in 1994 for the Sydney casino licence.
Gamble said the casino's plans to list on the NASDAQ exchange in the United States was still going to plan and would be listed by April 1997.
""That is progressing satisfactorily, we have had a lot of other priorities on and we expect during the first quarter of calendar 1997 to compete that ADR listing on NASDAQ,"" he said.
-- Sydney newsroom 61-2 9373-1800
",23
"Canadian gold giant Placer Dome Inc on Tuesday agreed to a deal with Papua New Guinean (PNG) miner Highlands Gold Ltd that gives Placer control of the vast PNG Porgera gold mine and ends a bitter feud between the two miners.
The deal also keeps the Highlands group as a listed company free to develop base metal and gold projects in the resource rich South Pacific nation.
Under the complex plan the Vancouver-based miner would pay Highlands A$316.1 million (US$249.7 million) to buy Highlands' 25 percent stake in the Porgera mine, which is estimated to have produced 850,000 ounces of gold in calendar 1996.
Placer had previously offered Highlands A$276.8 million for its Porgera stake after building up a 40-percent stake in Highlands through a hostile takeover bid.
""We are pleased that Placer has accepted our offer,"" Highlands managing director Ian Goddard said in a statement.
The restructuring plan involves all shares in Highlands other than those held by Placer being cancelled and holders receiving a capital return of 65 cents cash per share and one share in Highlands Pacific.
""It's good for Placer Dome because it gets what it really wanted, it's good for Highlands shareholders because they get more than 75 cents, they get 65 cents cash plus they have the share in the new company,"" one source close to the deal said.
Highlands will spin-off a new company, Highlands Pacific Ltd, which would hold the Ramu nickel/cobalt and Frieda-Nena copper/gold projects as well as its exploration porfolio in PNG and Indonesia.
""There has been strong institutional interest in our proposal, which unlocks the value of Ramu, Frieda-Nena and Highlands' extensive exploration interests,"" Goddard said.
Under the restructure of the Highlands group about A$160 million would be raised through a mixture of new equity and the planned sale by Placer Dome of the shareholding it would inherit in Highlands Pacific.
The new equity issue in Highlands Pacific would be at 30 cents per share, Highlands Gold said. The newly-formed company would have a market capitalisation of about A$250 million when it lists on the Australian Stock Exchange in March.
Placer Dome already has effective control over the 25 percent stake in Porgera through its Australian offshoot Placer Pacific Ltd, which the Canadian miner plans to buy-out the remaining 24.6 percent stake in the Australian miner.
Placer Dome's orginal bid of 75 cents per Highlands share launched on November 28, 1996 was rejected by the PNG miner, which valued Highlands at A$423 million. Highlands had also threaten Placer with court action over its initial bid.
Investors welcomed the new deal.
In early afternoon trade Highlands shares were two cents up at 81 cents on active trade of about 14 million. While fellow Porgera partner Orogen Minerals Ltd touched a record high of A$3.05 on the news. Orogen holds 15 percent of Porgera.
(A$=US$0.7900)
",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 said it would spend A$340 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 Sydney 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.
-- Sydney Newsroom 61-2 9373-1800
",23
"Rupert Murdoch, the Australian-born mogul who turned his father's newspaper business into a global media empire, is publicly grooming the next generation to succeed him.
But the 65-year-old who has transformed the industry worldwide still has a few more ambitions to achieve before he passes on the baton to his heirs and settles into retirement.
Instead of rolling up their shirtsleeves and getting inked up on the printing presses as Rupert did, his eldest son Lachlan and daughter Elisabeth will be dealing with the latest in digital technology and multi-channel television satellites.
With the dawning of the digital age, television is the business that Murdoch sees fuelling the next stage of growth of the News Corporation Ltd conglomerate built from the small beginnings of his father Keith's Adelaide newspaper.
The TV business already produces the most revenue of News Corp's five main operations -- newspapers, magazines, films and book publishing. News Corp recorded total revenues of A$13.0 billion (US$10.27 billion) in the year to June 30, 1996.
NEWS CORP, A FAMILY BUSINESS
Lachlan, 25, and Elisabeth, 28, are already familiar with the television business. Elizabeth owned and operated two TV stations in California before selling them earlier this year to join British Sky Broadcasting Plc (BSkyB).
Murdoch's other son, James, and daughter Prudence are not involved in Dad's business, but his wife Anna is on the board of ""News"", which is about 32-percent owned by the Murdoch family.
""Obviously he is lining up people to help,"" said a Melbourne based media analyst.
At 65, Murdoch has passed News Corp's own retirement age but with the business just entering a new phase of expansion he is not about to leave yet.
""News Corp is still being formed, that is why there is not much chance of him walking away tomorrow,"" said the Melbourne analyst, referring to News Corp expansion in satellite and cable TV.
The analyst said either Elisabeth or Lachlan would probably work in News Corp's U.S. business, before they could take over.
At the start of October, Elisabeth was appointed head of programming at BSkyB, which is 40-percent owned by News Corp. The British-based satellite TV operation nearly sank News Corp in debt six years ago, but has become a river of cash.
A week before his sister's promotion, Lachlan was appointed managing director of News Ltd, the Australian arm of News Corp.
""Lachlan's job is to get pay TV up and running (in Australia),"" said one Sydney analyst of News Ltd's 50-percent interest in Foxtel, a cable TV network launched last year.
Murdoch has placed both his children under the tutorage of two of his loyal lieutenants, BSkyB managing director Sam Chisholm and News Ltd chairman Ken Cowley.
Most Murdoch watchers see Lachlan as the favourite to step into his father's shoes because of his appointment to the key 12-strong executive committee of News Corp, which is separate from the company's board of directors.
""You can't consider Elisabeth a real contender for the top job until she gets on that board,"" the Sydney media analyst said. He added that she would have to take Chisholm's job at BSky to get onto the executive committee.
""That is not going to happen for a while, whereas Lachlan has got the job of managing director of Australia and he is on the executive committee -- so that tells you who is the favourite right now,"" the analyst said.
Lachlan's growing confidence was evident recently at News Corp's annual meeting in Adelaide, where the Princeton graduate and rock climbing enthusiast firmly guided his father away from an impromptu press conference after the annual meeting.
The previous year the young Murdoch stayed firmly in the background as his father spoke about all.
""We have to go, I'm sorry,"" Lachlan told reporters firmly, ushering his father away once the questioning turned to the thorny matter of Australian media ownership rules.
EXPANSION THE NEW MURDOCH WAY
Since he inherited his father Keith's newspaper stable in 1952, Murdoch built his media empire by raising large slabs of debt -- often to the annoyance of his shareholders.
But in a move welcomed by analysts, Murdoch has said News Corp's future growth is likely to be based on a more conservative financing strategy.
""We now have US$2.5 billion in the bank and we intend to leave it there,"" Murdoch told News Corp's annual meeting.
This is a far cry from the dark days of late 1990 and January 1991, when Murdoch had to beg his bankers to get them to reschedule US$7.6 billion in debt after News Corp said it would be insolvent if the refinacing package was not completed.
Murdoch said News Corp's multi-billion dollar plans for pay television networks in the United States, Asia, Japan, Latin America and Australia would be financed from cash flow.
Analysts say Murdoch is unlikely to leave until he has widened News Corp's world television network reach and increased the company's reservoir of programming content.
""I think geographically he is almost there. There are only three areas he doesn't have exposure to, they are Canada, Africa and Eastern Europe,"" said one analyst.
""I don't think he is very interested in Eastern Europe, Canada is very difficult for foreigners from what I understand. But, I think there is a chance at some stage that Africa might be in his sights,"" the analyst added.
Murdoch will have to build up News Corp's programming further, particularly in film, analysts said. They said News is strong in sports and now news following the launch of the 24-hour a day Fox News channel launched on October 7.
""Sports, movies and news are the focus, but it wouldn't surprise me that he would have something to do with music as well at some stage,"" said a Melbourne-based analyst. ""If you think about the sort of content you can take from one country to another, sports is obviously one, then news and film and the other one to my mind would be music."" (A$1 = $0.79)
",23
"British Airways Plc (BA) said on Tuesday that it had no plans for new alliances over the next few years, but would extend its global reach by franchising its popular brand name to smaller airlines.
British Airways has an alliance with Australian carrier Qantas Airways Ltd and formed an alliance with American Airlines in June, although this is subject to regulatory approvals and a legal suit by USAir Group, in which BA holds 24.6 percent.
""One of the great challenges of alliance development is the management challenge and I think it would be unwise to take on any more than we can absorb at any one time,"" BA chief executive Robert Ayling said at an industry luncheon in Sydney.
Reports that BA would look to an alliance with a Japanese airline, notably Japan Airlines, were quashed by Ayling in a speech to the National Aviation Press Club in Sydney.
""I think the Japanese airline industry is an independent industry and I think it will remain a strongly independent industry. If there are opportunities in the future for developing relationships there with other carriers then obviously we will do that,"" Ayling said.  
However, Ayling said the airline's four-year experiment with franchising its brand name to smaller airlines was successful and would be an area of future growth, providing safety and customer service standards were met.
""It is a way of bringing extended services to customers and of allowing operators of smaller airlines, who would have found it very difficult to survive in this world of global networks, to be more successful,"" Ayling said.
In June, BA signed its first franchise agreement outside of the European Union with South Africa's largest independent carrier, Comair. Under the deal Comair's eight-jet fleet will use the British Airways name and livery.
Under the existing rules it would have been impossible to acquire or invest more than 50 percent in an airline in South Africa, said Ayling. ""South Africa is a part of the world which would not be open to us if we didn't have this deal,"" he said.
Ayling is visiting Australia to look at the operations of BA's 25 percent stake in Qantas, the national carrier.
Under the alliances with American Airlines and Qantas, BA and its partners fly to over 500 destinations in about 100 countries. Ayling said BA's global alliance could lead to opportunities in other parts of the world.  
""We may see, although this may be some way off, fleet acquisition opportunities, which would make a significant impact on procurement of aircraft,"" said Ayling.
""Once these agreements are put in place and they are being effectively managed, we will be able to see some things we are not able to see at the moment,"" he said.
Two weeks ago, BA reported an 11.1 percent rise in first quarter profits to 150 million sterling (US$231 million) on sales of 2.103 billion sterling. It forecast another record year in the year to March 1997.
",23
"Australian government-owned airport operator Federal Airports Corp (FAC) sees some life after the planned privatisation of its 22 airports, chief executive officer Barry Murphy said.
""We will eventually go out of existence if all 22 airports that we currently own and operate are eventually disposed of to other owners,"" Murphy told Reuters in a telephone interview.
""One thing we do hope will survive is our service group called the FAC Airport Consultancy, which we are trying to build into a viable business for the long run,"" Murphy said.
Murphy said FAC Airport Consultancy would be a group of 20 or 30 people, with specialist knowledge of the aviation industry and property management.
""We hope to sell those services at arm's length to the remaining airports and to new airport owners,"" Murphy said.
The Australian government has 10 consortiums shortlisted for bidding in its first sale phase which consists of 50-year leases for Melbourne, Brisbane and Perth airports. These are expected to sold in early 1997.
The sale of Adelaide lease was supposed to be part of the first phase, but was delayed for an upgrade.
The remaining 18 airports, including Sydney and the yet-to-be-built second airport at Sydney, will be sold in one or more future tranches.
""By the year 2000 I would imagine that they would have all gone with the possible exception of Sydney, if that is held back because of the Olympics,"" Murphy said.
Sydney will host the 2000 Olympics Games.
Murphy said the sale timetable was uncertain and the whole process was quite unsettling for FAC staff, as one of the major problems for the corporation was staff leaving to join the various consortiums.
Former FAC chief executive Jack Moffatt is the acting chief executive of Australian Airports Ltd, a consortium bidding for Brisbane, Melbourne and Perth.
In late November, FAC reported a 14.5 percent rise in net profit to A$78.1 million in the year to June 30, 1996 on a 14.6-percent rise in revenue to A$579.3 million, while passenger volume at the airports grew 7.3 percent.
""Passenger growth seems to be holding up quite well and we are expecting a continuing strong performance in that area...and we are hopeful that kind of growth rate will continue,"" Murphy said.
""We are confident that revenue growth would follow similar growth.""
Murphy said the FAC would try to minimise capital expenditure ahead of its privatisation, although Sydney airport may need to be upgraded. ""We do expect significant work at Sydney to cater for terminal growth within in the two years.""
Sydney is Australia's busiest airport.
Murphy said the FAC had been in talks with freight operators with a view to expand freight facilities at some of Australias airports.
""It is apparent now that freight is attracting more interest,"" Murphy said. However, he added any expansion of freight facilities was unlikely to involve major sums of money.
-- Sydney newsroom 61-2 9373-1800
",23
"Australian oil and gas companies are being snapped up by foreign companies with an eye for undervalued stocks, but analysts say the sector faces a bright future with higher oil prices and a deregulated gas market.
During 1996, there has been about A$2.5 billion (US$1.98 billion) worth of takeovers announced in Australia's shrinking oil and gas sector and another A$600 million worth of asset sales as some non-oil and gas players quit the local market.
Local oil groups with low share prices and overseas assets have struck the eye of hungry foreign companies, analysts said.
""Overseas people appreciate the value of oil and gas assets, particularly in southeast Asia, but I don't think the market is fully valuing these assets through the share prices,"" Timothy Savage, an oil and gas analyst at Hartley Poynton, told Reuters.
The A$1.78 billion tilt by U.S. oil giant Mobil Corp for Sydney-based Ampolex Ltd in February was the largest bid made this year in the sector, while British oil producers are also showing an active interest in Australian oil firms.
Brisbane-based Crusader Ltd was taken over mid-year by Clyde Petroleum Plc of the UK, while in the past month Premier Oil Plc has made a bid for Discovery Petroleum NL and Cairn Energy Plc has made a offer for Command Petroleum Ltd.
Most of the Australian oil groups that have attracted predator attention have been producers with oil assets offshore, said Stuart Baker, an oil and gas analyst with BT Securities.
""It is no coincidence at all that the companies that have disappeared have been always companies that have endeavoured to build an overseas presence, and they have all without exception been taken over,"" Baker told Reuters.
However the rise in the oil price this year had not been a reason for the corporate activity, analysts said. The main oil futures contract traded in New York has risen almost 50 percent over the past five months to about US$25.50 a barrel.
""Takeovers have been a feature of this sector for years and it doesn't seem to matter if the oil price is up or down,"" Baker said.
Baker said oil companies making the bids have a double positive effect from the oil price rise with increased cash flow and a boost in share prices making it easier for companies to raise equity and debt.
Remaining potential targets in the local oil and gas sector were medium sized groups like Cultus Petroleum Ltd and Petroz NL which have assets in the prospective Timor Sea area.
The sector's largest listed companies, Woodside Petroleum Ltd and Santos Ltd, were unlikely bid targets, analysts said. Woodside, which accounts for nearly 50 percent of the A$12 billion sector, is controlled by Anglo-Dutch oil giant Royal Dutch/Shell Group.
Santos is seen to have a restrictive share ownership structure making it difficult for takeovers, analysts said.
Santos has also been keen on purchases, buying A$250 million worth of oil assets this year from groups quitting the sector.
Takeover activity has raised the focus on the sector, particularly in gas exploration and development, analysts said.
They said reforms in the local gas industry has opened up opportunities for gas supplies to major mines in remote areas and the set up of co-generation projects around the country.
""There is a lot of money coming over here and finding their way into all sorts of corners of the industry. So it looks like it is going to be a fairly buoyant period again, irrespective of whether we have further takeovers ahead,"" Baker said.
(A$1 = $0.79)
",23
"The growth of the Internet has created the biggest creative explosion in the history of the computing world, said Sun Microsystems Inc chairman Scott McNealy on Friday.
""It is only been since we unleashed the Internet that you have suddenly seen this unleashing of technology and innovation and research and a transformation,"" McNealy told Reuters in an interview.
McNealy cited the launch of the Netscape Communications Corp Navigation browser and his company's Java computer language that allows users to operate across all computer operating systems as examples of recent computer innovation.
The Internet and Java is likely to pose the biggest threat to U.S. software giant Microsoft, said McNealy, who is on a 10-day visit to Australian and New Zealand along with 2,500 Sun employees, who are in Sydney attending a sales convention.
""Its two main two sources of revenue, (Microsoft) Office (software) and the desktop operating system are under threat,"" said McNealy, who is well known for firing salvos at Bill Gates, Microsoft's co-founder.
Microsoft and Sun are locked in many battles across the fiercely competitive computer industry. Microsoft has annual revenues around US$8.6 billion, while Sun has revenues of US$7.00 billion a year.
McNealy said Java users could operate in all operating systems including Windows, while the Internet and Java allowed users to download word processing applications without buying Microsoft's popular Microsoft Office software.
""The Internet has forced them (Microsoft) to change their strategies,"" said the 42-year-old computer millionaire.
Microsoft unveiled plans on Thursday to relaunch its online service Microsoft Network (MSN) with a US$100 million promotion push in order to double MSN's subscriber base. But McNealy said this showed another Internet strategy shift by Microsoft.
""Do you know what the Internet has done to our business? Absolutely nothing, we haven't changed our strategy one bit,"" said McNealy, who is on his first visit to Australia.
Java, which was developed by Sun and launched in May 1995, is a language that specialises in letting a wide range of computers share information with each other through networks.
Those capabilities are in themselves a threat to dominant players like Microsoft, whose MS-DOS and family of Windows operating systems run on nearly 90 percent of the world's PCs, industry sources said.
Sun has already licenced its Java technology to most of the world's computer industry, including Microsoft.
McNealy sees no threat from selling Sun's Java technology to its competitors. ""We don't own the language, we compete by doing something better in the language. It is like trying to own the English language, you compete by what you do with the language.""
Java computers, known as Network Computers, would be launched soon, which McNealy likened to the launch of the car. The Network Computer is the third wave in the evolution of the computer, McNealy said. The first was the mainframe, with the second wave being the personal computer, he said.
""We will still have buses and trains, which work on centralised systems like the mainframe. We will still have bicycles, which are like PCs, but the preferred mode of transportation for most of us is the automobile, which will be the Network Computer,"" McNealy said.
",23
"Canadian gold giant Placer Dome Inc's takeover bids for its Australian offshoot Placer Pacific Ltd and Papua New Guinea gold miner Highlands Gold Ltd are likely to be successful, analysts said on Thursday. A takeover of the two miners would give Placer Dome control of the big Porgera gold mine in Papua New Guinea (PNG).
""I think they will walk it in,"" said David Kauler, gold mining analyst at ANZ Securities.
Placer Dome had amassed a 33 percent stake in Highlands in the 24 hours before launching a 75 cents a share bid.  
The Vancouver-based miner is offering one of its shares for every 15 Placer Pacific shares. Placer Dome said its offer for Highlands represented a 36 percent premium to the price of the the shares on November 26. The offer for the 24.6 percent Placer Dome does not own in Placer Pacific represents aa 50 percent premium on the November 26 price, the Canadian miner said.
The shares of both Placer Pacific and Highlands soared after Placer Dome unveiled its offers before the market opening.
At 12.50 p.m. (0150 GMT) Placer shares were 47 cents or 32.87 percent higher at A$1.90 while Highlands shares were 16 cents or 27.59 percent higher at 74 cents.  
Australian gold analysts said they did not expect Placer Dome to raise its bid prices, with both Placer Pacific and Highlands directors likely to recommend shareholders to accept the offers in the absence of any higher bids.
""At the moment, the advice would be not to sell,"" Highlands company secretary Phillip West told Reuters. ""But the directors are considering the offer and are expected to make a statement later today,"" West said.
Analysts said the speed at which Placer Dome picked up a third of Highlands indicated there were plenty of sellers of the stock at these levels.  
Highlands has been in play since MIM Holdings Ltd put its 65 percent stake up for sale at 65 cents a share in April, but underwriter to the offer ANZ Securities, was left with 40 percent of Highlands, as investors neglected the offer.
""When you have someone offering 75 cents and not too long ago nobody was buying at 65 (cents) then its no wonder they are queuing up to sell,"" said Keith Goode at Bell Securities.
Analysts said Highlands needed a partner to help develop the Nena/Frieda River copper/gold project and the Ramu nickel-cobalt deposit, both in PNG. The two projects are estimated to cost US$1.5 billion to develop.  
""Highlands was really under pressure as its needed around A$500-A$600 million to finance its share of the Frieda and Ramu projects and that is pretty difficult for a company that is capitalised at A$350 million,"" ANZ's Kauler said.
Analysts said the offers are probably opportunistic, given that Placer Pacific and Highlands share prices were both earlier this year above Placer Dome's offer prices. But both have fallen with the gold price, which is currently around 2-1/2 year lows.
""It is opportune, with the gold price falling, but neither Placer (Pacific) or Highlands share prices have been going anywhere for most of this year,"" Kauler said.  
Gold analysts said Placer Dome was unlikely to mop up the remaining stake in Kidston Gold Mines Ltd, which is currently 75 percent owned by Placer Pacific.
""I don't expect there to be bid for Kidston, I think they will let that run its course,"" said one Sydney gold analyst.
The takeover bids for the Porgera partners, also boosted Goldfields Ltd share price, which owns 25 percent of the PNG mine and most of the gold sector despite a weaker gold price, which is currently trading at US$373/50 an ounce.
At 1.35 p.m. (0235 GMT), Goldfields shares were 24 cents or 9.76 percent higher at A$2.70. --Sydney newsroom 61-2 9373-1800
",23
"Investment bank Macquarie Bank Ltd reported on Monday a record result for the six months ended September 30, and started the second half optimistically.
Macquarie Bank, which is 13.4 percent owned by the Brunei Investment Agency (BIA), reported a 21.3 percent rise in first half net profit to A$46.03 million in the first half of 1996/97.
""This was a very solid first half result and one which reflects more even contributions fom business groups across the bank,"" executive chairman David Clarke said.  
""Although it is too early to make a forecast, we are optimistic about the second half,"" Clarke said.
While the 1995/96 second half was very strong, he said the bank was hopeful it could at least match the result.
""There has been nothing to change that view following the trading for the first two months of this half.""
Managing director Allan Moss said the equities, treasury and commodities group accounted for most of the first half rises.
""The Treasury and Commodities Group's first half result is the best since the formation of the group in 1993,"" Moss said.  
""The strong result in the Equities Group reflects good performances from institutional and corporate stockbroking and underwriting,"" Moss said.
Moss said the near 400 percent increase in profit from its stockbroking arm, Macquarie Equities Ltd, was due partly to an increase in market share, but mainly due to market volume.
Macquarie's Direct Investment division, which manages the Macquarie Investment Trusts, also had a good result, Moss said.
The bank was currently very active right across all its operations, Moss said. ""We are busy right across the board. There is a lot of activity in all our operations,"" he said.  
Macquarie said total operating income rose to A$232.69 million in the half, from A$190.21 million a year earlier.
The Brunei government-owned BIA became Macquarie's largest shareholder after it bought Lloyds TSB Plc's 13.4 percent stake for A$151.7 million last week.
Macquarie's chairman said there had been a good reaction to the link with BIA.
""We have had a very positive reaction from a number of existing clients, particularly in southeast Asia. I think it has been widely acclaimed in southeast Asia that it would lead to more business in the region,"" Clarke said.  
Macquarie, which listed in late July, reported a net profit of A$93.17 million in the year to March 31, 1996, up from A$76.07 million a year earlier.
Clarke said Macquarie had no plans to return capital to shareholders or to make a takeover due to its high capital adequacy ratio (CAR). Macquarie's CAR was 13.6 percent at September 30, down from 15.4 percent at March 31, 1996.
This ratio compares with the Reserve Bank of Australia's minimum requirement of eight percent.
""As far as any prospect of share acquisition or buy-back, we have nothing in mind yet,"" Clarke said.  
""I think it is the nature of our business to have a capital adequacy ratio that is higher than the trading banks because we are very dependent on counter-party limits from other banks, they in turn are quite dependent on ratings...it is a healthy capital adequacy ratio and I think we can expect to be well and truly above the basic minimum,"" Clarke said.
At 2.00 p.m. (0300 GMT), Macquarie shares were 11 cents lower at A$8.55 with about 160,000 shares traded in a generally weaker Australian sharemarket.
The shares listed on the local bourse in July at A$6.95.
-- Sydney newsroom 61-2 9373-1800
",23
"Australian fast ferry and transport group Holyman Ltd plans to further expand operations in Europe before moving into the Asian market, managing director Christopher Butcher said in an interview.
""We currently have operations in North America and northern Europe and we can't see any reason why we can't start doing the same thing in the Mediterranean,"" Butcher told Reuters.
Butcher said Holyman was likely into expand into Asia in the future as the cost structure for operating fast ferries improved in some markets in the region.  
""We could be seeing the cost structure changing in Asia, so we are likely to move into some markets in north Asia and south east Asia,"" Butcher said.
He said that as incomes rose in Asia the amounts charged for ferry services would rise, making it more economical for operators like Holyman to enter the market.
Holyman company secretary Simon Lennon said the company was also looking at fast ferry services from Darwin to Indonesia, but he did not expect a decision to be made for at least a year.  
""It is one of a number of projects we are looking at in the region,"" he said. He said Holyman had looked at particular routes within China and Indonesia, but they did not fit within the company's plans. ""I would imagine in a few years we would have something up there (in Asia),"" Lennon said.
Holyman shares had a lacklustre showing in its first year of listing, but since January this year the shares have more than doubled to make the stock one of the strongest sharemarket performers over the past year.
The shares listed in April 1994 at A$2.00 and hit a high of A$6.00 on November 11 and are currently trading around A$5.06.  
The Sydney-based group was floated on the local bourse in April 1994, as part of a spin-off from TNT Ltd, when the transport group was selling assets to trim its high debts.
""The stock really took some time to get off the ground,"" Butcher said.
""I think there has been a lot of hard work done over the past year to educate shareholders in what the company is doing and where the company is going as there was a perception out there that we were a mismash of businesses,"" Butcher said.  
Holyman's main activities are its fast ferry services in Australia, across the North Sea between Britain and Europe, New York and in Denmark. It also operates a gas pipeline, bulk commodity handling and freight forwarding businesses.
""There are a number of different projects and businesses, we found there are quite a lot of common threads going through,"" Butcher said. ""I think these operations all have their own place and there are opportunties to expand these further,"" he said.
Butcher worked with TNT for 25 years before taking charge of Holyman when it split from TNT.  
Butcher said the group had no plans to raise capital to fund the expected expansion, as the company was well financed.
In October, Holyman bought a fast passenger ferry for A$43 million. He said there was no plans for any immediate purchases of more ferries.
Butcher said he could not comment on its trading performance or earnings forecasts.
Holyman reported a net profit of A$16.09 million in calendar 1995. The group posted a net profit of A$15.03 million in the six months to June 30, 1996, up from A$6.79 million earlier.
-- Sydney Newsroom 61-2 9373-1800
",23
"Rupert Murdoch's global media group, The News Corp Ltd, on Tuesday reported an 8.1-percent fall in net profit for the first quarter of 1996/97, in stark contrast to market expectations of a healthy rise.
But analysts said Murdoch's forecast last month at News Corp's annual meeting that the group would achieve a profit lift of 20 percent for the year to June 30, 1997 was still possible.
The film, television, publishing and newspaper conglomerate reported net profits of A$283 million (US$223 million) for the three months ended September 30, down from A$308 million a year earlier.
Analysts had forecast net profit before abnormal items would be around A$320-330 million, up around 15 percent.
Net profit before abnormals came in at A$285 million.
The poor result caused News Corp shares to fall sharply and dragged the whole Australian share market lower.
The share price fall wiped over A$300 million of the group's market capitalisation. The stock closed 18 cents or 2.52 percent lower at A$6.95 with over 4.7 million shares traded.
The weaker profit was a result of poorer returns in U.S. TV, Australian newspapers and book publishing, News Corp said.
""This is not as people were expecting type of result. It was a very flat result,"" one Sydney-based media analyst said.
News Corp could still report a 20 percent rise in net profits for the 1996/97 year as it was only the U.S. television business that was clearly below forecast, analysts' said. They said this forecast by Murdoch was in U.S. dollar terms.
In U.S. dollar terms, News Corp operating income was seven percent higher in the first quarter.
""Basically, what News has said is 'the first quarter was a bit disappointing but you are still going to get your growth for the year',"" one Melbourne-based analysts said after taking part in an analysts' conference telephone call with News Corp.
News Corp said its profit was mainly bolstered by the worldwide box office success of the science fiction movie Independence Day and its British newspapers and book publishing.
Independence Day, a film about invading aliens who launch an attack against the Earth from huge space ships, has grossed more than US$670 million worldwide, making it the third highest-grossing film in box office history.
British newspaper operations enjoyed strong growth with an 18-percent gain in operating profits in the three months to September, News Corp said. The Sun, The Times and The Sunday Times newspapers all posted gains in both advertising and circulation revenues in the first quarter.
""Additionally, the group has benefitted from reduced newsprint costs,"" the company said.
""Offsetting these gains were weaker results in U.S. television, Australian newspapers and book publishing, which lacked results from the educational division which was sold in March 1996,"" it said.
News also said continued losses for its Asian satellite broadcaster, STAR TV, were in line with expectations.
The fall in profit in Australian dollar terms also reflected the stronger local currency against the U.S. dollar as about 75 percent of News Corp's revenue is in U.S. dollars.
The first quarter profit drop follows a profit dip for News Corp in the 1995/96 year, when it reported a six-percent fall in pre-abnormals net profit to A$1.26 billion.
(A$1 = $0.79)
",23
"Building products and energy group Boral Ltd said on Monday it had started the 1996/97 year poorly due to continued weakness in the Australian housing market, but it was still coy about the results for the full year.
Chairman Peter Cottrell told shareholders at the annual meeting that Boral's operating profit in the first four months of the current 1996/97 year was in line with budget, but about 20 percent below year ago levels.
Cottrell gave no figures, but said the 1996/97 first half earnings would be above the second half of 1995/96.  
""In summary, operating profit for the first four months is in line with budget and around 20 percent behind last year,"" Cottrell said. ""Happily, this indicates that the half year profit will be substantially above the extremely disappointing result in the second half of last year.""
He said most forecasters expected a recovery in demand for home building materials in the second half and this, along with recent interest rate cuts, should give the economy a boost.
""In this context, we expect that the second half profit should be well above the same period in 1995/96."" Boral reported a 30 percent fall in its 1995/96 net profit to A$205.69 million.  
Sales fell to A$4.69 billion in the year to June 30, 1996 from A$4.94 billion a year earlier.
One analyst at the Boral meeting said the first four month profit result indicated that the group was currently looking at a flat annual profit for 1995/96.
Cottrell said shareholders would receive a 7.5 cents per share dividend payment for the six months ended December 31, 1996, the same amount paid in the second half of 1995/96.
""...current levels of trading enable the directors to anticipate that the company will be able to maintain the 7.5 cents rate for the 1997 interim dividend,"" Cottrell said.  
Boral cut its 1995/96 second half to 7.5 cents a share, from 10.5 cents a share, due to the 30 percent fall in net profit to A$205.69 million in the year to June 30, 1996.
Boral's total dividend for 1995/96 fell to 18 cents a share from 21 cents a year earlier.
The meeting was adjourned for two hours after Cottrell called a poll to amend Boral's articles of association giving Boral the authority to issue converting preference shares. Cottrell said 89.15 percent of the shareholders who voted approved the issue. Only 20 percent of shareholders voted.  
Managing director Tony Berg told reporters after the meeting that Boral would issue converting preference share for potential acquisitions, but neither a purchase or an issue was planned.
Cottrell said Boral was reviewing its European assets following poor financial performances from the operations there. ""There is a review of the assets at present, some assets have been sold off in the U.K., we are looking hard at those in mainland Europe, primarily Germany,"" Cottrell said.
However, after the meeting, referring to the European operations, Berg said: ""We are about to implement strategies that would result in a good return for shareholders.""  
Profits from Boral's European businesses fell 73.7 percent to A$7 million in 1995/96, while sales fell 13.9 percent to A$205 million.
Cottrell and Berg were grilled by shareholders over the group's overall financial performance and its timber logging and woodchipping activities and were faced by environmental protesters outside the hotel where Boral held its meeting.
Berg also said Boral was on target to deliver more than A$80 million in savings in the 1996/97 year and that Boral was ahead of budget for the first quarter with savings of over A$20 million being achieved.  -- Sydney newsroom 61-2 9373-1800
",23
"The recent surge in the Australian dollar and higher jet fuel prices are going to hurt exporters of fresh food in particular, according to Australian Federation of International Forwarders (AFIF) chief executive Brian Lovell.
""With the rise in the fuel price and the higher Australian dollar it is going to affect a lot of exporters,"" Lovell said.
""The hardest hit are going to be the perishible exports,"" Lovell said, referring to Australia's fresh food exporters to mainly to Asian countries.
Lovell said exporters, who had entered contracts before the recent freight rate hike, could now be finding they cannot meet their contract obligations due to the extra charge.
""This can really affect things as you might have signed the contract and then suddenly realised that you can't afford to move it,"" Lovell told Reuters in an interview.
""There are some people that won't be able to get out of a binding contract,"" Lovell said.
Lovell said many AFIF members were surprised by the freight rate rises by some local air carriers, due to the strength of the local dollar, which had given carriers greater buying power.
""They are buying fuel now more cheaply,"" Lowell said.
Qantas Airways Ltd has increased its jet fuel surcharge, while Ansett Airlines Ltd has kept its freight rates unchanged.
The Australian dollar has risen four percent to its current level of US$0.8000 over the past five months.
Lovell said that although airfreight volumes had been growing over recent years, there was now a move by exporters to transport perishable goods to Asia by fast ferry.
""I would say in the next 10 years we will see a lot more freight carried by fast ferries, as it is more economical to carry them by ferry than plane as fuel costs are lower.""
Lovell said some of the AFIF's 250 members were in dispute with some of the airports over the management of cargo terminals, but this had not impeded freight movement.
AFIF was formed in October following the merger of Australian Dederation of Air Freight Forwarders and the International Forwarders Association of Australia.
-- Sydney Newsroom 61-2 9373-1800
",23
"Australian government plans to toughen the rules for the rollout of optic fibre cable could make Optus Communications' cable rollout plans uneconomic, said Optus chief executive officer Zygmunt Switkowski.
""We looked at the technology and the economics of underground cabling and we can't make the business case work for us,"" Switkowski told Reuters, before addressing a luncheon at the Committee for Economic Development of Australia.
""It could certainly add hundreds of millions of dollars to our cost base,"" Switkowski said.  
Last week, the Australian government said Optus and Telstra Corp would need the approval of a local council before it could install cables in its jurisdiction.
Optus, through its 46.5 percent owned Optus Vision, is rolling out fibre optic cables overhead on mainly existing telephone poles to carry pay television and telephone services at a cost of around A$3.0 billion.
Switkowski said there was no overall figure on how much extra it would cost Optus for the underground cables.
""It can be three to six times more costly to roll out an underground cable than it is to roll out an aerial cable.""  
However, Switkowski said the government's decision had not affected the group's cable rollout programme.
Optus has targetted 2.3 million homes to be cabled by the end of 1996. ""Everything is going according to plan,"" he said.
Switkowski played down newspaper reports that the telecommunications group would take the government to court over its change in policy.
""I think the suggestion that the rules under which have established this corporation should change earlier than expected is an unsettling one,"" he said.
The new cable rollout rules start on July 1, 1997.  
This is the same day that Australia's telecommunications industry will be liberalised, allowing overseas telephone carriers to provide local telephony services.
Australian Communications Minister Richard Alston announced the cable rollout changes last week, following lobbying by some lcoal councils and back-benchers in his own conservative Liberal party who wanted the roll-out restricted or stopped.
Alston said cable operators would not be able to install overhead cables where there had previously been no overhead cables and would have to go underground when above-ground power cables in that street went underground.  
Several councils have taken Optus Vision to court, but the rollout has continued because it is permitted under the current telecommunications regime.
Switkowski said he could make no comment on Optus Communications planned sharemarket float, which is scheduled to list by the end of this year, but has been delayed by legal action between Optus Vision and Seven Network Ltd.
Optus Communications is 25 percent owned by Mayne Nickless Ltd, BellSouth Corp and Cable and Wireless Plc both have a 24.5 percent stake in the Sydney-based group.
The balance is owned by Australian institutions.  
-- Sydney newsroom 61-2 9373-1800
",23
"Australian airlines and tourist operators are worried about Australia's falling share of the growing number of Japanese taking overseas holidays, so much so that they have formed an action plan to halt the decline.
However, details of the action plan are secretly guided by the carriers, Qantas Airways Ltd and Ansett Airlines Ltd, as they don't want to be giving away their strategic plans to the opposition.
Ansett is jointly owned by News Corp Ltd and Air New Zealand Ltd.
Both Qantas and Ansett also face lower yields as they cut air fares on the Japan route to entice holidaymakers down-under.
""We have to arrest the decline as soon as we identify it, because it might be even worse next year and then we are in trouble,"" said Col Hughes, Qantas' group general manager Pacific and Japan.
Hughes said the decline in Japanese market share is serious for the A$14-billion Australian tourism industry.
""Our share of the Japanese market has fallen 0.5 of a percentage point over the past eight months, so our share of a growing market is falling and that is not good news to have a decline in a market share, because once you have a decline it could have further ramifications,"" Hughes told Reuters.
Hughes said Australia is losing its share of the Japanese tourist market to Europe and the United States, in particular Hawaii.
He added these markets have raised their promotion budgets to attract Japanese tourists, while Australia was cutting its marketing budget.
The Australian government plans to cut 25 percent of the budget for the industry's top body, the Australian Tourism Commission (ATC).
Fellow Australian airline Ansett Airlines Ltd sees raising capacity on the Japan route as a way to tourist numbers, said Ansett's general manager of international services, Craig Wallace.
""There has been a great expansion of capacity on the European route (from Japan),"" Wallace told Reuters.
""What I would like to see is an increase in our (Ansett) capacity, so we can fly daily to Japan, which would create more flexibility with tour operators and may stimulate demand.""
Ansett, which started its international operations in September 1994 with its inaugural flight to Osaka, has five flights a week to Japan's second largest city.
Aviation analysts said the entry of Ansett into the Japan market has put more pressure on Qantas' Japanese routes.
""Qantas is hurting as there is more competition on the Japanese route, with Ansett coming in and airfares going down, said Peter Harbison, managing director of aviation consultants Centre for Asia-Pacific Aviation.
Qantas said in August that results from its Japan routes had weakened in the six months to June 1996.
Revenue from the Japanese route fell to A$742.1 million in the year to June 30, 1996, compared with A$797.3 million a year earlier, but the route still generated the most revenue of Qantas' overseas routes. Qantas also flies to the UK and Europe, southeast Asia, northeast Asia and the U.S. and the Pacific.
However, the number of Japanese tourists coming to Australia is still projected to grow, albeit at a slower rate.
The Australian government's Tourism Forecasting Council predicts that 849,000 Japanese tourists will come to Australia in 1996, up from 783,000 in 1995, and this is expected to grow to 923,000 in 1997.
The number of tourists from the rest of Asia, excluding Japan, is forecast to grow to 1.32 million in 1996, from 1.12 million in 1995, and to grow further to 1.53 million in 1997.
""The market is still growing, but it's just not as fast as some people would like it,"" Harbison said.
-- Sydney Newsroom 61-2 9373-1800
",23
"Australian fast ferry and transport group Holyman Ltd plans to further expand operations in Europe before moving into the Asian market, managing director Christopher Butcher said in an interview.
""We currently have operations in North America and northern Europe and we can't see any reason why we can't start doing the same thing in the Mediterranean,"" Butcher told Reuters.
Butcher said Holyman was likely into expand into Asia in the future as the cost structure for operating fast ferries improved in some markets in the region.
""We could be seeing the cost structure changing in Asia, so we are likely to move into some markets in north Asia and south east Asia,"" Butcher said.
He said that as incomes rose in Asia the amounts charged for ferry services would rise, making it more economical for operators like Holyman to enter the market.
Holyman company secretary Simon Lennon said the company was also looking at fast ferry services from Darwin to Indonesia, but he did not expect a decision to be made for at least a year.
""It is one of a number of projects we are looking at in the region,"" he said. He said Holyman had looked at particular routes within China and Indonesia, but they did not fit within the company's plans. ""I would imagine in a few years we would have something up there (in Asia),"" Lennon said.
Holyman shares have had a lacklustre performance in its first year of listing, but since January this year the shares have more than doubled making the stock one of the strongest sharemarket performers over the past year.
The shares listed in April 1994 at A$2.00 and hit a high of A$6.00 on November 11 and are currently trading around A$5.06.
The Sydney-based group was floated on the local bourse in April 1994, as part of a spin-off from TNT Ltd, when the transport group was selling assets to trim its high debts.
""The stock really took some time to get off the ground,"" Butcher said.
""I think there has been a lot of hard work done over the past year to educate shareholders in what the company is doing and where the company is going as there was a perception out there that we were a mismash of businesses,"" Butcher said.
Holyman's main activities are its fast ferry services in Australia, across the North Sea between Britain and Europe, New York and in Denmark. It also operates a gas pipeline, bulk commodity handling and freight forwarding businesses.
""There are a number of different projects and businesses, we found there are quite a lot of common threads going through,"" Butcher said. ""I think these operations all have their own place and there are opportunties to expand these further,"" he said.
Butcher was with TNT for 25 years before taking charge of Holyman when it split from TNT.
Butcher said the group had no plans to raise capital to fund the expected expansion, as the company was well financed.
In October, Holyman bought a fast passenger ferry for A$43 million. He said there was no plans for any immediate purchases of further ferries following the latest purchase.
Butcher said he could not comment on its trading performance or earnings forecasts.
Holyman reported a net profit of A$16.09 million in calendar 1995. The group posted a net profit of A$15.03 million in the six months to June 30, 1996, up from A$6.79 million earlier.
-- Sydney Newsroom 61-2 9373-1800
",23
"The international partners in Australia's largest gas project said on Thursday they plan to spend A$6.0 billion (US$4.7 billion) to double production, making it Australia's largest single resources investment.
Australian oil and gas producer Woodside Petroleum Ltd said the partners in the North-West Shelf gas project offshore Western Australia planned to double production capacity to 14.5 million tonnes of liquefied natural gas (LNG) a year.
The decision by the North West Shelf partners was unlikely to boost the much-touted prospect of a co-operative development with the nearby Gorgon gas field, which has the capacity to produce six million tonnes of LNG a year, analysts said.
""The North West shelf partners have their own plans for expansion, but if the Gorgon partners have a good proposal that we can work together then we will certainly have a look at it,"" said Woodside's corporate affairs manager Geoff Wedgwood.
""But to date we have not seen a plan from them that fits within our plans,"" Wedgwood told Reuters.
Last month an executive of Anglo-Dutch oil giant Royal Dutch/Shell Group, a partner in both projects, raised hopes that the two projects could be developed together and questioned the expansion of the North West Shelf on a stand-alone basis.
Cor Herkstroter, chairman of Royal Dutch/Shell Group's committee of managing directors, then told Reuters in an interview that expansion of the North West Shelf could not be justified without integrating it with another project and that the development of both projects was a viable option.
Royal Dutch/Shell also owns 34 percent of Woodside.
Woodside, the North West Shelf project operator, said the expansion plan was submitted to the project's eight Japanese power and gas utility customers at a meeting in Osaka this week.
LNG is mainly used for fuelling power stations.
""It is a significant step for the expansion of the North West Shelf project,"" Wedgwood said. The partners have spent A$12 billion on the project since it started in the early 1980s.
Woodside is an equal 16.66 percent shareholder in the project along with some of the world's major oil producers.
The Osaka meeting followed indications from buyers in June of their interest in an expansion of the project, said Woodside.
However, work on the expansion would not start for another two years at least, Wedgwood said.
""The next thing that is likely to be a letter of intent in late 1997 for the development of this expansion proposal,"" Wedgwood said. He said between now and then there were lots of talks on technical issues surrounding the expansion proposal.
""Following that, would be a purchase agreement between the North West shelf partners and the Japanese buyers, which would be around late 1998,"" Wedgwood said.
Only after this agreement would work start on the expansion.
The other partners in the North West Shelf are Australia's The Broken Hill Pty Co Ltd, British Petroleum Plc, Chevron Inc of the United States, and Japanese groups Mitsui & Co Ltd and Mitsubishi Corp.
Royal Dutch/Shell and Chevron are also partners in Gorgon along with U.S. oil giants Texaco Inc and Mobil Corp.
(A$1 = $0.79)
",23
"Corporate Australia is likely to continue its thirst for takeovers in 1997 with banks, media and resources tipped to feature prominently.
Brokers estimate there were about A$8.5 billion ($6.8 billion) worth of takeovers and share buy-backs in 1996, up from A$5.9 billion in 1995 and A$2.0 billion in 1994. Takeovers and share buy-backs are both seen as ways to boost growth in earnings per share.
The biggest deal this year was the A$2.0 billion agreed takeover of freight transporter TNT Ltd by Dutch postal and telecoms group Koninklijke PTT Nederland NV.
""Almost across the board there is rationalisation and international interest in our industries,"" said Chris Mackay, executive director at broker SBC Warburg.
SLOWING AUSTRALIAN ECONOMY SPURS RATIONALISATION
Analysts said Australia's low inflation and low economic growth prospects also made conditions ripe for takeovers.
""With low levels of inflation, companies have difficulty pushing through cost increases, so they have got to look for efficencies in order to increase profitability and to do that, some companies acquire others,"" said Merv Peacock, the Australian Mutual Provident Society's head of marketable securities.
Profits have been falling across the board for the past 18 months, with industrials hit by the slowing economy and resource companies severely affected by lower commodity prices.
GOLD TO SHINE IN RESOURCE TAKEOVER ACTIVITY
""Gold is an area where we could see a lot of takeover activity,"" said Craig Drummond from leading broker J.B. Were & Son. ""The gold valuations have fallen a long way this year,"" he told Reuters.
The Australian gold index is currently 22 percent down from its 1996 high in February, while the broader market has risen six percent over the same period.
""The scope still exists for both domestic takeovers and in particular foreign takeovers of Australian gold assets,"" Drummond said.
The Australian gold sector was one of the most active sectors during 1996. The largest takeover in this group was the A$3.0 billion merger among the Normandy Mining Ltd group of companies.
Foreign gold miners were also keen to snare Australian gold producers in 1996, a trend which analysts say will continue next year.
Last month, Canadian gold mining giant Placer Dome Inc unveiled a US$600 million plan to buy the rest of its local offshoot Placer Pacific Ltd and Papua New Guinea Highlands Gold Ltd.
Australian gold analysts said other North American gold miners keen on expanding their presence in the region are Battle Mountain Inc and Coeur d'Alene Corp.
However the rest of the resource sector is unlikely to see much takeover activity in 1997.
""There is not a lot left in the oil sector and in the base metals sector there are few options so it's primarily the gold sector where there is going to be more activity,"" Drummond said.
Australian oil assets were vigorously snapped up in 1996 by overseas predators. The biggest deal was the Mobil Corp's A$1.78 billion purchase of Ampolex Ltd.
INDUSTRY INQUIRIES MAY SPARK MORE TAKEOVERS
The Australian government is holding inquiries into the media and banking industries, with analysts tipping banking as the more probable of the two sectors to see merger activity.
The Wallis inquiry into Australia's financial system, which is looking at the possibility of a relaxation of rules that stop big bank mergers and takeovers by foreign banks, is due to hand down its recommendations in March 1997.
There have already been several regional bank takeovers in 1996, but the outcome of the largest deal -- the A$2.65 billion friendly bid by St George Bank Ltd for fellow Sydney-based Advance Bank Australia Ltd -- will be known early next year.
The Liberal-National government, elected in March, has ordered a review of media ownership laws which currently limits cross ownership of newspapers and television.
But the review is not examining foreign ownership rules, which could limit any expansion plans Rupert Murdoch's News Corp Ltd has pencilled in for Australia. Upmarket newspaper publisher John Fairfax Holdings Ltd remains the most likely target in this sector -- with Kerry Packer already holding a sizeable stake.
""In relation to media and banks, subject to the conclusion of the respective inquiries, there could well be more activity in those two sectors,"" SBC Warburg's Mackay said.
But some analysts said any liberalisation of the banking sector could find opposition from the anti-monopolies watchdog -- the Australian Competition and Consumer Commission (ACCC).
($1 = 0.7960)
",23
"Canadian gold mining giant Placer Dome Inc on Thursday announced plans to expand its presence in the Asia-Pacific region through takeover offers worth a total of US$600 million for two Australian-listed gold miners.
Placer Dome launched takeover offers for Papua New Guinea (PNG) miner Highlands Gold Ltd and a mop-up offer for its Australian offshoot Placer Pacific Ltd.
If Placer Dome succeeds with both bids it will have control of PNG's biggest gold mine. PNG's Porgera mine is expected to produce over 940,000 ounces of gold in calendar 1996.
""It (the takeover) recognises the prospectivity that we see of the Asia-Pacific region and our desire to take full advantage of any opportunities that exist here,"" said Placer Dome's chief executive officer John Willson.
However, there were no plans to acquire more assets in the Asia-Pacific region, he said. However, Placer Pacific has stepped up its exploration activity in Asia in recent years with programmes in China, Indonesia and the Philippines.
The takeover bids were well received by investors on the Australian share market, with both Highlands and Placer Pacific shares soaring in active trade on the bid announcements, which were made before Thursday's market open.
However, the bids were not so welcomed by Highlands, which said Placer Dome's offer of 75 cents (US$0.61) for each Highlands shares was inadequate. However, Placer Pacific was more coy, it advised shareholders to take no action on the bid.
The Sydney-based Placer Pacific was partly floated in 1986 by its parent, which in turn now plans to buy-out the rest of the 24.6 percent it does not own through a share swap of one Placer Dome share for every 15 Placer Pacific shares.
Placer Dome, a Vancouver-based miner and one of the world's top three gold producers, plans to finance its A$425 million Highlands purchase through the issue of prefered shares.
""When we are done with this acquisition assuming it goes ahead, we will have debt of about US$1.0 billion and equity of US$1.7 billion,"" Willson said
""We will then refinance the Highlands gold purchase through a preferred share issue and we look at asset sales to bring our equity close to US$2.0 billion and with debt below $1.0 billion, we will be well within our range on a debt-to-equity basis.""
Highlands has stakes in two potentially large mining projects in PNG. The Nena/Frieda River copper/gold project and the Ramu nickel-cobalt deposit, both projects are estimated to cost a total of US$1.5 billion to develop.
In regards to Highlands non-gold assets, Willson said: ""We don't know much about them or what we are going to do with them, to develop them, sell them, or swap them.""
Australian gold analysts said the Canadian gold miner was likely to succeed with its two bids. ""I think they will walk it in,"" said David Kauler, gold mining analyst at ANZ Securities.
Analysts said the offers are probably opportunistic, given that Placer Pacific and Highlands share prices were both earlier this year above Placer Dome's offer prices. But both have fallen with the gold price, which is currently around 2-1/2 year lows.
Highlands shares closed 17 cents or 29 percent higher at 75 cents, Placer Dome has amassed a 33 percent stake in Highlands over the past two days. Placer Pacific shares closed 42 cents or 29.37 percent higher at A$1.85 with 5.5 million shares traded.
(A$1=US$0.80)
",23
"Australian regional banks St George Bank Ltd and Advance Bank Australia Ltd on Monday unveiled a merger plan to create the nation's fifth largest bank with a market value of A$4.5 billion (US$3.55 billion).
""We have that golden opportunity, we are not going to miss it,"" St George Bank managing director Jim Sweeney told reporters at a joint news conference. This is the fifth merger St George has tried with different banks in the past two years.
""We are going to build a special new different bank here that will take advantage of all of things that many of us always want to do,"" said Sweeney, who will head the enlarged group.
Advance Bank shareholders would be offered a combination of A$2.10 in cash, a 20 cent special cash dividend and new St George shares up to a value of A$5.00 per Advance Bank share.
The total value of the offer was A$7.30 per Advance share, which values it at A$2.65 billion. St George would fund the offer by a mixture of cash and scrip and a new capital raising.
The friendly merger of the two Sydney-based banks would create a bank with assets of A$40 billion and make it one of Australia's top 25 listed companies.
""The Australian banking industry is currently going through a very dramatic stage, we cannot be sure what will come out the other end, but we believe this will allow us to make the most of opportunities that the market change present,"" Sweeney said.
Advance bank shares soared on the merger announcement. It closed 57 cents or nine percent higher at A$6.85, a record close. St George shares ended 40 cents or 4.5 percent lower at A$8.55, after hitting a low of A$8.30 during the day.
Australian banking analysts said that the offer was generous to Advance shareholders because it was well above prices paid in recent local banking takeovers.
Any rival bidders might be scared off entering the fray by a current official inquiry into the banking industry and an agreement, part of the merger deal, for Advance to pay A$100 million to St George if it is taken over by a third party.
""I think that would make it unattractive for somebody else to come in and make a bid,"" said Linda Lyon, banking analyst at brokers BNP Equities.
St George has been desperately seeking a friendly merger over the past two years to avoid being swallowed up itself.
The stock market viewed Australia's largest banking group, National Australia Bank Ltd (NAB), as the most likely predator.
NAB holds 6.8 percent of St George although it has said it had no takeover plans for the Sydney bank.
However, in June it voted against a plan for St George to merge with Queensland based Metway Bank Ltd.
NAB declined to comment on Monday's announcement.
St George's bid for Metway was also was scuttled by the Queensland government, which trumped St George's offer with a higher bid through its wholly-owned financial services group Suncorp and the Queensland Industry and Development Corp (QIDC).
Last year, St George was also blocked by Westpac Banking Corp, one of Australia's top banks, in a takeover bid for Perth-based Challenge Bank Ltd after Westpac made a higher offer.
St George was also in talks last year to merge with the Bank of Western Australia Ltd before the Bank of Scotland Plc took control of the Perth-based bank, and with the Bank of South Australia, which was taken over by Advance in early 1995.
A$1 = $US0.79
",23
"The aggressive cost cutting programmes planned by Australia's two major airlines Qantas Airways Ltd and Ansett Airlines Ltd can be achieved without affecting services, analysts said.
Both Qantas and Ansett face pressure on profits because of the stronger Australia dollar, higher fuel prices, a soft domestic market and competition in the international market.  
""Australian airlines are seen as high cost operators compared with the rest of world,"" said Peter Harbison, managing director of the Centre for Asia Pacific Aviation consultancy service.
""So I suppose there is scope there to reduce the cost base,"" Harbison told Reuters.
Qantas, which is 25 percent owned by British Airways Plc, announced at its annual meeting last month that it will increase its cost cutting programme by about A$100 million for the 1996/97 year on the previous target of A$330 million.  
Ansett, which is a joint venture between News Corp Ltd and Air New Zealand Ltd, said three months earlier that it plans to cut A$150 million from its annual cost base of A$3 billion.
""They will have to reduce their costs along with every other airline in the world and that will continue to happen for some time,"" Harbison said.
Investors are focusing on Qantas, which is cutting costs more aggressively so that it can meet profit estimates.
Qantas aims to cut costs across the board but has not revealed specific areas.  
Analysts said Qantas will have plenty of scope to cut costs, using its alliance with BA to share facilities.
""They have got a lot of inefficiences, they can outsource some of their engineering and maintenance,"" said Greg Ward, aviation analyst at First Pacific Stockbroking.
Analysts said the Australian flag carrier will also cut costs in areas where it is not so noticeable to customers, such as in the accounts, and marketing and sales departments.  
""It's the tail that Qantas will hack into, Qantas will not hack into the sharp end,"" said David Turner, analyst at Shaw Stockbroking, referring to accounts and sales areas as the tail, with the sharp end being flight services.
He said Qantas is very competitive with other world airlines in terms of pilot performance and aircraft ultilisation, so there is little change seen in those areas.
Analysts said Qantas has to focus on cutting costs in order to grow profits and release funds for the expansion of services and purchase of new aircraft.  
""They haven't got the capacity to go out and buy planes and fill them up and fly hundreds more routes so the focus is on improving their balance sheet and generating more profits to do that,"" one Melbourne-based aviation analyst said.
However, analysts said both Qantas and Ansett run a risk in cutting costs as it may affect staff morale, which in turn affects customer service and in turn customer loyality.
-- Sydney newsroom 61-2 9373-1800
",23
"Building materials group James Hardie Industries Ltd reported on Friday a first half net profit in line with expectations, but comments on the second half by the group is likely to see full year earnings forecasts trimmed.
James Hardie, 27.23 owned by New Zealand's Brierley Investments Ltd, reported a 12.1 percent fall in net profit before abnormals to A$27.6 million for the six months ended September 30, 1996, in line with analysts' forecasts.
But managing director Keith Barton said he expected the second half result to be significantly down on the first half.  
Analysts at the company's results briefing said Barton's comments on the second half meant that estimates for pre-abnormal net profit for the 1996/97 year would be trimmed back to around A$50 million from A$53-A$54 million.
They welcomed the company's statement that outlook for its U.S. businesses were very positive for the 1996/97 second half and into 1997/98.
""In contrast, the outlook for Australian operations remains bleak in the short term,"" it said.  
""In view of the immediate prospects, the company maintains its previously stated position that profit for the full year will reflect a marked deterioration on last year's results,"" the company said.
""Growth prospects for the following year remain very positive,"" James Hardie said.
Keith Barton said the first half downturn reflected a fall in earnings from Australian building products due to lower housing starts.  
""Reduced activity in the housing sector had an adverse impact on both volumes and margins for the Australian building boards, windows and bathroom products businesses,"" he said.
Continued strong performances from the fibre cement and gypsum businesses in the United States as well as solid performances from New Zealand had however helped the result.
""U.S. fibre cement production sold out during the six months to September and we continue to ship significant volumes of product from Australian and New Zealand plants to satisfy demand,"" Barton said.  
Hardie had just increased U.S. fibre cement production capacity by more than 40 percent to 480 million square feet through the commissioning of a third line at Plant City in Florida.
However analysts said the market would not be worrying too much about 1996/97 results, which are widely expected to be down on the A$58.4 million pre-abnormal net profit reported in the year to March 31, 1996.
Barton said he expected a rebound in profit in the year to March 31, 1998, following an expected fall in profit in the 1996/97 year.  
""I expect it to be higher, but it is too early to say if it will be significantly higher,"" Barton later told reporters.
Analysts forecast James Hardie to have pre-abnormal net profit earnings of about A$90 million in 1997/98.
Barton also revealed that the Sydney-based group was conducting a study of the European fibre cement market, but had made no decison to enter any European countries yet.
""We are going to have a look, it is a large market,"" Barton said. ""It is early days, we are just having a look to see if we can understand the market.""  
Sales for the first half rose 2.7 percent to A$913.9 million, while the dividend remained unchanged at 6.5 cents per share.
At 1.10 p.m. (0210 GMT), James Hardie shares were six cents lower at A$3.40 in a weaker Australian sharemarket that has been hit by a slump in the local bond market.
-- Sydney newsroom 61-2 9373-1800
",23
"Canadian media baron Conrad Black said on Wednesday he wanted to increase his stake in Australia's oldest newspaper group, John Fairfax Holdings Ltd, to 50 percent from 25, a day after meeting the prime minister.
However, Black repeated that he would sell out of Fairfax if there was no easing in Australia's current media ownership rules, which he described as ""anachronistic"".
Black said that although he could not rule out selling his stake to Kerry Packer, the suggested merger plan by Packer between his media empire and Fairfax was unlikely to suceed.  
Black told shareholders at Fairfax's annual meeting that he had said to John Howard in their first meeting since Howard became prime minister that he would like to raise his stake, which is held through Hollinger International Inc.
Black was asked by reporters after Fairfax's meeting just how much he would want to increase his stake to, if allowed. ""Fifty percent,"" he said.
The media baron added that U.S. accounting rules effectively punished companies which had higher than 50 percent stakes in their associates. However, Black repeated that he would sell his Fairfax stake if he was not allowed to raise it further.  
""If the road is truly blocked, then obviously we are going,"" Black said. He added that Hollinger would not lodge any application for a higher stake until the government ended its study into media ownership and presented new ownership rules.
Under Australia's current media ownership rules, foreigners are prevented from owning more than 25 percent of a newspaper group or 15 percent of a television group. They also prevent a newspaper group owner from owning more than 15 percent of a television station in the same city and vice-versa. ""These thing as they are now are very anachronistic,"" Black told reporters.  
In August, Packer's main media group, Publishing and Broadcasting Ltd (PBL) proposed a merger between PBL and Fairfax only if media ownership rules were liberalised. PBL owns top-rating Nine Network and 15 percent of Fairfax.
Black said PBL's merger proposal was unlikely to succeed while he (Black) was a shareholder. ""He (Packer) would have quite a time getting that one through,"" Black said.
""I don't ever rule out anything, but I think that's fairly improbable. If Mr Packer wants to control Fairfax he's going to have to it the old-fashioned way and pay for it."" Rupert Murdoch's News Corp Ltd owns five percent of Fairfax.  
""I know he's averse to doing that,"" Black said. He added he was not particularly interested in any stock swap deal with Packer which would leave him with a PBL stake.
Black said John Fairfax's profits were starting to improve.
Fairfax reported a 41 percent fall in net profit to A$87.4 million in the year to June 30, 1996.
""It's starting to look a little better now. Profits are affected by increased newsprint, they are affected by increased depreciation because of the plant at Chullora, cash flow rates are starting to improve a little bit,"" Black said. Fairfax spent A$330 million on a new printing plant at Chullora in Sydney.  
Fairfax chairman Sir Laurence Street told shareholders the slower Australian economy coupled with higher newsprint prices would impact on the group's final results for the 1996/97 year.
""Coupled with the state of the economy, Fairfax, in common with the whole newspaper industry, has had to face high newsprint prices and this, too, will impact upon our final results in the current year,"" Street said.
At 3.45 p.m. (0435 GMT) Fairfax shares were two cents higher at A$2.69, giving it a market capitalisation of A$2.04 billion.
-- Sydney Newsroom 61-2 9373-1800
",23
"Rupert Murdoch's global media group, The News Corp Ltd, on Tuesday reported an 8.1 percent fall in net profit for the first quarter of 1996/97, in stark contrast to analysts' forecasts of a healthy rise.
But analysts said Murdoch's forecast last month at News Corp's annual meeting that the group would achieve a profit lift of 20 percent for the year to June 30, 1997 was still possible.  
News Corp reported net profits of A$283 million for the three months ended September 30, down from A$308 million a year earlier. News said the weaker profit was a result of poorer returns in U.S. TV, Australian newspapers and book publishing.
Analysts had forecast net profit before abnormal items would be around A$320-330 million, up around 15 percent.
Net profit before abnormals came in at A$285 million.
""This is not as people were expecting type of result. It was a very flat result,"" one Sydney-based media analyst said.  
News Corp could still report a 20 percent rise in net profits for the 1996/97 year as it was only the U.S. television business that was below forecast, the analyst said.
The analyst said he would likely cut his full year forecasts for News Corp from the current A$1.545 billion (excluding abnormals and before preference dividends). ""I can see myself shaving that back to about the A$1,500 (million) mark,"" he said.
However, asked if News Corp could meet Murdoch's forecasts, the analyst replied: ""I think so, because the rest of the result was perfectly in line with what we were going for, so they will have to work hard and if things go right for them they can.""  
News Corp said its profit was mainly bolstered by the worldwide box office success of the science fiction movie Independence Day and its British newspapers and book publishing. Independence Day has grossed more than US$670 million worldwide, making it the third highest-grossing film in box office history.
British newspaper operations enjoyed strong growth with an 18-percent gain in operating profits in the three months to September, News Corp said. The Sun, The Times and The Sunday Times newspapers all posted gains in both advertising and circulation revenues in the first quarter.  
""Additionally, the group has benefitted from reduced newsprint costs,"" the company said.
""Offsetting these gains were weaker results in U.S. television, Australian newspapers and book publishing, which lacked results from the educational division which was sold in March 1996,"" it said.
News also said continued losses for its Asian satellite broadcaster, STAR TV, were in line with expectations.
At 1.40 p.m. (0240 GMT), News Corp shares were 16 cents or 2.24 percent lower at A$6.97 with just over 2.30 million shares traded, wiping over A$300 million off its market capitalisation.  
""It seems it's just a knee-jerk reaction to the first quarter, which looks like it was A$40 million below what the market was looking for,"" a Sydney broker said.
The analyst said the fall in Australian dollar terms also reflected the stronger local currency against the U.S. dollar as about 75 percent of News Corp's revenue is in U.S. dollars.
In U.S. dollar terms, News Corp operating income was seven percent higher in the first quarter.
The film, television, publishing and newspaper conglomerate reported a six percent fall in pre-abnormals net profit to A$1.26 million for the year to June 30, 1996.  
This is seen rising to around A$1.59 billion in 1996/97 according to the Barcep survey of analysts by BZW Australia.
-- Sydney Newsroom 61-2 9373-1813
",23
"Australia's second largest bank Westpac Banking Group renewed its interest in Asia on Wednesday through an alliance with British-based Standard Chartered Bank, 3-1/2 years after its sold a swag of its Asian units.
The move signals Westpac is ready to expand in Asia again after largely withdrawing from the region to focus on Australia and New Zealand during the last Australian recession.
Under the alliance Westpac and Standard Chartered would share banking services for medium-to-large scale corporate customers in their respective dominant markets of Australia and New Zealand and Asia.
Westpac chief executive Bob Joss said in a statement that the initiative was of major importance to Westpac.
""It is a good strategic fit for our future growth,"" he said. Standard Chartered group chief executive Malcolm Williamson said his bank was committed to ""ensuring this new relationship with Westpac is of significant long-term benefit to both companies"".
The venture would focus primarily on Singapore, Hong Kong, Indonesia, Thailand and Malaysia, before expanding into Vietnam and China in about six months, said David Morgan, group executive of Westpac's Institutional and International Banking.
""Initially the main purpose of this relationship is to provide select Asian banking services to Westpac's medium to large customers -- including cash management services, local Asian currency lending, local transaction facilities and trade finance facilities,"" the banks said in a joint statement.
The banks expect quick success from the alliance.
""We expect it to be a fairly rapidly growing revenue stream,"" Morgan told Reuters.
Westpac reported a A$16 million (US$12.8 million) profit in the year to September 30, 1996 from its Asian operations compared with A$10 million in 1994/95.
But, Morgan said he could not say how much revenue the alliance would produce in its first year of business or how much Westpac had invested in the venture, which started on Wednesday.
""We have made a substantial investment already, but it is going to be a continuing investment as we expand our capabilities across Asia,"" Morgan said.
The move was a cheap way of getting into Asia by Westpac, banking analysts said. ""It gives them access to markets in a fairly cost effective way,"" said Graham Maloney, banking analyst at brokers Macquarie Equities. ""It's a good thing. It gives them exposure to an area that is very fast growing.""
Westpac has banking licences is some Asian countries, but its activities are limited, Westpac's Morgan said.
Traders welcomed news of the alliance pushing Westpac shares up two cents to A$7.36, while the overall market was lower.
The link with Westpac follows Standard Chartered's Asian pact formed with the U.S. First Chicago NBD Corp last week.
""They (Standard Chartered) are obviously looking around the region for alliances,"" one Melbourne-based analyst said.
Westpac's alliance with Standard Chartered also comes ahead of an inquiry into Australia's finance and banking industry, which could see further deregulation and some mega-mergers.
The inquiry's final report is due next March.
Last month, speculation mounted that Standard Chartered was looking at a merger with another Australian bank, the Australia and New Zealand Banking Group (ANZ), but this was denied by Melbourne-based ANZ. (AUD=US$0.80)
",23
"Corporate Australia is likely to continue its thirst for takeovers in 1997 with banks, media and resources tipped to feature prominently.
Brokers estimate there were about A$8.5 billion ($6.8 billion) worth of takeovers and share buy-backs in 1996, up from A$5.9 billion in 1995 and A$2.0 billion in 1994. Takeovers and share buy-backs are both seen as ways to boost growth in earnings per share.
The biggest deal this year was the A$2.0 billion agreed takeover of freight transporter TNT Ltd by Dutch postal and telecoms group Koninklijke PTT Nederland NV.
""Almost across the board there is rationalisation and international interest in our industries,"" said Chris Mackay, executive director at broker SBC Warburg.
SLOWING AUSTRALIAN ECONOMY SPURS RATIONALISATION
Analysts said Australia's low inflation and low economic growth prospects also made conditions ripe for takeovers.
""With low levels of inflation, companies have difficulty pushing through cost increases, so they have got to look for efficencies in order to increase profitability and to do that, some companies acquire others,"" said Merv Peacock, the Australian Mutual Provident Society's head of marketable securities.
Profits have been falling across the board for the past 18 months, with industrials hit by the slowing economy and resource companies severely affected by lower commodity prices.
GOLD TO SHINE IN RESOURCE TAKEOVER ACTIVITY
""Gold is an area where we could see a lot of takeover activity,"" said Craig Drummond from leading broker J.B. Were & Son. ""The gold valuations have fallen a long way this year,"" he told Reuters.
The Australian gold index is currently 22 percent down from its 1996 high in February, while the broader market has risen six percent over the same period.
""The scope still exists for both domestic takeovers and in particular foreign takeovers of Australian gold assets,"" Drummond said.
The Australian gold sector was one of the most active sectors during 1996. The largest takeover in this group was the A$3.0 billion merger among the Normandy Mining Ltd group of companies.
Foreign gold miners were also keen to snare Australian gold producers in 1996, a trend which analysts say will continue next year.
Last month, Canadian gold mining giant Placer Dome Inc unveiled a US$600 million plan to buy the rest of its local offshoot Placer Pacific Ltd and Papua New Guinea Highlands Gold Ltd.
Australian gold analysts said other North American gold miners keen on expanding their presence in the region are Battle Mountain Inc and Coeur d'Alene Corp.
INDUSTRY INQUIRIES MAY SPARK MORE TAKEOVERS
The Australian government is holding inquiries into the media and banking industries, with analysts tipping banking as the more probable of the two sectors to see merger activity.
The Wallis inquiry into Australia's financial system, which is looking at the possibility of a relaxation of rules that stop big bank mergers and takeovers by foreign banks, is due to hand down its recommendations in March 1997.
There have already been several regional bank takeovers in 1996, but the outcome of the largest deal -- the A$2.65 billion friendly bid by St George Bank Ltd for fellow Sydney-based Advance Bank Australia Ltd -- will be known early next year.
The Liberal-National government, elected in March, has ordered a review of media ownership laws which currently limits cross ownership of newspapers and television.
But the review is not examining foreign ownership rules, which could limit any expansion plans Rupert Murdoch's News Corp Ltd has pencilled in for Australia. Upmarket newspaper publisher John Fairfax Holdings Ltd remains the most likely target in this sector -- with Kerry Packer already holding a sizeable stake.
""In relation to media and banks, subject to the conclusion of the respective inquiries, there could well be more activity in those two sectors,"" SBC Warburg's Mackay said. ($1 = 0.7960)
",23
"The News Corp Ltd is expected to meet the 20 percent rise in net profit before abnormals for the year to June 30, 1997, predicted by its chairman Rupert Murdoch last month, Australian media analysts said on Tuesday.
""They should do it easily,"" one Melbourne-based analyst told Reuters after taking part in an analysts' conference call with News Corp following the release of its first quarter results.
News Corp earlier reported a lower than expected net profit before abnormals of A$285 million for the three months to September 30, slightly up from A$284 million a year earlier.  
Analysts had forecast net profit before abnormal items would be around A$320-330 million, up around 15 percent.
They said News Corp's results in Australian currency were hit by poor U.S. television results and a stronger local dollar.
In U.S. dollar terms, News Corp operating income was seven percent higher in the first quarter. The analysts said Murdoch's 20 percent profit lift forecast was in U.S. dollar terms.
""They said that growth is still on for in excess of 20 percent and that is in U.S. dollar terms,"" another Melbourne based analyst said. She said News' Fox Broadcasting U.S. TV network results should start to improve in the second quarter.  
""I think you will find that there is more disappointment from the Australian viewpoint than the U.S. viewpoint,"" the second Melbourne analyst said.
""I imagine there won't be too much of a downgrade with respect to people's full year forecasts,"" she said.
""Basically, what News has said is 'the first quarter was a bit disappointing but you are still going to get your growth for the year',"" she said after taking part in the conference call.
The film, television, publishing and newspaper conglomerate reported a six percent fall in pre-abnormals net profit to A$1.26 million for the year to June 30, 1996.  
News Corp's net profit before abnormals and preference dividends is seen rising to around A$1.59 billion in 1996/97 according to the Barcep survey of analysts by BZW Australia.
The second Melbourne analyst said the second quarter is traditionally a stronger quarter for Fox Broadcasting and is likely to get a boost from the baseball World Series finals.
""There is definitely room for recovery from the one-off things in this quarter -- if they don't then they have got problems,"" she said.
""The second quarter is by far their biggest quarter and you wouldn't want to see any problems,"" she said.  
Analysts said the first quarter is also likely to be the quarter most affected by the stronger Australian dollar, which had averaged US$0.78 in the 1996/97 first quarter, compared with US$0.73 a year earlier.
They said that in the rest of 1995/96, the Australian dollar was mainly around US$0.75. The local unit is currently worth about US$0.78. News has 75 percent of its sales in U.S. dollars. The first Melbourne analyst said News Corp had leverage to earnings growth in its publishing related businesses, (newspapers, book publishing and magazines) which account for 55 percent of earnings, following the fall in newsprint prices.  
The first Melbourne analyst said he is forecasting News Corp to report a net profit before abnormals of A$1.63 billion in 1996/97.
However, one Sydney analyst said he would be likely to cut his full year forecast from A$1.545 billion, excluding abnormals and before preference dividends. ""I can see myself shaving that back to about the A$1,500 (million) mark,"" he said.
At 3.20 p.m. (0430 GMT), News Corp shares were 18 cents or 2.52 percent lower at A$6.95 with just over 3.96 million shares traded, wiping over A$300 million off its market capitalisation.
-- Sydney newsroom 61-2 9373-1800
",23
"British Telecom unveiled the largest transatlantic deal in history on Sunday, linking up with America's MCI Corp in a $20 billion merger that catapults it into second place in the world's international telecoms market.
The deal with MCI -- the number two U.S. long-distance phone company after U.S. telecoms giant AT & T Corp -- creates a $54 billion group to be called Concert Plc, which will have 43 million business and residential customers in 70 countries.  
""Tomorrow begins a new era for all of us as we go forward in Concert and harmony,"" Gerald Taylor, MCI's president and chief operating officer told a news conference as journalists were plied with champagne.
In an attempt to keep one step ahead of rivals as world telecom markets are liberalised, BT is taking on a partner with a powerful position in the world's biggest telecoms market, generating about 40 percent of the world's long-distance calls.  
Under the deal, which has yet to win regulatory approval on both sides of the Atlantic, MCI shareholders would receive up to 2.3 billion pounds cash and new Concert American Depositary Shares. For each MCI share, investors will get 5.4 new BT shares and $6.0 cash, valuing MCI shares in the mid $30 each.
BT is also paying its 2.4 million shareholders a special dividend bonanza of 2.2 billion pounds ($3.6 billion), or 35p per share, which is not dependent on any completed merger.
The company also said it would ask shareholders to approve plans for its first ever share buy-back at an extraordinary meeting to approve the MCI deal.  
BT, whose motto ""It's good to talk"" appears to have paid off since alliance talks failed with British rival Cable and Wireless six months ago, already owns 20 percent of MCI.
Sir Peter Bonfield, BT's chief executive, denied that the deal with MCI was the second best choice for BT, which has been keen to get access to the world's fastest growing telecoms market -- Asia -- via Cable and Wireless' 57.5 percent stake in highly profitable Hong Kong Telecommunications.
""It's not second best, it's first best,"" he told the news conference.  
BT already has a joint venture with MCI called Concert, which provides a whole range of communications services to customers in more than 50 nations. MCI also carries 40 percent of the worldwide traffic on the Internet.
""The merger combines the substantial financial resources and global position of BT with the growth momentum and market expertise of MCI, known for its success in the competitive U.S. long distance market,"" BT said in a statement.  
The new telecoms giant, which will have annual cash flow of about 7.5 billion pounds, will be incorporated in Britain with headquarters in London and Washington and operate under the BT and MCI brand names in Britain and America.
BT expects the merger, after an initial five percent earnings dilution, to yield savings from combining overlapping services of 1.5 billion pounds ($2.46 billion) over the first five years and 500 million pounds pre-tax annually after that.
BT also forecast dividends of 19.85 pence per share for the year to March 31, 1997 -- a rise of six percent over last year -- excluding the 35p per share special dividend.  
BT, which will release full year results on November 14, has declared a half year dividend of 7.90 pence payable in November, six percent more than in the same period last year.
The deal is believed to be the second largest ever involving a U.S. company -- topped only by the 1989 buyout of RJR Nabisco by Kohlberg Kravis Roberts and Co.
Analysts said a combined company would be a good fit in the ultra-competitive U.S. long-distance phone industry, where MCI's major competitors are AT&T Corp and Sprint.
Current market leader AT&T, which would be the hardest hit by a financially muscular new enlarged rival, said on Friday it was confident any MCI/BT deal would receive proper scrutiny by the U.S. government. ($1=.6096 Pound)
",24
"British Telecommunications (BT) on Friday played down top level talks with Japanese telecoms giant Nippon Telegraph and Telephone Corp but analysts refused to rule out that the companies were hatching a deal.
Since the talks were announced on Thursday, speculation has swept the market that BT, which along with its American partner MCI Communications has been openly courting NTT, might be on the brink of a link-up.
But a BT spokesman told Reuters: ""That meeting was of no particular significance. We have regular contacts at that level and will continue to do so with NTT and others.""
While BT is playing its cards close to its chest, some analysts speculated that the company, keen to get a foothold in the lucrative Asian telecoms markets via the world's biggest telecoms player, might hammer out a deal with NTT quite soon.
""I think that they are quite close to it,"" said John Tysoe, telecoms analyst at brokers SocGen Strauss Turnbull. But he added: ""That is just instinct.""
One analyst even said he had made a bet with a colleague that a deal would be signed or announced before the end of February. But others were split.
""You would expect in the next 12-18 months something to happen,"" said Chris McFadden, analyst at Merrill Lynch, adding: ""If it happened tomorrow, we'd be all pleasantly surprised.""
Another said he thought an imminent ""memorandum of understanding"" between the two companies was quite possible. But he added: ""But in terms of any tangible, real tie-up, I would put it later in the year.""
But analysts agree on two things. They dismiss as a ""courtship ritual"" NTT's statement that it might prefer to branch out into the global international market on its own.
They also believe that NTT will want to be calling the shots on any deal.
NTT may even stop short of a straight deal with BT and MCI's Concert alliance, preferring to link up with more than one global alliance. ""On a selected basis, they may link up with as many as possible,"" said one analyst.
At present, there are three main alliances.
Apart from Concert, Deutsche Telekom, France Telecom and America's Sprint have formed Global One. The third consortium is WorldPartners, a loosely-knit organisation created by U.S. telecoms gaint AT&T.
Members include Unisource, a venture of PTT Telecom of the Netherlands, a Swedish firm, the Swiss service provider, Spain's Telefonica and a stack of Asia-Pacific members such as Hongkong Telecom, Australia's Telstra and Korea Telecom.
BT's chief executive Sir Peter Bonfield is also travelling to Japan at the end of this month, part of a regular trip where he is likely to meet NTT executives, BT says.
BT has had an office in Japan for 10 years and already has a minor link with one of NTT's units, NTT Data, which distributes its Concert Internet Plus services.
It sent its first regional director to Tokyo this year in a move to highlight the growing importance of the area.
",24
"LONDON - Shares in British Telecommunications (BT) surged on both sides of the Atlantic on Monday as traders furiously dealt the stock higher in the wake of a $20 billion mega-merger with America's second biggest carrier, MCI Communications.
Analysts said the deal with MCI, which turns the BT/MCI combine into the world's second largest international telephone group with annual revenues of over 25 billion pounds ($41 billion), was mainly welcomed because it would force BT to become more capital efficient by increasing its borrowing.
Weekend news of the biggest transatlantic deal in history, linking Britain's dominant telecoms company with a major American player, also prompted some analysts to reassess BT's growth prospects.
Just under 82.5 million BT shares exchanged hands in London on Monday and the stock ended a sharp 22.5 pence higher at 373.5 pence, having touched 392 pence during trade.
Some analysts recommended buying BT shares up to 400 pence on the back of the tremendous growth prosepects in the telecoms market, one of the world's most rapidly changing industries.
The deal, which 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 also allows BT to limit its dependence on the heavily regulated British telecoms market.
""This deal will force people to look at BT in a new light; look at the international operations, look at the international alliances in Europe, look at what they could be doing with the Internet because MCI is a big player there,"" said one analyst who asked not to be named.
""All these much higher growth and much more exciting elements of BT in which the company has been quietly building value will come much more to the fore,"" he added, noting that he was pitching the stock's value at nearer 430 pence.
The merger, which was sweetened with a 2.2 billion pound special dividend for BT shareholders, helps lift the company's debt-to-equity ratio, or gearing, to 65 percent from under five percent.
Analysts have been valuing BT, which had a market value of about 22.6 billion pounds before the MCI deal was announced on Sunday, as a British utility that had about 60 percent of its revenues governed by a regulatory price cap.
But having lined up six European joint-ventures, BT's share of the population in Europe alone for which it may win a licence could rise to 90 million. Armed with MCI, it also hopes to be better placed to win market share in Asia -- possibly with NTT.
""In one year's time, only 15 percent of BT's revenues will be covered by a price cap. And, with their European operations getting off the ground, they will have a very substantial business in international markets,"" said one analyst.
BT and MCI's alliance, dubbed Concert Plc, still needs to win regulatory clearance in both America and Britain.
Britain's Department of Trade and Industry (DTI) said that it was still unclear whether the merger, which BT believes will be cleared in about 12 months, would fall under its remit for clearance or under that of the European Commission.
One of the issues that determines which regulatory authority rules on the merger will be the turnover of the new company. However, any EC decision would be made in conjunction with advice from Oftel, the British telecoms regulator, and the DTI.
Most analysts believe that while there are hurdles to the deal, the merger is likely to be shown the green light.
Under U.S. rules, a 25 percent stake limit in U.S. communication companies can be lifted if it is in the public interest. Concert Plc, as a major competitor both in the U.S. and internationally, would help drive down call rates. ($1=.6107 Pound)
",24
"British telecommunications company Energis said on Friday that its parent, the National Grid electricity transmission network, might sell a majority stake in the company to one or more strategic investors this summer.
The group, which supplies telecoms services to about 14,000 business customers via the Grid's high voltage electricity pylons, also said it was poised to announce a continental deal in a move that will slash the cost of European telephone calls.
Chief executive Mike Grabiner, who moved from the country's dominant phone company British Telecommunications a year ago, said Energis had talked to all global carriers, with the exception of BT, in its search for international partners.
And since the birth of a new cable giant -- Cable and Wireless Communications -- the company is also looking to gain access to key metropolitan areas.
""I think both Energis and the Grid initially see the Grid selling a minority stake in the business,"" Grabiner told Reuters in an interview. But he added: ""For the right mix of partners, I think they could go below 50 percent -- but still maintain a very large strategic and influential interest in the company.""
Energis has been burning a 100 million pound ($168 million) per-year hole in the pocket of the Grid, which was demerged from the 12 regional electricity companies and floated in 1995.
Some analysts say that a significant equity partner in loss-making Energis, that has been valued at more than 600 million pounds, could help inspire the Grid's lacklustre shares.
However, Grabiner said talks with U.S. telecoms giant AT&T were ""not very active"". Some analysts tip the Global One alliance between America's Sprint, France Telecom and Deutsche Telekom as a potential partner.
Global One has little British access and Energis has already signed a ""correspondent agreement"" with Sprint, America's third international carrier, to end each other's transatlantic calls.
But Energis is keeping its options open. It has also talked to ""selected international strategic investors"". ""(A partner) hasn't got to be a global carrier. It has to be a partner who can support us and add value to the business,"" Grabiner stated.
Energis was set up in 1993 and operates one of the country's most advanced networks by wrapping 4,500 kms of fibre optic cables -- capable of transmitting images and data as well as voice -- around the earthwires between overhead power pylons.
But Energis still has to rely on local operators to originate and end calls.
A five billion pound merger between Cable and Wireless's Mercury unit, NYNEX CableComms, Bell Cablemedia and Videotron to create the country's biggest cable group has increased the pressure on Energis to get local access.
To be competitive with BT and Cable and Wireless Communications, Energis is considering linking up with other cable players, local operators or building its own network.
In the meantime, with an international licence safely under its belt, Energis is looking to spark an aggressive price war on European busines telephone routes with an ""imminent"" new correspondent agreement with a major telecom player.
The government broke the BT/Mercury duopoly on owning international calls networks last month, awarding 44 new international licences. Rivals, which used to be forced to lease line capacity from BT and Mercury at high prices, can now buy permament line capacity from others -- and save a lot of money.
""We have a very small market share, a dramatically reduced cost base and every incentive to be aggressive on price to grow our market share. And we will do that,"" Grabiner said.
Last October, Energis offered to undercut BT by about 50 percent with a 10 pence-per-minute charge for selected business customers on direct dialled calls to America. ""European prices have further to go than North American prices,"" Grabiner noted.
($1=.5958 Pound)
",24
"Twelve years as a privatised business have left British Telecommunications Plc (BT) leaner and more efficient, with its staff halved -- but with few growth prospects in one of the world's most competitive markets.
Persistent wrangles with industry regulator Don Cruickshank over uncompetitive practices have helped depress BT's relative market performance. Its shares have lagged rivals in the FTSE telecoms sector by almost six percent since early June 1995 and the wider FTSE All-Share index by over 20 percent.
But analysts say the millions of hopeful investors signing up for the latest European telecommunications sell-off -- Germany's $12 billion sale of about 23 percent of Deutsche Telekom -- have little to fear under a more lenient regulatory regime than that faced by its British counterpart.
""The overall spirit of Deutsche Telekom's regulatory regime is supportive,"" says broker ABN AMRO Hoare Govett in London. ""The current regime provides investors with a high level of earnings visibility. It runs until 2001, whereas most European regulatory arrangements expire in 1998.""
BT, which first stepped onto the privatisation launchpad in November 1984, now employs about 130,000 staff and has a gearing level, or debt-to-equity ratio, of around seven percent. Since 1994, around 110,000 jobs have gone. BT LOOKS ABROAD
Ever fiercer competition at home has forced BT to seek growth abroad. This month, the company launched an assault on America's $100 billion a year local telephone market with a $20 billion merger with MCI Communications. The deal would create the world's second biggest international carrier.
BT still controls nine-tenths of the UK residential market, but stiff competition for international and business calls and tough regulation have helped the group forge a deal -- however defensive -- analysts say may turn it into a world class firm.
""BT has exploited its lead...in doing a deal with MCI while the UK is squeaky clean as far as open markets are concerned -- certainly by comparison with anyone else,"" said one analyst.
As the technological revolution sweeps the market and the cost of delivering an ordinary telephone call plunges, customers can already avoid excessive international charges by using several sorts of wireless telephone, cable telephony in some countries, callback services and Internet telephony.
Since 1991, the British international telecoms duopoly between BT and its much smaller rival Cable and Wireless' Mercury Communications unit was ended, allowing rivals to carry calls by leasing BT and Mercury lines.
International competition will be complete from January 1, 1997, when all 46 rivals to BT and Mercury, such as U.S. telecoms giant AT&T, will be free to build and operate their own infrastructure without having to make costly settlement payments for using other networks.
The rest of Europe is only due to break up telecoms monopolies, which have relied on national and international restrictions to shore up their profits, by January 1998. EASIER REGIME FOR DEUTSCHE TELEKOM
While BT has to cut its prices under an inflation minus 7.5 percent (RPI-7.5) formula at the moment, a cap that will be eased to RPI-4.5 percent from August 1997, Deutsche Telekom will operate under a price cap requiring it to cut tariffs by only three percent below inflation in each of two years to 1998/99.
Deutsche Telekom, due to start trade next week, revealed to analysts during syndicate meetings that past high investment levels have left it with a gearing level of more than 400 percent. It will cut staff to 170,000 from 207,000 by 2000.
But the company is now generating five to 10 billion marks ($3.32-$6.64 billion) of net cash annually, and analysts in London expect interest costs to fall by an average of 0.5 billion marks per year.
While restructuring and other factors have depressed Deutsche Telekom's net profits, earnings are expected to recover strongly during 1997 and beyond, analysts say.
($1=1.5059 Mark)
",24
"Telefonica de Espana, the leading telephone group in the Spanish speaking world, on Friday dismissed concerns that new rivals would force its prices and profits down and said it saw robust growth.
""The wind is behind us. The growth is there,"" Juan Villalonga Navarro, Telefonica's new chairman and chief executive, told Reuters in an interview in London.
The $20 billion company, which serves a market of more than 300 million customers mainly in Spain and South America, faces its first home competitor in the form of state broadcaster Retevision SA next year.
The Spanish government, which also plans to float the last 21 percent tranche of Telefonica early next year, will award a third licence in early 1998, completing telecommunications liberalisation by the end of the same year.
Villalonga, 43, who joined Spain's biggest company in June, insisted that the firm would weather the uncertainty of rivals moving into its markets by streamlining businesses and riding on a wave of increased demand -- especially for mobile telephones.
Spain's mobile telephone market was growing faster than any in Europe and in four years, penetration would jump from seven to 27 percent, he said.
Double digit growth is also expected in South America. In Peru, it is forecast to rise to 10 percent from six percent, Chile will see growth of 21 percent from a current 14 percent and growth in Argentina will jump to 28 percent from 10 percent.
""Obviously we will lose market share (through competition) but this will be compensated for by the growth of the market and an increase in efficiency,"" Villalonga stated.
Telefonica plans to slash its 69,000-strong workforce in Spain by 11,000 over the next four to five years.
Telefonica has been long hailed by analysts, who have called it both ""one of the best stocks in Spain"" with a rising income stream and falling financial costs and ""one of the best strategically positioned operators in Europe"".
Villalonga thanks what he calls the company's ""unbelievable track record of success"" for its strategy of breaking into new markets by taking minority stakes, keeping the old management and linking up with ""very, very strong local partners"".
Analysts say Telefonica's robust third quarter profits in August confirm 20 percent earnings growth estimates for the year -- a second year of high growth.
But rather than a one-off to impress prior to the final sale of government stock, analysts such as brokers UBS say they believe the company is more than able to sustain high earnings growth and say the shares, that have surged more than 20 percent since October, should be bought up to 3,300 pesetas.
The stock ended trade at 2,875 pesetas on Friday.
There have been delays in releasing details about the impending flotation of the state's last 197 million Telefonica shares -- at current share prices worth about 566 billion pesetas ($4.3 billion). Spain's financial media is tipping a 60 percent of the total offer will go to retail investors.
While Villalonga declined to comment on the sell-off, newspapers say five to six percent of the offer will be put aside for Spanish institutional buyers, with the rest going to foreign institutions.
Broker Morgan Stanley, global coordinator for the international tranche of the offer, argues that competition will take longer to become a harsh reality than suggested by the official European Union January 1, 1998 timetable and in the meantime investors face ""years more of nice, fat cash flows"".
But the broker noted recently: ""We think we are right on this, although we are becoming distinctly more nervous.""
($1=130.0 Peseta)
",24
"Orange Plc said on Monday its customers will be able to use their mobile phones to chat, transfer data and send faxes in Germany, France, Switzerland, Malaysia, Thailand and Singapore by the end of 1997.
Announcing a roaming agreement with Swiss state-owned telecoms monopoly Swiss PTT, Orange Group technical and operations director Colin Tucker said he hoped customers would also soon be able to ""roam"" freely in Hong Kong and Scandinavia.
""I suppose the thing to say is, Watch this space,"" he told a news conference in Geneva.  
The introduction of digital equipment has helped fuel the battle to add value to the basic mobile telephone by allowing free roaming from country to country and far more reliable and secure connections.
Orange's 573,000 subscribers will be able to sign up for these enhanced services if they pass stringent credit checks and pay a 250 stg deposit to help curtail the fraud that has dogged similar previous agreements.
Orange already has a full roaming agreement in Germany and a partial one in France, centred on Paris. Talks are under way to add a number of European and Asian nations to the list.  
As with all roaming agreements, the financial details of the Swiss deal remain a trade secret. Initially, only subscribers in Geneva will be able to use Swiss PTT's Natel City network but Orange aims to boost coverage to Basel and Zurich by early 1997.
Orange says its offer of roaming services between the UK and other countries is part of its aim to provide customers with the best value for money. It notes that a significant proportion of users regularly use its established German services.
""Adding Geneva as another roaming service demonstrates our commitment to providing an international continuity of service,"" Tucker said.  
The system that Orange uses is much like that of market leaders Vodafone Group and British Telecom's 60 percent-owned Cellnet, in that they are based on the GSM (global system for mobile communications) sister technology called DCS-1800, which operates at 1800 MHz as opposed to 900 MHz.
Most of Cellnet's and Vodafone's subscribers are on the increasingly crowded analogue networks while Orange, along with rival Cable and Wireless- and U S West -owned Mercury One 2 One, is wholly digital.  
As mobile phone companies vie to lift the market out of its yuppie ghetto and into the mass market, the challenge for newcomers like Orange -- with its monthly rental packages that include free minutes and per-second charges -- is to attract customers who still have no mobile phone.
It also has to catch those as they move from the older analogue networks to the new digital technology. Orange, which last month reported gaping first-half pretax losses of 125.2 million stg, has seen its shares fall well short of the 205 pence level of its March flotation that valued the company at about 2.5 billion stg.
But the company, partly owned by Hong Kong conglomerate Hutchison Wam Poa and British Aerospace, says its expects to turn in a profit or pay shareholders a dividend by 1998.
-- London Newsroom +44 171 542 7717
",24
"Analysts said on Monday they were expecting UK electronic business information company M.A.I.D Plc to launch new screen-based products that would rival services offered by real-time financial news services.
M.A.I.D declined to comment on a newspaper report that it was working on new online products that would undercut the prices of international news and information group Reuters Holdings Plc and financial news group Bloomberg LP.
The company's executives are on a roadshow in the U.S. for about a week. But a company spokesman said: ""We never comment on market speculation regarding product development.""
The Sunday Times said M.A.I.D was poised to unveil a screen-based real time news service at sharply lower prices than services from Reuters or Bloomberg. Other products could include transmitting financial data to hand-held devices using mobile-telephone technology, the newspaper added.
Analysts had heard a deal was on the cards between MAID and Finnish group Nokia to start a mobile share price service and expected a similar deal with Psion Plc.
Experts said they had also been waiting for Reuters and MAID to launch more similar, rival services.
""I'm totally unsurprised at the article,"" said Keith Woolcock, analyst at Merrill Lynch. ""MAID and Reuters are going to be competing more in the future. Their products are going to become more similar, I think,""
Reuters Business Briefing, the Reuters service against which MAID is expected to compete, offers mainly online business news and share price data at the moment, whereas about 70 percent of MAID's data is market research information.
But analysts expect soon to be able to set up a customised service on MAID systems so that they are alerted to pre-selected requested headlines as stories appear on MAID's news services.
""I know they have been working on that,"" noted one analyst who declined to be named. ""The big deal is having the alerts built in. The key thing about this is what they are going to charge for it in America...
""If they offer this new alert service for free then it's very hot and will make it very hard for anyone to compete."" Analysts expect MAID to tie up a deal with the Financial Times, adding it to French news agency Agence France Presse and U.S. services as well as direct links to other newspapers.
Reuters Business Briefing, meanwhile, is branching out into market research.
Market research group Datamonitor said it has signed a deal with Reuters since ending a similar contract with MAID.
From November no Datamonitor research will be available on MAID anymore, a Datamonitor spokesman said.
-- London Newsroom +44 171 542 7987
",24
"Britain's Airtours proved on Wednesday that package holidays is a sunny business by beating forecasts with record profits and looking to spend up to 250 million pounds ($413 million) on further acquisitions.
Pretax profits in the year to the end of September soared 46.1 percent to 86.8 million pounds, topping even the most optimistic forecasts of 82 million pounds.
Earnings per share jumped 39 percent to 45.63 pence and Airtours raised dividends for the year 14.3 percent to 16 pence.
As the summer holiday buying season gets into full swing, Airtours -- one of Britain's three big quoted tour operators -- has seen bookings rise a sharp 57.2 percent on last year.
With winter bookings up 12.6 percent in Britain, a sharp 92 percent higher in Scandinavia and 58.9 percent up in Canada, chairman and chief executive David Crossland predicted an encouraging outlook for all the group's major markets.
""They were very good figures,"" said one analyst, adding that he had nudged up his full year forecasts for 1997 to 103 million pounds from 100 million pounds. Airtours's shares bucked a weak market trend and rose nine pence to 712 pence.
Crossland told Reuters that the group was keen to boost its cruising business, buy a new U.S. or Canadian company or find another country in Europe where it could have a similar businesses to those it already owns in Scandinavia and Britain.
""We're probably in a position to spend between about 200 and 250 million pounds on the right sort of acquisition,"" he said, adding: ""We have the resources to be able to do that today.""
Airtours, whose dividends are covered more than three times by earnings, has a robust balance sheet and about 425 million pounds of cash. It said there would be significant opportunities for expansion which it would ""exploit as they arise"".
Record profits were fuelled by strong results from its Scandinavian operations where Airtours owns Premiair, the largest leisure airline in the region, and careful pricing in Britain with fewer packages on offer, the firm said.
Summer 1997 will see about the same number of packages as this year, but they will attract more long haul, flight and cruise and ""all inclusive"" holiday makers -- packages which have a higher sales price and better margins, Crossland said.
""We shall maintain our capacity at or about the same level as summer 1996 and if this position is maintained across the industry the rewards could be substantial,"" he noted.
The thee big operators -- Airtours, First Choice Holidays and Inspirations -- have tried to encourage early bookings and load prices on late bookings for both the 1995 and 1996 summer seasons.
But last month saw Francis Baron, the chief executive of loss-making First Choice, ousted and Inspirations issue a profit warning due to troubles with its Caledonian Airways arm and a setback in tour operations caused by aircraft delays.
The operators' future is also clouded by a government decision last month to refer the industry for a monopolies probe in a row about promoting package holidays through their travel agency arms and offering holiday discounts in exchange for expensive travel insurance.
Chancellor Kenneth Clarke's latest budget also jacked up holiday insurance tax from 2.5 to 17.5 percent from April and doubled airport departure tax from next November.
But Crossland said holiday makers seemed unperturbed. ""People are bringing their buying position forward because there were less late deals in the market last year and they are tending to buy the more expensive products as well,"" he said.
($1=.6047 Pound)
",24
"The top executives of U.S. utility Dominion Resources were locked in their first bid talks with British power supplier East Midlands Electricity on Tuesday to try and hammer out a takeover price.
A source close to the British regional electricity supplier said a meeting between Dominion's chairman, chief finance officer and lawyers and East Midlands' chairman Nigel Rudd and Norman Askew, the chief executive, and their advisers -- merchant bank Schroders -- was starting in London at 1700 GMT.
No further details were immediately available.
Talks were agreed despite East Midlands' insistence that it would reject any offer from the Virginia-based utility pitched at around 608 pence per share, which would value the British company at 1.2 billion pounds ($2 billion).
In the fifth potential U.S. bid for one of Britain's 12 cash rich regional electricity companies (RECs), Dominion said last week that it was considering an offer ""at a price not much in excess of 608 pence per share"".
But East Midlands, the first of its wealthy peers to launch a share buy-back in an attempt to redistribute cash to shareholders, scorned the price, stating that it would undervalue the Nottingham-based power supplier's prospects.
East Midlands, the target of consistent bid speculation as seven of 12 RECs have fallen to predators and an eighth, Northern Electric, is facing its second hostile bid, saw its shares end 8.5 pence higher at 612 pence.
But some traders and analysts said the market remained unconvinced that the American utility would launch a bid.
Nigel Hawkins, utilities analyst at brokers Yamaichi, said Dominion would need to start bid talks at 650 pence per share, but added that East Midlands was unlikely to recommend a bid much below 700 pence.
""I do not believe East Midlands would recommend a bid siginficantly below 700p per share,"" he said. ""I am not saying they would refuse it at the 690p level.""
Traders also emphasised that Dominion could still walk away from the bid talks amid regulatory and political uncertainties.
A spokesman for Dominion Resources has said the U.S. group was well aware of the uncertainties that surround the purchase of a British electricity company.
The popular opposition Labour Party has threatened to impose a windfall tax on utilities if it comes to power in the next general election, due by May 1997.
But the U.S. group may feel its bid will win approval from regulators. Britain has so far cleared three U.S. bids for regional electricity companies.
A lull in a wave of bids for electricity companies was brought to an abrupt halt last month when CE Electric -- jointly owned by CalEnergy Co and  Peter Kiewit Sons' Inc -- launched a hostile 650 million pound bid for Northern Electric.
The Nebraska-based utility has built up a stake of around 29.5 percent in a series of market raids in Northern Electric, which became the first REC to be faced with a takevoer attempt in December 1994.
A costly shareholder package in a defence against the unwanted attentions of conglomerate Trafalgar House, now owned by Norway's Kvaerner, has left Northern Electric with high debts. ($1=.6050 Pound)
",24
"Schroders Plc, one of the great British merchant banks, on Friday delivered record half-year profits along with a warning that conditions for its businesses may become more uncertain.
""Although the second half has started reasonably well, it will not be easy to match two successive record half years,"" the the bank said while posting a first-half pretax profit of 115.9 million pounds ($181.5 million) compared to 85.6 million in 1995.
""With elections imminent in the U.S. and UK and with equity markets in those countries testing all-time highs, conditions for our businesses may become more uncertain,"" Schroders added, sending its shares spinning lower.
Schroders, which lifted its half year dividend 33 percent to 6.0 pence -- the top-end of forecasts -- said the environment for the financial sector had been benign, with financial markets, banking and leasing the major contributors to profits.
Analysts expected the merchant bank, whose shares have seen some hot money thrown at them as bid speculation refuses to die down, to report pretax profits of 106-125 million pounds.
But although first-half results were in line with forecasts, Schroders' shares dived 57.5 pence lower to 13.90 pounds as the market took stock of the company's cautious outlook.
""Talk about uncertain business conditions is not what investors wants to hear,"" noted one London market-maker.
Some analysts warned that they may scale back profit forecasts despite a healthy growth in profits at Schroders' investment banking arm.
The division saw profits rise to 50.7 million pounds from 41.7 million and Schroders said it had gained a number of prominent new clients. Earnings from its securities businesses in North America and Europe grew ""satisfactorily"", but activity in Asia/Pacific operations was more subdued, it stated.
The merchant bank's asset management division was boosted by a strong inflow of new businesses and total funds under management rose 13 percent to 83.4 billion pounds.
Schroders said it had built up an ""outstanding performance record"" in emerging markets, adding that a significant proportion of new business inflow related to new appointments to manage funds in emerging markets.
Pretax profit at the division jumped to 65.2 million pounds from 43.9 million in the same period last year, partly reflecting a delay as profits from new funds feed through.
Some analysts say Schroders' controlling family holding may hinder a takeover. But others believe that the bank may not be able to hang onto its independence for more than two years as the desire for fresh capital for its investment banking arm becomes overwhelming.
This could either lead to a full-scale merger or as a tie-up such as the one brokered between merchant bank Rothschild and ABN Amro, analysts say. ($1=.6385 Pound)
",24
"British Telecom (BT) made corporate history on Sunday by unveiling a $20 billion merger with America's MCI Communications in a coup that ensures it a leading position in the world's biggest telecoms market.
The giant merger with MCI, in which BT already has a 20 percent stake, is to be called Concert Plc and marks a vital step in BT's plans to expand overseas as world markets begin to liberalise, following in the steps of America and Britain.
By joining forces with the second-largest U.S. long-distance carrier, BT -- which already has six joint ventures in the top six European markets worth $135 billion -- has placed itself well to tap into the corporate market for long-distance calls, data and mobile services.
BT, which sweetened the alliance for its own 2.4 million shareholders with a 2.2 billion pound ($3.6 billion) special dividend, has been angling to get a foothold in the $200 billion U.S. telecoms market, where it sees tremedous growth prospects.
Concert, a $54 billion group with annual revenues of over 25 billion pounds, will have a significant market share in the world's two most competitive markets as well as being well-placed to gain access to leading-edge technology.
MCI, which has the biggest Internet backbone in the U.S. -- carrying 40 percent of worldwide traffic -- is estimated to have a 20-22 percent share of the U.S. long-distance telephone market and has been dubbed by newspapers ""one of the most admired technology and marketing companies in the U.S."".
The MCI deal, which will challenge rival alliances led by U.S. telecoms giant AT&T and Deutsche Telekom, could trigger a fresh round of deal-making between local telecoms alliances ahead of the deregulation of European telecoms markets in 1998.
But BT also has its sights on Asia Pacific markets, the world's fastest growing market, which was worth about $125 billion in 1996. With the MCI deal in the bag, BT said it hoped to be better able to address that market.
Since its plans were foiled six months ago to merge with British rival Cable and Wireless and link up with its ""global digital highway"" and telecoms businesses in Hong Kong, Japan and Australia, BT has been struggling to find an alternative route into Asia.
Chief executive Sir Peter Bonfield denied that the deal with MCI, which comes without any real presence in Asia-Pacific, was the second best. ""It's not the second best -- it's the first best choice,"" he insisted.
Analysts now expect the enlarged BT/MCI group to start making overtures to major Asian players such as Japan's giant Nippon Telegraph and Telephone Corp, the world's largest telecoms group.
""(BT) have made no secret of their ambitions in Asia,"" said Laurence Heyworth, telecoms analyst at Robert Fleming Securities. ""The problem is...NTT is being courted by everybody in terms of international alliances. But as a consequence of this merger, Concert has a stronger potential,"" he added.
Bonfield said that although he would like to talk to NTT, the company would probably want to devote attention to deregulating its home market before seeking any deals.
BT's deal with MCI depends on both American and British regulatory approval. The U.S. Federal Communications Commission and has to approve foreign ownership of every deal involving more than 25 percent of a company.
However, it has allowed the French and German carriers -- France Telecom and Deutsche Telekom -- to take stakes in Sprint, America's third-largest long-distance provider, and form Global One.  ($1=.6096 Pound)  REUTER
",24
"British Telecom (BT) made corporate history on Sunday by unveiling a $20 billion merger with America's MCI Communications in a coup that ensures it a leading position in the world's biggest telecoms market.
The giant merger with MCI, in which BT already has a 20 percent stake, is to be called Concert Plc and marks a vital step in BT's plans to expand overseas as world markets begin liberalise, following in the steps of America and Britain.
",24
"Human rights activists and the computer industry joined in a rare show of cooperation on Thursday, urging more effective policing of pornography and violence in the anarchic ""virtual wild west"" of the Internet.
    Stories proliferate about pornography, sexual   violence
against women and children, bomb-making recipes, incitement to racial hatred and do-it-yourself fraud schemes that are available at various computer Web sites.
""We acknowledge the problems, we're not abdicating responsibility,"" said Janet Henderson, lawyer and rights strategy manager for Internet services at British Telecommunications.
""We do have the well-being of customers and ultimately their fundamental freedoms at heart,"" she told the first European conference on combating violence and pornography in cyberspace.
Lawyers have been studying how to police what appears to be a regulatory vacuum without national boundaries -- while trying to distinguish between what is illegal and what is, more subjectively, harmful.
BT, which launched its Internet access service last March, has adopted what it calls a ""taste and decency"" policy. Any illegal material found through its access to the computer network is reported to the Internet Watch Foundation, which was created last October.
The foundation, which will pass on information about potentially illegal material to the police, also wants to encourage legal material to be classified, allowing users to block access to certain subjects with filtering software.
Henderson said the Internet allowed anonymous worldwide distribution of vast amounts of extremely violent material and child pornography. But access providers could not be the ""moral guardians of the nation"".
""Slow but sure is the approach we are taking,"" she said.
Speakers agreed that without knowing the names of ""obscene"" websites, even spending hours wandering through cyberspace was unlikely to reveal anything more perturbing than walking into a newsagents. Only with ""a great level of intent and technical expertise"" was it possible to find obscene material, they said.
But German human rights campaigner Monika Gerstendorfer noted that the Internet made it easier for groups, such as extreme political organisations, to communicate and gather forces worldwide.
German Chancellor Helmut Kohl's cabinet last year approved a bill that will ban websites spreading Nazi propaganda, distributing hardcore pornography to minors and conducting fraudulent business.
The German division of the world's second largest online service, CompuServe GmbH, has said it would consider moving its operations to a neighbouring country if German laws forced Internet companies to control porn on their networks.
",24
"Vodafone Group, Britain's biggest mobile phones firm, posted a sharp 21 percent rise in first half profits on Tuesday and insisted that the mobile market was likely to maintain a robust 20-25 percent growth rate next year.
Vodafone also announced it was buying The People's Phone Company, its biggest high-street retailer and service provider of mobile phones, for about 77 million pounds ($129 million).
Vodafone, which is licenced to serve over 250 million people in 13 countries, now has five wholly-owned service providers which, along with investments in another four, represent over 70 percent of its subscriber base with more than 410 branded shops.
Pretax profits in the first half of the year rose to 252 million pounds -- after a 17.2 million pound exceptional credit on asset disposals -- on sales of 771.5 million pounds, 16 percent higher than last time.
The dividend, up 20 percent at 2.36p per share, also came in at the top-end of expectations, helping the shares to close 11 pence higher at 254.5 pence.
Outgoing chief executive Sir Gerald Whent dismissed newspaper articles heralding what he called ""doom and gloom"" in the mobile phone market, saying that he expected a similar growth in net new connections to this year.
""Vodafone has only just begun,"" he stated.
His successor, Chris Gent, told a news conference that the total market for mobile communications grew by 1,428,000 in the first six months of the year -- six percent less than in the same period last year.
The group netted 2,654,000 subscribers at the end of September 1996 in its core British market, with overall growth in the period of 203,000 compared to 371,000 last year.
But Gent said the rate of decline was slowing and figures for October and November indicated a better quarter than the last two -- even before the key Christmas period.
""It may be that in previous years figures were inflated by customers attracted to cellular before they were ready to make a long term commitment,"" he said.
Despite a 1.3 percent dip in market share as rivals such as smaller digital mobile phones group Orange leave their indelible mark, Vodafone said it still had 42 percent of the mobile phone market and remained the market leader.
Vodafone's total customer base has swollen to 2,654,000 on its analogue network and 945,000 digital customers.
""Vodafone rarely disappoints and it certainly hasn't this time around,"" said Evan Miller, telecoms analyst at brokers CS First Boston. ""Rumours of the demise of the UK mobile phone market have proved premature. There is life in the market and Vodafone is taking more than its fair share of it.""
Vodafone, which celebrated its fifth anniversary as a fully independent company last month, has generated robust profits which last year amounted to 473 million pounds with operating cash flows of 621 million pounds.
A proposed $20 billion merger between British Telecommunications and America's MCI sparked rumours that U.S. telecoms giant AT&T may want to increase its presence in Britain by acquiring Vodafone.
But Gent told Reuters in an interview that the group had not had talks with AT&T and doubted such a deal would emerge. ""Anything is possible, but we haven't been approached,"" he said.
As the British mobile market becomes increasingly competitive, Vodafone has invested in mobile businesses through western Europe and the Pacific Rim which contributed a maiden 9.9 million pound profit before interest, tax and a 3.9 million pound charge for its Hong Kong operation.
Foreign interests, including a stake in France's Societe Francaise du Radiotelephone (SFR), a stake in the German operator E-Plus Mobilfunk, and operations in Australia, South Africa, Greece and Hong Kong, turned in a loss of about 17 million pounds in the first half of last year.
But the company is on track for reaping 30 percent of profits from overseas operations by 2000, Gent said.
($1=.5970 Pound)
",24
"Angry British businesses expressed dismay on Tuesday after news of another overhaul of telephone prefixes in what is promised to be the final phase of a search for ""future proof"" phone numbers.
Telecommunications watchdog Oftel announced plans to create billions of new numbers, although Britain has barely recovered from ""PhONEday"" in April 1995, when the last batch of new numbers was created and millions of old ones were made obsolete.
""These changes mean more disruption and cost to businesses,"" said Simon Sperryn, chief executive of the London Chamber of Commerce & Industry. ""...business is bound to be lost because of customers ringing the outdated number.""
PhONEday cost telecoms giant British Telecommunications alone 100 million pounds ($166 million).
Each time numbers change, companies have to pay thousands of pounds in notifying business contacts and to change stationery and logos on delivery vans and shopfronts.
London dialling codes will now be lengthened by a uniform 020 prefix in the year 2000. The current London codes of 0171 and 0181 will be shortened to 7 and 8, respectively, to be dialled after 020.
Northern Ireland, Cardiff (Wales) and the southern English coastal cities of Southampton and Portsmouth will also each get a new prefix starting with 02. Prefixes of 03 to 06 are being kept for future generations.
In an attempt to quell mounting anger and confusion, Oftel director general Don Cruickshank, who was once memorably quoted as saying he was ""not very good"" at forecasting demand for numbers, pledged the new plan would be robust and flexible.
""By early in the next century we will have completed transition to one of the most clear, flexible and customer-friendly numbering schemes in the world,"" he said.
But the opposition Labour Party called for his suspension pending an inquiry into what it called a renumbering ""shambles"".
Labour consumer affairs spokesman Nigel Griffiths said Oftel had ignored advice that PhONEday would not create enough new numbers and another costly upheaval would be needed.
""Sadly this was ignored. How can the public have any confidence that Mr Cruickshank has got it right?"" he asked.
Perhaps surprisingly, BT has backed Cruickshank's new attempt to solve the problem of surging demand for telephone numbers. Cruickshank also drew praise from the Telecommunications Managers Association, a professional consumer group, which said the old system had lacked logic and structure.
A range of numbers with the prefix 05 will be reserved for corporate use, so companies can move around the country without changing numbers -- or just keep one number for all sites.
Mobile, paging and personal numbers are set to take the prefix 07 by 2001, special freephone and local rate services will have the prefix 08 and premium rate numbers will adopt 090 by 1999.
Nevertheless, Cruickshank voiced uncertainty about long-term future use, musing: ""If you star-gaze way into the next century I have a sneaking suspicion e-mail and voice recognition may well replace numbers.""
",24
"Shareholders in Anglo-American conglomerate Hanson overwhelmingly approved the group's final plank of its ambitious four-way demerger on Friday, clearing the way for its Energy Group division to be spun off on Monday.
About 98 percent of shareholders voted for the motion, ending an era of wheeler-dealing that created Britain's once mighty conglomerate which, under takeover king Lord Hanson and his late partner Lord White, became a star performer in the 1980s.
But with a stock market that showed its mistrust of conglomerates by sharply marking down their shares, Hanson last January announced that it would tear itself up into separate tobacco, chemicals, energy and building companies.
""I am very pleased with the outcome of the meeting,"" Energy Group's chairman Derek Bonham told Reuters after the shareholder vote on the final demerger of the Energy Group and a share consolidation.
""And I am personally very excited about the prospects for the Energy Group in the future.""
Energy, which will be listed in London and New York, has said it is already mulling a string of acquisitions in Britain and North America, which some analysts say could be worth up to 1.4 billion pounds ($2.3 billion).
Bonham also confirmed that the group was still in acquisition talks with a U.S. power marketing company.
The group, which is expected to start with a market value of around 2.8 billion pounds and is being sold with 1.4 billion pounds of debt, will be large enough to rank among Britain's biggest FTSE 100 blue-chip companies and America's Fortune 500.
Bonham dismissed speculation that Energy would embark on a further sub-demerger of its two main components -- U.S.-Australian Peabody Coal and Britain's largest regional electricity company Eastern Group -- referred to by one shareholder as an ""unhappy marriage"".
""No, I have had enough of demergers and I think (the two) fit very well together,"" he told the shareholder meeting.
Energy executives want the company, which says its year dividend will be an indicative 22 pence, to be viewed as a growth stock rather than a utility.
Peabody is the world's largest private coal producer -- still a cheaper fuel than gas in the U.S. -- and Eastern Group is the only fully integrated electricity and gas company in England and Wales.
""Energy will be substantially cash generative until it starts making acquisitions,"" noted David Campbell, electricity analyst at brokers Greig Middleton.
The demerger will give shareholders one Energy share for every 10 existing Hanson shares held. Every eight shares in the remaining Hanson group will be consolidated into one new share at the same time.
Hanson's first two demergers, of Britain's Imperial Tobacco and U.S.-quoted Millennium Chemicals, took place last October.
Unofficial grey market trading has already begun in both Energy and the new Hanson shares ahead of the split.
Energy saw its shares trade at 520 pence, a loss of 6.5 pence on Friday, while new Hanson shares, the rump building group that retains the old household name, were quoted at 287.5 pence, a loss of six pence.
Bonham, who newspapers say takes home a basic pay package of 450,000 pounds annually, also fielded questions from at least four shareholders who said they were ""nauseated"" and ""aghast"" at the executive pay and bonus packages that company directors awarded themselves.
He said that long-term incentive plans, geared to total shareholder return, ensured that executives only got paid what they deserved.
($ = 0.619 British Pounds)
",24
"As Japanese telecoms titan NTT mulls an investment with British Telecommunications (BT) in France, analysts said on Thursday any such deal would be a major coup for Britain's dominant telecoms operator.
One investment banker told Reuters that Nippon Telegraph and Telephone, the world's biggest telecoms company, had approached probably more than two investment banks to evaluate an investment alongside BT in the French telecoms market.
""I am aware approaches have been made and I am also aware that strategically and commercially this is an opportunity which has been given a lot of attention within the senior management of NTT,"" he said.
With further details largely confidential, the investment banker said only that BT was also exploring whether to strengthen its 1.1 billion pound ($1.8 billion) investment in a 25 percent stake in France's new telecoms operator Cegetel.
Cegetel, which was set up by Cie Generale des Eaux, is seen as the main rival to France Telecom.
""What is being looked at these initial stages is much more to do with access to international traffic and strategically, from NTT's perspective, how it can enter the market,"" he said.
BT declined to be drawn on reports that NTT was evaluating a 300 million pound ($490.3 million) investment -- or whether it would welcome such a link. But along with its American partner MCI, BT has been openly courting NTT along with MCI for many years.
And major deal in Japan has become increasingly urgent since the NTT was last month freed by the government to pursue international business.
But a BT spokesman would only say: ""If NTT have appointed investment bankers that is their decision.""
All three global telecoms alliances are vying to get a foothold in the lucrative Asian markets so that they can sell their services to multinational firms.
""If BT were able to get NTT to take this step in France that would be a significant coup for BT because it would be the first step towards tying them in to (BT's) global Concert alliance,"" said Andrew Harrington, telecoms analyst at Salomon Brothers.
""Japan is the last major frontier for the world telecoms companies...And if you're going to service multinationals, you've really got to be in Japan,"" he added.
NTT is the obvious partner choice as it controls virtually all of the local network in Japan as well as having a large presence in Asia.
And there are three main global alliances eager to link up with the group; BT and MCI's Concert, Global One, which incorporates France Telecom, Deutsche Telekom and America's Sprint and U.S. telecoms gaint AT&T's loosely-knit global alliance.
But while speculation is swirling that NTT may first move in France, the investment banker said he would be surprised if the group wasn't looking for alliances right across Europe.
France is one of the most important European markets, but companies such as Italy's STET are also looking to see whether they can forge international partnerships with other operators.
""I would think NTT would be looking at a toe-hold in the top four or five markets in Europe,"" he said. ""(It seems) discussions within NTT have moved onto a more advanced stage and I would be surprised if their efforts were being focused exclusively on France. But that is pure speculation."" ($1=.6119 Pound)
",24
"British Telecommications beat even the most optimistic analyst forecasts on Thursday with robust second quarter and first half profits and insisted it was growing despite ever stiffer competition.
BT, which plans to merge with America's MCI to create Concert, one of the world's biggest telecoms groups, said profits before tax, redundancy and restructuring charges rose 7.4 percent in the quarter and 5.2 percent in the first half.
But after a hefty 235 million pound ($388.2 million) of redundancy costs and a 60 million pound charge for the repurchase of government-held bonds, half year pretax profits came in at 1.6 billion pounds and 730 million pounds in the second quarter -- slightly below the corresponding 1995 figures.
BT, whose shares were 8.5 pence higher at 369p in heavy trade after a high on the day of 371, managed to hang onto its 20.5 million residential customer lines despite predictions that competition from cable companies would dent its market share.
""We're growing, we're not going backwards,"" finance director Robert Brace told Reuters in an interview, noting that turnover in the six months rose 4.5 percent to 7.37 billion pounds.
""I think telecoms is one of the most exciting growth industries in the world,"" he said. ""When we open (the markets) up, drop the prices, raise the quality of service, and really market hard, the growth levels are double digit.""
The group also said its biggest business, inland calls, grew one percent to over seven percent in the quarter on a 12 month moving average basis after price cuts and marketing initiatives.
But chief executive Sir Peter Bonfield told a news conference BT was probably losing one to two percentage points of a growing British telecoms market, and that this trend was likely to continue, forcing BT to turn abroad for profit growth.
""BT will lose profits in the short term,"" said James Ross, telecoms analyst at ABN AMRO Hoare Govett, who expects BT to post a full year pretax profit of 2.1 billion pounds. But he said BT was well placed to fight competition at home and abroad.
""They are the group that has done the best (abroad) so far and in the UK, they have protected their position,"" he said.
Brace said BT planned to ""get very aggressive"" in the next two years as European telecoms markets are opened around 1998.
BT expects to win more than 30 percent of revenues from its six continental European joint ventures after liberalisation. Those ventures, worth about $135 billion, could start contributing profits after five to seven years, Bonfield said.
The group plans to take a substantial market share of the lucrative big business, data and mobile services markets.
Bonfield said BT, which expects 1996/97 capital expenditure to be around 2.7-2.8 billion pounds, still saw a link-up with a partner such as Japan's Nippon Telegraph and Telephone a high, long-term priority for a ticket into booming Asia.
""I'd really hate to be knocked out by another competitor just because we weren't treading the boards,"" he said.
While Japan was mulling the future structure of NTT, BT would make sure it was ""parading outside the door"", he said.
BT operates in 30 countries and employs about 130,000 staff worldwide. Since privatisation in 1984, about 110,000 jobs have gone. Another 3,200 staff left in the first half of this year with about 3,000 more voluntary redundancies expected this year.
Asked whether BT planned similar deals to its $20 billion MCI merger, Brace said: ""I'm not sure that there are similar deals as MCI -- because there aren't many companies that size in the world one would wish to merge with,"" he said.
BT had already planned a six percent half year dividend rise to 7.9 pence. As part of the MCI deal, BT is also paying a 35p special dividend in September 1997 on top of the final dividend. ($1=.6054 Pound)
",24
"Shares in Cable and Wireless, Britain's second biggest telecoms group, lost more ground on Tuesday as analysts said the $20 billion creation of Anglo-U.S. Concert Plc had thrown the group its biggest challenge to date.
Uninspiring results from Cable and Wireless' (C&W) lucrative Hong Kong subsidiary, Hong Kong Telecommunications Ltd, on which the British group relies for about 75 percent of attributable profits, also helped depress the stock.
C&W, faced with a change of government in Hong Kong next July and growing competition in the territory, has also been dogged by talk that it may have to sell part of its Hong Kong stake in return for a worthwhile position in China. ""I think the Hong Kong Telecom figures this morning served to remind people that that is where most of the money comes from,"" said John Tysoe, telecoms analyst at SG Strauss Turnbull. ""Not a particularly sparkling set of figures.""
The Hong Kong unit lifted net profits 12.1 percent, under some analysts' expectations, to HK$5.39 billion.
While C&W's shares ended five pence lower at 470.5p, executives of its Hong Kong unit insisted that they were unconcerned by the mega-merger, announced over the weekend, between British Telecommunications and MCI Communications to form the second biggest international carrier.
But analysts said the huge merger, creating a $54 billion company, posed a substantial threat to telecom rivals and could make it harder for C&W to expand in the United States.
""What we saw at the weekend has thrown down the gauntlet to everyone else,"" Tysoe said. ""It is a challenge to absolutely every other operator and I'm not sure that half of those other guys have got a coherent response.""
Had Cable and Wireless' own merger talks with BT not broken down in May, that deal, valued at about 33 billion pounds ($54.54 billion), as a deal would have easily eclipsed the BT/MCI merger.
But BT's new strategic plans makes it one of the biggest players in America behind market leader AT&T.
Cable and Wireless' own U.S. operation brings in annual revenues of about 0.5 billion pounds -- a far cry from BT's share, which now jumps to around $18 billion a year.
Analysts agree that BT has proved to the market that Cable and Wireless (C&W) is bid proof, partly because it is hard to value its Hong Kong stake. What the do see happening however, is that C&W will seek to increase its foothold in the increasingly competitive U.S. telecoms market and link up with new partners.
""The important thing for C&W is to get more of a presence there and my guess is that they will do that in an alliance,"" Tysoe said.
Few industry analysts took market rumours seriously that BT's latest expansion plans would prompt its arch-rival in the international market, AT&T, to bid for C&W -- or even launch an immediate takeover of mobile phone operator Vodafone.
As for an alliance partner for C&W, the bets were on NYNEX Corp. Its subsidiary NYNEX CableComms is the largest minority shareholder in Cable and Wireless Communications, an alliance creating Britain's largest cable operator.
NYNEX also has an international diversification strategy centered around the Far East, similar to that of C&W. Other potential U.S. partners could be Pacific Telesis (PacTel), which is being taken over by SBC Communications. However, PacTel is more interested in central or south America, analysts said. ($1=.6051 Pound)
",24
"British Telecommunications (BT) and its American partner MCI will ""move heaven and earth"" to link up with Japan's restructured telecoms giant Nippon Telegraph and Telephone (NTT), analysts said on Friday.
BT welcomed news that the Japanese government had decided to split NTT into three parts under one holding company as part of its efforts to reach a compromise while liberalising the world's second biggest telecoms market.
""BT...welcomes the news that NTT is to be given the opportunity to operate on a truly international basis,"" a company spokesman told Reuters.
The British telecoms giant, which announced last month that it wanted to merge with America's second biggest long-distance carrier MCI to create Concert Plc, has openly stated that the enlarged group should give it more clout to woo NTT as part of its ticket into the booming Asian telecoms markets.
But he declined to say whether news that Japan will restructure NTT into two regional and one long-distance group would help BT in its quest to link up with the Japanese titan.
""We've always said we'd like NTT to be our partner in Japan,"" he said, but added: ""We can't say whether this makes it easier and better...""
Analysts said that Japan's decision to restructure NTT, the world's biggest telecoms company, had been well flagged and it was now up to BT, MCI and their proposed combined company, dubbed Concert Plc, to forge a deal.
But the difficulty was how to establish partial ownership of an asset in Japan without significant earnings dilution.
""If BT can form a partnership with this new holding company structured NTT -- with access to the international market -- then that's game, set and match,"" said John Tysoe, telecoms analyst at brokers Societe Generale Strauss Turnbull.
""My feeling is that Concert will probably move heaven and earth try and do a deal with NTT now -- and NTT would probably be crazy to take on anyone else as a partner. Concert has got the product set which everyone wants.""
Taking any significant stake in NTT would not only be hugely expensive but dilute earnings. Foreign companies would find themselves paying a lot of money for few earnings simply because the price earnings ratio of NTT is so high, analysts noted.
""There are still foreign ownership restrictions on NTT which will not be lifted until next year,"" said Andrew Harrington, telecoms analyst at Salomon Brothers.
""But we do know BT wants to establish some form of global alliance with NTT, be it in the form of a marketing agreement, some sort of equity swap or a straightforward equity stake.
""I dont think BT knows what it is going to do yet.""
If the creation of Concert wins regulatory approval next year, it will be one of the largest end-to-end telecoms services providers for multi-national companies as the worldwide telecoms market is rapidly being liberalised.
Rivals include French and newly-floated German telecoms groups France Telecom and Deutsche Telekom, that have linked up with U.S. long-distance carrier Sprint to form Global One -- and U.S. telecoms giant AT&T, which has set up World Partners with 16 companies.
NTT, which currently is a purely domestic operator with a stranglehold on the domestic Japanese market, has a market capitalisation that at around $120 billion, eclipses all others.
Japan's Posts ministry said earlier today that the NTT restructuring may not be put into place until 1999-2000.
",24
"A battle to revolutionise British television with more channels, high-quality pictures and CD-quality sound began Friday when two new TV groups applied to run Britain's key digital terrestrial television services.
Leading heavyweights BSkyB, Carlton Communications and Granada Group are teaming up to create a formidable new company -- British Digital Broadcasting.
It plans to offer an initial 15 channels including subscription channels from the British Broadcasting Corporation .
The group faces competition from Britain's third largest cable operator CableTel, which is wholly-owned by U.S. cable company International CableTel, and which also owns NTL, one of two major British transmission companies.
This group, which plans to offer about 20 channels, interactive services such as home shopping and home banking and information services, is called Digital Terrestrial Network (DTN).
""This is the most exciting development in broadcasting since the introduction of colour,"" said DTN Chief Executive Jeremy Thorp. ""We are on the brink of a revolution in entertainment, information and telecommunications.""
Thorp gave away few clues about where the group is planning to get its programmes from, saying only that it had ""the best sources in the UK and U.S."" Its investment plans are also still subject to confidentiality agreements, although the group says they will be ""obviously substantial.""
If the BSkyB camp is successful in winning the licenses, the shareholders have agreed to meet between them a peak funding requirement of up to 300 million pounds ($481 million). The company is expected to be profitable within five years.
The BSkyB/Carlton/Granada/BBC venture plans three premium subscription channels showing top Hollywood movies and sports. Another 12 channels will be offered as part of a basic subscription package.
",24
"British Telecom unveiled the largest merger in Britain's corporate history on Sunday, linking up with MCI Communications, the number two U.S. long-distance phone company, to create a $54 billion group.
Six months after alliance talks failed with BT's British rival Cable and Wireless, BT announced that its deal with MCI, to be called Concert Plc, would create one of the world's largest telecoms groups with 43 million business and residential customers in 70 countries.
BT already owned 20 percent of MCI with which it has created the Concert joint venture, providing a whole range of communications services to customers in more than 50 nations.
""The merger combines the substantial financial resources and global position of BT with the growth momentum and market expertise of MCI, known for its success in the competitive U.S. long distance market,"" BT said in a statement.
Under the deal, which has yet to be agreed by regulatory authorities on either side of the Atlantic, shareholders in MCI would receive up to $3.8 billion in cash as well as 0.54 new Concert American Depositary Shares for every MCI share held.
Under the proposed deal, BT is paying its shareholders a special dividend bonanza of 35 pence a per share, worth an estimated two billion pounds.
BT did not immediately give figures for the total value of the proposed deal, details of which started leaking into the markets late on Friday.
Analysts expect the deal to be worth about $22 billion.
The new telecoms giant, incorporated in Britain, would have headquarters in London and Washington and operate under the BT and MCI brand names.
BT has been looking for a major acquisition since its proposed merger with British rival Cable and Wireless failed in May. BT had been keen to forge that deal because it would have given it access to the lucrative Asian telecoms market -- the world's fastest growing market.
Analysts now expect BT and MCI to start making overtures to major Asian players such as Japan's giant Nippon Telegraph and Telephone Corp, the world's largest telecoms group. The company said in a statement that the proposed deal would create a world leading communications power house with annual cash flow of about 7.5 billion pounds.
BT expects the merger would yield savings from combining overlapping services of 1.5 billion pounds ($2.46 billion) over the first five years and 500 million pounds per year before tax after that.
BT also forecast dividends of 19.85 pence per share for the year to March 31, 1997 -- a rise of six percent over last year -- excluding the 35p per share special dividend.
BT, which will release full year results on November 14, has declared a half year dividend of 7.90 pence payable in November, six percent more than in the same period last year.
The deal is believed to be the second largest ever involving a U.S. company -- topped only by the 1989 buyout of RJR Nabisco by Kohlberg Kravis Roberts and Co.
Analysts said a combined company would be a good fit in the ultra-competitive U.S. long-distance phone industry, where MCI's major competitors are AT&T Corp and Sprint.
Current market leader AT&T, which would be the hardest hit by a fiancially muscular new enlarged rival, said on Friday it was confident any MCI/BT deal would receive proper scrutiny by the U.S. government.
One potential problem is a media joint venture between MCI and Robert Murdoch's News Corp. BT would end up with MCI's 13 percent non-voting stake in News Corp and this could cause regulatory difficulties in Britain, analysts say. ($1=.6096 Pound)
",24
"British Telecom Sunday formally announced its agreement to acquire the rest of U.S. long distance phone company MCI Communications, creating a worldwide telecommunications powerhouse.
The merged company, to be called Concert Plc, creates the world's second-largest telecommunications group, behind Japan's NTT, and presents a powerful rival to U.S. leader AT&T.
British Telecom already owned 20 percent of Washington,D.C.-based MCI, the No. 2 U.S. long telecommunications company. The deal values all of MCI at a total $25.2 billion, but as British Telecom already owns 20 percent, it will issue Concert stock and cash worth $20.1 billion for the 80 percent it does not own.
The deal would be the largest between a British and American company.
Analysts said a combined company would be a good fit in the ultra-competitive U.S. long-distance phone industry, where MCI's major competitors are AT&T and Sprint. AT&T, which would be the hardest hit by a financially muscular enlarged rival, said Friday it was confident any MCI/British Telecom deal would receive proper scrutiny by the U.S. government.
Concert Plc would be one of the world's largest telecommunications companies, with 43 million business and residential customers in 70 countries.
""The complementary strengths and skills of BT and MCI will enable Concert to take full advantage of the great opportunities provided by the forthcoming liberalisation of the telecommunications market in the U.S. and Europe,"" said Sir Iain Vallance, British Telecom's chairman.
""This is an industry with a voracious appetite for capital,"" Gerald Taylor, MCI president and chief operating officer, told a news conference in London. ""We have been living and working together for nearly three years ... we know our strengths and weaknesses ... I believe we will be a winning team.""
MCI and British Telecom were to hold another news conference at 2 p.m. EST in New York.
Under the terms of the agreement, which has yet to be approved by regulatory authorities on either side of the Atlantic, MCI shareholders would receive 0.54 new American Depositary Shares in the new combined group for every MCI share. Each Concert ADS is equivalent to one British Telecom American Depositary Share and $6 cash.
British Telecom's ADSs closed at $55.50 in New York on Friday, giving a value of $30 per MCI share, plus $6 in cash per share before the effect of a buyback by British Telecom that is part of the deal, MCI Chief Financial Officer Doug Maine told Reuters.
British Telecom said Concert will buy back up to 10 percent of its shares after the deal closes. The maximum buyback would increase the value of the deal to MCI shareholders to $39.60 per MCI share. MCI's stock closed Friday at $30.25 on Nasdaq.
The new company, incorporated in Britain, would have headquarters in London and Washington and operate under the British Telecom and MCI brand names.
British Telecom has been looking for a major acquisition since its proposed merger with British rival Cable and Wireless failed in May. It had been keen to forge that deal because it would have given it access to the lucrative Asian telecoms market -- the world's fastest-growing market.
Analysts now expect British Telecom and MCI to start making overtures to major Asian players such as Japan's giant Nippon Telegraph and Telephone Corp.
One potential problem is a media joint venture between MCI and Robert Murdoch's News Corp. British Telecom would end up with MCI's 13 percent non-voting stake in News Corp, and this could cause regulatory difficulties in Britain, analysts say.
",24
"British Telecommunications Plc (BT) might give some ground to U.S. rival AT & T Corp in a quest to win regulatory approval for its $20 billion merger with U.S. carrier MCI Communications Corp, a source familiar with negotiations said on Wednesday.
The proposed merger, the biggest transatlantic deal in history, is being examined by British, American and European regulators. Regulatory clearance from America hinges on whether the British telecom market is deemed to be as open as America's.
AT&T, the world's second biggest telecoms group after Japan's Nippon Telegraph and Telephone Corp, has charged that it does not have the same competitive advantages in Britain as BT will have in the U.S. after its MCI take-over.
The source said BT might look at some of the prices it charges AT&T, which has been active in Britain for some years. The American giant wants BT to lower its transit' costs -- charged for transporting calls from the coast to AT&T's network in cities.
The company also wants what is dubbed ""equal access"" to the British market. This would mean that customers would not have to call special numbers or press other buttons on their telephones before being connected with their chosen telecoms operator.
AT&T complains that customers often forget to dial an access code to get onto its service before making calls, which means that BT gets paid for the call.
While the source said BT was unlikely to give ground on equal access, because it was not cost-effective, he said BT might consider its transit charges. ""It is something that BT may look at,"" the source said, adding: ""I think interconnect costs are always looked at in the UK.""
MCI is America's second biggest international carrier and BT, keen to gain a greater access to the world's biggest telecoms market, wants to buy the 80 percent of MCI it does not already own.
EU sources say that the European Commission is expected to launch a full investigation into the alliance later this week.
The proposed merger, announced last November, was submitted to the Commission for clearance last December, and it has until Thursday to decide whether to clear it following a preliminary investigation -- or launch a deeper probe.
An in-depth probe into whether the deal could violate European fair competition rules could last up to four months.
But BT's EU affairs official Mike Corkerry told Reuters in Brussels: ""We're not picking up any negative vibes about the merger...but there may be some nervousness because it is just so big.""
BT, which along with MCI is holding briefing on Thursday to discuss British and American regulation, expects the deal to be cleared around autumn.
",24
"Angry British businesses expressed dismay on Tuesday after news of another overhaul of telephone prefixes in what is promised to be the final phase of a search for ""future proof"" phone numbers.
Telecommunications watchdog Oftel announced plans to create billions of new numbers, although Britain has barely recovered from ""PhONEday"" in April 1995, when the last batch of new numbers was created and millions of old ones were made obsolete.
""These changes mean more disruption and cost to businesses,"" said Simon Sperryn, chief executive of the London Chamber of Commerce & Industry. ""...business is bound to be lost because of customers ringing the outdated number.""
PhONEday cost telecoms giant British Telecommunications alone 100 million pounds.
Each time numbers change, companies have to pay thousands of pounds in notifying business contacts and to change stationery and logos on delivery vans and shopfronts.
London dialling codes will now be lengthened by a uniform 020 prefix in the year 2000. The current London codes of 0171 and 0181 will be shortened to 7 and 8, respectively, to be dialled after 020.
Northern Ireland, Cardiff (Wales) and the southern English coastal cities of Southampton and Portsmouth will also each get a new prefix starting with 02. Prefixes of 03 to 06 are being kept for future generations.
In an attempt to quell mounting anger and confusion, Oftel director general Don Cruickshank, who was once memorably quoted as saying he was ""not very good"" at forecasting demand for numbers, pledged the new plan would be robust and flexible.
""By early in the next century we will have completed transition to one of the most clear, flexible and customer-friendly numbering schemes in the world,"" he said.
But the opposition Labour Party called for his suspension pending an inquiry into what it called a renumbering ""shambles"".
Labour consumer affairs spokesman Nigel Griffiths said Oftel had ignored advice that PhONEday would not create enough new numbers and another costly upheaval would be needed.
""Sadly this was ignored. How can the public have any confidence that Mr Cruickshank has got it right?"" he asked.
Perhaps surprisingly, BT has backed Cruickshank's new attempt to solve the problem of surging demand for telephone numbers.
Cruickshank also drew praise from the Telecommunications Managers Association, a professional consumer group, which said the old numbering system had lacked logic and structure.
""Oftel is to be congratulated -- it has developed a framework that will give UK telecoms and the country as a whole the necessary stability to enable people to plan for the future in a dynamic and competitive environment,"" it said.
A range of numbers with the prefix 05 will be reserved for corporate use, so companies can move around the country without changing numbers -- or just keep one number for all sites.
Mobile, paging and personal numbers are set to take the prefix 07 by 2001, special freephone and local rate services will have the prefix 08 and premium rate numbers will adopt 090 by 1999.
Nevertheless, Cruickshank voiced uncertainty about long-term future use, musing: ""If you star-gaze way into the next century I have a sneaking suspicion e-mail and voice recognition may well replace numbers.""
",24
"Institutional investors in British utility Northern Electric said on Friday they were likely to sell up if told to do so by the company, despite their objections to the price offered in U.S. group CE Electric's winning bid.
Northern Electric, which operates in northeast England, was poised to announce whether it would officially concede defeat and recommend the 782 million pound ($1.3 billion), or 650p- per-share, hostile offer by the U.S.-controlled energy group.
""There will be a statement from us in the next 72 hours or so,"" a company spokesman told Reuters.
Institutions said they were awaiting Northern's response after CE Electric on Tuesday declared its bid unconditional having secured a slim 50.3 percent majority of acceptances.
""We thought that the price offered was too low and I think now it is a question of getting Northern's judgement on it and making up our minds,"" said a fund manager at one institution who declined to be named. ""But we would have to give a lot of thought to being a minority shareholder,"" he added.
Another institutional investor also said it was unlikely to keep its stake. ""I doubt if we would be standing aside. (Selling) would be our normal procedure,"" said a spokesman.
In normal circumstances, a firm recommends even a hostile offer after the bid has been declared unconditional.
But there has been little about CE Electric's fight for Northern that has been normal -- and at least one institution admitted to harbouring a slim hope Northern could still pull something out of the hat.
Northern Electric, which last year became the only one of the 12 regional electricity companies (RECs) to fight off a hostile bid, lost the battle after an unprecendented extension to the bid tipped the votes in CE Electric's favour.
The Prudential Corp, one of Northern's biggest shareholders, then attempted to defeat the takeover in the eleventh hour by trying to persuade investors who had accepted the offer to sell their Northern shares to the insurer instead for the same price.
CE Electric is keen to win at least 90 percent of the shares -- the amount needed under British takeover rules before it can carry out a compulsory purchase of the remaining ones -- and its message to any institutions thinking about hanging on to minority stakes was terse.
""If these reports about some shareholders deciding that they will not accept the offer are true, it raises a number of questions about their investment policy. But obviously it is up to them to decide what they want to do,"" a CalEnergy spokesman.
While Northern's core business is heavily regulated, most institutions invest in utilities for their robust dividends -- which is a matter for the board, not the industry regulator.
Some institutions said they remained baffled that Northern's bid for independence had failed because of a technicality.
The Takeover Panel last Friday extended the bid, after CE Electric narrowly failed to win control, because Northern's broker BZW had belatedly reported it had charged Northern an extra 250,000 pounds in a performance-related fee.
One institution said on Friday it remained convined that Northern was worth 700-720 pence a share, saying that if CE's bid had failed, the U.S. group may have come back to discuss a higher price -- or a fresh bidder could have been attracted.
Failing that, the value of the company would have been reflected in its share price in the long term, it said.
Only two of 12 regional electricity companies now remain independent -- Southern Electric and Yorkshire Electricity. Six have been bid for by American companies.
($1=.5943 Pound)
",24
"Virginia-based Dominion Resources executives Tuesday began merger talks with British utility East Midlands Electricity in an effort to agree on a takeover price.
Dominion's chairman, chief finance officer and attorneys began meeting in London with East Midlands Chairman Nigel Rudd, Chief Executive Norman Askew and their advisers -- the merchant bank Schroders -- a source close to the British regional electric company said.
No further details were immediately available.
Richmond, Va.-based Dominion Resources owns Virginia Power.
Dominion and East Midlands agreed to talk despite East Midlands' insistence it would reject any offer from Dominion Resources pitched at around 6.08 pounds sterling per share ($10.05), which would value the British company at 1.2 billion pounds ($2 billion).
In the fifth potential U.S. bid for one of Britain's 12 cash-rich regional electricity companies, Dominion said last week that it was considering an offer ""at a price not much in excess of 608 pence per share.""
But East Midlands, the first of its wealthy peers to launch a stock buy-back in an attempt to redistribute cash to shareholders, scorned the price as undervaluing the Nottingham-based utility's prospects.
East Midlands, the target of consistent bid speculation as seven of 12 regional electricity companies have fallen to predators and an eighth, Northern Electric, is facing its second hostile bid, saw its stock end 8.5 pence (14 cents) higher at 6.12 pounds ($10.12).
Dominion's stock closed up 12.5 cents at $39.75 on the New York Stock Exchange.
Some traders and analysts said the London market remained unconvinced the American utility would launch a bid.
Nigel Hawkins, utilities analyst at the Yamaichi brokerage, said Dominion would need to start merger talks at 650 pence ($10.74) per share, but added East Midlands was unlikely to recommend a bid much below 7 pounds, or 700 pence ($11.57).
""I do not believe East Midlands would recommend a bid siginficantly below 700p per share,"" he said. ""I am not saying they would refuse it at the 690p ($11.40) level.""
Traders also emphasised that Dominion could still walk away from the talks amid regulatory and political uncertainties.
A Dominion Resources spokesman has said the U.S. company was well aware of the uncertainties that surround the purchase of a British electrical utility.
A lull in a wave of bids for electric companies came to an abrupt halt last month when CE Electric -- jointly owned by CalEnergy Co. and Peter Kiewit Sons' Inc. -- launched a hostile 650 million-pound ($1.07 billion) bid for Northern Electric.
The Nebraska-based utility has built up a stake of around 29.5 percent in a series of market raids on Northern Electric, which became the first regional electric company to be faced with a takevoer attempt in December 1994.
A costly shareholder package in defence against the unwanted attentions of conglomerate Trafalgar House left Northern Electric with high debts.
",24
"Shareholders in Anglo-American conglomerate Hanson Plc Friday overwhelmingly approved the final part of the group's ambitious four-way split-up.
The approval clears the way for its Energy Group division to be spun off on Monday. About 98 percent of shareholders voted for the plan.
The vote ended an era that saw Hanson, under takeover king Lord Hanson and his late partner Lord White, become a star performer in the 1980s as it grew into one of Britain's largest conglomerates.
But with a stock market that showed its mistrust of conglomerates by sharply marking down their shares, Hanson last January announced that it would tear itself up into separate tobacco, chemicals, energy and building companies.
Energy has two main parts, U.S.-Australian Peabody Coal, the world's largest private coal producer, and Eastern, Britain's fourth-largest electricity generator and distribution business.
Analysts said the company has good growth prospects but is difficult to value because of its diversity.
""I genuinely think if there is a chance of growth this is it, but valuing Energy is difficult because it is a very different animal from other utility stocks,"" said one analyst who asked not to be named.
David Campbell, an analyst at Craig Middleton, said he forecasts earnings growth of around 12 percent annually over the next two years.
Analysts said the potential for using electricity expertise to help Peabody Coal expand in this area in the United States could help Energy's growth.
""Peabody could be the most interesting. It's a clear chance to expand into electricity in the U.S.,"" one said.
Energy has already said it is mulling a string of acquisitions in Britain and North America and has started talks with a U.S. power marketing company.
The company will join a British electricity sector that has been whittled down by take-overs over the last two years as regional electric companies were bought, leaving just two out of an original twelve created at privatissation in 1990.
There has been some speculation Peabody Coal could be spun off from the British electricity interests, but on Friday, Hanson chairman Lord Hanson ruled this out.
""No, I have had enough of demergers (split-ups) and I think (the two) fit very well together,"" he replied to a shareholder question.
The group, which is expected to start with market value of around 2.8 billion pounds ($4.5 billion) and is being sold with 1.4 billion pounds of debt ($2.3 billion), will be large enough to rank among Britain's biggest blue-chip companies and America's Fortune 500. Shares of the company will be listed in London and New York.
The split-up will give shareholders one Energy share for every 10 existing Hanson shares held. Every eight shares in the remaining Hanson group will be consolidated into one new share at the same time.
Hanson's first two split-ups, of Britain's Imperial Tobacco Group Plc and U.S.-listed Millennium Chemicals Inc., took place last October.
",24
"Misys, Britain's fast-growing, 950 million pound software supply giant, said on Wednesday it was looking at four or five international acquisition targets worth up to $30 million each.
Chairman Kevin Lomax told Reuters that Misys, which has snapped up software trading firms in South East Asia, Ireland, the U.S. and Europe, was keen on businesses that operated within a strong international financial services market.  
""They (possible acquisition targets) are worth mainly between $2.0 million to $30 million -- and we might do one, we might do four,"" Lomax said.
With 18.7 million pounds of cash and an undisclosed, but low gearing level, Lomax said the company had plently of headroom in its cash flow and borrowing facilities to enable it to embark again on the acquisition trail.
Supplying software to banks and insurers has brought rich rewards to Misys. The group earlier raised pretax profits in the half year by 23 percent to 23.7 million pounds on revenues of 129.5 million pounds -- a 10 percent rise.  
Lomax said he saw the possibility of ""creating quite a bit of shareholder value"" by buying regional software companies, particularly in the banking industry.
Misys, whose banking division alone now supplies software to 12,000 banks and 4,000 installations, has become one of the world's largest application software companies as consolidation in the industry gathers pace.
In the last 12 months, its shares have almost doubled to 1115 pence from 567 pence as it systematically targets international financial institutions that need new software at lower costs but with a greater security of transactions.  
Lomax insists that he is unworried by the share price, which at about 20 times prospective earnings, no longer looks cheap. Competitors' PE ratios are comparable, he says.
But the stock slipped 2.5p to 1115p despite record results.
The company has bought software businesses in risk management, private banking, corporate electronic banking, derivatives trading, capital markets trading --- areas where banks and securities firms want to expand and control their activities.
""Internal production is not meeting the time to market requirements that these companies have -- so they tend to look outside to other (software) products,"" Lomax says.
Only last month, Misys announced the planned $60 million acquistion of Summit Systems, a New York computer company specialising in financial derivatives trading software.
In terms of international banking, Misys is three to five times bigger than its next competitor. Rivals such as Reuters Holdings and America's SunGard Data Systems impinge only on parts of its market, Lomax noted.
""Nobody of any serious calibre or size competes across the board with us.""
The group lifted its half year dividend 15 percent to 4.57p.
London Newsroom +44 171 542 7987
",24
"Intel Corp launched its new Pentium chip with multimedia extension (MMX) technology on Wednesday, promising TV-quality video, stereo surround sound and three-dimensional graphics for personal computers.
The world's largest computer chip maker, Intel has collaborated with more than 100 software developers, some of which have created programs such as UbiSoft's dizzying new car race game called Pod' especially for Intel's Pentium processors that have the new MMX technology.
""This means life-like colour, full screen video and graphics, CD (compact disk) quality stereo sound, real-time animation and a better Internet experience,"" Intel said.
Long-awaited in the computer market, the MMX has helped drive Intel shares to record levels over recent weeks and is expected by industry watchers to boost computer sales.
Intel shares rose a further four dollars on Tuesday to $143-3/8 but were down slightly in active early Wednesday trade.
Trumpeting MMX as a ""giant leap forward"" for PC users, European technology director Ian Wilson told Reuters that new multimedia software written to take advantage of MMX technology ran up to 60 percent faster than on Intel's previous Pentium processors. Existing software runs up to 10-20 percent faster.
Intel says the new technology will boost computer sales and soon become an industry standard.
""The new features we have introduced with MMX technology allow a much better, richer multi-media experience...and we'll see a home and consumer demand for PCs growing even more,"" Wilson said.
Intel said that for the first time in its history, a wide range of consumer software was available right at launch to exploit the powers of the new chip.
The MMX chip will initially be offered with the 166 and 200 MHz Pentium processors, improving the performance of personal computer-based multimedia and high-speed communications with faster ""modems"" for speeding access to the Internet.
A host of computer manufacturers are offering the Pentium MMX processor, including America's International Business Machines Corp, Compaq, Hewlett-Packard, Italy's Olivetti and Japan's Toshiba.
British electrical retail chain Dixons said new Pentium processors with MMX technology would be available in some of its stores from Wednesday.
Wilson said he expected systems incorporating the new MMX technology to retail at between $1,500 and $2,000.
Analysts have estimated that Intel could sell 30 million to 45 million MMX chips this year -- about half of the microprocessor units it will sell this year.
But Wilson declined to comment on shipments, saying only: ""By end of year, a significant percentage of our microprocessors being shipped will be incorporating MMX technology.""
The MMX chip, which is available on desktop PCs as well as on low-power portable computers, contains 4.5 million transistors and adds 57 processor instructions to speed up software instructions.
The added performance of the technology frees up more of the Pentium processor to work on several tasks at once, including low-cost PC videoconferencing over standard telephone lines.
Intel said it planned to build technology to upgrade some of its older Pentium processors later this year.
The company does not expect a re-run of its experiences in 1992, when it was forced to recall hardware because of problems with its processor chips.
""I think we have learnt a lot from that experience,"" Wilson said. ""We're very confident of the quality and reliability of the product we are shipping.""
",24
"Misys, Britain's fast-growing, 950 million pound ($1.5 billion) software supplier, posted record half-year results on Wednesday and said it was eyeing up to five international acquisition targets worth up to $30 million each.
Chairman Kevin Lomax told Reuters that Misys, which has snapped up software trading firms in South East Asia, Ireland, the U.S. and Europe, was keen on businesses that operated within a strong international financial services market.
""They (possible acquisition targets) are worth mainly between $2.0 million and $30 million...,"" Lomax said.
Misys, whose banking division alone now supplies software to 12,000 banks with 4,000 separate installations, has become one of the world's largest application software companies as consolidation in the industry gathers pace.
And with 18.7 million pounds of cash and undisclosed, but low debt levels, Lomax said the company had plently of headroom in its cash flow and borrowing facilities to enable it to embark again on the acquisition trail.
Only last month, Misys announced the planned $60 million acquistion of Summit Systems, a New York computer company specialising in financial derivatives trading software.
Supplying software to banks and insurers has brought rich rewards to Misys. The group raised pretax profits in the half year by 23 percent to 23.7 million pounds on revenues of 129.5 million pounds -- 10 percent higher than in the last half year.
Lomax said he saw the possibility of ""creating quite a bit of shareholder value"" by buying regional software companies, particularly in the banking industry.
The group has bought software businesses in risk management, private banking, corporate electronic banking, derivatives trading, capital markets trading --- areas where banks and securities firms want to expand and control their activities.
In the last 12 months, Misys's shares have more than doubled to 1140 pence from 567 pence as the group systematically targets international financial institutions that need new software at lower costs but with a greater security of transactions.
Lomax insists that he is unworried by the share price, which at about 20 times prospective earnings, no longer looks cheap. Competitors' price/earnings ratios are comparable, he says.
But the stock has slipped recently, and was trading 2.5 pence weaker at 1115p by 1115 GMT -- despite the strong results.
In terms of international banking, Misys is three to five times bigger than its competitors. Large rivals such as Reuters Holdings Plc and America's SunGard Data Systems impinge only on parts of its market, Lomax noted.
""Nobody of any serious calibre or size competes across the board with us.""
The group lifted its half year dividend 15 percent to 4.57p.
($1=.6199 Pound)
",24
"The UK telecoms market is one of the world's most competitive and any attempt to block a planned $20 billion merger between British Telecom and U.S. firm MCI on grounds of restricted trade will fail, analysts said on Monday.
The merger partly hinges on how open the UK market is deemed to be because U.S. rules bar foreign groups from buying more than 25 percent of a U.S. firm unless their home market is deemed to be as competitive as that of the United States.
If it is approved, the merger between BT and America's MCI announced on Sunday to create Concert Plc will represent the largest cross-border takeover in history and the world's second biggest international telephone group.
U.S. telecommunications market leader AT&T, which stands to lose most from such a new heavyweight rival, has urged regulatory authorities to give the planned deal with MCI, the number two U.S. carrier, the ""scrutiny it deserves.""
But analysts said it was unrealistic for AT&T, British Telecom's arch-rival in international markets, to say that the British market was not competitive enough.
One industry analyst, asked whether he thought the proposed deal would be cleared, said: ""Ultimately, I think it will be approved. But some tinkering may be required.""
""I don't think it's realistic for AT&T to argue that the market in the UK isn't open -- or that the market in the U.S. is any better,"" said one analyst who declined to be named.
Britain's market is more open than those of its European neighbours, most of which will only abolish state monopolies over telecoms services by January 1, 1998.
The European Commission cleared the BT's acquisition of its initial 20 percent stake in MCI three years ago.
The merger between BT and MCI to form Concert Plc will have to be approved by the U.S. Department of Justice, the U.S. Federal Communications Commission and Britain's Department of Trade and Industry.
Although BT still controls more than 90 percent of all local UK telephone connections, analysts said there were few barriers to foreign companies wanting to compete here.
AT&T is already planning to establish a foothold in the UK market since the international partnership between BT and Cable and Wireless unit Mercury ended earlier this year.
AT&T has also been tipped as likely to forge alliances with UK cable companies in the local market as well as with mobile networks and new operators such as Cambridge-based Ionica.
A spokeswoman for UK telecoms regulator Oftel said it was too early to say which obstacles stood in the way of BT and MCI completing the proposed deal by the end of next year.
",24
"Scotland-based hotels and casinos group Stakis on Thursday said it will buy Lonrho Plc's five Metropole hotels, funding the 327 million pound ($530 million) deal with a huge cash call on shareholders.
Stakis, which operates 46 British hotels and 22 casinos -- and whose current market value is only about 472 million pounds -- said it wanted to raise 222 million pounds via a heavyweight four-for-seven rights issue, set at 82 pence per share.
""We've found a reasonable and sensible price for a very good, perhaps unique, product,"" Stakis chief executive David Michels told a news conference.
Lonrho, which is in the throes of a demerger, said in a separate statement that the disposal would generate net proceeds of 316 million pounds as well as payments of 63 million pounds in dividends and tax relief that it will receive from the chain.
""The proposed sale of Metropole Hotels represents an important step in the separation of Lonrho's mining and non-mining assets...,"" said Lonrho chairman John Leahy, adding that the firm was continuing to make progress with its demerger.
Last month, Lonrho shelved plans for a 700 million pound flotation of its Metropole and its North American-based Princess luxury resort hotels because of the level of interest it had received from potential buyers.
Saudi billionaire Prince al-Waleed bin Talal has been tipped as the most likely buyer of the 10 five-star Princess hotels. Lonrho expects to announce the sale in about three weeks.
The sale of the hotels, which will be followed by the divestment of the group's African trading operations, is part of Lonrho's plans to turn itself into a focused mining company and ends 30 years of empire building by founder Tiny Rowland.
Stakis had been the front-runner to buy the conglomerate's Metropole chain -- four-star hotels with extensive conference facilities -- since rival Millennium & Copthorne Hotels pulled out of the bidding race earlier this month.
The hotels group said it expected the acquisition to boost earnings from the first year and forecast 1996 group profit before tax and exceptionals would be over 30.6 million pounds.
Stakis also forecast a final dividend of 1.2 pence per share, giving a total payout of 2.15 pence for the full year -- 23 percent more than last year.
The company, which had been in acquisition talks with Lonrho for about 15 months, plans to cut costs at the hotels and boost profits by boosting occupancy -- currently at about 68 percent.
Analysts welcomed the deal. ""The numbers stack up. I have no problem with their strategy,"" said Matthew Nayler, leisure analyst at brokers Williams de Broe.
Analysts estimate that Stakis will have to boost profits at the hotels -- in the cities of London and Birmingham and the seaside resorts of Brighton and Blackpool -- by at least 12 percent for the purchase to be profitable.
In an innovative move by investment bank Schroders that will save Stakis some money on commissions, the bank is arranging a partial tender for sub-underwriting of the rights issue by investment institutions in which sub-underwriters will be allowed to tender at lower commissions for additional sub- underwriting above their initial allocations.
Schroders will then cut the primary underwriting commission charged to Stakis at the same rate as any reduction in total sub-underwriting charges.
""We may lose money but we think change (to commission rates) is inevitable,"" Schroders' Robert Swannell told reporters.
The market is now awaiting news on Lonrho's sale of the Princess hotels, which include resorts in Acapulco, Mexico, the Caribbean and the U.S.
A Lonrho spokesman said news on this was expected in approximately three weeks.
Financial sources in the Gulf said earlier this month that the Saudi prince had exclusive rights to negotiate a deal and that the price was $300 million. The prince's key western investments include stakes in New York's luxury Plaza hotel, the Four Seasons hotel group, banking group Citicorp and the Disneyland Paris theme park.
($1=.6165 Pound)
",24
"The UK telecoms market is one of the world's most competitive and any attempt to block a planned $20 billion merger between British Telecom and U.S. firm MCI on grounds of restricted trade will fail, analysts said.
The merger partly hinges on how open the UK market is deemed to be because U.S. rules bar foreign groups from buying more than 25 percent of a U.S. firm unless their home market is deemed to be as competitive as that of the United States.
If it is approved, the merger between BT and America's MCI announced on Sunday to create Concert Plc will represent the largest cross-border takeover in history and the world's second biggest international telephone group.
U.S. telecommunications market leader AT&T, which stands to lose most from such a new heavyweight rival, has urged regulatory authorities to give the planned deal with MCI, the number two U.S. carrier, the ""scrutiny it deserves.""
But analysts said it was unrealistic for AT&T, British Telecom's arch-rival in international markets, to say that the British market was not competitive enough.
One industry analyst, asked whether he thought the proposed deal would be cleared, said: ""Ultimately, I think it will be approved. But some tinkering may be required.""
""I don't think it's realistic for AT&T to argue that the market in the UK isn't open -- or that the market in the U.S. is any better,"" said one analyst who declined to be named.
Britain's market is more open than those of its European neighbours, most of which will only abolish state monopolies over telecoms services by January 1, 1998.
The European Commission cleared the BT's acquisition of its initial 20 percent stake in MCI three years ago.
The merger between BT and MCI to form Concert Plc will have to be approved by the U.S. Department of Justice, the U.S. Federal Communications Commission and Britain's Department of Trade and Industry.
Although BT still controls more than 90 percent of all local UK telephone connections, analysts said there were few barriers to foreign companies wanting to compete here.
AT&T is already planning to establish a foothold in the UK market since the international partnership between BT and Cable and Wireless unit Mercury ended earlier this year.
AT&T has also been tipped as likely to forge alliances with UK cable companies in the local market as well as with mobile networks and new operators such as Cambridge-based Ionica.
A spokeswoman for UK telecoms regulator Oftel said it was too early to say which obstacles stood in the way of BT and MCI completing the proposed deal by the end of next year.
",24
"British Telecommunications Plc is likely to brush off Japanese telecom giant Nippon Telegraph and Telephone Corp's statement that it hopes to move into the global market independently, analysts said on Thursday.
BT, along with most of its global telecoms rivals, has long sought to link up with NTT and gain a foothold in the lucrative Asian markets. The company's top bosses, who regularly travel to Japan, are meeting NTT executives this month, BT confirmed.
NTT, which only last month won regulatory approval to offer international services as part of a move to restructure the company, said earlier this week that it hoped to pursue an independent approach to gain customers in the global market -- rather than seek tie-ups with interational rivals.
However, analysts said NTT's views, published in a newspaper interview, were more likely to be a negotiating ploy.
""I suspect the interpretation is that this is an entirely rational approach by NTT to indicate that it can, if necessary, go alone,"" said Laurence Heyworth, telecoms analyst at Robert Fleming Securities.
""Obviously that does improve its negotiating position with regard to potential partners as well,"" he added.
BT confirmed that chairman Sir Iain Vallance, who is in India with British Prime Minister John Major as part of a tour to boost British trade, will travel on to Japan on Friday to meet NTT executives.
Sir Peter Bonfield, BT's chief executive, will also meet NTT and other organisations in Japan at the end of this month. But the company said these visits had long been scheduled and were not a knee-jerk reaction to NTT's independence stance.
""This is something that has been planned for a long time and yes, they will be meeting people from NTT and indeed other organisations in Japan...as you would expect. It is an important area,"" a BT spokesman said.
BT has an office in Japan and this year appointed its first regional director in Japan in a move to highlight the importance of the area. It already has a minor link with one of NTT's units, NTT Data, which distributes its Concert Internet Plus services.
But BT also reiterated that while NTT, the world's biggest telecoms company, would be a good partner, there were others it could talk to.
BT has small stakes in mobile telephone operations in Japan.
Most global telecoms groups, for whom the key to success in the increasingly competitive market is global reach, are keen to move into Asia -- an area where few are well represented.
""I think that every major telecommunications grouping is harbouring hopes of linking up with Japan. Clearly NTT is the largest telecom company in the world and provides local access to one of the most impenetrable markets in the world as well,"" Heyworth said.
BT last November announced a $20 billion merger with America's MCI Communications in a move partly to increase its clout and make it more attractive to potential Asian partners.
",24
"British companies tipped as possible targets for a windfall tax under a Labour Government are unconvinced by the opposition party's promise not to discriminate unfairly between ""utilities"".
Labour, which is far ahead of Prime Minister John Major's Conservative Party in opinion polls, has said only that it plans to tax what it calls ""the excess profits of privatised utilities"" if it wins the next election, due by May 22.
With speculation mounting that the party plans to raise up to 10 billion pounds ($16.6 billion) from such a tax, companies as diverse as electricity, water, gas, telecoms, airline and airport firms are being tipped as possible targets.
""If Labour are not going to increase taxes anywhere else -- and utility taxes are not exactly unpopular -- they could decide to go and dig more deeply into the stores of privatisation wealth,"" said Nigel Hawkins, utilities analyst at Yamaichi.
Hawkins speculates that on a rough calculation based on market value, the 15 electricity groups might be hit by a two billion pound bill, the 10 big water companies with one billion pounds, British Telecommunications with 1.5 billion and British Gas with 500 million.
To raise 10 billion pounds, Labour might stretch the phrase ""utilities"" to include firms such as former airports authority BAA, Associated British Ports, British Steel, British Aerospace and possibly some bus firms.
Perhaps unsurprisingly, while Labour said it did not want to ""discriminate unfairly between companies"", none of the firms contacted by Reuters believed they should be affected by Labour's tax proposals.
Labour has argued that Britain's utilities were sold too cheaply on privatisation and have benefited from relatively benign regulation allowing them to stack up windfall profits.
Electricity and water giant United Utilities denied it had benefited from a windfall, BT, the country's dominant telephone company, insisted it was neither a monopoly nor a utility and BAA would not even contemplate such a tax.
""We just think it would be a crazy thing to do...the likelihood is just so small,""a BAA spokesman said.
A spokeswoman for British Gas said the firm had made no provisions for a profit tax. ""We prefer to see any details of any proposals before commenting on them. It's all hypothetical at the moment,"" she said.
But analysts are starting to pencil in calculations.
""I work on a basis, as a very rough guideline, of a tax of between five and 10 percent of total market capitalisation,"" Hawkins said. ""In some cases it means in a single year a utility has no retained earnings.""
But ahead of its first budget, the Labour Party declines either to define what it means by privatised utilities, or to disclose how much it plans to raise.
Labour has consistently condemned the so-called ""fat cat"" executives of the privatised electricity and water companies for what it calls short-changing consumers while lining their own pockets and those of their shareholders with hefty dividends.
But short of conceding that it does not consider British Airways a utility, the party will not be drawn on which other companies will fall into its tax net.
""We will consult with the regulators before we make any announcement about the definition of the tax, who it will apply to, its scale. And that won't happen until we're in government,"" an aide to Labour's finance spokesman Gordon Brown said.
The party, which has taken extensive legal advice, added: ""No amount of lobbying by companies or the Conservatives will make any difference. In the way we intend to introduce it, we're 100 percent convinced there will be no legal, financial or technical obstables to the introduction of a windfall tax."" ($1=.6035 Pound)
",24
"British households are likely to pay less for water and get a better service from cash-rich privatised utility companies in the next decade, the industry regulator promised consumers on Wednesday.
Water watchdog Ian Byatt told privatised water companies -- whose bills and fat executive wages have fuelled vitriolic criticism from consumer groups -- that he expected them to pass on significant efficiency savings to customers in 2000.
""Lower costs mean falling bills,"" Byatt warned them in a letter setting out his proposed objectives and timetable for the price review, which will be completed in December 1999.
""At the next review, I will expect companies to demonstrate improving standards for their customers and efficiency gains will allow prices to come down in real terms, despite continuing capital investments,"" he said.
Byatt, who plans to call this summer for comments on his plans, will impose new price curbs on 29 water and sewerage companies in England and Wales from April 1, 2000.
A spokesman for the Water Services Association trade group said that lower bills depended on what new quality and environmental obligations were be set by Europe and Britain -- and how much needed to be spent on new water resources.
But the Ofwat National Customer Council consumer group said that in the absence of competition, it was looking to Byatt to take ""the toughest action possible"" to get water bills down.
""In my view, water companies have rewarded their shareholders handsomely but have treated their customers much more mean-spiritedly,"" said deputy chairman Clive Wilkinson. ""Customers have had enough of big profits and rising dividends and, at best, being handed back the small change.""
Water groups are the only utilities to have raised prices since privatisation in 1989, blaming costly infrastructure investments and new swimming and drinking water quality control directives from the European Union.
The opposition Labour Party, which is expected to levy a one-off tax on the profits of privatised utilities if it comes to power in the next election, is widely considered to have discovered one of the few ""popular"" taxes.
Headlines such as: ""Like water off a duck's back"" greeted Byatt's last review, which came into effect in 1995, as shares surged. Consumer groups charged that Byatt had been too lenient.
But Byatt said one of the new review's main aims would be to ensure that water companies' savings over the last five years should be quickly given to customers.
He also does not want spending on water quality, maintaining supplies and reducing leakage -- which sparked criticism during a drought in 1995 -- to be passed onto household bills.
Amid charges that regulators are out of touch with the industry and underestimate its cash-spinning powers, Byatt is mulling appointing senior industrialists to help find a balance between consumer bills and maintaining companies' efficiency incentives.
London's Thames Water charges the least for water -- not being responisble for any coastline. Average bills, at 180 pounds ($294) per year, are some 80 percent higher than in 1989.
Exeter-based South West Water, with its long coastline, has the highest bills at about 330 pounds per year -- a 121 percent rise -- according to 1995-96 figures. ($1=.6120 Pound)
",24
"U.S./Canadian mobile satellite communications group Odyssey Telecommunications is near securing $600-$800 million of the $3.2 billion it needs to launch 12 satellites into orbit from 2001, an industry source said.
The group -- the joint project of U.S. aerospace giant TRW Inc and Canada's telecoms firm Teleglobe Inc -- is one of four main rivals that want to allow subscribers to receive voice, faxes and paging services anywhere in the world using only a pocket telephone.  
""We're pleased with the progress we have made in bringing together a global team of national service operators.""
OTI declined to name the companies attending the meeting, citing concerns for confidentiality. But it said there were representatives from companies in Asia, Europe and North and South America.
So far, the company has received letters of intent, which are non-binding until the initial round of financing is closed.  
Although the company has dismissed speculation that it has had difficulties finding backers for its system, its plans to launch the satellites have been delayed by around three years.
However, after representatives from 12 strategic partners in the company met in London to review the planned project, the source told Reuters: ""The first round of financing is expected to be completed in three to four months.""
""This meeting marks the first time we have all met around the same table,"" said Odyssey Telecommunications International (OTI) managing director Marc Leroux in a statement.  
""Participants in the meeting were enthusiastic and confident about Odyssey's business plan and system design,"" Bruce Gerding, a managing director of OTI said in a statement.
The second and third phase of funding is expected to include further equity and an element of debt finance, the source said.
The worldwide market for personal satellite telephones (satphones), that seeks to replace the cumbersome suitcase-sized terminals costing up to $10 per minute to use, has been estimated by some analysts to be worth $12 billion in global annual revenues by 2004.  
The main contenders for their share of the hand-held satphone market are Iridium, backed mainly by U.S. technology gaint Motorola Inc, U.S. aerospace firm Loral Corp's and Qualcomm's Globalstar and ICO Global, a spin-off of international telecom consortium Inmarsat.
Odyssey wants to launch its satellites into ""medium-Earth"" orbit -- about 10,000 kms from the earth's surface. Seven Earth stations, linked by a global fibre-optic network, are also part of the patented Odyssey system.  
The company has started legal proceedings against ICO Global for alleged infringement of its medium earth orbit technology patents.
-- London Newsroom +44 171 542 7987
",24
"A war of words between Northern Ireland Electricity (NIE) and its watchdog broke out on Friday after the company rejected stringent price cut proposals and asked for a Monopolies and Mergers Commission (MMC) referral.
Charles Coulthard, Northern Irish deputy director general for electricity supply, accused NIE of trying to raise prices by rejecting his plans that would chop more than 300 million pounds ($467 million) off revenues over a five-year period.
""...when I had expected that NIE would be working with me to tackle the problem of Northern Ireland's high electricity costs they instead have chosen for the first time since privatisation to deliberately seek to increase the price which customers in Northern Ireland must pay for electricity,"" he stated.
Patrick Haren, NIE chief executive, scorned the statement as ""garbage"" and ""quite disgraceful"". He reminded Coulthard that under NIE's proposals, average domestic customer power bills would fall by 35 pounds next year, rising to 50 pounds per year by 2002.
""I have never heard anything so oustandingly outlandish,"" he told reporters. ""Where on earth the man got this...from is beyond me. We unreservedly refute the nonsense of it.""
""If this is what passes for dialogue at Offer (the Office of Electricity Regulation) it is quite obvious why we need to have our review assessed by the MMC.""
NIE's troubled shares hit another year low of 322 pence, a loss of 11 pence. Most analysts had been surprised at the savage review, but did not believe the group would risk further uncertainty by asking for a lengthy MMC investigation.
Nigel Hawkins, utilities analyst at Yamichi, said the MMC referral may prompt a similar move by National Grid, the electricity transmission network, which last week urged its shareholders to help fight its own price review.
""They (NIE) have a stronger balance sheet than National Grid, so if they think they have a lousy deal then National Grid could well follow suit,"" Hawkins said. NIE chairman David Jefferies is also the chairman of the National Grid.
NIE is proposing a 22 percent one-off price cut next year followed by a three percent cut in power bills in each of the next four years -- a level it calls tough but sustainable.
However Offer's Northern Irish office wants prices across NIE's three main businesses cut by an average one-off 31 percent, or 68 million pounds, next April followed by a two percent cut in annual charges in the following years.
Bills in Northern Ireland have traditionally been about 20 percent higher than in England and Wales, partly because of the sparse population in the area. It has around half the customers of the smallest English and Welsh regional electricity groups.
NIE also blames escalating oil prices and the high prices independent generating companies charge. They account for about 60 percent of customer bills.
($1=.6420 Pound)
",24
"British Telecom unveiled the largest transatlantic deal in history on Sunday, linking up with America's MCI Corp in a $20 billion merger that catapults it into second place in the world's international telecoms market.
The deal with MCI -- the number two U.S. long-distance phone company after U.S. telecoms giant AT&T Corp -- creates a $54 billion group to be called Concert Plc, which will have 43 million business and residential customers in 70 countries.
""Tomorrow begins a new era for all of us as we go forward in Concert and harmony,"" Gerald Taylor, MCI's president and chief operating officer told a news conference.
In an attempt to keep one step ahead of rivals as world telecoms markets are liberalised, BT is taking on a partner with a powerful position in the world's biggest telecoms market, generating about 40 percent of the world's long-distance calls.
Under the deal, which has yet to win regulatory approval on both sides of the Atlantic, MCI shareholders would receive up to 2.3 billion pounds ($3.77 billion) cash and new Concert American Depositary Shares. For each MCI share, investors will get 5.4 new BT shares and $6.0 cash, valuing MCI shares in the mid $30 each.
BT is also paying its 2.4 million shareholders a special dividend bonanza of 2.2 billion pounds, or 35 pence per share, which is not dependent on any completed merger.
The company also said it would ask shareholders to approve plans for its first ever share buy-back at an extraordinary meeting to approve the MCI deal.
BT, whose motto ""It's good to talk"" appears to have paid off since alliance talks failed with British rival Cable and Wireless six months ago, already owns 20 percent of MCI.
Sir Peter Bonfield, BT's chief executive, denied that the deal with MCI was the second best choice for BT, which has been keen to get access to the world's fastest growing telecoms market -- Asia -- via Cable and Wireless's 57.5 percent stake in the highly-profitable Hong Kong Telecommunications.
""It's not second best, it's first best,"" he told the news conference.
BT already has a joint venture with MCI called Concert, which provides a whole range of communications services to customers in more than 50 nations. MCI also carries 40 percent of the worldwide traffic on the Internet.
""The merger combines the substantial financial resources and global position of BT with the growth momentum and market expertise of MCI, known for its success in the competitive U.S. long distance market,"" BT said in a statement.
The new telecoms giant, which will have annual cash flow of about 7.5 billion pounds, will be incorporated in Britain with headquarters in London and Washington and operate under the BT and MCI brand names in Britain and America.
BT expects the merger, after an initial five percent earnings dilution, to 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.
BT also forecast dividends of 19.85 pence per share for the year to March 31, 1997 -- a rise of six percent over last year -- excluding the 35 pence per share special dividend.
BT, which will release full year results on November 14, has declared a half-year dividend of 7.90 pence payable in November, six percent more than in the same period last year.
The deal is believed to be the second largest ever involving a U.S. company -- topped only by the 1989 buyout of RJR Nabisco by Kohlberg Kravis Roberts and Co.
Analysts said a combined company would be a good fit in the ultra-competitive U.S. long-distance phone industry, where MCI's major competitors are AT&T Corp and Sprint.
Current market leader AT&T, which would be the hardest hit by a financially muscular new enlarged rival, said on Friday it was confident any MCI/BT deal would receive proper scrutiny by the U.S. government. ($1=.6096 Pound)
",24
"British Telecommunications' shares, which surged on Monday after weekend confirmation that the telecoms giant had merged with MCI of the U.S., should be valued at around four pounds each, analysts said on Monday.
News of the biggest trans-Atlantic deal in history, linking Britain's dominant telecoms company with America's second largest international carrier, has helped instititions on this side of the Atlantic reassess BT's growth prospects.
By 1306 GMT, almost 56 million shares had exchanged hands as the stock surged 28.5p to 379.5 pence down from an earlier 386p.  
""This deal will force people to look at BT in a new light; look at the international operations; look at the international alliances in Europe; to look at what they could be doing with the Internet because MCI is a big player there,"" said one analyst who asked to be named.
""All these much higher growth and much more exciting elements of BT in which the company has been quietly building value will come much more the fore,"" he added, noting that he was pitching the stock's true value at nearer 4.30 pounds.  
Analysts were split on how much of the share price rise was attributable to the $20 billion MCI merger, which included a 2.2 billion stg special dividend for BT shareholders.
But they said the market had been valuing the 22.6 billion stg group more as a UK utility, with 60 percent of its revenues governed by a regulatory price cap. However, having lined up six European joint-ventures, BT's share of the population in Europe for which they will have a licence could rise to 90 million.  
""In one year's time, only 15 percent of BT's revenues will be covered by a price cap. And, with their European operations getting off the ground, they will have a very substantial business in international markets,"" the analyst added.
Another analyst said that news of the special dividend alone had helped lift BT's shares by as much as 22 pence. Analysts have welcomed the move by BT, which has negligible gearing, to increase borrowing to make it more capital efficient.
""I think its a four-pound stock,"" he said. ""The market did want to see capital restructuring.""
The deal helps lift BT's gearing to around 65 percent.  
""The majority of the share price rise is a function of what is happening to the balance sheet rather than it being an indication that MCI was the right thing to buy,"" he added.
One analyst at brokers Deutsche Morgan Grenfell said that the MCI deal yielded a leverage benefit of about 0.4-0.5 percentage points off the weighted average cost of capital through BT being more highly geared.
-- London Newsroom +44 171 542 7987
",24
"Cable & Wireless (C&W) on Friday brushed aside speculation that its landmark merger with three companies had run into hurdles and said it had got the man it wanted to run what will be Britain's biggest cable firm.
In a long-awaited statememt, C&W said it would appoint Graham Wallace as chief executive of Cable and Wireless Communications, formed by merging C&W's Mercury unit, Nynex Corp's NYNEX CableComms Group, Bell Cablemedia Plc, and Videotron Holdings Plc.
""Graham Wallace is the one we wanted,"" C&W chief executive Richard Brown told Reuters in an interview.
""He is the first choice and we're delighted to get him.""
Wallace, who will join C&W on February 1, is currently a director at leisure and media company Granada Group. But he brings with him useful experience in television from a stint on the board of satellite broadcaster BSkyB.
C&W, is mainly a telecommunications business and has little previous experience in television.
But one analyst gave the appointment a lukewarm reception.
""It's not an obvious choice,"" said the analyst. ""He strikes me as very competent, but does he know anything about the cable business? I'm not quite sure why they didn't go for one of the insiders. There were some strong people, I thought.""
Although C&W's shares were languishing 2.5 pence lower at 485.5 pence in late afternoon trade, NYNEX CableComms saw its shares rise 5.5 pence to 108.5 pence.
With C&W, Britain's second biggest telecoms company, planning to finalise the cable merger in spring, the lack of a chief executive at the new company had fuelled some speculation that a clash of cultures was hindering talks.
Although Brown conceded that the merger was complicated, he insisted: ""That is not true...There's a great deal of activity and we really are right on track.
""There is an exciting spirit of cooperation to bring this to reality,"" he said.
Brown, who will take the chair of the company, tipped to be worth 5.0 billion pounds ($8.36 billion), said a finance director would be the next announcement.
The proposed cable merger was announced last October -- and most such deals spell job cuts.
Although Brown said he was not legally allowed to comment ahead of Cable and Wireless Communications's planned listing in London and New York, he warned that the new group would ""clearly"" reap efficiencies.
""I cannot quantify what that is going to be, but we are working on that and we will achieve that,"" he said.
Cable and Wireless Communications, which will be well-placed to compete against dominant telecoms company British Telecommunications, will provide local, national and international data and mobile telecommunications with multi-channel television and Internet services.
($1=.5979 Pound)
",24
"British Telecommunications admitted on Thursday to not sharing the same culture as its merger partner MCI Communications, America's second largest international carrier.
But after reporting robust third quarter profits, helped by ""healthy"" demand for its products and services, BT's chief executive Sir Peter Bonfield told reporters, ""We are open minded that these things (mergers) have their pitfalls on culture.""
Commentators have dubbed BT ""staid"" and MCI ""spunky"". But Bonfield said MCI staff he had met so far had been ""amazingly enthusiastic"" about the two companies' planned $20 billion merger, which BT expects European and American regulators to clear by this autumn.
After a 39 million pound ($64 million) charge for redundancies, BT's third quarter pretax profits rose to 909 million pounds ($1.45 billion) from 829 million pounds last time -- towards the upper end of analysts expectations.
BT announced last October that it planned to buy the 80 percent of MCI that it did not already own. The new group, called Concert Plc, aims to service multinational companies end-to-end and be represented in all the world's key nations.
BT also hopes to become the second telecoms operator in continental Europe as key markets are eased open to competition in 1998 and is itching to get into lucrative Asian markets.
BT has one of the most comprehensive network partnerships across Europe, having set up joint ventures in about eight continental European markets worth more than $140 billion.
In a move to boost its German venture, BT announced that Norwegian telecoms operator Telenor had agreed in principle to take a 10 percent stake in VIAG InterKom, the alliance BT has set up with German engineering conglomerate VIAG AG.
Telenor brings with it vital expertise from operating in one of the world's most saturated markets for mobile telephones. Having won a mobile and fixed-line licence in Germany, BT said VIAG InterKom would be the first major telecoms copany to exploit the convergence between the two services.
In December, BT beat arch-rivals Deutsche Telekom and France Telecom by clinching a deal with TeleDanmark in Switzerland's second telecom network Newtelco.
While global telecoms groups jockey for position in a race to secure lucrative services to multinational companies, Japan is seen as the last major frontier.
BT has been wooing Japan's Nippon Telegraph and Telephone Corp, the world's biggest telecoms titan, for years.
While NTT takes its time to decide how best to enter the international market, BT's finance director Robert Brace told Reuters that the group did not expect an MCI-type deal in the Asian telecoms markets ""in the next few years"".
""I think we will continue to develop on a global basis as and when the opportunities arrive,"" he said.
Bonfield, who was in Japan last week, said NTT was too big a company to risk linking up with a single company.
""But it may come up with a preferred partner -- and we would like to be that partner,"" he said. BT, which already has a technology agreement with NTT, is keen to use the $150 billion group's lines to sell its Concert services to business clients.
BT's share price, which has surged to new year highs of 450p in the run-up to results, seesawed despite what SocGen's analyst John Tysoe called ""a good, cheerful presentation"".
Tysoe has edged up his full year forecast to a pretax profit of 3.2 billion pounds, largely because of a 50 million pound reduction in the level of expected redundancy charges.
BT saw net cash inflow swell to 4.4 billion pounds in the first nine months and has now got a hefty 211 million pounds of funds on its balance sheet.
",24
"After 11 days of number crunching, telecoms analysts remain split over the financial merits of British Telecommunications's (BT) $20 billion proposed merger with America's MCI Communications.
Some insist the deal is at best neutral, with synergy benefits just about offsetting the 30 percent premium BT paid.
BT, which posted second quarter pretax profits ahead of expectations at 730 million pounds ($1.21 billion) on Thursday, has been traditionally considered a less inspiring stock than faster-growing, smaller UK rivals like Cable & Wireless.
But when the telecoms giant announced on November 3 its plans to link up with MCI to form one of the world's biggest international telecoms groups, some brokers promptly recommended buying BT's shares up to 400 pence.
However the stock failed to rise substantially on the MCI move -- and some analysts changed their ""buy"" recommendations back to ""hold"".
MCI investors, bailing out after the deal with the larger and slower BT, have also been blamed for BT's lagging shares.
But some analysts said they thought the shares were now fairly valued and brushed aside BT projections of double digit growth from the new enlarged BT/MCI group, to be called Concert.
""(The deal) changes the way BT looks but it doesn't change the price it should be at,"" noted one analyst.
But not all analysts are so bearish. Daiwa's telecoms analyst John Clarke said he believed the deal would boost BT's five year earnings per share compound growth from 5.5 percent in 1996/97 to between seven and eight percent.
""The problem is that the benefits from the acquisition won't become apparent for a couple of years,"" he said. ""But it has given BT the confidence to signal that it can increase the rate of its dividend growth (to six percent), which presumably it wouldn't have done otherwise.""
BT is paying its shareholders a 35 pence special dividend as part of the deal, as well as forecasting a final 1995/96 dividend rise of 6.1 percent to 19.85 pence.
The split in analysts' views on the merger, trumpeted as the biggest transatlatic deal ever, highlights the complexities of valuing telecoms stocks.
BT, whose long-distance businesses are faced with ever fiercer competition, is pitched against companies such as Vodafone, whose sole business as a mobile telephone operator is booming. Vodafone is also seen as a potential takeover target.
BT's relative performance has lagged rivals in the FTSE telecoms sector by almost six percent since early June 1995 and the wider FTSE All-Share index by over 20 percent.
Although BT is a prolific cash generator, its gross dividend yield has topped seven percent in the past year, reflecting the opportunity cost of investing in a highly regulated stock where growth prospects may be limited.
Analysts polled by Edinburgh Financial Publishing, a third party data provider, see the dividend yield slipping to near six percent in the year to March 1998. But it remains stubbornly above smaller rivals.
C&W and Vodafone's gross dividend yield is nearer 2.5 percent, according to EFP.
According to Reuters 3000 analysis, BT's price earnings ratio (PE) is currently only 11.5 compared with Vodafone's hefty 24, while C&W, with its prize Hong Kong Telecommunications stake, has a PE of 17.4.
A sector rating of nearly 21 -- against a market PE of around 15.25 -- underlines the growth prospects as well as the possibilities of takeovers or demergers that some investors see in some parts of the telecoms industry.
But some analysts argue that comparing PE ratios is no longer a valid way of deducing future earnings potential.
""For companies other than mega carriers like BT, it's not really a PE story anymore, it's a strategic value story,"" said Andrew Harrington, telecoms analyst at Salomon Brothers.
""When assessing the growth potential moving forward, you've got to look at each stock with reference to the operating environment compared to the others,"" he added.
Harrington doubts BT's predictions of double digit growth for Concert, pitching growth forecasts nearer 8-9 percent, dented by a loss of margin and earnings suffered by BT at home and abroad in the face increasing competition.
""Just as it makes a lot of sense for BT to invest a lot of money in the U.S., so it makes a lot of sense for other big international carriers to invest a lot of money in the UK.
""At the end of the day, BT is not going to compensate for the fact that there's going to be another turn of the screw in tariff declines in the next five years in the UK,"" he said. ($1=.6054 Pound)
",24
"Sema Group, the fast-growing Anglo-French information technology group, said on Friday it was banking on growth from its telecoms and business systems operations in 1997.
But director of communications Marie-Claude Bessis told Reuters that although the group was seeking to expand into Germany and the U.S., Sema plans to focus on maintaining robust organic growth this financial year.
""1997 will be a year of integration...It will not be a year of acquisitions like 1996 and even 1995,"" Bessis told Reuters by telephone from Paris.
""From 1997 we will see the opportunities...But the objective will be to integrate the acquisitions, to maintain a strong organic growth and to accelerate the telecom and business system market,"" she said.
Spending on technology is surging in the fast-growing telecoms market and Sema has signed agreements with Global One -- the alliance of Sprint, Deutsche Telekom and France Telecom, which is an indirect shareholder in Sema -- and AT&T.
The group is developing value-added services and two-way messaging for AT&T's wireless arm and is integrating the computer systems of Global One.
Sema's first rights issue to raise 99 million stg for acquisitions and growth last year has left the group with 18 million stg of cash and no gearing.
And acquisitions such as the purchase of France Telecom's stake in IT systems integration business Telis last year have given Sema substantial new resources and know-how in the fixed telephone market.
A recent acquisition spree has brought not only Telis, but British Rail's business services arm and a majority stake in Olivetti's Sytax processing unit into Sema's fold. The first two are expected to add 170 million stg to group turnover in 1997.
Sema, which is quoted on the London and Paris stock exchanges, earlier reported a 35 percent rise in annual year pre-tax profits to 50 million stg on sales of 927 million stg -- a rise of 37 percent.
Organic growth rose a sharp 20 percent and its order book jumped 66 percent to 1.25 billion pounds. But Bessis said she expected average annual growth of around 13 percent from all businesses, including the slower technology arm which includes control and command systems for the Royal Navy.
Sema's telecoms systems business saw 44 percent growth and its business systems, which includes the high-margin outsourcing and systems integrations operations, saw 46 percent growth over the year, Bessis said.
The company, whose shares have surged from 532p to 1275 pence over the year, was one of the best performers on the stock exchange last year.
And Sema says it is unconcerned at its soaring price earnings ratio of around 40 times which could make the shares look expensive.
It's a good sector and it's a company which is growing spectacularly,"" Bessis said. ""We've had five years of tremendous results -- not just one year.""
But the shares slipped 23.5p to 1226.5p by 1115 GMT.
Double-digit compound growth is expected to be fuelled by the vast workload as companies prepare computer systems for European Monetary Union and what has been dubbed the ""millenium problem"" -- adjusting computers to handle dates from 2000.
The bill for these preparations has been tipped by consultants and analysts to be anything from 32-360 billion pounds.
-- London Newsroom +44 171 542 7987
",24
"British Telecommuncations Plc, the telecoms giant, beat even the most optimistic analyst forecasts on Thursday with robust second quarter and first half profits and insisted it was growing despite ever stiffer competition.
BT, which plans to merge with America's MCI to create one of the world's biggest telecoms groups, said profits before tax, redundancy and restructuring charges rose 7.4 percent in the second quarter and 5.2 percent in the first half.
But after a hefty 235 million pound ($388.2 million) redundancy charge and a 60 million pound charge for the repurchase of government-held bonds, half year pretax profits came in at 1.6 billion pounds and 730 million pounds in the second quarter -- slightly below figures for the same periods in 1995.
""The results for the half year show an encouraging position with sustained high growth in demand for our telephony services and significant sales increases in our new markets and advanced products,"" said chairman Sir Iain Vallance.
BT, whose shares jumped 8.5 pence to 369 pence in heavy trade, has managed to hang onto its 20.5 million residential customer lines over the last 12 months despite predictions that competition from cable companies would dent its market share.
The group also said its biggest business, inland calls, grew one percent to over seven percent in the quarter on a 12 month moving average basis after price cuts and marketing initiatives.
""We're growing, we're not going backwards,"" finance director Robert Brace told Reuters in an interview, noting that turnover in the six months rose 4.5 percent to 7.37 billion pounds.
""I think telecoms is one of the most exciting growth industries in the world...When we open (the markets) up, drop the prices, raise the quality of service and really market hard, the growth levels are double digit.""
BT, which has formed six joint ventures worth $135 billion to gain access to the European markets, said it planned to ""get very aggressive"" in the next two years as the continental telecoms markets are opened up to competition, around 1998.
Asked where BT saw the main profit growth, Brace said:
""All prices in France and Germany are very high compared with the UK. If markets open up and we compete, prices will come down. But we will take substantial market share, particularly in the business area where quality of service really matters.""
BT has operations in 30 countries and employs about 130,000 staff worldwide. Since privatisation in 1984, about 110,000 jobs have gone. The firm, which cut another 3,200 staff in the first half of this year, expects about the same number of voluntary redundancies in the second.
As part of its European offensive, BT has won a licence in the Netherlands, plans to win both fixed and mobile licences in Germany and has bought into a mobile licence in France where it also thinks it will win the second fixed licence.
Brace said high-speed digital ISDN (Integrated Services Digital Network) lines and overseas operations were growing at about 50-100 percent per year and that the company had high hopes for its intranet initiative with software giant Microsoft Corp, where it also sees booming demand.
BT said on Wednesday that it and MCI, whose proposed merger is the biggest transatlantic deal in history, were linking up with Microsoft to offer transnational firms private communications networks based on the internet.
Asked whether BT, which announced its $20 billion merger with MCI on November 3, planned similar deals, Brace said few other large communications groups offered the same prospects.
""I'm not sure that there are similar deals as MCI -- because there aren't many companies that size in the world one would wish to merge with.""
As previously announced, BT is raising its interim dividend by six percent to 7.9 pence. As part of the MCI deal, BT is also paying a special dividend of 35 pence which it expects to pay in September 1997 at the same time as the final dividend.
($1=.6054 Pound)
",24
"Scotish-based hotels and casinos group Stakis Plc launched a huge cash call to fund a 327 million pound ($530 million) acquisition of British conglomerate Lonrho's five Metropole hotels announced on Thursday.
Stakis, which has about 46 British hotels and whose current market value is only about 472 million pounds, said it wanted to raise 222 million pounds via a four-for-seven rights issue, set at 82 pence per share.
Last month, Lonrho shelved plans for a 700 million pound flotation of its Metropole and its North American-based Princess luxury resort hotels because of the level of interest it had received from potential buyers.
Saudi billionaire Prince al-Waleed bin Talal has been tipped as the most likely buyer of the 10 five-star Princess hotels.
Lonrho, which is in the throes of a demerger, said in a separate statement that the disposal would generate net proceeds of 316 million pounds as well as payments of 63 million pounds in dividends and tax relief that it will receive from the chain.
""The proposed sale of Metropole Hotels represents an important step in the separation of Lonrho's mining and non-mining assets...,"" said Lonrho chairman John Leahy.
""The board of Lonrho continues to make progress with the next steps of the separation process,"" he added in a statement.
The sale of the hotels, which will be followed by the divestment of the group's African trading operations, is part of Lonrho's plans to turn itself into a focussed mining company and ends 30 years of empire building by founder Tiny Rowland.
Stakis had been the front-runner to buy the conglomerate's Metropole chain -- four-star hotels with extensive conference facilities -- since rival Millennium & Copthorne Hotels  MLC.L pulled out of the bidding race earlier this month.
In a profit forecast, the hotels group said its profit before tax and exceptionals would be not less than 30.6 million pounds in the year to September 30.
Stakis, which said returns on the acquisition were expected to enhance earnings from the first year, also forecast a final dividend of 1.2 pence per share, giving a total payout of 2.15 pence for the full year -- 23 percent more than last year.
Analysts welcomed the deal that helped strengthen Stakis' share price 1.5 pence to 100 pence.
""The numbers stack up. I have no problem with their strategy,"" said Matthew Nayler, leisure analyst at brokers Williams de Broe.
But some analysts said that Stakis would have to boost profits at the five hotels -- in the cities of London and Birmingham and the seaside resorts of Brighton and Blackpool -- by at least 12 percent for the purchase to be profitable.
Analysts, who have said a sale of the hotels is easier and cleaner than a float amid a glut of companies coming to Britian's market, are now awaiting news on whether Prince al-Waleed has clinched a deal to buy the Princess hotels, which include resorts in Acapulco, Mexico, the Caribbean and the U.S..
Financial sources in the Gulf said earlier this month that the prince had exclusive rights to negotiate a deal and that the price was $300 million. The prince's key western investments include stakes in New York's luxury Plaza hotel, the Four Seasons hotel group, banking group Citicorp and the Disneyland Paris theme park. ($1=.6165 Pound)
",24
"Britain on Thursday opened its doors to 44 new international telephone operators, saying it would create a fully open long-distance telecommunications market 12 months ahead of the rest of Europe.
U.S. telecoms giant AT&T, Channel Tunnel operator Eurotunnel and the Global One alliance between Deutsche Telekom, France Telecom and Sprint are now among those free to compete against dominant players British Telecommunications (BT) and Mercury.
While the rest of Europe is only aiming for telecom liberalisation in 1998, a rash of new rivals -- mainly from the United States -- will be able to offer a full range of telecoms services between Britain and the rest of the world from January 1, 1997.
""The UK has proved to the world that liberalisation pushes down prices and improves services,"" Science and Technology Minister Ian Taylor said in a statement.
""Phone prices are down 40 percent overall since 1984, and I expect these new licensees to put further downward pressure on international rates,"" added Taylor, who is keen for a more open telecommunications market to attract inward investment.
In the largest single move towards opening up the international telecom market, which BT values at just under 2.0 billion pounds ($3.33 billion), 46 companies applied for licences in July, 44 of which have now been granted.
Until now, international rivals to BT and Mercury -- which is owned by Britain's second largest telecoms operator Cable and Wireless -- have only been able to operate by paying to lease lines from two British companies.
But own-facilities services are cheaper to provide.
The move may also help dampen opposition by AT&T, America's largest long-distance carrier, to BT's proposed $20 billion merger with America's MCI Communications Corp.
Regulatory clearance hinges on how open the authorities deem Britain's telecom market is. With BT keen to take on the U.S., the world's largest telecoms market -- worth about $200 billion -- regulators are keen to ensure that the same competitive benefits are available to U.S. companies.
BT welcomed its new rivals, adding that it was hopeful of winning approval for its U.S. mega-merger. ""This (move) indicates how open the UK market is,"" a spokesman said.
Analysts say that expectations of growing competition and the inevitable falling margins at home have already been discounted in telecom companies' share prices.
""This has been very well flagged,"" noted one.
Mobile telephone operator Vodafone Group, having clinched its licence, jumped 6.5 pence to 246.5p.
BT's shares rose four pence to 397p and Cable and Wireless' stock added 1/2p 474.5 pence by early afternoon.
Analysts have found it hard to predict how hard revenues will be hit by BT and Mercury's loss of market share as telecoms companies turn their attention overseas to help boost earnings.
But Cable and Wireless' Mercury is expected to suffer more than BT because international traffic makes up a much higher proportion of traffic -- and thus contributes a higher proportion of profits.
($1=.6003 Pound)
",24
"British telecommunications company Energis said on Friday that its parent, the National Grid electricity transmission network, might sell a majority stake in the company to one or more strategic investors.
Energis, which supplies telecoms services to 13,000-14,000 business customers via the Grid's high voltage electricity pylons, is seeking both an international partner and one that will give it local access to key metropolitan areas.
""We have an excellent core national network and a growing customer base,"" chief executive Mike Grabiner told Reuters.
""International connectivity and local access are the two things to do next,"" he added in an interview.
Grabiner, who came from the country's dominant 'phone company British Telecommunications one year ago, said Energis had talked with all global carriers, with the exception of BT, in its search for an international partner.
""I think both Energis and the Grid initially see the Grid selling a minority stake in the business,"" Grabiner said.
But he added: ""For the right mix of partners, I think they could go below 50 percent -- but still maintain a very large strategic and influential interest in the company.""
Energis is on track for signing up an international partner this summer, Grabiner said, noting: ""We're very much still in active discussions.""
However, Grabiner said talks with U.S. telecoms giant AT&T were ""not very active"". Some analysts tip the Global One alliance between America's Sprint, France Telecom and Deutsche Telekom as a potential partner.
Global One has little British access and Energis has already signed a ""correspondent agreement"" with Sprint, America's third inernational carrier, to end each other's transatlantic calls.
But Energis is keeping its options open. It has also talked to some international ""strategic investors"". ""(A partner) hasn't got to be a global carrier. It has to be a partner who can support us and add value to the business,"" Grabiner stated.
He conceded that a five billion pound cable link-up between Cable and Wireless, NYNEX Cablecomms, Bell Cablemedia and Videotron, has highlighted Energis' lack of local loop access.
""In a sense our discussions have broadened,"" he said.
Energis, which needs to be able to match the cost structure of BT and the new cable company Cable and Wireless Communications, is considering whether to link up with a cable company, other local operators or build its own network.
Some analysts say that a significant equity partner in loss-making Energis, that has been valued at more than 600 million pounds, could help inspire the Grid's lacklustre shares.
The Grid is committed to investing 100 million pounds per year into the loss-making telecoms subsidiary for the immediate forseeable future.
-- London Newsroom +44 171 542 7987
",24
"The Florida judge in a class-action suit against tobacco groups Thursday allowed one of the pioneering case's lead smokers to take a back seat in the upcoming trial after he complained of intimidation.
Stanley Rosenblatt, the lawyer pursuing the class-action suit on behalf of all ill and addicted smokers in Florida, said in Dade County Court that Arthur Reeves had been one of the original six smokers in the suit filed three years ago but did not want to take a prominent role as a witness in a trial scheduled for Sept. 8.
""He feels he has been greatly embarrassed and humiliated by investigators going out and asking neighbours and relatives and people he hasn't seen in 30 years about him,"" Rosenblatt said.
The lawyer gave no details in court, but said at a news conference Wednesday that private investigators working for tobacco companies routinely checked the backgrounds of people opposing them in court and potential trial jurors.
Rosenblatt asked Dade County Circuit Court Judge Alan Postman to allow another smoker, throat-cancer victim Frank Amodeo of Orlando, Fla., to be substituted for Reeves.
Amodeo said Wednesday he began smoking at 14, more than a decade before the health dangers of smoking were known, and that he has tried to stop smoking repeatedly. He still smokes and takes liquid nourishment through a feeding tube, since he can neither eat nor drink.
Rosenblatt said Reeves was not withdrawing from the suit, an option any ill smoker in Florida can choose, but would not act as a representive of the 500,000 potential claimants Rosenblatt has estimated his suit covers.
Reeves would share in money awards, if any, secured through the trial. The case appears likely to be the first to come to trial of a dozen or more class-action suits filed by smokers against tobacco companies.
Rosenblatt claims that tobacco companies such as Liggett Group, RJR Nabisco Holdings Corp., Loews Corp. and the Brown & Williamson unit of B.A.T Industries conspired for decades to hide medical evidence damaging to their businesses and mislead Americans about the dangers of smoking.
A lawyer for Philip Morris Cos. Inc. said that allowing the switch just months before trial was unfair.
The lawyer, Philip Heim, said he had no knowledge of Reeves' complaints. ""I don't know anything about him being allegedly harassed,"" Heim said.
",33
"BellSouth Corp will expand by a third its network of wireless-telephony shops in a campaign to cut the nearly $400 it spends acquiring each new customer, chief financial officer Ronald Dykes said on Thursday.
The company operates 200 or more of its own outlets selling BellSouth Mobility cellular-telephone services and finds it saves about $100 on each customer signed up by its own representatives.
""I wouldn't be surprised if the number grew by a third,"" Dykes told Reuters.  
BellSouth has 3.3 million U.S. cellular customers, a total rising at the rate of 31 percent a year. It also has more than one million cellular customers in 11 other nations.
Dykes said BellSouth, a leading regional telephone group, expects the share of wireless customers secured through its directly owned shops to rise but never to replace its direct-sales force or third-party vendors.
""We want to have a very broad distribution system and drive the costs down,"" he said.  
BellSouth also sells in select markets personal communications services (PCS), a new generation of wireless telephony which uses spectra other than the 800 megahertz reserved for cellular, but intends to keep the BellSouth Mobility brand for both PCS and cellular.
""The customer doesn't care,"" he said. ""We are using PCS to fill out our footprint"", or areas in its region where it does not have cellular rights.  
Marketing, he said, also played an important role in the 43 percent spurt in quarterly revenues from convenience telephone features BellSouth sells to traditional wired telephone customers.
Quarterly revenues for such services rose to $281 million in the third quarter, when net income rose 12.9 percent to $631 million.
Selling such services as Call Waiting, a feature which signals a customer using a telephone that a second caller is ringing, in discounted bundles or on a per-use basis had lifted sales mightily.
""Those two methods are very strong drivers of our success,"" Dykes said.
Per-use sales of such services totalled $53 million in the first nine months of 1996, he said.
-- New York Newsdesk 212-859-1713
",33
"Tobacco companies are countersuing Florida, saying the state government should be held liable for manufacturing cigarettes in its prisons if the state wins a billion-dollar lawsuit against cigarette makers.
Tobacco industry lawyers filed the suit on Wednesday, a Philip Morris Cos spokeswoman said and comes a week after a Florida judge blocked the industry from using Florida's history of cigarette-making in a trial scheduled to begin in August.  
Tobacco legal papers filed in Palm Beach County Court said the Florida Department of Corrections for decades made high-nicotine, high-tar cigarettes and other tobacco products and sold or distributed them to inmates.
State officials believed the cigarettes were ""particularly unhealthful ""but still distributed them to inmates.""
""The state believed that its cigarettes were cancer-causing and addictive,"" the court papers said.
The tobacco countersuit asked that Florida pay some damages along with the tobacco industry if it should win its lawsuit to be tried in August.  
Florida, the countersuit said, should be liable ""for the portion of damages that is attributable to its own conduct, or for its presumptive share of the market.""
State officials have said the tobacco used in the cigarettes was bought from one of the defendants, American Tobacco Co, and it no longer makes cigarettes in its prisons.
Spearheaded by Gov. Lawton Chiles, Florida is suing cigarette makers for $1 billion, or more in costs incurred from treating smokers through the state's Medicaid healthcare program.  
The state has also won the right to press for punitive damages under a state racketeering law if it can prove tobacco companies such as RJR Nabisco and the Brown & Williamson unit of B.A.T Industries of Britain conspired to hide the health risks of tobacco from customers.
The governor is also pressing to raise cigarette taxes and backed restrictions made public this week on tobacco-related advertising on Florida's state roads.
Some two dozen state governments and other local governments are suing tobacco companies to recover monies spent on treating tobacco-related illnesses.
""It's ironic,"" said April Herrle, spokeswoman for the governor. ""This is a backdoor admission by the industry that nicotine is addictive, something it denies.""
She said the state expects the countersuit to be dismissed.
Last week, the tobacco companies were rebuffed by the trial judge in the case when they sought to use the state's cigarette-making record as a partial defense in the approaching trial.
-- Miami newsroom, 305-374-5013.
",33
"Florida Panthers Holdings Inc's cash flow losses are narrowing because of strong professional hockey revenues and a lift from newly acquired leisure properties, President Richard Evans said Tuesday .
""The games are sold out, and advertising and sponsorship revenue is better than expected,"" Evans told Reuters after a presentation to investors at a conference sponsored by Raymond James & Associates Inc. ""We also are benefitting for part of the year from the hotel and Incredible Ice properties.""  
He predicted the company would have a cash flow loss, defined as earnings before taxes, interest, depreciation and amortization (EBITDA), of about $3.1 million for the 12 months ending June 30.
The Fort Lauderdale-based company forecast last November, when it made a 7.0 million share initial offering, that EBIDTA losses would total about $15 million in the fiscal year through June.
Evans said EBITDA should turn positive and total $3.1 million or more in the fiscal year ending June 30, 1998.  
EBITDA should total $22.5 million in the following fiscal year, when the Panthers hockey team will have 12 months' occupancy of a new, $185-million arena being built in Broward County north of Miami.
The arena will seat 19,000 during hockey games, stimulate ticket, souvenir and food revenues, and draw from three South Florida counties with four million residents, Evans said.
The Panthers, which now play in the Miami Arena, will also get a bigger share of concession profits than under the current deal, he said.  
He declined to predict when Panthers Holdings would turn profitable.
Evans said he spent two-thirds of his time working on possible acquisitions, under the direction of majority shareholder and Chairman Wayne Huizenga, and that deals were likely this year. He said leisure properties, particularly involving golf, were of keen interest to Panther Holdings.
Since November, Panthers Holdings has bought two marina hotels in Fort Lauderdale, in stock deals, and paid $15.5 million for Incredible Ice, an ice rink offering a spectrum of entertainments. Evans said Incredible Ice sites were likely to be opened elsewhere in the United States.
""The market has given us an incredible currency, and we intend to use it,"" he said.
Panthers Holdings shares have nearly tripled from their $10 offering price in November.
Evans said all acquisitions would be accretive to cash flow and were very likely to be stock transactions
Huizenga said in a speech at the Raymond James conference Monday night that deals for the Panthers were likely.
((--Miami Newsroom 305-374-5013))
",33
"RJR Tobacco, a unit of RJR Nabisco Holdings, said on Friday that documents it turned over to Minnesota in a lawsuit may suggest its executives considered using additives to enhance the nicotine kick of its cigarettes.
The company also said in a brief summary of some of the papers delivered to Minnesota state lawyers that its executives also considered beefing up marketing in 1980 to reverse a loss in market share among U.S. teenagers to rival Philip Morris Cos.  
RJR, along with other tobacco companies, is being sued by Minnesota and 17 other states to recover billions of dollars spent treating smoking-related illnesses of people through governmental medical programs. Trials in state lawsuits are scheduled this year in Mississippi, Florida and Texas.
RJR said it expected anti-tobacco information to be leaked selectively to news organizations by opposing lawyers and was releasing three potentially damaging short excerpts from the 4.5 million pages of documents with its own explantions.
The company said it would not release the full documents.  
RJR said two documents it turned over to Minnesota lawyers under court order suggested the company studied during the 1970s adding ammonia compounds to increase the effects of nicotine from cigarette smoking.
If ammonia, RJR quoted from one 1973 company document, were ""found to make desirable contributions to the physiological satisfactions derived from smoking, we will want to optimize this effect in existing and/or new products.""
RJR said research was carried out in an era when industry and popular thinking held low-tar cigarettes with heightened nicotine kicks would be less harmful to smokers.  
RJR deputy general counsel Daniel Donohue expects the Minnesota lawyers to use the documents to bolster claims the company was manipulating nicotine to hook smokers.
Anti-tobacco activists have repeatedly accused the industry of tarting up nicotine levels. Philip Morris won a large settlement and an on-air apology from the ABC television network owned by Walt Disney Co for a news story suggesting it manipulated nicotine content in its cigarettes. RJR also quoted from a 1980 memo sent by a marketing executive to the company chairman saying RJR's market share among smokers 14-17 was falling, but Philip Morris's was growing.  
""Hopefully our various planned activities that will be implemented this fall will aid in some way in reducing or correcting those trends,"" RJR's then-head of marketing wrote.
Donohue described the memorandum as shorthand and said it in no way suggested RJR worked to sell cigarettes to teenagers.
He also said company data on underage smokers was collected as a by-product of market research among adults.
The company said it was releasing the excerpts because it expected the memos and studies to be leaked and reported by rushed journalists without full context.  
""Cherry picked, leaked documents do not reflect the totality of our company's positions, strategies and marketplace efforts,"" RJR spokeswoman Peggy Carter said in a news release. But Minnesota Attorney General Hubert Humphrey III said RJR was misleading the public by complaining of selective leaks by anti-tobacco lawyers.
""The vast majority of documents cannot be made public due to a protective order demanded by the tobacco industry,"" Humprhey said in a news release. ""If the tobacco industry truly wanted the public to know the whole truth, it would waive this protective order...I challenge them to do so.""
A trial in the Minnesota lawsuit is set for 1998, Humphrey spokesman Joe Loveland said.
-- Miami newsroom, 305-374-5013.
",33
"R.J. Reynolds executives considered using additives to enhance the nicotine kick of cigarettes and also considered beefing up marketing to teenagers, according to a summary of documents that the company's parent turned over in a Minnesota lawsuit.
R.J. Reynolds, a unit of RJR Nabisco Holdings Corp., said Friday it turned over the documents to Minnesota state lawyers in connection with a lawsuit the state has filed against tobacco companies to recover state money spent on treating smoking-related illnesses.
Along with other tobacco companies, R.J. Reynolds is being sued by Minnesota and 17 other states to recover billions of dollars spent treating smoking-related illnesses. Trials those lawsuits are scheduled this year in Mississippi, Florida and Texas.
R.J. Reynolds said it expected anti-tobacco information to be leaked selectively to news organisations by opposing lawyers and was releasing three potentially damaging short excerpts from the 4.5 million pages of documents with its own explantions.
The company said it would not release the full documents.
It said two documents it turned over to Minnesota lawyers under court order suggested that the company in the 1970s studied adding ammonia compounds to increase the effects of nicotine from cigarette smoking.
If ammonia were ""found to make desirable contributions to the physiological satisfactions derived from smoking, we will want to optimize this effect in existing and/or new products,"" the company quoted one 1973 company document as saying.
Cigarette makers have long denied that they tried to manipulate the nicotine effects from their products.
R.J. Reynolds said the research was carried out when the industry and others thought low-tar cigarettes with heightened nicotine kicks would be less harmful to smokers.
R.J. Reynolds deputy general counsel Daniel Donohue said he expected the Minnesota lawyers to use the documents to try to bolster claims that the company was manipulating nicotine to hook smokers.
Anti-tobacco activists have repeatedly accused the industry of manipulating nicotine levels.
Philip Morris Cos. Inc., the world's biggest cigarette maker and producer of Marlboro and other brands, won a large settlement and an on-air apology from the ABC television network for a news story suggesting it manipulated nicotine content in its cigarettes.
R.J. Reynolds also quoted from a 1980 memo sent by a marketing executive to the chairman stating that market share among smokers aged 14 to 17 was falling while Philip Morris' share was growing.
""Hopefully our various planned activities that will be implemented this fall will aid in some way in reducing or correcting those trends,"" the official wrote.
Donohue described the memo as shorthand and said it in no way suggested Reynolds worked to sell cigarettes to teenagers. He said company data on young smokers was collected as a by-product of market research on adults.
The Food and Drug Administration issued new rules last summer meant to curb sales to underage smokers, but the industry is challenging the rules.
R.J. Reynolds said it was releasing the excerpts because it expected the memos and studies to be leaked and reported by journalists without full context.
""Cherry picked, leaked documents do not reflect the totality of our company's positions, strategies and marketplace efforts,"" Peggy Carter, a spokeswoman for RJR Nabisco Holdings Corp., said in a statement.
Minnesota Attorney General Hubert Humphrey III said the company was misleading the public by complaining of alleged selective leaks by anti-tobacco lawyers.
""The vast majority of documents cannot be made public due to a protective order demanded by the tobacco industry,"" he said in a news release.
""If the tobacco industry truly wanted the public to know the whole truth, it would waive this protective order .... I challenge them to do so.""
A trial in the Minnesota lawsuit is set for 1998, Humphrey spokesman Joe Loveland said.
",33
"Florida is stepping up anti-smoking efforts by barring cigarette promotions on state roads, forcing Marlboro to drop its name from thousands of banners promoting the Marlboro Grand Prix of Miami motor race.
New rules detailing limits on using banners to promote sports events, to be published on Friday, are due to take effect in early March, a Florida Department of Transportation official said.
Banners for beer, tobacco and other products meant for adults are covered by the new rules. Promoters can place a product name on the banners but cannot use type faces, logos and colours associated with the banned products.
""Most sporting events have a corporate name attached to them and that name would be allowed,"" said department spokeswoman Lynn Holschuh. ""But if it's a product that can't be sold to minors, the banner can't contain logos or significant advertising promoting the product.""
Advertising on billboards, often located on private property, will not be affected by the new rules covering state roadways, the official said. The rules do not affect municipal, Interstate and other roads maintained by other governments.
In Miami, an IndyCar-class grand prix site since 1983, thousands of coloured banners no longer bear the Marlboro name, even though the Feb. 4 to March 2 competition is officially called the Marlboro Miami Grand Prix presented by Toyota.
Banners for the event say simply, Grand Prix of Miami presented by Toyota.
Last year's banners carried the distinctive red colour and bold typface of Marlboro, the most popular cigarette in the United States.
A spokeswoman for Philip Morris Cos. Inc., maker of Marlboro cigarettes, said the company had chosen to drop the Marlboro name from the banners as a courtesy. State officials, including anti-tobacco activist Gov. Lawton Chiles, complained about the Marlboro signs last year.
""We will have signage and merchandise and cigarettes for sale to people 21 and over at the site,"" said Philip Morris spokeswoman Tara Carraro. ""We really want to reach smokers choosing brands.""
Marlboro, which along with RJR Nabisco Holdings Corp. is a major sponsor of motorsports events, will back other IndyCar events this year in California, Ohio, New Hampshire, Wisconsin and elsewhere.
Such sponsorships are major promotional outlets for the U.S. tobacco industry, with the top two producers spending $50 million or more each year on motorsports sponsorships, according to the IEG Sponsorship Report newsletter.
Marlboro spent about $19 million on motorsport sponsorships and likely as much again on related advertising and promotion during 1996, according to David Jacobsen, senior editor at IEG.
Cigarette advertising has been banned since the 1960s from U.S. television and steadily driven from sponsoring many other sports. The industry now faces still stricter federal government limits on promoting its products.
The federal rules, the first of which are to take effect on Feb. 28, sharply curtail cigarette advertising near schools and playgrounds and in publications favoured by people under 18.
A spokesman for the National Centre for Tobacco Free Kids, an anti-smoking group, said Florida's roadway ban was unusual. Some local transit systems, in San Francisco and elsewhere, have dropped tobacco advertising, he said.
A spokesman for Chiles, who is spearheading a billion-dollar lawsuit against the tobacco industry and advocating new state taxes on cigarettes, described him as pleased by the Marlboro's decision to take its name off the Miami race banners.
",33
"Florida Attorney General Bob Butterworth said on Friday U.S. cigarette makers had delayed harsh revelations about the industry with a surprising decision to end pre-trial opposition to punitive damages in the state's multi-billion dollar anti-tobacco lawsuit.
Butterworth told Reuters a court hearing set for January 24 on the punitive claims to be added to any other jury awards would have made public information he alleged would have been highly damaging about the industry's marketing and medical research, contained in 27,000 pages of court-sealed documents.  
""I liken it to a criminal trial in which the defendant tries to suppress evidence that would prove him guilty,"" Butterworth said.  ""They want to delay.  It's their best short-term ploy.""
Florida is one of 18 states suing U.S. cigarette companies to recoup billions of dollars spent through government healthcare programs on treating people made ill by smoking.  A trial in the Florida lawsuit filed by Butterworth is set for August 4.  
Philip Morris Cos Inc and other cigarette companies, complaining of likely bad publicity, earlier dropped pre-trial opposition to punitive claims by the State of Florida.  The state is seeking to recoup $1 billion or more for treating Medicaid costs from 1994.
Philip Morris Cos Inc lawyer Gregory Little said in a news release that the industry's decision had no legal effect and that the industry had never paid punitive damages in any lawsuit.  
Little said a key reason for the industry's decision was a worry that the state's lawyers would present evidence against cigarette makers during a public, pre-trial hearing.  Tobacco lawyers would be severly restricted in defending against the evidence during the hearing, he said.
""The lawyers for the state of Florida have demonstrated a remarkable propensity for trying their case in the media,"" Little said.
He accused anti-tobacco lawyers in Florida of leaking documents to reporters.  
""... The January 24 hearing -- which was already window dressed for media consumption with a 442-page brief and 12 boxes of documents -- would have done nothing other than provide a platform for the plaintiffs' lawyers to once again trumpet their case making it difficult for all parties to seat an unbiased jury,"" Little said.
Other tobacco companies, including RJR Nabisco Holdings Corp, have accused anti-tobacco lawyers of selective and unfair leaks to the media.  
Butterworth said he was forbidden by court order from detailing the damaging information in the documents but said 90 percent of the material came from industry internal documents. Much of the material was gathered by other attorneys general, many of whom are cooperating in their anti-tobacco lawsuits.
""It's nearly all their documents, all about their marketing practices, their science ... and they are giving up everything to avoid publicity,"" Butterworth said.
""This is a 100 percent victory for the state,"" he said of the industry's decision.
""The only downside is that disclosure of the documents is delayed.""
A trial in the lawsuit is scheduled to begin on August 4 in West Palm Beach, Florida.
-- Miami bureau, 305-373-5014
",33
"Sunbeam Corp., the struggling appliance maker led by corporate turnaround specialist Albert Dunlap, said Tuesday it would cut 6,000 jobs -- half its work force -- and eliminate 87 percent of its product lines.
The drastic measures, even more severe than Wall Street had expected, were announced just four months after Dunlap -- known as ""Chainsaw Al"" for his deep cost-cutting at troubled companies -- became chairman.
The maker of Sunbeam and Oster appliances, patio furniture and gas grills, which just reported its first quarterly loss since 1992, said it would also reduce the number of its facilities to 14 from 53 and take a charge of $300 million for one-time costs associated with the moves.
The Fort Lauderdale, Fla.-based firm, which lost $28.7 million in the third quarter as sales fell 2 percent, did not specify when the charge would be taken.
It did say, however, that only $75 million of the charge would be in cash -- for the payment of severance and other employee costs, lease obligations and other plant costs.
Sunbeam also announced ambitious plans for the future. It said it plans to double revenues to $2 billion by 1999 and lift operating margins to 20 percent of sales from the 2.5 percent posted for the first nine months of 1996.
Sunbeam also wants its return on equity to grow to 25 percent from 1 percent in the past year.
Shrinking profit margins and high manufacturing and administrative costs have depressed the company's profits in recent years. Sunbeam earned $50.5 million in 1995, less than half its 1994 profits.
Sunbeam said it will sell or shut 39 of 53 facilities, including 18 of its 26 factories, leaving it just four factories in the United States and four overseas. In addition, warehouses will be cut to 24 from 61.
The company said it will sell several businesses, including those that make furniture, time and temperature devices, scales and decorative bedding.
Sunbeam said its remaining businesses will be centered on kitchen appliances, personal care products, health care items, outdoor cooking equipment and professional care products.
""Our goal is to essentially complete the restructuring initiatives within the next 45 days. Therefore, the company has every intention of meeting its previously stated goal of beginning 1997 as a new company,"" Dunlap said in a statement.
Sales will double by 1999 to $2 billion, he said.
""It will be vintage Dunlap,"" Dunlap said in a conference call with institutional investors and analysts.
Dunlap declined to identify potential deal partners but said new products, including many designed for non-U.S. markets, and other steps would yield 20 percent or better year-over-year revenue growth.
Dunlap, who was named chairman and chief executive officer in July, is credited with turning around Scott Paper Co., which was later sold to Kimberly-Clark. At Scott Paper, Dunlap fired 10,000 workers and sold more than $2 billion in assets.
While his turnaround campaigns have helped stockholders, they have been criticized by community activists, unions and other groups as insensitive to workers.
Within months of joining Sunbeam, Dunlap -- also nicknamed ""Darth Vader"" after the villain of the ""Star Wars"" films -- replaced several top executives and brought in people who had worked for him in the past.
Although restructuring annoucements usually boost a company's stock price, Sunbeam stock lost 75 cents to $25 in late trading on the New York Stock Exchange.
""He's pulled off some amazing turnarounds,"" Chapman Co. analyst Daniel Noll said of Dunlap. ""But I'm a little skeptical. I think the stock's a little ahead of itself.""
""'Chainsaw Al' is a pussycat name for you,"" analyst Andrew Shore of PaineWebber told Dunlap. ""If you pull this off, you should be called 'Nuclear Al.'""
",33
"A Florida judge said on Monday that tobacco-company lawyers fighting a massive secondhand- smoking suit brought by sick flight attendants were unlikely to win separate trials for each of as many as 300,000 claims.
Tobacco-company lawyers arguing during an informal hearing in the run-up to a June 2 class-action trial said lung cancer, cardiac ailments and 21 other illnesses attributed by rival lawyers to secondhand smoke inhalation were too complicated to lump together in one trial.  
""There is no way a jury can be asked to weed out these complications,"" said Hugh Whiting, an attorney for the RJ Reynolds Tobacco Co, a unit of RJR Nabisco Holdings.
Whiting and lawyers for other tobacco companies such as the Brown & Williamson unit of B.A.T Industries Plc said each case was different and the connection between a malady and secondhand smoke would have to individually proven.
But Dade County Circuit Court Judge Robert Kaye said so many trials would be impossible to hold and he expects a two-part trial process for the class-action suit brought by two Miami lawyers to begin June 2.  
In the first, a jury will determine whether or not tobacco companies conspired to keep evidence of dangers from secondhand smoke from the public and if scientific evidence is strong enough to legally blame the illnesses incurred by non-smoking flight attendants on the cigarette smoke they inhaled while working.
A second trial will set money damages, if the tobacco companies lose in the first. But he said that, while he had made no final decision, he believed the claims by the flight attendants could be grouped by category and be handled by just one jury.  
""There's no reason this trial cannot be tried by one jury,"" Kaye said.
The judge also said he was near deciding the particulars of a campaign to reach the estimated 160,000 to 300,000 U.S. flight attendants who would be eligible for compensation if the class-action suit is lost by the tobacco industry.
Whiting pressed for a national media campaign, in addition to an agreed mailing to about 160,000 current and former flight attendants. He also proposed establishing a toll-free contact number. Such costs would be borne by the flight-attendants lawyers.
Flight-attendants attorneys Stanley and Susan Rosenblatt said such a campaign was wasteful and very expensive and that word-of-mouth spurred by the mail campaign would lift the number of people joining in the class-action suit.
The flight-attendants suit is one of several high-stakes anti-tobacco suits scheduled to come to trial in Florida and elswhere in the United States during 1997. On Friday, another Florida judge overseeing a case brought by the State of Florida ruled tobacco companies can be sued under Florida's anti-racketeering law.
-- Miami newsroom 305-374-5013.
",33
"Silver King Communication's $1.27 billion stock-swap acquistion of Home Shopping Network hastens Silver King's plans to become a conventional broadcast-TV powerhouse, Silver King said on Monday.
The deal re-uniting Silver King, spun off by Home Shopping five years ago, with its former parent also feeds speculation that Silver King chairman Barry Diller is closer to launching a seventh U.S. television network.
Veteran entertainment-industry executive Diller led the 1980s launch of News Corp Ltd's Fox network.  
Silver King spokesman Jason Stewart said Diller had no firm plans to launch a network and intended for now to reprogram Silver King's 12 stations carrying Home Shopping Network with conventional, locally oriented shows.
""With most stations emphasizing national and syndicated programs, there's room for local,"" Stewart said.
Stewart said some Silver King stations, located in top markets such as New York, Los Angeles and Miami, would be converted in about a year and others would follow.  
He declined to detail Diller's programming plans but said the stations would cover local news and sports with a format common on all Silver King stations. Some entertainment executives have speculated the Silver King stations would program daytime and late-night slots initially.
Silver King, which is paid by Home Shopping Network to broadcast its television retailing service, intends to seek cable-system carriage of Home Shopping as its stations convert to traditional television programming.
A Home Shopping spokesman declined to say whether or not the company had reached carriage deals with any cable systems.  
Diller said last spring that Silver King, which is partly owned by Tele-Communications Inc subsidiary Liberty Media, as is Home Shopping Network, intended to break away from Home Shopping but that the conversion would take two or three years.
Diller also has a stake in SF Broadcasting, owner of four stations, that could be woven into a new U.S. network.
""I think it's a very viable deal,"" said analyst Alvin Mirman of Commonwealth Associates. ""Diller reduces Home Shopping's distribution costs immediately. That could be a much as $40 million a year.""
Diller, a highly successful television programmer credited with the FOX network's racy and successful shows, is also expected to revive Home Shopping Network's fortunes. Home Shopping's sales have been flat for several years.
Home Shopping Network's shares were up 1/4 to 11-1/2, while Silver King's shares were down 1-7/8 to 27-5/8.
-- New York Newsdesk 212-859-1713.
",33
"Sunbeam Corp., the struggling appliance maker led by corporate turnaround specialist Albert Dunlap, said Tuesday it would cut 6,000 jobs -- half its work force -- and eliminate 87 percent of its product lines.
The drastic measures, even more severe than Wall Street had expected, were announced just four months after Dunlap -- known as ""Chainsaw Al"" for his deep cost-cutting at troubled companies -- became chairman.
The maker of Sunbeam and Oster appliances, patio furniture and gas grills, which just reported its first quarterly loss since 1992, said it would also reduce the number of its facilities to 14 from 53 and take a charge of $300 million for one-time costs associated with the moves.
The Fort Lauderdale, Fla.-based firm, which lost $28.7 million in the third quarter as sales fell 2 percent, did not specify when the charge would be taken.
It did say, however, that only $75 million of the charge would be in cash -- for the payment of severance and other employee costs, lease obligations and other plant costs.
Sunbeam also announced ambitious plans for the future. It said it plans to double revenues to $2 billion by 1999 and lift operating margins to 20 percent of sales from the 2.5 percent posted for the first nine months of 1996.
Sunbeam also wants its return on equity to grow to 25 percent from 1 percent in the past year.
Shrinking profit margins and high manufacturing and administrative costs have depressed the company's profits in recent years. Sunbeam earned $50.5 million in 1995, less than half its 1994 profits.
Sunbeam said it will sell or shut 39 of 53 facilities, including 18 of its 26 factories, leaving it just four factories in the United States and four overseas. In addition, warehouses will be cut to 24 from 61.
The company said it will sell several businesses, including those that make furniture, time and temperature devices, scales and decorative bedding.
Asked in an interview later on CNN whether Sunbeam itself is for sale, Dunlap replied, ""Everything is for sale."" He did not elaborate.
Sunbeam said earlier its remaining businesses will be centred on kitchen appliances, personal care products, health care items, outdoor cooking equipment and professional care products.
""Our goal is to essentially complete the restructuring initiatives within the next 45 days. Therefore, the company has every intention of meeting its previously stated goal of beginning 1997 as a new company,"" Dunlap said in a statement.
Sales will double by 1999 to $2 billion, he said.
""It will be vintage Dunlap,"" Dunlap said in a conference call with institutional investors and analysts.
Dunlap declined to identify potential deal partners but said new products, including many designed for non-U.S. markets, and other steps would yield 20 percent or better year-over-year revenue growth.
Dunlap, who was named chairman and chief executive officer in July, is credited with turning around Scott Paper Co., which was later sold to Kimberly-Clark. At Scott Paper, Dunlap fired 10,000 workers and sold more than $2 billion in assets.
While his turnaround campaigns have helped stockholders, they have been criticised by community activists, unions and other groups as insensitive to workers.
Within months of joining Sunbeam, Dunlap -- also nicknamed ""Darth Vader"" after the villain of the ""Star Wars"" films -- replaced several top executives and brought in people who had worked for him in the past.
Although restructuring annoucements usually boost a company's stock price, Sunbeam stock lost 75 cents to $25 in late trading on the New York Stock Exchange.
""He's pulled off some amazing turnarounds,"" Chapman Co. analyst Daniel Noll said of Dunlap. ""But I'm a little sceptical. I think the stock's a little ahead of itself.""
""'Chainsaw Al' is a pussycat name for you,"" analyst Andrew Shore of PaineWebber told Dunlap. ""If you pull this off, you should be called 'Nuclear Al.'""
",33
"H.J. Heinz Co chairman Tony O'Reilly said on Friday the U.S. food group was in deal talks with prospective buyers and would sell substantial businesses by April 30.
""By the end of the fiscal year, the businesses will have a leaner focus,"" O'Reilly said in a telephone interview.  
O'Reilly declined to identify the businesses on the auction block or estimate how much cash the properties would bring Heinz, a leading U.S. food products group which dominates several lines, such as canned tuna fish.
""If I tell you, that's where the bargaining will start,"" O'Reilly said.
He said Heinz was in contact with four or five potential buyers.  
The executive said Heinz will trim down to six business clusters: food-service products, pet food, infant formula outside the United States, condiments such as ketchup, and weight-loss services and products.
A third to a fourth of Heinz businesses are estimated to be outside those areas.
""The buzz word now is focus,"" O'Reilly said.
Heinz, based in Pittsburgh, has scheduled a Wall Street analysts' meeting in March on the asset sales.
O'Reilly repeated that Heinz should post a double-digit percentage profit increase in the fiscal year ending April 30.
The company 10 days ago repeated quarterly share profits of $0.47, up from $0.42 a year earlier, and said most businesses performed well.  An exception was U.S. Weight Watchers diet classes and foods.
Heinz shares were up 1/2 to 36-1/4.
-- Miami newsroom, 305-374-5013
",33
"International businessman Tony O'Reilly said on Friday acquisitions by his Independent Newspapers Plc will slow considerably next year after the takeover of New Zealand's leading newspaper and other deals.
""I consider next year a year of consolidation,"" Independent Newspapers Chairman O'Reilly told Reuters in a telephone interview.  
But O'Reilly's name came up just this week in London markets as the rumored buyer of Mirror Group Newspapers Plc's 46 percent stake in Britain's Independent Newspapers Plc.
Both Mirror Group and O'Reilly, whose separate, Dublin-based firm also owns a 46 percent stake in the British title, denied a deal was in the works.
O'Reilly, best known in the United States as chairman of H.J. Heinz Co, also acknowledged his company was keeping a close eye on Australian media group John Fairfax Holdings Ltd.  
Conrad Black, the Canadian media tycoon who runs Hollinger International Inc, sold a 20 percent stake in Fairfax this week after complaining about Australian limits on foreign ownership of newspaper companies.
Some press reports suggest Fairfax might sell a top newspaper or become an acquisition target.
""The situation there is fluid, very interesting,"" O'Reilly said. ""You can just say the O'Reillys are looking on with interest.""  
News Corp Ltd chairman Rupert Murdoch last month sold his five percent stake in Fairfax and on Wednesday said he had lost interest in the company because of the foreign ownership ceilings. A native Australian, Murdoch is now a U.S. citizen.
Independent Newspapers owns a 25 percent stake in the Australian regional newspaper company APN, and this year acquired a controlling 85 percent stake in Wilson & Horton in a deal valuing the leading New Zealand newspaper company at NZ$1.32 billion.  
""Wilson & Horton will be an important springboard for us,"" O'Reilly said.
The executive said the New Zealand company would help Independent expand its commercial printing and educational businesses in the region.
O'Reilly said his executives next year would be working primarily on increasing results and efficiencies in Independent properties. Deals, in part because his family wishes to maintain its 28 percent equity stake in Independent, would be secondary.
Company results should be strong in 1997, he said.  
The company's South African properties will have to produce better than normal profit gains to offset currency losses expected from a drop in the South African rand, he said.
Independent's newspapers in Ireland, Britain, Australia, New Zealand, South Africa and elsewhere will benefit from a sharp drop in newsprint. Costs for the raw material of newspapers has dropped from an average $520 a ton within the past year to around $400 currently, he said.  
O'Reilly described as reasonable profit forecasts by Dublin's Davey Stockbrokers that Independent would post a 15 percent profit rise to 18.6 pence per share in 1997 and an 18 percent rise to 21.4 pence per share in 1998.
-- Miami newsroom, 305-374-5013.
",33
"Riding rising U.S. cable TV fees, Time Warner Inc said its earnings before heavy debt payments shot up 32 percent in the third quarter, compared with the same three months last year.
Covering the quarter before last Thursday's completion of its $7.5 billion acquisition of Turner Broadcasting System, the entertainment group said three hit movies, strong magazine advertising sales helped by the Olympic Games, and good HBO results lifted cash flow to $964 million.
Revenues for the three months ended Sept. 30 were $4.877 billion, up from $4.344 billion a year ago.
Last year's third-quarter cash flow, defined as earnings before interest, taxes, depreciation and amortization, or EBITDA, was $729 million, the company said on Wednesday.
Time Warner, many of whose cable TV and other businesses are co-owned with 25 percent partner U S West Inc. , reported a net loss of $167 million, or 43 cents a share, for the quarter.
Net losses in last year's quarter were $160 million, or 41 cents a share, on 1.5 million more shares outstanding.
Net interest costs were $276 million, up from $259 million in last year's third quarter. Preferred dividends rose to $76 million in the third quarter from $16 million.
Time Warner's stock showed no gain after the results but rose smartly later in the day after top executives told institutional investors that debt reduction was centre stage at the company.
The executives said Time Warner is in active discussions aimed at restructuring its troubled cable-television partnership with U S West Media Group.
One Time Warner executive said the talks with regional phone group U S West, 25 percent owner of most of Time Warner's cable systems, studios and the HBO pay-TV service, are likely to quicken and could yield a deal within months.
""We want to delever the company, lighten up on cable, and simplify the corporate capital structure,"" said the executive, speaking on a promise of anonymity.
The executives echoed Ted Turner, founder of Turner Broadcasting and now vice chairman of the combined company as well as its biggest individual shareholder. He has said he wants Time Warner's $17.5 billion debt halved.
Time Warner now sees itself with the acquisition of Turner, producer of Cable News Network, The Cartoon Network and two studios, as primarily a programming group, the executives said.
Capital-intensive cable operations are less important and ripe for partial divestment, the executives said. Investment capital can be better used outside cable, the executives said.
EBITDA at Time Warner's cable operations, including those shared with with U S West, rose 14 percent to $512 million, the company said in its earnings report.
Basic cable revenues rose sharply and advertising sales in cable also increased, the company said. With some 12.1 million customers, Time Warner is the nation's second-largest cable operator.
Time Warner also had three summer movies grossing more than $100 million in U.S. ticket sales -- ""Twister,"" ""Eraser"" and ""A Time To Kill"".
Time Warner shares rose $1.125 to $42 in New York Stock Exchange Trading.
",33
"Debt reduction, largely through rejigging its vast cable holdings, is the central task of top managers at Time Warner Inc after the $7.5 billion Turner deal, senior executives said on Wednesday.
The company, which last week took control of Turner Broadcasting System Inc, is in active discussions aimed at restructuring its troubled cable-television partnership with U S West Media Group, the executives said.
One Time Warner executive said the talks with U S West are likely to quicken and could yield a deal within months.  
""We want to delever the company, lighten up on cable, and simplify the corporate capital structure,"" said one executive, speaking on a promise of anonymity.
The executives echoed Ted Turner, founder of Turner Broadcasting and now vice chairman of the combined company as well as its biggest individual shareholder. He has said he wants Time Warner's $17.5 billion debt halved.
Partners since 1992, when regional phone group U S West bought 25 percent of most of Time Warner's cable systems, its film studios and the HBO pay-TV service, the two companies have recently been preoccupied with major acquisitions.  
Time Warner last week completed its takeover of Turner, a deal unsuccessfully opposed in court by U S West. And U S West is expected to close next month its $5.3 billion acqusition of Continental Cablevision, the third-ranked U.S. cable operator.
Time Warner now sees itself with the acquisition of Turner, producer of Cable News Network, The Cartoon Network and two studios, as primarily a programming group, the executives said.
Capital-intensive cable operations are less important and ripe for partial divestment, the executives said. Investment capital can be better used outside cable, the executives said.  
""We look at the opportunities and, hey, we can't do everything,"" one executive said.
Time Warner earlier reported very strong operational earnings from its cable operations, largely on rate increases, but the company has also committed to spending at least $4 billion to improve its systems through 2000.
The executives declined to discuss possible terms of a U S West agreement but analysts have speculated Time Warner might swap selected cable properties for U S West's equity in HBO and the studios. A key question in such a deal would be how much debt would be taken off Time Warner's books.  
Spin-off of properties is also possible, analysts have said. Time Warner is also said to be considering the sale of Castle Rock, one of the studios owned by Turner Broadcasting.
The executives said a deal with U S West was very important but failure to reach one would not stop the debt-reduction campaign.
A little-noticed deal earlier this year, in which Time Warner swapped some cable properties for a minority interest in a joint venture with Fanch Cablevision of Indiana and the Blackstone Group, could be a model for other cable transactions, the executives said.
""The objective of deleveraging is larger than U S West. The objective of lightening up on cable is larger than U S West,"" one of the Time Warner executives said.
Shares of Time Warner closed up 1-1/8 at 42.
-- New York Newsdesk 212-859-1713
",33
"VTR Galaxy Chile SA won government permission to offer direct-to-home (DTH) television and will start selling the DIRECTV service in Chile by March 31, the head of DIRECTV's Latin American operations said on Wednesday.
The approval by the Transportation and Telecommunications Ministry gives DIRECTV, a consortium of a Hughes Electronics unit and three Latin American companies, a lead over rival DTH services in Chile, Galaxy Latin America chief executive Jose Antonio Rios said.  
""We will begin with advertising about the middle of December, telling people about the number of channels. From then we won't let up,"" Rios said.
Billboards, newspaper advertising and television will all be used to promote the multi-channel TV service. In addition, the campaign will rely heavily on in-store demonstrations, Rios said.
VTR, a partnership of Luksic and Southwestern Bell Corp and DIRECTV will spend the next months training retail clerks in presenting the receivers, he said. Full availability in Chile will come by March 31, he said.  
DIRECTV is sold in Latin America and the Caribbean by Galaxy Latin America, a venture of Hughes, The Cisneros Group of Venezuela, Televisao Abril of Brazil and MVS Multivision of Mexico. It offers subscribers who buy a receiver about 100 channels of video, music and extra-fee film channels. Several companies, including the Sky venture involving News Corp, are offering satellite television in Latin America, a fast-growing region lightly penetrated by cable television.  
DIRECTV has been a huge hit in the United States, hailed as the fastest selling consumer electronics item ever since its 1994 launch and credited by some industry analysts with eating into the dominant cable industry's audiences.
Rios said DIRECTV has some 16,000 vendors throughout the region selling its receivers and expects that number to nearly double to 30,000 by the end  of 1997.
The company expects soon to launch in Trinidad and Barbados and in Ecuador, Colombia, Guatemala, Costa Rico, Panama and Argentina by June 30.
Rios said DIRECTV would be available in 23 nations in Latin America and the Caribbean by the end of 1997.
The service is now available in Mexico, Brazil and Venezuela.
-- Miami newsroom, 305-374-5013
",33
"The head of America's most popular cable television service said on Tuesday that Latin American television will continue booming into the 21st century and that pan-regional advertising would shoot up to $1 billion within a decade.
Kay Koplovitz, chief executive of U.S.A. Networks, told an industry conference that cross-boarder advertising on Latin American cable television and Direct-to-Home (DTH) was about $50 million to $75 million in 1996 but was poised for spectacular growth as new DTH services penetrate Latin America's 80 million television households.  
""I really believe it will reach $1 billion in the next decade,"" Koplovitz said.
Audiences for cable and DTH in Latin American were affluent and younger than those in North America, characteristics that should appeal to advertisers.
""This audience is younger and vibrant for consumer goods,"" she said.  
Some industry analysts and executives have questioned the appeal of pan-regional programming and advertising in Latin America saying Argentine and Mexican and other national audiences have varying taste and a much more pronounced hunger for local programming.
Koplovitz likened the state of multiple-channel television in Latin America to the early days of U.S. cable television in the 1970s, when advertisers shunned the new medium because audience measurements were crude or nonexistent.  
""We need a reliable, standardized amd pan-regional measuring system,"" she told an audience of entertainment industry executives at a conference sponsored by the Variety trade newspaper.
She also predicted that the governmental restrictions on DTH in some countries would melt away before the force of illegal satellite-dish sales and as taxing authorities realized that growing revenues streams were going untapped.  
According to Kagan Associates, a consulting group, cable television and DTH revenues in Latin America will grow to $8.1 billion by 2001. Industry revenues were about $2.5 billion last year in Latin America.
Kagan has also estimated that only a bit more than 13 percent of Latin America's television homes subscribe to some form of multiple-channel television. By contrast, multiple-channel television penetration in the United States is more than 60 percent.  
""Latin America is one of the fastest growing and underdeveloped TV markets in the world,"" Koplovitz said.
The expansion of DTH services by big international media ventures will be key in expanding pan-regional advertising, she said.  
One Latin American DTH service, called Galaxy is owned by GM Hughes of the United States, Cisneros Group of Venezuela, Multivision of Mexico and TVA Abril of Brazil. Its main competitor is Sky Entertainment, owned by multinational News Corp Ltd, Tele-Communications Inc of the United States, Mexico's Televisa and TV Globo of Brazil.
""This is a market destine to grow, and grow it will,"" Koplovitz said.
-- Miami Newsroom, 305-374-5013.
",33
"Two leading international satellite-television groups said on Wednesday they will overcome regulatory hurdles and enter Argentina, a country already heavily penetrated by pay-television and whose satellite-TV rights are held by a smaller rival.
""We intend to be there; it's key to our strategy,"" said Mark Goldman, a vice president of News Corp Ltd, at a Latin American investors conference sponsored by Kagan Seminars International.  
Kagan analyst Jimena Urquijo said Nahuelsat, a smaller direct-to-home (DTH) service owned in part by Argentine investors and Daimler-Benz AG of Germany, already sells satellite-TV services in Argentina and holds exclusive satellite-TV rights for the country.
""Both will have to deal with Nahuelsat,"" Urquijo said, referring to Galaxy Latin America and Sky Entertainment Latin America.  
Galaxy, owned by Hughes Electronics Corp of the United States, the Cisneros Group of Venezuela, Multivision of Mexico and TVA Abril of Brazil, and Sky Entertainment have satellite-TV services in other parts of Latin America and plan to expand.  Sky Entertainment is owned by multi-national News Corp, Tele-Communications Inc of the United States, Mexico's Grupo Televisa SA de CV and TV Globo of Brazil.
Erik Moe, vice president of Galaxy Latin America, said he expected his company would eventually enter Argentina.  
""We recognize that there's a regulatory environment which does not encourage DTH,"" Goldman said. ""We are lobbying the (Argentine) government.""  Neither executive gave a target date for entering Argentina, and Nauhelsat chief executive Eckart Schober declined to answer when asked if he expected DTH rivals to appear in Argentina.
Nahuelsat already sells a stripped-down, relatively low-cost DTH service in rural areas of Argentina outside Buenos Aires, a metropolitan area with more than one-quarter of the country's pay-television subscribers and served by such cable-television giants as Tele-Communications.  
Nahuelsat tailors its services to national and regional tastes, Schober said at the Kagan conference.
Urquijo said business fundamentals in the country are also daunting for the two big DTH groups, given that 52 percent, or more than four million, of Argentina's television homes already subscribe to pay television.  Nahuelsat itself is primarily targeting Argentine regions without cable or microwave television services.
""I'm not sure there's room for three competitors,"" Urquijo said.
By contrast, other parts of Latin America are much more open to DTH.   Only some 13.3 percent of Latin America's 80
million television homes now take any type of pay television, a much smaller share than in western Europe or the United States, according to the Kagan organization.
Satellite-television in the United States, the most heavily penetrated pay-television market in the world, with some two thirds of homes subscribing to cable, has been a huge success in just two years.  Millions of subscribers in both cities and areas without cable have paid $500 or more for receivers during the past two years.
-- 212-859-1713
",33
"Carnival Corp is shopping around Europe and elsewhere for acquisitions and partners to boost the number of passengers on its cruise ships, industry analysts said on Tuesday.
The company -- the leader of the pleasure cruise market with 28 percent -- is said to be in talks to acquire Italy's Costa Crociere Spa.
Trading in Costa Corciere shares was suspended on Monday by Italian regulators until detailed information on the reported talks between the companies was revealed.  
""The Carnival people are the most natural buyers,"" said industry analyst Edward Tavlin of Fahnestock & Co. ""They are willing go worldwide.""
A spokesman for Miami-based Carnival declined to comment.
Last month, Carnival Chairman Micky Arison said in a Reuters interview that he saw industry consolidation continuing and that markets outside North America warranted attention.  
Arison did not comment directly on the possibility of acquiring Costa Crociere, a relatively small and heavily indebted line, which had been in meger talks with Royal Caribbean Cruises Ltd.
Carnival has formed a joint venture with Hyundai Corp of South Korea to provide Asian cruises and bought a stake in British travel group Airtours Plc as part of its global expansion.
""They are trying to better exploit overseas markets,"" analyst Jill Krutick of Smith Barney said. ""The North American market has lots of capacity and pricing pressure.""  
Carnival, which runs three cruise lines, is profitable in a sector burdened with a declining customer base and the prospect of expanded capacity. The company has said it expects to post record profits for the fiscal year ended November 30.
To be sure, Carnival, founded 24 years ago, has miscalculated in overseas ventures in the past. The company two years ago shut down its start-up FiestaMarina line aimed at Latin Americans and exited a Bermuda hotel operation with substanial losses, Tavlin said.
""The overseas markets are not as developed, but they have different dynamics,"" Krutick said. ""Each has its own features and characteristics.
-- Miami newsroom, 305-374-5013.
",33
"The $600 million acquisition of National Car Rental would give Republic Industries Inc inventory for its fledgling AutoNation used-car chain but little added purchasing power in Detroit.
""There's no such thing as a volume discount,"" said automobile-industry analyst Maryann Keller at Furman Selz in New York. ""It makes no difference whether you're buying one million cars or 20.""
Keller said the big Detroit manufacturers do give fleet discounts to buyers but the terms have been getting tougher.
",33
"Republic Industries Inc. Monday agreed to buy National Car Rental System Inc. for about $600 million in stock, another step into auto rentals that will also feed its growing used car business.
Republic, a diversified, Fort Lauderdale, Fla.-based company controlled by Florida billionaire Wayne Huizenga, said it would offer stock for Minneapolis-based National, owned by an investor group led by the former chief executive of Thrifty Car Rental.
Republic, which also owns waste management, electronic security and media assets, bought Alamo Rent-a-Car in November for $625 million in stock. The acquisitions would give it car-rental agencies with 230,000 cars in their fleets.
Industry analysts said the National deal would bolster Republic in the competitive car rental business and provide its AutoNation chain a steady supply of used cars for sale.
""The deals give Republic steady inventory,"" said analyst Jordan Hymowitz at Montgomery Securities in San Francisco.
The fledgling AutoNation chain and its rivals in the growing business for used cars just a few years old need big supplies of second-hand cars. AutoNation aims to have 80 outlets in place by 2000.
But the main source for used cars is the rental market, analysts said. Leased cars coming back from consumers for resale are usually streered by automakers' financing arms to dealers the automakers do business with.
National will also give Republic another avenue for growth in car rentals, analysts said. While Alamo rents mostly to vacationers and other consumers, National's target market is business customers.
National is owned by an investor group led by William Lobeck, the former chief executive officer of Thrifty Car Rental, who along with other National executives will sign employment agreements with Republic and manage National's daily operations, the companies said.
National has about 800 locations in North America with a fleet of about 100,000 vehicles in the United States.
Huizenga, who also owns the Florida Marlins baseball team and the Miami Dolphins football team, is seeking to build yet another fortune.
He is one of the few executives to have built two giant corporations -- he was a co-founder of Waste Management, now known as WMX Technologies Inc., and Blockbuster Video, which was sold to Viacom in 1994.
Meanwhile, transactions for rental car companies have picked up in recent months. Before Republic bought Alamo, HFS Inc. bought Avis for about $800 million.
Analysts said few big independent car-rental agencies remained, adding that neither Drivers Mart nor Car Max appeared interested in buying a rent-a-car business for their used-car outlets.
While the National deal would help ensure car supplies for AutoNation, the fledgling chain would not get much more muscle in dealings with Detroit automakers, analysts said.
""There's no such thing as a volume discount,"" said analyst Maryann Keller at Furman Selz in New York. ""It makes no difference whether you're buying 1 million cars or 20.""
Keller said Detroit automakers give discounts to big buyers such as car rental agencies but that the terms have grown more stringent. Agreements by automakers to buy back rental cars have also been drying up, she said.
""The fleet market is lower profit"" for automakers, she said.
Republic stock jumped $1.875 to $32.75 on the New York Stock Exchange.
",33
"Lawyers battling cigarette companies on behalf of flight attendants exposed for decades to second-hand smoke on Wednesday began notifying potential claimants of a historic tobacco trial set to begin in June.
A mass mailing to some 120,000 former and current flight attendants on U.S. airlines seeks to identify non-smokers who suffer ailments such as lung cancer.  
Print advertisements in union and trade magazines, an Internet site and follow-up mailings seeking claimaints are to follow during the next two months.
The class-action suit claims that the illnesses were caused by second-hand smoke from cigarettes aboard airliners and seeks unspecificed damages likely to total billions of dollars.
It accuses Philip Morris Cos Inc and other leading tobacco companies of hiding the dangers of second-hand, or environmental, smoke from Americans.  
""This is clearly a milestone,"" said Richard Daynard, chairman of the Tobacco Liability Law Project at Northeastern University in Boston. ""This is the first time a class-action case has gotten to notificiation,"" he said, referring to actions taken in the tobacco industry.
A separate suit in Louisiana seeking to represent as many as 50 million ill smokers was thrown out last year. Daynard said two other class-action suits, another in Miami and the second in Pennsylvania, were also scheduled to go to trial this year.
""This is a significant stage,"" said University of Colorado School of Law professor Christopher Mueller.  
Flight attendants lawyer Stanley Rosenblatt of Miami said 25,000 to 60,000 flight attendants would likely be included in the suit out of an estimated 300,000 who worked for U.S. airlines before in-flight smoking was banned.
The suit alleges that second-hand smoke causes cardiac conditions, cancer and 21 other ailments. Rosenblatt and Daynard said scientific findings had established links between those ailments and second-hand smoke that were strong enough to stand up in a jury trial.  
""That's a very big if,"" said Michael York, an attorney for the tobacco industry. ""If he were successful in that, he has to come back and prove that second-hand smoke caused individual injuries.""
Rosenblatt said damages, if any, would be set in follow-up trials after the completion of the June 2 trial, which he estimated would run two to three months in Dade County Court. Categories of claims, such as those of people suffering with emphysma, would likely be determined separately, he said.  
Tobacco attorneys had in recent months pressed Rosenblatt to spend heavily on a national media campaign, using television and popular magazines, but Dade County Circuit Judge Robert Kaye ruled that mail notification was sufficient.
Daynard and Mueller said the tobacco industry, in expectations it would beat Rosenblatt, wanted as many potential claimaints involved in the class-action suit since those people then would not be able to sue independently.
""We think the entire case is meritless,"" York said.
Rosenblatt said any claimants who did not write and ask to be excluded from the class-action lawsuit would be included. Typically, no more than five to 10 percent of class-action claimants drop out, legal experts said.
((-- Miami newsroom, 305-374-5013))
",33
"In a move to end ""shock at the dock,"" six top cruise-ship lines agreed Wednesday to include all fees in the advertised price, and make booking a cruise as simple as buying an airline ticket.
Add-on fees as high as $150 a person will be included in advertised prices so consumers will not be surprised when the final tally is made.
""You won't have any more shock at the dock,"" Florida Attorney General Bob Butterworth said in an interview.
Separately negotiated deals with Butterworth's staff, including one with industry-leader Carnival Corp., cover only lines operating out of Florida ports but should be felt all over the United States, Butterworth said.
Florida has two million cruise passengers each year, or about 60 percent of the North American market, and shapes national television ad campaigns by an industry courting customers throughout the continent.
Two other lines, Princess and Holland America, operating mainly out of California, Washington state and Alaska, are also likely to adopt the full-price policies, Butterworth said. Smaller lines are also likely to take up full-price advertising, he said.
""Combining port charges with the cruise fare will not change the total price paid by the consumer,"" said Adam Goldstein, marketing chief for Royal Caribbean Cruises Ltd another of the lines adopting the full-price policy.
Butterworth said cruise lines had over the years begun adding many operating costs to port fees, which most passengers believed were government taxes. The fees can add as much as 30 percent to a basic trip price. Now, only minor fees such as head taxes and port pilot fees actually paid to governments can be added.
Some lines, Butterworth said, were charging as port fees the salaries of cruise crew while their ships were docked and other operating costs in no way connected with any government.
""Anything could have been expensed in this way. It could be the food put on for the trip; it could be the water,"" Butterworth said.
Butterworth also said the lines -- including Norwegian Cruise Line Ltd., Celebrity Cruises Inc., Dolphin Cruise Line and Majesty Cruise Line -- would pay Florida $295,000 as part of the agreements.
Carnival said in a news release that the $295,000 in fees were neither fines nor penalties but payments to cover the costs of an 18-month state investigation. The company also said its brochures had always included a notice that extra port fees were required of Carnival passengers.
Carnival President Bob Dickinson said his company had been merely following an industry norm, in which port fees were added on to the advertised prices.
Advertising rates for Carnival and Royal Caribbean trips would be changed beginning later this month, the companies said.
Butterworth said the pricing changes may prove a boon to the cruise-ship industry, since passengers will not be startled by higher prices when they book. ""We want just one price, just like the airlines,"" he said.
Last summer, one-day cruise ship lines in Port Everglades, a major cruise venue near Fort Lauderdale, agreed to stop calling passenger charges as high as $19 ""port fees"" because only about $3 was being passed on to governments.
""Government gets blamed for enough already,"" Butterworth said.
",33
"With the dark cloud of high raw material costs now clearing, large U.S. newspapers companies are expected to report good third-quarter earnings despite weak growth in advertising.
""I keep hearing good news out of these guys, and they're all smiling about newsprint,"" said Prudential Securities newspaper industry analyst James Marsh.
Newsprint for newspapers now costs an average $550 a ton, much less than the average forecast of $600 a ton at the start of 1996, he said. Per ton prices peaked at $743 last January.  
""Trends in advertising have been a little sluggish, but with lower newsprint costs, most newspapers should have a strong quarter,"" said newspaper industry analyst Edward Atorino at Oppenheimer & Co.
Retail advertising were tepid through late summer, after rising only about one percent during the first half of the year, compared with the first six months of 1995, analysts said.
Classified advertising rose 10 percent in the first half but likely cooled in the third quarter, Atorino said.  
Times Mirror Co will enjoy an especially strong lift from newsprint savings because of its inventory accounting methods and a sharp decline in its consumption of newsprint this year after shutting two big city papers, Marsh said.
""The fall in newsprint prices coupled with ongoing cost reduction efforts will result in strong second-half earnings for newspaper publishing companies this year and provide further benefit into 1997,"" Atorino said in a written report.
",33
"Florida is set to challenge the tobacco industry on Friday using a tough anti-racketeering law that could mean bigger damages against cigarette makers if the state prevails.
The new claim under the state's Racketeer Influenced and Corrupt Organisations Act, tacked onto Florida's existing lawsuit that seeks at least $1 billion for treating smokers' illnesses, could mean more losses for the tobacco makers, tobacco-litigation expert Christopher Mueller of the University of Colorado School of Law said.
""Florida has a good law (for winning damage claims) but it only goes back to 1994. Using RICO may give the state a deeper reach,"" Mueller said.
The state's RICO law, similar to a federal statute and laws on the books in other states, would allow Florida officials to seek damages from before 1994, when a state law was passed that opened the way for Florida to try to recoup money spent on treating poor smokers.
Florida is one of 16 states and several big cities, including New York, San Francisco and Los Angeles, that have sued tobacco companies to recoup costs of health care for poor smokers.
Texas and now Florida are among a handful of states that are also using RICO laws to bolster their claims against Philip Morris Cos. Inc., the world's biggest cigarette maker, and other tobacco companies. Florida filed the added claims under RICO laws on Nov 4.
Mueller said use of RICO could add to the industry's potential financial losses by allowing Florida to make claims to recoup costs of treating smokers from before 1994.
Florida Attorney General Bob Butterworth is set to appear on Friday in county court in West Palm Beach, a spokesman said. He and attorneys for tobacco companies will argue over the industry's request that the RICO claim be dismissed.
It was unclear when a ruling would be made, a court official said.
Presiding Palm Beach County Circuit Judge Harold Cohen recently dismissed 15 counts of the state's 18-count lawsuit that claims the industry was liable for state-paid hospital costs from lung cancer and other smoking-related diseases. The full case is expected to come to trial next year.
A Jacksonville, Fla., jury last summer handed the tobacco industry its biggest loss in a court case yet when it awarded $750,000 to a lung cancer sufferer who had smoked for half a century. The defendant was the Brown & Williamson unit of Britain's B.A.T Industries Plc.
In Washington, anti-smoking groups said divesting tobacco investments was being actively considered by a growing number of institutional investors concerned by both the ethics and the financial outlook for the industry.
",33
"Grand Metropolitan Plc's Burger King is benefitting from a sales recovery in Europe, as well as strong U.S. expansion, and should post $10 billion in sales in the fiscal year ending September 30, Burger King chief executive Robert Lowes said on Tuesday.
""There's no question that my goal for this year is $10 billion, to add a billion in sales,"" Lowes told Reuters.  
Burger King's worldwide sales through some 8,700 restaurants, including 756 added during the fiscal year, totalled $9 billion in fiscal 1996, or nine percent more than in the previous 12 months.
Burger King also said in a brief year-end summary that its market share rose, touching 16.2 percent of all fast-food hamburger restaurant sales.  The company competes against sector-leading McDonald's Corp and Wendy's International Inc.  
Comparable store sales, meaning those restaurants open at lease one year, rose 2.3 percent worldwide and 2.6 percent in the United States, Lowes said.
Grand Met, the British branded-goods conglomerate, said last week operating profits at Burger King declined in the last fiscal year because of a European beef scare and a planned turndown in sales of restaurants to franchisees.
European sales last spring were hit by an outbreak of a disease attributed to contaminated British beef, especially hurting the company's hamburger outlets in Britain, France and Germany.  
Lowes said Burger King had responded by substituting for beef some chicken and other foods, including a vegetarian hamburger in Britain, to sustain sales in Europe.
""Our sales volumes are back where they were,"" Lowes said, referring to existing stores.
The executive said new stores to be added, including 75 to be built along British motorways in a deal with Granada Group Plc, would lift sales.
Burger King was also negotiating other deals in Europe similar to the one with Granada, Lowes said.  He gave no details.
-- Miami newsroom, 1-305-374-5013
",33
"Tony O'Reilly, best known in America as H.J. Heinz chairman, has the U.S. food group slimming down while beefing up his family's Independent Newspapers Plc of Ireland.
Independent, an acquisitive, fast-growing company that is 28 percent owned by O'Reilly and his family, competes in deals and markets with such international media figures as Rupert Murdoch of News Corp. Ltd.
O'Reilly's name came up just this week in London markets as the rumoured buyer of Mirror Group Newspapers Plc's 46 percent stake in Britain's Independent Newspapers Plc for $100 million.
While O'Reilly knocked down deal speculation on the Independent, a leading British daily in which his firm already has a 46 percent holding, he hinted in an interview that he has an eye on buying into leading Australian publisher John Fairfax Holdings Ltd.
""The situation there is fluid, very interesting,"" O'Reilly said. ""You can just say the O'Reillys are looking on with interest.""
Since the early 1970s, when the former rugby star and food industry executive bought into Independent, the company has steadily expanded and sells 80 percent of Ireland's nationally distributed newspapers.
Independent also has radio partnerships and controlling shares of leading newspaper businesses in New Zealand and South Africa and a French billboard company.
Financial performance has been very strong, with the stock market value of Independent rising a heady sixfold in five years.
In Pittsburgh, the headquarters of Heinz, the drill is largely different.
O'Reilly, in the telephone interview from Dublin, said the food company he has run since 1979 was in deal talks with prospective buyers and would sell substantial businesses by April 30.
""By the end of the fiscal year, the businesses will have a leaner focus,"" he said.
O'Reilly declined to identify the businesses on the auction block or estimate how much cash the properties would bring Heinz, which dominates in canned tuna, ketchup and other segments.
""If I tell you, that's where the bargaining will start,"" O'Reilly said. He said Heinz was in contact with four or five potential buyers.
The executive said Heinz will trim down to six business clusters: food-service products, pet food, infant formula outside the United States, condiments, ketchup, and weight-loss services and products.
One-third to one-quarter of Heinz businesses covering thousands of products are estimated to be outside those areas.
""The buzz word now is focus,"" O'Reilly said.
Acquisitions at Heinz, known for its Weight Watchers services and brands such as 9 Lives pet food, are not ruled out. The company, in fact, just broke off talks aimed at acquiring some assets of Bumble Bee, a competitor to its StarKist line of canned tuna. Heinz is also digesting a large pet-food acquisition it made from Quaker Oats.
Beyond being known as a newspaper baron outside North America, O'Reilly has interests in other Irish firms. Another he leads as chairman, Irish crystal and china firm Waterford Wedgwood, Thursday agreed to buy 9.1 percent of a German porcelain group Rosenthal AG.
O'Reilly, 60, is widely regarded as Ireland's richest man and appears close to being, if not already, Ireland's only billionaire, associates said.
",33
"The Florida judge in a class-action suit against tobacco groups Thursday allowed one of the pioneering case's lead smokers to take a back seat in the upcoming trial after he complained of intimidation.
Stanley Rosenblatt, the lawyer pursuing the class-action suit on behalf of all ill and addicted smokers in Florida, said in Dade County Court that Arthur Reeves had been one of the original six smokers in the suit filed three years ago but did not want to take a prominent role as a witness in a trial scheduled for Sept. 8.
""He feels he has been greatly embarrassed and humiliated by investigators going out and asking neighbors and relatives and people he hasn't seen in 30 years about him,"" Rosenblatt said.
The lawyer gave no details in court, but said at a news conference Wednesday that private investigators working for tobacco companies routinely checked the backgrounds of people opposing them in court and potential trial jurors.
Rosenblatt asked Dade County Circuit Court Judge Alan Postman to allow another smoker, throat-cancer victim Frank Amodeo of Orlando, Fla., to be substituted for Reeves.
Amodeo said Wednesday he began smoking at 14, more than a decade before the health dangers of smoking were known, and that he has tried to stop smoking repeatedly. He still smokes and takes liquid nourishment through a feeding tube, since he can neither eat nor drink.
Rosenblatt said Reeves was not withdrawing from the suit, an option any ill smoker in Florida can choose, but would not act as a representive of the 500,000 potential claimants Rosenblatt has estimated his suit covers.
Reeves would share in money awards, if any, secured through the trial. The case appears likely to be the first to come to trial of a dozen or more class-action suits filed by smokers against tobacco companies.
Rosenblatt claims that tobacco companies such as Liggett Group, RJR Nabisco Holdings Corp., Loews Corp. and the Brown & Williamson unit of B.A.T Industries conspired for decades to hide medical evidence damaging to their businesses and mislead Americans about the dangers of smoking.
A lawyer for Philip Morris Cos. Inc. said that allowing the switch just months before trial was unfair.
The lawyer, Philip Heim, said he had no knowledge of Reeves' complaints. ""I don't know anything about him being allegedly harassed,"" Heim said.
",33
"Any walkout by American Airlines pilots would hit tourist-dependent Caribbean islands like a hurricane, while Latin America's diversified economies should easily weather a service-stoppage.
""A hurricane hits only one island, and this will hurt all the islands,"" said Antonio Colorado, executive director of the Caribbean/Latin America Action economic organisation.
A halt by American Airlines, a unit of AMR Corp., which dominates U.S. service to the Caribbean and Latin America, would come just at the height of the Caribbean tourist season and cause economic havoc, regional industry, political and economic offcials and analysts said.
The roughly 160,000 hotel rooms in Barbados, St. Lucia, Aruba and other Caribbean islands are 90 percent occupied on average and losses from a strike could total $15 million each day of the North American winter, Colorado said.
""Few hoteliers in the Caribbean could be expected to sustain the loss of such revenue for more than a few days without terminal effect,"" said Caribbean Hotel Association executive vice president John Bell.
American, now in labour talks with its pilots, and its American Eagle subsidiary account for as much as 70 percent of the flights between the Caribbean and North America. Some 7.2 million North Americans travel to the Caribbean each year.
Some Caribbean economies are 50 percent or more tourist reliant, and region-wide tourist spending adds up to some $11 billion each year.
Grenada, Martinique, St. Kitts and St. Lucia are among the islands most reliant on American services.
""An American Airlines strike would be devastating to us at this time,"" St. Lucia's Prime Minister Dr. Vaughn Lewis said.
Some manufacturers and shippers of perishable goods from Latin America and the Caribbean would be hurt by a stoppage at American but the interruption in passenger traffic to Latin America would be short-lived, economists said.
""I think it would be little more than a blip,"" said Terry McCoy of the University of Florida in Gainesville.
Much of the travel between North America and the bigger countries in South America such as Argentina and Chile is by business people and much commerce can be carried out by telephone and otherwise.
""A lot of people who would take trips can use faxes,"" said Jerry Haar at the North-South Centre, a think tank at the University of Miami. ""There would be a disruption but it's not anything which can't be recouped.""
Cut-flower exporters from Ecuador and Colombia and seafood or horticultural shippers could also be hurt, Haar said. Some shippers of other goods might also face higher transport rates.
But overall the manufacturing and services businesses throughout Latin America were unlikely to feel many effects from a strike, economists said.
Aviation consultant Stuart Klaskin of Miami said a strike running a week or more might be a boon to U.S. rivals of American Airlines such as Delta, United Airlines and Continental Airlines. Each would likely seek to increase flights or add destinations.
",33
"""Chainsaw Al"" Albert Dunlap, the chief executive of Sunbeam Corp aiming to halve his workforce and add $1 billion in sales, ran into Wall Street skepticism.
The company's shares have been riding high, up more than 100 percent since Dunlap's appointment as Sunbeam CEO last summer, but dropped 1/2 to 25-1/4 on Tuesday after Dunlap said he would cut 6,000 jobs in restructuring the appliance group.
""He's pulled off some amazing turnarounds,"" said Chapman Co analyst Daniel Noll. ""But I'm a little skeptical.""  
""I think the stock's a little ahead of itself,"" Noll said.
Dunlap, author of a current best-selling book, ""Mean Business: How I Save Bad Companies And Make Good Companies Great"", is credited with turning around Scott Paper Co and Lily-Tulip Co. He fiercely cuts staff and lifts stock values.
In addition to the ""Chainsaw Al"" moniker, the 59-year-old executive has also been dubbed ""Darth Vader"".
On Tuesday, Dunlap said he would halve to 6,000 the worldwide staff of Sunbeam, eliminate dozens of factories, regional adminstrative offices and warehouses, and stop making more than 85 percent of Sunbeam's 11,500 products.  
He also promised to sell Sunbeam's furniture business, open fresh sales avenues such as outlet stores, strike overseas marketing alliances, and eliminate all debt by next year. The company might launch share buybacks or make acquisitions once debt is paid off, he said.
Sales will double by 1999 to $2 billion, he said.
""It will be vintage Dunlap,"" Dunlap said in a conference call with institutional investors and analysts.
Analysts pressed Dunlap on specifics for doubling sales and when and with whom Sunbeam would align itself.  
Dunlap declined to identify potential deal partners but said new products, including many designed for non-U.S. markets, would along with other steps yield 20 percent or better year-over-year revenue growth.
""It takes some length of faith from us,"" analyst Scott Grant of Oppenheimer said during the conference call.
Other analysts questioned whether Dunlap's reliance on outsourcing -- hiring other manufacturers to make Sunbeam and Oster products -- was feasible as the company will have only eight factories to make its 1,500 remaining products.
The restructuring was very ambitious, involving deeper staff cuts, consolidation and tougher goals than had been expected since Dunlap began firing Sunbeam executives last July, analysts said.
""'Chainsaw Al' is a pussycat name for you,"" analyst Andrew Shore of Paine Webber told Dunlap. ""If you pull this off, you should be called 'Nuclear Al'.""
-- New York Newsdesk 212-859-1713
",33
"Billionaire Wayne Huizenga's Republic Industries Inc. added another sales outlet to its mushrooming auto-retailing business with the $200 million acquisition Tuesday of a leading Florida car dealer.
Republic said in a news release it was issuing stock to acquire Maroone Automotive Group, the owner and operator of seven new and used car dealerships, six in southern Florida. It also operates a showroom in Buffalo, N.Y.
Republic just last week agreed to pay $600 million for the National Car Rental Agency, the fourth largest rental car group in the United States, and this week is scheduled to complete acquisition of AutoNation USA.
AutoNation is a private company owned by Huizenga and is pioneering, with other competitors, the consolidation of the highly fragmented second-hand car business in the United States. AutoNation is building sprawling superstores of lightly used cars with set prices and warranties.
Both the acquisition of National and the takeover last November of Alamo Rent-A-Car, the fifth largest car-rental company, are meant to feed AutoNation. Republic has said it wants to open between 80 and 100 AutoNation stores by 2000.
""We plan to have new vehicle stores in markets where we are developing AutoNation USA. Maroone Automotive will enable us to add more major automotive brands as a complement to our used car megastores in south Florida,"" Huizenga said.
Maroone, now run by the son of the founder, owns the fourth largest Chevrolet store, third largest Dodge location and largest Isuzu franchise in the United States. The group also owns Ford and Oldsmobile franchises.
Michael Maroone, who heads the chain, will become president of Republic's new-car division.
In a continuing buying spree, Republic and Huizenga have acquired Mullinax Inc., the largest Ford dealer in the United States, Magic Ford and Magic Lincoln-Mercury in southern California, and leading southwestern Dodge dealer Bell Dodge.
Tuesday's deal came just a day after Republic said it would pay about $100 million to acquire Grubb Automotive Inc., which owns and operates six new and used vehicle dealerships in Arizona and Texas.
""Republic is now one of the largest purchasers of new vehicles ...,"" Montgomery Securities analyst Jordan Hymowitz said in a recent report. ""As such, we believe they have an increased ability to request vehicles (makes, models, etc.), as well as rental terms to meet its retailing terms.""
Other participants in the consolidating auto-retailing business are the CarMax superstore chain of electronics merchant Circuit City and United Auto Group of New York, which has grown to be the fourth largest new-car dealer in the country since 1992.
In still another deal reflecting auto-retailing consolidation, the largest single franchisee of Budget Rent a Car Corp., Team Rental Group Inc. of Daytona Beach, Fla., agreed Tuesday to acquire Ford Motor Co.'s interest in Budget in a deal valued at around $350 million. Ford does not own Budget outright, but controls it through a stock purchase option.
Republic Industries, based in Fort Lauderdale, Fla., also operates in the solid waste and electronic security services industries.
Republic's stock gained $1.125 to $37 in afternoon trading on the Nasdaq market.
",33
"Anti-tobacco lawsuits brought by Florida and other state governments under anti-racketeering laws are meant to demonize cigarette manufacturers and turn Americans against a legitimate industry, a tobacco-industry lawyer said on Friday.
At a pre-trial hearing of a high-stakes tobacco lawsuit, attorney Irvin Nathan held up a newspaper article quoting Florida state government lawyers and said such publicity was meant solely ""to demonize the industry.""  
The article, published in the Tampa Tribune of Florida, quoted state lawyers as saying they want to show that cigarette makers had misled Americans for decades about the health risks of smoking and prove the industry was liable for potentially billions of dollars in medical procedures covered by a Florida insurance program.
Nathan spoke on behalf of Philip Morris Cos Inc, one of several big tobacco companies that asked the judge to throw out a Florida claim that they were liable under Florida's Racketeer Influenced and Corrupt Organizations Act (RICO).  
He argued the law did not apply to the tobacco companies, which are also being sued in Florida under a separate 1994 law that may leave them liable to penalties of $1.0 billion or more.
In claims under RICO -- a type of law also on the federal books and those of many other U.S. states -- Philip Morris and the other tobacco defendents would be liable to triple damages. RICO laws are usually used to prosecute organized criminals.  
Robert Blakey, a law professor at Notre Dame University, said on behalf of Florida that the RICO claim against the tobacco companies fell easily within the scope of the law. In the 1970s, Blakey was an author of several RICO laws, including the federal legislation.
""This, your honor, is a good RICO case,"" Blakey said.
Presiding Judge Harold Cohen of the Palm Beach County Circuit Court is not expected to rule for weeks on the tobacco defendents' request that the RICO claims be dismissed.  
Still, in opening remarks before lawyers for both sides presented their arguments, he said he was inclined to allow the Florida state lawyers to go ahead with the RICO-based claims.
A jury trial of the suit is tentatively scheduled for August 1997, the judge said.
Florida Attorney General Bob Butterworth said in an interview that Florida's RICO claims, if successful, could open a new battle front against the tobacco industry. Attorney generals from two other states that are pressing similar lawsuits agreed with that view.  
Mississippi Attorney General Mike Moore, who accompanied Butterworth to the hearing along with Arizona Attorney General Grant Woods, said the lawsuits filed by 19 states and several cities concerned more than just monetary damages. The lawsuits were needed to alert people to the dangers of smoking and help curb smoking among teenagers.
""That helps me sell the litigation more than the money,"" Moore said.
Moore said Florida, Arizona, Mississippi and several other state governments had allied themselves to press their tobacco cases. With several cases coming to trial next year, 1997 could prove crucial in determining whether the tobacco industry is liable for some of the hundreds of billions of dollars in health-care costs arising from smoking-related diseases.
A trial on Moore's suit begins in March in Mississippi, with Florida's set for the summer and a Texas lawsuit expected to go to trial in the fall.
""I think we will know the answer in 1997,"" Moore said.
-- Miami Newsroom 1-305-374-5013
",33
"New Corp. Ltd. said Tuesday that its Fox News division will file suit Wednesday in U.S. District Court here against Time Warner Inc., Turner Broadcasting System Inc. and its Chairman Ted Turner, alleging antitrust violations.
News Corp., which is led by media mogul Rupert Murdoch, said the suit will allege that an antitrust conspiracy to block Fox News Channel in New York City has taken place prior to the still-to-be consummated merger.
""The suit will allege that the conspiracy has taken place prior to the still-to-be-consummated merger,"" Arthur Siskind, News Corp. Group General Counsel, said in a brief statement. ""The suit also charges Time Warner with breach of contract and fraud in reneging on its agreement to carry Fox News in New York City.""
Locked in a bitter campaign to win New York channel space for its Fox News service, News Corp. on Monday urged city officials to void cable-TV franchises with Time Warner Inc.
News Corp. executives told city officials at a hearing that the pending merger of Time Warner and Turner constituted a change of control of Time Warner's cable systems in New York City and allowed early rebidding for the valuable franchises.
Time Warner holds city cable-television franchises serving 1.2 millions New Yorkers that are due to expire in 1998.
Time Warner, which denies the merger constitutes a change in management control, has refused to carry the 24-hour Fox News service and instead carries two Cable News Network services owned by Turner, and MSNBC, a joint venture of General Electric Co.'s NBC and Microsoft Corp.
Turner and Time Warner are expected to merge on Thursday, creating the world's biggest media organisation. Turner Chairman Ted Turner will become vice chairman of the new company and will be the company's biggest shareholder.
Time Warner is also opposing a proposal backed by New York Mayor Rudolph Giuliani that Fox News be carried on a city-owned channel known as CrossWalks.
Giulani has said that wide dissemination of Fox News throughout New York was important since it was the only all-news channel based within the city and was the source of hundreds of jobs.
The city's Franchise Concession and Review Committee is scheduled to vote Wednesday on whether or not the Turner-Time Warner deal should prompt a review of the Time Warner franchises.
Time Warner executive Richard Aurelio said Monday that 90 percent of the regulators overseeing Time Warner's cable operations, the second largest in the United States, had passed without objection on the Turner-Time Warner merger.
",33
"Eastman Kodak Co secured only a partial exit from the bruising copier wars with the $684 million sale on Monday 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 will 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.
-- New York Newsdesk 212-859-1713.
",33
"Quick & Reilly Group Inc agreed on Wednesday to buy over-the-counter market-maker  Nash, Weiss Inc, another step by the pioneering discount broker into low-profile, but lucrative financial services businesses.
Terms were not disclosed, but two sons of co-founder Leslie Quick Jr said in an interview that the acquisition of the New Jersey firm was by far the biggest deal Quick & Reilly has done.
Nash, Weiss buys and sells on behalf of retail brokerages some 2,500 stocks listed on the Nasda.  
Salomon Brothers analyst Michael Sears said the acquisition may be the start of a flurry of deals involving market-makers in Nasdaq stocks as reforms in pricing threaten to narrow the often wide spreads on Nasdaq stocks.
Investors have complained that the price differences can amount to as much as 10 percent or more of a stock price.
""Going for market share through acquisitions is one way to make up for narrowing spreads,"" Sears said.
He said he knew of no pending deals.  
Among the top six independent Nasdaq market makers, Nash, Weiss profits on the spread, or difference between prices the seller and buyer get. It employs about 60 people, Quick & Reilly said.
The biggest Nasdaq market makers are subsidaries of big financial firms.
""This gives us another major leg,"" said Leslie Quick III, head of the company's U.S. Clearing Corp subsidiary. ""We expect this Nasdaq market maker business to be a fourth leg for us.""  
Best known as a retail broker, Quick & Reilly is also a significant force through U.S. Clearing in backroom processing of Wall Street trading and owner of the JCC Specialist Corp., the second-largest market-maker, or specialist firm, on the New York Stock Exchange.
""The deal really plays well with The Quick & Reilly Group as whole,"" said Salomon Brothers analyst Michael Sears. ""With U.S. Clearing it gives Nash, Weiss a lot of potential for going after instutitional clients.""  
Thomas Quick, president of the firm, said Quick & Reilly with Nash, Weiss would court institutional clients by adding to its roster of 2,500 securities in which it makes markets.
""That number will probably go to 3,500 to 4,000,"" Leslie Quick III said.
The brothers, whose father, chairman Leslie Quick Jr., co-founded the firm in the early 1970s, said the mightily improved  capitalization of Nash, Weiss after the merger with Quick & Reilly will make it much more attractive to large institutional clients.  
Thomas Quick said the leading market-maker for institutional clients had capitalization of about $80 million, or 20 times or more that of Nash, Weiss. Sears said Quick & Reilly had capitalization of about $350 million.
The brothers said they expect revenues at Nash, Weiss to rise dramatically as long as stock trading remains robust and may even double to $120 million by early 1998.
Business has been strong in December and in January and should yield a strong fiscal fourth-quarter, Thomas Quick said. He declined to comment on analysts forecasts of earnings. Sears expects Quick & Reilly to report $0.77 a share for the period ending February 28. Last year, the company reported a normalized $0.91.
Co-founder Leslie Quick Jr serves as chairman and chief executive of the firm, which was the first to offer discounted commissions on New York Stock Exchange-listed stocks after fixed trading commissions were abolished in 1975.
",33
"Quick & Reilly Group Inc sees revenues possibly doubling to as much as $120 million by early 1998 at the OTC market-maker, Nash, Weiss & Co, the pioneering discount broker is buying, top Quick executives said on Wednesday.
The firm also plans to move Nash, Weiss, now largely a market maker for retail brokerages, into the institutional side of the business by adding 1,000 or more issues to its current 2,500 roster, Quick President Thomas Quick told Reuters.  
""This gives us another major leg,"" said Leslie Quick III, the president's brother and head of the discount-brokerage's U.S. Clearing Corp subsidiary. ""We expect this Nasdaq market maker business to be a fourth leg for us.""
Best known as a retail broker, Quick & Reilly is also a significant force in backroom processing of Wall Street trading and owner of the JCC Specialist Corp, the second largest market-maker, or specialist firm, on the New York Stock Exchange.
Earlier, the firm agreed to acquire Nash Weiss, a market maker of 2,500 Nasdaq issues, for an undisclosed amount.  
""That number will probably go to 3,500 to 4,000,"" Leslie Quick III said.
The brothers, whose father, chairman Leslie Quick Jr, co-founded the firm in the early 1970s, said the mightily improved  capitalization of Nash, Weiss after the merger with Quick & Reilly will make it much more attractive to large institutional clients.
""Right now, they are on the retail side,"" said Leslie Quick III. ""They are probably the fifth or sixth largest. We think we can take the business into the top three. With our balance sheet, we can go after institutions.""  
Thomas Quick said the leading market-maker for institutional clients had capitalization of about $80 million, or 20 times or more that of Nash Weiss.
The brothers said they expect revenues at Nash, Weiss, to rise dramatically as long as stock trading remains robust and may even double by the end of fiscal year 1998. The company's fiscal year ends on the last day of February.
Nash, Weiss will be run as a separate subsidiary remaining in Jersey City, New Jersey, and no job cuts or restructurings were planned, the brothers said.
Shares of Quick & Reilly were up 1/8 to 331/4.
-- Miami newsroom, 305-374-5013.
",33
"Lawyers battling cigarette companies on behalf of flight attendants exposed for decades to second-hand smoke began notifying potential claimants Wednesday of the first broad class-action tobacco suit to go to trial.
The mass mailing to some 120,000 former and current flight attendants on U.S. airlines was meant to find non-smoking stewards and stewardesses who have ailments such as lung cancer, attorneys for the plaintiffs said.
Print advertisements, notices on an Internet site and additional mailings will follow. The trial is to begin on June 2 in Miami's Dade County Court.
The class-action claims the illnesses among non-smoking flight attendants were caused by second-hand smoke from cigarettes aboard airliners and seeks unspecificed damages likely to total billions of dollars.
It accuses Philip Morris Cos. Inc., the world's biggest cigarette company and maker of the Marlboro brand, and other leading U.S. tobacco companies of hiding the dangers of second-hand, or environmental, smoke from Americans.
""This is clearly a milestone,"" said Richard Daynard, chairman of the Tobacco Liability Law Project at Northeastern University in Boston.
""This is the first time a class-action case (against tobacco companies) has gotten to notificiation,"" Daynard said.
Another suit in Louisiana seeking to represent as many as 50 million ill smokers was thrown out last year. Daynard said two other class-action suits, another in Miami and the second in Pennsylvania, are also scheduled to go to trial this year.
""This is a signicant stage,"" said University of Colorado School of Law professor Christopher Mueller.
Flight attendants' lawyer Stanley Rosenblatt of Miami said 25,000 to 60,000 sick people would likely be included in the suit out of an estimated 300,000 or more flight attendants who worked for U.S. airlines before in-flight smoking was banned.
The suit alleges that second-hand smoke causes cardiac ailments, cancer and 21 other ailments. Rosenblatt and Daynard said scientific findings do establish links strong enough to stand up in a jury trial.
""That's a very big 'if',"" said Michael York, an attorney for the tobacco industry. ""If he were successful in that, he has to come back and prove that second-hand smoke caused individual injuries.""
Rosenblatt said damages, if any, would be set in follow-up trials after the finish of the June 2 trial, which he estimated would run two to three months. Categories of claims, such as those of people suffering with emphysema, would likely be determined separately, he said.
Tobacco attorneys had in recent months pressed Rosenblatt to spend heavily on a national media campaign, using television and popular magazines, but Dade County Circuit Judge Robert Kaye ruled that mail notification was sufficient.
The mass mailing costs about $1 a letter, Rosenblatt said.
Daynard and Mueller said the tobacco industry, in expectations it would beat Rosenblatt, wanted as many potential claimaints involved in the class-action suit since those people then would not be able to sue independently.
""We think the entire case is meritless,"" York said.
Rosenblatt said any claimants who did not write and ask to be excluded from the class-action lawsuit would be included. Typically, no more than five to 10 percent of class-action claimants drop out, legal experts said.
",33
"International businessman Tony O'Reilly said on Friday acquisitions by his Independent Newspapers Plc will slow considerably next year after the takeover of New Zealand's leading newspaper and other deals.
""I consider next year a year of consolidation,"" Independent Newspapers Chairman O'Reilly told Reuters in a telephone interview.
But O'Reilly's name came up just this week in London markets as the rumored buyer of Mirror Group Newspapers Plc's 46 percent stake in Britain's Independent Newspapers Plc.
Both Mirror Group and O'Reilly, whose separate, Dublin-based firm also owns a 46 percent stake in the British title, denied a deal was in the works.
O'Reilly, best known in the United States as chairman of H.J. Heinz Co , also acknowledged his company was keeping a close eye on Australian media group John Fairfax Holdings Ltd .
Conrad Black, the Canadian media tycoon who runs Hollinger International Inc , sold a 20 percent stake in Fairfax this week after complaining about Australian limits on foreign ownership of newspaper companies.
Some press reports suggest Fairfax might sell a top newspaper or become an acquisition target.
""The situation there is fluid, very interesting,"" O'Reilly said. ""You can just say the O'Reillys are looking on with interest.""
News Corp Ltd chairman Rupert Murdoch last month sold his five percent stake in Fairfax and on Wednesday said he had lost interest in the company because of the foreign ownership ceilings. A native Australian, Murdoch is now a U.S. citizen.
Independent Newspapers owns a 25 percent stake in the Australian regional newspaper company APN, and this year acquired a controlling 85 percent stake in Wilson & Horton in a deal valuing the leading New Zealand newspaper company at NZ$1.32 billion.
",33
"The head of Walt Disney Co's international television business said on Thursday talks with Latin America satellite-television companies could at any moment yield a deal on The Disney Channel.
""The talks are ongoing,"" Herbert Granath, chairman of Disney/International Television, told Reuters. ""We would be capable of reaching a deal in Latin America very quickly.""  
Granath said such a deal for carriage of a Spanish version of The Disney Channel would likely be exclusive to one of two big media consortia active in Latin American direct-to-home (DTH) television.
An international group led by DirecTV of Hughes Electronics Corp, prominent in U.S., DTH is competing with another led by News Corp Ltd in offering multi-channel television delivered by high-power satellites.
Granath declined to detail the Latin American DTH talks, other than to say they were at a stage where a deal could come together on short notice. No agreement was imminent, he said.  
Disney earlier announced a 10-year film deal with KirchGroup of Germany which includes an option to distribute a German version of The Disney Channel on Kirch's DF1 satellite-television system.
Kirch will have pay-television and subscriber-television rights to all Disney's live-action movies for a decade.
The companies declined to put a value on the Kirsch deal, but industry executives said the transaction was likely in line with other recent Hollywood deals with Kirsch valued at about $1 billion.
Disney now produces tailored versions of The Disney Channel, a family-oriented entertainment service popular in the United States which draws heavily on Disney's film library, in Taiwan, Australia and Britain. A French version is due in 1997.
""We're concentrating on The Disney Channel,"" Granath said.
Spain and Italy were other markets where Disney deals might come soon, Granath said.
-- New York Newsdesk 212-859-1713
",33
"Riding rising U.S. cable TV fees, Time Warner Inc said on Wednesday its earnings before heavy debt payments shot up 32 percent in the third quarter, compared with the same three months last year.
Covering the quarter before last Thursday's completion of its $7.5 billion acquisition of Turner Broadcasting System, the entertainment group said three hit movies, strong magazine advertising sales helped by the Olympic Games, and good HBO results lifted cash flow to $964 million.
Revenues for the three months ended Sept. 30 were $4.877 billion, up from $4.344 billion a year ago.
Last year's third-quarter cash flow, defined as earnings before interest, taxes, depreciation and amortization, or EBITDA, was $729 million, the company said.
Time Warner, many of whose cable TV and other businesses are co-owned with 25 percent partner U S West Inc. , reported a net loss of $167 million, or 43 cents a share, for the quarter.
Net losses in last year's quarter were $160 million, or 41 cents a share, on 1.5 million more shares outstanding.
Net interest costs were $276 million, up from $259 million in last year's third quarter. Preferred dividends rose to $76 million in the third quarter from $16 million.
Time Warner's stock showed no gain after the results but rose smartly later in the day after top executives told institutional investors that debt reduction was centre stage at the company.
The executives said Time Warner is in active discussions aimed at restructuring its troubled cable-television partnership with U S West Media Group.
One Time Warner executive said the talks with regional phone group U S West, 25 percent owner of most of Time Warner's cable systems, studios and the HBO pay-TV service, are likely to quicken and could yield a deal within months.
""We want to delever the company, lighten up on cable, and simplify the corporate capital structure,"" said the executive, speaking on a promise of anonymity.
The executives echoed Ted Turner, founder of Turner Broadcasting and now vice chairman of the combined company as well as its biggest individual shareholder. He has said he wants Time Warner's $17.5 billion debt halved.
Time Warner now sees itself with the acquisition of Turner, producer of Cable News Network, The Cartoon Network and two studios, as primarily a programming group, the executives said.
Capital-intensive cable operations are less important and ripe for partial divestment, the executives said. Investment capital can be better used outside cable, the executives said.
EBITDA at Time Warner's cable operations, including those shared with with U S West, rose 14 percent to $512 million, the company said in its earnings report.
Basic cable revenues rose sharply and advertising sales in cable also increased, the company said. With some 12.1 million customers, Time Warner is the nation's second-largest cable operator.
Time Warner also had three summer movies grossing more than $100 million in U.S. ticket sales -- ""Twister,"" ""Eraser"" and ""A Time To Kill"" -- and its filmed entertainment unit had an EBITDA rise of 13 percent to $146 million.
HBO's EBITDA rose 23 percent to $91 million. Sales to subscribers to satellite-television services led HBO's strong growth, senior executives said.
The publishing unit's EBITDA was $99 million, or 15 percent more than the $86 million posted in the year-ago quarter. Sports Illustrated, which produced a daily, limited-circulation version of its weekly magazine during the Atlanta Olympics, had particularly strong advertising sales.
The recorded music unit's EBITDA rose $1 million to $143 million from last year's quarter, when the division took an $85 million charge. Small gains in foreign sales were offset by drops in U.S. music sales, the company said.
Time Warner shares rose $1.125 to $42 in New York Stock Exchange Trading.
",33
"Time Warner Inc. said Wednesday it will launch its CNN/SI sports news service on Dec. 12, more than a month after the debut of another sports news television channel from rival media conglomerate Walt Disney Co.
Time Warner executives meeting reporters said CNN/SI would combine the television apparatus of the Cable News Network and the sports expertise of Sports Illustrated, a weekly sports magazine published by Time Warner since 1954.
In a bid to reach wider audiences when various all-news services are scrambling to secure channel slots on America's crowded cable-television systems, the executives said CNN would simultaneously carry a nightly sports news programme being delivered to CNN/SI subscribers. CNN reaches some 70 million U.S. homes.
General Motors Corp., LCI International and Delta Airlines were among 13 advertisers that have signed on with CNN/SI, the executives said.
ESPNEWS, majority owned by Disney, began service on Nov. 1.
Both services compete against NewSport, a 24-hour sports news service owned by General Electric Co. unit NBC, Rainbow Programming, and a subsidiary of Tele-Communications Inc.
NBC, in alliance with Microsoft Corp., last summer launched the all-news service MSNBC to compete against CNN, part of Time Warner since the October takeover of Turner Broadcasting System Inc. News Corp. also recently launched a general news TV service and is fighting in court to secure a channel slot on Time Warner's New York cable systems delivering television to 1.1 million homes and Madison Avenue.
All business news channels are also about to increase in the United States. Dow Jones & Co. and ITT Corp. is scheduled to launch a business news and sports channel in New York City. NBC and Time Warner already operate all-business-news services throughout the United States.
",33
"A Florida judge said Friday that he was inclined to let stand civil claims filed under state anti-racketeering laws against the tobacco industry.
Speaking from the bench at the start of a preliminary hearing, Palm Beach County Circuit Judge Harold Cohen said he was inclined to let stand claims filed by the state using Florida's Racketeer Influenced and Corrupts Organisations Act, which could mean more losses for cigarette makers.
""It would seem that the state can maintain the RICO actions,"" Cohen said.
The claims under state RICO laws were added last month to the state's existing lawsuit that seeks at least $1 billion compensation for treating smokers' illnesses.
The judge said he would not make up his mind until the end of oral arguments on Friday.
He gave no timetable for making public his decision on a request by Philip Morris Cos. and other cigarette makers that the claims made by the state under RICO laws be thrown out.
Florida State Attorney General Bob Butterworth said before the hearing that a victory against tobacco companies using the RICO law would allow the court to triple the more than $1 billion dollars in damages claimed by the state.
He also said a victory in Florida using its RICO law would widen the war against the tobbaco industry by possibly allowing other states to sue under their own RICO laws.
Lawyer Irving Nathan, representing the tobacco industry, said that lawsuits brought by state governments under anti-racketeering laws were meant to demonise cigarette manufacturers and turn Americans against a legitimate industry.
Nathan argued that the RICO laws did not apply to the tobacco companies that are also being sued in Florida.
The state of Florida in 1995 filed a lawsuit against the tobacco industry, seeking $1 billion or more for health care costs paid for poor people afflicted with smoking-related ailments.
Last month the state amended the suit using the RICO law and claiming that the tobacco companies had conspired with one another to confuse Americans about the dangers of smoking.
Cohen is not expected to rule for weeks on the tobacco defendents' request that the RICO claims be dismissed but he said in opening remarks that he was inclined to allow the Florida state lawyers to go ahead with the RICO-based claims.
A jury trial of the suit is tentatively scheduled for August 1997, the judge said.
Mississippi Attorney General Mike Moore, who accompanied Butterworth to the hearing along with Arizona Attorney General Grant Woods, said the lawsuits filed by 19 states and several cities were about much more than mere money. The lawsuits were needed to alert people to the dangers of smoking and help curb smoking among teenagers.
""That helps me sell the litigation more than the money,"" Moore said.
",33
"Quick & Reilly Group Inc.  agreed Wednesday to buy over-the-counter market-maker Nash, Weiss Inc., another step by the pioneering discount broker into low-profile but lucrative financial-services businesses.
Terms were not disclosed, but two sons of co-founder Leslie Quick Jr. said in an interview that the acquisition of the New Jersey firm was by far the biggest deal Quick & Reilly has done.
Nash, Weiss buys and sells on behalf of retail brokerages some 2,500 stocks listed on the Nasdaq over-the-counter electronic market.
Among the top six independent Nasdaq market makers, Nash, Weiss profits on the spread, or difference between prices the seller and buyer get. It employs about 60 people, Quick & Reilly said.
The biggest Nasdaq market makers are subsidaries of big financial firms.
""This gives us another major leg,"" said Leslie Quick III, head of the company's U.S. Clearing Corp. subsidiary. ""We expect this Nasdaq market maker business to be a fourth leg for us.""
Best known as a retail broker, Quick & Reilly is also a significant force through U.S. Clearing in backroom processing of Wall Street trading and owner of the JCC Specialist Corp., the second-largest market-maker, or specialist firm, on the New York Stock Exchange.
""The deal really plays well with The Quick & Reilly Group as whole,"" said Salomon Brothers analyst Michael Sears. ""With U.S. Clearing it gives Nash, Weiss a lot of potential for going after instutitional clients.""
Sears said the acquisition may be the start of a flurry of deals involving market-makers in Nasdaq stocks as reforms in pricing threaten to narrow the often wide spreads on Nasdaq stocks. Investors have complained that the price differences can amount to as much as 10 percent or more of a stock price.
Thomas Quick, president of the firm, said Quick & Reilly with Nash, Weiss would court institutional clients by adding to its roster of 2,500 securities in which it makes markets.
""That number will probably go to 3,500 to 4,000,"" Leslie Quick III said.
The brothers, whose father, chairman Leslie Quick Jr., co-founded the firm in the early 1970s, said the mightily improved  capitalisation of Nash, Weiss after the merger with Quick & Reilly will make it much more attractive to large institutional clients.
Thomas Quick said the leading market-maker for institutional clients had capitalisation of about $80 million, or 20 times or more that of Nash, Weiss. Sears said Quick & Reilly had capitalisation of about $350 million.
The brothers said they expect revenues at Nash, Weiss to rise dramatically as long as stock trading remains robust, and may even double by early 1998.
Nash, Weiss will be run as a separate subsidiary remaining in Jersey City, N.J., and no job cuts or restructurings were planned, the brothers said.
Co-founder Leslie Quick Jr. serves as chairman and chief executive of the firm, which was the first to offer discounted commissions on New York Stock Exchange-listed stocks after fixed trading commissions were abolished in 1975.
Based in Palm Beach, Fla., the firm is still largely controlled by the Quicks and has more than 100 brokerage offices across the United States.
",33
"Silver King Communications Inc. agreed Monday to buy the Home Shopping Network (HSN) for about $1.3 billion in stock, feeding speculation that Barry Diller was getting set to launch another major television network.
Diller, who is chairman of both Silver King and Home Shopping, could be positioning his companies to compete head on with ABC, NBC, CBS and Fox, whose launch Diller spearheaded in the 1980s, industry analysts said.
The deal would reunite Silver King, which owns 12 TV stations spun off in 1992 by HSN, with its old parent.
Diller, widely known in Hollywood for leading the launch of Fox, which is owned by Rupert Murdoch's News Corp., had already announced plans to drop HSN programming from Silver King's stations and replace it with a traditional mix of locally oriented news, sports and other shows.
""We have a long agenda,"" Diller said in an interview. ""By putting these companies under a common roof, we will get there quicker.""
Diller said speculation that he would start a new national network was premature but he said cash generated by HSN would help Silver King pay for programming and other costs in developing its stations.
Diller declined to discuss details of Silver King's programming, saying plans will be unveiled in November or December. A Silver King spokesman said the programming would emphasise local news and sports and would appear in some markets starting in about a year.
Some executives have said Silver King, with stations in New York, Los Angeles, Miami and other leading markets, would initially target late-night and daytime slots with its own programmes. Start-up networks usually start building their programming with evening fare.
HSN, which pays fees to Silver King to broadcast its retailing shows, will seek to win more slots on cable systems as Silver King's stations convert to traditional television programming, an HSN spokesman said.
Silver King said the stock-swap merger was worth about $1.27 billion based on Friday's closing stock prices. The deal calls for each HSN shareholder to receive 0.45 of a share of Silver King common for each share of HSN stock owned.
""I think it's a very viable deal,"" said analyst Alvin Mirman of Commonwealth Associates. ""Diller reduces Home Shopping's distribution costs immediately. That could be a much as $40 million a year.""
Mirman said he expects Diller to establish another network once he has overhauled the Silver King stations, which together comprise the sixth largest TV company in the United States.
Diller is also buying Savoy Pictures, a money-losing studio that owns other television stations, for about $117 million in stock.
Although HSN, based in St. Petersburg, Fla., invented television shopping in the early 1980s and was once a favourite on Wall Street, it has fallen to number two behind QVC Inc. as its sales have stagnated at about $1 billion annually.
Still, its 24-hour programming reaches some 69 million households via cable television, broadcast station affiliates and satellite dish receivers.
Diller, a highly successful television programmer credited with the Fox network's racy and successful shows, is also expected to revive Home Shopping Network's fortunes, analysts said.
Under the terms of the deal, each share of HSN Class B stock, which has 10 votes per share and is held solely by Liberty Media Corp., will be converted into 0.54 of a share of Silver King Class B Stock.
Silver King said Liberty Media, in order to stay within rules on television-station ownership, will retain a 19.9 percent stake in HSN, under the 21 percent allowed by regulators. Liberty Media already owns a stake in Silver King.
Home Shopping Network stock rose 12.5 cents to $11.375 on the New York Stock Exchange and Silver King fell $1.50 to $28 on Nasdaq.
",33
"Born as the world's first airborne crop-dusting service, Delta Air Lines Inc. may be on the verge of an alliance that would make it the industry's top gun.
The New York Times and Wall Street Journal, both quoting sources familiar with the discussions, reported that Delta and Continental Airlines have been talking about a merger for several months. The Times said a deal was not imminent.
Should Atlanta-based Delta merge with Continental, the new company would be the world's largest carrier.
The newspaper reports contained few financial details, but Standard and Poor's Corp. said it may change its ratings on Continental and Delta debt based on the reports of the talks.
A merger would fill gaps in each carrier's routes and create a powerhouse that would be certain to draw attention of regulators in Washington.
Both companies declined to comment on the reported talks.
Delta, the nation's No. 3 carrier, had a historic summer. Atlanta, where Delta has a major hub, hosted the Summer Olympics attended by tens of thousands who flew on the airline, which posted its best earnings for a quarter, $238 million, on revenues of $3.43 billion.
But Delta, which moved to Atlanta in 1941 and helped transform the sleepy Southern city into a business center after World War II, still faces stiff competition.
In addition to its traditional rivals such as United Airlines, the nation's largest carrier, and No. 2 American Airlines, it also faces newer, low-cost rivals such as ValuJet Inc..
In the talks with Houston-based Continental, Delta may be trying to get a headstart on another possible round of mergers in the industry. Carriers flush with cash from two years of solid earnings could seek mergers in a slow-growth business.
Delta itself has long been a buyer of rivals.
Started 72 years ago as Huff-Daland Dusters to combat the boll weevil, the company bought Chicago and Southern Airlines in 1952 and spread its routes into the South, Midwest, Texas and the Caribbean.
Nearly two decades later, in 1961, Delta moved into New England and Canada by acquiring Northeast Airlines. Its first trans-Atlantic flights, to London, began in 1978. It bought Western Air Lines in 1986.
By the late 1980s, international routes accounted for more than 10 percent of Delta's revenues and the company formed alliances with Swissair and Singapore Airlines.
In 1990, it launched a computer-reservation service, Worldspan, in a venture with Trans World Airlines and Northwest Airlines, to compete with Sabre, the dominant reservations system 84-percent owned by American Airlines parent AMR Corp. .
The following year Delta cherry-picked planes, airport gates, routes and other properties from troubled Eastern Airlines and Pan American World Airways as the economy weakened, concluding a troubled $1.2 billion purchase of Pan Am in 1991.
Like most of the industry, Delta posted losses in the four years through 1994.
",33
"Lawyers in a class-action suit against cigarette makers won the right to question and videotape the chief executives of several top tobacco companies, lawyers said on Thursday.
The chief executives of Brown & Williamson, a subsidiary of B.A.T Industries Plc; the tobacco unit of Philip Morris Cos Inc; the RJ Reynolds Tobacco unit of RJR Nabisco, and Loews Corp's Lorillard were covered in an order issued by Dade County Judge Robert Kaye, according to Edward Moss, a lawyer for Brown & Williamson.  
Stanley Rosenblatt, one of the lawyers bringing the class-action suit on behalf of U.S. flight attendants allegedly sickened by second-hand smoke, said he may use the videotapes at a trial in Dade County Court scheduled to begin in June.
Rosenblatt alleges in his lawsuit that tobacco company scientists and executives conspired to hide the dangers of smoking, even when the industry's own research backed up scores of independent studies that found smoking was unhealthy.  
The suit covers an estimated 60,000 flight attendants who never smoked and who suffer from lung ailments or other sicknesses and worked for U.S. airlines before in-flight smoking was banned.
Moss and other tobacco company lawyers had argued that Rosenblatt questioned tobacco industry chief executives several years ago.
Rosenblatt argued that many of the executives he questioned had retired and that scores of industry documents allegedly backing his claims had since become public.  
Moss said he and other tobacco company lawyers were considering appealing Kaye's order.
Kaye said in a separate order that he would privately review some 1,500 industry documents for possible use by Rosenblatt in the trial.
The tobacco lawyers say the documents, many of them made public by a legal assistant in a law firm representing a tobacco company, are privilged communications. They say the documents should not be used as evidence because the assistant had no right to the documents.
Anti-tobacco activists have described the documents as evidence that the industry for decades knew the risks of smoking while aggressively selling cigarettes and denying the dangers.
((--Miami Newsroom, 305-374-5013))
",33
"Cigarette companies, complaining of likely bad publicity, Friday dropped pre-trial opposition to punitive claims by the state of Florida in a multi-billion dollar anti-tobacco lawsuit.
Florida is seeking $1 billion or more from U.S. cigarette makers for actual costs incurred in its Medicaid healthcare programme for treating people afflicted with smoking-related ailments. Punitive damages, assuming a victory for the state, raise the potential losses to the industry substantially.
The state last month won the right to claim even further damages under Florida's anti-racketeering laws, a legal precedent in the spreading courtroom battle against tobacco companies. State lawyers have said the racketeering claims could cost cigarette makers tens of billions of dollars.
A lawyer for Philip Morris Cos Inc., one of the defending tobacco companies, said in a news release that ending pre-trial opposition had no legal effect and that the industry had never paid punitive damages in any lawsuit.
Florida Attorney General Bob Butterworth hailed the action as victory and said the industry had made a major legal concession to delay harsh disclosures during a scheduled Jan. 24 hearing about industry marketing and medical research practices.
""I liken it to a criminal trial in which the defendant tries to suppress evidence that would prove him guilty,"" Butterworth said in an interview. ""They want to delay. It's their best short-term ploy.""
Butterworth said he was forbidden by court order from detailing the damaging information in 27,000 pages of documents to have been presented on Jan. 24 but said 90 percent of the material came from industry internal documents. Much of the material was gathered by other attorneys general, many of whom are cooperating in anti-tobacco lawsuits filed by 18 states.
""It's nearly all their documents, all about their marketing practices, their science ... and they are giving up everything to avoid publicity,"" Butterworth said.
Philip Morris lawyer Gregory Little said a key reason for the industry's decision was a worry that the state lawyers would present evidence against cigarette makers during the hearing open to journalists. Tobacco lawyers would be severly restricted in defending against the evidence during the hearing, he said.
""... The January 24 hearing -- which was already window dressed for media consumption with a 442-page brief and 12 boxes of documents -- would have done nothing other than provide a platform for the plaintiffs lawyers to once again trumpet their case ...,"" Little said.
He accused anti-tobacco lawyers in Florida of leaking documents to reporters and polluting the pool of unbiased potential jurors needed for a fair trial.
The judge in the Florida trial, which is scheduled to begin Aug. 4 in West Palm Beach, Florida, last fall threw out 15 of the state government's original 18 claims.
Defendants in the case, one of several such lawsuits brought by state governments scheduled to go to trial this year, include RJR Nabisco Holdings and the Brown & Williamson unit of B.A.T Industries of Britain.
The industry may receive another legal blow if a reported campaign by Brooke Group, parent of cigarette maker Ligget Group Inc., to settle Medicaid claims in a deal that could involve the exchange of confidential documents.
Liggett was last year the first tobacco company to ever settle cigarette lawsuits in an accord with five states which had sued the industry to recoup health-care costs of smokers.
",33
"Taking mortgage-backed securities as a model, trucking giant Ryder System Inc is bargaining with a half dozen banks on possibly creating securitized financial offerings on as many as 15,000 leased trucks a year.
A first offering of securitized truck leases could come as early as March and all offerings could total as much as $700 million by year-end 1997, Ryder chief financial officer Ed Huston told Reuters.  
""We're thinking of taking a package of leases and selling them,"" Huston said. ""It's a variation of mortgage-backed securities.""
Huston said no deal, which would be an innovation among trucking services groups, had been agreed and warned an unforseeen issue could block the plan.
""We've talked to a number of banks and we are on the verge of selecting one,"" he said.
He declined to identify which banks Ryder was considering. Citicorp is currently a leading finance source for Ryder, Huston said.  
Ryder late Monday announced it would take a $215 million pre-tax charge against fourth-quarter and full-1996 results to pay for a restructuring, early-retirment and layoffs. The moves affect some 2,100 people and should yield savings in 1997 of $75 million for Ryder and $150 million annually afterwards, Huston said.
The charge was bigger than Wall Street expected, Merrill Lynch analyst Jeff Kauffman said.
""It reflects a conviction by management to change things .... Shareholders really want to see some changes and some of them are losing faith in the story. The onus has been put on management to deliver results,"" he said.
""We are encouraged by their conviction. They seem to be in earnest,"" Kauffman said.  
Ryder, which last year agreed to sell its consumer-truck rental operations, now buys about 25,000 each year. Some 15,000 of those would be suitable for lease-backed securitization, Huston said.
Ryder, he said, may be able to free equity by the lease-backed offerings and get lower costs because lease-backed offerings typically get better ratings than company debt instruments.
Ryder now has single A and A- ratings on its debt and might secure a triple A rating on its lease-back offerings, Huston said.
Shares of Ryder were up 3/4 to 29-1/8.
-- Miami newsroom, 305-374-5013.
",33
"Silver King Communications Inc chairman Barry Diller said on Monday that the $1.27 billion stock-swap acqusition of Home Shopping Network would help fund Silver King's ambitious broadcasting plans.
""We have a long agenda and this helps certainly in developing the stations. We will get there quicker by combining the two companies,"" Diller told Reuters in a telephone interview.
Silver King agreed earlier to acquire HSN, a limping number two in U.S. TV retailing, for $1.27 billion in stock.  
The deal reunites Silver King, owner of 12 U.S. television stations spun off in 1992 by HSN, with its old parent and feeds speculation that Diller is close to launching a seventh U.S. television network.
Diller described as premature the speculation he would start a new national network, but said the cash flow from HSN would help Silver King pay for programming and other costs in developing its stations.  
Diller, a celebrated Hollywood executive credited with leading the 1980s launch of the FOX network, had already announced plans to drop HSN programming now carried on Silver King's stations in order to replace it with a traditional mix of locally oriented news, sports and other shows.
The stations in major markets such as Miami, New York and Los Angeles could attract significant audiences eagerly sought by advertisers, become much more valuable and form the nucleus of a national television network, industry analysts said.
""Silver King will use Home Shopping's cash flow. That will be the start of the benefits,"" Diller said.
""For Home Shopping, it adds businesses it is not now in,"" he said, adding the combined companies would be financially vigorous and poised to exploit new forms of electronic retailing.
""I am thrilled with the combination,"" Diller said.
""As to its more expansive possibilities, I believe the combination will allow the companies the very best way to pursue their very aggressive individual agendas with clarity and without conflict.""
-- New York Newsdesk 212-859-1713.
",33
"Amoco Corp is basing its 1997 business plans on assumed prices of $18 to $19 per barrel for crude oil and $2.00 to $2.10 per thousand (corrects from million) cubic feet for natural gas, said chief financial officer John Carl.
In an interview with Reuters, Carl said, ""We're making our investment decisions on $18 to $19 crude. On natural gas ... around $2.00, $2.10 per thousand (corrects from million) cubic feet of natural gas is what we're looking at from a planning assumption.""""
U.S. crude futures for March delivery on Wednesday closed at $24.24 per barrel.  
""We like these prices where they are. We think they're where they are because of a tightness between supply and demand ... But we're not making our investment decisions on those prices,"" Carl said.
Shares in Chicago-based Amoco rose 7/8 to 85-7/8 on Wednesday after the energy giant reported strong fourth-quarter and 1996 financial results.
Amoco will likely spend about $550 million this year on exploration, compared to about $610 million in 1996, he said.
The company also is planning to hold its 1997 operating costs throughout the company flat at the 1996 level, he said.  
""You look at total operating costs as a company, they're basically flat, '97 to '96, on a planning basis. We're really pushing that responsibility down into the units. One unit to another unit might have job eliminations ... But we don't anticipate any wholesale, large restructurings like we announced in '92 and '94,"" Carl said.
In reporting results, Amoco said fourth-quarter chemical sector earnings fell versus the year-ago period and cited lower olefins and softened paraxylene product profit margins.
On paraxylene prices, Carl said, ""It looks like maybe they hit the bottom at the end of December"" near $0.19 per pound.  
""It may be that they're starting to firm up a little bit, but I think it's too soon to call that,"" he said.
Paraxylene traded on the spot market Wednesday near $0.22 per pound. ""Paraxylene prices appear to be coming up,"" said Salomon Brothers energy industry analyst Paul Ting.
On olefins, Carl said, ""Olefins is much tougher. The trick with olefins right now is the feedstock issue hitting them. A little bit of pressure on the price side, too. Too soon to call that one, too, I think.""
He said Amoco saw refining margins decline in December. ""We're not seeing any change from that"" in Q1, he said. ""It's kind of hanging around the same place. Those refining margins continue to be below where we were a year ago on a year-to-date basis. It's still tough out there.""
((--Chicago Newsdesk 312-408-8787))
",22
"Columbia/HCA Healthcare Corp., the largest U.S. hospital company, Thursday agreed to buy pharmacy benefits management firm Value Health Inc. for about $1.3 billion in stock.
The deal caused concern on Wall Street, which sold off Columbia shares. Its stock fell $1 to $39.25 on the New York Stock Exchange.
Some analysts said the acquisition signalled that Columbia intended to set itself up as a competitor to health insurers and HMOs, many of which are its customers, in a strategy that could have huge repercussions in the healthcare business.
""If anybody was unclear about Columbia's intentions before today, they certainly shouldn't be anymore,"" said Montgomery Securities healthcare industry analyst Ken Laudan.
Other analysts viewed the Value Health deal as essentially defensive, gaining for Columbia some of the same buying power its biggest customers enjoy and sometimes use against it.
""There will be a point where Columbia will compete with HMOs and payors,"" said an analyst who asked not to be identified.
When that day comes, Columbia wants to be sure it can offer consumers a package of healthcare services as integrated and affordable as those of its rivals, he suggested.
""Value Health fits well into Columbia's integrated delivery system and increases our ability to be a full service provider of healthcare services for our patients and customers,"" Columbia Chairman Richard Scott said in a statement.
For Avon, Conn.-based Value Health, which had 1995 revenues of nearly $1.9 billion, the proposed Columbia deal ends a long process of shopping for suitors. ""Value Health has been on the block for a while,"" said ABN-AMRO Chicago Corp. healthcare industry analyst Peter Costa.
Value Health was rumoured in late 1994 to have received a buyout offer from Pfizer Inc. of as much as $60 per share, analysts said. At the time, drug manufacturers were busily acquiring pharmaceutical benefits managers, with the notion that they could sell more drugs through them.
Since then, Value Health's stock price has dropped from a trading range in the high $50s to $21.875, up $1.625, Thursday. On a per-share basis, the Columbia stock transaction proposal is worth about $23.35 per share, based on Wednesday's closing price of Columbia, analysts said.
""I don't think there's going to be a competing bid because everyone has had a chance to see Value Health by now,"" said Dain Bosworth healthcare industry analyst Chris Sergeant.
In the rapidly changing healthcare business, Nashville, Tenn.-based Columbia, with 1996 revenues estimated to total nearly $20 billion, is in a class by itself.
It operates 344 hospitals, 135 surgery centres, more than 550 home health locations and a pharmacy benefits management operation of its own. No other hospital company approaches its size and its decisions have far-reaching impact on drugs, medical devices and virtually every other healthcare market.
Last March, Columbia said it intended to buy for $299.5 million most of Cleveland-based Blue Cross and Blue Shield of Ohio, a health insurer that covers 1.5 million people.
With Columbia's Blue Cross deal awaiting Ohio regulatory clearance, the Value Health deal heightens fears that Columbia sees its future extending beyond hospitals, analysts said.
At the same time, Robinson Humphrey analyst John Runningen said the Value Health deal did not pose a direct challenge to insurers and HMOs. ""Value Health is not an HMO. It's a company that sells services to HMOs ... (Columbia) is stopping short of competing with HMOs,"" Runningen said.
Columbia did not immediately return telephone calls.
",22
"Aon Corp. said Wednesday it agreed to acquire Alexander & Alexander Services Inc. for about $1.23 billion, creating by some counts the world's largest insurance and risk consulting company.
Aon, a Chicago-based insurance holding company, said it will pay $17.50 a share, or about $790 million, for Alexander & Alexander's common stock and about $437.5 million to holders of the company's preferred stock.
Layoffs and office closings are expected to follow the deal as Aon moves to cut cost, analysts said.
With offices around the world, Aon employs about 27,000 people; Alexander & Alexander about 12,000.
""You have to assume every place there's an Aon office and an Alex office, one of them has got to close. And that's a lot of places,"" said Conning & Co. insurance analyst Gary Ransom.
Aon Chairman Patrick Ryan said he could not estimate possible job cuts.
""I don't think you should look for huge layoffs,"" he said.
Alexander & Alexander's stock jumped $3.125 to $17.25, while Aon rose $1 to $58.625, both on the New York Stock Exchange.
Alexander & Alexander, based in New York, is the fourth-largest insurance broker in the world. It has operations in 80 countries, primarily the United States, Canada and Britain.
After its acquisition of Alexander & Alexander, Aon will become either the largest or second-largest insurance broker in the world.
How it will size up against rival giant Marsh & McLennan Cos. Inc. depends on how their operations are counted, Ryan said. ""It's not apples to apples,"" he said.
Aon said it will begin a cash tender offer for Alexander & Alexander's common shares no later than Dec. 16 and upon completion of the tender offer the purchase of the preferred shares will begin.
""Virtually everyone who watches the insurance industry has been expecting this deal,"" said Robinson-Humphrey insurance analyst Thomas Rosencrants.
""It's a fair price. A&A has been struggling for 15 years. There will be tremendous economies of scale to come out of this as A&A is folded into Aon,"" Rosencrants said.
Analysts said they would expect Ryan to head up the combined operations and Alexander & Alexander Chairman and Chief Executive Officer Frank Zarb to step aside.
""I would have to assume that Frank Zarb would not be around,"" Ransom said.
The deal was approved unanimously by the boards of both companies, Aon said.
Over the past decade, the insurance industry has become increasingly competitive and insurers have been forced to hold down premium rate increases, which has put downward pressure on their profit margins.
""There's no end in sight to the 10-year soft market,"" Rosencrants said.
Competition has pressured companies to look for strategic alternatives and led to industry consolidation.
Aon in October completed a $250 million acquisition of Bain Hogg Group Inc. from Britain's Inchcape Plc. The Alexander & Alexander deal likely caps Aon's acquisition drive for now, analysts said.
""The industry has been consolidating. Certainly people have been expecting us to continue to be a leader in that,"" Ryan said. ""We've made two what we think to be strategic and good acquisitions. Now we've got to put them together.""
Aon added that its offer was still subject to several conditions, including the tender and non-withdrawal of at least a majority of the voting power of A&A's common shares, and various regulatory approvals.
",22
"In a move that would reshape the world medical device business, St. Jude Medical Inc agreed Wednesday to make four long-awaited, strategic transactions that would lift it into the top ranks of manufacturers of devices for regulating heartbeat.
The $665-million package of interlocking deals is costly and poses some risks, but likely will proceed, analysts said.
Shares in St. Paul, Minn.-based St. Jude traded down 1-1/2 to 37-1/8 after the announcement, while shares in other companies in the industry also fell.  
""There's a small chance this won't go through, and the Street is also concerned about dilution. But I think this is perfect timing ... It's an idea whose time has come,"" said Montgomery Securities medical technology analyst Kurt Kruger.
The main thrust of St. Jude's bold move is an agreement to buy Ventritex Inc in a stock swap valued at $505 million. Ventritex, of Sunnyvale, Calif., is the smallest of three companies that dominate the fast-growing, $500-million world market for implantable defibrillators, or ICDs -- electronic devices implanted in the chest and connected to the heart by wires to keep it from beating too rapidly.  
To resolve some long-standing legal actions and help free Ventritex from cross-licensing restrictions that have hobbled it for years, St. Jude is making three smaller deals.
The company agreed to buy certain assets from Telectronics Pacing Systems, a unit of Australia's Pacific Dunlop ; to acquire Medtel, an Asia-Pacific medical goods distributor also tied to Pacific Dunlop; and to buy certain intellectual property rights from the Intermedics unit of SulzerMedica, owned by Swiss medical giant Sulzer AG.
""Part of the brilliance of this deal is bringing all these parties together,"" said Piper Jaffray analyst Arch Smith.  
St. Jude is the world's largest maker of heart valves, markets for which are growing, but slowly.
In search of growth and risk diversification, chief executive Ronald Matricaria engineered St. Jude's 1994 acquisition for $500 million of the Pacesetter Inc unit of Germany's Siemens AG. The deal transformed St. Jude into a leading manufacturer of heart pacemakers.  
Since then, rumors have swirled that St. Jude might acquire Ventritex--a deal seen by many analysts as setting a capstone on Matricaria's efforts. ""If he pulls this off, it's the highlight of his career,"" said J.P. Morgan analyst Michael Weinstein.
Even with St. Jude's careful efforts, analysts said legal action could ensue. The other two main players in the ICD market -- Medtronic Inc and Guidant Corp -- could seize the chance to drag St. Jude into the courtroom.  
Shares in Minneapolis-based Medtronic were down 7/8 to 63-3/4, while shares in Indianapolis-based Guidant were off 2-3/8 to 41-3/8. Analysts said both fell on a perceived competitive threat from the St. Jude-Ventritex combination.
""Medtronic's world is getting more competitive, but I think they're less vulnerable than Guidant ... A hard rain is going to fall on Guidant,"" Kruger said.
Acquiring Ventritex promises to cut into St. Jude's future profits. UBS Securities analyst Samuel Navarro estimated 1997 earnings could be reduced by 10 to 15 percent.
Analysts disagreed on whether 1998 earnings would show a neutral, positive or continued negative impact from the deal.
St. Jude earned $129 million, or $1.71 per share, on sales of $723.5 million in 1995. The pre-merger First Call consensus of Wall Street analysts' estimates projected St. Jude earnings of $1.85 per share in 1996 and $2.19 per share in 1997.
""""One of the reasons the stock is off is uncertainty over 1997 earnings ... It's very difficult to say what St. Jude's earnings will look like in 1997 in the wake of this. But if you look into 1998 and beyond, it's powerful,"" Smith said.
--Chicago Newsdesk 312-408-8787
",22
"Outboard Marine Corp said it is only five percent finished with a radical restructuring that it expects will result in more charges against earnings in 1997 and possibly in 1998, the company said.
Restructuring is about ""five percent complete as far as going down the road and getting the savings,"" said spokesman Stan Main. ""That does not mean that we've taken only five percent of our restructuring charges ... There will likely be more charges during '97 and perhaps even into '98.""
Shares in Outboard on Friday were off 1/4 to 15-3/4.  
The Waukegan, Ill.-based maker of boats and boat engines reported fourth-quarter profits Thursday that, excluding restructuring charges, beat Wall Street estimates.
Analysts cautioned, however, that a turnaround at Outboard remains a long-term project.
""They're going to be continuing this restructuring process in '97 and they're going to continue to have some more charges ... They describe the phase they're in now as the discovery process,"" said Lehman Brothers analyst Harriet Baldwin.
A key moment could come Tuesday when Outboard executives are scheduled to meet with analysts and investors in New York.  
Expected to be in attendance are the principals of Greenway Partners, an investment firm led by former Carl Icahn associates Alfred Kingsley and Gary Duberstein. Greenway bought an 8.5-percent stake in Outboard this summer.
Although the firm is known for activism, Greenway so far has not pressured Outboard to alter course, Main said. Nor has there been further communication between Greenway and company executives since initial discussions in August, he said.
Analysts speculated there could be fireworks next week or at the January 16 annual meeting of shareholders, who are said to be growing impatient for a cohesive recovery plan.  
A restructuring was set in motion this year by chief executive Harry Bowman, who came aboard in 1995, when the stock was trading in the low 20s. Bowman continues to deliberate over how to fix Outboard and key pieces remain to be put in place, analysts said.
The business is under evaluation from top to bottom, Main said. Once restructuring is complete, Outboard ""certainly will be a marine products company,"" he said.  
""Longer term, we could get into products that would not be marine related. But our initial focus over the next two to three years is to fix the business that we're in and then perhaps look at other areas that might be less cyclical or seasonal,"" said Main, who is director of strategic planning.
Bowman has spoken of finding more stability for Outboard, which suffers more from boating's boom-bust cycles than rivals, such as Lake Forest, Ill.-based Brunswick Corp, which has diversified into bowling, fishing and camping gear.
Outboard sees opportunities to enter other markets -- such as motorcycles, snowmobiles and personal watercraft -- via its innovative FICHT fuel injection engine technology, Main said.
Spending on capital and tooling in fiscal 1996, ended September 30, fell to $52.7 million from $66.5 million the year before, but spending on FICHT is holding steady as the company converts more of its engine line to it, he said.
Sales of 150-hp FICHT engines to dealers will begin in December and consumers will see the engines in January. A promotional roll-out is underway.
The company plans to convert its entire outboard engine line above 20-hp to FICHT engines, which will cost 22 to 25 percent more than their traditional equivalents, Main said.
--Chicago Newsdesk 312-408-8787
",22
"In a move that would reshape the medical device business, St. Jude Medical Inc. agreed Wednesday to make four strategic transactions that would lift it into the top ranks of manufacturers of devices for regulating heartbeat.
The $665 million package of interlocking deals is costly and poses some risks, but likely will proceed, analysts said.
The stock of St. Paul, Minn.-based St. Jude fell $1.25 to 37.375 after the announcement, while shares in other companies in the industry also fell.
The main thrust of St. Jude's moves was an agreement to buy Ventritex Inc. in a stock swap valued at $505 million.
Ventritex, of Sunnyvale, Calif., is the smallest of three companies that dominate the fast-growing, $500 million world market for implantable defibrillators, or ICDs -- electronic devices implanted in the chest and connected to the heart by wires to keep it from beating too rapidly.
""There's a small chance this won't go through, and the Street is also concerned about dilution. But I think this is perfect timing ... It's an idea whose time has come,"" said Montgomery Securities medical technology analyst Kurt Kruger.
To resolve some long-standing legal actions and help free Ventritex from cross-licensing restrictions that have hobbled it for years, St. Jude is making three smaller deals.
The company agreed to buy some assets from Telectronics Pacing Systems, a unit of Australia's Pacific Dunlop; to acquire Medtel, an Asia-Pacific medical goods distributor also tied to Pacific Dunlop; and to buy certain intellectual property rights from the Intermedics unit of SulzerMedica, owned by Swiss medical giant Sulzer AG.
""Part of the brilliance of this deal is bringing all these parties together,"" said Piper Jaffray analyst Arch Smith.
St. Jude is the world's largest maker of heart valves, markets for which are growing, but slowly.
In search of growth and risk diversification, chief executive Ronald Matricaria engineered St. Jude's 1994 acquisition for $500 million of the Pacesetter Inc. unit of Germany's Siemens AG. The deal transformed St. Jude into a leading manufacturer of heart pacemakers.
Since then, rumours have swirled that St. Jude might acquire Ventritex -- a deal seen by many analysts as setting a capstone on Matricaria's efforts.
""If he pulls this off, it's the highlight of his career,"" said J.P. Morgan analyst Michael Weinstein.
Even with St. Jude's careful efforts, analysts said legal action could ensue. The other two main players in the ICD market -- Medtronic Inc. and Guidant Corp. -- could seize the chance to drag St. Jude into the courtroom.
Shares in Minneapolis-based Medtronic fell 12.5 cents to $64.125, while shares in Indianapolis-based Guidant dropped $2 to $41.50. Analysts said both fell on a perceived competitive threat from the St. Jude-Ventritex combination.
""Medtronic's world is getting more competitive, but I think they're less vulnerable than Guidant ... A hard rain is going to fall on Guidant,"" Kruger said.
",22
"Freed from its slow-growing data storage and imaging businesses, Minnesota Mining & Manufacturing Co showed on Friday it can excite Wall Street.
The St. Paul, Minn.-based manufacturing giant -- sometimes seen as a mirror of the U.S. economy -- posted strong third quarter sales and earnings growth versus year-ago results.
Shares in 3M jumped 2-1/8 to 73-3/8 on the strength of an earnings report that exceeded analysts' estimates. ""It's been a long time since 3M beat any kind of estimate,"" said PNC Institutional Investment Services analyst John Franck.  
""A lot of people were questioning whether this company could grow again,"" Franck said.
3M served notice that it can with third-quarter sales up 7.5 percent and profits up 17.4 percent, analysts said.
""Now that they've spun off Imation, which was taking up too much of their resources and adding to earnings volatility, this is the 3M that most people expect when they invest in it,"" said Crowell Weedon analyst Douglas Christopher.
On July 1, 3M's data storage and imaging businesses began operations as an independent company, Imation Corp. The quarter just ended is 3M's first since the spinoff.  
""They're not held back anymore by that business that's now called Imation,"" said Merrill Lynch analyst Robert Curran.
After reporting third-quarter profits of $398 million, or $0.95 per share, on sales of $3.62 billion, 3M said it expects solid growth again in the fourth quarter.
If it can deliver successive quarters of big gains, 3M could move out of the realm of value stock funds and draw the attention again of growth stock investors, analysts said.
""3M is a little different from most companies ... They're PhD oriented so there's a lot of intellectual types up there, but they're building a powerhouse,"" Franck said.  
3M makes thousands of products -- from Scotch tape, Post-it notes and air filters to diaper closures, flexible computer circuits and kitchen sponges.
""It can be said that their domestic business is something of an indicator of the economy as a whole because it's so diverse,"" Curran said.
That is less true since the Imation spin-off. There are key sectors of the U.S. economy absent from 3M's product line. And more than half its business is outside the United States.
Still, said Franck, ""You can probably take U.S. GDP (gross domestic product), multiply it by two and factor in whatever you want for inflation and you've basically got their sales growth rate ... If the economy is doing well, they do well.""
--Chicago Newsdesk 312-408-8787
",22
"Increasing pressure from customers to hold down prices will keep a profit squeeze on U.S. medical device manufacturers in 1997, although the sector's biggest firms are expected to show healthy growth.
Other variables looming over the industry are the naming of a successor to departing U.S. Food and Drug Administration Commissioner David Kessler and Congress' mood on healthcare.
""Expectations are still for a positive environment from a Washington standpoint, but I don't think you can take that for granted,"" said Prudential Securities analyst Charlene Lu.  
After six contentious years, Kessler announced his resignation from the FDA last month. The White House has not named a replacement. ""Questions like who replaces Kessler are going to have a big impact on whether new products get approved quickly,"" Lu said.
Congressional and White House sentiment on reforming the U.S. healthcare industry is lukewarm at the moment, but could reemerge as an issue, analysts said.
""Meanwhile, managed care marches on and that will have an impact,"" said Wasserstein Perella analyst Robert Dunne.  
Health maintenance organizations, hospitals and others that buy medical devices -- such as pacemakers, catheters and heart valves -- are squeezing device makers for lower prices. That has cut into profits and limited the growth potential of some companies, analysts said.
""You're going to continue to see greater and greater market pressures,"" Lu said.
In search of growth, many device companies are looking overseas and finding opportunity. ""To grow the top line, you've got to move outside the United States,"" said Dain Bosworth analyst Rachael Scherer.  
Partly as a result, the sector's biggest firms -- those with global reach -- had the best 1996 and are widely expected to lead the pack again next year. Companies such as Medtronic Inc, Boston Scientific Corp and Guidant Corp are widely seen as market outperformers for 1997.
""I'm looking probably for 20 percent-plus earnings growth from them ... Those stocks will probably perform a little bit better than the market,"" Dunne said.  
Possibly less rosy is the general outlook for small device companies. Scherer pointed out that Nasdaq medical technology stocks severely underperformed the Standard & Poor's 500 Stock Index this year, while larger listed issues topped the index, mirroring a dichotomy seen in other industries, as well.
""We're optimistic that Nasdaq med tech issues will outperform next year,"" Scherer said.
Smaller and mid-sized firms named by analysts as potential 1997 winners were Datascope Corp, Target Therapeutics Inc, Stryker Corp, Mentor Corp, and Nellcor Puritan Bennett Inc.
On the technology front, growth was expected to continue to be strong for stents, which shore up the insides of diseased blood vessels, and implantable defibrillators, which treat too-rapid heartbeat.
Key products expected next year from industry giant Medtronic include an atrial fibrillation device, a device for continually recording electrocardiogram readouts to help diagnose unexpected fainting, a new stent and an implantable drug pump for cancer patients, Medtronic said.
((--Chicago Newsdesk 312-408-8787))
",22
"The growing attractiveness of the subprime auto lending market was underlined again Monday when Olympic Financial Ltd said it had received expressions of interest from more than one potential acquirer.
Olympic expects to get a formal acquisition offer ""within the next several weeks,"" said spokeswoman Jennifer Weichert.
The company's stock price shot up 6-1/4 to 23-7/8 in heavy trading Monday amid speculation of a buyout.
""We don't have an offer on the table ... and we don't have a price,"" Weichert said.  
She also declined to identify those expressing interest in buying Olympic. But she said, ""Generally the kinds of companies that would look at a firm like this are other finance companies or regional banks or a conglomerate.""
Two major regional bank companies have waded into the subprime auto lending market via acquisitions in the past year. KeyCorp bought AutoFinance Group Inc last September, and Southern National Corp is in the process of buying Regional Acceptance Corp.
""It's partly the banks saying they want to recapture this market share,"" said Robison-Humphrey analyst John Coffey.  
Minneapolis-based Olympic, as with other subprime lenders, makes loans to borrowers with credit histories classified as weak or on the average- to lower-end of prime.
""These companies exist today because the banks have been unable to serve these markets ... and because you don't need to be a deposit taker to make auto loans,"" Coffey said.
Returns on well-managed subprime car loan portfolios can be strong and attractive to banks, he said.
Earlier this year, the Consumer Bankers Association warned of pitfalls in the subprime business and cautioned banks against jumping headlong into this growing market.  
Analysts said banks that could be interested in Olympic include KeyCorp, Norwest Corp and BankAmerica.
Also mentioned by analysts as a possible suitor was the GE Capital unit of General Electric Co.
Whoever the buyer, Coffey said, Olympic is ""intent on selling this company.""
He suggested the price could go higher than the $30 per share that other analysts set Monday as the likely top limit.
Trading volume in Olympic shares Monday was triple normal levels. ""There's some people taking some bets that it's going to go,"" said Principal Financial analyst Bob Ollech.
-- Chicago Newsdesk 312-408-8787
",22
"Baxter International Inc said it expects to maintain annual gross profit margin in the 44 to 45 percent range.
""We'll definitely be able to stay, on an annual basis, in the 44 to 45 percent range,"" said chief financial officer Harry Kraemer in an interview with Reuters.
The Deerfield, Ill.-based medical products and services company also is still comfortable with the forecast it made in September that 1996 sales would be about $6.2 billion, although Kraemer suggested that figure could be low.  
""I would say that we're very comfortable with that number ... It could be higher,"" Kraemer said of the estimate.
Baxter reported third-quarter earnings on Wednesday of $0.65 per share, beating the consensus Wall Street estimate of $0.64 per share. Year-ago profits were $0.59 per share.
Sales for the quarter were $1.31 billion, compared to $1.26 billion a year earlier.
Foreign exchange translations reduced third-quarter sales by about $60 million, Kraemer said. ""Despite the fact that our sales impact of foreign exchange was $60 million, we still exceeded the earnings estimate for the quarter,"" he said.  
Unfavorable currency exchange ratios continued to hit hardest in Japan, Kraemer said. ""Going forward, we're assuming that it doesn't get better. If it does get better, then we have this strange thing called an upside ... But predicting foreign exchange is the first step to doom,"" he said.
After closing its acquisition of Switzerland's Immuno International AG, likely by the end of the year, Baxter expects 60 percent of sales and 75 percent of profits to come from outside the United States.
The company targeted 1996 cash flow of $500 million. In the first nine months of the year, cash flow was $457 million.  
Shares in Baxter were unchanged at 44 at midday.
On a segment basis, sales growth in the third quarter was strongest in Baxter's smallest business, cardiovascular medical products, and weakest in its largest business, the intravenous systems sector.
In cardiovascular, percentage third-quarter sales growth was in the high teens, led by strong sales gains in tissue heart valve and perfusion services, Kraemer said. The segment generated 14.5 percent of 1995's $5.05 billion in sales and is expected to remain in that range this year, he said.  
Percentage sales growth in the biotechnology segment was in the mid-teens, powered by growth in sales of Recombinate, a blood-clotting factor for haemophiliacs, and Gammagard, a therapy for patients with weak immune systems, Kraemer said.
Biotech provided 22.4 percent of 1995 sales, but is expected to jump to 32 percent after the Immuno acquisition.
Kraemer added that Baxter's development of a blood substitute product ""continues to move ahead.""  
The renal therapy business showed percentage sales growth on the quarter in the low teens outside the United States, while U.S. sales were down in single digits. The U.S. decline was caused by sales lost to Fresenius AG following its acquisition of the National Medical Care unit of W.R. Grace & Co, Kraemer said.
The renal segment's percentage share of Baxter sales is expected to contract to about 22.6 percent this year from 25.5 percent last year, Kraemer said.
In the cash cow intravenous business, percentage non-U.S. sales growth was in the mid-single digits, while it was flat inside the United States, Kraemer said.
The IV business generates more than 50 percent of Baxter's cash flow and is feeling pressure from the continuing cost containment push in the healthcare industry, he said.
The IV segment accounted for 37.4 percent of 1995 sales. This year, that share is likely to fall to about a third of sales, based on Baxter sales growth estimates.
--Chicago Newsdesk 312-408-8787
",22
"Ford Motor Co. said Wednesday it may sell its interest in Budget Rent a Car, joining other U.S. automakers in their race to exit the battered rental car business.
""We're looking at the idea that a sale could be done,"" said Ford spokesman Chris Vinyard.
Ford does not own Budget outright, holding non-voting preferred shares and an option to acquire the car rental agency's common shares, which are owned by investor John Nevin, Vinyard said.
""We could theoretically either sell our option or direct the sale of the common shares through our option,"" he said.
If a sale goes through, as analysts widely expect, Budget would be the fifth major rental car agency to change hands since 1994. ""The reason is they're not making any money,"" said WEFA Group automotive consultant George Magliano in New York. ""Travel is hot, but the car rental business is going nowhere.""
That is not evident from the sudden interest shown in the $14 billion a year business by a new class of investors who are buying up the agencies as the automakers unload them.
""They see opportunity for profits. The industry is in a mild recovery and it's probably a better time to own a rental car agency than it has been for a long time,"" said Jon LeSage, editor of Auto Rental News, a trade journal in California.
Ford declined to comment specifically on an article in Wednesday's Wall Street Journal that said Ford was expected to sell Budget to Team Rental Group Inc., a Daytona Beach, Fla.-based Budget licensee, for $350 million.
A Team Rental spokesman also declined comment.
""No agreements have been reached among any parties,"" said Kimberly Mulcahy, spokeswoman for Lisle, Ill.-based Budget. She declined further comment.
Ford said last year it would exercise its option and buy out Budget's common shares, but analysts said the deal looks shaky now after delays resulting from an antitrust review by the Federal Trade Commission.
Budget has been closely allied with Ford for many years and rents mainly Ford vehicles. Ford's planned purchase of the company was meant to improve its performance.
Vinyard said Ford was exploring a possible sale because of rising investor interest in rental car firms. ""Interest in the group in the last six to 10 months has increased significantly,"" Vinyard said.
Vinyard said the automaker does not plan to make any announcements regarding Budget following Ford's regular board of directors meeting scheduled for Thursday.
A.G. Edwards auto analyst Michael Braigg in St. Louis said he expects Ford to sell Budget soon, likely to Team Rental. ""I think that one's pretty far along,"" he said.
""The real issue is that Budget is the small rental property of Ford. And if Budget is for sale, then so is Hertz in the long run,"" Braigg said.
Ford began investing in Park Ridge, N.J.-based Hertz in 1987 when U.S. automakers were buying up rental car agencies hoping to load up their fleets with the thousands of new cars that consumers were leaving on the lots.
The strategy worked for a while, but then backfired when agency sales of barely used rental vehicles started eating into new car sales. Automakers began encouraging the agencies to hold fleet cars longer, which restricted how many new cars the agencies could take on.
Ford bought all of Hertz in 1994 and, unlike many rental car agencies, Hertz is probably profitable, analysts said.
""There is no big advantage to the automakers to owning these agencies anymore,"" WEFA's Magliano said. ""Probably along the way, Ford will sell Hertz. Generally, when these companies begin to divest operations, they get rid of them all.""
Reassured by a back-to-basics management trend running through U.S. industry, automakers started selling off rental car agencies in 1994 with Chrysler Corp.'s sale of Snappy Car Rental. General Motors Corp. sold National Car Rental Systems Inc. in 1995 to private investors, who earlier this week agreed to sell National to Republic Industries Inc.
Seeking to lock in supply for its fledgling AutoNation used-car chain, Atlanta-based Republic in November agreed also buy Alamo Rent-A-Car Inc.
Last June GM sold its 29-percent stake in Avis Inc. to HFS Inc., a real estate and hotel concern based in New Jersey.
Chrysler still owns Dollar Rent-A-Car and Thrifty Rent-A-Car. ""Our status today is that Dollar and Thrifty are very much a part of our everyday business. It's business as usual,"" said Chrysler spokeswoman Lori McTavish.
""It is Chrysler's goal, however, to focus on our core automotive business,"" she added.
Based on U.S. vehicle fleet size, Auto Rental News ranks privately held Enterprise Rent-A-Car, of St. Louis, as the nation's largest rental car agency, followed by Hertz, Avis, National, Alamo, Budget, Dollar and Thrifty.
Together, Enterprise, Hertz and Avis own half of the total rental fleet of about 1.5 million vehicles, according to the trade journal.
",22
"Approval of Eli Lilly & Co's new anti-schizophrenia drug, Zyprexa, is expected to come soon from the U.S. Food and Drug Administration, analysts said.
Marketing clearance for the drug, known generically as olanzapine, would put Lilly in the front of a parade of new anti-schizophrenia medications coming on the U.S. market.
""We expect approval yet this year ... There's been no hint of any issues"" from the FDA that might cause delay, said Lilly spokesman Edward West.
Wall Street analysts said approval could come this month.  
The FDA has not scheduled an advisory committee hearing for Zyprexa. West said Lilly has no indication that a committee hearing will be set. Analysts said the drug likely will be cleared without committee deliberations.
""The big expectation would be that Zyprexa will be approved ... That's what's on everybody's radar screen,"" said Smith Barney pharmaceuticals analyst Christina Heuer.
Zyprexa received a positive opinion in June from the European Union's Committee for Proprietary Medicinal Products. European marketing approval likely will follow, analysts said.
Several competing products are in the pipeline.  
Close behind Lilly are Abbott Laboratories Inc with Serlect, Zeneca Group Plc with Seroquel and Pfizer Inc with Ziprasidone. All are expected to hit the market within the next 12 months.
Already on the market are Johnson & Johnson's Risperdal, Sandoz AG's Clozaril and the benchmark treatment available since 1967, haloperidol, as well as a host of less frequently prescribed drugs.
Studies have shown that one in 100 people is schizophrenic. Estimates of the annual U.S. market for treating the disease range from $1 billion to $4.5 billion.
Looking at the huge success of Lilly's Prozac in treating clinical depression, drugmakers are hoping to score equally impressive wins with the new anti-schizophrenics.
--Chicago Newsdesk 312-408-8787
",22
"If the weather cooperates, U.S. retailers expect this weekend to cap a holiday shopping season that looks moderately better than last year's, despite being shorter by five days.
""This weekend is crucial,"" said Prudential Securities retail analyst Wayne Hood in Atlanta. ""With the snow and cold weather, it's a little too early to tell. ... But on balance, it should be a better holiday sales season than last year.""
Warmer weather is forecast for much of the country this weekend following a cold snap that rattled some regions.
A blast of arctic air slowed shopping earlier this week in Minnesota, the Dakotas, Iowa and Nebraska, said Susan Eich, spokeswoman for Minneapolis-based retailer Dayton Hudson Corp., which owns Target, Mervyn's and three department store chains.
Cold, wet weather in the Northeast dampened midweek shopping in the New York area, analysts said.
Snow fell Wednesday in Atlanta. And south Florida felt an unfamiliar chill Friday, but the retail impact was minimal. ""It looks fairly good. ... Down here they're buying,"" said J.W. Charles Securities retail analyst Allen Roness in Boca Raton, Fla. The registers are ringing in California as well, where weather has not been a problem, said Robertson Stephens retail analyst Edward Weller in San Francisco. ""It's going to be a reasonably good Christmas for American consumers and a very good one for retailers,"" he said.
He noted, however, that some sectors are outperforming others. Clothing sales are strong, reflecting perhaps the closings this past year of hundreds of apparel retailers, Weller said.
On the other hand, home computer sales continue to look anemic and prices are coming down fast. ""Consumer demand for computers is, in technical terms ... poor,"" Weller said.
There are five fewer shopping days this year between Thanksgiving and Christmas compared with 1995. As a result, retailers have that much less time to meet their sales targets and consumers have that much less time to shop and compare.
""Everybody knew it going in. So they got the ads out early and put the decorations up early,"" said A.G. Edwards retail analyst Stephen Latz in St. Louis, where warmer weather is forecast for the weekend.
Staring down the barrel of a shortened season, retailers have begun some sales promotions, but last year's huge price markdowns so far are not being matched, Latz said.
""I don't think anybody has gone nuts like they did in past years,"" he said. ""It's going to be the best season in the last few years, but those five fewer days are a lot to overcome ... That's going to be the story.""
",22
"TheraTx Inc does not expect the federal government to implement new guidelines for certain key Medicare reimbursement rates until the summer of 1997, postponing until then any likely damage to the health care services concern's profitability.
""It's a government reimbursement change which is forthcoming. It will definitely pressure our earinings, there's no doubt about it,"" chief financial officer Donald Myll said in an interview.  
Like other companies that provide rehabilitation services to patients mostly in nursing homes, TheraTx has been waiting for two years for action from Washington on the reimbursement issue.
The company's stock has been depressed during that time by a market unjustifiably focused on one issue, Myll said following a presentation to investors at a Robinson-Humphrey conference here on Tuesday.
""At this point, I'd rather have bad news on salary equivalency than what we have now, which is no news,"" Myll said, referring to the issue.  
Public since 1994, Alpharetta, Ga.-based TheraTx operates 29 nursing homes and provides rehabilitation services on contract to dozens of other nursing homes companies. The firm also runs several occupational health clinics.
The rehabilitation division provides about 45 percent of revenues and offers three main forms of therapy: speech, occupational and physical.  
Most revenues in the rehabilitation area come from Medicare, the federal healthcare program for the elderly. The U.S. Health Care Financing Administration, which oversees Medicare, has been rewriting its reimbursement rules for speech, occupational and physical therapy since October 1994.
If HCFA proceeds with its latest set of reforms, TheraTx could see 1997 earnings come in flat to down compared to this year's level, Myll said.
Much remains to be determined, however, he said. Moreover, despite market concerns, the potential earnings hit from the changes is not large enough to hurt TheraTx seriously, he said.  
""There's no real threat. It's a one-time pricing issue.... The market has no clue on this,"" Myll said.
TheraTx on Tuesday reported third-quarter profits of $0.29 per share, up from $0.26 per share a year ago. The First Call consensus earnings forecast for the third quarter was $0.30 per share.
""The general performance of the company is on track. Whether (1996 per-share net) is $1.17 or $1.12 is not for me to say...but I would guess that analysts are probably going to revise their estimates downward because the third quarter was a couple pennies below the consensus,"" Myll said.
The First Call 1996 earnings estimate range is $1.15-$1.20 per share.
TheraTx shares closed Tuesday up 3/8 at 10-1/2.
",22
"Heartport Inc leaped almost a year ahead of its scheduled plan for developing a new heart surgery technology thanks to an earlier-than-expected U.S. Food and Drug Administration approval granted on Monday.
As a result, analysts who had looked for Heartport to turn its first profit in 1999 are now talking about 1998.
For its part, the company plans a U.S. launch of its port-access surgical system in mid-1997. ""That's about a year earlier than we had previously expected,"" said chief executive Dr. Wesley Sterman in an interview with Reuters.  
Between now and then, Heartport plans to equip its six lead clinical training centers with port-access systems.
""We're targetting having 30 surgical teams trained by the end of the year, then drastically increasing our training capabilities over the next six to 12 months,"" Sterman said.
""Most analysts were looking at us crossing over (to profitability) in 1999. So maybe you could argue now that it could come in 1998, but I don't know that we would support that. I'm just saying what the analysts are doing,"" he said.
Shares in Heartport slipped 2 to 34-1/2 on Tuesday afer soaring as much as 7 on Monday after the FDA approval.  
Several medical technology firms are chasing the young market for minimally invasive heart surgery, in which surgeons work through small holes in the chest, instead of by cutting the chest open. Alone among potential rivals, Heartport is focused on a technique that stops the heart and puts the patient on a heart-lung bypass circuit like those used today in traditional open-heart surgery.
Other companies, such as CardioThoracic Systems Inc and Medtronic Inc, are focused on beating-heart techniques that eliminate heart-lung bypass. U.S. Surgical Corp is also working in the field.
",22
"Amidst a wave of consolidation, U.S. hospital management and nursing home companies are expected to post mixed results in the third quarter.
Big hospital companies, despite cost and competitive pressures, are beating up on non-profits and posting fat profit margins. The average gain expected from the top five firms is 17.6 percent, based on First Call estimates.
""I haven't noticed deterioration in margins in these companies because they're grabbing market share, controlling costs and being efficient,"" said Wheat First analyst Joel Ray.  
The hospital business was shaken Thursday by the proposed $1.8-billion merger of Tenet HealthCare and OrNda HealthCorp, which combined will be second-largest in the field behind giant Columbia/HCA Healthcare Corp.
The nursing home industry was jolted Thursday when Integrated Health Services Inc said it acquired First American Health Care of Georgia, the largest privately held U.S. home healthcare company.
The volatile nursing home and post-acute care market is less concentrated than the hospital business and the third quarter profit picture is more mixed, analysts said.  
""Results are going to be coming in all over the board,"" said Alex. Brown & Sons analyst Jean Swenson.
Big profit gainers on the quarter look to be Vencor and Genesis Health Ventures, with weak results forecast for Beverly Enterprises and Horizon/CMS Healthcare, analysts said.
Challenges facing both the labor-intensive hospital and nursing home businesses include upward wage pressure due to record-low unemployment levels, as well as ongoing debates in Washington over the future of Medicare and its reimbursement rates for certain contract therapy services, analysts said.
U.S. FIRST CALL CONSENSUS QTRLY EARNINGS FORECASTS
Company			    Qtr  EPS estimate  Yr-ago EPS
Beverly Enterprises	    Q3     $0.22	   $0.23
Columbia/HCA Healthcare	Q3     $0.70	   $0.61
Genesis Health Ventures	Q4     $0.39	   $0.31
Health Management		Q4     $0.17	   $0.14
Horizon/CMS Healthcare	 Q2     $0.26	   $0.27
Manor Care			 Q2     $0.53	   $0.46
OrNda Healthcorp		 Q4     $0.39	   $0.33
Vencor Inc			 Q3     $0.47	   $0.38
--Chicago Newsdesk 312-408-8787
",22
"Freed from its slow-growing data storage and imaging businesses, Minnesota Mining & Manufacturing Co. Friday reported a 16 percent jump in earnings for the third quarter.
The St. Paul, Minn.-based manufacturing giant -- sometimes seen as a mirror of the U.S. economy -- said net profits rose to $398 million, or 95 cents a share, in the quarter, from $344 million, or 82 cents a share, in the 1995 period. The year-ago quarter included earnings of $5 million, or 1 cent a share, from discontined operations.
Sales grew 7 percent to $3.62 billion from $3.37 billion.
The results surpassed analysts' average forecasts of 93 cents a share, according to First Call, which tracks estimates.
3M's stock jumped $2 to $73.25, helping to boost the Dow Jones industrial average, of which is it is a component.
""It's been a long time since 3M beat any kind of estimate,"" said PNC Institutional Investment Services analyst John Franck. ""A lot of people were questioning whether this company could grow again.""
3M served notice that it can grow with third-quarter sales up 7.5 percent and profits up 17.4 percent, analysts said.
""Now that they've spun off Imation, which was taking up too much of their resources and adding to earnings volatility, this is the 3M that most people expect when they invest in it,"" said Crowell Weedon analyst Douglas Christopher.
On July 1, 3M's data storage and imaging businesses began operations as an independent company, Imation Corp. The third quarter was 3M's first since the spinoff.
""They're not held back anymore by that business that's now called Imation,"" said Merrill Lynch analyst Robert Curran.
3M said it expected solid growth again in the fourth quarter.
If it can deliver successive quarters of big gains, the company's stock could move out of the realm of value stock funds and draw the attention again of growth stock investors, analysts said.
""3M is a little different from most companies ... They're PhD oriented so there's a lot of intellectual types up there, but they're building a powerhouse,"" said Franck.
3M makes thousands of products -- from Scotch tape, Post-it notes and air filters to diaper closures, flexible computer circuits and kitchen sponges.
""It can be said that their domestic business is something of an indicator of the economy as a whole because it's so diverse,"" said Merrill Lynch's Curran.
That portrayal is somewhat less accurate since the Imation spin-off, since key sectors of the economy are now absent from 3M's product line and more than half its business is outside the United States.
Still, said Franck, ""You can probably take U.S. GDP (gross domestic product), multiply it by two and factor in whatever you want for inflation and you've basically got their sales growth rate ... If the economy is doing well, they do well.""
The company's units in Japan, elsewhere in Asia, Latin America and Canada posted double-digit volume increases in the quarter while unit sales in Europe grew 7 percent, despite sluggish economies in many major European countries.
For the nine months, net income grew 6 percent to $1.14 billion, or $2.73 a share, as sales rose 4 percent to $10.61 billion.
",22
"General Instrument Corp. said Tuesday it planned to split into three companies through a tax-free spin-off to shareholders in a bid to boost its stock market value.
Wall Street welcomed the move, which was seen as unlocking the value of the Chicago-based company's core high-tech communications business.
""That's where the growth is,"" said industry analyst Louis Ehrenkrantz of brokerage Ehrenkrantz King Nussbaum.
General Instrument said it will create NextLevel Systems Inc. out of its cable television, satellite and telephone business; CommScope Inc. out of its coaxial cable manufacturing business; and General Semiconductor Inc. from its units that make electronic components.
""Investors will be able to value each of the three companies on its own merits and growth fundamentals,"" said General Instrument Chairman Richard Friedland.
The company said the breakup will force it to take an after-tax charge against earnings of $55 million to $65 million, or 37 cents to 44 cents a share, for the fourth quarter. The fourth-quarter charges consist mainly of costs related to the transition to the next generation of digital products, restructuring costs incurred through Dec. 31, and the write-down of certain assets, the company said.
The company said it will incur additional charges this year of up to $70 million for costs related to the spin-off, including the costs of dividing the company's Taiwan assets between NextLevel Systems and General Semiconductor.
The company expects fourth-quarter earnings, which will be announced Feb. 10, to be in the range of 28 cents to 32 cents a share, excluding the charges. Last year, the company reported net earnings of $53.5 million, or 43 cents per share, in its fiscal fourth quarter.
The restructuring is expected to be completed this summer.
Friedland, who will become chairman of NextLevel, said the three businesses would be best positioned as independent, public companies.
""The businesses have different dynamics and business cycles, serve different markets and customers, are subject to different competitive forces and must be managed with different short- and long-term goals,"" Friedland said in a statement.
NextLevel will be comprised of General Instrument's cable, satellite and telephone businesses, which had 1996 sales of about $1.7 billion. The company will supply systems and components for high-performance networks delivering video, voice and Internet and data services.
CommScope Inc. will make and supply coaxial and electronic cables, businesses that had 1996 sales of more than $560 million.
General Semiconductor Inc., the company's power semiconductor division, will supply low-to-medium power rectifiers and voltage suppressors. It had 1996 sales of more than $360 million.
General Instrument stock rose 12.5 cents to $22.875 in afternoon trading on the New York Stock Exchange.
",22
"Major retailers reported mixed results for the crucial holiday sales season Thursday, sparking a drop in retail stocks.
The preliminary holiday reports by J.C. Penney Co. Inc., Dayton Hudson Corp., Carson Pirie Scott & Co. and others are ""further confirmation that the holiday was one of moderate growth,"" Morgan Stanley retailing analyst Bruce Missett said in an interview.
J.C. Penney said sales for the four weeks ended Dec. 28 were close to the Plano, Texas-based company's goals but markdowns were higher than expected.
Total sales, including drug store sales, for the period totalled $3.6 billion, a 23.2 percent increase from the $2.9 billion in sales for the comparable period in 1995.
Same-store sales at J.C. Penney stores, not including drug stores, for the holiday period increased 6.2 percent over 1995. The company did not release dollar figures for same-store sales, which cover stores open at least a year.
The company also said it expected fourth-quarter earnings before charges would not meet Wall Street expectations and that profit margins for November and December were below planned levels.
J.C. Penney stock dropped $1.75 to $47 in midday trading on the New York Stock Exchange.
Dayton Hudson said same-store sales at its 65 department stores in the Midwest, 736 Target discount stores nationwide and 300 Mervyn's discount stores in the West and South were up 4.2 percent for the same period. The Minneapolis-based company did not give dollar figures.
""Results at Target and Mervyn's for the four weeks were on plan, while department stores sales were below our expectations,"" Chief Executive Bob Ulrich said in a statement. ""With the shorter selling season this year, we planned our sales conservatively and generally met our plans for the season.""
Dayton Hudson department store sales increased 0.3 percent, Mervyn's sales decreased 4.1 percent and Target sales increased 7.1 percent, the company said.
Dayton Hudson stock fell $1.25 to $38 on the NYSE.
Carson Pirie reported a 12.8 percent increase in sales to $194.1 million for the four-week period vs. 1995. Same-store sales rose 7.6 percent.
""The sales results during the 1996 holiday season were in line with my expectations,"" Chairman Stanton Bluestone said in a statement.
But the Milwaukee-based company, which operates 53 department stores and four furniture stores, said it expects five-week sales results for fiscal December will fall slightly below those for the five-week period ended Dec. 30, 1995.
Carson Pirie and Dayton Hudson expect to report five-week results next week.
Carson Pirie stock dropped 25 cents to $25 on the NYSE. Among other retailers, Sears Roebuck & Co. dropped $1.25 to $44.875 and May Department Stores Co. fell $1.375 to $45.375, both on the NYSE.
",22
"The Food and Drug Administration is approving new drugs and medical devices at a rapid clip this year, heartening drug and device companies that have long criticised the agency.
In the federal fiscal year ended Sept. 30, the agency cleared for U.S. marketing 46 new drugs, up from 26 approvals in fiscal 1995, the agency said.
In the same period, 37 new medical devices were cleared, up from 27 the year before, according to a tally kept by Montgomery Securities, an investments firm.
""What you are seeing is the culmination of improvements in the review system that date back 10 years or more,"" said FDA associate commissioner for public affairs Jim O'Hara.
Even long-time FDA critic the Pharmaceutical Research and Manufacturers of America, or PHARMA, sounded congratulatory, albeit with reservations. ""Improvments have been made in the last couple of years,"" said Jeff Trewhitt, PHARMA spokesman.
Two bills before Congress that proposed more flexible and shorter FDA new drug reviews died without action with the adjournment of the House and Senate last week, a sign that the agency's actions have blunted attacks from outside critics.
Drug and medical device industry analysts said faster FDA approvals are helping companies in both sectors by reducing their research and development risks.
A year ago, companies had complained that burdensome U.S. regulatory oversight threatened to drive U.S. drug and medical technology research to Europe, known for speedier reviews.
But a study released this spring showed the FDA's median review time for new drugs approved in 1994 and 1995 was 1.3 years, as fast as that of Britain and faster than those of France, Spain, Germany, Australia, Japan, Italy and Canada, according to the FDA. The study was conducted by the British-based Centre for Medicines Research, the agency said.
""In 1996, the U.S. is reviewing and approving ... faster than any other country,"" O'Hara said.
He credited internal reforms at the FDA largely to passage by Congress in 1992 of the Prescription Drug User Fee Act, which made more money available to the agency through a system of user fees imposed on companies.
Those revenues have paid for the hiring of more reviewers and upgrading of FDA information systems, he said.
",22
"Eight of the top 10 publicly traded U.S. health maintenance organizations are expected to report lower or flat fourth-quarter profits as the industry shuts the books on a dismal year and moves warily into 1997.
Dissatisfied with narrow profit margins, Wall Street is turning cautious on many HMO stocks, although plenty of merger and acquisition action underlies the sector and is supporting the share prices of firms seen as targets.
""Consolidation will remain at a high level,"" said Salomon Brothers managed healthcare analyst Robert Hoehn.  
As HMOs report quarterly results over the next few weeks, two companies are expected to defy the earnings slump.
Booming Oxford Health Plans Inc has been a bright spot in the gloom all year and is forecast to post profits 70 percent higher than the year-ago level, analysts said.
PacifiCare Health Systems Inc is expected to show 10 to 13 percent earnings improvement, although its quarter will be complicated by a pending acquisition of FHP International Corp.
""It's sort of a throw-away quarter for"" PacifiCare, said Volpe Welty analyst Ed Keaney.  
The problem that most HMOs were unable to solve throughout 1996 was a costly mismatch between medical cost inflation forecasts that fell short and an inability to push through compensatory premium increases. A margin squeeze resulted.
""This year there may be room for a little bit of (premium) expansion as the year unfolds, but not enough of an increase to make it possible for these companies to restore margins to previous levels,"" Keaney said.
Citing small premium rises so far in the January renewal period, Hoehn said: ""Uncertainties regarding profitability will remain, albeit at a reduced level from 1996.""  
U.S. FIRST CALL CONSENSUS QTRLY EARNINGS FORECASTS
Company				Qtr   EPS estimate   Yr-ago EPS
Foundation Health	 Q2	 $0.64	   $0.72
Humana		     Q4	 $0.21	   $0.30
Mid Atlantic Medical   Q4	($0.02)	  $0.33
Oxford Health			Q4	 $0.36	   $0.21
PacifiCare Health		  Q1	 $0.99	   $0.88
Physicians Health     Q4	($0.43)	  $0.42
Sierra Health	    Q4	 $0.59	   $0.59
United Healthcare	Q4	 $0.48	   $0.57
Healthsource		Q4	 $0.10	   $0.22
NOTE: Parentheses indicate loss.
((--Chicago Newsdesk 312-408-8787))
",22
"General Instrument Corp pleased Wall Street Tuesday by announcing a three-way corporate break-up that analysts said will unlock the value of the company's core high-tech communications systems business.
""Generally, these things work in the sense that when you do the spinoff, the sum of the parts tends to be greater than the initial whole,"" said industry analyst Hickman Powell at Southeast Research Partners.
At the same time, the planned creation of three new companies raises some questions, analysts said.
Chicago-based General Instrument said it will create a company to be called NextLevel Systems Inc out of its cable television, satellite and telephone businesses.
Also planned is creation of a new firm called CommScope Inc out of a world-leading coaxial cable manufacturing business, and General Semiconductor Inc out of electronic component manufacturing operations.
""Investors will be able to value each of the three companies on its own merits and growth fundamentals,"" said General Instrument chief executive Richard Friedland.
Shares in General Instrument were up 1/4 to 23 at midday.
The prize to emerge from the bust-up will be NextLevel, focused on high-speed modems, television cable set-top boxes and other hot areas. ""That's where the growth is,"" said analyst Louis Ehrenkrantz of Ehrenkrantz King Nussbaum.
But some analysts questioned how the business will fund its growth after being stripped of the coaxial and semiconductor businesses, which throw off large cash flows.
""The answer must be that that portion will have to, from time to time, come to the equity market,"" Powell said, adding that a recent optic fiber deal with NYNEX Corp bodes well for NextLevel.
Optic fiber is replacing coaxial cable in many places, especially along communications trunk lines, which may pose a threat to the distant future of CommScope, analysts said.
But Powell pointed out, ""There's still quite a lot of the world to be cabled up...That company, by the way, has been gaining market share.""
Finally, General Semiconductor on its own will suffer from the same cyclical swings in the electronic components markets that drove it as a unit of General Instrument, analysts said.
""Two-thirds of that company are going to be very good stocks. The semi-conductor unit, well, it will come along when the semiconductors recover,"" Ehrenkrantz said.
General Instrument said the break-up will force it to take charges against earnings of as much as $135 million on its fourth quarter results due February 10 and later this year.
",22
"Eli Lilly & Co's third-quarter profits are expected to be up strongly over 1995, but analysts expressed some concern about the drugmaker's profit margins.
Increased marketing costs for the anti-depressant Prozac and the recently launched anti-schizophrenic drug Zyprexa may combine with higher sales of lower-margin goods, such as the blood clot buster ReoPro, to hold back margins, analysts said.
""One of our concerns ... is that gross profit margin could again fall below last year's level, said Deutsche Morgan Grenfell pharmaceuticals industry analyst Mariola Haggar.
Third-quarter 1995 gross margin was 74.3 percent.
The First Call consensus of 20 analysts' projections forecast third-quarter Lilly profits of $0.64 per share, up 18.5 percent from $0.54 per share a year ago.
Revenues on the quarter were expected to come in at about $1.8 billion, up from $1.63 billion in the year-ago period.
Shares in Lilly were up 3/4 to 69-1/4 on Monday ahead of the earnings report expected on Tuesday morning.
Analysts said the third quarter could be boosted by a one-time gain on the deal giving Dura Pharmaceuticals marketing rights to the antibiotics Ceclor CD and Keftab.
No significant revenue was expected to be recorded in the third quarter from Zyprexa, approved for marketing October 1, but it was expected to lift the fourth quarter. Lilly was expected to record its first revenues in the third quarter from Humalog, a new short-acting insulin, analysts said.
Under close scrutiny will be Prozac, which accounts for about a third of Lilly revenues. New prescription growth rates for the blockbuster drug were recovering but continued to lag competing products, August script reports showed.
A Lilly spokesman declined to comment on analysts' comments and forecasts.
--Chicago Newsdesk 312-408-8787
",22
"Outboard Marine Corp chief executive Harry Bowman talked Thursday with the principals of Greenway Partners -- Alfred Kingsley and Gary Duberstein -- who have bought an 8.5-percent stake for nearly $30 million in the manufacturer of boats and boat engines.
""It was really just a get-acquainted call,"" said Stan Main, spokesman for Outboard Marine, or OMC.
If Waukegan, Ill.-based OMC is anything like some other companies that Greenway has invested in, Bowman may soon get to know Kingsley and Duberstein very well indeed.  
Former associates of Carl Icahn, the two New York financiers specialize in buying shares in companies that are struggling, then pressuring managements for changes.
OMC does not know Greenway's intentions, Main said. He added, ""All you can look at is their track record.""
Known as a highly active shareholder, Greenway has sought a three-way break-up of Unisys Corp, the spin-off by Woolworth Corp of its profitable Footlocker division, and helped cause the 1994 sale of U.S. Shoe Corp.
""We're not bashful,"" Kingsley said in an interview, confirming that he has had one chat with OMC.  
The topic of discussion on the call was ""the company and its operations,"" Kingsley said. He added, ""We might have more conversations with them.""
Of particular interest, Kingsley said, is OMC's new FICHT fuel injection technology, which the company said can reduce hydrocarbon emissions of two-stroke engines by 70-80 percent.
""It's true that for emissions standards, they have to do something. But I think that they've got an interesting engine here with other applications, in addition to the outboard motor area,"" Kingsley said.  
Asked if Greenway was happy with OMC's financial performance, Kingsley said, ""The company's probably not satisfied with their performance.""
OMC has made that quite clear in recent quarters and is taking steps to fix the situation, Main said. ""There is a plan being developed,"" he said.
Investors have been waiting for improvements at OMC, but are beginning to lose patience, said Lehman Brothers analyst Harriet Baldwin. ""It's likely Greenway's effect will be to bring more focus on management,"" she said.  
OMC makes Evinrude and Johnson outboard motors, as well as Chris-Craft and Four Winns boats. The company posted a loss in its third-quarter ended June 30 of $0.18 per share, compared to a profit of $1.39 per share last year. Quarterly revenues were $291 million, down from $329.6 million a year before.
Shares in the company were up 1-5/8 to 17-3/8 Friday after the Greenway stake was announced in a filing with the U.S. Securities and Exchange Commission. A year ago, OMC shares traded in the low 20s.
Main said OMC is pursuing other markets for the FICHT system. ""We are talking with people who make personal watercraft engines or motorcycle engines,"" he said.
In addition, he said OMC is taking cost-cutting steps. ""We are looking very hard at our corporate overhead costs and expect some dramatic cost savings there,"" he said.
For example, OMC may consolidate administrative functions for its boat companies from six locations to one in Nashville, Tenn., Main said.
Reuters Chicago Newsdesk  312-408-8787
",22
"Merger synergies that were supposed to carry Pharmacia & Upjohn Inc through a dry spell in its new product pipeline are not being realized as planned, raising questions about the drug giant's short-term future.
Shares in the barely one-year-old Swedish-American concern fell 6-1/2 to 34-7/8 on Friday after it said its third-quarter profits would be well below Wall Street estimates.
""This clearly indicates that the merger is not going as smoothly as hoped. I think this is a wake-up call for the company,"" said independent drug industry analyst Hemant Shah.  
Pharmacia & Upjohn, formed through the merger of Sweden's Pharmacia AB and Kalamazoo, Mich.-based Upjohn Co, formally began operations in November, 1995.
""There's a cloud over the beginning of 1997. There's no earnings guidance,"" said Rodman & Renshaw analyst Mario Corso.
In a conference call on Friday, the company said the merger is on track and cost savings of $500 million by 1998 are still projected. It said the merger has reduced the work force by 3,000 people to date. But the company earlier blamed ""the usual short-term disruptions seen in a multinational merger"" in part for its third-quarter earnings disappointment.  
""The problem is they're not realizing synergies as they thought they would,"" said Mehta & Isaly analyst Steve Lisi.
Pharmacia & Upjohn blamed the third-quarter earnings shortfall chiefly on currency translations. It said foreign exchange -- especially involving the Japanese yen, Italian lira and Swedish krona -- reduced quarterly sales by two percent and increased the cost of goods sold.
Limits to the company's currency hedging activities were blamed by the company for the foreign exchange hit. These inadequacies, coupled with an ongoing sales force transition, can be traced to the merger, analysts said.  
Merger programs are progressing, but the combination may never realize the synergies hoped for, Corso said.
That could compound another problem. Several of Pharmacia & Upjohn's top drugs face competition from generic equivalents and few new products are in the pipeline, analysts said.
Xalatan for glaucoma and Camptosar for cancer are rolling out and could give the fourth quarter a boost. The company said it expects earnings for the fourth quarter and the full year to exceed year-ago levels. It also said it anticipates profit margin improvement through 1997.
But analysts were uncertain about the near-term outlook. They said the company offered no specific guidance on the conference call for 1997 earnings levels.
""They were hoping that through this merger they would realize synergies to ride this out ... We just don't know if they can do it,"" Lisi said. ""They'll get through these next couple of years, but it's going to be ugly.""
--Chicago Newsdesk 312-408-8787
",22
"Cellex Biosciences Inc said it expects to report a strong fiscal fourth quarter ending September 30 and to move into the black next fiscal year.
In a Reuters interview, chief executive Richard Sakowicz said revenues this year will be ""substantially up"" from last year. ""We're going to have a good fourth quarter,"" he said.
As of June 30, the company -- which records revenues when it ships product -- had $3.6 million worth of work in process.
The Minneapolis-based concern expects to turn a profit next fiscal year, said chief financial officer Mary Lore.  
Formed in 1983 at the beginning of the biotechnology boom, Cellex makes and markets two types of machines for growing cell cultures used by drug and biotech companies.
Cellex's original business is in perfusion systems in which cells grow for 35-45 days on hollow-fiber membranes contained in cases through which liquid nutrients, such as sugars and vitamins, flow to feed the cells and flush out their waste products. The company has 60-80 percent of the $10-$15 million world market for perfusion culture systems.
In December 1993 Cellex acquired LSL Biolafitte SA, a French maker of larger, old-style cell culture tanks.  
Unlike perfusion systems, tanks grow batches of cells in a nutrient bath that produces for a few days before the cells begin to degrade in their own wastes and have to be replaced.
Biolafitte has 10-15 percent of the $100-million world culture tank market. About 80 percent of Cellex revenues come from sales of the technologically better-established tank systems, with the rest from perfusion systems, Sakowicz said, adding that perfusion system sales are growing faster.
For the nine months ended June 30, tanks provided three-quarters of revenues totalling $10.7 million, up from $7.5 million in the year-ago period, he said.  
Cellex posted a loss of $0.75 per share in the nine-month period, compared to a year-ago $1.69 per share loss.
To boost weak tank sales in the United States, Cellex plans to open a U.S. tank factory, Sakowicz said.
""We'll also be introducing over the next six months a number of bench-top research systems for fermenters,"" he said.
The company gets about $1.5 million in annual revenues from sales of disposable hollow-fiber packets for its perfusion systems. That figure is growing about 35 percent annually, although most revenues still come from sales of long-lasting tank systems and spare parts.
Shares in Cellex traded off 1/8 Tuesday to 2. Once as high as more than $14 per share, Cellex was hit hard by the biotech sell-off of late 1994, Sakowicz said.
He said he sees signs of renewed investor interest in biotechnology. ""As we grow the revenue base and pay down our debt and lessen our dependence on major custom systems, I think our whole operating performance is going to be much improved and much more predictable,"" Sakowicz said.
--Chicago Newsdesk 312-408-8787
",22
"Shareholders are pushing harder for change at WMX Technologies Inc, which said Monday a major investor is proposing that the company hire investment bankers to examine further sales of non-core assets.
Lens Inc, based in Washington, D.C., also has hired an executive recruiter to assemble an alternate slate of nominees for four WMX board seats coming open this year, including WMX chairman Dean Buntrock's seat,  said a Lens spokeswoman.
""The battle lines are being drawn here,"" said Goldman Sachs industry analyst Barry Mannis.  
WMX, the largest U.S. garbage hauler with $10 billion in annual revenues, has been under investor attack for months. Not only Lens, headed by Robert Monks, but billionaire George Soros and others are among WMX shareholders demanding changes.
The company has responded by repurchasing shares and selling off pieces of its Rust International unit, its stake in Wessex Water Plc and most of its medical waste business. The sales have raised about $1 billion in cash.
Yet WMX's stock price has hardly budged, prompting the activist stakeholders to press harder still for management changes, new directors and more asset sales, analysts said.  
""Management has been moving in this direction and the stock price has responded moderately, but I don't think to anywhere near the level that investors want,"" Mannis said.
Shares in WMX were off 1/4 at 33-1/2 late Monday, compared to a 24-month high above $36 in early December. A year ago, they were trading in the $30 per share range.
""Between now and the annual meeting (May 9), management has its opportunity to once and for all...show the Street its plan for enhancing shareholder value. If they don't do that, I think investors are going to look at some of the proposals Lens is making,"" Mannis said.  
Soros Fund Management owns 19.7 million shares of WMX, or nearly four percent of the company, according to CDA/Spectrum.
Lens's stake is reportedly much smaller than Soros's.
The latest proposal from Lens on selling non-core assets contains little new, WMX spokesman Bill Plunkett said.
""The proposal is consistent with the things the company is already aggressively pursuing, essentially affirming our strategy,"" Plunkett said. ""We have other equity investments remaining. We have other businesses that are non-core and we have under-performing businesses.... We have been working with various financial advisers to enhance shareholder value.""
Credit Suisse First Boston industry analyst Michael Hoffman said WMX on its own will likely fulfill Soros's and Lens's agenda. ""These guys would just like it to happen faster,"" Hoffman said. WMX has ""done a lot of the easier things. Now it gets a little more challenging.""
An obvious next step for the company would be to authorize more share buybacks, Mannis said.
WMX could still sell off certain non-U.S. interests, as well as its equity interest in ServiceMaster LP, analysts said. Whether such steps are taken before the annual meeting remains to be seen, but in the meantime, Lens and Soros can be expected to keep the pressure on.
""This is just another volley in the skirmish,"" said Smith Barney industry analyst Leone Young.
WMX is scheduled to report fourth-quarter financial results in the week of February 3.
((--Chicago Newsdesk 312-408-8787))
",22
"A lower than expected third quarter sales growth rate may explain why shares in Guidant Corp closed off 2-7/8 to 46-1/2 Monday on the New York Stock Exchange, said Guidant chief executive Ronald Dollens.
""There was some expectation of higher sales growth rates,"" Dollens said in an interview with Reuters.
Sales increased 11 percent on the quarter against the year-ago period. ""Last quarter our sales were up 18 percent,"" Dollens said. ""They were looking for a higher sales number ... I think that's what caused the consternation.""  
Sales would have been up 13 percent if not for the negative impact of exchange rate translations, he said.
About 39 percent of the medical device manufacturer's sales are in non-U.S. markets. Unfavorable exchange rates hit hardest in Japan in the third quarter, Dollens said.
Guidant posted earnings of $41.2 million, or $0.57 per share, on sales of $260.1 million. A year ago, earnings were $28 million, or $0.39 per share, on sales of $234.1 million.
""Earnings were up 47 percent. They were above Street expectations, but the stock's getting hit. That is a hard one to understand,"" Dollens said.  
Analysts' concerns focused on Guidant's vascular intervention business, which saw a sales decline in the third quarter to $104.7 million from $108.4 million a year earlier.
""Revenues there were a little lower than expected,"" said Hilliard Lyons analyst Stephen O'Neil. ""It relates to the stent business here in the U.S.... Right now they're not positioned quite right in that market, but I think they will be.""
Guidant's U.S. sales of devices based on the most widely used stent technolgy are growing, but not enough to offset some erosion in other areas, Dollens said.  
Guidant expects to introduce two catheters into the U.S. market this quarter. ""Then the truly important step will be when we get our stent approved in the United States,"" Dollens said, adding the ACS Multi-Link stent is selling in Europe.
""We did $14 million of stent sales internationally this quarter,"" Dollens said. A U.S. Food and Drug Administration trial is under way for the new stent. Patients who have received implants must now be tracked for nine months.
--Chicago Newsdesk 312-408-8787
",22
"Ford Motor Co joined other U.S. automakers Wednesday in their accelerating race to exit the battered car rental business.
Ford said it may sell its interests in Budget Rent a Car, the nation's sixth-largest rental car agency.
If a sale goes through, as analysts widely expect, Budget would be the fifth major agency to change hands since 1994.
""The reason is they're not making any money,"" said WEFA Group automotive consultant George Magliano in New York. ""Travel is hot, but the car rental business is going nowhere.""  
That is not evident from the sudden interest shown in the $14-billion a year business by a new class of investors who are buying up the agencies as the automakers unload them.
""They see opportunity for profits. The industry is in a mild recovery and it's probably a better time to own a rental car agency than it has been for a long time,"" said Jon LeSage, editor of Auto Rental News, a trade journal in California.
Ford declined to comment specifically on a published report that it may sell Budget to Team Rental Group Inc, a Florida-based Budget licensee, for $350 million.
A Team Rental spokesman also declined comment.  
""No agreements have been reached among any parties,"" said Budget spokeswoman Kimberly Mulcahy, declining further comment. She said Ford does not own Lisle, Ill.-based Budget outright, but controls the company through an option to purchase its common shares.
Ford said last year it would exercise its option and buy out Budget's common shares, but analysts said the deal looks shaky now after delays resulting from a U.S. Federal Trade Commission antitrust review.  
As a result, A.G. Edwards auto analyst Michael Braigg in St. Louis said he expects Ford to sell Budget soon, likely to Team Rental. ""I think that one's pretty far along,"" he said.
""The real issue is that Budget is the small rental property of Ford. And if Budget is for sale, then so is Hertz in the long run,"" Braigg said.
Ford began investing in Hertz in 1987 at a time when U.S. automakers were buying up rental car agencies hoping to load up their fleets with the thousands of new cars that consumers were leaving on the lots.  
The strategy worked for a while, but then backfired when agency sales of barely used rental vehicles started eating into new car sales. Automakers began encouraging the agencies to hold onto fleet cars longer, which restricted how many new cars the agencies could take on.
Ford bought all of Hertz in 1994 and, unlike many rental car agencies, Hertz is probably profitable, analysts said.
But Magliano said, ""There is no big advantage to the automakers to owning these agencies anymore ... Probably along the way, Ford will sell Hertz. Generally, when these companies begin to divest operations, they get rid of them all.""  
Reassured by a back-to-basics management trend running through U.S. industry, automakers started selling off rental car agencies in 1994 with Chrysler Corp's sale of Snappy Car Rental.
General Motors Corp in 1995 sold National Car Rental Systems Inc to private investors, who earlier this week resold National to Republic Industries Inc.
Seeking to lock in supply for its fledgling AutoNation used-car chain, Atlanta-based Republic in November agreed to buy Alamo Rent-A-Car Inc.
In June last year, General Motors sold off its 29-percent interest in Avis Inc to HFS Inc, a real estate and hotel concern based in New Jersey.
Chrysler still owns Dollar Rent-A-Car and Thrifty Rent-A-Car. ""Our status today is that Dollar and Thrifty are very much a part of our everyday business. It's business as usual,"" said Chrysler spokeswoman Lori McTavish.
She added, ""It is Chrysler's goal, however, to focus on our core automotive business.""
Based on U.S. vehicle fleet size, Auto Rental News ranks privately held Enterprise Rent-A-Car, of St. Louis, as the largest U.S. rental car agency, followed in order by Hertz, Avis, National, Alamo, Budget, Dollar and Thrifty.
Together, Enterprise, Hertz and Avis own half of the U.S. rental car fleet of about 1.5 million vehicles, according to the trade journal.
",22
"Wall Street hammered shares of Swedish-American drug giant Pharmacia & Upjohn Friday after it said profits would fall far short of expectations.
The company said it expects earnings of about 44 cents a share for the third quarter, equal to year-ago results. Analysts had expected 10 cents more than that and hit the stock hard after the announcement.
The stock dropped as much as $6.50 before trading down $5.25 at $34.875 in late trading on the New York Stock Exchange. More than 18 million shares had changed hands by early afternoon.
The company blamed foreign exchange problems, pricing pressures and weak U.S. sales of older products for the shortfall. It also cited a sales force transition and ""the usual short-term disruptions seen in a multinational merger.""
Pharmacia & Upjohn was formed by the merger of Sweden's Pharmacia AB and Kalamazoo, Mich.-based Upjohn Co. It formally began operations in November 1995.
""This clearly indicates that the merger is not going as smoothly as hoped. I think this is a wake-up call,"" said independent pharmaceuticals industry analyst Hemant Shah.
With few new high-margin products expected out of the pipeline for the next year or so, Pharmacia & Upjohn had been hoping that the merger would produce cost savings and other synergies that would help it through the dry spell.
""The problem is, they're not realising synergies as they thought they would,"" said Mehta & Isaly analyst Steve Lisi.
""They were hoping that through this merger they would realise synergies to ride this out ... We just don't know if they can do it,"" Lisi said. ""They'll get through these next couple of years, but it's going to be ugly.""
Pharmacia & Upjohn Chief Executive John Zabriskie said the merger is producing benefits, including a 3,000 person reduction in the work force to date. The company also said it continues to expect $500 million in cost savings by 1998.
Earnings for the fourth quarter and full year are expected to top year-ago levels, buoyed by two new drugs, Xalatan for glaucoma and Camptosar for cancer, the company said.
But analysts were uncertain about the near-term outlook and said the company offers no firm guidance for next year.
""There's a cloud over the beginning of 1997,"" said Rodman & Renshaw analyst Mario Corso.
",22
"Aon Corp said Wednesday it expects to take a charge against earnings of about $100 million in the 1997 first quarter on its $1.23-billlion purchase of Alexander & Alexander Services Inc.
In an interview, Aon Chief Executive and Chairman Patrick Ryan told Reuters, ""There will be consolidating costs that will take place in the first quarter after we close.""
Those costs will cause the charge, he said. ""It's certainly going to be in the $100 million range ... It's a 'guesstimate' at this stage, but it's in that range.""  
Ryan said Aon does not expect additional charges beyond the first quarter.
""But there is a fair value charge that will go into the deal cost,"" he said. ""Space costs and corporate redundancies have yet to be determined ... So it's difficult to say at this point what will be a charge to earnings and what will be an increase in terms of the cost of the deal.""
He added, ""The charge is in that ($100-million) range. I can't get any more precise at this stage.""
Chicago-based Aon would become either the largest or second-largest insurance brokerage through the deal, he said.  
How the post-acquisition Aon will size up against rival giant Marsh & McLennan Cos Inc of New York depends on how the two companies' operations are counted, Ryan said.
""It's not apples to apples,"" he said.
Asked whether Aon would look to do further acquisitions, Ryan said, ""We've got to digest these.""
In October Aon completed a $250-million acquisition of Bain Hogg Group Inc from Inchcape Plc.
""The industry has been consolidating. Certainly, people have been expecting us to continue to be a leader in that. And we had announced that we intended to be,"" Ryan said.  
""We've made what we think to be two strategic and good acquisitions. Now we've got to put them together,"" he said.
Aon employs about 27,000 people. Alexander & Alexander, based in New York, employs about 12,000.
""We're not in a position to comment on layoffs, other than to say that as you bring businesses together, there obviously will be some redundancies,"" Ryan said.
""There will be some redundancy at corporate and things like that that we have to identify,"" he said.
""Will all employees that are currently employed be employed down the road? That generally is not the case. But I don't think you should look for huge layoffs,"" he said.
Shares in Aon were up 3/8 to 58 and shares in Alexander & Alexander were up 3-1/8 to 17-1/4 at midday on the New York Stock Exchange.
-- Chicago Newsdesk 312-408-8787
",22
"Third-quarter profits for St. Jude Medical Inc were held back by several factors, including a missed heart valve sale to Iran, tax law changes and a dilutive acquisition, said chief executive Ronald Matricaria.
In an interview with Reuters on Wednesday evening, Matricaria also said St. Jude would not rule out possibly someday acquiring Cyberonics Inc, although a proposed merger of the two was called off by St. Jude on Wednesday.
""We're going to maintain our equity position in the company,"" Matricaria said.  
Although it owns 18 percent of Cyberonics, St. Jude said it will not exercise its option to acquire the remainder, as it had proposed doing earlier this year.
Matricaria declined to comment on analysts' speculation that St. Jude found problems with data from medical trials testing Texas-based Cyberonics' implantable device for treating epilepsy by stimulating the vagus nerve.
""I can't say anything about the data,"" he said. ""The best thing I can tell you is if I had a son or daughter and they were on drug therapy and they weren't getting relief, the first thing I'd look for would be the Cyberonics device.""  
St. Paul, Minn.-based St. Jude is the world's largest maker of heart valves and is a major producer of pacemakers and other medical devices. It reported third-quarter earnings of $0.44 per share, up from $0.42 per share from a year ago.
Matricaria said the heart valve business showed no growth in the third quarter because St. Jude failed to land a major order from Iran that it did get in last year's third quarter.
""The timing just wasn't in this quarter. It will probably be the fourth quarter or the first quarter next year. It didn't happen (in the third quarter), so it basically wiped out all of our unit growth,"" he said.  
Changes in U.S. tax law effecting St. Jude's operations in Puerto Rico cut earnings by about $0.02 per share in the third quarter, Matricaria said.
Recently acquired Daig Corp was St. Jude's fastest-growing unit on the quarter and reported sales of $11.5 million. But the Daig acquisition reduced earnings again this quarter by about 10 percent. Matricaria said he sees that level of earnings dilution continuing until mid-1997.
""For the third and fourth quarters this year and the first and second quarters next year, it will have a dilutive impact ...of about 10 percent,"" he said, adding Daig is expected to begin adding to profits in the third quarter of 1997.
Research and development spending remained about nine percent of sales in the third quarter.
Finally, Matricaria said St. Jude expects to begin regaining market share in the fourth quarter in the pacemaker market, where it has lost ground recently due to technological shortcomings in its products that have now been overcome.
--Chicago Newsdesk 312-408-8787
",22
"Baxter International Inc said on Wednesday it expects to record unspecified charges against earnings in the first quarter of 1997 on in-process research and development acquired through its purchases of Research Medical Inc and Immuno International AG.
The amounts of the anticipated charges have not been determined, said Michael Mussallem, Baxter group vice president, in an interview with Reuters.  
The Research Medical charge ""will be substantial,"" Mussallem said. ""When you start talking about half the transaction value, that's substantial.""
He said the company expects to have a better grasp on the estimated charges by the end of January.
Baxter announced early Wednesday it reached a definitive agreement to acquire Utah-based Research Medical for about $236 million, or $23.50 per share, in a stock transaction.
At the same time, Baxter said it expects to close its purchase of Immuno in two to six weeks. Baxter agreed in August to buy Immuno for $715 million over three years.  
The acquisition had been delayed last month because it was not yet approved by the U.S. Federal Trade Commission and because of a postponed bond issue related to the deal.
In announcing the Research Medical acquisition, Deerfield, Ill.-based Baxter said in a statement it expects the purchase to be accretive to earnings in 1998.
In the interview, Mussallem said, ""This is not going to be significantly accretive in 1998. It will be more significantly accretive beyond that.""
The acquisition will dilute Baxter earnings through 1997 in decreasing amounts with each successive quarter, he said.  
""You're really talking about pennies here,"" he added.
Shares in Baxter, a U.S. healthcare products giant, were up 3/8 to 41-3/8 in midday New York Stock Exchange trading.
A maker of medical devices focused on heart surgery, Research Medical employs 270 people, mostly at its Salt Lake City base. No layoffs or transfers are planned, Baxter said.
Research Medical chief executive Gary Crocker will stay on with Baxter through a transition. ""We'll see how long it goes beyond that, but we certainly welcome him,"" Mussallem said.
Under the acquisition agreement, Research Medical shareholders will get shares of Baxter worth $23.50 for each share of Research Medical. The Baxter stock will be priced as the average of the 10 trading days ending two days prior to the Research Medical shareholders meeting. No meeting date has been set, but is expected to come in the first quarter.
--Chicago Newsdesk 312-408-8787
",22
"Large U.S. medical device manufacturers are expected to post strong profit gains for the third quarter, possibly speeding a flight to quality in a sector where small-cap companies are taking a beating.
Five of nine big device companies are expected to report year-over-year earnings gains of 20 percent or more, according to First Call consensus forecasts.
On the strength of actual and projected earnings, stocks in larger companies, such as Medtronic Inc and Boston Scientific Corp, are rallying from a summer slump.  
""There hasn't been much of a bounce in the small-cap names. Instead, you're seeing a flight to quality ... Investor sentiment is clearly shifting,"" said Donaldson Lufkin & Jenrette medical technology analyst Steven Halper.
As the market turns cautious on loss-making start-ups, major manufacturers are entering a new period of abundance that makes them attractive, analysts said.
""This quarter will suggest that, in fact, the bigger companies are some of the best positioned in the medical technology field. They have a surfeit of new technology and new products,"" said Montgomery Securities analyst Kurt Kruger.  
Products are making it to market more quickly as well, thanks to more rapid U.S. Food and Drug Administration reviews. The agency approved 37 product marketing applications in its latest fiscal year, up from 27 in the prior year and 26 in fiscal 1994, according to Montgomery Securitities' count.
""This has reduced considerably the risk in bringing a new product to market and has important commercial relevance for the industry,"" Kruger said.
Continued powerful growth in European and Asian consumer demand for U.S. medical devices also bodes well for U.S. companies big enough to take advantage of it, analysts said.  
U.S. FIRST CALL CONSENSUS QTRLY EARNINGS FORECASTS
Company			    Qtr  EPS estimate  Yr-ago EPS
C.R. Bard			  Q3     $0.47	   $0.43
Boston Scientific		Q3     $0.41	   $0.31
Guidant			    Q3     $0.54	   $0.39
Johnson & Johnson		Q3     $0.55	   $0.48
Medtronic			  Q2     $0.55	   $0.45
St. Jude Medical		 Q3     $0.45	   $0.42
Sofamor Danek		    Q3     $0.42	   $0.34
Stryker			    Q3     $0.25	   $0.21
Target Therapeutics	    Q2     $0.22	   $0.18
--Chicago Newsdesk 312-408-8787
",22
"After a tough year of slimmer profits and lower stock values, U.S. health maintenance organisations are expected to bounce back a bit in 1997.
Medical cost inflation is slowing and analysts see room for HMOs to raise premiums and restore some of the profit margin they lost this year. Still, the prognosis is cautious as the industry continues consolidating and faces controversy.
""It's not a super spectacular outlook, but it certainly looks better than 1995 and 1996,"" said Bear Stearns managed health care industry analyst Gary Frazier.
This year, medical costs, driven largely by higher prescription drug prices, rose faster than forecasts based on historical trends and left HMOs locked into premium rates that were too low to preserve profit margins. By early spring, the pinch was evident to Wall Street and HMO stock values from March to July declined sharply across the board.
Thirteen of the 16 largest publicly traded HMOs still have not regained first-quarter highs since the sell-off. The three that have are United Wisconsin Services Inc., Oxford Health Plans Inc. and FHP International Corp., which is being acquired by PacifiCare Health Systems Inc.
Good recovery has been experienced by PacifiCare, WellPoint Health Networks Inc. and Aetna Inc., while only modest upward reversals have been made by industry giant United Healthcare Corp., Humana Inc. and others. Still reeling from the debacle are Coventry Corp., Mid Atlantic Medical Services Inc. and Physician Corp.
""Questions about pricing and margins still hang over the industry,"" said Salomon Brothers managed health care industry analyst Robert Hoehn.
Medical cost inflation forecasts vary, but most analysts look for premiums to rise slightly faster than costs in 1997.
""The HMOs are starting to take some action by raising premiums, but the problem is they're really just catching up,"" said Peter Reilly, an actuary at the health care consulting firm of Milliman & Robertson. ""Premium increases have lagged cost increases significantly.""
Whether HMOs are able next year to restore profit margins to the levels that Wall Street likes may have as much to do with their willingness to court public criticism as with their actual market power, suggested one industry observer.
""This has been a year characterised by scathing attacks on the industry with the implication that profits are being made at the expense of high-quality health care,"" said Doug Sherlock, editor of the industry newsletter Pulse.
With one eye on public relations and the other on the bottom line, some HMOs in 1996 may have intentionally let margins slip, Sherlock suggested. ""One or 2 percent profit margins are less easy to attack than 9 percent,"" he said.
If the heat in state legislatures and elsewhere subsides, HMOs may feel they have room to move, or they may not, Sherlock said. ""These companies still have ... all the bargaining power they need. It's really a situation of whether they choose to exercise it or not.""
Based on a survey of 100 HMOs nationwide, Pulse projects the industry's aggregate medical-loss ratio to decline 1.5 percentage points next year, boosting profits slightly. The ratio, which measures how much HMOs pay out to cover members' medical costs, rose a hefty 4.2 percentage points in 1996.
More mergers and acquisitions are expected, as well. Of the more than 600 U.S. HMOs, only United and Aetna look to be truly national players, Hoehn said. ""Everybody else has to either merge with someone or sell,"" he said.
",22
"General Instrument Corp. said Tuesday it planned to split into three companies through a tax-free spin-off to shareholders in a bid to boost its stock market value.
Wall Street welcomed the move, which was seen as unlocking the value of the Chicago-based company's core high-tech communications business.
""That's where the growth is,"" said industry analyst Louis Ehrenkrantz of brokerage Ehrenkrantz King Nussbaum.
General Instrument said it will create NextLevel Systems Inc. out of its cable television, satellite and telephone business; CommScope Inc. out of its coaxial cable manufacturing business; and General Semiconductor Inc. from its units that make electronic components.
""Investors will be able to value each of the three companies on its own merits and growth fundamentals,"" said General Instrument Chairman Richard Friedland.
The company said the breakup will force it to take an after-tax charge against earnings of $55 million to $65 million, or 37 cents to 44 cents a share, for the fourth quarter. The fourth-quarter charges consist mainly of costs related to the transition to the next generation of digital products, restructuring costs incurred through Dec. 31, and the write-down of certain assets, the company said.
The company said it will incur additional charges this year of up to $70 million for costs related to the spin-off, including the costs of dividing the company's Taiwan assets between NextLevel Systems and General Semiconductor.
The company expects fourth-quarter earnings, which will be announced Feb. 10, to be in the range of 28 cents to 32 cents a share, excluding the charges. Last year, the company reported net earnings of $53.5 million, or 43 cents per share, in its fiscal fourth quarter.
The restructuring is expected to be completed this summer.
Friedland, who will become chairman of NextLevel, said the three businesses would be best positioned as independent, public companies.
""The businesses have different dynamics and business cycles, serve different markets and customers, are subject to different competitive forces and must be managed with different short- and long-term goals,"" Friedland said in a statement.
NextLevel will be comprised of General Instrument's cable, satellite and telephone businesses, which had 1996 sales of about $1.7 billion. The company will supply systems and components for high-performance networks delivering video, voice and Internet and data services.
CommScope Inc. will make and supply coaxial and electronic cables, businesses that had 1996 sales of more than $560 million.
General Semiconductor Inc., the company's power semiconductor division, will supply low-to-medium power rectifiers and voltage suppressors. It had 1996 sales of more than $360 million.
General Instrument stock rose 25 cents to close at $23 on the New York Stock Exchange.
",22
"United Airlines has ordered $4.4 billion worth of airplanes from Boeing Co. and Europe's Airbus Industrie, with the the lion's share going to Boeing, the airline announced Thursday.
United ordered 27 wide-body jets -- 19 jumbo 747-400s, six 757s and two 777s -- valued at about $3.5 billion from Boeing and 24 narrow-body Airbus A319s valued at $900 million.
The Chicago-based UAL Corp. unit is the first U.S. airline to order Airbus' latest model, United and Airbus said.
United chose the Airbus planes over competing Boeing 737-700s and 737-300s after evaluating both, a UAL spokesman said.
""United benefited from substantial discounts to the prices from both manufacturers,"" the airline said, noting that the order values it quoted were based on manufacturers' list prices.
United said the planes will be part of its ""retire and replace"" programme to update its fleet.
""By 2000, the programme is expected to generate more than $100 million in annual operating cost savings, reducing fuel, maintenance and labour costs,"" the airline said.
The programme will also ensure that United meets certain noise reduction requirements.
Delivery of all aircraft is scheduled to be completed by 2002, United said.
The carrier said it placed orders with United Technologies Corp.'s Pratt & Whitney unit for engines for the Boeing aircraft and with International Aero Engines AG for engines for the Airbus jets. United Technologies owns 33 percent of International Aero Engines.
The Airbus A319s will replace United's older Boeing 737-200s, the airline and Airbus said. The new planes are configured to seat 126 passengers.
The A319 is a smaller derivative of the Airbus A320. United already operates 34 A320s and will take delivery of 16 more by the end of 1998, they said.
United joins German airline Deutsche Lufthansa AG as the largest airline customers for the A320 family, each with 74 planes.
Airbus Industrie is a consortium made up of French-owned Societe Nationale Industrielle, British Aerospace Plc, Daimler-Benz Aerospace, a unit of Germany's Daimler-Benz AG, and Construcciones Aeronauticas SA of Spain.
",22
"ClinTrials Research Inc expects to continue to expand revenues 35 to 45 percent per year, thanks to growing use by major pharmaceutical companies of outside research help and market share gains by the firm -- the world's fifth-largest contract research concern.
""We can grow at the 35-45 percent rate over the next several years and be able to handle it,"" said chief executive William O'Neil on Tuesday in remarks to investors at a Robinson-Humphrey investors conference here.
Later, in an interview with Reuters, O'Neil said the Nashville, Tenn.-based company estimates that drug and biotechnology companies spend $10 to $11 billion annually on research and development.
About $2.5 billion, or roughly one quarter, is outsourced to companies such as ClinTrials and rivals, including the Corning Research unit of Corning Inc and Quintiles Transnational Corp. ""Five years ago, only five percent was outsourced. So it's been growing very rapidly,"" O'Neil said.
Moreover, he said, R&D spending is growing about 10 percent annually and ClinTrials is taking market share from smaller contract researchers. ""Of the additional dollars being spent, more is being shifted to us,"" he said.
ClinTrials recently acquired BioResearch Laboratories Inc, of Montreal, for $65 million. The acquisition was immediately accretive to earnings and effectively reduced ClinTrials' tax rate thanks to Canadian laws under which BioResearch pays no taxes, O'Neil said.
Without another major acquisition, ClinTrials likely will stay for now in the fifth-largest position in the contract research market, he said. Although he would not rule out another major deal, O'Neil said one is not in the offing.
Eighty percent of revenues for the company come from major drug companies, with biotech firms and medical device manufacturers making up the balance.
When such companies develop a new compound or device they hope may be marketable, they must test it through an extensive series of clinical trials. Animal subjects are first used. Later human patients become involved. All tests have to be conducted under standards set out by the U.S. Food and Drug Administration or other government regulators.
When launched in 1990, ClinTrials handled portions of research work that had overflowed the capacities of drug and biotech firms. Today, O'Neil said, ClinTrials finds itself increasingly built into the R&D budgets of clients.
Last week, ClinTrials for the third quarter reported profits of $2 million, or $0.18 per share, on revenues of $25.4 million. In the year-ago period, profits were $979,000, or $0.11 per share, on revenues of $16 million.
Shares in the company closed up 1/2 at 38 on Tuesday.
",22
"Monsanto Co. said on Monday it will spin off its chemicals business in a long-awaited and costly move that will allow the company to focus on its faster-growing agriculture, food and healthcare units.
Between 1,500 and 2,500 jobs will be eliminated in the transaction, causing the company to take a $400 million to $600 million fourth-quarter charge against earnings, it said.
""What they're trying to create is one company that's clearly focused on growth and one that's clearly focused on efficiency,"" said Smith Barney industry analyst James Wilbur.
St. Louis, Mo.-based Monsanto is a far-flung conglomerate whose varied products include Roundup weed killer, NutraSweet sweetener, carpet fibers, and drugs for treating arthritis and insomnia, as well as genetically engineered corn and soybeans.
Wall Street had long expected the giant company, which has about $8.9 billion in annual sales, to break itself up.
""It was a fait accompli,"" Wilbur said. ""The market likes companies that are less diversifed.""
The pared-down Monsanto will focus on its higher-profit margin agricultural, pharmaceuticals and biotechnology businesses, a spokesman said.
The new chemicals business will have to emphasize production efficiencies in a market subject to cyclical sales trends and intense global competition, analysts said.
""After careful consideration, we're convinced these businesses must operate separately to reach their maximum potential and thereby unlock significant value in both,"" Monsanto Chairman Robert Shapiro said.
Shapiro will head the post-spin-off Monsanto and Executive Vice President Robert Potter, who runs the chemicals business, will run the new company, still unnamed, Monsanto said.
The scope of job cuts coming with the spin-off has not been determined, but more details will likely be available by the end of January, a spokesman said.
Monsanto employs 28,500 people around the world. The anticipated cuts would reduce that headcount by 5 percent to 9 percent, the company said.
The tax-free spin-off proposed would create a new firm by the end of 1997. Current Monsanto shareholders would keep their Monsanto shares and get shares in the new concern as a special dividend, the company said.
Monsanto said its directors approved the spin-off.
The company also said the exact amount of the after-tax charge, which is to cover the costs of job reductions, asset and equipment write-offs, and consolidation of some manufacturing and offices, would be fixed at a later date.
Analysts estimated the one-time charge would total between 80 cents and $1 per share.
Monsanto, which reported 1995 profits of $739 million, or $1.25 a share, is expected to post per-share profits for 1996 of $1.50, according to First Call, which tracks analysts' projections.
Monsanto said in October it was considering options for its chemicals business, which had about $3 billion in 1995 revenues but is growing less rapidly than other units and is subject to more ups and downs.
""Chemicals would hurt the multiple of the company if they held onto it ... because the chemicals growth rate is not as high as the agriculturals growth rate and the earnings are more cyclical,"" said PaineWebber industry analyst Paul Raman.
The chemicals business -- making acrylic carpet fibers, plastic interlayers for glass, industrial phosphorus compounds and other products -- was shopped around for months, but no buyer was found, in part for tax reasons, analysts said.
Monsanto said the spin-off requires shareholder approval and clearance by government agencies and the Internal Revenue Service for it to be tax-free.
The spin-off is intended to be completed no later than the end of next year. Until then, the two companies will operate separately within Monsanto beginning early next year, it said.
Monsanto's stock slipped 37.5 cents to $40.75 in midday trading on the New York Stock Exchange.
",22
"U.S. consumers are greeting the latest home computers -- faster than ever, but lacking new whiz-bang features -- with a collective yawn.
Major U.S. electronics retailers said Thursday that home PC sales were weak in October and analysts see few signs of a recovery without lower prices or a technology breakthrough.
""Everybody seems to have stopped buying PCs all of a sudden,"" said Janney Montgomery Scott analyst Terrence McEvoy.
Defying the downdraft are mail-order computer vendors and sellers of computers to business, which are both thriving.  
Their success reflects a shifting market, analysts said.
""The business today is less first-time buyers and more repeat customers,"" said Robertson Stephens analyst Edward Lee.
The pool of entry-level buyers is contracting and the PC industry increasingly relies on second- or third-time buyers, who are smarter than novices. Veterans look for vendors offering lots of peripherals, such as CompUSA Inc, or discount mail-order houses, such as Dell Computer Corp and Gateway 2000 Inc, analysts said.
That leaves generalists, like Best Buy Co and Circuit City Stores, to fight for a shrinking market.  
Eden Prairie, Minn.-based Best Buy, with 268 stores in 31 states, reported October sales were down 15 percent from a year ago on a same-store basis and said ""the sale of personal computers was impacted by industry-wide weakness.""
Richmond, Va.-based Circuit City saw an October decline in same-store sales of nine percent and cited ""softness in the personal computer and ... consumer electronics categories.""
Disappointing results were posted by Tandy Corp, owner of the RadioShack, Computer City and Incredible Universe chains. ""Our results parallel the sluggish consumer electronics and personal computer retail market,"" Tandy said.  
""Demand is starting to dry up across the board,"" Lee said.
Best Buy shares Thursday fell 3-1/4 to 13 on the October report. Circuit City shares were up 3/8 to 34-7/8. Shares in Fort Worth, Texas-based Tandy were off 3/4 to 38-3/4.
At the same time, shares in Dell were up 1-1/2 to 88-5/8, while Gateway 2000 shares were up 3-3/4 to 52-3/4. Shares in computer and microprocessor manufacturers also rallied, with Intel Corp up 5-3/4 to 124-5/8 and International Business Machines Corp up 1 to 134-1/4.  
PC sales at this time last year were buoyed by promotions and the multi-media explosion. The home PC was transformed from a word processor into a high-quality game station and an educational tool for kids thanks to CD-ROM drives, speakers and soundcard packages and a bevy of new applications.
""Today, computers are faster than they were a year ago, but what does it do more?"" Lee asked. ""Demand is driven by applications and how it changes the typical consumer's life.""
Savvy consumers could just be waiting for lower prices, of course, and analysts said if they keep dropping, there may yet be a holiday buying burst. But without some hot new features, the shopping season for PC retailers could be a cold one.
""When you've got Intel moving up five in one day and Best Buy moving down three the same day, that tells you something ... It's a tough business,"" said Securities Corp of Iowa analyst Pat Dunkerley.
Reuters Chicago Newsdesk  312-408-8787
",22
"Holiday sales for top U.S. retailers so far look mildly disappointing, but Wall Street is withholding judgment on the season and retailing's fourth quarter profit outlook until all the scores are tallied.
""There's a lot of nervousness about retailers and what they're going to report. It's definitely taking a toll on the stocks,"" said UBS Securities retailing analyst Annie Erner.
Shares in most retailers fell Thursday after J.C. Penney Co Inc said fourth-quarter earnings would not meet expectations and November-December profit margins were thin.  
Dayton Hudson Corp also reported early holiday results Thursday that were less than exciting, following a Friday warning of lower holiday sales from  Nordstrom Inc. The reports put retail analysts on edge, but they remain confident that other big players, such as Sears Roebuck and Co, May Department Stores and Federated Department Stores, will meet or exceed expectations.
""My impression is that May did okay. Federated looks like they're on plan and for Sears, we're looking for a good fourth quarter,"" said Brown Brothers Harriman analyst Joseph Ronning.
Shares in all three companies fell Thursday, nevertheless.  
The only major retail stocks to defy the downdraft, which was aggravated by a broadly lower Dow Jones industrial average, were Toys R Us Inc and Saks Holdings Inc, reflecting good toy and luxury items sales, analysts said.
Bed Bath & Beyond Inc, a smaller home furnishings seller, also made gains Thursday after reporting good same-store sales for December, offering hope to analysts of more positive surprises from specialty retailers.
No such hopes lingered for hard-pressed computer retailers, however, as shares in CompUSA Inc, Tandy Corp and Circuit City Stores Inc declined.  
Reflecting a broad slump in home computer sales, CompUSA said Thursday that second-quarter same-store sales rose 1.5 percent, letting down analysts who had expected three percent.
Doing substantially better than computer sellers are drugstores, which may be among the top performers in weeks ahead as retailers post fourth-quarter results, analysts said.
Rite Aid Corp on Thursday reported strong December same-store sales gains. Advances in non-pharmacy revenues signalled good holiday gift sales and pharmacy-side gains reflected the growing prevalence of third-party payor schemes for prescription drugs, analysts said.  
In addition, J.P. Morgan Securities analyst Mark Husson said, ""The cough and cold season is beginning to warm up. So that's good for sales, too.""
Among department stores and discounters, a big factor in the mixed holiday sales season was the fact that it was five days shorter than last year's due to a fluke in the calendar.
""None of us knew what this five fewer days would do ... to the mechanics of the season,"" said Morgan Stanley analyst Bruce Missett.  The net result was that most big sales gains were restricted by the shortened season, while mediocre showings were made worse by it, analysts said.
""You came out with a trend line not dissimilar to what we've seen all year, which is modest growth,"" Missett said.
((--Chicago Newsdesk 312-408-8787))
",22
"Chicago Board of Trade Chairman Patrick Arbor said Thursday he expects electronic technology to replace open outcry trading in 20 to 25 years.
""I would think that in 20 to 25 years, there will be some kind of technology that will replace the traditional, open outcry market,"" Arbor said in answer to a student's question after a speech at the University of Chicago.
In the past, the CBOT has said it views electronic trading as a supplement to open outcry pit trading, which it has said provides maximum integrity and liquidity at minimum cost.
A CBOT press release distributed after Arbor's speech quoted him saying that ""electronic trading ... supplements open outcry during daytime hours and the evening session.""
In answer to the student's question, Arbor remarked that his 33-year-old son, a CBOT member allowed to trade in the pits, has ""got about 20 years left"" in his trading career.
Arbor added, ""Technology is the wave of the future. There's no question about it.""
Electronic trading remains a small part of the total volume of trading done on the CBOT, but is growing rapidly.
Total trading volume on the exchange in 1995 was more than 210 million contracts and Arbor predicted record-setting volume in 1996. Electronic trading increased to an average daily volume of 7,397 contracts in the first quarter of 1996 from just 560 contracts in 1992, when it commenced.
""The growth of electronic trading is here. It's going to continue,"" Arbor said.
He said he expects the CBOT -- the world's largest futures exchange -- soon to move away from paper orders. He said, ""My prediction would be that in three to five years, the Board of Trade floor ... will be completely paperless and pretty much automated as far as the entering and exiting of orders.""
",22
"Major retailers reported mixed results Thursday for the crucial holiday sales season, sparking a drop in their stocks on Wall Street.
The preliminary holiday reports by J.C. Penney Co. Inc., Dayton Hudson Corp., Carson Pirie Scott & Co. and others are ""further confirmation that the holiday was one of moderate growth,"" Morgan Stanley retailing analyst Bruce Missett said.
""There's a lot of nervousness about retailers and what they're going to report. It's definitely taking a toll on the stocks,"" said UBS Securities retailing analyst Annie Erner.
J.C. Penney said sales for the four weeks ended Dec. 28 were close to the Plano, Texas-based company's goals but that markdowns were higher than expected.
Total sales, including drug store sales, for the period were $3.6 billion, a 23.2 percent increase from the $2.9 billion in sales for the comparable period in 1995.
Same-store sales at J.C. Penney, not including drug stores, for the holiday period increased 6.2 percent over 1995. The company did not release dollar figures for same-store sales, which cover stores open at least a year.
The company also said it expected fourth-quarter earnings before charges would not meet Wall Street expectations and that profit margins for November and December were below planned levels.
J.C. Penney stock dropped $1.25 to $47.50 in midday trading on the New York Stock Exchange.
Dayton Hudson said same-store sales at its 65 department stores in the Midwest, 736 Target discount stores nationwide and 300 Mervyn's discount stores in the West and South were up 4.2 percent for the same period. The Minneapolis-based company did not give dollar figures.
""Results at Target and Mervyn's for the four weeks were on plan, while department stores sales were below our expectations,"" Chief Executive Bob Ulrich said in a statement. ""With the shorter selling season this year, we planned our sales conservatively and generally met our plans for the season.""
Dayton Hudson department store sales increased 0.3 percent, Mervyn's sales decreased 4.1 percent and Target sales rose 7.1 percent, the company said.
Dayton Hudson stock fell $1.375 to $37.875 on the NYSE.
Carson Pirie reported a 12.8 percent increase in sales to $194.1 million for the four-week period. Same-store sales rose 7.6 percent.
""The sales results during the 1996 holiday season were in line with my expectations,"" Chairman Stanton Bluestone said in a statement.
But the Milwaukee-based company, which operates 53 department stores and four furniture stores, said it expected five-week sales results for fiscal December will fall slightly below those for the five-week period ended Dec. 30, 1995.
Carson Pirie and Dayton Hudson expect to report five-week results next week.
Last Friday, Seattle-based Nordstrom Inc. warned that holiday sales would decline from year-ago levels and that earnings would be below Wall Street estimates.
The reports put retail analysts on edge, but they remained confident that other big names, such as Chicago's Sears Roebuck and Co., May Department Stores Co. of St. Louis, and Federated Department Stores, of Cincinnati, would meet or exceed expectations.
""My impression is that May did okay. Federated looks like they're on plan and for Sears, we're looking for a good fourth quarter,"" said Brown Brothers Harriman analyst Joseph Ronning.
A big factor in the mixed sales performance for the holiday season was the fact that it was five days shorter than the previous year since the Thanksgiving holiday was later.
""None of us knew what this five fewer days would do ... to the mechanics of the season,"" said Morgan Stanley's Missett.
The net result was that most big sales gains were restricted by the shortened season, while mediocre showings were made worse by it, analysts said.
""You came out with a trend line not dissimilar to what we've seen all year, which is modest growth,"" Missett said.
Carson Pirie's stock dropped 25 cents to $25 on the NYSE. Among other retailers, Sears dropped $1.25 to $44.75 and May fell $1.25 to $45.50, both on the NYSE.
",22
"General Instrument Corp is setting goals for NextLevel Systems Inc -- the lead business to come out of a three-way corporate break-up -- of 35-45 percent annual operating income growth and 22-25 percent annual sales growth on operating margins of 10-12 percent.
Those growth rates could be even higher this year, General Instrument chief executive Richard Friedland said in an interview with Reuters on Tuesday, adding he sees stock price gains ahead for all three firms being formed in the break-up -- NextLevel, CommScope Inc and General Semiconductor Inc.
""I'd look to CommScope and General Semiconductor to increase at above-average rates in the eight to 10 percent return range, maybe more. I see NextLevel Systems doubling over the next year to 18 months,"" Friedland said.
Shares in General Instrument were up 1/4 to 22-7/8 Tuesday after the Chicago-based company announced a three-way split designed primarily to unlock the share value of NextLevel.
For CommScope, to be built on the world's largest coaxial cable business, Friedland said management's goals are 18 to 20 percent annual sales growth and 16 to 17 percent operating income growth with operating margins of 16 to 17 percent.
For General Semiconductor, to be formed from General Instrument's electronic component manufacturing operations, goals are 10 to 11 percent operating income growth on annual sales growth of 14-16 percent and operating margins of 20-21 percent, Friedland told analysts at a meeting Tuesday.
Under the plan, General Instrument shareholders will get one share in each of the new companies for each General Instrument share held, Friedland said.
""We may have to do a reverse split to comply with New York Stock Exchange rules,"" he said, adding closing of the transaction is seen by July.
No layoffs or hiring are planned. ""There are no staff actions contemplated as a result of the transaction,"" he said.
General Instrument has primary goals in the restructuring, Friedland said. One is to unlock the value of the businesses that will comprise NextLevel, which analysts said has been held back by General Instrument's other segments.
""Electronic conglomerates are not looked at very favorably these days,"" said Michael Geran, industry analyst at the Pershing Division of Donaldson Lufkin & Jenrette.
The other goal, Friedland said, has to do with General Instrument's heritage as part of the cable television industry -- a legacy that has overshadowed its newer technologies.
""We're going to continue to service the heck out of the cable base, but we're also getting into provision of dial tone and data. We need to break out of that mold General Instrument has been in of being a cable supplier,"" Friedland said.
He said the company decided to proceed with the break-up because it showed in 1996 that it could meet its business objectives, after failing to do so in years past. ""We've made that transition from development to deployment,"" he said.
Deprived of cash flows thrown off by the CommScope and General Semiconductors businesses, NextLevel will fund growth two ways. ""We do have a lot of visibility to cash flow in NextLevel Systems now that we have the products going out the door,"" he said. ""So we feel that, while NextLevel Systems may be slightly cash negative in '97, even our downside scenarios say we have more than adequate capabilities.""
In addition, he said, most of General Instrument's debt will be loaded onto CommScope and General Semiconductor, which can afford to service it. ""That leaves CommScope and General Semiconductor in fine shape in terms of their capital structure because they do generate the cash to pay this debt off in the near-term,"" he said.
",22
"Most U.S. nursing home and hospital companies are expected to report higher profits in the fourth quarter on some easy comparisons, but Wall Street is wary of negative surprises.
""A lot of them are going against very weak results last year so they have easy comparisons,"" said NatWest Securities industry analyst Marie Conway.
At the same time, Schroder Wertheim analyst William McKeever said, ""There's probably more potential for downside to earnings than upside ... There could be disappointments.""  
Pressing industry issues such as Medicare and Medicaid reform and reimbursement rates for contract therapy services remain unresolved. ""Little progress has been made in Washington,"" said Scott & Stringfellow analyst George Shipp.
The industry finished a volatile 1996 on the upswing after a big summer sell-off. The Morgan Stanley Healthcare Provider index of 15 top hospital management and nursing home stocks was near 326 Tuesday, up from 288 at the start of the year.
""We like the sector in general, although there are some issues that have dogged certain companies,"" Conway said.  
For instance, Sun Healthcare Group Inc and Horizon/CMS Healthcare Corp, dragged down by various problems, have lagged the sector, she said.
Earnings at Integrated Health Services Inc are forecast to be barely improved from last year after the company's acquisitions of Coram Healthcare Corp and First American Health Care of Georgia Inc. ""They've made a very bold bet on home healthcare ... Things at Integrated are getting a little better,"" Shipp said.  
Health Management Associates Inc is expected to lead the for-profit hospital sector in earnings gains, with moderate increases projected for Tenet HealthCare and sector giant Columbia/HCA Healthcare Corp.
U.S. FIRST CALL CONSENSUS QTRLY EARNINGS FORECASTS
Company			   Qtr  EPS estimate  Yr-ago EPS
Beverly Enterprises	    Q4	$0.21	  $0.10
Columbia/HCA		     Q4	$0.61	  $0.53
Health Care & Retirement     Q4	$0.33	  $0.27
Health Management Associates Q1	$0.18	  $0.14
Integrated Health		Q4	$0.53	  $0.52
Manor Care			 Q3	$0.39	  $0.33
Tenet Healthcare		 Q3	$0.38	  $0.33
Vencor Inc			 Q4	$0.51	  $0.41
NOTE: Manor Care figures exclude earning of Choice Hotels unit. Manor Care and Tenet Q3's end in February.
((--Chicago Newsdesk 312-408-8787))
",22
"Aon Corp's acquisition of Alexander & Alexander Services Inc looks like a good deal for both insurance giants and an even better one for American International Group Inc.
Aon will pay an aggregate of $1.23 billion for Alexander & Alexander -- a price called reasonable by industry analysts.
Included in that amount is $317.5 million in cash for Alexander & Alexander's Series B preferred shares, which AIG bought for $200 million in June 1994. ""AIG made out pretty good on this,"" said Conning & Co analyst Gary Ransom.  
An AIG spokesman declined to comment on the transaction.
Analysts had long expected Aon to make a major buy. Its purchase this fall for $250 million of Inchcape Plc's Bain Hogg Group unit, a third the size of Alexander & Alexander, did not convince most analysts that Aon was through expending its $1 billion cash warchest. ""Virtually everyone who watches the insurance industry has been expecting this deal,"" Robinson Humphrey analyst Thomas Rosencrants said.
""It's good for Aon. It's good for Alex, too. It gives them something better than what they had. Their (Alexander's) stock price looked like it was going to keep going down,"" Ransom said.  
Aon chief executive Patrick Ryan is expected to head up the combined operation, with Alexander & Alexander chief executive Frank Zorb expected eventually to step aside.
""I would not be surprised to see Frank take a consulting role. I would not expect him to be involved to a great extent following the merger,"" Rosencrants said.
In an interview with Reuters, Ryan said Aon was attracted to the strategic fit offered by Alexander & Alexander.
""They've got a great international business. They've got a wonderful consulting business that fits with ours. And they're strong in Canada, where we are quite small,"" Ryan said.  
Over the past decade, the insurance industry has become increasingly competitive and insurers have had to hold down premium increases. Profit margins have suffered in the process and industry consolidation has accelerated.
""There's no end in sight to the 10-year soft market,"" Rosencrants said. ""A&A has been struggling for 15 years ... Their only realistic alternative would have been to sell to Marsh & McLennan (Cos Inc). But they've been such close competitors over the years that there could have been some cultural problems there.""
Aon shares were up 1-1/4 to 58-7/8, Alexander & Alexander was up 3 to 17-1/8, and AIG was off 2 to 109-5/8.
((--Chicago Newsdesk 312-408-8787))
",22
"Pall Corp and Memtec Ltd may have different reasons, but they seem equally determined to acquire Gelman Sciences Inc.
Analysts and arbitrageurs were reluctant to say whether that portends an all-out bidding war, especially after a rally in American Depositary Shares of Memtec on Thursday that reflected some doubt on Wall Street of Memtec's commitment.
Still, Gelman would nicely complement the operations of either suitor and will likely be hotly pursued by both, filtration industry analysts said.  
Shares in Ann Arbor, Mich.-based Gelman closed up 3 at 29 on the American Stock Exchange on the news that it was in discussions with Pall about a possible acquisition.
Gelman reached a definitive agreement on August 30 to be acquired by Australia's Memtec, which said Thursday it intends to proceed with the agreement.
""I don't think Memtec is going to back away,"" said Robert W. Baird & Co analyst Walter Morris.
Memtec wants Gelman's sophisticated membrane technology to put Memtec into closer competition with East Hills, N.Y.-based Pall and Millipore Corp, Morris said. 
Pall -- much larger than either Gelman or Memtec -- wants Gelman to broaden Pall's medical and process businesses and ""frankly, to eliminate a pesky competitor,"" Morris said.
Gelman sales in fiscal 1996 ended July 31 were $112 million, versus $103.5 million in fiscal 1995. Memtec sales in the year ended June 30 were $175 million, up from $145 million in fiscal 1995. Pall had revenues of $960.3 million in fiscal 1996 ended August 3, up from $822.2 million in fiscal 1995.
""Pall under chief executive Eric Krasnoff has been more acquisitive than under previous management teams,"" said Morgan Stanley & Co analyst Mark Gulley.  
""If he does this deal, it will have been his third acquisition"" since taking the helm at Pall about two years ago, Gulley said.
Krasnoff's acquisitions have tended to broaden Pall's presence in existing markets, rather than move it into new areas -- a pattern into which a Gelman acquisition would fit, said Fourteen Research analyst Anthony Ginsberg.
""There's good overlap ... They're in many of the same venues and markets,"" Gulley said.
Morris said, ""Gelman is strategically important to both companies.""
Arbitrageurs seemed to cast doubt Thursday on Memtec's contention that it plans to proceed with the Gelman deal by bidding up the Australian company's American depository shares as much as 3-5/8 in the morning. They lost ground in the afternoon to close up 1-15/16 at 28-15/16.
The rally in part was likely explained by short covering, arbitrageurs said.
Late Thursday, Gelman issued a statement saying it intended to pursue its agreement with Memtec, but also to talk with Pall and any other interested parties.
--Chicago Newsdesk 312-408-8787
",22
"United Airlines said Thursday it ordered 51 new airliners valued at $4.4 billion from Boeing Co. and Airbus Industrie, and although the lion's share went to Boeing, one industry analyst said the European consortium scored a big victory over arch-rival Boeing.
United said it will buy 24 narrow-body A319 aircraft from Airbus. The order is valued at $900 million based on manufacturers' list prices, but United will likely pay much less thanks to special discounts.
United chose the Airbus planes over competing Boeing 737-700s and 737-300s after evaluating both, a UAL spokesman said.
""It certainly is a big win for Airbus,"" said Peter Jacobs, aerospace analyst at Ragen MacKenzie.
Boeing hardly walked away empty-handed, as United said it will buy 27 new wide-body planes -- 19 747-400s, six 757s and two 777s -- from the Seattle-based aircraft manufacturer.
The Boeing order is valued at $3.5 billion based on list prices. But again, United spokesman Joe Hopkins said, ""We're not paying the retail price.""
Jacobs said United may have won discounts from Boeing and Airbus of 10 percent to 15 percent off list price.
The new wide-body planes will replace older Boeings in United's fleet, said the airline, a unit of Chicago-based UAL Corp.
Boeing has been flooded with orders for new aircraft over the past 18 months. That may have made the manufacturer less willing to offer rock-bottom prices to beat Airbus for the narrow-body planes, Jacobs said.
""Boeing may have been more willing to walk away from an order than it would have been earlier,"" he said.
Airbus initially sold United a fleet of narrow-body A320s in 1992 by offering the airline deep discounts and an unusual walk-away lease arrangement.
""What that did was it got Airbus planes into the United fleet. That made this next decision for United easier,"" Jacobs said.
United will likely need to order another 100 narrow-body planes over the next seven years to update its fleet, he added.
United said the planes will be part of its ""retire and replace"" programme to update its fleet.
""By 2000, the programme is expected to generate more than $100 million in annual operating cost savings, reducing fuel, maintenance and labour costs,"" it said.
The programme will also ensure that United meets certain noise reduction requirements.
Delivery of all aircraft is scheduled to be completed by 2002, United said.
The carrier said it placed orders with United Technologies Corp.'s Pratt & Whitney unit for engines for the Boeing aircraft and with International Aero Engines AG for engines for the Airbus jets. United Technologies owns 33 percent of International Aero Engines.
The Airbus A319s will replace United's older Boeing 737-200s, the airline and Airbus said. The new planes are configured to seat 126 passengers.
The A319 is a smaller derivative of the Airbus A320. United already operates 34 A320s and will take delivery of 16 more by the end of 1998, they said.
United joins German airline Deutsche Lufthansa AG as the largest airline customers for the A320 family, each with 74 planes.
Airbus Industrie is a consortium made up of French-owned Societe Nationale Industrielle, British Aerospace Plc, Daimler-Benz Aerospace, a unit of Germany's Daimler-Benz AG, and Construcciones Aeronauticas SA of Spain.
",22
"When Pharmacia & Upjohn Inc launched Caverject, an anti-impotence drug, it ordered the usual marketing programme and then, in line with a growing trend, it called Time magazine.
And Newsweek and Smithsonian and New Yorker and more than 50 other national publications and radio stations -- all of which are now engaged in a huge ""consumer awareness"" campaign about impotence, paid for by Pharmacia & Upjohn.
Whether it is impotence, baldness, depression, schizophrenia, osteoporosis or allergies, U.S. consumers are being flooded with ads for health problems and often, in a departure from tradition, prescription drugs to cure them.
Spending on advertising on prescription drugs throughout the U.S. media topped $323 million in the first six months of 1996, compared to $356.8 million for the whole of 1995, according to Competitive Media Reporting, a market research firm.
""It certainly is a growing category for Time magazine and for news magazines in general,"" said Robert Pondiscio, spokesman for the Time Warner newsweekly.
Time broke new ground in the area this month with a 90-page special issue called ""Frontiers of Medicine"" almost fully underwritten by Britain's Glaxo Wellcome Plc, the largest drug manufacturer in the world.
The spread of direct-to-consumer prescription drug advertising marks a victory for drug companies, which fought for years with physicians and regulators opposed to it.
The American Medical Association, based here, still stands publicly against such advertising. The U.S. Food and Drug Administration (FDA), after banning the adverts in the early 1980s, now allows them if they follow certain guidelines.
FDA rules explain why prescription drug advertisements sometimes identify a company and a drug but do not on other occasions.
For instance, Pfizer Inc is advertising its Zyrtec allergy drug in the main U.S. dailies. The ads show a picture of a smiling woman surrounded by wildflowers and weeds. Underneath is large-type text promoting the drug and off to one side is a 1,500-word ""brief summary"" in fine print about side-effects and dosages. The summary is required by the FDA because the ad mentions Pfizer's and the drug's names.
In contrast, one of Glaxo's many ads in the Time special issue is about how Olympic gold medalist Jackie Joyner-Kersee keeps her asthma under control with a ""program"" put together by Glaxo. A free telephone number is provided. Callers are automatically sent a complimentary ""asthma control kit"" from Glaxo.
No mention is made in the advertisement that Glaxo is a world leader in asthma medicines. Its Ventolin is an industry standard. Serevent was introduced a year ago and Flovent was just unveiled. Because none of these drugs is named in the ad, it does not have to include a brief summary of their attributes.
The FDA is talking with drug companies and broadcasters about how to handle radio and TV ads for prescription drugs. Some advertisements are broadcast, but so far remain much rarer than those in print.
These ads -- whether they name the drug or not -- are meant to raise consumers' awareness of new drugs and to reach doctors -- medicine's decision-makers -- through patients.
""The ads are effective in informing consumers of the availability of a drug. The action step is to suggest to the consumer that they consult their physician,"" said Dick Johnson, spokesman for Hoechst Marion Roussel, which is advertising its Allegra allergy medicine with pictures of a windsurfer skimming across an open field.
The ads seem to be working on the consumer.
In 1987, about 18 percent of U.S. patients initiated conversations with their physicians about advertised drugs. That figure was up to 51 percent in 1995, according to a study done by American Home Products Corp, which advertises Premarin for menopause and Effexor for depression.
""The ads create a more educated consumer and an educated consumer is more prepared to have an intelligent dialogue with the physician,"" said American Home spokeswoman Audrey Ashby.
Whether or not that dialogue leads doctors to write more prescriptions for advertised drugs, thereby boosting sales for the drug companies, is difficult to judge because the companies will not disclose such details.
No objective studies have determined if drug companies gain incremental revenues from advertising, but the companies' growing advertising budgets in themselves may be a sign of success.
""If these ads weren't working, why would they be doing them? Unless they were being forced to by competitors,"" said Stephen Scala, pharmaceuticals industry analyst with Cowen & Co.
Advertising is a vital part of the over-the-counter drugs business, where the consumer -- not the doctor -- calls the shots. The kind of competitive pressures that drive over-the-counter markets may help explain the spread of advertising for prescription drugs, as well, Scala said.
But, he added, the role of consumers in a changing healthcare system are part of the answer, too.
""People are more knowledgable and aware and willing to learn about their treatments than they used to be,"" he said.
",22
"Eli Lilly & Co expects marketing and administration costs in the fourth quarter to be only slightly up or flat versus the year-ago level, marking a slowdown from a third-quarter jump of 6.5 percent.
The line item ""may be up a couple percent, but certainly below the growth rates we showed in the third quarter,"" Lilly chief financial officer Charles Golden said in an interview.
Lilly's gross profit margin declined again in the third quarter, partly due to increased marketing costs for launching new products, such as the anti-schizophrenia drug Zyprexa.  
Zyprexa is one of a handful of new, higher-margin products that will begin to lift sales in the fourth quarter, but a margin trend turnaround is likely further off, Golden said.
""I think it's going to be sometime next year. I'm not sure it's in the next quarter,"" Golden said of improved margins.
Gross margin has declined for two consecutive quarters.
Other than that, analysts greeted Lilly's third-quarter results with a positive tone.
""I didn't see any real big surprises in these numbers,"" said NatWest Securities drug industry analyst John Lamberton.  
Lilly's third-quarter operating profits of $0.64 per share, versus $0.54 per share in 1995, were precisely in line with Wall Street expectations, said Deutsche Morgan Grenfell analyst Mariola Haggar.
The company said an 11-percent sales gain was led by the anti-depressant Prozac, the human insulin Humulin and increased revenues from the PCS Health Systems unit.
Shares in Lilly were up 1/2 to 69-1/4 on Tuesday after the Indianapolis-based drugmaker reported an 18-percent gain in third-quarter earnings over the year-ago period.  
In the fourth quarter, Golden said, Lilly will likely lose a small benefit to earnings per share stemming from a decline in outstanding shares versus the prior year. That benefit, caused by the split-off of Guidant Corp last year, boosted third-quarter earnings by five percent.
""We will lose that in the fourth quarter ... You're talking a penny or two per share,"" he said.
In the fourth quarter, the company will also lose a small boost to earnings from a lower tax rate that lifted third-quarter earnings slightly compared with the prior year.
--Chicago Newsdesk 312-408-8787
",22
"Chinese President Jiang Zemin, in a new overture to rival Taiwan, on Tuesday called on Taiwanese from all walks of life to offer their views and suggestions on ways to reunify the mainland and the island.
""We welcome Taiwanese people of all circles to raise beneficial ideas and suggestions on peaceful reunification,"" Jiang said in a New Year's address broadcast on state television.
Jiang's proposal was seen by some Chinese analysts as a possible step away from paramount leader Deng Xiaoping's formula of ""one country, two systems"", long rejected by Taiwan's leadership.
Under the formula the two sides would reunify, with Taiwan enjoying autonomy and maintaining its own army.
""Jiang is trying to be flexible and open-minded on the Taiwan issue,"" said one China watcher who declined to be identified.
Jiang is eager to secure a place in modern China's history alongside Mao Zedong, who established the People's Republic, and Deng, who cemented the return of the British colony of Hong Kong to Chinese rule.
""This is the carrot following the stick that China wielded this year,"" the analyst said.
Ties plunged last March when Beijing conducted war games and missile tests in waters close to Taiwan in the run-up to the island's first direct presidential elections.
Jiang, who doubles as the Communist Party chief, told Taiwan's leadership to work to repair strained ties and said reunification was the common wish of all Chinese people.
Achieving reunification at the earliest possible date was in the interests of mainlanders and residents of Taiwan, he said.
""The Taiwanese authorities would be well advised to put the interests of the nation first and to stop all activities of splitting the motherland,"" Jiang added.
Beijing has viewed Taiwan as a rebel province since the end of the Chinese civil war in 1949 and suspects the island is covertly seeking independence. Taipei says it wants reunification, but on different terms.
Jiang said China would continue to push for direct transport and trade links with Taiwan, which have been banned for almost five decades.
China warned Taiwan earlier on Tuesday that its tight controls on trade with the mainland were harming economic ties but said links could be helped by the return of Hong Kong to Beijing's rule next year.
""If the Taiwan authorities continue to pursue a policy of tight controls, circumstances will not be good for trade contacts,"" the official Xinhua news agency said.
This was ""something that we do not want to see"", the agency quoted Wang Hui, an official of the Ministry of Foreign Trade and Economic Cooperation, as saying.
But Wang said he believed the return of Hong Kong to Chinese rule on July 1, 1997, and the possible entry of Beijing into the World Trade Organisation (WTO) would ""provide good opportunities for developing economic and trade exchanges"" between China and Taiwan.
Indirect trade between Taiwan and China was worth $17.76 billion in the first 10 months of 1996, up 2.6 percent compared with the same period of last year, the island's Board of Foreign Trade said at the weekend.
",43
"China has launched its first survey of its hundreds of millions of rural residents to gauge the impact of nearly two decades of economic reforms on the country's agricultural sector, officials said on Monday.
Since January 1, an army of six million officials and interviewers has been mobilised to canvass an estimated 230 million households in towns and villages throughout China's countryside, Shao Jianmin, deputy leader of the Beijing Rural Survey Team, said in an interview.
The survey is intended to gather more detailed data on rural areas, which have been radically transformed by the sweeping market-oriented agricultural and economic reforms launched by paramount leader Deng Xiaoping in the late 1970s, he said.
In Nankou township to the north of Beijing, a band of women interviewers visited the homes of local residents on Monday to ask about the size of their families, educational levels, what crops they grew and the occupations of family members.
Deng's reforms have encouraged private enterprise and rural industry, creating huge changes in the countryside, officials said.
""We don't know how people in the agricultural sector are making money,"" said interviewer Xie Fang.
Official statistics show 75 percent of China's 1.2 billion people are farmers but officials say this figure is misleading because it includes many former farmers who have since become migrant labourers or rural factory hands.
China's farmers have increasingly abandoned their ploughs to take up more lucrative jobs in small-scale township industries or to seek their fortunes in cities.
""After this survey the country will have an overall understanding of how many households are engaged in farming, how many are in township enterprises and how many have gone into business for themselves,"" Xie said.
""This is the first national rural census to be held since Liberation (the 1949 communist takeover),"" Shao said.
""We will be going to every single household,"" he said.
The survey would take about one month to complete, he said, adding that the findings would be published at the end of this year and throughout next year.
The survey would cover the numbers and types of farming and non-farming rural firms as well as details of land use.
It would also gather data on infrastructure in villages, towns and counties, Shao said.
""The census will better serve national macro-economic policy and provide more accurate statistics for rural management,"" he said.
China must feed one-fifth of the world's people on just seven percent of its arable land but Beijing says a lack of accurate data about cropland has hindered efforts to stop the misuse and erosion of land and boost grain production.
The survey may clear up confusion over how much arable land China has. Last December, officials said the amount had been miscalculated, and they raised the estimated total to 147 million hectares (363 million acres) compared with 133.4 million (328 million acres) just six months earlier.
China has forecast a record grain output of 480 million tonnes last year, up from 1995's 466 million tonnes, a record at the time.
Survey authorities have launched a propaganda blitz to urge farmers to cooperate for the good of the nation, Shao said.
""They started broadcasts about it in December 1996,"" said Shen Jiucai, a 59-year-old gatekeeper and part-time farmer in Nankou. ""This will be of great use and spur on agricultural development.""
",43
"China posted a trade surplus of $12.24 billion in 1996 on Friday, lower than recent official projections but an about-face from predictions early in the year of a trade deficit.
Exports were spurred by the government's faster payment of export tax rebates and an expansion of credit to exporters as well as by soaring trade by foreign-invested enterprises.
Exports for the year totalled $151.07 billion, up by 1.5 percent compared with 1995, the official Xinhua news agency quoted customs figures as showing.
Imports were $138.83 billion, climbing by 5.1 percent, the customs figures showed.
The customs figures did not specify trade in December alone, but the surplus for the whole year of $12.24 billion indicated that exports slid in the last month of the year to give an estimated deficit for that month of $1.74 billion.
The surplus for the year fell short of the State Statistical Bureau's provisional estimate last month of a $16 billion surplus. It was down from the $16.7 billion surplus in 1995.
Many economists had forecast China would post a trade deficit for 1996, or at best achieve balanced trade, after it registered a deficit of $1.15 billion in the first quarter of the year.
The slow pace of government payment of export tax rebates to exporters in the first half of 1996 coupled with the relative strength of the yuan currency had been expected to sharply cut exports.
Imports had been forecast to soar after Beijing slashed import tariffs on more than 4,000 items to an average 23 percent last April.
However, imports grew more slowly than expected due to the elimination of many tariff exemptions in imports of capital goods for foreign-funded firms.
A government move to revive trade by sharply accelerating payments of export tax rebates in the second half of the year along with a strong export performance by foreign-funded firms fuelled the surplus.
The trade volume of overseas-funded businesses increased by 25 percent in 1996, to $137.1 billion, the customs figures showed. They gave no breakdown for exports. Economists have said most export gains were made by foreign-invested companies while China's state-run firms showed disappointing export records.
Foreign trade of state-owned businesses fell by 11 percent, to total $145.2 billion, the latest figures showed.
Japan was China's largest trading partner last year, with total trade hitting $60.1 billion. China exported $30.9 billion of goods to Japan, up slightly from $29.2 billion in 1995.
Trade with the United States rose 4.9 percent to nearly $43 billion, customs said, but gave no details of the imbalance.
U.S. figures show a ballooning surplus in favour of China, and this has become a thorn in Beijing's ties with Washington. Beijing has said it has a trade deficit with the United States.
Trade with the European Union edged up 1.6 percent to $39.7 billion.
China imported 22.62 million tonnes of crude oil, a rise of 32 percent from 1995 and steel imports rose 14 percent to 15.99 million tonnes, the figures showed. ($1 = 8.3 yuan)
",43
"China said on Monday it would support Hong Kong's efforts to expand foreign trade relations after the territory returns to Beijing's control in mid-1997 provided such ties did not undermine China's sovereignty.
""We stand ready to support Hong Kong in its efforts to expand foreign economic and trade relations... provided the state's sovereignty and interests are not undermined,"" the Xinhua news agency quoted An Min, vice-minister of foreign trade, as saying.
Hong Kong would pursue a free trade policy to allow the free flow of commodities and capital after China resumes control of the British colony at midnight on June 30, An said.
""We will fully support a high degree of freedom and openness in Hong Kong's status as an ideal arena for concentration and flow of international capital,"" he said.
Hong Kong would be allowed to formulate its own economic and trade regulations as long as such policies conformed with the Basic Law, the territory's 1990 mini-constitution promulgated by Beijing, An said.
""All the existing laws will remain in force, except those provisions that contradict the Basic Law or those requiring amendments by the Hong Kong SAR (Special Administrative Region) legislature,"" An said.
A separate report in the China Taxation News said Hong Kong businessmen would retain preferential tax status for investments on the Chinese mainland.
""After 1997, China's tax laws will not apply to the Special Administrative Region and Hong Kong compatriots will be able to continue to receive the preferential treatment given to foreign investors,"" the newspaper said.
China gives foreign investors lower tax rates than Chinese companies and treats businessmen from Hong Kong as foreigners.
Foreign businessmen, however, are made to pay a whole range of fees that are not required from local businessmen. They also must hire employees through special government agencies, boosting their operating costs.
The newspaper did not say whether these fees would still apply to Hong Kong businesses after the transfer of power.
Chinese firms would not enjoy any priveleges when investing in Hong Kong after the handover, An said, adding that mainland companies would be treated as overseas investors.
""Chinese enterprises shall follow internationally prevailing economic and trade rules and local 'rules of the game',"" An said.
""The principles we are pursuing are fair competition, vigorous development, operation guided by law and enriching Hong Kong,"" he said.
China hit a raw nerve in Hong Kong on Monday when it announced proposals to abolish a series of laws on democratic elections and civil liberties when it resumes sovereignty.
Beijing has tried to reassure Hong Kong's people they will enjoy considerable autonomy in running their affairs and maintain their free-wheeling capitalist way of life under the doctrine ""one country, two systems"".
China has said it will dismantle the territory's elected legislature and has appointed a provisional one to take its place on July 1.
",43
"China said on Tuesday it had drawn a pledge from Guatemala not to support Taiwan's bid to enter the United Nations, winning a round in its campaign to isolate the island on the world stage.
Guatemala had promised to abide by a U.N. resolution stating there was only one China and that Beijing was the sole legal representative of China, Foreign Ministry spokesman Shen Guofang told a regular news briefing.
""They pledged to respect the provisions of Resolution 2758 of the General Assembly and to use it as a guide to relevant actions in the United Nations,"" Shen said.
""According to this resolution, Guatemala cannot support Taiwan's actions to regain entry to the United Nations,"" Shen told reporters.
With China voting in favour, the U.N. Security Council on Monday approved the dispatch of 155 U.N. military observers to monitor peace accords in Guatemala that ended three decades of civil war in the Central American nation.
China had vetoed a similar resolution on January 10 because of Guatemala's ties to Taiwan, which Beijing views as a rebel province not entitled to diplomatic relations.
The 14 other Security Council members all supported sending the peacekeepers to Guatemala but a negative vote by China, one of five permanent council members with veto power, killed the three-month mission.
China and Guatemala had held several rounds of negotiations at the United Nations to seek a solution to the impasse, Shen said.
""Guatemala indicated it realised the gravity and sensitivity of the Taiwan issue and showed a willingness to take a positive approach,"" Shen said.
""This has borne great fruit for us,"" Shen said in a reference to Beijing's diplomatic coup in eroding some of the support Taiwan can muster for its U.N. bid from among its few remaining diplomatic allies.
Guatemala is among some 30 nations, mostly from Africa and Central America, that officially recognise Taipei instead of Beijing. Taiwan has doled out generous amounts of aid to these countries.
Taiwan's allies have co-sponsored an annual, unsuccessful resolution aimed at regaining U.N. membership for the island, which lost its seat in the world body to the People's Republic of China in 1971. Taiwan's campaign sends Beijing into a fury.
Taiwan and China have been arch rivals since the end of the Chinese civil war in 1949.
Taiwan says it is committed to eventual reunification but Beijing accuses Taipei of secretly working for independence and has moved to block the island's drive to gain more international recognition.
Guatemalan officials say they have not broken off diplomatic relations with Taiwan, although China had never requested they do so.
Diplomats said Beijing had also demanded a public apology from Guatemala for inviting Taiwan's foreign minister to the December 29 peace signing ceremonies. Guatemala has refused.
The U.N. mission will send 155 military observers to Guatemala for three months to monitor U.N.-brokered peace accords aimed at cutting the numbers of government troops and disarming guerrillas.
The peace process was to have begun later this week and be monitored by the military observers, who will now take weeks longer to arrive.
",43
"China's Communist Party has taken its crusade to resurrect socialist values to Tibet, with a call for textbooks and publications to stress the historical links between the restive Himalayan region and its Chinese rulers.
Delegates to a recent Communist Party meeting urged Tibet to embrace ""spiritual civilisation"", or socialist values, to uproot the influence of the region's exiled spiritual leader, the Dalai Lama, the Tibet Daily said in an edition seen in Beijing on Saturday.
""Protecting the unity of the motherland and opposing the Dalai Lama's evil activities to split the motherland is a major task of building spiritual civilisation in our region,"" the November 6 edition of the official newspaper said.
""School textbooks, classrooms and various publications must strengthen (the) embodiment of the historical links between Tibet and the motherland,"" the newspaper said.
Beijing says Tibet has been a part of China for centuries but many Tibetans dispute this and have yearned for independence since Communist troops marched into the region in 1950.
""The mentality that Tibet is an inseparable part of the motherland must be firmly established throughout society,"" the Tibet Daily said.
The newspaper accused the Dalai Lama, who won the Nobel Peace Prize in 1989 for his peaceful campaign for Tibetan autonomy, of disfiguring religion to paralyse his people and split the deeply-Buddhist region from the rest of China.
Tibet's most revered spiritual leader fled into exile in India in 1959 after a failed revolt against Chinese rule.
""Tibetan Buddhism has already been disfigured beyond recognition by the Dalai clique,"" the Tibet Daily said.
""The Dalai clique has employed every possible trick to use religion in vain attempts to split the motherland and paralyse the people,"" it said.
Greater efforts were needed to expose the ""evil"" acts of the Dalai Lama that were aimed at stirring up turmoil, it said.
Tibet has been rocked by repeated anti-Chinese protests that Beijing charges are stirred up by the Dalai Lama's supporters.
The newspaper warned that Tibetan culture and material life had been flooded by religious ideas and urged people to embrace socialist culture.
""Religion...cannot provide the impetus for development in Tibet and cannot provide any help to the Tibetan people in throwing off poverty and becoming prosperous,"" it said.
China has called for greater efforts to promote atheism in the deeply religious area, saying that religious beliefs are a hindrance to economic progress.
Beijing views international support for Tibet's holiest man as a Western plot to split China and contain its development.
China slammed as rude intereference in its internal affairs a meeting last month between the globe-trotting Buddhist monk and representatives of the European Parliament.
Beijing also threatened trade relatiation against Canberra after a meeting between the Dalai Lama and Australian Prime Minister John Howard in September.
",43
"China warned the United States on Thursday that slowly warming Sino-U.S. ties could be complicated if Washington decided to confront Beijing on the issue of human rights.
""If the human rights question is made into an issue to interfere in China's internal affairs, then this problem will become more and more complicated,"" Foreign Ministry spokesman Shen Guofang told a regular news briefing.
""The Chinese government cannot accept... using the human rights question to put pressure on the Chinese government or to interfere in China's internal affairs,"" Shen said.
Repeated clashes over human rights and issues ranging from Taiwan to copyright piracy sent Sino-U.S. relations into a tailspin in 1995 and 1996, and ties have only recently started to recover with a series of high-level official meetings.
Differences in U.S. and Chinese views towards human rights were normal and could be resolved through talks, Shen said.
""But if you are confrontational then the basis for dialogue will be lost,"" Shen said in response to a question about China's reaction to comments by U.S. Secretary of State-designate Madeleine Albright which slammed Beijing's human rights record.
Albright said at her Senate confirmation hearing in Washington on Wednesday that the United States could co-sponsor a resolution criticising China's human rights record and present it before the United Nations Human Rights Commission when it meets in Geneva early this year.
Last April, China succeeded in quashing a U.S.-backed draft resolution at the commission expressing concern over continuing reports of Chinese violations of fundamental freedoms.
The human rights situation in China had not improved much since the forwarding of last year's resolution, Albright said.
But she said Washington's focus towards Beijing would be on ""Chinese integration, not isolation"" and that she still supported the separation of human rights issues from trade.
In 1995, U.S. President Bill Clinton delinked annual renewal of China's Most Favoured Nation trade benefits from Beijing's human rights record, a move hailed by Beijing.
Secretary of State Warren Christopher visited Beijing last November but made little public mention of human rights, in contrast to his 1994 trip that ended in disaster because of wrangling over the issue.
Christopher pledged not to allow Sino-U.S. ties to be derailed by any single issue.
Clinton met his Chinese counterpart Jiang Zemin at the Asia-Pacific Economic Cooperation summit in the Philippines last December, when the two leaders agreed to an exchange of state visits in 1997.
Washington has criticised Beijing for its imprisonment of political dissidents and for its heavy-handed rule in Tibet but China defends its human rights record by pointing to rising living standards and booming economic growth.
China jailed several prominent dissidents in 1996 as part of its obsession with stability coupled with the easing of foreign pressure on its human rights record, activists have said.
The official Xinhua news agency said meanwhile that China and the United States had agreed to hold another round of talks this month aimed at hammering out a new textile pact.
The bilateral pact had been scheduled to expire on December 31 last year but was extended until January 31 amid progress on renewing the 1994 accord. The talks will begin in Beijing on January 27.
",43
"Visiting Colombian Foreign Minister Maria Emma Mejia said on Monday she hoped to boost cooperation with Beijing to help both nations crack down on a flourishing narcotics trade.
Colombian officials said they hoped to sign an agreement with China that would increase information exchanges and strengthen police training in the fight against drugs.
""The Chinese were very clear that they very much wanted to seek cooperation in the matter of drugs,"" said Mejia, who is accompanying Colombian President Ernesto Samper on a three-day visit to China.
""We want to exchange knowledge in the field of fighting heroin trafficking,"" Mejia told reporters, adding that the rise of the heroin trade in Colombia -- infamous for its cocaine cartels -- was a relatively new development.
""Colombia knows very little about narcotics trafficking in Asia, and we have to know more, and China has to know more about narco-trafficking in South America, otherwise it will be very difficult to have a multilateral policy,"" Mejia said.
She did not say when she expected the proposed accord to be signed.
Samper told a news briefing Beijing had expressed support for Colombia's anti-drug efforts, but did not elaborate.
Beijing had expressed an interest in pursuing a policy not only of cracking down on drug traffickers but of preventing and treating drug addiction, Mejia said.
China's official Xinhua news agency quoted Chinese Foreign Minister Qian Qichen as urging major drug-consuming nations to bolster their efforts to reduce domestic drug use.
""Drug-consuming countries should also shoulder heavy responsibility because the great market demand for drugs would result in widespread drug production and trafficking,"" Qian was quoted as saying.
Colombia's top anti-drug policeman General Rosso Jose Serrano told the briefing he did not think Colombian and Chinese drug cartels were working together to distribute heroin throughout North America.
""The Chinese mafia is the most difficult to penetrate, but as far as we know, there is no connection between Colombian and Chinese (drug traffickers),"" said Serrano, who is widely credited with smashing Colombia's notorious Cali cocaine cartel.
A report by the U.S. Drug Enforcement Administration last month said Colombia had edged out southeast Asia's Golden Triangle region as the top supplier of high-grade heroin to the United States.
The report said 62 percent of all heroin confiscated in the United States came from Colombia.
China faces a growing problem with drug trafficking, much of it through the southwestern province of Yunnan which borders on the Golden Triangle drug production region that includes parts of Burma, Thailand and Laos.
China frequently executes people convicted of narcotics crimes and sentences many drug users to strict rehabilitation programmes.
",43
"China has sentenced two veteran democracy activists to hard labour for up to three years, a fellow dissident said on Saturday.
Authorities in Taiyuan in central China's Shanxi province sentenced Fu Guoyong to three years of re-education through labour, the dissident told Reuters by telephone.
Fellow activist Chen Ping, who had worked with Fu on pro-democracy tracts, had been sentenced to one year of labour reform, said the dissident who asked not to be identified.
""The reason was because they published articles abroad about democracy,"" said the dissident. ""They just wrote some articles. There really was no reason for this.""
Authorities had branded the essays counter-revolutionary, said a statement by the Information Centre of Human Rights and Democratic Movement in China.
Taiyuan police detained Fu, 29, in late July for what they said were illegal political activities.
Chen, 45, had been arrested in Taiyuan in August and was sentenced together with Fu, the source said, adding he did not know when the sentences had been passed.
Police in Taiyuan contacted by telephone declined to comment on the cases. Family members were not available.
Fu moved to Taiyuan in late June, complaining of repeated harassment by police in Hangzhou city in the eastern province of Zhejiang, where he had been living with his wife.
Fu previously served two years in a labour camp for his role in the student-led demonstrations in Beijing's Tiananmen Square that were crushed by the military with heavy loss of life on June 4, 1989.
Police detained Fu for more than a month in December 1995 after he, along with dissidents Wang Donghai and Chen Longde, wrote a letter calling for the release of Wei Jingsheng, widely regarded as the father of China's modern democracy movement.
Fu also joined in an appeal with Wang and Chen Longde to China's parliament before the 1996 anniversary of the bloody June 4 crackdown, demanding the release of those jailed for their involvement in the movement.
Fu and Chen Ping's sentences come amid a widening crackdown on dissent by Beijing. Most dissidents are already serving lengthy sentences in prisons or labour camps or have been forced into exile.
China drew international condemnation when a Beijing court sentenced former student leader Wang Dan to 11 years in prison in October for conspiring to subvert the government.
Beijing dismisses criticism of its human rights record as interference in its internal affairs.
A Chinese court last week sentenced dissident Zhang Zong'ai to five years in prison for counter-revolutionary incitement.
Three pro-democracy activists are currently standing trial on charges of counter-revolutionary propaganda and incitement in Hefei, capital of the central province of Anhui.
In the southern boomtown of Shenzhen that borders Hong Kong, two labour activists are standing trial for conspiring to subvert the government.
",43
"China's listed companies must work to increase transparency and improve asset valuation if the country's fledgling markets are to gain global prominence, a top U.S. securities official said in Beijing on Tuesday.
Arthur Levitt, chairman of the U.S. Securities and Exchange Commission, said he stressed in meetings with Chinese officials the need for frank disclosure of company data as a crucial step in boosting investor confidence in Chinese firms.
""I mentioned in every meeting over and over and over again the importance of transparency,"" Levitt told reporters.
""That's something that we can't emphasise enough: transparency, transparency, transparency,"" said Levitt, who is on a seven-day visit to China.
Officials in Chinese listed firms often saw the need for transparency but many were reluctant to disclose company data out of fears that such frankness would profit the competition, Levitt said.
Chinese public firms needed to think of shareholders as owners of the company rather than as impediments to progress, he said.
Levitt said he had urged the Chinese to swallow the bitter medicine of improved disclosure, effective regulation and cracking down on corruption to bolster investor confidence in what many businessmen were eyeing as a promising market.
""Their markets, just like every other market in the world, will be no better than public confidence is in that market,"" Levitt said.
Levitt said one of Beijing's most pressing tasks would be to draft a securities law that would serve as a guidepost for companies as well as regulatory agencies.
""The thing that business abhors more than anything else is uncertainty, or a lack of clarity,"" Levitt said.
The lacklustre performance of Chinese companies that had listed on the New York Stock Exchange reflected a lack of investor confidence in Chinese accounting methods and asset valuation systems, he said.
""The process of evaluating assets in China is an uncertain process that concerns many investors,"" Levitt said.
Many Chinese officials had been deeply disappointed by the slack overseas performance of Chinese firms, prompting a two-year pause in the process of nurturing of Chinese financial markets, he said.
""The Chinese over the past 12 to 18 months have been inner-directed, looking at the system, looking at the process and asking themselves what went wrong,"" he said, adding that reform had to continue.
""I tried to encourage everyone I talked to to stay the course, that the stakes were too high to turn around,"" Levitt said.
""This is a road that, once started on, there really is no turning back.""
",43
"Xujiachong village in central China's Hubei province is nestled in a lush, narrow valley dotted with whitewashed concrete houses, small cabbage patches and freshwater fish ponds.
Ruddy-cheeked children peer out of ill-lit doorways while farmers steer belching tractors along dirt roads lined with orange trees, their verdant branches heavy with the bright, tart fruit.
Xujiachong is much like any other village in China, except that it is scheduled to be wiped off the map by the end of next year.
The village of 2,480 people is just one of hundreds of towns and hamlets that will be flooded by the silt-laden waters of the Yangtze river when the mighty waterway is diverted in November 1997 as part of the giant Three Gorges dam project.
""The total number of people to be relocated under the Three Gorges project, those in submerged areas, is now 840,000,"" said Wang Jiazhu, deputy general manager of the China Yangtze Three Gorges Project Development Co that is building the mammoth dam.
""We are estimating there could be a million or 1.2 million at most, taking into account the population increase during the 17 years of construction,"" Wang said.
In Yichang county, site of the future dam, more than 12,300 people have been resettled from the sprawling construction site that flanks the broad, snaking river, said Wang Jiangyi, deputy director of the Yichang Resettlement Bureau.
Evacuation of the giant reservoir area -- to cover more than 600 square km (230 square miles) -- began in 1994 and will involve moving about 100,000 people from Yichang county alone, Wang Jiangyi said.
LEAVING ANCESTRAL HOMELANDS
The fates of hundreds of thousands of households in Hubei and neighbouring Sichuan province were sealed in 1992 when Beijing ended seven decades of debate to give the green light to start work on the gargantuan dam that is to harness the power of the world's third longest river.
Beijing hopes the project, to be completed in the year 2009, will help to power China's economic charge in the 21st century and bring an end to disastrous flooding that has claimed the lives of more than 300,000 people in this century alone.
Officials say they have run into opposition from many local residents unwilling to abandon their ancestral homes and traditional lifestyles.
""There are residents who aren't willing to move,"" said Wang Kaidong, village chief of Xujiachong, which is just two km (1.2 miles) from the dam site.
""It is understandable that they don't want to leave the homes their families have occupied for generations,"" she said.
IDEOLOGICAL WEAPONS AND CASH CARROTS
Communist Party officials have tried to combat anti-relocation sentiment by preaching traditional communist values of self-sacrifice while holding out cash and material incentives.
""The magic weapon of our party is ideological work,"" said Wang Kaidong. ""We talk face to face with residents about the resettlement policies and compensation standards.""
Of the project's estimated 204 billion yuan ($24.6 billion) cost, about 40 billion yuan has been earmarked to finance the resettlement, said He Gong, a deputy general manager of the Three Gorges Development Co.
Government work teams have fanned out through the countryside offering compensation to residents based on the size and quality of their houses and farms that will be committed to the watery mass grave.
Total compensation for each family ranges from 30,000 to 80,000 yuan and those being resettled to rural areas are to receive parcels of land to build new houses on, Wang Jiangyi of the resettlement bureau said.
Blocks of apartment buildings have sprung up to house those moving into urban areas to be employed in factories or tertiary industries, Wang Jiangyi said.
Relocated families will also enjoy preferential charges for electricity, water and road use and will be allowed to make two moving trips free of charge, Wang Jiangyi said.
If ethical campaigns and cash rewards failed to convince the stubborn to pack up, authorities could still resort to the force of law, Wang said.
""In the resettlement process, if there is any case of... disrupting the public order that prevents the process from proceeding smoothly...it will be dealt with in accordance with punitive public security regulations,"" he said.
($1 = 8.3 yuan)
",43
"To dam or not to dam the mighty Yangtze river has been a question that has teased China for much of this century.
Electrical engineer-turned-premier Li Peng finally took the decision to dam, and four years later officials charged with the giant project are confident neither funding shortfalls nor environmental activists will stand in their way.
Officials of the China Three Gorges Project Development Corp say the dam in the central province of Hubei faces a funding shortfall of one-sixth of its multi-billion dollar price tag.
But they vow to complete it even if foreign funding now being sought fails to materialise.
The price tag of the world's biggest water control project, harnessing the power of Asia's longest river, is expected to be at least 240 billion yuan ($29 billion), officials told reporters at a recent visit.
That however could rise as high as 300 billion yuan ($36 billion), depending on such variables as inflation and interest rates, they said.
Costs were estimated to be 90 billion yuan at 1993 levels while interest and inflation would add at least 150 billion yuan by the time the dam was completed in 2009 after 17 years of construction, said Three Gorges Corp vice-president Yuan Guolin.
""Our capital shortfall, as a proportion of the total funding needed, is about 20 percent,"" Yuan said.
The central government will directly pick up 50 percent of the projected minimum 240 billion yuan tab while loans from state banks would account for another 20 percent, said He Gong, deputy general manager for the Three Gorges Corp.
ABOUT 30 BILLION IN LOANS
Of this, the State Development Bank would provide about 30 billion yuan in loans while revenue allocated from the Gezhouba dam downstream on the Yangtze would bring in an additional 15-18 billion yuan, He said.
The project would start generating money itself when some of the dam's 26 turbines whir into life in 2003, financing about another 10 percent of the cost.
The dam will eventually fire out 84.7 million megawatt-hours of electricity a year, transmitting power to nearly every major city in China.
Asked how the company would make up a shortfall of at least 40 billion yuan, officials coupled rosy predictions about overseas bond issues and export credits with steely defiance against foreign jitters over the project.
""The overall trend is that we need to develop towards international channels,"" Yuan said. He hailed a deal with Canada for $30 million in export credits for the project's computer network.
The company was eyeing a long-delayed foreign bond issue in the near future and could look to a stock issue further down the road, said deputy general manager Wang Jiazhu.
""When we will issue bonds and stocks remains to be seen. When the time comes, we will make an announcement,"" Wang said.
EXIMBANK SHORT-SIGHTED, SAYS YUAN
Vice-president Yuan dismissed the U.S. Export-Import Bank's refusal to finance the dam because of environmental worries as short-sighted folly, saying the decision would only hurt U.S. firms and workers.
""We would welcome a change in attitude by the United States toward the Three Gorges,"" Yuan said. ""It would not only be good for the project, it would bring numerous benefits to American companies.""
The dam, which will create a 600-square km (230-square mile) reservoir, has drawn heavy fire from environmental and human rights groups abroad, who fear damage to the river ecology and fret over the resettlement of 1.2 million local residents.
Chief engineer Gan Weiyi vowed China would find the funding at home if cash failed to materialise from abroad.
""If you don't want to lend to me, I can overcome that,"" Gan said.
Faced with the job of moving 102.6 million cubic metres (3.6 trillion cubic feet) of soil and stone, the company has bought construction equipment from Caterpillar Inc of the United States, Japan's Komatsu Construction Co and other foreign firms.
""Our purchases of foreign equipment now total more than $100 million,"" vice-president Yuan said.
BIG PRIZE
The big prize will be landed in the middle of 1997.
It is then that China is to sign a 10 billion yuan contract with foreign suppliers for the 14 700-megawatt generators that will be part of the heart of the riparian behemoth.
Consortia involving Germany's Siemens, GE Canada, and Hitachi and Toshiba of Japan -- among others -- are expected to participate in the bidding, scheduled to open on December 18.
The numbers are on a giant scale. More than 27 million cubic metres (953 million cubic feet) of concrete will be poured into the dam, shiplocks and navigation channels. About 354,000 tonnes of rebar and nearly 281,000 tonnes of metal will be used.
To carry out the herculean task, China has mobilised tens of thousands of workers to build the project.
A steady stream of dumptrucks with tires twice as tall as a man rumble to and from the sprawling construction site. Mountains of sand, gravel and steel bars line the roads.
Proud officials voiced conviction that the decision taken after seven decades of vacillation was the correct one.
""We are confident we have the capability to finish the construction,"" He said.
($1 = 8.3 yuan)
",43
"A prominent exiled Chinese human rights activist has said his contacts with detained dissident Wang Dan do not justify the capital charge against the former student leader, who is expected to go on trial soon.
Wang Juntao, who now lives in the United States, has prepared written testimony rejecting charges that Wang Dan conspired with him to subvert the government, according to a U.S.-based human rights group.
""Wang Juntao has already ... prepared testimonial materials and turned them over to Wang Dan's relatives,"" said a statement from Human Rights in China received in Beijing on Thursday.
Wang Dan played a key role in pro-democracy demonstrations crushed by the army in 1989.
The charges against him included ""collaborating with Wang Juntao and acting as director of the 'China Research Centre' established by Wang Juntao in the United States with the aim of subverting the Chinese government"", the statement said.
Court officials have confirmed that Wang Dan, detained since May 1995, has been charged with plotting to overthrow the government -- a crime that carries a maximum penalty of death and a minimum of 10 years in prison.
Wang Juntao, condemned by Beijing as one of the ""black hands"" behind the student-led movement, was freed from prison on medical parole in 1994 and allowed to leave China for the United States.
He said his research centre was dedicated to studying the problems of China's modernisation drive and that Wang Dan had played but a nominal role in it.
""Wang Dan...acted as an honorary director and never published opinions in connection with the research centre's work and never participated in any of its activities,"" the statement quoted Wang Juntao as saying.
Other evidence against Wang Dan included taking part in home studies offered by a U.S. university and accepting donations and economic aid from overseas groups.
U.S.-based Chinese democracy activist Cheng Zhen said a group she headed had assisted Chinese student activists in enrolling in home study classes at foreign universities by helping them pay tuition and book fees but had no other dealings with them, the statement said.
""Wang Dan was helped in this way by them in selecting a correspondence course with the history department of the University of California, Berkeley,"" it quoted Cheng as saying.
The statement quoted Wang Dan's mother as saying her son's health had deteriorated while in confinement.
Family members could not be reached for comment.
Wang Dan's trial was expected to be held behind closed doors soon, relatives said earlier, adding that the family had not yet been advised of a trial date.
Wang Dan had already served four years in prison for counter-revolutionary crimes, or subversion, for his role in the 1989 demonstrations in Beijing which were crushed by the army with heavy loss of life.
He had been active since his parole in 1993, defying police harassment to join in a daring appeal to communist leaders for the release of all those still in prison for their part in the 1989 protests.
",43
"China issued an anti-corruption communique to the Communist Party on Thursday, warning members of the party that swept to power in 1949 on a platform of integrity not to exploit official power for personal profit.
The communique, issued by the ruling party's Central Commission for Discipline Inspection, also warned officials and the 57 million party members not to hold political views that differ from the party line.
Beijing had scored great successes in battling graft in 1996 but further efforts were needed to combat official corruption this year, said the communique, published by the People's Daily, mouthpiece of the ruling party. ""We must see with a clear head that the phenomenon of corruption still exists and in some places is spreading rapidly,"" the communique said.
""Some unhealthy tendencies still have not been effectively contained and officials in some places and departments still do not have a sufficient understanding of the seriousness of the anti-corruption drive,"" it said. The communique followed a speech on Wednesday by President Jiang Zemin, who has staked much of his political credibility on fighting graft and who said the anti-corruption battle was a struggle upon which the fate of the nation and party depended.
It reminded government officials that they were forbidden from exploiting their political clout to secure loans, goods or business contracts for their spouses or children.
Beijing would also punish officials in loss-making state-owned firms who used company funds for personal use or who caused huge business losses through mismanagement, it said.
Disciplinary watchdogs would maintain a vigilant eye for officials who failed to toe the party line and be good communists, it said.
""Officials at every level...must strictly observe political discipline and maintain agreement with the central government in politics, ideology and action,"" it said.
""Party members, leaders and officials must...be honest in performing their duties, be staunch in their faith in communism and diligently uphold communist values,"" it said.
Those who violated political discipline would be strictly punished, it said without elaborating.
Corruption, virtually unknown in China under the strict Stalinist rule of the late party Chairman Mao Zedong, who led the communists to power in 1949, has boomed during nearly two decades of market-oriented economic reform.
Disciplinary authorities punished more than 116,000 officials for exploiting their positions for personal gain in 1996, up 14.3 percent from the year before, discipline committee chairman Wei Jianxing said this week.
More than 72,000 officials had owned up to using their power to obtain better housing, with 74 percent handing over a total of 94 million yuan ($11.3 million) to pay for the housing.
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 loyalty with his high-profile anti-graft campaign.
While the president and party chief has won some credit from the netting of corrupt senior officials such as former Beijing party chief and Politburo member Chen Xitong, many Chinese say results of the corruption crackdown have been patchy at best.
",43
"China said on Tuesday the health of its 92-year-old paramount leader Deng Xiaoping was relatively good and had not changed dramatically.
""For an old man, he is doing relatively well,"" Chinese Foreign Ministry spokesman Shen Guofang told a news briefing when asked about Deng's health.
""There has been no big change,"" Shen said. He declined to comment further.
Deng, whose market-oriented policies helped transform China from a backward Stalinist state into one of the world's most dynamic economies, has not been seen in public since early 1994. In his last appearance he looked frail and faltering.
Speculation abounds about his health, ranging from rumours he was admitted to hospital in recent days to reports he remains at home though no longer mentally alert.
Deng has vowed to visit Hong Kong to witness the return of the British colony to Chinese rule at midnight on June 30 but a Beijing vice-mayor believed to be close to the Deng family said recently this would be difficult.
Deng oversaw the negotiations that led to 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 transfer of sovereignty.
He has spent his twilight years cloistered off from the public eye, creating opportunities for power-hungry, would-be heirs fighting for his title to use his name to strengthen their hand, analysts say.
China Central Television is broadcasting a 12-part documentary series about Deng's life that shows a vigourous leader portrayed against a background of golden clouds.
The man who launched China's economic reforms no longer holds public office but remains highly influential.
Deng's health has long been the subject of intense speculation both in China and elsewhere because his death is expected to trigger a power struggle among those eager to succeed him as the de facto emperor of the world's most populous nation.
Analysts have said the series was carefully crafted by those who would benefit most from polishing up Deng's image.
President Jiang Zemin is in line to succeed Deng as China's most powerful man but it is widely believed that Jiang still needs to shore up his position as the heir to Deng's political mantle.
Jiang, Deng's own anointed heir-apparent, will need to call on the clout of his sponsor to consolidate his position at a crucial party meeting later this year, analysts have said.
The television paean to Deng, who always openly shunned the personality cult surrounding Mao Zedong, has been seen as evidence of his waning control over the affairs of the government.
",43
"This month's Asia-Pacific Economic Cooperation (APEC) summit could see conflicting views between regional powers eager to boost free trade and a Chinese delegation more interested in soft loans, diplomats said.
While Pacific heavyweights such as the United States, Japan and Canada aimed to lower trade barriers between the region's markets, China was hoping to squeeze easy credit out of richer APEC members at the summit in the Philippines, they said.
""There's a fundamental tension between China on the one hand and most other APEC states on the other,"" said a Western diplomat in Beijing.
""Should (APEC) be directed toward the trade-investment liberalisation framework or should it be directed toward economic and technical cooperation?"" asked the diplomat.
Analysts say the Subic summit would also give Chinese president Jiang Zemin a key opportunity to put his personal seal on a recent upturn in cross-Pacific ties at the first Sino-U.S. presidential meeting since 1995.
While the forum would provide the Chinese delegation with a welcome venue for private talks with the United States -- and possibly rival Taiwan -- Beijing would be less keen on the summit's avowed free trade agenda, the diplomats said.
China feared throwing open its doors to foreign competitors could devastate China's struggling state sector, raising the spectre of social unrest, the Western diplomat said.
""There is a fundamental contradiction between the imperatives of China's domestic situation and the free trade agenda,"" he said.
Access to its potentially vast markets would be the juicy carrot China dangled in front of other APEC members in exchange for promises of soft loans and technical assistance, he said.
""China... is hinting that APEC members should make a 'down payment'... on economic and technical cooperation, i.e. fork out some money,"" he said.
Beijing could be looking for the creation of a special APEC fund to assist the region's developing countries, he said.
The economic summit would also provide China's Jiang with a rare chance to rub shoulders with other world leaders and to boost the recent warming in Sino-U.S. ties long battered by disputes over trade, human rights and arms proliferation.
""The Chinese like to talk about the 'APEC style'...you shelve sensitive agendas and sensitive questions and you talk about them behind closed doors,"" the diplomat said.
Beijing could also use the meeting to quietly resume talks with its island arch-foe Taiwan, he said.
""It's an ideal opportunity for them to get together in circumstances where they've got a fairly good chance of...keeping news of it hush-hush,"" he said.
Other analysts said there was little chance of backroom talks between Beijing and Taipei officials because China was unlikely to soften its stance towards the island, which it has viewed as a rebel province since the end of civil war in 1949.
""I don't expect any breakthrough in Taiwan-China relations at the APEC meeting because the two sides set their own conditions, and very different ones, for resuming talks,"" said Chiu Chao-ling, a research fellow at Taiwan's Academia Sinica.
While other APEC members send heads of state to attend the forum, Taiwan, at the insistence of Beijing, has been allowed to send only low-ranking officials to lead its delegation.
Taipei wanted to crack open its diplomatic isolation at this year's summit by sending President Lee Teng-hui or vice-president Lien Chan, but host Manila rejected the move.
""It looks like Taiwan puts too much focus on its APEC representative, but not on what it can do as an APEC member,"" said Taiwan's Chiu. ""We should play a more active role instead of asking only who can go to the meeting.""
",43
"China, stronghold of table tennis and kung fu, is trying its hand at professional basketball with the start on Saturday of a new league using American coaches and players.
The China New Basketball Alliance was set up earlier this year by the country's State Sports Commission along with Spectrum, a Hong Kong-based sports promotion company. 
The new league aims to offer an alternative to the existing China Basketball Association, which is made up entirely of Chinese players.
""One league is the local, provincial teams and one is definitely a professional league with foreign players and different rules,"" said Spectrum chief operating officer Andy Jay.
The alliance will use National Basketball Association (NBA) rules and generate all revenue through ticket sales and television advertising.
Each of the eight teams has hired four players and a head coach from the United States, but only two American players from each team will be allowed on the court at any one time.
The Americans, recruited from colleges or the ranks of former NBA players, have been in China for weeks, training and learning to work with their new team mates.
""The only thing is the language barrier -- once I learn some Chinese I think we will have a lot more fun,"" Beijing Lions player Tyrone Doleman said.
The U.S. coaches use translators on the courts to help render their brusque and lingo-filled commands into Chinese.
""You got some of them that got no clue as to what's going on as far as what I'm telling them,"" said Beijing Lions coach Joe Weakley.
China's national team were eighth in the Atlanta Olypmics, their best-ever showing.
The 18-week season begins in Beijing on Saturday with a match between the Beijing Lions and Shanghai Nanyang.
",43
"China confirmed on Tuesday that veteran dissident Wang Xizhe had fled the country, accused him of crossing the border illegally and said Chinese authorities were pursuing those who helped him.
""Concerning the question of Wang Xizhe, this is a case of illegally and secretly crossing the border,"" Foreign Ministry spokesman Shen Guofang told a regular news briefing.
""The judicial authorities are currently pursuing the legal responsibilities of Wang Xizhe and the plotters,"" Shen said, apparently implying that Wang had help when he fled to Hong Kong last week.
Wang, 46, one of China's most vocal advocates of democracy for more than two decades, escaped to Hong Kong just days after a fellow activist in Beijing was condemned to a labour camp for three years.
""We hope that countries concerned will not have the slightest ambiguity in cracking down on illegal and secret immigration,"" Shen said.
Wang has been missing from his home in the southern Chinese province of Guangdong that abuts Hong Kong since fellow pro-democracy activist Liu Xiaobo was arrested in Beijing last Tuesday and ordered to serve three years in a labour camp.
He is reported to be seeking asylum in the United States but Shen said China had received no official confirmation that Wang had sought refuge there.
""We have not yet seen any action by the United States,"" Shen said, adding that Beijing would watch Wang's case closely.
""The governments of some countries, including the United States, should carry out what they have always stressed, namely their stand to crack down on illegal immigration,"" he said.
Wang and Liu penned a daring statement last month accusing the ruling Communist Party of reneging on a 1945 pledge to grant freedom of the press and to allow people to form political parties and stage demonstrations.
The two urged the impeachment of Communist Party chief Jiang Zemin for violating the constitution by saying the army should answer only to the party rather than to the state.
Wang would be the second Chinese dissident to flee to the United States via Hong Kong this year. Activist Liu Gang fled to Hong Kong last May and has since found asylum in the United States.
Wang was first jailed in 1974 on charges of sedition for putting up a wall poster advocating democracy in China. He was paroled in 1993 after serving 12 years of a 14-year sentence and stripped of his civil rights for five years.
The report of Wang's flight abroad comes amid a renewed crackdown on China's tiny, struggling democracy movement.
Liu Gang, who spent six years in prison as a leader of the 1989 student-led demonstrations for more democracy, fled to the United States last May after months of police harassment at his home in the northeastern province of Liaoning.
Detained dissident and former leader of the 1989 protests Wang Dan faces the capital charge in Beijing of plotting to subvert the government based on evidence such as writings critical of the state and accepting funds from abroad.
Wang Dan, detained since May 1995, has been charged with plotting to overthrow the government -- a crime that carries a maximum penalty of death and a minimum of 10 years in prison.
Wang Dan had defied persistent police surveillance and harassment to take part in a bold appeal in May 1995 to Beijing for the release of all those still in prison for their part in the 1989 student protests.
",43
"China on Thursday warned the United States to stop selling arms to Taiwan, saying the issue could ruin relations despite the friendly smiles shown on Defence Minister Chi Haotian's current U.S. visit.
Washington's arms sales to Beijing's island rival would destroy the warming Sino-U.S. relationship that was vital for maintaining regional and world peace, the official China Daily said in a commentary.
""To continue to sell weapons to Taiwan will upset Washington's apple cart and eventually ruin Sino-U.S. relations,"" the commentary said.
Although Chi Haotian's long-delayed visit to the United States could help renew bilateral ties, Washington's policy towards Taiwan would continue to be a sore point in relations between the two Pacific giants, the commentary said.
""A friendly smile cannot ignore or wipe away the underlying embarrassment that exists bewteen the two countries,"" it said.
""The ties can be broken if the U.S. continues to sell advanced weapons and military equipment to Taiwan.""
Chi is on a two-week fence-mending visit that was postponed twice by wrangling over Taiwan.
Taiwan's procurement of U.S. weapons would only undermine peaceful reunification with mainland China by fanning sentiment for independence on the island, the commentary said.
""The sale of weapons to Taiwan will whip up whatever dreams of independence some people are harbouring on the island,"" it said, adding that Beijing would seek reunification at any cost.
""The Chinese government will not stand idly by and ignore any challenge to that goal,"" the commentary said, echoing a blunt speech Chi delivered to U.S. military officers on Tuesday.
Chi held talks with President Bill Clinton and Defence Secretary William Perry on Monday, pointedly refusing to renounce Beijing's right to retake Taiwan by force if necessary.
Beijing and Taipei split at the end of the Chinese civil war in 1949 when the Nationalist army fled into exile on the island off the mainland's southeastern coast.
Sino-U.S. relations were strained in March when Washington sent two aircraft carriers to waters near Taiwan in the wake of missile tests and military exercises held by Beijing to intimidate the island in the run-up to its first direct presidential elections.
Washington recognises communist Beijing as the sole legal representative of all China but maintains the right to arm and even defend the island that Beijing regards as a renegade province.
Taiwan's Defence Minister Chiang Chung-ling said on Wednesday he was not worried that the thaw in U.S.-China military ties would harm the island's ability to procure advanced weapons from the United States.
Two days before Chi arrived in the United States, the U.S. Army announced it had awarded a $63 million contract to a Boeing Co unit to produce 74 high-tech Avenger anti-aircraft missile systems for Taiwan.
Taiwan has also been allowed to buy Patriot anti-missile missile batteries from U.S. defence giant Raytheon Co.
The Avengers and Patriots are to enter service by 1999, boosting the island's defences against China's People's Liberation Army.
",43
"China defended on Wednesday a proposal to roll back civil liberties in Hong Kong after the British colony reverts to Chinese rule this year, saying all rights and freedoms had limits.
Recent British reforms to Hong Kong's civil liberties laws had violated the Basic Law, the future mini-constitution of Hong Kong promulgated by Beijing, said Zhou Bingxin, an official with the Hong Kong and Macau Affairs Office under the State Council, China's cabinet.
""Hong Kong's original laws are in line with international human rights conventions and there is no need to unilaterally draft more laws,"" Zhou told a news conference.
Zhou's comments came amid criticism from Britain and the United States over a plan by the China-appointed body in charge of the handover to roll back laws protecting some civil rights in the colony.
A panel of the Preparatory Committee earlier this month listed 25 laws and articles, some the product of recent reforms and others the trappings of the colonial era, for repeal or amendment when Beijing resumes control of the territory.
The 1990 Basic Law and a 1984 Sino-British handover treaty promises Hong Kong's 6.3 million people a high degree of autonomy and permits them to retain their freewheeling capitalist system.
Zhou said the right to hold mass public gatherings and demonstrations in Hong Kong would be guaranteed by law after the handover on midnight on June 30 but said all countries had legal restrictions on such activities.
""No rights or freedoms are absolute, all of them have limits,"" Zhou said.
""For example, everyone has the freedom of speech, but must respect the rights and life of others and guarantee the safety of the state and public order,"" Zhou said.
""Limiting some rights and freedoms of the minority is to guarantee more rights and freedoms for the majority,"" Zhou said.
Britain last week voiced concern to China over the proposed changes as legally unsound and has protested against plans to scrap Hong Kong's elected legislature and replace it with a provisional body when it takes over.
U.S. President Bill Clinton said on Tuesday that Hong Kong's value to China might fall if liberties in the colony were lost after it returned to Beijing's rule.
Zhou dismissed international concerns over Hong Kong's post-handover liberties, saying he was optimistic about the colony's future.
""The Basic Law...explicitly states that Hong Kong residents enjoy the freedoms of speech, the press, publication and the freedoms of forming organisations, assembly and demonstration,"" Zhou said.
The 60-member provisional legislature held its first formal meeting last week in Shenzhen, across the border from Hong Kong, to avoid legal challenges to its legitimacy in the territory, where opponents have branded it as illegal.
Britain has challenged China to allow the world court in The Hague to rule on whether the existence of the provisional legislature violates the treaty governing the handover.
Beijing on Tuesday dismissed as irresponsible a proposal by U.S. Foreign Relations Committee Chairman Jesse Helms to bar members of Hong Kong's provisional legislature from visiting the United States.
",43
"A U.S. forensics team has arrived in China to recover the remains of crew members from a crashed World War Two bomber recently discovered in south-western China, U.S. officials said on Sunday.
The team from the U.S. Department of Defence would focus on recovering and identifying the remains of the doomed bomber's crew, a U.S. official told reporters at a briefing.
""Our purpose is to recover all human remains and make the fullest possible identification of the 10 crew members on that plane,"" said the official, who asked not to be identified.
Officials of south-western China's Guangxi region would hand over the remains of the 10 men, aged from 19 to 26, who died when the B-24 bomber slammed into a cliff near scenic Guilin on August 31, 1944 while returning from a bombing raid on Japanese ships around Taiwan, the official said.
Local villagers looking for wild mountain herbs had stumbled across the scattered remnants of the bomber in a remote ravine last October, he said.
U.S. officials first learned of the wreckage when Chinese President Jiang Zemin handed over a video and photographs of the crash site to U.S. President Bill Clinton when the two met in Manila last November at the summit of the Asia-Pacific Economic Cooperation forum.
Chinese Defence Minister Chi Haotian gave U.S. Secretary of Defence William Perry two dogtags recovered from the site during a meeting in Washington last month.
China's claim that the wreckage was found last October appeared to be true, the official said.
""There's no indication that it is anything other than what they said it was,"" the official said, adding that the Chinese government had given them full cooperation in arranging the repatriation of the remains.
Some analysts have said Beijing may have known of the wreck for some time but has made it public only at a time when it is eager to improve strained ties with Washington.
""The Chinese see this as a humanitarian issue,"" the official said.
U.S. forces lost contact with the bomber after it was forced to change course to Guilin because of a Japanese assault against its original base in Liuzhou, also in Guangxi region, he said.
The cause of the crash was still unknown and the forensic team would not seek to discover what brought the plane down on this trip, he said.
Video footage of the site seen by reporters showed five sets of dog tags, eight pistols, machineguns and other pieces of equipment recovered from the destroyed aircraft.
Chinese authorities had sealed off the crash site and the video and photographs suggested the wreckage had been untouched for more than 52 years, the official said.
""The recovery of small items, usually the first things to go, would indicate there has been no scavenging,"" he said.
The remains would be flown back to Hawaii next Friday for analysis and identification, he said, adding that it could take weeks to years to identify the remains.
U.S. officials had made contact with representatives of all 10 families including at least one son, he said.
A U.S. team trekked to a Himalayan site in remote Tibet in 1994 to recover remains from another U.S. aircraft that crashed in 1945, another U.S. official said.
From 500-1,000 U.S. airmen remained unaccounted for after disappearing during World War Two flights over China, where U.S. aviators for years supported attempts by the then Nationalist government to resist Japanese invaders.
",43
"China's defence sector and state-owned heavy industries are the country's biggest loss-makers but reform of the lumbering state sector is proceeding at a snail's pace, analysts said on Friday.
More than 45 percent of China's 68,800 state industrial firms posted losses from January to September, a rise of 17.6 percent from the same period last year, according to the latest data from the State Statistical Bureau.
""Those most in need of help would be the military industries and traditional industries,"" said Zheng Haihang, a professor of industrial economics at the Chinese Academy of Social Sciences.
Traditional industries included the coal and oil sectors as well as heavy industry, Zheng said by telephone.
""To put it simply, it's mostly these traditional industries, which have a very backward structure,"" Zheng said of the state sector's mounting losses.
Many of China's state-run enterprises are overstaffed and unable to compete in domestic or overseas markets. They also carry the heavy burden of providing cradle-to-grave welfare services for their employees.
The combined losses of state firms reached 65.12 billion yuan ($7.8 billion) during the first nine months of the year, a rise of 45.7 percent from a year ago, official figures show.
Compounding the problem is interest on unpaid debts -- a substantial burden even after two interest rate cuts this year.
""The debt burden of state-owned enterprises is very heavy, so of course this affects their profitability,"" Zheng said.
The January-September net profits of China's state industries fell to 11.28 billion yuan, down 75.8 percent from the same period last year, the statistics show.
Reform of defence industries -- many based in remote and backward inland regions and fitted with ageing technology -- had proceeded slowly, the economist said.
""Military industries are trying to transform into civilian industries, but the transition is extremely difficult -- there's no capital,"" he said.
Officials have said more than 200 state firms have been declared insolvent to date but Beijing has been wary of pushing ahead with bankruptcies.
Beijing fears that reform of state enterprises will lead to mass unemployment and eventually spark social unrest, said one Western analyst reached by telephone.
""That's one major reason why reform is going so slowly,"" said the analyst, who declined to be identified.
China's trade unions had set up a special fund this year to help workers in ailing state firms, the China Daily newspaper said on Friday.
""The relief fund...is designed to help employees from money-losing state-owned enterprises maintain decent living standards,"" the newspaper said.
Unions had raised 1.2 billion yuan so far this year to help about seven million impoverished workers in state enterprises and disaster-stricken areas, it said.
($1 = 8.3 yuan)
",43
"The Communist Party chief in Tibet has vowed to boost patriotic education in the Himalayan region to battle foreign forces hostile to China and the influence of the exiled spiritual leader, the Dalai Lama.
Patriotic education would be an important factor in battling hostile Western forces that sought to create chaos in Tibet, the Tibet Daily said in an edition seen in Beijing on Thursday.
""Unflaggingly carrying out patriotic education...and opposing the ideologicial infiltration of hostile Western forces and the Dalai Lama clique is an arduous and prominent task,"" the November 12 edition of the newspaper said, quoting party secretary Chen Kuiyuan.
Combatting the influence of Beijing's chief rival for Tibetan loyalties, the Dalai Lama, was a pressing task for the restive region, Chen said.
Chen accused Western media of spreading the Dalai Lama's plots to split Tibet from China.
""The struggle against 'westernisation' and 'splitting up' is present at every moment and will be present for a long time to come,"" he said.
Beijing suspects the West is playing the Tibet card to weaken, divide and contain China.
Ideological education was needed to fight religious thinking and separatist ideas that had penetrated Tibetan schools and threatened to gain control of the region's youth, Chen said.
""Teaching cadres, the masses and broad numbers of youth to passionately love the motherland and passionately love socialism is the primary task of ideological construction,"" Chen said.
Chen's speech appeared a day after the newspaper called for tighter controls on religion in Tibet and vowed to crack down on pro-independence monks and nuns.
The Dalai Lama, who fled his Himalayan homeland in 1959 after a failed uprising against communist rule, had draped himself in the cloak of religion to further his splittist aims, Chen said.
The Dalai Lama, widely revered in his homeland as a god-king, won the 1989 Nobel Peace Prize for his non-violent struggle for autonomy for Tibet.
Chen said temples would be the battlefields in the fight against the Dalai Lama. He did not elaborate.
Beijing has repeatedly cracked down on monks and nuns in the deeply devout Buddhist region and accused the clergy of playing a major role in an underground Tibetan campaign against communist rule.
Tibet has been rocked by anti-Chinese protests by monks and nuns since the 1980s. Communist troops marched into Tibet in 1950.
The London-based watchdog group Tibet Information Network reported earlier this week that a jailed Tibetan nun had had her sentence doubled to 18 years for defying Beijing's choice of the reincarnation of the region's second holiest monk.
The party boss also warned that superstitious beliefs had made a recent comeback in the region because the Dalai Lama had used religion to drug the people.
Ugly religious practices had appeared again in wedding and funeral ceremonies and other aspects of social life, Chen said.
Religion had even taken root among some government officials and threatened to hinder the economic development of the backward and remote region, Chen said.
""These negative ideas and actions block the spread of science and technology and hinder the development of productive forces,"" he said.
",43
"China's top graft-buster on Monday lauded the country's success in battling corruption in 1996 but urged greater efforts this year to fight abuses of power by government officials.
Vigilant residents and rules requiring officials to report their incomes had helped uncover hundreds of thousands of graft cases in 1996, Xinhua news agency quoted Wei Jianxing, chairman of the Communist Party's Central Disciplinary Inspection Committee, as saying.
Authorities had also cracked several cases involving major officials such as Tie Ying, a member of the standing committee of the Beijing Municipal People's Congress, Wei told a meeting of the committee in Beijing that opened on Monday.
Several officials were dismissed during the investigation of those cases, Wei said but gave no further details.
More work was needed to fight corruption in 1997, Wei said.
""While affirming the achievements of 1996 we must address the serious situation and problems facing the anti-corruption drive,"" Wei said.
President and Communist Party chief Jiang Zemin launched a crackdown on corruption in 1995, saying that graft was a virus that threatened to topple the party.
Wei said China should place priority on fighting random and illegal fees on public roads, students in primary and middle schools and on farmers.
""The leaders and cadres of some localities and departments still do not have sufficient understanding of the seriousness and importance of the anti-corruption struggle,"" he said.
The party should step up internal scrutiny and encourage supervision of officials by the public, he said.
Residents made more than 1.45 million telephone calls to anti-graft hotlines in January-November last year, 16.8 percent more than the same period in 1995, he said.
The calls had resulted in more than 135,000 cases, including 5,643 involving officials at the county level or above, he said. The total number of cases in the period had risen 10.9 percent from the same time in 1995.
Disciplinary authorities had punished more than 116,000 people, up 14.3 percent from the year before. Of those, 3,695 were from the county level or above while 321 were provincial level officials, he said.
Investigators had found more than 21,000 cars used by party or government officials that exceeded standards set for officials, he said.
More than 72,000 officials had admitted 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.
Some 85,000 officials, 95 percent of whom ranked above the county level, had handed over cash and gifts worth more than 51 million yuan ($6.1 million), he said.
Government agencies and state-owned enterprises had reduced entertainment expenses by 1.6 billion yuan ($193 million) after being forced to make full accountings of such items, he said.
""The use of public funds to engage in the unhealthy trend of 'eat, drink and be merry' has been contained somewhat,"" he said.
($1 = 8.3 yuan)
",43
"China is singing the praises of paramount leader Deng Xiaoping in a primetime television series but the paean to the ageing patriarch is getting mixed reviews from the man in the street.
Beijing residents viewed the first few episodes of the 12-part documentary on the 92-year-old leader with a mixture of adulation, scepticism and indifference.
""I think it's great. I've seen all of the episodes so far and I'm going to watch the rest, too,"" said a 35-year-old journalist on Sunday.
""Deng should be honoured for China's economic development,"" he told Reuters. ""The show is just great.""
Deng, whose pragmatic policies helped transform China from a backward Stalinist state into an economic powerhouse, has not been seen in public in nearly two years. In his last appearance he looked frail and faltering.
Speculation abounds about his health, ranging from rumours he was admitted to hospital in recent days to reports he remains at home with little change in health but with fading lucidity.
But he has been lionised in the television series.
Analysts have said the documentary would help define Deng's legacy to the current party leadership and set the tone for a crucial Communist Party congress due later this year.
Saturday's episode dealt with the period just after the 1949 Communist revolution and strove to show how Deng began forming his market-oriented economic policies.
While the television series has so far avoided measuring Deng's more open policies against the disastrous radicalism of revolutionary leader Mao Zedong, the contrast was not lost on some viewers.
""Mao liberated the country but he made mistakes like the Cultural Revolution,"" said the journalist in a reference to the decade of ultra-leftism that Mao inspired in 1966.
Some viewers said the programme was carefully crafted by China's propaganda tsars and may not have given the whole story.
""Of course they have to censor a few things,"" said one 27-year-old musician who declined to be identified.
The series has not mentioned Deng's second wife who left him for another Communist official in 1932 when he fell from political grace for the first of three times in his long career.
But many people said they had not watched any of the episodes, while others who saw it were less than enthusiastic.
""I saw some of it but there were too many commercials,"" said a middle-aged woman who was selling peanuts and sunflower seeds at a roadside market.
A soldier who was sweeping snow from a Beijing street, asked for his thoughts on the man responsible for China's opening up to the outside world, said; ""I don't know anything about that. And why do you ask?""
",43
"China on Wednesday handed over to U.S. military officers the remains of U.S. airmen who died 52 years ago when their bomber crashed into a remote southwestern Chinese mountain during World War Two.
""No matter where we must go or how much time it takes, America does not forget its warriors and we will endeavour to bring each and every one home,"" said Alan Liotta, deputy director of the MIA/POW (Missing In Action/Prisoner of War) office under the Department of Defence.
A senior Chinese military officer handed over two wooden chests containing remains and a third filled with personal effects to uniformed U.S. officers in a brief ceremony in the southwestern Guangxi region.
Four U.S. soldiers in full military uniform took the boxes, exchanged salutes with the Chinese officer and placed a folded U.S. flag on each of the three boxes. A formal ceremony is to be held in Beijing on Friday.
""Fifty years ago these brave young men scattered their blood over this beautiful region,"" said Liang Ziwei, director of foreign affairs in the town of Xingan.
A six-man forensic team from the U.S. Department of Defence clawed its way up the steep, slippery face of Maoer mountain on Tuesday to inspect the crash site and found human remains and parts of an American bomber.
The officials said findings confirmed information about the fatal crash that occurred on August 31, 1944. The human remains would be taken back to the United States for identification.
Local residents searching for wild herbs discovered the crash site last October. The B-24 bomber with its 10-man crew never returned from a raid on Japanese ships around Taiwan.
""I like the idea... that even if it is 52 years later that we discovered the remains that we make the effort to bring them back and show the honour and respect they deserve,"" U.S. Lieutenant Colonel Paul Phillips said after the ceremony.
People's Liberation Army Colonel Fu Jianping voiced China's gratitude for U.S. help in fighting Japan in World War Two.
""As a military man, I have a great respect for their spirit, especially the airmen who met with disaster here,"" he told Reuters.
U.S. officials first learned of the find when Chinese President Jiang Zemin handed over a video and photographs of the crash site to President Bill Clinton when the two met in Manila last November at the Asia-Pacific Economic Cooperation forum.
Jiang revealed the find at a time when Sino-U.S. ties, which plunged early last year, were recovering significantly.
""This demonstrates a spirit of cooperation and a longing for future peace and renewed relationships,"" U.S. Major Mark Keene said after the ceremony.
Chinese Defence Minister Chi Haotian gave U.S. Secretary of Defence William Perry two dogtags recovered from the site during a meeting in Washington last month.
Journalists who made the trek to the site saw a pile of charred and twisted metal wedged into a narrow crevasse on the mountain side. Higher up the slope was a chunk of the plane's fuselage along with part of an engine, also wedged into rock.
U.S. officials said they had made contact with all 10 families of the crewmen aboard the plane. They said the site appeared to have been untouched for more than half a century.
",43
"Jailed Chinese dissident Wang Dan is suffering from severe throat and back problems in a cold northeast China prison that does not have the facilities to treat him, his mother said on Friday.
Wang, who is serving an 11-year sentence for plotting to overthrow the government, was suffering from throat inflammation, back ailments and a prostate problem, his mother said after visiting the Jinzhou prison in Liaoning province.
""According to what one doctor said, just one look at his throat infection was enough to know it is very serious,"" his mother, Wang Lingyun, said by telephone.
The mother quoted Wang as saying prison authorities had called in outside medical specialists to examine him.
Doctors told the 27-year-old former student leader that the prison did not have the facilities to treat him and his condition could deteriorate with the onset of winter, she said.
""It appears they have no way to cure his sickness there,"" she said. ""The place he's in is pretty cold and very dry and not very suitable for people with throat infections.""
Wang Lingyun said the family would continue to petition the courts to review her son's case and that she was looking into the possibility of getting him released on medical parole.
""The law gives us this right, and if we have this right, we want to use it,"" she said of the petitions.
Such petitions are symbolic gestures and would not involve any court hearings.
""As for medical parole, I'm still looking up the relevant laws,"" she said.
A Chinese court last week took 10 minutes to reject Wang's appeal and upheld his prison sentence for subversion for publishing articles in foreign publications and receiving funds from hostile overseas organisations.
China earlier this month released leading dissident Chen Ziming from prison to allow him to receive medical treatment.
Wang Lingyun said her son, dressed in prison clothes, had appeared in good spirits and said he was being treated well.
""He said...they had put him in a small compound and he can go outside and move around whenever he wants,"" she said.
Wang Lingyun said prison authorities had handed over to her son a stack of books she had brought him.
""They gave him a bookshelf -- something they've never done before -- and a desk,"" she said. ""You can say he's getting relatively special treatment.""
Wang, a former history major at Beijing University, has already served four years in prison for his role in student demonstrations for democracy that were crushed by the army in June 1989 with heavy loss of life.
The jailing of Wang was the latest in a series of crushing blows to China's struggling democracy movement. Most dissidents have been forced into exile or are serving long sentences in prison or labour camps.
",43
"Chinese President Jiang Zemin on Thursday used the 60th anniversary of a communist military ordeal to try to strengthen his grip on the army by exhorting soldiers to toe the party line.
Western diplomats have said that whether Jiang will be able to fill the shoes of his mentor, paramount leader Deng Xiaoping, now 92 and in fragile health, depends to a large extent on his ability to win the military to his side.
""The Long March victory fully illustrates that the party's absolute leadership over the army is...the core and spirit of our army's fine tradition,"" Jiang said in reference to the communist army's epic, 9,650-km (6,000 mile) trek across the mountains of China in 1934-1936.
""Every comrade in the army must firmly note this basic principle and at any time and under any circumstances must not waver, even in the slightest,"" the Xinhua news agency quoted Jiang as saying in a speech to army leaders and veterans.
Officers and soldiers should heed the direction of communist rulers and strive to enforce the party line, Jiang advised his audience of mostly ageing People's Liberation Army (PLA) veterans.
The PLA owed its survival of the gruelling journey as well as its subsequent victory over the Nationalist forces in 1949 to the firm leadership of the Communist Party, Jiang said.
Jiang exhorted the army to be ""forever be loyal to the party, loyal to socialism, loyal to the motherland and loyal to the people"".
In a rare deviation from his usual dark, western-style suit and red tie, Jiang sent the army a visual signal by donning a military green Mao suit during his address to the military elders that was broadcast on state television.
Other party and army leaders used the occasion to voice their support for Jiang, who already holds the three most powerful jobs in China -- state president, Communist Party chief and head of the powerful Central Military Commission -- but has yet to accumulate full power as Deng's anointed successor.
Vice-chairman of the Central Military Commission Liu Huaqing urged the military to unite under the banner of Jiang as leader of the party.
""We must...uphold the party's basic theory and basic line and resolutely protect the collective authority of the third generation of leaders with Comrade Jiang Zemin as the core,"" Liu said.
Western analysts have said Jiang, who has no military experience and is not a veteran of the Long March that honed most of China's previous top leaders, still needs to shore up his position with the army after Deng's death.
Jiang, fearful that two decades of economic reform has undermined the communist's grip on power, has made repeated calls for officials to be politically correct and toe the party line.
Two prominent Chinese dissidents recently penned a bold statement calling for Jiang's impeachment for violating the constitution by saying the army should be under control of the party instead of the state.
One of the authors, Liu Xiaobo, was detained last week and sentenced to three years in a labour camp. Co-author Wang Xizhe has since fled to the United States.
",43
"China's inefficient coal sector needs foreign funds and technology to modernise but must do more to create a better investment environment, industry officials and foreign businessmen said on Tuesday.
""There are opportunities for literally billions of dollars in coal investments here,"" said David Klingner, group executive of Australian mining group CRA Ltd.
Development of the sector's small and inefficient mines and antiquated power plants would be vital for China to meet ambitious production goals and sustain economic growth in the next century, Klingner told an energy conference in Beijing.
""The government is coming to realise that a way to ensure that the energy resources for future development are available is by getting foreign companies in with their expertise and capital capacity,"" Klingner said.
China relies on coal to meet about 75 percent of its energy needs and production accounted for about one-third of world output, Klingner said.
However, Beijing needed to create a sound investment environment to woo foreign cash and technology to the backward sector, said Rong Geng, director of the coal and oil department of China's State Development Bank.
""The coal industry... is characterised by long periods of construction, huge demands for funds, long repayment periods, low profits and certain risks,"" Rong said.
About 10 percent of funding for large and medium-scale coal projects came from overseas, Rong said, adding that his bank would try to raise more foreign capital for coal projects in China.
""We need to foster a sound investment environment for foreign investors so as to enhance their confidence,"" Rong told the conference.
Klingner said Beijing had made large strides in opening its doors to the once-sensitive power sector but foreign firms would require stronger legal guarantees before taking the plunge into the Chinese market.
""Foreign companies see the regulatory framework for mining investments, especially insofar as it relates to resources title, as critical to the success of any long-term commercial venture,"" he said.
Better risk assessment, long-term contracts and assurances of continued profits are also vital to entice foreign firms to China's coal sector, he said.
""The international financial community will want these issues settled prior to the funding of large-scale mining projects,"" he said.
China, with more than 80,000 small-scale mines, needed to form large-scale production to improve efficiency and cut down on waste and pollution, he said, adding that streamlining was now being balanced against the politically-charged concerns of mass unemployment.
Large-scale mining could also greatly reduce China's high rate of mining deaths and accidents, he said. About 10,000 workers are killed in China's mines every year.
China has said it would open at least 300 coal projects to foreign investors with priority to foreign investment in pit-head power plants, coal transport facilities and coal-bed methane. It has not said whether investors would be allowed to export output.
",43
"China said on Wednesday it would empower Hong Kong's courts to put on trial off-duty Chinese soldiers after Beijing resumes control over the British colony in 1997.
The standing committee of the National People's Congress (parliament), which is in session in Beijing, was expected to pass a law spelling out how to handle criminal or civil cases involving troops to be garrisoned in Hong Kong, the official Xinhua news agency said.
""Crimes committed by off-duty personnel... will be handled by the courts of the Hong Kong SAR (Special Adminstrative Region),"" the agency said.
Criminal cases involving on-duty soldiers would be handled by military courts, it said.
Civil rights offences committed by off-duty members of the Chinese garrison, which will be responsible for Hong Kong's security after the colony returns to Beijing's rule on July 1, 1997, would be dealt with by Hong Kong courts, it said.
Civil rights offences committed by soldiers while on duty would be referred to China's Supreme People's Court, the nation's highest judicial body, it said.
Chinese lawmakers had used British army practices in Hong Kong as a reference in drafting the measures, Xinhua quoted Fu Quanyou, general chief of staff of China's People's Liberation Army (PLA), as saying.
Defence operations of the PLA would not be subject to Hong Kong courts, Xinhua said but did not elaborate.
""Troops stationed in Hong Kong will notify the Hong Kong SAR government in advance of any military drills and exercises to be conducted that involve the public interest,"" it said.
The Hong Kong government said in a statement it was ""not able to provide a detailed response to the garrison law just relying on the reports"".
""We hope that we and the people of Hong Kong can have an early opportunity to study the draft law itself,"" it added.
Xinhua said Hong Kong would be required to provide facilities for the carrying out of defence duties and would have to consult the military when drafting policies that concern them.
Military personnel would be forbidden from participating in political or religious organisations in the territory, it said.
Beijing has eagerly sought to allay fears among Hong Kong's 6.3 million people over the posting of Chinese troops in the territory. State media has said soldiers destined for Hong Kong have been studying local songs and customs.
Many Hong Kong people view with trepidation the arrival of Chinese troops, remembering the PLA's bloody 1989 crackdown on student-led demonstrations for more democracy in Beijing.
""Sending the People's Liberation Army troops to Hong Kong on July 1, 1997, has become a matter of concern among Hong Kong residents,"" Xinhua said.
""Troops stationed in Hong Kong will not interfere in the SAR's local affairs,"" it pledged.
China has not revealed how large a force it will post in Hong Kong but says it will send no more than the 10,000 troops Britian stationed there at its peak level.
",43
"China on Thursday accused foreign journalists of biased reporting and urged them to learn from Edgar Snow, a U.S. reporter and author sympathetic to the Chinese communist cause.
Reporters from Western nations had misjudged China based on standards that did not apply to countries with different social and political systems, said a commentary in the official China Daily.
""It is common sense that news reporting...should serve the purpose of offering adequate information to the audience to help them form correct judgments on world affairs,"" the commentary said.
The commentary urged Western media to emulate Snow whose reports from China in the 1930s painted a sympathetic portrait of Mao Zedong and his struggling communist crusade.
The newspaper praised Snow for his accuracy, objectivity and impartiality in his coverage of China as it was swept up in the communist movement.
""In his reportage, Edgar Snow wrote exactly what he witnessed,"" it said. ""What the Western media are doing is the opposite of what Edgar Snow did 60 years ago.""
Most Western reporters were barred from China after the communists seized power in 1949 but Snow's personal contacts with Chairman Mao allowed him to roam much of the country unhindered.
His reports praised the Communist Party for its sweeping reforms and later denied rumours of widespread famine in the early 1960s.
Historians now estimate more than 30 million people died as a result of famines after Mao launched the Great Leap Forward, urging farmers to abandon their fields and join the rush to make steel in backyard furnaces.
The commentary blasted the Western media for spreading the theory that China was a threat to the world while ignoring what it said were Japan's rising military ambitions.
Foreign journalists are viewed by many Chinese as spies and most come under police surveillance during their stay in China. Many foreign reporters have been expelled since 1949.
Western journalism focused mostly on negative issues such as crime, disease and political turmoil, it said.
""It has been a general practice of the Western media to look everywhere for the seamy side of society,"" it said.
Communist Party chief Jiang Zemin last month sternly told the Chinese media to toe the party line and propaganda boss Ding Guangen last week called on the media to report more positive news.
""One may ask why there have been so many disappointing reports by Western journalists,"" the commentary said.
""One clue lies in the fact that those journalists do not know what is really going on in China,"" it said.
",43
"China warned Taiwan on Wednesday not to seek independence from the communist mainland, hinting the island would meet disaster if Taipei insisted on splitting from the motherland.
Taipei had failed to answer a 1995 call by Chinese President Jiang Zemin for reconciliation and had instead actively sought to split Taiwan from mainland China, the official Xinhua news agency said.
""We urge the Taiwan authorities to rein themselves in at the precipice so that they can see clearly that the status of Taiwan being part of China cannot be changed and that the trend of Taiwan's reunion with the motherland cannot be resisted,"" the agency said in a commentary.
Beijing, which views Taiwan as a rebel province, refuses to rule out the use of force to recover the island if Taipei declares independence.
However, the tough commentary by China's state news agency held out the possibility of a resumption of quasi-official talks if Taiwan's authorities showed they sincerely wanted the eventual unification they say is their goal.
The commentary was issued to mark the second anniversary of a conciliatory speech by Jiang, who urged an end to hostilities between the bitter political rivals and the opening of direct trade links.
Taiwan officials had shrugged off Jiang's olive branch and were actively working to divide China and further block economic and trade links, Xinhua said.
""The Taiwan authorities advocate 'splitting the country and ruling under separate regimes' and 'two equal political entities', which are in fact aimed at tearing apart China's sovereignty and territory,"" the agency said.
It said people gifted with insight and who had at heart the fundamental interests of Taiwan's people should unite and remove obstacles preventing talks.
""The Taiwan authorities, under pressure both from within and without, have to respond to the important speech of President Jiang Zemin and at least gesture to make strategic readjustments regarding some questions in the cross-straits relations,"" Xinhua said. It did not specify what adjustments were needed.
Taiwan has barred direct trade and transport links with the mainland since the two were separated at the end of the Chinese civil war in 1949. Taipei has clung to its ban as a last bargaining chip in talks on reunification with Beijing.
China's resumption of sovereignty over Hong Kong this year is expected to give Beijing more leverage in any talks.
""With the return of Hong Kong and that of Macau in 1999, the solution of the Taiwan question and the motherland's reunification will become more prominent issues for all Chinese people,"" Xinhua said.
Analysts have said Jiang is eager to bring Taiwan into the mainland's communist fold to etch his name in history alongside the late Chairman Mao Zedong and current paramount leader Deng Xiaoping, who negotiated the return of Hong Kong from Britain.
China would continue to promote economic exchanges between the two sides while keeping a vigilant watch over any movement toward independence for Taiwan, the Xinhua commentary said.
""The fight against separatism and Taiwan independence has illustrated the Chinese people's strong determination and ability...to strike hard against separatist activities and Taiwan-independence forces in Taiwan,"" the agency said.
",43
"Chinese President Jiang Zemin will travel to Moscow in spring for a summit with Russian leader Boris Yeltsin, the official Xinhua news agency said on Tuesday.
The two sides are expected to sign agreements on arms reductions along the 4,300-km (2,580-mile) Sino-Russian border in the near future, Xinhua said.
Chinese Premier Li Peng is scheduled to visit Moscow next month, state television said.
The forthcoming trips by Jiang and Li to Moscow were announced during a three-day visit to China by Russian Foreign Minister Yevgeny Primakov.
Primakov met both Jiang and Li on Tuesday, the television said.
Jiang told Primakov that China's long-term policy towards Russia was ""good neighbourly friendship, equality, trust, mutually beneficial cooperation and joint development"", state television said.
""No matter what changes occur in the situation, this guiding principle will not change,"" Jiang said of a pledge by China and Russia in April to establish a strategic partnership.
Jiang and Yeltsin last met during the Russian president's tour of China in April in a visit that both sides hailed as instrumental in forging a new, strategic partnership.
""We have a common objective of making our border a bond of peace, stability, cooperation and prosperity,"" Chinese Foreign Minister Qian Qichen said. He did not elaborate on the specifics of the arms reduction agreements or when they might be signed.
Border disputes between China and Russia have been longstanding, although the two states reached basic agreement on border demarcation in 1991.
During Yeltsin's visit, China and Russia -- along with the former Soviet states of Kazakhstan, Kyrgyzstan and Tajikistan -- signed a treaty calling for all parties to inform each other of the scope of their military exercises and agreeing not to attack each other.
The Russian foreign minister came to China from Japan, where he scored a major improvement in relations with Tokyo.
Japan released $500 million in long-delayed aid to Russia, while Moscow offered the joint development of a group of disputed islands in the biggest step forward in their ties since the end of the Cold War.
",43
"China said on Friday that sexual contact was the leading cause of AIDS and warned that venereal disease could be a springboard for an AIDS epidemic.
""China should take immediate steps to curb the epidemic of STDs (sexually transmitted diseases) because their incidence rate is rising in the country,"" the official Xinhua news agency quoted health experts as saying.
""Sexual contact is now the leading cause of HIV infection,"" the agency said. AIDS, or Acquired Immune Deficiency Syndrome, is caused by infection with the Human Immunodeficiency Virus (HIV).
The number of reported cases of eight major sexually transmitted diseases diseases, including AIDS, gonorrhea and syphilis, had risen to 362,000 last year and officials forecast that figure could rocket to more than 800,000 by 2000, it said.
""We should give first priority to STD control in the battle against AIDS, because STDs are a springboard for an HIV/AIDS epidemic,"" Xinhua quoted Minister of Public Health Chen Minzhang as telling a national conference on the disease in Beijing.
""In line with the increase of STDs, the occurrence of HIV infection will be more frequent,"" Xinhua quoted Ye Shunzhang, director of the National Venereal Disease Control Centre, as telling the conference, which closed on Thursday.
Official figures show China has 4,305 people infected with HIV, up from 3,341 at the end of 1995, but experts say up to 100,000 could be infected.
""China could see its number of HIV cases spinning out of control if prompt, preventive measures are not taken,"" Xinhua said.
China would open hundreds of screening stations as part of a plan to set up a national AIDS monitoring network to supply accurate and fast data on the spread of the disease, it said.
Health authorities would open between 300 and 400 HIV monitoring centres by 2000 and set up a national laboratory to lead the country's battle against the disease.
Prostitution and narcotics abuse have both boomed in recent years as freewheeling economic reforms weaken puritan Marxist values.
",43
"China said on Wednesday it would empower Hong Kong's courts to put on trial off-duty Chinese soldiers after Beijing resumes control over the British colony in 1997.
The standing committee of the National People's Congress (parliament), which is in session in Beijing, was expected to pass a law spelling out how to handle criminal or civil cases involving troops to be garrisoned in Hong Kong, the official Xinhua news agency said.
""Crimes committed by off-duty personnel... will be handled by the courts of the Hong Kong SAR (Special Adminstrative Region),"" the agency said.
Criminal cases involving on-duty soldiers would be handled by military courts, it said.
Civil rights offences committed by off-duty members of the Chinese garrison, which will be responsible for Hong Kong's security after the colony returns to Beijing's rule on July 1, 1997, would be dealt with by Hong Kong courts, it said.
Civil rights offences committed by soldiers while on duty would be referred to China's Supreme People's Court, the nation's highest judicial body, it said.
Chinese lawmakers had used British army practices in Hong Kong as a reference in drafting the measures, Xinhua quoted Fu Quanyou, general chief of staff of China's People's Liberation Army (PLA), as saying.
Defence operations of the PLA would not be subject to Hong Kong courts, Xinhua said but did not elaborate.
""Troops stationed in Hong Kong will notify the Hong Kong SAR government in advance of any military drills and exercises to be conducted that involve the public interest,"" it said.
Hong Kong would be required to provide facilities for the carrying out of defence duties and would have to consult the military when drafting policies that concern them, it said.
Military personnel would be forbidden from participating in political or religious organisations in the territory, Xinhua said.
Beijing has eagerly sought to allay fears among Hong Kong's 6.3 million people over the posting of Chinese troops in the territory. State media has said soldiers destined for Hong Kong have been studying local songs and customs.
Many Hong Kong people view with trepidation the arrival of Chinese troops, remembering the PLA's bloody 1989 crackdown on student-led demonstrations for more democracy in Beijing.
""Sending the People's Liberation Army troops to Hong Kong on July 1, 1997, has become a matter of concern among Hong Kong residents,"" Xinhua said.
""Troops stationed in Hong Kong will not interfere in the SAR's local affairs,"" it pledged.
China has not revealed how large a force it will post in Hong Kong but says it will send no more than the 10,000 troops Britian stationed there at its peak level.
",43
"North Korea expects a shortfall of two million tonnes of grain next year -- equal to 40 percent of the nation's needs and significantly worse than expected, a Red Cross official said on Monday.
Only a few months ago, aid workers had estimated the food shortage would be 1.5 million tonnes.
""Their shortages are serious...they (North Korean officials) have not been able to meet the daily food ration,"" said Ole Gronning, representative of the International Federation of the Red Cross and Red Crescent Societies in North Korea's capital of Pyongyang.
""This is bad news, really bad news in a country that already doesn't have much now,"" Gronning said by telephone.
He said farmers whose crops had been wiped out by devastating floods in July had eaten about 400,000 tonnes of grain before it came to maturity, adding this would worsen the food shortage this winter.
North Korea has faced the spectre of famine since July after the floods destroyed about 373,000 tonnes of grain, compounding damage from widespread floods in 1995.
Official figures showed North Korea would need 5.5 million tonnes of grain next year, but this year's harvest had yielded just 3.5 million tonnes, Gronning said.
The federation was trying to raise $10.5 million for a new programme to buy grain to stave off hunger for some 140,000 North Koreans badly hit by the floods, he said.
""In some of the villages and the valleys we are now going into, they were working on repairing the damage from the 1995 floods and then they got hit once again,"" he said.
""They have lost everything, including houses, livestock and so on,"" he said.
The summer floods had submerged large tracts of arable land for more than 10 days. Some of that land was now covered in sand and mud and could not be farmed again.
""The second floods left people in a really bad situation,"" Gronning said. ""People will be running out of food in the second half of December.""
The federation would work with the North Korean Red Cross Society to distribute a daily ration of 450 grams (15.75 ounces) of grain and a helping of supplementary foods such as soybeans to each person, he said.
Aid workers would try to provide stricken residents with winter clothes and blankets to brace against winter temperatures that could drop as low as minus 20 degrees Celsius, he said.
""Without enough food and without proper heating, these people are really badly off,"" he said.
North Korea, despite its philosophy of self-reliance, cracked open the door to foreign aid last year in the face of looming food shortages.
Gronning said the federation had appealed to member societies in Europe, North America and Japan to donate money urgently needed to start buying grain and clothes.
""Hopefully, we will have the first pledges very, very soon so we can start purchasing,"" he said.
",43
"U.S. Vice-President Al Gore could visit China in early 1997 if he was re-elected next month, a senior U.S. official said in Beijing on Saturday.
""We have sent a proposal here and it's been reviewed and I don't think there's any real disagreement,"" U.S. Assistant Secretary of State for Oceans and International Environmental and Scientific Affairs Eileen Claussen said when asked if Gore had any plans to visit China.
""The vice-president is very interested in trying to establish...a sustainable development forum here between (Chinese Premier) Li Peng and the vice-president,"" she told a news conference.
No specific date has been set for Gore's visit.
""We are now discussing terms of reference for that and there's every expectation that if those terms of reference are worked out, the vice-president will make a visit in the spring,"" she said.
Asked to elaborate on the terms of reference, Claussen said: ""We just have to have sort of a set of operating rules and subjects we're going to talk about.""
A visit by Gore could improve often stormy Sino-U.S. ties, which plunged to their lowest ebb in more than two decades after Washington enraged Beijing by allowing Taiwan's President Lee Teng-hui to make a landmark, private visit in June 1995.
Beijing and Taipei have been diplomatic rivals since Mao Zedong's Red Army defeated and drove Chiang Kai-shek's Nationalist troops into exile in Taiwan at the end of the Chinese civil war in 1949.
China regards Taiwan as a rebel province and has sought to push the island into diplomatic isolation.
U.S. Secretary of State Warren Christopher is due to visit Beijing in November and Chinese Defence Minister Chi Haotian plans to make a long-delayed trip to Washington before the end of the year.
China postponed Chi's visit to Washington in March, infuriated by a U.S. decision to order two aircraft carriers into seas near Taiwan as the island inched towards democracy -- holding its first direct presidential elections -- in the face of missile tests and live-fire war games.
Beijing and Washington have also wrangled over alleged sales of nuclear technology by China, human rights abuses in China and trade issues.
China has bitterly accused the United States of blocking its bid to gain admission to the World Trade Organisation.
Beijing and Washington narrowly avoided a trade war in June and February 1995 over widespread copyright piracy.
",43
"China on Tuesday blasted U.S. penalties against its textiles ahead of a visit next week by U.S. Secretary of State Warren Christopher, but said the two sides had more in common than differences.
Beijing accused Washington of not having produced enough evidence to support textile sanctions and said it opposed strong-arm tactics to settle trade disputes.
""We are opposed to one side imposing its will on another in trade disputes,"" Foreign Ministry spokesman Cui Tiankai told a regular news briefing.
""The United States has not fully consulted with China and has not provided clear supporting evidence,"" Cui said.
But Cui declined to comment on whether the dispute would overshadow a visit by Christopher to China next week. Christopher's last visit to China two years ago ended in wrangling over human rights issues.
""This is an important bilateral meeting,"" Cui said of Christopher's trip, scheduled for November 19-21.
Christopher's visit would help lay the groundwork for bilateral relations in the 21st century, Cui said, adding there was no reason for China and the United States not to develop a healthy and stable relationship.
""The state of relations between the two countries will...have major effects on the peace, stability and prosperity of the Asia-Pacific region and the world as a whole,"" Cui said.
""We will discover that the common interests of China and the United States are far greater than the differences,"" Cui said.
Beijing and Washington both say ties have warmed after a series of spats over Taiwan, human rights, arms proliferation and trade over the past year.
In the most recent clash, Beijing said on Sunday it would temporarily ban imports of selected U.S. textiles, farm goods, fruits and alcoholic drinks from December 10 in retaliation for U.S. sanctions taken against Chinese textiles.
Washington announced penalties against imports of Chinese textiles in September, accusing China of using shipments through third countries to avoid quotas agreed upon in a bilateral textile accord.
U.S. trade officials said on Monday that Chinese violations of the textile accord were well documented. The sanctions were expected to cost China about $19 million a year.
The spokesman sidestepped a question about whether the textile dispute would be part of discussions during Christopher's visit but said China hoped for a solution beneficial to both sides.
""We have always been devoted to developing bilateral trade on the basis of equality and mutual benefit,"" Cui said.
""We hope again that the United States will be able to adopt a stance helpful to the development of Sino-U.S. trade,"" Cui said.
",43
"A decade ago, Chinese publishers were still putting type in place by hand, painstakingly selecting one character at a time from thousands of inky stereotypes.
Then in 1986, Wang Xuan, a professor of computer science at Beijing University, created a software programme to represent Chinese fonts on a computer.
Today, nearly all of China's newspapers are printed using Wang's Electronic Publishing System, a product of the Founder Group Corp that he helped the university launch.
""Our Chinese word processing software was far ahead of foreign products, that's why we took the leading market position at a stroke,"" Wang told Reuters in an interview.
From Founder's modest origins as a college department offshoot employing 20 workers, the firm now has 36 subsidiaries employing more than 1,000 people. It also has a listing on the Hong Kong stock exchange.
Founder's net assets totalled HK$494.9 million at the end of 1995 and the company posted net profit of HK$109 million last year on sales turnover of HK$1.1 billion.
Wang, the 59-year-old chairman of what has perhaps become one of China's most successful computer companies, predicted the firm would continue its strong performance as the domestic market expands and it finds new opportunities abroad.
The company's net profit in the first six months of this year rose a year-on-year 7.0 percent to HK$55.8 million and turnover shot up 27 percent to HK$590 million.
""I can confidently say that we will see an increase in both turnover and profit in 1996,"" Wang said.
Founder is China's fourth biggest manufacturer of personal computers but Wang says he plans to focus his energies on the more interesting -- and lucrative -- software business.
""Selling personal computers is all about sales technique,"" Wang said. ""I get very excited about high-tech stuff, much more than business.""
Founder had snared 78 percent of China's publishing software market as of August, up from 70 percent at the end of 1995, Wang said.
The company also boasted clients among Chinese newspapers in Hong Kong, Taiwan, Malaysia and North America, he said.
Founder's office automation products were gaining popularity among Chinese banks, government agencies and advertising firms, he said.
Wang has visited numerous companies abroad and said he was confident Founder would crack the Japanese market in two years and be a strong player in the international market within five years.
As part of Wang's drive to boost Founder's role overseas, the firm signed a pact last May to develop publishing solutions based on products and technology of U.S.-based Apple Computer Inc
Wang listed Founder in Hong Kong in December 1995. Beijing University still holds 56 percent of the company.
Initially offered at HK$1.98 a share, Founder's stock shot up to a high of HK$4.0 a share earlier this year though it has since fallen back. It ended at HK$3.15 on Friday.
Wang's market success has earned the slender, bespectacled entrepreneur comparisons at home to Microsoft's Bill Gates, a likeness Wang is happy to embrace.
But Wang insists similarities to the American software guru are limited.
""The difference is huge. Bill Gates is 40, I am almost 60. I am past my creative peak,"" Wang said.
The entrepreneur notes other differences.
Like many Chinese his age, Wang lived through the tumultuous early years after the communist revolution in 1949.
That included the disastrous Great Leap Forward  -- launched by Chairman Mao Zedong in the late 1950s to spur rapid development. Instead, it set China back for years and triggered famine that killed as many as 30 million people.
Wang was persecuted for listening to English radio broadcasts during the Cultural Revolution, a decade of political turmoil that began in 1966 to infuse the young communist state with renewed ideological vigour.
While the Microsoft mogul has amassed a personal fortune of billions of dollars, Wang receives a salary of about 10,000 yuan a month and holds no shares in the firm he heads.
""I'm easily satisfied,"" he said.
($1 = 8.3 yuan) ($1 = HK$7.8)
",43
"A lone Russian with a European record-breaking performance kept the Chinese women's swimming team from a clean sweep on the final day of the World Cup short-course series on Thursday.
The Chinese women struck gold by powering their way to eight victories in nine events, failing to capture only the 100 metres backstroke.
Nina Zhyvanevskaya of Russia took the crown in that event when she smashed the European record by a full 1.0 second with her time of 59.01 seconds.
In the other heats it was China all the way.
Wang Luna led Olympic gold medallist Claudia Poll throughout the 400 metres freestyle and not even a mid-contest surge by the powerful Costa Rican could propel her ahead of Wang, who clinched the win with a time of 4:05.45.
Rising star Chen Yan, who took home two golds in Wednesday's finals, emerged victorious in the 400 metres individual medley.
The 17-year-old also took silver in the 100 metres individual medley and bronze in the 100 metres backstroke.
Han Xie drew wild cheers from the crowd as she came within a hair's breadth of breaking the world record in the 50 metres breaststroke, clocking 31.00 seconds, just 0.02 second outside the record books.
The Chinese women's squad is seeking to re-establish world dominance after seven swimmers were banned in an embarrassing doping scandal at the 1994 Asian Games.
Lu Bin, who made her first appearance in an international event on Wednesday since she was suspended in the Asian Games scandal, placed a lowly sixth in the 100 metres backstroke.
Shan Ying glided to gold in the 100 metres freestyle, Qu Yun seized the title in the 200 metres butterfly and Mi Tong won the 200 metres breaststroke.
The women's gold haul was rounded out by Sun Guiling's victory in the 100 metres individual medley and Cai Huijue's 50 metres butterfly triumph.
China's men's team echoed their Wednesday night performance with a haul of three out of eight available golds.
Jiang Chengji outpaced Jamaican Sion Brinn in the 50 metres freestyle. Brinn won the 100 metres freestyle on Wednesday.
Australia's Adrian Radley captured gold with his time of 24.58 in the 50 metres backstroke while Marcel Wouda of the Netherlands notched up his third victory in Beijing with a win in the 200 metres individual medley.
Ian Wilson of Britain swam to a surprise victory in the 800 metres freestyle while German Jens Kruppa took the 100 metres breaststroke title.
The next leg of the eight-round World Cup series, which carries $150,000 in prize money, is on January 22-23 in Espoo, Finland.
",43
"China has urged the devoutly Buddhist region of Tibet to embrace atheism to counter the influence of the exiled spiritual leader the Dalai Lama and to raise itself out of poverty.
Beijing also lashed out at the European Union for allowing a meeting between officials of the European Parliament and the Dalai Lama, whom Beijing accuses of covertly working for independence for his Himalayan homeland.
""We have expressed our intense dissatisfaction and serious protest to the European side,"" Foreign Ministry spokesman Shen Guofang told a regular news briefing on Thursday when asked to comment on the meeting.
To check the influence of the Dalai Lama, China called on officials in the restive region to preach atheism and instill socialist beliefs.
""To carry out atheistic education is a neccesary condition for...opposing the Dalai Lama's disastrous teachings aimed at causing chaos in Tibet and splitting the motherland,"" the Tibet Daily said in an edition seen in Beijing on Thursday.
""Many people have been fettered by religion and cannot break free of its bewitchment,"" the newspaper said in its October 14 edition.
Beijing vehemently denies accusations by western rights groups of widespread human rights abuses and religious persecution, pointing to rising living and health standards in the remote mountainous region.
The newspaper said traditional Buddhist beliefs, such as canons against killing animals, including pests, had hampered development of the backward and sparsely populated region.
""A lot of technology, because it violates religious tenets, is difficult to put into widespread use,"" it said.
The newspaper accused the Dalai Lama of seeking to split Tibet from China and of using his faith both as a weapon against the Tibetan people and as a shield to protect himself from criticism.
""In order to expose the Dalai's trick of keeping the people ignorant and to smash the Dalai's plot to split the motherland...we should implement atheist education,"" it said.
The Dalai Lama fled Tibet in 1959 after an abortive revolt against Chinese rule and won the Nobel Peace Prize 30 years later for his peaceful campaign for autonomy.
During his meeting with European Parliament officials in Strasbourg, France, on Wednesday, the Dalai Lama reiterated the call for autonomy for Tibet.
""The action of the European Union is open support and connivance with the splittist activities of the Dalai Lama,"" Shen said.
The Dalai Lama's comments to EU officials were restrained, dismissing any notion of economic sanctions against China over its rule in Tibet and advising that it would be wrong to try to isolate China.
The Dalai Lama frequently meets foreign leaders in a globetrotting campaign to win autonomy for his homeland. China has vehemently opposed such meetings.
A meeting between the Dalai Lama and Australian Prime Minister John Howard last month infuriated Beijing, which demanded that Canberra rectify its mistake or face possible trade retaliation.
",43
"U.S. Undersecretary of State Lynn Davis has begun talks with Chinese officials in Beijing on arms proliferation issues, a U.S. Embassy official said on Monday.
""She has arrived and started talks,"" the official said by telephone. Davis arrived in Beijing last Thursday and was due to hold talks on Monday and Tuesday.
""She is the undersecretary for arms control issues... She has a whole range of issues that she'll be bringing up with the Chinese,"" the official said when asked what Davis would discuss with her hosts.
Deputy Assistant Secretary of State Robert Einhorn flew into Beijing last week for talks before Davis's visit.
John Holum, director of the U.S. Arms Control and Disarmament Agency, also visited the Chinese capital recently.
Officials have said Davis would discuss how the two countries might implement a decade-old, peaceful nuclear cooperation accord that would let U.S. firms sell nuclear power reactors to China.
Beijing has tried to lure foreign technology, some of it with potential military value, with promises of lucrative business contracts.
China's official Xinhua news agency said on Monday that U.S. firms stood to win billions of dollars of nuclear energy contracts if the 1985 agreement were put into effect.
""Sino-U.S. cooperation in nuclear energy development has yet to enter a substantial stage,"" Xinhua quoted Li Donghui as saying.
""Negotiations on the agreement are still under way,"" added Li, the deputy-general director of the China National Nuclear Corp's international cooperation bureau.
The pact has not been implemented because of Washington's concern that Beijing has sold nuclear technology to unsafeguarded nuclear facilities in other nations, most notably to Pakistan.
Both China and Pakistan deny the charges.
China agreed last May not to provide aid such as ring magnets and other devices used in making nuclear weapons to unsafeguarded nuclear facilities.
U.S. officials say a reported nuclear-related deal between Beijing and Islamabad was struck before the May accord was drawn up and that they have no evidence China has violated the pact.
Davis would also renew U.S. concerns over Chinese sales of conventional arms to Iran, who Washington has blacklisted as a sponsor of terrorism, officials have said.
Washington is investigating reports that Indonesia and China are close to a deal to sell Iran five French helicopters that could be armed with air-launched missiles.
Davis's talks were expected to pave the way for a visit by U.S. Secretary of State Warren Christopher later this month, his first to China in two years.
Christopher's 1994 visit ended in bitter wrangling over human rights issues.
Sino-U.S. relations have been battered in recent months by disputes over human rights, China's rampant copyright abuse and Beijing's terms of entry into the World Trade Organisation.
The White House said last week it was deeply concerned over a Chinese court verdict sentencing prominent pro-democracy activist Wang Dan to 11 years in prison for plotting to overthrow the government.
",43
"U.S. Undersecretary of State Lynn Davis has arrived in Beijing for talks next week with Chinese officials on arms proliferation, a spokesman at the U.S. Embassy in Beijing said on Friday.
Davis would lay the groundwork for a visit by U.S. Secretary of State Warren Christopher later this month, his first to China since a 1994 trip that ended in disaster because of wrangling over human rights issues.
Deputy Assistant Secretary of State Robert Einhorn flew into Beijing earlier this week for expert talks ahead of Davis' visit, nthe spokesman said.
""Expert talks are going on today and she (Davis) will have her main talks on the 4th and the 5th on security issues and on proliferation issues,"" the spokesman said.
""She'll be going back to the United States to report to the Secretary of State,"" the spokesman said, adding that arms control would be just one of many issues Christopher would bring up with his Chinese hosts.
""He (Christopher) has a lot of things on his agenda,"" the spokesman said.
Sino-U.S. ties have long been strained by disputes over human rights, Taiwan, copyright theft in China and Beijing's terms of entry to the World Trade Organisation.
Washington has expressed deep concern over the Beijing court sentencing of prominent Chinese pro-democracy activist Wang Dan on Wednesday to 11 years in prison for plotting to overthrow the government.
Officials in Washington have said Davis also would discuss how the two countries might implement a decade-old peaceful nuclear cooperation pact that could allow sales of U.S. nuclear power reactors to China.
The accord, signed in 1985, has not been put into effect because of U.S. suspicions that Beijing is peddling nuclear technology to unsafeguarded nuclear facilities abroad, most notably to Pakistan. Both China and Pakistan deny the charges.
China agreed last May not to provide aid such as ring magnets and other devices used in making nuclear arms to unsafeguarded nuclear facilities.
U.S. officials have insisted they have no evidence China has violated the May agreement and say a reported nuclear-related deal between Beijing and Islamabad was struck before the accord was drawn up.
Beijing has tried to lure foreign technology, some of it with potential military value, with promises of lucrative business contracts.
Davis would also renew U.S. concerns over Chinese sales of conventional arms to Iran, which Washington has blacklisted as a sponsor of terrorism.
Washington is investigating reports that Indonesia and China are close to a deal to sell Iran five French helicopters that could be armed with air-launched missiles.
",43
"China said on Thursday that Sino-U.S. trade ties have improved but warned that major problems, including Beijing's long-delayed entry into the World Trade Organisation (WTO), still needed to be resolved.
It also hinted at possible retaliation against a U.S. decision last month to slap punitive charges against Chinese textile quotas -- a move it described as ""totally unacceptable"".
""The Sino-U.S. economic relationship is recovering, but two major issues concerning Sino-U.S. economic links need to be settled,"" the official China Daily on Thursday quoted Foreign Trade Minister Wu Yi Wu as saying.
Those two issues were Beijing's failure to join the WTO and the lack of permanent Most Favoured Nation (MFN) trade status for Chinese goods in the U.S. market.
A recent series of high-level exchanges between Beijing and Washington had helped ease friction over copyright piracy, textile quotas, Taiwan and human rights, the newspaper quoted Wu as saying.
""The tension in the Sino-U.S. relationship has been alleviated,"" Wu said, adding that further progress would hinge on Washington's stance towards Beijing's entry into the WTO and its yearly review of MFN.
""The annual examination of China's MFN status is already a shadow over Chinese and U.S. enterprises and adds a factor of instability,"" Wu said.
Washington annually reviews China's MFN status, which confers on trading partners the lowest possible tariffs. Beijing has urged the United States to make such treatment permanent.
""We hope the Most Favoured Nation issue will be solved once and for all,"" Wu said.
China is one of the United States' largest trading partners.
U.S. companies sold about $12 billion worth of goods to China last year, while Americans bought some $46 billion worth Chinese products.
Wu also called on Washington to work harder with Beijing to hammer out conditions whereby China could secure a coveted seat in the WTO, saying such moves would benefit trade links.
China has insisted on entering the world trade body under the easier terms accorded to developing nations. But many developed nations, including the United States, have demanded tougher entry requirements because of the sheer size of China's economy.
""Smooth settlement of the two issues would prove to be a great impetus to Sino-U.S. trade and economic cooperation,"" Wu said.
He said China's total foreign trade would hit $280 billion this year and forecast that figure to balloon to $400 billion in 2000 and $800 billion in 2010. She did not say how much exports or imports were expected to be.
Last month the United States decided to set punitive charges against China's 1996 textile quotas in a move that Beijing says was made without full consultation.
""We would like the United States to change it's decision,"" Wu said. ""Otherwise, China will take measures in response.""
",43
"China has revived a call by Communist Party chief Jiang Zemin to wipe out poverty before the end of the century in a bid to placate its backward hinterland, analysts said.
The text of a speech Jiang made in September calling for more funds to fight poverty was splashed across front pages of major newspapers on Monday.
The coverage was aimed partly at bolstering the Communist Party's standing in impoverished but politically sensitive regions, one Beijing-based Western diplomat said.
""It shows that the party leadership has not forgotten the poor,"" said the diplomat, who asked not to be identified.
The reports were also timed to show concern ahead of the Lunar New Year, China's most important holiday, analysts said.
Chinese leaders traditionally make highly publicised trips to poor areas to hand out gifts before the holiday which this year begins on February 7.
""The poor can have a happy Lunar New Year, but after the holidays, life will still be difficult,"" one Chinese analyst said.
""The gap between the rich and poor is becoming wider and there's more bitterness.""
China's eastern coastal provinces have boomed under nearly two decades of economic reform that have allowed some areas to get rich faster than others. Provinces in central and western China have lagged badly.
Beijing fears that the widening gap between rich and poor could spark social unrest and undermine its grip on power.
Analysts said that was a major concern ahead of a crucial Communist Party congress scheduled for later this year and expected to set the course of national policy over the medium term.
""The scale of poverty relief will be bigger this year,"" the Chinese analyst said.
More people were in need of aid after being laid off from loss-making or insolvent state enterprises, he said.
""They're playing up a 1996 speech to show the government is earnestly concerned about the problem and trying to do something about it,"" the analyst said.
In the speech, Jiang urged the nation to ""gnaw the hard bone"" of poverty by pouring more funds into eliminating the problem by the end of the century.
China says it reduced the number of people living in poverty by five million in 1995 but about 65 million people are still struggling to get by with incomes under the official poverty line of 530 yuan ($64) a year.
The central government currently spends 10.8 billion yuan a year on poverty relief and Beijing has pledged a further 1.5 billion yuan to build roads and water facilities in impoverished areas.
During an inspection tour of some of China's poorest regions last September, Jiang tried to resurrect communist revolutionary fervour to fight poverty.
He exhorted villagers and officials to resurrect the ""glorious tradition"" of the revolution that won the civil war for the communists in 1949.
($1 = 8.3 yuan)
",43
"China tried to backtrack on Thursday from a warning to Hong Kong people on limits to their freedom of expression after the territory reverts to Beijing rule in 1997, saying liberties would remain but within the law.
""Hong Kong people will have full freedom of expression, but all freedoms must be within the limits allowed by law,"" Foreign Ministry spokesman Shen Guofang told a news briefing.
His remarks followed an interview with Foreign Minister Qian Qichen by the Asian Wall Street Journal in which Qian hinted that Hong Kong would no longer be able to mark the anniversary of Beijing's June 4, 1989, crackdown on student-led protests.
Qian's interview stirred an outcry in Hong Kong, where China has pledged a high degree of political freedoms for 50 years after the handover on July 1, 1997, and not to change its current capitalist system.
""China has obviously inflicted a fair amount of political damage in Hong Kong, it is now trying to undo some of that damage,"" said one China analyst.
Shen said Hong Kong residents would have freedom of the press and freedom of speech but such liberties would have to operate within the boundaries of the law.
""Any activities held in Hong Kong must be in accordance with legal regulations,"" Shen said.
""Hong Kong should not interfere in mainland China's affairs by organising some political activities to attack the mainland's internal affairs,"" he said.
Shen said the territory, a British colony for a century and a half, would maintain its capitalist system after it returns to mainland control at midnight on June 30, 1997.
""After July 1, 1997, there will be no changes to our one nation, two systems policy, the Hong Kong people will rule Hong Kong,"" he said. ""In our words, well water does not intrude into the river water.""
Hong Kong newspaper reports that interpreted Qian's remarks as a ban on activities in the territory to commemorate the 1989 crackdown were wrong, Shen said.
""Hong Kong opinion has misinterpreted Qian's remarks,"" Shen said, adding that Beijing had not altered its pledge to maintain Hong Kong's current political and economic system unchanged under Chinese sovereignty.
A transcript of Qian's interview showed he was specifically asked to say what activities would not be allowed and whether the 1989 commemoration was among them. Qian replied that he was referring to just such activities.
Shen said people would be free to criticise Beijing but said they should be careful in commenting on Chinese leaders.
""If some media make personal attacks on other people or on our leaders, this touches on news ethics,"" Shen said without elaborating.
""Except for national defence and foreign affairs, the central government will not interfere (in) any activities of the Hong Kong special administrative region's government, and Hong Kong should not interfere in mainland internal affairs,"" Shen said.
Shen said dissidents in Hong Kong would be free to travel outside the territory but should respect local laws while in Hong Kong.
""Hong Kong dissidents in Hong Kong will have the freedoms to go and stay, but if they stay there, they must act in accordance with local laws,"" Shen said.
",43
"China said on Thursday that Sino-U.S. trade ties have improved but warned that major problems, including Beijing's long-delayed entry into the World Trade Organisation (WTO), still needed to be resolved.
It also hinted at possible retaliation against a U.S. decision last month to slap punitive charges against Chinese textile quotas -- a move it described as ""totally unacceptable"".
""The Sino-U.S. economic relationship is recovering, but two major issues concerning Sino-U.S. economic links need to be settled,"" the official China Daily on Thursday quoted Foreign Trade Minister Wu Yi Wu as saying.
Those two issues were Beijing's failure to join the WTO and the lack of permanent Most Favoured Nation (MFN) trade status for Chinese goods in the U.S. market.
A recent series of high-level exchanges between Beijing and Washington had helped ease friction over copyright piracy, textile quotas, Taiwan and human rights, the newspaper quoted Wu as saying.
""The tension in the Sino-U.S. relationship has been alleviated,"" Wu said, adding that further progress would hinge on Washington's stance towards Beijing's entry into the WTO and its yearly review of MFN.
""The annual examination of China's MFN status is already a shadow over Chinese and U.S. enterprises and adds a factor of instability,"" Wu said.
Washington annually reviews China's MFN status, which confers on trading partners the lowest possible tariffs. Beijing has urged the United States to make such treatment permanent.
""We hope the Most Favoured Nation issue will be solved once and for all,"" Wu said.
China is one of the United States' largest trading partners.
U.S. companies sold about $12 billion worth of goods to China last year, while Americans bought some $46 billion worth Chinese products.
Wu also called on Washington to work harder with Beijing to hammer out conditions whereby China could secure a coveted seat in the WTO, saying such moves would benefit trade links.
China has insisted on entering the world trade body under the easier terms accorded to developing nations. But many developed nations, including the United States, have demanded tougher entry requirements because of the sheer size of China's economy.
""Smooth settlement of the two issues would prove to be a great impetus to Sino-U.S. trade and economic cooperation,"" Wu said.
He said China's total foreign trade would hit $280 billion this year and forecast that figure to balloon to $400 billion in 2000 and $800 billion in 2010. She did not say how much exports or imports were expected to be.
Last month the United States decided to set punitive charges against China's 1996 textile quotas in a move that Beijing says was made without full consultation.
""We would like the United States to change its decision,"" Wu said. ""Otherwise, China will take measures in response.""
",43
"Leading Chinese activist Wang Dan will go on trial on Wednesday, charged with the capital crime of plotting to overthrow the government, a family member said.
The Beijing Number One Intermediate People's Court had told Wang's family that his trial would begin on Wednesday morning, his mother Wang Lingyun said by telephone on Friday.
Court officials could not be reached for comment.
Wang's mother, a 61-year old museum researcher who has no background in law, said she would be in court to help defend her son against some of the charges.
Wang's family earlier found a lawyer willing to defend the former student leader on most of the charges after being given just one day in which to do so.
""As for family members, only Wang Dan's father and his sister will be able to attend,"" she said, adding she hoped the court would judge her son based on the facts of the case.
""I'm hoping the trial outcome will go according to the facts and the law, and that Wang Dan will be found not guilty,"" she said. ""We'll have to see at the end.""
She said she was doubtful court officials would let her talk to her son before the trial.
""I don't think they'll make such arrangements,"" she said, adding that court officials had given her no further details about the trial.
Court officials have confirmed that Wang, who vanished into detention in May 1995, has been charged with plotting to overthrow the government -- a crime that carries a maximum penalty of death and a minimum of 10 years in prison.
The court has not given further details of the trial but one official has said that Wang could appeal to the Higher People's Court if convicted.
Wang's court appearance would likely be held out of the public eye, as was last year's trial of Wei Jingsheng, the father of China's democracy movement, a political activist said.
In December Wei was sentenced to 14 years in prison for subversion and funding democracy activists.
The court is widely expected to fill the limited number of courtroom seats at Wang's trial with carefully selected people to keep away foreign reporters and fellow dissidents.
Dissidents and foreign reporters were barred from Wei's trial but the cases of both Wei and Wang have drawn worldwide attention and are regularly raised by visiting western politicians.
Wang, 26, has already served four years in prison for counter-revolutionary crimes, or subversion, for his role in pro-democracy demonstrations in Beijing's Tiananmen Square that were crushed by the army in June 1989 with heavy loss of life.
Wang Lingyun has said the dissident has been very calm and was mentally prepared for a harsh sentence, though she has said his health has deteriorated during his detention.
Wang Dan had been active after his parole in 1993, defying persistent police surveillance to join in a daring appeal to communist leaders for the release of all those still in prison for their part in the 1989 protests.
China has in recent months cracked down on its tiny band of remaining dissidents who have not yet fled into exile or been imprisoned.
",43
"A U.S. defence team found human remains and parts of an American bomber on Tuesday after making its way up a steep mountain slope in southwestern China to inspect a recently found World War Two crash site.
The officials clawed their way up the slippery, granite face of Maoer mountain in Guangxi province and pronounced the mission a success despite the injury in a fall of a U.S. reporter accompanying them.
""We consider this a very successful mission,"" said Alan Liotta, deputy director of the MIA/POW (Missing in Action/Prisoner of War) office under the Department of Defence.
Speaking to reporters in the town of Xingan after returning from the site late on Tuesday, he said findings confirmed information about the fatal crash that occurred on August 31, 1944.
The B-24 bomber with its 10-man crew never returned from a raid on Japanese ships around Taiwan.
""Any step that we can take to bring a case closer to resolution and to provide a family some answers ...indeed gives us some satisfaction,"" Liotta told reporters.
The six-man forensic team from the Department of Defence flew into the Guangxi region on Monday to try to recover remains and learn more about the crash.
Local residents, searching for wild herbs in the region's thick forest, discovered the crash site last October.
U.S. officials first learned of the find when Chinese President Jiang Zemin handed over a video and photographs of the crash site to President Bill Clinton when the two met in Manila last November at the Asia-Pacific Economic Cooperation forum.
Chinese Defence Minister Chi Haotian gave U.S. Secretary of Defence William Perry two dogtags recovered from the site during a meeting in Washington last month.
Chinese authorities will turn over some of the remains later on Wednesday and a formal ceremony is to be held in Beijing on Friday.
The human remains would be taken back to the United States for identification, Liotta said.
The U.S. team's elation at reaching what was left of the bomber was dulled by an injury to Voice of America journalist Stephanie Ho who was knocked unconscious briefly after she slipped 75 metres (yards) down a slope returning from the site.
Ho lost her footing as she made her way across the moss-covered face of the mountain. A doctor at the scene said her injury was not serious but she was taken by ambulance to a hospital in the city of Guilin.
""This was extremely treacherous terrain and a very difficult climb,"" said Liotta.
Journalists who made the trek to the site saw a pile of charred and twisted metal wedged into a narrow crevass on the mountain side. Higher up the slope was a chunk of the plane's fuselage along with part of an engine, also wedged into rock.
""We had a total destruction of the aircraft,"" Liotta said.
Two farmers hunting for wild herbs found the crash site and alerted officials. They will receive 50,000 yuan ($6,000) each as a reward from the state, local authorities said.
U.S. officials said they had made contact with all 10 families of the crewmen aboard the plane.
They also said the site appeared to have been untouched for more than half a century.
""It's no wonder it took 50 years to discover the site,"" said David Rankin, a forensic anthropologist with the Defence Department's Central Identification Laboratory in Hawaii.
""We are truly talking about an extremely remote, isolated area.""
",43
"A U.S. military honour guard on Friday formally took back the remains of U.S. airmen killed in World War Two and sent them on their final journey home.
Chinese officials handed over to U.S. Ambassador James Sasser three black cases containing the remains of the B-24 bomber's crew, who died when their plane hit a steep mountain slope in China's southwestern Guangxi region 52 years ago.
Under a crisp blue winter sky, uniformed men and women from the U.S. Army, Marine Corps and Navy placed the remains in three body-length aluminium cases and covered each with an American flag in a ceremony at Beijing's Capital Airport.
""This ceremony is dedicated to the American servicemen who made contributions and sacrificed their lives to resist fascist aggression,"" said Mei Ping, director of the North American and Oceanian Affairs Office of China's Foreign Ministry.
""The remains of these airmen will now be repatriated to their homeland where they can finally rest in peace,"" Mei said at the ceremony.
The oblong cases were loaded onto a U.S. C-141 Starlifter transport aircraft that was to fly the remains to the Department of Defence's Central Identification Laboratory in Hawaii for identification.
The remains represented more than one person but it was still unknown how many individuals they belonged to, said Alan Liotta of the MIA/POW (Missing in Action/Prisoner of War) Office under the Department of Defence.
Chinese and U.S. officials and soldiers saluted the dead airmen as a military dirge drifted across the airport tarmac.
U.S. officials said the mission to recover the remains was part of an ongoing effort by the U.S. and Chinese governments to provide a full accounting of American soldiers lost in regional conflicts.
""After 50 years, we have every reason, between the United States and China, to live in peace and work for peace, security and prosperity of mankind,"" Mei told reporters.
U.S. officials first learned of the find when Chinese President Jiang Zemin handed over a video and photographs of the crash site to President Bill Clinton when the two met in Manila last November at the Asia-Pacific Economic Cooperation forum.
Jiang revealed the find at a time when both Washington and Beijing say ties are improving after plunging early last year.
Two local farmers discovered the wreckage of the aircraft last October after becoming lost while looking for wild herbs.
The B-24 bomber with its 10-man crew never returned to its base in Guangxi after completing a raid on Japanese ships around Taiwan on August 31, 1944.
A six-man forensic team from the Department of Defence that clawed its way up the steep, slippery face of Mao'er mountain on Tuesday to inspect the crash site found more human remains and parts of the bomber.
U.S. officials said they had made contact with all 10 families of the crewmen aboard the plane. They said the site appeared to have been untouched for more than half a century.
",43
"Archer Daniels Midland Co. Monday said it agreed to plead guilty to two counts of federal charges of price fixing in the sale of agricultural products and to pay record fines totaling $100 million.
Under the agreement, which is subject to court approval, ADM will pay $70 million to settle a charge of fixing prices for lysine, a feed additive for livestock, and $30 million in connection with citric acid, a food and beverage additive.
While the $100 million in fines were the largest ever in a criminal antitrust action, they will have only a minimal financial impact on the Decatur, Ill.-based agricultural products giant.
""This is not going to affect their balance sheet in any meaningful way,"" said NatWest Securities analyst David Nelson.
ADM has about $1.3 billion in cash and short-term securities on hand and another $1.1 billion in long-term securities it could sell if it needed to, analysts said.
But the settlement left unclear the fate of two top ADM executives who had been expected to face indictments in the government's four-year investigation of price-fixing for the food additives.
In a statement, ADM did not mention Vice Chairman Michael Andreas or Terrance Wilson, a group vice president in charge of corn refining. The additives are derived from corn.
ADM had said in a proxy statement that indictments in the lysine probe were being considered against Wilson and Andreas, the son of ADM Chairman Dwayne Andreas.
""That's intriguing, that there is no mention (of) the individuals,"" said antitrust attorney Joe Sims, a partner in the Washington office of Jones, Day, Reavis & Pogue who is not involved in the ADM antitrust case.
Sims called the wording of ADM's statement ""ambiguous.""
A government source said the Justice Department's antitrust investigation was ""ongoing."" Department officials declined to comment.
ADM did not return a phone call requesting comment on the status of possible indictments against the executives.
In its statement, ADM said the agreement brought an end to the government probe into ""alleged misconduct"" by the company, including its practices in the market for high-fructose corn syrup, a widely used sweetener that is one of ADM's most important products.
Analysts said the high-fructose corn syrup case could have been the biggest potential liabilty for ADM, given the size of that market. ADM previously settled civil cases brought by its customers and agreed to pay $25 million in the lysine case and $35 million to buyers of its citric acid.
A civil case brought by high-fructose corn syrup customers is pending.
""The important news here is just that the criminal investigation is behind them,"" said Bonnie Wittenburg, an analyst at Dain Bosworth, a Minneapolis-based brokerage.
Investors reacted positively to the settlement and sent ADM shares up 75 cents to $21.375 on the New York Stock Exchange, a 52-week high.
The federal probe of alleged price-fixing in the food and feed additive markets was first disclosed by ADM in June 1995. At that time, ADM said it was subpoenaed for documents and testimony as part of a probe of the lysine, citric acid and high-fructose corn syrup markets.
A former ADM executive, Mark Whitacre, acted as a government informant for about three years in the investigation. Whitacre, who was president of ADM's BioProducts Division, was fired in August 1995 when the company accused him of stealing $9.5 million.
Whitacre has denied those charges and has said he plans to file a wrongful dismissal lawsuit against ADM.
ADM said the plea agreement resulted from negotiations between Justice Department officials and a special committee of seven independent board members.
ADM said the special committee was created in 1995 to respond to the department's investigation into ADM's alleged anti-competitive activity and related civil litigation.
Analysts also said the fate of Michael Andreas was not expected to impact the succession at ADM. ""That issue was settled a long time ago. Mick is not a successor,"" said George Dahlman at Piper Jaffray, a Minneapolis-based brokerage, referring to Michael Andreas.
In an interview in January, Dwayne Andreas said he believed there were eight people who might succeed him some day, including his son. But he said at the time there was no succession plan at the company. ADM's proxy statement lists Dwayne Andreas' age at 78.
",36
"Quaker Oats Co. said Thursday its profits more than doubled in the latest quarter despite a drop in sales due to lower prices for breakfast cereals and heavy spending on its struggling Snapple beverage line.
Concerns over Snapple, which Quaker bought nearly two years ago for $1.7 billion, sent the company's stock down $1.75 to $34.625 on the New York Stock Exchange.
""The stock is declining because they didn't announce any restructuring in Snapple, and some people had speculated they would,"" said William Leach, analyst at Donaldson, Lufkin and Jenrette.
Overall, Quaker Oats reported net income for the third quarter of $133 million, or 98 cents a share, up from $61.5 million, or 45 cents per share, last year. The latest's quarter's results, however, included a $133.6 million pretax gain on the sale of its frozen foods business and $23 million in pretax restructuring charges.
Excluding these factors, Quaker's third quarter net income was 53 cents a share, which was well above Wall Street estimates of 46 cents a share, according to First Call, which tracks analysts' estimates.
Chairman William William Smithburg said Snapple was expected to report an operating loss for 1996.
""Clearly, the biggest challenge facing the company is Snapple's disappointing performance,"" Smithburg said. ""The integrated sampling and advertising campaign that ended in mid-September generated some excitement behind the brand this summer, but we're still disappointed.""
While he declined to give a specific projection, he said the 1996 operating loss for Snapple likely will be narrower than the loss it reported in 1995, although the business will not generate a profit.
Excluding goodwill and other charges, Snapple's loss for 1995 was about $6 million, according to analysts' estimates.
Smithburg said Quaker executives believe Snapple can show a cash profit, which is the goal for next year. He added that results for Snapple could improve next year, even if sales volume were flat.
Quaker said several alternatives were being considered for Snapple. Those options include making Snapple into a regional brand or perhaps selling the beverage operations.
The company said its overall third-quarter sales slipped to $1.44 billion from last year's $1.55 billion, which included $72.3 million in sales from divested businesses.
Total beverage sales fell 11 percent to $593.4 million, while beverage operating income dropped 43 percent to $34.0 million. In the United States and Canada, beverage income was $57.5 million, excluding a $16.6 million restructuring charge, down 15 percent from last year.
Quaker said Gatorade sports drink, the company's single best-selling brand, had a 20 percent rise in operating profit in North America.
Despite an unseasonably cool summer, which hurt sales of the drink, Gatorade is having another good year, Smithburg said in a teleconference.
U.S. sales of Gatorade will hit about $1 billion by the end of October, compared with sales of just over $1 billion for all 1995. That is ""kind of an important milestone for us,"" Smithburg said.
Quaker said U.S. and Canadian foods' operating income of $92.6 million, excluding a $6.4 million restructuring charge, was up 7 percent from last year. These profits rose in spite of price decreases in ready-to-eat cereals.
Smithburg said Quaker's ready-to-eat cereals, such as Life and Cap'n Crunch, had a 14 percent rise in volume in the third quarter. Value-priced bagged cereals, which carry the Quaker name, are growing at more than 20 pecent.
The company said North American foods sales increased 2 percent to $687.3 million. International foods sales rose 9 percent to $152.9 million, with increases in Latin America, Europe and the Pacific. International foods operating income was $2.8 million, down from $3.7 million.
",36
"Conseco Inc's $477 million planned purchase of Pioneer Financial Services Inc, its seventh acquisition announced this year, is aimed at building the company's product offerings for senior citizens.
Conseco is already among the leading providers of supplemental health insurance, retirement annuities and life insurance for consumers aged 40 and older, analysts said.
""The (aged) 65-plus consumer is a key part of the current marketplace and also a rapidly growing piece of that 40-plus marketplace,"" added James Rosensteele, Conseco spokesman.  
For Pioneer, a health and life insurance company based in Schaumburg, Ill., its agreement to join forces with Conseco reflects continued consolidation in the industry.
""With the consolidation that's going on in the industry, you're going to have to be a mega-company to have the greatest efficiency and the greatest value to the customer,"" EVEREN analyst Frederick Sandburg said.
That consolidation is apparent in Conseco's track record of completing 16 acquisitions involving a total of 29 insurance companies since 1982.  
In the latest deal, Pioneer shareholders will receive a fraction of a Conseco share worth $25 to $28 for each Pioneer share held.
Rosensteele said earnings from Pioneer operations will more than offset the dilutive effect of the Conseco shares to be issued in the deal. Conseco said previously it expects Pioneer to add about $0.15 per fully diluted share to its operating earnings in the first year.
Pioneer shares were up 5-7/8 at 24-7/8 at mid-day on Monday, and Conseco shares were up 2-1/8 at 61-5/8.  
Rosensteele said that while acquisitions continue to be a part of Conseco's strategy, roughly half of the growth of its assets has been from new business generated by companies after they have been purchased.
Conseco said it would have $29 billion of assets and $32 billion of investments under management after completion of the Pioneer acquisition and other deals.
Beyond the portfolio of policies, the Pioneer acquisition also will add to Conseco's marketing efforts, particularly to senior citizens, analysts said.  Pioneer has 90,000 agents, in addition to Conseco's 90,000 independent and career agents.  
""It really helps them (Conseco) in distribution capability,"" Dean Witter analyst Michael Lewis said.
Through its Bankers Life and Casualty unit, Conseco sells to senior citizens through career insurance agents.
((Reuters Chicago Newsdesk (312) 408-8787))
",36
"The burger battle will stay hot next year as fast-food chains test new recipes and cook up promotions to draw more customers into their eateries -- and away from each other.
McDonald's Corp. dominates the landscape with about 12,000 U.S. restaurants and more than 20,000 worldwide. But in spite of a new menu, its U.S. same-store sales, measuring sales from restaurants open at least a year, have been shrinking.
""This will be their sixth consecutive quarter of lower comps (same store sales) in the U.S.,"" Dean Witter analyst David Adelman said, referring to the fourth quarter of 1996.
Wendy's International Inc., on the other hand, has seen U.S. same store sales rise 5 percent to 6 percent in the fourth quarter, following an 8 percent gain in the third quarter. Spokesman Denny Lynch declined to comment.
""Wendy's..., although their margins have been squeezed, has the best traffic of the big three,"" said Roger Lipton of Lipton Financial Services.
Wendy's has about 4,425 U.S. restaurants and 4,925 worldwide.
Burger King, a unit of Grand Metropolitan Plc, said its U.S. same-store sales rose 2.6 percent for fiscal 1996 ended Sept. 30.
Burger King had 8,696 restaurants worldwide at the end of fiscal 1996, including more than 6,600 in the United States.
At this point, Wendy's may have the most significant new product offering in 1997, fresh pita sandwichs containing grilled chicken and salads. They are being tested in 11 U.S. markets and may be rolled out nationally next year, analysts said.
""It's being given very serious consideration,"" Lynch said of pita sandwiches. ""We're very pleased with the test.""
Adelman said he expected the pita sandwich to be launched in the United States later in 1997, adding, ""That's going to be a material event for (Wendy's).""
In 1996, McDonald's stole the menu spotlight by introducing its Arch Deluxe hamburger, garnished with lettuce, tomato and a mustard-mayonnaise sauce, as well new chicken and fish deluxe sandwiches.
In spite of those new menu items, McDonald's same store sales continue to show declines compared with a year ago.
McDonald's U.S. same store sales were down in the first nine months of 1996, spokesman Chuck Ebeling said, but declined to comment on the fourth quarter.
McDonald's has blamed the drop in its U.S. same store sales in part on an intensely competitive domestic market.
Looking ahead, analysts said the most significant event for McDonald's likely will be the start of its 10-year exclusive marketing alliance with Walt Disney Co. That alliance gives McDonald's exclusive rights to marketing tie-ins, such as toy giveaways, to Disney movies.
Ebeling said the Disney alliance will be the ""centerpiece"" of McDonald's marketing efforts, ""but not the only thing.""
As for its menu, Ebeling said McDonald's will continue to focus on ""delivering great food taste,"" but did not comment on new items.
",36
"McDonald's Corp. said Tuesday it created a new position of chairman of its U.S. operations, in a move analysts said was sparked by intense competition and soft sales from existing stores in the domestic market.
McDonald's named Jack Greenberg, 54, to the new post of chairman, McDonald's U.S.A. He remains vice chairman of the Oak Brook, Ill.-based company, but will relinquish the chief financial officer post.
Greenberg will continue to report to Michael Quinlan, McDonald's chairman.
""The signal they are trying to send is, 'we clearly recognise that we have problems in the U.S. and we are going to do something about it',"" NatWest Securities analyst Damon Brundage said of Greenberg's appointment.
Reflecting the mature and intensely competitive U.S. market, analysts said they expected McDonald's third-quarter same store sales will be down compared with a year ago. Same store data measure sales from units open at least a year.
""They have not had a single positive month in the U.S. this year,"" Brundage said of its same store sales. McDonald's does not disclose its same store sales.
""Margins have been under pressure for over a year in the U.S.,"" added Schroder Wertheim analyst Wayne Daniels.
Greenberg's new post indicates that McDonald's was not pleased with the direction of its domestic business, Daniels said. ""They are trying to shake things up and put a little more focus on being aggressive in responding to the competition,"" he added.
The company has been introducing new offerings such as its Arch Deluxe hamburger earlier this year and the recent launch of Deluxe Grilled Chicken, Fish Filet and Crispy Chicken sandwiches.
McDonald's said Greenberg's appointment was aimed at strengthening U.S. management.
""While these changes are evolutionary, they will bring more management firepower where we need it, both for the short and long-term,"" Quinlan said in a statement.
As part of the management changes, Edward Rensi, McDonald's U.S.A president, will report to Greenberg. But Greenberg was quick to say he and Rensi have a good working relationship.
""Ed and I are good friends. We work well together. He's very enthusiastic about this,"" Greenberg said in a telephone interview. ""We all want this business to do well.""
Despite the pressure in the United States, McDonald's international business, which accounts for more than half of its operating income, continues to be strong, analysts said.
""International is a wide-open growth opportunity for McDonald's,"" Daniels said.
International profit growth is expected to contribute to an expected 12 percent gain in earnings for McDonald's overall in the third quarter, according to analyst estimates.
Given the intense competition between McDonald's, Wendy's International Inc. and Grand Metropolitan Plc.'s Burger King, Greenberg faces a tough job as head of the U.S. operations, analysts said.
""He is going to parachute into ... what looks to be one of the most challenging operating roles in the U.S. fast-food restaurant business,"" Brundage said.
Greenberg, 54, said he believed McDonald's was well positioned to compete in the domestic market.
""We've got more locations than anybody else. We've got the most powerful brand in the world... We've got the largest marketing budget. We've got enormous purchasing power,"" he added.
McDonald's operates more than 19,200 restaurants worldwide, including about 12,000 in the United States.
While Greenberg joined McDonald's in 1982 as chief financial officer, he said he has field experience with its restaurants. ""I spent a year in the field in restaurants and became a regional manager for a year as well,"" Greenberg said.
In other management moves, McDonald's also named Michael Conley, currently senior vice president and controller, as chief financial officer, succeeding Greenberg.
",36
"Quaker Oats Co. is looking to shed its Snapple beverage business and, in the process, may also end up selling the Gatorade sports drink line, its single largest brand, analysts said Friday.
""I think it's up for sale,"" Prudential Securities analyst John McMillin said of Quaker's beverage division.
Speculation that Quaker may get rid of Snapple, which has posted operating losses since it was purchased for $1.8 billion two years ago, boosted Quaker's stock, which gained $1.50 to $37.50 in early afternoon trading on on the New York Stock Exchange.
""We've been saying since this summer that there was a high probability that Quaker would pursue a restructuring, and beyond just Snapple,"" CS First Boston analyst Michael Mauboussin said.
He said that a possible restructuring at Quaker likely would include selling some assets, which Mauboussin said were currently under-valued.
""Gatorade being the crown jewel, clearly,"" he added.
Rumors regarding an outright purchase of Quaker or various parts of its businesses have swirled around the Chicago-based company for about three years. Quaker has consistently declined to comment on any speculation.
""I will simply tell you that it is our policy not to comment on rumors and speculation,"" Quaker spokesman Ronald Bottrell said Friday.
The speculation gained credibility, analysts said, when the Wall Street Journal reported Friday that Quaker might sell Gatorade and Snapple, with prices quoted between $3 billion and $4 billion.
""I would have said (the chance of Quaker selling its beverage business was) less than 50-50 before I read the article,"" BT Securities analyst John O'Neil said. ""But I think if somebody offers them $4 billion ... they have to take it.""
The Wall Street Journal said the most likely buyers for Quaker's beverage business were said to be Procter & Gamble Co. and PepsiCo Inc..
PepsiCo also declined to comment.
""We have a long standing policy of not commenting on rumors,"" said Richard Detwiler, director of public relations for PepsiCo.
If Quaker sold its beverage businesses, its food businesses, including oatmeal, ready-to-eat cereal and pasta and rice dishes, could also attract buyers, analysts said.
The Wall Street Journal said Philip Morris Cos. Inc. might be interested in buying some of Quaker's food brands to bolster its Kraft Foods operation.
A Kraft spokesman did not return a call seeking comment.
It had been widely anticipated that Quaker would scale back Snapple to a regional brand, spin it off or sell it.
Quaker management, however, said earlier this year that Snapple's fruit-flavored and iced tea beverage business would remain a national brand.
""What he (Chairman William Smithburg) has been saying does not indicate that he is looking to sell the business right now,"" O'Neil of BT Securities said. ""But he always comments that he will act to increase shareholder value.""
Smith Barney analyst David Rabinowitz said selling off Quaker's businesses may yield the highest return to shareholders on a short-term basis. But ""it doesn't have to happen,"" Rabinowitz said.
Analysts have said previously that they expected Quaker to write off additional goodwill for Snapple, which would be a non-cash charge.
The company said in a recent Securities and Exchange Commission filing that it will review Snapple for a possible charge to reduce its carrying value.
-- Reuters Chicago Newsdesk (312) 408-8787
",36
"McDonnell Douglas Corp. Friday announced the sudden resignation of the head of its aerospace business, Herbert Lanese, sparking speculation that disagreements over cost-cutting tactics might have hastened his departure.
Lanese, who joined the aircraft and aerospace firm in 1989 as senior vice president of finance, left the firm in an apparent disagreement with President Harry Stonecipher.
""Although Herb and I were in total agreeemtn regarding business objectives and strategy, we had sharp differences involving management and leadership styles,"" Stonecipher said in a statement. ""After two years of working together, it became obvious to me that these differences could not be reconciled.""
Merrill Lynch analyst Byron Callan called Lanese's departure ""a bolt out of the blue.""
""Herb had been tasked with reducing costs at McDonnell Douglas at the military aircraft business,"" Callan said. ""It may well have been (a dispute over) how do you go about doing that.""
Lanese, who became president of McDonnell Douglas Aerospace in March, 1996, after serving as deputy president since July 1995, had a difficult job from the start, analysts said. His focus on cost-cutting meant he had to tackle the thorny issue of reducing employment.
""When well over 50 percent of your costs are people, cost-cutting is a euphemism for cutting people,"" PaineWebber analyst John Modzelewski said. ""It's the hardest thing that you can do.""
Job security became the crux of labor troubles at McDonnell Douglas, with a strike by the International Association of Machinists that lasted from June 5 until Sept. 11 of this year.
Cost-cutting is ""where his (Lanese's) expertise lay with the company,"" said Mike Schoen, assistant director of business at District 837 of the Machinists union. ""And we weren't ready to be cut corners on.""
Slashing costs and raising capital, however, were hallmarks of Lanese's career when he was chief financial officer of McDonnell Douglas. Analysts credited him with a financial turnaround, which included raising cash and slashing debt, that led to record earnings.
""Singlehandedly, he was the person that I think was majorly responsible for the change in McDonnell Douglas,"" Modzelewski said.
",36
"Nalco Chemical Co Chairman Ted Mooney said he is comfortable with analysts' estimates for fourth quarter earnings from continuing operations of $0.50 to $0.51 per fully diluted share, up from $0.45 from continuing operations a year ago.
""We're comfortable with that,"" Mooney said in a telephone interview.  
Looking ahead, the water treatment and process chemicals company expects to increase earnings by a double-digit rate.
""Our overall goal is to grow double-digit, and we certainly think we can do that many more years than not,"" Mooney said. ""Next year, we don't see as atypical as yet.""
Earlier this week, Nalco reported third quarter earnings of $0.52 per fully diluted share from continuing operations, up 16 percent from $0.45 a year ago.
To increase its business, which is roughly equally divided between water treatment and process chemicals, Nalco will continue to make strategic acquisitions, Mooney said.  
Earlier today, Nalco, based in Naperville, Ill., agreed to acquire Nutmeg Technologies Inc, a Connecticut-based water treatment company with $9 million in annual sales.
""They (Nutmeg) are operating in an area that is growing rapidly and also have some very fine people,"" Mooney said.
Technical personnel in the water treatment business are a key asset given the range of customers served, from manufacturers to hospitals. Nalco's technology treats both water intake as well as water that is discharged.
Nalco also provides process chemicals to a variety of industries, such as paper-making.  
Nalco is also split in half between the United States and foreign markets, currently operating in about 20 countries.
With a global presence, Nalco, with about $1.4 billion in annual sales, is able to pursue opportunities wherever they arise, Mooney said. One down side, however, is that such globalization also makes it suspectible to regional economic downturns.  
For example, Nalco's European division, which accounts for 25 percent of its foreign business, faces tough economic conditions there. And as a U.S. company, Nalco's European profits suffer when converted into a stronger U.S. dollar.
""We are growing in dollar terms, if at all, very slowly in Europe right now,"" Mooney said.
Balancing that weakness in Europe, Nalco is growing by about double-digits in the United States, which accounts for about half the business.  
Nalco's business in the Asia/Pacific market, which accounts for 12 to 13 percent of company revenue, currently is growing at 15 to 20 percent. In Latin America, which also accounts for 12 to 13 percent of Nalco's business, growth is running at 15 to 20 percent, Mooney said.
""Wherever in the world it is, we'll go after that opportunity,"" Mooney said.
Reuters Chicago Newsdesk - 312-408-8787
",36
"Monsanto Co. said Thursday it is considering several options for the future, including splitting into two separate, publicly traded corporations -- one a life sciences company and one a chemical business.
Other options being weighed by the St. Louis-based company are to sell or merge its chemical businesses with other firms or to keep the chemical operations and restructure them.
""In recent years, the strategies and needs of the chemical and life sciences businesses have become quite different,"" Chairman Robert Shapiro said in a statement.
Wall Street applauded the possible sale or spin-off of the chemical business, which had been expected, sending Monsanto's stock to a new 52-week high of $42.75 early in the day. The shares later traded at $42, up $1.375.
Analysts said Monsanto's life science businesses -- including agricultural chemicals, biotechnology, food additives and pharmaceuticals -- likely would have a higher valuation as a separate company than if Monsanto remained intact.
""The key here is that the chemical business does not have the growth potential as the ag-biotech and the ag-chemical and the drug component could,"" NatWest Securities analyst Mark Wiltamuth said.
Monsanto Chief Economist Nicholas Filippello said in a telephone interview that no options for the chemical operations had been ruled out.
He added that a decision was expected to be made as soon as possible, but did not give a timeframe. ""As soon as practical,"" he said.
Monsanto had been expected to shed its chemical businesses, which are affected by economic cycles and the price of commodity raw materials, since the sale late last year of its worldwide styrenics plastics business.
In recent months, it has been the strength of Monsanto's agricultural business that has propelled the stock upward.
Spinning off the chemical businesses as a separate company was the option that most analysts favoured, since it would not have the tax implication of an outright sale.
""I would say the chances of keeping it (chemicals) and restructuring it are pretty slim,"" Dain Bosworth analyst Bonnie Wittenburg said.
The chemical businesses that may be sold or spun off include nylon and acrylic fibers, Saflex plastic interlayer, which is sold to glass manufacturers, and speciality chemicals.
""The chemical operations ... would be very viable as a standalone company,"" said NatWest analyst Andrew Cash.
Cash said Monsanto's acrylic fiber, nylon and Saflex businesses have limited competition in the United States and very favourable cost structures.
""It would be a focused company with good technology ... and a lot of interest in the assets from a stock market perspective, if they choose to spin it off,"" Cash said.
However, agricultural chemicals would remain as one of the crown jewels of the life sciences division.
Monsanto's popular Roundup weed killer is key to Monsanto's agricultural biotechnology business. The company has developed crops that are genetically altered to resist Roundup.
The life science operations also would include food additives and Monsanto's G.D. Searle pharmaceutical division. In a recent report, NatWest said it expected Monsanto to keep Searle, which some analysts previously thought would be sold.
In 1995 Monsanto's chemical sales of $3.69 billion accounted for about 40 percent of the company's total sales of $8.96 billion. The chemical businesses' operating profit of $357 million was 30 percent of the total profit of $1.17 billion.
In contrast, agricultural profit of $523 million accounted for nearly 45 percent of the total.
",36
"Morton International Inc., the maker of Morton Salt, has gained a key European presence for two of its businesses due to planned acquisitions, its chairman said Thursday, and is likely to expand there with further purchases.
""We're prepared to look at specialty chemical investments anywhere in the world. There are more opportunities in Europe and Asia than in the U.S. right now,"" Morton Chairman S. Jay Stewart said in an interview.
Earlier this week, Morton said it plans to acquire Italian powder coatings company Pulverlac Spa and French salt company, Compagnie des Salins du Midi et des Salines de l'Est.
Morton International's major product is Morton Salt, known for the signature phrase, ""When it rains, it pours.""
""We had been looking for an opportunity to get a reasonably significant powder coatings base in Europe,"" Stewart said of the Pulverlac agreement.
Morton has other specialty chemicals operations overseas, including making packaging adhesives in Italy and the Netherlands.
Stewart said he saw good demand growth for powder coatings, which are now applied to metal parts for protection and coloration. That demand could expand greatly in the future if use of these coatings expands to plastics and wood, he added.
Morton said Pulverlac will join Morton's North American coatings business and the combined operations will have sales of more than $200 million.
Morton's total sales for fiscal 1996, ended June 30, were $3.3 billion, including $1.6 billion in specialty chemicals sales.
""The acquistion of Pulverlac is very much consistent with the company's focus on growing its specialty chemical operations,"" William Blair analyst Robert Bartels said.
Morton also established a European presence in its core salt business with a definitive agreement to acquire two-thirds of Salins du Midi for about $195 million. Morton said it will make a public cash tender offer in France for the remaining shares of Salins du Midi, bringing the total price to about $290 million.
Salins du Midi, with estimated 1996 sales of almost $270 million, will join Morton's salt group, resulting in combined sales of $870 million.
Salins du Midi, headquartered in Paris, supplies salt for food and agricultural products, water treatment, de-icing and industrial applications. Salins produces salt at nine sites in France and four in Spain.
Morton operates 22 salt facilities in the United States, Canada and the on the Island of Inagua in the Bahamas.
Stewart said the acquisitions are expected to close in the third or fourth quarters of fiscal 1997, which ends in June. The acquisitions are expected to add modestly to earnings in the first year of operation, which would be fiscal 1998, and then contribute more significantly a few years later.
Looking ahead, Stewart said specialty chemicals remains ""a priority"" for making acquisitions.
Morton is growing its salt and specialty chemicals businesses as it moves ahead with plans to merge its auto airbag business with Autoliv AB of Sweden. That merger is expected to be completed in calendar 1997.
Stewart said the current debate over potential safety hazards from airbags, which critics say may harm children and smaller adults, underscores what he saw as the value of the business combination.
The combined company would make not only airbags but also car passenger restraints, enabling it to capitalize on whatever safety systems are employed in the future, Stewart said.
",36
"Former Archer Daniels Midland Co. executive Mark Whitacre said Tuesday he was no longer cooperating with the U.S. government in its price-fixing probe, adding yet another wrinkle to the complex antitrust case.
Whitacre, a government informant for about three years in the federal investigation of his former employer, was indicted Tuesday along with two other ex-ADM executives for conspiring to fix prices of the feed additive lysine.
Also indicted were Michael Andreas, former executive vice president and vice chairman of ADM, and Terrance Wilson, a former group vice president. Michael Andreas is also the son of ADM Chairman Dwayne Andreas.
""I have decided not to participate in the government's coverup any longer,"" Whitacre told Reuters.
Asked to comment on the indictment against him, Whitacre said, ""I have no comment other than when all the evidence comes out in this case, the only people that will have questions yet to answer will be the Justice Department and the FBI (Federal Bureau of Investigation) itself.""
The Justice Department did not respond to Whitacre's statement.
Legal experts said it was common for federal informants and cooperative witnesses to be indicted, though they often receive lenient treatment and light sentences in return for their cooperation.
""If the informant got too good a deal, it would diminish his credibility,"" said James Shapiro, a former assistant U.S. Attorney in Chicago who has no direct knowledge of the case involving ADM and Whitacre.
Whitacre's decision to stop cooperating with the government could jeopardise his treatment by the Justice Department. But antitrust attorney Champ Davis of the Chicago firm Davis, Mannix and McGrath, said Whitacre's previous cooperation could still be taken into consideration.
""He can argue, I think, that he was cooperative up to a point,"" said Davis, who is not involved in the ADM case. ""(That) is a factor that ought to be taken into account.""
By no longer cooperating -- and presumably not agreeing to testify on behalf of the government in upcoming trials against the defendants -- Whitacre could weaken the government's case somewhat, legal experts said.
""It would weaken the government's case (against Michael Andreas and Wilson) to some extent, not to have the guy who made the tapes to interpret them,"" Shapiro said.
While he was cooperating with federal investigators, Whitacre had said that he made hundreds of tape recordings of ADM executives allegedly in price-fixing discussions.
But the government's case was unlikely to be derailed since the tapes still could be used, Shapiro said.
In October, 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 also agreed to pay a $100 million fine.
A lawsuit Whitacre filed against his former employer in November stated that the government's case against ADM was based ""in large part upon the information obtained from Whitacre.""
Whitacre gave no further reasons for his decision to stop cooperating with the government. But he has been involved in several legal tangles since the ADM price-fixing probe first came to light in June 1995.
In August 1995, ADM fired Whitacre, who had been head of its BioProducts division, for allegedly stealing $9 million from the company. Whitacre has denied those charges, saying the money allegedly involved off-the-books bonuses that he received that were approved by company management.
ADM has sued Whitacre over the $9 million. Whitacre filed a wrongful dismissal suit last month against ADM.
The Justice Department has been conducting a separate investigation into the money that Whitacre received and allegations of off-the-books payments by ADM.
",36
"Monsanto Co, which produces genetically altered soybeans, on Wednesday defended the scientific tests that back its safety claims for the crop.
""We did something like 1,800 tests to evaluate those soybeans,"" said Karen Marshall, manager of public affairs for Monsanto. ""These soybeans are absolutely safe.""
The environmental group Greenpeace has continued to protest the genetically altered soybeans and has criticized  Monsanto for allegedly not testing the biotech crop for exposure to the herbicide Roundup.  
Monsanto's genetically altered Roundup Ready soybeans are resistant to the Roundup herbicide, allowing farmers to spray Roundup on the fields to kill weeds without harming the crop.
But use of Roundup to kill weeds could result in residue on the harvested soybeans.
Marshall of Monsanto, however, said Roundup residue is not an issue since tolerance levels for the herbicide had been previously established and did not need to be established by testing.
Therefore, Monsanto's testing of biotech crop focused on genetic alteration.  
""What we figured would be the new piece of information was the one protein that we added to the plant, itself,"" she said.
Marshall said Roundup Ready soybeans have been reviewed and approved by regulatory bodies in Argentina, Mexico, Canada, Japan, the European Union and United States.
She added that Roundup Ready soybeans have also received food safety approvals in the United Kingdom, the Netherlands and most recently Denmark, and are under consideration in Switzerland.
Merrill Lynch analyst Douglas Groh said that while concerns about the Roundup Ready soybeans must be addressed, he does not expect any impediments to market the crops.
""In some form or fashion, Monsanto will be able to commercialize the work that they've done,"" said Groh, who focuses on agribusiness and biotech companies.
He added that residue on the soybean crop should not be an issue since Roundup breaks down over time to ""environmentally benign"" substances that do not pose a threat.
Reuters Chicago Newsdesk (312) 408-8787
",36
"Competitive pressures in the U.S. cereal market are expected to put a crunch on earnings for two companies -- one the branded leader and the other the largest maker of private-label cereals.
Analysts said Kellogg Co, the largest U.S. cereal maker, is expected to report flat fourth quarter earnings, although it may be able to eke out a rise of a penny or two.
Ralcorp Holdings Inc, which makes private-label -- or store brand -- cereal, is expected to report lower earnings for its fiscal first quarter, analysts added.
In both cases, earnings are pressured by price cuts and promotions in the intensely competitive U.S. cereal market.
Kellogg has seen its market share decline recently in the face of heavy promotions by its rival, General Mills Inc . General Mills last month reported an increase in its fiscal second quarter earnings to $1.00 a share from $0.92.
""(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.
She added Kellogg's market share appeared to have risen somewhat in December as it increased promotions.
Among the other food companies reporting quarterly earnings, poor pork and beef margins are expected to hurt fourth quarter earnings for meat processor IBP Inc.
""IBP will have down earnings, how far down we don't know,"" Piper Jaffray analyst George Dahlman said.
Quaker Oats Co is expected to report an operating profit for the fourth quarter compared with a year ago operating loss. Quaker, however, is expected to take a charge in the fourth quarter to reduce the carrying 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 Snapple for a possible charge to reduce the carrying value. A Quaker spokesman declined to comment on the possibility of a charge in the fourth quarter.
Sara Lee Corp is expected to report a double-digit earnings increase for its fiscal second quarter, with the biggest improvement in its meat and bakery division, said Donaldson, Lufkin and Jenrette analyst William Leach.
Analysts said CPC International Inc is expected to report a smaller than typical rise in its quarterly earnings, due to the previously reported impact of high corn costs.
Company     Qtr     First Call Mean EPS Estimate   Yr-Ago EPS
CPC Int'l   Q4		   $1.08			$1.02
IBP Inc     Q4		   $0.29			$0.59
Kellogg     Q4		   $0.77			$0.77
Quaker Oats Q4	  profit $0.12		loss  $0.18
Ralcorp     Q1		   $0.20*		     $0.46
Sara Lee    Q2		   $0.63			$0.55
*Ralcorp estimate based on analysts contacted by Reuters, not First Call
((Reuters Chicago Newsdesk (312) 408-8787))
",36
"American Trans Air (ATA), which recently announced plans to cut back its jet capacity and some scheduled service, expects to forge additional alliances with other air carriers.
""We clearly think that code-sharing is an opportunity for this company to expand the markets in which it can participate,"" Kenneth Wolff, chief financial officer of Amtran Inc, parent of ATA, said in a telephone interview Wednesday.
In late May, ATA and Chicago Express Airlines agreed to a code-sharing agreement.  
Under these agreements, the airlines put their codes on each other's flights in computerized reservation systems.
""In general, it has exceeded our expectations, although this was a relationship which we both went into expecting some good things,"" Stanley Pace, president of the Indianapolis-based company, said of the alliance with Chicago Express. ""The benefits have been much more substantial than we both thought they would be.""
Looking ahead, ATA will continue to serve vacation destinations from Indianapolis, Milwaukee and Chicago's Midway Airport with charter and scheduled service.  
But Pace added that expansion of its service will be made more ""thoughtfully"" than in the past when the carrier underwent rapid growth.
In the second quarter, Amtran lost $0.20 a share, compared with a year-ago profit of $0.29, due to aggressive scheduled service expansion that was not as profitable as it had hoped.
ATA said last week it is cutting back some of its scheduled service, particularly from Boston to destinations like Orlando, Fla., and Nassau, Bahamas.
ATA also has said it is reducing lease obligations for Boeing Co 757 jets to boost its operating efficiency.  
These steps are expected to improve Amtran's profitability, although Pace said the next two quarters will be a transition period for the company.
Pace declined to comment on near-term earnings projections. According to First Call, the mean analyst estimate for the third quarter is $0.28, based on a wide range from breakeven to $0.55 a share. A year ago it earned $0.31.
""We're going to strengthen the bottom line fairly quickly over the next two quarters so that we have a solid foundation...to resume deliberate, systematic, thoughtful and profitable growth through 1997 and into 1998,"" Pace said.
Company executives acknowledged that some consumers postponed buying tickets on ATA following the May 11 ValuJet Inc crash in the Florida Everglades.
To allay consumer concerns, Pace said ATA emphasized its safety record of flying 23 years without any serious accidents.
Reuters Chicago Newsdesk - 312-408-8787
",36
"Western Resources Inc said its alliance with natural gas company ONEOK Inc could boost its earnings by $0.10 to $0.15 a share in the first full year of operations.
""We could see earnings be improved by maybe $0.10 or $0.15 a share in the first full year of operation,"" David Wittig, Western Resources president, said in a telephone interview.
The Western Resource-ONEOK alliance is expected to become effective in mid-1997, making calendar 1998 the first full year of operation.  
According to First Call, the consensus earnings estimate for Western Resources is $2.63 a share in 1996, down from $2.71 a year ago.
In addition, Western Resources, which is swapping its natural gas assets in return for about a 45 percent stake in ONEOK as part of the alliance, is expected to see its cash flow increase by $35 million in the first full year.
""The best way to look at this transaction is on a cash basis,"" Wittig said. ""And we expect this transaction to improve our cash flow in the first full year of operations by around $35 million.""  
The alliance also reflects Western Resources' strategy to become a brand-name supplier of electricity and home-security products nationwide, while its natural gas assets become part of a larger, focused gas company.
""They (ONEOK) are a total gas company. They understand the gas business better than we do,"" Wittig said.
In addition, ONEOK's 735,000 gas customers present a marketing potential for Western Resources' electricity and home-security businesses. With ONEOK as a partner, Western Resource hopes to offer gas supplies to customers nationwide.  
Western Resources, based in Topeka, Kan., continues to look for acquisitions to expand its electricity and home security businesses.
Western Resources' planned acquisition of utility Kansas City Power & Light Co is pending. In home security, Western Resources, which holds about a quarter of ADT Ltd, has made five acquisitions related to that business this year, Wittig said.
""Obviously, we're acquisitive,"" he added.
Wittig said electricity and home-security businesses are similar, beyond the common customer base of households.
""You are providing a service on a 24-hour basis,"" he said. ""You are monitoring a home when you are selling electricity (and with home-security services),"" he added.
((Reuters Chicago Newsdesk (312) 408-8787))
",36
"Monsanto Co, which exceeded analysts' expectations for its third quarter, warned analysts not to increase earnings estimates for the full year, according to Nicholas Filippello, chief economist.
""I warned them (analysts) not to increase expectations for the full year,"" Filippello said, adding the First Call mean of analysts' estimates is $1.48 a share, compared with $1.25 a year ago.
""We're urging people not to increase the number,"" he added.  
Earlier, Monsanto reported third quarter earnings of $0.28 a share, up from $0.23 a year ago and above the First Call mean of $0.24.
Filippello said certain factors, including the timing of bulk aspartame sweetener shipments and an adjustment in the full-year tax rate, contributed to third quarter earnings exceeding First Call expectations.
Looking ahead, Filippello said Monsanto continues to weigh options for its chemical business, as reported earlier this month.  One possibility is to spin the chemicals operation off as a separate publicly traded company.  
Or chemicals could be spun off and then merged with another company, Filippello added. The ""spin-off/merger option,"" he said, would be preferrable from a tax standpoint from an outright sale of the chemical operations.
But he said it was too early to speculate which options was likely to take place.  ""I think it's too early to speculate,"" Filippello said.
If Monsanto shed its chemical operations, it would be left with a life sciences business consisting of agricultural products, pharmaceuticals and food ingredients.  
Filippello said Monsanto is considering ways to make food ingredients ""an important part of this life sciences company."" But it remains to be seen how much growth in food ingredients would be accomplished internally or if the company would undertake licensing, partnerships and possible acquisitions, he added.
The life sciences business would include the G.D. Searle pharmaceutical company, which analysts in the past had expected Monsanto to sell.
""There is no interest at this point in selling Searle,"" Filippello said. ""Searle clearly is an appreciating asset at this point...Our expectation at this time is that value is going to continue increase over time.""
Reuters Chicago Newsdesk - 312-408-8787
",36
"Kellogg Co. on Friday reported a drop of more than 30 percent in its third quarter profits as its cereal volume dropped in an intensely competitive market.
Kellogg, which makes Corn Flakes, Frosted Flakes, Rice Krispies, Fruit Loops and Special-K, is fighting back, launching marketing plans for the fourth quarter that are aimed at boosting its sales.
""We'll be taking what we believe are appropriate actions,"" Kellogg spokesman Richard Lovell said.
The company, the world's biggest maker of ready-to-eat breakfast cereals, said its net income for the third quarter fell to $159.5 million, including a $21.3 million charge, from $230 million a year ago. On a per share basis, Kellogg's earnings dropped 29 percent to 75 cents, with fewer shares outstanding, from $1.05 last year.
Kellogg said its overall sales slipped 9 percent to $1.68 billion from $1.84 billion as continued weak prices for breakfast cereals offset a 1 percent gain in worldwide sales volume.
""As previously forecast, our third quarter performance was influenced significantly by competitive conditions in the U.S. cereal category,"" Kellogg Chairman Arnold Langbo said in a statement.
Analysts estimate that Kellogg's domestic cereal sales volume fell 9 percent to 10 percent in the third quarter.
""We can't detail it. It was a challenging quarter in the U.S. and our volume was down,"" Lovell added.
Kellogg said its fourth quarter 1996 earnings likely will show a slight rise from the 77 cents it earned a year ago. First quarter 1997 earnings, however, may not match the 99 cents earned in the 1996 period.
""It's a challenging comparison,"" Lovell said.
Kellogg's stock fell on concern over U.S. cereal sales volume and the outlook for earnings, dropping $1 at $64.50 a share, on the New York Stock Exchange. Earlier, it set a new 52-week low of $64.125.
Kellogg said the U.S. cereal market overall was sluggish, with sales growing about 1.5 percent, measuring grocery stores, mass merchandisers and all other outlets.
Looking ahead, Kellogg refused to outline what promotional programmes it was planning for the fourth quarter.
Analysts said they did not expect the Battle Creek, Mich.-based cereal giant to return to deep-discount coupons or buy-one, get-one-free promotional giveaways.
""It's sort of left to speculation what they're going to do,"" SBC Warburg analyst Chris Jakubik said.
""There is no indication that, at this time, they have shifted from their long-term strategic goal, which is to reduce inefficient promotions,"" added BT Securities analyst John O'Neil.
Kellogg reduced prices on about two-thirds of its breakfast cereals in June. Other major manufacturers also cut prices this year as they battled for market share and tried to jump-start consumer purchases.
But those price cuts alone apparently were not enough to jump-start consumer purchases, according to Smith Barney analyst David Rabinowitz.
""The message there is that prices have to come down further,"" Rabinowitz said.
According to Information Resources data, U.S. ready-to-eat cereal sales in grocery stores fell 1.6 percent to 2.6 billion pounds for the 52 weeks ended Aug. 11, according to the most recent data available, compared with a year earlier.
Kellogg's sales volume declined in that period by 4.1 percent to 881.3 million pounds for a market share of about 34.4 percent, Information Resources said.
",36
"Just days after pleading guilty to price fixing and agreeing to pay $100 million in fines, Archer Daniels Midland Co. lost two key executives Thursday, as the giant agricultural products company remained dogged by controversy.
ADM said Michael Andreas, vice chairman and son of influential Chairman Dwayne Andreas, took a temporary leave, and Terrance Wilson, a vice president in charge of corn refining, retired for medical reasons relating to progressive heart disease.
Michael Andreas and Wilson are being investigated by the Justice Department in connection with a price-fixing scheme.
The Decatur, Ill.-based company, which advertises itself as ""Supermarket to the World,"" has said previously that indictments were being considered against Wilson and Michael Andreas.
On Tuesday, ADM pleaded guilty to two counts of pricing-fixing and agreed to pay $100 million in fines to the federal government, the largest penalty ever in a criminal antritust case.
That day, Deputy Assistant Attorney General Gary Spratling said federal authorities were still gathering evidence in the case involving Wilson and Michael Andreas.
William Leach, an analyst with Donaldson, Lufkin & Jenrette, said some had expected Wilson and Michael Andreas to step down. ""I'd say it's hardly unexpected given the circumstances,"" he said.
The announcement that Michael Andreas was taking leave and Wilson had retired came after the company's shareholder meeting Thursday at its central Illinois headquarters here. No mention of the investigation of the two executives was made by the company during the meeting.
Dwayne Andreas, like other ADM officials who spoke at the meeting, used mostly euphemisms when referring to ADM's guilty pleas to two counts of pricing-fixing and an agreement to pay $100 million in fines to the U.S. government.
""I acknowledge to you that this occurred on my watch as chairman of your company,"" Dwayne Andreas told shareholders at the annual meeting here. ""You have my apology and my commitment that things are arranged so that this will never happen again.""
One of the few direct mentions of the antitrust investigation came in response to a question from Ed Durkin of the United Brotherhood of Carpenters, an institutional shareholder.
Durkin asked why ADM had not notified shareholders officially of its guilty pleas to two counts of price fixing and the $100 million plea. Richard Reising, corporate secretary and general counsel, said the company did not consider it necessary given the amount of publicity the antitrust settlement received.
ADM board member Brian Mulroney, former Prime Minister of Canada, told shareholders the ""consensual resolution"" with the Justice Department was reached after negotiations with the board's special committee of independent directors.
""This has been a terribly unfortunate experience for the company and we as a committee deeply deplore it,"" Mulroney said.""It is our intention to ensure that the company learns from mistakes in the past and acts so that they never happen again,"" Mulroney said.
A proposal requiring the board be composed of a majority of independent directors was defeated, but received 42 percent of the votes cast.
Other shareholder proposals addressing corporate governance issues did not pass. ADM's slate of 12 directors was approved by about 89 percent of the votes cast, the company announced.
The new board, which was reduced in number from 17, was hailed by ADM as a more independent body since Dwayne Andreas is the only company executive remaining on the board.
The antitrust investigation sparked criticism from some large shareholders who questioned the independence of ADM's board of directors and its ability to oversee management.
In a statement released following the meeting, Charles Valdes, chairman of the the California Public Employees Retirement System (Calpers), said ""Calpers will continue to meet with directors and pursue the wishes of shareholders that want a majority of independent directors and increased oversight of the ADM board.""
",36
"Diana Corp said Thursday that its decision to spin off its various business holdings and keep only its Sattel Communications Inc unit should attract analyst coverage of the firm.
""The analysts on Wall Street were not interested in picking up coverage of the company"" because of its diverse holdings, said Sattel spokesman Tony Squeglia.
No analysts actively follow Diana, he said, which in addition to Sattel includes telecommunications equipment distribution and meat and seafood businesses.  
Diana said Thursday it would retain Sattel Communications, which provides telephone and Internet switching equipment, and would change its name to Sattel.
The other businesses -- including Atlanta Provision Co Inc, C&L Communications Inc and Valley Communications Inc -- will be grouped together in a yet-to-be-named company that will trade on the Nasdaq.
Atlanta Provision, a meat and seafood distributor, remains for sale, although a deal is not imminent. ""I know they are in discussions with potential buyers, but there is nothing close,"" Squeglia said.  
After the split, he added, the core businesses of the new company will include Atlanta Provision, which currently accounts for about 80 percent of Diana's total revenues.
Diana's plans to split into two companies follows its announcement earlier this year that it would restructure to make Sattel a pure play, or a primary business focus.
""We did a survey of shareholders and found that many of the shareholders who hold the stock today...bought Diana as a proxy for Sattel,"" Squeglia said in a telephone interview. ""So there's a lot of interest in the one operating unit called Sattel Communications.""  
He reiterated that Sattel, for its fiscal second quarter ended in September, is expected to have roughly $4.0 million in sales and to be modestly profitable. In the fiscal first quarter, Sattel's revenues were roughly $840,000.
The increase in revenues between the first and second quarters reflects recent sales of its DSS switches, which are used in long-distance telecommunications services.
Diana is expected to report results for its second quarter -- which for the entire firm ended in October -- on November 26.
Diana's decision to split into two companies was applauded by the market. Diana's shares traded as high as 41-3/4 Thursday, and were up 3/8 at 37-1/4 late in afternoon trading.
""We're obviously pleased at the way the market has reacted,"" Squeglia said.
Diana shares have traded in a wide range, from a 52-week low of 11-3/4 to a high of 114-1/4. Diana has repeatedly declined to comment on its stock movements.
Reuters Chicago Newsdesk (312) 408-8787
",36
"Facing declining U.S. cereal volumes in an intensely competitive market, Kellogg Co said it is launching promotional programs to boost its sales.
""We'll be taking what we believe are appropriate actions,"" Kellogg spokesman Richard Lovell said Friday.
Kellogg refused to outline what those programs might include. Analysts said they don't expect the cereal giant to return to deep-discount coupons or buy-one, get-one-free promotional giveaways.  
""It's sort of left to speculation what they're going to do,"" SBC Warburg analyst Chris Jakubik said.
""There is no indication that, at this time, they have shifted from their long-term strategic goal, which is to reduce inefficient promotions,"" added BT Securities analyst John O'Neil.
Whatever form the marketing actions take -- perhaps offering additional modest coupons in Sunday newspaper supplements or some form of price promotion -- the programs will be launched in the current fourth quarter.  
Kellogg, like other major cereal makers, cut cereal prices earlier this year in an effort to attract consumers back to the cereal aisle.
But those price cuts alone apparently were not enough to jump-start consumer purchases, according to Smith Barney analyst David Rabinowitz.
""The message there is that prices have to come down further,"" Rabinowitz added.
The drop in U.S. cereal sales contributed to a decline in third quarter operating earnings of $0.85 a share, before a $0.10 charge, compared with $1.05 last year.  
Kellogg's decision to launch promotions follows a decline in its third quarter U.S. cereal sales volume, which analysts estimate at nine to 10 percent.
""We can't detail it. It was a challenging quarter in the U.S. and our volume was down,"" Lovell said.
Kellogg's sales volume declined due to intense competition in the United States, as other producers continued coupons and other promotions in a sluggish cereal market. Kellogg said third quarter U.S. cereal industry sales grew 1.5 percent, measuring all retail outlets.
""As previously forecast, our third quarter performance was influenced significantly by competitive conditions in the U.S. cereal category,"" Arnold Langbo, chairman, said in the third-quarter earnings statement.
According to Information Resources data, U.S. ready-to-eat cereal sales in grocery stores only fell 1.6 percent to 2.6 billion pounds for the 52 weeks ended August 11, according to the most recent data available, compared with a year ago.
Kellogg's sales volume declined in that period by 4.1 percent to 881.3 million pounds for a market share of about 34.4 percent, Information Resources said.
Reuters Chicago Newsdesk - 312-408-8787
",36
"Conseco Inc. said Monday it would buy Pioneer Financial Services Inc., a health and life insurer, for about $417 million in stock, extending its acquisition spree.
Carmel, Ind.-based Conseco will also pay $60 million to retire bank debt and pay other costs, the companies said.
For Conseco, the Pioneer acquisition -- its seventh deal announced this year alone -- is aimed at building its offerings for senior citizens.
Conseco is already among the leading providers of supplemental health insurance, retirement annuities and life insurance for consumers aged 40 and older, analysts said.
""The (aged) 65-plus consumer is a key part of the current marketplace and also a rapidly growing piece of that 40-plus marketplace,"" added James Rosensteele, Conseco spokesman.
The companies said the merger would create the largest distribution organisation selling health and life insurance products in the markets where it operates.
""It's an excellent match,"" Conseco Chairman Stephen Hilbert said in a statement.
Under the transaction, Conseco would use a fraction of a share of its common stock worth $25 to $28, depending on the price in the days before the closing, to buy Pioneer Financial stock. Pioneer debt notes would also become convertible into Conseco stock.
Pioneer Financial jumped $5.50 to $24.50 in afternoon trading on the New York Stock Exchange, while Conseco stock was up 50 cents at $60 in consolidated trading.
The transaction is subject to approval by regulators and Pioneer Financial stockholders. It should be completed within 180 days, the companies said.
For Pioneer, a health and life insurance and annuities company based in Schaumburg, Ill., its agreement to join forces with Conseco reflects continued consolidation in the industry. Pioneer markets mainly to people 65 and older, small business owners and the self-employed.
""With the consolidation that's going on in the industry, you're going to have to be a mega-company to have the greatest efficiency and the greatest value to the customer,"" Everen analyst Frederick Sandburg said.
That consolidation is apparent in Conseco's track record of completing 16 acquisitions involving a total of 29 insurance companies since 1982.
Conseco is one of the nation's leading providers of supplemental health insurance, retirement annuities and universal life insurance.
Rosensteele said while acquisitions continued to be a part of Conseco's strategy, roughly half of the growth of its assets has been from new business generated by companies after they have been purchased.
Conseco said it would have $29 billion of assets and $32 billion of investments under management after completion of the Pioneer acquisition and other deals.
Beyond the portfolio of policies, the Pioneer acquisition also will add to Conseco's marketing efforts, particularly to senior citizens, analysts said. Pioneer has 90,000 agents, in addition to Conseco's 90,000 independent and career agents.
Founded in 1979, fast-growing Conseco has completed several acquisitions recently. In October, it completed the purchase of American Life Holdings Inc., a provider of annuities for retirement savings plans, for $165 million in cash.
On Aug. 26, Conseco agreed to acquire American Travellers Corp., a provider of long-term care insurance, for $793 million in stock, and Capitol American Financial Corp., which markets cancer insurance and other health coverage, for $650 million in cash and stock.
Also in August, Conseco completed the acquisition of Life Partners Group, a life insurer, for $600 million in stock, a deal that was announced on March 12.
",36
"Archer Daniels Midland Co.'s Chairman Dwayne Andreas apologised to shareholders Thursday for the ""difficult situations"" that the company faced over the past year.
Andreas, like other ADM officials who spoke at the meeting, used mostly euphemisms when referring to ADM's guilty pleas to two counts of pricing-fixing and an agreement to pay $100 million in fines to the U.S. government.
""I acknowledge to you that this occurred on my watch as chairman of your company,"" Andreas told shareholders at the annual meeting here. ""You have my apology and my commitment that things are arranged so that this will never happen again.""
A proposal requiring the board be composed of a majority of independent directors was defeated, but received 42 percent of the votes cast.
Other shareholder proposals addressing corporate governance issues did not pass. ADM's slate of 12 directors was approved by about 89 percent of the votes cast, the company announced.
The new board, which was reduced in number from 17, was hailed by ADM as a more independent body since Andreas is the only company executive remaining on the board.
William Bell of the Florida Retirement System Trust Fund said he hoped the 42 percent of the votes cast in favour of the outside director measure would send a signal to ADM about shareholder concerns regarding the independence of the board.
""I think it's a positive number,"" Bell told reporters after the meeting. The Florida trust fund and the California Public Employees Retirement System (Calpers) co-sponsored the independent board proposal.
In a statement released following the meeting, Charles Valdes, chairman of the Calpers, said ""Calpers will continue to meet with directors and pursue the wishes of shareholders that want a majority of indpependent directors and increased oversight of the ADM board.""
During the meeting, no mention was made of a pending U.S. Department of Justice investigation of Michael Andreas, vice chairman and son of Dwayne Andreas, and Terrance Wilson, a group vice president in charge of corn refining.
These two executives are eligible for stock options under an incentive plan that was approved by stockholders Thursday, the company said in response to a question.
The antitrust investigation sparked criticism from some large shareholders who questioned the independence of ADM's board of directors and its ability to oversee management.
One of the few direct mentions of the antitrust investigation came in response to a question from Ed Durkin of the United Brotherhood of Carpenters, an institutional shareholder.
Durkin asked why ADM had not notified shareholders officially of its guilty pleas to two counts of price fixing and the $100 million plea. Richard Reising, corporate secretary and general counsel, said the company did not consider it necessary given the amount of publicity the antitrust settlement received.
ADM board member Brian Mulroney, former Prime Minister of Canada, told shareholders the ""consensual resolution"" with the Justice Department was reached after negotiations with the board's special committee of independent directors.
""This has been a terribly unfortunate experience for the company and we as a committee deeply deplore it,"" Mulroney said.
""It is our intention to ensure that the company learns from mistakes in the past and acts so that they never happen again,"" Mulroney said.
He referred to the investigation of ADM as a ""shadow"" that was cast on the future of the company.
""While some matters still await resolution, I am pleased to tell you today that we have begun to cast off that shadow and move the company forward into the future...,"" Mulroney said.
",36
"Archer Daniels Midland Co, which pleaded guilty to price fixing this week, will face tough criticism at its annual meeting Thursday from shareholders seeking to make ADM's board more independent.
""There needs to be dramatic reform at this company, at...both the board and the management level,"" said Edward Durkin, director of special programs at the United Brotherhood of Carpenters.
The carpenters union is among four institutional shareholders pressing for changes in ADM's board.  
Despite the settlement with the U.S. Justice Department, including the payment of $100 million in fines, corporate governance issues remain at ADM, according to Jon Lukomnik, New York City deputy controller for pensions.
""I think people are looking at this (the Justice settlement) as if it's the last scene in a five-act play. It is not,"" Lukomnik said.
Going forward, Lukomnik said he is looking for ADM to, over time, enact steps to make its board more independent and to set a succession plan for the eventual retirement of Chairman Dwayne Andreas, aged 78.  
The chairman's son, Vice Chairman Michael Andreas, is among two executives still being investigated by the Justice Department as the price-fixing probe continues. Also being investigated is ADM Group Vice President Terrance Wilson.
""Dwayne Andreas is not young. A person they were grooming to be a successor is the target of an investigation,"" Lukomnik said, referring to Michael Andreas, who had been seen in the past as a possible successor to the chairman's post.
A shareholder proposal calling for a more independent board at ADM is garnering a significant number of votes.  
The California Public Employees Retirement System (CalPERS) said earlier a survey of votes cast thus far indicated that 47 percent are in favor of that measure.
CalPERS co-sponsored the proposal with the Florida Retirement System Trust Fund.
""Our primary focus is the proposal,"" Brad Pacheco, a spokesman for CalPERS, said. ""But i think we also need to see some increased oversight (of management by the board).""
Other proposals include a measure by the carpenters to hold directors personally liable for gross negligence. The New York City Fire Department Pension Fund proposed confidential voting for directors when there is no competing proxy.
At last year's annual meeting, Chairman Dwayne Andreas kept a lid on shareholder comments. When Durkin of the carpenters union tried to gain the floor, he was told by the chairman, ""This meeting runs according to my rules.""
Durkin, who will attend this year's annual meeting, said he was hopeful shareholders would be able to voice their concerns this year.
He added the company had sent him a fax outlining the agenda, when issues will be raised and how much time will be allotted for comments. ""There needs to be some basic rights allowed to the (share) owners,"" Durkin said.
Reuters Chicago Newsdesk - 312-408-8787
",36
"Shedding its chemical businesses would leave Monsanto Co as a pure play in the high-growth life sciences area with attractive agricultural biotechnology and pharmaceutical holdings.
""This entity is likely to (have) a higher valuation by itself than with the chemical businesses intact,"" NatWest Securities analyst Mark Wiltamuth said Thursday.
""The key here is that the chemical business does not have the growth potential as the ag biotech and the ag chemical and the drug component could,"" he added.  
Earlier, Monsanto said it might spin off its chemical businesses, sell or merge them with other companies, or keep and restructure the operations.
The news sent the stock up 1-3/8 at 42 at mid-day, after setting a new 52-week high of 42-3/4.
""It has become increasingly clear, especially over the last couple of years, that the directions and the needs of the life sciences businesses and the chemical businesses were quite different,"" Nicholas Filippello, Monsanto chief economist, said in a telephone interview. ""We feel that we are doing this from a position of strength.""  
Analysts said the St. Louis-based company had been expected to shed its chemical businesses since the sale late last year of its worldwide stryrenics plastics business.
""I would say the chances of keeping it (chemicals) and restructuring it are pretty slim,"" said Dain Bosworth analyst Bonnie Wittenburg.
The chemical businesses that may be sold or spun off include nylon and acrylic fibers, Saflex plastic interlayer that is sold to glass manufacturers, and specialty chemicals.
""The chemical operations...would be very viable as a stand alone company,"" NatWest analyst Andrew Cash said.  
Cash said Monsanto's acrylic fiber, nylon and Saflex businesses have limited competition in the United States and very favorable cost structures.
""It would be a focused (chemical) company with good technology...and a lot of interest in the assets from a stock market perspective if they choose to spin it off,"" Cash added.
Agricultural chemicals would remain as one of the crown jewels of the life sciences division, analysts said.
Agricultural chemicals, including Roundup herbicide, is key to Monsanto's agricultural biotechnology. The company has developed crops that are genetically altered to resist the use of Roundup in the fields to kill weeds.
The life science operations also would include food additives and the G.D. Searle pharmaceutical division. In a recent report, NatWest said it expected Monsanto to keep Searle, which some analysts previously thought would be sold.
While Monsanto is expected to spin off or sell its chemical operations, rather than keep and restructure them, Filippello said all options are being studied. He added that a decision is expected soon, but did not give a timeframe.
""As soon as is practical,"" he added.
Reuters Chicago Newsdesk - 312-408-8787
",36
"Monsanto Co said Monday its pending acquisition of Holden's Foundation Seeds, a $1.0 billion deal that gives it access to the worldwide seed corn market, will dilute earnings for two or three years.
In the first year, dilution could be as much as $0.10 to $0.17 a share, Filippello said, but cautioned the number could be lower than that due to pending accounting issues.
""But by the end of the decade, this will be accretive even from an accounting standpoint,"" Nicholas Filippello, chief economist for Monsanto, said in a telephone interview.  
Variables in determining the amount of earnings dilution include charges Monsanto may take in the future related to the Holden's deal. Those charges may include write-offs of Holden's in-process research and development, which would reduce the amount of ongoing amortization from the deal.
Based on Monsanto's benchmark of measuring itself on an ""economic value added"" (EVA) basis, the acquisition is positive for the company, Filippello added.
""We are willing to accept some near-term dilution in (earnings per share) from an accounting standpoint if in fact we are creating value in a net added value sense,"" he said.  
EVA is derived by taking net income and subtracting a charge for the capital used to generate that income, Monsanto said in its 1995 annual report.
Earlier, Monsanto said it will buy Holden's,  Corn States Hybrid Service Inc and  Corn States International for up to $1.02 billion.
Filippello said Monsanto will pay up to $945.0 million for Holden's, which produces corn germplasm used by seed companies to create hybrid seeds. It will pay up to $75 million for Corn States and Corn States International, which are the exclusive worldwide marketing and sales representatives for Holden's.  
Both prices may later be reduced, Filippello added.
Analysts said Monsanto's acquisition of Holden's, which had been expected, is also a defensive move to block its competitors from gaining access to the seed company.
NatWest Securities analyst Mark Wiltamuth said he considers the planned acquisition of Holden's and Corn States ""a strategic positive"".
By buying Holden's, Monsanto gains an outlet for its genetic developments. Simply put, Monsanto can implant the genes it develops in the germplasm -- or parent seeds -- produced by Holden's.
Monsanto said more than 35 percent of the approximately 80 million acres of corn planted in the United Sates use genetic material developed by Holden's.
Filippello said the Corn States International acquisition also gives Monsanto access to some 300 million acres of corn worldwide.
The other positive for Monsanto is the ability to sell more of its flagship Roundup herbicide to farmers who plant genetically-enhanced seeds from Holden's. Monsanto has developed a gene that makes crops, like corn, resistant to use of its Roundup herbicide to kill weeds in the field.
",36
"A federal judge Tuesday accepted Archer Daniels Midland Co.'s price-fixing guilty plea and ordered it pay $100 million in fines, but the action did not put an end to the scandal at the farm products giant.
Shortly before U.S. District Court Judge Ruben (corrects from Rueben) Castillo accepted ADM's guilty plea to two counts of price fixing, U.S. Justice Department officials in Washington said they were continuing their investigation of two company officials.A ""This is not a good day for corporate America,"" Castillo said in accepting the company's guilty pleas and confirming separate fines of $70 million and $30 million -- by far the largest ever in a price-fixing case.
The judge said he recognised that some parties might criticise the fines as being too low, but said he believed they would serve as a deterrant to any company that is tempted to fix prices.
""No American company is above the law,"" Castillo said.
Under the plea agreement Castillo accepted, ADM will pay a $70 million fine for fixing prices of lysine, a feed additive, and $30 million for fixing prices on citric acid, an additive used in food, beverages and other products.
Earlier in Washington, Deputy Assistant Attorney General Gary Spratling said federal authorities were still gathering evidence in the case involving two ADM officials, Vice Chairman Michael Andreas, and Terrance Wilson, a vice president in charge of ADM's corn refining division.
Attorney General Janet Reno, who joined Spratling at a news conference, also said the settlement should send a message worldwide to corporations that if they engage in collusive behaviour that hurts U.S. consumers, ""there will be vigorous investigation and tough, tough penalties.""
U.S. Attorney James Burns of the Northern District of Illinois said that under the agreement, Archer Daniels officials are required to cooperate with the Justice Department in its ongoing investigation.
""You should stay tuned,"" said Burns. ""There will be more to come.""
The company, meanwhile, said its profits plunged in the latest quarter after it took a $174.4 million charge related to the fines and other litigation settlements arising from the lysine and citric acid cases.
ADM said its net income for the three months ended Sept. 30 fell to $3.6 million, or 1 cent a share, from $163.1 million, or 29 cents a share.
The company's stock was unchanged at $21.625 in late trading on the New York Stock Exchange.
",36
"Kellogg Co. pledged again Friday to halt the erosion of its leading share of the $9 billion U.S. cereal market, but did not say what steps it planned to take.
The uncertainty over its future strategy made some investors nervous, and the stock was down 75 cents to $67 in afternoon trading after earlier falling as low as $65.50 on the New York Stock Exchange.
Earlier, company executives met with analysts to discuss its strategy to stop market share erosion, but offered few details.
""I was unimpressed with the company's presentation,"" BT Securities analyst John O'Neil said.
Kellogg pledged to stop any further crumbling of its U.S. market share, which has dropped to between 32.5 and 33 percent from what it considers to be a normal level of 35 percent, analysts said.
Kellogg, the leader in the U.S. ready-to-eat cereal market, said it will not tolerate any further market share erosion, a company spokesman said, but did not give any specifics.
""He (Chairman Arnold Langbo) indicated we remain committed to our long-term strategy of lower cereal prices and reducing inefficient price promotion spending, introducing strong new products, cutting costs,"" Kellogg spokesman Richard Lovell said. ""That's the long-term way to go.""
In the short term, analysts said, Kellogg is hoping that competitors cut back on their promotions, taking the pressure of its market share.
""The first thing they are going to do is hope the competition will cut back (on) promotions,"" O'Neil said. ""Their initial strategy is a passive one.""
But if competitors, such as rival General Mills Inc., do not cut back on discount coupons and other consumer enticements, analysts said Kellogg will have to respond in kind.
Kellogg officials were not immediately available.
""Their primary goal for 1997 is to get volume moving back up again,"" Schroder Wertheim analyst Robert Cummins said. ""In regard to the U.S. cereal business, it is going to cost them some money to do that.""
For now, Kellogg is not expected to increase its marketing push too much, given its pledge to report modestly better fourth quarter earnings compared with last year's results of $166.7 million, or 77 cents a share.
""They're very concerned about their credibility after the third quarter and are not likely to do anything that will prevent them from making that very modest increase in fourth quarter earnings,"" Smith Barney analyst David Rabinowitz said.
Third quarter earnings per share were down 20 percent, which Kellogg blamed on competition in the U.S. cereal market.
Kellogg has said 1996 earnings will be below the $761.6 million, or $3.48 a share, it earned in 1995. The consensus of analysts' estimates for 1996 is $3.07 a share, according to First Call.
Kellogg has said it expects earnings in first quarter of 1997 to be lower than in the first quarter of 1996. Earnings for all of 1997 are expected to be up by a low double-digit percentage from disappointing 1996 results.
Compounding Kellogg's problem is the slow growth in the U.S. cereal market, despite a round of price cuts by major companies earlier this year.
Kellogg said the U.S. cereal market overall grew by about 1.5 percent in the third quarter.
""The price cuts didn't work. It didn't help their (Kellogg's) volume or industry volume,"" Cummins said. ""(That) backs up my contention that consumers who want to eat cereal are eating cereal, whether its $5 a box, which they complain about, or $2 a box, which they would prefer.""
",36
"Former Archer Daniels Midland Co executive Mark Whitacre, who acted as an informant in an antitrust case against the company, on Friday filed suit against ADM seeking back wages and punitive damages.
In a suit filed in U.S. District Court for the Central District of Illinois, Whitacre also formally denied charges previously brought by ADM that he allegedly stole $9.0 million from the agribusiness company.
""ADM's claim that Whitacre was fired for embezzlement is merely a pretext,"" the lawsuit says.  
""Whitacre was in fact fired for assisting the FBI (Federal Bureau of Investigation) with its investigation into ADM,"" the suit continues.
Last month, ADM pleaded guilty to two counts of fixing prices of lysine, a feed additive and citric acid, which is used in food and beverages. It agreed to pay $100 million in fines, a record for U.S. antitrust cases.
In his suit, Whitacre seeks a judgment against ADM of more than $50,000 and punitive damages of more than $50,000. Potential damages, if awarded, could be much greater, perhaps in the tens of millions, sources close to the case said.  
In September, Whitacre had said he planned to file an $80 million wrongful discharge suit against ADM.
Legal experts said it is common practice in suits to seek damages above or below $50,000.
ADM did not respond to requests for comment on the suit.
In his suit, Whitacre is claiming lost wages from August, 1995, when he was fired as president of ADM's BioProducts Division, until October 1995 when he was hired as chief executive officere of  Biomar International Inc.
Whitacre earned $320,000 a year at ADM, plus stock options.  
In his suit, Whitacre charges ADM with denying him the right to exercise company stock options, defamation of his character and mental and emotional distress.
Whitacre has admitted to trying to kill himself last year after his role as an FBI mole became known.
He also claimed that he was forced to sell his home in the Decatur, Ill., area for only $400,000, even though it had been recently appraised for $1.0 million. Whitacre also said in the suit he had invested about $1.3 million on the home.
Whitacre is now a resident of Chapel Hill, N.C.
Whitacre's attorneys, Richard Kurth of Kurth & DeArmond of Danville, Ill., and Bill Walker of Granite City, Ill., were not immediately available for comment.
The lawsuit was not handled by Chicago attorney James Epstein of the firm Epstein, Zaideman & Esrig, who has been representing Whitacre. Asked if he has fired Epstein from the case, Whitacre replied, ""no comment.""
Epstein was not available for comment.
Reuters Chicago Newsdesk (312) 408-8787
",36
"Archer Daniels Midland Co's $100 million agreement with the U.S. Justice Department will likely have minimal financial impact on the agribusiness giant, which has about $1.3 billion on hand.
""This is not going to affect their balance sheet in any meaningful way,"" said NatWest Securities analyst David Nelson.
But the settlement leaves unclear for the moment the fate of two top ADM executives, who had been expected to face indictments in a nearly four-year antitrust investigation into lysine, citric acid and high fructose corn syrup.  
ADM had said in a proxy statement in advance of its October 17 annual meeeting that indictments in the lysine probe were being considered against the company, Michael Andreas, vice chairman, and Terrance Wilson, a group vice president in charge of corn refining.
A government source, however, said the investigation is ""ongoing.""
ADM did not return a phone call requesting comment on the status of possible indictments against the executives. The Justice Department declined comment.  
""That's intriguing, that there is no mention (of) the individuals,"" said antitrust attorney Joe Sims, a partner in the Washington office of Jones, Day, Reavis & Pogue. Sims is not involved in the ADM antitrust case.
While the $100 million in fines is a record for Justice in an antitrust case, analysts said ADM has an estimated $1.3 billion in cash, cash equivalents and short-term and marketable securities. The company has another $1.1 billion in long-term marketable securities.
ADM agreed to pay $70 million to settle antitrust charges for lysine and $30 million for citric acid.  
Beyond those two products, the settlement also puts an end to Justice's antitrust probe of high fructose corn syrup, a widely used sweetener. ADM did not pay any fines for this product, which posed the largest potential liability given the size of that market.
Previously, ADM settled civil cases brought by its customers and agreed to pay $25 million for lysine, a feed additive, and $35 million for citric acid, which is used in food and beverages.
A civil case brought by a class of high fructose corn syrup customers is pending.  
""The important news here is just that the criminal investigation is behind them,"" Dain Bosworth analyst Bonnie Wittenburg said.
The fate of Michael Andreas, son of Chairman Dwayne Andreas, is not expected to impact succession at the Decatur, Ill.-based company.
Piper Jaffray analyst George Dahlman said analysts have ruled Michael Andreas out for the chairman's post since he has been expected to face price-fixing charges.
In an interview in January, however, Dwayne Andreas said he believed there were eight people who could possibly succeed him some day, including his son. He said at the time there was no current succession plan at ADM.
The stock market reacted positively to the settlement, sending ADM's stock up 3/4 to a new 52-week high of 21-3/8. ADM's stock has also been bolstered in recent weeks by lower corn prices that have improved its grain-processing margins.
Reuters Chicago Newsdesk - 312-408-8787
",36
"At Archer Daniels Midland Co.'s annual meeting last year, Chairman Dwayne Andreas declined to give shareholders the floor, saying, ""This meeting runs according to my rules.""
This year, however, shareholders are pressing for different rules.
Four institutional shareholders will have the floor at Thursday's meeting here to present proposals dealing with corporate governance -- or how the board of directors oversees corporate management at ADM, which on Tuesday pleaded guilty to two counts of price fixing and agreed to pay $100 million in fines, by far the highest penalty ever for violating antitrust laws in the United States.
In its guilty plea, the company admitted it fixed prices for lysine, a feed additive, and citric acid, widely used in foods, beverages and other products.
The shareholder vote at this year's meeting is expected to be close for one proposal that calls for ADM's board to be composed of a majority of independent directors with no personal or business connections with the company.
A survey of early votes showed that about 47 percent were in favour of the measure, the California Public Employees Retirement System (Calpers) said on Wednesday. Calpers, the nation's largest public retirement system, known for its shareholder activism, co-sponsored the proposal with the Florida Retirement System Trust Fund.
""This proposal is prompted by our belief that the employment, business and family relationships of any corporate director has the potential to raise conflicts of interest that may limit the vigilance and diligence of the board,"" the co-sponsors said in a supporting statement contained in ADM's proxy materials for the meeting.
The independence of ADM's board has been an issue since it was disclosed in late June 1995 that the company was the target of a federal price-fixing investigation. Despite the settlement with the Justice Department, some major shareholders continue to voice concern about the board's ability to oversee ADM's management.
Of particular concern to some is that the department continues to investigate two top ADM executives -- Vice Chairman Michael Andreas, the son of Chairman Dwayne Andreas, and Terrance Wilson, group vice president in charge of corn refining. Lysine, citric acid and other ADM products are refined from corn.
""There needs to be dramatic reform at this company, at both the board and the management level,"" said Edward Durkin, director of special programmes at the United Brotherhood of Carpenters union, which is sponsoring a proposal this year to hold directors personally liable in cases of gross negligence.
In addition, the New York City Fire Department Pension Fund has proposed that confidential ballotting be allowed in shareholder votes, except in cases where there is a contested board election.
Since last year's meeting, ADM has agreed to cut its 17-member board down to 12 members. All current company executives have left the board, with the exception of Dwayne Andreas.
Some institutional shareholders have questioned the independence of ADM's nominees as outside directors. One nominee, Mollie Hale Carter, is the daughter of H.D. Hale, a former board member who retired from ADM this year. Other nominees include former Secretary of Agriculture John Block and former Ambassador Richard Burt.
At last year's meeting, which was punctuated with rounds of applause for ADM executives, the board defended its independence. Brian Mulroney, a board member and former prime minister of Canada, said at the time that ADM's independent directors ""are fully independent and have the utmost integrity.""
",36
"Deere & Co. Tuesday reported record fourth-quarter and annual earnings as demand grew for its agricultural, industrial, commercial and consumer equipment worldwide.
Net income jumped 15 percent to $173.9 million, or 68 cents a share, for the quarter ended Oct. 31, from $150.6 million, or 57 cents a share, in the year-ago period. Revenues rose 7 percent to $2.9 billion from $2.7 billion.
""The company's operating margins remain strong as our focus on continuous improvement and growth is having a positive impact throughout our businesses,"" Deere Chairman Hans Becherer said in a statement.
But fourth quarter profits were less than some analysts had expected, although results did include a $15 million after-tax write-off to integrate and consolidate various Mexican operations.
Deere's stock dropped $2.625 to $44 on the New York Stock Exchange.
""Deere came in a little light on a reported basis,"" NatWest Markets analyst Thomas Burns said.
Profits for the fiscal year rose 16 percent to $817.3 million, or $3.14 a share, from $706.1 million, or $2.71 a share, last year. Revenues climbed 9 percent to $11.2 billion from $10.3 billion.
One area of weakness was Deere's commercial and consumer equipment business, such as lawn and landscaping products.
Worldwide commercial and consumer equipment operating profits fell to $1 million for the fourth quarter from $35 million last year, and to $118 million for the full fiscal year from $165 million a year ago. Deere blamed the drop on lower sales volume and increased promotional and growth expenditures.
""The one big operational shortfall that was very, very disappointing and was a surprise to us was the commercial and consumer business,"" Dain Bosworth analyst J. Blair Brumley said.
Moline, Ill.-based Deere said export sales from the United States continued to grow, by 20 percent to $1.58 billion for 1996 from $1.31 billion last year.
Overseas sales for the year remained very strong, rising by 26 percent to $2.75 billion, topping $2.5 billion for the first time in the company's history, Deere said.
Worldwide agricultural equipment operating profits jumped to $202 million for the fourth quarter from $135 million in the year-ago period.
Worldwide demand for John Deere agricultural equipment remains very strong, Becherer said.
Overseas agricultural equipment sales, which were strong during 1996, are expected to continue to increase in 1997 due to sales in Ukraine and Kazakhstan.
Industrial equipment operating profit fell to $34 million for the fourth quarter from $36 million last year. Deere cited increased development expenses associated with improving the fuel efficiency and emissions performance of new engines.
Net income of Deere's financial services subsidiaries was $47.6 million for the quarter vs. $41 million a year ago.
Looking ahead, Deere said it expected worldwide physical volume of sales to dealers on a comparable basis to increase by about 5 percent in 1997 compared with 1996.
",36
"The green fields of agricultural biotechnology are turning into a legal battle ground as companies file suits and countersuits against each other to protect their stakes in the budding business.
Biotech players are ""suing each other over control of the technology,"" said Ray Goldberg, professor of Agriculture and Business at the Harvard Graduate School of Business. ""They are going to redefine how they work together.""
At stake are rights to produce and sell genetically enhanced crops. After more than a decade of research, biotech crops are beginning to be commercialized. They include corn and cotton that produce their own pesticides and soybeans that can withstand the use of certain herbicides.
In the end, analysts and company executives say, many of the lawsuits are expected to be settled out of court, resulting in agreements to license and swap technology.
""It is very unlikely, because stakes are very high, that the seed companies will really let this work its way entirely through the court system,"" said Dain Bosworth analyst Bonnie Wittenburg.
""Ultimately (companies) will cross-license, trade rights and use these pieces of protected technology as assets and trade them back and forth,"" added Timothy Martin, a spokesman for Pioneer Hi-Bred International Inc.
Pioneer, which provides the leading share of seed for corn, the biggest U.S. crop, has been sued for alleged patent infringement by DeKalb Genetics Corp.
Pioneer's defence is that it has a U.S. patent pending, which if approved could supersede DeKalb's claims. Pioneer said the application for that patent was filed before DeKalb's.
The case illustrates how new and pending patents complicate the legal landscape for agricultural biotechnology as seed and biotech development companies seek protection for their gene portfolios, production methods and the biotech crops themselves.
""The patent positions are not yet clear. The patents that have been issued leave some room for different interpretations,"" said Michael Sund, vice president of communications and investor relations for Mycogen Corp.
Mycogen and Monsanto Co. have sued each other for alleged patent infringement, and Mycogen is considering appealing some recent rulings in Monsanto's favour, Sund said.
Despite the legal complications, companies are expected to continue full-steam to commercialize biotech crops.
""They've made the decision to go ahead,"" said Piper Jaffray analyst George Dahlman.
Mycogen, for example, this year commercialized in limited quantities three corn hybrids that contain the Bt gene, which enables the plant to produce a substance that is toxic to the European core borer, a major pest.
Sund said the hybrids have performed well, as expected, in fighting off the corn borer. ""Performance has been everything we hoped for,"" he added.
A genetically enhanced cotton that contains the Bt gene to fight bollworm has come under some tough scrutiny this year after a heavy infestation of the pest in some areas of Texas prompted farmers to use chemical sprays on the crop.
Monsanto, which collaborated with Delta and Pine Land Co. to produce Bollgard cotton, maintained that the biotech crop still performed well. Monsanto said Bollgard cotton had to be sprayed less than traditional cotton.
The collaboration between Monsanto and Delta and Pine Land is but one example of the partnerships that are being forged in agricultural biotechnology.
Monsanto has an ownership stake in DeKalb and Pioneer has a research collaboration with Mycogen.
These partnerships -- like the lawsuits -- underscore one key aspect of the biotechnology business: no one party has all the key pieces to the puzzle.
""No one single firm has the monopoly on the germ plasm,"" Goldberg said. ""No one single firm has the monopoly on the science.""
",36
"McDonnell Douglas Corp said Wednesday it was cooperating with a federal investigation into the sale of $5 million of used machine tools to China, which diverted the equipment to the site of a military plant.
""We're confident that the current investigation will show that McDonnell Douglas violated no laws in the sale of this surplus equipment to the Chinese,"" said Larry McCracken, vice president of corporate communications.
He said the machine tool sale was not directly linked to a 1994 agreement for 40 aircraft to be co-produced by the St. Louis-based aerospace company and its Chinese partner.  
McCracken said he did not know the focus of the federal investigation into the machine tools, which had been shipped to China between November 1994 and February 1995. But he acknowledged that there were allegations the Chinese had intended all along to divert the equipment for military use.
The sale to China of certain equipment, such as machine tools and presses, requires U.S. government approval and assurances that it will not be used for military purposes.
""We believe that we followed all the rules and regulations...,"" McCracken said.  
The problem with the machine tools focuses on when McDonnell Douglas learned that some equipment had been shipped to Nanchang, where China has a military plant, instead of being stored in Beijing, as stipulated by the U.S. export license.
McCracken said the company learned of the diversion in March 1995 when investigating the whereabouts of the shipment, and then notified the U.S. Government.  
Nanchang, where some of the equipment was found, was also the site of a Chinese commercial plant. McCracken said it is possible the Chinese could have misunderstood the regulations governing  all of the machine tools.
According to a report in the New York Times Wednesday, U.S. government officials say there was evidence that some company officials may or should have been aware before March 1995 that China would not house the equipment in Beijing.  
In response to that allegation, McCracken reiterated that McDonnell officials did not learn of the shipments to Nanchang until March 1995.
As for allegations that McDonnell Douglas officials should have known about the shipments, McCracken said the equipment was meant for a joint venture between China and another U.S. aerospace firm.
That joint venture was never established.
McCracken said negotiations followed between McDonnell Douglas, the Chinese government and U.S. officials, and the export license for the machine tools was amended in February 1996. Under the amended license, the equipment was shipped to Shanghai to be used to build commercial aircraft under the McDonnell Douglas co-production agreement.
Merrill Lynch analyst Byron Callan said he does not expect the investigation to have an impact on McDonnell Douglas's aircraft business.
""I don't think it's a big deal from a corporate point of view,"" Callan said.
Reuters Chicago Newsdesk - 312-408-8787
",36
"McDonald's Corp. on Friday reported a 10 percent rise in net income, despite a weak U.S. operating environment that was offset by growth overseas.
The fast-food giant, which has nearly 20,000 restaurants worldwide, said net income rose to $440 million from $400 million. Earnings per share gained 11 percent, with fewer shares outstanding, to 62 cents a share from 56 cents.
Earnings for the quarter, however, were about 1 cent below what analysts had expected.
McDonald's, based in Oak Brook, Ill., said operating earnings in the United States fell five percent in the third quarter while company revenues rose only one percent.
""Our U.S. restaurants are operating in a complex, dynamic and difficult marketplace and recent operating performance has fallen short of our goals,"" Chairman Michael Quinlan said in a statement.
McDonald's said U.S. same store sales -- measuring results for units open at least one year -- were negative for both the third quarter and nine-month period.
But U.S. sales may be picking up, said Merrill Lynch analyst Peter Oakes. ""I think (U.S. same store sales) are starting to hit bottom,"" Oakes said. ""Thus far in October, it (seems) like they have picked up and are in the flattish range.""
McDonald's recently reorganized its management to address disappointing results in the United States.
Outside the United States, McDonald's operating earnings grew 11 percent in the quarter as revenue jumped 13 percent.
It said growth in earnings was strongest in Hong Kong, England, Italy, Spain, Sweden and Taiwan. Results in Mexico remained weak due to the sluggish economy, it said.
While McDonald's continues to expand its global reach, the company said its new restaurant openings for 1996 and 1997 likely will be at the low-end of its targeted range of 2,500 to 3,200 units.
""We will hit the low end of our projected range (with) 2,500-plus restaurants (in 1996),"" McDonald's spokesman Chuck Ebeling said. ""We're just doing our planning for next year, but we expect to do 2,500 plus next year.""
This would be the first time in at least three years that McDonald's failed to meet its expansion projections, as it cuts back on limited menu, or satellite, units.
In 1995, McDonald's opened 2,430 units, beating the projection for that year of 2,300. In 1994, it opened 1,800 units, beating the projection of about 1,400 to 1,700.
McDonald's has nearly 20,000 restaurants worldwide.
""We've been ratcheting up the level of development every year since around 1991,"" Ebeling said.
Ebeling said McDonald's this year plans to open about ""600-plus"" satellite units worldwide, down from its original plan of 700 to 1,000 satellites. The biggest decline will be seen in the United States.
""We recognise we need higher volume restaurants to meet the kind of profitability that we'd like for ourselves and our franchisees,"" Ebeling said.
Merrill Lynch analyst Peter Oakes said the profitability of some satellite units, which are often built in non-traditional sites such as shopping malls, has been uncertain. ""In the big picture, the financial performance of satellites appears to be spotty,"" Oakes said.
Ebeling said U.S. satellite units will acount for about one-third of the total for these smaller sites, compared with 60 percent as originally planned.
Overall, Ebeling said about one-third of McDonald's total restaurant openings will still be in the United States.
",36
"Archer Daniels Midland Co. Monday said it agreed to plead guilty to two counts of federal charges of price fixing in the sale of agricultural products and to pay record fines totalling $100 million.
Under the agreement, which is subject to court approval, ADM will pay $70 million to settle a charge of fixing prices for lysine, a feed additive for livestock, and $30 million in connection with citric acid, a food and beverage additive.
While the $100 million in fines were the largest ever in a criminal antitrust action, they will have only a minimal financial impact on the Decatur, Ill.-based agricultural products giant.
""This is not going to affect their balance sheet in any meaningful way,"" said NatWest Securities analyst David Nelson.
ADM has about $1.3 billion in cash and short-term securities on hand and another $1.1 billion in long-term securities it could sell if it needed to, analysts said.
But the settlement left unclear the fate of two top ADM executives who had been expected to face indictments in the government's four-year investigation of price-fixing for the food additives.
In a statement, ADM did not mention Vice Chairman Michael Andreas or Terrance Wilson, a group vice president in charge of corn refining. The additives are derived from corn.
ADM had said in a proxy statement that indictments in the lysine probe were being considered against Wilson and Andreas, the son of ADM Chairman Dwayne Andreas.
""That's intriguing, that there is no mention (of) the individuals,"" said antitrust attorney Joe Sims, a partner in the Washington office of Jones, Day, Reavis & Pogue who is not involved in the ADM antitrust case.
Sims called the wording of ADM's statement ""ambiguous.""
A government source said the Justice Department's antitrust investigation was ""ongoing."" Department officials declined to comment.
ADM did not return a phone call requesting comment on the status of possible indictments against the executives.
In its statement, ADM said the agreement brought an end to the government probe into ""alleged misconduct"" by the company, including its practices in the market for high-fructose corn syrup, a widely used sweetener that is one of ADM's most important products.
Analysts said the high-fructose corn syrup case could have been the biggest potential liabilty for ADM, given the size of that market. ADM previously settled civil cases brought by its customers and agreed to pay $25 million in the lysine case and $35 million to buyers of its citric acid.
A civil case brought by high-fructose corn syrup customers is pending.
""The important news here is just that the criminal investigation is behind them,"" said Bonnie Wittenburg, an analyst at Dain Bosworth, a Minneapolis-based brokerage.
Investors reacted positively to the settlement and sent ADM shares up 75 cents to $21.375 on the New York Stock Exchange, a 52-week high.
The federal probe of alleged price-fixing in the food and feed additive markets was first disclosed by ADM in June 1995. At that time, ADM said it was subpoenaed for documents and testimony as part of a probe of the lysine, citric acid and high-fructose corn syrup markets.
A former ADM executive, Mark Whitacre, acted as a government informant for about three years in the investigation. Whitacre, who was president of ADM's BioProducts Division, was fired in August 1995 when the company accused him of stealing $9.5 million.
Whitacre has denied those charges and has said he plans to file a wrongful dismissal lawsuit against ADM.
ADM said the plea agreement resulted from negotiations between Justice Department officials and a special committee of seven independent board members.
ADM said the special committee was created in 1995 to respond to the department's investigation into ADM's alleged anti-competitive activity and related civil litigation.
Analysts also said the fate of Michael Andreas was not expected to impact the succession at ADM. ""That issue was settled a long time ago. Mick is not a successor,"" said George Dahlman at Piper Jaffray, a Minneapolis-based brokerage, referring to Michael Andreas.
In an interview in January, Dwayne Andreas said he believed there were eight people who might succeed him some day, including his son. But he said at the time there was no succession plan at the company. ADM's proxy statement lists Dwayne Andreas' age at 78.
",36
"Archer Daniels Midland Co., which earlier this month pleaded guilty to two counts of price fixing, took steps Thursday to ease the reins out of the hands of its 78-year-old chairman, Dwayne Andreas.
ADM, which faced strong criticism from big shareholders at its annual meeting on Oct. 17, said it formed a four-member office of the chief executive, a post that has been held solely by Andreas.
""The fact that they (ADM) listed the ages is signalling something: They're setting this up as part of their succession plan and ... there is more to come,"" Dain Bosworth analyst Bonnie Wittenburg said.
ADM also named replacements for two other executives who left the company earlier this month and remain targets for possible criminal indictments in the federal probe -- Vice Chairman Michael Andreas, the son of Dwayne Andreas, and Terrance Wilson, who had been group vice president in charge of corn refining.
The giant agricultural products company said the newly formed office of the chief executive will consist of Dwayne Andreas, James Randall, president, age 72, Charles Bayless, 61, president of ADM's processing division, and G. Allen Andreas, 53, a nephew of Dwayne Andreas and counsel to the executive committee of the board of directors.
Jon Lukomnik, New York City's deputy controller for pensions, which hold about 3.4 million ADM shares, applauded the executive realignment as a means to address succession. But he said more changes were needed within ADM's top ranks.
""There remains another issue, which is corporate culture,"" said Lukomnik.
New York City pension funds have been among several institutional shareholders pressing for changes in ADM's board and management in the wake of the U.S. antitrust investigation that targeted the company.
A shareholder proposal requiring that the Decatur, Ill.-based company's board be composed of a majority of independent directors was defeated at the annual meeting, but received an usually heavy 42 percent of the votes cast.
On Oct. 14, ADM agreed to pay $100 million in fines and pleaded guilty to fixing prices of lysine, a feed additive, and citric acid, an additive used in foods, beverages and other products.
Among the four-member office of the chief executive, Allen Andreas stands out given his experience building ADM's business in Europe, said Merrill Lynch's Leonard Teitelbaum.
""It goes a long way to putting the events of the last several months behind the company,"" Teitelbaum said of the management changes.
ADM made no mention of the antitrust investigation, which is continuing, although the company has been given immunity from further prospecution in return for its cooperation.
Earlier this month, ADM said Michael Andreas took a temporary leave and Wilson retired for health reasons. In its proxy statement for the annual meeting, ADM said indictments were being considered against the younger Andreas and Wilson.
The new vice chairman is Gaylor Coan, 60, an outside director, who heads Gold Kist Inc., a farmer-owned cooperative in Atlanta, Ga., that is the second-largest poultry processor in the United States and one of the largest shareholders of ADM.
ADM also named Larry Cunningham, 52, as president of ADM's corn processing division and a group vice president, in addition to his dutues as president of ADM's protein specialities.
The company's lysine and citric acid products are both derived from corn.
",36
"Former Archer Daniels Midland Co. executive Mark Whitacre, who acted as an informant in an antitrust case against the company, Friday sued ADM, seeking back wages and punitive damages.
In a lawsuit filed in U.S. District Court, Whitacre also formally denied charges previously brought by ADM that he allegedly stole $9.0 million from the agribusiness company.
""ADM's claim that Whitacre was fired for embezzlement is merely a pretext,"" the lawsuit says.
""Whitacre was in fact fired for assisting the FBI (Federal Bureau of Investigation) with its investigation into ADM,"" the lawsuit continues.
Last month, ADM pleaded guilty to two counts of fixing prices of lysine, a feed additive and citric acid, which is used in food and beverages. It agreed to pay $100 million in fines, a record for U.S. antitrust cases.
In his lawsuit, Whitacre seeks a judgment against ADM of more than $50,000 and punitive damages of more than $50,000. Potential damages, if awarded, could be much greater, perhaps in the tens of millions of dollars, sources close to the case said.
In September, Whitacre had said he planned to file an $80 million wrongful discharge lawsuit against ADM.
Legal experts said it is common practice in lawsuits to seek damages above or below $50,000.
ADM did not respond to requests for comment on the lawsuit.
In his lawsuit, Whitacre is claiming lost wages from August 1995, when he was fired as president of ADM's BioProducts Division, until October 1995, when he was hired as chief executive officere of Biomar International Inc.
Whitacre earned $320,000 a year at ADM plus stock options.
In his lawsuit, Whitacre charged ADM with denying him the right to exercise company stock options, defamation of his character and mental and emotional distress.
Whitacre has admitted to attempting suicide last year after his role as an FBI mole became known.
He also said he was forced to sell his home in the Decatur, Ill., area for only $400,000, even though it had been recently appraised for $1 million. Whitacre said in the lawsuit he had invested about $1.3 million on the home.
Whitacre is now a resident of Chapel Hill, N.C.
His attorneys, Richard Kurth of Kurth & DeArmond of Danville, Ill., and Bill Walker of Granite City, Ill., were not immediately available to comment.
The lawsuit was not handled by Chicago attorney James Epstein of the firm Epstein, Zaideman & Esrig, who has been representing Whitacre. Asked if he has fired Epstein from the case, Whitacre replied, ""no comment.""
Epstein was not available to comment.
",36
"Stiff competition and high ingredient costs will likely result in flat to lower earnings for several U.S. food companies that will soon report quarterly results.
Quaker Oats Co is expected to report flat earnings for the third quarter as its Snapple beverage line continues to be a drag on the company. ""We're looking for a flattish quarter and that will be once more due to the very heavy spending behind Snapple and probably a double-digit (volume) decline for Snapple,"" Goldman Sachs analyst Nomi Ghez said.  
Last month, Quaker said a new promotional campaign for Snapple, which included a nationwide sampling effort, came too late to reap any financial benefits for this year. Snapple accounts for about 10 percent of Quaker's annual sales.
Cereal giant Kellogg Co said recently it projects earnings for the third quarter will be about 20 percent below last year due to competitors' sales promotions.
Stiff competition in the cereal aisle is expected to result in a loss in the fiscal fourth quarter for Ralcorp Holdings Inc, which makes private label products.  
Lower profit margins, partly due to higher cattle costs, likely will result in a decline in third quarter earnings for meat processor IBP Inc, analysts said. Donaldson, Lufkin and Jenrette analyst William Leach said IBP's meat export sales are expected to be lower in the quarter.
CPC International Inc is projected to report only a modest rise in its third quarter earnings due to high corn prices that hurt its milling business, analysts said.
""If it weren't for the corn refining business, (CPC's) profits would be up a lot more,"" Schroder Wertheim analyst Robert Cummins said.  
Ghez of Goldman Sachs said she expects a drop in grain prices will bring CPC back to double-digit earnings growth in the fourth quarter.
Also on the positive side, Sara Lee Corp, a food and consumer products company with businesses from meat to pantyhose, is expected to report double-digit earnings growth for its fiscal first quarter. These results will reflect Sara Lee's focus on higher margin products, Oppenheimer analyst Leslie McCall said.
However, profit margins for Sara Lee's packaged meats business were under pressure in the quarter, added SBC Warburg
analyst Chris Jakubik.
Company     Qtr   First Call Mean estimate  Yr-Ago EPS
CPC	   Q3	     $1.00 a share	 $0.96
IBP	   Q3	     $0.53		   $0.88
Kellogg     Q3	     $0.85		   $1.05
Quaker Oats Q3	     $0.46		   $0.45
Ralcorp     Q4     loss  $0.19	 profit  $0.09
Sara Lee    Q1	     $0.41		   $0.36
Reuters Chicago Newsdesk - 312-408-8787
",36
"Quaker Oats Co. is looking to shed its Snapple beverage business and, in the process, may also end up selling the Gatorade sports drink line, its single largest brand, analysts said Friday.
""I think it's up for sale,"" Prudential Securities analyst John McMillin said of Quaker's beverage division.
Speculation that Quaker may get rid of Snapple, which has posted operating losses since it was purchased for $1.8 billion two years ago, boosted Quaker's stock, which gained $2 and closed at $38.125 on the New York Stock Exchange.
""We've been saying since this summer that there was a high probability that Quaker would pursue a restructuring, and beyond just Snapple,"" CS First Boston analyst Michael Mauboussin said.
He said that a possible restructuring at Quaker likely would include selling some assets, which Mauboussin said were currently under-valued.
""Gatorade being the crown jewel, clearly,"" he added.
Rumours regarding an outright purchase of Quaker or various parts of its businesses have swirled around the Chicago-based company for about three years. Quaker has consistently declined to comment on any speculation.
""I will simply tell you that it is our policy not to comment on rumours and speculation,"" Quaker spokesman Ronald Bottrell said Friday.
The speculation gained credibility, analysts said, when the Wall Street Journal reported Friday that Quaker might sell Gatorade and Snapple, with prices quoted between $3 billion and $4 billion.
""I would have said (the chance of Quaker selling its beverage business was) less than 50-50 before I read the article,"" BT Securities analyst John O'Neil said. ""But I think if somebody offers them $4 billion ... they have to take it.""
The Wall Street Journal said the most likely buyers for Quaker's beverage business were said to be Procter & Gamble Co. and PepsiCo Inc.
Procter & Gamble and PepsiCo both declined to comment.
""We have a long standing policy of not commenting on rumours,"" said Richard Detwiler, director of public relations for PepsiCo.
If Quaker sold its beverage businesses, its food businesses, including oatmeal, ready-to-eat cereal and pasta and rice dishes, could also attract buyers, analysts said.
The Wall Street Journal said Philip Morris Cos. Inc. might be interested in buying some of Quaker's food brands to bolster its Kraft Foods operation.
A Kraft spokesman did not return a call seeking comment.
It had been widely anticipated that Quaker would scale back Snapple to a regional brand, spin it off or sell it.
Quaker management, however, said earlier this year that Snapple's fruit-flavored and iced tea beverage business would remain a national brand.
""What he (Chairman William Smithburg) has been saying does not indicate that he is looking to sell the business right now,"" O'Neil of BT Securities said. ""But he always comments that he will act to increase shareholder value.""
Smith Barney analyst David Rabinowitz said selling off Quaker's businesses may yield the highest return to shareholders on a short-term basis. But ""it doesn't have to happen,"" Rabinowitz said.
Analysts have said previously that they expected Quaker to write off additional goodwill for Snapple, which would be a non-cash charge.
The company said in a recent Securities and Exchange Commission filing that it will review Snapple for a possible charge to reduce its carrying value.
",36
"By strengthening its management team with the new post of chairman of its domestic business, McDonald's Corp is attempting to address head-on its problems in the intensely competitive U.S. market.
""The signal they are trying to send is, 'we clearly recognize that we have problems in the U.S. and we are going to do something about it',"" NatWest Securities analyst Damon Brundage said.
Those problems include declining same store sales in the mature and intensely competitive U.S. market, analysts said.  
Analysts said they expect McDonald's third-quarter same store sales to be down compared with a year ago.
""They have not had a single positive month in the U.S. this year,"" Brundage said. McDonald's does not disclose same store data measuring sales from units open at least a year.
""Margins have been under pressure for over a year in the U.S.,"" added Schroder Wertheim analyst Wayne Daniels.
Naming Jack Greenberg, who remains vice chairman of the company, as chairman of McDonald's U.S.A. indicates the fast-food giant is not pleased with the direction of its domestic business, Daniels said.  
""They are trying to shake things up and put a little more focus on being aggressive in responding to the competition,"" Daniels added.
As part of the management changes, Edward Rensi, McDonald's U.S.A president, will report to Greenberg.
""Ed and I are good friends. We work well together. He's very enthusiastic about this,"" Greenberg said in a telephone interview. ""We all want this business to do well.""
Despite the pressure in the United States, McDonald's international business, which accounts for more than half of its operating income, continues to be strong, analysts said.  
""International is a wide-open growth opportunity for McDonald's,"" Daniels said.
Given the intense competition between McDonald's, Wendy's International Inc and Grand Metropolitan plc's Burger King, Greenberg faces a tough job as head of the U.S. operations, analysts said.
""He is going to parachute into...what looks to be one of the most challenging operating roles in the U.S. fast-food restaurant business,"" Brundage said.
But Greenberg, 54, said he believes McDonald's is well positioned to compete in the U.S. market. ""We've got more locations than anybody else. We've got the most powerful brand in the world...We've got the largest marketing budget. We've got enormous purchasing power,"" he added.
McDonald's operates more than 19,200 restaurants worldwide, including about 12,000 in the United States.
While Greenberg joined McDonald's in 1982 as chief financial officer, he said he has field experience with its restaurants. ""I spent a year in the field in restaurants and became a regional manager for a year as well,"" Greenberg said.
Reuters Chicago Newsdesk - 312-408-8787
",36
"McDonald's Corp said its new restaurant openings for 1996 and 1997 likely will be at the low-end of its targeted range of 2,500 to 3,200 units.
""We will hit the low end of our projected range (with) 2,500-plus restaurants (in 1996),"" McDonald's spokesman Chuck Ebeling told Reuters. ""We're just doing our planning for next year, but we expect to do 2,500 plus next year.""
This would be the first time in at least three years that McDonald's failed to beat its expansion projections, as it cuts back on limited menu -- or satellite -- units.  
In 1995, McDonald's opened 2,430 units, beating the projection for that year of 2,300. In 1994, it opened 1,800 units, beating the projection of about 1,400 to 1,700.
McDonald's has nearly 20,000 restaurants worldwide.
""We've been ratcheting up the level of development every year since around 1991,"" Ebeling said.
Ebeling said McDonald's this year plans to open about ""600-plus"" satellite units worldwide, down from its original plan of 700 to 1,000 satellites. The biggest decline will be seen in the United States.  
""We recognize we need higher volume restaurants to meet the kind of profitability that we'd like for ourselves and our franchisees,"" Ebeling said.
Merrill Lynch analyst Peter Oakes said the profitability of some satellite units, which are often built in non-traditional sites such as shopping malls, has been uncertain. ""In the big picture, the financial performance of satellites appears to be spotty,"" Oakes said.
Ebeling said U.S. satellite units will account for about one-third of the total for these smaller sites, down from 60 percent as originally planned.  
Overall, Ebeling said about one-third of McDonald's restaurant openings will still be in the United States.
Bear, Stearns analyst Joseph Buckley added he would not be surprised to see McDonald's shift its restaurant opening strategy to further emphasize the international market.
McDonald's said operating income outside the United States contributed 59 percent to consolidated income for the quarter.
Earlier, McDonald's reported third quarter income of $0.62 a share, $0.01 below the consensus estimate, but above the $0.56 it earned last year.
McDonald's said its U.S. operating income was down five percent in the quarter, which it blamed partly on an intensely competitive operating environment.
Same-store sales in the United States, measuring results for units open for at least one year, were negative in the third quarter and for the first nine months of the year.
But U.S sales may be picking up, Oakes added.
""I think (U.S. same-store sales) are starting to hit bottom,"" Oakes said. ""Thus far in October, it (seems) like they have picked up and are in the flattish range.""
Reuters Chicago Newsdesk - 312-408-8787
",36
"Archer Daniels Midland Co., which pleaded guilty to price fixing this week, will face tough criticism at its October 17 annual meeting from shareholders seeking to make ADM's board more independent.
""There needs to be dramatic reform at this company, at...both the board and the management level,"" said Edward Durkin, director of special programmes at the United Brotherhood of Carpenters.
The carpenters union is among four institutional shareholders pressing for changes in ADM's board.
Despite the settlement with the U.S. Justice Department, including the payment of $100 million in fines, corporate governance issues remain at ADM, according to Jon Lukomnik, New York City deputy controller for pensions.
""I think people are looking at this (the Justice settlement) as if it's the last scene in a five-act play. It is not,"" Lukomnik said.
Going forward, Lukomnik said he is looking for ADM to, over time, enact steps to make its board more independent and to set a succession plan for the eventual retirement of Chairman Dwayne Andreas, aged 78.
The chairman's son, Vice Chairman Michael Andreas, is among two executives still being investigated by the Justice Department as the price-fixing probe continues. Also being investigated is ADM Group Vice President Terrance Wilson.
""Dwayne Andreas is not young. A person they were grooming to be a successor is the target of an investigation,"" Lukomnik said, referring to Michael Andreas, who had been seen in the past as a possible successor to the chairman's post.
As previously reported, a shareholder proposal calling for a more independent board at ADM is garnering a significant number of votes.
The California Public Employees Retirement System (CalPERS) said earlier a survey of votes cast thus far indicated that 47 percent are in favour of that measure.
CalPERS co-sponsored the proposal with the Florida Retirement System Trust Fund.
""Our primary focus is the proposal,"" Brad Pacheco, a spokesman for CalPERS said. ""But i think we also need to see some increased oversight (of management by the board).""
Other proposals include a measure by the carpenters to hold directors personally liable for gross negligence. The New York City Fire Department Pension Fund proposed that shareholders' votes for directors remain confidential when there is no competing proxy.
At last year's annual meeting, Chairman Dwayne Andreas kept a lid on shareholder comments. When Durkin of the carpenters union tried to gain the floor, he was told by the chairman, ""This meeting runs according to my rules.""
Durkin, who will attend this year's annual meeting, said he was hopeful shareholders would be able to voice their concerns this year.
He added the company had sent him a fax outlining the agenda, when issues will be raised and how much time will be allotted for comments. ""There needs to be some basic rights allowed to the (share) owners,"" Durkin said.
The Justice Department said its price-fixing investigation continues. ADM has agreed to cooperate with probes involving citric acid as well as high fructose corn syrup.
Hoffman-La Roche Inc, the Nutley, N.J. unit of Roche Holding Ltd of Switzerland, said it has been cooperating with the Justice investigation of citric acid, which is used in food, beverages and other products.
A.E. Staley, a unit of Tate and Lyle Plc of the United Kingdom, said it is not a target in the high fructose corn syrup probe and is cooperating with that investigation.
",36
"Archer Daniels Midland Co likely will face criminal charges in a U.S. government price-fixing investigation after three companies pleaded guilty, legal experts said Tuesday.
""It puts them (ADM) on notice that their alleged co-conspirators are cooperating with the government, providing both documents and oral testimony,"" said Robert Stephenson, an attorney with Cotsirilos, Stephenson, Tighe & Streicker in Chicago. ""The table stakes have significantly increased that ADM will be charged.""  
An ADM spokeswoman said the company declined to comment. The other three firms  admitted to conspiracy in price-fixing of lysine, a feed additive.
Stephenson has no direct involvement in the ADM case but is experienced in antitrust cases.
Earlier the Justice Department said Ajinomoto Co Inc and Kyowa Hakko Kogyo Co Ltd of Tokyo and the U.S. unit of Sewon Co Ltd of South Korea admitted conspiring to fix prices to eliminate competition in the world lysine market. They also agreed to cooperate fully with the investigation by providing witnesses and documents.  
""If they (the government) have signed some of the potential defendants to plea agreements that include a commitment to cooperate, that puts tremendous pressure on the remaining potential defendant, of which ADM is obviously one,"" said Joe Sims, an attorney with Jones, Day, Reavis & Pogue.
At this point, he added, ADM may decide to enter a plea or may face indictment.
""Either one of those things can come reasonably promptly,"" said Sims, an antitrust expert who is not directly involved in the ADM case. ""I would not be surprised to see something in the next 30 days.""  
If ADM should decide to enter a plea, analysts said it could easily afford the $10 million fines that were levied against Ajinomoto and Kyowa.
""Those are not the kinds of fines that are going to break the company,"" Piper Jaffray analyst George Dahlman said.
He added that, as of March 1996, ADM had about $3.0 billion in working capital.
In a separate proceeding, ADM has agreed to pay $25 million to settle a civil lysine price-fixing lawsuit brought by its customers as part of an overall $45 million settlement that also involves Ajinomoto and Kyowa Hakko.  
The guilty pleas by Ajinomoto, Kyowa Hakko and Sewon came about 14 months after ADM acknowleged the government had asked it for documents and testimony in an antitrust investigation. That probe included high-fructose corn syrup, citric acid and lysine.
Since the beginning, ADM has denied any wrongdoing and has said it cooperated fully with the investigation.
One wrinkle in the case, however, has been the controversy surrounding Mark Whitacre, a former president of ADM's BioProducts Division, who acted as a government informant in the probe for about three years. Whitacre was fired by ADM last year over allegations he embezzled millions of dollars from the company.
Stephenson said the guilty pleas by Ajinomoto, Kyowa Hakko and Sewon diminish the government's need to rely on Whitacre as a witness against ADM.
Reuters Chicago Newsdesk - 312-408-8787
",36
"The higher minimum wage signed into law Tuesday will be welcome relief for millions of workers, but it may also translate into higher prices for hamburgers, pizzas and other fast-food items, some restaurant chains said.
The 90-cent-an-hour increase will have little short-term impact on many fast-food chains that already pay workers rates above the federally mandated minimum.
But in the long run, industry officials fear that workers already earning above the new minimum wage, which will rise to $5.15 an hour next year, will be looking for more.
""What we're concerned about is the ripple effect it brings,"" said Bruce Cotton, chief spokesman for Long John Silver's Restaurants Inc. in Lexington, Ky.
""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 about 4,300 restaurants in the United States.
President Clinton signed into law the first increase in the minimum wage in five years, boosting it by 50 cents to $4.75 on Oct. 1 and 40 cents more to $5.15 on Sept. 1, 1997.
The White House estimates the new law will mean a raise for about 10 million American workers, many of them in restaurants and stores.
Most small businesses had opposed the increase, saying it would prompt them to hire fewer people, particularly young people looking for entry-level jobs.
But some economists argued that the negative effects of an increase in the wage, first imposed by the federal government in 1938 at 25 cents an hour, would be minimal.
To help get the bill through the Republican-controlled Congress, a package of about $22 billion in tax breaks aimed mostly at small businesses was added to the measure.
As a result of the higher minimum wage, American Restaurant Partners L.P., which operates 62 Pizza Hut restaurant franchises, expects its total wage costs will rise $500,000 over the next 12 months.
""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.
To compensate, the Wichita, Kan.-based restaurant operator hopes to raise prices by about 3 percent. The risk, Freund added, is that higher prices will keep some customers away or prompt them to scale back on the pizzas or other items they normally order.
Beyond the minimum wage requirements, competition for workers -- from cooks to delivery drivers to counter staff -- 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, particularly fast-food and casual dining establishments.
""There are neighbourhoods where we have to pay $6.00 an hour to $6.50 or $7.00 to get"" good workers, Wendy's Lynch said. ""The competition is setting the wage.""
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 fast-food chains is wage competition from other employers. A fast-food worker, for example, may be able to earn $50 or $60 a night in tips at a casual dining establishment, executives said.
""For QSRs (quick service restaurants) ... it's even tougher to keep the kids,"" said Roger Lipton, president of Lipton Financial Services.
",36
"Despite losing out on two potential aircraft deals, McDonnell Douglas Corp's stock remains near its 52-week high, reflecting a strong balance sheet and expectations it will make an acquisition.
""The company is generating on the order of about $1.0 billion to $1.25 billion of free cash flow annually, which translates into between $5 and $7 a share,"" said BT Securities analyst Wolfgang Demisch, who has a buy rating on the stock.
That could enable the company to buy back shares or make a long-awaited defense acquisition, he added.  
Although it lost out on the race to build a next generation fighter for the Pentagon and rival Boeing Co was awarded a 103-plane AMR Corp deal, McDonnell Douglas shares remain relatively strong.  Shares were down $0.25 at $52.625 a share on Monday, $4.125 below a 52-week high of $56.75 but more than $10 above a low of $42.125.
In fact, losing out on the potential $2.2 billion in jet fighter contracts -- which could eventually be worth as much as $500 billion to the ultimate winner -- could prompt McDonnell Douglas to pursue an acquisition aggressively to build its defense business, analysts added.  
CS First Boston analyst Peter Aseritis said he expected the company's ""board and management to take a fairly proactive stance...to do something in the merger and acquisition area.""
Analysts also shrugged off Boeing getting the plane order from AMR's American Airlines, saying McDonnell Douglas was not a serious contender after it cancelled development of its next generation commercial plane, known as the MD-XX.
""They were never in the running,"" Merrill Lynch analyst Byron Callan said of McDonnell Douglas.  
""The events don't affect near-term earnings in either case,"" Goldman Sachs analyst Howard Rubel said of the lost jet fighter and American Airlines deals.
McDonnell Douglas management said the Pentagon business would have been a significant long-term program for it.  But analysts said the company still has a chance to capture future military sales, particularly with acquisitions to build its portfolio, which now includes the F-18 fighter jet, C-17 military cargo plane and Apache helicopter.  
""The things to keep in mind are, the joint strike fighter is a long ways away.  It doesn't affect McDonnell Douglas' business portfolio near term,"" Callan said.
Callan added it is possible the new fighter jet might not be developed due to U.S. government budget pressures. And, in the interim, McDonnell Douglas could make its existing fighter jets more affordable and more capable.
Analysts dismissed the ideas that takeover speculation has been boosting McDonnell Douglas shares.  Earlier this year, McDonnell Douglas was reported to be in preliminary merger talks with Boeing, but a deal never materialized.  ""I don't think the people who own the stock today are looking at McDonnell Douglas as a takeover candidate,"" Callan said.
Reuters Chicago Newsdesk (312) 408-8787
",36
"Oneok Inc. and Western Resources Inc. on Thursday agreed to a $660 million deal that combines their natural gas assets and gives Western Resources access to a broader base of customers for its electricity and security services.
The deal reflects the moves within the utility industry to prepare for further deregulation.
Under the agreement, Oneok will take all the natural gas assets of Western Resources, making it the ninth largest gas distribution company in the United States serving 1.4 million customers. Tulsa-based Oneok is the parent of Oklahoma Natural Gas Co.
Western Resources, based in Topeka, Kan., will become the largest equity holder in Oneok, receiving about 3 million new shares of Oneok common stock and preferred stock that will be convertible, upon necessary regulatory approvals, into about another 19.3 million shares of Oneok common. Its total stake in Oneok is about 45 percent.
The deal is expected to close by mid-1997, following approval by Oneok shareholders and federal and state regulatory authorities.
""They (Oneok) are a total gas company. They understand the gas business better than we do,"" Western Resources president David Wittig said in a telephone interview.
By swapping its gas assets, Western Resources will be able to focus its efforts on growing its electricity and home-security businesses, both of which involve a customer base of home owners and 24-hour monitoring of consumers.
Oneok's 735,000 customers could become potential clients of Western Resources' services.
""Western Rseources has been becoming a nationwide marketer of retail energy -- electricity and/or gas -- and home security,"" Everen Securities analyst Dan Rudakas said. ""This combination gives them direct access to another 735,000 gas customers, which in the future ... would be potential electric customers and also electronic home security customers.""
The companies said the alliance will position the companies to take advantage of the expected deregulation of the electricity industry, allowing customers to buy electrical power from several sources instead of just the local utility. That type of deregulation is already taking place in the natural gas industry.
""Eventuallly there will be total competition in electricity and in gas,"" John Hayes Jr, Western Resources chairman, told a teleconference. ""We are just preparing for the future.""
The companies said Oneok's independence would be preserved by standstill provisions in the agreement that define the rights and responsibilities of the respective companies for at least the next 15 years.
Western Resources will receive a preferred dividend of 1.5 times the underlying common dividend, which now stands at 30 cents a share, but no less than $1.80 per preferred share per year for the first five years.
George K. Baum analyst Dennis Hudson said Western Resources' natural gas assets earned that company about $20 million in 1995. As part of Oneok, the assets likely will earn more, given that company's expertise in gas distributions and synergies from its existing gas business.
With its stake in Oneok, Western Resources will still benefit from a portion of the gas earnings, as well as future gas alliances that Oneok might enter into in the future.
""Oneok would continue to search for opportunities to acquire more customers on the gas side. We're most supportive of that,"" Wittig said.
He added that Western Resources continues to look for ways to expand its electricity and home-security businesses.
((Reuters Chicago Newsdesk (312) 408-8787))
",36
"U.S. cereal leader Kellogg Co is hoping its competitors cut back on their promotional efforts, but failing that it may be forced to increase costly marketing efforts next year.
""The first thing they are going to do is hope the competition will cut back (on) promotions,"" said BT Securities analyst John O'Neil, who attended a meeting between Kellogg and analysts on Friday.
""Their initial strategy is more of a passive one,"" he added.  
But if competitors such as rival General Mills Inc do not cut back on discount coupons and other consumer enticements, Kellogg will have to respond in kind, analysts said.
""Kellogg is resolved to rebuild their market share,"" Smith Barney analyst David Rabinowitz said.
Kellogg, the leader in the $9.0 billion U.S. ready-to-eat cereal market, has seen its market share slip to between 32.5 percent and 33 percent due to competitive pressure.
""They consider 35 percent to be normal,"" said Schroder Wertheim analyst Robert Cummins.  
Analysts who met with Kellogg said the company did not outline its market share strategy, except to say it does not intend to return to deep-discounts and giveaways.
""They say they will do what is necessary to regain their market share, but for now will avoid the deep discounts,"" SBC Warburg analyst Chris Jakubik said.
Kellogg officials were not immediately available for comment.
Still, analysts say the Battle Creek, Mich.-based firm, which earlier this year was forced to cut prices to respond to the competition, cannot sit and do nothing.  
""I think Kellogg is more likely to increase promotions (in 1997) and target promotional efforts behind new products,"" O'Neil added.
For now, Kellogg is not expected to increase its marketing push too much, given its pledge to report modestly better fourth quarter earnings compared to last year's $0.77 a share.
""They're very concerned about their credibility after the third quarter and are not likely to do anything that will prevent them from making that very modest increase in fourth quarter earnings,"" Rabinowitz said.
Third quarter earnings were down 20 percent, which Kellogg blamed on competitive pressures.
Compounding Kellogg's problem is the slow growth in the U.S. cereal market, despite a round of price cuts by major companies earlier this year. Kellogg said the market overall grew by about 1.5 percent in the third quarter.
""The price cuts didn't work. It didn't help their (Kellogg's) volume or industry volume,"" said Schroder Wertheim's Cummins. ""(That) backs up my contention that consumers who want to eat cereal are eating cereal, whether its $5 a box, which they complain about, or $2 a box, which they would prefer.""
Reuters Chicago Newsdesk - 312-408-8787
",36
"Monsanto Co's board of directors, at its regularly scheduled meeting on Friday, is expected to decide the fate of the chemical business that the company has said it wants to shed, analysts said.
A Monsanto spokeswoman on Thursday confirmed the Monsanto board is meeting on Friday, but she declined to comment on what it might do.
""I can confirm that the board is meeting tomorrow,"" she said. ""I cannot ever presume board discussions, actions or vote, and we won't comment on that sort of speculation.""  
In October, Monsanto said it was considering several options, including possibly spinning off its non-agricultural chemical business.
The remainder of Monsanto would be a life sciences company with core businesses of agricultural chemicals such as its flagship Roundup herbicide, biotech operations and the G.D. Searle pharmaceutical unit.
Another possible option for Monsanto would be to sell or merge the chemical business with other firms.  
""Probably a spinoff is likely,"" said PaineWebber analyst Paul Raman. ""There is a significant tax liability of selling it (the chemical business). The capital gains tax on it could be about $500 million plus or minus.""
Among the possible suitors mentioned for Monsanto's chemical business was Hercules Inc, analysts said. They added that Monsanto could be interested in the Tastemaker food and beverage flavors business held by Hercules and its joint venture partner, Mallinckrodt Inc.  
Hercules and Mallinckrodt have previously said they were seeking a buyer for Tastemaker. But a Mallinckrodt spokeswoman said no offers had been received for Tastemaker and no agreements had been signed.
The Monsanto spokeswoman declined to comment. Hercules was not available for comment.
Should Monsanto opt to swap its chemical business for assets of another company it would reduce its tax liability, analysts said.  
Whatever action Monsanto takes, analysts said they expect the board of directors to decide the course of action at the meeting on Friday.
""This is the last board meeting of the year. It is a planned meeting,"" Merrill Lynch analyst Doug Groh said.
Speculation that Monsanto was near a long-anticipated final decision on its chemical businesses helped boost the stock, which ended the day up 2-1/4 at 41-3/4.
Analysts have previously said that shedding the chemical operation, which are profitable, would enable Monsanto's life sciences business to trade at a higher multiple.
((Reuters Chicago Newsdesk (312) 408-8787))
",36
"The burger battle will continue in the United States next year as fast-food chains test new recipes and cook up promotions to draw more customers into their eateries -- and away from each other.
McDonald's Corp dominates the landscape with about 12,000 U.S. units and over 20,000 worldwide. But in spite of a new menu, its U.S. same-store sales are below year-ago levels.
""This will be their sixth consecutive quarter of lower comps (same store sales) in the U.S.,"" Dean Witter analyst David Adelman said, referring to the fourth quarter of 1996.
Wendy's International Inc, on the other hand, has seen U.S. same store sales rise five to six percent in the fourth quarter, following an eight percent gain in the third quarter. Spokesman Denny Lynch declined to comment.
""Wendy's..., although their margins have been squeezed, has the best traffic of the big three,"" said Roger Lipton of Lipton Financial Services.
Wendy's has about 4,425 U.S. units and 4,925 worldwide.
Burger King, a unit of Grand Metropolitan Plc, said its U.S. same-store sales rose 2.6 percent for fiscal 1996 ended September 30.
Burger King had 8,696 units worldwide at the end of fiscal 1996, including more than 6,600 in the United States.
At this point, Wendy's may have the most significant new product offering in 1997, a fresh pita sandwich that is currently being tested in 11 U.S. markets and may be rolled out nationally next year, analysts said.
""It's being given very serious consideration,"" Lynch said of pita sandwiches. ""We're very pleased with the test.""
Adelman said he expects the pita sandwich to be launched in the United States later in 1997, adding, ""That's going to be a material event for (Wendy's).""
In 1996, McDonald's stole the menu spotlight by introducing its Arch Deluxe hamburger, garnished with lettuce, tomato and a mustard-mayonnaise sauce, as well new chicken and fish deluxe sandwiches.
In spite of those new menu items, McDonald's same store sales continued to show declines compared with a year ago.
McDonald's U.S. same store sales showed a negative comparison in the first nine months of 1996, spokesman Chuck Ebeling said, but he declined comment on the fourth quarter.
McDonald's has blamed the drop in its U.S. same store sales in part on an intensely competitive domestic market.
Looking ahead, analysts said the most significant event for McDonald's likely will be the start in 1997 of its 10-year exclusive marketing alliance with Walt Disney Co. That alliance gives McDonald's exclusive rights to marketing tie-ins -- such as toy giveaways -- to Disney movies.
Ebeling said the Disney alliance will be the ""centerpiece"" of McDonald's marketing efforts, ""but not the only thing.""
As for its menu, Ebeling said McDonald's will continue to focus on ""delivering great food taste,"" but he did not comment on new items.
((Reuters Chicago Newsdesk (312) 408-8787))
",36
"Kansas City Southern Industries Inc said it is weighing options to finance its part of a joint $1.4 billion venture to control a Mexican rail line, a key link in its plans to offer Canada-to-Mexico service.
""We absolutely have the ability to finance this,"" Michael Haverty, president of the Kansas City Southern Railway subsidiary, said in a telephone interview on Thursday.
Financing concerns hit Kansas City Southern since it and partner Transportacion Maritima Mexicana SA de CV (TMM) were awarded control of the rail line this month.
Kansas City Southern holds 49 percent of the Laredo, Texas to Mexico City rail line, known as Line 1, with TMM holding 51 percent. Responsibility for financing the deal will be split along those lines as well, Havery said.
While financing has not been finalized, options include potential equity investments from partners, Haverty said, but added, ""We would prefer to jealously guard the equity.""
""We've also talked to some strategic partners about the possibility of loaning us money in exchange for commercial arrangements,"" he added.
Gruntal & Co analyst Steven Lewins said one option would be to raise its portion of the financing in dollars, but pay for the Mexican rail stake in pesos. If the peso loses value, as he expects, that would create currency translation gains for the company and reduce Kansas City Southern's costs.
Recent concerns over financing and dilution of earnings has brought Kansas City Southern's shares from 50-3/8 on December 5, before the Mexican deal was formally announced, down to 44-3/4 on Friday, unchanged from the day before.
At this level, Lewins said he considers Kansas City Southern shares ""buyable.""
Haverty said the company told analysts it expects the deal to hurt its earnings in the first year, be ""slightly"" dilutive in the second and add to earnings in the third. Lewins cut his 1997 earnings estimate for Kansas City Southern on December 10 to $2.85 a share from $3.20 due to the Mexican deal.
The potential investment in Line 1 will not stop with the initial bid. Haverty said the partners may spend up to $900 million over five years to upgrade Line 1.
He stressed that the $900 million figure is a maximum, saying there are other alternatives including leasing equipment instead of purchasing.
But the challenge remains that only about 12 percent of the freight along the Mexico City to Laredo corridor moves by rail, with the remainder hauled by truck, compared with 20 percent moving by rail about 10 years ago. About 35 to 40 percent of U.S. freight moves by rail, Haverty added.
Haverty said he believes Kansas City Southern and TMM can increase the amount of Mexican freight moving by rail. He views Line 1 as the key component in his company's plans to build a ""NAFTA railroad,"" referring to the North American Free Trade Agreement (NAFTA) that allows the flow of goods between the United States, Canada and Mexico.
((Reuters Chicago Newsdesk (312) 408-8787))
",36
"New pickup trucks and sport/utility vehicles helped Ford Motor Co.'s third-quarter profits nearly double to $686 million, the company said Wednesday, but it alarmed analysts with growing losses in Europe.
Ford eeked out a $15 million profit from its worldwide automotive operations -- versus a loss of $201 million a year ago --  as U.S. automotove net income of $634 million was offset by a loss of $619 million from non-U.S. regions.
Ford's third-quarter profits, which amounted to 56 cents a share on a fully diluted basis, compared with $357 million, or 27 cents a share, in the year-ago period. The latest results were in line with Wall Street expectations.
Boosting the numbers was another strong performance from Ford's Financial Services Group. The unit earned $671 million, including a gain of $76 million from the sale of USL Capital assets, compared with a profit of $558 million in the 1995 third quarter.
But Ford Credit's earnings slipped to $299 million from $357 million a year ago, reflecting higher credit losses.
""I think there's some real red flags there with overseas operations and Ford Credit,"" said Bear Stearns analyst Nicholas Lobocarro.
The company's earnings were negatively affected by a $39 million charge to cover the costs of early retirements for U.S. salaried employees. Ford expects to report further charges of $300 million to $400 million in the fourth quarter for more early retirements.
Despite the charges, Ford Chairman Alex Trotman said the company expects its automotive results to be stronger in the fourth quarter from a year ago, with higher sales volumes and improving margins.
In the U.S. market, the latest results were spurred by strong acceptance of new light truck products such as the F-Series pickup truck and new Expedition full-size sport/utility vehicle, Trotman said.
""Outside the U.S., results continue to reflect challenges in several key regions, particularly Europe and South America,"" Trotman said in a statement, adding, ""There's still much to do.""
Ford lost $226 million from its South American operations in the third quarter, mostly from Brazil, up from a loss of $102 million in the year-ago period. Ford had said in September that second-half losses in South America would be larger than the first half because of a lower market share and a costly launch process for its new Fiesta.
In Europe, the company's loss grew to $472 million from $320 million. Ford blamed new product launches, adverse vehicle mixes and continued high marketing costs.
However, Ford said its European high-volume vehicle launches were largely completed and that it would focus on cost reductions. It added that new products, such as the recently launched Ka small car that will go on sale next month, will strengthen its European line-up.
Third-quarter revenues climbed to $34 billion from $31.4 billion. Worldwide vehicle unit sales in the third quarter were also up, increasing to 1,452,000 from 1,435,000.
But the automaker lost market share in both the U.S. and western Europe. Ford ended the quarter with 24.5 percent of the U.S. car and truck market. It had 24.8 percent in both the second quarter of 1996 and the third quarter of 1995.
Ford lost a full point of share in western Europe, falling to 11.8 percent from 12.8 percent in the year-ago quarter. Ford's share in the second quarter was 12.0 percent.
The Associates, Ford's consumer finance unit, reported third-quarter earnings of $230 million, a record for any quarter.
Trotman said Ford expects U.S. total vehicle sales to be 15.5 million for 1996, about in line with its earlier forecasts. The industry had 15.1 million sales in 1995.
In Western Europe, Ford forecasts industry sales at 14.2 million for 1996, up from 13.4 million in 1995. Ford expects moderate economic growth to continue in its major worldwide markets, providing for stable industry sales volumes.
",48
"The effects of a strike by 26,000 Canadian autoworkers will continue to ripple through General Motors Corp.'s operations even though a tentative deal was reached Tuesday after marathon talks.
GM has told about 2,000 workers at its Lordstown, Ohio, car assembly plant not to report to work when their work week begins on Friday, said company spokesman Tom Klipstine.
""There are still some problems out there in terms of having enough material to keep plants running,"" he said.
Negotiators for the company and the Canadian Auto Workers union settled disputes over the contracting out of work and reached a tentative agreement on a new contract, putting an end to the 19-day strike.
In addition to the striking CAW members, GM has idled 19,931 workers at dozens of assembly and parts plants in the U.S. and Mexico that depend on the Canadian operations. That figure does not include workers such as the Lordstown employees whose scheduled shifts have yet to start.
If the deal is ratified Wednesday as expected and parts resume shipments, Klipstine said it could take until the end of next week before all of GM's affected plants are operating at pre-strike levels.
One analyst estimated the strike could end up costing the world's largest automaker about 100,000 units of straight-time production in North America.
The calculation, by CSM Forecasting in Farmington Hills, Mich., assumes that all of GM's plants are back in operation by Oct. 28, and does not include over-time production.
""There's still some operations that may go down that we may have not anticipated,"" said Michael Robinet, managing director of CSM, an industry consulting firm. ""There's going to be some ebb and flow.""
GM is expected to lose production of about 51,000 units in Canada, and 45,000 to 46,000 units in the United States, Robinet said.
Of the 51,000 units in Canada, about 40 percent are GM's popular full-size C/K pickup trucks, which are made at GM's assembly complex in Oshawa, Ontario, he said.
CAW President Buzz Hargrove told reporters during a press conference after the new pact was reached that GM could restart the Oshawa truck plant as soon as Wednesday night, after the deal is ratified.
Inventories of the trucks have been tight, and the sales effects will start showing up in the October sales numbers, analysts said.
Any market share losses to competitors, however, would be tempered by the fact that Ford Motor Co. is already running at maximum capacity for its new F-Series pickups, said David Healy, an analyst at Burnham Securities Inc.
GM had sufficient inventories of cars that the strike is not expected to crimp those sales too much, analysts said.
Where GM could be hurt most is in new product launches. Production of the new Buick Century was previously scheduled to start at the Oshawa car plant on Nov. 4. But the strike could push that back until the middle or end of November, Robinet said.
GM's Oklahoma City, Okla., assembly plant will also be delayed another two to three weeks in starting production of the new Oldsmobile Cutlass and Chevrolet Malibu cars, because of a parts shortage due to the strike, he said.
Healy, who believes GM has lost production of about 65,000 units, estimated it will bring down the automaker's earnings by about $225 million after taxes. A strike at two Dayton, Ohio, brake plants in March cost GM $900 million.
""It's not a major disaster,"" Healy said. ""It's not of the magnitude of Dayton.""
",48
"Calling it a crucial change for how it develops new cars and trucks, Ford Motor Co. Wednesday launched a new computer-aided design project based on a computer programme from Structural Dynamics Research Corp..
Ford said the new project, called C3P, will cut prototype costs by up to 50 percent; improve investment efficiency by 20 percent to 30 percent; and eliminate half of costly late development changes.
""The new C3P initiative represents the most fundamental change of the engineering computer infrastructure in Ford's history,"" Paul Blumberg, director of product development systems at Ford's Product Development Centre, said in a statement.
Officials did not specify any dollar amount savings. But executives said they fall under previously disclosed product development cost savings. Three new vehicle programmes started this year will use C3P.
Once the programme is fully implemented in 2000, Ford said it will merge computer-aided design, manufacturing and engineering functions into a seamless, unified system encompassing all stages of vehicle and component development.
Ford's decision to team up with Structural Dynamics Research (SDRC) raised eyebrows at competitors. The Milford, Ohio-based firm is a small player in the market of supplying computer aided design and manufacturing systems (CAD/CAM) to the auto industry, according to both competitors and analysts.
""You just don't hear about SDRC,"" said Ron Bienkowski, an executive engineer at Chrysler Corp.
Bienkowski also chided Ford for launching a new design programme seven years after Chrysler did.
""We made the decision to go to a single system like C3P back in 1989,"" he said.
Chrysler, as well as several other Japanese and European automakers, use the more popular CATIA programme from Paris-based Dassault Systemes and IBM Corp..
Charles Foundyller, president of market research firm Daratech Inc. in Cambridge, Mass., said the SDRC system is an easy-to-use, powerful system that should serve Ford well.
""All in all, I don't think Ford made a bad decision,"" he said.
Ford made the C3P announcement as part of a half-day presentation to reporters touting the No. 2 U.S. automaker's computer capabilities. Among other news items announced Wednesday, Ford:
-- plans to eliminate 90 percent of its physical prototypes by 2000 in favour of electronic versions. Physical prototypes now constitute about 40 percent to 50 percent today;
-- will be able to conduct a computer-simulated frontal crash for $10 in 2000, compared to the $200 it currently costs;
-- will introduce a production car in Europe in 1997 that was designed almost completely using computer technology.
Ford executives were hard-pressed to assign dollar amounts to all of the new computer design and prototype initiatives.
But Claude Lobo, director of advanced design at Ford, said the new systems dramatically improve quality and free designers and engineers to take more risks.
",48
"Although General Motors Corp and the United Auto Workers are separated by crucial outsourcing issues, analysts said Monday they do not foresee the union staging a protracted strike against GM.
""I don't think there's any will to have some major explosion,"" said David Cole, director of the University of Michigan's Center for the Study of Automotive Transportation.
""They've been close for some time,"" he said.  
David Healy, analyst at Burnham Securites Inc, said the union could still hit GM with ""Apache raids"" that target individual plants that make high-profit vehicles, however.
Talks for a new three-year labor deal were to resume Tuesday about 8:30 a.m. EST/1330 GMT. Bargainers worked for 17 hours into the early morning Monday before calling a recess, even though a contract extension deadine expired at midnight Sunday.
UAW President Stephen Yokich said earlier Monday he plans to settle the union's differences with the company at the bargaining table, and not resort to selective strikes at profitable light truck plants, as had been speculated Sunday.
The UAW represents 215,000 members at GM, more than half of the 390,000 UAW workers who work at Detroit's Big Three automakers.
Union members had made up picket signs and drafted strike schedules Sunday night in the event they got the word to walk off the job. On Monday, one local union official said members were comfortable working without a contract.
""People understand that things have got to be done the way the negotiators do it,"" said Ken Summers, administrative assistant to the chairman of Local 594 in Pontiac, Michigan. ""Nobody wants a strike.""
Summers said Local 594, where members make the popular full-size C/K pickup trucks, has ""serious"" issues with GM over outsourcing, as well as health and safety issues.
Harley Shaiken, a labor expert at the University of California at Berkeley, said it's possible local disputes will inger even after a national agreement is reached, like they did following the 1993 contract talks.
""Although my sense is if GM gets a pact similar to Ford and Chrysler, which I think is the odds-on favorite, we will see many of the local disputes wrap up relatively quickly,"" he said.
Yokich said he intends to return to GM's headquarters for more talks Tuesday. GM Chairman Jack Smith, who was present for some of the talks late Sunday, is scheduled to appear in New York at a morning news conference with Hazel O'Leary, secretary of the U.S. Department of Energy, on renewable energy issues.
A GM spokeswoman could not be reached to determine if Smith still plans to attend the event.
",48
"General Motors Corp. said Tuesday it agreed to sell four troubled parts plants to a new company that plans to become a major player in the competitive $22 billion automotive interior supply industry.
The new company, Peregrine Inc., is being funded by the New York investment firm Joseph Littlejohn & Levy and auto industry executive Edward Gulda. No terms were announced for the sale, which has been expected for months.
Peregrine, which will have more than $1 billion in annual revenues, will be based in Southfield, Mich., and pursue contracts with car and truck manufacturers in North America as well as overseas.
""Peregrine will be one of North America's premier automotive supply companies,"" Gulda said in a statement. ""We expect to see signficant growth in the years ahead.""
Gulda is a former chief executive officer of Kelsey-Hayes, a brake systems maker that is part of LucasVarity Plc.
Peregrine also said it expected to sign an agreement with GM for future business. The Financial Post newspaper of Canada reported Tuesday that said GM has agreed to provide Peregrine with more that $4 billion in contracts over five years.
Peregrine officials could not be reached to comment.
The four plants make hinges, door and instrument panels and other interior parts, and generate combined revenue of about $1 billion a year. The plants employ about 5,500 hourly and salaried workers.
Two of the plants, in Livonia, Mich., and Flint, Mich., are part of GM's Delphi Interior & Lighting Systems unit. The other two, a fabrication plant in Oshawa, Ontario, and a trim plant in Windsor, Ontario, report to Delphi and GM of Canada.
Peregrine will enter a competitive market facing major companies such as Lear Corp. and Johnson Controls Inc. Some analysts said at least one of the Peregrine plants could have have a difficult time competing. Contracts for most of what the Windsor plant supplies, for example, will run out in about two years, and the plant has not been winning new bids.
Nevertheless, there are some parts segments, such as door panels, where the industry needs all the producers that are out there, said Gregory Janicki, a vice president at industry consultant CSM Corp.
""There is such a need for all of these door panels that five companies couldn't supply them all,"" he said.
Moreover, companies that have been spun off from GM have a history of performing better than they did under the parent company, said Dennis Virag, managing director of the Automotive Consulting Group Inc. in Ann Arborn, Mich.
Virag cited privately held American Axel Manufacturing, a forging operation that GM sold in 1994, and engine maker Detroit Diesel Corp., which was sold in 1988.
""If you look at history, there's a very good chance that this company will do well,"" he said.
The Michigan plants had been on a list of 12 domestic operations GM had identified as being troubled facilities.
Sale of the Canadian plants became an issue in the three-week strike by members of the Canadian Auto Workers union in October. In the end, GM won the right to sell the two plants. Workers not kept on by the new owner will be offered jobs at other GM facilities.
Peregrine said hourly workers at the four plants who are retained will be covered by the 1996 master contracts with the United Auto Workers and Canadian Auto Workers unions. Wages, pensions and benefits for salaried and hourly workers will be about the same as they had been under GM, it said.
Peregrine will be financed with equity from Joseph Littlejohn & Levy Fund II, a private partnership formed to invest in consolidating industries and corporate divestitures. Peregrine said it does not expect to incur debt other than for working capital needs.
",48
"The engines have been started in the race to succeed Alex Trotman for the top office at Ford Motor Co.
The company Thursday promoted two long-time Ford executives into positions that will allow them to prove if they are worthy of occupying one or more top spots at Detroit's No. 2 automaker.
Edward Hagenlocker, 56, was promoted to vice chairman from executive vice president, and put in charge of a new auto components organisation with 75,000 employees and revenues of $14 billion.
Jacques Nasser, 48, previously the group vice president in charge of product development, was named to Hagenlocker's old job of heading up Ford Automotive Operations, the company's core car and truck business.
Speculation has swirled for months about how Ford's board of directors plans to handle the succession of Trotman, who currenly holds the titles of chairman, chief executive officer and president. Trotman reaches the mandatory retirement age of 65 in July of 1998, but the board can ask him to stay on.
Complicating matters is the prospect of a Ford family member returning to a top officer's role for the first time since 1980.
Recent reports have said William Clay Ford Jr., 39, a great-grandson of company founder Henry Ford, could be named a non-executive chairman, or chairman, when Trotman leaves.
Because Hagenlocker's nearly three-year tenure at Ford Automotive Operations has been marred by slumping profits and a slow start for the redesigned Taurus, some outsiders have said his chances for higher office have dimmed.
But Hagenlocker, a reserved man who joined the company in 1964 as a research scientist, has also overseen the launch of the hugely successful new F-Series pickup trucks, as well as the new Ford Expedition full-size sport utility, which is expected to be both popular and profitable.
Eugene Jennings, a retired professor of management at Michigan State University, said Hagenlocker's being put in charge of the new parts organisation could turn into a high-profile spot that should not be read as a demotion.
""It's the one thing that Hagenlocker needs under his belt to give him the experience he needs to run the company,"" said Jennings, a long-time Big Three observer.
Nasser has been at Ford nearly as long as Hagenlocker. Born in Lebanon but raised in Australia, Nasser first joined the company in 1968 as a financial analyst. He rose through several international assignments, earning a reputation as a ""no-nonsense petrol head.""
While Hagenlocker is stiff in front of the media, Nasser moves easily among reporters, entertaining them with colourful stories about cricket and his globe-trotting life abroad.
Wesley Brown, of industry consultant CSM Forecasting in Farmington Hills, Mich., said Nasser's new role also offers him a chance to further demonstrate his abilities at running the company.
""It clearly puts Nasser in a position to take over from Trotman when he retires,"" said Brown.
For his part, Trotman was circumspect about the succession question. At a news briefing Thursday, he was asked if the board is actively working on the issue.
Trotman responded, ""Absolutely. In depth, and frequently -- and has been for the last 20 or 30 years.""
",48
"General Motors Corp, battling to avoid a second strike by assembly and parts workers this month, said it was hopeful a new labor contract could be reached before an extension deadline at midnight on Sunday.
Speaking to reporters gathered at GM's headquarters here, GM spokesman Chuck Licari said GM and the United Auto Workers were still working to resolve difficult and complex issues.
""GM remains hopeful an agreement can be reached before the UAW's termination of the current 1993 national agreement at 11:59 p.m. (0459 GMT) tonight,"" said Licari.
At stake is a new labor agreement for GM's 215,000 hourly UAW workers. GM employs more than half of the approximately 390,000 UAW members who work at Detroit's Big Three automakers. It is the only one of the Big Three to not have a new three-year labor contract.
UAW spokesman Frank Joyce declined to comment on the talks. UAW President Stephen Yokich said on Friday that he was not optimistic a deal could be reached by the deadline. In a sign an agreement might not be reached tonight, Licari said GM Chairman Jack Smith was not at the automaker's headquarters, although he was in touch with negotiators.
Both Ford Motor Co Chairman Alex Trotman and Chrysler Corp Chairman Robert Eaton were present for the final stages of their company's negotiations and appeared at press conferences announcing a deal.
Bargainers for UAW and GM resumed Sunday morning after they adjourned Saturday evening. Analysts speculated that negotiators could be wrangling over contract language that would dictate how many workers GM would have to guarantee jobs.
Bowing to UAW concerns over job security, both Ford and Chrysler have agreed to new contracts that promise to keep 95 percent of their current UAW hourly workforces except in the event of a severe industry downturn.
""I think if there's a sticking point that may be it,"" said Dale Brickner, a labor expert at the Michigan State University. ""GM may be pushing to get that figure farther down than the UAW may be comfortable living with.""
GM, the least efficient U.S. automaker, is trying to shed 12 unprofitable parts plants, and wants to exclude certain component facilities from the employment guarantee, including a door hardware plant in Flint, Mich., and an interior trim plant in Livonia, Mich.
In settling a 20-day strike by the Canadian Auto Workers union last week, GM was able to secure a deal that included the sale of two parts plants and flexibility to outsource more products.
Yokich has not said what he will do after once the contract extension expires at midnight Sunday. He set the deadline on Friday, but did not actually threaten a strike. Workers have been told to stay on the job until they hear otherwise.
However, there was speculation Sunday the UAW could mount a plant-specific strike if not enough progress had been made by the deadline. By hitting light truck plants such as the sport/utility facility in Janesville, Wis., the union could hurt the sale of some of GM's most profitable products at a time it is trying to bounce back from the Canadian strike.
GM's U.S. operations continue to respond to the strike by 26,000 CAW workers. The more than 6,600 UAW members at GM's Buick City complex have been told not to report Monday. At the same time, GM is running radio ads telling first-shift workers at its Hamtramck assembly plant to report to work Monday.
",48
"Labour lawyer James Hoffa, refusing to concede defeat in the Teamsters union presidential election nearly a week after his opponent claimed victory, called Thursday for a congressional investigation into the vote.
Hoffa on Tuesday formally asked U.S. Attorney General Janet Reno to impound the ballots and initiate an FBI investigation into ""serious irregularities"" in the election.
""We really have what I call Teamstergate,"" Hoffa told reporters at a news conference Thursday at the Teamsters' Detroit offices, where his legendary father, the late Jimmy Hoffa, ruled the union in the 1950s and '60s.
Incumbent Teamsters President Ron Carey on Saturday claimed victory in the hard-fought election, winning by an apparent margin of about 17,000 votes. But 41,002 ballots were set aside for further eligibility checks, and Hoffa says more than 25,000 other ballots may have disappeared.
After all eligible votes were tallied late Saturday, court-appointed Election Officer Barbara Zack Quindel accounted for 485,605 ballots returned. But last week she reported that the total number of mail-in ballots received was 511,268, an estimate based on receipts from the U.S. Postal Service.
Hoffa said he wants an explanation for the discrepancy between the ballots counted and the ballots received.
""If I lost, I lost. I just want a fair election,"" Hoffa said.
Carey, 60, was first elected president of the 1.4 million-member International Brotherhood of Teamsters as a reformer in 1991. His apparent re-election was lauded by AFL-CIO President John Sweeney, who had remained neutral during the campaign.
Meanwhile, Quindel decided Wednesday to void 120 Hoffa votes after finding that a Hoffa backer and former officer of Teamsters Local 743 in Chicago violated election rules by collecting and mailing ballots for other members, according to her spokesman, Jeff O'Mara.
Acting on a protest filed by Carey's campaign last week, O'Mara said Quindel decided it would be too extreme a remedy to void all of the local's ballots, estimated by the Carey campaign at more than 2,800.
The ballots were among 41,002 so-called challenged ballots that are still being checked for eligibility and have yet to be counted. Although there are enough of them to erase Carey's lead, Hoffa would need to carry the challenged ballots by a better than three-to-one margin for that to happen.
The election officer has not disclosed any interim results of the tabulation of the challenge ballots. O'Mara said he did not know when the tabulation would be completed.
Hoffa said Thursday, however, that initial tabulations of the challenged ballots have cut Carey's lead by as much as 2,400 votes. He did not disclose how many votes had been counted.
",48
"The engines have started in the race to succeed Alex Trotman for the top office at Ford Motor Co.
The company on Thursday promoted two longtime Ford executives to positions that will allow them to prove if they are worthy of occupying one or more of the top spots at Detroit's No. 2 automaker.  
Edward Hagenlocker, 56, was promoted to vice chairman from executive vice president, and put in charge of a new auto components organization with 75,000 employees and revenues of $14 billion.
Jacques Nasser, 48, previously group vice president in charge of product development, was named to Hagenlocker's old job of heading up Ford Automotive Operations (FAO), the company's core car and truck business.  
Speculation has swirled for months about how Ford's board of directors plans to handle the succession of Trotman, who currently holds the titles of chairman, chief executive officer and president. Trotman reaches the mandatory retirement age of 65 in July 1998, but the board can ask him to stay on.
Complicating matters is the prospect of a Ford family member returning to a top role for the first time since 1980. Recent reports have said William Clay Ford Jr., 39, a great- grandson of company founder Henry Ford, could be named a non- executive chairman, or chairman, when Trotman leaves.  
Eugene Jennings, a retired professor of management at Michigan State University, said Hagenlocker's assignment at the head of the new parts organization could turn into a high-profile spot, and it should not be read as a demotion.
""It's the one thing that Hagenlocker needs under his belt to give him the experience he needs to run the company,"" said Jennings, a long-time observer of the Big Three U.S. automakers.  
Nasser has worked at Ford nearly as long as Hagenlocker. Born in Lebanon and raised in Australia, Nasser joined the company in 1968 as a financial analyst. He rose through several international assignments, earning a reputation as a ""no- nonsense petrol head.""
While Hagenlocker is stiff in front of the media, Nasser moves easily among reporters, entertaining them with colorful stories about cricket and his globe-trotting life abroad.  
Wesley Brown of industry consultant CSM Forecasting in Farmington Hills, Mich., said Nasser's new role also offers him a chance to demonstrate his abilities at running the company.
""It clearly puts Nasser in a position to take over from Trotman when he retires,"" said Brown.
For his part, Trotman was circumspect about the succession question at a news briefing Thursday, saying it was the board's decision. Asked if the board is actively working on the issue, Trotman responded: ""Absolutely, in depth and frequently -- and has been for the last 20 or 30 years.""
",48
"General Motors Corp. took the wraps off its much awaited 1997 Chevrolet Corvette amid a shower of sparks and blaring music Monday, rounding out a day of coupe introductions at the North American International Auto Show.
The new Corvette is the fifth generation of the classic Detroit muscle car, and the first redesign since the 1984 model year vehicle. The manufacturer's suggested retail prices for the car, which starts arriving at dealerships in February, is $38,060, an increase of $270 over the previous model.
General Motors Chairman Jack Smith said the new Corvette will continue its long-time tradition as Chevrolet's signature sports car.
""It's the image car for Chevrolet. Always has been and always will be,"" he said.
Although its looks are similar to the old one, Chevrolet touts the new Corvette as all new from ""rubber to roof.""
The 1997 version carries a new 5.7 litre, small block engine that produces 345 horsepower from a smaller unit. The car also features a stiffer frame, all-new suspension, a larger interior, 70 percent more cargo room, and is easier to get in and out of.
Some critics have said the design of the new model, which has been under development for almost a decade, is too close to the current model. But Chevrolet General Manager John Middlebrook said Corvette buyers, some of the most loyal in the industry, did not want a radical design change.
""We did a lot of research and testing and the customer wanted Corvette cues,"" he told reporters following the introduction.
The fifth generation 'Vette, a closely guarded secret, was GM's highest profile scheduled introduction at the Detroit auto show. The company made the most of it by posting sheriff's deputies outside of the press conference who turned away executives from other auto companies who wanted to watch the introduction.
Annual production at its Bowling Green, Ky., plant is expected to be about 28,000 units, Middlebrook said. However, production for calendar 1997 will be about 20,000 because the company will not get a full year of straight-time production.
Also introduced Monday was the Mercedes-Benz CLK, a four-seat coupe that will sell for about $40,000. The new coupe shares the round front headlights of the Mercedes C-Class sedan.
Mercedes said it will offer two versions of the new coupe and three engine choices. The car will begin hitting dealer showrooms in the United States in June.
Ford Motor Co. unveiled its new ZX2 Escort coupe. Pricing was not set, but Ford officials said it would be similar to current Escort prices. Ford is aiming the vehicle at younger buyers who want performance. The new car, which goes on sale in April, will come with a 130 horsepower, 16-valve engine with a dual overhead camshaft.
Earlier, the North American Car and Truck of the Year Awards were announced. The new Mercedes SLK roadster edged out the Jaguar XK8 for the car award. Ford's new Expedition full-size sport utility won the truck award.
",48
"Chrysler Corp said Tuesday it filed an appeal protesting a California Department of Motor Vehicle (DMV) ban on the company shipping new vehicles to dealers as a penalty for allegedly violating the state's ""lemon law.""
The move, which was expected, means the U.S No. 3 automaker can delay the 45-day ban taking effect for years as it pursues an appeal through the legal system.  
The ban, issued October 16, came after the DMV determined Chrysler resold 116 vehicles in 1991 and 1992 without properly disclosing to new owners the cars were so-called lemons, a term that refers to vehicles with chronic repair problems.
In its appeal to California's New Motor Vehicle Board, Chrysler called the DMV's actions a ""draconian penalty."" The company argues it complied with the lemon law as it was written at the time of the vehicle sales.  
Chrysler said the statute in effect at the time was vague about which vehicles repurchased by manufacturers had to be branded as lemons. Specifically, it said the law did not address disclosures relating to the resale of other vehicles bought back by automakers, such as those repurchased after informal dispute resoltions, or as part of a legal settlement.
Chrysler said it made good faith efforts to keep used car buyers informed about the vehicles they were purchasing. The company also complained about the economic ramifications of the penalty on its 240 California dealers.
""The economic harm to the dealers and their employees caused by this action has been well documented but ignored by the DMV,"" the company said in its appeal.
The New Motor Vehicle Board, which was set up to render an impartial view of regulatory actions, can reverse or amend the DMV's decision.
Chrysler sold nearly 170,000 new cars and trucks in California in 1995, representing close to eight percent of its annual volume, according to R.L. Polk & Co.
The DMV ban, which would have taken effect November 25, was hailed by consumer advocates as the first tough stance aimed at ending the process of ""lemon laundering.""
",48
"Nearly one quarter of ITT Automotive Inc's workers around the world will be paid a combined hourly and benefit rate of less than $10 an hour by 2000, the company's top executive said Tuesday.
ITT Automotive, a unit of ITT Industries Inc  paid 15 percent of its 35,000 workers less than $10 an hour in 1995, and 10 percent that amount in 1990, said Timothy Leuliette, president and chief executive officer of ITT Automotive.
The numbers, provided by Leuliette at the Automotive Industries' Executive Management Conference, were offered as another illustration of how auto suppliers need to continue slashing costs if they expect to remain an independent player in the fast-changing industry.
""Do we do that because we're mean?"" Leuliette said of the falling rates. ""No. We did that because we have to promise our customers a 3-4 percent price reduction.""
Leuliette spoke as part of a panel discussion with J.T. Battenberg, president General Motors Corp's Delphi Automotive Systems, and Robert Oswald, chairman, president and chief executive officer of Robert Bosch Corp's U.S. automotive unit.
Asked how much a supplier should expect to pay workers, Leuliette said the global hourly rate for labor-intensive assemblies such as wiring harnesses is $1 to $2. More technical products are made for $10 to $12 an hour.
""If you are regionally competitive but not globally competitive, you will unlikely be a supplier to ITT,"" he said.
Battenberg had three areas of advice for suppliers: focus on a few product areas; continuously stress quality; and pursue international alliances with other suppliers to expand more efficiently.
""I just don't think you can be all thing to all people. It's a lesson we learned at General Motors the hard way,"" Battenberg said.
Oswald said suppliers need to be more than good product innovators. ""At Bosch, we believe that our performance as a supplier is not based just on innovation, but also that weare meticulous in bringing that innovation to production,"" he said.
Meantime, Leuliette said in 2000 suppliers to ITT can expect to receive 80 percent of what they are paid now for their products.
He noted the supplier industry is under such pressure to reduce costs that firms need between eight percent and nine percent productivity growth in order to keep their present level of employees.
",48
"Haworth Inc. said Monday it received a $211.5 million payment for a patent infringement award against Steelcase Inc., ending a 17-year battle between the two Michigan office furniture giants over electrified office panels.
Of the total $211.5 million, Steelcase, the largest office furniture maker in the world, paid Haworth $96.8 million in damages and interest worth $114.7 million.
""While we don't agree with this ruling, we respect that the courts have the final word and it's time to move on,"" Steelcase President James Hackett said in a statement.
The two companies began warring over the issue in 1979. Haworth sued Steelcase in November 1985, alleging Steelcase infringed on its patents for pre-wired modular panel systems, which are used to build office cubicles.
Developed during the early 1970s, the technology provides a safe way for electricity to be routed through office panels, eliminating the need for extension cords and helping satisfy the growing demand for electronic office equipment, Haworth said.
The decision and damage award, which are binding and cannot be appealed, were entered Dec. 23 by a special judge appointed to determine damages in U.S. District Court in Kalamazoo, Mich.
In related rulings, the court denied Steelcase's allegations in a 1989 suit that Haworth infringed on two patents for prewired panels. It also upheld Haworth's position on a lawsuit it filed relating to computer keyboard shelves.
Steelcase won the first round of the original 1985 lawsuit when a federal court found Steelcase did not infringe Haworth's patent. Haworth appealed that decision and the U.S. Court of Appeals reversed the lower court ruling in 1989.
The case then went to a second trial that was an alternative dispute resolution before the special judge in Washington. That trial determined damages and resolved Steelcase's 1989 patent lawsuit against Haworth.
In a news release, Haworth said the award provides vindication for its role in developing the first safe method of routing electricity through movable office panels.
""But no monetary award can make things right,"" said President Jerry Johanneson. ""No montary award can erase the gains our competitors made when they infringed our patents and used the technology that was rightfully ours.""
In addition to Steelcase, eight other companies have paid more than $75 million to settle patent infringement cases brought by Haworth, it said.
Based in Grand Rapids, Mich., with a total of 19,000 workers worldwide, Steelcase had total revenues of $2.6 billion for its 1996 fiscal year, which ended in February.
Haworth, based in Holland, Mich., with more than 9,000 employees around the world, had 1995 sales of about $1.2 billion.
",48
"While General Motors Corp. struggles to overcome labor costs of $43 an hour at its parts plants, the head of one global auto supplier is painting a Darwinian view of the future, in which an increasing number of workers earn less than $10 an hour.
Nearly one-quarter of ITT Automotive Inc.'s workers around the world will be paid a combined hourly wage and benefit rate of less than $10 by 2000, the company's top executive said this week at a conference of suppliers.
That sobering forecast spotlights a long-term problem for GM, which is now in the throes of negotiating a new three-year labor contract with the United Auto Workers union.
""They can't make a buck stamping out taillights and paying people $43 an hour,"" said David Healy, an analyst at Burnham Securities Inc.
Adds Lehman Brothers analyst Joseph Phillippi: ""Their 43 other competitors aren't going to say 'We'll spot you a couple of years.'""
Timothy Leuliette, president and chief executive officer of ITT Automotive, said the company paid 15 percent of its 35,000 workers around the world less than $10 an hour in 1995. That was up from 10 percent of its employees at that pay level in 1990.
""Do we do that because we're mean?"" Leuliette said of the falling wage rates. ""No. We did that because we have to promise our customers a 3 to 4 percent price reduction.""
Facing union demands for greater job security, GM must find a way for its massive Delphi Automotive Systems parts business to stay competitive in the worldwide auto supplier market.
In the current talks, Delphi has said 12 of its U.S. component facilities are underperforming and should not be subject to the job guarantees the UAW has received from other automakers.
Even if it accepts the economic terms already agreed to by Ford Motor Co. and Chrysler Corp. , GM and Delphi will pay the average U.S. parts worker a base wage of nearly $19 an hour in the first year of the contract, and more than $21 in 1999, the third year of the agreement.
About 42 percent of Delphi's workers are located in the United States, where the combined hourly wage and benefit cost of a UAW worker under the 1993 national agreement is about $43.
Delphi, with 1995 revenues of $26.4 billion, is in 167 businesses around the world. Global expansion remains a focus for the company, which this year expects 35 percent of its revenues to come from customers outside of GM's North American Operations, Delphi President J.T. Battenberg said Tuesday.
But as Leuliette's comments indicate, the global auto supplier industry is growing increasingly competitive.
The worldwide hourly wage rate for assembling a labor-intensive part such as a wire harness is between $1 and $2, he estimated. More technical parts cost $10-$12 an hour. Leuliette said workers in Vietnam will earn $64 a month working 48 hours a week putting together wiring harnesses for ITT.
""If you are regionally competitive but not globally competitive, you will unlikely be a supplier to ITT,"" Leuliette told the gathering of suppliers in Detroit.
ITT Automotive, based in Auburn Hills, Mich., is the biggest unit within ITT Industries Inc., and one of the largest independent auto suppliers in the world.
The company, which has annual sales of about $5.5 billion, makes brake and chassis systems, as well as body and electrical components such as motors, actuators and wiper systems. Leuliette estimated the company's average global total wage costs at about $14 an hour.
",48
"Seven years after General Motors Corp created the Geo brand to entice more import buyers, the automaker is dropping the name, though it will continue to sell the Metro, Prizm and Tracker models as Chevrolet vehicles.
Chevrolet General Manager John Middlebrook said the Chevrolet image and its products have improved to the point where it no longer needed the Geo badge to attract new buyers.
Middlebrook said the move also fitted in with GM's efforts to unclutter its numerous brand images among consumers.  
GM created the Geo brand in 1989 as a sub-category of Chevrolet by renaming several Chevrolet vehicles. The name Geo, created under the direction of former GM Chairman Roger Smith, was meant to signify a world car.
GM plans no changes to the joint venture agreements that produce the Geo vehicles. The Prizm, essentially the same car as the Corolla from Toyota Motor Corp, is made by NUMMI, a Fremont, Calif.-based venture with Toyota.
Both the Metro and Tracker are produced in Ingersoll, Ontario, at CAMI, GM's joint venture with Suzuki Motor Corp.  
Middlebrook, who took over as general manager of Chevrolet in early 1996, said the move has been under consideration for some time, following the renewed strength of the Chevrolet brand.
Chevrolet, which currently has 16 different products, has introduced 18 new models since 1989. Consumer research has shown that awareness levels and purchase consideration jump between 30 percent and 40 percent when target buyers compare Chevrolet with Geo, the company said.
""It's the strength of the Chevrolet brand that's driving this,"" Middlebrook said.  
In a sign that GM still has an image problem with import buyers, Prizm sales lag those of its Corolla sister by a wide margin. The Prizm sold about 77,000 units through November of this year, compared with 188,000 for the Corolla.
Sales for all three Geo vehicles have fallen since reaching a high of 325,000 in the 1990 calendar year. Sales for the first 11 months of 1996 totaled 206,491. Although that was an increase of eight percent over a year ago, the vehicles carried rebates ranging from $300 to $1,000.  
In selling the Prizm as a Chevrolet, the division's 4,400 U.S. dealers will have a car similar in price and features to the Cavalier sedan.
However, Richard Scheidt, Geo brand manager, said GM did not anticipate too much duplication because traditional Geo buyers are different from typical Chevrolet buyers. For instance, he said the Prizm outsells the Cavalier in Texas.
Analysts reacted favorably to the move, saying it demonstrates another step by GM to use its marketing and advertising resources more efficiently.  
Joseph Phillippi, an analyst at Lehman Brothers, said it was also not out of the question that GM would eventually drop some of the current Geo models.
""I would guess at some point in time they would do some additional pruning,"" he said.
Chevrolet, which will gain some marketing efficiencies through the move, will pay for the new signs that dealers will be required to put up, Middlebrook said.
Gerald Seiner, a Chevrolet-Geo dealer in Salt Lake City, Utah, said dealers were in favor of the move because it would bring a simpler image to the Chevrolet brand.  
""Frankly, I haven't had anybody walk through the door and say they want to buy a Geo,"" he said.
",48
"Chrysler Corp. minivans have came under fire again from safety regulators, who said Tuesday they stepped up probes into two problems, including reports that a 90-pound rear hatch door can suddenly close without warning.
Nearly 2 million minivans are involved in the investigations, which were also sparked by reports that side sliding doors on 1996 models flew open at high speeds.
The National Highway Traffic Safety Administration (NHTSA) said it has received reports that 39 people have been injured when the rear hatch door on 1991-1993 model Caravan, Voyager and Town & Country minivans dropped unexpectedly.
The problem occurs when bolts holding cylinders that prop the door open shear, according to the federal safety agency. The agency has received a total of 477 complaints. The probe, first launched in May and upgraded on Oct. 31, covers almost 1.3 million minivans.
NHTSA also upgraded a preliminary investigation into about 582,000 1996-model Caravan, Voyager and Town & Country minivans. It has received 19 complaints that the right or left sliding door can come open while the vehicle is moving.
Owners have reported doors opening a few inches or flying wide open at speeds from 15 to 60 mph. No injuries have been reported. NHTSA said it is not aware of any incidents involving vehicles built during or after January 1996.
Chrysler was the first automaker to offer a sliding door on the left side of a minivan. The feature has made the No. 3 automaker's minivans the hottest seller in a popular segment.
Chrysler agreed in 1995, under pressure from regulators, to replace the latches on the rear hatch doors on more than 4 million minivans but stopped short of recalling the vehicles, from the 1984 through 1995 model years. Safety officials said the doors could pop open during low-speed crashes.
A Chrysler official could not be reached to comment.
But the company has told the safety agency the sliding door problem may stem from incorrect latch adjustments by dealers, which the company attributed to problems with the service manual.
Chrysler also said eight of the complaints about side doors opening involved vehicles that had had door repairs made. Chrysler said it has corrected the manual procedure and has made three design changes to door components.
But NHTSA said it has continued to receive complaints about the doors opening on vehicles with no repair history.
Separately, NHTSA said it upgraded an investigation into 621,000 1995 and 1996 Windstar minivans from Ford Motor Co. Regulators have received 327 complaints about brake problems, which have led to 76 accidents and two injuries.
In addition to the incidents reported to NHTSA, Ford said it has received 64,000 warranty claims that could relate to a brake problem causing long stopping distances.
Also, NHTSA said it opened an investigation into Land Rover's Discovery sport/utility vehicle. It has received two complaints that the right front door opened on 1996 models. Rover is a unit of German carmaker BMW.
Chrysler stock fell 25 cents to $34.75 on the New York Stock exchange in afternoon trading.
",48
"CMS Energy Co should have no trouble meeting or exceeding the $2.40 to $2.45 a share earnings estimates that analysts forecast for all of 1996, Chairman and Chief Executive Officer William McCormick said Friday.
""We feel very comfortable we'll be at or above that range,"" he said in a telephone interview from the utility's Dearborn, Mich. headquarters. CMS, the parent company for Consumers Power Co, Michigan's largest utility, earned $2.27 a share on total revenues of $3.9 billion in 1995.  
Earlier Friday, CMS announced the Michigan Public Service Commission (MPSC) approved a settlement that removes the final rate uncertainty of its Midland Cogeneration Venture L.P., ending a 10-year regulatory saga involving the embattled plant.
The settlement allows Consumers Power to include the cost of buying the final 325 megawatts of power from the plant in its customer rates. Previously, CMS was granted permission to include in rates the cost of buying 915 megawatts of the plant's total 1240 megawatts of power.  
""The last significant uncertainty related to the whole Midland situation was the recovery of the remaining 325 megawatts,"" said McCormick, who added he has been dealing with the Midland project since he became CEO of CMS 11 years ago.
McCormick said the settlement removes the possibility of future earnings write-downs related to the project. CMS recorded an after-tax charge of $343 million in the fourth quarter of 1992 from an earlier settlement of Midland Cogeneration issues.  
CMS' stock was up $1 to $32-3/8. Trading volume on the New York Stock Exchange was 206,700, indicating trading for Friday would be more than 300,000 shares, heavier than normal, said McCormick.
CMS' construction of the facility as a nuclear power plant was abandoned in the mid-1980s. CMS finished its conversion to a gas-powered energy plant in 1990.
Midland Cogeneration, the largest cogeneration project in North and South America, is a partnership of CMS; Dow Chemical Co, Coastal Corp, Asea Brown Boveri Inc and Fluor Corp.
Approval of the settlement prompted Standard & Poor's to revise its outlook on Consumers Power and CMS to positive from stable, and re-affirm its ratings on the companies.
McCormick said he believes CMS will be meeting with the debt rating agency to discuss a possible upgrade of its ratings.
",48
"Chrysler Corp. said Monday it was exploring the possibilty of extending its car production agreement with Mitsubishi Motors Corp., reversing a trend toward cutting ties with the Japanese automaker.
""We are discussing the possibility with them, but we haven't reached any conclusions or any decisions yet,"" said Chrysler spokeswoman Shawn Williams.
Mitsubishi Motor Manufacturing of America Inc., the company's U.S. subsidiary, currently builds the Dodge Avenger, Chrysler Sebring and Eagle Talon coupes at its assembly plant in Normal, Ill.
That agreement is set to expire after the 1999 model year. Chrysler executives have suggested in the past they want to phase out the automaker's production arrangement with Mitsubishi.
Richard Recchia, chief operating officer of Mitsubishi's U.S. unit, said in October 1995 the future relationship between the two companies would likely be based more on a partnership of components and engineering exchanges instead of complete products.
That is apparently changing.
Automotive News, a weekly trade publication, reported Monday that Chrysler Executive Vice President Thomas Gale took a team of executives to Tokyo in November to meet with Mitsubishi officials about extending the current contract through 2004.
Williams would not comment on the meeting. Gail O'Brien, a spokeswoman for Mitsubishi's Normal plant, said discussions with Chrysler have been continuing, with Mitsubishi considering numerous options.
""Talks have been ongoing, which is totally understandable based on the fact that the contract is coming up,"" she said. Analysts said it would make sense for Chrysler to continue to use Mitsubishi as a production partner.
Since coupe sales have fallen off in recent years, Chrysler could use its own manufacturing resources to build products where it has a greater competitive edge, such as sport utility vehicles and pickup trucks, said Michael Robinet, managing director of CSM Forecasting, an industry consultant in Farmington Hills, Mich.
""This way they can steer development dollars to some of their other platforms,"" he said.
Moreover, if Chrysler were to move Avenger and Sebring coupe production out of the Normal plant, it would most likely have to convert its plant in Toluca, Mexico, which currently builds the popular Sebring convertible, Neon, Cirrus and Stratus cars, analysts have said.
Robinet also noted that Mitsubishi would benfit from keeping Chrysler as a production customer. Although the Normal plant has capacity to make at least 240,000 vehicles a year, this year it is only expected to make 184,000 units, he said. Next year, the plant is forecast to produce 175,000 units.
In addition to the Avenger, Sebring and Talon, the plant makes the Galant sedan and Eclipse coupes for Mitsubishi.
According to Automotive News, Chrysler's products have accounted for 45 percent of the 177,707 units produced through November.
Chrysler was a 50-50 partner with Mitsubishi when the Normal plant, originally called Diamond Star Motors, was founded in 1985. In 1993, Chrysler sold its ownership stake back to Mitsubishi.
Last year, Chrysler said it would drop the Dodge Stealth sports car from its 1996 model year line up because of slumping sales. Mitsubishi made the Stealth and imported it from Japan. The two companies continue to supply each other with engines.
",48
"Ford Motor Co. said Tuesday it will move 2,500 sales, marketing and customer service workers out of the Renaissance Centre over the next two years, ending a downtown Detroit office presence that dates back to 1978.
The move was prompted by General Motors Corp.'s May purchase of the landmark complex located on the Detroit River for use as its new headquarters.
Included in the deal announced Tuesday were 26 acres of land next to the centre now used for employee parking that Ford agreed to sell to GM.
No financial terms were released. Robert Rewey, Ford's group vice president of marketing and sales, said at a press conference both sides were ""happy"" with the deal, which has been completed.
Rewey said Ford, which occupies about 650,000 square feet in two of the center's four towers, had planned to stay in its location through 2005 when its leases expire.
""Our plans got changed -- by the new landlord,"" he said.
Most of the employees, who work in the Ford, Lincoln-Mercury and Customer Service Divisions, will be relocated to Ford's existing Regent Court building near the automaker's headquarters in Dearborn, Mich.
Rewey said Ford was not pressured by GM to leave early, but decided to do so because it now has space to relocate workers as a result of its ongoing Ford 2000 reorganization.
Rewey declined to say if GM will pay any of Ford's relocation costs. Those expenses could be substantial because Ford's customer assistance and business assistance centres are computer-intensive, technically sophisticated operations.
Employees will begin moving by mid-1997 and should be out of the Renaissance Centre by the end of 1998.
Fearing his urban revitalisation efforts could be hurt, Detroit Mayor Dennis Archer had encouraged Ford to stay in downtown Detroit. But Rewey said Ford could not find a suitable downtown location that would allow it to replicate the efficiencies it now enjoys at the Renaissance Centre.
He noted Ford is encouraging its outside advertising agencies and accounting suppliers to remain in Detroit.
Ford officials took pains Tuesday to point out the company remains committed to the resurgence of Detroit. Included in that is a $25 million renovation of the former Veterans Memorial Building late next summer that will serve as the new UAW-Ford Training Centre.
In October, Ford agreed to pay $40 million for naming rights to a new downtown stadium for the Detroit Lions professional football team.
But some local real estate observers said Ford's decision to leave Detroit does not bode well for the city, which is losing a long-time and prominent tenant. Even though GM will fill the space Ford is vacating, there is still a surplus of class A office space, said Joel Feldman, a broker and market analyst at Friedman Real Estate Group Inc. in Farmington Hills, Mich.
""It lessens the possibility that current vacant class A space will be able to fill up, and the spill-over effect on class B office space is diminished because of this,"" he said.
Ford's history with the Renaissance Centre dates back to 1972 when then Chairman Henry Ford II announced the Renaissance Centre development project, which was designed to attract business and employment that would lead to the revitalisation of downtown Detroit.
Ford said its 35,000-square-foot World of Ford exhibition and display area at Renaissance Centre will be discontinued in June 1997. Company officials said they are not sure where or how the exhibit, which is popular with marketing and sales workers, will be reconstructed.
",48
"Labor lawyer James Hoffa, refusing to concede defeat in the Teamsters union presidential election nearly a week after his opponent claimed victory, called Thursday for a congressional investigation into the vote.
Hoffa on Tuesday formally asked U.S. Attorney General Janet Reno to impound the ballots and initiate an FBI investigation into ""serious irregularities"" in the election.
""We really have what I call Teamstergate,"" Hoffa told reporters at a news conference Thursday at the Teamsters' Detroit offices, where his legendary father, the late Jimmy Hoffa, ruled the union in the 1950s and '60s.
Incumbent Teamsters President Ron Carey on Saturday claimed victory in the hard-fought election, winning by an apparent margin of about 17,000 votes. But 41,002 ballots were set aside for further eligibility checks, and Hoffa says more than 25,000 other ballots may have disappeared.
After all eligible votes were tallied late Saturday, court-appointed Election Officer Barbara Zack Quindel accounted for 485,605 mail-in ballots returned. But last week she reported that the total number of ballots received was 511,268, an estimate based on receipts from the U.S. Postal Service.
Hoffa said he wants an explanation for the discrepancy between the ballots counted and the ballots received.
""If I lost, I lost. I just want a fair election,"" Hoffa said.
Carey, 60, was first elected president of the 1.4 million-member International Brotherhood of Teamsters as a reformer in 1991. His apparent re-election was lauded by AFL-CIO President John Sweeney, who had remained neutral during the campaign.
Meanwhile, Quindel decided Wednesday to void 120 Hoffa votes after finding that a Hoffa backer and former officer of Teamsters Local 743 in Chicago violated election rules by collecting and mailing ballots for other members, according to her spokesman, Jeff O'Mara.
Acting on a protest filed by Carey's campaign last week, O'Mara said Quindel decided it would be too extreme a remedy to void all of the local's ballots.
The ballots from Local 743 were among the 41,002 ballots that were being checked for eligibility.
The election officer has not disclosed interim results of the tabulation of those ballots and O'Mara said he did not know when the final tally would be completed.
But Hoffa said Thursday that initial tabulations of the so-called challenged ballots have cut Carey's lead by as much as 2,400 votes.
The Carey campaign, however, said the lead was cut only by about 1,500 votes. The latest count which included the strongly pro-Hoffa Local 743, showed Carey with 230,111 and Hoffa with 214,906 with about 30,000 of the challenged ballots remaining to be processed and counted if found to be eligible, the Carey campaign said.
",48
"Officials from Ford Motor Co pledged to review security measures Thursday after the fourth fatal shooting in two years at one of their facilities.
But executives from the automaker said there was little that plant security guards, who do not carry guns, could do to defend themselves against armed intruders.
""When somebody blasts their way into a factory, it's very difficult to prevent,"" said Jacques Nasser, the executive vice president in charge of Ford's automotive operations.
A gunman dressed in military fatigues shot his way into Ford's Wixom Assembly plant about 30 miles west of Detroit Thursday morning, according to police.
The man killed a manufacturing planning manager, 57-year old Darrell Izzard, and fired at people throughout the plant, sending workers fleeing in panic through the sprawling assembly complex.
Before it was over more than four hours later, several people, including two police officers, had been wounded.
The shooting came three months after a Ford worker shot and killed a security guard at Ford's Sheldon Road climate control plant in Plymouth, Mich. In January of 1995, another employee of the plant wounded his estranged wife and killed her boyfriend before killing himself.
In September 1994, a United Auto Worker union official killed two fellow union officials and wounded two others during a shooting at Ford's Rouge Manufacturing centre in Dearborn, Mich.
Throughout Thursday, radio and television stations carried calls they said they received from hourly Ford workers who complained about the stressful work environment at the Wixom plant and other Ford facilities.
But Ford spokesman Jon Harmon pointed out the suspect in the Wixom shooting, identified as Gerald Atkins, 29, was not an employee of any Ford facility. Moreover, he noted it has not been uncommon in recent months for workers at Wixom to be idled because of slow demand for vehicles made at the plant.
The plant produces the Lincoln Town Car, Mark VIII and Continental cars, which have all been experiencing soft sales. About 3,000 hourly workers, members of United Auto Workers union Local 36, work at the facility.
During a news conference, plant manager Jeff Haller described the plant's workforce as dedicated, hard-working and cohesive. He said the plant's security measures would be reviewed. Some workers told reporters they had not had their security badges checked in eight years.
UAW Local 36 President Richard Greenfield said the union was saddened by the event and had set up a counselling line. He declined to comment on the day's events because the investigation had not been completed.
",48
"Union workers prepared to strike General Motors Corp for the second time this month Sunday night as bargainers for the company and the United Auto Workers struggled to reach a new contract agreement before a midnight deadline.
In a sign the pace of talks could be picking up, GM Chairman Jack Smith arrived at the automaker's headquarters early in the evening.
UAW members at pickup truck and sport/utility vehicle assembly plants in Pontiac, Mich. and Janesville, Wis. said picket signs had been made and strike schedules drafted.
""We don't know if we're going to work in the morning or not,"" said a woman answering the phone at UAW Local 95 in Janesville, who declined to give her name.
At stake is a new labor agreement for GM's 215,000 hourly UAW workers. GM employs more than half of the approximately 390,000 UAW members who work at Detroit's Big Three automakers. It is the only one of the Big Three to not have a new three-year labor contract.
Last week, the world's largest automaker settled a strike by 26,000 members of the Canadian Auto Workers union that shut down the Canadian operations and idled more than 23,000 workers at dozens of plants in the United States and Mexico.
""GM remains hopeful an agreement can be reached before the UAW's termination of the current 1993 national agreement at 11:59 p.m. tonight,"" GM spokesman Chuck Licari told reporters gathered at company headquarters late Sunday afternoon.
UAW spokesman Frank Joyce declined to comment on the talks. UAW President Stephen Yokich Friday said he is not optimistic a deal can be reached by the deadline.
Bargainers for UAW and GM resumed at midmorning Sunday after they adjourned Saturday evening. Analysts speculated that negotiators could be wrangling over contract language that would dictate how many workers GM is obligated to guarantee jobs for.
Bowing to UAW concerns over job security, both Ford and Chrysler have agreed to new contracts that promise to keep 95 percent of their current UAW hourly workforces except in the event of a severe industry downturn.
""I think if there's a sticking point that may be it,"" said Dale Brickner, a labor expert at the Michigan State University. ""GM may be pushing to get that figure farther down than the UAW may be comfortable living with.""
GM, the least efficient U.S. automaker, is trying to shed 12 unprofitable parts plants, and wants to exclude certain component facilities from the employment guarantee. Those include a door hardware plant in Flint, Mich., and an interior trim plant in Livonia, Mich.
In settling a 20-day strike by the Canadian Auto Workers union last week, GM was able to secure a deal that included the selling of two parts plants and flexibility to outsource Yokich has not indicated what he will do after once the contract extension expires at midnight Sunday. Yokich on Friday set the Sunday deadline, but did not actually threaten a strike. Workers have been told to stay on the job until they hear otherwise.
However, there was speculation Sunday the UAW could mount a plant-specific strike if enough progress has not been met by the deadline Sunday. By hitting light truck plants such as the Janesville facility that makes Tahoe and Yukon full size sport/utilities, the union could hurt the sale of some of GM's most profitable products at a time it is trying to bounce back from the Canadian strike.
GM's U.S. operations continue to respond to the 20-day CAW strike. The more than 6,600 UAW members at GM's Buick City complex have been told not to report Monday. At the same time, GM is running radio ads telling first-shift workers at its Hamtramck assembly plant to report to work Monday.
",48
"General Motors Corp, still feeling the effects of a 20-day Canadian autoworker strike, told all of its 5,000 Lordstown, Ohio, assembly workers they will be idled for two weeks, company and United Auto Workers officials said Thursday.
The plant, which makes the Chevrolet Cavalier and Pontiac Sunfire small cars, has run out of transmissions supplied by a GM parts plant in Windsor, Ontario.
Workers at another assembly plant, the Buick City complex in Flint, Mich., could also be idled on Friday or early next week, industry sources said. The plant, which employs 5,236 hourly UAW workers, makes LeSabre, Park Avenue, Eighty Eight and Bonneville, mid-sized cars.
""It's a situation we are looking at,"" said GM spokesman Tom Klipstine, adding the automaker continues to monitor all of its vehicle and parts production operations.
As of Thursday afternoon GM had told 23,801 assembly and parts workers in the United States and Mexico to stay home because of a shortage of parts from its Canadian operations.
The Lordstown shutdown is the second U.S. plant where GM has suspended operations completely since 26,000 Canadian Auto Workers began an escalating strike on Oct. 3. The first plant to go totally down was Detroit/Hamtramck, which makes Cadillacs.
The Lordstown plant has three crews. The first crew was told to report back Nov. 10, the second Nov. 11 and the third Nov. 12, a UAW spokeswoman said.
Losing production of the mid-sized cars is not expected to have a big impact on sales, because the automaker had between 67 and 98 days supply of those vehicles on dealer lots as of the end of September, according to Autodata Corp.
But GM could feel the impact of lost production of its popular Cavalier and Sunfire cars. The Cavalier had a 61 days supply and the Sunfire had 61. The industry generally considers 60-days supply to be ideal.
GM and CAW negotiators reached agreement on a new three-year labor pact Oct. 22. The deal was approved by CAW members Wednesday.
The Canadian operations are being brought up in stages.
",48
"Ford Motor Co. Thursday announced sweeping organisational changes and a major shake-up of its senior management, replacing the head of its global automotive operations.
The moves include combining Ford's four components divisions into a single organisation with 75,000 employees and $14 billion in revenues, and a consolidation of the automaker's vehicle product development centres to three from five.
As part of the management changes, Ford named group Vice President Jacques Nasser, 48, a personable, fast-rising cost-cutter, to replace Edward Hagenlocker, 56, as president of its global automotive operations.
Hagenlocker, who headed Ford's core car and truck business for nearly three years, was named a vice chairman, overseeing the new components unit, land development, technical affairs and rental car operations.
Hagenlocker, a reserved engineer who came up through Ford's truck operations, has in the past come under fire for the auto unit's lackluster financial performance. For the first half of 1996, the worldwide auto unit's profits were $1.25 billion, down from $2.24 billion a year ago.
Hagenlocker has also been criticised for the slower-than-expected start of the redesigned Taurus and the decision not to offer a fourth door on Ford's minivans.
The moves, which had been rumoured for months, intensify the race to succeed Alex Trotman, who currently holds the titles of chairman, chief executive and president. In 1998, Trotman reaches the mandatory retirement age of 65, but the board could ask him to stay on longer.
Trotman, briefing reporters on the changes at Ford World Headquarters, declined to comment on the succession issue.
Ford said it would reorganize its global product development operations for the second time in two years. The changes, which call for Ford to reduce its vehicle line directors to 11 from 17, come less than two years after the automaker embarked on its ambitious ""Ford 2000"" global reorganization plan, which combined the U.S. and European development groups into a single unit.
Trotman said formation of the new Automotive Products Operation will help the company streamline its component operations into a single enterprise that will be more competitive with other auto suppliers.
Trotman said Ford wants the unit to increase its sales from non-Ford customers. Currently, the vast majority of the unit's revenues come from internal Ford customers, with non-Ford automakers contributing about 5 percent.
No significant headcount changes are expected. But Trotman said an evaluation under way could result in new acquisitions as well as divestitures of existing product lines.
""We are separating the automotive components business from Ford Automotive Operations to focus senior management attention on making it more competitive in its own right,"" he said. ""I have asked Ed Hagenlocker to take on the crucial assignment of making this happen.""
Analysts applauded the move, with one saying changes to Ford 2000 are overdue because the initiative needs a sharper focus.
""What Ford 2000 taught us is that they had too many cooks working on the broth,"" said Eugene Jennings, a retired professor of management at Michigan State University and long-time Big Three automaker watcher.
He also approved of giving Hagenlocker responsibility for the parts business. ""It puts a top officer directly in charge of the major challenge for the next 10 years -- and that's components,"" Jennings said.
Also named a vice chairman was Executive Vice President Wayne Booker, 62, who remains in charge of the automaker's international operations. Chief Financial Officer and Group Vice President John Devine, 52, also was promoted to executive vice president.
Ford said it promoted Vice President James Englehart, 59, to take Nasser's old job of group vice president responsible for product development. Englehart was previously vice president for the vehicle centre that developed light trucks primarily for personal use.
In the future, Ford will have three vehicle centres for car and truck development: Truck, to be headed by Vice President Jim Donaldson; Small and Medium Car, to be headed by Vice President Richard Parry-Jones; and Large and Luxury Car, to be headed by Vice President Ken Kohrs.
The small and medium-car development centre will continue to be based in Merkenich, Germany and Dunton, England, while both the truck and large/luxury car centres will be based in Dearborn, Mich. Previously, Ford had a development centre in Merkenich and Dunton for small front-drive cars and in Dearborn for large front-drive cars, for rear-drive cars, for light trucks and for commercial trucks.
""We have beeen able to simplify and streamline the organisational structure now that we are reducing our vehicle platforms by 50 percent,"" Trotman said. ""Using the 16 vehicle plaforms and at the same time increasing the number of derivatives, we can provide a broader array of vehicles for customers in many more markets,"" he said.
",48
"Chrysler Corp. said Thursday it expected strong December sales results to cap off a record year for the automaker, with total 1996 car and truck deliveries exceeding 2.4 million units.
Chrysler's year-end sales report, to be released Friday, is expected to be one of the few bright spots for December, a month in which analysts predict industry volume will fall as much as 6 percent from strong year-ago levels.
Despite an expected drop in General Motors Corp.'s December sales by as much as 16 percent from year-ago levels, analysts say automakers sold enough cars and trucks during the month to enable the full year totals to match U.S. industry sales projections of 15.1 million light vehicles.
Chrysler Vice Chairman Robert Lutz told reporters at the Los Angeles International Auto Show that he expected the automaker's total December vehicle sales to be ""several percentage points"" ahead of last year's sales of 177,803 cars and trucks, which was a record for the month of December.
For the full 1996 year, Chrysler's sales of more than 2.4 million units exceeded their 1988 record of 2,208,057 cars and trucks.
Light truck sales, which have been accounting for about 70 percent of Chrysler's total, are projected to rise 8 percent, offsetting an expected 9 percent slide in passenger car sales, said Burnham Securities analyst David Healy.
Healy said GM's sales of pickup trucks, sport utility vehicles and minivans -- the light truck category -- will be down significantly, in large part because the automaker was up against a tough comparison from a year ago.
Car sales also will plunge by as much as 20 percent, estimates Michael Luckey, of Luckey Consulting Group. He attributes the decline largely to the continued aftershocks of GM's labour strife this fall, which cost the automaker about 120,000 units of mostly car production.
""They're still being hurt by the strikes,"" he said. ""I think that's still a legitimate reason for one more month here in December.""
GM is scheduled to report its sales on Friday, Jan. 3.
Ford Motor Co., scheduled to release its results Jan. 6, will enjoy one of its best year-to-year comparisons since March 1994, said Luckey, with sales rising between 8 percent and 9 percent against a somewhat weak performance in December 1995.
Robert Rewey, Ford group vice president of sales and marketing, said at the Los Angeles International Auto Show that he expected December car sales to be flat with the year-ago level, but truck sales were ""fantastic"" and should be up sharply.
Last week, Ford added another $500 to the $500 rebate it was already offering on the 1997 Taurus, indicating its determination to hang on the title of the best-selling car in America. Taurus sales through November were about 10,000 units over the rival Honda Accord.
""If Taurus sales spurt up, cars might be a little bit better than that,"" said Luckey.
Ford's light truck sales are seen rising a sharp 20 percent, Luckey said, thanks to the strength of its pickup trucks and popular Expedition full-size sport utility vehicle.
Imports and transplants continued to take market share from the Big Three in December, Healy said, climbing to a combined share of 28.6 percent, up from 28.1 percent in November.
""The strong dollar and the weak yen are resulting in aggressive pricing by the Japanese makers, particuarly in intermediate and small passenger cars,"" he said.
For December, the light vehicle seasonally adjusted annual sales rate is expected to be in the mid-14 million range, analysts said, a precipitous drop from 15.9 million a year ago, the strongest month of 1995.
However, Luckey said the Commerce Department factors used to compute the rate penalise the total by 800,000 units, meaning the real rate is stronger than it would appear.
Most analysts expect the industry to finish the year at 15.1 million units.
""It should be 15.1 million,"" said Luckey. ""That's almost certain unless something very strange happens in December.""
That total would bring the average for the last three years to an unusually stable 15 million mark. In 1995, total light vehicle sales were 14.7 million, down from 15.1 million for all of 1994.
",48
"General Motors Corp, still feeling the effects of a 20-day Canadian autoworker strike, told all of its 5,000 Lordstown, Ohio, assembly workers they will be idled for two weeks, company and United Auto Workers officials said Thursday.
The plant, which makes the Chevrolet Cavalier and Pontiac Sunfire small cars, has run out of transmissions supplied by a GM parts plant in Windsor, Ontario.
Workers at another assembly plant, the Buick City complex in Flint, Mich., could also be idled on Friday or early next week, industry sources said. The plant, which employs 5,236 hourly UAW workers, makes LeSabre, Park Avenue, Eighty Eight and Bonneville, mid-sized cars.
""It's a situation we are looking at,"" said GM spokesman Tom Klipstine, adding the automaker continues to monitor all of its vehicle and parts production operations.
As of Thursday afternoon GM had told 23,801 assembly and parts workers in the United States and Mexico to stay home because of a shortage of parts from its Canadian operations.
The Lordstown shutdown is the second U.S. plant where GM has suspended operations completely since 26,000 Canadian Auto Workers began an escalating strike on Oct. 3. The first plant to go totally down was Detroit/Hamtramck, which makes Cadillacs.
The Lordstown plant has three crews. The first crew was told to report back Nov. 10, the second Nov. 11 and the third Nov. 12, a UAW spokeswoman said.
Losing production of the mid-sized cars is not expected to have a big impact on sales, because the automaker had between 67 and 98 days supply of those vehicles on dealer lots as of the end of September, according to Autodata Corp.
But GM could feel the impact of lost production of its popular Cavalier and Sunfire cars. The Cavalier had a 61 days supply and the Sunfire had 61. The industry generally considers 60-days supply to be ideal.
GM and CAW negotiators reached agreement on a new three-year labour pact Oct. 22. The deal was approved by CAW members Wednesday.
The Canadian operations are being brought up in stages.
",48
"Chrysler Corp. Monday said sales rose a scant 1.4 percent in November, a dramatic slowdown for the nation's third-largest automaker and a sign of what analysts said would be a weak month for Detroit's Big Three.
November sales of 179,628, up from 177,073 in November 1995, set a record for the month, and Chrysler's year-to-date sales of 2,271,022 surpassed its previous full-year record of 2,208,057 set in 1988. But the 1.4 percent increase was one of the smallest for Chrysler so far this year.
Chrysler said car sales fell 11 percent based on daily selling rates last month while sales of pickup trucks, sport/utility vehicles and minivans rose 7 percent.
Chrysler credited a strong performance from its Dodge and Jeep divisions. Dodge sales were 95,022 and Jeep sales reached 42,835, both records for November.
""Our new 1997 lineup continues to generate healthy traffic at our dealerships,"" James Holden, executive vice president of sales and marketing, said in a statement.
But Burnham Securities Inc. analyst David Healy said sales to fleet dealers such as car rental agencies fell in November, contributing to the weak performance.
Both General Motors Corp. and Ford Motor Co. are expected to post lower car sales for November, leading to weak overall sales for the No. 1 and No. 2 automakers.
That is expected to drag down the industry's sales by 2 percent to 3 percent, according to Michael Luckey, president of Luckey Consulting Group.
""The car market from what I'm hearing is going to be lousy for just about everybody,"" he said.
Luckey said annual sales based on November's expected performance and government seasonal data would be 14.7 million to 14.8 million units. The rate for October was 14.9 million, and the rate for November 1995 was 14.8 million.
But the actual november sales rate could be 300,000 units below that, he said, because of fluctuations in government data used to compute the rate.
Analysts noted that slower sales were expected for the second half of 1996, but Healy said it was too early to declare a recession for car sales because monthly sales rates can be volatile.
GM, set to report sales on Tuesday, is seen posting a 15 percent drop in overall sales, with car sales down more than 20 percent and light truck sales unchanged.
Car sales were hurt by the three-week Canadian autoworkers' strike in October, which caused a production loss of some 100,000 GM cars. Contributing to the weak numbers were customers who chose to wait for GM's 15 new models instead of buying older versions.
""Certainly for quite awhile their car sales are going to be hurt by these painfully slow transitions to the new models,"" said Luckey, noting it could be next spring before GM has full availability of its new cars.
Healy estimated Ford sales will slide 4 percent to 5 percent. Sales of pickups, minivans and sport/utilities are expected to rise 2 percent, with car sales off 12 percent, he said. Ford is scheduled to announce its sales on Wednesday.
Subaru of America Inc. reported a 21 percent jump in sales to 11,072 from the previous month. Year-to-date sales from Subaru, a unit of Fuji Heavy Industries Ltd of Japan, were 108,533, also up 21 percent from a year ago.
Volvo AB said U.S. sales fell 3.6 percent to 6,582 for November.
",48
"Peregrine Inc. may let go up to half of the 5,500 hourly employees at the four former General Motors Corp. component plants it purchased last month, the new company's top executive said Thursday.
Peregrine Chief Executive Officer Edward Gulda, in a briefing with reporters, said workers not needed at Peregrine would be able to transfer back to GM.
People who stay with Peregrine will be paid according to the terms of the new United Auto Worker and Canadian Auto Worker contracts worked out with GM in November and October.
Peregrine was formed by the New York investment firm Joseph Littlejohn & Levy to purchase the four plants from GM's Delphi Automotive Systems unit. Peregrine formally takes over the plants Jan. 1.
The plants, two of them in Michigan and two located in Ontario, make a variety of parts, including window regulators, door hardware, interior trim, structural plastics and metal stampings.
Gulda outlined several steps the new management has mapped out to streamline cost structures and expand the company's operations from the current annual revenue base of about $1 billion. He said three of the four plants are expected to turn a profit in 1997, with the fourth breaking even.
Peregrine, which will be based in Southfield, Mich., will make annual capital investments of at least $20 million a year into the four facilities, he said. Funds will come from cash generated by the operations and initial investor capital.
UAW parts workers earn about $43 an hour, including benefits -- substantially more than non-union companies pay for their workforce. But Gulda said the plants can still be competitive at those wage rates.
""Those people who say they can't be competitive with that just aren't very imaginative,"" he said. ""It isn't a question of what individual people make in the company, it's a question of being worth what you make.""
Peregrine expects its overall business to decline over the next two years as a result of past sourcing actions from GM, the company's major customer. But Gulda said future acquisitions, new GM business and internal growth will more than offset that decline.
Three to four years from now, Gulda said he expected Peregrine to generate roughly half of its revenue from non-GM customers as it expands from a regional structure to a global one. He said he would be disappointed if the firm had not doubled its revenues in five years.
Future acquisitions, which could come as soon as early next year, would complement Peregrine's existing business lines, Gulda said. He said the firm may be interested in purchasing other plants from GM's Delphi unit. He also said Peregrine might sell stock to the public, although that is at least two years away.
One of the first facilities to be upgraded will be the door hinge and hardware plant in Flint, Mich., which will receive an immediate overhaul of its stamping operations.
The plant in Livonia, Mich., which makes interior door panels and other trim components, has the most serious structural problems and will require the most significant upgrades, he said.
Gulda said the seat plant in Windsor, Ontario, is an ""excellent facility."" Key to its future is extending capacity and finding new business as soon as possible, he said.
Peregrine also plans to expand the mold and pain capacity at the faciltiy in Oshawa, Ontario, and improving its cost structure.
",48
"Ford Motor Co. on Friday became the second of the U.S. Big Three automakers to align itself with the emerging auto superstore trend by announcing a new agreement with Republic Industries Inc., the parent company of AutoNation USA.
Under the agreement, AutoNation can submit proposals to acquire existing Ford or Lincoln-Mercury dealerships. The pact also covers areas Ford may want a dealership where it does not currently have one.
The move could have implications for the future of Ohio-based Mullinax Management, one of the largest dealer groups in the country, which is reported to be in merger talks with AutoNation.
Ford spokesman John Ochs said Ford has not sold any dealerships to AutoNation. A spokesman for Mullinax, based in Amherst, Ohio, could not be reached for comment.
Mullinax, which owns several large Ford dealerships, was the 11th largest dealer group in the country, based on its 1995 retail unit sales of 20,374 cars and trucks, according to industry trade publication Automotive News.
Last month, published reports began to surface on talks between Mullinax and AutoNation. The growing auto superstore chain was founded by Wayne Huizenga, who transformed Blockbuster Video into a multibillion-dollar business and owns the Miami Dolphins professional football team.
Ford's deal with Republic is a ""framework agreement"" that opens the door for AutoNation to submit individual proposals, Ochs said. In a statement, Robert Rewey, Ford's group vice president of marketing and sales, said the automaker believed private entrepreneurs with local community ties will continue to be the ""backbone"" of its franchise system.
""However, there will continue to be developments in the industry relating to other types of dealership ownership and distribution methods,"" he said. ""We are working diligently to ensure that the new operators fit into our franchise system.""
That is a change from last February, when Ford Chairman Alex Trotman told the National Automotible Dealers Association it had no plans to offer a new-car franchise to an auto superstore.
A year ago, Chrysler Corp. announced it would grant a new-car franchise to CarMax Auto Superstore in Norcross, Ga. CarMax is owned by consumer electronics giant Circuit City Stores Inc..
The move sent a shockwave through the traditional auto dealer industry, which had already been warily watching the growth of chains such as CarMax and AutoNation in the used-car segment of the business.
The new superstores quickly have become popular with consumers because they offer large numbers of newer used cars at haggle-free prices in a pressure-free environment.
The Ford announcement signals the superstores will continue to build a presence in the new-car business, analysts said. ""That's big news,"" said William Sawyer, vice president of sales in the Detroit office of Polk, a marketing research firm. ""It's definitely a change for Ford.""
The move is also noteworthy, he said, because Ford has traditionally been opposed to publicly traded companies owning its franchises.
General Motors Corp. is the last of the Big Three to not have any franchise agreements with an auto superstore. GM spokesman Edward Lechtzin said the automaker was not opposed to the concept and has held talks with those groups in the past.
""We've held discussions. We'll continue to hold discussions. If one of them wants to purchase a GM dealership, we'll review it,"" he said.
",48
"General Motors Corp. said Tuesday it signed a memorandum of understanding to sell four parts plants to a new company that plans to be major auto industry supplier with more than $1 billion in annual sales.
The new company, Peregrine Inc., was formed by the New York investment firm Joseph Littlejohn & Levy and auto industry executive Edward Gulda. No terms were announced for the deal, which had been expected for months.
""Peregrine will be one of North America's premier automotive supply companies,"" Gulda said in a statement. ""We expect to see signficant growth in the years ahead.""
Gulda is a former chief executive officer of Kelsey-Hayes, a brake systems maker that is part of LucasVarity Plc.
The new company, to be based in Southfield, Mich., will pursue business with all car and truck manufacturers in North America and internationally, he said.
Peregrine said that, following a final agreement expected by the end of 1996, it will sign a supply agreement with GM to address ""current and future business.""
The four plants produce a variety of interior parts, including hinges, door panels and instrument panels, and generate combined revenue of about $1 billion a year. Hourly and salaried workers at the plants total about 5,500.
Two of the plants, in Livonia and Flint, Mich., are part of GM's Delphi Interior & Lighting Systems unit. The other two, a fabrication plant in Oshawa, Ontario, and a trim plant in Windsor, Ontario, report to both Delphi and GM of Canada.
The Michigan plants had been on a list of 12 U.S. Delphi operations GM had identified as being troubled facilities.
Sale of the Canadian plants became an issue in the three-week strike by members of the Canadian Auto Workers union. In the end, GM won the right to sell the two plants.
Workers not kept on by the new owner will be offered jobs at other GM facilities.
Peregrine said in a statement that hourly workers at the four plants who are retained will be covered by the 1996 master contracts with the United Auto Workers and Canadian Auto Workers unions.
Wages, pensions and benefits for salaried and hourly workers will be about the same as they had been under GM, it said.
Peregrine will be financed with equity from Joseph Littlejohn & Levy Fund II, a private partnership formed to make investments in consolidating industries and corporate divestitures.
Peregrine said it does not expect to incur debt other than for working capital needs.
",48
"General Motors Corp., facing a rancorous strike by its Canadian workers, Tuesday reported a $1.3 billion third-quarter profit that was boosted by strong automotive results and an unsually low income tax rate.
The world's largest automaker said the combined net income of its North American Automotive Operations and its Delphi Automotive Systems parts businesses was $515 million. A year ago, the operations had a combined loss of $93 million, while the parent company posted a profit of $396.7 million.
Increased volume and favourable currency exchange rates helped GM to nearly triple its international operations profits to $323 million from $111 million a year ago.
""The third quarter results from continuing operations clearly show momentum as we continue to rebuild our strength in North America and grow our business in key international markets throughout the world,"" GM Chairman John Smith said in a statement.
The earnings, equal to $1.57 a share, compared with a profit of 39 cents a share from continuing operations. They do not include results from Electronic Data Systems Corp, which GM spun off in June. Revenues climbed to $39.1 billion from $35.3 billion in the 1995 period.
Contributing to profits was $565 million in one-time favourable items. GM recorded a $253 million after-tax gain from a reduction in the reserve to pay for plant closings, thanks to its decision to use its Wilmington, Del., facility to assemble new Saturn vehicles.
Also, GM's effective income tax rate was 2.8 percent, adding another $312 million, as the company took advantage of several tax credits, including a reinstatement of research and experimentation credits for the last half of 1996.
GM Chief Financial Officer Michael Losh told reporters during a conference call that rate is expected to return to the 27 percent range in the fourth quarter.
As it has all year, GM continued to add to its growing cash account in the third period, contributing another $1.5 billion to bring its total cash balance to $14.5 billion at the end of the quarter.
Because GM has previously set its cash goal at $13 billion, Ronald Glantz, an analyst at Dean Witter Reynolds, believes the GM board will return some of that money to shareholders.
""I thought it was a pretty decent quarter,"" he said. ""I have a lot more confidence that they are going to raise the dividend and announce a share repurchase programme.""
Glantz said the annual dividend could go to $2.00 a share from the current rate of $1.60 at the next board meeting Nov. 4. By the end of 1997, he said GM may have in place a $3 billion share repurchase programme.
GM's third quarter net profit margin from continuing operations rose to 3.7 percent from 1.3 percent. Smith said that was good news, but noted the company still has a ways to go before it reaches its average annual profit margin goal of 5 percent over an auto business cycle.
""We still have our work cut out to improve margin performance,"" he said.
GM delivered more vehicles worldwide in the third quarter -- 2,085,000 vs. 2,060,000 -- but its global market share slipped to 16.1 percent from 16.9 percent.
The company also lost share in the U.S. car and truck market, finishing the quarter with 30.4 percent compared with 32.2 percent. GM delivered 1,182,000 vehicles in the United States during the quarter, down from 1,235,000.
But CFO Losh said the overall volume increase represented good news for the company, and was a sign there is demand for the bevy of new models it is launching.
""It's volume that drives earnings, not market share, per say,"" he said.
Another positive sign was the pace of new-model launches, said Losh. Production of full-size vans at Wentzvile, Mo., and Saturn coupes in Spring Hill, Tenn., have reached full line speed, and other plants are on schedule.
GM is in the midst of launching 15 new cars and trucks. In the third quarter, the company had nine plants actively involved in changeovers. Losh said that is the most it expects to have in a given quarter, adding GM will have seven in changeovers in the fourth quarter.
However, one of those nine plants is a facility in Oshawa, Ontario, which is the target of a strike by Canadian Auto Workers. Losh declined to say how much the strike will set back the new model launch there.
Losh also declined to comment on status of talks between both the CAW and United Auto Workers. About 26,000 CAW members began walking off the job Oct. 3 over the issue of outsourcing -- the use of outside contractors. GM also has yet to reach a new labour pact with the UAW.
On Tuesday, the number of U.S. workers idled by the strike rose to 10,297 from 5,911 on Monday.
",48
"The engines have been started in the race to succeed Alex Trotman for the top office at Ford Motor Co.
The company Thursday promoted two long-time Ford executives into positions that will allow them to prove if they are worthy of occupying one or more top spots at Detroit's No. 2 automaker.
Edward Hagenlocker, 56, was promoted to vice chairman from executive vice president, and put in charge of a new auto components organisation with 75,000 employees and revenues of $14 billion.
Jacques Nasser, 48, previously the group vice president in charge of product development, was named to Hagenlocker's old job of heading up Ford Automotive Operations, the company's core car and truck business.
Speculation has swirled for months about how Ford's board of directors plans to handle the succession of Trotman, who currenly holds the titles of chairman, chief executive officer and president. Trotman reaches the mandatory retirement age of 65 in July of 1998, but the board can ask him to stay on.
Complicating matters is the prospect of a Ford family member returning to a top officer's role for the first time since 1980.
Recent reports have said William Clay Ford Jr., 39, a great-grandson of company founder Henry Ford, could be named a non-executive chairman, or chairman, when Trotman leaves.
Because Hagenlocker's nearly three-year tenure at Ford Automotive Operations has been marred by slumping profits and a slow start for the redesigned Taurus, some outsiders have said his chances for higher office have dimmed.
But Hagenlocker, a reserved man who joined the company in 1964 as a research scientist, has also overseen the launch of the hugely successful new F-Serieswell as the new Ford Expedition full-size sport utility, which is expected to be both popular and profitable.
Eugene Jennings, a retired professor of management at Michigan State University, said Hagenlocker's being put in charge of the new parts organisation could turn into a high-profile spot that should not btion.
""It's the one thing that Hagenlocker needs under his belt to give him the experience he needs to run the company,"" said Jennings, a long-time Big Three observer.
Nasser has been at Ford nearly as long as Hagenlocker. Born in Lebanon but raised in Australia, Nasser first joined the company in 1968 as a financial analyst. He rose through several international assignments, earning a reputation as a ""no-nonsense petrol head.""
While Hagenlocker is stiff in front of the media, Nasser moves easily among reporters, entertaining them with colourful stories about cricket and his globe-trotting life abroad.
Wesley Brown, of industry consultant CSM Forecasting in Farmingtills, Mich., said Nasser's new role also offers him a chance to further demonstrate his abilities at running the company.
""It clearly puts Nasser in a position to take over from Trotman when he retires,"" said Brown.
For his part, Trotman was circumspect about the succession question. At a news briefing Thursday, he was asked if the board is actively working on the issue.
Trotman responded, ""Absolutely. In depth, and frequently -- and has been for the last 20 or 30 years.""
",48
"Chrysler Corp minivans have came under fire again from U.S. safety regulators, as federal officials said Tuesday they stepped up two probes involving the vehicles' doors, including an inquiry into several dozen reported collapses of a 90-pound rear hatch.
Nearly two million minivans are involved in the investigations, which also include complaints that side sliding doors on 1996 models flew open at high speeds.  
The National Highway Traffic Safety Administration (NHTSA) said it has received reports that 39 people have been injured when the rear lift-gate on 1991-1993 Caravan, Voyager and Town & Country minivans dropped unexpectedly.
The problem occurs when retaining bolts holding two cylinders that prop the door open shear, according to NHTSA. The agency has received a total of 477 complaints. The probe, first launched in May and upgraded to an engineering analysis on October 31, covers 1,271,575 minivans.  
NHTSA also upgraded a preliminary investigation into 581,686 1996-model Caravan, Voyager and Town & Country minivans. It has received 19 complaints that either the right or left sliding door can come open while the vehicle is moving.
Owners have reported the doors open anywhere from a few inches to fully open at speeds ranging from 15 mph to 60 mph. No injuries have been reported from the openings. NHTSA said it was not aware of any incidents involving vehicles built during or after January 1996.  
Chrysler was the first automaker to offer a sliding door on the left side of a minivan. The feature has made the U.S. No. 3 automaker's minivans the hottest seller in the popular family segment.
A Chrysler representative could not be reached Tuesday. But the company has told the safety agency the problem may stem from incorrect dealer latch adjustments, which the company attributed to an inaccurate service manual procedure.  
Chrysler also said eight of the complaints involved vehicles that had door repairs made. Chrysler said it has corrected the manual procedure and has made three design changes to various door components.
Still, NHTSA said it has continued to receive complaints about sliding doors opening, including vehicles with no repair history.
In 1995, Chrysler agreed to replace rear liftgate latches on more than four million 1984-95 model minivans, but stopped short of recalling the vehicles. Safety officials said the doors could pop open during low-speed crashes.  
Separately, NHTSA said it upgraded an investigation into 621,000 1995 and 1996 Windstar minivans from Ford Motor Co. Regulators have received 327 complaints about brake problems on the minivans, which have led to 76 accidents and two injuries.
In addition to the incidents reported to NHTSA, Ford said it has received 64,000 warranty claims that could relate to a brake problem resulting in long stopping distances.
Also, NHTSA said it opened an investigation into Land Rover's Discovery sport/utility vehicle. It has received two complaints that the right front door opened on 1996 models.
Rover is a unit of German carmaker Bayerische Motoren-Werke AG.
",48
"General Motors Corp. told employees it has a potential buyer for four of its parts plants, but denied reports Tuesday that it is in discussions to sell the facilities to Canadian auto supplier Magna International Inc.
GM informed workers at its Delphi Interior and Lighting Systems plant in Flint, Mich., on Monday that it has a possible buyer for the facility and three others, union and company representatives said Tuesday.
The 1,200 workers at the Flint plant were not told who the prospective buyer is, said officials at United Auto Workers union Local 326.
""They did tell us that as we spoke the potential buyer was entering into discussions,"" said Tim Thompson, a district shop committee officer for Local 326.
The Detroit News reported Tuesday that GM is talking with Magna, of Markham, Ontario, and that a deal could be announced soon. Separately, a source with knowledge of the auto supplier industry told Reuters that Atoma International Inc., a division of Magna, won the bidding for the plants, although the deal had not been finalized.
But Delphi spokeswoman Kari Hulsey denied that Magna is a finalist to buy the plants. ""It's not Magna, it's not a division of Magna,"" she said.""
One factor that could delay the announcement is the continuing contract talks between the UAW in the United States and Canada and Detroit's Big Three automakers. If Magna does turn out to be the buyer, it may be to GM's advantage to hold off finalizing a deal. Magna has previously had a contentious relationship with the Canadian United Auto Workers union.
The buyer wants to purchase the Flint plant, one in Livonia, Mich., and two in Canada as a group. The plants employ a total of 5,100 hourly workers and make a variety of interior parts, including hinges, door panels and instrument panels, GM said.
The Flint plant, which makes hardware, and the Livonia facility, which makes interior door panels, are both Delphi plants. The fabricating facility in Oshawa, Ontario, and a seat plant in Windsor, Ontario, are managed by GM of Canada but make products for Delphi.
GM spokeswoman Hulsey would not say if the four facilities are among the 14 underperforming Delphi plants that GM has said it wants to divest.
",48
"Sales of light vehicles in December are expected to be down as much as 6 percent from an unusually strong month a year ago, but analysts say the pace was robust enough for 1996's total to match industry projections of 15.1 million units.
General Motors Corp. will endure the largest drop of the Big Three, with the daily sales rate off by an estimated 16 percent from December 1995, according to David Healy, an analyst at Burnham Securities Inc.
GM's sales of pickup trucks, sport/utility vehicles and minivans -- the light truck category -- will be down significantly, in large part because the automaker is up against a tough comparison from a year ago.
However, car sales will also plunge by as much as 20 percent, estimates Michael Luckey, of Luckey Consulting Group. He attributes the decline largely to the continued aftershocks of GM's labour strife this fall, which cost the automaker about 120,000 units of mostly car production.
""They're still being hurt by the strikes,"" he said. ""I think that's still a legitimate reason for one more month here in December.""
GM is scheduled to report its sales on Friday, Jan. 3. Also reporting Friday is Chrysler Corp., whose sales will be flat or up slightly from December a year ago.
Light truck sales, which have been accounting for about 70 percent of Chrysler's total, are projected to rise 8 percent, offsetting an expected 9 percent slide in passenger car sales, said Healy.
Ford Motor Co., scheduled to release its results Jan. 6, will enjoy one of its best year-to-year comparisons since March 1994, said Luckey, with sales rising between 8 percent and 9 percent against a somewhat weak performance in December 1995.
Ford's car sales are forecast to dip 3 percent to 4 percent. Last week, Ford added another $500 to the $500 rebate it was already offering on the 1997 Taurus, indicating its determination to hang on the title of the best-selling car in America. Taurus sales through November were about 10,000 units over the rival Honda Accord.
""If Taurus sales spurt up, cars might be a little bit better than that,"" said Luckey.
Ford's light truck sales are seen rising a sharp 20 percent, he said, thanks to the strength of its pickup trucks and popular Expedition full-size sport/utility.
Imports and transplants continued to take market share from the Big Three in December, Healy said, climbing to a combined share of 28.6 percent, up from 28.1 percent in November.
""The strong dollar and the weak yen are resulting in aggressive pricing by the Japanese makers, particuarly in intermediate and small passenger cars,"" he said.
For December 1996, the light vehicle seasonally adjusted annual sales rate is expected to be in the mid-14 million range, analysts said, a precipitous drop from 15.9 million a year ago, the strongest month of 1995.
However, Luckey said the U.S. Commerce Department factors used to compute the rate penalise the total by 800,000 units, meaning the real rate is stronger than it would appear.
Most analysts expect the industry to finish the year at 15.1 million units.
""It should be 15.1 million,"" said Luckey. ""That's almost certain unless something very strange happens in December.""
That total would bring the average for the last three years to an unusually stable 15 million mark. In 1995, total light vehicle sales were 14.7 million, down from 15.1 million for all of 1994.
",48
"Calling it a crucial change for how it develops new cars and trucks, Ford Motor Co. Wednesday launched a new computer-aided design project based on a computer program from Structural Dynamics Research Corp..
Ford said the new project, called C3P, will cut prototype costs by up to 50 percent; improve investment efficiency by 20 percent to 30 percent; and eliminate half of costly late development changes.
""The new C3P initiative represents the most fundamental change of the engineering computer infrastructure in Ford's history,"" Paul Blumberg, director of product development systems at Ford's Product Development Center, said in a statement.
Officials did not specify any dollar amount savings. But executives said they fall under previously disclosed product development cost savings. Three new vehicle programs started this year will use C3P.
Once the program is fully implemented in 2000, Ford said it will merge computer-aided design, manufacturing and engineering functions into a seamless, unified system encompassing all stages of vehicle and component development.
Ford's decision to team up with Structural Dynamics Research (SDRC) raised eyebrows at competitors. The Milford, Ohio-based firm is a small player in the market of supplying computer aided design and manufacturing systems (CAD/CAM) to the auto industry, according to both competitors and analysts.
""You just don't hear about SDRC,"" said Ron Bienkowski, an executive engineer at Chrysler Corp.
Bienkowski also chided Ford for launching a new design program seven years after Chrysler did.
""We made the decision to go to a single system like C3P back in 1989,"" he said.
Chrysler, as well as several other Japanese and European automakers, use the more popular CATIA program from Paris-based Dassault Systemes and IBM Corp..
Charles Foundyller, president of market research firm Daratech Inc. in Cambridge, Mass., said the SDRC system is an easy-to-use, powerful system that should serve Ford well.
""All in all, I don't think Ford made a bad decision,"" he said.
Ford made the C3P announcement as part of a half-day presentation to reporters touting the No. 2 U.S. automaker's computer capabilities. Among other news items announced Wednesday, Ford:
-- plans to eliminate 90 percent of its physical prototypes by 2000 in favor of electronic versions. Physical prototypes now constitute about 40 percent to 50 percent today;
-- will be able to conduct a computer-simulated frontal crash for $10 in 2000, compared to the $200 it currently costs;
-- will introduce a production car in Europe in 1997 that was designed almost completely using computer technology.
Ford executives were hard-pressed to assign dollar amounts to all of the new computer design and prototype initiatives.
But Claude Lobo, director of advanced design at Ford, said the new systems dramatically improve quality and free designers and engineers to take more risks.
",48
"With Chairman Jack Smith behind the wheel of a shiny red EV1, General Motors Corp. rolled its first electric vehicle out of the plant Thursday, marking what it dubbed the start of a new era in the auto industry.
The car was loaded on the back of an auto-hauling truck at the Lansing Craft Centre that will take it on the first leg of its journey to the West Coast. The cars will go on sale Dec. 5 at 26 Saturn dealerships in Los Angeles, San Diego, Phoenix and Tucson, Ariz.
""When they look back on the next 100 years of the evolution of the automobile, they will agree that this car was the first in a new generation of vehicles that redefined the limits of technology and efficiency,"" Smith said during the drive-away ceremony.
GM spent $350 million and more than six years to develop the two-passenger, sleek-looking coupe. The car is the first and only GM vehicle to carry a GM badge, instead of a name from one of its other seven divisions.
While other automakers have developed and are selling electrically powered vehicles, GM says the EV1 is the first vehicle to be designed from the ground up as an electric car.
In his remarks, Smith called the EV1 ""the most technologically advanced vehicle platform in the world,"" incorporating 23 new patents.
The EV1 is powered by 26 12-volt lead-acid batteries. It can travel up to 90 miles before it needs recharging. The fully equipped EV1 comes with standard features, including air conditioning, dual air bags, anti-lock brakes, power windows and door locks. It can go from 0 to 60 mph in less than nine seconds, and has a top speed of 80 mph.
GM announced in October that it will sell the EV1 through a 36-month lease at a sticker price of $33,995. Buyers who receive a $5,000 credit from the state of California will be able to lease an EV1 for $480 a month. Monthly payments without the credit would be $640. The cost does not include a wall-mounted charger, which sells for about $2,000.
Production of the EV1 began at the Lansing Craft Centre in August. GM officials will not discuss how many EV1s they intend to sell or produce annually, although the Lansing facility has the capacity to make about 2,000 of the vehicles annually.
So far, Saturn has received more than 1,000 calls from potential buyers on a toll-free line, said Joe Kennedy, vice president of sales and marketing for the division. Of that, Saturn estimates about 250 are ""serious"" buyers.
Talking to reporters after the ceremony, Smith said GM viewed the electric vehicle market as a long-term programme. He again would not say when the EV1 will turn a profit for GM.
""Our effort is to make the programme over time to be a business,"" he said. ""The niche is small to start, but it will grow.""
Kennedy said the initial focus is not on volume but on generating a positive shopping, buying and ownership experience. He said the company will remain flexible in its production and sales plans to adjust to demand.
""This is a totally new market, and we don't know what the demand will be on any given month of year,"" he said, noting that Saturn has 13 EV1 specialists who have completed two months of special sales training.
",48
"While the U.S. auto industry celebrated its 100th birthday in 1996 with higher sales and a new labor accord, it expects its 101st year to feature a flat environment and tougher competition from foreign shores.
Forecasts for 1997 project sales of total vehicles will be roughly the same as the 15.4 million seen for 1996. But that's not all that bad, industry executives say. It means the four-year upswing of car, sport/utilty and pickup truck sales could continue for yet another year.  
""We see moderate inflation. We see a steady continuation of economic expansion in the United States,"" Ford Motor Co Chairman Alex Trotman said recently.
""We're looking for the car and truck industry to fall somewhere in the 15 to 15.5 million range for 1997, which we would describe as a pretty good year,"" he said.
But clouds loom on the horizon, namely from Detroit's old nemisis -- Japan.
Japanese automakers, which have introduced hot new car and sport/utility vehicles this year, are set to unleash more new products in 1997.  
Honda Motor Co Ltd will soon introduce its CR-V compact sport/utility, and is scheduled to bring out new versions of its Accord sedan and Odyssey minivan.
Toyota Motor Corp, building on the momentum of its new Camry sedan, will unveil a front-wheel drive minivan called the Sienna next fall.
Meantime, the relatively weak value of the Japanese yen promises to give cost-conscious Big Three executives headaches. A weaker yen makes it cheaper for Japanese firms to produce vehicles in Japan and sell them in the U.S.  
Since April 1995, when the yen exchange value hit a high of 80 to the dollar, the yen has weakened. The rate is now about 114, meaning it takes more yen to buy one dollar.
Van Bussman, Chrysler Corp's top economist, sees the yen staying in the 110-115 range for the first three to six months of 1997, then strengthen to about 100 yen per dollar.
""I think it will be a substantial issue in 1997,"" Bussman said. ""The yen having weakened from 80 to 110 has given them tremendous profit potential in North America.""
Adds Ford's Trotman: ""It's going to be tough next year because we have the weaker yen,"" Trotman said.  
General Motors Corp will try to reverse a slide in both sales and market share next year as it introduces 15 new cars and light trucks, including a new line of minivans.
GM will also look to improve overall competitiveness with a new three-year contract with the United Auto Workers that could allow it to shed 30,000 workers. But that deal did not come cheaply. GM endured several strikes through the year that will cost it more than $1.6 billion in 1996.
At Ford Motor Co, cost-cutting will remain a top priority next year.  
Ford, the U.S. No. 2 automaker, has scored big in the market place with its new F-Series pickup trucks and Expedition full-size sport/utility.
But car sales have lagged, with Ford being forced to slap incentives on its redesigned Taurus to push them out of dealer showrooms. Ford, which replaced the head of its core automotive operations in October, will also lose hundreds of millions from European and South American operations.
",48
"New pickup trucks and sport/utility vehicles helped Ford Motor Co.'s third-quarter profits nearly double to $686 million, the company said Wednesday, but it alarmed analysts with growing losses in Europe.
Ford eeked out a $15 million profit from its worldwide automotive operations -- versus a loss of $201 million a year ago -- as U.S. automotive net income of $634 million was offset by a loss of $619 million from non-U.S. regions.
Ford's third-quarter profits, which amounted to 56 cents a share, compared with $357 million, or 27 cents a share, in the year-ago period. The latest results were in line with Wall Street expectations.
Results from Ford finished a strong third quarter for Detroit's Big Three. The companies posted combined net profits of $2.64 billion, more than twice the $1.11 billion they reported a year ago.
Although there were some favourable one-time events, the Big Three have digested heavy launch costs and reaped the benefits of a 10 percent volume increase, said David Healy, an analyst at Burnham Securities Inc.
In the third quarter, Ford's European loss widened substantially to $472 million from a $320 million loss a year ago, surprising many analysts.
""The size of the loss was enormous,"" Healy said.
Ford blamed new product launches, adverse vehicle mixes and continued high marketing costs. Vice President David McCammon said the automaker is taking steps to cut costs by reviewing product, material, personnel and plant expenses.
In a sign of how seriously it is taking the situation, Ford Chairman Alex Trotman was on his way to visit operations in Europe, and Chief Financial Officer John Devine was scheduled to leave for Europe Wednesday.
""We were unhappy with our European results,"" McCammon told reporters, adding that he hopes the situation can be turned around by next year.
Although McCammon said the fourth-quarter results will be up from the $660 million Ford earned in the 1995 quarter, analysts indicated they would be trimming their estimates because of a $300 million to $400 million fourth-quarter charge to cover early retirement costs for about 4,000 salaried employees.
Devine told analysts that South America will post a loss similar to the $226 million deficit of the third quarter because of continuing start-up problems in Brazil.
""Brazil is likely to be just as bad"" in the fourth quarter, said Nicholas Lobacarro, an analyst at Bear Stearns.
Helping Ford's bottom line was another strong performance from its Financial Services Group. The unit earned $671 million, including a gain of $76 million from the sale of USL Capital assets, compared with a profit of $558 million in the 1995 third quarter.
The Associates, Ford's consumer finance unit, reported third-quarter earnings of $230 million, a record for any quarter. However, Ford Credit's earnings slipped to $299 million from $357 million a year ago, reflecting higher credit losses.
The company's earnings were negatively affected by a $39 million charge to cover the costs of early retirements for U.S. salaried employees.
In the U.S. market, the latest results were spurred by strong acceptance of new light truck products such as the F-Series pickup truck and new Expedition full-size sport/utility vehicle, Trotman said in a statement accompanying the results.
Third-quarter revenues climbed to $34 billion from $31.4 billion. Worldwide vehicle unit sales in the quarter were also up, increasing to 1,452,000 from 1,435,000.
But the automaker lost market share in both the United States and western Europe. Ford ended the quarter with 24.5 percent of the U.S. car and truck market, down from 24.8 percent in both the second quarter of 1996 and the third quarter of 1995.
Ford lost a full point of market share in western Europe, falling to 11.8 percent from 12.8 percent in the year-ago quarter. Ford's share in the second quarter was 12.0 percent.
Trotman said Ford expects U.S. total vehicle sales to be 15.5 million for 1996, about in line with its earlier forecasts. The industry had 15.1 million sales in 1995.
In Western Europe, Ford forecasts industry sales at 14.2 million for 1996, up from 13.4 million in 1995. Ford expects moderate economic growth to continue in its major worldwide markets, providing for stable industry sales volumes.
Ford's stock lost 75 cents to end at $32.375 on the New York Stock Exchange.
",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 repoort 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
"While General Motors Corp. struggles to overcome labour costs of $43 an hour at its parts plants, the head of one global auto supplier is painting a Darwinian view of the future, in which an increasing number of workers earn less than $10 an hour.
Nearly one-quarter of ITT Automotive Inc.'s workers around the world will be paid a combined hourly wage and benefit rate of less than $10 by 2000, the company's top executive said this week at a conference of suppliers.
That sobering forecast spotlights a long-term problem for GM, which is now in the throes of negotiating a new three-year labour contract with the United Auto Workers union.
""They can't make a buck stamping out taillights and paying people $43 an hour,"" said David Healy, an analyst at Burnham Securities Inc.
Adds Lehman Brothers analyst Joseph Phillippi: ""Their 43 other competitors aren't going to say 'We'll spot you a couple of years.'""
Timothy Leuliette, president and chief executive officer of ITT Automotive, said the company paid 15 percent of its 35,000 workers around the world less than $10 an hour in 1995. That was up from 10 percent of its employees at that pay level in 1990.
""Do we do that because we're mean?"" Leuliette said of the falling wage rates. ""No. We did that because we have to promise our customers a 3 to 4 percent price reduction.""
Facing union demands for greater job security, GM must find a way for its massive Delphi Automotive Systems parts business to stay competitive in the worldwide auto supplier market.
In the current talks, Delphi has said 12 of its U.S. component facilities are underperforming and should not be subject to the job guarantees the UAW has received from other automakers.
Even if it accepts the economic terms already agreed to by Ford Motor Co. and Chrysler Corp. , GM and Delphi will pay the average U.S. parts worker a base wage of nearly $19 an hour in the first year of the contract, and more than $21 in 1999, the third year of the agreement.
About 42 percent of Delphi's workers are located in the United States, where the combined hourly wage and benefit cost of a UAW worker under the 1993 national agreement is about $43.
Delphi, with 1995 revenues of $26.4 billion, is in 167 businesses around the world. Global expansion remains a focus for the company, which this year expects 35 percent of its revenues to come from customers outside of GM's North American Operations, Delphi President J.T. Battenberg said Tuesday.
But as Leuliette's comments indicate, the global auto supplier industry is growing increasingly competitive.
The worldwide hourly wage rate for assembling a labour-intensive part such as a wire harness is between $1 and $2, he estimated. More technical parts cost $10-$12 an hour.
Leuliette said workers in Vietnam will earn $64 a month working 48 hours a week putting together wiring harnesses for ITT.
""If you are regionally competitive but not globally competitive, you will unlikely be a supplier to ITT,"" Leuliette told the gathering of suppliers in Detroit.
ITT Automotive, based in Auburn Hills, Mich., is the biggest unit within ITT Industries Inc., and one of the largest independent auto suppliers in the world.
The company, which has annual sales of about $5.5 billion, makes brake and chassis systems, as well as body and electrical components such as motors, actuators and wiper systems. Leuliette estimated the company's average global total wage costs at about $14 an hour.
",48
"Chrysler Corp. said Tuesday it has filed an appeal protesting a California Department of Motor Vehicle (DMV) ban on shipping new vehicles to dealers in the state for allegely violating the state's ""lemon law.""
The move, which had been expected, means the U.S No. 3 automaker can delay any effect of the 45-day ban for years as it pursues an appeal through the legal system.
The ban, issued Oct. 16, came after the DMV determined Chrysler resold 116 vehicles in 1991 and 1992 without properly disclosing their so-called lemon status to the new owners.
Under California's lemon law, an automaker must buy back a car from a first owner if the vehicle spends 30 days in a repair shop during the first year of ownership or if a specific problem has not been fixed after three attempts.
Once the cars are repaired, automakers must notify used car customers that the vehicles were repurchased under the lemon law because of chronic problems.
In its appeal to California's New Motor Vehicle Board, Chrysler called the DMV's actions a ""Draconian penalty."" The company argued that it complied with the lemon law as it was written at the time of the vehicle sales.
Chrysler said the statute in effect at the time was vague about which vehicles repurchased by manufacturers had to be branded as lemons.
Specifically, it said the law did not address disclosures relating to the resale of other vehicles bought back by automakers, such as those repurchased after informal dispute resolutions, or as part of a legal settlement.
Chrysler said it made good-faith efforts to keep used-car buyers informed about the vehicles they were purchasing. The company also complained about the economic ramifications of the penalty on its 240 California dealers.
""The economic harm to the dealers and their employees caused by this action has been well documented but ignored by the DMV,"" the company said in its appeal.
The New Motor Vehicle Board, which was set up to render an impartial view on regulatory actions, can reverse or amend the DMV's decision.
Chrysler sold nearly 170,000 new cars and trucks in California in 1995, representing close to 8 percent of its annual volume, according to R.L. Polk & Co.
The DMV ban, which would have taken effect Monday, was hailed by consumer advocates as the first tough stance aimed at ending the process of so-called ""lemon laundering.""
",48
"General Motors Corp.'s sales slipped nearly 8 percent in October, dragged down by steep declines in car sales, while Chrysler Corp. posted another double-digit jump for the month, the automakers said Friday.
GM's total vehicles were 402,420 in October, off 7.8 percent on a daily sales basis from 420,408 in the year-ago month. October had 27 selling days vs. 26 a year ago.
Passenger car sales at GM were 215,276, a drop of 24 percent. All of GM's car divisions reported declines, including Chevrolet, where sales were 68,934, down 31 percent.
Offsetting the slumping car numbers were total light truck sales of 187,144, which climbed 22 percent on a daily basis from last year.
Three Chevrolet sport utility vehicles -- the Suburban, Tahoe and Blazer -- each had their best-ever sales month in October, with percentage increases ranging from 35 percent for the Blazer to 63 percent for the Suburban.
Production of the Tahoe and its GMC sister, the Yukon, has been halted at GM's Janesville, Wis., assembly plant since Oct. 29, when 4,800 United Auto Workers members walked off the job in a contract dispute. It is the only plant that makes the sport utilities, GM's most profitable vehicles.
As it has for the previous two months, GM blamed the passenger car drop on customers waiting for the introduction of GM's 15 new vehicle lines that will be hitting the market through the next year.
""I think there's a great deal of anticipation for the newer models that will be coming out,"" said GM spokesman Dean Rotondo.
The 20-day strike by Canadian autoworkers in October had a minimal effect on the month's sales, Rotondo said.
Sales of Chevrolet Cavalier were up 1.5 percent, and were down 12.4 percent for the Pontiac Sunfire, which Rotondo said could be related to the strike.
Meanwhile, Chrysler's total sales rose 18.6 percent to 205,393. Sales of passenger cars were 61,213, an increase of almost 13 percent. Sales of minivans, sport utilities and pickup trucks shot up 22.3 percent to 144,180.
Chrysler said the October total broke a record of 176,339 for the month set in 1972. James Holden, Chrysler executive vice president of sales and marketing, said about 75 percent of the October sales came from 1997 model vehicles, which consumers bought with a minimal amount of incentives.
""I believe that we've got a fundamentally different demand for our products than we've had historically, because it shows strength across the board and month to month,"" he said.
Holden predicted the U.S. No. 3 automaker will be able to sustain the sales momentum in 1997 because of its increased production plans.
Highlights for Chrysler included a 50 percent increase in sales of the Dodge Dakota Pickup, which was redesigned for the 1997 model year, to 8,722; and a 24 percent increase in all Dodge trucks to 74,860.
Other October sales reported Friday were: Toyota Motor Corp., where sales were 92,918, up 15.7 percent; Honda Motor Co. Ltd., which had an 8.8 percent increase to 74,914; Nissan Motor Co. Ltd., which had sales of 49,121, a decrease of 11.8 percent.
With 17 of 22 automakers reporting, total U.S. light vehicle sales for October were 912,037, a 1.5 percent daily sales rate increase from 865,378.
Ford Motor Co., the last of the Detroit's Big Three to report, is expected to post a slight increase in sales on Nov. 5, according to analysts.
",48
"A gunman in military fatigues burst into a Ford Motor Co. assembly plant and opened fire Thursday, killing one and wounding two others before eluding police in a series of draininge tunnels.
Police said they trapped the man and he gave up voluntarily after a tense, four and a half-hour standoff.
Sgt. Clarence Goodlein of the Wixom police said the white male shot and killed one Ford employee and wounded another, then left the plant and shot an Oakland County Sheriff's deputy in the shoulder when police tried to confront him.
Goodlein did not identify the victims, but a Ford worker, Jim Maher, said the man killed was a foreman at the plant.
Deputy Matt Miller, 39, was listed in stable condition and was expected to undergo surgery Thursday afternoon, said Amy Middleton, a spokeswoman for Providence Park Medical Center.
The other worker, Alvin Akers, 43, was treated and released, with a bullet fragment in his arm and glass fragments in his neck.
Goodlein said authorities did not immediately know whether the gunman was a Ford employee.
""This guy came into the plant and with some kind of weapon starting shooting all over the place,"" said Ford spokesman Bill Carroll.
Police shut down nearby Interstate 96, which runs parallel to the plant. Workers were evacuated from the plant and production of Lincoln Town Cars, Continentals and Mark VIII luxury cars was suspended until Monday.
Carroll said the gunman opened fire in several sections of the plant before before leaving and shooting in the direction of the nearby Interstate.
Witnesses said the gunman was dressed in camouflage, with a dark cap and carried an assault-type rifle. It was not known whether he was an employee at the plant, but several said they thought he may be going on a deer hunting vacation.
One employee at the plant, who identified herself as Christy, told WWJ Radio the gunman told her, ""Get out of here"" before he started shooting in the plant.
""He knew what he was doing. He just started shooting, and when he ran out of ammo, he just reloaded and kept on shooting,"" she saiid.
The shooting is the third at a Ford plant in the Detroit area since August 1994. It also falls on the fifth anniversary of a 1991 tragedy in which a fired postal worker went on a shooting rampage at the Royal Oak, Mich., post office, killing himself and four others.
In August of this year, a Ford employee killed a security guard at a Ford climate control plant in Plymouth, Mich., then shot himself. On January 7, 1995, a Ford worker at the same factory wounded his estranged wife, killed her boyfriend, then shot himself to death.
In August 1994, a United Auto Workers official at Ford's Rouge industrial complex in Dearborn, Mich., shot two of his fellow union committeemen to death and wounded two others in a dispute over union policy.
Chrysler Corp, also has had its share of tragedy. In December 1994, a worker upset about a job assignment killed his foreman and wounded a coworker at a metal stamping plant in Sterling Heights, Mich.
",48
"Sales of light vehicle in December are expected to be down as much as 6 percent from an unusually strong month a year ago, but analysts say the pace was robust enough for 1996's total to match industry projections of 15.1 million units.
General Motors Corp. will endure the largest drop of the Big Three, with the daily sales rate off by an estimated 16 percent from December 1995, according to David Healy, an analyst at Burnham Securities Inc.
GM's sales of pickup trucks, sport/utility vehicles and minivans -- the light truck category -- will be down significantly, in large part because the automaker is up against a tough comparison from a year ago.
However, car sales will also plunge by as much as 20 percent, estimates Michael Luckey, of Luckey Consulting Group. He attributes the decline largely to the continued aftershocks of GM's labor strife this fall, which cost the automaker about 120,000 units of mostly car production.
""They're still being hurt by the strikes,"" he said. ""I think that's still a legitimate reason for one more month here in December.""
GM is scheduled to report its sales on Friday, Jan. 3. Also reporting Friday is Chrysler Corp., whose sales will be flat or up slightly from December a year ago.
Light truck sales, which have been accounting for about 70 percent of Chrysler's total, are projected to rise 8 percent, offsetting an expected 9 percent slide in passenger car sales, said Healy.
Ford Motor Co., scheduled to release its results Jan. 6, will enjoy one of its best year-to-year comparisons since March 1994, said Luckey, with sales rising between 8 percent and 9 percent against a somewhat weak performance in December 1995.
Ford's car sales are forecast to dip 3 percent to 4 percent. Last week, Ford added another $500 to the $500 rebate it was already offering on the 1997 Taurus, indicating its determination to hang on the title of the best-selling car in America. Taurus sales through November were about 10,000 units over the rival Honda Accord.
""If Taurus sales spurt up, cars might be a little bit better than that,"" said Luckey.
Ford's light truck sales are seen rising a sharp 20 percent, he said, thanks to the strength of its pickup trucks and popular Expedition full-size sport/utility.
Imports and transplants continued to take market share from the Big Three in December, Healy said, climbing to a combined share of 28.6 percent, up from 28.1 percent in November.
""The strong dollar and the weak yen are resulting in aggressive pricing by the Japanese makers, particuarly in intermediate and small passenger cars,"" he said.
For December 1996, the light vehicle seasonally adjusted annual sales rate is expected to be in the mid-14 million range, analysts said, a precipitous drop from 15.9 million a year ago, the strongest month of 1995.
However, Luckey said the U.S. Commerce Department factors used to compute the rate penalize the total by 800,000 units, meaning the real rate is stronger than it would appear.
Most analysts expect the industry to finish the year at 15.1 million units.
""It should be 15.1 million,"" said Luckey. ""That's almost certain unless something very strange happens in December.""
That total would bring the average for the last three years to an unusually stable 15 million mark. In 1995, total light vehicle sales were 14.7 million, down from 15.1 million for all of 1994.
",48
"The president of Ford Motor Co.'s automotive operations denied Thursday that the company is mulling plant closures in North America, but added that Ford is pressing employees to chop an additional $2.5 billion from its 1997 spending plans.
Jacques Nasser, president of Ford Automotive Operations, told reporters the nation's second-largest automaker is always studying alternatives for its manufacturing facilities.
""But we have no plans and we've made no decisions on plant closings,"" he said.
The Wall Street Journal reported Thursday that Ford was considering closing its Lorain, Ohio, car plant and consolidating its Explorer production into a single plant, at Louisville, Ky.
Nasser said Ford has no plans to reduce capacity for its Explorer sport utility vehicle. He noted that the Explorer had strong sales over the last two to three months despite increased competition.
Asked about the newspaper report, Nasser said: ""I view that whole story as surprising and lacking substance.""
An industry source, however, said Ford has considered closing the Lorain plant to boost profits in its core North American automotive business.
Ford might build a new, smaller sport utility vehicle previously earmarked for Lorain at a St. Louis plant that also builds Explorers, the source said.
Nasser spoke to reporters at a ceremony at Ford's Wayne, Mich., truck plant where Ford announced it has become the first major automaker to achieve the industry's top quality certification on a global basis.
Nasser, who has a reputation as an aggressive cost-cutter, has wasted no time shaking things up at the automaker's core vehicle unit since he was promoted to his current post Oct. 10.
He said Thursday that units throughout Ford have ""internal stretch"" targets for 1997 that combined amount to $2.5 billion. He said the targets are cost-cutting and other initiatives that would push savings beyond the regular goals for 1997.
""These are internal targets -- they're stretch targets. They're meant to provide improved customer value and shareholder value. They're what we're about,"" he said.
Nasser, who previously headed Ford's product development operations, said in February that it plans to cut $11 billion out of its new product spending between 1996 and 2000.
Wide-spread cost-cutting efforts are also in full swing in Europe, Nasser said Thursday. Ford's European operations, which lost $472 million in the third quarter, are looking in all areas for excess costs, but Nasser said he is not aware of any hiring freezes.
""Europe is a very sophisticated market, "" he said. ""We're in the midst of some very heavy launches there and extremely tough market conditions.""
",48
"A gunman in military fatigues shot his way into a Ford Motor Co. assembly plant and continued firing Thursday, killing one person and wounding two before barricading himself in a network of drainage tunnels.
The suspect, 29-year-old Gerald Atkins of Wixom, fired repeatedly at officers in a 4 1/2-hour standoff but had given up voluntarily by late afternoon, police said.
Authorities said Atkins, armed with a high-powered assault-type rifle, fatally shot Darrell Izzard, 57, the Ford plant's manager of manufacturing planning, and wounded two Oakland County sheriff's deputies. The 18-year Ford veteran killed in the rampage was married and had three children.
Another worker in the factory was injured slightly in the neck by glass fragements from a window that was shot out.
Ford officials said Atkins had never been a Ford employee but had apparently come to the plant to talk to a woman he had been dating. He had had no prior contact with Izzard.
""He more or less shot his way into the plant,"" Wixom Police Sgt. Richard Howe said, adding that Atkins fired on a security office at the plant's main entrance when unarmed security guards tried to block his way.
One employee, who identified herself as Christy, told WWJ Radio the gunman told her, ""Get out of here,"" before he started shooting.
""He knew what he was doing. He just started shooting, and when he ran out of ammo, he just reloaded and kept on shooting,"" she said.
Howe, the Wixom police sergeant, said that after firing shots in several parts of the plant, Atkins left the sprawling facility and shot two deputies who tried to apprehend him.
One deputy was hit in the shoulder and the other in the leg as they tried to confront the gunman outside the plant.
One of the wounded officers, Matt Miller, 39, was listed in fair condition but may need shoulder surgery, Amy Middleton, a spokeswoman for Providence Hospital in Southfield, Michigan, said.
Police shut down adjacent Interstate 96 for most of the afternoon. Workers were evacuated from the plant, and production of Lincoln Town Cars, Continentals and Mark VIII luxury cars was suspended until Monday.
Howe said Atkins fired several shots at police from a series of storm drainage tunnels underneath the plant but they managed to close off the tunnels and persuade him to surrender.
They had not established a motive for the rampage.
But a friend of Atkins said he had been having problems in a relationship with a female employee at the plant and ""something cracked.""
""Gerry's a very intense guy. He was in the military and was very successful in it,"" Ron Vahanian, a neighbor of Atkins, said. ""I think there might have been problems with this girlfriend that he had that worked there.""
Several workers said security at the facility, which employs about 3,200 people, was lax and identification cards were rarely checked.
Ford officials pledged to review security measures at all company facilities. ""We're going to take a look at everything,"" Ford Automotive Group President Jacques Nasser said, adding that Thursday's incident ""was probably impossible to prevent.""
The shooting was the fourth at a Ford plant in the Detroit area since August 1994. It also fell on the fifth anniversary of a shooting rampage at the Royal Oak, Michigan, post office in which a fired postal worker killed himself and four others.
",48
"The U.S. auto industry celebrated its 100th birthday in 1996 with higher sales and a new labour accord, but it can expect tough competition from foreign shores in the coming year.
Clouds loom on the horizon, namely from Detroit's old nemesis -- Japan.
The relatively weak Japanese yen promises to give cost-conscious Big Three executives headaches. A weaker yen makes it cheaper for Japanese firms to produce vehicles in Japan and sell them in the United States.
Since April 1995, when the yen hit a high of 80 to the dollar, the Japanese currency has weakened. The rate is now about 114, meaning it takes more yen to buy one dollar.
Van Bussman, Chrysler Corp.'s top economist, believes the yen will continue in the 110-115 range for the first three to six months of 1997, then strengthen to about 100.
""I think it will be a substantial issue in 1997,"" Bussman said. ""The yen having weakened from 80 to 110 has given them tremendous profit potential in North America.""
A look back through 1996 shows that Japanese automakers have already turned the weaker yen to their advantage through lower prices.
Industry trade publication Automotive News reported the average 1997 model year price increase at Detroit's Big Three was $386, while the average price hike for Japanese automakers was a mere $8.
""It's going to be tough next year because we have the weaker yen,"" Ford Motor Co. Chairman Alex Trotman said recently.
Forecasts for 1997 project total vehicle sales will be roughly the same as the 15.4 million expected for 1996. But that's not all that bad, industry executives say.
It means the four-year upswing of car, sport utilty and pickup truck sales could continue for yet another year.
""We see moderate inflation. We see a steady continuation of economic expansion in the United States,"" Trotman said. ""We're looking for the car and truck industry to fall somewhere in the 15 to 15.5 million range for 1997, which we would describe as a pretty good year.""
Japanese automakers, which have introduced hot new car and sport utility vehicles this year, are set to unleash more new products in 1997.
Honda Motor Co. Ltd. will soon introduce its CR-V compact sport utility and is scheduled to bring out new versions of its Accord sedan and Odyssey minivan. Building on the momentum of its new Camry sedan, Toyota Motor Corp. will unveil a front-wheel drive minivan called the Sienna next fall.
Among the Big Three, 1996 proved to be the year that Chrysler's raft of stylised new products took off, outshining its two domestic rivals. The No. 3 automaker has boosted U.S. market share nearly two points to 16 percent, and its calendar year sales will post their best results since 1988.
General Motors Corp. will try to reverse a slide in both sales and market share next year as it continues with the introduction of 15 new cars and light trucks, including a new line of minivans.
GM will also look to improve its overall competitiveness with a new three-year contract with the United Auto Workers that could allow it to shed 30,000 workers. But that deal did not come cheaply. GM endured several strikes through the year that will cost it more than $1.6 billion.
At Ford, cost-cutting will remain a top priority next year. The No. 2 automaker has scored big in the market place with its new F-Series pickup trucks and Expedition full-size sport utility vehicle.
But its car sales have lagged, and Ford has been forced to slap incentives on its redesigned Taurus to push them out of dealer showrooms. Ford, which replaced the head of its core automotive operations in October, will also lose hundreds of millions from European and South American operations in 1996, but sees improvements in those areas for 1997.
",48
"Bargainers for the United Auto Workers union and General Motors Corp. continued bargaining on Sunday but kept a tight lid on whether any progress was being made toward a new labour pact as a midnight (0500 GMT) deadline loomed.
GM spokesman Ray Deibel said talks resumed at midmorning Sunday after they adjourned Saturday evening. He declined to be more specific, or to say if GM Chairman Jack Smith is taking part in the discussions at the automaker's headquarters in downtown Detroit.
At stake is a new labour agreement for GM's 215,000 hourly UAW workers. GM employs more than half of the 390,000 UAW members who work at Detroit's Big Three automakers. It is the only one of the Big Three not to have a new three-year labour contract.
Analysts speculated that negotiators could be wrangling over contract language that would dictate how many workers to whom GM is obligated to guarantee jobs.
Bowing to UAW concerns over job security, both Ford Motor Co. and Chrysler Corp. have agreed to new contracts that promise to keep 95 percent of their current UAW hourly workforces, except in the event of a severe industry downturn.
""I think if there's a sticking point that may be it,"" said Dale Brickner, a labour expert at the Michigan State University. ""GM may be pushing to get that figure farther down than the UAW may be comfortable living with.""
GM, the least efficient U.S. automaker, is trying to shed 12 unprofitable parts plants, and wants to exclude certain component facilities from the employment guarantee. Those include a door hardware plant in Flint, Mich., and an interior trim plant in Livonia, Mich.
In settling a 20-day strike by the Canadian Auto Workers union last week, GM was able to secure a deal that included the selling of two parts plants and flexibility to outsource UAW President Stephen Yokich had not indicated what he would do after the contract extension expires at midnight Sunday. Yokich on Friday set the Sunday deadline, but did not actually threaten a strike .
However, there was speculation Sunday the UAW could mount a plant-specific strike if enough progress has not been met by the deadline Sunday.
By hitting light truck plants, such as the sport/utility facility in Janesville, Wisc., the union could hurt the sale of some of GM's most profitable products at a time when it is trying to bounce back from the Canadian strike.
Brickner said the UAW used that strategy in the mid-1980s to hamper individual sites without shutting down the entire North American production system.
GM's U.S. operations continue to respond to the strike by 26,000 CAW workers.
More than 6,600 UAW members at GM's Buick City complex were told not to report on Monday. At the same time, however, GM was running radio ads telling first-shift workers at its Hamtramck assembly plant to report to work on Monday.
",48
"Chrysler Corp. minivans have came under fire again from safety regulators, who said Tuesday they stepped up probes into two problems, including reports that a 90-pound rear hatch door can close suddenly without warning.
Nearly 2 million minivans are involved in the investigations, which were also sparked by reports that side sliding doors on 1996 models flew open at high speeds.
The National Highway Traffic Safety Administration (NHTSA) said it received reports that 39 people have been injured when the rear hatch door on 1991-1993 model Caravan, Voyager and Town & Country minivans dropped unexpectedly.
The problem occurs when bolts holding cylinders that prop the door open shear, according to the federal safety agency. The agency has received a total of 477 complaints. The probe, first launched in May and upgraded on Oct. 31, covers almost 1.3 million minivans.
NHTSA also upgraded a preliminary investigation into about 582,000 1996-model Caravan, Voyager and Town & Country minivans. It has received 19 complaints that the right or left sliding door can come open while the vehicle is moving.
Owners have reported doors opening a few inches or flying wide open at speeds from 15 to 60 mph. No injuries have been reported. NHTSA said it is not aware of any incidents involving vehicles built during or after January 1996.
Chrysler was the first automaker to offer a sliding door on the left side of a minivan. The feature has made the No. 3 automaker's minivans the hottest seller in a popular segment.
Chrysler agreed in 1995, under pressure from regulators, to replace the latches on the rear hatch doors on more than 4 million minivans but stopped short of recalling the vehicles, from the 1984 through 1995 model years. Safety officials said the doors could pop open during low-speed crashes.
Chrysler told the safety agency the sliding door problem may stem from incorrect latch adjustments by dealers, which the company attributed to problems with the service manual.
Chrysler also said eight of the complaints about side doors opening involved vehicles that had had door repairs made. Chrysler said it has corrected the manual procedure and has made three design changes to door components.
But NHTSA said it has continued to receive complaints about the doors opening on vehicles with no repair history.
Chrysler spokeswoman Michele Tinson said the automaker was working with the safety agency to resolve the complaints. Injuries reported from sudden closings of rear hatch doors have been minor, she said, noting Chrysler stood behind the safety record of its vehicles.
""Minivans are the safest vehicles on the road today,"" she said.
Separately, NHTSA said it upgraded an investigation into 621,000 1995 and 1996 Windstar minivans from Ford Motor Co. Regulators have received 327 complaints about brake problems, which have led to 76 accidents and two injuries.
In addition to the incidents reported to NHTSA, Ford said it has received 64,000 warranty claims that could relate to a brake problem causing long stopping distances.
Also, NHTSA said it opened an investigation into Land Rover's Discovery sport/utility vehicle. It has received two complaints that the right front door opened on 1996 models. Rover is a unit of German carmaker BMW.
Chrysler stock fell 25 cents to $34.75 on the New York Stock exchange in afternoon trading.
",48
"Volkswagen AG Czech unit Skoda Auto a.s. said on Monday its new mid-sized ""Octavia"" sedan will list on its home market at a base price of 335,700 crowns ($12,800), at the low end of its class.
At a media presentation at the plant north of Prague, marketing chief Detlef Wittig said Skoda will make 64,000 Octavias next year, and raise production to 90,000 in 1998.
The new model, built on a common VW platform designed for the 1998 Audi A3 and upgraded Golf, will be available with three petrol and two diesel engines, with the top-of-the-line SLX automatic model priced at 497,900 crowns.
The Octavia will get its international test at the Paris International Auto Show in October and should be delivered to Czech dealers in November, followed by launches on foreign markets where prices have yet to be determined.
Skoda was taken over by Volkswagen in 1992 under a government privatisation plan. The company built an entirely new factory for Octavia production.
Continuing the break from the boxy communist-era Skodas, the Octavia has more modern but conservative lines, somewhere between a Ford Mondeo and Audi's A-line.
Skoda is hoping to build on the success of its Felicia economy five-door hatchback by offering an affordable middle-range sedan and take back chunks of its home market lost to Czechs seeking a more western-looking status symbol.
""Octavia... is a logical step from Felicia into a higher market segment,"" said Wittig.
The cheapest Octavia includes a 1.6 litre, 55 Kw engine, ignition immobiliser, driver-side airbag, plus an adjustable driver's seat and steering wheel.
More expensive versions will be alternatively equipped with a 1.6/74 kw, 20-valve 1.8/92 kw engine, 1.9/66 kw turbodiesel or 1.9/50 kw diesel engine, and an optional passenger-side airbag.
Side-body airbags should be available in mid-1997.
Wittig told reporters that Octavia should help Skoda's total production to rise to 350,000 units next year and 400,000 at the turn of the century after 251,000 cars made this year.
""Within the (VW) concern, Skoda takes the position of the counterweight to the Asian producers,"" he added.
Skoda Chairman Ludvik Kalma said that he expected about 20,000 Octavias to be sold annually on the domestic market, the rest being exported to the rest of Europe and overseas.
The company lost 1.621 billion crowns last year due to heavy investments into the new factory, but Kalma said the firm should come close to breaking even this year.
-- Prague Newsroom, 42-2-2423-0003 ($ = 26.12 Czech Crowns)
",13
"Czech National Bank (CNB) Governor Josef Tosovsky on Friday said the central bank was committed to keeping the crown strong, despite some calls to devalue the appreciating currency to help exports.
Speaking after a meeting with Prime Minister Vaclav Klaus and top business executives, Tosovsky said the central bank would keep the crown within the current band within which it fixes the currency daily against a mark/dollar basket.
""I said that we will try to keep the rate within the plus/minus 7.5 percent band (agains the mark/dollar cross rate),"" Tosovsky told reporters.
""I dismissed speculation that we would want to move the crown in some way outside the band,"" he added.
Analysts recently have been debating whether a devaluation of the crown might be needed to boost exports and help stem a ballooning current account deficit.
The trade deficit is threatening to send the current account shortfall to close to six percent of gross domestic product this year after about four percent last year.
Some have argued that a devaluation is still required to help the country's goods to remain competitive while wages are rising and the economy is still transforming.
But others have said that the foreign capital inflow is still comfortably paying for the imports, and the current account deficit is still not dangerous.
Tosovsky said a stable crown had served its purpose in regulating the country's inflation, and a stronger crown would have positive effects on reforming Czech industry to make it more competitive.
He said a stronger crown ""should help faster restructuring of our economy, to help increase the added-value faster...and to help to bring our country closer in productivity to the countries that we want to compare ourselves with.""
The latter was a clear reference to the European Union and especially neighbouring Germany.
The central bank fixes the crown daily within a band plus or minus 7.5 percent from the central parity of the mark/crown basket.
It has been fixing it recently at more than three percent above parity to match a modest net inflow from foreign crown buying.
After the meeting at a government chateau east of Prague, Prime Minister Vaclav Klaus said that the government would aim to provide more funds to export promotion agencies such as the Czech Export Bank, and its sister export insurance agency.
He said he also told the business leaders that it was also necessary for businesses to lower their expectations of higher inflation because it had become a self-fulfilling prophecy.
""We can not automatically appease the expectation of, let's say, nine percent inflation, and make that the basis for all further expenditure -- price and wage items,"" Klaus said.
He said that this would be key to the government's position in collective bargaining.
""We have to radically break this (inflation expectation). This must be the basis of this year's debates on collective agreements.""
-- Prague Newsroom, 42-2-2423-0003
",13
"The Czech cabinet should decide soon on the further privatisation of the largest savings bank, Ceska Sporitelna a.s. to clarify the situation for potential investors, a bank official said on Thursday.
Sporitelna's deputy general director Jaroslav Svoboda said however there was not a need to hurry with the privatisation, and that he believed that the state should keep a 10 to 15 percent stake in the bank after sale is concluded.
""The important thing is to decide on the privatisation in order to calm down the situation, also for foreign investors (so they know) how to proceed on the Czech market,"" Svoboda told reporters.
""I think it is not necessary to hurry abnormally with the privatisation (after the decision),"" he added.
Sporitelna's further privatisation has become a hot topic in Czech banking circles especially after the central bank's recent suggestion to merge the bank with Ceskoslovenska Obchodni Banka (CSOB), one of the country's four largest banks.
The state currently holds 45 percent stake in the bank through its privatisation agency, the National Property Fund (NPF). Svoboda said 30 to 35 percent should be sold to one, or possibly two, ""long-term and transparent"" investors.
""If it was a domestic investor, there is the question where it would get money for it. A foreign investor could use capital not obtained on the domestic market,"" Svoboda said.
Asked about the Czech National Bank's (CNB) proposal to merge Sporitelna with CSOB, Svoboda said that he had not seen the plans, and he had little reaction to what had been reported in the media.
He said however that Sporitelna has developed its specific position on the Czech market over many years and that should be preserved.
The CNB plan submitted to the cabinet calls for a merger of the two institutions which would create the largest banking institution in the Eastern Europe with combined assets of roughly 540 billion crowns.
The CNB however proposed holding off on privatisation of the new combined Sporitelna and CSOB for three to five years until the effects of the merger were analysed.
The plan also calls for fast selloff of the state 31.5 percent stake in another bank, IPB a.s. , to a foreign partner, and for a delay in the privatisation of the state roughly 49 percent share in Komercni Banka a.s. .
It is not clear when the cabinet will debate the CNB proposals, but a senior central bank official said it might be on the agenda of next Wednesday's government meeting.
-- Prague Newsroom, 42-2-2423-0003
",13
"The chairman of Germany's opposition Social Democrats (SPD), Oskar Lafontaine, told Czech President Vaclav Havel on Wednesday that his party would push for approval of a long-awaited post-war reconciliation pact, Havel's spokesman said.
Speaking after a meeting of the two officials, Havel's spokesman Ladislav Spacek told reporters that the president ""thanked German Social Democrats for their interest in removing the last stones from the way of good understanding"" between the two nations.
""(Lafontaine) expressed the interest of the SPD in early debate on the declaration by the governments and parliaments of the two countries,"" Spacek said.
Lafontaine himself told a joint news conference with the Czech Social Democratic Party (CSSD) leader Milos Zeman that his party ""was doing everything so the declaration would be approved yet this year.""
The declaration seeks to address Czech memories of the 1938-1945 Nazi occupation and German memories of the indiscriminate expulsion of 2.5 million Sudetens for supporting Hitler, authorised by the victorious World War Two allies.
The Czech Republic is the only remaining victim of Nazi occupation not to have come to terms with Germany. Negotiations on the declaration have dragged on for more than a year, bedevilled by political pressures, particularly in Germany.
Prague says the text has been completed and the problem now lies with Bonn where members of the Sudeten German community, expelled en masse from the former Czechoslovakia after the war, have made a series of demands holding up the text's approval.
Havel called heads of the right-wing coalition including Foreign Minister Josef Zieleniec as well as Zeman for a Thursday luncheon debate on the progress of the issue.
One obstacle seemed to disappear last month when Chancellor Helmut Kohl, the dominant figure in German politics, said he hoped it could be signed before the end of the year.
Czech government and moderate opposition leaders agree on the need to settle the issue, which Sudeten leaders have threatened to use to block Czech attempts to join the European Union.
Zeman said on Wednesday the draft version of the declaration did not include demands of Sudetens on possible double citizenship, return of property, nor cancellation of the so-called Benes decrees under which the Germans were expelled.
""I am not aware of anything like that and I don't expect it would get to the final version,"" he told the news conference.
Havel has said that it was wrong to hold the Sudetens collectively guilty as some -- albeit a minority -- had remained loyal to the democratic Czechoslovak state.
Spacek said Havel might give a speech to the German parliament before the year's end, but added nothing has been finalised.
",13
"A reporter's call to the new director's secretary at a major Czech industrial company went something like this:
Journalist: ""Could you please tell me Mr Novak's first name?""
Secretary, with no hesitation: ""Doctor.""
Czechs are obsessed with academic titles. It was Justice Minister Jan Kalvoda's use of an unattained ""Doctor of Law"" which forced him to resign from the cabinet on Tuesday in a confession on the floor of parliament.
""In this society having a title plays such a role -- whether or not you have a degree,"" said Jiri Pehe, the head of research at Prague's Open Media Research Institute.
Normal discussions in many offices begin with colleagues addressing each other as ""Mr Engineer"" -- a title of mid-level academic specialisation -- or ""Mr Doctor"", held by many Czechs from physicians to lawyers and PhD-holding journalists.
Kalvoda was once a practicing lawyer who did complete law school but did not finish the certification process required to become a doctor of law. His colleagues and his party began using the title in literature, and he never refuted it.
His resignation came on top of the confessions of four other deputies in the lower house of parliament who also used the unauthorised moniker, indicated by initials JUDr, in campaign material and biographies.
Apart from Kalvoda, only one has resigned from parliament, three others refusing to do so.
""I suspect that there may be a few more deputies or government officials in some positions who are claiming to have degrees which they in fact do not have,"" said Pehe, a PhD who did not insist on the use of ""Dr"" for this story.
The Czech prime minister, a highly-educated economist, has the full academic title of Professor Engineer Vaclav Klaus CSc (Candidate of Science, a former regional variation of PhD), but he does not inisist on its use by others.
Some of the title-envy stems from four decades of communism, which ended with 1989's bloodless ""Velvet Revolution"" led by a band of intellectuals and the dissident playwright Vaclav Havel.
Communist leaders insisted on an educated population, at least quantitatively, and even implemented programmes producing fast-brewed PhD's and engineers at colleges.
Kalvoda's resignation inspired commentaries on the subject of academic titles in Wednesday newspapers.
The daily Mlada Fronta Dnes quoted an unnamed cabinet member as saying the only minister safe from title-fixing accusations was Interior Minister Jan Ruml -- a former dissident who the communists would never allow to attend college.
The daily Lidove Noviny used the Kalvoda incident to pay tribute to Havel, who became the country's president after the 1989 revolution.
Havel, as a dissident, was forced by the communists to work in manual jobs and was never allowed to study for a formal degree. He now has a truckload of honorary doctorates from universities worldwide.
""He made himself a name, not a title,"" Lidove Noviny wrote.
",13
"Czech Prime Minister Vaclav Klaus accused opposition Social Democrat leader Milos Zeman of lying and losing his nerve as neck-and-neck campaigning for weekend Senate elections turned increasingly bitter.
Zeman made a thinly-veiled allegation that the BIS intelligence agency had tried to extract compromising material from his elderly mother.
The slanging match between the two leading antagonists of Czech politics began on Monday when BIS director Stanislav Devaty, a Klaus protege, was forced to quit over allegations of spying on a deputy prime minister and a subsequent coverup.
""Yesterday's comments by Zeman on a police state, or on the BIS as a political police in the service of one party, are a visible result of losing his nerve before the elections,"" Klaus told a news conference.
""I can imagine such words being said by a radical anarchist but I can't imagine them from one of the three highest constitutional officials of this country.""
On Monday Zeman, who is lower house speaker, accused Klaus of playing dirty before the Senate elections, where the Social Democrats have been running level with the ruling Civic Democratic Party (ODS) in most opinion polls.
""The political struggle should be a struggle of arguments and not an abuse of secret services for spying on political opponents,"" he said.
""During the last three years an operational group has existed within the BIS which has been responsible for shadowing several Social Democrat politicians,"" said Zeman.
Spymaster Devaty quit after Deputy Prime Minister Josef Lux, who leads the junior Christian Democrats in Klaus's coalition, accused the BIS of spying on him three years ago.
The BIS had covered up the operation by failing to report it to the cabinet and a parliamentary commission supervising the agency.
Klaus said the agent had been spying not on Lux, who is also agriculture minister, but on a former adviser of his who was director of a bank which collapsed amidst fraud allegations in 1993. He has not explained why the state security service was investigating an apparent fraud case.
Devaty was a member of Klaus's ODS, although he had suspended his membership to become BIS chief.
Allegations of politically-inspired spying on both government and opposition politicians have surfaced regularly in recent years in a country where memories remain of the pervasive state security apparatus before communism fell in 1989.
The political temperature soared on Tuesday when Zeman said his 79-year-old mother had been visited by ""certain people"" trying to acquire compromising information.
Asked about this comment, Klaus said: ""If this actually represents what he said then this is such an unbelievable lie that I couldn't bring myself to reply at all. It's pure lie.""
Klaus accused Zeman of running a negative campaign.
""Instead of programmes there are scandals and affairs which destabilise the state and damage our country abroad,"" he said.
""The BIS affair is a clear evidence that above all the (Social Democrats) lack, in contrast to the ODS, a positive programme.""
",13
"The Czech Statistical Bureau
(CSU) said on Thursday it would change its methodology for
calculating industrial production, to bring it in line with
western standards.
CSU Chairman Edvard Outrata said the change, which updates
the old methodology introduced in 1953 under communist
planning, would take effect in January 1997.
The new methodology excludes multiple calculation of
semi-finished products, resources, and other materials and
commodities, which were included in output data at every stage
under the old method measuring the gross value of all goods
produced, the CSU said.
The new index will measure output changes by units, weight
or other measurements, of the total of 1,304 products out of
879 product groups consisting of one or more similar products.
The product groups's output indices will be placed in
sectors, using weighting equal to their weight in the
respective industrial sector.
The overall index will be calculated from weighted changes
in the sectoral indices.
Outrata said the old system of measuring ""gross
production"", or ""goods production"" was suited for the
management of a planned economy as it allowed to measure the
total summ of production and compare it with state plans.
Construction output data will be adjusted to the new
methodology at the beginning of 1998, Outrata added.
Preliminary monthly data will be released on the 40th day
after the end of the month being examined.
Outrata also said the data would include seasonally
adjusted and figures adjusted if the number of working days in
the period differed from previously measured periods.
He added the CSU would gradually, throughout next year,
start releasing seasonally adjusted and pro-rated figures for
most data on the same day as the raw figures.
 MONTH ('96)	REAL IND. OUTPUT		REAL IND. OUTPUT
		   UNDER CURRENT METHOD (YR/YR)   UNDER NEW METHOD
 Sept (pct)	   +6.9				 +7.8
 August		 +5.9				 +0.9
 July		  +15.7				+24.5
 June		   +1.5				 +2.2
 May		    +6.0				 +1.8
 April		 +12.8				 +6.9
 March		  +4.5				 +2.1
 Feb		   +13.4				+12.2
 Jan		   +12.0				 +7.8
Note. Current methodology examines companies with over 100
employees and includes estimates for smaller firms. The new
methodology includes data from some 5,200 firms with 25 or more
employees. As of January, it will include data form firms with
20 or more workers.
-- Prague Newsroom, 42-2-2423-0003
",13
"The ""Big Four"" state-controlled Czech banks need owners who could secure their growth and international competitivness, a vice-governor of the Czech National Bank (CNB), Pavel Kysilka, said on Wednesday.
""We need strong, stable, sound and efficient banks able to compete on the European market,"" Kysilka told a banking seminar. ""Czech banks need owners who can meet that criteria.""
He said the CNB had fine-tuned its concept, submitted to the government last month, for selling the state's stakes in the country's four largest banks, after requests for clarification from Prime Minister Vaclav Klaus.
Kysilka did not elaborate on what changes were made to the CNB's original concept.
The state holds 49 percent in Komercni Banka a.s., 45 percent in savings bank Ceska Sporitelna a.s., 66 percent in Ceskoslovenska Obchodni Banka a.s. (CSOB), and 31.5 percent in IPB a.s..
The parts of the original CNB plan which have already been been made public propose a quick selloff of the IPB stake, a merger of CSOB and Sporitelna with eventual privatisation of the single entity, and an incremental sale of Komercni shares.
The ultimate decision rests with the government which has yet to put forward its own plan. The CNB has said however that there is a broad consensus that the ""Big Four"" privatisations should go through, but the question is how.
Klaus has said he was opposed to the idea of a merger of CSOB and Sporitelna, which would create post-Communist Europe's largest bank with assets topping $20 billion
But Klaus and the Finance Ministry have agreed that the IPB stake should be sold quickly to a strategic foreign investor.
Local media have been ripe with speculation over which foreign partner is most likely to take the shares.
Japan-based Nomura, and Dutch ING Bank NV, are widely seen as front runners for the IPB stake.
The Czech private station TV Nova reported earlier this week that Dutch bank ABN Amro was also interested in buying into IPB.
On Wednesday, an ABN Amro spokesman said his bank viewed the report as ""market rumour"" and declined further comment.
Meanwhile, Klaus economic adviser Martin Kocourek was quoted as saying in the Czech daily Hospodarske Noviny on Wednesday that Union Bank of Switzerland  was looking to win a mandate to arrange the sale of IPB's stake.
CNB Governor Josef Tosovsky told Reuters last week however that the full cabinet had yet to discuss the central bank's plan but would do so in a few weeks time. He said only a few of the opinions from the government were known.
Kysilka told the confernce that the state-held stakes in the Big Four are now worth 50-60 billion crowns at market prices, after having negative value before the post-Communist banking reforms at the beginning of the 1990's.
-- Jan Lopatka, Prague Newsroom, 42-2-2423-0003
",13
"The party of Czech Prime Minister Vaclav Klaus pulled ahead in Senate elections on Saturday but with turnout at just 35 percent, the real winner was apathy.
In what was billed as a key test of Klaus's minority coalition government, candidates of his centre-right Civic Democratic Party (ODS) topped voting in 66 of the 71 constituencies declared by mid-evening.
But most face a second round run-off on November 22-23 for the newly-created upper house, and analysts said the dismal turnout vindicated more the far-right Republicans, who boycotted the elections and told fellow Czechs to do likewise.
Nationwide figures were not available. But the Central Election Commission said turnout in 53 of the 81 constituencies had been just 34.27 percent.
This was far lower than forecast and compared with 76.4 percent participation in lower house elections held in June.
Klaus, the father of Czech economic reform, played down the voter apathy and played up the ODS performance following his electoral disaster last June, when strong Social Democrat gains stripped his three-party coalition of its lower house majority.
""From the results so far it is obvious that the citizens of this country understand that they want stability,"" he told reporters, alluding to the political stalemate which has stalled reform since the inconclusive lower house polls.
""These elections ... are an important test of the political feelings of people of this country about the (June) elections. In this respect they are giving an important signal,"" he said.
Under the Senate rules, candidates who fail to win over half the first round vote have to face the runner-up in a second round. Most constituencies will be decided next weekend.
But already it appears the Social Democrats of economist Milos Zeman have done badly, failing to come out on top in a single constituency.
Zeman, whose party has been afflicted by squabbling, appeared to blame the low turnout for the poor result.
But he added: ""I firmly believe that in the second round, participation will be markedly higher because then it is a choice between the two strongest candidates.""
In the end the Republicans led by doctor of philosophy Miroslav Sladek came out looking best without even running.
Sladek hit a chord by denouncing the Senate as a waste of time and money. ""They had nowhere to dump the political zombies so they established the Senate,"" he told a recent rally.
Polls showed few Czechs understand the function of the Senate, which has little power compared with the lower Chamber of Deputies. With a few exceptions, most of the candidates are little known because Czech leaders all sit in the lower house.
Conventional wisdom has been that if ODS did well in the Senate, Klaus might provoke early lower house polls to regain the coalition's majority, although he denies that.
But ODS is better at mobilising support than the Social Democrats when interest is low. A big ODS win on a low turnout might therefore not be representative for lower house polls.
""If there is a low turnout, even if Klaus wins, I think that it would be very difficult for the ODS to know the real mood of the country,"" said Jiri Pehe, research director at the Open Media Research Institute (OMRI).
",13
"Prime Minister Vaclav Klaus, in his dual role as economics professor, said on Monday the large Czech foreign trade deficit came from a temporary investment wave, and he forecast a perpetual, but smaller trade gap.
Lecturing a packed assembly hall at the Prague School of Economics, Klaus, a freshly-accredited professor of economics, said the record 110.7 billion crown trade deficit in the first nine months of this year was ""not tragic"".
""It would be correct to discuss the current account, or the whole payment balance, and not just the trade balance... due to a number of structural phenomena,"" Klaus said.
""The Czech Republic will probably not have a positive trade balance in the long term, ever,"" he added.
Klaus said the current trade deficit was ""the temporary above-average rate of investment.""
He said the investment boom would ease, leading to a narrowing in the differential with savings, but a lack of natural resources, the structure of the Czech economy, and its geographical position would perpetuate a trade deficit.
In the first nine months of this year, imports rose by a nominal 15.2 percent, year-on-year, to 551.2 billion crowns, while exports climbed 5.9 percent to 440.5 percent.
The Czech Statistical Bureau forecast last week that the foreign trade deficit would reach 163.3 billion crowns for the whole of 1996, up from about 95.7 billion crowns last year.
The current account deficit stood at 46.7 billion crowns, or 6.9 percent of gross domestic product (GDP) in the first half, and the CSU foreacsts it to reach 6.9 percent of GDP for the whole of 1996, and 6.8-7.4 percent of GDP next year.
Klaus repeated his long-held objection to a devaluation of the Czech crown, saying it would not help much as exports ""are not a straight function of the exchange rate"".
He also criticised export lobbyists' calls for an import surcharge and higher tariffs, and blasted moves to ""Buy Czech"", saying each country should use its comparative advantages in production and cannot make everything itself.
Klaus said his government's aim was to stop an acceleration in the deficit, and then to start lowering it. He said the increase could be stopped by the beginning of 1998.
There is no theory on what is the maximum-bearable deficit of the current account, as a percentage of GDP, Klaus said.
He said that the Czech Republic had more than sufficient foreign exchange reserves cover the gap. The Czech central bank said official reserves totalled roughly $13 billion at the end of August, with gross banking-sector reserves at $16.6 billion.
Answering a student's question on export structure, Klaus said that exports of high-added-value goods would help the overall trade balance, but such technology would take time to develop.
""How high can you jump? One metre thirty? It would be better if you could jump one-eighty.... But you can't do that straight away, you need to train it,"" Klaus said.
With practise ""maybe you'll get to some 140 centimetres in a year's time,"" he said.
-- Prague Newsroom, 42-2-2423-0003
",13
"Czech National Bank (CNB) Governor Josef Tosovsky said on Friday that there was no need to hurry the of the state's stake in the country's largest commercial bank, Komercni Banka a.s..
He said when the time comes to sell the stake of some 49 percent it could be offered to several investors.
""There is not a need to hurry with (Komercni's) privatisation. A strategic partner is not necessary, so it is possible to propose to sell the state stake to more investors,"" Tosovsky said after a closed meeting of the parliament's banking commission.
But he added the central bank does not yet have a strong consensus on what to do with the stake.
""We haven't an absolutely firm opinion on this, it's possible (to sell) to both domestic and foreign investors.""
The central bank has submitted a broad plan to privatise shares in the so-called ""Big Four"" banks which calls for the merger of trade bank  Ceskoslovenska Obchodni Banka a.s. with Ceska Sporitlena a.s., the largest savings bank.
The CNB has said it would prefer to wait several years before privatising the state shares after the newly-merged bank is established to analyse effects of the merger.
""CSOB is ready for quite a fast privatisation, but when considered in a wider scope, we (the CNB) think that a merger with Ceska Sporitelna would be more suitable,"" Tosovsky said.
""If this proposal is accepted, privatisation would be... delayed, beause there must be the merger first.""
The Czech cabinet must approve any privatisation of shares in the Big Four banks, and this week they asked the central bank for more concrete details on the central bank's plan.
""(A merger of CSOB and Sporitelna) has a number of rational and economic reasons,"" Tosovsky said without elaborating.
The governor rejected comments by CSOB and Sporitelna executives who reacted coolly to the merger plan.
""The managements are not the owners... it's logical the managements have their own interests and preferences, but the owner is the (state National Property Fund),"" he said.
He said Prime Minister Vaclav Klaus had requested details to the central bank's plan for a quick sale of the state's 31.5 percent of Investicni a Postovni Banka a.s. to a strategic foreign partner.
""The prime minister proposed (for the CNB) to make concrete some procedings concerning mostly IPB so that the privatisation can start as soon as possible,"" Tosovsky said.
IPB executives have confirmed that both Japan's Nomura and Dutch ING Bank NV have shown an interest in acquiring shares in IPB.
Klaus has said he is not in favour of the CSOB/Sporitelna merger, equating it with melding Prague's two top soccer teams Sparta and Slavia, an idea unthinkable for most Czechs.
-- Prague Newsroom, 42-2-2423-0003
",13
"Bidders for a stake in troubled Czech aircraft maker Aero Vodochody a.s. must offer at least 950 million Czech crowns ($35 million) for the shares, Industry and Trade Minister Vladimir Dlouhy said on Thursday.
But he told a news conference that the tender, open to domestic and foreign bidders seeking to revitalise the light jet maker, might be geared toward choosing a Czech partner.
Between 34 and 40 percent of Aero will be sold, depending on how many new shares are issued during the deal, rules for which the cabinet approved on Wednesday.
Dlouhy said a steering committee would evaluate bids in the tender, which is expected to open by the end of the month, based on bidders' economic strength, obligations to other shareholders and their strategic position.
The Czech chemical and arms conglomerate Chemapol Group a.s. has shown an interest in Aero, as well as local trading company CIMEX Holding a.s., and Boeing Co of the United States in an alliance with Czech airline Ceske Aerolinie a.s..
Dlouhy said Aero shareholders controlled by the state would pass their shareholders' rights to the new investor to allow it to manage the company from a majority position.
The winner of the tender, ultimately picked by the cabinet, should be known in April.
Dlouhy said strategic considerations might persuade the steering committee to pick a Czech domestic partner for Aero.
""If, for example, the Defence Ministry submits arguments which persuade the commission that it is necessary... to prefer a domestic investor, it will be a criterion ... followed by the commission.
""But we do not want to consider it open only for domestic companies from the beginning,"" he said.
Shareholders of the debt-strapped company approved a cut in Aero's basic capital last month to one million crowns from 962 million, as part of an overall a financial restructuring plan. They also agreed to underwrite a rights issue to raise equity to between 1.74 and 2.5 billion crowns as a part of the deal.
Aero is pinning hopes of recovering from financial problems on its flagship L-159, a light training subsonic fighter currently in its final stages of development, which is to be equipped with Rockwell International Corp avionics.
The Czech army has signed up to buy 72 L-159s, and the government has already approved a 3.26 billion crown package clearing the heavily indebted company's books.
Other criteria approved by the cabinet include that Aero will not pay out dividends until production of L-159 starts, and that the investor has to pay most of the price of the shares from his own assets, not on credit.
-- Prague Newsroom, 42-2-2423-0003 ($1=27.30 Czech Crown)
",13
"Prime Minister Vaclav Klaus, in his dual role as economics professor, said on Monday the large Czech foreign trade deficit came from a temporary investment wave, and he forecast a perpetual, but smaller trade gap.
Lecturing a packed assembly hall at the Prague School of Economics, Klaus, a freshly-accredited professor of economics, said the record 110.7 billion crown trade deficit in the first nine months of this year was ""not tragic"".
""It would be correct to discuss the current account, or the whole payment balance, and not just the trade balance... due to a number of structural phenomena,"" Klaus said.
""The Czech Republic will probably not have a positive trade balance in the long term, ever,"" he added.
Klaus said the current trade deficit was ""the temporary above-average rate of investment.""
He said the investment boom would ease, leading to a narrowing in the differential with savings, but a lack of natural resources, the structure of the Czech economy, and its geographical position would perpetuate a trade deficit.
In the first nine months of this year, imports rose by a nominal 15.2 percent, year-on-year, to 551.2 billion crowns, while exports climbed 5.9 percent to 440.5 percent.
The Czech Statistical Bureau forecast last week that the foreign trade deficit would reach 163.3 billion crowns for the whole of 1996, up from about 95.7 billion crowns last year.
The current account deficit stood at 46.7 billion crowns, or 6.9 percent of gross domestic product (GDP) in the first half, and the CSU foreacsts it to reach 6.9 percent of GDP for the whole of 1996, and 6.8-7.4 percent of GDP next year.
Klaus repeated his long-held objection to a devaluation of the Czech crown, saying it would not help much as exports ""are not a straight function of the exchange rate"".
He also criticised export lobbyists' calls for an import surcharge and higher tariffs, and blasted moves to ""Buy Czech"", saying each country should use its comparative advantages in production and cannot make everything itself.
But Klaus, tongue-in-cheek, checked the bottle of mineral water he was given, and was pleased it was locally made.
""I was going to complain that you gave me imported water,"" he told the rector of the university, sitting by his side.
He said his government's aim was to stop an acceleration in the deficit, and then to start lowering it. He said the increase could be stopped by the beginning of 1998.
There is no theory on what is the maximum-bearable deficit of the current account, as a percentage of GDP, Klaus said.
He said that the Czech Republic had more than sufficient foreign exchange reserves cover the gap. The Czech central bank said official reserves totalled roughly $13 billion at the end of August, with gross banking-sector reserves at $16.6 billion.
Answering a student's question on export structure, Klaus said that exports high-added-value goods would help the overall trade balance, but such technology would take time to develop.
""How high can you jump? One metre thirty? It would be better if you could jump one-eighty.... But you can't do that straight away, you need to train it,"" Klaus said.
With practise ""maybe you'll get to some 140 centimetres in a year's time,"" he said.
-- Prague Newsroom, 42-2-2423-0003
",13
"Czech power producer CEZ a.s. on Friday said its nine month net profit hit 8.4 billion crowns, up from 7.4 billion for the same period last year, according to international accounting standards, as household electricity demand surged.
CEZ's Director of Planning and Analysis section Petr Voboril told a news conference that higher depriciation write-offs due to the opening of new installations cut the company's tax obligations, and boosting its bottom line.
The company's gross profit for the period remained flat at 13.1 billion.
Czech accounting put the firm's profit for the first nine months at 7.04 billion, up from 6.7 billion last year.
CEZ said the result did not change the firm's profit forecast under Czech standards for the whole year, which is 8.1 billion crowns, equal to last year's.
A financial statement showed CEZ wrote off 4.1 billion in the first nine months compared with 3.4 billion in the same period of 1995, and paid 4.7 billion in income tax after 5.7 billion last year.
""Above all, lowering of tax obligations in connection with depriciation policy have influenced this (profit) increase,"" Voboril said.
He said that overall demand for electricity rose by 5.5 percent in the period, and is expected to reach a record high of 55.3 terrawatthours, 6.1 percent up year-on-year, for the whole 1996.
Household consumption drove the increase, rising 10.5 percent, while large clients demanded almost two percent more power over the same period of the last year.
Voboril said that a recent ruling by the Finance Minstry on maximum prices CEZ can charge regional power distributors did not effect results thanks to the sales increase.
The ministry decided that the maximum average price CEZ can charge for supplies this year is 1,035 crowns per megawatthour, up two crowns from the last year but below the firm's 1,040 crown expectation included in business plan.
Voboril said that short-term indebtedness of CEZ increased as well as financial expenditures due to unpaid recievables from some of the eight regional distributors, which totalled 3.2 billion crowns as of September 30.
CEZ and six of the country's eight regional grid operators had been locked in a price dispute with CEZ until the ministry ruling last month.
CEZ is also considering an international bond issue next year as it needs financing but has already flooded the domestic market with paper, Voboril said.
Local analysts welcomed the results but said they did not expect them to help CEZ's share price much as the Prague Stock Exchange is plagued by a lack of confidence.
""The CEZ results are slightly better than I expected. CEZ is fundamentally undervalued but genereal market sentiment is not very strong,"" said Petr Dousa of Zivnostenska Banka. ""I don't expect the price to go up to 1,000 in the next few days.""
CEZ shares closed up 14 crowns on the Prague Stock Exchange on Friday to close at 937.
-- Prague Newsroom, 42-2-2423-0003
",13
"The three-party Czech coalition cabinet on Wednesday agreed to quickly find a new director for the country's secret service following the resignation of its former chief amid a pre-election political spying row.
Prime Minster Vaclav Klaus, head of the senior coalition Civic Democratic Party (ODS), told a news conference that each coalition party had been asked to propose a candidate acceptable for all parties to lead the BIS ""as soon as possible"".
Acting-director Stanislav Devaty resigned on Monday after the head of junior coalition partner, Christian Democratic Union (KDU-CSL) Josef Lux accused the BIS last Friday of spying on him three years ago and then covering it up.
He requested Devaty's dismissal along with the right-wing Civic Demopcratic Alliance (ODA), the other coalition member which had already made similar claims last year.
The government charged Devaty's deputy, Jaroslav Jiru, to lead the BIS until a new director is named, Klaus said.
The affair hotted up just a week before Senate elections, a key test of Klaus's government which lost its majority in the lower house of parliament in June elections.
The Senate has only limited powers but analysts say the outcome of the polls will be a significant indicator for the future of Klaus's centre-right cabinet. The allegations within the coalition were potentially damaging ahead of the vote.
Klaus said the ministers were also asked to consider how to tighten control over BIS.
Analysts say if Klaus's party fares well in the elections, his government's position may be eased. But he might find it hard to stay in office if his position is weak in both houses.
Klaus said ministers were disturbed by opposition Social Democrat chairman of parliament Milos Zeman who had suggested the Interior Ministry had joined the BIS in creating ""political police"" groups shadowing politicians.
""All members of the cabinet expressed their irritation from the statements of the second constitutional official of this country, by which he in fact threw in doubt the credibility of the constitution system of the Czech Republic,"" Klaus said.
President Vaclav Havel has called Zeman's statements ""extremely irresponsible"" and said the opposition leader should go through formal channels he has proof of his accusations.
",13
"The Czech National Bank (CNB) on Thursday laid out conditions for a government scheme to buy smaller banks' doubtful debts in an effort to restore confidence in the country's banks.
The CNB said it would demand that those participating in the scheme -- which is open to a total of 13 small, private, banks -- follow strict conditions and allow the central bank to make management changes where needed.
CNB officials said the programme, approved by the cabinet on Wednesday, was not aimed at resolving a problem at any one bank.
""It is a preventative programme, it is a step toward strenghtening the confidence in our banking sector,"" CNB Governor Josef Tosovsky said.
He said the decision followed the failure of Keditni Banka in August -- the 11th bank in which the CNB had intervened -- and the ""politicisation"" of the case which had undermined confidence especially in small banks.
The collapse became a political issue which drove parliament to set up an inquiry.
The plan will be open to all small private banks which have total paid-in capital of 12.5 billion crowns ($458.5 million), each with total assets not more than 30 billion crowns.
The state-run Konsolidacni Banka would buy the banks' doubtful assets at a nominal price.
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, CNB board member Ota Kaftan said.
He said banks seeking to participate would 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.
Kaftan said that the banks must maintain cost controls, profitability, and liquidity as well as agree to frequent reviews by the central bank.
The maximum purchase of debt by Konsolidacni can total up to 110 percent of a single bank's paid-in capital, meaning a maximum exposure for the state of 13.7 billion crowns in total if all eligible banks participated.
The programme is voluntary based on a contract with the CNB, and the central bank said it would not reveal banks which elect to participate in the scheme.
The banks eligible include Ekoagrobanka, Union Banka,  Evrobanka,  Prvni Mestska Banka,  COOP Banka,  Pragobanka,  Plzenska Banka,  Foresbank,  Bankovni Dum Skala, Moravia Banka,  Universal Banka,  Zemska Banka, and Banka Hana.
Tosovsky said the money for the scheme would come primarily from state-controlled Konsolidacni Banka and if necessary from the CNB itself. A newly created unit of Konsolidacni, Ceska Financni s.r.o., will administer the programme.
Any losses from the programme would be covered by the National Property Fund (NPF), the state privatisation agency.
Analysts welcomed the programme as long as it leads to better risk management at the smaller banks, which still comprise a minor fraction of activity. But overall, they said, it was a political step taken under pressure. ($1=27.26 Czech Crown)
",13
"Prime Minister Vaclav Klaus on Tuesday said the 1997 Czech state budget, to be presented to the full cabinet in September, plans an overall spending increase of 11.8 percent.
Speaking to reporters after a working session of economics ministers, Klaus also said he did not expect inflation to fall below eight percent next year.
The monetarist economist Klaus, who has said a balanced budget is the ""Alpha and Omega"" of his government, said spending increases would be largest in percentage terms for export supports, regional transportation, and housing.
He said the total expenditure side next year would rise 58 billion czech crowns ($2.21 billion) over expected 1996 spending to 549 billion crowns. The ministers were to discuss the revenue side of the budget later in September.
Finance Minister Ivan Kocarnik said the full cabinet should get the full draft for discussion on September 20. When asked if there was talk among ministers of anything excpet a balanced budget Kocarnik replied tersely ""No"".
The government's draft budget has traditionally been debated and passed by mid-December.
Klaus's government has passed four straight balanced budgets, although it will discuss a plan on Wednesday to cut 1996 spending by another 9.3 billion crowns in order to balance this year's ledger.
Klaus said the expenditure figures were still subject to further discussion but he did not expect major changes. Fixed manadatory expenditures are forecast rising by 14.0 percent while discressionary spending would rise 9.9 percent.
Klaus added that state sector wages were planned to rise a nominal 12.4 percent in 1997, and he hoped that it would set an example for private sector budget planning.
""(The government) wants to send a message which would lead to a certain stoppage of the pace of wage increases also in the non-budget (private sector) sphere,"" Klaus said.
Earlier this month the central bank warned of inflationary wage rises not being matched by increases in productivity.
Klaus also said that he did not expect 1997 inflation to fall below eight percent, which was the government's target for lowering inflation in 1996.
""Unfortunately we don't expect a number lower than eight (percent),"" he said.
He did not elaborate on if he meant average or year-on-year inflation. For budget purposes, however, the government usually speaks in terms of average inflation.
Czech year-on-year inflation stood at 9.4 percent in July, while the moving average stood at 8.6 percent.
The government in passing the 1996 budget forecast inflation for the year of roughly eight percent, but strong domestic demand has kept prices higher.
($1=26.24 Czech Crown)
",13
"Disgruntled Czech opposition Social Democrats have blamed party chairman Milos Zeman for their poor showing in weekend elections for the country's new Senate.
They suggested that charges by Zeman ahead of the elections that intelligence agents had harassed himself and his mother had backfired on the party, which had been neck and neck with the ruling Civic Democratic Party (ODS) in most opinion polls.
In the event, the Social democrats won only 20.3 percent of the vote in first round voting held on Friday and Saturday. This compared with 36.5 percent for the ODS, led by conservative Prime Minister Vaclav Klaus.
While the ODS called a news conference on Monday to trumpet its dominant showing, leading Social Democrats went to ground after a weekend of squabbling over who was to blame.
Vasil Biben, Social Democrat candidate in the north Bohemian town of Trutnov, was blunt in his criticism of Zeman.
""The Social Democrats were were hurt by his pre-election excesses, thanks to which the party lost centre-left voters,"" the daily Mlada Fronta Dnes quoted Biben, who will fight a second round run-off this weekend, as saying.
Shortly before the polls Zeman alleged secret agents had tried to extract compromising information from his elderly mother.
Earlier he had caused uproar when he accused the state intelligence agency BIS of spying on him. But he failed to provide evidence to a parliamentary watchdog and earned a rebuke from President Vaclav Havel.
The Social Democrats divided roughly into those who back Zeman and those who support four rebel deputies who voted with Klaus's coalition in a parliamentary budget vote last month.
Low turnout also hit the centre-left party, which did so well in general parliamentary six months ago that Klaus's centre-right coalition lost its parliamentary majority.
Only 34 percent of the electorate bothered to vote for the newly-created Senate (upper house), which few Czechs seem to understand. But the pro-business ODS proved much better at getting its supporters out than the opposition.
The Social Democrats failed to win most votes in any constituency, although their candidates went through to the second round in 48 of the 81 constituencies by finishing second.
Afterwards Zeman blamed the rebels, who included one of his vice-chairmen, Karel Machovec, for the setback. The defection in early October triggered public squabbling between the party's right wing and former communist colleagues.
Zeman dismissed the row over the BIS as a factor, citing a poll taken before the spy scandal broke which showed a sharp drop in the willingness of Czechs to vote again so soon after general elections.
""When I analyse what happened, and see that this opinion poll preceded the BIS affair, then I can find only one cause and that is the budget vote,"" he said.
One Social democrat rebel, Jozef Wagner, described this as nonsense.
Wagner, who chairs the parliamentary budget committee, noted that the BIS affair had been broken not by Zeman but by Deputy Prime Minister Josef Lux, who leads the Christian Democrats, a junior partner in Klaus's coalition.
Wagner said the Social Democrats should have stayed quiet in the affair, which cost the job of the BIS acting director.
",13
"The largest Czech commercial bank, Komercni Banka a.s. , on Friday posted roughly 10 percent lower nine-month results but attributed the drop to accounting changes and KB's shares rose on the news.
The bank's net profit, calculated under international accounting standards, declined to 4.88 billion crowns from 5.44 billion, but Komercni shares moved higher on the Prague Stock Exchange as analysts praised the results.
The bank's finance division director Kamil Ziegler told a news conference that since third quarter 1995, Komercni had revised its methodolgy to exclude unpaid late fees and commissions, including penalty payments.
""Our profit, according to international accounting standards, is by roughly 10 percent lower than in the same period of the last year. But, there is very important methodical influence,"" Ziegler told reporters.
""Currently there are only really paid late fees in our books, that means real cash flow.""
He added that the sum of unpaid late fees substracted from the accounting was 1.2 billion crowns. Komercni posted a 5.11 billion net profit for the whole of 1995.
The bank's total assets rose to 432.04 billion crowns at the end of the third quarter from 336.21 billion, year-on-year.
The net interest margin declined to 4.07 percent from 5.40 percent, but up from 3.93 percent at the end of the first half.
Under Czech accounting standards, which Ziegler said do not include the tital of 700 million crowns of unrealised gains from securities, Komercni's gross for the period was 3.87 billion, down from 6.83 billion year on year.
He told rpeorters that he considered the results to be ""very good"", but warned that simple annualisation of the nine month figures would not lead to a full-year profit forecast.
He said fourth quarter results could be affected by unclear development on the stock market and other factors.
Sandy Winthrop Chen, vice president of equity research at the Prague office of CS First Boston, welcomed the figures,
""The results are quite in line with our expectations, I think the performance is very strong, and it puts Komercni Banka in a very good position to meet or exceed out 1996 forecast.""
He added that the forecast was a 5.95 billion crown net profit, according to international standards.
Komercni share price jumped 125 crowns on the Prague Stock Exchange soon after the news to 2,125, and closed at 2,126 after a week of heavy losses in which some analysts anticipated poor results.
Dealer Karel Ruzicka of ING Barings said the results were in line with his expectations and partly attributed Komercni's share price rise to demand from foreign investors.
""Some of the foreign investors...think they are not so bad therefore we can see some demand in the stock,"" he said.
Added Chen: ""We definitely remain buyers of the stock, and the recent weakeness in the shareprice we interpret as a major buyer opportunity.""
Komercni's largest shareholder is still the Czech government which has a 48.74 percent stake, followed by the Bank of New York which has accumlated a 9.65 percent stake.
-- Prague Newsroom, 42-2-2423-0003
",13
"The Czech Republic could have a 50,000- 100,000 tonne sugar surplus from this year's campaign but little will be exported due to high local production costs and a world sugar surplus, sugar experts say.
The Agriculture Ministry said the state would buy some surplus sugar for strategic reserves and would prepare indirect support for exporters but it ruled out direct export subsidies.
Industry sources varied in their assesment of potential foreign markets but agreed producers will try to sell as much as they can at home as world prices were considerably lower.
""It is expected that the surplus will be up to 80,000 to 100,000 tonnes,"" said Eva Divisova of the ministry, adding that total production will be between 520,000 and 540,000 tonnes raw value after last campaign's 460,035 tonnes.
She added net sugar exports in 1996 should be about 4,000 tonnes. Divisova declined to say how much the state would buy for its reserves from this year's crop, nor what the reserves are, saying this was secret.
""State reserves will be filled, other parts will have to be exported. But it is very difficult to get to foreign markets,"" Divisova added.
She said Slovakia was not importing due to higher output. There are payment problems with Ukraine and Russia, but former Yugoslav countries were potentially interesting, she said.
Director of trading firm Agrointernational Petr Prochazka believed the surplus would total 50,000-80,000 tonnes, most of which would stay in the Czech Republic.
""The surplus will not be so dramatic...There are quite good yields but the harvest is going slowly due to bad weather. A forecast freeze and subsequent warming will limit output.""
""Producers will not want to export...(because of low prices) Those who can store it, will, he told Reuters, adding he believed the state could buy up to 20,000 tonnes for reserves.
Secretary of the Sugar Refiners' Association Vladimir Ulrich also saw a 50,000-80,000-tonne surplus but said it could be partially swallowed by the state and the elasticity of domestic consumption. But he stressed that financial costs of storing sugar could push producers to sell at any price.
Ulrich said local prices have dropped to 12-15 crowns per kilo from 16 earlier in the year. The market is protected by a 68.4 percent tariff, which will drop next year to 65 percent.
""We are pushed from two sides -- the domestic surplus and low price on the world market. If prices drop further, other sugar could get here,"" Ulrich told Reuters.
Breweries could buy up to 10,000 tonnes more than they usually do if prices go below the costs of malt, and citric acid makers could take care of another 10,000 tonnes, Ulrich said.
""There is a hunger for sugar in Bulgaria, Romaina, Ukraine, also in Russia,"" said Ulrich. He added that Poland, which itself expects to have a sizeable surplus, was also a potential market.
""We also cannot expect to supply the London exchange, because our sugar does not meet the conditions,"" added Prochazka.
He said Czech exporters could also look to traditional markets like Saudi Arabia...""Of course, the price would be poor.""
The ministry and Ulrich said the surplus would lead to a smaller sown area next year after 104,115 hectares this year. ""I believe the optimal area for next few years would be between 90,000 and 94,000 hectares,"" Ulrich said.
",13
"Czech Prime Minister Vaclav Klaus announced a state commission on Wednesday to attack bureaucracy in the land of Franz Kafka.
It will have a steering committee, a chairman, two vice-chairmen, two sections, six sub-commissions and more members than the Klaus's cabinet.
But Klaus denied suggestions that the new ""Commission for the Removal of Bureaucratic Burden"" would pour fuel on to the fire, telling a news conference that the only bureaucrat working at the commission would be a secretary. 
The other staff, numbering around 20, would perform their duties part time, said Klaus, whose cabinet has 16 members.
The Czech bureaucracy, crafted by the Austro-Hungarian empire and perfected under communism, inflicts daily misery on local and foreign residents alike.
Franz Kafka, the Prague novellist of the early 20th century, wrote of angst born of bureaucracy in such works as ""The Trial"" and ""The Castle"".
Things today do not seem much better. Applications for documents such as company registrations, licences and work permits can take weeks or months to process.
They can involve repeated visits to offices where citizens have to queue patiently sometimes for hours waiting to be summoned by often surly bureaucrats. Knocking on office doors for attention is strictly forbidden.
Klaus said the commission should aim to simplify issues like setting up a business, getting construction permits or social benefits, or dealing with tax offices.
Chairman Vladimir Budinsky, a former transport minister, indicated he was confident his commission would not gain the Czech bureaucrat's reputation for idleness.
""I believe that we will be able to find people for each section who would be ready to work,"" he said.
-- Prague newsroom (42 2) 24 23 0003
",13
"The Czech government on Tuesday approved the text of a long-awaited declaration on post-World War Two reconciliation with Germany, paving the way for its initialling on Friday.
The declaration, leaked to news media last week, contains mutual expressions of regret for the Nazi occupation from 1938 to 1945 and for excessive brutality during the post-war expulsion of ethnic Germans from the Sudetenland region of what was then Czechoslovakia.
Prime Minister Vaclav Klaus told reporters after a weekly government meeting that he had been authorised to sign the text, which took two years to negotiate, without changes.
""The government has closed the debate by this text and it sees no chance, opportunity or reason to make any changes to it...Negotiation on the text has ended for us, I'm saying that unambiguously,"" Klaus said.
The foreign ministers of the two countries are now due to initial the text in the Czech capital on Friday. Signature by the two presidents and confirmation by the parliaments are expected early next year.
""In this declaration it is clearly stated that the will of both sides is to close the past, to close the negative chapters of our history. This declaration means a clear turn in our relations toward the future,"" Klaus said.
The text has angered groups representing families of the Sudeten Germans, who complained that it did not compensate for property lost during the expulsions.
Germany's Christian Social Union (CSU), the political sponsor of the expelled Germans which has in the past hinted it might use its weight in the Bonn government to block the declaration, has given qualified support to the text.
But on Tuesday the CSU government of Bavaria, home of most expellees, made a number of demands.
It said it could accept the declaration only if both Bavaria and the official Sudeten German representatives were allowed to participate in a planned fund for German-Czech projects.
And it picked up a key condition which Prague has so far rejected, saying that it expected a commitment, ""no later than when the declaration is signed, that the Czech side will hold talks with the representatives of the Sudeten German community"".
In the Czech parliament the mainstream parties have backed the declaration, but the extreme-right Republican Party and far-left Communists have ruled out voting for it in any form.
Members of the largest Czech opposition party, the Social Democrats, whose votes may be crucial for approval by parliament, have said they still had concerns about vague wording on compensation for victims of Nazi aggression.
The declaration sets up a Czech-German Future Fund with the German side paying in 140 million marks ($90 million) and the Czechs paying about one-seventh of that to finance ""projects of common interest"" including joint environmental, historical and scientific projects and youth meetings.
But the text adds: ""The German side acknowledges its obligation of responsibility to all who became victims of National Socialist violence. That is why the projects, wherever appropriate, should work mainly for the benefit of the victims of National Socialist violence.""
",13
"Bitter infighting broke out among Czech Social Democrats on Friday only a month before elections in which the opposition party hopes to humiliate conservative Prime Minister Vaclav Klaus.
Party chairman Milos Zeman denied there was any split in his party, which is running neck and neck with Klaus's Civic Democratic Party (ODS) before Senate elections next month.
But almost in the same breath he threatened to resign next spring unless a party deputy chairman who broke ranks to vote with the Klaus government last week went first.
Adding to his woes, a Social Democrat deputy threatened to leave the parliamentary party in a row with an ex-communist colleague, a move which could tip the balance of parliamentary power between the minority government and opposition.
Klaus, whose three-party coalition lost its parliamentary majority in lower house elections earlier this year, has seemed under heavy pressure with opinion polls showing the Social Democrats level or slightly ahead of his ODS.
But just as the Social Democrats seemed in with a good chance of beating the ODS for the first time since the restoration of democracy, strife flared in opposition ranks.
Last week Jozef Wagner, the chairman of the parliamentary budget committee, led a revolt by four Social Democrat deputies which allowed the 1997 state budget to pass its first reading.
Tempers flared on Friday after Wagner threatened to resign from the parliamentary party unless another Social Democrat deputy, ex-communist Michal Kraus, quit the budget committee and a parliamentary commission investigating a bank collapse.
Despite the appearance of disarray in Social Democrat ranks, Zeman played down Wagner's threat. ""There is no real split. I do not want to overestimate the importance of his proclamation in this case,"" he told a news conference.
""A split would happen only if a body of opinion formed which was sharply different in questions of principle from the opinion of the party leadership,"" he said.
But then he attacked party deputy chairman Karel Machovec, one of the Wagner rebels. ""There should not be a person in the leadership who shows himself up by talking about disputes in the party,"" said Zeman.
Asked if he would resign if Machovec remained vice chairman after a party congress scheduled for next March, Zeman said: ""Yes. It is true, I can confirm that.""
Kraus, a communist deputy before the 1989 collapse of the East Bloc, accused the four budget rebels of being ""corrupted politically"" by the Klaus coalition.
Wagner told the daily Mlada Fronta Dnes he would leave the Social Democratic parliamentary party or ""club"" if Kraus did not go. Machovec was quoted by local media as saying that if Wagner left, there would be a serious party split.
This could change the balance of power in the 200-seat lower house where the Social Democrats, along with the little-reformed Communists and the far-right Republicans, have 101 votes to the government's 99.
The Senate itself has few powers. But the elections on November 15 and 16, with a second round runoff a week later, have become a test of public opinion which could indicate whether early lower house elections are likely.
Analysts say that if the Social Democrats perform strongly, Zeman might be tempted to bring down the coalition to force lower house polls in which his party might overtake Klaus's ODS. But that depends on Zeman being able to maintain discipline.
So far voters do not seem concerned. A poll taken by the STEM agency before and after the budget vote showed the Social Democrats with 27.3 percent support ahead of ODS with 26.8.
In the lower house elections on May 31-June 1, ODS won 29.6 percent and the Social Democrats 26.4.
",13
"The party of Czech Prime Minister Vaclav Klaus performed strongly in Senate elections on Saturday but with turnout at 35 percent, the real winner was apathy.
In what was billed as a key test of the minority coalition government, Klaus's centre-right Civic Democratic Party (ODS) took a commanding 36.47 percent of the first round vote, with the opposition Social Democrats trailing on 20.27 percent.
The result was a major improvement for the ODS, which won only 29.6 percent in elections to the lower house in June when a strong Social Democrat performance of 26.4 percent stripped Klaus's three-party coalition of its majority.
Klaus, the father of Czech economic reform, played down the voter apathy and played up the ODS performance.
""It is obvious that the citizens of this country understand that they want stability,"" he told reporters, alluding to the political stalemate since the inconclusive lower house polls.
""These elections ... are an important test of the political feelings of people of this country about the (June) elections. In this respect they are giving an important signal,"" he said.
Klaus also sidestepped questions on whether he might seek early lower house elections to try to regain his majority.
But analysts said the results may be misleading. Unlike the lower house system of proportional representation, the Senate is elected in two rounds of a first-past-the-post system.
Only three ODS candidates won outright in the first round held on Friday and Saturday. Another 76 face a run-off on November 22-23 between the top two contenders in constitiuencies where no-one won more than half the first round vote.
Also, the well-organised and funded ODS is better at rallying support when public interest in elections is low than the Social Democrats. Klaus cannot therefore automatically rely on repeating the performance in a lower house election, when turnout is usually over 75 percent.
But the dismal turnout vindicated more the far-right Republicans, who boycotted the elections to the newly-created upper house and told fellow Czechs to do likewise.
The Central Election Commission said turnout was just 35.03 percent, far lower than forecast and compared with 76.4 percent participation in lower house elections in June.
Zeman, whose party has been afflicted by squabbling, appeared to blame the low turnout for the poor result.
But he added: ""I firmly believe that in the second round, participation will be markedly higher because then it is a choice between the two strongest candidates.""
In the end the Republicans led by doctor of philosophy Miroslav Sladek came out looking best without even running.
Sladek hit a chord by denouncing the Senate as a waste of time and money. ""They had nowhere to dump the political zombies so they established the Senate,"" he told a recent rally.
Polls showed few Czechs understand the function of the Senate, which has little power compared with the lower Chamber of Deputies. With a few exceptions, most of the candidates are little known because Czech leaders all sit in the lower house.
",13
"Czech National Bank (CNB) Governor Josef Tosovsky on Friday said the central bank was committed to keeping the crown strong, despite some calls to depreciate the currency to help exports.
Speaking after a meeting with Prime Minister Vaclav Klaus and top business executives, Tosovsky said the central bank would keep the crown within the current band against which it fixes the currency daily versus a mark/dollar basket.
""I said that we will try to keep the rate within the plus/minus 7.5 percent band (against the mark/dollar cross rate),"" Tosovsky told reporters.
""I dismissed speculation that we would want to move the crown in some way outside the band,"" he added.
Analysts recently have been debating whether a devaluation of the crown might be needed to boost exports and help stem a ballooning current account deficit.
The trade deficit is threatening to send the current account shortfall to close to six percent of gross domestic product this year after about four percent last year.
Some have argued that a devaluation is required to help the country's goods remain competitive while wages are rising and the economy is transforming.
But others have said that the foreign capital inflow is l comfortably paying for the imports, and the current account deficit is not dangerous.
Tosovsky said a stable crown had served its purpose in regulating inflation, and a stronger crown would have positive effects on reforming Czech industry to make it more competitive.
He said a stronger crown ""should help faster restructuring of our economy, to help increase the added-value faster...and to help to bring our country closer in productivity to the countries that we want to compare ourselves with.""
The central bank fixes the crown daily within a band plus or minus 7.5 percent from the central parity of the mark/crown basket.
It has been fixing it recently at more than three percent above parity to match a modest net inflow from foreign crown buying.
After the meeting, Prime Minister Vaclav Klaus said the government would aim to provide more funds to export promotion agencies such as the Czech Export Bank, and its sister export insurance agency.
He said he had told business leaders it was necessary to lower their expectations of higher inflation because it had become a self-fulfilling prophecy.
""We cannot automatically appease the expectation of, let's say, nine percent inflation, and make that the basis for all further expenditure -- price and wage items,"" Klaus said.
He said this would be key to the government's position in collective bargaining. ""We have to radically break this (inflation expectation). This must be the basis of this year's debates on collective agreements.""
-- Prague Newsroom, 42-2-2423-0003
",13
"Czech Prime Minister Vaclav Klaus on Wednesday said the government had approved a plan to privatise at least part of the state's 31.5 percent stake in commercial bank IPB a.s..
Speaking after the government's regular weekly session, Klaus said he had charged Finance Minister Ivan Kocarnik with the task of setting conditions for a tender to sell the stake.
He added that no decision on a central bank proposal to merge banks CSOB a.s. and Ceska Sporitelna a.s. had been taken, though the government remained committed to privatising its holdings in the country's four biggest banks.
""He (Kocarnik) is due to submit to the cabinet, in cooperation with a chosen consultancy firm, the criteria for the selection of a strategic foreign partner,"" Klaus said.
Representatives from the state privatisation agency, the National Property Fund (NPF), and the central bank would also be involved in the process of developing the tender.
""The intention is for Mr Kocarnik to come up with the criteria as soon as possible,"" Klaus said.
Klaus did not say how much of the government's stake would be included in the sale to a strategic foreign partner.
Japan's Nomura and Dutch banks ING and ABN AMRO have been widely reported as expressing an interest in the IPB stake.
The central bank has submitted a plan to the cabinet proposing a merger of CSOB, where the Czech government holds 66 percent, and Ceska Sporitelna where it has 45 percent, but Prime Minister Vaclav Klaus has reacted coolly to the idea.
""We did not make any fundamental judgements on mergers today,"" Klaus said. He did not elaborate.
A merger of CSOB and Sporitelna would create post-Communist Europe's largest bank with assets topping $20 billion.
Klaus added that the privatisation of CSOB, which is wholly-owned by Czech and Slovak state institutions, and the selloff of Komercni Banka were complicated because of shareholdings and arrangements between the banks and Slovakia.
",13
"Czech surgeons began exploratory surgery on President Vaclav Havel on Monday to remove a spot from his lung, but the former dissident playwright has said that his health was not in serious danger.
Havel's office announced in a statement that a news briefing would be held on Monday afternoon after the operation but an official said it was impossible to say how the long the surgery would last.
Havel, a heavy smoker who spent almost five years in communist jails, has been ill for several weeks.
But in his weekly radio address, broadcast on Sunday, he was in an optimistic mood, saying the operation would ""remove some sort of bad point or spot found on my lungs, the character of which is still unknown"".
""However, even if it is something bad, it is so small and its location is so favourable that it seems that I am in no serious danger,"" he said in the address, recorded on Friday.
Havel, who led the 1989 ""Velvet Revolution"" which overthrew communism, said in the address from his hospital bed: ""I am here not because my state of health is worsening"".
""On the contrary, never in the past few weeks have I felt as well as I feel just now.""
Havel, who is widely respected at home and abroad, was admitted to hospital last Monday, more than a week after his office said he was suffering from pneumonia. Later surgeons described the planned surgery as ""medium serious"".
The Czech daily Mlada Fronta Dnes said that a sample of the spot would be sent for immediate analysis during the operation. Based on the results, surgeons would decide whether to continue with the operation, it said without elaborating.
Havel will keep his full presidential responsibilities during the operation.
Under the Czech constitution, most executive power lies with Prime Minister Vaclav Klaus who is attending the European security summit in Lisbon in Havel's place.
Havel's power lies more in his personal authority and reputation for honesty in a Czech political scene increasingly dominated by squabbling and allegations of impropriety.
Opinion polls show his popularity rating at around 80 percent while public disillusionment with Czech politics is widespread.
Turnout for elections to the new Senate last month was just 30 percent in the second round, and a poll published last week showed that 58 percent of respondents were dissatisfied with the state of Czech politics.
Havel, whose wife Olga died of cancer in January, supports the free market but has bitterly criticised the corruption, dishonesty and materialism which has accompanied the scramble to make money.
",13
"The largest Czech commercial bank, Komercni Banka a.s., said on Friday that profits in the first nine months of this year fell some 10 percent due to accounting changes. The shares rose on the news.
The bank's net profit, calculated under international accounting standards, declined to 4.88 billion crowns from 5.44 billion, but Komercni shares moved higher on the Prague Stock Exchange as analysts praised the results.
The bank's finance division director Kamil Ziegler told a news conference that since third quarter 1995, Komercni had revised its accounting method to exclude unpaid late fees and commissions.
""Our profit, according to international accounting standards, is roughly 10 percent lower than in the same period of the last year. But there are very important methodological influences,"" Ziegler told reporters.
Only those fees that have actually been paid are included in the figures now whereas outstanding receivables were included previously, he said.
He added that the amount of late fees that would have been included under the previous accounting method was 1.2 billion crowns. Komercni posted a 5.11 billion net profit for the whole of 1995.
The bank's total assets rose to 432.04 billion crowns at the end of the third quarter from 336.21 billion, year-on-year.
The net interest margin declined to 4.07 percent from 5.40 percent, but up from 3.93 percent at the end of the first half.
Under Czech accounting standards, which Ziegler said do not include the tital of 700 million crowns of unrealised gains from securities, Komercni's gross profit for the period was 3.87 billion, down from 6.83 billion year on year.
He told rpeorters that he considered the results to be ""very good"", but warned that simple annualisation of the nine month figures would not lead to a full-year profit forecast.
He said fourth quarter results could be affected by unclear development on the stock market and other factors.
Sandy Winthrop Chen, vice president of equity research at the Prague office of CS First Boston, welcomed the figures,
""The results are quite in line with our expectations, I think the performance is very strong, and it puts Komercni Banka in a very good position to meet or exceed out 1996 forecast.""
He added that the forecast was a 5.95 billion crown net profit, according to international standards.
Komercni share price jumped 125 crowns on the Prague Stock Exchange soon after the news to 2,125, and closed at 2,126 after a week of heavy losses in which some analysts anticipated poor results.
Dealer Karel Ruzicka of ING Barings said the results were in line with his expectations and partly attributed Komercni's share price rise to demand from foreign investors.
""Some of the foreign investors...think they are not so bad therefore we can see some demand in the stock,"" he said.
Added Chen: ""We definitely remain buyers of the stock, and the recent weakeness in the shareprice we interpret as a major buyer opportunity.""
Komercni's largest shareholder is still the Czech government which has a 48.74 percent stake, followed by the Bank of New York which has accumlated a 9.65 percent stake.
-- Prague Newsroom, 42-2-2423-0003
",13
"Czech consumer prices rose less than expected in September, but analysts said on Tuesday it remained unclear if the government can meet its full-year target.
The Czech Statistical Bureau (CSU) said prices rose 0.3 percent in September versus analysts' expectations of a 0.6 percent rise.
The year-on-year inflation stood at 8.9 percent, down from 9.6 percent in August, when the monthly rise was also a low 0.2 percent. The sliding 12 month average inflation was 8.7 percent, after 8.6 percent in August.
""Our forecast for the whole year does not change, which is also because one month result does not change much in the average inflation rate,"" Martin Kupka of investment bank Patria Finance told Reuters.
""I don't think that the favourable developments in the last two months will be repeated in the months at the end of the year, which leads to our nine percent (average) inflation forecast for the whole year, not lower,"" he added.
The government had originally set its average inflation rate target for the whole year at eight percent, but recently raised it to 8.3 percent.
Analysts said that the low 0.2 percent monthly increase in the food, tobacco and beverages sector contributed to the overall result, but added this could have been caused by seasonal influences.
The CSU said prices in the heavily-weighted sector were held back by a 19 percent drop in potato prices, as well as a fall in vegetable and fruit prices.
Kupka welcomed the September result, but said that when more foodstuffs from the domestic harvest come to the market toward the end of the year, prices could be pushed up as farmers look to offset rising production costs.
Radek Maly of Prague's Citibank branch said he was pleased by the September figures, as he had expected a monthly increase of 0.5 percent.
""We have to wait for what the foodstuffs prices will do in the next months.But if they keep this pace, in line with the other basket components, we could get positive figures at the end of the year,"" Maly said.
""The year-on-year rate could get under nine percent at the year's end if the trend continues... maybe the moving average as well.""
He added that other components of the basket also showed positive development, following low increases in producer prices in the last several months.
The CSU said prices in the leisure sector dropped by 1.1 percent in the month, thanks mainly to lower prices of holiday trips abroad. Education costs rose 3.9 percent due to an increase in fees at the beginning of the new school year.
Clothing prices rose 0.9 percent, housing climbed 0.3 percent, and transportation prices remained flat in the month.
The CSU in July raised its average inflation forecast for the whole year to 9.0 percent, and the cabinet based its 1997 budget calculations on an average inflation expectation of 8.6 percent.
",13
"Czech National Bank (CNB) Governor Josef Tosovsky said on Friday that there was no need to hurry the privatisation of shares in the largest commercial bank, Komercni Banka a.s. .
He said when the time comes to sell the state's roughly 49 percent in Komercni, it is possible the stake could be divided for sale to several investors.
""There is not a need to hurry with (Komercni's) privatisation. A strategic partner is not necessary, so it is possible to propose to sell the state stake to more investors,"" Tosovsky said after a closed meeting of the parliament's banking commission.
But he added the central bank does not yet have a strong concensus on what to do with Komercni's shares.
""We haven't an absolutely firm opinion on this, it's possible (to sell) to both domestic and foreign investors.""
The central bank has submitted a broad plan to privatise shares in the so-called ""Big Four"" banks which calls for the merger of trade bank Ceskoslovenska Obchodni Banka a.s. with Ceska Sporitlena a.s. , the largest savings bank.
The CNB has said it would prefer to wait several years before privatising the state shares after the newly-merged bank is established to analyse effects of the merger.
""CSOB is ready for quite a fast privatisation, but when considered in a wider scope, we (the CNB) think that a merger with Ceska Sporitelna would be more suitable,"" Tosovsky said.
""If this proposal is accepted, privatisation would be... delayed, beause there must be the merger first.""
The Czech cabinet must approve any privatisation of shares in the Big Four banks, and this week they asked the central bank for more concrete details on the central bank's plan.
""(A merger of CSOB and Sporitelna) has a number of rational and economic reasons,"" Tosovsky said without elaborating.
The governor rejected comments by CSOB and Sporitelna executives who reacted coolly to the merger plan.
""The managements are not the owners... it's logical the managements have their own interests and preferences, but the owner is the (state National Property Fund),"" he said.
He said Prime Minister Vaclav Klaus had requested details to the central bank's plan for a quick sale of the state's 31.5 percent of Investicni a Postovni Banka a.s. to a strategic foreign partner.
""The prime minister proposed (for the CNB) to make concrete some procedings concerning mostly IPB so that the privatisation can start as soon as possible,"" Tosovsky said.
IPB executives have confirmed that both Japan's Normura and Dutch ING Bank NV have shown an interest in acquiring shares in IPB.
Klaus has said he is not in favour of the CSOB/Sporitelna merger, equating it with melding Prague's two top soccer teams Sparta and Slavia, an idea unthinkable for most Czechs.
-- Prague Newsroom, 42-2-2423-0003
",13
"Volkswagen AG Czech unit Skoda Auto a.s. said on Monday its new mid-sized ""Octavia"" sedan will list on its home market at a base price of 335,700 crowns, at the low end of its class.
At a media presentation at the plant north of Prague, marketing chief Detlef Wittig said Skoda will make 64,000 Octavias next year, and raise production of the line to 90,000 in 1998.
The new model, built on a common VW platform designed for the 1998 Audi A3 and upgraded Golf, will be available with three petrol and two diesel engines in three lines, with the top-of-the-line SLX automatic model priced at 497,900 crowns.
The Octavia will get its international test at the Paris International Auto Show in October and should be delivered to Czech dealers in November, followed by launches on foreign markets where prices have yet to be determined.
Skoda was taken over by Volkswagen in 1992 under a governemnt privatisation plan. The company built an entirely new factory for Octavia production.
Continuing the break from the boxy Communist-era Skodas, the Octavia has more modern but conservative lines, somewhere between a Ford Mondeo and Audi's A-line.
Skoda is hoping to build on the success of its Felicia economy five-door hatchback by offering an affordable middle-range sedan and take back chunks of its home market lost to Czechs seeking a more western-looking status symbol.
""Octavia... is a logical step from Felicia into a higher market segment,"" said Wittig.
The cheapest Octavia includes a 1.6 litre, 55 Kw engine, ignition immobiliser, driver-side airbag, plus an adjustable driver's seat and steering wheel.
More expensive versions will be alternatively equipped with a 1.6/74 kw, 20-valve 1.8/92 kw engine, 1.9/66 kw turbodiesel or 1.9/50 kw diesel engine, and an optional passenger-side airbag.
Side-body airbags should be available in mid-1997.
Wittig told reporters that Octavia should help Skoda's total production to rise to 350,000 units next year and 400,000 at the turn of the century after 251,000 cars made this year.
""Within the (VW) concern, Skoda takes the position of the counterweight to the Asian producers,"" he added.
Skoda Chairman Ludvik Kalma said that he expected about 20,000 Octavias to be sold annually on the domestic market, the rest being exported to the rest of Europe and overseas.
The company lost 1.621 billion crowns last year due to heavy investments into the new factory, but Kalma said the firm should come close to breaking even this year.
-- Prague Newsroom, 42-2-2423-0003
",13
"The main Czech oil refiner, Ceska Rafinerska a.s., said on Wednesday it would reopen the hydrocracking unit at its Litvinov refinery, damaged by a fire last month, by the end of January.
Company spokesman Ales Soukup said that the fire on December 2, and another apparently unrelated fire eight days before that, would have some effect on 1996 earnings, but he said it was not yet clear to what extent.
""The refinery is in full operation... the cracking unit was put aside. It should be reopen by the end of January,"" Soukup told Reuters.
He said that the refinery, in the northwest of the country, was processing crude at normal levels, but the depth of quality of the processing was lower due to the absence of the cracker.
""(The fires) will certainly have some impact, on the other hand, the company is insured, so a number of those damages will be paid for,"" he said.
Soukup added that final results for last year should be known at the end of the first quarter.
The fire affecting the hydrocrcker broke out on December 2 in a furnace of the unit, just as crude flow resumed after an eight-day stoppage.
Oil flow had been halted when a blaze ripped through a tanking terminal in another part of the refinery on November 23.
They were the first major reported incidents at the refinery since a western consortium took a major equity stake in the newly created Ceska Rafinerska at the end of 1995.
In a deal completed last year, the IOC consortium of three foreign oil groups bought a 49 percent stake in Rafinerska, a company set up to operate the two main Czech refineries at Litvinov and Kralupy, earlier belonging to Chemopetrol Group a.s. and Kaucuk Group a.s. .
The IOC is equally owned by DuPont Co unit Conoco of the United States, Royal Dutch/Shell , and Italy's Agip SpA .
The state holds the remaining 51 percent stake in Rafinerska through the holding company Unipetrol a.s..
The remaining parts of Kaucuk and Chemopetrol, both controlled by the state, are to complete a merger into Unipetrol with a share swap planned for later this year.
Unlike recent January's, Czech refineries are recieving Russian crude supplies normally through the Druzhba (Friendship) pipeline, which had frequent New Year's flow interruptions the past two years because of rows over transit fees between Moscow and Kiev.
-- Prague Newsroom, 42-2-2423-0003
",13
"Czech Prime Minister Vaclav Klaus said on Wednesday that there was no reason to hurry the privatisation of the country's four largest banks.
""(The privatisation) does not have any exceptional level of urgency,"" Klaus told a news conference after a cabinet meeting.
He said the cabinet would wait until the central bank submitted a more complete plan to the cabinet for the privatisation of the remaining state shares in the large banks.
""It is irrelevant if it is two or three weeks later or two or three weeks sooner,"" Klaus said.
The central bank and the finance ministry have both called for the rapid privatisation of the state's roughly one-third stake in Investicni a Postovni Banka a.s. to a strategic foreign partner.
Japan-based investment bank Nomura and Dutch ING Bank NV are both said to have a strong interest in the IPB stake.
The Czech National Bank, the central bank, also has called for the merger of the largest savings bank Ceska Sporitelna a.s., with the foreign trade bank Ceskovslovenska Obchodni Banka a.s..
If the merger goes ahead, forming a bank with 540 billion crowns ($20.16 billion) in assets based on end-1995 results, the plan would be to privatise the new megabank several years later.
Klaus has balked at the merger plan, saying that it was akin to merging Prague's two top soccer clubs, Sparta and Slavia, which would be hard for Czechs to imagine.
The prime minister has reacted favourably in recent weeks to news that Nomura was keen to buy the state's stake in IPB.
At the news conference Klaus bristled at a series of questions on the subject by foreign news agencies. When asked specifically about the timing of IPB's privatisation Klaus said: ""I don't know if this is the question of some lobbyist who wants to buy some bank fast, or really the general interest of a journalist.""
""From the point of view of the first (case),"" he continued, ""then I think that a party interested in buying or who instigates you into this question is probably in a hurry.""
-- Prague Newsroom, 42-2-2423-0003 ($1=26.78 Czech Crown)
",13
"Czech Prime Minister Vaclav Klaus announced a state commission on Wednesday to attack bureaucracy in the land of Franz Kafka.
It will have a steering committee, a chairman, two vice-chairmen, two sections, six sub-commissions and more members than Klaus's cabinet.
But Klaus denied suggestions that the new ""Commission for the Removal of Bureaucratic Burden"" would pour fuel on to the fire, telling a news conference that the only bureaucrat working at the commission would be a secretary.
The other staff, numbering around 20, would perform their duties part time, said Klaus, whose cabinet has 16 members.
The Czech bureaucracy, crafted by the Austro-Hungarian empire and perfected under communism, inflicts daily misery on local and foreign residents alike.
Franz Kafka, the Prague novellist of the early 20th century, wrote of angst born of bureaucracy in such works as ""The Trial"" and ""The Castle"".
Things today do not seem much better. Applications for documents such as company registrations, licences and work permits can take weeks or months to process.
They can involve repeated visits to offices where citizens have to queue patiently sometimes for hours waiting to be summoned by often surly bureaucrats. Knocking on office doors for attention is strictly forbidden.
Klaus said the commission should aim to simplify issues like setting up a business, getting construction permits or social benefits, or dealing with tax offices.
Chairman Vladimir Budinsky, a former transport minister, indicated he was confident his commission would not gain the Czech bureaucrat's reputation for idleness.
""I believe that we will be able to find people for each section who would be ready to work,"" he said.
",13
"The Czech government on Tuesday approved the text of a long-awaited declaration on post-World War Two reconciliation with Germany, paving the way for its initialling on Friday.
The declaration, leaked to news media last week, contains mutual expressions of regret for the Nazi occupation from 1938 to 1945 and for excessive brutality during the post-war expulsion of ethnic Germans from the Sudetenland region of what was then Czechoslovakia.
Prime Minister Vaclav Klaus told reporters after a weekly government meeting that he had been authorised to sign the text, which took two years to negotiate, without changes.
""The government has closed the debate by this text and it sees no chance, opportunity or reason to make any changes to it...Negotiation on the text has ended for us, I'm saying that unambiguously,"" Klaus said.
The foreign ministers of the two countries are now due to initial the text in the Czech capital on Friday. Signature by the two presidents and confirmation by the parliaments are expected early next year.
""In this declaration it is clearly stated that the will of both sides is to close the past, to close the negative chapters of our history. This declaration means a clear turn in our relations toward the future,"" Klaus said.
The text has angered groups representing families of the Sudeten Germans, who complained that it did not compensate for lost property during the expulsions.
Germany's Christian Social Union (CSU), political sponsor of the expelled Germans, said its support for the text was not guaranteed.
Final approval from the CSU, a partner in the Bonn coalition, would depend on assurances that the Sudetens would be ""involved at an appropriate level"" in a dialogue between Prague and Bonn.
The Bavarian-based CSU has in the past hinted it could use its weight in the government to block the declaration or oppose the Czech Republic's application to join the European Union unless the Sudetens were given better terms.
In the Czech parliament the mainstream parties have backed the declaration, but the extreme-right Republican Party and far-left Communists have ruled out voting for it in any form.
Members of the largest Czech opposition party, the Social Democrats, whose votes may be crucial for approval by parliament, have said they still had concerns about vague wording on compensation for victims of Nazi aggression.
The declaration sets up a Czech-German Future Fund with the German side paying in 140 million marks ($90 million) and the Czechs paying about one-seventh of that to finance ""projects of common interest"" including joint environmental, historical and scientific projects and youth meetings.
But the text adds: ""The German side acknowledges its obligation of responsibility to all who became victims of National Socialist violence. That is why the projects, wherever appropriate, should work mainly for the benefit of the victims of National Socialist violence.""
",13
"Czech  Ceska Rafinerska a.s. closed a cracking unit at its Litvinov refinery on Monday after the second fire in eight days struck the plant, company spokesman Ales Soukup said.
But he said the restoration of crude processing, which was halted after the first fire, would continue.
A fire broke out on Sunday night in a furnace of a cracking unit as crude flow resumed after an eight-day stoppage.
Oil flow had been halted since a blaze in another part of the refinery began on November 23 and lasted for more than two days. The latest fire was put out several hours after it started.
Soukup told Reuters that the current resumption of production at the refinery would continue as crude is diverted around the cracker.
The shutdown of the cracker would limit the content, not the amount, of processed crude, Soukup said.
""This (cracking) unit will be out of order for some time, and therefore the refinery will operate in a substitution regime. It will affect the depth of processing,"" he said.
The extent of damage at the refinery, near the northern town of Litvinov, has not yet been determined. Soukup said reopening the cracker ""was not a question of hours or days.""
An explosion in the refinery's tanking station on November 23 sent flames visible for several kilometres into the air and caused dense smoke to roll into neighbouring Germany.
Soukup said the causes and damage from both fires were under investigation.
After the earlier fire, officials from Rafinerska, petrol firms and the government decided that supplies from the Kralupy refinery and in the distribution network were sufficient in the short term, and state reserves would not be tapped.
In a deal completed last year, the IOC consortium of three foreign oil groups bought a 49 percent stake in Rafinerska, a company set up to operate the two main Czech refineries at Litvinov and Kralupy.
The IOC is equally owned by DuPont Co unit Conoco of the United States, Royal Dutch/Shell, and Italy's Agip SpA.
The state holds the remaining 51 percent stake in Rafinerska through the holding company Unipetrol a.s..
-- Prague Newsroom, 42-2-2423-0003
",13
"The Czech government faces one of its most difficult decisions in choosing how to diversify natural gas supplies now coming solely from Russia, Industry and Trade Minister Vladimir Dlouhy said on Thursday.
""It is going to be one of the toughest decisions of this cabinet,"" ministry spokesman Miroslav Konvalina quoted Dlouhy as telling Anneke van Dok-van Weele, the visiting Dutch Minister of Foreign Trade.
Dlouhy has said he would submit four options for securing gas supplies in the future, but declined to detail them before the material is debated by the ministers. He has said that Russia would remain the dominant supplier.
But a source at his ministry, who asked not to be named, confirmed on Thursday a story in the Czech weekly Tyden which listed the four options:
* Purchasing all natural gas from Gazprom, using two different shipping routes, with a long-term agreement until 2,016, with price guarantees until 1998.
* Purchasing some Russian gas indirectly through Dutch company Nederlandse Gasunie NV, and Germany' Wintershall, a subsidiary of BASF.
Gasunie would start supplies in 1998, delivering up to two billion cubic metres in 2005, with agreement lasting until 2014. In case of fallout of Russian supplies, it would deliver its own natural 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 an supply contract.
* Finalising and maintaining the agreement for Norwegian gas, which has already been preliminarily approved this year, until 2017.
* A limited purchase from U.S.-based Mobil Europe Gas Inc., Germany's Brigitta Erdgas und Erdoel (BEB), and British Gas plc.
""But we do not want to connect this decision with political issues like our relations with the European Union or NATO.""
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 senior official from Dlouhy's ministry told Reuters that the issue would most probably be debated by the council of ministers, which should come up with a recommendation to the full cabinet, ""in the coming days, probably next week"".
Government representatives have held talks on limited deliveries from Norway, which according to a preliminary agreement should start in January next year.
The Czechs consume around eight to nine billion cubic metres of natural gas per year, but volume is expected to rise to some 12-13 billion cubic metres by the turn of the century.
The preliminary agreement, which was initiated by Czech state-owned importer Transgas with Norway's GFU gas negotiating alliance in summer, expects eventual growing of the potential supplies to three billion cubic metres per year in 2002.
Konvalina said Dlouhy told Minister van Dok-van Weele that one option included involvement of Dutch companies in future supplies, and the minister said her country could provide ""confidence and reliablity guarantees"" for the supplies.
The spokesman, who declined direct comment on the four options presented to the government, said Dlouhy told the Dutch minister the Czech ""priority is to diversify, but we will keep a balanced relations with the Russian side at the same time"".
-- Prague Newsroom, 42-2-2423-0003
",13
"A reporter's call to the new director's secretary at a major Czech industrial company went something like this:
Journalist: ""Could you please tell me Mr. Novak's first name.""
Secretary (with no hesitation): ""Doctor.""
Czechs are obsessed with academic titles.
It was Justice Minister Jan Kalvoda's use of an unattained ""Doctor of Law"" which forced him to resign from cabinet on Tuesday in a shocking mea culpa on the floor of parliament.
""In this society having a title plays such a role -- whether or not you have a degree,"" Jiri Pehe, the head of research at Prague's Open Media Research Institute, said.
Normal discussions in many offices begin with colleagues addressing each other as ""Mr. Engineer"" -- a title of mid-level academic specialisation -- or ""Mr. Doctor"", held by many Czechs from physicians to lawyers to PhD'd journalists.
Kalvoda was once a practicing lawyer who did complete law school but did not finish the certification process required to become a doctor of law. His colleagues and his party began using the title in literature, and he never refuted it.
His resignation came on top of the confessions of four other deputies in the lower house of parliament who also used the unauthorised ""JUDr"" moniker in campaign material and biographies.
Apart from Kalvoda, only one resigned from parliament, the three others so far have refused.
""I suspect that there may be a few more deputies or government officials in some positions who are claiming to have degrees which they in fact do not have,"" said Pehe, a PhD who did not insist on the use of ""Dr."" for this story.
The Czech prime minister, a highly-educated economist, has the full academic title -- Professor Engineer Vaclav Klaus CSc (Candidate of Science, a former regional variation of PhD) -- but he does not inisist on its use by others.
Some of title-envy stems from four decades of communism which ended with 1989's bloodless ""Velvet Revolution"" led by a band of intellectuals and the dissident playwright Vaclav Havel.
Communist leaders insisted on an educated population, at least quantitatively, and even implemented programmes producing fast-brewed PhD's and engineers at colleges.
Kalvoda's resignation inspired commentaries on the subject of academic titles in Wednesday newspapers.
The daily Mlada Fronta Dnes quoted an unnamed cabinet member as saying the only minister safe from title-fixing accusations was Interior Minister Jan Ruml - a former dissident who the communists would never allow to attend college.
The daily Lidove Noviny used the Kalvoda incident to pay tribute to Havel, who became the country's president after the 1989 revolution.
Havel, as a dissident, was forced by the communists to work in manual jobs and never was allowed to study for a formal degree. He now has a truckload of honorary doctorates from universities worldwide.
""He made himself a name, not a title,"" Lidove Noviny wrote.
",13
"The Czech Agriculture Ministry on Friday halted a shipment of U.S. maize thought to contain genetically-manipulated strains, pending further study on its effects.
Until the study is finished no maize from the shipment will be distributed in the Czech Republic, it added.
Frantisek Havir of the ministry's agriculture production section said the Institute for Agricultural Production would conduct the study as soon as possible.
""The state Veterinary Administration is halting the shipment of maize...until it is decided whether these genes can pass into the food chain,"" Havir said.
On Thursday, protestors in Hamburg disrupted loading of the shipment, chaining themselves to the trains bound for the Czech Republic, where laws regulating how genetically manipulated products should be treated do not exist.
The exact location of the 33,000 tonne shipment was unknown, but the Czech chapter of Greenpeace carried on with the protest on Friday, with five demonstrators dressing up as laboratory rabbits.
""Today, the issue is that there is a precedent being made. There is no legislation in the Czech Republic regulating dealing with genetically-modified materials,"" said Vaclav Masku of Greenpeace.
The protests are the latest of several blockades in Europe in recent weeks aimed a halting the import of genetically altered soybeans, and now maize.
It is illegal to market such modified maize in the EU, though Greenpeace says cargoes may have already reached Germany, Italy, the Netherlands, Spain and Portugal.
An EU Commission is due to decide on December 18 whether to allow imports of such modified maize, made in the U.S. under licence by Swiss chemicals company Ciba  CIGZsn.S Geigy AG.
U.S. exporters do not separate the maize, estimated to amount to 0.6 percent of their crop, from conventional maize.
Havir, who met Greenpeace protestors before the news conference, said the Czechs would cooperate with the EU in any way possible, in addition to conducting its own study.
But he added: ""Genetically-modified commodities do not have to be dangerous. Their usage is a great advance in agriculture.""
",13
"The Czech government on Wednesday approved rules for a tender to sell a stake of about 34 percent in the financially troubled jet aircraft maker Aero Vodochody a.s. to a strategic partner.
Prime Minister Vaclav Klaus told a news conference after a cabinet meeting that the tender is open to both domestic and foreign investors, despite hints from some ministers that the sale might be geared toward domestic companies.
The winner is to be announced on April 2.
The Czech chemical and arms conglomerate Chemapol Group a.s. has shown an interest in Aero, as well as U.S. Boeing Co in an alliance with Czech air carrier Ceske Aerolinie a.s., and local trading company CIMEX Holding a.s..
Aero is pinning hopes of recovering from financial problems on its flagship L-159, a light training subsonic fighter currently in its final stages of development, which is to be equipped with Rockwell International Corp. avionics.
The Czech army has signed up to buy 72 L-159s, and the government has already approved a 3.26 billion crown package clearing the heavily indebted company's books.
State-controlled shareholders approved a cut in Aero's basic capital last month to one million crowns from 962 million, and to subsequently underwrite a rights issue to raise equity to between 1.74 and 2.5 billion crowns as a part of the deal.
Klaus said the criteria approved by the cabinet include that Aero will not pay out dividends until production of new L-159 starts, and that the investor has to pay most of the price of the shares from his own assets, not on credit.
He said a commission would be set up to consider bids, including representatives of the privatisation agency National Property Fund (NPF), ministries of interior, industry and trade, foreign affairs, defence, finance, and other officials.
Section Director at the Industry and Trade Ministry, Pavel Stejskal, told Reuters that ""roughly 34 percent stake was available"" for the tender.
He added that the chosen investor would underwrite a new share issue.
Klaus said the state would keep at least a 34 percent stake in the future.
Aero Holding a.s., majority owned by the NPF, holds 44 percent stake in Aero Vodochody, while the state-owned bank Konsolidacni Banka s.p.u. has 32 percent, while the banks IPB a.s. and  Ceskoslovenska Obchodni Banka a.s. have 16 and eight percent respectively.
-- Prague Newsroom, 42-2-2423-0003
",13
"The Czech Statistical Bureau (CSU) said on Thursday it would change its methodology for calculating industrial production, to bring it in line with western standards.
CSU Chairman Edvard Outrata said the change, which updates the old methodology introduced in 1953 under communist planning, would take effect in January 1997.
The new methodology excludes multiple calculation of semi-finished products, resources, and other materials and commodities, which were included in output data at every stage under the old method measuring the gross value of all goods produced, the CSU said.
The new index will measure output changes by units, weight or other measurements, of the total of 1,304 products out of 879 product groups consisting of one or more similar products.
The product groups's output indices will be placed in sectors, using weighting equal to their weight in the respective industrial sector.
The overall index will be calculated from weighted changes in the sectoral indices.
Outrata said the old system of measuring ""gross production"", or ""goods production"" was suited for the management of a planned economy as it allowed to measure the total summ of production and compare it with state plans.
Construction output data will be adjusted to the new methodology at the beginning of 1998, Outrata added.
Preliminary monthly data will be released on the 40th day after the end of the month being examined.
Outrata also said the data would include seasonally adjusted figures and data adjusted if the number of working days in the period differed from previously measured periods.
He added the CSU would gradually, throughout next year, start releasing seasonally adjusted and pro-rated figures for most data on the same day as the raw figures.
 MONTH ('96)	REAL IND. OUTPUT		REAL IND. OUTPUT
		   UNDER CURRENT METHOD (YR/YR)   UNDER NEW METHOD
 Sept (pct)	   +6.9				 +7.8
 August		 +5.9				 +0.9
 July		  +15.7				+24.5
 June		   +1.5				 +2.2
 May		    +6.0				 +1.8
 April		 +12.8				 +6.9
 March		  +4.5				 +2.1
 Feb		   +13.4				+12.2
 Jan		   +12.0				 +7.8
Note. Current methodology examines companies with over 100 employees and includes estimates for smaller firms. The new methodology includes data from some 5,200 firms with 25 or more employees. As of January, it will include data form firms with 20 or more workers.
-- Prague Newsroom, 42-2-2423-0003
",13
"Czech consumer prices edged up less than expected in September, pleasantly surprising analysts though they remain guarded on the prospects of whether the government can hit its full-year target.
The Czech Statistical Bureau (CSU) said on Tuesday that CPI rose 0.3 percent, month-on-month, in September after an equally unexpected 0.2 percent increase in August.
The year-on-year rate now stands 8.9 percent higher while the September sliding 12 month average inflation average was 8.7 percent, after 8.6 percent in August. A Reuters survey of economists had predicted a monthly increase of 0.6 percent.
""Our forecast for the whole year does not change, which is also given by the fact that one month result does not change much in the average inflation rate,"" Martin Kupka of investment bank Patria Finance told Reuters.
""I don't think that the favourable development of the last two months will repeat in the months at the end of the year, which leads to our nine percent (average) inflation forecast for the whole year, not lower,"" he added.
The government had originally set its average inflation rate target for the whole year at eight percent, but recently raised it to 8.3 percent.
Analysts said that 0.2 percent monthly increase in the food, tobacco and beverages sector contributed to the overall result, though they warned it could have been caused by seasonal influences.
The CSU said prices in the heavily-weighted sector were held back by a 19 percent drop in potato prices, as well as a fall in vegetable and fruit prices.
Kupka welcomed the September result, but said that when more foodstuffs from the domestic harvest come to the market toward the end of the year, prices could be pushed up as farmers look to offset rising production costs.
Radek Maly of Prague's Citibank branch said he was pleased by the September figures, as he had expected a monthly increase of 0.5 percent.
""We have to wait for what the foodstuffs prices will do in the next months...But if they keep this pace, in line with the other basket components, we could get positive figures at the end of the year,"" Maly said.
""The year-on-year rate could get under nine percent at the year's end if the trend continues... maybe the moving average as well.""
He added that other components of the basket also showed positive development, following low increases in producer prices in the last several months.
The CSU said prices in the leisure sector dropped by 1.1 percent in the month, thanks mainly to lower prices of holiday trips abroad. Education costs rose 3.9 percent due to an increase in fees at the beginning of the new school year.
Clothing prices rose 0.9 percent, housing climbed 0.3 percent, and transportation prices remained flat in the month.
The CSU in July raised its average inflation forecast for the whole year to 9.0 percent, and the cabinet based its 1997 budget calculations on an average inflation expectation of 8.6 percent.
-- Prague Newsroom, 42-2-2423-0003
",13
"The Czech Republic could have a 50,000- 100,000 tonne sugar surplus from this year's campaign but little will be exported due to high local production costs and a world sugar surplus, sugar experts say.
The Agriculture Ministry said the state would buy some surplus sugar for strategic reserves and would prepare indirect support for exporters but it ruled out direct export subsidies.
Industry sources varied in their assesment of potential foreign markets but agreed producers will try to sell as much as they can at home as world prices were considerably lower.
""It is expected that the surplus will be up to 80,000 to 100,000 tonnes,"" said Eva Divisova of the ministry, adding that total production will be between 520,000 and 540,000 tonnes raw value after last campaign's 460,035 tonnes.
She added net sugar exports should be about 4,000 tonnes. Divisova declined to say how much the state would buy for its reserves, nor what the reserves are, saying this was secret.
""State reserves will be filled, other parts will have to be exported. But it is very difficult to get to foreign markets,"" Divisova added.
She said Slovakia was not importing due to higher output. There are payment problems with Ukraine and Russia, but former Yugoslav countries were potentially interesting, she said.
Director of trading firm Agrointernational Petr Prochazka believed the surplus would total 50,000-80,000 tonnes, most of which would stay in the Czech Republic.
""The surplus will not be so dramatic...There are quite good yields but the harvest is going slowly due to bad weather. A forecast freeze and subsequent warming will limit output.""
""Producers will not want to export...(because of low prices) Those who can store it, will, he told Reuters, adding he believed the state could buy up to 20,000 tonnes for reserves.
Secretary of the Sugar Refiners' Association Vladimir Ulrich also saw a 50,000-80,000-tonne surplus but said it could be partially swallowed by the state and the elasticity of domestic consumption. But he stressed that financial costs of storing sugar could push producers to sell at any price.
Ulrich said local prices have dropped to 12-15 crowns per kilo from 16 earlier in the year. The market is protected by a 68.4 percent tariff, which will drop next year to 65 percent.
""We are pushed from two sides -- the domestic surplus and low price on the world market. If prices drop further, other sugar could get here,"" Ulrich told Reuters.
Breweries could buy up to 10,000 tonnes more than they usually do if prices go below the costs of malt, and citric acid makers could take care of another 10,000 tonnes, Ulrich said.
""There is a hunger for sugar in Bulgaria, Romaina, Ukraine, also in Russia,"" said Ulrich. He added that Poland, which itself expects to have a sizeable surplus, was also a potential market.
""We also cannot expect to supply the London exchange, because our sugar does not meet the conditions,"" he noted.
He said Cezch exporters could also look to traditional markts like Saudi Arabia...""Of course, the price would be poor.""
The ministry and Ulrich said the surplus would lead to a smaller sown area next year after 104,115 hectares this year. ""I believe the optimal area for next few years would be between 90,000 and 94,000 hectares,"" Ulrich said.
",13
"Czech power producer CEZ a.s. on Friday said its nine month net profit hit 8.4 billion crowns ($312.6 million), up from 7.4 billion for the same period last year, according to international accounting standards, after household electricity demand surged.
CEZ's Director of Planning and Analysis section Petr Voboril told a news conference that higher depreciation write-offs due to the opening of new installations cut the company's tax obligations, and boosting its bottom line.
The company's gross profit for the period remained flat at 13.1 billion.
Czech accounting put the firm's profit for the first nine months at 7.04 billion, up from 6.7 billion last year.
CEZ said the result did not change the firm's profit forecast under Czech standards for the whole year, which is 8.1 billion crowns, equal to last year's.
A financial statement showed CEZ wrote off 4.1 billion in the first nine months compared with 3.4 billion in the same period of 1995, and paid 4.7 billion in income tax after 5.7 billion last year.
""Above all, lowering of tax obligations in connection with depriciation policy have influenced this (profit) increase,"" Voboril said.
He said that overall demand for electricity rose by 5.5 percent in the period, and is expected to reach a record high of 55.3 terrawatthours, 6.1 percent up year-on-year, for the whole 1996.
Household consumption drove the increase, rising 10.5 percent, while large clients demanded almost two percent more power over the same period of the last year.
Voboril said that a recent ruling by the Finance Minstry on maximum prices CEZ can charge regional power distributors did not effect results thanks to the sales increase.
The ministry decided that the maximum average price CEZ can charge for supplies this year is 1,035 crowns per megawatthour, up two crowns from the last year but below the firm's 1,040 crown expectation included in business plan.
Voboril said that short-term indebtedness of CEZ increased as well as financial expenditures due to unpaid debts from some of the eight regional distributors, which totalled 3.2 billion crowns as of September 30.
CEZ and six of the country's eight regional grid operators had been locked in a price dispute with CEZ until the ministry ruling last month.
CEZ is also considering an international bond issue next year as it needs financing but has already flooded the domestic market with paper, Voboril said.
Local analysts welcomed the results but said they did not expect them to help CEZ's share price much as the Prague Stock Exchange is plagued by a lack of confidence.
""The CEZ results are slightly better than I expected. CEZ is fundamentally undervalued but genereal market sentiment is not very strong,"" said Petr Dousa of Zivnostenska Banka. ""I don't expect the price to go up to 1,000 in the next few days.""
CEZ shares closed up 14 crowns on the Prague Stock Exchange on Friday to close at 937. -- Prague Newsroom, 42-2-2423-0003
($1=26.87 Czech Crown)
",13
"The Czech government delayed payments and forced some early collections in order to allow it to claim its fourth straight budget surplus in 1996, Finance Minister Ivan Kocarnik said on Tuesday.
Kocarnik told a news conference that it was not yet clear whether the 1996 budget balancing measures and a slowdown in forecast economic growth would require cuts in 1997 spending.
The 1996 budget showed a 419 million crown ($15.4 million) surplus on revenues of 482.797 billion crowns while expenditure totalled 482.378 billion, according to finance ministry figures which are still subject to revision.
The surplus came as a shock to many after the government said in December that it was trying to hold an expected deficit to around one billion crowns.
Kocarnik said the government took 650 million crowns in early repayment on credit to the Deposit Insurance Fund, and froze one billion crowns in infrastructure investment to help the 1996 budget.
""This investment was reallocated to the following years,"" he said, without elaborating.
He added that ministries were also asked to save as much as possible in December, and banks Ceska Sporitelna a.s. and IPB a.s. agreed to delay their receipt of 800 million crowns in state support on housing loans.
Both banks are partially privatised, but the state still holds major stakes in each.
Kocarnik said that final 1996 result might still show a deficit since bills will keep coming until January 15.
He noted that the 1995 budget surplus ended at a revised 7.2 billion crowns from the finance ministry's originally reported 8.6 billion crowns, after various revisions.
Kocarnik repeated his committment to keep this year's budget balanced as well.
""It is early to talk about corrections (in 1997 spending) now, we do not know the final 1996 figures yet, but if they (cuts) will be needed, I will of course propose them,"" he said.
Prime Minister Vaclav Klaus, who calls balanced budgets the ""alpha and omega"" of his government, has praised the figures as a sign of the country's continued fiscal responsibility.
In the autumn, the government made across the board spending cuts to avoid a forecast 9.3 billion crown shortfall, caused by high-than-expected spending, slow repayments on credits to Russia, and lower than expected tax revenue.
The 1996 budget was originally approved as a balanced budget totalling 497.6 billion crowns, but autumn spending cuts knocked the forecast expenditure down to 491 billion crowns.
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 Klaus's budget record entact. -- Prague Newsroom, 42-2-2423-0003 ($1=27.22 Czech Crown)
",13
"Czech President Vaclav Havel on Tuesday called the opposition Social Democrat leader ""extremely irresponsible"" for claiming the secret service was being used for party politics.
Havel's remarks came as campaigning for closely-fought Senate elections due this weekend turned increasingly bitter, with the secret service in the middle.
Earlier Prime Minister Vaclav Klaus accused Social Democrat leader Milos Zeman of lying when he made a thinly-veiled allegation that the BIS intelligence agency had tried to extract compromising material from his elderly mother.
The slanging match between the two leading antagonists of Czech politics began on Monday when BIS director Stanislav Devaty, a Klaus protege, was forced to quit over allegations of spying on a deputy premier and a subsequent coverup.
""Yesterday's comments by Zeman on a police state, or on the BIS as a political police in the service of one party, are a visible result of losing his nerve before the elections,"" Klaus told a news conference on Tuesday.
""I can imagine such words being said by a radical anarchist but I can't imagine them from one of the three highest constitutional officials of this country.""
On Monday Zeman, who is lower house speaker, accused Klaus of playing dirty before the Senate elections, where the Social Democrats have been running level with Klaus's ruling Civic Democratic Party (ODS) in most opinion polls.
""During the last three years an operational group has existed within the BIS which has been responsible for shadowing several Social Democrat politicians,"" said Zeman.
Havel, who is politically neutral, said after talks with Interior Minister Jan Ruml:  ""I can only say that I consider (Zeman's) statements to be extremely irresponsible.""
""As chairman of the parliament he should know that it is necessary to proceed in the proper ways,"" Havel said at his private residence in the Hradecek region of east Bohemia.
He said Zeman should have first brought the charges to a parliamentary commission overseeing the intelligence services before making them public.
But the president added that he would meet Zeman, who promised to produce evidence backing the claims next week.
Havel, imprisoned on several occasions as a political dissident under communism, said he ""could not be the head of a state which would create a system for spying on its politicians"".
He said rogue individuals or groups within the BIS might attempt such actions, but without the approval of superiors.
Spymaster Devaty quit after Deputy Prime Minister Josef Lux, who leads the Christian Democrats, junior partners in Klaus's coalition, accused the BIS of spying on him three years ago and then covering up the operation.
Allegations of politically-inspired spying have surfaced in recent years in a country where memories of the pervasive state security apparatus during four decades of communism still linger.
Klaus said the agent had been spying not on Lux, but on his former adviser, director of a bank which collapsed amid fraud allegations in 1993. He has not explained why the security service was investigating an apparent fraud case.
",13
"The Czech government on Wednesday approved rules for a tender to sell a stake of about 34 percent in the financially troubled jet aircraft maker Aero Vodochody a.s. to a strategic partner.
Prime Minister Vaclav Klaus told a news conference after a cabinet meeting, that the tender is open to both domestic and foreign investors, despite hints from some ministers that the sale might be geared toward domestic companies.
The winner is to be announced on April 2.
The Czech chemical and arms conglomerate Chemapol Group a.s. has shown an interest in Aero, as well as U.S. Boeing Co in an alliance with Czech air carrier Ceske Aerolinie a.s., and local trading company CIMEX Holding a.s..
Aero is pinning hopes of recovering from financil problems on its flagship L-159, a light training subsonic fighter currently in its final stages of development, which is to be equipped with Rockwell International Corp. avionics.
The Czech army has signed up to buy 72 L-159s, and the government has already approved a 3.26 billion crown package clearing the heavily indebted company's books.
State-controlled shareholders approved a cut in Aero's basic capital last month to one milion crowns from 962 million, and to subsequently underwrite a rights issue to raise equity to between 1.74 and 2.5 billion crowns as a part of the deal.
Klaus said the criteria approved by the cabinet include that Aero will not pay out dividends until production of new L-159 starts, and that the investor has to pay most of the price of the shares from his own assets, not on credit.
He said a commission would be set up to consider bids, including representatives of the privatisation agency National Property Fund (NPF), ministries of interior, industry and trade, foreign affairs, defence, finance, and other officials.
Section Director at the Industry and Trade Ministry, Pavel Stejskal, told Reuters that ""roughly 34 percent stake was available"" for the tender.
He added that the chosen investor would underwrite a new share issue.
Klaus said the state would keep at least a 34 percent stake in the future.
Aero Holding a.s., majority owned by the NPF, holds 44 percent stake in Aero Vodochody, while the state-owned bank Konsolidacni Banka s.p.u. has 32 percent, while the banks IPB a.s. and Ceskoslovenska Obchodni Banka a.s. have 16 and eight percent respectively.
-- Prague Newsroom, 42-2-2423-0003
",13
"The Czech ruling centre-right coalition agreed on Monday to name Vlasta Parkanova as justice minister, replacing Jan Kalvoda who resigned last month after he admitted to using an unattained ""Doctor of Law"" title.
But coalition leaders agreed to wait on the choice of a replacement for Kalvoda, who is chairman of a small right-wing junior coalition party, the Civic Democratic Alliance (ODA), in the more politically-sensitive post of deputy prime minister.
""We received an official proposal from the ODA for a new justice minister... as Doctor Parkanova. We approved this proposal by the ODA on the coalition level,"" Prime Minister Vaclav Klaus, the head of the senior Civic Democratic Party (ODS), told a news conference.
After a meeting with his coalition partners Klaus said that Parkanova could be officially appointed by President Vaclav Havel as soon as Tuesday.
Parkanova, 45, a certified doctor of law, currently serves as a chief of staff at the Interior Ministry.
She would become the first woman to have a seat in the Prague government since the split of Czechoslovakia in 1993.
ODA vice chairman Karel Ledvinka said the coalition agreed to a request by his party to postpone nomination of the new deputy prime minister, who would lead the party in the tenuous minority cabinet, until after the party's congress in March.
Kalvoda's position as chairman of the pro-business ODA is also to be decided at the March party congress.
The ODA has four seats in the 16-member cabinet under a coalition agreement with the ODS and the centrist Christian Democrats (KDU-CSL), plus one of four deputy premierships.
Kalvoda and the KDU-CSL leader Josef Lux have fought heated policy battles with Klaus's party, which controls half of the cabinet, but the coalition remains the longest-running conservative government in post-Communist Europe.
Tensions have been heightened since June when the coalition lost its majority in the lower house of parliament.
Kalvoda, a parliamentary deputy and a cabinet member since the coalition was formed in 1992, was the fifth member of parliament who admitted using the title of Juris Doctor without actually having qualified for it.
Out of the other four fake doctors, only one has resigned her parliamentary seat.
",13
"Czech President Vaclav Havel, nursing a heavy cold, voted in Senate elections on Friday and called on fellow citizens to turn out despite widespread apathy or even hostility towards the newly created upper house.
Voting in a Prague suburb, Havel showed his identity card to election officials before patiently queueing up with pensioners to cast his ballot in a primary school.
The vote is the first electoral test for right-wing Prime Minister Vaclav Klaus since he lost his lower house majority in June.
Opinion polls suggest many Czechs will not bother to turn out for the elections, which have a second round runoff on November 22 and 23, because they either do not understand what the Senate will do or feel it is a waste of time.
The Senate was written into the new constitution of the Czech Republic which came into force in 1993 after the breakup of Czechoslovakia. But only now is the Senate to be elected after much political footdragging.
Havel, who spent almost five years in communist jails in the fight to restore Czech democracy, called on citizens to vote even it means turning out two weekends in a row.
""At first glance it may seem like bothering people that they have to vote twice in a row,"" he said in a voice made hoarse by his illness.
But he pointed out that the two-round system, in which the top two candidates from the first round meet in a runoff if neither wins more than half the vote, was common in Europe.
""It has to be like that and I believe that anyone who is not indifferent to the democratic development of our country will turn out for the second round as well,"" he said.
Both rounds span a Friday and Saturday, with voting ending at 2 p.m. (1300 GMT).
Havel has appealed for a high turnout before previous elections. Until now Czechs, who regained their pre-war democracy after the 1989 fall of communism, have heeded him.
Turnout was 76.4 percent in voting for the lower house, the Chamber of Deputies, last June. But it is expected to be much lower for the Senate, which has few powers compared with the Chamber of Deputies where all government and opposition leaders sit.
A survey by the IVVM agency showed that only 57 percent planned to vote in the first round and 52 in the runoffs. Another IVVM poll showed 53 percent of those questioned doubted the need for the Senate at all.
Politicians have also been lukewarm. However, the results may give clues on the political way ahead, depending on how well Civic Democratic Party (ODS) headed by Klaus and its two junior coalition partners do.
If the coalition performs well, Klaus may be tempted to provoke early lower house elections in an attempt to regain the majority lost in a surge in support for the opposition Social Democrats.
But if the Social Democrats win the Senate race, Klaus could be forced to resign.
Most opinion polls suggest a tight race. But the last survey suggested the ODS was pulling ahead after an outbreak of squabbling in Social Democrat ranks.
The Social Democrats may also have suffered from a row this week over allegations by their chairman Milos Zeman that the state intelligence agency BIS had spied on him.
Asked about the row, Havel told reporters: ""I don't think that the affair, as you call it, will influence in any significant way the outcome of the elections.""
",13
"The Czech Republic's sole supplier of natural gas, Russia's Gazprom, has agreed to start talks on a long-term supply deal, Industry and Trade minister Vladimir Dlouhy said on Tuesday.
He said the talks would focused on a contract for supplies of 8.9 billion cubic metres (bcm) per year.
""Today's offer respects this conclusion (of the Czech government to diversify supplies),"" Dlouhy told a news conference after meeting Gazprom chairman Rem Vyakhirev.
""That means supplies of only 8.9 bcm, and an agreement to start negotiations on a long-term contract. I consider this to be a good result,"" he said.
The Czech Republic currently imports all of its roughly nine bcm of natural gas a year from Gazprom under a three-year contract ending in 1998, extendable for another three years.
Dlouhy said Gazprom had accepted that the Czechs want to partially diversify their gas supplies.
""Until now, they have been trying to save the 100 percent coverage. Today they came with an offer -- not all supplies from Russia,"" he added.
The consumption is expected to rise to about 12 to 13 bcm per year in several years. The country wants to cover the increase from alternative sources.
Dlouhy's deputy, Miroslav Tvrznik, told reporters that the aim was to bring the contract with Gazprom to ""a European standard of 15 to 25 years"".
Dlouhy said talks would start with several potential partners to choose how to diversify the supplies. These talks would be included in a report to the full cabinet which should make a ""more concrete"" decision next January, Dlouhy said.
""We would want to have the first supplies from diversified sources already in the year 1997,"" he said.
He added that some of the options would include buying Russian gas through an intermediary, possibly through Dutch company Nederlandse Gasunie NV, and Germany's Wintershall, a subsidiary of BASF.
Dlouhy said these partners would provide a guarantee of supplying from their own sources in case of emergency.
He also said an earlier announced option of buying some gas from Norway was still under consideration, and said that Germany's  BEB Erdgas und Erdoil, or U.S.-based Mobil could serve as ""supplementary sources"".
-- Prague Newsroom, 42-2-2423-0003
",13
"Millennium Chemicals - the Hanson Plc company which is due to be floated off in New York on October 1 - said on Tuesday it planned a share buyback by the year 2000 after completing debt cutting and investment plans.
Millennium chairman and chief executive William Landuyt told Reuters in an interview on Tuesday that he also planned a low-yielding dividend policy as he saw the company as a growth stock.  
Millennium net debt levels are seen around $2.0 billion. Landuyt said the chemcials company would initiate a buyback by 2000 after reducing debt, implementing its capital expenditure plans and using proceeds from its steady cash generation.
Investment plans include continued expansion in the speciality products and regions including Asia-Pacific and Western Australia.
On dividend policy, Landuyt said the payout would not be high bearing in mind the need for investment and cutting debt. ""Our payout will be around 60 cents a year or 15 cents a quarter.""  
""We are not a dividend yield stock. We are a growth company,"" he concluded.
On trading, Landuyt said he expected SCM to be able to make its October price increases stick after heavy destocking by customers.
Quantum's recently reported improvement in pricing and demand also continues, he said.
He added that the recent plant closure at SCM would have a neutral trading profit impact because the plants were not profitable and had been replaced by new more efficient plant capacity.  
The closure had already resulted in $60 million of charges to write-off fixed assets, he said. But he revealed that a further $15 million charge still has to be levied.
--London newsroom +44 171 5427717
",8
"Wickes Plc, the British Do-It-Yourself retailer hit by accounting irregularities that led to an overstating of profits, said on Wednesday its ex-chairman had accepted responsibility and the cost would be a 51 million pounds write-off.
The retailer said the problems had resulted in profits being overstated by 51 million pounds ($80.8 million) over recent years and that amount would be written off shareholder funds.
Restatement of the accounts will result in a reduction of 26 million pounds in operating profit for 1995, 14 million pounds for 1994 and 11 million pounds for earlier years.
Profits for 1995 will also be hit by a two million pounds charge against shareholder funds relating to European businesses and a 10 million pounds charge stemming from property interests.
In a letter to shareholders, new chairman Michael von Brentano said the group had recorded an operating loss for the nine months so far this year but pledged that its objective was a return to profits in 1997.
""A new business plan...will be finalised once the negotiations with suppliers are substantially complete. This provides for a substantial reduction in costs, improved marketing initiatives and efficient administrative procedures,"" he said.
Wickes also plans a refinancing involving a rights issue of new shares to restore its gearing to a ""more suitable level"". Group net debt averaged 65 million in the second half of the year.
Wickes said it would not seek a relisting of its shares, which were suspended in June, until the new rights shares were issued. A prospectus in connection with the issue was expected to be issued in December, with the new shares being issued following shareholder approval in early 1997.
""I appreciate that much of what I have written will be very disappointing to you,"" he said. ""But now my principal concern is to secure the company's future, define the appropriate cost base and reassert the group's market strengths.""
Von Brentano said his predecessor, Henry Sweetbaum, who resigned in June, had now accepted ""ultimate responsibility"" for overstating profits.
Sweetbaum will repay 1.2 million pounds in bonus payments, including tax, and former finance director Trefor Llewellyn has agreed to repay his 485,000 pounds bonus for 1995.
The group is seeking a new chief executive and said it also intended to strengthen non-executive representation on its board.
Disciplinary action has been taken against two Wickes directors with responsibility for the buying department, both of whom have resigned. Further action will be taken against other middle ranking executives and more junior employees.
The news ends months of waiting for shareholders which saw the shares in limbo at 69 pence after suspension, compared with a year high of 142.
The chairman said it was now important to look to the future and offered some good news, saying that sales in the Wickes stores had been up 8.9 percent on a comparable-store basis in the third quarter, recovering from a 9.7 percent slump seen in the first three months of the year. ($1=.6309 Pound)
",8
"Debt-laden Eurotunnel faced fresh financial pressure on Wednesday in the wake of the fire which swept through a main tunnel leaving a trail of damage, no running services and shaken consumer confidence.
Just one month after coming back from the brink of bankruptcy with a restructuring of nine billion pounds ($15 billion) of debt, the company faced uncertainy once again as one of its two rail tunnels remained shut pending a safety review.
Analysts said the modest fall in Eurotunnel shares since Monday's fire was about right, however, and few believed there would be long-term damage to customer confidence.
Eurotunnel has warned of reduced services for weeks ahead as repair work goes ahead and eats into revenues.
And one source close to Eurotunnel told Reuters that the cost of repairs may be heavier than first thought. ""The cost will be millions (of pounds) and could get into double figures, it you consider the damage to the 15 wagons and a locomotive, plus severe tunnel damage.""
He added that track sections may also need replacing after buckling in the intense heat.
While the tunnel remains shut, Eurotunnel is losing revenues at the rate of one million pounds a day. It also faces the cost of compensating passengers and tranferring them by air or ferry.
A Eurotunnel spokesman said all these costs should be covered by insurance, however.
""It will have very little impact,"" said one analyst. ""Transport disasters are always newsworthy but the bad publicity will soon fade away. Eurotunnel will be financially damaged, but you have to look at it in relation to the nine billion of debt.""
The ferries have been scooping up extra business from big freight customers like TNT, which said it would be using the ferries more as a result of the tunnel fire.
Andrew Darke, analyst at Williams de Broe, said ""There's clearly going to be some emotional reaction, but I expect it to be short-lived. After all passenger numbers rose after the Herald of Free Enterprise (ferry) disaster nine years ago.
""Disasters don't stop people travelling. People still go shopping in London despite IRA bombs,"" he said.
Eurotunnel had around 45 percent of the cross-Channel ferry market before the fire -- a share won partly by waging a cut-throat price-war with the ferries, which have since proposed linking up to battle against their tunnel rival.
Swedish ferry giant Stena Line and P&O agreed to merge in October and are awaiting clearance from competition bodies.
Darke said P&O's chances of clearance had been boosted by the tunnel disaster. The verdict is due later this month.
""The government wants a viable alternative to the tunnel for emergencies like this. That means the ferry business has to be economically viable. So the fire has probably improved the chances of the merger being approved.""
Last month Eurotunnel agreed a debt deal with its banks, giving them 45.5 percent of the company in return for wiping out one billion pounds of debt. The deal fixed and capped interest payments and the company said it would be unable to pay a dividend for 10 years as it uses cash flow to service its debt.
Some analysts, such as UBS, remain sceptical, pointing out that the tunnel's present cash flow of 150-200 million pounds per annum over its remaining 52-year concession to operate the tunnel comes in at six billion pounds, still well short of the total remaining debt.
Eurotunnel shares on Tuesday were at 86-1/2pence, down 1-1/2, compared to the 544 pence high touched on December 31 1993. In Paris, the shares were down 20 centimes at 7.5 francs.
($1=.5950 Pound)
",8
"British entrepreneur Richard Branson's Virgin Group Friday clinched a British rail franchise and said it planned to spend an extra 250 million pounds ($420 million) on new trains and increased services.
He won control of the CrossCountry service, which covers more than 130 stations and is based in the central British city of Birmingham.
The company, with 842 employees and passenger revenues worth 108 million pounds ($181.3 million) in the year to March, is part of the national rail network that is in the process of being privatised.
""Virgin believes that it can be built into one of the prime rail franchises serving several markets... Exciting times are ahead,"" Branson told a London news briefing.
The Virgin empire, which spans everything from its airline, music and financial services to its own-label cola, already has a major rail business.
It is a partner in the London and Continental Railways (LCR) consortium which owns the Eurostar passenger service that links London with Paris and Brussels through the Channel Tunnel.
Will Whitehorn, director of Virgin Rail, told Reuters, ""Our key plan is to buy a new fleet, spending 250 million pounds ($419.7 million) on new rolling stock, agreed as part of the bid.""
The order will be placed next year, with the first deliveries due in 2002. Under financial terms, the government subsidy in the first year of the 15-year franchise will be 112.9 million pounds ($189.6 million).
That subsidy has been cut from the 1996/97 level of 127 million pounds ($213.2 million) and will average 36.4 million ($61.1 million) over the life of the franchise term.
Whitehorn said the subsidy will be eroded over the 15-year term and in the final year Virgin Rail will make a 10 million pound ($16.9 million) payment to the government.
Sir George Young, transport secretary said, ""This deal is final proof of the renaissance which is sweeping through Britain's railway industry... Virgin will take a loss-making nationalised company and transform it within 15 years into a profitable enterprise.""
Virgin will refurbish the company's HST 125 diesel trains and has pledged to increase train miles by 14 percent between May 1998 and 2002.
The services will be rebranded under the Virgin name and cover destinations across England, Scotland and Wales.
This is the first rail franchise to be awarded to Virgin Rail which also bid unsuccessfully for the Gatwick Express route.
But Virgin is on the shortlist for the West Coast rail franchise and has a bid in for the Thameslink service in London.
Of 25 rail franchises covering passenger services across Britain, the government has sold 14 to the private sector as part of its privatisation of the network.
",8
"Britain's second biggest bus company Cowie Group said on Thursday it had been approached by a defence vehicle manufacturer about forming a leasing joint venture targeting clients including the Ministry of Defence.
Cowie told Reuters that the tentative approach was made this year and added it was open to considering new options for business.
But the bus and vehicle leasing giant played down a report by The Times newspaper which said the firm was pitching specifically to buy and lease battle tanks, saying such a move was ""highly speculative at this stage.""
Cowie conceded, however, that it had received an approach to form a leasing venture for military transportation equipment.
Robert Blower, a Cowie spokesman, told Reuters: ""A UK defence equipment supplier has approached us. Their idea was for Cowie to come in as player in the consortium, with our leasing expertise. We will assess each new idea on its merit.""
He said any move into military vehicles would have to be cleared with shareholders first, ""...for ethical as well as commercial reasons,"" he said.
On the subject of leasing out frontline tanks, Cowie was more cautious, admitting that there had been ""No talks with the MOD. But it has said that under PFI (private finance initiative) there aren't any no-go areas,"" said Blower.
The PFI scheme, applied across all government departments, aims to bring private cash into public spending projects including the option of the government leasing equipment. But an MOD spokesman was highly sceptical. Asked whether the MOD would put out a PFI project for tank leasing, he said
""Emphatically not. In broad terms the PFI rules nothing out and nothing in. Cowie has won a contract (with us) for forklift trucks and that is not. There is nothing else on the cards, let alone tanks.""
Cowie announced on Wednesday it had won a material handling equipment leasing contract with the MOD.
Tank and transportation equipment manufacturers like Vickers Plc were sceptical about reports of expanding leasing to military vehicles.
A Vickers spokeswoman told Reuters it did not approach Cowie and described the idea of leasing battle tanks as ""fairly off the wall. Leasing trucks is one things, but a battle tank is quite another,"" she said.
But GKN was more circumspect. Asked whether it had approached anyone about the idea of forming a leasing venture to supply the MOD or other markets, a spokeswoman said ""There are no discussions at this stage.""
U.S. giants have already caught onto the concept, with world leaders like Lockheed Martin and McDonald Douglas exploring the possibility of leasing military aircraft to Eastern European countries.
At 1159 GMT Cowie shares were down nearly two pence at 372-3/4p in a generally weaker British stock market.
",8
"Imperial Tobacco Group Plc, fresh from its demerger from Hanson Plc in October, said on Monday it was capable of cutting back debt levels and investing in further export growth as a dual policy.
Gareth Davis, chief executive, told Reuters in an interview that the two could be achieved ""in parallel"" because of the group's strong cash generation. In particular, Davis revealed Imperial was in talks with a Japanese company about entering the market for the first time. He also said the group would keep open the option of a share buyback in the future.  
Imperial inherited around 1.1 billion stg of debt as its legacy from the Hanson family break-up. But Davis said this did not hamper the group's plans to seek distribution deals or joint ventures in the overseas cigarette markets and possibly examine small acquisition deals in the fragmented cigar market.
He added that if an important larger-sized acquisition opportunity came up he would be prepared to raise debt levels, but for the moment ""the priority is to get it down. Our situation, our ability to generate cash means we can do things in parallel - pay down debt and pay for acquisitions...Bolt-on acquisitions are more likely in the cigar area,"" he added.  
On the Japanese market in particular, Davis told Reuters ""We are looking to do something in Japan. We are actively considering this. In one way or another we will establish a presence in that market,"" admitting that talks were underway with one party.
But he sought to reassure shareholders that Imperial would not squander its sound financial inheritance in its bid to catch up in the overseas field. ""In our international expansion plans I would not dream of being a balance sheet wrecker,"" he said. If Imperial failed to find the right deals, it would be prepared to conside other options to return value, he said.  
If a possible acquisition fails to offer sufficient rates of return ""we would say: what would a share buyback do to enhance shareholder value, rather than a potential acquisition?""
""A buyback is something we'd never rule out. Given our cash flow characteristics people tend to say ""What are you going to do with all that cash.'""
Imperial reports its first set of results since the Hanson demerger on December 5 when it will give a trading update of the first few months since its split.
Davis said he expected the UK market to continue to decline at around 2 percent next year.  
But the international business, accounting for 17 percent of profits in the first eight months of the year, s expected to show continued rapid growth.
""I would be very disappointed if it wasn't 25 percent by 2,000."" The last two years have seen overseas sales double, but Davis drew the line at hitting his target by 1997.
""That would be overstating it (our confidence). But the signs are the business is showing strong growth.""
Despite his caution, Davis has said that the company has already clinched a deal with unions to add a third shift from May 1997 which has the potential to raise capacity at its Nottingham factory  by one third.
Imperial says if a number of overseas deals start feeding through it will be ready to meet the surge in demand.
The third shift could, in theory, raise Imperial's total cigarette production to 53 billion from the existing 37 billion mark.
--London newsroom +44 171 5427717
",8
"Wickes Plc, the British Do-It-Yourself retailer rocked by accounting irregularities this summer, said on Wednesday the first cost was a 51 million pounds ($80.84 million) write-off for which its ex-chairman accepted responsibility.
The retailer said the problems had resulted in profits being overstated by 51 million pounds ($80.8 million) over recent years and that amount will be wiped off shareholder funds.
The restatement of the accounts will result in a reduction of 26 million pounds in operating profit for 1995, 14 million pounds for 1994 and 11 million pounds for earlier years.
Profits for 1995 will also be hit by a two million pounds charge against shareholder funds relating to European businesses and a 10 million pounds charge stemming from property interests.
But the cost does not end there. Finance director Bill Hoskins, brought in after the purge which saw former chairman and chief executive Henry Sweetbaum resign, told Reuters he expected another one-off charge against 1996 results.
This relates to restructuring and the costs of the investigation into the accounting problems uncovered in June. Hoskins told Reuters: ""Taking the two together, the cost won't be tens of millions, but around 10 million.""
The company will now undergo a refinancing rights issue. Hoskin said 30 million pounds would be ""a good starting point"" and be used to cut gearing (the debt-to-equity ratio) which remains ""pretty horrid.""
The new chairman Michael von Brentano said in a letter to shareholders his predecessor Sweetbaum accepted ""ultimate responsibility"" and would repay his 1.2 million pounds in bonus payments including tax.
Former finance director Trefor Llewellyn has agreed to repay his 485,000 pounds bonus for 1995.
The group is seeking a new chief executive and said it also intends to strengthen non-executive representation on its board.
Disciplinary action has been taken against two Wickes directors with responsibility for the buying department, both of whom have resigned. Further action against other middle ranking executives and more junior employees will be taken in due course, the company said.
Wickes will replace auditors Arthur Andersen once the work is completed on revisions, but it reserved the right to take action against it.
""I appreciate that much of what I have written will be very disappointing to you,"" von Brentano's letter said. ""But now my principal concern is to secure the company's future, define the appropriate cost base and reassert the group's market strengths,"" he said.
Hoskins also spoke of a new start, telling Reuters ""We want to make a clear distinction between the past and the future. It is essential that we draw a line in the sand.""
But the path to profitability still looks rocky. Nick Bubb, analyst at MeesPierson said there were two disappointments: ""The company is losing money this year, admittedly partly because of large exceptional items, and the fact that the debt is as high as it is at 65 million pounds - that is a big increase and I can see why a rights issue is needed.""
But he added that 30 million pounds was seen as the bare minimum. This would cut gearing to just 70 percent. ""It may need to raise as much as 40 or 50 million and that won't be easy,"" said Bubb.
Wickes shares remain suspended at 69 pence, frozen at that level since the problems were uncovered in June. They will not resume trading until early 1997. ($1=.6309 Pound)
",8
"Imperial Tobacco Plc, fresh from its split from Hanson Plc, has admitted that its former parent group did receive a takeover approach prior to the demerger but rejected it because the price was too low.
Imperial's chief executive Gareth Davis told Reuters in an interview this week: ""A phone call was made to Grosvenor Place (Hanson's headquarters) but they were talking silly prices."" He confirmed that the interested party was a tobacco firm, but refused to comment on recent speculation that B.A.T. Industries Plc was a potential buyer.
",8
"Britain's top fraud watchdog, the Serious Fraud Office (SFO) on Wednesday launched an investigation into former bosses of Wickes Plc, the do-it-yourself retailer rocked by accounting irregularities worth tens of millions of pounds.
""The SFO has launched an investigation into the former senior management of Wickes,"" an SFO spokesman told Reuters.
It said the probe was being carried out jointly with the British police fraud squad in London.
Investigators are now expected to interview the ex-chairman and chief executive Henry Sweetbaum who resigned from the group in the summer, former finance director Trefor Llewellyn who is now at Caradon Plc, and the former buying and commercial directors.
""No-one has been arrested or charged and we have not executed any search warrants,"" the SFO spokesman said, adding that it had taken on the case on November 20 but had not announced its involvement ""for operational reasons.""
Wickes uncovered the accounting scam in June. The discrepancies date back five years and led to a 51 million stg overstatement of profits which will be wiped off shareholder funds.
The news led to a boardroom shake-up last summer and a three-and-a-half month internal inquiry by accountants Price Waterhouse and law firm Linklaters & Paine.
""These investigations have led to the SFO having the reasonable grounds it requires to be able to launch a criminal investigation,"" said the SFO spokesman.
Meanwhile, Wickes is trying to salvage its business which was shaken by the summer's events.
Its shares remain frozen at 69 pence per share and it is planning to restate profits next month and launch details of a refinancing rights issue of between 30 and 40 million pounds.
A Wickes spokesman told Reuters those plans were ""well advanced."" It is also close to deciding on a new chief executive, with two to three candidates shortlisted including an internal candidate.
The former chief Sweetbaum said last month that he accepted ""ultimate responsibility"" for what happened under his regime.
He has agreed to repay his 1.2 million pounds in bonuses including tax. Former finance chief Llewellyn has also agreed to repay his bonus of 485,000 pounds for 1995.
Moves to refinance the group will help cut gearing to around 70 percent said analysts, who believe it will be far from easy to raise the rights issue cash needed to put the company back on the road to recovery.
Shares are not expected to resume trading until early 1997.
",8
"UK leisure group Conrad Plc is seen sealing its proposed takeover of Sheffield United Football Club in three to four weeks, when details will be sent to shareholders after due diligence is complete, a senior source close to the company told Reuters.
Conrad confirmed earlier on Tuesday it was in talks with the UK soccer club about the acquisition which is expected to take the form of a reversed takeover with Sheffield floating on the London Stock Exchange. The source said: ""Conrad will pay a figure approaching 10 million, but it'll be under 10 million.""
",8
"Wolseley Plc, the British building materials giant, is seen reporting slightly lower year pretax profits next Tuesday as expected, but reporting a rise in its dividend payout.
Wolseley was one of many in the sector to issue a profit warning earlier this year when it said that year profits for the period to July 31 would not match 1995.  
But the group is seen turning in a more solid performance for the year than rivals including Redland Plc and RMC Group Plc who have been hit by their heavy exposure to the German market.
Analysts forecasts for Wolseley's year profits ranged from 230 million stg to 240 million, with an average prediction of 234.9 million against 245.4 million last year.
The dividend is expected to come out between 10.3 pence and 10.5 pence, with analysts predicting an average payout of 10.3 pence against 9.8 pence last year.  
A key reason for its relatively better performance compared to sector rivals is that that 50 percent of Wolseley's revenues stemmed from the U.S. market, an analyst said.
""The U.S. may have its regional differences but nationally the economy is doing well,"" he said.
He added, however, that the UK market remained difficult and France continued to be ""dreadful.""
France is expected to continue to be difficult, while in the UK a recent uptick in the housing market may have fed through to materials firms -- but this remains to be seen.  
With a recent changeover of top management, market watchers will also be looking for evidence of any tinkering with the group strategy.
Wolseley's existing strategy is seen as sound and analysts may be perturbed if there is evidence of it being radically altered, said one.
No exceptionals are anticipated in the results.
--Edna Fernandes, London newsroom +44 171 5427717
",8
"The UK construction industry expects to get the cold shoulder from the Chancellor of the Exchequer (Finance Minister)again this year, with industry leaders predicting continued cutbacks in infrastructure spending in next Tuesday's budget.
Building industry leaders say they expect no more than a few crumbs from Chancellor Kenneth Clarke next week and are forecasting even more pressure on roads spending, with some rumours that Clarke will take a further slice off the road budget this year.
""If ever there was going to be a budget with severe cuts, it's this one, which needs to make room for pre-election tax cuts,"" said Graham Watts, chief executive of industry lobby group the Construction Industry Council.
As far as the housing market goes, builders are unanimous in their call for no sharp shocks to disturb the market's equilibrium. That means steady inflation and interest rates, plus no more reduction in mortgage interest tax relief, groups like the Building Employers Federation say.
On the spending side, The British Road Federation, embracing builders, motor groups and oil companies, said the road budget had been cut by 25 percent in the last two years.
""We expect to see a further contraction by 200 million pounds ($337 million),"" said Federation spokesman Mark Glover ""It's already been cut for the last four years.""
Spending on new roads and maintenance by government offshoot the Highways Agency was 2.04 billion pounds in 1994/95, falling to 1.75 billion pounds in 1995/96 and is expected to be down to 1.5 billion this financial year.
The forecast for the year 1997/98 is seen dipping again.
These cutbacks, plus reduced state investment in rail since privatisation, and the fact that hospitals are now under constrained regional budgets, have resulted in the building industry remaining in recession years after the rest of the economy moved into recovery, lobbyists claim.
Few industry leaders hope for a spending increase, but they would like to see a spending freeze at best.
The other issue on the construction industry's wish-list is for the Chancellor to break the log-jam holding up the private finance initiative (PFI) -- which aims to get private capital flowing into public sector projects.
The PFI has replaced a lot of fresh government spending, but the frequent hold-ups to project awards due to red-tape have
",8
"UK building bosses and health insiders have warned of dying confidence in privately financed health projects, unless there is rapid acceleration in the number of contracts awarded in the next few months.
This industry crisis of confidence comes ahead of Monday's annual Private Finance Panel conference on Monday, which will be addressed by the Chancellor of the Exchequer Kenneth Clarke and health secretary Stephen Dorrell.  
This week the government provided a glimmer of hope, however, giving the go-ahead to a 280 million pounds east London hospital project won by a venture led by AMEC Plc.
But of all the problems in the Conservative government's flagship private finance initiative (PFI) -- aimed at attracting private sector cash for public infrastructure projects -- health has proved to be the biggest headache of all.
The Treasury set Health Secretary Stephen Dorrell a target of 500 million pounds of projects by April.  
The likelihood of that target being reached looked slim until this week, when the government sought to temporarily silence its critics with its announcement of the first major private finance health project -- the east London hospital.
Before that, building firms and National Health Service (NHS) leaders had been apportioning blame for delays on each other and the government as it tried to referee both sides.
British junior health minister John Horam defended his department's record in a recent interview with Reuters.  
""We are confident of getting 500 million pounds by April. If we are able to bring in a 170 million project and a 30 million one in the next few months then we are almost there,"" he said.
But some construction industry leaders remain downbeat, privately hinting the biggest players in the business will shun future projects for fear of tying up further millions in a sector which is taking too long to deliver the goods.
""I've heard that around 20 companies are not going to go forward with new bids,"" one industry leader said.
Also, some leading National Health Service (NHS) figures have questioned the value of the policy itself.  
Gordon Best, a leading adviser to chief executives of NHS Trusts told Reuters the policy was ""a dead duck"" in health and said the government would have to push one or two schemes through just to ""save face."" He said PFI had resulted in projects which the NHS could not afford and failed its needs.
Another construction industry leader summed up the crisis of confidence among builders: ""Companies are frustrated with the whole negotiating approach -- I wouldn't say it should be abandoned but the whole process needs radical surgery.""
Graham Watts, chief executive of the Construction Industry Council was also pessimistic.  
""The big companies have basically had enough. They've spent a lot of money so far and there is resentment that they're being used to pioneer a system which is not working at a time when an industry is still locked in recession.""
PFI has been very slow getting off the ground, both due to red tape and having the Treasury as an ""out-of-the-room negotiator' for many of the projects, industry sources said.
Business has been feeding through in other sectors like roads and prisons, but health has proved slow to take off.  
One positive factor is that PFI does have the backing of the opposition Labour Party, so industry figures are talking to Labour about their problems. A general election is due by May 1997, with Labour currently leading in opinion polls.
In the meantime, the health sector problems remain. Another issue dogging confidence in the building sector is the fear that building firms could be saddled with liabilities if an NHS Trust defaults on repayments over the 30-year term.
But minister Horam told Reuters the government had changed the law to underwrite that risk. ""This is one reason why these projects have taken so long. We got Royal Assent on this in June and it makes that commitment inescapable.""
He dimissed claims of disillusion: ""The big boys are competing in PFI. No single project has been left without a bidder.""
-- London Newsroom +44 171 542 7717
",8
"Britain's fraud watchdog, the Serious Fraud Office (SFO) on Wednesday launched an investigation into former bosses of Wickes Plc, the do-it-yourself retailer rocked by accounting irregularities worth tens of millions of pounds.
""The SFO has launched an investigation into the former senior management of Wickes,"" an SFO spokesman told Reuters.
It said the probe was being carried out jointly with the British police fraud squad in London.
Investigators are now expected to interview the ex-chairman and chief executive Henry Sweetbaum who resigned from the group in the summer, former finance director Trefor Llewellyn who is now at Caradon Plc, and the former buying and commercial directors.
""No-one has been arrested or charged and we have not executed any search warrants,"" the SFO spokesman said, adding that it had taken on the case on November 20 but had not announced its involvement ""for operational reasons"".
Wickes uncovered the accounting scam in June. The discrepencies date back five years and led to a 51 million pound ($85.62 million) overstatement of profits which will be wiped off shareholder funds.
The news led to a boardroom shake-up last summer and a three and a half month internal inquiry by accountants Price Waterhouse and law firm Linklaters & Paine.
""These investigations have led to the SFO having the reasonable grounds it requires to be able to launch a criminal investigation,"" said the SFO spokesman.
Meanwhile, Wickes is trying to salvage its business which was shaken by the summer's events.
Its shares remain frozen at 69 pence per share and it is planning to restate profits next month and launch details of a refinancing rights issue of between 30 and 40 million pounds.
A Wickes spokesman told Reuters those plans were ""well advanced."" It is also close to deciding on a new chief executive, with two to three candidates shortlisted including an internal candidate.
The former chief Sweetbaum said last month that he accepted ""ultimate responsibility"" for what happened under his regime.
He has agreed to repay his 1.2 million pounds in bonuses including tax. former finance chief Llewellyn has also agreed to repay his bonus of 485,000 pounds for 1995.
Moves to refinance the group will help cut gearing to around 70 percent said analysts, who believe it will be far from easy to raise the rights issue cash needed to put the company back on the road to recovery.
Shares are not expected to resume trading until early 1997.
($1=.5956 Pound)
",8
"Debt-laden Eurotunnel is awaiting the outcome of insurer investigations into the costs of the major fire aboard a freight train last week.
Lead insurer Union des Assurances De Paris (UAP) said on Tuesday it was ""impossible to quantify yet the cost of the damage.""
""Up to now, there is no reliable estimate of the amount of damage caused by the fire on November 18 in the south tunnel,"" it said, adding its maximum residual risk was 75 million francs ($14.4 million).
Eurotunnel said in a statement earlier that it will hold a press conference to update the situation on Wednesday.
The beleaguered tunnel operator also said the investigating judge had finished his inspection of the scene of the blaze, but insurers and company engineers were continuing to investigate.
The latest statements were made amid rife speculation on the cost of the fire, including unconfirmed reports of total insured costs of as much as 200 million pounds ($334 million).
Current restrictions caused by fire damage are costing the group a million pounds in lost revenue every day.
Eurotunnel was also hit this week by reports of possible claims from companies operating the Eurostar high-speed train service which runs through the tunnel.
Eurostar's British owners, the London and Continental Railways consortium, said there were provisions in its contract with Eurotunnel for reduced access charges if the tunnel was partially or fully closed.
Eurotunnel's spokeswoman said reduced access meant Eurostar (and possibly its French and Belgian counterparts) could see ""a reduction to their payment.""
She reiterated that Eurotunnel is fully insured.
""The insurance should cover loss of business, the rolling stock, damage to the tunnel, compensation,"" she said.
The company declined to comment further at this stage.
One source close to Eurotunnel said last week that the cost of fire damage alone to freight and to the tunnel could run to tens of millions of pounds.
""The cost will be millions (of pounds) and could get into double figures, if you consider the damage to the 15 wagons and a locomotive, plus severe tunnel damage,"" said the source.
The cost of replacing a whole train was estimated at around 25 million pounds.
A senior source close to Eurotunnel insurers told Reuters on Tuesday that the cost of replacing rolling stock could be ""in the range of mid- to late-teens (of millions of pounds).""
Adding to uncertainty surrounding insurance cover was the possibility that any payout could be affected by suggestions that the train was on fire before entering the tunnel.
However, analysts seem confident the costs would be covered.
But some said the level of losses caused by the fire were belittled by the scale of Eurotunnel's total debts.
""In relation to Eurotunnel's other financial problem of 8.8 billion (pounds) in debt anything else is incidental, even if the fire cost is 200 million at worst,"" one analyst said.
Since the fire, Eurotunnel's shares have fallen from a close of 91-1/2 pence on November 18 before the fire broke out to 77-1/2 by the close on Tuesday. ($1=5.190 French Franc) ($1=.5990 Pound)
",8
"Millennium Chemicals, to be spun off from the mighty Hanson conglomerate in an October flotation, has already had to rebuff would-be suitors, chief executive of the soon-to-be independent company said on Tuesday.
William Landuyt, who is also chairman of Millennium, also unveiled his strategic blueprint in an interview with Reuters, including plans for a share buyback by 2000 after cutting debt and implementing post-demerger investment plans.
Millennium had 1995 sales of two billion pounds ($3.12 billion) and profits of 588 million pounds.
""We are not a dividend yield stock. We are a growth company,"" Landuyt said, warning investors of a tight dividend policy.
The demerger of Hanson Plc will create four companies - Millennium, Imperial Tobacco, Energy Group and the rump building firm which will retain the famous Hanson name.
As investors await details of the float of the first two divisions - Millennium and Imperial - Landuyt said there had been takeover interest in all four companies including his own empire.
""We've had interest for every business in Hanson."" He said ""expressions of interest"" included those for whole divisions as well as individual companies within each of the four divisions to be floated off.
Millennium itself received approaches for all three of its units - Quantum, SCM and Glidco. All approaches were rebuffed.
Hanson's chemicals arm had been widely tipped as a takeover candidate by analysts in recent months, but Hanson's group share price recently took a hit after it was revealed that Millennium had built in a ""poison pill"" to deter predators.
The move led to a downgrading in the Hanson break-up value by analysts including BZW which pared back to 193 from 207 pence per share. The market valuation range spreads from 150 pence to 200 pence per share. Hanson's shares stand at 162 1/4, up 2 3/4 pence.
One analyst said of the poison pill episode ""It was quite disgusting. Here is a predatory company which has spoken out against such tactics and has installed a poison pill itself.""
But Landuyt said it was vital to prevent a predator buying up shares on the cheap and launching an undervalued bid.
""We do expect selling pressure (for Millennium shares) for at least the first six months. We don't want a temporary drop in the share price to allow someone to get a commanding position and launch a bid which does not offer full value.""
Under law in the U.S. state of Delaware, a company gaining a 15 percent stake in Millennium would see those shares become worthless. They would carry no vote or liquidation value unless the board had been approached first.
But the poison pill clause ends after one year, said the chemicals company chief, freeing the way for a possible bid.
Another factor which has damped Millennium's core valuation has been poor trading which has dogged the chemicals market leading to plant closures and asset writedowns of $60 million at SCM. Landuyt said that a further $15 million charge still had to be levied.
He said the impact on trading profits would be neutral and also said signs of an uptick remain.
He expected SCM to be able to make its October price increases stick after heavy destocking by customers.
Quantum's recently reported improvement in pricing and demand also continues, he said.
($1=.6415 Pound)
",8
"Imperial Tobacco Plc spelled out its blueprint for export growth this week, seeking to silence critics of its strategy who have contributed to driving down the shareprice by 17 percent since its Oct 1 demerger from Hanson Plc.
Imperial's chain-smoking chief executive, Gareth Davis, who joined the company after graduating from Sheffield University in 1972, told Reuters in an interview that investors should not under-estimate his determination to expand exports fast.
""Admittedly we were a late entrant to international markets. But that's because we had to get our costs licked,"" he said.
Getting costs licked helped make Imperial one of the most efficient players in its sector in the 10 years under Hanson's ownership, with productivity raised by 195 percent in a decade.
Davis sees it continuing to grow by eight to nine percent over the next four years, he said.
But recently Imperial has seen its shares slide, partly due to concerns that most of its profits (85 percent) stem from a shrinking British market. Analysts are asking how Imperial can invest in export growth while cutting back its sizable 1.1 billion pounds ($1.8 billion) in debt.
Natwest Markets and Credit Lyonnais issued sell notes on Imperial this month. But SBC Warburg said it was undervalued, citing its efficiency and greater attraction as a bid target over Gallaher, the American Brands UK unit due to be demerged.
Davis sought to answer the critics this week. ""The priority is to get it (debt) down. Our situation, our ability to generate cash means we can do things in parallel -- pay down debt and pay for acquisitions."" Bolt-on acquisitions are likely in cigars.
Expanding on his growth plans, he said ""We have already grown profits with little dilution of margins. Our strategy to grow is very much a multi-pronged route.
""We roll out our American brand success in France to Germany and Spain as well. We continue to follow the Brits into key holiday and work markets abroad. Keep developing the hand rolling product, seek bolt-on acquisitions and develop in selected emerging markets.""
He said these key markets in Asia and China already had a preference for the Virginia style of cigarette, a plain unflavoured tobacco variety which is Imperial's strength.
""We're not a Philip Morris or B.A.T(BATS.L. We're not a major global player and we don't see this as a head-on collision. These markets are so massive that even developing a small part of it will have a big impact on our profits.""
The company has already set up a base in Hong Kong, with a senior marketing recruit from Marlboro cigarettes. It is establishing four bases in China and has a technical co-operation agreement with China's state tobacco company.
It is focused on developing in Taiwan, South Korea, Malaysia and Indonesia. ""More specifically, the group is in talks with one party in Japan about entering that market for the first time. This deal is likely to be a distribution agreement.""
The group said it will seek joint ventures and distribution deals in these emerging markets.
Imperial is already gearing up to cope with a possible surge in production at its Nottingham plant in Britain.
Company bosses clinched a deal with unions to add a third shift from May onwards, which could allow capacity to be raised by one third to 53 billion cigarettes from 37 billion.
Davis has pledged shareholder value through expansion. But if cash builds up and there are no buying opportunities the company will consider a share buy back.
Imperial's boss is sanguine about the roller coaster ride for its shareprice since demerger. Its strong debut lit up the tobacco sector, taking Imperial to a high of 438 pence per share. But it has since fallen back to 361 1/2 pence.
He cited ""overheating in the first days, with rumours of a dawn raid (on shares) that never happened."" He also cited some selling of shares by U.S. retail investors, but said the holdings were eventually soaked up by US institutions.
""There'll be a wee bit of volatility for a while longer,"" said Davis who sees a truer value at between 390 pence and 410.
($1=.6050 Pound)
",8
"Wickes Plc, the Do-It-Yourself retailer hit by accounting discrepencies dating back five years, told Reuters on Wednesday it planned another one-off charge against 1996 results of around 10 million stg.
The charge will relate to restructuring and the costs of the investigation into the accounting problems revealed in June. Finance director Bill Hoskins told Reuters in an interview: ""Taking the two together, the cost won't be tens of millions, but around 10 million."" He also said that under plans for a rights issue 30 million stg would be ""a good starting point.""  
The charge cited by the finance chief will be in addition to charges announced by the chairman Michael von Brentano earlier on Wednesday.
Von Brentano had said there would be a 51 million stg write-off against shareholder funds to cover the profit overstatements for recent years, due to misleading accounting.
There is also a separate 10 million stg charge relating to property interests.
Wickes said it planned to explore all avenues to boost its finances before going to shareholders, with a 30 million cash call seen as possible.  
Details of the refinancing are due in December, said Wickes, when it will reveal more about how it plans to turn the group round to profitability by 1997.
Hoskins described the current level of gearing as ""pretty horrid."" Net debt has averaged at 65 million in the second half.
Talking about the timetable for change, he said ""Hopefully the plans will be approved in January and the share relisting will be in early 1997.""
Shares are currently suspended, frozen at 69 pence.
The company aims to cut costs and ""establish a proper cost base"" to make its accounting transparent in the future.
Hoskins concluded that the company wanted to make a clean break from its past troubles. ""We want to make a clear distinction between the past and the future. It is essential that we draw a line in the sand and where we have to face up to our responsibilities we will.""
The chairman told Reuters ""We're in negotiations with all our suppliers and we hope our negotiations will be concluded by the end of the month.""
He added that next year would start with a clean slate, with no more charges expected.
-- London Newsroom +44 171 542 7717
",8
"Christian Salvesen, the transport to business services group which rejected a 1.1 billion pound hostile takeover from Hays, said on Monday its special dividend and power unit demerger gave ""much better"" shareholder value.
Chris Masters, Salvesen chief executive, told Reuters in an interview ""I think this (plan) is much better"" and ""more in the interests of our shareholders."" He said he thought the 150 million pounds special dividend and demerger plan for the Aggreko hire business compared favorably with the rejected 390 pence per share bid from Hays, ditched in August.  
Masters said the plan to spin off the fast-growing hire group Aggreko was the culmination of a six-year restructuring strategy.
He added that a review to deliver shareholder value had already been underway before the hostile Hays bid was made in the summer.
The path chosen by the board made the best financial sense in tax terms as well, he added.
He said the Aggreko business was now ready to go it alone and had strong growth prospects. ""It now operates in 20 countries and is a global market leader,"" he said.  
The logistics business, which will remain within the Salvesen group, also offered strong growth potential, said Masters.
""In Europe, logistics got half of its profits from food two years ago. Now that figure is less than 30 percent. Industrial logistics is growing at twenty percent per annum and the consumer business is growing at around 15 percent, with food manufacturing business also offering strong growth thanks to European deregulation.""
Christian Salvesen will be making its case to institutional shareholders over the next two weeks, said Masters, in a bid to persuade them that this package offers a better deal than the 1.1 billion takeover bid from Hays.
The board has been under pressure to deliver after suffering share price underperformance earlier this year against the Financial Times All Share index.
--London newsroom +44 171 5427717
",8
"Two of the biggest names in the British motor industry, Rover and Vauxhall, kicked off the British International Motor Show on Tuesday by unveiling big new investments to fuel their drive for more exports.
Rover, owned by Germany's BMW, said it planned to launch a new four-wheel drive ""baby Land Rover"" to take on Japanese rivals in Britain and world export markets.
The new vehicle, due to go on sale in 1998, is part of Rover's rolling 3.0 billion pound ($4.75 billion) investment programme.
Rover will in addition inject 3.5 billion pounds of new business into the components industry. This will go mainly to British firms and safeguard tens of thousands of jobs at Rover and its supplier firms.
Vauxhall, owned by General Motors of the United States.S., also guaranteed 4,200 existing jobs at its Ellesmere Port complex in northwest England with the announcement of a 300 million pound investment to modernise the plant.
Efforts by both companies to gear up to expand foreign sales come as the British market is witnessing sluggish sales, with most growth stemming from sales to company car fleets.
The Birmingham-based motor show, following the recent Paris showcase, saw motor companies banging the sales drum, seeking to gloss over their problems with glitz and new gizmos to tempt customers into buying. But exports remain key.
Rover's new chief executive, Dr Walter Hasselkus, said: ""The baby Land Rover is very much an export product,"" adding that he hoped its export sales would account for 70 percent of production and boost sales in 1998.
Vauxhall Motors chairman and managing director Nick Reilly said while the British and European markets remained difficult, he saw opportunities for sales of the five-year old Astra model to grow quite significantly in Asia Pacific and Latin America.
Most industry leaders agree that Europe is likely to remain a cut-throat place to do business, with over-capacity squeezing margins.
Ian McAllister, head of Ford Motors in Britain, told Reuters that the six percent growth levels seen in Europe was distorted by factors like discounting and the French government offering incentives for customers to buy new cars.
Some analysts put underlying European growth as low as two percent, after stripping out factors like those cited by Ford.
McAllister blamed poor consumer interest in Britain on the ""feeling-not-so-good"" factor and predicted no turnaround until consumers were cured of their recessionary hangover.
The Society of Motor Manufacturers and Traders industry group admitted that a turnaround depended on persuading ""Joe Public to visit showrooms"" again and the first test is tomorrow when the show opens to consumers. ($1=.6317 Pound)
",8
"The British government on Thursday referred a proposed merger of key cross-Channel ferry services provided by Britain's P&O and Sweden's Stena Line to its main competition watchdog for investigation.
Ian Lang, president of the Board of Trade, said he had asked the Monopolies and Mergers Commission (MMC) to study competition effects of the deal -- hatched to help the ferry giants counter the impact on the market of Eurotunnel's Channel Tunnel.
Most Eurotunnel services, including its own passenger and freight shuttles and intercity rail trains run by Eurostar, were suspended following a serious fire last week.
Although the government gave no explanation of its motives for the review, both P&O and share analysts said it seemed to be partly motivated by Eurotunnel's suspension of services.
P&O immediately slammed the move, calling it ""totally unnecessary"". Its shares dipped on the news, and were down 6-1/2 pence at 589 1/2 pence by 1300 GMT.
P&O chairman Lord Sterling said the two ferry companies' plans had now been ""kicked into touch for three months,"" as the MMC has been given until March 6, 1997 to review the deal.
The two old shipping rivals unveiled plans in October to join forces on three routes across the English Channel, in response to the swift progress made by the tunnel in grabbing a 40 percent market share on the route two years after opening.
The tunnel opted for an aggressive pricing policy as it built up its market presence, cutting deep into the ferry lines' profits as firms led by P&O European Ferries and Stena Sealink responded with parallel price-cuts and expensive extra ships.
The ferry duo's planned merger was designed to rationalise their capacity on the key short-sea section where the Channel is at its narrowest, crossing times are short and competition for millions of passengers and freight units a year is most fierce.
The ferry giants said the link-up would allow them to slash 75 million pounds ($126 million) off a combined fixed cost base of 280 million pounds, as well as building up cash generation.
P&O's Sterling argued on Thursday that Eurotunnel's fire had done nothing to change the economic arguments for a ferry link-up to remove excess capacity.
""Although the tunnel is temporarily out of action due to the unfortunate fire, I cannot see how the MMC reference will change the underlying situation,"" the statement quoted him as saying.
With Eurotunnel taking 45 percent of the market, P&O added, ""it is difficult to see that there is any competition concern that requires investigation.""
James Halstead, analyst at Credit Lyonnais Laing in London, said the referral decision was slightly unexpected and disappointing for the market.
""They were effectively given the green light in the summer by the government when the injunction on a merger was removed, and the government saw the impact on business after the Channel Tunnel opened. We thought there would be no problem,"" he said.
In Sweden, Stena Line's shares dipped 0.80 crowns to 28.50 after the news.
($1=.5956 Pound)
",8
"The story of Sea Launch sounds like the daring fiction of a Bond movie -- with corporate giants from Russia, the U.S., Norway and Ukraine joining forces to build the ultimate in space technology, firing satellite rockets into space from the Pacific Ocean.
The cost is 350 million pounds ($583.2 million), funded by a consortium of four firms, joining the East and West in a deal which claims it can undercut the cost of land-based launchers including the French-led Ariane, recently embarrassed by a rocket explosion, and Nasa of the U.S..
The lead Sea Launch investor is Boeing Commercial Space Co of the U.S., holding 40 percent, with  RSC-Energia of Russia taking a 25 percent slice, Norway's Kvaerner with 20 percent and  NPO-Yuzhnoye of the Ukraine holding 15 percent.
At a sneak preview in Norway on Thursday, Svein Johnsen, Sea Launch project manager from Kvaerner joked with Russian reporters that countries which had once built technology with the conflict in mind, were now united in their quest for profit.
""In the name of detente,"" he said.
Norway's Kvaerner is the prime contractor, building the mobile sea-borne rocket launch platform and the command ship.
It rescued the Ocean Odyssey oil rig which exploded in a fireball just after the 1988 Piper Alpha rig disaster.
Odyssey has since been stripped and reconstructed to become the floating rocket launcher which will operate under remote control from a specially built command ship.
The platform is nearing completion at Stavanger in Norway, with the command ship under construction and ready for launch next month at Govan in Scotland.
The first rocket launch will happen in June 1998. The rig and command ship will travel from the base in Long Island, California and travel to a site in the Pacific Ocean for blast off.
Satellites and rockets will be assembled on the ship for transfer to the platform which will be evacuated before lift-off.
The command ship will press the control button for firing the rocket at a distance of two or three miles. The 10,600 ton ship has the added protection of blast-proof safety glass at a cost of 2,000 pounds a pane.
The Russians will provide the Zenit rockets, chosen because they can be assembled horizontally on board the command ship.
Boeing will provide project management, marketing services and run the operation for lift-off.
Asked about the risk of explosion Johnsen says ""The risk of explosion is very much related to this business. But we think that risk is very low. There are in-built safety features and it's a very sound operation from an insurance point of view.""
Ignition to release of the rocket takes 4.6 seconds, with emissions from the rocket on take-off channelled sideways.
""If the emissions didn't go sideways, the pressure could shift the platform,"" he said, which weighs 23,000 tons.
Confidence in the system, a world-first, has been demonstrated by a rash of early contracts.
Hughes Space and Communications International Inc of Los Angeles, California has 10 launches signed. Space Systems/Lorel, also from California has five booked.
The groups involved have refused to comment on how much they will charge per launch or on potential profits, with Kvaerner's Johnson only stating that its slice will be ""A good return on our investment.""
It will be able to fire six to eight rockets a year. The idea was originally conceived by Boeing which had intended to fire satellites from a supertanker.
But the danger involved made the platform idea more appealing, allowing evacuation before blast off. ($ = 0.600 British Pounds)
",8
"AMEC Plc, the British building group, said late on Friday that expected to issue details of its possible investment in France's Spie Batignolle by November, predicting it would be wrapped up by the end of the year.
Peter Mason, chief executive, said an envisaged initial stake would probably be followed by a decision to take on a larger controlling share ""in a number of years time, and I'm not talking one or two years.""
Spie Batignolles is a currently a unit of holding company Schneider SA.  
That would be followed by a decision on whether to float part of it off. The amount to be floated would depend on various factors, he said.
""There will be negotiations between the management and us on how much we will retain and what to float. It will also depend on the state of the (stock) market at the time,"" said AMEC's chief executive.
He said the deal had been under discussion for some months and represented a good fit. An eventual combined group would have 5.0 billion stg of sales and give AMEC access to key new markets in areas like oil and gas and pharmaceuticals.  
It will also act as a springboard for AMEC into new regions, notably Indonesia, South America and South Africa.
""At present 70 percent of our business is in the UK,"" said Mason. But the new deal will mean that the combined group has 40 percent U.K. exposure, 30 percent French exposure with the remainder in world sales.
""One important concept is that there is little overlap between the two groups,"" Mason added.
He admitted that the greater exposure to France came as the market was suffering from very tough conditions, but he said that AMEC was ""buying at the bottom, not at the top.""
The deal is currently at due diligence stage.
--London newsroom +44 171 5427717
",8
"The 350 million stg Sea Launch satellite project -- backed by firms from the U.S., Russia, Norway and Ukraine -- will fire its first satellite from a sea platform in June 1998, project contractor Kvaerner told reporters on Thursday.
Kavaerner, which also has a 20 percent stake in the project, is overseeing the construction of the launch platform and control ship, at Stavanger, Norway and Goven, Scotland.  
Boeing Commercial Space Co of the United States, Russia's RSC-Energia and the Ukraine's NPO-Yuzhnoye are also involved in the project.
As well as being a shareholder, Kavaerner is receiving a 250 million stg fee to build the ship and platform launcher.
In Stavanger, Sea Launch project manager Svein Johnsen told Reuters that launch prices would be ""significantly cheaper"" than those charged by land-based sites, but refused to be drawn further.
Hughes Space & Communication International Inc has a contract for 10 launches and Space Systems/Lorel for five.
Sea Launch will use a converted oil rig called Odyssey to fire Russian-made Zenits rockets from a position in the Pacific.
The rockets will be transported and assembled on the control ship. The 640 feet ship, still to be named, will have blast proof safety glass. It weighs 10,600 tons and can carry 250 crew. The platform weighs 23,000 tons, is 430 feet long and has room for 20 crew members.
",8
"Britain's biggest builder Taylor Woodrow has finally got something to celebrate in 1996, its 75th anniversary year, reversing 1995's share slide to outpace the market and assuring investors that year results remain on track.
Colin Parsons, Taylor's chairman, told Reuters in an interview that the second half performance so far has been ""exactly as we indicated in the half year statement,"" when he described the outlook as ""encouraging.""
Taylor's shares hit a high of 183 pence in September after those results, with profits up 81 percent at 25.4 million pounds ($42.37 million).
The shares have since edged off that five-year peak to 156 pence, but are still outperforming the Financial Times All Share index by 30 percent and the building and construction sector by 18 percent, according to Reuters Securities 3000 data.
The group has clawed its way back from a share price nadir of 53 pence in July 1991, in the depths of the building recession when the group's results slumped to a 66 million pounds loss.
Taylor Woodrow is probably most famous for its international contracting activities, with involvement in high-profile projects from the Channel Tunnel to the building of a light railway in Malaysia.
But contracting offers the lowest growth potential in future. Instead revenue growth will stem from housing and land development, property and the Greenham Trading unit in that order, with contracting lagging last.
Commenting on current trading,, Parsons said contracting remained very tough, citing in particular the expense of operating in the British Private Finance Initiative (PFI) market - aiming to get private money into public infrastructure projects.
""PFI remains a very expensive business - too expensive for an industry operating on a zero percent margin basis,"" he said.
The industry has often complained about the high bidding costs - sometimes running to millions of pounds and delays from red-tape adding to costs further. Parsons also says ""It's not a question of allocating capital but whether we want to carry the risks associated with it.""
Parsons says that does not mean Taylor Woodrow will bail out, but it will be selective. He adds that ""overseas business is encouraging,"" however, offering higher-margin business.
Taylor Woodrow remains committed to its four-business strategy, with Parsons comparing it to ""sitting on a chair instead of relying on the uncomfortable shooting stick of having one business. When the wind blows you know where you are on a chair.""
He has refuted suggestions that it may bail out of constracting. But admits that money for acquisitions will be targeted at the other businesses.
Commenting on trading since the first half, Parsons said the UK housing market recovery ""...has now spread into the new home market and is doing well in the second half. The first half was much slower.""
""In Canada housing had a dreadful year in the worst market for 40 years, I believe.""
""Australia seems to be one of the worst markets in living memory. It shows no improvement but it's happening at the same time as a relatively strong Australian economy.
He added ""It will be well into next year before we see any improvement."" The California and Florida markets were reported to be doing well, however.
The outlook for the group's results have brightened, with analysts' forecasts for pretax profits in the year ending 31 December 1996 seen at between 63 and 67 million, a rise of 41 percent on 1995 figures. For the year ending 1997, the forecasts range from 70 to 80 million, a rise of 16 percent.
Simon Brown, analyst at UBS said Taylor's performance turnaround was partly down to ""swift and aggressive action to downsize contracting activities"" into a single operation spanning Africa, Asia Pacific, Middle East and Europe.
""It's closed non-profit making areas and is now investing in areas where it can get a good return,"" he said. The residual contracting business remained a sound business.
UBS has the shares on hold. ""It will move ahead but it will not outperform sharply,"" he said. ($1=.5994 Pound)
",8
"Eurotunnel Plc, the Anglo-French Channel Tunnel operator, said on Tuesday that its traffic will be cut to one third of normal levels after a fire swept through one of its main tunnels on Monday night, injuring eight people.
Services have been terminated until the tunnel affected is cleared. A Eurotunnel spokesman in London said there was no fixed time for when services would resume or how long reduced capacity will operate once the tunnel is opened.
News of the fire and worries about the extent of damage and a resultant safety review hit Eurotunnel's shares in both London and Paris.
The fire is the latest issue to dog Eurotunnel's performance which has been plagued by negotiations to rejig nine billion pounds ($15 billion) in debt.
In London, Eurotunnel shares fell 3-1/2 pence to 88 pence while in Paris the stock was down around two percent at 7.68 francs per share. But trading in its debt was barely changed.
Commenting on the initial impact on traffic, a Eurotunnel spokesman in London said, ""We will operate at one third of normal capacity and we will give priority to Eurostar (passenger) trains. But there will still be space for shuttle trains as well.""
He did not say how many Eurostar or Le Shuttle trains would be cancelled as a result.
The Tunnel's operations were closed after a fire engulfed part of one of two tunnels, near to Calais where parties from France and Britain had been holding a safety conference.
The Eurotunnel spokesman said it did not yet know the full extent of damage to rolling stock or the tunnel itself or how much it could cost, but admitted it was a ""very ferocious fire.""
""It's quite messy down there. There will be damage to the overhead powerline cables, the heat will have buckled the steel rails and the carriages involved would be very badly damaged and may need to be replaced,"" he said.
The cost of a new train is 25 million pounds, but Eurotunnel did not think an entire train would need replacing. But Eurotunnel faces costs in repairing tunnel and rolling stock damage and may face compensation costs, possibly involving paying for customers to travel by ferry or air.
The company said at this stage that it does not know the cause of the fire. But unconfirmed media reports say the fire began in a truck carrying inflammable polystyrene.
The heavy goods vehicle shuttles are known to have partially open sides -- the safety of which had been questioned by the British fire brigade some years before.
Mike Frattini, fire officer and spokesman for the Kent Fire Brigade which helped put out the tunnel fire, said earlier: ""Our chief officer warned the safety committee (for the tunnel) five years ago.""
Fire fighters could raise this objection again as part of the investigation which will go to the Anglo-French Channel Tunnel Safety Authority.
If the current goods carriages are deemed to be hazardous in light of the accident there could be a call for changes, incurring further costs to Eurotunnel.
Eurotunnel's spokesman refused to comment on whether changes will need to be made to carriages, adding that ""It is a key question.""
The fire comes just before Christmas when the tunnel was expected to see a surge in holiday sales. But pre-holiday publicity now consists of media reports of choking people emerging from smoke and ""blow-torch""-like heat.
Asked whether this would dampen customer demand, Eurotunnel said ""We hope not. But what's happened has happened and how the fire was handled should renew confidence in our safety procedures,"" said the press officer.
One analyst at Natwest Securities said there should be little further impact on shares or consumer confidence.
Shares in cross-channel ferry operator P&O were five pence higher at 602-1/2p.
($1=.5970 Pound)
",8
"Environmental warfare has broken out across the British construction industry, striking some of the biggest corporations as activists give up peaceful protests and seek to hit builders where it hurts -- in their profit margins.
Described by one British company as ""eco-terrorism,"" it is seen as the new business risk of the 1990s.
Famous names like Tarmac Plc, Costain Group Plc and ARC, a unit of the conglomerate Hanson Plc, have all been targeted.
Activist groups are no longer seen by British companies as harmless, badly organised groups of students and hippies.
""You only have to see them in action at protests,"" said David Harding, a spokesman for ARC, a unit of Hanson which supplies construction materials.
""They walk around with mobile phones and camera equipment, they communicate and gather support for demos via the Internet -- we're talking about a highly sophisticated organisation.""
One road protester, using the code name Steady Eddie, told the construction journal Building earlier this year: ""If it comes down to full-scale economic warfare, we will aim to drive them out of business.""
In addition to financial threats, companies say that ""terror"" tactics are used by the activists.
Costain's contract to build the controversial Newbury bypass, which runs through a conservation area, has led to violent protests delaying building. There have also been bomb threats, staff intimidation and picketing of Chief Executive Alan Lovell's home.
A Costain spokesman told Reuters: ""We've had all sorts of protests at the head office and the chief executive's house. But it's when it gets to the (employee) families -- that it goes across the line.""
Tactics used by some underground groups, including the cryptic Berkshire Wood Elves, which distributes leaflets with instructions on homemade explosives, are now the subject of a police investigation.
Larger activist groups include Earth First, The Land is Ours, Alarm UK and Road Alert.
The groups have targeted specific projects like the Newbury bypass and the M3 highway through Twyford Down in the southern county of Hampshire.
But they are also campaigning on broader issue such as stopping the government road-building programme and stopping out-of-town superstores, which they say create more traffic and pollution and damage local communities.
The government has slashed its road-building spending, but it has been seen primarily as economic rather than environmental, although protests may have contributed to the decision.
Graham Watts, chief executive of the Construction Industry Council, said, ""I don't think many firms involved in tendering (bidding) for sensitive projects realise the impact environmental activity has on the cost of running a project.
""But they are more alert than they were three-four years ago. There's no doubt it's a big issue now.""
He says the damage comes in two forms: ""Tangible -- in the form of extra costs, additional security, threats to staff and the more intangible -- damage caused by negative publicity.""
Watts said the cost of protesting can be heavy once the company is locked into a contract.
""I do often hear on the industry circuit of tales where the company tenders at low margins and the demonstrations which follow means they are running the project at a loss.""
ARC says it's not just contractors in the front line that are affected but also suppliers like itself.
Its own quarries came under attack after it emerged that it may be a supplier for the Newbury bypass.
""It was called the 'First Battle of the Newbury bypass',"" said ARC's Harding.
""We had 300 Earth First protestors invade and occupy our site. Hundreds of thousands of pounds (dollars) of damage was done in one day. Plus, there was the knock-on cost of lost production and extra security in future.""
Simon Brown, analyst at investment bank UBS, said this new phenomenon has led to a change in the way the industry evaluates project risk.
""When talking to Tarmac about the M3 link (through Twyford Down) they made it fairly clear that their risk assessment methods have been changed and now involve a very clear environmental risk analysis.""
Harding says others have done the same. ""As a result of eco-terrorism, we are looking at controversial jobs more closely to see if the profit margins are wide enough to cover things like extra security.""
For an industry already suffering from razor-thin margins, overcapacity and stagnant demand, eco-terrorism is the latest bizarre twist in the construction sector's tale of woe.
",8
"Japanese car giant Nissan Motor Co is expected to make a decision on whether to go ahead with building a new medium-sized vehicle for the European market in spring 1997, according to the head of its UK operations.
Ian Gibson, managing director of Nissan Motor UK and vice-president of Nissan Europe, said in an interview with Reuters he would be presenting his plan to the Nissan board in Tokyo next spring.
But he added that the investment size, design details and production were yet to be thrashed out. Gibson said it was still an open verdict on whether the plan would go ahead.
Speaking from the British Internaitonal Motor Show in Birmingham, he said the new car would be between its small Micra and larger Primera, based on the Almeira model which is currently manufactured in Japan and shipped to Europe.
""If we build the car in Europe, the design and develoment is purely for a model destined for Europe, not one that has to include a number of viewpoints for world export.""
""We will do it from scratch if it goes ahead,"" said Gibson.
But he added that if the decision is given the go-ahead next year it would mean moving up to 100,000 units of capacity from Japan into Europe.
""The question is what opportunities are there for Japan to use that excess capacity for something else?""
Gibson said this was part of the equation in the decision but refused to outline what options the Japan headquarters were looking at in terms of ""new models and new markets.""
If Nissan does decide to build the new model in Europe it would be manufactured in the UK or Spain.
Gibson was circumspect about the cost of developing and putting the new model on sale, saying ""I can't see it happening for less than 200 million (stg). But that's the absolute minimum.
He refused to cite a top end figure, but separately spoke of the general industry cost of building and marketing a new vehicle, estimating it at between one and three billion stg.
On Nissan's European sales for 1996, Gibson said there would be a modest rise, predicting three percent sales growth for 1997.
",8
"British entrepreneur Richard Branson's Virgin Group said on Friday it had clinched the CrossCountry passenger rail franchise and planned to spend an extra 250 million pounds ($420 million) on new trains and increased services.
CrossCountry, which covers more than 100 stations and is based in the central British city of Birmingham, is one of the last few passenger rail franchises to be awarded under Britain's rail priavatisation programme.
The company has 842 staff and in the year to March 30 passenger revenues were 108 million pounds.
""Our key plan is to buy a new fleet, spending 250 million on new rolling stock, agreed as part of the bid,"" Will Whitehorn, director of Virgin Rail, said in an interview.
Train orders will be placed next year, with the first deliveries due to be made in 2002. Under Virgin's financial terms with the government, it will get a subsidy in the first year of the 15 year franchise of 115 million pounds. This is 12 million pounds less than in 1996/97.
Whitehorn said the subsidy will be eroded over the 15 year term and in the final year Virgin Rail will make a 10 million payment to the government.
It will refurbish existing HST 125 diesel trains and has pledged to increase train miles by 14 percent. ""We will grow the service, we will not cut them."" he said.
The services will be rebranded under the Virgin name and cover destinations across England, Scotland and Wales.
This is the first rail franchise to be awarded to Virgin Rail which also bid unsuccessfully for the Gatwick Express route which went to National Express buses.
But Virgin is on the shortlist for the West Coast rail franchise and has a bid in for the Thameslink service in London. There are 25 rail franchises in all, covering passenger services across Britain.
So far the government has sold 14 franchises to the private sector as part of its privatisation of the entire network.
The Virgin empire, which spans everything from its airline, music and financial services to its own-label cola, already has a major rail business.
It is a partner in the London and Continental Railways consortium which owns the Eurostar passenger service linking London with Paris and Brussels through the Channel Tunnel.
Service through the Channel Tunnel were suspended last week after a serious fire.
Whitehorn refused to comment on the financial impact of the closure of Eurotunnel's tunnel.
LCR has said that it needs to raise Eurostar's passenger traffic to fund construction of the Channel Tunnel Rail Link between the tunnel and London. ($1=.5956 Pound)
",8
"British building materials company Wolseley Plc reported a one percent slip in year pretax profits on Tuesday, but despite topping analysts' forecasts in a tough market shares slid on the poor outlook for mainland Europe.
Pretax profits for the year ended July 31 fell to 242.9 million pounds ($387 million) from 245.4 million. But sales rose to 4.31 billion from 3.78 billion pounds and the dividend was raised to 10.35 pence from 9.80 last year.
The fallback in profits had been flagged in a profit warning earlier this year.
But Wolseley survived the difficult conditions better than others partly thanks to its lower European exposure. The group has 50 percent of its sales in the U.S.
Chairman Richard Ireland reported organic sales growth across all three divisions blaming the lower profits on ""poor economic conditions in mainland Europe and volatile lumber prices in the U.S.""
""The results for 1996 should be set against the background of economic difficulties in France and Austria and a flat home (UK) market,"" he said.
But in an interview with Reuters chief financial controller Stephen Webster said ""I do not see an upturn in the next 12 months in France, Austria or Germany.""
He denied it would seriously dampen profits this coming year, explaining that conditions remain stable.
The UK market showed a glimmer of recovery, with spending on repair and maintenance of homes moving ahead.
But Webster said the housebuilding sector had seen companies using up existing stock so there has been little feed-through to companies like Wolseley. He predicted it would be spring before the industry felt the benefits.
The finance chief also expressed concern about the threat of an interest rate hike in the U.S. ""A half a percent would not be a big deal but one percent could damage confidence.""
The caution in all its markets was enough to push shares lower. By 1045 GMT they were down 13 pence at 494.
The new chief executive John Young did not signal any departure from the group's existing strategy.
But Webster signalled the possibility of some change ""We are keen to keep the good things. If anything it may mean a change of style. ""But there are no sacred cows in Wolseley. We will take difficult decisions if needed.""
Young said in the interim statement he wanted to look to expansion into new regions and products. With gearing at a low 7.7 percent, there is scope to raise it to around 30 percent if a big acquisition comes along, said Webster.
$1=.6270 Pound)
",8
"Imperial Tobacco Group will split from conglomerate Hanson Plc on October 1 as one of the most efficient players in its sector, but while the new chief talks of export-led growth, the outlook is clouded by the threat of litigation against tobacco firms.
Imperial is Britain's second biggest tobacco firm after B.A.T Industries and its brands include Embassy, John Player Special and Superkings cigarettes as well as Panama and Castella cigars.
It is one of four arms of the mighty Hanson conglomerate being spun off into separate floated companies to unlock value.
In the ten years since Hanson took over Imperial, it has slashed costs, cut its brands to 33 from 150 and raised productivity by 195 percent. 1995 profits were 348 million pounds on 3.6 billion of sales.
But analysts fear that despite Imperial's impressive track record, marking it as the comeback kid of the tobbaco industry, its shares could face a rough ride once listed in London.
This week saw tobacco stocks hit by a backlash in the United States, with fresh litigation plus tough new curbs from U.S. President Bill Clinton to regulate the industry.
So far, BAT Industries has borne the brunt. But some analysts believe it is only a matter of time before the U.S. scenario widens its impact and is repeated across the Atlantic.
""If it happens in the U.S. it's subsequently followed in other countries,"" said Zafar Khan, analyst at Societe Generale Strauss Turnbull.
""Imperial could have been a ripe international takeover candidate. But the litigation threat means a group buying a tobacco company would have a tough time selling the idea to shareholders now,"" he said.
UBS analysts agree that the threat of legal action is enough to dampen the company's outlook.
But they warn of another possible dampener on the stock when Imperial starts trading - its heavy reliance on Britain, largely seen as a mature market. Britain accounts for 87 percent of profits, say analysts.
Imperial has already committed itself to overseas expansion, but there are fears that it will have a tough time muscling in on the U.S. giants which have already made inroads into the markets of tomorrow - India, China and the Far East.
""We see investor concerns on litigation risk combined with the uncertain outlook in the key UK market as implying a 20-30 percent PE (price earnings) discount to the UK average."" This assumes a prospective PE of 9.9 times, UBS said in a note.
It has given Hanson a total break-up value of 164 pence, in a market range of 150 to 200 pence per share. Hanson shares were down 2 1/2 pence at 159 1/2 by 1033 GMT Friday.
UBS specifically values the Imperial constituent at 39 pence per share or 2.03 billion pounds ($3.14 billion).
However, another investment analyst who declined to be named, said he was more upbeat on Imperial's prospects.
""It's a clean business. It could become a takeover target and it's also very cash generative,"" he said.
He values Imperial at 37 pence in a total Hanson break-up valuation of 187 pence per share.
There is some upside to the Imperial story. Apart from being viewed as a highly efficient player and being the second biggest UK tobacco company with 38 percent of the market, it is also poised to try and tap the vast emerging markets.
Gareth Davis (corrects from Nigel Davis), Imperial's chief executive who joined the company straight from university, told the London-based Evening Standard newspaper earlier this week that he believed the group would continue to build up exports to Europe and the Asia-Pacific region.
""Worldwide this industry is buoyant,"" he said.
Imperial has said in earlier mission statements that it will expand abroad through ""organic growth and acquisition.""
But with 1.1 billion pounds in debt as part of its Hanson inheritance, industry watchers wonder just how it will finance its much needed expansion. ($1=.6458 Pound)
",8
"Christian Salvesen moved to silence critics on Monday with plans to demerge its Aggreko business and make a 150 million pound ($253 million) special payout just months after shunning a 1.1 billion hostile bid.
Chris Masters, chief executive of the transport to services group, said his plans offered much better shareholder value than a rejected cash and paper bid from Hays Plc in the summer.
Masters said the demerger of its Aggreko equipment hire business was the culmination of a six year restructuring process which was now boosting the Edinburgh-based company's results.
Earnings unveiled on Monday showed first-half pretax profits unveiled surged to 51.6 million pounds from 45.0 million. Sales rose to 383.1 million pounds from 345.9 million.
""The board intends to pay special dividends totalling 150 million pounds, to continue the process of realising non-core assets and to demerge Aggreko within the next financial year,"" the company said in a statement.
In addition to an ordinary dividend of 3.8 pence per share for the half year, the group intends to pay an enhanced dividend of 17 pence now at a cost of about 50 million pounds.
""A foreign income dividend of approximately 100 million pounds will be paid before the end of March 1997,"" it said.
""The special dividends... represent the amount which the board considers the company should prudently pay, from both a borrowing capacity and tax perspective,"" Salvesen concluded.
Masters said in an interview the 150 million pound special dividend and demerger plan for the Aggreko hire business compared favourably with the 390 pence a share bid from business support company Hays that was dropped in August.
Plans for the demerger and special payout had been long rumoured, although earlier estimates said the special dividend had been expected to be worth 200 million.
Press reports put the value of the Aggreko demerger at around 400 million pounds.
Salvesen is due to brief institutional investors about its plans over the next two weeks. Some investors expressed disappointment earlier this year that the Hays offer was rejected, complaining about the severe underperformance of Salvesen's shares in the run-up to the bid.
By mid-afternoon Salvesen's shares were trading at 327-1/2 pence per share, up three and a half pence but off their highs for the day of 332.
In the months to August the shares underperformed the sector by 30 percent from the start of 1996 and by 10 percent against the FT-All Share index.
Since Salvesen rejected the bid, the shares have improved significantly and are currently outperforming the sector by 34 percent and the FT-All Share by 22 percent. ($1=.5941 Pound)
",8
"The British government on Tuesday said the design of Eurotunnel's freight trains would have to be scrutinised after a massive fire swept through one of its main tunnels, injuring eight people and causing wide damage.
British transport secretary Sir George Young told parliament he was sure the Anglo-French Channel Tunnel Safety Authority would look at the design aspects after warnings from British fire chiefs about the safety of the trains.
Any changes to the design of Eurotunnel carriages would be another costly blow to the Channel Tunnel operator which recently came back from the brink of bankruptcy after restructuring its nine billion pounds ($15 billion) in debt.
The fire, the first serious incident since the tunnel opened two years ago, halted services on Tuesday. Even if limited services resume on Wednesday, Eurotunnel warned that traffic capacity would be cut to one third of normal levels for an indefinite period.
The fire and worries about the extent of damage and a resultant safety review hit Eurotunnel shares.
In London, they closed down 4-1/2 pence at 87 pence while in Paris the stock dropped 1.28 percent to 7.65 francs per share. But trading in its debt was barely changed.
One freight customer TNT Express Worldwide said it would be relying more on ferries as a result of the fire.
Eurotunnel confirmed in a statement that 15 heavy goods vehicles and the rear locomotive had suffered ""severe"" damage.
The fire was reported to have started in a goods carriage carrying a truck holding flammable polystyrene but Eurotunnel said the cause had not yet been determined.
The goods vehicle shuttles have partially open sides - the safety of which had been questioned by the British fire brigade some years before.
Mike Frattini, fire officer and spokesman for the Kent Fire Brigade which helped put out the fire, told Reuters earlier: ""Our chief officer warned the safety committee (for the tunnel) five years ago.""
He suggested that fire fighters could raise this issue once again with the Channel Tunnel Safety Authority.
Eurotunnel's spokesman refused to comment on whether changes will need to be made to carriages, adding that: ""It is a key question.""
A spokesman for the Department of Transport told Reuters that past concerns about the safety of these carriages had led to Eurotunnel carrying out safety tests two years ago. ""They were then approved in May 1994,"" he said.
Apart from possible safety changes, Eurotunnel faces other heavy costs.
The first is lost revenue due to reduced traffic. A Eurotunnel spokesman in London told Reuters ""We will operate at one third of normal capacity and we will give priority to Eurostar (passenger) trains. But there will still be space for shuttle trains as well."" He did not say how many Eurostar or Le Shuttle trains would be cancelled as a result of the fire.
Eurotunnel confirmed in a statement that 15 heavy goods vehicles and the rear locomotive had suffered ""severe"" damage. ""It is a serious accident,"" chairman Patrick Ponsolle said.
A Eurotunnel spokesman said the cost of repairs was not yet known. ""It's quite messy down there. There will be damage to the overhead powerline cables, the heat will have buckled the steel rails and the carriages involved would be very badly damaged and may need to be replaced,"" he said.
The cost of a new goods train is 25 million pounds, but Eurotunnel said it did not think an entire train would need replacing. It faces costs in repairing tunnel and rolling stock damage and may face compensation costs, possibly involving paying for customers to travel by ferry or air, although the company said it is heavily insured.
The fire comes just before Christmas when the tunnel was expecting a surge in holiday sales. But pre-holiday publicity now consists of media reports of choking people emerging from smoke and ""blow-torch""-like heat.
Asked whether this would dampen customer demand, Eurotunnel said ""We hope not. But what's happened has happened and how the fire was handled should renew confidence in our safety procedures,"" said the press officer. ($1=.5970 Pound)
",8
"LucasVarity Plc, the U.S.-Anglo auto components giant formed in September, announced a major restructuring Tuesday, including the planned disposal of 13 non-core businesses and the elimination of 3,000 jobs over two years.
LucasVarity said it had identified a range of additional moves that will mean an extra 120 million British pounds ($200 million) in profit benefits -- double the level anticipated just three months ago when the company was formed in the merger of Lucas Industries of Britain and Varity Corp. of Buffalo, N.Y.
Worldwide employment will be cut by 3,000 over the next two years as a result of the moves, the company said.
LucasVarity said it also will take an extra one-time charge of 130 million pounds ($217 million), mainly in non-cash items, along with 120 million pounds ($200 million) in charges already planned for this year.
Thirteen companies were identified for sale in a three-month post-merger review, although only eight were named in the restructuring announcement -- all small businesses in Britain, Argentina and South Africa.
Chief Executive Victor Rice said in an interview that the company was ""sifting through some offers"" and expected to be in ""active negotiations"" on the sale of some of the 13 units quite soon.
Rice said major businesses like aerospace and electronics were not among the unnamed five.
The criteria for divestment were those firms which ""neither fitted into the core strategy of the company or contributed economic added value,"" Rice said.
Rice, who came from Varity, said the post-divestment savings were ""virtually double"" original expectations.
LucasVarity is involved in the design, manufacture and supply of systems, products and services in international automotive, diesel engine, aftermarket and aerospace industries.
Both parties in the merger specialised in braking systems and industry sources expected that many of the measures would affect production and employment in these units.
",8
"Imperial Tobacco Group will split from conglomerate Hanson Plc on Oct. 1 as one of the most efficient players in its sector, but while its new chief talks of export-led growth, the outlook is clouded by the threat of litigation against tobacco firms.
Imperial is Britain's second-biggest tobacco firm after B.A.T Industries. Its brands include Embassy, John Player Special and Superkings cigarettes as well as Panama and Castella cigars.
It is one of four arms of the mighty Hanson conglomerate being spun off into separate companies.
In the 10 years since Hanson took over Imperial, it has slashed costs, cut its brands to 33 from 150 and raised productivity by 195 percent. Its 1995 profits were 348 million pounds ($538.9 million) on 3.6 billion ($5.6 billion) of sales.
But analysts fear that despite Imperial's impressive track record, its shares could face a rough ride once listed in London.
This week saw tobacco stocks hit by a backlash in the United States, with fresh litigation plus tough new curbs from President Clinton to regulate the industry.
So far, BAT Industries has borne the brunt. But some analysts believe it is only a matter of time before the U.S. scenario widens its impact and is repeated across the Atlantic.
""If it happens in the United States, it's subsequently followed in other countries,"" said Zafar Khan, analyst at Societe Generale Strauss Turnbull.
""Imperial could have been a ripe international takeover candidate. But the litigation threat means a group buying a tobacco company would have a tough time selling the idea to shareholders now,"" he said.
UBS analysts agree that the threat of legal action is enough to dampen the company's outlook.
But they warn of another possible dampener on the stock when Imperial starts trading -- its heavy reliance on Britain, largely seen as a mature market. Britain accounts for 87 percent of profits, say analysts.
Imperial has already committed itself to overseas expansion, but there are fears it will have a tough time muscling in on the U.S. giants, which have already made inroads into the markets of tomorrow - India, China and the Far East.
Gareth Davis, Imperial's chief executive, told the London-based Evening Standard newspaper earlier this week that he believed the group would continue to build up exports to Europe and the Asia-Pacific region.
""Worldwide this industry is buoyant,"" he said.
",8
"All four Hanson companies - due to be spun off as part of the demerger process - had received takeover approaches for part or all of the units in the chemicals, tobacco, building and energy sectors.
William Landuyt, chairman and chief executive of Millennium Chemicals and a Hanson group board member, told Reuters in an interview on Tuesday ""We've had interest for every business in Hanson."" He said the ""expressions of interest"" included possible offers for whole divisions as well as individual companies within each of the four divisions to be floated separately.  
Landuyt, who will head up the U.S. chemicals giant Millennium which had 1995 sales of more than two billion stg and 588 million stg in operating profit, told Reuters his own empire had received approaches for all three of its units - Quantum, SCM and Glidco.
But he said that the board had decided against pursuing any of the approaches.
Landuyt also defended Millennium's decision to incorporate a so-called ""poison pill"" clause to protect it from a hostile takeover. He said it was necessary to prevent a predator buying up shares on the cheap and launching an undervalued bid.  
""We do expect selling pressure (for Millennium shares) for at least the first six months,"" said Landuyt who predicted selling pressure from UK investors.
""We don't want a temporary drop in the shareprice to allow someone to get a commanding position and launch a bid which does not offer full value.""
He said the poison-pill arrangement, which under law in the U.S. state of Delaware means that a company gaining a 15 percent stake in Millennium would see those shares become worthless. They would carry no vote or liquidation value unless the board had been approached first.  
However, the poison pill clause ends after one year, said the chemicals company chief, freeing the way for a possible bid.
He said if a full-value bid was launched before then, the board would be under a duty to examine it.
-- London newsroom +44 171 5427717
",8
"Smiths Industries Plc said on Wednesday that its $30 million acquisition of Leland Electrosystems Inc of the U.S. offered a perfect product fit and access to major military aircraft supply contracts.
Leland is an electrical power generator manufacturer for military and civil aircraft. It has a key U.S. position to supply the F18 military aircraft which is the principal U.S. fighter jet.
It has also secured an order to supply the new version of the F18, involving 1,000 aircraft.  
Russell Plumley, director of public affairs, told Reuters in an interview that Leland's contract for these military aircraft alone involved ""very substantial sums. Tens of millions of dollars over a five to six year period.""
The smaller civil aviation side of the business includes a contract to provide generators for the 777 commercial aircraft. Smiths also services the F18 and 777 aircraft in other product areas, he said.
The Leland deal will be earnings enhancing in the first full year after acquisition. But Smiths said it would not be implementing job cuts or cost cutting.
",8
"Ford Motor Company Ltd, the U.S. carmaker's U.K. arm, said on Tuesday that the British sales outlook for 1997 looked pretty flat as customers suffered from a ""feeling-not-so-good"" factor.
Ian McAllister, chairman and managing director of Ford U.K., told Reuters in an interview at the British International Motor Show that weak sentiment was the primary reason for sluggish interest among UK consumers in the last three years.
""People were badly bitten by the recession and have become cautious about their own personal balance sheets,"" he said.
He added that it would require an end to consumer worries, like house owners' negative equity, and a cure for the recessionary hangover before the private car market took off.
Industry analysts have said that most of the growth in the UK car market has been due to companies buying cars, rather than the man on the street snapping up new models.
McAllister said company fleet sales would remain a priority for Ford in the coming year but said, ""We will reduce our exposure to the heavily discounted rental market.""
The UK chief agreed that the slight growth in sales across the wider European car market so far in 1996 had been distorted by government incentives in countries like France to trade in fuel guzzling old cars for new models, as well as heavy discounting by most car makers.
The underlying picture for the European car industry has been less promising, he acknowleged, agreeing that excess market capacity in Europe had fuelled downward pressure on margins for players across the board.
-- London newsroom +44 171 542 7717
",8
"British entrepreneur Richard Branson's Virgin Group on Friday clinched a British rail franchise and said it planned to spend an extra 250 million pounds ($420 million) on new trains and increased services.
He won control of the CrossCountry serice, which covers more than 130 stations and is based in the central British city of Birmingham.
The company, which has 842 staff and earned passenger revenues worth 108 million pounds ($181.3 million) in the year to March, is part of the national rail network that is in the process of being privatised.
""Virgin believes that it can be built into one of the prime rail franchises serving several markets...Exciting times are ahead,"" Branson told a London news briefing.
Will Whitehorn, director of Virgin Rail, told Reuters: ""Our key plan is to buy a new fleet, spending 250 million pounds on new rolling stock, agreed as part of the bid.""
The order will be placed next year, with the first deliveries due in 2002. Under financial terms, the government subsidy in the first year of the 15 year franchise will be 112.9 million pounds.
The 112.9 million subsidy has been cut from the 1996/97 level of 127 million pounds and will average at 36.4 million over the life of the franchise term.
Whitehorn said the subsidy will be eroded over the 15 year term and in the final year Virgin Rail will make a 10 million pound payment to the government.
Sir George Young, transport secretary said: ""This deal is final proof of the renaissance which is sweeping through Britain's railway industry...Virgin will take a loss-making nationalised company and transform it within 15 years into a profitable enterprise.""
Virgin will refurbish the company's HST 125 diesel trains and has pledged to increase train miles by 14 percent between May 1998 and 2002.
The services will be rebranded under the Virgin name and cover destinations across England, Scotland and Wales.
This is the first rail franchise to be awarded to Virgin Rail which also bid unsuccessfully for the Gatwick Express route.
But Virgin is on the shortlist for the West Coast rail franchise and has a bid in for the Thameslink service in London.
Of 25 rail franchises covering passenger services across Britain, the government has sold 14 to the private sector as part of its privatisation of the network.
The Virgin empire, which spans everything from its airline, music and financial services to its own-label cola, already has a major rail business.
It is a partner in the London and Continental Railways (LCR) consortium which owns the Eurostar passenger service that links London with Paris and Brussels through the Channel Tunnel.
A serious fire in the tunnel last week has temporarily halted services, but Whitehorn declined to comment on the financial impact on the company.
LCR has said that it needs to raise Eurostar's passenger traffic to fund construction of the planned Channel Tunnel Rail Link between London and the tunnel. ($1=.5956 Pound)
",8
"Debt-laden Eurotunnel faced fresh financial pressure on Wednesday in the wake of the fire which swept through a main tunnel leaving a trail of damage, no running services and shaken consumer confidence.
Just one month after coming back from the brink of bankruptcy with a restructuring of nine billion pounds ($15 billion) of debt, the company faced uncertainy once again as one of its two rail tunnels remained shut pending a safety review.
Analysts said the modest fall in Eurotunnel shares since Monday's fire was about right, however, and few believed there would be long-term damage to customer confidence.
Eurotunnel has warned of reduced services for weeks ahead as repair work goes ahead and eats into revenues.
And one source close to Eurotunnel told Reuters that the cost of repairs may be heavier than first thought. ""The cost will be millions (of pounds) and could get into double figures, it you consider the damage to the 15 wagons and a locomotive, plus severe tunnel damage.""
He added that track sections may also need replacing after buckling in the intense heat.
While the tunnel remains shut, Eurotunnel is losing revenues at the rate of one million pounds a day. It also faces the cost of compensating passengers and tranferring them by air or ferry.
A Eurotunnel spokesman said all these costs should be covered by insurance, however.
""It will have very little impact,"" said one analyst. ""Transport disasters are always newsworthy but the bad publicity will soon fade away. Eurotunnel will be financially damaged, but you have to look at it in relation to the nine billion of debt.""
The ferries have been scooping up extra business from big freight customers like TNT, which said it would be using the ferries more as a result of the tunnel fire.
Andrew Darke, analyst at Williams de Broe, said ""There's clearly going to be some emotional reaction, but I expect it to be short-lived. After all passenger numbers rose after the Herald of Free Enterprise (ferry) disaster nine years ago.
""Disasters don't stop people travelling. People still go shopping in London despite IRA bombs,"" he said.
Eurotunnel had around 45 percent of the cross-Channel ferry market before the fire -- a share won partly by waging a cut-throat price-war with the ferries, which have since proposed linking up to battle against their tunnel rival.
Swedish ferry giant Stena Line and P&O agreed to merge in October and are awaiting clearance from competition bodies.
Darke said P&O's chances of clearance had been boosted by the tunnel disaster. The verdict is due later this month.
($1=.5950 Pound)
",8
"British building group AMEC Plc said on Friday it was exploring a possible investment in France's Spie Batignolle's electrical and construction businesses with the aim of widening its international exposure.
AMEC said it had been in talks with Spie management about taking an unquantified minority stake which could be raised to a majority stake from the current parent group Schneider SA.
If clinched, the deal would create a major European player with around five billion pounds ($7.9 billion) in sales, with 40 percent exposure in Britain, 30 percent in France and the rest worldwide.
Peter Mason, AMEC's chief executive, told Reuters: ""One important concept is that there is little overlap between the two groups.""
He admitted that AMEC's possible greater exposure to France came as the market was suffering from very tough conditions but he said that AMEC was ""buying at the bottom, not at the top"" and foresaw a turnaround.
The new deal could act as a springboard for AMEC into new markets including oil and gas and pharmaceuticals and new regions including Indonesia, Latin America and South Africa, Mason said.
At present 70 percent of its sales are in Britain.
Mason told Reuters that the two parties were at the due diligence stage and expected more details by November, with completion in December.
The initial stake will be funded from AMEC's existing cash reserves and will give it access to Spie's international network of regional bases offering partnership opportunities on a cost-efficient basis.
The decision to raise the stake to a majority holding would be taken in ""a number of years' time and I'm not talking one or two years"".
AMEC and Spie management envisage a possible flotation of the French operation.
""There will be negotiations between the management and us on how much we will retain and what to float. It will also depend on the state of the (stock) market at the time,"" the AMEC chief said.
""I have been most impressed with Spie's management team and the progress they have made in revitalising Spie,"" he added.
Spie has 28,000 employees and operates in 290 locations. In its 1995 results after restructuring it reported turnover of 17 billion francs ($3.26 billion) and an operating profit of 34 million francs. ($1=.6298 Pound) ($1=5.211 French Franc)
",8
"Ecological warfare has broken out across the British construction industry, striking some of the biggest corporates as activists give up peaceful protests and seek to hit builders where it hurts -- their profit margins.
Described by one British company as ""eco-terrorism"", it is seen as the new business risk of the 1990s.
Famous names like Tarmac Plc, Costain Group Plc and ARC, a unit of conglomerate Hanson Plc, have all been targeted.
Activist groups are no longer seen by British firms as a harmless, badly organised ragbag of students and hippies.
""You only have to see them in action at protests,"" said David Harding, spokesman at ARC, Hanson's aggregates company. ""They walk around with mobile phones and camera equipment, they communicate and gather support for demos via the Internet -- we're talking about a highly sophisticated organisation.""
One road protestor under the codename Steady Eddie told construction journal ""Building"" earlier this year, ""If it comes down to full-scale economic warfare, we will aim to drive them out of business.""
As well as financial threats, companies also emphasise the ""terror"" tactics used.
Costain's contract to build the controversial Newbury bypass, which runs through a conservation area, has led to violent protests delaying building, bomb threats, staff intimidation and picketing of chief executive Alan Lovell's home.
A Costain spokesman told Reuters:""We've had all sorts of protests at the head office and the chief executive's house. But it's when it gets to the (employee) families -- that it goes across the line.""
Tactics used by some underground groups including the cryptic Berkshire Wood Elves, which distribute leaflets with instructions on home-made explosives, are now the subject of a police investigation.
Other larger activist groups include Earth First, The Land is Ours, Alarm UK and Road Alert.
The groups have targeted specific projects like the Newbury bypass and the M3 motorway through Twyford Down in the southern county of Hampshire.
But they are also campaigning on broader issue such as stopping the government road building programme and out-of-town superstores which they say create more traffic, pollution and damage local communities.
The government has slashed its road-building spending. Although protests may have contributed to the decision it has been seen primarily as economic rather than ecological.
Graham Watts, chief executive of the Construction Industry Council, said :""I don't think many firms involved in tendering for sensitive projects realise the impact environmental activity has on the cost of running a project.
""But they are more alert than they were 3-4 years ago. There's no doubt it's a big issue now.""
He says the damage comes in two forms: ""Tangible -- in the form of extra costs, additional security, threats to staff and the more intangible damage caused by negative publicity.""
Watts said the cost of protesting can be heavy once the company is locked into a contract.
""I do often hear on the industry circuit of tales where the company tenders at low margins and the demonstrations which follow means they are running the project at a loss.""
ARC says it's not just contractors in the front line but also suppliers like itself.
Its own quarries came under attack after it emerged that it may be a supplier for the Newbury bypass.
""It was called the ""First Battle of the Newbury bypass',"" said ARC's Harding.
""We had 300 Earth First protestors invade and occupy our site. Hundreds of thousands of pounds (dollars) of damage was done in one day. Plus there was the knock-on cost of lost production and extra security in future.""
Simon Brown, analyst at investement bank UBS, said this new phenomenon has led to a change in the way the industry evaluates project risk.
""When talking to Tarmac about the M3 link (through Twyford Down) they made it fairly clear that their risk assessment methods have been changed and now involve a very clear environmental risk analysis.""
Harding says others have done the same. ""As a result of eco-terrorism we are looking at controversial jobs more closely to see if the profit margins are wide enough to cover things like extra security.""
For an industry already suffering from razor-thin margins, overcapacity and stagnant demand, eco-terrorism is the latest bizarre twist in the construction sector's tale of woe.
",8
"Virgin Rail group, the rail division of Entrepreur Richard branson's Virgin Group, said on Friday it planned to spend 250 million stg on new rolling stock after announcing it has won the CrossCountry rail franchise.
Will Whitehorn, director of Virgin Rail, told Reuters  ""Our key plan is to buy a new fleet, spending 250 million (stg) on new rolling stock, agreed as part of the bid."" The order will be placed next year, with delivery starting in 20002. He also said the government subsidy in the first year of the 15 year franchise will be 115 million pounds.  
The 115 million subsidy will be payable to Virgin in the first year of the new operation and has been reduced from the 1996/97 subsidy level of 127 million. Whitehorn said the subsidy will be eroded over the 15 year term and in the final year Virgin Rail will make a 10 milliong payment to the government.
It will refurbish the HST 125 diesel trains and pledges to increase train miles by 14 percent. ""We will grow the service, we will not cut them."" he said.
It plans to introduce a series of initiatives on the CrossCountry franchise, the first to be won by Virgin.
CrossCountry had 108 million stg in passenger revenues in the year to March 31. It employs 842 staff and covers services linking England, Scotland and Wales.
-- London Newsroom +44 171 542 7717
",8
"Anglo-U.S. autocomponents giant LucasVarity unveiled a major corporate shake-up on Tuesday planning 13 non-core disposals and a speeded-up rationalisation which will axe 3,000 jobs worldwide over two years.
LucasVarity, created by a merger earlier this year of Britain's Lucas Industries and Varity Corp of the U.S., said it had identified a range of additional restructuring plans that meant it now saw operating savings of 120 million pounds ($200.2 million) -- double the level anticipated after the merger.
The market initially welcomed the news and the company's shares jumped to a new 12-month high of 263 pence. But downbeat company comments about the auto industry during a telephone conference call to analysts sent the stock slumping to close a sharp 16.5 pence lower at 234p.
""They said that things were relatively tough in France and in the heavy truck market, particularly in Europe, and that they weren't immune to the trends we are seeing in the (competitive) market,"" said one analyst, who declined to be named.
LucasVarity expects to take an extra one-off charge of 130 million pounds, mainly in non-cash items, which will be levied along with 120 million pounds of costs already planned for current year accounts.
Worldwide headcount will be cut by 3,000 over the next two years as a result of the moves, the company said.
Thirteen companies have been marked up for sale after the three-month review which came in the wake of the multi-billion pounds merger between Britain's Lucas Industries and Varity Corp of the U.S. which became effective in September this year.
Commenting on the speed of disposals, Victor Rice, chief executive, told Reuters the group was ""sifting through some offers"" and expected to be in ""active negotiations"" on the sale of some of the 13 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.
The eight named so far are small niche businesses and include starter and alternator firms in Britain, Argentina and South Africa. The 13 disposal targets have combined sales of 270 million pounds.
The criteria for divestment were those firms which ""neither fitted into the core strategy of the company or contributed economic added value,"" said Rice.
Commenting on the rationalisation moves, Rice, who came from the Varity side of the merger, said ""the combination of cost savings and anticipated revenue growth identified by these teams will help the company achieve the aggressive performance targets it has set for itself.""
He said the post-demerger savings were ""virtually double"" original expectations. The process of cost cutting would continue he added, concluding that he was ""pretty excited for the future"" of the merged business.
LucasVarity is involved in the design, manufacture and supply of systems, products and services in international automotive, diesel engine, aftermarket and aerospace industries.
Both parties in the merger specialised in braking systems and industry sources expected that many of the rationalisation measures would affect production and employment in these units. ($1=.5995 Pound)
",8
"Drugs giant Glaxo Wellcome Plc bought the remaining 50 percent of its Japanese joint venture Nippon Glaxo for 354 million pounds ($596 million) on Thursday in its quest for growth in the world's second biggest market.
Analysts in London said they had long expected the buy-out of Japanese partner Shin Nihon Jitsugyo Co Ltd, which will also get a 7.7 million pounds (1.38 billion) payout in lieu of the 1996 dividend.
Nippon Glaxo develops, produces and markets prescription medicines across Japan and has net assets of 30.7 billion yen ($275.3 million), as valued on June 30. Its post-tax profit for the six months to June 30 was 2.5 billion yen.
After setting up a series of Japanese joint ventures since the early 1980s, Glaxo has moved to take them over in a bid to carve a share in Japan's lucrative marketplace, second only to the U.S. in terms of profitability and sales to the group.
Seven percent of Glaxo Wellcome's profits stem from Japan, which represents 20 percent of the world market itself.
One London-based pharmaceuticals analyst said: ""The deal will be slightly earnings enhancing as it's financed by debt and Japanese interest rates are low at half a percent.""
The move to take over ventures in Japan would allow the group to accelerate growth plans by launching new products there, including its new respiratory treatments for asthma and the new herpes treatment Valtrex which replaces Zovirax.
Another analyst agreed that Japan offered a notable expansion opportunity, saying: ""It's obviously one of the leading growth markets for Glaxo.""
But shares in Glaxo showed little response, falling a modest 3.5 pence to 950 in London.
Under the deal, Hiroshi Konishi, president of Nippon Glaxo, and Akira Konishi, vice-president and general manager, will give up these positions but remain members of Nippon Glaxo's board, Glaxo Wellcome said.
Nippon Glaxo had net assets at June 30 of 30.7 billion yen, or 180 million pounds. Its profits after tax for the six months ended June 30 were 2.5 billion yen.
($1=.5940 Pound)
($1=111.5 Yen)
",8
"The story of Sea Launch sounds like the daring fiction of a James Bond movie -- with corporate giants from Russia, the United States, Norway and Ukraine joining forces to build the ultimate in space technology, firing satellite rockets into space from the Pacific Ocean.
The cost is 350 million pounds ($583.2 million), funded by a consortium of four companies, joining the East and West in a deal that claims it can undercut the cost of land-based launchers including the French-led Ariane, recently embarrassed by a rocket explosion, and NASA.
The lead Sea Launch investor is Boeing Co.'s Commercial Space division, holding 40 percent, with RSC-Energia of Russia taking a 25 percent slice, Norway's Kvaerner with 20 percent and NPO-Yuzhnoye of Ukraine holding 15 percent.
At a sneak preview in Norway recently, Svein Johnsen, Sea Launch project manager from Kvaerner, joked with Russian reporters that countries that had once built technology with conflict in mind were now united in their quest for profit.
""In the name of detente,"" he said.
Norway's Kvaerner is the prime contractor, building the mobile seaborne rocket launch platform and the command ship.
It rescued an off-shore oil rig, which had been severely damaged in a 1988 explosion, and rebuilt it to become a floating rocket launcher that will operate under remote control from a specially built command ship.
The platform is nearing completion at Stavanger in Norway, with the command ship under construction and ready for launch next month at Govan in Scotland.
The first rocket launch is scheduled for June 1998 from a site in the Pacific Ocean.
Satellites and rockets will be assembled on the ship for transfer to the platform, which will be evacuated before liftoff.
The command ship will press the control button for firing the rocket at a distance of two or three miles. The 10,600-ton ship has the added protection of blastproof safety glass.
The Russians will provide the Zenit rockets, chosen because they can be assembled horizontally on board the command ship.
Boeing will provide project management, marketing services and run the operation for liftoff.
Asked about the risk of explosion Johnsen said, ""The risk of explosion is very much related to this business. But we think that risk is very low. There are built-in safety features and it's a very sound operation from an insurance point of view.""
Ignition to release of the rocket takes 4.6 seconds, with emissions from the rocket on takeoff channelled sideways.
""If the emissions didn't go sideways, the pressure could shift the platform,"" he said, which weighs 23,000 tons.
Confidence in the system, a world-first, has been demonstrated by a rash of early contracts.
Hughes Space and Communications International Inc. of Los Angeles has 10 launches signed. Space Systems/Loral, also from California has five booked.
The groups involved have refused to comment on how much they will charge per launch or on potential profits, with Kvaerner's Johnson only stating that its slice will be ""a good return on our investment.""
It will be able to fire six to eight rockets a year. The idea was originally conceived by Boeing, which had intended to fire satellites from a supertanker.
But the danger involved made the platform idea more appealing, allowing evacuation before blastoff.
",8
"Stagecoach Plc, the bus to rail operator which has seen its shareprice double in under a year, said on Thursday it expected ongoing progress in dividend growth after reporting record profits of 47 million stg.
Keith Cochrane, finance director, told Reuters ""We expect ongoing progress in our second half dividend,"" even after raising the interim payout by 43 percent to three pence. But he pointed out that the first dividend reflected the 15 million stg profit from the sale of its stake in Strathclyde Buses.
",8
"Imperial Tobacco Group Plc, fresh from its demerger from Hanson Plc in October, said on Monday it was capable of cutting back debt levels and investing in further export growth as a dual policy.
Gareth Davis, chief executive, told Reuters in an interview that the two could be achieved ""in parallel"" because of the group's strong cash generation.
In particular, Davis said Imperial was in talks with a Japanese company about entering the Japanese market for the first time. He also said the group would keep open the option of a share buyback in the future.
Imperial inherited around 1.1 billion pounds ($1.8 billion) of debt as its legacy from the Hanson family break-up. But Davis said this did not hamper the group's plans to seek distribution deals or joint ventures in the overseas cigarette markets and possibly examine small acquisition deals in the fragmented cigar market.
He added that, if an important larger-sized acquisition opportunity arose, he would be prepared to raise debt levels, but for the moment ""the priority is to get it down. Our situation, our ability to generate cash means we can do things in parallel - pay down debt and pay for acquisitions...Bolt-on acquisitions are more likely in the cigar area"", he added.
On the Japanese market in particular, Davis told Reuters ""We are looking to do something in Japan. We are actively considering this. In one way or another we will establish a presence in that market,"" admitting that talks were under way with one party.
But he sought to reassure shareholders that Imperial would not squander its sound financial inheritance in its bid to catch up in the overseas field. ""In our international expansion plans I would not dream of being a balance sheet wrecker,"" he said. If Imperial failed to find the right deals, it would be prepared to conside other options to return value, he said.
If a possible acquisition fails to offer sufficient rates of return ""we would say: what would a share buyback do to enhance shareholder value, rather than a potential acquisition?""
""A buyback is something we'd never rule out. Given our cash flow characteristics people tend to say ""What are you going to do with all that cash.'""
Imperial reports its first set of results since the Hanson demerger on December 5 when it will give a trading update of the first few months since its split.
Davis said he expected the British market to continue to decline at around two percent next year.
But the international business, accounting for 17 percent of profits in the first eight months of the year, is expected to show continued rapid growth.
""I would be very disappointed if it wasn't 25 percent by 2000."" The last two years have seen overseas sales double, but Davis drew the line at hitting his target by 1997.
""That would be overstating it (our confidence). But the signs are the business is showing strong growth.""
Despite his caution, Davis has said that the company has already clinched a deal with unions to add a third shift from May 1997 which has the potential to raise capacity at its Nottingham factory  by one third.
Imperial says if a number of overseas deals start feeding through it will be ready to meet the surge in demand.
The third shift could, in theory, raise Imperial's total cigarette production to 53 billion from the existing 37 billion mark. ($1=.6069 Pound)
",8
"Stagecoach, the British bus and rail group which has seen its shareprice grow fivefold in three years, saw its stock hit a record high on Thursday after posting a bumper 127 percent rise in first half profits.
The Scottish-based group which has enjoyed explosive growth since its flotation in 1993, said half year pre-tax profits climbed to a record 47 million pounds ($79 million). The half year dividend rose 43 percent to three pence a share and group turnover leapt to 405 million pounds from 198.8 million.
Chairman Brian Souter called the results excellent.
Shares in Stagecoach were up 45.5 pence at 629 by 1350 GMT, leading a fleet of other bus companies higher in its wake. Go-Ahead Group rose 15 pence to 411.5 and Cowie Group added 5.5 pence to 396p.
""It's good news all round. The profits are two million above what I expected. We're upgrading our year forecast by five million to 97 million pounds,"" said UBS analyst Richard Hannah.
The results were the first since the group's high profile acquisitions of British rail rolling stock company Porterbrook and the Swedish bus group Swebus.
""The integration of Porterbrook and Swebus is proceeding and I am confident of a successful outcome,"" said Souter.
Porterbook and the bus operations were the real driver behind the growth in profits. The figures were also flattered by a one-off gain of 15 million pounds from the sale of a 21.7 percent stake in Strathclyde Buses. This was reflected in the high half year payout.
Porterbook's profits were better than expected at 13.5 million pounds in the six weeks since it was acquired.
""That's about two million profit a week on operating profit margins of 40 percent,"" said Hannah.
Stagecoach finance director Keith Cochrane said operating profits would ease slightly in the latter part of the year as the company took on ""on-going expenditure for maintenance"".
He forecast Porterbrook would still perform strongly, although margins would not be as high as in the first six weeks.
Total sales in the bus operation rose to 232.2 million pounds against 189.2 million, yielding profits of 34.6 million versus 29.0 million.
South West Trains, a new business, saw sales of 128 million pounds and profits of 500,000 pounds.
Porterbrook sales were 33.6 million pounds, with 13.5 million profit and Swebus sales came in at 11.3 million, with 600,000 pounds in profit.
Stagecoach, which started out as a brother and sister team in Scotland, was floated in 1993 at 112 pence a share. The share price has doubled this year. ($1=.5956 Pound)
",8
"Stagecoach, the British bus and rail group which has seen its share price grow fivefold in three years, Thursday posted a bumper 127 percent rise in first-half profits, boosting its stock to a record high.
The Scottish-based group, which has enjoyed explosive growth since its flotation in 1993, said half year pre-tax profits climbed to a record 47 million pounds ($79 million). The half year dividend rose 43 percent to 3 pence (5 cents) a share and group revenues leapt to 405 million pounds ($679.0 million) from 198.8 million ($333.3 million).
Chairman Brian Souter called the results excellent.
Shares in Stagecoach were up 45.5 pence (76.28 cents) at 629 ($10.54) by 1350 GMT (8:50 a.m. EST), leading a fleet of other bus companies higher in its wake. Go-Ahead Group rose 15 pence to 411.5 ($6.90) and Cowie Group added 5.5 pence (9.2 cents) to 396p ($6.63).
""It's good news all round. The profits are two million ($3.4 million) above what I expected. We're upgrading our year forecast by five million ($8.4 million) to 97 million pounds ($162.6 million),"" said UBS analyst Richard Hannah.
The results were the first since the group's high profile acquisitions of British rail rolling stock company Porterbrook and the Swedish bus group Swebus.
""The integration of Porterbrook and Swebus is proceeding and I am confident of a successful outcome,"" said Souter.
Porterbook and the bus operations were the real driver behind the growth in profits. The figures were also flattered by a one-off gain of 15 million pounds ($25.1 million) from the sale of a 21.7 percent stake in Strathclyde Buses. This was reflected in the high half-year payout.
Porterbook's profits were better than expected at 13.5 million pounds ($22.6 million) in the six weeks since it was acquired.
""That's about two million ($3.4 million) profit a week on operating profit margins of 40 percent,"" said Hannah.
Stagecoach finance director Keith Cochrane said operating profits would ease slightly in the latter part of the year as the company took on ""on-going expenditure for maintenance.""
He forecast Porterbrook would still perform strongly, although margins would not be as high as in the first six weeks.
Total sales in the bus operation rose to 232.2 million pounds ($389.3 million) against 189.2 million ($317.2 million), yielding profits of 34.6 million ($58 million) versus 29.0 million ($48.6 million).
South West Trains, a new business, saw sales of 128 million pounds ($214.6 million) and profits of 500,000 pounds ($838,222).
Porterbrook sales were 33.6 million pounds ($56.3 million), with 13.5 million ($22.6 million) profit and Swebus sales came in at 11.3 million ($18.9 million), with 600,000 pounds ($1 million) in profit.
Stagecoach, which started out as a brother and sister team in Scotland, was floated in 1993 at 112 pence ($1.87) a share. The share price has doubled this year.
",8
"China's breakaway Catholic Church has ordained about 50 graduates of one of the country's biggest seminaries into the priesthood this year, clergy at the seminary said on Monday.
The new priests, five of whom were ordained on Sunday, were the first group of clergymen installed by the National Catholic Seminary since 1991, they said.
The officially authorised seminary in Beijing did not accept any new students for six years from 1986 due to a lack of funds and space, the clergymen said.
""It's a big problem. Funds are too limited,"" a priest surnamed Meng told Reuters by telephone.
The seminary receives 10,000 yuan ($1,200) a year from the government, or one-sixth of its annual budget, another priest said. It raises the rest from donations.
Father Meng, who graduated in 1991, said there was no shortage of youths, many of them poor, who wanted to become priests.
He and other priests denied that government pressure had played a role in the lack of new students between 1986 and 1991.
Catholics in communist China are allowed to worship openly only if they belong to the state-sponsored Catholic Patriotic Association.
The association, which supervises the national seminary, appoints its own bishops and does not recognise the Pope as universal Catholic leader.
The official church has the blessings of the Communist Party but it too must walk a fine line between the demands of the party elite and the needs of the faithful.
The Washington-based Human Rights Watch/Asia has said Beijing has been stepping up harassment of unauthorised Catholic and Protestant groups in recent years.
The group said the crackdown on Christians included stricter controls on contacts with foreigners and was part of a broader drive begun in 1994 against all forms of religion as well as political dissent.
Bishop Zong Huaide of the state-backed church ordained five graduates of the seminary on Sunday. Zong delivered mass at the Church of the Holy Saviour, built in 1703, which was packed with about 3,000 people.
China has 31 seminaries and about 1,100 priests, 700 of whom are state-anointed young men.
The official Catholic Church in China counts four million members, while the underground church is believed to have several million members.
Vatican relations with Beijing have alternately cooled and warmed over the decades since the late 1950s, when links were severed over the Vatican's recognition of Taiwan.
China has said it will not normalise relations until the Vatican severs its ties with Taiwan, which Beijing has regarded as a rebel province since the end of the Chinese civil war in 1949.
The Vatican, on the other hand, has demanded recognition of the Pope's primacy before it renews ties with China.
",3
"China on Thursday savoured its latest victory in a diplomatic tug-of-war with Taiwan, while the stunned island scrambled to limit the damage from South Africa's decision to abandon it.
South African President Nelson Mandela said in Johannesburg on Wednesday that Pretoria would switch diplomatic recognition from Taipei to Beijing by the end of 1997.
Beijing hailed the move, saying it was in South Africa's interest.
""We ...welcome President Mandela's positive statement concerning normalisation of relations between China and South Africa,"" Foreign Ministry spokesman Cui Tiankai told a news briefing in Beijing.
""If South Africa can recognise reality at an earlier date it is in its own interest to do so,"" Cui said.
Beijing and Taipei have been diplomatic rivals since the end of the Chinese civil war in 1949.
China regards Taiwan as a rebel province and has sought to push the island into diplomatic isolation. Taiwan insists its 21 million people should have a voice in international affairs.
South Africa is the biggest of just 30 states that recognise Taiwan's exiled Republic of China rather than the communist People's Republic on the mainland.
The Chinese government spokesman said the People's Republic was the sole, legitimate government of all China.
""South Africa must recognise there is only one China, recognise that Taiwan is a part of China and sever so-called diplomatic relations with Taiwan,"" Cui said.
Wealthy but diplomatically isolated Taiwan was stunned by Mandela's announcement and scrambled to limit the damage by urging its 29 other allies not to be swayed by China.
""We hope such a situation won't affect our diplomatic relations with other countries...,"" Taiwan's Foreign Minister John Chang said in a televised news conference in Taipei.
""We will actively negotiate with South Africa in the next 12 months,"" Chang said, adding that he might visit South Africa before an official visit scheduled for January.
South Africa's Ambassador to Taiwan Johannes Viljoen urged the island not to exact reprisals against Pretoria.
But Taiwan's top economic planner said the island would not continue to encourage investment in South Africa.
Tuntex, one of the island's major business groups, said earlier on Thursday it would respect the government's wishes in deciding whether to move ahead with a planned $3 billion petrochemical project in South Africa.
Taiwan officials said they would conduct an overall review of Taiwanese investments in South Africa, currently totalling over $1.5 billion.
South Africa's decision to switch ties to China sent Taiwan stocks into a brief dive, but the market had recovered by the close. Many businesssmen played down any potential for serious, long-term harm.
The Taiwan dollar closed little changed against its U.S. counterpart despite news of the island's diplomatic setback.
Taiwanese officials blamed China for South Africa's decision to ditch Taiwan, saying China was ""buying"" foreign ties and damaging chances for reunification between the longtime rivals.
There were no protests at Pretoria's embassy in Taipei, contrasting with the public outrage displayed in previous years after Washington, Seoul and other former allies dropped Taipei for Beijing.
",3
"China on Tuesday slammed Taiwan for failing to crack down on a new opposition party seeking independence for the island and warned that separatism was ""a road to death"".
""Not only do the Taiwan authorities fail to ban the formation of the Taiwan Independence Party, but they also tolerate it,"" a spokesman for the Taiwan Affairs Office under the State Council, or cabinet, said.
""The self-proclaimed anti-independence stand of the Taiwan authorities is a double-faced practice that deceives others as well as themselves,"" the official People's Daily quoted the spokesman as saying.
Beijing has regarded Taiwan as a rebel province since Mao Zedong's Red Army defeated and drove Chiang Kai-shek's Nationalist troops into exile in Taiwan at the end of the Chinese civil war in 1949.
A group of Taiwanese activists plan to break away from Taiwan's main opposition party and form the Taiwan Independence Party on December 12.
China has threatened to invade if Taiwan declared independence. China conducted missile tests and war games off Taiwan last March in the run-up to the island's first direct presidential elections to cow Taipei into abandoning any dreams of independence.
""Taiwan independence is a road to death that cannot be walked because it is blocked,"" the spokesman said.
The spokesman described the party as a ""reactional political organisation"" with the explicit purpose of splitting the motherland.
""The Taiwan authorities should adopt realistic anti-independence action as soon as possible. Compatriots on the two sides are waiting to see,"" the spokesman said.
""The Chinese government and the Chinese people will definitely not sit back idly and do nothing about it,"" the spokesman warned.
""Their scheme will never succeed,"" he said of the new party's drive for independence.
Taiwan says it is committed to reunification, but stresses that this cannot be achieved overnight and says China must democratise.
Beijing's criticism came a day after Taiwanese President Lee Teng-hui blamed China for deadlocked relations between the two.
Referring to the Communist authorities, Lee said in a speech on Monday: ""They adopted a hegemonic attitude and stubborn policy toward Taiwan, singlehandedly blocked the development of history and caused the stalemate of cross-Strait relations.""
The island maintains an official policy of anti-independence, but has decriminalised advocacy of independence, saying such calls are within the bounds of freedom of speech.
Ties between Beijing and Taipei, which began to thaw in the late 1980s, took an icy plunge after a landmark, private visit by Lee to the United States in June 1995.
China, which has sought to push Taiwan into diplomatic isolation, saw the trip as a bid to raise the island's international profile.
Beijing has stepped up its reunification overture in recent months, calling for political talks to end almost five decades of hostility.
China unilaterally introduced a series of regulations last August to pave the way for direct shipping links with Taiwan.
Taiwan has banned direct air and shipping links with China since 1949, but allows indirect links through Hong Kong or third countries. Taiwan is reluctant to lift the ban lest the island become an economic hostage to China.
",3
"A group of foreign legal experts has asked China for permission to observe next week's trial of detained dissident Wang Dan, a human rights group said on Saturday.
Wang faces the capital charge of plotting to overthrow the government, a crime that carries a maximum penalty of death and a minimum sentence of 10 years in prison.
The legal team consists of French senator Robert Badinter, former U.S. attorneys-general Nicholas Katzenback and Richard Thornburgh and former Canadian solicitor-general Warren Allmand, the New York-based Human Rights Watch said.
""The request ... is in part to see whether the right of Wang Dan to a fair and public hearing by an independent and impartial tribunal ... is respected,"" the human rights group said.
Wang, 26, who vanished into detention in May 1995, would plead not guilty at his Beijing Intermediate People's Court trial which opens on Wednesday, family members have said.
The human rights group said the chances of China allowing the foreign legal experts to observe the trial were slim. ""Admittance to the courtroom is often denied to ... journalists and other 'outsiders' on grounds that the courtroom is 'too small',"" Human Rights Watch said.
Wang's court appearance would likely be held out of the public eye, as was last year's trial of Wei Jingsheng, regarded as the father of China's tiny, struggling democracy movement.
Wang's mother, a 61-year old museum researcher who has no background in law, would attend the trial as one of two defence lawyers. His father and a sister have been allowed to sit in.
The court has refused to give details of Wang's trial other than the fact that he has been charged with plotting to overthrow the government, but one official has said Wang could appeal to the Higher People's Court if convicted.
Wang's mother has said the dissident was calm and mentally prepared for a harsh sentence, though she has said his health has deteriorated during his detention.
Human Rights Watch was not optimistic about an acquittal. ""He has not had adequate time to prepare a defence,"" it said in a statement made available to Reuters by facsimile.
""Chinese criminal trials seldom respect the presumption of innocence, and defence lawyers are generally restricted to arguing mitigating circumstances for a reduced sentence,"" the group said.
Wang's family have found a lawyer willing to defend the former student leader after being given just one day in which to do so.
Wang has already served four years in prison for counter-revolutionary crimes, or subversion, for his role in pro-democracy demonstrations in Beijing's Tiananmen Square that were crushed by the army in June 1989 with heavy loss of life.
He had been active after his parole in 1993, defying persistent police surveillance to join in a daring appeal to communist leaders for the release of all those still in prison for their part in the 1989 protests.
China has in recent months cracked down on its tiny band of remaining dissidents who have not fled into exile or been imprisoned.
",3
"Beijing Mayor Li Qiyan is to step down in a long-delayed reshuffle after the downfall of his mentor, the Chinese capital's disgraced Communist Party boss Chen Xitong, sources with close ties to the city government said on Sunday.
Li, 58, mayor of Beijing since 1993, would become a vice-minister of labour and could eventually replace Li Boyong, 62, as labour minister, said the sources who asked not to be identified. The two Lis are not related.
Li Qiyan's departure was widely expected after one of his vice-mayors came under investigation for economic crimes and committed suicide in April 1995.
The suicide shocked the nation and led to the downfall of Li's mentor, Chen Xitong, who has since disappeared from the public eye.
Chen resigned as Beijing's Communist Party boss and was later sacked from the Politburo, becoming the most senior official to be ensnared in a corruption scandal since the communists came to power in 1949.
Officials say Chen was himself still under investigation for possible wrongdoing.
The city government had been virtually paralysed since Chen's disgrace, the sources said.
""After Chen Xitong stepped down, the (city) government lost its credibility ... and could maintain only the most basic operation,"" one source told Reuters. ""It could not embark on huge projects ... It could not do anything.""
Li would be replaced by Jia Qinglin, 56, party secretary of the southeastern province of Fujian, the sources said.
Jia arrived in Beijing last week to take up his new post as acting mayor, the sources said. Jia is expected to formally become the capital's mayor after his nomination is approved by the Beijing People's Congress.
In the run-up to the party's 15th congress next year, Jia could be promoted to Beijing's Communist Party secretary and land a seat in the party's powerful Politburo, they said.
The vice-mayor who committed suicide was found to have used his position to amass 116 houses illegally and build himself a villa on the outskirts of the city. He also masterminded a $37 million embezzlement and graft scam, officials have said.
Corruption was virtually eliminated in the years after the communists came to power in 1949, but has staged a comeback along with economic reforms in the past 17 years.
Communist Party chief and state president Jiang Zemin has declared war on corruption, warning that the scourge was a virus which threatened the party. Courts frequently impose the death penalty in major corruption cases.
Earlier this month, prosecutors filed charges of corruption against 30 people, including Zhou Beifang, former head of two publicly listed Hong Kong affiliates of a China steel giant, and two former officials of the Beijing city government.
The announcement of the charges against Zhou was among the first against one of China's so-called ""princelings"", the popular sobriquet applied to the children of the ruling party elite, who enjoy wide influence.
Zhou, detained in February, 1995, is the son of Zhou Guanwu, former chairman and Communist Party secretary of Beijing's giant Capital Iron and Steel Corporation, also known as Shougang, and among the largest conglomerates in China.
",3
"China's exports climbed again in October as slow demand at home encouraged companies to ship abroad and the government expanded credit to exporters, newspapers and a government economist said Wednesday.
The upturn was expected to continue through the first half of 1997, said Wang Jian, a researcher with the cabinet's State Planning Commission.
Exports rose for the fourth consecutive month in October, jumping 23.3 percent to $15.22 billion from a year ago, said the International Business Daily, a newspaper published by the Ministry of Foreign Trade and Economic Cooperation.
The performance helped the nation register its biggest monthly trade surplus of the year. The surplus stood at $3.9 billion in October compared with $3.2 billion in September, the newspaper said.
""This kind of rebound in exports ... is estimated to last until the first half of next year,"" Wang said in a telephone interview. Wang said slow domestic demand has forced manufacturers to look to overseas markets.
Also, domestic enterprises had adjusted to a cut in government-paid export tax rebates, he said. The government slashed the rebate on exports of industrial products to 9.0 percent from 14.0 percent on January 1, 1996.
The International Business Daily said exports rebounded because the government sped up the payment of export tax rebates and expanded credit to exporters.
Exports slumped in the first six months of 1996, dented by rising wages and the relative strength of the currency.
A slowdown in government payments of tax rebates to exporters had also discouraged many firms from exporting their goods earlier in the year. Many of those firms focused sales on the domestic market instead.
However, the government has been stepping up payment of export rebates to try to revive exports.
Imports inched up 3 percent to $11.31 billion in October from October 1995, the Business Daily said.
The import data showed that the impact of this year's tariff cuts has gradually weakened, it said.
In the first 10 months of this year, China's exports totalled $119.22 billion, mostly unchanged from the same 1995 period, the newspaper said. But imports added up to $107.21 billion, a rise of 5.5 percent from the year-ago period.
Japan, the United States and Europe remained China's largest export markets.
China's exports to Japan rose a year-on-year 8.6 percent to $24.5 billion in the first 10 months of this year, the daily said. Exports to the United States and Europe increased 5.5 percent and 4.5 percent to $21.3 billion and $18.9 billion respectively.
",3
"China said on Wednesday Japan was heading for confrontation with an election platform reiterating Tokyo's claim to disputed islands in the East China Sea but said it was not too late for Japan to stop its reckless gamble.
""Japan is turning a deaf ear to warnings and protests from China...and has embarked on the road to confrontation,"" the official China Daily said, commenting on the election platform of Japan's biggest political party, the Liberal Democratic Party (LDP).
""It is still not too late for Japan to stop this reckless gamble,"" the newspaper said in a commentary. ""It is high time for Japan to take measures to stop the game for the sake of the world and its own future.""
The LDP announced last week an election platform that reiterates Tokyo's claim to the East China Sea islands, which Tokyo calls the Senkakus and which Beijing and Taipei call the Diaoyus.
""Japan has not learnt the lesson of its militarist expansion and...it is going into another dangerous game,"" the newspaper said.
On Monday, about 300 Taiwanese and Hong Kong protesters aboard a 50-boat flotilla pierced a Japanese maritime cordon around the islands and briefly raised the flags of Beijing and Taipei on the rocky outcrops in a challenge to Tokyo's claim of sovereignty.
Japan has sought to calm passions in the dispute and asked China and Japan to prevent a recurrence of Monday's landings. Tokyo has said it would not recognise a lighthouse built on one of the islands by Japanese rightwingers this year.
Japanese rightwingers sailed to the islands in July and repaired the lighthouse, rekindling the dispute.
Chinese Foreign Ministry spokesman Shen Guofang on Tuesday accused Japan of taking an irresponsibile approach by encouraging landings on the islands by the rightwing groups.
Shen warned that the will of the Chinese people ""cannot be bullied"" and that sovereignty ranked above everything else.
The row was aggravated last week when a Hong Kong activist drowned after diving into stormy seas near the islands as part of a protest against Tokyo's sovereignty claim.
Tokyo's claim dates back to 1895, when it defeated imperial China and seized the uninhabited islands. Japan says the issue is not open for discussion.
China has claimed sovereignty over the islands for centuries.
Taiwan has no diplomatic ties with Japan, which only recognises Beijing's Communist government.
The China Daily commentary also slammed the LDP's election platform for containing an endorsement of visits by cabinet ministers to a Tokyo shrine to Japan's war dead.
""Japanese politicians have waged a war to reverse the verdict on Japan's war shame concluded by the world half a century ago,"" the commentary said.
Japanese prime minister and LDP leader Ryutaro Hashimoto in July broke a decade-long taboo on prime ministerial visits to Tokyo's Yasukuni Shrine, saying it was time for Japan to stop apologising for honouring its fallen soldiers.
""Such dishonest activities, which reinvigorate militarism, have naturally caused indignation in the war-victimised countries,"" the newspaper commentary said in reference to visits to the shrine by Japanese leaders.
Last week, Chinese Foreign Ministry spokesman Shen Guofang expressed strong indignation over the LDP's election platform.
",3
"China sent a senior official to attend a reception at the Ukraine embassy on Friday despite a diplomatic rift over a visit to Kiev by Taiwan's vice president Lien Chan.
But an apparent guest list mix-up left both sides unsure over who would represent Beijing at the reception, held to mark Ukraine's independence day.
Ukraine's ambassador thought Chinese Vice-Foreign Minister Tian Zengpei would attend, but the Chinese thought it was Vice-Foreign Minister Zhang Deguang.
Zhang, however, fell ill and Vice-Foreign Minister Tang Jiaxuan showed up instead.
The confusion followed Taiwan Vice President Lien Chan's three-day trip this week to Ukraine which infuriated Beijing.
""It was a misunderstanding...a mix-up,"" Ukrainian Minister-Counsellor Leonid Leshchenko told Reuters, referring to the guest list.
Asked if he saw it as an intentional slap on the wrist, Leshchenko shook his head and said: ""No, no no.""
A Chinese Foreign Ministry protocol officer said Tian, the vice-minister that the Ukrainians were expecting, was abroad.
Ukrainian diplomats noted that Tang, the vice-minister who attended, was filling in for Tian as the acting first vice-minister and was actually higher in rank than the person who fell ill.
Ukraine's Ambassador Anatoly Plyushko emerged from a half-hour chat with Vice-Minister Tang, and said the vice-minister told him that China attached ""great attention to bilateral relations"" and ""hoped to continue to develop"" ties.
Plyushko said the vice-minister did not raise the issue of Lien's three-day Kiev visit.
""All Chinese guests...invited came,"" Plyushko said. ""This is evidence...(of) their attitude towards our relations. I'm optimistic.""
The atmosphere was less pleasant on Wednesday when the Chinese Foreign Ministry summoned Plyushko to protest against Lien's trip.
China regards Taiwan as a rebel province with no right to conduct foreign relations on its own, and has sought to push it into diplomatic isolation since a civil war separated them in 1949.
The former Soviet republic of Ukraine recognises China but not Taiwan.
In apparent retaliation against Lien's visit, Chinese State Councillor Li Tieying, a member of the powerful Politburo of the ruling Communist Party, has postponed a visit to Ukraine.
In Kiev, Ukrainian Foreign Minister Hennady Udovenko took a shot at Beijing on Thursday, saying China had over-reacted to Lien's visit and calling Beijing's protest ""out of proportion"".
",3
"The mother of detained Chinese dissident Wang Dan said on Monday she would defend her son in court against the capital charge of plotting to overthrow the government.
""Two defence counsels are allowed...I will be one of them,"" Wang Lingyun, a 61-year-old researcher at a museum who has no background in law, told Reuters in an interview.
""Wang Dan also wants me to defend him,"" she said. Chinese laws allow accused to be defended by family members.
A court spokeswoman confirmed Wang Dan, 26, had been charged with plotting to overthrow the government but declined to give further details.
Wang Dan's mother said the court had yet to inform her of the trial date, but said it could come as early as this week.
She said she would defend her son against the charge of collaborating with overseas subversive forces.
""This charge does not stand up,"" she said, adding that Wang Dan had only taken a correspondence course at the University of California, Berkeley, in the United States.
""It has nothing to do with politics. I was the one who wanted him to attend the course...It has nothing to do with overthrowing the government,"" she said.
Asked to comment on the chances of winning, she said: ""I'm not optimistic. But I must say it for the record. This will become history.""
Relatives said last week they had found a lawyer willing to defend Wang after being given one day to find one.
The lawyer retained by the family would defend the dissident against other charges in the indictment.
Wang Dan, former leader of the 1989 pro-democracy demonstrations, has been charged with the capital offence of plotting to subvert the government, based on evidence such as writings critical of the state and accepting funds from abroad.
He was detained by police in a raid on his home in May 1995, but was not formally arrested or charged until last week.
On Friday, the family obtained a copy of the bill of indictment, which accused Wang Dan of plotting to subvert the government, a crime that carries a maximum penalty of death. The minimum sentence is 10 years, although the court can show leniency if it finds extenuating circumstances.
Wang has already served four years in prison for counter-revolutionary crimes, or subversion, for his role in the 1989 demonstrations centred in Beijing's Tiananmen Square, which were crushed by the army with heavy loss of life.
Wang had been expected to face new charges since last December, when the court that convicted veteran democracy activist Wei Jingsheng of plotting to overthrow the government also implicated the former student leader.
The court's verdict said Wei, who was jailed for 14 years, had links with people ""convicted of counter-revolutionary crimes, including Wang Dan"". It also referred to a tape-recorded conversation between Wang and Wei, but gave no details.
Wang had been active since his release from jail, defying persistent police surveillance and harassment to join in a daring appeal to communist leaders for the release of all those still in prison for their part in the 1989 protests.
",3
"China's former first lady Wang Guangmei auctioned her private antique collection on Tuesday and said she would use proceeds to help impoverished mothers.
Wang's collection, consisting of porcelain bowls and plates and a brush holder made of ivory dating back to the Qing (1644-1911) and Song (960-1279) dynasties, fetched 566,000 yuan ($68,000) at an auction at a Beijing hotel.
""My mother gave them to me ... They are priceless to me,"" Wang told Reuters.
She is the widow of former president Liu Shaoqi who died in prison during the chaotic 1966-76 Cultural Revolution.
The Sungari auction house had put the value of the antiques, some of which were Wang's dowry from her wealthy capitalist father, at up to 510,000 yuan ($61,000).
The collection was seized from Wang and eluded destruction by radical Red Guards during the Cultural Revolution. The authorities returned some of her collection when she was released from prison 11 years later.
""They were at Zhongnanhai or they would have all been smashed during the Cultural Revolution,"" Wang said. The Zhongnanhai compound in central Beijing still serves as home and office to many of China's leaders.
Liu, China's former president, was deposed during the Cultural Revolution and died in prison in 1969. He was rehabilitated posthumously in 1980.
Wang said she had deep emotional ties to the collection but these were outweighed by concerns for those living in poverty.
""I would be reluctant to part with what my mother left me without a reason ... (but) my heart aches even more when I see impoverished mothers,"" the former first lady said.
""It shouldn't be like this. The country led by our Communist Party cannot let families be this destitute,"" she said.
China has about 65 million people still struggling to get by with incomes under the official absolute poverty line of 530 yuan ($64) a year, officials say.
In September, Communist Party chief Jiang Zemin vowed to ""gnaw the hard bone"" of poverty by pouring funds into the drive to raise living standards for the poorest segment of the nation by the turn of the century.
The communists, who swept to power in 1949 on public resentment against widespread poverty and corruption, fear the widening gap between rich and poor today could spark social unrest and undermine its grip on power.
China says it reduced the number of people living in abject poverty by five million in 1995.
About 3,500 destitute mothers in western and southwestern China were expected to benefit from Tuesday's auction.
Proceeds would go to an anti-poverty fund headed by the former first lady to lend money to impoverished mothers to help them get started in farming, raise livestock or make handicrafts to earn a living in future, Wang said.
The fund would also provide education and give medical treatment to destitute mothers, she said.
",3
"China has retired its navy and air force commanders due to old age, a source familiar with the reshuffle said on Tuesday.
Admiral Zhang Lianzhong and Lieutenant General Yu Zhenwu, both 65, have stepped down as navy and air force commanders respectively, said the source who spoke on condition of anonymity.
Zhang was replaced by navy deputy commander Rear Admiral Shi Yunsheng, 56, the source said. Yu was succeeded by air force deputy commander Liu Shunyao, believed to be in his early 50s.
Communist Party boss Jiang Zemin approved the reshuffle in October in his capacity as chairman of the party's Central Military Commission, or commander-in-chief of the People's Liberation Army (PLA), the source said.
Asked if the reshuffle was intended to further consolidate Jiang's power in the military, the source said Zhang and Yu retired due to old age.
""It's professionalisation of the military,"" the source said.
However, a Chinese analyst said the four vice-chairmen of the Central Military Commission were already aged between 67 and 82 and still active. The two youngest vice-chairmen were appointed by Jiang.
Both the new appointees are believed to be proteges of Jiang, another analyst said. Jiang ordered the promotions of Shi and Yu to navy and air force deputy commanders in January, 1995 and December, 1994 respectively, the analyst said.
Some diplomats and Chinese analysts have dismissed Jiang as a transitional figure lacking the personal clout, political power base and administrative ability to step into the shoes of paramount leader Deng Xiaoping after the death of the 92-year-old patriarch.
But Jiang, who has no military pedigree, has moved in recent years to shore up his position in the military with a string of reshuffles.
The PLA is the world's largest armed force with three million members.
It is believed to be planning to pare that number by 500,000 in a streamlining that reflects the end of the Cold War and a desire to redirect state funds to economic development.
",3
"Chinese President Jiang Zemin tried to reassure Taiwanese businessmen on Thursday, saying Beijing would not allow political differences to stand in the way of trade and investment.
""We maintain that political differences should not be allowed to affect and interfere with economic cooperation between the two sides,"" state radio quoted Jiang as telling visiting Taiwanese business leaders.
The economies of China and Taiwan were complementary, Jiang said, adding that the two sides should strengthen economic cooperation to benefit the entire Chinese race.
""We will continue to carry out our long-time policy of encouraging Taiwanese businessmen to invest,"" Jiang was quoted as saying. ""No matter what the circumstances, we will protect all legitimate rights of Taiwanese investors.""
A delegation of nearly 80 Taiwanese business leaders and politicians arrived in Beijing on Tuesday for a high-profile visit. Taiwanese economic officials are part of the delegation in a private capacity.
Taiwan has banned direct trade, transport and mail links with China since 1949 when the nation's Nationalist rulers fled to the island after their defeat by the communists.
Indirect trade and investment has been allowed since the late 1980s, usually through Hong Kong.
Jiang said China has always sought to speed up the establishment of direct trade and transport links with Taiwan.
Beijing has stepped up pressure on the island to lift the ban. Last week it unilaterally announced a set of regulations to pave the way for direct links.
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.
Kao Ching-yuan, head of the delegation, urged Beijing on Wednesday to resume talks with Taiwan, saying the island's investors would lose confidence in China if political friction impeded ties.
The talks were suspended last year after Taiwan's President Lee Teng-hui made a landmark trip to the United States. Beijing views the island as a rebel province and insists it is not entitled to official links with other states.
Kao, vice-chairman of President Enterprises, a major Taiwanese conglomerate, was quoted by state television as saying the Chinese market had great potential and many Taiwanese businessmen were pushing for expanded economic cooperation.
President Enterprises is Taiwan's biggest investor in China.
Kao's visit came less than two weeks after Taiwan's President Lee called for a review of economic policy toward China with the aim of avoiding overdependence on the mainland.
The Taiwanese delegation was the largest to visit China since a trend of easing tensions was reversed by Lee's mid-1995 U.S. visit.
",3
"A Chinese court has rejected the appeal of veteran dissident Liu Nianchun against a labour camp term for writing petitions, saying freedom of speech must not endanger the security of the state.
Beijing's Chaoyang District Court rejected Liu's lawsuit on Monday on the grounds that a petition he initiated in 1995 ""contained attacks against the people's government"", said a copy of the verdict seen by Reuters on Tuesday.
The petition ""exceeded the limits of the constitution and the law"", the verdict said.
Liu had argued in his appeal that the constitution guaranteed his right to freedom of speech.
The court rejected Liu's argument, saying freedom of speech ""must not endanger the security, honour and interests of the state"", the verdict said.
Liu's wife, Chu Hailan, said she would appeal even though chances of victory were slim. She has 15 days in which to file an appeal.
""I will definitely appeal. This is our right,"" Chu said by telephone on Tuesday. She attacked the court ruling as ""unfair... not objective and unjust"".
Chu said that during the visit of U.S. Secretary of State Warren Christopher to China last month police had shunted her to a labour camp in the northeastern province of Heilongjiang where her husband is held to prevent her meeting U.S. officials.
""It's a very desolate place. Life's awfully hard there,"" she said. ""Liu Nianchun... eats only two meals a day.""
She said her husband was sharing a 14-square-metre (150 square-ft) cell with 15 other people.
Last July, police ordered Liu, 48, to serve three years of re-education through labour on top of nearly one year in detention for drafting the petition, which urged the government to re-evaluate its crackown on student demonstrators in Tiananmen Square on June 4, 1989, and to free all political prisoners.
He was also accused of accepting illegal aid from human rights organisations abroad and of trying to form a group to promote protection of workers' rights.
Re-education through labour is a form of administrative punishment that can be imposed by the authorities without recourse to prosecutors or the courts.
Western human rights activists say it is increasingly favoured by the authorities as a way of removing dissidents from circulation without the complications and publicity of a trial.
Liu took part in the Democracy Wall movement of the early 1980s and was sentenced in 1981 to a three-year jail term for ""counter-revolutionary propaganda and incitement"", or subversion.
Prominent dissident and former student leader Wang Dan, who drafted the petition together with Liu, was sentenced to 11 years in prison last month for conspiring to subvert the government -- a sentence that triggered international condemnation.
China dismisses criticism of its human rights record as interference in its internal affairs.
The Chinese authorities have dealt crushing blows to the struggling democracy movement in recent months.
Most dissidents have already been forced into exile or are serving long sentences in prison or in labour camps.
Three pro-democracy activists are currently standing trial on charges of counter-revolutionary propaganda and incitement in Hefei, capital of the central province of Anhui.
In the southern boomtown of Shenzhen that adjoins Hong Kong, two labour activists are standing trial for conspiring to subvert the government.
",3
"China called on Taiwan on Tuesday to show goodwill by lifting a decades-old ban on direct trade and transport links, saying attempts by the island nation to block such links would be futile.
""Obstructing the three links between the two sides...will be futile...is against the will of the people on both sides,"" a commentary by the Xinhua news agency said of Taiwan's ban on direct trade, transport and mail links with China.
""(We) hope the Taiwan authorities can make a pragmatic, goodwill response,"" said the commentary carried by major newspapers on Tuesday.
Last week, China introduced a series of regulations to pave the way for direct shipping links.
Taiwan has banned direct trade, transport and mail links with China since Mao Zedong's communist army defeated and drove Chiang Kai-shek's Nationalist troops to the island at the end of a civil war in 1949.
Indirect links between the two sides have been allowed since the late 1980s through Hong Kong or a third country.
The commentary accused the Taiwan authorities of creating obstacles to direct trade and transport links in recent years, saying this would not be conducive to prospects for peaceful reunification. The commentary did not explain how it would not be conducive.
China regards Taiwan as a renegade province and has threatened to invade if the island declared independence. It has also sought to push Taipei into diplomatic isolation.
Many Taiwanese businessmen, who have poured more than $20 billion into China, clamour for direct trade and transport links, but Taiwan has been reluctant to lift the ban, which it views as its last bargaining chip in talks with the communists.
Taiwan says it is committed to reunification but stresses this cannot be achieved overnight.
Last week China heaped pressure on Taiwan by offering to hold political talks to end almost five decades of hostility.
Nearly 80 prominent Taiwanese business leaders and politicians were scheduled to arrive in Beijing on Tuesday for a a high-profile, 12-day visit, despite reservations voiced by the island's leaders about depending too heavily on China.
The visit has aroused attention because the delegation is led by Kao Ching-yuan, a senior member of Taiwan's ruling Nationalist Party and vice-chairman of President Enterprises, the island's biggest investor in China.
Taiwanese newspapers said Kao would meet Chinese President Jiang Zemin and other senior officials.
The trip comes less than two weeks after Taiwan's President Lee Teng-hui called for a review of economic policy toward China with the aim of avoiding over dependence on the mainland.
The China Times Express newspaper in Taipei said on Sunday that Taiwan's economic planners had drawn up measures -- including contingency plans to restrict Taiwanese investment on the mainland -- if Taiwan-China relations deteriorate.
The Taiwanese delegation would be the largest to visit China since easing tensions across the Taiwan Strait began to fray in mid-1995 over a landmark, private visit by Taiwan's President Lee to the United States.
In apparent retaliation, China denounced Lee and held intimidatory war games off Taiwan before the island's historic presidential elections in March in which Lee was re-elected.
",3
"A Chinese court on Friday will consider the appeal of dissident Wang Dan against his 11-year sentence for plotting to overthrow the government, a hearing held days before a visit by U.S. Secretary of State Warren Christopher.
The Beijing Higher People's Court was widely expected to reject the 27-year-old dissident's appeal and uphold his conviction, Chinese lawyers said. In China, appellate courts rarely overturn rulings by lower courts.
Asked what the chances were of an acquittal, Wang's mother, Wang Lingyun, told Reuters on Thursday: ""I feel there's practically none. There is no precedent.""
Wang's appeal comes four days before the scheduled arrival of the U.S. secretary of state, who diplomats say was expected to raise human rights issues in his meetings with Chinese leaders during his November 19-21 visit.
Sino-U.S. relations have been strained over the last year by a range of issues from human rights to Taiwan to arms proliferation and trade.
Chinese Foreign Ministry spokesman Cui Tiankai told a briefing on Thursday that Wang's trial had no bearing on Sino-U.S. relations because it involved a Chinese citizen and not an American.
Beijing has slammed Western criticism of its human rights record as interference in its internal affairs.
Christopher would not be not alone in bringing up Beijing's shortcomings in human rights.
Former British prime minister Margaret Thatcher said on Thursday that harsh sentences slapped on Wang and Wei Jingsheng, widely known as the father of China's modern democracy movement, had caused dismay in the international community.
""The recent harsh sentences imposed on Mr Wei and Mr Wang have caused dismay in the wider world,"" Thatcher told a business conference in Beijing.
Last week, Swedish Prime Minister Goran Persson said he had expressed his misgivings over the jailing of Wang to his Chinese counterpart, Li Peng.
Wang's mother said court officials had told her that she would be able to attend her son's hearing as one of two defence lawyers, but she would not be allowed to speak. She has submitted a written defence.
The dissident's father and older sister would also be allowed to sit in on the hearing at the appellate court in Beijing, the mother said.
""If we don't go, Wang Dan would feel even more isolated. Our going is spiritual encouragement for him,"" the mother said.
The dissident's lawyer is unlikely to attend because only Wang would be allowed to speak.
The jailing of Wang was the latest in a series of crushing blows to China's struggling pro-democracy movement. Most dissidents have already been forced into exile or are serving long sentences in prison or labour camps.
The lower court took less than four hours to convict and sentence Wang on October 30.
Wang had already served four years in prison for his role as a leader of student demonstrations for democracy that were crushed by the military with heavy loss of life in 1989.
The New York-based Human Rights in China has denounced what it said was the ""secret trial"" of Wang on a trumped up charge.
China said it was an open and fair trial but Human Rights in China said no foreign reporters, diplomats or other international observers were allowed to attend.
There has been no mention of Wang's conviction in the local Chinese-language media.
",3
"Bankruptcies in China -- unheard of for almost four decades -- are expected to more than double in number this year as authorities try to shed hopelessly indebted firms.
The figure is expected to rise even further next year as officials become more determined not to subsidise loss-making state firms.
More than 5,200 Chinese companies were expected to go under in 1996, up from 2,200 in 1995 or more than the previous six years put together, Cao Siyuan, architect of China's bankruptcy law, said.
""Whether enterprises are psychologically prepared for it or not, the rate of bankruptcies gradually increasing is unavoidable,"" Cao said in a recent interview.
In the first half of this year, 1,692 enterprises declared bankruptcy, soaring by more than 107 percent compared with the year-ago period, said Cao, who now runs a consultancy to help enterprises seeking to merge or go bankrupt.
A total of 1,625 firms declared bankruptcy in 1994, up from 710 in 1993, 428 in 1992, 117 in 1991 and 32 in 1990.
China passed a breakthrough bankruptcy law in 1988 in the first flush of an ambitious campaign to force lumbering state-owned enterprises to sink or swim in the marketplace.
However, official fears of mass unemployment and social unrest if loss-making firms are allowed to go under has hampered implementation of the bitter medicine.
But China was expected to accelerate bankruptcies and mergers of state firms next year to reduce the burden on state coffers and slash subsidies to state enterprises.
There is little need for alarm for the ever-increasing number of bankruptcies because it is only a fraction of the total number of enterprises, said Cao.
""One can't say it's too big,"" Cao said of the number of insolvent enterprises. ""Currently, the bankruptcy rate is less than 0.1 percent (of the total number of firms)... One percent is normal.""
About one percent of China's estimated 100,000 state enterprises were hopelessly in debt and completely unattractive to investors looking for cheap companies to purchase or to merge with, Cao said.
In Huangshi city in the northern province of Hubei, about 80 percent of medium- and large-size state enterprises are losing money, the official People's Daily said.
China's state sector reported a historic net loss of 3.0 billion yuan ($361.4 million) in the first quarter, the first such deficit since the country embraced paramount leader Deng Xiaoping's economic reforms in 1979.
The government allocated 20 billion yuan this year to write off bad debts of state firms which go under, but this is hardly enough, the People's Daily said.
In Wuhu city in the central province of Anhui, 420 million yuan is needed to write off the bad debts of 35 state firms, but only 50 million yuan has been allocated, the newspaper said.
""Mergers and bankruptcies... are roads without detour,"" the People's Daily, mouthpiece of the ruling Communist Party, said.
""(Enterprises) which should die should be allowed to die,"" the newspaper said. ""Mergers and bankruptcies are a reform in which we have more to gain than lose.""
But bankruptcies and mergers must guard against social unrest, debt evasion and theft of state assets, it said.
($1 = 8.3 yuan)
",3
"China has vowed to curb the influence of Buddhism in Tibet, saying religion would have to bow to socialism.
Monks outnumbered students and more money was spent on monasteries than on Communist Party buildings in the Himalayan region, the official Tibet Daily said in an edition seen in Beijing on Wednesday.
""In the basic interest of the Tibetan people, further development of temples, monks and nuns cannot be without restrictions,"" the newspaper said.
""Satisfying the basic needs of believers will do.""
There were 1,787 temples in the restive region by early 1996, with 46,000 monks and nuns -- exceeding the number of high school students in the region, the newspaper said. It gave no comparative figures.
China has shut many temples in Tibet in recent years to uproot the influence of the region's spiritual god-king, the Dalai Lama, who fled into exile in India in 1959 after an abortive uprising against communist rule.
Socialism must take precedence over religion, the newspaper said.
""Religion must adapt to the development needs of socialism and not socialism adapting to the needs of religion. We must remain clear-headed on this principle,"" it said.
The Dalai Lama won the Nobel Peace Prize in 1989 for his non-violent campaign for autonomy for his homeland, but Beijing views international support for Tibet's holiest man as a Western plot to return the region to feudal rule and split China.
Beijing says the Dalai Lama is a political activist and not a purely religious figure.
""International anti-Chinese forces use the Tibet issue to contain China's development and (the Tibet issue) is an important means to 'Westernise' and 'divide' China,"" the newspaper said.
""Some temples are directly or indirectly controlled by the Dalai Lama clique and become the headquarters and venue of separatist forces at home and abroad,"" the newspaper said.
""Since 1987, elements creating disturbances and sabotaging stability have been mainly law-breaking monks and nuns.""
Tibet has been rocked by repeated anti-Chinese protests that Beijing charges are stirred up by supporters of the Dalai Lama.
The newspaper also complained that monks did not contribute to economic growth.
""It goes without saying that such a large number of strong young people relying on alms from the masses and not engaging in productive work has a negative effect on social and economic development,"" the newspaper said.
""Money spent on renovating temples is more than money spent on building or repairing Communist Party and government buildings,"" it said.
Beijing, eager not to antagonise all of the Buddhist clergy, has pumped 53 million yuan ($6.4 million) into its five-year renovation of the sprawling Potala Palace, winter home of the Dalai Lamas for centuries.
",3
"The mother of detained Chinese dissident Wang Dan said on Monday she would defend her son against the capital charge of plotting to overthrow the government and that he was prepared for a heavy sentence.
""Two defence counsels are allowed...I will be one of them,"" Wang Lingyun, a 61-year-old researcher at a museum who has no background in law, told Reuters in an interview.
""Wang Dan also wants me to defend him,"" she said. Chinese laws allow accused to be defended by family members.
A court spokeswoman confirmed Wang Dan, 26, had been charged with plotting to overthrow the government but declined to give further details.
Wang Dan's mother said the court had yet to inform her of the trial date, but said it could come as early as this week.
The dissident, detained without charge since May 1995, met his mother for the first time under police surveillance at a detention centre in Beijing, the Hong Kong-based Information Centre of Human Rights and Democratic Movement in China said.
""Wang Dan...was very calm and psychologically prepared for a heavy sentence,"" the group quoted the mother as saying. She added that she was worried about her son's health.
She told Reuters earlier that she would defend her son against the charge of collaborating with overseas subversive forces. ""This charge does not stand up,"" she said, adding that Wang Dan had only taken a correspondence course at the University of California, Berkeley, in the United States.
""It has nothing to do with politics. I was the one who wanted him to attend the course...It has nothing to do with overthrowing the government,"" she said.
Asked to comment on the chances of winning the case, she said: ""I'm not optimistic. But I must say it for the record. This will become history.""
Relatives said last week they had found a lawyer willing to defend Wang after being given one day to find one.
The lawyer retained by the family would defend the dissident against other charges in the indictment.
Wang Dan, former leader of the 1989 pro-democracy demonstrations, has been charged with the capital offence of plotting to subvert the government, based on evidence such as writings critical of the state and accepting funds from abroad.
He was detained by police in a raid on his home in May 1995, but was not formally arrested or charged until last week.
On Friday, the family obtained a copy of the bill of indictment, which accused Wang Dan of plotting to subvert the government, a crime that carries a maximum penalty of death. The minimum sentence is 10 years, although the court can show leniency if it finds extenuating circumstances.
Wang has already served four years in prison for counter-revolutionary crimes, or subversion, for his role in the 1989 demonstrations centred in Beijing's Tiananmen Square, which were crushed by the army with heavy loss of life.
Wang had been expected to face new charges since last December, when the court that convicted veteran democracy activist Wei Jingsheng of plotting to overthrow the government also implicated the former student leader.
The court's verdict said Wei, who was jailed for 14 years, had links with people ""convicted of counter-revolutionary crimes, including Wang Dan"". It also referred to a tape-recorded conversation between Wang and Wei, but gave no details.
Wang had been active since his release from jail, defying persistent police surveillance and harassment to join in a daring appeal to communist leaders for the release of all those still in prison for their part in the 1989 protests.
",3
"A Tibetan nun has had her jail term doubled to 18 years for refusing to recognise Beijing's choice as the reincarnation of the region's second holiest monk, the Tibet Information Network (TIN) said on Monday.
The sentence of 19-year-old Ngawang Sangdrol, jailed since she was 15, was doubled in July, partly because she refused to accept Beijing's choice as the Panchen Lama, according to the London-based TIN, which monitors human rights in the Himalayan region.
""Ngawang...is now facing (more time) in jail than any other female political prisoner in Tibet,"" TIN said. She is due for release in the year 2010.
Officials reached by telephone in the Tibetan capital of Lhasa denied knowledge of the report.
The 10th Panchen Lama died in 1989, and Beijing has anointed a six-year-old boy as his reincarnation.
The Dalai Lama, Tibet's exiled spiritual leader, has named another six-year-old boy as the 11th Panchen Lama, and many Tibetans see the Beijing-backed child as a pretender.
Beijing's choice is in the Chinese capital under state protection against any possible assassination attempts by radical Tibetans, Chinese sources have said.
China denies there are political prisoners in Tibet and says foreign critics of its human rights record are interfering in its internal affairs.
Ngawang is already serving nine years -- three years for taking part in a pro-independence demonstration in 1992 and six years for singing nationalist songs in prison in 1993, according to TIN.
Her sentence was doubled in part because she refused to tidy her cell in Lhasa's Drapchi prison in March in apparent protest against a political re-education campaign, TIN said.
The campaign is designed to force prisoners to accept Beijing's choice as the reincarnated Panchen Lama.
Ngawang also refused to stand up in the presence of a Tibetan official, Brigade Commander Khandrol Jangpe, TIN said.
The human rights group, which had reported in August that Ngawang was on a restricted diet and confined in a cell with no windows, said it had only recently received confirmation of the longer jail term through a former prisoner who fled Tibet.
China has vowed to curb the influence of Buddhism and the Dalai Lama in Tibet, saying socialism must take precedence over religion.
The Dalai Lama, the most revered figure in Tibetan Buddhism, fled into exile in India in 1959 after an abortive uprising against communist rule. He won the Nobel Peace Prize in 1989 for his non-violent campaign for autonomy for his homeland.
State media have complained that monks and nuns outnumber high school students and that too much money was spent on the region's monasteries.
",3
"China pledged on Wednesday to curb a rush by provinces to invest in high-profile industries, but economists said defiance from regional authorities would impede attempts by the central government to restructure the economy.
The People's Daily, mouthpiece of the ruling Communist Party, said many new state enterprises were doomed from the beginning due to blind investment in many provinces.
""From the day production began, (many enterprises) entered a vicious cycle of high investment, high consumption of resources, low production efficiency and poor management,"" the newspaper said in a front-page commentary.
Many old enterprises, unable to upgrade their technology, lose their competitive edge and become inefficient, it said.
The newspaper said blind investment was widespread, citing 22 provinces that listed car production as one of their pillar industries in their Five-Year Plan between 1996 and 2000 and the plan for 2010.
Twenty-four provinces listed electronics as one of their pillar industries through 2000, and 16 provinces said they would concentrate on machinery and chemicals, the newspaper said.
""This has been a major problem for China's economy for a long time,"" economist Mao Tianqi said in a telephone interview when asked about the blind investment.
Blind investment had also led to monopolies and local protectionism, with many provinces banning competitive products from neighbouring regions, the newspaper said.
It said China's economic structure was ""unreasonable"", with too many small enterprises, not enough large enterprises, too many low-end products and insufficient high technology items.
The central government planned to restructure the economy next year to curb concentration in high-profile industries and to boost efficiency, the newspaper said.
""Restructuring the economy...is a mission of extreme importance,"" it said.
The central government would try to divert investment into the manufacturing of products with big demand as well as high technology products, the newspaper said. It did not elaborate.
The government would try to break monopolies by encouraging joint ventures among provinces, the newspaper said, adding that business groups would be encouraged to shed affiliates that are not related to production, such as hospitals and kindergartens.
""There are many difficulties and contradictions in adjusting and improving the economic structure, but...the State Council's (cabinet's) determination will not waver,"" the newspaper said.
But economist Mao was not optimistic.
""This is not a problem that can be resolved in one year,"" Mao said.
Many local governments would defy or skirt decisions by the central government to limit investment in certain industries to a few regions, he said.
About one percent of China's estimated 100,000 state enterprises are hopelessly in debt and unattractive to investors looking for cheap companies to buy or to merge with.
The government has been dragging its feet on bankruptcies due to fears of mass unemployment and social unrest.
However, the number of bankruptcies in China -- unheard of for almost four decades -- was expected to more than double to 5,200 this year, or more than the total of the previous six years put together.
",3
"China will defrock radical monks in Tibet in a crackdown that could last up to five years in a bid to uproot the influence of the Dalai Lama in his Himalayan homeland, a Chinese propaganda official said on Thursday.
""Lamas who are comparatively reactionary will be told to return to secular life,"" the propaganda official said by telephone from Tibet's capital, Lhasa.
""Reorganisation of monasteries... will consist mainly of ideological education... It could continue for three to five years,"" said the official, who declined to identify himself.
China has vowed to curb the influence of Buddhism and the Dalai Lama, Tibet's exiled god-king, in the region, saying religion must conform to socialism instead of the other way round.
Atheist China views religion as feudal superstition though it tolerates a limited degree of religious freedom.
""Religious culture... not only hampers social development and economic development, but also stops people becoming more civilised,"" the official Tibet Daily said in an edition seen in Beijing on Thursday.
The newspaper complained last week that monks in Tibet outnumbered students and more money was spent on monasteries than on Communist Party buildings.
""Monasteries will not be closed... (but) work teams will enter and be stationed at monasteries,"" the propaganda official said.
For several months, China has been stationing ""work teams"" in Tibetan monasteries. The teams force monks into study sessions on becoming more ""patriotic"" and into signing pledges supporting Chinese authorities.
""Those aspects of religion which fail to adapt to social development and impede social progress will be eliminated... to prevent the Dalai Lama from using religion to engage in splittist activities,"" the official said.
There were 1,787 temples in Tibet by early 1996, with 46,000 monks and nuns -- exceeding the number of high school students in the region, the Tibet Daily has said.
The newspaper has complained that healthy young Tibetans were entering the clergy and living off alms instead of working.
China has shut many temples in Tibet in recent years to try to eradicate the influence of the Dalai Lama, who fled into exile in India in 1959 after an abortive uprising against communist rule.
The Dalai Lama won the Nobel Peace Prize in 1989 for his non-violent campaign for autonomy for his homeland, but Beijing views international support for Tibet's holiest man as a Western plot to split China and contain its development.
Beijing says the Dalai Lama is a political activist and not a purely religious figure.
""The spiritual realm is the main battlefield of our struggle against the Dalai Lama clique,"" the Tibet Daily said.
The newspaper said last week some temples in Tibet were controlled by supporters of the Dalai Lama and had become the headquarters and venue of separatist forces at home and abroad to engage in separatist activities.
It blamed monks and nuns for creating disturbances and sabotaging stability since 1987. Tibet has been rocked by repeated anti-Chinese protests that Beijing charges are stirred up by the Dalai Lama's supporters.
",3
"Chinese dissident Wang Dan has appealed against his 11-year jail sentence for plotting to subvert the government, but his mother said on Tuesday she held little hope of an acquittal or a lighter sentence.
Wang Lingyun said she hoped U.S. Secretary of State Warren Christopher and German President Roman Herzog would raise her son's predicament in their meetings with Chinese leaders when they visit China later this month.
""Wang Dan... should be acquitted because... he's innocent,"" she told Reuters by telephone. ""We hope for an acquittal or a reduced sentence... but it is unlikely.""
Wang Lingyun, who acted as one of two defence lawyers in her son's case, said court officials had asked her to submit a written defence for the appeal and that family members may not be allowed to attend the appeals court trial.
Experts on China's legal system have said the chances of the appeals court overturning the lower court's verdict were slim.
An official of the Beijing Higher People's Court said the 27-year-old dissident had filed his appeal. She declined to provide further details.
The Beijing Number One Intermediate People's Court took less than four hours last Wednesday to convict and sentence Wang, who had already served four years in prison for his role as a leader of the 1989 student demonstrations for democracy that were crushed by the military with heavy loss of life.
On Monday, visiting Swedish Prime Minister Goran Persson said he had expressed his disapproval to Chinese Premier Li Peng over the jailing of Wang.
A foreign ministry spokesman defended China at a news briefing on Tuesday, saying Beijing would not impose its laws on others and that foreign countries should take a similar stance.
The spokesman also said China opposed using human rights as a pretext to interfere in the internal affairs of any country.
An international human rights group denounced what it said was the ""secret trial"" of Wang on a trumped-up charge.
""What (the court) brought to bear on Wang Dan was a secret trial in which the facts were deliberately hidden and the truth distorted,"" the New York-based Human Rights in China said in a statement made available to Reuters by facsimile.
""A fabricated charge was used to wantonly convict Wang Dan,"" the group said. ""Wang Dan's case... is suppression and persecution of thought and speech by the Chinese government.""
When told during the trial of his right to seek the removal of any biased judges, Wang demanded all judges and prosecutors be removed from the case. The tribunal rejected his request after a few minutes of deliberation, the group said.
China said it was an open and fair trial but Human Rights in China said no foreign reporters, diplomats or other international observers were allowed to attend.
The group said more than 10 people wearing tags identifying themselves as reporters attended the trial but there was no mention of the conviction in the local Chinese-language media.
The jailing of Wang was the latest in a series of crushing blows to China's struggling pro-democracy movement. Most dissidents have already been forced into exile or are serving long sentences in prison or labour camps.
Human Rights in China accused the official Xinhua news agency of preparing English-language stories about the results of the trial and an interview with the chief judge even before the verdict was delivered.
Asked to comment, an official of the foreign affairs office of Xinhua said: ""It is not necessary to find out whether the story was prepared before or after the sentencing... News agencies have different ways and practices of releasing news.""
After breaking the news of Wang's conviction, it took Xinhua only 1-1/2 hours to put out a 54-paragraph story on the interview with the chief judge.
",3
"Taiwanese business leader Kao Ching-yuan on Wednesday urged Beijing to resume talks with Taiwan, saying the island's investors would lose confidence in China if political friction impeded relations.
""If the relations between the two sides are kept at a low ebb due to political and ideological problems... Taiwanese businessmen will lose confidence because of higher risks,"" said Kao, vice-chairman of President Enterprises, Taiwan's biggest investor in China.
Chinese Vice-Premier Li Lanqing earlier told the same seminar in Beijing no one could stand in the way of direct trade and transport links between China and Taiwan which have been banned by the island since 1949.
Kao is heading a delegation of nearly 80 prominent Taiwanese business leaders and politicians who arrived in Beijing on Tuesday for a high-profile visit. Taiwanese economic officials are visiting in a private capacity.
Kao called for the resumption of talks suspended last year after Taiwan's President Lee Teng-hui made a landmark trip to the United States. Beijing regards Taiwan as a rebel province and has sought to push the island into diplomatic isolation.
""I would like to suggest here... that the two sides resume as soon as possible talks on trade and investment,"" Kao said.
Taiwanese newspapers said Kao would meet Chinese President Jiang Zemin and other senior officials during the current trip, which comes less than two weeks after President Lee called for a review of economic policy toward China with the aim of avoiding overdependence on the mainland.
Taipei's China Times Express newspaper said on Sunday that Taiwan's economic planners had drawn up measures -- including contingency plans to restrict Taiwanese investment on the mainland -- if Taiwan-China relations deteriorated.
Li, the Chinese vice-premier, took a swipe at President Lee, saying no one could block direct trade and transport links between China and Taiwan, rivals from the time of the Chinese civil war that ended in 1949.
""Economic development between the two sides is the general trend and no single person can obstruct this,"" Li said.
""Any person who tries to place artificial barriers to restrict economic cooperation is going against the will of the people of the two sides,"" he said.
He also told the seminar he hoped Taiwan authorities would allow direct links as soon as possible.
Indirect links between the two sides have been allowed since the late 1980s, through Hong Kong or a third country.
Many Taiwanese businessmen, who have poured more than $20 billion into China, are eager for direct trade and transport links. But Taiwan has been reluctant to lift the ban, which it views as its last bargaining chip in talks with the communists.
China has been pressing Taiwan to open direct links. Last week, China introduced a series of regulations to pave the way for direct shipping links.
The Taiwanese delegation is the largest to visit China since a trend of easing tensions was reversed by Taiwan President Lee's mid-1995 visit to the United States.
",3
"A son-in-law of China's paramount leader Deng Xiaoping has resigned as director of the armament department of the People's Liberation Army (PLA), Chinese sources with close ties to the military said on Sunday.
Major General He Ping, husband of Deng's youngest daughter Deng Rong, quit the post recently after his hopes for promotion were dashed, one source said.
""He Ping was unhappy... He wanted to become deputy chief of general staff, but the Central Military Commission would only make him assistant chief of general staff initially,"" the source, who requested anonymity, told Reuters.
The assistant chief of general staff is one rank below the deputy chief of general staff.
Another source said a replacement had been named to succeed He Ping as director of the armament department, which supplies equipment to the three million-strong PLA.
The commission's refusal to give Deng's son-in-law the post he wanted was not so much a blow to the first family as it was a boost to the position of Communist Party boss Jiang Zemin.
""It was not so much as a challenge to Deng Xiaoping. Rather, it was a sign that Jiang Zemin is now more powerful,"" the second source said.
The first source agreed. ""Jiang Zemin does not have to do everything Deng Xiaoping says,"" the source said of the commission's decision not to promote He Ping to deputy chief of general staff.
Jiang, who is chairman of the commission, has moved in recent years to shore up his position by appointing allies to key military positions and shrug off Deng's shadow.
Deng, 92, no longer holds any office but remains highly influential. He has not been seen in public since early 1994.
The paramount leader vouched for his son-in-law, whose company was alleged to have been involved in the smuggling of the biggest haul of automatic weapons in U.S. history.
""Deng Xiaoping spoke. He said: 'It was not He Ping's fault'... He Ping does not have any more problems,"" the first source said of the arms smuggling scandal.
""It was a trap by the United States,"" the source said of the arms seizure. Many communist officials harbour deep suspicions of the United States and the view that the arms seizure was a U.S. conspiracy to undermine China.
China's two top government-run arms merchants, Polytechnologies Ltd and China North Industries Corp (Norinco), have rejected U.S. charges they were involved in the scandal.
He Ping is president of Poly Group, which is owned by the PLA's armament department. Poly Group subsidiary Polytechnologies is a joint venture with China's flagship multinational China International Trust and Investment Co and headed by Wang Jun, son of a late vice-president and close associate of Deng.
Norinco is a civilian organisation that has no direct relationship with the army but supplies it with arms.
In March, U.S. federal agents seized a shipment of 2,000 AK-47 fully automatic machine guns and 4,000 ammunition magazines, with a street value of more than $4 million.
U.S. agents arrested at least seven people, including executives of Norinco, in May and charged them with involvement in the ring.
The seizure was the culmination of a 16-month investigation of senior officials, based in both the United States and China, of Norinco and Polytechnologies.
The suspects had offered to sell much more powerful weapons to undercover agents, including mortars, rocket launchers, machineguns and a surface-to-air missile, U.S. officials have said.
",3
"China announced on Thursday that a court had rejected the appeal by a son of one of the country's politically powerful families, upholding a suspended death sentence for bribery.
The court showed leniency to Zhou Beifang, 43, former chairman of Hong Kong-listed affiliates of the giant state-owned Capital Iron and Steel Corp (Shougang), because he showed remorse, the official Xinhua news agency said.
Zhou's death sentence was suspended for two years. Such suspensions usually mean the sentence will not be carried out if the prisoner repents and cooperates with authorities.
Zhou is one of China's so-called ""princelings"", or children of the ruling party elite, who enjoy wide influence due to their top level connections.
The Zhou family has close ties to the family of paramount leader Deng Xiaoping.
The court also showed leniency because Zhou voluntarily returned ill-gotten wealth even before prosecutors obtained evidence against him, Xinhua said.
Zhou was convicted of accepting bribes totalling 9.28 million Hong Kong dollars ($1.2 million) between June 1993 and April 1994, Xinhua said. It gave no details of who paid Zhou the bribes or why.
He was also found guilty of paying 1.2 million yuan ($144,600) in bribes to three people, including two former officials of the Beijing city government, so that his wife and daughter could move to the British colony, it said.
Xinhua quoted the Supreme Court as announcing the decision though it was the appeals court that handed down the verdict.
The agency gave no explanation. It did not say when Zhou was convicted, when he appealed or why his appeal was turned down.
Court officials reached by telephone declined comment.
State television showed a grim Zhou wearing a stylish, striped blue shirt and examining documents held by a court policeman as a court tribunal looked on.
Zhou's conviction was part of a highly-publicised anti-graft campaign launched by China last year. It led to the suicide of a Beijing vice-mayor in April 1995 and the fall of his mentor, former Beijing Communist Party boss Chen Xitong.
Zhou's father, Zhou Guanwu, 78, resigned as chairman and Communist Party secretary of Shougang in February 1995, citing old age. He stepped down days after his son's detention.
The court also rejected the appeal of co-defendant Chen Jian, 39, former deputy director of the General Office of the Communist Party's Beijing Municipal Committee. It upheld his 15-year prison sentence for accepting bribes from Zhou, Xinhua said.
Another former official of the Beijing city government, Li Min, did not appeal against his sentence of life imprisonment, also for accepting bribes from Zhou, the agency said.
In a related case, the court rejected the appeal of businessman He Shiping, who was sentenced to 16 years for accepting bribes. A fifth defendant, who was given five years in prison, did not appeal, it said.
Television showed lengthy footage that include Li staring at the floor and a dejected He Shiping wiping tears from his eyes.
Corruption was virtually eliminated in the years after the communists came to power in 1949. But it has staged a comeback since economic reforms were introduced 17 years ago as living standards climb but at the cost of eroding party discipline.
",3
"China's paramount leader Deng Xiaoping, reported to be in fragile health, was absent from a rally on Tuesday to pay tribute to him and other survivors of the 1934-36 Long March.
Deng, 92, one of about 700 surviving veterans of the Red Army who trekked 9,650 km (6,000 miles) across China on foot to flee Chiang Kai-shek's Nationalist troops, did not appear on state television which showed the 45-minute rally live.
Deng, who no longer holds any office but is believed to remain highly influential, has not been seen in public since early 1994.
His health is a matter of intense speculation in China, Hong Kong and the Asian region because his death is expected to trigger a scramble for power among those eager to succeed him as de facto emperor of the world's most populous nation.
The official line is that Deng is in good health for a man of his age.
Extensive preparations were made last year for Deng to grace official celebrations to mark the 50th anniversary of the World War Two victory against Japan, but his scheduled appearance was cancelled at the last minute, Chinese sources said.
The Long March rally was seen by some analysts as a show of support for Deng's successor, Communist Party boss and state president Jiang Zemin, who has been eager to shrug off the patriarch's shadow.
""It was staged to show Jiang has the support of military from the old to the present and future generations,"" one Chinese analyst said.
Long March survivors, including former state president and Jiang's bitter rival Yang Shangkun, were at the rally. A representative of the three million-strong People's Liberation Army pledged to follow Jiang's leadership.
Eight Young Pioneers -- China's version of boy and girl scouts -- recited poems at the rally at the Great Hall of the People in central Beijing adjacent to Tiananmen Square.
Wearing his trademark army uniform with no stars or stripes, Jiang urged the ruling Communist Party to inherit the spirit of the Long March.
""The spirit of the Long March...is a strong spiritual force that guarantees our walking from victory to victory,"" Jiang said, reading from a prepared statement.
The gruelling Long March slashed the Red Army's numbers to about 7,000 from 100,000, but survivors were hardened and went on to defeat and drive Chiang and his troops into exile in Taiwan at the end of the Chinese civil war in 1949.
""The road after the revolution is even longer and the work greater and tougher,"" Jiang said.
Jiang has declared war on crime, corruption and poverty -- problems plaguing China today -- and embarked on a crusade to resurrect socialist ethics, which have been eroded by almost two decades of economic reforms.
He paid little tribute to his mentor, mentioning Deng only twice in his lengthy speech.
The People's Daily, mouthpiece of the Communist Party, splashed on its front page a photograph showing portraits of Jiang, Deng and chairman Mao Zedong hanging over a cultural performance on Monday evening to mark the anniversary.
",3
"Chinese activists, in a statement on Tuesday hours ahead of a visit by the U.S. Secretary of State, protested against American backing for Japan's bid to become a permanent member of the U.N. Security Council.
""We hold that Japan is not qualified to become a permanent member of the Security Council of the United Nations,"" the activists said in a letter to U.S. Secretary of State Warren Christopher, who is due to arrive in Beijing later on Tuesday for a three-day visit.
The letter, signed by 15 activists, said they opposed Japan becoming a permanent member of the Security Council because many Japanese politicians had been reluctant to apologise for its war atrocities and had tried to whitewash history.
China says more than 35 million people were killed or wounded during Japan's invasion and occupation of most of China from the early 1930s to 1945.
""(We) strongly protest the U.S. government supporting Japan's (bid) to become a permanent member of the U.N. Security Council to draw Japan over to its side,"" said the letter, a copy of which was made available to Reuters.
Tong Zeng, a leader of the group, said he would forward the letter to Christopher through the U.S. embassy in Beijing.
The Chinese government, eager for more low-interest loans from Japan, has been reluctant to antagonise Tokyo and has not taken a public stance on the issue.
The United States has long supported giving Japan and Germany permanent seats on the Security Council.
The council currently consists of five permanent members that were the main victors in World War Two -- the United States, Russia, Britain, China and France -- and 10 non-permanent members who serve two-year terms.
Most Chinese have been slow to forgive Japan's war past.
""U.S. backing for Japan's (bid)...will undoubtedly encourage the resurrection of Japanese militarism and bring a new threat to the peace and stability in the Asia-Pacific region,"" the letter said.
The anti-Japanese activists recounted what they said were U.S. mistakes, including not putting Emperor Hirohito on trial after the end of World War Two in 1945.
""After the end of the war, the United States harmed the feelings of the Chinese people several times...sheltering Japan's top war criminal Emperor Hirohito,"" the letter said. Hirohito died in 1989.
The activists also faulted the United States for ""ignoring historical facts"" and handing disputed islands in the East China Sea to Japan in 1971.
Sino-Japanese ties were strained this year over the islands, which Beijing calls the Diaoyus and Tokyo the Senkakus.
A Japanese right-wing group built a makeshift lighthouse on one of the islands in July, triggering anti-Japanese demonstrations in Hong Kong and Taiwan.
Taiwan's Nationalist rulers, who lost the Chinese civil war to the Communists in 1949, also claim the islands. Activists in the British colony of Hong Kong, which reverts to Chinese rule in 1997, have opposed Japan's territorial claims.
Emotions were fanned in September when a Hong Kong activist drowned after he jumped into stormy waters around the islands to demonstrate support for Chinese claims.
",3
"China's Communist Party leader Jiang Zemin appears to be making all the right moves to shore up his position to retain power after the death of paramount leader Deng Xiaoping, diplomats and analysts said on Friday.
Jiang has declared war on corruption, crime and poverty -- scourges that have plagued China for centuries and led to the downfall of many a dynasty.
In his latest move, he used the party's four-day, annual closed-door plenum that ended in Beijing on Thursday to resurrect ideological puritanism -- spiritual civilisation -- which has been eroded by nearly two decades of economic reforms.
Whether Jiang would be able to stave off challenges from rivals in the party and cling to power in the post-Deng era hinged in part on the crucial 15th party congress to be held in late 1997, diplomats and analysts said.
The party's political heavyweights will be jockeying for position in the run-up to next year's congress, a five-yearly opportunity for reshuffles in the party's powerful Politburo and its yet more influential standing committee.
Chinese sources say the Communist Party is debating a plan to revive the post of chairman and to create one or two vice chairman positions -- one of which could be given to Premier Li Peng, a loose ally of Jiang whose term ends in 1998.
Li is required by the constitution to step down as premier in 1998 after serving two six-year terms and is keen to find another job to remain in the top echelons of power.
Armed with the weapon of spiritual civilisation -- communist jargon for toeing the party line -- Jiang is battling to avoid the fate of his two predecessors, analysts said.
Hu Yaobang and Zhao Ziyang were sacked from the party's general secretary post in 1987 and 1989 respectively because their ""grip on material civilisation was tight but their grip on spiritual civilisation was loose"", one Chinese analyst said.
""They did not pay enough attention to ensuring that the party's position could not be challenged...that was what brought them down,"" an Asian diplomat said of Hu and Zhao.
A plenum communique attested to Jiang's worries. ""From the start to the end, we should be resolute on tightening the grip on both,"" the plenum communique said.
""At no time can we sacrifice spiritual values in the name of momentary economic development,"" the communique said.
The spiritual civilisation campaign aims to create a communist utopia -- stamp out superstition, tighten the party's grip on media, instil politically correct values and create heroes and model workers whose orthodox Marxist behaviour the populace at large should strive to emulate.
It is hardly rousing stuff. But Jiang may be desperate.
Analysts said Jiang remained overshadowed by Deng, architect of the market-oriented economic reforms and still influential even without an official post and despite increasingly fragile health.
""In the midst of his great triumph, Jiang Zemin if he is all that powerful...there is no need for him to go out of his way to mention Deng Xiaoping,"" a Western diplomat said referring to the communique that tips its hat to Deng.
""Jiang Zemin...is still in consolidation mode...in the process of selling himself,"" he said. ""The jury is still out.""
Jiang is eager to consolidate his power base even after amassing the three most important positions in China -- general secretary of the Communist Party, state president and chairman of party's powerful Central Military Commission.
Many diplomats see Jiang as a transitional figure after the death of Deng, which is widely 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.
",3
"Leading Chinese dissident Chen Ziming has been placed under tight police surveillance after his release on medical parole and needs permission to consult a doctor, a relative said on Thursday.
""Some conditions (after his parole) are not as good as when (he) was in prison,"" the dissident's sister, Chen Zihua, said after meeting him earlier on Thursday at his home.
""When he was in prison he could still go downstairs for some air,"" she said in a telephone interview. ""(Now) he can't even go downstairs to get some sun... He cannot go out.""
Chen Ziming has been under tight police surveillance since he was released on medical parole and returned to his eighth-floor Beijing home late on Wednesday.
Asked about Chen's plans, the sister said he did not talk about anything besides his wish to get medical treatment.
The dissident needs police permission to see a doctor, the sister said. He has heart, liver and digestion problems. He had been treated for cancer.
He is barred from talking to foreign reporters. Uniformed and plainclothes police on Thursday prevented reporters from approaching Chen's home and that of his parents.
Asked if the dissident was under house arrest, Chen's sister said: ""(I'm) afraid it's a little graver than that. It's just moving the prison from one place to another.""
But his release was a welcome surprise to the family.
""We felt surprised to a certain degree. Of course, (we) are happy (he) could be released,"" the sister said. ""His medical parole...was a little unexpected.""
Chen, 44, was sentenced to 13 years in prison in 1991 for engaging in ""counter-revolutionary"", or subversive, activities during a student-led campaign for democracy that was centred on Beijing's Tiananmen Square in 1989.
Chen had been singled out by Beijing authorities as the ""black hand"" behind-the-scenes organiser of the demonstrations, which were crushed by the army with heavy loss of life.
He won medical parole in 1994 in a move widely seen as part of a successful bid by Beijing to persuade Washington not to revoke China's Most Favoured Nation trade status on grounds of persistent human rights violations.
Chen was returned to prison on June 25, 1995, after joining calls for Beijing to release political prisoners and reverse its verdict that the Tiananmen Square protests were seditious.
His release on Wednesday came seven days after a Beijing court took less than four hours to convict former student leader Wang Dan and sentence him to 11 years in prison for plotting to subvert the government.
Wang's imprisonment was the latest in a series of crushing blows to China's embattled dissidents, most of whom were already either in exile or serving long terms in administrative detention or prison.
Asked if Chen's release was a gift to U.S. President Bill Clinton on his re-election, the sister said: ""It gives (Clinton) face.""
Human rights have long been a major irritant in Sino-U.S. ties already strained by disputes over trade, copyright piracy, arms proliferation and Taiwan.
U.S. Secretary of State Warren Christopher is scheduled to travel to Beijing this month for a visit widely seen as a vital step toward rebuilding the cross-Pacific relationship.
",3
"China said on Friday that Taiwan was a pawn and toy of hostile Western forces out to weaken and divide the country and thwart its development.
""Taiwan...acts as a pawn of international anti-Chinese forces, a toy in the hands of others,"" said a front-page commentary in the People's Daily, the ruling Communist Party's official newspaper.
The commentary, issued to mark the 25th anniversary of Beijing's ousting of Taipei from the United Nations, accused Taiwan of collaborating with forces hostile towards China to try to regain admission to the world body.
""Some Western forces have ceaselessly played the 'human rights card', 'Tibet card' to limit China's development,"" the commentary said.
""They see the Taiwan issue as one of their trump cards -- an important means of weakening and dividing China,"" it said without naming any countries but implying the United States.
In September, the U.S. House of Representatives approved a non-binding resolution supporting Taiwan's efforts to rejoin the United Nations, enraging Beijing.
China, which regards Taiwan as a rebel province, maintains that the issue was settled once and for all in 1971 when Taipei was replaced by Beijing at the United Nations.
The commentary said countries that have helped Taiwan with its bid to regain admission to the United Nations were shortsighted like ""rats which can only see an inch in front of their eyes"".
It urged Taiwan's allies, mainly Central American, African and Caribbean countries, to stop ""foolish activities in the interest of others"".
For the fourth consecutive year, China and its supporters blocked moves in the General Assembly in September to consider U.N. membership for wealthy but diplomatically isolated Taiwan.
China considers any move to give Taiwan U.N. membership an encroachment on its sovereignty and an interference in its internal affairs.
Beijing and Taipei have been diplomatic rivals since Mao Zedong's Red Army defeated Chiang Kai-shek's Nationalists and forced them to flee to Taiwan at the end of the Chinese civil war in 1949.
Beijing's communist rulers have sought to push the island into diplomatic isolation to force it into reunification. Almost 160 countries recognise Beijing, while 30 have diplomatic relations with Taiwan.
Both communist Beijing and capitalist Taipei agree to reunify one day, albeit on different terms. China has threatened to invade if the island declares independence.
The commentary said Taiwan's offer to give $1.0 billion to the United Nations on admission into the world body had become an ""international joke"".
It jeered at the argument that Taiwan deserved a seat as it was now democratic and economically prosperous, saying the island was ""deceiving others and itself"".
""No matter what political system Taiwan implemented or what level of economic development it attained...regaining admission to the United Nations would be purely a dream,"" it said.
",3
"A Chinese court has jailed a 56-year-old dissident for five years for subversion, dealing another blow to the country's tiny, struggling democracy movement.
The Intermediate People's Court in Xi'an city, in the northern province of Shaanxi, convicted Zhang Zong'ai this week of spreading ""counter-revolutionary propaganda and incitement"", his lawyer, Zhang Jiankang, said on Saturday.
The dissident, detained since June, has appealed to the Shaanxi provincial Higher People's Court, the Hong Kong-based Human Rights and Democracy in China Information Centre said.
""Their (Chinese authorities) intention is to kill the chicken for the monkey to see... to frighten other dissidents,"" a spokesman for the centre, which monitors human rights abuses in China, said in a telephone interview.
Zhang was previously jailed for five years for demanding Premier Li Peng be impeached for ordering the military to crush student-led pro-democracy demonstrations centred in Beijing's Tiananmen Square in June 1989, the human rights watchdog said.
He lost his seat in the local lawmaking body along with his teaching job at the Xi'an Institute of Statistics and his wife divorced him after his incarceration in 1989, his family said.
Asked to comment on Zhang's latest conviction, his sister, Zhang Xin, said he was innocent.
""He was wrongly accused,"" the sister said by telephone. ""He didn't commit any crime... He didn't do anything.""
His lawyer told Reuters the court had found Zhang guilty of attacking China's judiciary in an interview with former student leader Wang Dan that was later published in a Hong Kong newspaper.
Wang, a former student leader of the 1989 democracy demonstrations, was sentenced to 11 years in prison last month for conspiring to subvert the government.
The court also found Zhang guilty of signing a petition last year urging authorities to show political tolerance, the lawyer said.
The court cleared Zhang of any wrongdoing in accepting money from an overseas group, the lawyer said. The court ruled Zhang did accept money but that he did not use the funds for counter-revolutionary activities.
The lawyer said the verdict also did not mention a charge in the bill of indictment that accused Zhang of ""pledging loyalty"" to the Taiwan authorities by writing to General Wego Chiang.
Chiang is the sole surviving son of the late Nationalist leader Chiang Kai-shek, who fled to Taiwan after losing the Chinese civil war to the Communists in 1949. China regards Taiwan as a rebel province.
The dissident had not mailed a letter to Chiang that was found in his home in Xi'an.
Beijing's Communists and Taipei's Nationalists have been political rivals for almost five decades.
In recent months, the Chinese authorities have dealt crushing blows to the struggling democracy movement.
Most dissidents have already been forced into exile or are serving long sentences in prison or labour camps.
China dismisses criticism of its human rights record as interference in its internal affairs.
Three pro-democracy activists are currently standing trial on charges of counter-revolutionary propaganda and incitement in Hefei, capital of the central province of Anhui.
In the southern boomtown of Shenzhen that neighbours Hong Kong, two labour activists are standing trial for conspiring to subvert the government.
",3
"China's Supreme Court announced on Thursday that a court has rejected the appeal of a son of one of the country's political elite, upholding a suspended death sentence for bribery.
The appellate court showed leniency because Zhou Beifang, 43, former chairman of Hong Kong-listed affiliates of the giant state-owned Capital Iron and Steel Corp (Shougang), showed remorse, the Xinhua news agency said, quoting the Supreme Court.
Chinese courts frequently impose the death penalty in corruption cases but as Zhou's death sentence was suspended for two years it could be commuted to life imprisonment by the time it was due to be carried out, as is often the case in China.
Zhou is one of China's so-called ""princelings"", the popular sobriquet applied to the children of the ruling party elite, who enjoy wide influence.
The Zhou family has close ties to the family of paramount leader Deng Xiaoping.
The appellate court also showed leniency because Zhou voluntarily returned ill-gotten wealth during the investigation even before prosecutors obtained evidence against him, Xinhua said.
Zhou was convicted of accepting bribes totalling 9.28 million Hong Kong dollars ($1.2 million) between June 1993 and April 1994, Xinhua said. It gave no details of who paid Zhou the bribes or why.
He was also found guilty of paying 1.2 million yuan ($144,600) in bribes to three people, including two former officials of the Beijing city government, so that his wife and daughter could move to the British colony, it said.
Xinhua did not say when Zhou appealed, when he was first convicted or why the Beijing Higher People's Court rejected his appeal.
Court officials reached by telephone declined to comment.
Zhou's conviction was part of a highly-publicised anti-graft campaign launched by China last year.
The drive led to the suicide of a Beijing vice-mayor in April 1995 and the fall of his mentor, former Beijing Communist Party boss Chen Xitong.
Zhou's father, Zhou Guanwu, 78, resigned as chairman and Communist Party secretary of Shougang in February 1995, citing old age following Zhou Beifang's detention.
Shougang has been restructured since Zhou Guanwu's downfall.
The appellate court also rejected the appeal of co-defendant Chen Jian, 39, a former senior official of the Beijing city government, and upheld his 15-year prison sentence for accepting bribes from Zhou, Xinhua said.
Another former official of the Beijing city government, Li Min, did not appeal against his sentence of life imprisonment also for accepting bribes from Zhou, the agency said.
The appeal of a fourth defendant who was sentenced to 16 years was rejected while a fifth defendant who was given five years in prison did not appeal, it said.
Corruption was virtually eliminated in the years after the communists came to power in 1949, but has staged a comeback along with economic reforms in the past 17 years.
",3
"The father of Chinese dissident Wang Dan protested his son's innocence on Wednesday, just hours before the start of the former student leader's trial, and said the family would not give in to the authorities.
""He is definitely innocent,"" Wang Xianzeng told reporters as he left his home to go to the court.
The trial of Wang Dan, 27, on the capital charge of plotting to overthrow the government was due to begin on Wednesday morning at the Beijing People's Intermediate Court.
The public was effectively barred from the court, which was surrounded by police who had set up roadblocks across all major roads leading to the building.
""It just depends on whether the government wants to convict him or not,"" Wang Xianzeng told reporters.
""I'm not optimistic about the results... We will definitely appeal... We will not give in,"" he said.
""Speech can't overthrow the government,"" he said.
The court charges against Wang say that his writings in foreign publications are part of evidence to back up the charge that he had tried to overthrow the government.
His mother, Wang Lingyun, said on Tuesday she expected Wang to receive a harsh sentence although he would plead not guilty to the capital charge.
She said court officials told her the verdict could be delivered as early as Wednesday or in two days. Family members had been under surveillance for several weeks, she added.
The former student leader, who vanished into detention in May 1995, faces a minimum 10-year sentence and a maximum penalty of death.
The New York-based Human Rights Watch said last week the chances of acquittal were slim because Wang has not had adequate time to prepare a defence.
His family found a lawyer willing to defend the dissident after being given just one day in which to do so.
Wang's mother, a 61-year old museum researcher who has no background in law, would attend the trial as one of two defence lawyers. His father and a sister would be allowed to sit in.
The mother has said the dissident was calm and mentally prepared for a harsh sentence, although she has said his health had deteriorated since he was detained in May 1995.
Human Rights Watch attacked the trial on Tuesday as a sign of the Chinese leadership's increasing intolerance of dissent.
""The fact is that China's urban dissident movement...has in effect been comprehensively smashed,"" it said in a statement.
""At least where political dissidents are concerned, all the judicial signs thus far point...to intensified repression by the country's state security forces,"" it said, calling for a freeze on trade missions from the United States, Europe, Japan and Australia.
Wang's court appearance was expected to resemble the in-camera proceedings last December against Wei Jingsheng, regarded as the father of China's tiny, struggling democracy movement.
Wang has already served four years in prison for counter-revolutionary crimes, or subversion, for his role in pro-democracy demonstrations in Beijing's Tiananmen Square that were crushed by the army in June 1989 with heavy loss of life.
He was politically active again after his parole in 1993, defying police surveillance to join a daring appeal to communist leaders for the release of those still jailed for their part in the 1989 protests.
China has recently cracked down on the few remaining dissidents who have not fled into exile or been jailed.
",3
"China demanded on Monday that the United States cancel plans to sell Stinger missiles, launchers and other weapons to Taiwan to prevent ""new damage"" to slowly recovering Sino-U.S. relations.
""We ask the U.S. side...to cancel plans to sell missiles to Taiwan to prevent creating new damage to Sino-U.S. relations,"" a Foreign Ministry spokesman told Reuters.
Beijing has regarded Taiwan as a renegade province since the end of the civil war in 1949. It opposes the sale of weapons to the island.
The United States should take Sino-U.S. relations into account and live up to its promise regarding the sale of weapons to Taiwan, the spokesman said without elaborating. Washington has agreed to reduce weapons sales to Taiwan.
Rejecting a similar demand by China on August 15, the U.S. Defence Department notified Congress last Friday of plans to sell Stinger missiles, launchers and other weapons to Taiwan.
U.S. officials said the weapons were defensive and the sale would not affect the basic military balance in the region.
The Pentagon said Taiwan wanted to buy 1,299 Stinger missiles, 74 guided missile launchers, 74 flight trainer Stinger missiles, 96 jeep-like Humvee vehicles and 500 rounds of .50 calibre ammunition for an estimated $420 million.
The principal contractors are the Hughes Missile Systems Co., Boeing Missile and Space Systems Co. and AM General.
Such sales must be made through the U.S. Defence Department, not directly by contractors, and Congress must be notified in case it wants to veto the sale.
Sino-U.S. ties have see-sawed in recent years over disputes ranging from human rights abuses and widespread copyright piracy in China to alleged nuclear proliferation by Beijing.
The ties plunged to new depths over the last year in a row over a landmark trip by Taiwan's President Lee Teng-hui to the United States in June 1995.
Earlier this month, Beijing warned Washington that a U.S. stopover by Taiwan's Vice-President Lien Chan could cause new damage to slowly recovering ties.
However, in a sign that China was eager to prevent Lien's visit from harming slowly warming relations, Beijing refrained from further comment while Lien was in the United States.
Ties between Beijing and Washington were set on better footing after a visit to Beijing by U.S. National Security Adviser Anthony Lake in July.
The trip laid the groundwork for an exchange of high-level visits later in the year, with U.S. Secretary of State Warren Christopher invited to China in November and Chinese Defence Minister Chi Haotian due to go to Washington before the end of December.
An exchange of visits by Chinese President Jiang Zemin and U.S. President Bill Clinton could go ahead next year, if Clinton wins re-election in November.
Chinese officials have said they expect Christopher's visit, his first since a 1994 trip that stumbled badly over human rights, to go smoothly with both sides keen to remove obstacles in their relations.
In a separate development that could strain Sino-U.S. ties, the Washington Post reported on Sunday that U.S. intelligence officials had concluded that Pakistan was secretly building a medium-range missile factory near Islamabad using Chinese blueprints and equipment.
Asked to comment on the report, Chinese Foreign Ministry spokesman Shen Guofang said: ""The report is totally groundless.""
",3
"China's parliament, eager to shed its rubber stamp image, has vowed to crack down on lawless officials by intensifying supervision of the government's executive and judicial branches.
Tian Jiyun, vice-chairman of the National People's Congress, had conceded that the problem of officials disregarding the law was very serious in some departments, major newspapers said on Friday.
""Some officials are not strict when implementing the law and do not investigate legal violations,"" Tian told the opening of a nine-day seminar in the booming southern city of Shenzhen on Thursday.
""These phenomena are very serious in some regions and departments,"" said Tian, a member of the ruling Communist Party's 19-member Politburo.
Official media frequently carry reports of abuse of power by local officials, who run their areas of jurisdiction as virtual fiefdoms. The word of an official is often taken as law.
""Some officials go as far as to replace the law with their word,"" Tian said. ""There are laws but some officials do not do things according to the law.
""Some use power to suppress the law, those enforcing the law break the law and some take the law into their own hands.""
Some Chinese analysts saw Tian's remarks as an attempt to increase the say of parliament in Chinese politics.
Tian and his mentor, Qiao Shi, chairman of the National People's Congress, who sits on the party's omnipotent seven-member Standing Committee, have moved in recent years to boost the status of parliament.
Tian urged lawmaking bodies at all levels to step up supervision of the executive and judicial branches.
""Supervision is a very weak link of the work of the People's Congress,"" Tian said.
He urged all lawmakers to conscientiously supervise trials and the work of the government, prosecutors and police.
Last month, a court took 10 minutes to reject the appeal of dissident and former student leader Wang Dan and uphold an 11-year jail term for conspiring to subvert the government.
Another dissident, Chen Longde, attempted suicide in August by jumping from a third-floor window because he could no longer stand beating by guards at a labour camp, his family has said.
The labour camp denies any wrongdoing.
Chen, who broke his right leg and smashed three teeth, has been discharged from hospital and sent back to the labour camp, where he is serving three years of re-education through labour for sending a petition to parliament demanding the release of all political prisoners.
Re-education through labour is a form of administrative punishment that can be imposed by authorities without recourse to prosecutors or the courts.
Western human rights activists say the punishment is increasingly favoured by the authorities as a way of removing dissidents from circulation without the complications and publicity of a trial.
",3
"China's exports climbed again in October due to sluggish domestic demand, faster payment of export tax rebates and an expansion of credit to exporters, newspapers and a government economist said on Wednesday.
The upturn in exports was expected to continue through the first half of 1997, said Wang Jian, a researcher with the cabinet's State Planning Commission.
Exports rose for the fourth consecutive month in October, jumping 23.3 percent to $15.22 billion from a year ago, said the International Business Daily, a newspaper published by the Ministry of Foreign Trade and Economic Cooperation.
The healthy exports performance helped the nation register its biggest monthly trade surplus of the year. The surplus stood at $3.91 billion in October compared with $3.2 billion in September, the newspaper said.
""This kind of rebound in exports ... is estimated to last until the first half of next year,"" Wang told Reuters in a telephone interview.
Wang attributed the upturn to slow domestic demand, forcing manufacturers to look to overseas markets.
Also, domestic enterprises had adjusted to a cut in government-paid export tax rebates, he said. The government slashed the rebate on exports of industrial products to 9.0 percent from 14.0 percent on January 1, 1996.
The International Business Daily said exports rebounded because the government sped up the payment of export tax rebates and expanded credit to exporters.
Exports slumped in the first six months of 1996, dented by rising wages and the relative strength of the currency, the renminbi.
A slowdown in government payments of tax rebates to exporters had also discouraged many firms from exporting their goods earlier in the year. Many of those firms focused sales on the domestic market instead.
However, the government has been stepping up payment of export rebates to try to revive exports.
Imports inched up a year-on-year three percent to $11.31 billion in October, the Business Daily said.
The import data showed that the impact of this year's tariff cuts has gradually weakened, it said.
In the first 10 months of this year, China's exports totalled $119.22 billion, mostly unchanged from the same 1995 period, the newspaper said. But imports added up to $107.21 billion, a rise of 5.5 percent from the year-ago period.
The latest figures brought the total trade surplus for the January-to-October period to $12.01 billion, it said.
Japan, the United States and Europe remained China's largest export markets.
China's exports to Japan rose a year-on-year 8.6 percent to $24.5 billion in the first 10 months of this year, the daily said. Exports to the United States and Europe increased 5.5 percent and 4.5 percent to $21.3 billion and $18.9 billion respectively.
Machinery and electronic exports totalled $38 billion in the first 10 months, accounting for one-third of total exports and up 11 percent from the year-ago period, the newspaper said.
Exports of toys, furniture, shoes, crude oil and plastic products increased in the first 10 months. But exports of textile yarn and related products, garment, steel and aquatic products all fell, it said.
Imports by foreign-funded enterprises in the first 10 months soared a year-on-year 23 percent to $105.0 billion.
Car imports plunged 39 percent year-on-year between January and October, the newspaper said. It did not elaborate.
",3
"The mayor of China's capital resigned on Tuesday in a reshuffle that had been expected since the downfall last year of his mentor, disgraced Beijing Communist Party boss Chen Xitong, in a corruption scandal.
The Beijing People's Congress had approved the resignation of city mayor Li Qiyan, the official Xinhua news agency said.
It did not explain why Li, 58, was stepping down, saying only that he would become secretary of the Labour Ministry's Communist Party committee.
Chinese sources have said Li Qiyan could eventually replace Li Boyong as labour minister. The two men have the same surname but are not related.
Diplomats and Chinese sources said Li was forced to step down because of his close links to Chen, who resigned as Beijing party boss in April 1995 after his protege, a vice-mayor, came under investigation for economic crimes and committed suicide.
""Li Qiyan had been closely associated with Chen Xitong...and Li Qiyan's departure was inevitable,"" a Western diplomat said.
""When revelations about the extent of corruption in the Beijing government became public, sweeping changes of the Beijing leadership were required but could not be done in one go in the interest of preserving stability,"" the diplomat said.
Chinese sources said the city government had been virtually paralysed since Chen's downfall and that authorities had decided they could no longer delay naming a new mayor.
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 communists came to power in 1949.
He has since disappeared from public view and has come under investigation for possible wrongdoing.
It was not known if Li was under investigation.
Xinhua said the Beijing People's Congress, or city council, had approved the appointment of Jia Qinglin, 56, as vice and acting mayor of the nation's capital.
The Central Committee of the Communist Party named Jia to the post of vice secretary of Beijing's party committee.
Jia had resigned as party secretary of the southeastern province of Fujian and was replaced by Fujian Governor Chen Mingyi, Xinhua said.
Fujian Vice-Governor He Guoqiang would replace Chen as the provincial governor, it said.
In the run-up to the party's 15th congress next year, Jia could be promoted to chief of the Beijing municipal party committee and even land a seat in the Politburo, Chinese sources have said.
Corruption was virtually eliminated in the years after the communists came to power in 1949, but has staged a comeback along with economic reforms in the past 17 years.
Wang Baosen, the vice-mayor who committed suicide was found to have used his position to amass 116 houses illegally and build himself a villa on the outskirts of the city. He also masterminded a $37 million embezzlement and graft scam, officials have said.
Communist Party chief and state president Jiang Zemin has declared war on corruption, warning that the scourge was a virus that threatened the party. Courts frequently impose the death penalty in major corruption cases.
",3
"Beijing's top negotiator with rival Taipei sought on Tuesday to allay Taiwan's fears that China would swallow up the island if Taipei lifts a decades-old ban on direct trade and transport links between the two.
""We feel this kind of strange logic is very ridiculous,"" Tang Shubei, vice-chairman of the Association for Relations Across the Taiwan Straits, said of Taiwan's concerns.
""We advocate that after reunification, 'you don't eat me up and I don't eat you up',"" he told reporters in his Beijing office.
Taiwan has banned direct air and shipping links with China since Chiang Kai-shek's nationalist troops lost the civil war to Mao Zedong's communist army in 1949 and fled into exile in Taiwan. Taiwan allows indirect links through Hong Kong or third countries.
Taiwanese businessmen have poured more than $20 billion into China. Many of them have been clamouring for direct transport links, but Taiwan authorities are reluctant to lift the ban lest the island become an economic hostage to China.
Tang said scrapping the ban would help both sides and said Taiwan's losses would be greater than China's in the long run if it resisted direct links.
China unilaterally introduced a series of regulations in August to pave the way for direct shipping links with Taiwan. China first called on Taiwan to lift the ban 17 years ago.
The ban would in effect be scrapped in mid-1997 in any case when the British colony of Hong Kong reverts to Chinese rule, Tang said, adding that Taiwanese aircraft and ships could continue to land and dock in Hong Kong.
He said the reunification of China and Taiwan would become a more glaring issue after the nearby Portuguese enclave of Macau reverts to Chinese rule in 1999.
""The Taiwan problem will stand out in front of us after Hong Kong's return in 1997 and Macau's return in 1999,"" Tang said.
Tang said time and patience were needed for China and Taiwan to reunify, but declined to spell out a timetable.
""Time is needed to resolve the Taiwan problem. We have adequate patience,"" he said, but urged Taiwan not to seek to declare independence. Beijing has threatened to invade if Taiwan declared independence.
He renewed an offer to hold political talks to end almost five decades of animosity. ""Political differences must be resolved (through) political talks,"" Tang said.
But Tang said Taiwan must first abandon its attempt to break out of diplomatic isolation.
Beijing regards Taiwan as a rebel province and has sought to push the island into isolation.
Ties between Beijing and Taipei plunged after the landmark, private visit by Taiwan's President Lee Teng-hui to the United States in June 1995 that China saw as a move to raise the island's international profile.
China's military conducted missile tests and war games off Taiwan before the island's first direct presidential elections last March, which Lee won by a landslide.
Last week, China accused Taiwan of standing in the way of reunification by creating obstacles to economic and trade cooperation, saying the island was ""squashing its own feet with a rock"" by refusing to end the ban.
",3
"The seven-year-old boy chosen by China as Tibet's second holiest monk attended a ritual in Beijing last week to celebrate the first anniversary of his enthronement, major Chinese newspapers said on Wednesday.
Monks pounded drums, rang bells and chanted Buddhist scriptures as Beijing's choice as the reincarnation of the Panchen Lama visited the Yonghe Lamasery -- the Temple of Harmony and Peace, on November 22, the newspapers said, quoting a report by the official Xinhua news agency.
Xinhua gave no reason for the delay in reporting the celebrations which were held a week before the actual anniversary on November 29.
Tibet's exiled god-king, the Dalai Lama, has named another boy as the reincarnation of the 10th Panchen Lama, the Himalayan region's second holiest monk who died in 1989.
Many Tibetans see the Chinese-sanctioned child, Gyantsen Norpo, as a pretender.
State media has given Beijing's choice much publicity in an apparent bid to convince Tibetans that he is the real reincarnation.
Major Chinese newspapers on Wednesday ran a picture of the child wearing traditional robes and a cap and surrounded by monks as he toured the Yonghe Lamasery which was built in 1694.
The boy blessed believers and preached from the seat reserved for the 10th Panchen Lama before his death.
Chinese sources have said Beijing's choice currently lives in the Chinese capital under state protection against any possible assassination attempts by radical Tibetans.
Western human rights groups have accused Beijing of detaining the boy recognised by the Dalai Lama and persecuting monks and nuns who refused to accept Beijing's choice.
The London-based human rights watchdog Tibet Information Network said last week a 19-year-old Tibetan nun had her jail term doubled to 18 years for refusing to recognise Beijing's choice.
China denies the accusations, saying the Dalai Lama's choice is ""leading a free life, just like other Tibetan children"".
But Beijing has refused to reveal the whereabouts of the Dalai Lama's choice or allow diplomats or foreign reporters to meet the boy.
China has lashed out at the exiled Tibetan leader, quoting the boy it anointed as the Panchen Lama as saying the Dalai Lama was the cause of turmoil in the region.
The Dalai Lama fled his homeland along with thousands of followers in 1959 after an abortive uprising against communist rule. He heads a government-in-exile, which is not recognised by any country, in the Indian town of Dharamsala.
The Dalai Lama won the Nobel Peace Prize in 1989 for his non-violent campaign for autonomy for his homeland, but Beijing views international support for Tibet's holiest man as a Western plot to split China and contain its development.
",3
"Two sons of Beijing's disgraced Communist Party boss, Chen Xitong, have been detained and face possible prosecution for economic crimes, Chinese sources said on Friday.
The fate of Chen himself was unknown. He was one of the most powerful men in China before his fall in April 1995 after one of his proteges, Beijing Vice-Mayor Wang Baosen, came under investigation for economic crimes and committed suicide.
""It all depends on the (party's) Central Commission for Discipline Inspection...(which) is investigating Chen Xitong,"" one source said in reference to whether the commission would hand Chen's case over to courts for prosecution.
Court officials, reached by telephone, declined to comment.
""This is a test of whether the government's anti-corruption drive is for real,"" the source said told Reuters. Critics say the campaign targets only petty officials.
Two sources with ties to the party said Chen's eldest son, Chen Xiaoxi, and younger son, Chen Xiaotong, were being held at the Qincheng Prison in a northern suburb of Beijing and faced possible prosecution.
The younger son has been in custody since last year but it was unclear when the older son was detained.
The sources said they were uncertain over precisely what charges might be filed against either of the two.
Prison guards were transferred to Beijing from other provinces to ensure the two men remained under tight security. Beijing was the political powerbase of the family.
Outlook magazine, published by the official Xinhua news agency, said this month that Chen Xitong's case ""will not just fade away"".
Chen Xitong, 66, has not been seen in public since April 1995 when he resigned as Beijing's Communist Party boss. He was ousted from the party's powerful Politburo in September 1995, becoming the most senior victim of a crackdown on corruption.
Chen, who was promoted to the Politburo in recognition of his hardline stand against student-led demonstrations for democracy in Beijing in 1989, is believed to be under virtual house arrest. He is officially said to be under investigation for ""serious mistakes"".
Unpublished party documents have said Chen, who ran Beijing for 12 years, first as mayor and then as party boss, had abused his office by amassing $24 million in unauthorised funds and lavishing favours on friends, associates and a mistress.
Chen gave nine flats around Beijing to his mistress and her relatives, according to the documents.
In December 1995, Beijing Vice-Mayor Zhang Baifa shed light on Chen's whereabouts. Zhang said: ""His life is better than mine... He plays table tennis...eats what he wants.""
A second source quoted official documents as saying the younger son illegally channelled government funds to his father's mistress, He Ping.
The younger son, a former executive of a Sino-Japanese joint venture hotel in Beijing, also tipped off his father's mistress about the vice-mayor's suicide and told her to go to Hong Kong and not come back, the source said.
The brothers are among China's so-called ""princelings"", or children of the ruling party elite who enjoy wide influence due to their top level connections.
Corruption was virtually eliminated after the communists came to power in 1949, but has staged a comback along with economic reforms in the past 17 years.
",3
"A Chinese court on Friday took 10 minutes to reject the appeal of dissident Wang Dan and uphold an 11-year prison sentence for subversion, his mother said.
The verdict came four days before the scheduled arrival of U.S. Secretary of State Warren Christopher, who diplomats say was expected to raise human rights issues in his meetings with Chinese leaders during his visit.
Angry family members staged a one-hour sit-down protest in front of the Beijing Higher People's Court after the court rejected Wang's appeal against his conviction, she said.
""It (the verdict) was all prepared in advance,"" Wang Lingyun told Reuters in a telephone interview.
""I'm very angry. It was very unfair,"" she said. ""The (appeals) court just copied the verdict of the first trial.""
The 27-year-old dissident was not allowed to speak at his appeal hearing as a judge read from a brief, prepared statement, the mother said.
Wang was convicted of plotting to subvert the government by publishing articles in foreign publications and receiving funds from hostile overseas organisations.
The mother said she would petition the appeals court but that it would be a formality and would not involve the court holding another trial.
Court officials, reached by telephone, declined comment. The tightly-controlled state media made no mention of Wang's conviction.
Police earlier kept reporters away from the court building, the family's home and nearby subway stations.
The dissident, wearing a red sweater and grey suit, appeared in low spirits and poor health, the mother said.
""(But) he was psychologically prepared. It came as no surprise. He does not have any illusions about them (the authorities),"" she said.
The former student leader had already served four years in prison for his role in student demonstrations for democracy that were crushed by the army in 1989.
The U.S. secretary of state, scheduled to arrive on Tuesday, was likely to bring up human rights when he meets Chinese leaders.
Sino-U.S. relations have been strained over the last year by issues ranging from human rights to Taiwan to arms proliferation and trade.
Beijing has slammed Western criticism of its human rights record as interference in its internal affairs.
Former British prime minister Margaret Thatcher said in Beijing on Thursday that the world was dismayed by harsh sentences slapped on Wang and fellow dissident Wei Jingsheng, the father of China's modern democracy movement.
The jailing of Wang was the latest in a series of crushing blows to China's struggling democracy movement. Most dissidents have already been forced into exile or are serving long sentences in prison or labour camps.
China has said Wang's trial last month by a lower court was open and fair but the New York-based Human Rights in China said no foreign reporters, diplomats or other international observers were allowed to attend.
Human Rights in China has denounced the trial as a ""secret trial"" on a trumped up charge. The lower court took less than four hours to convict and sentence Wang on October 30.
",3
"Taiwanese business leader Kao Ching-yuan has invited one of China's top policymakers on Taiwan to visit the island, but Beijing was tight-lipped on whether to accept the offer.
The invitation was offered to Wang Zhaoguo, director of the Chinese cabinet's Taiwan Affairs Office, in a private capacity, a spokesman for Kao told Reuters.
If Wang accepted and Taiwanese authorities allowed him to visit, he would be the most senior Chinese official to set foot on the island since the end of China's civil war in 1949.
Wang was quoted by the spokesman as saying he would be happy to visit if he had an opportunity, but there was no definite commitment to accept.
""If there was this opportunity, he would be very happy to go (to Taiwan). There is no definite concrete time,"" the spokesman said, speaking by telephone from the north China city of Tangshan.
In Taipei, a spokesman for the cabinet-level Mainland Affairs Council, which formulates Taiwan's policy towards China, said the council would be happy to see a visit by Wang but noted that procedures must be followed.
The Taiwan Affairs Office declined to comment on the council spokesman's remarks. Earlier, the office denied Taiwanese newspaper reports that Wang had accepted the invitation.
Kao is head of a delegation of nearly 80 Taiwanese businessmen, economists and officials, who arrived in Beijing on Tuesday for a 12-day visit.
Chinese President Jiang Zemin met members of the delegation on Thursday and tried to reassure Taiwanese investors, saying Beijing would not allow political differences to stand in the way of trade and investment.
In his meetings with other Chinese officials, Kao, vice-chairman of President Enterprises, had raised tax and labour problems faced by Taiwanese investors in China, the delegation's spokesman said. President Enterprises is Taiwan's biggest investor in China.
On Wednesday, Kao urged Beijing to resume talks with Taiwan, saying the island's investors would lose confidence in China if political friction impeded ties.
The talks were suspended last year after Taiwan President Lee Teng-hui's landmark trip to the United States.
Beijing has viewed Taiwan as a rebel province since the Nationalist government collapsed on the mainland and fled to the island in 1949. China insists Taiwan is not entitled to official links with other states.
China has stepped up pressure on Taiwan to lift a decades-old ban on direct trade and transport links between the two sides. Last week Beijing unilaterally announced a set of regulations to pave the way for direct 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 business executives, 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.
",3
"China began the trial of prominent dissident and former student leader Wang Dan on Wednesday on the capital charge of plotting to overthrow the government, a court official said.
""The trial started at 9.00 a.m. (0100 GMT),"" said an official of the Beijing People's Intermediate Court reached by telephone. He declined to give further details.
Security was tight around the court building in western Beijing, with dozens of police preventing the public from approaching the building and manning roadblocks to prevent access.
The father of the former student leader protested his son's innocence just hours before the start of the proceedings and said the family would not give in to the authorities.
""He is definitely innocent,"" Wang Xianzeng told reporters as he left his home with the dissident's mother, Wang Lingyun, to go to the court. ""It just depends on whether the government wants to convict him or not.""
Wang's mother, a 61-year old museum researcher who has no background in law, would attend the trial as one of two defence lawyers. His father and a sister would be allowed to sit in.
""I'm not optimistic about the results,"" Wang Xianzeng said. ""We will definitely appeal... We will not give in.
""Speech can't overthrow the government,"" he said.
The court indictment against Wang, 27, includes the charge that his writings in foreign publications were evidence of his plot to try to overthrow the government.
He is also accused of accepting foreign funds, of colluding with subversives living overseas and of conspiring with domestic plotters to organise the overthrow of the government.
Wang Lingyun said on Tuesday she expected Wang to receive a harsh sentence although he would plead not guilty.
The former student leader faces a minimum 10-year sentence and a maximum penalty of death.
The mother has said the dissident was calm and mentally prepared for a harsh sentence, although she has said his health had deteriorated since he vanished into detention in May 1995.
She said court officials told her the verdict could be delivered as early as Wednesday or in two days. Family members had been under surveillance for several weeks, she added.
The New York-based Human Rights Watch said last week the chances of acquittal were slim because Wang has not had adequate time to prepare a defence.
Human Rights Watch attacked the trial on Tuesday as a sign of the Chinese leadership's increasing intolerance of dissent.
""The fact is that China's urban dissident movement...has in effect been comprehensively smashed,"" it said in a statement.
Wang's court appearance was expected to resemble the in-camera proceedings last December against Wei Jingsheng, regarded as the father of China's tiny, struggling democracy movement.
Wang has already served four years in prison for counter-revolutionary crimes, or subversion, for his role in pro-democracy demonstrations in Beijing's Tiananmen Square that were crushed by the army in June 1989 with heavy loss of life.
He was politically active again after his parole in 1993, defying police surveillance to join a daring appeal to communist leaders for the release of those still jailed for their part in the 1989 protests.
China has recently cracked down on the few remaining dissidents who have not fled into exile or been jailed.
",3
"The trial of prominent Chinese dissident and former student leader Wang Dan for the capital charge of plotting to overthrow the government is expected to be held behind closed doors soon, a family member said on Tuesday.
The Beijing Number One Intermediate People's Court had yet to inform Wang's family of the trial date, the relative said.
The court was widely expected to fill the limited number of courtroom seats with carefully selected people to keep away foreign reporters and fellow dissidents.
""Only the people notified by the court can attend the trial. Others cannot attend,"" the family member said in a telephone interview.
""In reality, the trial will not be open...but the court will not admit it is not an open trial,"" the relative said. ""It tells a group of people to attend and calls this an open trial.""
A court official, contacted by telephone, declined to comment.
If last year's trial of Wei Jingsheng, father of China's tiny, struggling democracy movement, was an indication, Wang's trial would be kept from public view, a political activist said. Dissidents and foreign reporters were barred from Wei's trial.
Court officials have confirmed that Wang, detained since May 1995, has been charged with plotting to overthrow the government -- a crime that carries a maximum penalty of death and a minimum of 10 years in prison.
They have not given further details of the trial though one official said that Wang could appeal to the Higher People's Court if convicted.
Relatives said last week they had found a lawyer willing to defend Wang after being given one day to find one.
Wang's mother, Wang Lingyun, a 61-year-old museum researcher who has no background in law, has said she would defend her son in court. Chinese law allows an accused to be defended by a family member.
It also states that only lawyers can meet detained defendants. Wang's mother was allowed to meet the dissident at a detention centre in Beijing on Monday because she was his legal counsel.
The dissident was mentally prepared for a harsh sentence, Wang's mother told a Hong Kong-based group that monitors human rights in China.
""Wang Dan said he has not done anything wrong...He is very calm...and psychologically prepared for a heavy sentence,"" the group quoted the mother as saying.
""She is very worried about his health,"" the group said.
It added that Wang had back, throat and prostate problems.
""In the condition that Wang Dan is in, it would be difficult for him to hold out under another long prison sentence,"" it quoted the mother as saying.
Wang, 26, has already served four years in prison for counter-revolutionary crimes, or subversion, for his role in pro-democracy demonstrations that were crushed by the army in June 1989 with heavy loss of life.
Wang had been expected to face new charges since last December, when the court that convicted Wei Jingsheng implicated Wang.
The verdict said Wei, who was jailed for 14 years, had links with people ""convicted of counter-revolutionary crimes, including Wang Dan"". It also referred to a tape-recorded conversation between Wang and Wei, but gave no details.
Wang had been active after his parole in 1993, defying persistent police surveillance and harassment to join in a daring appeal to communist leaders for the release of all those still in prison for their part in the 1989 protests.
",3
"Two Chinese magazines are struggling for survival after being targeted in a crusade by China's propaganda tsars to cleanse the media of liberal influences, Chinese sources said.
""Focus"" magazine in the southern boomtown of Shenzhen has suspended publication for two issues after a Hong Kong newspaper reported the magazine defied propaganda tsars and ran a cover story on the anniversary of the chaotic 1966-76 Cultural Revolution, the sources said.
The Propaganda Department of the Communist Party had frowned on any commemoration of the decade of turmoil unleashed by revolutionary leader Mao Zedong to purge political rivals and infuse the nation with renewed ideological vigour.
A writer for the magazine said the suspension was due to a Hong Kong newspaper report of the article's publication.
""Had it not been for the foreign report, the magazine would not have suffered this kind of setback,"" said the writers, peaking anonymously ""This was a kind of punishment...by the party.""
In a telephone interview, Li Mei, publisher of Focus, disputed this assessment, saying the suspension was linked to unrelated financial trouble.
Other Chinese sources said the problems at ""Focus"" stemmed from the Communist Party's clampdown on publications and authors who dare to break away from a stultifying diet of state-approved fare.
""If a publication takes a detour (from the party line), it will be suspended for restructuring. There will be no exceptions,"" one source quoted propaganda tsars as saying.
Propaganda tsars are also debating the fate of the Beijing-based magazine ""Orient"" for publishing a series of book reviews on the ""Collected Works of Gu Zhun"", sources said.
The Propaganda Department of the ruling Communist Party had ordered a gag on all debate on the thoughts of Gu, an independent thinker who angered Beijing before his death during the Cultural Revolution.
Gu openly opposed totalitarianism and supported the rule of law and civil rights.
The fifth edition of the magazine was published in September under the watchful eyes of censors, the sources said.
""We will still be able to publish the sixth edition. After that we don't know,"" a magazine editor, who asked not to be named, said in an interview.
""They did not say what exactly the problem was with the magazine,"" said the editor who suggested that politics could be the cause.
The axe has fallen on other publications, authors and filmmakers.
In August, the Press and Publications Administration suspended publication of the Economic Work Monthly, based in the southwestern province of Guizhou.
The suspension followed the magazine's publication of an article critical of a privately circulated tract known as the ""10,000-word essay"" that urges a return to class struggle and warns of the erosion of the state sector by private enterprise.
In September, Cui Enqing was sacked as president of the Beijing Youth Daily after the Chinese capital's most outspoken newspaper reported a poisoning case that caused a plunge in sales of a state-owned beverage manufacturer.
Propaganda tsars also have banned all of the novels and two films of controversial writer Wang Shuo.
The campaign to enforce ideological orthodoxy has left Chinese filmmakers at a loss as to what kind of movies would receive the blessings of propaganda tsars. The number of movies made this year has fallen sharply compared with previous years.
",3
"China announced on Saturday a massive restructuring of one of its biggest conglomerates after reportedly meting out a suspended death sentence to the son of the former company chairman, one of the country's ruling elite.
State media announced the restructuring of Capital Iron, or Shougang, on Saturday but made no mention of the suspended death sentence handed down to Zhou Beifang, the former head of two of the steel giant's Hong Kong-listed affiliates.
A Beijing court gave Zhou the suspended death sentence for corruption as part of China's highly-publicised anti-graft campaign launched last year, a Chinese source said on Saturday.
The sentence was the heaviest handed down in recent years to one of China's so-called ""princelings"", the popular sobriquet applied to the children of the ruling party elite, who enjoy wide influence.
Shougang, one of China's biggest conglomerates, was thrust into the limelight after Zhou's detention in February 1995.
The arrest of a man symbolising Beijing's efforts to wield capitalist influence while retaining a socialist veneer underlined the vulnerability of that system to nepotism and abuse.
Zhou Beifang's father, Zhou Guanwu, 78, resigned as chairman and Communist Party secretary of Shougang in February 1995, citing old age following his son's detention.
The Zhous have close ties to the family of paramount leader Deng Xiaoping.
Last month, prosecutors filed charges of corruption against 30 people, including Zhou Beifang and two former officials of the Beijing city government. No other details of the case were available.
Chinese courts frequently impose the death penalty in major corruption cases. Suspended death sentences are often commuted to life imprisonment after two years.
Court officials could not be reached for comment on the sentencing.
The China Daily said the restructuring of Shougang draws a clear line between the property rights, responsibility and management of the parent company and subsidiary.
In the past, a large percentage of the parent company's profits went to branch companies, many of which are running in the red, the newspaper said.
Shougang's parent company would gradually cut off financial subsidies to subsidiaries which would be forced to sink or swim in the market economy as part of the restructuring programme.
""We will provide financial support for our subsidiaries for a few years, helping them in investment, finance and discharge of their debts based on an appraisal of their fixed assets,"" Bi Qun, Communist Party secretary of Shougang, told the newspaper.
""Once that is done the subsidiary companies will develop strategies to stop losing money and begin to make profits,"" Bi was quoted as saying.
The number of employees of the parent company would be gradually slashed to 58,000, or one-fourth of the group's total, the Xinhua news agency said. It gave no timetable.
The group's 27 subsidiaries would employ 176,000 people.
The group registered 1.653 billion yuan ($199 million) in pre-tax profits in the first 10 months of 1996, Xinhua said. It gave no comparative figures.
Corruption was virtually eliminated in the years after the communists came to power in 1949, but has staged a comeback along with economic reforms in the past 17 years.
Communist Party chief and state president Jiang Zemin has declared war on corruption, warning that the scourge was a virus that threatened the party.
",3
"China's flamboyant tycoon Mou Qizhong is hounded by creditors, faces lawsuits and investigation for alleged irregularities and cannot leave the country, company officials said.
The embattled chairman of the Land Economic Group, who has been identified by local media as China's second richest man, was down but not out and was counting on Russian-made satellites to bail him out of financial trouble, they said.
""We're in a crisis,"" Chen Fang, spokeswoman for Mou, told Reuters late on Monday. Mou declined repeated requests for an interview.
Domestic creditors had demanded repayment of loans, group officials said. Mou's Land Economic Group owes 200 million yuan ($24.1 million) at home and another 200 million yuan in Hong Kong and Russia.
""Some creditors...have asked for their money back even before the maturity date,"" Chen said, adding that the company was planning to repay the loans gradually.
Domestic banks had refused to grant Mou new loans and the group had given up seeking loans from Chinese banks. ""Abruptly recalling loans could be fatal,"" Chen said in an interview.
At least one investor had demanded its money back, but agreed to convert its equity into a loan, company officials said.
""The major problem we're facing now is circulating funds getting cut off... As a result, many projects are held up,"" Chen said.
Government authorities had cleared Mou of suspicion of tax evasion and of using unlawful funds but he remained under investigation for other unspecified irregularities, company officials said.
The authorities had been dragging their feet on renewing his passport apparently out of fear that he may flee the country and join his wife and three sons in the United States. Mou hopes to visit the United States next month.
Salaries of employees were slashed to 270 yuan a month -- China's urban minimum wage -- in July and August and were 600 yuan in September from an average of 2,000 yuan a month in the past, the officials said. About 50 people have resigned, leaving some 300.
A contractor in Inner Mongolia had sued the Land Group for allegedly defaulting on a contract, and court officials foreclosed on company cars and office equipment in August.
""Many people say that this could be what is called in Buddhism an inexorable doom for Mr Mou or the Land Group,"" Chen said.
Chen blamed the woes of Mou on the media ""surrounding and attacking"" him since March as well as a smear campaign by former employees and a government credit squeeze to curb inflation.
""But the Land Group will not collapse,"" she said.
Mou plans to raise an unspecified amount of money through a planned share issue, for two Russian-made GALS communications satellites he owns, on the Hong Kong stock exchange, officials said.
The first was launched in January 1994 and the second in November 1995. Russia launched both satellites in Kazakhstan.
In addition, Mou has bought a 30 percent stake in a company that will develop, manufacture and launch two Russian-made Intersputnik communications satellites.
The first of the two satellites is due to be launched from Kazakhstan in late 1998.
The satellites were expected to bring Mou net profits of $500 million and bail him out of his current crisis, Chen said.
The group has assets worth 1.2 billion yuan and liabilities of just 400 million yuan.
It is not Mou's first crisis. He was sentenced to death but eluded execution in the 1966-76 Cultural Revolution for criticising chairman Mao Zedong.
Mou was released from prison in 1979 and established his company the following year. He was arrested again and jailed for one year on a charge of speculating in the early 1980s.
He ran up huge debts in the mid 1980s but managed to bounce back by importing small refrigerators from South Korea at low tariff rates, raking in millions of yuan.
",3
"American movies, hamburgers, jeans -- and U.S. bashing -- are all the rage in China today.
China and the United States have gone from confrontation in the 1950s and 1960s to odd bedfellows in the 1970s and 1980s to a love-hate relationship in the 1990s.
""More and more ordinary Chinese people are disgusted with the deeds of the United States,"" said Tang Zhenyu, one of five authors of ""China Can Say No"", a controversial bestseller which is capitalising on anti-U.S. sentiment.
For Tang, the fondness he once had for the United States ended in March when Washington sent aircraft carrier battle groups to waters near Taiwan where China was conducting war games and missile tests to cow the island into abandoning any dreams of independence.
""I believe this was the turning point for most ordinary Chinese people,"" Tang said in a recent interview.
Washington sent the warships in a show of force to support Taipei, Beijing's rival since the end of the Chinese civil war in 1949, as Taiwan held historic direct presidential elections.
For some Chinese, their American dream turned into a nightmare when Beijing lost its bid to host the 2000 Olympics in 1993. Many blamed Uncle Sam.
Anti-U.S. sentiment mounted after Chinese state media played up what was described as unfair and discriminatory treatment meted out to Chinese Olympians at the Atlanta Games.
""In the past, the United States had the wrong impression that the Chinese government was anti-U.S. while the people were pro-U.S.,"" said Wang Jisi, director of the Institute of American Studies of the prestigious Chinese Academy of Social Sciences.
""China Can Say No"" touched a sympathetic chord with many Chinese fed up with the United States.
It has chapters entitled ""Burn Hollywood"" and ""If necessary, create another Saddam"" in a reference to Iraqi leader, Saddam Hussein.
""China Can Say No"" sold so well that its authors have put out a sequel. It has given rise to a flurry of anti-U.S. books, including ""Why Does China Say No?""
Beijing and Washington have also wrangled over human rights, arms proliferation and trade. The two giants narrowly avoided a bruising trade war in 1995 and again this year over U.S. charges that China condoned copyright piracy.
Many Chinese welcomed the re-election of U.S. President Bill Clinton this month as the return of a devil they knew and are hoping for a new post-election approach from Washington.
""Now, a good opportunity has presented itself for improving and expanding Sino-U.S. relations,"" Chinese Foreign Ministry spokesman Cui Tiankai said of Clinton's re-election.
U.S. Secretary of State Warren Christopher is scheduled to visit China next week to help push that process along. China last week blasted U.S. penalties against textiles ahead of Christopher's visit, but said the two sides had more in common than differences.
The Sino-U.S. honeymoon began in the 1970s when China's bamboo curtain came down and the country opened up to the West, triggering an influx of U.S. pop culture.
McDonald's is now a household word to many Chinese children and China's youth have traded yesterday's navy blue Mao suits for today's jeans.
U.S. blockbusters, such as ""True Lies"" starring Arnold Schwarzenegger and Tom Hanks' ""Forrest Gump"", have taken China by storm, raking in millions.
Beijing's honeymoon with Washington ended with the collapse of the Soviet Union and the Chinese military crackdown on a student-led drive for democracy in June 1989.
Sino-U.S. ties were dealt another jarring blow after the United States allowed a private visit by Taiwan's President Lee Teng-hui in June 1995. Beijing regards Taiwan as a rebel province and has sought to push the island into isolation.
Sino-U.S. ties have improved since the March war games but China still suspects Washington is trying to contain it.
""The United States does not wish for the rise of a strong country which does not listen to it and does not do things according to its rules,"" said Wang of the Chinese Academy of Social Sciences.
",3
"One of China's most prominent dissidents, Wang Dan, will likely receive a harsh sentence for the charge of plotting to overthrow the government, his mother said on Tuesday.
Wang would plead not guilty to the capital charge when his trial at the Beijing Intermediate People's Court begins on Wednesday, said the dissident's mother, Wang Lingyun.
""The court...giving my son a harsh sentence even though he is innocent is very likely to happen,"" Wang Lingyun told Reuters. ""I dare not rule it out.""
She said court officials told her the verdict could be delivered as early as Wednesday or in two days, adding that family members have been under surveillance in recent weeks.
Wang Dan, 26, who vanished into detention in May 1995, faces a minimum of 10 years in prison and a maximum penalty of death for allegedly plotting to overthrow the government.
The court has refused to give details of Wang's trial other than that the dissident has been charged with plotting to overthrow the government. But one official has said Wang could appeal to the Higher People's Court if convicted.
The New York-based Human Rights Watch said last week the chances of an acquittal were slim because Wang has not had adequate time to prepare a defence.
The dissident's family has found a lawyer willing to defend the former student leader after being given just one day in which to do so.
The human rights group said Chinese criminal trials seldom respect the presumption of innocence, and defence lawyers are generally restricted to arguing mitigating circumstances for a reduced sentence.
Wang's court appearance would likely be held out of the public eye, as was last year's trial of Wei Jingsheng, regarded as the father of China's tiny, struggling democracy movement.
The Chinese authorities have been quiet on a request by the U.S. Embassy in Beijing to send observers to Wang's trial, diplomats said.
French senator Robert Badinter, former U.S. attorneys general Nicholas Katzenback and Richard Thornburgh, and former Canadian solicitor-general Warren Allmand have also said they want to observe Wang's trial.
Foreign Ministry spokesman Shen Guofang on Tuesday shrugged off questions from reporters about the status of the requests, saying Wang's trial was China's internal affairs.
Beijing has repeatedly come under fire from the West for human rights abuses. It says foreign intervention in China's internal affairs is not welcomed.
Wang's mother, a 61-year old museum researcher who has no background in law, would attend the trial as one of two defence lawyers. His father and a sister would be allowed to sit in.
The mother has said the dissident was calm and mentally prepared for a harsh sentence, although she has said his health has deteriorated during his detention.
Wang has already served four years in prison for counter-revolutionary crimes, or subversion, for his role in pro-democracy demonstrations in Beijing's Tiananmen Square that were crushed by the army in June 1989 with heavy loss of life.
He was active after his parole in 1993, defying persistent police surveillance to join a daring appeal to communist leaders for the release of all those still in prison for their part in the 1989 protests.
China has recently cracked down on the few remaining dissidents who have not fled into exile or been jailed.
",3
"China's propaganda tsars have axed all the novels and two films of controversial writer Wang Shuo, among the earliest victims of a crusade to resurrect communist puritanism.
The state-owned Hua Yi publishing house decided recently to stop publishing a four-volume collection of Wang's 30-odd novels after coming under fire from the Propaganda Department of the ruling Communist Party, the author said on Friday.
""Someone reported me to the Propaganda Department. They said my works were reactionary...and ridiculed politics,"" Wang told Reuters by telephone.
""They said the taste and the language were vulgar...I do not deny this,"" said Wang, the author of colloquial novels that depict the underbelly of society in Chinese cities and are peppered with strong language and sex.
Propaganda tsars forced Hua Yi to write a self-criticism for publishing such politically incorrect books, Wang said.
""Hua Yi dared not continue publishing my books...No other publication house will dare to publish them,"" he said.
""The decision is very regrettable...I hope this is temporary...Not all my books have problems. I hope they will allow publication of some of them.""
The publishing house and the Propaganda Department could not be reached for comment.
Hua Yi has published about 200,000 copies of the ""Collected Works of Wang Shuo"" since 1992. Wang earns more than 100,000 yuan ($12,000) a year from reprints of his works, about 20 times the average urban salary.
""Reprints each year are my major source of income. It will have a big impact on me,"" Wang said of the ban.
The publisher has not been required to recall Wang's books, but military-owned bookstores have been banned from selling them.
Pirated copies of Wang's works, such as ""I'm Your Father"" and ""Life Fast, Die Happy"", have reportedly now appeared.
Wang is the most prominent victim so far of the Communist Party's crusade to resurrect what it calls spiritual civilisation, communist jargon for toeing the party line that has been eroded by nearly two decades of economic reforms.
The Communist Party elite ended a four-day, annual closed-door plenum in Beijing on Thursday with a pledge to ""use outstanding works that inspire people to cultivate citizens of a socialist (society) with ideals, morals, culture and discipline"".
Chinese film censors have been dragging their feet on giving approval to the public showing of the movie ""Dad"", said Wang, who directed and wrote the script for the film and wrote the extremely popular television series ""Stories from the Newsroom"".
""Basically, it's done for,"" Wang said of his movie, which was completed late last year. A private film company spent 3.3 million yuan ($398,000) on the film.
Shooting of ""Relations between Man and Woman"" was halted in April because the movie had ""mistakes and too much description of sex"", said Wang, who wrote the script.
The spiritual civilisation campaign has left Chinese filmmakers at a loss and the number of movies shot so far this year has plunged to about 30 compared with an annual average of 160 in the past, a Chinese source said.
Eight movies shot by the state-owned Beijing Film Studio had met the same fate as Wang's films, the source said.
""People don't know what kind of movies can be approved,"" said the source who asked not to be identified.
Asked if he was repentant, Wang said: ""I only have two roads to take. The first is to change my style and write things the government can tolerate and encourage. The second is to do nothing.
""It's very hard to write things the government likes...I will need two to three years to adjust,"" he said.
",3
"British Telecom and MCI Communications Sunday formally announced their agreement for the British company to acquire the rest of MCI in a deal worth more than $20 billion that will create a worldwide telecommunications powerhouse.
The merged company, to be called Concert Plc, creates the world's second-largest telecommunications group, behind Japan's NTT, and presents a powerful rival to U.S. leader AT&T.
British Telecom already owned 20 percent of Washington,D.C.-based MCI, the No. 2 U.S. long telecommunications company. The deal values all of MCI at a total $25.2 billion, but as British Telecom already owns 20 percent, it will issue Concert stock and cash worth $20.1 billion for the 80 percent it does not own.
The deal would be the largest between a British and American company.
""This is not a pebble we're throwing onto a quiet pool. It is a big rock, and it's going to make a big splash,"" Sir Iain Vallance, chairman of British Telecommunications Plc, told a news conference.
""Mergers don't always work, but this one will,"" Vallance added.
Industry analysts said a combined company would be a good fit in the ultra-competitive U.S. long-distance phone industry, where MCI's major competitors are AT&T and Sprint. AT&T, which would be the hardest hit by a financially muscular enlarged rival, said Friday it was confident any MCI/British Telecom deal would receive proper scrutiny by the U.S. government.
MCI Chief Executive Bert Roberts said he was confident the combination with British Telecom would win the approval of federal regulators, noting that ""the U.K. is the most competitive telecommunications market in the world.""
He added that the deal would result in lower expenditures for both companies because ""costs will be reduced by building networks once, not twice.""
In an attempt to keep one step ahead of rivals as world telecoms markets are liberalised, British Telecom is taking on a partner with a powerful position in the world's biggest telecommunications market, generating about 40 percent of the world's long-distance calls.
Concert Plc would be one of the world's largest telecommunications companies, with 43 million business and residential customers in 70 countries.
""The complementary strengths and skills of BT and MCI will enable Concert to take full advantage of the great opportunities provided by the forthcoming liberalisation of the telecommunications market in the U.S. and Europe,"" said Vallance.
""This is an industry with a voracious appetite for capital,"" Gerald Taylor, MCI president and chief operating officer, told an earlier news conference in London. ""We have been living and working together for nearly three years ... we know our strengths and weaknesses ... I believe we will be a winning team.""
Under the terms of the agreement, which has yet to be approved by regulatory authorities on either side of the Atlantic, MCI shareholders would receive 0.54 new American Depositary Shares in the new combined group for every MCI share. Each Concert ADS is equivalent to one British Telecom American Depositary Share and $6 cash.
British Telecom's ADSs closed at $55.50 in New York on Friday, giving a value of $30 per MCI share, plus $6 in cash per share before the effect of a buyback by British Telecom that is part of the deal, MCI Chief Financial Officer Doug Maine told Reuters.
British Telecom said Concert will buy back up to 10 percent of its shares after the deal closes. The maximum buyback would increase the value of the deal to MCI shareholders to $39.60 per MCI share. MCI's stock closed Friday at $30.25 on Nasdaq.
The new company, incorporated in Britain, would have headquarters in London and Washington and operate under the British Telecom and MCI brand names.
British Telecom has been looking for a major acquisition since its proposed merger with British rival Cable and Wireless failed in May. It had been keen to forge that deal because it would have given it access to the lucrative Asian telecoms market -- the world's fastest-growing market.
Analysts now expect British Telecom and MCI to start making overtures to major Asian players such as Japan's giant Nippon Telegraph and Telephone Corp.
One potential problem is a media joint venture between MCI and Robert Murdoch's News Corp. British Telecom would end up with MCI's 13 percent non-voting stake in News Corp, and this could cause regulatory difficulties in Britain, analysts say.
",35
"There are no signs of slackening demand for new telephone lines or services like caller ID at the regional Bells and GTE Corp, and earnings growth will remain robust in the third quarter.
""We are still seeing very strong demand for new services across the board,"" said Bette Massick of brokers Bear Stearns.
While regional Bell earnings growth is still above historic trends, Merrill Lynch analyst Dan Reingold expects third quarter average annual growth of 8.1 percent to fall short of the 9.6 percent set in the buoyant second quarter.  
Analysts' buy ratings generally favor Ameritech Corp, with BellSouth Corp, SBC Communications Inc and non-Bell company GTE close behind.
""Given continued strong growth in underlying operations, certain Bell stocks look attractive at the moment,"" said Guy Woodlief of Dean Witter Reynolds, whose favorites are Ameritech and GTE.
Regional Bells have badly trailed the broad market this year after last year's bullish outperformance, hit by fears of stiffer competition in the new unified market place.  
The Federal Communications Commission has made it clear that the Telecom Act of 1996 means Bells will have to face substantive competition before they can enter long distance markets in their own local calling regions.
GTE is an exception.  It already has long distance services in 23 states and has over 250,000 customers.
""I'm sure you will see the effect of GTE long distance operations as a minor cost pressure,"" said Massick.  She said it would take several years for the service to break even.  
Regional Bells are operating under a more favorable regulatory regime than two years ago, allowing them to cut costs without sharing the savings with consumers.
""With prices instead of earnings regulated, unit growth and cost reductions are flowing to the bottom line,"" Reingold said in a recent research report.
Company   (all in dollars)    Q3 est   yr ago  results date
Ameritech..................0.94.......0.84..Oct 15
SBC Communications.........0.95.......0.88..Oct 16
Bell Atlantic..............1.09.......1.01..Oct 17
BellSouth..................0.62.......0.56..Oct 17
GTE Corp...................0.78.......0.71..Oct 17
Pacific Telesis............0.68.......0.64..Oct 17
NYNEX Corp.................0.93.......0.86..Oct 22
US West Comms.......0.60.......0.59..Oct 23
NOTE: U S West Communications Group.
Estimates from First Call. Reporting dates from analysts.  
Cellular and other wireless services continue to be a big money earners for the Bells, though increased price competition is expected during 1997 as Personal Communications Services (PCS) increase to five from two the number of wireless telephone providers in each metropolitan area.
Even the advent of two mega mergers -- Bell Atlantic Corp and NYNEX Corp and SBC Communications and Pacific Telesis Group -- announced earlier this year has done little to enliven the sector.
While the effect of competition is an unknown, cost cuts can be solidly charted.
",35
"AT&T Corp chairman and chief executive Robert Allen will step down early as the price of attracting a talented enough successor to take over, sources close to the company said on Friday.
The sources said that whoever is chosen to succeed Alex Mandl, who quit in August as president and chief operating officer, would expect to be able to succeed Allen, 61, well before the four years still to run on his contract.
""I think it is fair to assume that,"" said one source, declining to be identified.  
AT&T would not comment on the search for Mandl's successor and whether the candidate would succeed Allen.
""The search by the board is a private matter and we won't comment beyond that,"" said AT&T spokesman Jim Byrnes.
Analysts say one possibility is that Allen would split out the role of chief executive to the new candidate in a year or so but retain his chairmanship until retirement.
""I expect the (AT&T) system would allow and wish Allen to stay on in a senior official position for some time,"" said Mark Bruneau of consultant COBA MID.  
An ambitious candidate would wantct on the strategic direction of AT&T, one source said, noting he fast-changing telecommunications market may be barely recognizable in ars.
The sources declined to comment on who the candidates might be, but many aired in the media already seem to have ruled themselves out.
""There is probably more speculation out there than truth in the media at this juncture (on who the candidates are),"" said one of the sources.  
The AT&T board meets next Wednesday, a day before its third quarter results, and may discuss the issue then.
Allen, a 40-year AT&T career veteran, would be reluctant to depart early, but in a recent press interview said he would consider it if a perfect candidate came along.
AT&T has hired executive search groups Korn Ferry and Spencer Stuart to look for an outside candidate, but officials at the firms declined to comment on the process.  
Two candidates mentioned by the New York Times on Friday virtually ruled themselves out. William Esry, chairman of long distance telephone company Sprint Corp, said through a spokesman he was unaware of being on any AT&T candidate list.
""His contract with Sprint precludes working with competitors for several years after he leaves the company,"" the Sprint spokesman added.
Similarly, Hughes Electronics Corp said president Michael Armstrong was unaware of being an AT&T candidate.  
The Wall Street Journal reported that Eastman Kodak Co chairman George Fisher and former AT&T director James Barksdale, who is chairman of Netscape Communications Corp, also ruled themselves out of the speculation.
Expectations of an earlier end to Allen's career have been fanned by AT&T's profit warning in September, in which it said earnings per share for the third quarter may be 10 percent below analysts' expectations.
The warning crowned a bad year for the largest U.S. telecommunications firm.  
AT&T incurred the wrath of politicians and the media for announcing 40,000 job cuts in January, but an improved stock performance it was meant to produce has not appeared, so Wall Street and investors are not happy either.
While the company's split into three parts is going ahead as planned, the remainder of AT&T is now more firmly wedded to the long distance telecommunications services sector, in which competition is heating up.
While the Dow Jones Industrial Average is up 16 percent in 1996, AT&T -- adjusted for its split -- is down 16 percent. -- New York Newsroom 212 859 1712
",35
"AT&T Corp. surprised almost everybody Wednesday by picking John Walter, chairman of printing company R.R. Donnelley and Sons, as its new president and heir apparent to Chairman Robert Allen.
The giant communications company, ending weeks of speculation, said that Walter, 49, was unanimously elected Tuesday night to the posts of president and chief operating offficer and as a member of the board, effective Nov. 1.
""I'm confident John Walter brings leadership qualities that will make the new AT&T successful, not only in the hotly contested long-distance market, but across the whole range of ...communications services,"" Allen, 61, said in a statement.
Industry analysts were stunned that AT&T had not chosen a better-known executive. They were also concerned that an 18-month handover would not lead to a quick enough change in strategy.
""My first reaction was 'John who?'"" said David Goodtree, an industry analyst with Forrester Research.
AT&T stock closed $1.875 lower at $37.875 on the New York Stock Exchange, where it was among the most active issues.
Adjusted for the spin-off of Lucent Technologies Inc., AT&T shares have fallen 16 percent this year -- about the same as the broad market has risen.
""This (Walter) is not a candidate to lead the rally,"" said analyst Barry Sine of SBC Warburg.
""I was expecting 12 months (handover) at most,"" said Chris Landis, an analyst at consultancy Telechoice Inc., and a former AT&T executive. ""I think most insiders were, too.""
The president and COO posts were left vacant after Alex Mandl resigned suddenly in August to head a small, new wireless company, Associated Communications.
AT&T said its board considered a number of candidates but quickly focused on Walter because his track record at Chicago-based Donnelley, the world's largest commercial printer, fit well with the challenges at AT&T.
""He's transformed a large, old-line company challenged by new technologies and changing markets into a tough global competitor. Meeting those challenges is what leading the new AT&T is all about,"" Allen said.
Allen said that starting in January 1998 he and Walter would split the duties of chairman and chief executive, with Walter becoming chairman later that year.
""The board and I have every expectation that John will become chairman and CEO of AT&T,"" Allen said.
AT&T Senior Vice President Hal Burlingame said Allen and Walter would work closely during the transition.
""They will work together very tightly on all the issues confronting the business, but Bob will obviously be chairman and CEO during that process,"" he said.
AT&T officials declined to detail Walter's salary, but told a news conference that the main part of the pay would be performance related, and that the package, while competitive, was by no means a record breaker.
Donnelley's last proxy filing showed Walter's compensation for 1995 as $900,000 plus a bonus of $555,000 and other annual compensation of $36,427.
Walter, who joined R.R. Donnelley in 1969 as a trainee, held numerous positions in the publishing and information company, becoming chairman in 1989.
""During the 10 years of his operational leadership, Donnelley steadily increased revenue, earnings and cash flow in an industry experiencing little growth,"" AT&T said in its announcement. ""It also transformed itself.""
Today Donnelley is a global leader in managing and distributing information -- from magazines to software disks and online services.
Expectations of an early end to Allen's career were heightened when the company warned in September that its earnings would be weaker than expected. The warning eroded staff morale that already had been hurt in January when the company lopped off 40,000 jobs.
AT&T's operating profits of $1.36 billion, or 84 cents a share, for the third quarter were off about 11 percent from $1.53 billion, or 96 cents a share, a year ago. The drop in operating profits came as increased competition and higher marketing expenses hit the company's core long-distance phone business, while financial services sank into losses.
Analyst say top candidates, like George Fisher of Eastman Kodak, may have been put off by the lengthy transition time to the top job while Allen remains in charge.
""I heard the reason Fisher taker didn't take the job was the 18-month delay before taking the reins,"" said consultant Jeffrey Kagan of Kagan Telecom.
However, a source close to AT&T, speaking on condition of anonymity, said no tentative or firm offers were made to any candidates who subsequently withdrew. AT&T declined comment.
AT&T started with a list of more than 30 names from executive search firms, and narrowed those to 17 early in September, when candidates were first approached.
A lengthy board meeting on Sept. 13 in West Virginia whittled down the number from 17 to six. Extensive discussions took place with Walter in the last week before his appointment was confirmed.
""The (stock) market doesn't know him yet, but this a person who will be regarded very positively as people come to know him,"" Burlingame said.
",35
"Fast growing telephone reseller Excel Communications Inc said on Wednesday that it expects record earnings and sales growth for the third quarter and the year, and has plans to expand into new services.
""We should have another record quarter and another record year,"" Jack McLaine, Excel chief financial officer, told Reuters in an interview.
McLaine said the company had plans to offer Internet access, home security monitoring, video service, local telephone services and eventually, wireless telephone.  
Excel reported a 350 percent rise in earnings per share in the second 1996 quarter to $0.36 from $0.08 a year earlier. The company is so far only covered by one analyst, so no consensus of expectations was available.
Excel doesn't own a single phone line itself, but uses the long distance network of WorldCom Inc to reach customers. WorldCom's planned merger with MFS Communications Co Inc , makes entering new markets easier. ""Its definitely easier if you can go to one company and buy the product where you will get nationwide coverage rather than have to go various regional carriers to package it together,"" McLaine said.  
""The move between WorldCom and MFS is a brilliant deal strategically. We have a good relationship with WorldCom and we look forward to talking with them about what these new products are,"" he said.
Excel is one of around 400 telephone service resellers which have been successfully eating into the market share of industry leaders like AT&T Corp. They now account for $12 billion of the $80 billion long distance market.
Analysts say the MFS WorldCom merger will allow these aggressive competitors into high value markets which are not normally available to companies without owned facilities.  
Excel said its sales approach -- using independent sales representatives to sell to their friends, family and associates -- will be powerful in new markets.
""Our relationship sales base is much stronger than telemarketing or direct mail programs, because the sales person knows the customer, and is able to sit down with them .. and explain the product,"" he said.
In the second quarter Excel said it had 220,710 sales representatives against 98,450 a year earlier. They earn a commission based on the size of the phone bill of those they sign up.
Excel's first new resold product is paging, which it has previously announced it is launching next week. It will be using the paging network of PageMart Wireless Inc. Internet service should follow in 1997, McLaine said. -- New York Newsroom  212 859 1712
",35
"With AT&T Corp losing market share and floundering in new markets, Wall Street had been expecting a well-known industry leader to take over from Chairman Robert Allen and turn the company around.
Instead, AT&T has recruited a relative unknown, John Walter, chairman and chief executive of R.R. Donnelley & Sons Co. He may be up to the job, but the market will be kept guessing for 18 months while Allen serves out his time.
""He may be exactly what they need, but we won't know for a while,"" said consultant Jeffrey Kagan of Kagan Telecom.  
Analysts and consultants say Walter is well respected but has never faced the scale of challenge he will find at AT&T, which bestrides the crossroads of communication, software, computing and the Internet.
""AT&T is the biggest battleship you have ever seen. Donnelley is not a small company, but AT&T is 10 times the revenues and has three times the employees,"" said David Goodtree, a consultant at Forrester Research.
AT&T appointed Walter as its new president and chief operating officer, effective November 1.  
But he will not take over as chief executive from Allen until January 1998. Four months later he will become chairman at AT&T's annual meeting.
""Allen does have an image problem, though I don't have that opinion of him,"" said Barry Sine of SBC Warburg, who cut his rating on AT&T stock to hold from buy today. ""The long handover period is an issue for the market.""
AT&T's share in the $75 billion long distance telephone market has fallen to around 55 percent today from 60 percent two years ago. Marketing stumbles hurt earnings in the recent third quarter, and investors are losing patience, analysts say.  
AT&T stock was down two points at 37-7/8 at noon EDT/1600 GMT in heavy volume. Adjusted for the split-off of Lucent Technologies Inc, AT&T shares have fallen 16 percent this year, about the same as the broad market has risen.
Sine said of Walter, ""This is not a candidate to lead the rally.""
Analysts say top candidates to succeed Allen, such as George Fisher of Eastman Kodak, may have been put off by the lengthy 18-month transition time while Allen remains in charge.  
""I heard the reason Fisher didn't take the job was the 18-month delay before taking the reins,"" Kagan said.
However, a source close to AT&T, speaking on condition of anonymity, said no tentative or firm offer was made to any candidate who subsequently withdrew. AT&T declined comment on the matter.
""I was expecting 12 months (handover) at most,"" said Chris Landis, an analyst at consultancy Telechoice Inc and a former AT&T executive. ""I think most insiders were too.""  
Walter has qualities and experience that AT&T will be able to make good use of, analysts said. His printing company specialized in high volumes and quick turnarounds.
""That's a good quality to have at AT&T because you are talking about billions of phone calls a month,"" said Goodtree.
Donnelley is a formidable user of technology and has used telecommunications to transform its business. It is also a significant customer of AT&T.
Cable & Wireless Plc Chief Executive Richard Brown spoke favorably of Walter.  
""I think AT&T is fortunate to get John Walter,"" Brown told Reuters. ""John Walter is a leader...He know the telecoms world but he is not directly involved. He's a quick study.""
On the downside, there is the huge leap of scale and the different nature of AT&T's business. Donnelley is a project-based company, while AT&T is a process-based company requiring different management techniques.
While Walter has made great inroads in the business market where Donnelley finds its customers, he has little experience in consumer markets where AT&T is having its biggest trouble fighting off aggressive competitors.
In an interview this summer, Allen told Business Week magazine that he would be prepared to step down early ""if we find God, or something short of that..""
John Walter has found some adherents at AT&T, but the stock market is not yet ready for a conversion.
",35
"GTE Corp. Wednesday said earnings rose 9 percent in the third quarter, boosted by strong demand for new phone lines from people setting up businesses or hooking up computers at home.
The results were in line with expectations, but GTE's stock jumped as investors cheered the report from the nation's largest local telephone company, as well a court ruling late on Tuesday that suspended key parts of federal rules designed to foster competition in local phone markets.
Other local phone company stocks also rose after the ruling by a three-judge appeals court panel in St. Louis. The judges said they had ""serious doubts"" about the Federal Communication Commission's authority to impose its pricing policies.
The FCC rules, among other things, would require the Baby Bells and other local carriers to lease their phone lines to new competitors at steep discounts of up to 25 percent.
Analysts said state regulators were likely to call for lower discounts. The appellate panel put the new rules on hold while it considers a court challenge to the FCC's plan.
The challenge to the FCC rules had been spearheaded by GTE, which was joined by some of the Baby Bells, other local carriers and state regulators.
""(The legal challenge) improves the probability for getting higher prices to resell local networks than under the FCC guidance,"" said Bette Massick at brokers Bear Stearns.
GTE jumped $3.625 to $42.25 in consolidated afternoon trading on the New York Stock Exchange.
Other Bell stocks that rose included BellSouth, up $2.50 to $38.875, Bell Atlantic, ahead $2.125 to $60.875, Nynex, which gained $1.625 to $44.50, Ameritech, up $1.75 to $56.125 and Pacific Telesis, which added $1.375 to $34.625, all on the NYSE.
In its report, Stamford, Conn.-based GTE said net income rose to $756 million, or 78 cents a share, in the quarter ended Sept. 30, from $695 million, or 72 cents a share, in the 1995 period.
The results matched analysts' forecasts of 78 cents a share, according to First Call, which tracks estimates. The 1995 figures included a gain of $11 million, or 1 cent a share, from the sale of secondary telephone properties.
Sales grew 7 percent to $5.34 billion from $5.0 billion.
In addition to strong line demand, GTE cited growth in its cellular and long-distance services.
""The continued pace of our revenue growth, driven by record line growth as well as strong demand for new and enhanced services, is particularly encouraging,"" Chairman Charles Lee said in a statement.
The number of domestic access lines grew 7 percent in the quarter, with more than half the growth in the residential side of the business from additional lines to the home, GTE said.
GTE said its number of cellular customers grew almost 5 percent in the quarter, while cellular revenue surged 15 percent.
It also said it doubled its number of long-distance customers to more than 500,000 from the end of the second quarter.
",35
"The long-heralded wireless revolution is arriving in dozens of cities across the United States this week, with new tiny digital mobile phones offering clear connections, better battery life and few dropped calls.
For consumers it means lower prices, greater choice, and new add-on features like voice mail and paging built into the phone. For wireless firms new and old it means a huge fight to grab and keep customers in much more competitive markets.
""Fundamentally, wireless services will get cheaper,"" said David Roddy, chief telecommunications economist of Deloitte and Touche Consulting.
On Tuesday PrimeCo, a consortium of three regional Bells and AirTouch Communications Inc. will announce its new digital Personal Communications Services offering in a dozen cities across the country, covering 32 million people.
PrimeCo will start services in Chicago, Richmond and Norfalk in Virginia, the Texas cities of Houston, Dallas/Fort Worth, San Antonio and Austin, New Orleans and all of Florida.
""We are offering people a value proposition, and it will be a hassle-free experience,"" said PrimeCo spokesman Reg Rowe.
On Thursday Omnipoint Corp. will announce its own PCS service in metropolitan New York, fighting existing cellular providers AT&T Corp., and merger partners Bell Atlantic Corp. and NYNEX Corp..
Eventually, Omnipoint will cover broad areas in the Northeast, where 40 million people live.
PCS refers to systems using licenses auctioned by the Federal Communications Commission in 1995. Two or three PCS providers will enter every city in the next three years to compete with two existing cellular service companies.
""We're already starting to spot bare bones pricing as companies vie for market share,"" Roddy said.
Building PCS networks across the country will cost at least $30 billion, and new entrants have to grab customers quickly, even at a loss, to get cash flowing in to start paying the interest charges. Bondholders will be watching closely.
""In some areas it could turn into a bloodbath. It's difficult to find a business plan that says five carriers can serve a given market and make money,"" Roddy said.
Comparing price is tough because of the variables of phone cost, monthly cost, per minute airtime and so on, but scales are expected to be similar to that offered by American Personal Communications, an affiliate of Sprint Corp..
APC offers customers in the Washington DC/Baltimore area phones for between $150-$200, a $15-a-month flat fee with 15 minutes free and a 31-cent-per-minute call charge.
Cellular's old pricing structure of year-long contracts, free phones but pricy airtime is changing.
""Nobody's doing contracts anymore, and one-cent phones are on their way out,"" said an Omnipoint spokesman.
APC's PCS service launched in November 1995 was the first in the country, undercutting cellular rivals by 30 percent.
In the first seven months of operation, APC gathered over 100,000 customers, many of them new to wireless. But as cellular rivals cut prices too, they also drew in extra customers, showing the depth of the potential marketplace.
Cellular providers are now upgrading their services too.
AT&T in October launched its Digital PCS, which is not based on PCS license frequencies but does offer similar features. These include call waiting, voicemail-to-pager, and the benefits of doubled battery life and small handset size.
""About a third of our new customers signing on nationally are choosing Digital PCS,"" said AT&T vice president Jane O'Donaghue, in the first hint of how the campaign is going.
The cost is $25 per month with 30 minutes of free airtime and a phone costing between $150 and $250.
Confusingly, AT&T will start offerings its real PCS service next year. While it currently covers 76 million people with Digital PCS, its real PCS network when complete in 1998 will give virtually complete national coverage, reaching 212 million customers.
PrimeCo, which includes Bell Atlantic, NYNEX and U S West as well as AirTouch, has a special feature in its phones for customers who want to avoid running up big bills.
Customers can set a maximum monthly bill, and the phone will alert them when they near that figure.
""'First bill shock' has been a problem with cellular phones,"" said PrimeCo's Rowe.
Wireless companies will find niches to avoid head-on pricing, with some concentrating on the mobile professional, and others on pre-paid wireless calling.
Nevertheless, with crowded markets, consumers will have to sit down and work out which is the best value of all the offerings available.
""Its going to be a pretty confusing marketplace,"" said Roddy.
",35
"AT&T Corp. surprised almost everybody Wednesday by picking John Walter, chairman of printing company R.R. Donnelley and Sons, as its new president and heir apparent to Chairman Robert Allen.
The giant communications company, ending weeks of speculation, said that Walter, 49, was unanimously elected Tuesday night to the posts of president and chief operating offficer and as a member of the board, effective Nov. 1.
""I'm confident John Walter brings leadership qualities that will make the new AT&T successful, not only in the hotly contested long-distance market, but across the whole range of ... communications services,"" Allen, 61, said in a statement.
In a telephone interview, Walter said, ""I'm very confident with my ability to move this enterprise forward."" Walter declined to outline areas where he believed AT&T had failed, but underlined an appropriate cost base as his clear focus.
""We have to have a cost platform which allows us to compete effectively or we are disadvantaged even before we come into the ring,"" he said.
Industry analysts were stunned that AT&T had not chosen a better-known executive. They were also concerned that an 18-month handover would not lead to a quick enough change in strategy.
""My first reaction was 'John who?'"" said David Goodtree, an industry analyst with Forrester Research.
AT&T stock closed $1.875 lower at $37.875 on the New York Stock Exchange, where it was among the most active issues.
Adjusted for the spin-off of Lucent Technologies Inc., AT&T shares have fallen 16 percent this year -- about the same as the broad market has risen.
""This (Walter) is not a candidate to lead the rally,"" said analyst Barry Sine of SBC Warburg.
""I was expecting 12 months (handover) at most,"" said Chris Landis, an analyst at consultancy Telechoice Inc., and a former AT&T executive. ""I think most insiders were, too.""
The president and COO posts were left vacant after Alex Mandl resigned suddenly in August to head a small, new wireless company, Associated Communications.
AT&T said its board considered a number of candidates but quickly focused on Walter because his track record at Chicago-based Donnelley, the world's largest commercial printer, fit well with the challenges at AT&T.
""He's transformed a large, old-line company challenged by new technologies and changing markets into a tough global competitor. Meeting those challenges is what leading the new AT&T is all about,"" Allen said.
Allen said that starting in January 1998 he and Walter would split the duties of chairman and chief executive, with Walter becoming chairman later that year.
""The board and I have every expectation that John will become chairman and CEO of AT&T,"" Allen said.
AT&T Senior Vice President Hal Burlingame said Allen and Walter would work closely during the transition.
""They will work together very tightly on all the issues confronting the business, but Bob will obviously be chairman and CEO during that process,"" he said.
AT&T officials declined to detail Walter's salary, but told a news conference that the main part of the pay would be performance related, and that the package, while competitive, was by no means a record breaker.
Donnelley's last proxy filing showed Walter's compensation for 1995 as $900,000 plus a bonus of $555,000 and other annual compensation of $36,427.
Walter, who joined R.R. Donnelley in 1969 as a trainee, held numerous positions in the publishing and information company, becoming chairman in 1989.
""During the 10 years of his operational leadership, Donnelley steadily increased revenue, earnings and cash flow in an industry experiencing little growth,"" AT&T said in its announcement. ""It also transformed itself.""
Today Donnelley is a global leader in managing and distributing information -- from magazines to software disks and online services.
Expectations of an early end to Allen's career were heightened when the company warned in September that its earnings would be weaker than expected. The warning eroded staff morale that already had been hurt in January when the company lopped off 40,000 jobs.
AT&T's operating profits of $1.36 billion, or 84 cents a share, for the third quarter were off about 11 percent from $1.53 billion, or 96 cents a share, a year ago. The drop in operating profits came as increased competition and higher marketing expenses hit the company's core long-distance phone business, while financial services sank into losses.
Analyst say top candidates, like George Fisher of Eastman Kodak, may have been put off by the lengthy transition time to the top job while Allen remains in charge.
""I heard the reason Fisher taker didn't take the job was the 18-month delay before taking the reins,"" said consultant Jeffrey Kagan of Kagan Telecom.
However, a source close to AT&T, speaking on condition of anonymity, said no tentative or firm offers were made to any candidates who subsequently withdrew. AT&T declined comment.
AT&T started with a list of more than 30 names from executive search firms, and narrowed those to 17 early in September, when candidates were first approached.
A lengthy board meeting on Sept. 13 in West Virginia whittled down the number from 17 to six. Extensive discussions took place with Walter in the last week before his appointment was confirmed.
""The (stock) market doesn't know him yet, but this a person who will be regarded very positively as people come to know him,"" Burlingame said.
",35
"AT&T Corp., ending weeks of speculation, said Wednesday that its board elected John Walter, chairman of printing company R.R. Donnelley and Sons, as its new president, chief operating officer and heir apparent to Chairman Robert Allen.
The giant communications company said that Walter, 49, was unanimously elected Tuesday night to the two management posts and as a member of the board, effective Nov. 1.
""I'm confident John Walter brings leadership qualities that will make the new AT&T successful, not only in the hotly contested long-distance market, but across the whole range of rapidly growing communications services,"" Allen, 61, said in a statement.
Industry analysts, however, were stunned that AT&T had not chosen a better-known executive. They were also concerned that an 18-month handover would not lead to a quick enough change in strategy.
AT&T stock fell $2 to $37.75 in heavy volume on the New York Stock Exchange, where it was among the most active issues in afternoon trading. Adjusted for the split off of Lucent Technologies Inc., AT&T shares have fallen 16 percent this year -- about the same as the broad market has risen.
""This (Walter) is not a candidate to lead the rally,"" said analyst Barry Sine of SBC Warburg.
""I was expecting 12 months (handover) at most,"" said Chris Landis, an analyst at consultancy Telechoice Inc., and a former AT&T executive. ""I think most insiders were, too.""
The president and COO posts were left vacant after Alex Mandl resigned suddenly in August to head a small, new wireless company, Associated Communications.
AT&T said its board considered a number of candidates but quickly focused on Walter because his track record at Chicago-based Donnelley, the world's largest commercial printer, fit well with the challenges at AT&T.
""He's transformed a large, old-line company challenged by new technologies and changing markets into a tough global competitor. Meeting those challenges is what leading the new AT&T is all about,"" Allen said.
Allen said that starting in January 1998 he and Walter would split the duties of chairman and chief executive, with Walter becoming chairman later that year.
""The board and I have every expectation that John will become chairman and CEO of AT&T,"" Allen said.
Walter, who joined R.R. Donnelley in 1969 as a trainee, held numerous positions in the publishing and information company, becoming chairman in 1989.
""During the 10 years of his operational leadership, Donnelley steadily increased revenue, earnings and cash flow in an industry experiencing little growth,"" AT&T said in its announcement. ""It also transformed itself.""
Today Donnelley is a global leader in managing and distributing information -- from magazines to software disks and online services.
Expectations of an early end to Allen's career were heightened when the company warned in September that its earnings would be weaker than expected.
AT&T's operating profits of $1.36 billion, or 84 cents a share, for the third quarter were off about 11 percent from $1.53 billion, or 96 cents a share, a year ago. The drop in operating profits came as increased competition and higher marketing expenses hit the cmopany's core long-distance phone business, while financial services sank into losses.
Industry analysts had speculated that Allen would surrender the role of chief executive, rather than chairman, to the new candidate and retain his chairmanship until nearer his retirement.
Analyst say top candidates, like George Fisher of Eastman Kodak, may have been put off by the lengthy transition time to the top job while Allen remains in charge.
""I heard the reason Fisher taker didn't take the job was the 18-month delay before taking the reins,"" said consultant Jeffrey Kagan of Kagan Telecom.
However, a source close to AT&T, speaking on condition of anonymity, said no tentative or firm offers were made to any candidates who subsequently withdrew. AT&T declined to comment.
",35
"Satellite television company DirecTV will on Monday slash the price of its entry-level receiver dish to $199 to grab customers before digital cable TV competitors get going, sources close to the company said.
""The new entry level price will be about $199,"" a source said, declining to be identified. DirecTV declined to comment.
DirecTV, part of Hughes Electronics Corp, is responding to recent similar price cuts by rival Echostar Communications Corp. DirecTV's cheapest dish currently costs $499, although models costing up to $900 are available.  
The price cuts are linked to taking a package of basic programming service which costs around $360 a year.
AT&T Corp, which has a 2.5 percent stake in DirecTV and markets the service directly, will not be changing the price of its own package which already offers the dish for $199 to consumers who are in its True Rewards program.
Consumers in that AT&T program have to use loyalty points earned towards the cost of the service.
The dishes are made by Thomson Consumer Electronic Corp's RCA. Thomson is owned by France's Thomson Corp.  
However, another source said AT&T would begin to apply discounts to the cost of programming, reducing it to $155 a year from the current $360 for True Rewards members.
AT&T declined to comment.
DirecTV is the largest U.S. direct satellite service, with 1.7 million subscribers, and growing at 20-30 percent a year.
PrimeStar is the second largest with 1.35 million. It is owned by a group led by cable TV firm Tele-Communications Inc . EchoStar is third with 105,000.
The turf war is already on between telephone companies, cable TV firms and satellite operators for a digital entertainment market worth tens of billions of dollars.
Phone firms are planning to offer wireless cable that beams programs by line of sight, cable TV companies are planning upgraded cable services and internet access over high speed networks, but satellite companies already have a lead.
""They are two or years out in front while the cable TV firms and telcos are just getting started,"" said Jimmy Schaeffler, an analyst at the Carmel Group.
One advantage of satellite services -- not lost on AT&T, which has an option to take a stake of up to 30 percent in DirecTV -- is that consumers who buy a dish are not likely to write off the cost by switching to another provider.
AT&T, which is suffering from heavy competition in long distance telephone services, is hoping to cut the loss of customers by tying them in to a satellite TV service.
""The bottom line is that this is all about market share,"" said Schaeffler.  -- New York Newsroom 212 859 1712
",35
"Lucent Technologies Inc is beginning to reap the rewards of severing its umbilical to AT&T Corp as regional Bells customers flock back.
Lucent's final fiscal 1996 quarter showed a surge in Bell orders as ageing networks were upgraded for demanding data and multimedia services. Lucent network system sales jumped 42.4 percent year-on-year to $3.2 billion in the quarter.
""It is underpinned by some fundamental demand that could keep it going,"" Don Peterson, Lucent's chief financial officer, told Reuters in an interview.  
One of the motives for AT&T's divestment of Lucent was a loss of orders. The Bells, seeing AT&T as a big new rival in their local calling areas, shied away from sharing their technological shopping lists with an AT&T unit.
""That was a reason for the down quarter last year,"" Peterson said. Lucent's changed year end to September 30 from December 31 means this year only had three quarters. The 1996 final quarter corresponds to the third quarter in past years.
Overall revenues climbed 24.7 percent to $5.9 billion in the quarter from a year ago, though comparisons are likely to be less favorable next quarter.  
""The next quarter will be good as well, I am expecting, but it will be comparing itself to a record fourth quarter in 1995,"" he said. ""It would be a mistake to expect 25 percent growth again, unfortunately.""
Increased orders have led to the hiring of 5,000 new factory workers even as Lucent implements a plan to cut jobs overall.
Peterson said the company cut 12,600 of the 23,000 posts scheduled to be eliminated from Lucent's 125,000 workforce by 1998. But with the new hires, net job cuts only amount to about 7,000.  
The closing of the Phone Center stores, the pruning of product lines and a drop in rental revenues combined to hold back revenues. Still, a host of new products, including a long-range cordless phone and sophisticated answering machines, are being prepared for 1997.
Next year, ""we're going to have 70 percent of a sales in products that aren't on the shelf today,"" he said.
Peterson predicted that new products would continue to galvanize the company's performance.  
Voice processing, a $3 billion market that is growing at 20 percent a year, would bring products for handling services such as phone banking and voice mail, as well as linking databases and phone systems for telemarketing.
""We'll see an increase in the data focus in our business,"" he said, noting soaring use of frame relay and the Internet.
In business communications, Peterson expected the emergence of a ""voice server"" product in both public and private networks.
Such a product would combine the roles of telephone exchange with a network server just as fiber optic cables now carry a mixture of data and voice, both digitized.
-- New York Newsroom 212 859 1712
",35
"Rivals the world over will shudder if British Telecommunications Plc and MCI Communications Corp merge, marrying MCI's aggressive marketing and quick reactions with the deep pockets and reach of BT.
Already first with a one-stop telecommunications shop for multinational corporations, a unified BT/MCI would pose an even greater threat in newly competitive U.S. markets, analysts said.  
""This is AT&T Corp's worst nightmare. Bob Allen (AT&T chief executive) will not get a wink of sleep this weekend,"" said consultant Jeffrey Kagan of Kagan Telecom.
The two companies on Friday confirmed market rumors that they were considering a merger and would make an announcement by the end of the weekend, but gave no further details.
However, a source close to the deal told Reuters that the deal would be a cash and stock offer from BT for MCI, the junior partner in market capitalisation.  
No price has yet been agreed upon, the source said, but analysts are speculating on $40 a share which would value MCI at $28 billion, and leave BT with a bill for $22.1 billion for the 80 percent of the company it does not already own.
""If it is true, it would have huge implications for the U.S. market,"" said analyst Ken McGee of the Gartner Group.
""MCI had taken competition about as far as it could go, and needs an infusion of capital for the next stage,"" he said.
MCI has around 20 percent of the $75 billion U.S. long distance market, compared to 55 percent for AT&T, but both are also entering the $90 billion local calling market.  
There they will meet seven regional Bells, once a legal challenge to the 1996 Telecom Act is resolved. The act was designed to let long-distance and local companies compete in a unified market place.
""It gives MCI an enormous warchest to attack the local markets and defend itself against the regional Bells in the long distance market,"" said analyst Guy Woodlief of brokers Dean Witter Reynolds.
""It would allow MCI to go after the U.S. local market with a fury that the Baby Bells have never seen,"" Kagan said.  
Analysts said BT has a very strong balance sheet and free cash flow, which could help fund the coming multi-front marketing war from wireless, long distance and local calling to satellite TV, Internet and business data services.
One conundrum is the MCI/News Corp media joint venture. BT would end up with MCI's about 13 percent non-voting stake in News Corp, which could cause regulatory problems for BT in the British media market.
However, elsewhere it would provide a deep fund of capital for global markets where communication and entertainment are gradually fusing, analysts said.  
""BT has a hell of a strong balance sheet, that's for sure,"" said Richard Klugman, an analyst at brokers PaineWebber.
Some analysts said the timing was perfect, calling President Bill Clinton's bluff before the November 5 election. ""Wonderful timing isnt it?"" said Frank Dzubeck, president of consultants Communications Network Architects.  
He said that with the U.S. bashing Europe over freeing air routes and opening markets such as that of Deutsche Telekom AG in Germany, it will now be tested on how open the U.S. market itself is to a foreign company like BT, whose home market is fully open to competition.
Dzubeck said that BT would be able to unify the global strategy and sort out some of the problems in concert, their global multinational business venture with MCI and make sure those problems are not replicated elewhere.
One competitor to MCI, Sprint Corp got an unexpected boost on Friday from the news of the merger talks.
Sprint's stock rose 4-1/2 to 43-3/4, with analysts saying an expected $40 per share value for MCI, would allow investors to focus on the long-term value of the network Sprint is building too. -- New York Newsroom  212 859 1610
",35
"Worries about regulatory hurdles and a lengthy 12 months to completion took the edge off market euphoria over MCI Communications Corp's merger with British Telecommunications Corp, analysts said on Monday.
MCI shares were trading on Monday morning just 1/4 firmer at 30-1/2, well adrift of a theoretical value that oscillated around $39 per share, based on the price of BT American depositary shares.  
""The arbs are probably demanding between 15 and 20 percent on this deal because of the lengthy time to closing and the uncertainties of U.S. regulatory approval,"" said analyst Richard Klugman of PaineWebber.
The deal is an offer of 0.54 new American depositary shares in the new combined group, named Concert, for every MCI share. Each Concert ADS is equivalent to one BT American depositary share and $6 cash.  
Analysts noted a yawning gap between the value of the deal taken by using BT shares in London and the ADS shares, and a fuzzy debate about how much of the $5.60 BT special dividend should be deducted from the ADS price.
""It depends on what you use as the implied exchange rate,"" said analyst Julie Kennedy of Goldman Sachs. At Monday's one pound equals $1.64, the ADS shares look to be too far ahead.
In any case the final calculations will seesaw with changes in both BT's stock price and the exchange rate.  
Given the broader uncertainties, arbitragers didn't expect to push up the shares to the point where they would have to go over the details looking for the last few cents.
""MCI is trading where is should, in line with BT based on a nine to 12 month transaction, and figuring MCI holders not getting the special (BT) dividends,"" one arbitrager said.
Analysts say the market is not expecting much of the possible buyback of up to 10 percent of Concert shares, which could take place after the deal closes.
Klugman said that though a buyback spreads a given level of earnings over fewer shares, the cost of purchase show up in operating earnings as higher interest charges.
By how much earnings per share improves hinges on how much cheaper debt is than equity, analysts say.  -- New York Newsroom 212 859 1610
",35
"The $20 billion merger of MCI Communications Corp. and British Telecommunications Plc will create a supercarrier posing a potent threat to rivals in the U.S. market place, industry analysts said Monday.
""In one company you have the resources of an AT&T and the marketing savvy of an MCI,"" said consultant Jeffrey Kagan of Kagan Telecom.
The new company, Concert will have a market value of $54 billion, roughly the same as AT&T Corp., and could spur more mega-mergers among U.S. carriers. MCI is currently the second largest U.S. long distance company behind AT&T and has about 20 percent of the market.
""Its already going pretty fast. We have had four deals of over $10 billion since April. But we are going to get more,"" said analyst Guy Woodlief of Dean Witter Reynolds.
The regional Bells as well as GTE Corp., AT&T Corp. and Sprint Corp. will all have to re-examine their market strategies and see where they may be vulnerable.
""It clearly ups the competitive ante for the whole industry,"" said analyst Julie Kennedy of Goldman Sachs.
Concert will push harder into the $90 billion local calling market, both through the MCI Metro venture it already has in major U.S. cities, and through resale of regional Bell circuits, as soon as possible.
""If BT is more prepared to take early losses than MCI is, you could see a renewed emphasis on local markets,"" Woodlief said, adding he expected to see marketing pushed harder.
AT&T will have to concentrate hard now that it is looking eye-to-eye at a rival its own size.
""Two years out MCI could take the top spot from AT&T domestically, which would have been unthinkable just one short year ago. Three years out you won't recognize this industry,"" Kagan said.
There are plenty of vital assets, like state-of-the-art nationwide networks in the hands of carriers who don't have enough money to make the most of them, analysts say.
""WorldCom Inc. is still definitely on the block,"" said David Goodtree, an analyst at consultancy Forrester Research.
WorldCom is in the process of buying business network provider MFS Communications Co. in a $13.3 billion deal. MFS has barely finished buying Internet access provider UUNet when the Worldcom deal was announced.
""Conventional wisdom says GTE or Bell Atlantic (Corp.) would buy WorldCom, but a dark horse would be Cable and Wireless Plc,"" Goodtree said. Britain's C&W said Monday it would build a trans-Atlantic cable system with MFS.
GTE was a rumored bidder for MCI, while Bell Atlantic and Nynex Corp. agreed to merge in April. None of them, however, owns a national long distance network.
GTE already is offering long distance calling. Bell Atlantic and Nynex, and the other regional Bells will not legally be able to offer long distance until a legal impasse over U.S. telecommunications reform is solved.
The Federal Communications Commission's attempts to implement the 1996 Telecom Act have been stalled by a legal challenge. The FCC had set rules to govern the resale of Bell circuits to new rivals in the local calling market.
Debt-strapped Tele-Communications Inc., the largest U.S. cable television company, is another candidate for takeover as cable networks and phone networks combine.
""Another company ripe for acquisition is TCI. They don't have enough cash to do what they want to do,"" said Goodtree.
He suggested that AT&T or Sprint would want to buy TCI. Sprint is already a partner with TCI and two other cable firms in a national venture called Sprint Spectrum to bundle local and long distance telephone, wireless and cable TV.
MCI shares added just 50 cents to $30.75 on Nasdaq on Monday, well down from the about $39 per share the deal is worth, reflecting concerns the FCC may block the deal and that approval in any case would take a year.
The deal's actual value varies with the movements of British Telecom shares. British Telecom American depositary shares on the New York Stock Exchange soared $6.125 to $61.625.
If the deal does go through, Concert could get even bigger, with more alliances likely by the time the regional Bells can get into long distance.
""I would assume within 36 months you will have one or more partners from the regional Bells joining the Concert alliance,"" said Joseph Kraemer, a consultant for A.T. Kearney.
Whatever happens, the market perception of the types of deals that can be done has changed.
""What you witnessed yesterday was the birth of a supercarrier,"" said Kagan.
",35
"Soaring Internet usage is bringing the United States phone system perilously close to gridlock by tying up millions of local phone lines every evening, say industry experts and analysts.
""It is like gridlock on a highway: If you are close to capacity, traffic still moves slowly, but just add a few more vehicles and you get gridlock,"" said Amir Atai, director of network and traffic performance at BellCore.
With Internet use rising at 42 percent a year, according to industry studies, phone capacity simply cannot keep pace.
""This type of (Internet) usage on our network is growing at 10 percent a month and we are watching it closely,"" said NYNEX Corp. spokeswoman Susan Butta.
For phone networks, gridlock means fewer calls going through on the first try, more busy signals and even blocked calls, where perplexed callers hear nothing at all after dialing.
The bottleneck is essentially confined to local networks, and does not affect long distance carriers, experts say.
Industry studies suggest that if U.S. Internet penetration reaches 15 percent, it would force a $22 billion network investment by the regional Bell phone companies to support it. California currently has the highest penetration at eight percent.
""We think action is required within two years,"" when the 15 percent figure is expected to be reached, said Atai.
Short-cut solutions exist, such as using filters to sort Internet calls from others based on their destination number.
If that idea catches on, it could open a huge market for firms like Lucent Technologies Inc. and Northern Telecom Ltd., which make the filters.
But regional Bells, indignant that Internet service providers do not have to pay access charges to reach Bell customers as long distance companies do, are reluctant to pay to sort out the problem.
""Bell switch ports are being tied up and they're not even being compensated for it,"" said David Goodtree, an industry analyst with consultancy Forrester Research.
The problem has swept like a tide from California, where Pacific Telesis Group (PacTel) already has major problems, to major cities and even some suburban areas.
""We found the problem is very severe in California and east coast metropolitan areas. It is beginning to appear in some other areas,"" Atai told Reuters.
The congestion could be a boon to cable TV operators in the fight for internet market share, analysts say.
Cable modems running on upgraded coaxial cable -- designed for the high data rate of video pictures -- are expected to avoid congestion problems and should be available in volume late next year, analysts say.
The problem is fundamental to the nature of phone systems.
""The local network was designed for short calls which you make and then hang up, but Internet calls often occupy a line for hours,"" said Goodtree. Those lines may not even be carrying much data, but are lost to the system in that time.
PacTel studied some of its telephone switches in detail and found that an average Internet surf was 20.8 minutes long, compared with 3.8 minutes for an average phone call. Ten percent of Internet calls were six hours or longer.
To make matters worse, the peak hour for phone systems has now switched to 10 p.m. because of evening Internet use, throwing out the logistics of networks designed around pre- and post-lunch weekday calling peaks.
PacTel said a study of one Silicon Valley telephone switch showed 16 percent of call attempts failed during peak evening hours because of Internet traffic, and 2.5 percent of lines used by Internet service companies absorbed 20 to 36 percent of the switch's capacity.
Ultimately, analysts say Internet traffic will migrate to packet data networks, the most efficient way of routing it.
Packet networks act like traffic policemen, routing data on the next free highway away from jams, even if it means splitting up a convoy  -- the words of a phone conversation for example -- travelling to the same destination.
",35
"British Telecom and MCI Communications on Sunday announced a $20 billion merger, using the largest cross-border takeover deal in history to spawn a global telecommunications powerhouse.
The merged company, to be called Concert Plc, creates the world's second-largest telecommunications group, based on market capitalisation, behind Japan's NTT Corp.
Valued at $54 billion based on Friday's closing stock prices, Concert is neck-and-neck with U.S. long-distance leader AT&T Corp., which is MCI's arch-rival in the super-competitive U.S. market.
For customers, the deal promises better service and lower international calling charges, while for businesses it means a company that can support them wherever they are. For for shareholders, it means faster earnings growth, analysts said.
""This is not a pebble we're throwing onto a quiet pool. It is a big rock, and it's going to make a big splash,"" Sir Iain Vallance, chairman of British Telecommunications Plc, told a news conference in New York.
The deal values all of Washington,D.C.-based MCI at a total $25.2 billion. But as British Telecom already owns 20 percent, it will issue Concert stock and cash worth $20.1 billion for the 80 percent it does not own. Holders of this MCI stake will thus control 33 percent of the stock in the combined company.
Because the companies have already worked together for three years, they expect the merged company to function well.
""Mergers don't always work, but this one will,"" Vallance added.
AT&T, which would be the hardest hit by a financially muscular enlarged rival, said it was confident any MCI/British Telecom deal would receive proper scrutiny by the U.S. government and called on both U.S. and European regulators to condition approval of the deal on a further freeing of competition in British Telecom's home market.
Already strong in long distance, MCI hopes to use BT's service and back-up expertise, plus plenty of cash, to help take a big chunk of the $100 billion a year U.S. local calling market from the regional Bells.
That market is expected to gradually open to competition following legislation earlier this year. Since 1984 it had been the monopoly of the seven regional Bells.
MCI Chief Executive Bert Roberts said he was confident the combination with British Telecom would win the approval of federal regulators, noting that ""the U.K. is the most competitive telecommunications market in the world.""
He added that the deal would result in lower expenditures for both companies because ""costs will be reduced by building networks once, not twice."" The companies expect to save $1.5 billion in costs over five years.
Employees, usually tense during mergers, can relax.
""Minimal job cuts, that is the joy of this. MCI will operate in the Americas, and BT will operate in the U.K and the rest of the world,"" Vallance told Reuters.
Concert Plc would be one of the world's largest telecommunications companies, with 43 million business and residential customers in 70 countries.
""The complementary strengths and skills of BT and MCI will enable Concert to take full advantage of the great opportunities provided by the forthcoming liberalisation of the telecommunications market in the U.S. and Europe,"" said Vallance.
Under the terms of the agreement, which has yet to be approved by regulatory authorities on either side of the Atlantic, MCI shareholders would receive 0.54 new American Depositary Shares in the new combined group for every MCI share. Each Concert ADS is equivalent to one British Telecom American Depositary Share and $6 cash.
British Telecom's ADSs closed at $55.50 in New York on Friday, giving a value of $30 per MCI share, plus $6 in cash per share before the effect of a buyback by British Telecom that is part of the deal, MCI Chief Financial Officer Doug Maine told Reuters.
British Telecom said Concert will buy back up to 10 percent of its shares after the deal closes. The maximum buyback would increase the value of the deal to MCI shareholders to $39.60 per MCI share. MCI's stock closed Friday at $30.25 on Nasdaq.
The new company, incorporated in Britain, would have headquarters in London and Washington and operate under the British Telecom and MCI brand names.
British Telecom has been looking for a major acquisition since its proposed merger with British rival Cable and Wireless failed in May. It had been keen to forge that deal because it would have given it access to the lucrative Asian telecoms market -- the world's fastest-growing market.
Analysts now expect British Telecom and MCI to start making overtures to major Asian players such as Japan's giant Nippon Telegraph and Telephone Corp.
But while seeking an Asian partner, MCI is putting another one on a backburner.
MCI is to cut its stake in a U.S. satellite venture with Australian media tycoon Rupert Murdoch to 20 percent from 50 percent, and will not increase its stake in Murdoch's News Corp as originally expected.
""It is unlikely you will see us increasing our investment (in News Corp),"" Roberts told Reuters.
MCI paid $1.35 billion for a stake of just under 9 percent, and could increase it to 13 percent with another $1 billion investment.
Roberts added that if U.S. regulatory permission could be obtained, he may even sell the $700 million license that goes with the U.S. direct-to-home broadcast satellite to Murdoch.
",35
"WorldCom Inc. said Monday it will acquire MFS Communications Co. Inc. in a stock swap worth about $14 billion, creating a giant international business communications company.
The combined company, to be called MFS WorldCom, will provide ""a single source for a full range of local, long distance, Internet and international service over an advanced fiber optic network,"" Worldcom said.
The merged company will have current annualized revenue of about $5.4 billion, with more than 500,000 business customers throughout North America, Europe and Asia. It will have an end-to-end fiber optic network with 25,000 miles of fiber in service or under construction connecting all major metropolitan areas in the United States.
""We are creating the first company since the breakup of AT&T to bundle together local and long distance services carried over an international end-to-end fiber network owned or controlled by a single company,"" said Bernard J. Ebbers, president and CEO of WorldCom.
The deregulation of the telecommunications industry early this year promises to bring end-to-end service, but neither AT&T Corp. nor any regional Bell can yet achieve it because of regulatory checklists and negotiating tussles.
""We think this gives us at least a two-year headstart over our competitors,"" Ebbers said in an interview.
The merger comes only weeks after MFS' $2 billion purchase of UUNET Technologies Inc. was completed on Aug. 12. That merger created a single source for Internet, voice, data and video services over an international fiber optic grid. MFS' stock has risen 41 percent a year since it went public three years ago.
In the latest deal, which was unanimously approved by both companies' boards, each share of MFS common stock will be exchanged for 2.1 shares of WorldCom common stock.
""As of Friday's closing, the merger consideration for MFS stock is approximately $14 billion,"" the statement said.
MSF's stock leaped $10 to $44.875 on Nasdaq in late trading.
However, worries that the deal was too generous hit Worldcom's stock, which has soared an average of 57 percent a year over the last 10 years. It fell $3.75 to $22.625 on Nasdaq after the company said the merger would dilute earnings for three years.
Although the transaction was valued at $55.39 per WorldCom share based on Friday's closing price, the steep drop in WorldCom's stock brought the value down to $47 per share, traders said.
""Over time, I think the deal will be viewed very positively, but it will take time,"" one takeover trader said.
Omaha, Neb.-based MFS is a major provider of communications services for business and government. Its local networks in dozens of major U.S. cities enable it to outflank the regional Bells' lock on access to local business customers, giving it a strong bargaining position in the merger.
""He (Ebbers) had the only one sizable company to merge with whose stock we really wanted (to own),"" James Crowe, chief executive of MFS, told reporters.
Despite the substantial stock premium for MFS, savings would soon cover the cost of the deal, Ebbers said.
Jackson, Miss.-based WorldCom said it expects significant cost savings from reduced line and access costs. The deal will also eliminate duplication of capital spending programmes and position the combined company to take full advantage of the recent easing of telecommunications laws, it said.
Specifically, MFS no longer has to build a $500 million intercity network, because WorldCom already has one. WorldCom will not have to take a share in a $450 million transatlantic cable for its expanding international business because MFS is already a partner in one.
Ebbers said access charges that Worldcom pays to local telephone companies to reach their local customers would drop because MFS already has local lines to businesses in 45 U.S. cities, rising to 85 cities in two years.
UUNET, the internet service provider that MFS bought earlier this month, will have the biggest savings.
WorldCom said the companies hope to close the latest merger in four to eight months, subject to federal regulatory approval. Shareholders will vote on the deal at special meetings.
Worldcom said in a separate statement that it has adopted a shareholder rights plan to discourage a hostile takeover. It said move was not affected by the deal with MFS.
",35
"MCI Communications Corp said on Sunday its $20 billion merger with British Telecommunications Plc will give the combined company great strength in international calling, consulting and in U.S. local calling.
""Collectively we have the size and strength to compete with any telecommunications company in the world,"" MCI Chief Financial Officer Doug Maine told Reuters in an interview.
Maine, also a director at the new combined firm Concert, said putting together MCI's Systemhouse with BT's Syntegra would give huge power in consulting and systems integration.  
""This is a scale game and this really positions us to compete with the likes of EDS (Electronic Data Systems Corp ) and Andersen (Consulting)..."", Maine said.
Analysts agreed MCI had a lot to offer BT in consulting.
""BT is getting its lunch eaten in U.K systems intergration,"" said Danny Briere of consultantcy Telechoice.
Maine predicted the deal could help hasten the end of the creaking international settlements system, which restricts the carriers and rates used on most of the world's international call connections and which keeps calls expensive.  
""It positions us to take advantage what will probably be the coming collapse of the international correspondent relations market, which is the settlement system..."" he said.
The system is under siege because of liberalization is opening up domestic markets in several key countries like Germany, and new carriers domestically will want to get into the international calling market too.
Analysts say that the more the international market opens up, the more calling rates for customers will fall.  
Maine said there is big money to be made in the $90 billion a year U.S. local market as well, partly through MCI Metro, MCI's business market local calling subsidiary.
""If you want to look at return on capital there is no better investment BT could make than investing in the local market where we have 46 percent EBITDA margins,"" Maine said.
EBITDA is earnings before interest, taxes, depreciation and amortization.
""BT will invest through MCI into the local market and earn considerable returns on the capital, far more than I believe they could investing in their own market,"" Maine said.  
He also expected that MCI's aggressive management team would be a great asset to BT, particularly in the U.S. market.
Maine said that on top of all the business advantages there would be a great deal of money saved by cutting out overlaps and inefficiencies between the two companies.
""Financially we have the synergies...$2.5 billion dollars over the next five years,"" Maine said.  
Maine, who will be getting a board position at Concert, said that he was determined to make sure that investor relations (IR) efforts were kept up in the U.S. to avoid the shareholder base switching over too much to the U.K.
""I believe its partly a result of the fact that the sell-side analysts who tend to follow the company tend to be those in the larger company. When you lose the sell side analysts you lose the involvement of the institutional sales forces,"" Maine said.
Telechoice's Briere said that the new company would tighten up a lot of areas which didn't work in the existing 20 percent stakeholding partnership.
""Huge area will disappear now, where they had been duplicating effort,"" said Briere. He saw it as the right decision, and a brave one to make the partnership work.
""Now there will be no excuses,"" he said. -- New York Newsroom 212 859 1610
",35
"A $22 billion merger between British Telecommunications Plc and MCI Communications Corp looks as good as agreed, crystallising the largest ever international business combination in record time.
Analysts and consultants said on Saturday that news of a London news conference at 8 a.m. EST (1300 GMT) on Sunday means the boards needed minimal time to wrap up the deal after the negotiations were reported on Friday.
MCI announced it would hold a news conference in New York at 2 p.m. EST (1900 GMT).
""At this point it really does sound like a done deal,"" said consultant Jeffrey Kagan of Kagan Telecom.
At the conference BT executives are likely to announce a $40 per share stock and cash offer valuing the 80 percent of MCI that it doesn't already own at $22.1 billion, and the entire company at $28 billion, analysts said.
If BT, with a market capitalisation of around 22.2 billion stg ($36.3 billion) uses mainly stock to foot the bill, it could mean MCI shareholders would own up to 37 percent of the combined company.
As a single company BT/MCI would be a true colossus, with revenues of $38 billion, 182,000 employees and a market value of $64 billion.
In the international big league it would be behind only Nippon Telegraph and Telephone Corp of Japan and AT&T Corp of the United States. In Europe, it would be roughly the same size as Deutsche Telekom AG.
MCI directors, meeting on Saturday in ""The Mausoleum,"" the name MCI staff give to their granite-domed Washington headquarters, have reason to be well pleased with the deal.
Analysts say MCI management will be left in charge of the U.S. market, and be given more money to fight in new markets and defend existing ones in the new deregulated environment.
""It is inconceivable to me that BT would change the MCI management,"" Kagan said.
For MCI the deal brings a 30 percent fillip to a stock price that had languished for almost two years, but for BT the benefits may be more symbolic than actual, analysts say.
""What does BT get for its $22 billion?"" asked David Goodtree of Forrester Research.
""You only need a global strategy to serve big businesses and they already have their Concert venture to serve that market. Other markets are regional,"" he said.
Economies of scale would be hard to find. Both companies already squeeze their suppliers to the limit, their brands are already strong in their respective markets, and geography and local market knowledge will continue to dictate fortunes.
According to one source close to the deal, staff numbers are not going to be cut as part of the deal, although existing job and cost cutting initiatives will continue.
A final hurdle, long thought insuperable to such a deal, is U.S. regulatory objections. But regulatory experts say the Federal Communications Commission itself opened a loophole earlier this year.
The FCC made a ruling that said bidders from truly open markets would be allowed to exceed the 25 percent limit on foreign ownership of U.S. media and communication assets.
""BT's home U.K. market is the most open in Europe and arguably the most open in the world,"" said Bill Gaik, telecommunications director for Deloitte & Touche Consulting.
",35
"AT&T Corp. Chairman Robert Allen is likely step down early to help attract a talented enough successor to take the helm of the nation's largest long-distance company, sources close to AT&T said Friday.
They said the person chosen to succeed Alex Mandl, who resigned as AT&T president and chief operating officer in August to head a small wireless communications company, would expect to be able to succeed Allen, 61, well before the four years still to run on his contract.
""I think it is fair to assume that,"" said one source, who declined to be identified.
AT&T would not comment on the search for Mandl's successor and whether the candidate would succeed Allen, who is also chief executive officer.
""The search by the board is a private matter and we won't comment beyond that,"" said AT&T spokesman Jim Byrnes.
Analysts said one possibility was that Allen would split off the role of chief executive to the new president in a year or so but retain his chairmanship until retirement.
""I expect the (AT&T) system would allow and wish Allen to stay on in a senior official position for some time,"" said Mark Bruneau at COBA MID, a consulting firm.
An ambitious candidate would want to make an early impact on the strategic direction of AT&T, one source said, noting that the fast-changing telecommunications market may be barely recognisable in four years.
The sources declined to comment on possible candidates, but some names already mentioned in the news media seem to have ruled themselves out.
""There is probably more speculation out there than truth in the media at this juncture"" on the candidates, one source said.
Two candidates mentioned by the New York Times on Friday ruled themselves out. William Esrey, chairman of long-distance company Sprint Corp., said through a spokesman he was unaware of being a candidate for the AT&T job.
""His contract with Sprint precludes working with competitors for several years after he leaves the company,"" the spokesman said.
Similarly, Hughes Electronics Corp. said its president, Michael Armstrong, was unaware of being an AT&T candidate.
The Wall Street Journal reported that Eastman Kodak Co. Chairman George Fisher and former AT&T director James Barksdale, now chairman of Netscape Communications Corp., also ruled themselves out.
The AT&T board meets Wednesday, a day before the company reports third-quarter earnings, and may discuss the issue then.
Allen, a 40-year AT&T career veteran, would be reluctant to depart early but said in a recent press interview that he would consider doing so if a perfect candidate came along.
Expectations of an early departure by Allen were fanned by AT&T's warning in September when it said earnings per share for the third quarter may be 10 percent below analysts' expectations.
The warning crowned a rough year for AT&T, which incurred the wrath of politicians, the media and the public for announcing 40,000 job cuts in January. Meanwhile, the rise in the stock price that job cuts often produce has not materialised, so Wall Street and investors are not happy either.
AT&T's split into three parts is proceeding as planned, leaving the company to concentrate on its core long-distance telecommunications business, where competition is heating up.
While the Dow Jones industrial average is up nearly 17 percent so far this year, AT&T shares -- adjusted for the company's breakup -- are off 16 percent.
AT&T has hired executive search groups Korn Ferry and Spencer Stuart to seek an outside candidate. Officials at both firms declined to comment.
",35
"British Telecom and MCI Communications on Sunday announced a $20 billion merger, using the largest cross-border takeover deal in history to spawn a global telecommunications powerhouse.
The merged company, to be called Concert Plc, creates the world's second-largest telecommunications group, based on market capitalization, behind Japan's NTT Corp.
Valued at $54 billion based on Friday's closing stock prices, Concert is neck-and-neck with U.S. long-distance leader AT&T Corp., which is MCI's arch-rival in the super-competitive U.S. market.
For customers, the deal promises better service and lower international calling charges, while for businesses it means a company that can support them wherever they are. For for shareholders, it means faster earnings growth, analysts said.
""This is not a pebble we're throwing onto a quiet pool. It is a big rock, and it's going to make a big splash,"" Sir Iain Vallance, chairman of British Telecommunications Plc, told a news conference in New York.
The deal values all of Washington,D.C.-based MCI at a total $25.2 billion. But as British Telecom already owns 20 percent, it will issue Concert stock and cash worth $20.1 billion for the 80 percent it does not own. Holders of this MCI stake will thus control 33 percent of the stock in the combined company.
Because the companies have already worked together for three years, they expect the merged company to function well.
""Mergers don't always work, but this one will,"" Vallance added.
AT&T, which would be the hardest hit by a financially muscular enlarged rival, said it was confident any MCI/British Telecom deal would receive proper scrutiny by the U.S. government and called on both U.S. and European regulators to condition approval of the deal on a further freeing of competition in British Telecom's home market.
Already strong in long distance, MCI hopes to use BT's service and back-up expertise, plus plenty of cash, to help take a big chunk of the $100 billion a year U.S. local calling market from the regional Bells.
That market is expected to gradually open to competition following legislation earlier this year. Since 1984 it had been the monopoly of the seven regional Bells.
MCI Chief Executive Bert Roberts said he was confident the combination with British Telecom would win the approval of federal regulators, noting that ""the U.K. is the most competitive telecommunications market in the world.""
He added that the deal would result in lower expenditures for both companies because ""costs will be reduced by building networks once, not twice."" The companies expect to save $1.5 billion in costs over five years.
Employees, usually tense during mergers, can relax.
""Minimal job cuts, that is the joy of this. MCI will operate in the Americas, and BT will operate in the U.K and the rest of the world,"" Vallance told Reuters.
Concert Plc would be one of the world's largest telecommunications companies, with 43 million business and residential customers in 70 countries.
""The complementary strengths and skills of BT and MCI will enable Concert to take full advantage of the great opportunities provided by the forthcoming liberalization of the telecommunications market in the U.S. and Europe,"" said Vallance.
Under the terms of the agreement, which has yet to be approved by regulatory authorities on either side of the Atlantic, MCI shareholders would receive 0.54 new American Depositary Shares in the new combined group for every MCI share. Each Concert ADS is equivalent to one British Telecom American Depositary Share and $6 cash.
British Telecom's ADSs closed at $55.50 in New York on Friday, giving a value of $30 per MCI share, plus $6 in cash per share before the effect of a buyback by British Telecom that is part of the deal, MCI Chief Financial Officer Doug Maine told Reuters.
British Telecom said Concert will buy back up to 10 percent of its shares after the deal closes. The maximum buyback would increase the value of the deal to MCI shareholders to $39.60 per MCI share. MCI's stock closed Friday at $30.25 on Nasdaq.
The new company, incorporated in Britain, would have headquarters in London and Washington and operate under the British Telecom and MCI brand names.
British Telecom has been looking for a major acquisition since its proposed merger with British rival Cable and Wireless failed in May. It had been keen to forge that deal because it would have given it access to the lucrative Asian telecoms market -- the world's fastest-growing market.
Analysts now expect British Telecom and MCI to start making overtures to major Asian players such as Japan's giant Nippon Telegraph and Telephone Corp.
But while seeking an Asian partner, MCI is putting another one on a backburner.
MCI is to cut its stake in a U.S. satellite venture with Australian media tycoon Rupert Murdoch to 20 percent from 50 percent, and will not increase its stake in Murdoch's News Corp as originally expected.
""It is unlikely you will see us increasing our investment (in News Corp),"" Roberts told Reuters.
MCI paid $1.35 billion for a stake of just under 9 percent, and could increase it to 13 percent with another $1 billion investment.
Roberts added that if U.S. regulatory permission could be obtained, he may even sell the $700 million license that goes with the U.S. direct-to-home broadcast satellite to Murdoch.
",35
"John Walter believes that making strategies work within the machinery of AT&T Corp will be the core both of his job as chief operating officer and when he steps up to become chief executive (CEO) in 1998.
""You can have the greatest strategy in the world, but if you dont execute, it doesnt matter,"" Walter told Reuters.
Walter, chairman and chief executive of commercial printing firm R.R. Donnelley & Sons Co, was on Wednesday appointed by AT&T as president and chief operating officer, and heir apparent to AT&T CEO and chairman Robert Allen.  
Walter will immerse himself in the operations of AT&T during the 14 months when he and Robert Allen work as a team, and emerge capable of holding the reins.
""I'm very comfortable with my ability to move this enterprise forward,"" he said in a telephone interview.
Walter declined to outline areas where he believed AT&T had failed, but underlined achieving objectives and having an appropriate cost base as his clear focus.
""We have to have a cost platform which allows us to compete effectively or we are disadvantaged even before we come into the ring,"" he said.  
Analysts have repeatedly criticised AT&T's inability to meet its objectives, which has resulted in an erosion of the value of the brand name and a sliding share price.
AT&T has flung tens of millions in $100 checks at consumer long distance customers only to find them desert again to rivals in the industry. Its share in the $75 billion market has fallen to around 55 percent from 60 two years ago.
""They haven't had the level of execution on the consumer side that we should have seen,"" said consultant Chris Landis of TeleChoice, who is also an ex-AT&T executive.  
AT&T has made repeated attempts to make money in online services and the Internet, but has sold off almost all its creative content efforts and has retreated to a core offering of Internet access.
For every acquisition that worked well, like the 1994 purchase of McCaw Cellular, there have been others that failed, like the $7.5 billion 1991 takeover of NCR Corp.
Adjusted for the split-off of Lucent Technologies Inc, AT&T shares have fallen 16 percent this year, about the same as the broad market has risen.  
Among Walter's favorite quotes: ""When you hire, hire people better than you and then you'll build a company of giants. Hire people worse than you and you'll disappear.""
Printing industry analysts say Walter has used technology very effectively to make Donnelley grow, but some say growth came at a price.
""A lot of things have been going wrong,"" said one analyst, citing the lower earnings outlook and falling stock price.
But analyst Rudolf Hokanson of Deutsche Morgan Grenfell said Walter was an effective manager.
""He tried to make people more accountable, tried to flatten some of the reporting structure,"" said Hokanson.
-- New York Newsroom 212 859 1712
",35
"The merger of MCI Communications Corp and British Telecommunications Plc will spur still more mega-mergers among U.S. carriers, seeking safety in size as markets coalesce.
""It's already going pretty fast. We have had four deals of over $10 billion since April. But we are going to get more,"" said analyst Guy Woodlief of Dean Witter Reynolds.
Regional Bells, GTE Corp, AT&T Corp and Sprint Corp will all have to re-examine their market strategies and see where they may be vulnerable.  
There are plenty of vital assets, like state-of-the art nationwide networks, in the hands of carriers who don't have enough money to make the most of them, analysts say.
""WorldCom Inc  is still definitely on the block,"" said David Goodtree, an analyst at consultancy Forrester Research.
WorldCom is in the process of buying business network provider MFS Communications Co in a $13.3 billion deal. MFS had barely finished buying Internet access provider UUNet when the Worldcom deal was announced.  
""Conventional wisdowm says GTE or Bell Atlantic (Corp ) would buy WorldCom, but a dark horse would be Cable and Wireless Plc,"" Goodtree said. C&W on Monday said it would build a transatlantic cable system with MFS.
GTE was a rumored bidder for MCI, while Bell Atlantic and NYNEX Corp agreed to merge in April. None of them owns a national long distance network.
GTE already is offering long distance calling, and the other two plan to, once the legal impasse over U.S. telecommunications reform is solved.  
With cable TV networks integrating with telephony, Tele-Communications Inc is a candidate, some say.
""Another company ripe for acquisition is TCI. They don't have enough cash to do what they want to do,"" said Goodtree.
He suggested that AT&T or Sprint would want to buy TCI. Sprint is already a partner with TCI and two other cable firms in a national venture called Sprint Spectrum to bundle local and long distance telephone, wireless and cable TV.
Concert, as the combined MCI/BT will be called, will be able to assert its strength fairly rapidly after the deal closes, expected in nine to 12 months.  
""It clearly ups the competitive ante for the whole industry,"" said analyst Julie Kennedy of Goldman Sachs.
Concert will push harder into local markets, both through the MCI Metro venture it already has in major U.S. cities and through resale of regional Bell circuits.
""If BT is more prepared to take early losses than MCI has, you could see a renewed emphasis on local markets,"" Woodlief said, adding he expected to see marketing pushed harder.
AT&T will have to concentrate hard now it is looking eye-to-eye at a rival its own size.
""In one company (Concert) you have the resources of an AT&T and the marketing savvy of an MCI,"" said consultant Jeffrey Kagan of Kagan Telecom.
""Two years out MCI could take the top spot from AT&T domestically, which would have been unthinkable just one short year ago. Three years out you won't recognize this industry,"" said Kagan.
",35
"MCI Communications Corp., embracing merger partner British Telecommunications Plc  in a $20 billion match, is growing increasingly distant toward media tycoon Rupert Murdoch and their joint offspring.
At the same time, BT and MCI are seeking Asian telecom partners for Concert, their new global company.
MCI said on Sunday it would cut its stake in a U.S. satellite joint venture with Murdoch's News Corp from 50 percent to 20 percent.
MCI Chief Executive Bert Roberts told Reuters that no major new launches were expected from the $400 million media joint venture with Murdoch's News Corp, and that MCI would sell to Murdoch a $700 million satellite license if it could.
MCI has a stake of just under 9 percent in News Corp, which it bought for $1.35 billion, and has an option to splash out an extra $1 billion to take this to 13.5 percent.
""It is unlikely you will see us increasing our investment (in News Corp)"" Roberts told Reuters in an interview. He said that News Corp was aware of MCI's position.
This is all a world away from the first flush of enthusiasm when Murdoch and Roberts announced a broad-ranging alliance in May 1995.
The plan was to take the Australian magnate's publishing and television expertise and put it together with MCI's communications network and marketing skill, especially in the emerging market of the Internet.
But so far, the venture has produced some duds.
MCI's electronic malls on the Internet are now closed, and News Corp's ideas of producing supermarket tabloids to lure middle-aged readers to the Internet have been shelved.
Low-level cross-promotion, like advertising MCI calling cards in Murdoch's U.S. TV Guide, have continued.
The crux of the problem, analysts say, is that there never was much overlap between MCI's blue-chip business clients and Murdoch's blue-collar sports and publishing expertise.
""BT/MCI is going after the High Street, not Melrose Place,"" said Danny Briere, an industry analyst at consultancy Telechoice.
The satellite offspring American Sky Broadcasting (ASkyB) has been a problem child, expensive and slow to develop in comparison with some rivals.
In January, MCI and News Corp said they would offer digital television direct to the home across the U.S. market within two years, using the $700 million license MCI won in an auction.
But the same month, AT&T announced an alliance with General Motors Corp.'s Hughes Electronics  DirecTV, a company that was already offering digital satellite services, and which now has two million subscribers.
MCI is clearly taking a second look.
""We would be willing, consistent with our lowering our investment position (in ASkyB), to move those to News Corp. That will take FCC approval,"" Roberts said.
BT Chairman Sir Iain Vallance said he expected to look hard for new partners to fill out the global telecommunications alliance in Asia.
""I think we will be more attractive to Asian partners than we would had we stayed separate,"" Vallance told Reuters in an interview. He declined to say which companies he had his eye on, but sources close to the company say Japan's NTT Corp. is considered the real prize.
Vallance said any partner would tie up closely to the business venture first.
""I think it is more likely that, in the first instance, we would invite partnership in Concert Communications Services rather than the parent itself,"" he said.
The source said that Concert would rely on chief executive Sir Peter Bonfield and his close links to the Japanese market to lure NTT aboard. Bonfield is a former head of ICL, a British computer company majority owned by Fujitsu Ltd. -- New York Newsroom 212 859 1610
",35
"Long distance and local telephone company Frontier Corp. said on Monday it is investing up to $500 million in a $2 billion fiber optic network being built across the United States.
Frontier said it will be the largest fiber optic network built in the United States as a single project, and will put it ahead of AT&T Corp., MCI Communications Corp. and others whose networks include both old and new technologies.
Lucent Technologies Inc., spun off from AT&T Corp. in September, will supply the network cable. That contract is worth at least $100 million, a source close to the deal said.
The network is being built by privately owned Qwest Communications, which began work in 1995 and has already spent $500 million. Qwest said it is open to other telecommunications partners to help fund the remaining $1 billion.
The network will connect almost 100 cities and use the technical standard known as SONET, or Synchronous Optical Network, which gives high performance and reliability.
""Used in a ring, SONET allows you to recover from a network failure in milliseconds,"" said analyst Christine Heckart of consultants TeleChoice. ""This investment will expand Frontier's network reach to customers it was hard to get at low cost,"" she said.
Frontier, based in Rochester, N.Y., currently leases its network from others. But it expects to be able to cut costs significantly by this investment, which will increase its network capacity forty-fold.
Robert Barrett, president of Frontier's Network Systems unit, said the network would begin to bring benefits in 1997, halving network transport costs, and cutting incremental network costs by 80 percent.
""Clearly it makes better sense for us to own the network,"" Barrett told a teleconference.
Qwest, a company specializing in network construction, is based in Denver, Colo. It is a subsidiary of Anschutz Co. Anschutz's owner and chief executive is Philip Anschutz, the largest shareholder in Union Pacific Corp.
Frontier will fund $350 million to $400 million of its investment from its own cash flow, and may use short- and medium-term debt for the remaining $100 million to $150 million.
Frontier's stock lost 25 cents to end at $27.75 on the New York Stock Exchange.
",35
"MCI Communications Corp said on Sunday its $20 billion merger with British Telecommunications Plc will give the combined company great strength in international calling, consulting and in U.S. local calling.
""Collectively we have the size and strength to compete with any telecommunications company in the world,"" MCI Chief Financial Officer Doug Maine told Reuters in an interview.
Maine, also a director at the new combined firm Concert, said putting together MCI's Systemhouse with BT's Syntegra would give huge power in consulting and systems integration.
""This is a scale game and this really positions us to compete with the likes of EDS (Electronic Data Systems Corp) and Andersen (Consulting),"" Maine said.
Analysts agreed MCI had a lot to offer BT in consulting.
""BT is getting its lunch eaten in U.K systems integration,"" said Danny Briere of consultancy Telechoice.
Maine predicted the deal could help hasten the end of the creaking international settlements system, which restricts the carriers and rates used on most of the world's international call connections and which keeps calls expensive.
""It positions us to take advantage what will probably be the coming collapse of the international correspondent relations market, which is the settlement system,"" he said.
The system is under siege because liberalisation is opening up domestic markets in several key countries like Germany, and new carriers domestically will want to get into the international calling market too.
Analysts say that as the international market opens up, calling rates for customers will fall.
Maine said there is big money to be made in the $90 billion a year U.S. local market as well, partly through MCI Metro, MCI's business market local calling subsidiary.
""If you want to look at return on capital there is no better investment BT could make than investing in the local market where we have 46 percent EBITDA margins,"" Maine said.
EBITDA is earnings before interest, taxes, depreciation and amortisation.
""BT will invest through MCI into the local market and earn considerable returns on the capital, far more than I believe they could investing in their own market,"" Maine said.
He also expected that MCI's aggressive management team would be a great asset to BT, particularly in the U.S. market.
Maine said that on top of all the business advantages there would be a great deal of money saved by cutting out overlaps and inefficiencies between the two companies.
""Financially we have the synergies...$2.5 billion dollars over the next five years,"" Maine said.
Maine, who will be getting a board position at Concert, said that he was determined to make sure that investor relations (IR) efforts were kept up in the United States to avoid the shareholder base switching over too much to Britain.
""I believe its partly a result of the fact that the sell-side analysts who tend to follow the company tend to be those in the larger company. When you lose the sell side analysts you lose the involvement of the institutional sales forces,"" Maine said.
Telechoice's Briere said that the new company would tighten up a lot of areas which didn't work in the existing 20 percent stakeholding partnership.
""Huge areas will disappear now, where they had been duplicating effort,"" said Briere. He saw it as the right decision, and a brave one to make the partnership work.
""Now there will be no excuses,"" he said.
",35
"With most of their third quarter results in, regional Bells are fulfilling their promise to build out more telephone lines, to put more new services on each line and to make more money doing it.
Share analysts say the Bells and GTE Corp show no signs of slackening demand and are preparing themselves well for the challenge of full competition in their local markets.
""I would characterise the quarter as a cause for celebration in just about every instance,"" said Bill Vogel of Dillon Read, a long-time bull on regional Bell stocks.
Thursday saw results of Bell Atlantic Corp BellSouth Corp Pacific Telesis Group and SBC Communications Inc, following results on Tuesday from Ameritech Corp and on Wednesday from GTE Corp. NYNEX Corp and U S West Inc report next week.
Earnings per share growth averaged 8.25 percent, ranging from 3.0 percent at Ameritech to BellSouth's 12.5 percent. All were within a cent of analyst's First Call estimates.
""Generally the bottom line results have come in as expected,"" said Goldman Sachs analyst Julie Kennedy.
Annual access line growth has averaged 4.9 percent, well above levels seen in the 1980s and early 1990s, boosted by demand for Internet access, home computers, facsimile machines and extra business lines.
""The temporary scare the market had with Ameritech's line growth seems a one-off,"" said Kennedy.
Ameritech saw a dip in line growth to 3.7 percent from 4.4 percent from a year ago, but it followed a drop in advertising and seemed to reflect changed priorities, analysts said.
Pacific Telesis, which is being taken over by SBC, reported strong results which reflected a bounce-back in the California economy. The toll market, a problem area for the company in previous quarters, came good with stable market share and a 6.1 percent increase in revenues year-on-year.
Vogel said the market was absorbing competitive access providers (CAPS) like MFS Communications Co Inc and Teleport Communications LP, without hitting the Bells' growth.
""Results show that the main business lines of the Bells are untouched in both price and volume by the CAPS,"" he said.
Nevertheless, Bell shares remained muted on Thursday, with none of those reporting results moving more than 1.5 percent.
The Bells have underperformed the broad market this year, with analysts saying investors remain concerned about regulation and competition stemming from the 1996 Telecom Act.
This week's good news, in the shape of a legal challenge to Federal Communications Commission (FCC) jurisdiction over the pricing process for reselling local circuits to competitors, is still lost in the broader Bell worries.
The FCC has to review the prices the Bells can charge for access to their local customers in 1997.
""The cloud over these stocks, what has to be decided by the FCC on access charges, has still not lifted,"" Kennedy said. -- New York Newsroom 212 859 1712
",35
"MCI Communications Corp is ducking the trench warfare in the consumer long distance telephone market by quietly using data warehousing  to target key customers who are unlikely to flee to the enemy.
MCI Chief Financial Officer Doug Maine said these customers are looking for advanced services, preferably in a package, but have hitherto been hard to pinpoint.
""It has taken tens of millions of dollars and many years to develop profiles of customers who can be targeted in our marketing,"" Maine told Reuters in an interview.  
Data warehousing requires powerful computers to assemble profiles of users from thousands of individual spending decisions and was a technique first applied by retailers.
""I always tell investors it is a hidden asset you cannot put a value on,"" Main said.
Sales people use these profiles to sell new services to existing customers, or target those of rivals who are likely to move across for the right services -- and stay.
""We've done this for some time in the business sales force,"" Maine said.  
The main enemy is churn, the tendency for some customers to switch between providers, which wastes all the marketing, promotional and administrative money spent recruiting them.
Third quarter results on Tuesday from MCI showed the benefits in the business and data markets that account for two-thirds of MCI's total revenues, but it is early days to see much improvement in the consumer market.
MCI said churn was higher than a year ago in the consumer market, but lower than in the second quarter.  
While AT&T Corp slugs it out with tiny but tenacious resellers in a costly battle for customers using millions of dollars in promotional ammunition, MCI has cut its promotional spending for customer sign-ons by 70 percent from a year ago.
Maine said MCI One, a service package on one bill, has no sign-on bonus but half of new users take the Internet service. MCI One users are five times as likely to take cellular and calling cards than when services are billed separately.  
It is not just a land war. MCI has cross promotions with Northwest Airlines, American Airlines and Delta Air Lines Inc, seeing overlaps between frequent fliers and heavy users of calling cards and wireless services.
Offering free air miles is much cheaper than offering cash, but just as alluring to certain markets.
""Our line-up gives us access to 70 percent of frequent fliers,"" said Maine.
Maine said that AT&T and Sprint Corp have been mining their databanks too, and the whole industry will have a headstart against the regional Bells, which are much newer to the game, when markets are all open to competition.
Despite all its data warehousing, MCI still makes errors.
MCI said it is in the process of revamping its paging services, which resell the networks of Paging Network Inc and Mobile Telecommunications Technologies Corp after it discovered heavy churn.
Paging customers in the third quarter fell to 342,000 from 474,000 the previous quarter, and are expected to be lower in the fourth quarter too before a recovery seen for 1997. -- New York Newsroom  212 859 1712
",35
"MCI Communications Corp., the No. 2 long distance phone company, said Friday it was in talks to be acquired by British Telecommunications Plc in what would be one of the biggest mergers ever.
Industry analysts said that if a deal emerges, it would send shudders throughout the worldwide telecommunications industry, and present an especially tough challenge for AT&T Corp., the leading -- but struggling -- U.S. phone company.
British Telecom already holds a 20 percent stake in MCI.
No price has yet been agreed upon, a source close to the deal said, but analysts were speculating on $40 a share, which would value MCI at $28 billion, and leave British Telecom with a bill for $22.1 billion for the 80 percent of the company it does not already own.
Washington-based MCI said it expected the talks to be concluded this weekend, although it noted that there were no guarantees an agreement would be reached. ""MCI anticipates that its deliberations will be concluded this weekend and an announcement will be made prior to Monday morning,"" it said.
Analysts said a combination of the two companies would be a good fit in the super-competitive U.S. long distance phone industry, where MCI and No. 3 Sprint have been battling an ailing AT&T Corp.
""This is AT&T Corp.'s worst nightmare. (AT&T Chief Executive) Bob Allen will not get a wink of sleep this weekend,"" said consultant Jeffrey Kagan, of Kagan Telecom.
""This is an extremely competitive business, and horizontal mergers like this make sense,"" said Allen Sinai, chief economist at Lehman Brothers Global Economic Advisors. ""The economies of scale in this case could be considerable, and the leverage in terms of potential profits is high ... It would be good purchase.""
A spokesman for British Telecom confirmed the British company was interested in a merger with MCI.
A British Telecom-MCI deal would be the largest between a British and American company, and it would rank as the second-biggest ever involving a U.S. company, behind the RJR Nabisco Inc. buyout by Kohlberg Kravis Roberts & Co., worth $30.6 billion including debt, according to Securities Data.
British Telecom is aiming to offer a mixture of cash and stock for the 80 percent of MCI it does not own, one source told Reuters. The source, who spoke on condition of anonymity, said an announcment was expected on Sunday, if not before.
""If it is true, it would have huge implications for the U.S. market,"" said analyst Ken McGee of the Gartner Group. ""MCI had taken competition about as far as it could go, and needs an infusion of capital for the next stage,"" he said.
MCI has around 20 percent of the $75 billion U.S. long distance market, compared with 55 percent for AT&T. But both are also preparing to enter the $90 billion local calling market.
""It gives MCI an enormous warchest to attack the local markets and defend itself against the regional Bells in the long distance market,"" said analyst Guy Woodlief of Dean Witter Reynolds.
Analysts said British Telecom has a very strong balance sheet and free cash flow, which could help fund the coming multi-front marketing war, from wireless, long distance and local calling to satellite TV, Internet and business data services.
British Telecom suffered a serious setback in September after German utility RWE severed links with British Telecom to join a rival consortium led by Britain's Cable & Wireless Plc. to provide service in Germany.
At the end of September British Telecom signalled its ambitions in the French market through a consortium involving Compagnie Generale des Eaux.
""It would be a good fit for British Telecom and provide a major foothold in this country,"" said Thom Brown, managing director of Rutherford Brown and Catherwood.
In Washington, lawyers and analysts said a deal would likely win approval of U.S. regulators.
""It appears this deal would pass (Federal Communications Commission) approval at first glance,"" said Scott Cleland of the Washington Research Group of Schawb Capital Markets.
An FCC rule adopted last year permits a foreign carrier to invest in a U.S. carrier in excess of a 25 percent cap, as long as the overseas company's home market is open for competition from U.S. telecommunications companies.
Scott Harris, a former head of the FCC's international bureau and now an attorney with Gibson, Dunn & Crutcher, said that other than the U.S. telecommunications market, the British market is the ""most open"" in the world.
MCI was founded in 1968 as MICOM, or Microwave Communications of America Inc. It was the first company to be authorised by the Federal Communications Commission to compete against AT&T in the domestic long-distance market.
MCI started offering point-to-point private-line service between Chicago and St. Louis in January, 1972, sold stock and was incorprated as MCI Communications in 1973.
The Washington-based company filed an antitrust suit against AT&T in 1974. Six years later, a jury ruled in MCI's favour on almost all counts and awarded the company $1.8 billion, providing a warchest to fund its expansion following the 1982 decision by the Department of Justice and AT&T to break up the giant's monopoly on the nation's long distance industry.
",35
"Like an ageing prizefighter, AT&T Corp is destined to slug it out with vigorous rivals both big and small in the $75 billion long distance telephone arena, with no lift in earnings performance in sight.
Though AT&T has just started to improve its marketing punch, share analysts say by the time it shows up in earnings it will be facing fresh opponents -- muscular regional Bells.
""It is hard to find a positive medium-term outlook for AT&T,"" said Bette Massick of brokers Bear Stearns, adding that more attractive stocks could be found elsewhere.  
Thursday's third quarter earnings were in line with analysts' estimates, revised after September's profits warning.  But few analysts give hope for a quick profit rebound now that the company's fortunes are so clearly tied to its long distance marketplace.
AT&T earlier reported a 12 percent earnings per share decline to $0.84 from $0.96 a year ago -- with increased competition and higher marketing expenses hitting long distance -- while financial services sank into losses.  
""I don't see much earnings improvement next quarter or in the first two 1997 quarters,"" said Simon Flannery of brokers J.P. Morgan.  The shares were 1/2 lower at $39-3/8.
AT&T said it has been encouraged by early responses to its new $0.15 a minute flat price for long distance, and analysts say this should stem the weakness for now.
AT&T has a higher proportion of revenues from the consumer long distance market place than its two archrivals MCI Communications Corp and Sprint Corp.  
The spinoff of Lucent Technologies Inc in September and of NCR Corp at the end of 1996, plus numerous unit sales, can only tighten the dependence.
Companies like GTE Corp -- which took half a million long distance customers in its first six months -- and Southern New England Telecommunications Corp are entering the market in a big way, mostly in the consumer area.
They join hundreds of tiny aggressive companies like Excel Communications Inc, which lease the circuits of the big players and then compete with them at low prices.  
By the second half of 1997, dependent on the state of a legal tussle over U.S. Federal Communications Commission resale rules, regional Bells will be starting to enter the long distance market themselves.
By this time AT&T, like other long distance players, is hoping to offer local calling using the circuits of the regional Bells. But the legal challenge led by GTE may succeed in shutting the FCC out of the resale pricing process.
""If so, it will cost AT&T more to get into the local market,"" Massick said.  
Major players by then will be starting to offer packages including wireless, local and long distance and in some cases satellite or cable television too, all on one bill.
This should shut out some of the small resellers and throw the fight onto brand names, where AT&T should be strong -- but the outcome is far from clear, analysts say.
In the meantime, they are hoping for strong action at the loss-making Universal Card credit card unit.
""The credit card business was very disappointing; that's something to watch going forward,"" Flannery said.
Analysts were concerned by a worsened risk profile and bad debt record at the unit.  If this can happen during buoyant economic times, a recession would be very painful, they say. -- Nick Louth, New York Newsroom 212 859 1712
",35
"PrimeCo, the mobile telephone venture owned by AirTouch Communications Inc and three regional Bells, expects a tougher fight with Sprint Corp in the wireless market than with AT&T Corp .
PrimeCo on Tuesday launched Personal Communications Services (PCS) in 16 cities, offering tiny phones with more features, longer battery life and clearer sound than cellular.
""With AT&T we believe we have a clearly discernible quality advantage, with Sprint..we felt it was important to be to market first,"" chief executive Ben Scott told Reuters.  
PrimeCo and Sprint both use the same technology, called code division multiple access (CDMA), so it would be much harder to claim a quality advantage, Scott said.
""They (Sprint) have a good brand for long distance, it remains to be seen whether we can have a better brand for wireless services,"" Scott said.
AT&T, Sprint and Primeco -- owned by Bell Atlantic Corp, NYNEX Corp, U S West Inc as well as AirTouch -- are the only three firms which spent enough on Federal PCS licenses in 1995 to build national networks.  
While every PCS operator starting up will make easy comparisons with analog cellular, the real fights will begin in a year or two when there are two or three PCS operators and two digital cellular operators in every market, analysts said.
The better the brand, the less any competitor will have to resort to cutting prices, according to business models. Winning the marketing war will be at least as important as the technical wizardry that allows the phones to work.  
By mid 1997, Scott expects PrimeCo will be spending about as much on advertising as AT&T Corp does. ATT doesnt break out its ad spending, but is thought by analysts to spend at least $100 million a year.
""As an alliance our spending will be very competitive with those levels (of AT&T),"" he said.
PrimeCo has already spent $1 billion building its PCS network, on top of $1.1 billion for licenses. When the network is complete the total bill may reach $3.6 billion.  
Nevertheless, Scott said PrimeCo is on target to reach a breakeven on earnings before interest, taxes, depreciation and amortization in 1999.
AT&T Corp in October launched Digital PCS, which does not use PCS license frequencies but a digital version of cellular services. However it does offer features similar to PCS, including call waiting, voicemail and long battery life.
AT&T will start offerings its real PCS service next year.
Arcane arguments continue to rage in the industry about which of the myriad technical standards is best, but all agree that PCS in all its forms is far better than analog cellular, which is what the vast majority of U.S. users still have.
American Personal Communications, an affiliate of Sprint, was the first to offer PCS in the country, starting last November with a service in Washington and Baltimore.
However this service uses time division multiple access (TDMA), a technology which is currently incompatible with the CDMA network Sprint plans to build elsewhere across the country with its cable TV partners.
-- New York Newsroom 212 859 1610
",35
"WorldCom Inc's audacious $14 billion takeover of MFS Communications Co Inc on Monday has both thrilled and unnerved share analysts.
They are thrilled by the strategy of one combined company beating industry giants to offer end-to-end business services, but some are worried by the MFS price tag and the danger of diluting WorldCom's hitherto rocket-like earnings trajectory.
""Strategically it is an extremely good move. It is likely to be the first to market such an offering for businesses,"" said analyst Guy Woodlief of Dean Witter Reynolds.  
""It will give WorldCom a breadth of services to business unmatched in the telecommunications industry,"" said Robert McNamara, a mergers and acquisitions advisor at consultants Broadview Associates.
I think there is some great strategic vision here,"" said Kevin Moore, analyst at brokers Alex Brown. He this morning upgraded his rating on the stock to strong buy from neutral.
Analysts have not finalised calculations, which are complicated by MFS's only-recently completed acquisition of Internet access company UUNET, but they say that on an earnings basis the deal looks extremely dilutive for WorldCom.  
""I would describe the price as a dizzying multiple, 20 times trailing earnings,"" said Bill Vogel of Dillon Read.
Most of the damage is done by huge new amortization charges -- $400 million a year for goodwill paid by MFS for UUNET, and $200 million a year for goodwill paid by WorldCom for MFS itself. WorldCom itself normally only pays $130 million a year in amortization.
Bernard Ebbers, WorldCom chief executive and chief executive of the new entity MFS WorldCom, said the new company should now be valued on a discounted cash flow basis, not on an earnings basis.  
""WorldCom has traditionally been very focused on earnings, price earnings multiples and anti-dilutive deals. They have crossed a very significant barrier here,"" said McNamara.
Woodlief said the company was now trading at 11 times cashflow for the new entity, instead of 10 times cashflow for WorldCom on its own, but with better cash flow growth rates now in prospect.
""The stock looks very attractive at this level,"" Woodlief said. ""Its only an issue of shareholder perception. You are paying a higher premium for a higher growth rate.""
Moore forecast that once WorldCom's management team does the rounds of investors in the next few days, the stock would bounce back.
""They are a very persuasive management team,"" Moore said. -- Nick Louth, New York Newsroom  212 859 1712
",35
"AT&T Corp's proposed successor to Robert Allen as chairman and chief executive will be a surprise, not one of those whose names have been mentioned in the press, sources close to the company said on Wednesday.
Neither Michael Armstrong, President of Hughes Electronics Corp nor William Esrey, chief executive of Sprint Corp are in contention, despite broad press speculation.
The sources declined to identify the true candidate.
AT&T declined comment, as did Korn Ferry International and Spencer Stuart, the executive search firms involved.
AT&T's board met earlier in the day to examine a slate of candidates put forward by the executive search groups for the post of president and chief operating officer, and sources expect an announcement in the next few days.
AT&T reports its third quarter results on Thursday.
""The search had (already) been narrowed to a critical few... and the board, not just Bob Allen, will make the final decision,"" said one source, declining to be identified.
The post is vacant after Alex Mandl resigned in August to head a tiny new wireless company, Associated Communications.
One possibility is that Allen would split out the role of chief executive to the new candidate in a year or so but retain his chairmanship until nearer retirement.
Allen, a 32-year AT&T career veteran would be reluctant to depart early, but in a recent press interview said he would consider it if a perfect candidate came along.
""AT&T wants a world class marketer and technologist, with considerable experience of leading a major business,"" one source said.
It is unclear yet whether AT&T will give a clear succession timetable in the announcement for the new post.
Armstrong, Esrey, Eastman Kodak Co chairman George Fisher and James Barksdale, chairman of Netscape Communications Corp, have ruled themselves out of the candidature, but this has not stopped the speculation.
Expectation of an earlier end to Allen's career has been fanned by AT&T's profit warning in September in which it said earnings per share for the third quarter may be 10 percent below analysts expectations.
The warning crowned a bad year for the largest U.S. telecommunications firm.
AT&T incurred the wrath of politicians and the media for announcing 40,000 job cuts in January, but an improved stock performance it was meant to produce has not appeared, so Wall Street and investors are not happy either.
While the company's split into three parts is going ahead as planned, the remainder of AT&T is now more firmly wedded to long distance telecommunications services sector, in which competition is hotting up.
While the Dow Jones Industrial Average is up 16 percent in 1996, AT&T -- adjusted for its split -- is down 14 percent. -- New York Newsroom 212 859 1712 (c) Reuters Limited 1996
",35
"Third quarter results at both MCI Communications Corp and Sprint Corp will be restrained by the cost of new ventures, and in Sprint's case the issue of new shares will lower per share earnings.
But analysts say both have so far escaped the problems which have hit AT&T Corp in the consumer long distance market, and which led to AT&T's profit warning in September.
""MCI will have increased earnings, but will continue the second quarter trend of slower long distance volume growth,"" Massick said Bette Massick of brokerage Bear Stearns.  
Sprint's earnings per share are expected to be lower than a year ago because of investment in the international Global One venture and in Personal Communications Services.
Sprint's shares in issue will rise to about 435 million, from 351 million a year ago, because of stock issued to partners Deutsche Telekom  DTK.CN and French Telecom.
MCI's heavy investment in media, Internet and satellite services with News Corp Ltd is not expected to break even for several years.
""The dilutive effects of the MCI ventures will increase year over year,"" Massick said.  
AT&T said on September 24 that earnings per share could be as much as 10 percent below analysts' forecasts of $0.92 per share for the third quarter.  If this fear were realized, it would report earnings of $0.83, 13.5 percent below the $0.96 of a year earlier.
Analysts say AT&T's problems were an expensive and flawed consumer market strategy of trying to win customers by offering them $100 checks and the competitive effect of small, fast-growing resellers and ""dial around"" services.  
Resellers include companies like Excel Communications Inc, which have produced 50 percent-plus annual revenue growth by using independent sales representatives to sell to friends, family and associates.
Dial around is so named because customers use a 1-800 number to access a rival service advertising cut price rates for long distance or international calling, without switching their long distance provider.
The long distance giants do not lose the customer, but notice a fall in average billable revenue.  
MCI expects higher customer turnover in consumer markets because of increased competition. But neither it nor Sprint depends as heavily on the consumer market as AT&T does.
Merrill Lynch analyst Dan Reingold said in a research report that demand demand for Sprint's services is robust.
""Our forecast minute (of use) growth rate of 9.1 percent should be almost double the industry average...indicating that Sprint continues to take market share,"" Reingold said.
By contrast he expected AT&T minutes of use to grow by 6.2 percent from a year ago, and revenue on this to rise just 1.5 percent.
This growth gap of 4.7 percentage points would exceed the 3.4 percent of the second quarter, he said.
Analysts say Sprint and MCI are not immune to the threat from dial around and resellers, but in any case the threat will be contained in the next two or three years.
""I think the idea of packages or bundles of services will be very much a threat to the small dial around competition because they won't be able to compete up and down the product chain,"" said Guy Woodlief of brokers Dean Witter Reynolds.  
AT&T's adoption of a flat rate 15 cent long distance charge should help it regain market share, especially against Sprint, which charges a flat 25 cents during the day.
Such is the danger is adopting a clear pricing policy -- when more than one major competitor does it comparisons become easy and can lead to a downward spiral in calling charges.
""Given AT&T's brand position in the market place, it is going to remain a formidable competitor,"" said Woodlief. Company   (all in dollars)    Q3 est   yr ago  results date
Sprint Corp................0.73.......0.76..Oct 16
AT&T Corp .................0.83.......0.90..Oct 17
MCI Communications Corp... 0.44.......0.40..Oct 22
Estimates from First Call. Reporting dates from analysts
",35
"Whoever takes over from Robert Allen as chairman and chief executive of AT&T Corp has a major task on hand to wake the sleeping giant, reverse its loss of market share and move strongly into new market opportunities.
""You need to do something to increase the growth rate at the margin, to throw out this rearguard mentality,"" said analyst Bill Deatherage of brokers Bear Stearns.
AT&T's core long distance market share has fallen to 55 percent from 60 percent in two years, while it has failed to capitalize profitably on the growth of new areas.  
""They need to get away from the price game; they cannot win that way,"" said Chris Landis, a consultant at TeleChoice Inc, and a former AT&T executive.
While AT&T made the right move into wireless with the purchase of McCaw Cellular, the integration of the products on one invoice is very important and has yet to happen.
""You need someone who can sell a bill because that is how you communicate with your customer,"" said Landis.  
Whoever is recruited to fill the vacant slot of chief operating officer, created when Alex Mandl left in August, will expect to take over as chief executive and chairman from Allen quickly, and will insist on a firm timetable.
""The problem is going to be getting the talent you need while Bob Allen is still around,"" said Landis.
Sources close to the company say AT&T has narrowed down its search to a shortlist of eager candidates -- none yet identified in the press -- but say an announcement is unlikely until the latter part of the week at the earliest.  
Television channel CNBC said Tuesday that Ameritech Corp's Richard Notebaert is the latest to emerge as a possible successor to Allen.  Ameritech said chief executive Notebaert was abroad and unavailable for immediate comment.
As a regional Bell chief executive he has powerful credentials for the post, but it remains unclear whether AT&T's search is focused within the industry, or would be broadened to a candidate with powerful marketing skills from some other industry.  AT&T, and the two executive search firms involved, Korn Ferry International and Spencer Stuart, have declined comment consistently on the succession issue.  
However, while the guessing game over successors has held sway in the press, it has been a snooze for investors, said analyst Bill Deatherage of brokers Bear Stearns.
""This is discussed much more in the press than by investors,"" Deatherage said.
He said that even if investors knew the candidate, it would be months at least before he or she would be able to have a discernible effect on the huge inertia in the corporation.
Some analysts have suggested that Allen may stay on as chairman while the new recruit rapidly steps up to become chief executive, but Landis thought Allen's continued presence would overshadow the new executive.
""Insiders would much rather see Bob Allen leave sooner than later and it could be his best act to show his love for the company,"" he said. -- New York Newsroom 212 859 1610
",35
"British Telecommunications Plc stock and cash share offer is worth between $36 and $39.60 per MCI share at Friday's closing BT share price, MCI chief financial officer Doug Maine told Reuters.
The deal is an offer of 0.54 new American Depositary Shares (ADS) in the new combined group, named Concert, for every MCI share. Each Concert ADS is equivalent to one BT American Depositary Share and $6 cash.
BT ADS's closed at $55-1/2 in New York, giving a value of $30 per MCI share plus $6 cash per share before the effect of a buyback by BT which is part of the deal, Maine said.  
BT said Concert will make a buyback of up to 10 percent of its shares after the closing. The maximum buyback would increase the value of the deal to MCI shareholders to $39.60 per MCI share.
""The buyback is very important to us,"" Maine said, adding that it was designed to offset some of the skewed stock ownership patterns which often happen in a transnational merger.
Maine said that the 80 percent of MCI shares held by owners other than BT would translate into a holding of 33 percent in the combined Concert company.  
The terms value MCI at a total $25.2 billion before the effect of the buyback, but as BT already owns 20 percent it need only issue Concert stock and cash worth $20.1 billion.
The new Concert company will have 9.5 billion shares in issue, including 3.1 billion new shares issued for MCI.
Maine said the buyback would be available to all shareholders, and didn't expect problems with U.K. tax law.
British tax complexities have been an obstacle recently to some companies' planned distributions of cash to shareholders in Britain.
MCI shareholders will receive the full BT dividend for fiscal 1998 providing the merger closes before BT's year end of March 31 1998.  Maine said that U.S. shareholders would be as much as 25 percent better off from the dividend proposals.
""A dividend from a U.K. company is worth more to a U.S. taxpayer than a dividend from a U.S. company because of the way the ACT (advance corporation tax) works, and because in the U.K. you don't double tax dividends,"" Maine said.
BT said it is planning a 6.1 percent increase in U.K. dividends for fiscal 1997, but did not give the figures for American Depositary Share dividends.  
Each BT ADS is worth 10 ordinary BT shares, so the 19.85 pence U.K dividend for fiscal 1997 translates to 1.98 stg per ADS, translated into dollars at the exchange rate prevailing at the record date in August 1997.
For fiscal 1996, BT paid $2.92 per ADS.  -- New York Newsroom 212 859 1610
",35
"Hordes of aggressive telephone resellers banging at the gates of AT&T Corp, Sprint Corp and MCI Communications Corp have already grabbed $12 billion of the $80 billion long distance market.
But Monday's merger between MFS Communications Co Inc and WorldCom Inc allows tiny resellers to swarm into a rich citadel industry giants see as their own.
""Its international services, data, Internet and intranet as well as local service resale,"" said analyst Daryl Edmonds of brokers Bear Stearns.  
MFS is a provider of local calling networks to businesses, while WorldCom is a long distance and international carrier.
MFS WorldCom will be a ferocious competitor itself, able to offer end-to-end business services, but as a carrier's carrier it will allow in many resellers to new markets, by offering ""own brand"" telecommunication services off the shelf.
Fast growing resellers like Excel Communications Inc, one of over 400 such firms in the industry, have helped to eat away at the long distance telephone market and set the standard for cheap service, analysts say.  
For long distance companies, and regional Bells trying to defend their home turf, it will mean more competition, more pressure on margins and harder work to keep customers.
Profit margins and growth rates in high speed data, dedicated access Internet, international calling and broadband applications like videoconferencing are way beyond that seen in long distance, which is becoming a commodity market.
Resellers would threaten future sources of growth for the biggest firms in the industry.  
""You now have one company, MFS WorldCom, which crystallizes the brave new world (of competition),"" said Simon Flannery of brokers J. P. Morgan.
He said resellers could always have pieced together such services, but this merger will make it easier.
Resellers focused on consumer services will not even be competing with MFS WorldCom's own branded product, which is pitched at small businesses.
UUNET, which MFS bought for $2 billion earlier this month, will be particularly empowered as a carrier of the internet services of others.  
As part of MFS WorldCom it will be able to call on 2,900 sales people across the country instead of 63.
""We think it is a very positive move for the reseller market place,"" MFS WorldCom chief executive designate Bernard Ebbers said during Monday's merger news conference, mentioning Excel and GTE Corp as possible buyers of services.
GTE and some regional Bells are already buying long distance services from WorldCom for their entry into that market. Using MFS's networks, they could now extend local services into cities in other parts of the country.  
This new competition is one of the aims of the 1996 Telecommunications Act, but the irony is this merger -- of an outsider in long distance and an outsider in local telephone -- could have happened even without deregulation.
""Both companies were unencumbered by national regulation,"" said Edmonds though he noted that to reach the greatest market opportunity they still need access to some elements of the Bell's local networks, a process eased by the telecom act.
""MCI or Sprint will say 'we can do this too',"" said Flannery.
However, they are some way behind in their reach.
MCI this morning detailed its local phone service plans, but its MCI Metro network will only reach 25 cities by March 1997, while MFS already has 45 cities up and running.
However, analysts reckon it will be some time before MFS WorldCom can become a threat in the really high margin areas of dealing with the national or global communication accounts of large companies.
-- New York Newsroom 212 859 1712
",35
"The keys to WorldCom Inc's $14 billion takeover of MFS Communications Co Inc are savings on duplicated costs and a chance to be the first with end-to-end service in U.S. businesses telecommunications.
WorldCom chief executive Bernard Ebbers acknowledged that there was a substantial premium in the stock terms offered for MFS but said savings would soon cover the cost of the deal.
""It is not to say that price isn't important, but it really depends on how quickly you pay for it,"" Ebbers told Reuters in an interview on Monday.  
MFS, with local networks in dozens of major U.S. cities, was in a unique position to outflank the regional Bell's lock on access to local business customers. It was in a position to get the terms it wanted.
""There aren't a lot of MFS's out there,"" Ebbers said.
""He (Ebbers) had the only one sizeable company to merge with whose stock we really wanted (to own),"" James Crowe, chief executive of MFS, told reporters.
WorldCom stock soared a heady 57 percent a year over the last ten years. MFS has grown 41 percent a year in the three years since it was floated.  
Ebbers said savings and new market opportunities would mean the deal would pay for itself within five or six years, though for the first three years, 1997-1999, earnings per share would be diluted, but solidly accretive thereafter.
Worries that the stock transaction was too generous for MFS hit Worldcom stock, which was 3-3/4 or 15 percent lower at 22-5/8 in early afternoon. MFS soared 10 to 44-7/8, with both atop the active shares list on Nasdaq.
Ebbers said communicating the deal's advantages may take time. ""If that happens we will have a significantly increased stock price from where we are today,"" he said.  
UUNET, the internet service provider which MFS completed buying earlier this month, will have the biggest savings.
Now it can provide both local and long distance connections without having to pay fees on outside networks. These fees had previously swallowed up half of its revenues.     Most
importantly, the combined company MFS WorldCom can present a comprehensive business package without having to use the networks or pay the fees of others.
End-to-end service is the promise of the U.S. deregulation which became law early this year, but neither AT&T Corp nor any regional Bell can yet achieve it either because of regulatory checklists or negotiating tussles.
""We think this gives us at least a two-year headstart over our competitors,"" Ebbers said.
By being first, Ebbers expects to reap wholesale business from the regional Bells and GTE Corp, companies which at a retail level are its competitors.
Ebbers said that any Bell which wanted to offer local telephone service outside its own region could simply resell the MFS WorldCom network, under the Bell's own brand name. -- New York Newsroom  212 859 1712
",35
"AT&T Corp.'s proposed successor to Robert Allen as chairman and chief executive will be a surprise, not one of those whose names have been mentioned in the press, sources close to the company said Wednesday.
Neither Michael Armstrong, president of Hughes Electronics Corp., nor William Esrey, chief executive of Sprint Corp., are in contention, despite broad media speculation.
The sources declined to identify the true candidate.
AT&T declined to comment, as did Korn Ferry International and Spencer Stuart, the executive search firms involved.
AT&T's board met earlier in the day to examine a slate of candidates put forward by the executive search groups for the post of president and chief operating officer, and sources expect an announcement in the next few days.
AT&T reports its third-quarter results Thursday.
""The search had (already) been narrowed to a critical few ... and the board, not just Bob Allen, will make the final decision,"" said one source, declining to be identified.
The post is vacant after Alex Mandl resigned in August to head a tiny new wireless company, Associated Communications.
One possibility is that Allen would split out the role of chief executive to the new candidate in a year or so but retain his chairmanship until nearer retirement.
Allen, a 32-year AT&T career veteran, would be reluctant to depart early, but in a recent interview said he would consider it if a perfect candidate came along.
""AT&T wants a world-class marketer and technologist, with considerable experience of leading a major business,"" one source said.
It is unclear yet whether AT&T will give a clear succession timetable in the announcement for the new post.
Armstrong, Esrey, Eastman Kodak Co. Chairman George Fisher and James Barksdale, chairman of Netscape Communications Corp., have ruled themselves out, but this has not stopped the speculation.
Expectation of an earlier end to Allen's career has been fanned by AT&T's profit warning in September in which it said earnings per share for the third quarter may be 10 percent below analyst expectations.
The warning crowned a bad year for the largest U.S. telecommunications firm.
AT&T incurred the wrath of politicians and the media for announcing 40,000 job cuts in January, but the improved stock performance it was meant to produce has not appeared, so Wall Street and investors are not happy either.
While the company's split into three parts is going ahead as planned, the remainder of AT&T is now more firmly wedded to the long-distance telecommunications services sector, in which competition is heating up.
The Dow Jones Industrial Average of blue-chip stocks is up 16 percent so far this year, but AT&T -- adjusted for its split -- is down 14 percent.
",35
"A $22 billion merger between British Telecommunications Plc and MCI Communications Corp looks as good as agreed, crystallising the largest ever international business combination in record time.
Analysts and consultants said on Saturday that news of a London news conference at 8 a.m. EST (1300 GMT) on Sunday means the boards needed minimal time to wrap up the deal after the negotiations were reported on Friday.
MCI announced it would hold a news conference in New York at 2 p.m. EST (1900 GMT).
""At this point it really does sound like a done deal,"" said consultant Jeffrey Kagan of Kagan Telecom.
At the conference, BT executives are likely to announce a $40 per share stock and cash offer valuing the 80 percent of MCI that it doesn't already own at $22.1 billion, and the entire company at $28 billion, analysts said.
If BT, with a market capitalisation of around 22.2 billion stg ($36.3 billion) uses mainly stock to foot the bill, it could mean MCI shareholders would own up to 37 percent of the combined company.
As a single company BT/MCI would be a true colossus, with revenues of $38 billion, 182,000 employees and a market value of $64 billion.
In the international big league it would be behind only Nippon Telegraph and Telephone Corp of Japan and AT&T Corp of the United States. In Europe, it would be roughly the same size as Deutsche Telekom AG.
MCI directors, meeting on Saturday in ""The Mausoleum,"" the name MCI staff give to their granite-domed Washington headquarters, have reason to be well pleased with the deal.
Analysts say MCI management will be left in charge of the U.S. market, and be given more money to fight in new markets and defend existing ones in the new deregulated environment.
""It is inconceivable to me that BT would change the MCI management,"" Kagan said.
For MCI the deal brings a 30 percent fillip to a stock price that had languished for almost two years, but for BT the benefits may be more symbolic than actual, analysts say.
""What does BT get for its $22 billion?"" asked David Goodtree of Forrester Research.
""You only need a global strategy to serve big businesses and they already have their Concert venture to serve that market. Other markets are regional,"" he said.
Economies of scale would be hard to find. Both companies already squeeze their suppliers to the limit, their brands are already strong in their respective markets, and geography and local market knowledge will continue to dictate fortunes.
According to one source close to the deal, staff numbers are not going to be cut as part of the deal, although existing job and cost cutting initiatives will continue.
A final hurdle, long thought insuperable to such a deal, is U.S. regulatory objections. But regulatory experts say the Federal Communications Commission itself opened a loophole earlier this year.
The FCC made a ruling that said bidders from truly open markets would be allowed to exceed the 25 percent limit on foreign ownership of U.S. media and communication assets.
""BT's home U.K. market is the most open in Europe and arguably the most open in the world,"" said Bill Gaik, telecommunications director for Deloitte & Touche Consulting.
",35
"Ameritech Corp. and Sprint Corp., the two biggest telecommunications companies in the Midwest, Tuesday reported double-digit profit increases in the third quarter of 1996 and said they expect more to come.
Sprint, a long-distance and local carrier based in Kansas City, Mo., said net income rose 16 percent to $312.4 million from $268.5 million in the 1995 quarter. Revenues grew 10.6 percent to $3.54 billion from $3.21 billion.
Earnings per share fell to 72 cents from 76 cents, mainly because of a 20 percent stake taken in Sprint by France Telecom and Germany's Deutsche Telekom which lifted the number of shares outstanding by 24 percent.
Ameritech, based in Chicago, said net income for the three months ended Sept. 30 edged up to $519 million, or 94 cents a share, from $512 million, or 92 cents a share.
Both companies' earnings were broadly in line with analysts' consensus forecasts carried on First Call, which tracks estimates.
""We currently expect to once again report double-digit volume and revenue growth ... in the fourth quarter,"" Sprint Chief Financial Officer Arthur Krause said.
Ameritech, whose core business is local phone service in the Midwest, said revenues rose 10 percent to $3.7 billion from $3.4 billion.
""Each of our three strategies -- growing our core business, investing in high-growth initiatives and geographic expansion -- plays an integral role in our ability to create sustainable double-digit growth,"" said Ameritech Chief Executive Richard Notebaert.
Analysts were impressed by Sprint's strong showing in long-distance service, an area where industry giant AT&T Corp. recently slipped up and warned of lower profits.
""Clearly this is going to be the strongest growth of the big three (AT&T, MCI Communications Corp. and Sprint) in long-distance volume and revenues,"" said analyst Bette Massick of brokers Bear Stearns.
However, some were concerned that the cost of investments such as Sprint PCS, a wireless venture, were eating up profit growth.
""There is a two sided story here: the businesses are growing very well, but there is all this dilution from new ventures,"" said analyst Richard Klugman at Painewebber.
Sprint PCS is a wireless Personal Communications Services (PCS) national network being built for tiny new mobile phones designed to have better battery life and building penetration than existing cellular services, and extra features including paging.
Sprint owns 40 percent of Sprint PCS, Tele-Communications Inc. owns 30 percent, and Comcast Corp. and Cox Communications Inc. each own 15 percent.
PCS services are already operating in one metropolitan area, Washington-Baltimore, and Sprint expects to launch two more in November and to be in 15 to 20 by the year end.
The other venture is Global One, an international firm designed as a carrier of services for other telecommunications companies and as one-stop shop for multinational corporations.
It is half owned by Sprint, and a quarter each by France Telecom and soon-to-be privatised Deutsche Telekom.
For the year to date, Sprint's net income grew 27 percent to $938.5 million, or $2.22 a share, from $739 million, or $2.10 a share. Sales expanded to $10.42 billion from $9.42 billion.
Ameritech said nine-month net income slipped 1.9 percent to $1.56 billion, or $2.83 a share, from $1.60 billion, $2.88 a share, despite a 12 percent growth in revenues to $11.0 billion from $9.9 billion.
The company said international investments drove more than one-third of its earnings growth in the quarter, led by investments in Belgacom of Belgium, Matav of Hungary and Telecom New Zealand.
In the third quarter telephone lines increased by 3.7 percent to 19.6 million, while cellular customers increased by 37 percent to 2.3 million.
Ameritech's shares fell 87.5 cents to $54.375 while Sprint added 37.5 cents to $40.25, both on the New York Stock Exchange.
",35
"Sprint Corp showed a dynamic performance in all businesses in the third quarter of 1996, and better than MCI Communications Corp or AT&T Corp will manage in long-distance telephone, analysts said.
But uncertainty surrounding the success of expensive new ventures, and continuing dilution of earnings from funding them, are a big and enduring question mark for investors.
""There is a two-sided story here: The businesses are growing very well, but there is all this dilution from new ventures,"" said analyst Richard Klugman of PaineWebber.  
Sprint third-quarter earnings per share were broadly in line with analysts' estimates at $0.72, down from $0.76 a year ago, weighed down by the cost of new ventures, a 24 percent increase in shares in issue and a two point tax rate rise.
But top line growth was outstanding, analysts said. Call volume carried soared by 21 percent from a year ago, while revenues increased 14.1 percent over the same period.
""Clearly this is going to be the strongest growth of the big three (AT&T, MCI, Sprint) in long-distance volume and revenues,"" said Better Massick of brokers Bear Stearns.  
However, the shares managed only a restrained rise of 1/2 to 40-3/8 by 1300 EDT/1700 GMT Tuesday.
Two complex multi-billion dollar ventures, Sprint PCS and Global One, caused respectively four and six cents per share of earnings dilution in the third quarter, and more is seen.
Sprint PCS is a wireless Personal Communications Services (PCS) national network being built for tiny new mobile phones that have better battery life and building penetration than existing cellular services, and extra features like paging.  
Sprint owns 40 percent of Sprint PCS, Tele-Communications Inc owns 30 percent, and Comcast Corp and Cox Communications Inc each own 15 percent.
""The question mark over the company is PCS and its ability to execute the strategy,"" said Simon Flannery of J.P. Morgan.
PCS services are already operating in one metropolitan area, Washington-Baltimore, and Sprint expects to launch two more in November and to be in 15 to 20 by the year end.  
But as each new market opens, the amortization of the license cost -- Sprint paid a total of $2.1 billion for licenses -- plus marketing, network costs and subsidised handset costs also kick in.
Analysts estimate that Sprint could suffer $450 million to $650 million dilution from those costs in 1997. The more successful it is with PCS, the higher these costs will be.
""PCS will not breakeven for years,"" Klugman said. ""But Global One should breakeven sometime in the second half of 1997,"" he added.  
Global One is an international venture designed both to act as a carrier of services for other telecommunications companies, and a one-stop shop for multinational corporations.
It is half owned by Sprint, and a quarter each by France Telecom and soon-to-be privatised Deutsche Telekom.
The European companies also took a 20 percent stake in Sprint for $3.66 billion in January, which accounts for the extra shares in issue.
Sprint said that Global One is on course for annualised revenues of $1 billion a year by the end of 1996, but Flannery said it was harder to figure out the earnings position.
""The visibility of earnings at Global One is not very good yet,"" Flannery said. -- New York Newsroom 212 859 1712
",35
"MCI Communications Corp., the No. 2 long distance phone company, said Friday it was in talks to be acquired by British Telecommunications Plc in what would be one of the biggest mergers ever.
Industry analysts said that if a deal emerges, it would send shudders throughout the worldwide telecommunications industry, and present an especially tough challenge for AT&T Corp., the leading -- but struggling -- U.S. phone company.
British Telecom already holds a 20 percent stake in MCI.
No price has yet been agreed upon, a source close to the deal said, but analysts were speculating on $40 a share, which would value MCI at $28 billion, and leave British Telecom with a bill for $22.1 billion for the 80 percent of the company it does not already own.
Washington-based MCI said it expected the talks to be concluded this weekend, although it noted that there were no guarantees an agreement would be reached. ""MCI anticipates that its deliberations will be concluded this weekend and an announcement will be made prior to Monday morning,"" it said.
Analysts said a combination of the two companies would be a good fit in the super-competitive U.S. long distance phone industry, where MCI and No. 3 Sprint have been battling an ailing AT&T Corp.
""This is AT&T Corp.'s worst nightmare. (AT&T Chief Executive) Bob Allen will not get a wink of sleep this weekend,"" said consultant Jeffrey Kagan, of Kagan Telecom.
""This is an extremely competitive business, and horizontal mergers like this make sense,"" said Allen Sinai, chief economist at Lehman Brothers Global Economic Advisors. ""The economies of scale in this case could be considerable, and the leverage in terms of potential profits is high ... It would be good purchase.""
A spokesman for British Telecom confirmed the British company was interested in a merger with MCI.
A British Telecom-MCI deal would be the largest between a British and American company, and it would rank as the second-biggest ever involving a U.S. company, behind the RJR Nabisco Inc. buyout by Kohlberg Kravis Roberts & Co., worth $30.6 billion including debt, according to Securities Data.
British Telecom is aiming to offer a mixture of cash and stock for the 80 percent of MCI it does not own, one source told Reuters. The source, who spoke on condition of anonymity, said an announcment was expected on Sunday, if not before.
""If it is true, it would have huge implications for the U.S. market,"" said analyst Ken McGee of the Gartner Group. ""MCI had taken competition about as far as it could go, and needs an infusion of capital for the next stage,"" he said.
MCI has around 20 percent of the $75 billion U.S. long distance market, compared with 55 percent for AT&T. But both are also preparing to enter the $90 billion local calling market.
""It gives MCI an enormous warchest to attack the local markets and defend itself against the regional Bells in the long distance market,"" said analyst Guy Woodlief of Dean Witter Reynolds.
Analysts said British Telecom has a very strong balance sheet and free cash flow, which could help fund the coming multi-front marketing war, from wireless, long distance and local calling to satellite TV, Internet and business data services.
British Telecom suffered a serious setback in September after German utility RWE severed links with British Telecom to join a rival consortium led by Britain's Cable & Wireless Plc. to provide service in Germany.
At the end of September British Telecom signalled its ambitions in the French market through a consortium involving Compagnie Generale des Eaux.
""It would be a good fit for British Telecom and provide a major foothold in this country,"" said Thom Brown, managing director of Rutherford Brown and Catherwood.
In Washington, lawyers and analysts said a deal would likely win approval of U.S. regulators.
""It appears this deal would pass (Federal Communications Commission) approval at first glance,"" said Scott Cleland of the Washington Research Group of Schawb Capital Markets.
An FCC rule adopted last year permits a foreign carrier to invest in a U.S. carrier in excess of a 25 percent cap, as long as the overseas company's home market is open for competition from U.S. telecommunications companies.
Scott Harris, a former head of the FCC's international bureau and now an attorney with Gibson, Dunn & Crutcher, said that other than the U.S. telecommunications market, the British market is the ""most open"" in the world.
MCI was founded in 1968 as MICOM, or Microwave Communications of America Inc. It was the first company to be authorized by the Federal Communications Commission to compete against AT&T in the domestic long-distance market.
MCI started offering point-to-point private-line service between Chicago and St. Louis in January, 1972, sold stock and was incorprated as MCI Communications in 1973.
The Washington-based company filed an antitrust suit against AT&T in 1974. Six years later, a jury ruled in MCI's favor on almost all counts and awarded the company $1.8 billion, providing a warchest to fund its expansion following the 1982 decision by the Department of Justice and AT&T to break up the giant's monopoly on the nation's long distance industry.
",35
"AT&T Corp said that the decision to wait 14 months before newly appointed President John Walter takes over as chief executive from Robert Allen made sense while he learned about a different business.
""It was something that Bob Allen felt made sense and something that made sense to John (Walter),"" Hal Burlingame AT&T senior vice president for human resources, told Reuters. ""It had a lot of input from the board (too),"" he said.  
AT&T appointed Walter as its new president and chief operating officer from November 1, following AT&T board approval last night. Walter is chairman and chief executive of printing firm R.R. Donnelley & Sons Co.
Walter will not take over as chief executive from Allen until January 1998, 14 months time, and will become chairman in May 1998 at AT&T's annual shareholder meeting.
In the meantime they will work together, while Walter gets to more fully understand AT&T's business, Burlingame said.  
""They will work together very tightly on all the issues confronting the business, but Bob will obviously be chairman and CEO during that process,"" he said.
Analysts had expected a full handover to whoever was chosen to succeed Allen in six or 12 months, and said the slower timetable was one reason for the stock price fall.
AT&T stock was down 1-7/8 at 38 at 1430 EDT/1830 GMT in heavy volume.  
Burlingame declined comment on what Walter would be paid, except to say that his package would have a very strong alignment with the interests of AT&T shareholders. Details will be available with the next 10K filing.
""Mr Walter had a very fine plan with a lot of futures built into it at R.R. Donnelley. We hav recognised that in the program we put together,"" Burlingame said.
AT&T separately told a news conference that the main part of the pay would be performance-related, and that the package, while competitive, was by no means a record-breaker.  
Donnelley's last proxy filing showed Walter's compensation for 1995 as $900,000 plus a bonus of $555,000 and other annual compensation of $36,427.
Walter's predecessor as AT&T chief operating officer and president, Alex Mandl, left in August to join a startup firm called Associated Communications for a package that included a mighty $20 million salary.
Burlingame said AT&T started with a list of more than 30 names from executive search firms, and narrowed those down to 17 early in September, when candidates were first approached.  
A lengthy board meeting on September 13 in West Virginia whittled down the number from 17 to six. Extensive discussions took place with Walter in the last week before his appointment was confirmed.
""The (stock) market doesn't know him yet, but this a person who will be regarded very positively as people come to know him,"" Burlingame said. -- New York Newsroom  212 859 1712
",35
"GTE Corp said on Wednesday that it expects to continue increasing earnings per share by at least 10 percent for the forseeable future, on revenues seen rising six to eight percent per year.
""At this point there is nothing on the horizon to suggest we should be backing off from that (earlier forecast),"" chief financial officer Michael Kelly told Reuters.
GTE earlier reported third quarter earnings per share of $0.78, 10 percent ahead of a year ago and exactly in line with analysts' consensus estimates carried on First Call.  
However, analysts were pleased by very strong growth in the business fundamentals, which included an industry-leading 7.4 percent rise in access lines and a 20 percent growth in cellular users. The stock was 2-3/4 firmer at 41-3/8 in early afternoon.
Kelly was delighted with GTE's line growth.  ""We just don't see it stopping; its unbelievably strong,"" he said.
GTE's local calling areas are mostly suburban, where families who telecommute are most likely to live, and where families have adolescent children who need their own lines -- as well as a computer or two in the home needing a line.  
On top of this GTE areas are concentrated in Sunbelt areas like Florida, where economic growth has been very strong, or California, where it is rebounding from recent weakness.
""GTE is in a position to grow faster that the regional Bells because of their concentration in suburban markets,"" said Bette Massick of Bear Stearns, noting that an end to sales of local operations has unmasked this growth.
Kelly said that GTE had worked hard to cut its customer turnover -- or churn -- in cellular services, which increases marketing costs substantially.  Targeting high value customers had paid dividends, without hitting overall growth.  
As a result, average monthly bills are $61 per month, $3 above the industry average, and churn has fallen 18 percent from a year ago.  Most customers are now on term contracts.
""Our (consumer) bad debt is coming down also,"" Kelly said.
GTE offers long distance across 31 states, including all the areas where it already offers local service -- a privilege which regional Bells will only be allowed when they have proven their own local calling markets are competitive.
It has already garnered 500,000 customers since it began in March and expects to reach one million soon after the end of 1996 at the expense of the industry's big three players.  
""...Most of our business is coming from the three traditional dominant players,"" Kelly said.
AT&T Corp, MCI Communications Corp and Sprint Corp are the industry's big three.
Kelly said that the long distance customers gained seemed above average in terms of call duration and spending.
GTE in late August began providing customers in Tampa with a single bill for all their GTE cellular, local, long distance and Internet services and will roll this out to new regions as soon as possible.
Single billing has long been desired by the industry as a tool to retain customers, who like the convenience of writing a single monthly check, but few companies have the software in place to support it. -- New York Newsroom 212 859 1712
",35
"Sprint Corp said on Tuesday  it put its local telephone ventures with cable television companies on a back burner because there are more immediate opportunities in reselling existing local telephone service.
""For a lot of reasons the wireline ventures with the cable TV companies moved ... to a back burner,"" Arthur Krause, Sprint chief financial officer told Reuters.
Sprint's cable partners are Tele-Communications Inc, Comcast Corp and Cox Communications Inc, which together reach 30 million households.  
They had planned to be an early part of Sprint's plan to offer bundled local, long distance and wireless telephone with cable TV on a single bill across the United States.
Krause said faster-than-expected legislative action from the Federal Communications Commission had opened up chances of earlier interconnection deals with incumbent local telephone companies than had been expected two years or so ago.
Some analysts believe there are technical and strategic difficulties too, which have already led to local services being arranged as several separate ventures rather than one common branded service as originally planned.  
Krause predicted Sprint's first such resale deal would precede any offerings of local service in partnership with the cable TV companies, but gave no exact timings.
He noted that resale was always a major part of the plan, because Sprint can only reach 11 million of the 100 million U.S. homes through its own local telephone service unit, and its cable partners reach only another 30 million.
Eventually local service would be provided broadly on Sprint-owned facilities, he said.  
Sprint reported third quarter earnings on Tuesday and pleased analysts with its operating performance, but the stock remains weighed by worries over its ambitious plans, like Sprint PCS, a multi-billion dollar wireless venture.
Krause said the market should see Sprint as two companies.
""We have been encouraging people to look separately at the core operation and at the ventures,"" he said.
Sprint's core telephone operations should be analyzed based on their earnings, while the new cash-hungry ventures  should be approached on a discounted cash flow basis, he said.  
""(Otherwise)...the value of the new ventures ends up as less than zero,"" he said.
Krause declined comment on estimates of dilution caused by Sprint PCS ahead of the finalization of the venture's 1997 business plan, which he expected within 30 days.  Analysts expect dilution of $450 miilion to $650 million in 1997.
Krause said he was encouraged that churn, or customer turnover, was declining in its long distance operations, particularly when others were being hit hard.
""(Nevertheless) churn rates still exceed what anyone would hope they would be,"" he said.
AT&T Corp said in September that high churn in this competitive marketplace was one of the reasons that it predicted an earnings shortfall for the third quarter.
Krause said Sprint's marketing encouraged customers to remain with the company.
""Sprint Sense has a cashback plan that basically rewards people who stay a year or longer,"" he said, of a consumer market plan.  For small business customers he said that the ""Fridays Free"" campaign had been equally successful. -- New York Newsroom 212 859 1712
",35
"MCI Communications Corp., the nation's second-largest long distance provider, said Friday it was in talks with British Telecommunications Plc on a possible merger of the two companies.
British Telecom already holds a 20 percent stake in MCI.
An MCI spokesman told Reuters the company expected the talks to be concluded this weekend, although he noted that there were no guarantees an agreement would be reached.
""We have entered into negotations with BT on a possible business combination,"" the spokesman said, reading from a prepared statement.
Industry analysts applauded the talks, saying a combination of the two companies would be a good fit in the super-competitive U.S. long distance phone industry, where MCI and No. 3 Sprint have been battling an ailing AT&T Corp.
""This is an extremely competitive business, and horizontal mergers like this make sense,"" said Allen Sinai, chief economist at Lehman Brothers Global Economic Advisors. ""The economies of scale in this case could be considerable, and the leverage in terms of potential profits is high ... It would be good purchase.""
MCI's stock was halted for trading at $27.25, up $1.875 on Nasdaq, although it jumped as much as $5 to $30.625 after CNBC television reported that the companies were talking. The exchange said it would investigate those trades.
""It would be a good fit for British Telecom and provide a major foothold in this country,"" said Thom Brown, managing director of Rutherford Brown and Catherwood.
""It wouldn't take away from the long-distance battle. Before that's over, there will be losers and winners,"" he added.
CNBC said Lazard Freres, MCI's investment bankers, and Morgan Stanley were working on the deal, which it said could be worth upward of $22 billion.
""It makes sense,"" said Kevin Haggerty, senior vice president and manager of equity trading at Fidelity Investments. ""I think BT is a great company.  The synergy is there. BT made a great initial investment.""
",35
"CIDCO Inc said its sales so far in the second half were similar to those in the first six months of the year -- as the company predicted in July -- though sales of caller ID equipment in California were even worse than expected.
""We were right on in July. If anything it is worse than we had ever thought (in California),"" Chief Financial Officer Scott McDonald told Reuters on Thursday.
Still, McDonald, who is also chief operating officer, said he was comfortable with analysts' current 1996 estimates, which were revised down sharply after the July statement.  
""Everything about the second half -- that is still the indication. Yes, we're happy with the guidance...,"" he said, referring to the company's statement during the summer.
In July, the company said it was unlikely to meet analysts' sales forecasts for the second half and instead expected sales in line with those in the first six months.
It said its lower expectations reflected weakness in California, uneven sales through Ameritech Corp and delays in new products.  
Caller ID services have taken off across the United States in recent years, with additional demand generated when long-distance caller ID received federal approval last year.
However, regulators in California had reservations about caller ID on privacy grounds and only approved Pacific Telesis Group's launch the service in the state in July 1996.
McDonald said the negative publicity about privacy for callers has inhibited sales despite a recent PacTel marketing campaign, and sales are not expected to pick up rapidly.  
""I would think they would be a little better, but not much,"" he said, referring to California caller ID sales in 1997. ""You open up a seventh of the U.S. market, and all of a sudden it turns out to be a dud.""
Sales of caller ID by Ameritech continue to be choppy -- as cited in the sales warning -- because of management changes at the company and on-off publicity for its caller ID service. Still, McDonald expects improvements soon.
Ameritech offers local telephone services in Illinois, Indiana, Michigan, Ohio and Wisconsin.
",35
"WorldCom Inc. said Monday it agreed to acquire MFS Communications Co. Inc. in a stock swap worth about $14 billion, creating a giant international business communications company.
The combined company, to be called MFS WorldCom, will provide businesses with local and long-distance telephone, data communications and Internet services all on one network -- something no competitor yet can on a significant scale.
""We are creating the first company since the breakup of AT&T to bundle together local and long-distance services ... controlled by a single company,"" said Bernard Ebbers, chief executive of WorldCom.
The deregulation of the telecommunications industry early this year promises to bring end-to-end service, but neither AT&T Corp. nor any regional Bell can yet achieve it because of regulatory checklists and other issues.
""We think this gives us at least a two-year headstart over our competitors,"" Ebbers said in an interview.
For WorldCom, the fourth largest U.S. long-distance company, the deal will allow it to muscle into business markets that the regional Bells and biggest long-distance providers thought they had to themselves.
For MFS it provides the long-distance connection between its metropolitan circuits that it long needed, and a very healthy premium over the prevailing share price.
The merged company will have current sales of about $5.4 billion a year, with more than 500,000 business customers throughout North America, Europe and Asia.
It will have an end-to-end fiber optic network with 25,000 miles of fiber in service or under construction connecting all major metropolitan areas in the United States.
The merger comes only two weeks after MFS's $2 billion purchase of internet provider UUNET Technologies Inc. was completed on Aug. 12. Monday's merger is expected to close within eight months, the companies said.
Under the agreement approved by both companies' boards, each share of MFS common stock will be exchanged for 2.1 shares of WorldCom common stock. Owners of MSF stock will control about 56 percent of the enlarged company.
MSF's stock leaped $9.75 to close at $44.75 on Nasdaq.
But Worldcom stock fell $3.75 to $22.625 on Nasdaq after the company said the merger would dilute earnings for three years.
Although the transaction was valued at $55.39 per WorldCom share based on Friday's closing price, the steep drop in WorldCom's stock brought the value down to $47 a share, traders said.
""Over time, I think the deal will be viewed very positively, but it will take time,"" one takeover trader said.
Omaha, Neb.-based MFS has local networks in dozens of major U.S. cities, which could help it outflank regional Bells' lock on access to local business customers. This gave it a strong bargaining position in the merger talks.
""He (Ebbers) had the only one sizable company to merge with whose stock we really wanted (to own),"" James Crowe, chief executive of MFS, told reporters.
Despite the substantial stock premium for MFS, savings would soon cover the cost of the deal, Ebbers said.
Jackson, Miss.-based WorldCom said it expects significant cost savings from reduced line and access costs. For example, MFS no longer has to build a $500 million intercity network, because WorldCom already has one. WorldCom will not have to take a share in a $450 million trans-Atlantic cable for its expanding international business because MFS is already a partner in one.
Ebbers said access charges that Worldcom pays to local telephone companies to reach their local customers would drop because MFS already has local lines to businesses in 45 U.S. cities, rising to 85 cities in two years.
Worldcom said in a separate statement that it has adopted a shareholder rights plan to discourage a hostile takeover. It said its move was not affected by the deal with MFS.
However WorldCom could nevertheless be a target for a regional Bell, tempted by the company's long-distance network, said mergers and acquisitions advisor Robert McNamara at consultant Broadview Associates.
""You have effectively put WorldCom into play with this (takeover) move,"" McNamara said.
",35
"Britain on Monday referred brewer to leisure group Bass Plc's acquisition of Carlsberg-Tetley (C-T) to the Monopolies and Mergers Commission for investigation but analysts said they believed the deal would go through once certain conditions had been met.
""Mr Lang (British Trade & Industry Minister) considers that the merger gives rise to competition concerns in relation to the significant increase in concentration of production in the UK brewing industry,"" the Department of Trade & Industry said in a statement.
Bass acquired half of C-T from Allied Domecq for 200 million pounds ($328 million) in August and declared its plan to buy the rest of the company from Danish brewer Carlsberg A/S, in exchange for Carlsberg taking 20 percent in the merged company.
Britain's MMC will investigate whether a full merger of the two companies would operate against the public interest. It will report by March 24, 1997.
If approved, the merger would create Britain's largest brewer by far, with at least 35 percent of the market. Bass now has a 23 percent market share.
Rival brewers and analysts widely expected a referral to the MMC because of the dominance it would give the merged group in setting beer prices in some regions.
Bass shares fell about 6p on the news to 783p but recovered to close 14-1/2p higher at 803-1/2p as analysts said they expected the Bass deal to go through with conditions imposed, given the force of growing competition in the industry and brewing over-capacity.
But they added Lang will be in no rush to approve the deal so close to a general election due before May 1.
""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 Lehman Brothers analyst John Wakeley.
Former Trade and Industry secretary Michael Heseltine, accredited with nodding through Scottish and Newcastle's (S&N) acquisition of Courage from Australian brewer Foster's 18 months ago without an MMC referral, was operating mid-way through the Conservative Party's term in office.
His stance on competition policy was also widely viewed by analysts as more laissez-faire than that of Lang.
""Clearly there is a very strong element of politics. And it is certainly more subject to politics than the last decision on S&N for Courage,"" said Nikko analyst Dermott Carr.
Analysts expect the MMC to require Bass to sell about 1,000 of its pubs, it currently owns about 4,200, and to cull its brand porfolio. It may be required to sell more pubs in areas where it is especially dominant.
A combination of these two conditions would reduce Bass' market share to around 35 percent from about 40 percent if the deal was allowed to go ahead unconditionally.
Brian Revell, Transport and General Workers Union national secretary for the drinks industry, welcomed the decision to refer the Bass takeover.
""Our main concern is that if the takeover is allowed to proceed, at least 2,000 jobs are likely to be lost,"" he said.
A spokeswoman for Bass said the company hoped the MMC could make a hasty decision. ""We are confident that more jobs will be safer at both companies if the merger goes ahead than would otherwise be the case,"" she added.
Britain's Secretary of State has the power to refer to the MMC for investigation any proposed merger which creates or intensifies a market share of 25 percent of supply in Britain.
Bass was knocked off its perch as Britain's leading brewer last year when S&N acquired Courage, giving it a 31 percent share of Britain's beer market.
C-T was formed as a joint venture between Allied Domecq and Carlsberg A/S in 1992 by the merger of their British brewing and wholesaling businesses.
Bass announced the acquisition of Allied's 50 percent stake in August along with some 30 beer brands including Tetley Bitter and Skol, six breweries and C-T's network of depots. ($1=.6087 Pound)
",47
"Ice cream had a sad time in Europe this summer, adding fresh impetus for the big makers to try to persuade us to eat it in the winter.
""We think for Unilever its meant 125 million pounds ($198.4 million) in lost sales and lost profits of 50 million in the summer months across europe,"" said David Lang, analyst at Henderson Crosthwaite.
The dull summer has hit impulse purchases of ice creams worst of all, a high-margin sector that makes up one third of all European ice cream sales.
Coca-Cola, sometimes taken as a benchmark for consumer spending behaviour, reported a 10 percent decline in case sales in Germany, 17 percent down in Britain and four percent down in France as a result of the poor summer.
It's no surprise then to find marketing executives at Wall's and Nestle scurrying for new products to sell in the winter months.
Britain's Birds Eye Wall's, owned by Unilever, said it has launched seven new lines across its impulse, take-home and multipack sectors as chocolate indulgences for the winter months.
Nestle is trying to roll out products like its Christmas Log in France to even out the seasonal swing in sales.
Both companies argue if people in Norway and Sweden, where the climate is cooler, can eat twice as much ice cream than in Britain, then there is work to be done.
""The snag is that in summer when people are on holiday that is when impulse sales are always at their highest, people just don't associate having an ice cream with winter,"" said John Campbell, an analyst at Paribas.
Industry watchers also point out that children, who account for 40 percent of all impulse icecream sales, take their longest holidays in the summer.
Wall's, the largest player in the British icecream market worth about 1.0 billion pounds estimates some 60 million pounds of the market growth in 1995 came from the very hot summer.
Wall's brands account for 17 out of the top 20 selling impulse brands with Wall's Solero heading up the league followed by Magnum White and Magnum Classic.
In terms of total market share Wall's has 43 percent in Britain, Nestle Lyons Maid 12 percent, Mars 7 percent, own label 29 percent and others 9 percent.
In a week of indifferent summer weather Wall's sells about 23 to 25 million portions of icecream whereas in a hot sunny week this figure can rise to around 55 million portions.
The big players in the 15 billion pounds European icecream market have come down with a thud from the summer of 1995.
It was the third hottest summer on record in Europe and August the hottest and sunniest ever -- with long periods of temperatures above 16 degrees centigrade, at which point consumers really switch into buying icecream.
Temperatures soared to an average 17.5 degrees centigrade in Britain with 7.8 hours of sunshine a day compared with 7.2 hours in 1996. Statistics from the MetOffice, Britain's national weather centre, show an average temperature of 15.9 degrees for the summer of 1996. The office says the South of France and Spain had just an average summer this year.
Nestle, who entered the UK market in 1992 with the purchase of the Lyons Maid brand, estimates total sales in Britain are down some 5 percent at 879 million due to the dull summer, of this hand held icecreams accounted for 489 million.
In Britain the all-time Summer record for Wall's still stands at 71 million portions sold during one week in the long, hot summer of 1976 -- the year when Wall's Cornetto first hit the market.
However much the big fridge fillers spend on advertising and dreaming up new products it will be hard to break that record.
($1=.6299 Pound)
",47
"British sugar and starch producer Tate and Lyle reported an 11 percent fall in full year profits to 276 million pounds ($463 million) on Wednesday after an earnings drop of more than 50 percent at its U.S. subsidiary Staley.
But the company's shares rose 9-1/2 pence to 479-1/2 after touching 482 as company executives made positive noises about the current trading environment for corn miller Staley, with corn prices now at more normal levels and demand rising for ethanol, which is extracted from the corn.
The price of corn now at $2.60 a bushel has settled after a much larger crop this summer of 9.3 billion bushels, Tate chief executive Larry Pillard told Reuters in an interview.
""I would like to think futures prices will stay at about $2.60 a bushel. At this time last year they were up by 33 percent at 3.50 and as high as five dollars a bushel at mid-year. That's unprecedented, the highest price for 120 years,"" he said.
Staley was severely squeezed last year. On the one hand by very high corn prices, which doubled after a low U.S. corn crop, and increased competition from new producers of high fructose corn syrup and on the other hand by its inability to pass this added cost onto customers.
""Conditions have reversed this year so that corn milling companies can divert some of their excess capacity into ethanol and that could tighten up the market a bit,"" he added.
Ethanol, a gasoline substitute, can also be made by corn millers but the price of gasoline was so low last year that this option was closed. Gasoline prices have averaged 63 cents a gallon so far this year, reaching a peak of 77.01 in April, up from 56 cents a gallon in 1995.
""I think that obviously the world grain situation getting back to more normal levels is encouraging, the re-emergence of ethanol is quite encouraging and the three percent increase in sugar deliveries in the U.S. is quite encouraging,"" said Pillard.
Staley, which produces high fructose corn syrup used as sweeteners in Coca Cola and Pepsi drinks, renegotiates supply contracts with soft drinks firms at the beginning of every calender year. Pillard said it was too early to comment on the next round of contracts.
""It looks like Staley has finally hit the bottom of the cycle,"" said one analyst who declined to be named.
Tate benefited in the last quarter of the year from a recovery in the U.S. sugar market where the selling price of white sugar rose after a low U.S. beet crop reduced supplies.
Cane raw sugar costs declined as supplies of cane raw sugar rose due to increases in the import quota.
North American sweeteners and starches business chipped in 116.2 million pounds in the year ended September 28, down from 170.9 million, as a result of Staley.
European profits rose 8.0 million to 152.5 million pounds, with increased security of supply to Tate's sugars from the new European Union Sugar Regime and progress at Amylum, its European cereal sweetener and starch business.
Trading profit from its emerging markets business was up 6.4 million at 31.5 million. Tate's animal feed and bulk storage business showed a slight profit improvement to 36.8 million.
Tate reported a currency loss of 3.5 million pounds in the year, against a gain of 4.8 million last time, due to sterling's strength against the dollar.
The board recommended a final dividend of 11.7p, bringing the total for the year to 17.0p, an increase of six percent. ($1=.5956 Pound)
",47
"British cider group Matthew Clark said on Tuesday fashionable ""alcopop"" drinks had helped to wipe a third off the sales of its premium brands -- Diamond White, K and Babycham -- in the first five months of the financial year.
Matthew Clark has been hit the hardest by a surge in popularity for so-called alcopops -- alcoholic colas and lemonades -- which have proved a success with younger drinkers. Fierce price wars among rival drinks companies have also had ab affect.
Since Matthew Clark stunned the stock market in September with a profit warning that wiped more than 290 million pounds ($466 million) off its market value, investors have badgered the group to explain how it intends to win back sales.
In the long-awaited statement, Matthew Clark conceded that price wars had continued and that sales of draught cider in June and July, were 10 percent lower than during last year's hot summer. Premium brands saw sales slump 30 percent.
The group's draught cider sales were 15 percent down across the whole summer -- although current trading in cider had since stabilised. ""We expect the underlying growth within the cider market as a whole to resume,"" the company said.
But it said it expected to hold its interim dividend at nine pence when it reported half year results ending October 31.
The company's shares closed a sharp 17.5 pence higher at 317.5 pence, although far short of their year high of 804 pence.
""The thing that's made them bounce is they've said they expect to maintain the dividend. But you've got to be cautious because there's no guide as to underlying profit levels,"" said one dealer.
The company has launched a review of its marketing strategy in branded drinks, mainly Diamond White and mainstream ciders Dry Blacthorn and Gaymers Olde English. The key findings will be released in January.
In the meantime, the company said it would create the new position of marketing director, a main board appointment, and take on 40 staff in sales and marketing in its branded drinks division.
Alcopops have proved especially popular with young drinkers, forging major inroads into the British drinks market. In May, research body Euromonitor said it would be worth about 170 million pounds this year after 100 million in 1995.
Leading brands include alcoholic lemonade Hooper's Hooch, owned by Bass, and Two Dogs, marketed by Merrydown.
Drinks industry leaders agreed in January to a voluntary code of practice aimed at limiting the promotion of alcopops after the drinks sparked a storm of controversy over whether they encouraged under-age drinking.
In its last budget, the government imposed a heavy duty on ciders with an alcohol content over 7.5 percent from next year but left alcoholic colas and lemonades unaffected.
",47
"British consumers are feeling better, they are spending more on leisure, and the upward trend is set to roll for at least another two years, said Whitbread chief executive Peter Jarvis.
""The markets in which we operate are better than they have been for many years. People are feeling better. House prices are rising again, the job situation is better and they have seen personal tax decreases this year,"" Jarvis said in an interview.
Earlier Whitbread posted a 14 percent rise in half year pretax profits to 177.5 million, beating analysts forecasts.  
""I think the consumer position in Britain is favourable for at least two or three years. Unless we have some kind of catastrophe, the prospects in Britain are good. All the economic predictions from the banks point to low inflation and growing consumer confidence,"" said Jarvis.
He said the outlook was unlikely to be affected by the government's budget statement on November 26 or if the opposition Labour Party wins the next general election. Labour have pledged to introduce a national minimum wage.
""I'm on the record as being in favour of a national minimum wage. I hope and believe it will be set at a reasonable level.""  
Whitbread's workforce comprises 42,000 full-time and 33,000 part-time staff, with many working in catering.
The company's hotels business doubled profits and sales in the six months to August 31. Like-for-like sales were up by 11 percent with occupancy levels and room rates much higher.
""The number of foreign tourists to Britain is growing very, very fast. They spent 13 to 14 billion pounds last year and half of that in London.""
""That's been growing very fast in the last 10 years and its forecast by Henley (forecasting centre) to be the fastest growing sector of the leisure market.""  
Americans stayed at Whitbread's Marriot hotels for the first time in the half year.
""We never had effective marketting in the U.S. for our hotels before. This link up with Marriott in the States gives us a great marketing power. And they are in really attractive places for American visitors like Stratford-upon-Avon and Edinburgh. So we have seen a huge influx of Americans and in many places it has put five extra points on occupancy levels.""
Whitbread acquired health and sports club group David Lloyd Leisure for 200 million stg and a chain of 16 Marriott hotels in Britain for some 185 million in August 1995.  
The company also owns a chain of about 130 low budget Travel Inns, which Jarvis said will be added at the rate of about one every 10 days to reach 300 by the end of the year 2000.
Whitbread plans to expand its hotel presence in London by converting County Hall and bringing Travel Inns into the capital. Consumers also spent more eating out during the half year with Pizza Hut, jointly owned with Pepsico, and TGI Friday's sales ahead by about 20 percent. The Beefeater chain of restaurants increased like-for-like sales three pecent and profit by 7 percent.  
Whitbread Inns, which includes casual dining out pub chain Brewers Fayre, saw profits grow by 15 percent to 77.4 million and total sales by 14 percent.
""The main driving force on like-for-like sales is on food pubs and restaurants and we also opened a lot more new places that appeal to people who would not normally go to pubs,"" said Jarvis.
The group thinks it can add about 40 new Pelican's a year -- the Pelican Group acquired for 133 million in July owns French bistro style cafes the Dome and Cafe Rouge -- bringing the total to about 300.  
""The most satisfying thing for me is the capital we have put into new businesses and invested in them has paid off. They have all performed well.""
Whitbread now owns ""three to four strong concepts that will give us good growth for the next three to four years.""
Whitbread, which confirmed last week it was in talks with BrightReasons about buying its pizza and pasta chains, hopes to agree on terms this month, said Jarvis.
BrightReasons owns a 180-strong chain of restaurants trading as Bella Pasta, Pizza Piazza and Pizzaland.
-- London Newsroom +44 171 542 7717
",47
"Brian Stewart, chief executive of brewer to leisure group Scottish and Newcastle Plc, said on Monday he expected an improved performance from its Center Parcs holiday resorts in the second half.
""We would expect Center Parcs to be much more on the front foot in the second half and we would quite clearly spell out that conditions in Germany are now more positive,"" said Stewart in an interview.  
S&N's profits from Center Parcs fell 11.4 percent to 38.9 million stg in the first half due to the weak economic background in mainland Europe and the cost of improving its parcs in Holland and Belgium.
The company sold its smallest village at Lommerbergen, Holland and had to close its De Eemhof parc in the Benelux while it upgraded the centre.  
""There were three hits to profits on Center Parcs. One million from the strength of sterling against the guilder, one million in redundancy for restructuring in the Benelux and 1.3 million from the effective closure of Eemhof while we were restructuring the centre,"" said Stewart.
He said no more new parcs would be built until consumer demand improves in mainland Europe. However, even in the absence of any pick-up in consumers leisure spending the Center Parcs business will do better in the second half, said Stewart.  
S&N's leisure business, which includes Pontin's holiday camps, represented the one drag on its half-year results, with its other two divisions, beer and pubs, both performing strongly.
The inclusion of Courage, acquired from Australian brewer Foster's last year, for its first full half-year pushed operating profits on the beer side by 67 percent to 89.9 million.
Margins improved on beer sales, both for take-home and in pubs and restaurants, but this meant giving up unprofitable sales, resulting in a small loss of market share for S&N.  
S&N posted trading profits up 8.2 percent at 87 million stg from its pub division, driven by its managed outlets where like- for-like food sales grew by 13 percent as the company developed more restaurants.
S&N will increase its capital expenditure by 25 percent from last year's level to 120 million stg at the end of its current financial year, said Stewart.
The company will open 35 new Chef & Brewer pub restaurants by the year-end and push the Barras & Co community pub brand very strongly, he said.  
""We will really be pushing down the accelerator on our community pubs Barras. Our focus has previously been on the high street or city centre and these community pubs really have a great deal of potential,"" said Stewart.
However, profits from the company's tenanted pubs fell some 9.0 percent to 11.8 million. The company sold 100 pubs in the first half period, reducing its number of tenanted pubs by 14 percent and managed outlets by 3 percent giving it a total estate of about 2,600 pubs.
The sales mean S&N has now met its obligation to government to reduce the size of its pub estate as a condition of the company being allowed to acquire Courage.
""Overall, I think our 10 percent dividend increase, at the top end of the range, is a measure of our confidence for the second half of the year. General trading conditions are at least as good as they were this time last year and there has been a bit of an improvement in mainland Europe,"" said Stewart.
-- London Newsroom +44 171 542 6437
",47
"Family controlled food and retailing group Associated British Foods reported a 15 percent incrase in its full year profits on Monday, but chairman Garry Weston sounded a wary note when asked about the year ahead.
""I never play hostage to fortune. I've always been cautious,"" said Weston in an interview. ""It's a very bad time to forecast anything with two elections coming up -- in the United States and Britian. We have no idea how they will impact on us.""
ABF posted pretax profits of 430 million pounds ($704.1 million) for the year ended September 14 whereas most stockmarket forecasts had centred on 415 million.
Worldwide sales were up 17 percent to 5.707 billion. Profits were driven by an especially strong performance from the company's retail operations in Britain and Ireland. Operating profits rose 25 percent to 69 million, with the company's supermarkets in Ireland further increasing their market share.
Primark, the women's textile chain, included results from One Up stores bought from Storehouse last year.
""We got the fashion right. Primark has been refurbished and that improved its buying power and gave it more notice on the high street."" In the second half Primark was more in tune with public demand, said Weston.
ABF's food manufacturing and processing operations in Britain showed an 8.0 percent sales growth to 3.11 billion pounds and a 12 percent profits increase to 282 million.
However, operating profits from British Sugar fell to 183 million. British Sugar sales are limited by European community quotas and the renewed strength of the pound made imports from mainland Europe look cheaper in the second half.
AFB's profits from its Australia and New Zealand operations increased by 20 percent to 38 million.
AC Humko, acquired from Kraft Foods in September 1995, chipped in its first full year of profits to ABF's north American business to help turn a 3.0 million loss in 1995 to a six million stg profit.
Analysts were surprised by the stronger than expected performance from ABF's milling and baking business where margins improved strongly. ABF owns the Twining group of companies, Burtons Biscuits, Allied Bakeries and an animal feed business.
""They were good numbers a bit ahead of our figures, but it will be hard to match that in the current year,"" said Michael Bourke, analyst at Panmure Gordon. ""The green pound rate is likely to mean a reduction in British Sugar profits and inflation in food prices looks very subdued,"" he said.
ABF shares rose 8p to 426p on the news.
Net cash held by the company rose by 196 million to 797 million at September 14, after spending 242 million on its assets and acquisitions during the year.
The company is keen to expand in the Far East and although ABF's history is one of expansion by organic growth if the oppurtunity arises it will make acquisitions, said Weston.
""We have been picking up acquisitions and if opportunities come along for something big then we will take it,"" he said.
During the year ABF acquired or formed businesses in Norway, Indonesia, China and the United States. ($1=.6107 Pound)
",47
"Spirits, pubs and Dunkin' Donuts group Allied Domecq is likely to post a big drop in full-year profits on Tuesday, hit by a 320 million stg loss on the sale of its 50 percent stake in brewer Carlsberg-Tetley (C-T).
Before this exceptional charge, analysts' forecasts for pretax profits range from 560 to 581 million stg, down from 645 million last time, with most of the damage coming in Allied's spirits arm. Profits have been hit by the weak Mexican peso, tough trading conditions in the mature markets of Europe and America and de-stocking in the United States.  
The consensus forecast for the total dividend is 23.6p.
Allied sold its share in C-T to Bass in August for 200 million in cash together with its beer brands, allowing the group to quit brewing and concentrate entirely on its spirits and retailing businesses.
Allied said at the time it expected a loss on the sale of C-T of about 320 million stg.
After tax the company said it would mean a reduction in reserves of some 200 million stg.  
At Allied Domecq Spirits and Wines, many analysts are predicting a 60 million drop in trading profits from the 488 million stg recorded in 1995. Stock reduction and weak markets dented profits at the division in the first half, too.
In the United States where trade stocks of four major brands -- Kahlua, Beefeater, Courvoisier and Canadian Club -- built up last year, Allied was forced to start reducing stock levels by half a million cases which it expected to complete by the end of August 1996.
Some analysts think this de-stocking will strip 40 million stg off operating profits from the group's spirits arm.  
Trading profits from Allied's spirits and wine division dropped to 258 million stg for the six months ended February 29 from 327 million.
""Spirits will continue to show that things are tough although we are now seeing price increases of two to three percent coming in for the industry as a whole,"" said Mark Puleikis, an analyst at Merrill Lynch.
Allied's retailing division, which includes managed pubs as well as Baskin-Robbins and Dunkin' Donuts, is expected to post only a slight improvement in profits of some eight million to 223 million.  
""Although the managed pub side will improve, let's say it will add about about 12 million pounds to give 127 million at an operating level, Dunkin' Donuts and Baskin Robbins will drag the division down,"" said one analyst who declined to be named.
In franchising, poor winter weather held back same-store sales growth particularly in Baskin-Robbins during the first half.
Carlsberg-Tetley is forecast to chip in trading profits of some 65 million at the year-end up from 61 million. In the six months to 29 February 1996 it made trading profits of 25 million, an increase of 14 percent on the same half last year.  
Attention will focus on what management has to say about continued pressure from the investment community for a demerger of Allied's spirits division.
Allied shares touched a five-month high of 492p on Friday. ""Obviously people are hoping there will be some news on a demerger,"" said one analyst who chose not to be named.
""A trading demerger would really add value to the group. The City has obviously done its sums and worked out it is worth about five pounds on a post-demerger basis,"" said another.
A Reuter poll of 24 brokers shows a consenus forecast for earnings per share of 33.7p rising to 37.4 next year.
-- London Newsroom +44 171 542 6437
",47
"Britain's leading discount food retailer Kwik Save Group Plc on Thursday said it was closing 107 shops as part a radical shake-up of its struggling discount chain, which unions said could mean 1,000 job losses.
The group, squeezed between mainstream food superstores and limited range discounters, also reported a 28 percent drop in annual profits to 90.3 million pounds ($148.2 million), before a provision of 87.5 million to pay for the rationalisation.
Sales rose 8.8 percent to 3.5 billion pounds ($5.76 billion) in the year and the company maintained its final dividend at 14.05p, making an unchanged total of 20p.
Chief executive Graeme Bowler said the reorganisation was designed to fend off fierce competition from superstores and continental discount groups, which have robbed Kwik Save of many of its traditional customers.
The restructuring pleased investors and Kwik Save's shares rose to peak 21 pence higher at 325 before settling a few pence bit lower.
A review of the company's operations by outside consultants, initiated in February, showed a need to improve its existing 979 stores and invest in staff and technology.
Kwik Save said it planned to spend some 50 million pounds on its New Generation programme in the next year and 100 million the year after as the new concept is rolled out into its stores.
Finance director Derek Pretty estimated the store closures would involve less than 200 job losses, as 90 percent of the staff would be redeployed in Kwik Save's remaining 900 stores.
There are plans to launch a Kwik Save own-label range to take on the superstores, improve contol over its fresh foods and tighten control of its pricing and quality. The group would have to invest heavily in technology, where it was about two to three years behind the competition.
""Research showed us that what our customers really like is discount values,"" Pretty said. ""What they did not like was our range which was not good enough in some areas and did not match superstores.""
Bowler acknowledged the group had failed to invest enough in upgrading the fabric of its existing stores in previous years. The new-style stores will be rolled out over the next three years at a cost of some 300 million pounds.
The chief executive told a news conference the company would introduce a new range of chilled foods, health and beauty products and over-the-counter medicines.
But he said the group was not trying to move away from its roots.
""We are not moving away from discounting prices,"" he said. ""We are not trying to be a mini-version of someone else, we want to be ourselves.""
Re-shaping the group was ""an enormous task,"" he said, which would have to be undertaken in stages in order to minimise disruption.
The 107 stores would be closed progressively between now and September 1997. ($1=.6093 Pound)
",47
"Sir Ian Prosser, chairman of brewer-to-leisure group Bass Plc, said the company's proposed acquisition of brewer Carlsberg-Tetley would make Britain's beer market more competitive.
""Obviously it would make the market more competitive. We would be looking to lower our cost base which would give us more money to invest in innovation and more money to invest in improving our products,"" said Prosser in an interview.
The acquisition is being studied by the Board of Trade on competition grounds. Their decision is expected in a few weeks.
",47
"Family-controlled British food and retailing group Associated British Foods should report a sharp rise in full year profits on Monday, as its retail and textile business benefit from a pickup in high street spending.
""The two parts of the business really driving the increase are the retail and clothing side which is benefitting from the feel-good factor,"" said Michael Bourke, analyst at Panmure Gordon. Analysts forecasts are centred on pretax profits of 415 million stg up from 375 million last time and a dividend increase to 9.5p from 8.8p.  
ABF, a food processor and manufacturer in Britain, Australia and the United States, as well as a food and textile retailer in Britain and Ireland, is also widely expected to yield yet more cash from British Sugar.
""The feature of the figures as ever is the strong cashflow coming out of British sugar. Net cash should rise by about 130 million pounds which always begs the question will they spend it?"" said UBS analyst Charlie Mills.
That would bring net cash to 735 million stg at year end.  
On the retail side PriMark, women's clothing chain in Ireland and Britain, as well as the Irish retailing businesses -- Stewarts supermarkets in Northern Ireland and Crazy Prices and Quinnsworth -- are expected to perform much better.
However the mainstream side of the business, British Sugar which contributes about 50 percent of profits, is likely to be slightly weaker after a hot summer in 1995 affected the sugar beet crop and margins came under pressure from the strength of sterling which made European imports look cheaper.  
Aside from British sugar, analysts expect the grocery business, like milling and baking, Rivita and Burton biscuits to show improvements.
On average analysts forecast trading profit from groceries, excluding British Sugar, to rise by 14 million stg to 82 million in the belief that the company has managed to claw back some of the margin on non-packaged food.
Including British Sugar operating profits are predicted to increase to about 265 million from 252 million previously.
ABF shares have risen consistently from 280p in January to 418-1/2p at Friday's close.
Consensus estimates, taken from a Reuter poll of 17 brokers, for 1996 is 30.1, rising to 31.6 in 1997.
The company has a return on equity of 11.5 percent, putting it in 28th slot in the FTSE-All share food manufaturing sector of 57 companies.
-- London Newsroom +44 171 542 6437
",47
"British food and drinks giant Grand Metropolitan Plc posted a six percent rise in annual profits before tax on Thursday to 965 million pounds ($1.6 billion).
Chairman George Bull said trading in the current year had started ""satisfactorily"" as the company outlined a strategy of steady organic growth.
Profits grew 30 percent at its North American foods business Pillsbury to 431 million pounds, with both sales and prices up, and its spirits arm International Distillers and Vitners (IDV) posted a four percent increase in trading profit to 471 million.
GrandMet shares fell back 8p to 448p however, as investors and analysts worried about the effects of a strong pound against the dollar on GrandMet's profits next year.
Pillsbury and fast food chain Burger King generate about 60 percent of group earnings in dollars. The pound stood at $1.493 on May 1 and has since risen to $1.6477.
""The main reason is the currency translation which means a lot of analysts will be downgrading their forecasts for next year and earnings growth will remain in single figures,"" said one analyst who declined to be named.
In an interview, group finance director Gerald Corbett said GrandMet had embarked on an era of steady, organic growth driven by profits from Pillsbury and spirits arm IDV.
""The message is steady as she goes, managing what we have got, building our brands and keeping the ship on a steady course,"" Corbett said.
The avowed strategy of steady, organic growth from GrandMet contrasts sharply with former chairman Lord Sheppard's era of frenetic acquisitions and disposals.
Corbett said the company is confident it can achieve the same level of profits growth at Pillsbury next year. Sales at Pillsbury were up four percent and prices three percent while margins rose 0.7 of a percentage point to 12.2 percent.
""We are not looking for a sharp improvement in demand in the states and equally we see no evidence of deterioration.""
Pillsbury included a full year from Pet, producer of Old El Paso and Italian foods and soups, which was acquired in February 1995. The division was able to cash in on rising raw material costs in the United States by lifting prices on all its major brands like Haagen-Dazs ice cream, Green Giant and Pillsbury.
At IDV GrandMet plans to get price rises through of another two to three percent on average next year, said Corbett.
IDV's spirits sales up five percent and average price rises of two percent in the year ended September 30. Profits growth in Europe was led by drinkers in Britain and Spain. Spirits sales in emerging markets were up 15 percent.
""We think we have done rather better on pricing than our competitors as we started investing on brand equity about two years ago whereas they have yet to really put their foot on the accelerator,"" said Corbett.
He sited the fact GrandMet got its first price rise for five years through in April on Smirnoff vodka in the United States.
GrandMet plans to spend 30 to 40 million pounds more on marketing its IDV brands this year, said Corbett, after spending 420 million in 1995-96. Again the bulk of its marketing spend will go behind liqueur Bailey's, Smirnoff, and J&B whisky.
Overall marketing expenditure was up 16 percent at 1.2 billion pounds in its year ended September 30.
But operating profits from Burger King fell 29 million to 167 million pounds in the year, hit by difficult trading in Britain and Germany due to the beef crisis and the slowing pace of refranchising outlets. The company opened 756 restaurants in the year to bring its worldwide total to 8,696.
GrandMet plans to ask for shareholder approval at its annual meeting in March to buy back up to 10 percent of its own shares.
Corbett said the company is ""reviewing a number of options"" but declined to say what they were or talk about the timing or size of any buyback. ($1=.6054 Pound)
",47
"Anglo-Dutch food-to-detergent group Unilever Plc , reporting third quarter results next Friday, is likely to have suffered from restructuring costs for its North American industrial cleaning business Diversey and from weak ice cream sales in a drab European summer, analysts said.
Diversey, acquired in January from Molson for 360 million stg, was merged with Lever Industrial in October to form a combined business with annual turnover of 1.15 billion stg and a workforce of 13,000 in 60 different countries.
Analysts predict third quarter pretax profits in a range of 760 to 820 million, against 786 million stg last time.
The wide range reflects uncertainty about the size of redundancy payments and closures needed to reshape Diversey.
Charges for Diversey could range from 15-30 million stg, with a further 20 million needed for restructuring other Unilever businesses.
But the interim dividend, paid in the third quarter, is forecast to rise sharply as a result of changes to dividend policy announced at the full year.
Analysts expect a 10.3p dividend payout under a new policy whereby 35 percent of the previous year's total dividend would be paid in the stronger of either Dutch guilder or sterling so far this year. A 10.3p payout would represent a 46 percent increase on the previous half-year's 7.05p.
For the nine month period analysts are forecasting pretax profits of about 1.9 billion pounds.
""European ice cream sales are not going to have the special benefit they had in 1995 or 1994,"" said John Campbell, analyst at Paribas.
""European economies are generally weak, and German consumption if anyhing lower because of the tough economic climate there,"" he added.
Michael Bourke at Panmure Gordon saw three factors behind the downturn. ""The exceptional charge will be a bit higher, perhaps about 40 million compared with 20 million the year before, and ice cream sales in the third quarter will have been influenced a lot by the summer weather.""
""Last but not least is the currency factor, with the majority of Unilever profits in US dollars and the recent weakness in the dollar clearly having an impact.""
The consensus forecast EPS for 1996, taken from 24 brokers polled by Reuters, is 84.40p, rising to 92.30p in 1997. Six brokers downgraded their 1996 EPS forecast in October.
Unilever's return on equity is currently running at 27.3 percent, against 66.57 percent for Unigate, the highest in the FTSE all-share food manufacturing sector.
The company's shares reached a high of 1412 pence for the year in mid-September before closing down at 1283 on Friday.
-- London Newsroom +44 171 542 6437
",47
"British brewer-to-leisure group Bass Plc, said on Wednesday the company planned to spend 670 million pounds ($1.1 billion) on the business next year, creating some 7,000 jobs.
The company plans a 300 million pound ($500 million) investment programme next year on its Bass Taverns, converting many pubs to branded concept bars like the trendy All Bar One or Irish pubs O'Neills and refurbishing community pubs.
This year Bass invested, net of disposals, 568 million in capital projects, which it calculates created at least 6,000 new jobs.
But in an interview chairman Sir Ian Prosser declined to comment on its proposed acquisition of brewer Carlsberg-Tetley (C-T) which is currently being studied by Britain's Board of Trade on competition grounds. Their decision is expected in the next few weeks.
C-T is a joint venture between Allied Domecq and Danish brewer Carlsberg A/S formed in 1992 by the merger of their British brewing and wholesaling businesses.
""I don't make any comment on that. Our discussions with the Office of Fair Trading are obviously confidential. We'll wait and see what the president of the Board of Trade says,"" he said.
Bass shares were 1p lower at 808p by 1302 GMT.
""To get the share price to move forward, the company needs to resolve the uncertainty surrounding C-T,"" said Charles Winston, an analyst at BZW. But he added the company's profits for the full year were at the top end of market expectations and showed the strongest cashflow since 1985.
In August Bass announced the acquisition of Allied's 50 percent stake in the venture for 200 million pounds in cash together with some 30 beer brands, among them Tetley Bitter, Skol and Ansell, six breweries and C-T's network of depots.
Bass and Carlsberg agreed at the same time to merge C-T and Bass Brewers, given regulatory approval. If approved, the merger will create Britain's largest brewer by far with at least 35 percent of the market.
Bass currently has a 23 percent market share.
Bass was knocked off its perch as Britain's leading brewer last year when Scottish and Newcastle (S&N) acquired Courage from Australian brewer Fosters, giving it a 31 percent share of Britain's beer market.
Prosser dismissed fears expressed by regional brewers and competitors that a full merger would make Bass too dominant in the Midlands and Yorkshire. ""I don't think we are going to have that high a concentration in any region,"" he said.
He also restated that the acquisition would be good for drinkers and reiterated the company's committment not to close any of C-T's breweries.
Bass anticipates continued buoyancy in UK consumer spending over the next year from which it will benefit, Prosser said.
The company's Holiday Inns profits rose by 18.9 percent to 195 million, while its Bass Taverns' chain of managed pubs increased operating profit by 22.8 percent to 221 million. The brewery division improved profits nine percent to 157 million while the Britvic soft drinks arm improved profits 8.7 percent to 50 million.
But the leisure division, which includes traditional Gala bingo halls and Corals betting shops, continued to be affected by lower admissions after the introduction of scratch cards and the national lottery. Profits were off 10.8 pct at 66 million.
Coral was hit by a one-off cost of 4.0 million pounds on the last Saturday of the financial year when all seven races at Ascot were won by the same jockey. A final dividend payout of 17.3 pence was recommended, making a total 25p for the year. ($1=.6054 Pound)
",47
"Food to drinks group Grand Metropolitan Plc has embarked on a period of steady growth driven by profits from its American foods business Pillsbury and spirits arm IDV, said group finance director Gerald Corbett.
""We would love to clap our hands and wonderful things to happen. But life is not like that. Life is about steady improvement of one's basic position. Moving the profits forward, managing the costs, generating cash,"" said Corbett.""The message is steady as she goes, managing what we have got, building our brands and keeping the ship on a steady course.""  
Earlier the company announced a six percent increase in its pretax profits to 965 million stg for the year ended September 30, 1996. GrandMet shares fell 6p to 451p as the figures came in below the market forecast consensus of 972 million.
The avowed strategy of steady, organic growth from GrandMet contrasts sharply with former chairman Lord Sheppard's era of frenetic acquisitions and disposals.
Corbett said the company is confident it can achieve the same level of 10 percent organic growth at Pillsbury next year.  
In the year ended September 30, 1996 Pillsbury grew operating profit 30 percent to 431 million, sales were up four percent and prices three percent. U.S. operating margins were up 0.7 percentage points at 12.2 percent.
""All our consumer indices show that its steady as she goes. We are not looking for a sharp improvement in demand in the states and equally we see no evidence of deterioration. We have begun the year satisfactorily and we are in good shape for another good year at Pillsbury,"" said Corbett. Pillsbury has lifted its margins steadily over the last four years and ""there is no reason to suppose that upward trend won't continue.""  
At its spirits arm, International Distillers and Vintners, (IDV) GrandMet plans to get price rises through of another two to three percent on average next year, said Corbett.
""We think we have done rather better on pricing than our competitors as we started investing on brand equity about two years ago whereas they have yet to really put their foot on the accellerator,"" said Corbett.
As an example Corbett cited GrandMet's move to impose its first price rise for five years in April on Smirnoff in the U.S. Other spirits companies are finding it tougher getting consumers to accept price increases on their brands.  
GrandMet plans to spend 30 to 40 million more on marketing its brands this year, said Corbett, after spending 420 million in 1995/96. Again the bulk of its marketing spend will go behind liquor Bailey's, vodka Smirnoff and J&B whisky.
Overall marketing expenditure was up 16 percent at 1.2 billion stg in its 1995/96 year.
IDV reported operating profits up four percent at 471 million, sales were up four perecent and prices up two percent. Sales of spirits were up five percent and profits growth in the region was led by Britain and Spain. Spirits sales in emerging markets were up 15 percent.  
At fast food chain Burger King profits were held back by fears over the health risks of eating beef in Britain and Germany as well as the decline in refranchising stores. The company plans to open another 800 new stores next year, up from 756 in 1995/96. It currently has at total 8,696 restaurants. Burger King posted a 29 million stg drop in trading profit to 167 million stg.
Corbett said GrandMet should achieve 30 million stg in cost savings in 1996/97. This comes on top of cost-savings of 120 million stg identified by the company at the time of its restructuring three years ago.
""Our major objective is to improve the return on capital,"" he said, adding that GrandMet's post tax return on total invested capital is about 8.0 percent which the company hopes to push into double digits in the next three years.
GrandMet should be able to reduce its debt to 2.2 billion stg by the end of its 1996/97 financial year, taking its interest cover to just under eight times, said Corbett.
The company will ask for shareholder approval at its annual meeting in March to buy back up to 10 percent of its own shares.
Corbett said the company is ""reviewing a number of options"" but declined to say what they were or talk about the timing or size of any buyback.
-- London Newsroom +44 171 542 6437
",47
"British brewer to leisure group Whitbread Plc posted a 14 percent increase in its half year profits on Tuesday to 177.5 million pounds ($290 million) and chairman Sir Michael Angus said he expects recent levels of growth in its markets to continue.
In an interview chief executive Peter Jarvis, in ebullient mood, said British consumers were feeling better, spending much more on leisure and the upward trend was set to roll for at least another two years.
""I think the consumer position in Britain is favourable for at least two or three years. Unless we have some kind of catastrophe, the prospects in Britain are good. All the economic predictions from the banks point to low inflation and growing consumer confidence,"" said Jarvis.
The company's hotels business doubled profits and sales in the six months to August 31. Like-for-like sales were up by 11 percent with occupancy levels and room rates much higher.
""The number of foreign tourists to Britain is growing very, very fast. They spent 13 to 14 billion pounds last year and half of that in London,"" he said.
""That's been growing very fast in the last 10 years and its forecast by Henley (forecasting centre) to be the fastest growing sector of the leisure market.""
Americans flocked to Whitbread's 16 Marriott hotels during the half year for the first time as a result of a marketing link-up with Marriott in America, adding five percent to occupancy levels at some Marriott hotels.
Whitbread acquired health and sports club group David Lloyd Leisure for 200 million pounds and a chain of 16 Marriott hotels in Britain for some 185 million in August 1995.
The company also owns a chain of about 130 low budget Travel Inns, which Jarvis said will be added at the rate of about one every 10 days to reach 300 by the end of the year 2000. Consumers also spent more eating out during the half year with Pizza Hut, jointly owned with Pepsico, and TGI Friday's sales ahead by about 20 percent.
The Beefeater chain of restaurants increased like-for-like sales three pecent and profit by 7.0 percent. The company's restaurant and leisure division saw pretax profits rise 58 percent to 56.3 million.
Whitbread Inns, which includes casual dining out pub chain Brewers Fayre, saw profits grow by 15 percent to 77.4 million and total sales by 14 percent. But sales from Whitbread's 2,200 leased pub estate were down three percent.
""The main driving force on like-for-like sales is on food pubs and restaurants and we also opened a lot more new places that appeal to people who would not normally go to pubs.""
Whitbread's beer company increased profits by 12 percent to 30.8 million pounds on sales which were ahead eight percent pushed higher by the acquisition of the Labatt and Wadworth brands. Heineken Export and Stella Artois produced the strongest brand performances.
However gearing -- the ratio of debt to equity -- more than doubled to 27.3 percent, after a spate of recent acquisitions including the Pelican Group of French-style urban bistros Cafe Rouge and Dome, for 133 million in July.
Whitbread shares rose 7p to 748p on the results, which beat most analysts' forecasts.
",47
"Shares in Anglo-Dutch consumer group Unilever Plc rose sharply on Friday after the group posted a better-than-expected five percent rise in third quarter profits.
""I gritted myself for something rather unpleasant and its turned out very well,"" said David Lang, an analyst at Henderson Crosthwaite.
The shares jumped 42-1/2p in early London trade to 1,317-1/2p after profits rose to 826 million pounds ($1.36 billion) for the quarter. The results beat analysts' forecasts which ranged from 760 million pounds to 820 million.
""I think there is quite a lot of momentum in Unilever and that is before the benefits of management reorganisation which began in September,"" said Lang.
Before an exceptional charge of 32 million pounds, mostly to reshape its newly acquired industrial cleaning business Diversey, pretax profits rose six percent to 918 million.
""The total charges were clearly lower than we expected,"" said Richard Newboult, an analyst at Lehman Brothers who forecast a total restructuring charge of 74 million with about half of that related to Diversey.
Diversey, acquired in January from Canadian brewer Molson for 360 million pounds, was merged with Lever Industrial in October to form a combined business with annual turnover of 1.15 billion and a workforce of 13,000 in 60 countries.
Unilever owns a range of household brands including washing detergent OMO, Brooke Bond tea, Ponds cosmetic cream and several ice-cream products.
""Although poor weather had a negative effect on icecream sales, other parts of the business in Europe did well,"" said Unilever press officer Mike Haines.
Analysts and stockmarket dealers agreed. Despite the impact of a dull summer on ice-cream sales and profits, Unilever still managed to improve its profit by 13 million pounds to 502 million in the three month period from improved profits in detergents, frozen foods and personal products.
""The real strength came from the emerging markets of Latin America and Asia Pacific and the strong underlying performance in North America,"" added Haines.
The Asia-Pacific region turned in a 20 million pounds increase in profits to 108 million in the third quarter, Latin America was up 14 million pounds at 79 million, while Africa and the Middle East showed a nine million rise to 56 million pounds, reflecting changes made by the group to its Nigerian business.
($1=.6093 Pound)
",47
"British tobacco and insurance conglomerate B.A.T Industries can expect more tough questions about U.S. litigation when it reports third quarter results on Wednesday as scientific evidence continues to mount that smoking and lung cancer are linked.
""It should be another set of solid results but they are nowadays rather secondary to litigation developments which are critical to the company's future growth prospects,"" said Charles Pick, analyst at Panmure Gordon.
B.A.T shares appear increasingly vulnerable to this issue.  
The growing pace of litigation claims against B.A.T's U.S. tobacco subsidiary Brown & Williamson, and the U.S. industry in general, recently led credit rating agency Standard & Poor's to revise down its outlook for the company to negative.
Meanwhile, analysts expect B.A.T's pretax profits this quarter to range from 650 to 715 million stg, slightly firmer than the 659 million stg last time.
No exceptional items are anticipated and the company pays a dividend only at the half- and full-year stage.
Paradoxically, underlying strength and growth in tobacco is likely to offset a mixed performance from financial services.  
While the group's main life and pension firms Allied Dunbar, Eagle Star overseas and Farmers should report higher sales, Eagle Star's general insurance business is widely forecast to suffer further from a cyclical downturn.
Analysts expect B.A.T's tobacco sales to emerging markets to remain strong, with continued growth in Asia.
Pretax profits for the nine month period, estimated to top the 2.0 billion stg mark, will include 69 million of exceptional gains on sale of two subsidiary businesses in the first half.
Further ahead, a consensus forecast for 1996 full-year earnings per share is 51.10p, rising to 53.40p for 1997.  
However, despite the prospect of firmer earnings and a strong performance by the London stock market in the first 10 months of ths year, B.A.T shares have generally weakened.
They have fallen from a high of 585p on February 2 to 434p on Friday, shedding nearly four billion pounds from the company's total stockmarket value along the way.
The main damage has been done by constant pressure on both B.A.T and its big U.S. rival Philip Morris from a stream of upsets and shifts in the progress of U.S. litigation.
The trend has led some of its big UK shareholders to call for a demerger of B.A.T's two component businesses.  
Analysts are sceptical on the whole about the possibility of demerger, despite the tactic's popularity among other diversified groups with tobacco interests.
""I don't think a demerger is legally possible and I don't think management see it as in the group's interest. In fact it only makes sense to liley-livered UK institutions who are obssessed with the U.S. tobacco litigiation,"" said Tom Bennet, analyst at Paribas.
Some tobacco litigants also oppose demergers, claiming they would amount to ""false conveyance"" on the tobacco industry's ability to pay up if it were to lose a major court battle.  
Proponents, on the other hand, argue a demerger would separate U.S. tobacco liabilities and enable the company to put its effort into selling cigarettes in Asia and other emerging markets.
The successful spin-off of Imperial Tobacco from the Hanson group has added more fuel to their cause, along with American Brands Inc's plan to spin off its UK-based Gallaher tobacco operations some time next year.
-- London Newsroom +44 171 542 6437
",47
"British pub to hotels group Greenalls Plc should report a near 20 percent rise in its full year profits on Thursday as its acquisition of Boddington Group feeds through into its managed pub estate, analysts said.
Analysts' forecasts for pretax profits in the year to September 27 range from 145 to 150 million stg excluding an exceptional 30 million stg for the cost of reorganising Boddington's, up from 100.5 million last time. Dividend forecasts are centred on a total payout of 15.4p.  
The acquisition of Boddington for 527 million stg in November 1995 added 458 pubs to the group's portfolio and made Greenalls the largest independent retail pub chain with 2,370 outlets. Some 270 former Boddington's managed pubs were absorbed into Greenalls Inns.
At the time of the acquisition Greenalls identified 18 million stg of cost savings from closing Boddington's offices and wholesale depots.
However, confusion remains among analysts about how former Boddington assets have been absorbed.  
Trading profits from its managed pubs are anticipated to be up some 45 percent at 76 million stg, driven by the inclusion of the Boddington estate for the first full year.
Profits from its hotel and restaurants division should grow about 10 percent to 58 million. The company announced the long-awaited sale of its six hotels in the United States on Friday for 14 million stg in cash with a loss on the disposal of 1.75 million.
""It's definitely a welcome sight to see. Those hotels have rarely been in profit over the last ten years,"" said one analyst who declined to be named.  
The division also includes De Vere Hotels, Village Leisure -- acquired from Boddington -- and the branded Premier House pub restaurants.
Earnings from the group's tenanted pubs and wholesaling are likely to be up about 25 percent at 50 million. At the end of August, Inn Partnership comprised 1,194 tenanted houses including 145 former Boddington tenanted pubs.
This division also includes 460 off-licenses and a distillery.
Analysts envisage an interest charge of about 38 million.  
Investors and analysts are keen to hear how the brands acquired from Boddington's are fitting in.
""There are a number of retail brands in this vastly enlarged group and it would be interesting to see which ones it considers to be really important for the future, "" said Colin Humphreys, analyst at Panmure Gordon.
Greenalls shares were off 6p at 596 on Friday at 1100 GMT, well off their 637p year high. The company improved operating margin to 17.6 percent in 1995 from 16.75 percent a year earlier.  
Its return on equity rose to 13.15 percent from 10.39 over the same period, compared with 9.84 percent for Whitbread.
A Reuter poll of 24 brokers produced a consensus estimate EPS for the full year ending September 27, 1996 of 38.5 rising to 42.5 in 1997.
-- London Newsroom +44 71 542 6437
",47
"British tobacco and insurance company B.A.T Industries reported a nine percent rise in nine-month profits on Wednesday but conceded U.S. tobacco litigation was the dominant issue affecting its share price.
Profits in the nine months rose to 2.04 billion pounds ($3.3 billion) from 1.87 billion last time. Profits in the third quarter rose to 714 million from 680 million pounds.
Trading profit from financial services rose by three percent, and profits from tobacco were seven percent ahead.
Overall cigarette sales rose by three percent, although volumes were lower in the United States, a market where total industry sales were flat, the company said.
Chief executive Martin Broughton told a meeting fo share analysts, ""...the dominant issue affecting the share price for B.A.T Industries currently is U.S. litigation, regulation and indeed science.""
The growing pace of litigation claims against the company's U.S. tocacco subsidiary Brown & Williamson, and the U.S. industry in general, continues to unsettle investors and hurt B.A.T's share price.
B.A.T shares have fallen from a high of 585 pence on February 2 to around 434 pence, shedding nearly four billion pounds from the company's stockmarket value along the way.
But Broughton said the company did not see value in demerging the group into separate tobacco and financial services companies.
He told Reuters that a recent strategy review showed ""there was no value we could see that would be generated from a demerger.""
Chairman Lord Cairns said in the results statement that the company had never kept from the public any conclusions showing that smoking causes diseases.
Broughton, responding to a recent paper in Science Magazine in the U.S. which claims a direct link between smoking and lung cancer at cell level, told analysts the company had no internal research which proved that smoking caused lung cancer, or that smoking was addictive.
He said there was still a lack of understanding of the mechanisms of diseases attributed to smoking.
Turning to the business results, B.A.T said the seven percent rise in tobacco trading profit to 1.27 billion pounds was helped by strong sales growth in the Asia Pacific and African, Middle East and Indian subcontinent regions.
In financial servies, B.A.T said its U.S. unit Farmers continued to have an excellent year. In Britain, its Eagle Star insurance division faced fiercely competitive conditions and profits fell to 162 million pounds from 194 million.
The life insurance and investment business reported a five percent increase in profit.
Shares in the company initially rose after the results, but later fell back to show a loss of 2-1/2 pence by 1130 GMT.
""The numbers are almost exactly in line with expectations, in fact if anything towards the top end of the range,"" said BZW analyst Nyren Scott-Malden. ($1=.6223 Pound)
",47
"Luxury goods maker Vendome on Wednesday blamed poor tourist spending in the Far East for a 4.6 percent drop in first half profits, but hoped this would recover when the yen recovers its strength.
The group, whose exclusive brands include Cartier, Dunhill and Karl Lagerfeld, saw pretax profits fall to 113 million pounds ($190 million) from, 118.5 million, while sales rose to 703.6 million from 699.5 million.
A fall in interest income to 3.2 million pounds from 5.7 million contributed to the profit decline, the company said.
Chairman Joseph Kanoui said he believed the drop in Far East demand was temporary and would pick up when the yen recovered.
""The decrease in tourist spending in the Far East, we believe, is a direct result of the weakening of the yen in the second half of last year,"" he said in a statement.
""The combination of these two factors has particularly affected those of our brands which have a greater proportion of their sales in the Far East.""
Vendome's profits fell short of market expectations which had looked for earnings of between 125 million and 135 million pounds. Its shares were five pence lower at 535.5.
The group, 70 percent owned by South African-controlled Richemont Securities, was set up three years ago as part of a reorganisation of the luxury goods and tobacco businesses of Compagnie Financiere Richemont AG, Dunhill Holdings and Rothmans International.
In Swiss francs, pretax profits fell 2.1 percent to 214.7 million ($166.3 million) in the six months to September 30.
Sales of jewellery in the first half decreased below last year by 17.4 percent and sales of leather goods, whch mostly depend on consumer demand in the Far East, fell by 2.3 percent.
Sales of watches rose by 10.4 percent and writing instrument sales increased by 1.7 percent over last year. Perfume sales showed an increase of 20.4 percent over last year, reflecting the success of the new Cartier fragrance launched in the second half of last year, but menswear sales were slightly down.
Cartier, founded in Paris in 1847, now has 164 retail outlets and provides an estimated 80 percent of group profits. Other Vendome brands include luxury writing goods maker Mont Blanc and Alfred Dunhill.
The group said it had made significant investments in the first half to boost its retail and wholesale network and in advertising major new products.
It is also building a new factory in France for leather goods, due to open next year. The group said this would give better control over production and higher margins. ($1=.5956 Pound) ($1=1.2908 Swiss Franc)
",47
"Britain's independent brewers on Thursday pressed for a cut in the excise duty on beer ahead of Chancellor of the Exchequer Kenneth Clarke's budget statement on November 26.
The brewers are lobbying hard this time round, after Clarke's previous budget cut the duty on Scotch whisky for the first time since 1895, while leaving the rates on beer and wine unchanged. The duty on beer was raised by 2p a pint in 1994.
""Increasing excise duty over a period...has inevitably increased the divergence with our European partners. The single market demands a single fiscal policy and a uniform excise duty,"" said a letter to the Times newspaper from the chairman of the Independent Family Brewers of Britain.
The letter said the group would deliver a petition to the European parliament, asking for the European Commission to take into account the wide differences in excise duty between EU member states on alcoholic drinks and beer in particular.
The Brewers and Licensed Retailers Association (BLRA) are arguing that a 20 percent cut in the beer duty, equivalent to knocking 6p off a pint, would lower inflation, help boost government revenue and discourage illegal cross-border shopping.
Oxford Economic Forecasting researcher Adrian Cooper used the Treasury's own economic model to argue that a 20 percent cut in beer duty would mean lower inflation, more jobs and in the second year of a duty cut more money for the Exchequer.
British duty on a pint of five percent alcohol by volume is 30 pence. In France, it is just four pence, encouraging people to buy their beer in mainland Europe.
The total volume of duty paid beer flooding into the country is estimated by the BLRA to be about 4-1/2 percent of the total beer market. Over half of this is for illegal resale.
The Scotch Whisky Association estimates the government has received 2.0 million stg more in revenue from the industry as a result of the last cut in the whisky duty. It says the reduction has also fed through into lower prices for consumers.
Before last year's budget, a typical bottle of blended whisky costing 10.70 pounds ($18.01) about 67 percent went in tax, with duty at 5.55 pounds a bottle and value added tax at 1.59 pounds.
Since last year's cut in duty, average prices per bottle have fallen to 9.85 pounds for on supermarket own labels, although the price of brands has risen slightly. The Association is pressing for another four percent off duty paid on a bottle.
Britain's tobacco industry wants a freeze on duty, arguing the government is losing revenue because the tax is so high compared with central Europe, that smuggling is rife.
""We would certainly like to see a freeze this year because we are so far out of sight of the rest of Europe that it's causing a major smuggling problem,"" said Clive Turner, media relations at the Tobacco Council. ""The government is currently missing out on 640 million a year in lost revenue,"" he said.
A 50 gram pack of rolling tobacco normally costs about 7.47 stg in Britain but can be bought in Belguim for slightly under 2.0 stg. The Tobacco Council estimate 68 percent of all hand rolling tobacco sold in Britain comes from mainland Europe and some 62 percent of that is smuggled across.
In his last budget statement Clarke, left the duty paid on hand rolling tabacco unchannged but raised thaty on cigarettes by 15 pence per pack. Cigarettes currently retail for around 2.95 pounds.
In the 1993 budget, Clarke pledged to raise tobacco tax on average by the rate of inflation plus at least three percent in future budgets. Last year's rise was equivalent to the rate of inflation plus seven percent. ($1=.5940 Stg)
",47
"John McGrath, chief executive of food and drinks giant Grand Metropolitan Plc said the company will continue to unshackle itself from production in its mission to bear down on costs.
""In many cases we don't need to produce what we sell,"" McGrath told Reuters. ""Whether you own the processing is often academic as long as you control the quality.""
The company is looking at further Seneca-type deals in the next year, he said, where a third party takes on the production but GrandMet keeps hold of pricing, marketing and quality.  
Last year, GrandMet contracted out to U.S. company Seneca the processing and packaging of its Green Giant's canned vegetables. Green Giant was acquired as part of Pillsbury, GrandMet's U.S. food arm, in 1989.
Pillsbury currently produces some 75 percent of what it sells and this number will decline in the future.
If a product can be insulated by patent from the competition, then GrandMet would want to continue making it, said McGrath in an interview. But, if it's a bread or biscuit product, for instance, it may make economic sense to allow a third party producer in.  
""We would never get out of distilling whisky or blending... that is a skill which only a few highly skilled people can ensure. They know how to get the right quality, the right taste, the right balance. But, whether you need to bottle it yourself is another matte,"" McGrath said.
""The best example is Coca-Cola who are brand marketeers, brand owner and controllers of the concentrate. But, whether they own the processing is academic as long as they control the quality.""  
McGrath paid tribute to former chairman Lord Sheppard, who stood down as chairman in March, after 21 years with the group, for transforming GrandMet into a leaner, more focused company.
When Sheppard took over in 1987, he found a company with over 30 very different business which he thinned down to three: food, drinks and Burger King retailing.
McGrath, appointed chairman and chief executive of International Distillers and Vintners (IDV), GrandMet's spirits arm, in September 1993, brought a tough, cost-conscious urge to make Sheppard's vision work.  
McGrath, whose management skills stem from the shopfloor and operations rather than boardroom, separates himself from the culture of GrandMet's heady, deal-making days of the last decade when companies were carved up and sold on in droves.
""The view I take which the board strongly supports is concentrating on making those very expensive assets that we have acquired work highly efficiently.""
""Now is the time to concentrate on organic growth very strongly supported by new brand development. We will only make minor acquisitions chiefly in emerging markets or food service in the U.S. where we can get some good returns,"" he said.
""What I am very much concentrating on now is taking all the action we possibly can to as rapidly as possible increase our return on capital,"" said McGrath.
""We are investing for the medium term and no longer for short term gain,"" he said.
-- London Newsroom +44 171 542 7717
",47
"Brewer to leisure group Bass Plc is expected to report a strong improvement in full-year earnings on Wednesday, driven by growth at Holiday Inns and its chain of Harvester restaurants.
""The company will benefit from a full year on its acquisition of Harvester, a full year of sales in Caffrey's and Hoopers Hooch and a full year from Robinsons',"" said BZW analyst Charles Winston. Bass bought the Harvester chain of 78 pubs for 165 million stg from Forte in July.  
Analysts forecasts for pre-tax profits range from 665 to 675 million stg, up from 599.1 million stg in 1995. A dividend of 24.7p is anticipated. The tight profits range bears testimony to the full and detailed trading statement the company announced in September, covering the first 48 weeks of the year.
Chairman Sir Ian Prosser said at the time revenue per available room in the US franchised hotels increased by six percent. Analysts expect revenue per available room to show an increase of 8.0 percent in Europe at the full year.  
""The growth will come from hotels, up 18 percent and pubs up 16 percent,"" said Goldman Sachs analyst Colin Davies.
Analysts expect profits from Holiday Inns to come in at about 193 million stg up from 164 million a year ago. The pubs division, which includes Harvester, is anticipated to show trading profits of some 284 million up from 240 million.
However, trading profit from the leisure division is expected to be down about 10 million at 65 million because of the impact of the national lottery and scratch cards on admissions at Gala, Bass owned traditional bingo clubs.  
But betting shops Coral, also part of the company's leisure division, are likely to see the benefit of government changes in June that allowed betting shop operators to have up to two 10 pound all-cash AWPs on the premises.
The company's brewing business should report a near 10 million stg increase in operating profit to 155 million, helped along by strong sales in the markets leading alcopop Hoopers Hooch and creamy ale Caffrey's.
Profits from the soft drinks division, which includes Britvic, should also be slightly higher -- some analysts predict by as much as 10 million up at 56 million -- as a result of the acquisition of Robinsons' soft drinks business.
Bass shares closed 11p down at 783-1/2p on Friday as talk surfaced that its proposed 200 million stg acquisition of Carlsberg-Tetley would only be allowed through with tough conditions imposed by government.
-- London Newsroom +44 71 542 6437
",47
"A planned merger between British brewer Bass and Carlsberg-Tetley will create such a dominant force in the industry that it is almost certain to fall foul of Britain's competition authorities, regional brewers said on Tuesday.
""I think it will be referred but what will happen then is anybody's guess. They must think there is a reasonable risk of that happening otherwise why have a plan B in place,"" said Ralph Findlay, finance director of Wolverhampton & Dudley Breweries.
On Sunday Bass confirmed details of a long-awaited deal to merge with Carlsberg-Tetley, leaving Danish brewer Carlsberg with a 20 percent stake in a merged Carlsberg-Tetley-Bass if British regulators allow the marriage to take place.
Under the terms of the deal, if Bass cannot combine C-T with its own brewing business within 16 months, Bass has the option to put its whole shareholding to Carlsberg and Carlsberg has an option to put 15 percent of C-T to Allied Domecq.
""If it doesn't work it seems plan B comes into operation. But it is by no means clear what will invoke plan B,"" Findlay said.
Bass was knocked off its perch as Britain's leading brewer last year when Scottish & Newcastle (S&N) acquired Courage from Australian brewer Fosters, giving it a 31 percent share of Britain's beer market.
A merger of Bass and Carlsberg-Tetley would make Bass Britain's largest brewer by far with 35 percent of the market.
Britain's competition authorities will want to find out if the deal would leave Bass and S&N too much control over beer prices and too powerful a grip in the Midlands and Yorkshire.
Roger Young, retail director at Greenalls Group, said: ""In common with the rest of the world we are expecting a referral. Anything that takes competition out on the supply side is not good news from the point of view of the purchaser.""
Greenalls, owners of some 2,400 pubs, exited brewing at the end of February 1991. ""If it becomes too much for Bass to swallow then I suppose plan B swings in -- Carlsberg effectively takes over,"" he told Reuters.
Many brewing analysts argue that the duopoly that exists in Scotland between Bass and S&N results in much higher margins for the brewers which means higher prices for drinkers.
""I think the supply position in the Midlands and Yorkshire is obviously something that needs to be looked at very carefully,"" said one senior source at regional brewer.
""Because Bass and Allied have dominated the beer supply in those areas since the Second World War.""
""In those areas they are the two biggest brewers and the two biggest brewers getting together in very significant regions like that is something which has never happened before.""
A spokesman for the Office of Fair Trading confirmed it would look at the deal but declined to comment on whether the OFT would recommend referring it to the Monopolies and Mergers Commission for a full investigation.
Industry sources say although S&N's purchase of Courage was referred the OFT gave the company much clearer guidance on what concessions would be required to let it through.
S&N was obliged to reduce its tied estate of pubs by 115 to 2,624. It also agreed to the early release of IEL (Intrepreneur Estates Ltd) pub tenants from a supply agreement. It had to release 500 of them by January 1996 and a further 500 by January 1997.
",47
"British dairy and distribution company Unigate Plc posted better than expected profits at the half year stage on Tuesday and said it was seeking to expand its presence as a distributor in mainland Europe.
""We have now refocused the group into food and distribution. And a lot of pan-European customers of ours are looking for us to come to them with some European capability, so one area we are looking at is distribution,"" chairman Ian Martin said.
Pretax profits in the half year to September 30 were up 0.3 percent at 60.6 million pounds ($101.1 million), better than stockmarket forecasts of 57 to 59 million. The company held cash of 58 million at September 30, giving it ample resources for acquisitions.
The company raised its interim dividend by 5.3 percent to 7.0 pence. Unigate shares were up four pence at 431p by late in the session.
Martin told a news conference: ""We tend to see the duck being thickest in Europe and that is where we are shooting at the moment.""
Chief executive Ross Buckland said in an interview that Unigate had between 200 and 300 million pounds to spend on acquisitions. ""If our interest cover went down below four times then you would have to question our cautiousness,"" he said.
He ruled out a special dividend, saying that growth by acquisition represented better value to shareholders.
""We are prepared to expand beyond areas in which we operate, into another food area, but if we did it would have to be a large and meaningful acquisition,"" said Buckland.
Unigate's European foods division reported profits up 3.1 million at 44.1 million in the first half, with fresh foods increasing profits from 20.5 million to 26.5 million pounds.
This increase was helped by the 77 million pound acquisition of Kraft's European margarines and spreads business in August.
Malton, the bacon and pork processing business, has also benefited from recent acquisitions.
In the half year, a total of 100 million was spent on acquisitions, including 20 million on the Hargrave pork products business to further strengthen Malton. Another 77 million was spect buying Kraft's Vitalite and Golden Churn brands to add to St Ivel's existing brands -- Gold and Utterly Butterly.
""I don't believe we can be accused of unwise investments over the last year,"" Buckland said.
Unigate's dairy business reported profits down 2.9 million pounds at 17.6 million due to lower prices for butter and milk powders, which Unigate estimated cost it about 4.0 million in the period. But from October, Unigate said it has seen a small reduction in raw milk prices.
Wincanton, Unigate's distribution business reported profits up 1.7 million at 12.3 million.
In August, Unigate completed its exit from the U.S. restaurant business with the sale of Taco Bueno and Casa Bonita for 27 million, enabling the company to focus purely on developing its core European food and distribution business.
The group sold its U.S. restaurant chain Black-eyed Pea for 42 million pounds in July and its minority stake in Dutch food company Nutricia for 360 million in January. Cash at the bank and in hand amounted to 292 million at the half-year stage. ($1=.5994 Pound)
",47
"British sugar and sweeteners group Tate and Lyle Plc is likely to see a sharp drop in its full year profits on Wednesday, as its U.S. sugar unit Staley suffers a near 50 percent decline in earnings.
""The main swing factor will be Staley which has been squeezed between high raw material costs and poor high-fructrose corn syrup pricing,"" said Michael Landymore, an analyst at Henderson Crosthwaite. Analysts forecasts for pretax profits range from 270 to 285 million stg, down from 311 million last time. A total dividend for the year of 17.0p is expected, up a penny.  
Staley, which turned in profits of some 150 million stg in 1995, is expected to contribute just 75 million this time round.
But analysts expect the downturn at Staley to be partly offset by an improvement in the company's North American sugar business in the second half and better returns from its investment in emerging markets.
""The key feature is going to be Staley and the re-negotiation of contracts although clearly these figures come a little early for the company to give us much indication of that,"" said John Elston, an analyst at Panmure Gordon.  
Staley, which produces high fructrose corn syrup used as sweeteners in Coca Cola and Pepsi drinks, re-negotiates supply contracts with soft drinks firms at the beginning of every calender year.
In May, at the half year stage, Tate & Lyle warned on its results for the full year as a result of steep grain prices. For the 26 weeks ended March 30, 1996 profits were up 10.1 percent from a year earlier at 168.2 million stg before tax.
But chairman Sir Neil Shaw said that profits for the full year were expected to be below the level anticipated at the company's annual meeting in January.  
""Trading conditions for Staley, the group's North American subsidiary are difficult, affected by increases in available industry capacity and coinciding with a dramatic increase in the cost of maize,"" said Shaw at the half year stage.
He said Staley's profits were expected to continue to be affected by the abnormal grain prices and competitive pressures through 1997 but that Tate & Lyle should get more benefit from other investments, especially in new growth areas.
Traditionally Staley has provided about 50 percent of group profits.  
In July, the company said an explosion at its Scottsbluff sugar beet facility in Nebraska would hit 1996 pretax profits by 10 million -- two thirds would be for the insurance loss and one third for the disruption to production.
Domino Sugar, a North American cane refiner, is likely to show an improvement while Tate's Western Sugar Company in Colorado is expected to suffer from a bad sugar beet crop.
Analysts expect Tate's north American business, excluding Staley, to contribute about 110 million to group profits.
An improvement is also expected in earnings from Tate's UK Thames sugar refinery, forecast to chip in about 60 million stg.  
Amylum, a Belgium based cereal sweetener and starch company majority owned by Tate, is forecast to make about 85 million.
Other European sugar businesses should contribute some 22 million. In 1995 Tate's European business made 144.3 million stg in operating profits.
The company's sweeteners and starches busines in the rest of the world, including 100 percent owned Bundaberg Sugar in Australia, should add about 32 million stg to group trading profits up from 25.1 million stg in 1995.  
The group's animal foods and bulk storage business is predicted to contribute some 32 million, slightly down from 35.4 million in 1995. A Reuter poll of 20 brokers produced a consensus estimate for earnings per share of 37.6p for the year ended 28 september 1996, rising to 40.6p the following year.
Since May, Tate & Lyle's shares have underperformed the stock market by about five percent but outperformed its peers in the food manufacturing sector by a similar amount.
The shares were up 3p in early trade on Friday at 466p.
-- London Newsroom +44 171 542 7717
",47
"Anglo-Dutch food-to-detergent group Unilever Plc, reporting third quarter results next Friday, is likely to have suffered from restructuring costs for its North American industrial cleaning business Diversey and from weak ice cream sales in a drab European summer, analysts said.
Diversey, acquired in January from Molson for 360 million stg, was merged with Lever Industrial in October to form a combined business with annual turnover of 1.15 billion stg and a workforce of 13,000 in 60 different countries.  
Analysts predict third quarter pretax profits in a range of 760 to 820 million, against 786 million stg last time.
The wide range reflects uncertainty about the size of redundancy payments and closures needed to reshape Diversey.
Charges for Diversey could range from 15-30 million stg, with a further 20 million needed for restructuring other Unilever businesses.
But the half-year dividend, paid in the third quarter, is forecast to rise sharply as a result of changes to dividend policy announced at the full year.  
Analysts expect a 10.3p dividend payout under a new policy whereby 35 percent of the previous year's total dividend would be paid in the stronger of either Dutch guilder or sterling so far this year. A 10.3p payout would represent a 46 percent increase on the previous half-year's 7.05p.
For the nine month period analysts are forecasting pretax profits of about 1.9 billion pounds.
""European ice cream sales are not going to have the special benefit they had in 1995 or 1994,"" said John Campbell, analyst at Paribas.  
""European economies are generally weak, and German consumption if anyhing lower because of the tough economic climate there,"" he added.
Michael Bourke at Panmure Gordon saw three factors behind the downturn.
""The exceptional charge will be a bit higher, perhaps about 40 million compared with 20 million the year before, and ice cream sales in the third quarter will have been influenced a lot by the summer weather.""
""Last but not least is the currency factor, with the majority of Unilever profits in US dollars and the recent weakness in the dollar clearly having an impact.""
The consensus forecast EPS for 1996, taken from 24 brokers polled by Reuters, is 84.40p, rising to 92.30p in 1997. Six brokers downgraded their 1996 EPS forecast in October.
Unilever's return on equity is currently running at 27.3 percent, against 66.57 percent for Unigate, the highest in the FTSE all-share food manufacturing sector.
The company's shares reached a high of 1412 pence for the year in mid-September before closing down at 1283 on Friday.
-- London Newsroom +44 171 542 6437
",47
"Britain's Lloyds Chemists said on Friday it was unable to advise shareholders what action to take on a renewed bid offer from UniChem until it had heard from rival suitor Gehe AG.
""What we will now need to do is to see if we can ascertain Gehe's intentions,"" finance director Johnathan Fellows said in an interview.
Both UniChem's original bid for the pharmacy chain and a rival offer from German pharmaceutical wholesaler Gehe AG lapsed in March after being referred to Britain's Monopolies and Mergers Commission because of competition fears.
""We have no comment at this stage. We need to meet as a board and we clearly need to have some correspondence with our shareholders. We have not yet resolved what recommendations to make,"" Fellows said.
""I would hope to make an announcement in the next few days.""
News of UniChem's renewed offer sent Lloyds shares to a record high of 523p, before slipping back to 518p, up 13-1/2p on the day. UniChem shares fell 6p to 250. Gehe shares trading in Frankfurt were off two marks at 109 marks.
Gehe, whose lapsed offer was an all cash bid pitched at 500 pence per share, said it planned an announcement later in the day.
UniChem, which already owns 9.9 percent of Lloyds, is offering 16 new UniChem shares and 926p in cash for every 10 Lloyds shares. That values the company at 657.6 million pounds ($1.04 billion).
UniChem also said it had identified cost savings and revenue benefits ""conservatively"" estimated at more than 15 million pounds in the 12 months after an acquisition and in excess of 20 million pounds a year thereafter.
As well as cost-savings UniChem said the acquisition would enable faster development of its retail pharmacy business and be earnings enhancing after 12 months.
""We believe that our extensive retail expertise, together with our unparalleled pharmaceutical wholesale distribution capabilities, will greatly enhance both businesses,"" said Jeffery Harris, chief executive of UniChem.
The offer was announced shortly after Britain's Department of Trade and Industry (DTI) cleared the way for a takeover of Lloyds, providing UniChem and Gehe fulfill promises to sell off certain parts of Lloyds.
""UniChem and GEHE have each identified a number of potential firm buyers for the businesses they are required to divest. These have been approved by the minister,"" said the DTI.
If either UniChem or Gehe are successful in acquiring Lloyds, they must sell off specified Lloyds' wholesale businesses within three months of the completed merger, the department said.
Lloyds Chemists, owns the second largest chain of retail pharmacies in Britain with more than 900 outlets. UniChem is one of the two largest wholesalers of pharmaceutical products in Britain and also owns a chaon of some 400 retail pharmacies.
Gehe, Europe's largest drug distributor, is keen to expand its pharmaceutical retail business in Britain which it entered with the acquisition of AAH Plc in April. ($1=.6298 Pound)
",47
"Imperial Tobacco Group Plc, demerged from Hanson Plc in October, said on Thursday it's future was bright although British market growth was tough due to escalating taxes on cigarettes.
""In Britain it is difficult to see the market growing given the punitive taxes. We are likely to see continued strong growth, though, in the Asia Pacific area of the world,"" chief executive Gareth Davis said in an interview.
Imperial posted trading profits of 303 million pounds ($491.8 million) from Britain in the year ended September 28, unchanged from its 1995 level, but profits from overseas grew 55 percent to 70 million.
Overall group profits before tax for the year were up five percent at 366 million pounds. The company's shares rose 5-1/2p to 373-1/2p.
Britain's Finance Minister, Kenneth Clarke, announced an increase of 15p on a packet of 20 cigarettes in his November 26 budget.
After a similar rise in 1995, British cigarette sales fell by 2.5 percent and Davis said he expected the same sort of fall again.
He said the latest tax rise would fuel smuggling by widening further the gap between taxes in Britain and mainland Europe.
The company's profits from overseas, which now make up 19 percent of total group profits, are targeted to reach 25 percent by the end of the decade, said Davis.
""I think we are in a world market which is still in growth, albeit modest, and Imperial is a relatively late entrant to international markets and has tremendous potential to exploit its brands internationally.""
In 1995, Imperial's set-up costs in emerging markets were about 9.0 million pounds before falling to around half that in 1996, said Davis, and its overseas investment is likely to remain at around that level each year until 2000.
He said the company was confident of its defence against 12 lawsuits bought in Britain by people who allege their health has been damaged by smoking its products.
""We have very strong defences and great confidence in those defences and we will defend each and any claim aganst us with the upmost vigour.""
One case involving 12 plaintiffs is the first in Britain where their lawyers, who have been denied legal aid, are working on a no win, no fee basis, a common practice in the United States. ($1=.6161 Pound)
",47
"Britain's Northern Foods sees world dairy commodity prices as unlikely to improve in the second half but the impact of this on earnings should be partly offset by improved margins on prepared foods, said Jo Stewart, managing director of the company's prepared food division.
""There is no immediate prospect of commodity prices improving in the second half. We are also very driven by the strength of sterling aginst other currencies,"" Stewart said in a telephone interview after the firm reported first half results.  
In the first half prices on the world commodity markets for butter, skimmed milk and bulk cream were off some 20 percent on last year's levels.
Weakening world demand for dairy productes and the rise in sterling against the other marjor European currencies was not offset by a reduction in Northern's cost of milk.
Eden Vale Food Ingredients, which sells by-products of milk production like butter, skimmed milk powder and cream, on world commodity markets was the hardest hit of Northern's divisions.  
Overall, however margins recovered on the company's prepared foods business rising one percentage point to 8.0 percent in the first half and there was room for further improvement in the second half, Stewart said.
""Our markets have been strengthening in general. We have seen stronger consumer demand, a trend we expect to continue at least until the end of our fiscal year.""
Northern achieved four percent price inflation on its prepared foods in the first half, compared with zero last year, and so far consumers have not reacted to price increases by curbing their demand, said Stewart.  
A typical pack of Northern's biscuits is now 2p higher at 51p than six months ago.
The impact of the beef crisis on consumers demand for beef and meat pies and in turn on Northern's operating profit should lessen in the second half to 2.0-3.0 million, said Stewart.
Sales of Northern's meat products were off 6.8 percent in the first half as shoppers continued to worry about a link between mad-cow disease and a similar brain wasting disease in humans. Northern estimated the beef crisis cost it about 3.0 million pounds in the first half.  
""The impact of BSE is likely to be a little less in the second half as we have put products in the market that can take the same role. We now use chicken, lamb or pork in a pie.""
Before the beef crisis about 55 percent of Northern's hot pies were beef against 40 percent today. Pies are more important to Northern in the winter months of the second half year.
Competition in supplying milk to supermarkets remains intense but the recent erosion in prices should stop soon, said Stewart. ""The profitability of that sector is now such that people are losing money and we expect the price erosion to stop,"" he said.  
Northern now supplies about 33 percent of all milk in supermarkets, haing lost about two percentage points of market share in the first half.
Robert Wiseman and fast-expanding Danish dairy products group MD Foods were especially keen on pricing of milk to supermarkets in the first half.
On Tuesday Unigate said its sales of milk to supermarkets fell 2.4 percent in the first half and dairy profits fell 2.9 million stg to 17.6 million due to lower prices for butter and milk powders, which Unigate estimated cost it about 4.0 million in the period.
Northern reported dairy profits down 27 percent at 21.6 million in the six months ended September 30.
Profits from its prepared foods division were up 24.2 percent at 43.1 million, driven hardest by the grocery sector which benefitted from a full six month contribution from Green Isle which sells the Goodfella pizza brand.
-- London Newsroom +44 71 542 6437
",47
"Shares in Anglo-Dutch consumer group Unilever Plc jumped on Friday after the group posted a better-than-expected five percent rise in third-quarter profits.
The company announced that profits rose to 826 million pounds ($1.4 billion) for the quarter, boosting the share price by 75p to 1,350 by the official close of the London market at 1630 GMT.
""I gritted myself for something rather unpleasant and its turned out very well,"" said David Lang, an analyst at Henderson Crosthwaite.
The results beat analysts' forecasts which ranged from 760 million pounds to 820 million.
""I think there is quite a lot of momentum in Unilever and that is before the benefits of management reorganisation which began in September,"" said Lang.
Before an exceptional charge of 32 million pounds, mostly to reshape Diversey, its newly acquired industrial cleaning business, pretax profits rose six percent to 918 million pounds.
""The total charges were clearly lower than we expected,"" said Richard Newboult, an analyst at Lehman Brothers. He had forecast a total restructuring charge of 74 million pounds with about half of that related to Diversey.
Diversey, acquired in January from Canadian brewer Molson for 360 million pounds, was merged with Lever Industrial in October to form a combined business with annual turnover of 1.15 billion pounds and a workforce of 13,000 in 60 countries.
Unilever owns a range of household brands including Persil and OMO washing detergents, Brooke Bond tea, Ponds cosmetic cream and Walls and Igloo frozen foods.
""Although poor weather had a negative effect on ice-cream sales, other parts of the business in Europe did well,"" said Unilever press officer Mike Haines.
Analysts and stock market dealers agreed. Despite the impact of a dull summer on ice-cream sales and profits, Unilever still managed to improve its profit by 13 million pounds to 502 million in the three month period from improved profits in detergents, frozen foods and personal products.
""The real strength came from the emerging markets of Latin America and Asia Pacific and the strong underlying performance in North America,"" added Haines.
The Asia-Pacific region turned in a 20 million pounds increase in profits to 108 million in the third quarter, Latin America was up 14 million pounds at 79 million, while Africa and the Middle East showed a nine million rise to 56 million pounds, reflecting changes made by the group to its Nigerian business.
($1=.6093 Pound)
",47
"British dairy and distribution company Unigate Plc is keen to acquire food and distribution companies in Europe, said finance director John Worby.
""We are actively seeking acquisitions. We continue to look at acquisitions of all sizes in both the food and distribution area in Western Europe,"" Worby told Reuters in an interview on Tuesday.
""We talk about small, medium and large. Medium is in the area of 50 to 150 million. We will continue to make small acquisitions of the in-fill, bolt-on type nature,"" he said.  
Unigate, which acquired Kraft's European margarine and spreads business in August for some 77 million stg, reported net cash held of 57.9 million at September 30.
The cash outflow for the half year of 110.4 million stg includes 71.4 million spent on acquisitions, net of disposals. The group sold its U.S. restaurant business Black-eyed Pea for 42 million stg in July.
The sale of Taco Bueno and Casa Bonita for 27 million since the half-year stage enables the company to focus on developing its core European food and distribution business.  
The company also sold its minority stake in Dutch food company Nutricia for 360 million stg in January.Cash at the bank and in hand amounted to 292 million at the half-year stage. Worby declined to say whether the company was in talks with any third parties nor would he be drawn on the specific type of acquisition Unigate is after.
At an operational level Worby said he expects the dairy side of the business to continue to suffer from weak commodity prices in the second half of the year. Dairy reported profits down 2.9 million stg at 17.6 million due to lower prices for butter and milk powders which cost Unigate about 4.0 million in the period.  
But from October 1 Unigate has seen a small reduction in raw milk prices, said Worby.
""In fresh foods, trading is still reasonably tough in the UK retail environment. We have seen high pig prices in the first half which squeezed margins but we expect some easing in that area,"" he said.
Unigate's European foods division reported profits up 3.1 million at 44.1 million in the first half, with fresh foods increasing its profits from 20.5 million to 26.5 million stg.
The improvement was especially helped by the contribution from the August acquisition of Kraft's margarines and spreads business.
Malton, the bacon and pork processing business, also benefitted from recent acquisitions.
In the half year a total of 100 million was spent on acquisitions, including 20 million on the Hargrave pork products business to further strengthen Malton and 79 million in buying Kraft's Vitalite and Golden Churn brands to add to St Ivel's existing brands -- Gold and Utterly Butterly.
-- London Newsroom +44 171 542 6437
",47
"B.A.T Industries, reporting a nine percent rise in nine-month profits, on Wednesday ruled out a demerger of its tobacco business despite conceding that U.S. tobacco litigation was the main issue affecting its share price.
Chief executive Martin Broughton said the company did not see value in demerging the group into separate tobacco and financial services companies.
A strategy review showed ""there was no value we could see that would be generated from a demerger,"" he told Reuters.
Profits in the nine months rose to 2.04 billion pounds ($3.3 billion) from 1.87 billion last time. Profits in the third quarter rose to 714 million from 680 million pounds.
Trading profit from financial services rose by three percent, and profits from tobacco were seven percent ahead.
Worldwide cigarette sales rose by three percent, although volumes were lower in the United States, a market where total industry sales were flat, the company said.
The growing pace of litigation claims against the company's U.S. cigarette subsidiary Brown & Williamson (B&W), and the U.S. industry in general, continues to unsettle investors and hurt B.A.T's share price.
B.A.T shares have fallen from a high of 585 pence on February 2 to below 430 pence, shedding nearly four billion pounds from the company's stockmarket value along the way.
Broughton said a demerger of Brown & Williamson would be ""highly destructive"" of shareholder value, adding there was ""no question"" that the board of directors was united on the issue.
He also played down fears over U.S. litigation. Only a few cases actually get to court although many are filed, and the company was confident of winning its appeal in the high-profile Carter case, Broughton told a meeting of company analysts.
In the case of Grady Carter, of Orange Park, Florida, a jury in Jacksonville ruled in August that B&W was negligent and made a dangerous and defective product. Carter smoked for 50 years until he was diagnosed with lung cancer.
B.A.T shares have fallen sharply since the Florida court decided to award damages of $750,000 to Carter.
Lawyer Woody Wilner, who acted for Carter in the Florida case, had promised to bring one case a month, but three have been postponed until next year and one dismissed, B.A.T said.
B.A.T was also confident of blocking the U.S. Food and Drug Administration's attempts to bring tobacco regulation into line with drugs and pharmaceuticals, said Broughton.
If the FDA proposals become law, cigarettes will be classified as ""medical devices"" and would have to meet rigorous safety and sales criteria.
Responding to a recent paper in the U.S Science Magazine which claims a direct link between smoking and lung cancer at cell level, Broughton said B.A.T had no internal research which proved smoking caused lung cancer or that smoking was addictive.
""We have not concealed, we do not conceal and we will never conceal,"" he said. There was still a lack of understanding of the mechanisms of diseases attributed to smoking, he added.
Turning to the business results, B.A.T said the seven percent rise in tobacco trading profit to 1.27 billion pounds was helped by strong sales growth in the Asia Pacific and the African, Middle East and Indian subcontinent regions.
In financial servies, B.A.T said its U.S. unit Farmers continued to have an excellent year. In Britain, the Eagle Star insurance division faced fiercely competitive conditions and profits fell to 162 million pounds from 194 million.
It also suffered a 91 million pounds charge for a surge in asbestos and pollution claims in the United States.
The life insurance and investment business reported a five percent increase in profit.
Shares in the company initially rose after the results, but later fell back to close at 427-1/2p pence, down 8-1/2p. ($1=.6223 Pound)
",47
"Lord Douro, deputy chairman of Vendome Luxury Goods, whose products are especially popular with Japanese consumers, said he thinks the yen has stabilised against the dollar and may improve.
""Chinese demand continues to increase strongly and the Japanese currency will stabilise if not improve from here and we will benefit from that,"" said Douro in an interview.
The yen reached a five year low of 82.52 against the dollar in April 1995. This April 1, at the start of Vendome's half year reporting period ending September 30, it stood at 107.17, before rising to around its current 111 level.
",47
"An ambitious bid by brewer-to-leisure group Bass to create Britain's largest brewer by merging with Carlsberg-Tetley  may get snagged by a UK government sensitive about bad publicity ahead of a general election, said analysts on Monday.
Ian Lang, president of the Board of Trade, will be reluctant to wave through a merger that could mean large scale job losses, upsetting the ruling Conservative Party's re-election drive in clear view of an election that must be held by May 1997, they said.  
Although analysts expect Britain's competition authority, the Monopolies and Mergers Commission, to approve the merger -- providing Bass agrees to certain conditions -- the final decision to let the deal go through rests with Lang.
""Clearly there is a very strong element of politics. And it is certainly more subject to politics than the last decision on S&N (Scottish & Newcastle ) for Courage,"" said Nikko analyst Dermott Carr.  
Former Trade and Industry secretary Michael Heseltine, accredited with nodding through S&N's acquisition of Courage from Australian brewer Foster's 18 months ago without an MMC referral, was operating mid-way through the Conservative Party's term in office and his stance on competition policy is widely viewed by analysts as more laissez-faire than Lang's.
Earlier, Britain's Department of Trade and Industry, said it had decided to refer Bass' proposed merger with Carlsberg-Tetley to the MMC for investigation. An MMC report is due by March 24.  
""I think politics will enter into this. They will be very lucky to get a decision by March 24 and the government will be in no hurry to decide before the election,"" said Stephen Cox, campaigns manager for the Campaign for Real Ale (CAMRA).
CAMRA wants to see the deal blocked because government undertakings imposed on S&N for its acquisition of Courage to go ahead have not improved customer choice in the pubs or led to lower beer prices, said Cox.
Analysts however expect the Bass deal to go through in some form, reflecting growing competition in the industry and brewing over-capacity.  
""We are confident that more jobs will be safer at both companies if the merger goes ahead than would otherwise be the case,"" said a Bass spokeswoman.
Analysts said they expect the MMC to require Bass to sell about 1,000 of its pubs, it currently owns about 4,200, and to cull its brand porfolio. The requirement to sell pubs may include a selective disposal programme in areas of particular geographic dominance.
A combination of these two requirements would reduce Bass' market share to around 35 percent from about 40 percent if the deal was allowed to go ahead unconditionally.
""How many they will be prepared to sell really does depend on what they (Bass) think the EC is going to come out with,"" said Carr. The European Commission has yet to decide whether British brewers should be allowed to keep the tie -- in other words brewing beer and requiring its own pubs to sell that beer.
""If the EC says they can't keep the tie then the pubs are clearly worth less. So Bass might get a better price for them now if they believe we are at the top end of the pub cycle,"" added Carr.
-- London Newsroom +44 171 542 6437
",47
"Gareth Davies, chief executive of British cigarette maker Imperial Tobacco, which de-merged from conglomerate Hanson in October, said on Thursday it was difficult to see growth in Britain, although it hoped to make this up by expansion in the Asia- Pacific region.
""In Britian it is difficult to see the market growing given the punitive taxes. We are likely to see continued strong growth, though, in the Asia Pacific area of the world,"" he said.  
Earlier, Imperial posted profits of 303 million stg from Britain in the year ended September 28, unchanged from its 1995 level but profits from overseas grew 55 percent to 70 million.
Britain's Chancellor of the Exchequer, Kenneth Clarke, announced an increase of 15p on a packet of 20 cigarettes in his November Budget. After a similar rise in 1995, British cigarette sales fell by 2.5 percent to 81 billion.
Davies said he expected the same sort of fall again. He said the latest tax rise would fuel smuggling by widening further the gap between taxes in Britain and mainland Europe.
",47
"Brewer to leisure group Whitbread Plc should report a 10 percent rise in first half earnings on Tuesday, kicking off the reporting season for drinks companies with a rosy picture of consumer spending on the high street this summer.
Analysts estimate pretax profits for the six months to the end of August in a range of 168-175 million, against 155.7 million last time.
Dividend forecasts range from 5.9 to 6.24p, up from 5.75p.  
""It's been a good performance in the summer. Consumer spending has picked up and on the beer side, they moved to higher margin premium beer. And you will see their acquisitions adding some benefit,"" said Ron Littleboy, analyst at Nomura.
Whitbread acquired health and sports club group David Lloyd Leisure for about 200 million stg and chain of 16 Marriott hotels in Britain for some 185 million in August 1995.
""If there is a surprise, it is probably on the upside and if that is going to come from anywhere, it would be on the hotels side,"" said John Beaumont, analyst at Merrill Lynch.  
The Whitbread hotel company includes about 130 budget Travel Inns, where new openings are running at a rate of about  one every two weeks, and Marriott hotels.
""The main growth will come on retail and leisure and what will pull them back is their leased pub side,"" said Littleboy.
WHitbread manages about 2,200 pubs mainly on 20 year leases.
The restaurant and leisure division includes TGI Friday, Pizza Hut, 50 percent owned by Pepsico, Costa Coffee, Thresher and Beefeater. Whitbread Inns, the managed pubs side of the business, includes Brewers Fayre which leads the casual-dining out sector.  
The company announced an agreed 133 million stg bid for Pelican Group of cafes in July -- including Cafe Rouge and Dome urban, French-style bistros -- which the company said would not contribute to earnings this financial year.
""One of the main variables that influences our future profit estimates is how quickly will they be expanding on the leisure and pub side,"" said Beaumont.
""And provided the company is still fairly sanguine on the roll out programme for these concepts, that will gives us a lot of reassurance.""  
Some analysts are also keen to get a view from the company about the impact of a minimum wage for its workforce on its earnings -- the opposition Labour Party widely expected to win the forthcoiming general election has pledged it will introduce a national minimum wage.
Whitbread shares rose 10p to 729p in early trade Friday, as positive notes from analysts reached their clients ahead of the first half results. The stock set a high for the year of 757p in April. The consensus estimate for EPS, taken from 25 brokers polled by Reuters, is 47.40 for 1997, rising  to 52.30 in 1998.  
The company currently shows a 9.84 percent return on equity, against the leader in the FTSE 350 breweries and pub sector Aberdeen Steak with 99.68 percent. Rival Bass has a return on equity of 10.44 percent.
-- London Newsroom +44 171 542 6437
",47
"Family controlled food and retailing group Associated British Foods reported a 15 percent increase in its full year profits on Monday, but chairman Garry Weston sounded a wary note when asked about the year ahead.
""I never play hostage to fortune. I've always been cautious,"" said Weston in an interview. ""It's a very bad time to forecast anything with two elections coming up -- in the United States and Britian. We have no idea how they will impact on us.""  
ABF posted pretax profits of 430 million pounds ($704.1 million) for the year ended September 14 whereas most stockmarket forecasts had centred on 415 million.
Worldwide sales were up 17 percent to 5.707 billion. Profits were driven by an especially strong performance from the company's retail operations in Britain and Ireland. Operating profits rose 25 percent to 69 million, with the company's supermarkets in Ireland further increasing their market share.
Primark, the women's textile chain, included results from One Up stores bought from Storehouse last year.  
""We got the fashion right. Primark has been refurbished and that improved its buying power and gave it more notice on the high street."" In the second half Primark was more in tune with public demand, said Weston.
ABF's food manufacturing and processing operations in Britain showed an 8.0 percent sales growth to 3.11 billion pounds and a 12 percent profits increase to 282 million.
However, operating profits from British Sugar fell to 183 million. British Sugar sales are limited by European community quotas and the renewed strength of the pound made imports from mainland Europe look cheaper in the second half.  
AFB's profits from its Australia and New Zealand operations increased by 20 percent to 38 million.
AC Humko, acquired from Kraft Foods in September 1995, chipped in its first full year of profits to ABF's north American business to help turn a 3.0 million loss in 1995 to a six million stg profit.
Analysts were surprised by the stronger than expected performance from ABF's milling and baking business where margins improved strongly. ABF owns the Twining group of companies, Burtons Biscuits, Allied Bakeries and an animal feed business.  
""They were good numbers a bit ahead of our figures, but it will be hard to match that in the current year,"" said Michael Bourke, analyst at Panmure Gordon. ""The green pound rate is likely to mean a reduction in British Sugar profits and inflation in food prices looks very subdued,"" he said.
ABF shares rose 8p to 426p on the news.
Net cash held by the company rose by 196 million to 797 million at September 14, after spending 242 million on its assets and acquisitions during the year.
The company is keen to expand in the Far East and although ABF's history is one of expansion by organic growth if the oppurtunity arises it will make acquisitions, said Weston.
""We have been picking up acquisitions and if opportunities come along for something big then we will take it,"" he said.
During the year ABF acquired or formed businesses in Norway, Indonesia, China and the United States. ($1=.6107 Pound)
",47
"Peter Jarvis, chief executive of brewer to leisure group Whitbread Plc, said the company is seeing fairly strong growth in consumer spending on leisure.
Jarvis said although consumer spending has been positive for the last 12 months, it was masked somewhat by expenditure on the National Lottery which took out 5.0 billion stg from the economy last year, equal to about 5.0 percent of total leisure spending in Britain.
""So all of the natural growth there would have been last year was missing,"" he told Reuters in an interview.  
""So the feelgood factor was not there and the main reason was the diversion of expenditure into the Lottery. But the comparables now don't have the Lottery effect in and we have got back into quite strong growth in leisure expenditure,"" he said.
The improvement was evident across all areas of its activity although Jarvis was especially encouraged by the hotels business.
""The hotel market in this country is very buoyant. The growth in expenditure in hotels far outstrips growth in new accomodation. And that is about more travel, more tourism, more retired people, more affluent retired people.""  
Whitbread acquired health and sports club group David Lloyd Leisure for about 200 million stg and a chain of 16 Marriot hotels in Britain for about 185 million last August.
""We are making very good progress in our hotel business. Our profits are substantially ahead of last year and our customers are recognising the improvements that have been made to our hotels through joining up with Marriot,"" he said.
""The performance of the Marriot hotels we bought has improved against last year as well as the performance of Whitbread hotels that have been transferred to Marriot.""  
Whitbread opened about 45 new budget hotels called Travel Inns during the year to March 2 and Jarvis said they this part of the hotels arm was performing well. ""The occupancy levels we are getting in our budget hotels now are higher than they have ever been since we started out in this business,"" Jarvis said.
He said the Marriot company would contribute substantially to the earnings of Whitbread, even after interest payments.
""If we paid 185 million for Marriot, and you can work out the interest, I am saying we will make many millions beyond that in the current year. And this is the first full year we have had Marriot,"" he said.  
""Next year David Lloyd will be in that kind of position and I think that Pelican will be as well,"" he added.
Whitbread announced an agreed 133 million stg bid for the Pelican Group of cafes in the UK in July.
""This year if you take Marriot and you take our Travel Inns we will make broadly as much money in hotels as we make in beer,"" Jarvis said.
The beer company reported operating profit of 44.9 million stg in 1995/96, a rise of some 4.5 million on the previous year, but just 15 percent of the company's total operating profit.  
Whitbread's restaurants and inns division, which includes Marriot hotels, reported trading profit of 88.3 million up from 66.0 million.
The company is due to report half-year results on November 5.
",47
"British clothing retailer Burton on Thursday showed off a 54 percent full year profit rise, breaking all stockmarket forecasts, and said shoppers were happier now than at any time since the early 1990's.
Pretax profits rose to 151.6 million pounds ($249 million) in the year to August 31 from 98.6 million on sales up 7.1 percent to 2.0 billion. The group raised its full-year dividend by 27 percent to 2.8 pence a share.
Chairman Sir John Hoskyns said all the group's divisions had reported an increase in full-year profits.
""This performance reflects the success of the trading strategies and continued brand building in every division,"" he said in a statement.
The retailer has had a long struggle to boost profit margins in what was until recently a depressed retail market. But the group has achieved a major turnaround.
Finance director Andrew Higginson said there was scope for more improvement in margins, although at a slower pace.
""There is still some scope for margin improvement this year, but be it at a lower pace. It will ease back somewhat from where we are at the moment,"" he told Reuters.
Higginson described the current trading environment as better than anything seen since the early 1990's, although he said it was certainly not booming.
Burton's Debenhams department store chain produced a 21 percent increase in profits to 102.8 million pounds. Hoskyns said the department store was set for a 20 percent increase in space over the next four years.
All the group's fashion stores, including Top Shop and Dorothy Perkins, made profits. Burton Menswear and Principles both moved back into the black after making losses last year.
Burton's shares rose on the better-than-expected results. The stock stood 1.5 pence higher at 146.5.
""The figures were at the top end of forecasts and we are still positive on the stock,"" said one senior trader.
Analysts had expected pre-tax profit of between 139.0 million and 149 million pounds.
Burton has just moved into home shopping via the acquisition of mail order group Innovations in August and Racing Green in October. But Higginson said the main focus of the group would remain with its stores.
""At the moment the focus is on the core retail division where the key oppurtunities lie,"" he said. ""Home shopping is a medium-term project which will kick in in two to three years time."" ($1=.6093 Pound)
",47
"British food producer Northern Foods Plc posted virtually flat profits on Wednesday, held back by the collapse of world prices for its dairy products.
""The dairy business continues to be affected by the decline of commodity markets compared with a period of exceptionally high prices last year,"" said chairman Sir Christopher Haskins.
Profits rose one percent before tax and exceptional items to 57.8 million pounds ($97 million) for the six months ended September 30. Northern Foods shares rose 2-1/2p to 198p.
""There is no immediate prospect of commodity prices improving in the second half. We are also very driven by the strength of sterling against other currencies,"" Jo Stewart, head of Northern's prepared foods division said in an interview.
At a news conference Haskins repeated his plea for Britain to join a single European currency which would remove one swing factor in its profits. ""If there is one company that thinks EMU is a good idea it is us.""
Prices on the world commodity markets for butter, skimmed milk and bulk cream were off some 20 percent on last year's levels. Weakening world demand for dairy products and the rise in sterling against the other major European currencies was not offset by a reduction in Northern's cost of milk.
Eden Vale Food Ingredients, which sells milk products on world commodity markets was the hardest hit of Northern's divisions. The company estimated the collapse in commodity prices cost it about 6.0 million pounds.
Its dairy business posted operating profits of 21.6 million pounds, down 27 percent, reflecting a sharp deterioration in dairy commodity prices.
Competition in supplying milk to supermarkets remained intense but the recent erosion in prices should stop soon, said Stewart. ""The profitability of that sector is now such that people are losing money and we expect the price erosion to stop,"" he said.
Northern now supplies about 33 percent of all milk in supermarkets, having lost about two percentage points of market share in the first half. Most British consumers get their milk from supermarkets where it costs about 28p, 10p less than a pint delivered to the doorstep.
On Tuesday rival Unigate said its sales of milk to supermarkets fell 2.4 percent in the first half, while dairy profits fell 2.9 million stg to 17.6 million due to lower prices for butter and milk powders, which Unigate estimated cost it about 4.0 million in the period.
Profits from Northern's prepared foods division were up 24.2 percent at 43.1 million, driven hardest by the grocery sector which benefitted from a full six month contribution from Green Isle which sells the Goodfella pizza brand.
But consumers' concern over a link between mad-cow disease and a similar brain wasting disease in humans hit sales of convenience foods and meat pies. Northern estimated the beef crisis cost it about 3.0 million pounds in the first half.
""We have seen a significant swing in our products offered to M&S (Marks and Spencer Plc). Thirty-three of our thirty-five new lines will have no beef in them,"" Haskins said.
He said total consumption of beef was off 20 to 30 percent since fears first surfaced over the spread of mad-cow disease.
""We have seen no material recovery in consumer demand for beef, we would be glad if it stabilised,"" said Haskins.
($1=.5950 Pound)
",47
"Regional brewer Marston, Thompson & Evershad Plc on Tuesday reported an 8.5 percent decline in sales of its key brand ale Marston Pedigree in the first half of the year due to the rising popularity of so-called nitrokegs.
But the ale increased its market share by one percent as its competitors real ales suffered even more. Overall sales of the company's own brewed beers rose 0.5 percent and it launched its own nitrokeg, Marston's Bitter Smoothbrewed, in the Spring.
""Nitrokeg is having quite an effect in terms of market share,"" said chief executive David Gordon in an interview.  
The company's shares were 5p lower at 275p. But the country's two largest brewers -- Scottish & Newcastle and Bass -- who boast a huge portfolio of brands, saw their shares rise.
S&N shares were up 6p at 667p after announcing an unexpectedly strong 26 percent rise in its half year profits on Monday. Unlike traditional beers, nitrokegs do not undergo a secondary fermentation in the cask.  
Brewers have scurried to launch their own nitrokegs after the runaway success of Bass-owned Caffrey's, which sold fast in the scorching 1995 summer.
Caffrey's, served chilled, has taken traditional real ale drinkers away from warmer ales and also attracted premium lager drinkers.
Earlier Marston, Thompson reported a 5.3 percent increase in its pretax profits to 14.7 million stg in the half year ended September 28, driven by strong food and liquor sales in its managed estate.  
Food sales were up by 18.9 percent and now account for 30.8 percent of total sales in its managed pub estate. The company's managed estate of 242 pubs made operating profits of 9.4 million up 12.2 percent.
""There is no evidence that demand is dropping. The average spend per head is seven pounds for food and the retired elderly and the young can afford to do that maybe two or three times a week,"" said Gordon.
""I feel there is a touch more consumer confidence,"" he said, adding conditions were better now than for six or seven years.
In a separate statement, Belhaven Brewery said it managed to increase sales of Belhaven Best despite tougher competition from other nitrokegs. Belhaven shares were unchanged at 188p.
-- London Newsroom +44 171 542 6437
",47
"Britain's largest brewer Scottish and Newcastle Plc announced a 26 percent increase in half-year profits to 195.1 million pounds ($328 million) on Monday and said the second half of the year had started positively.
The company's acquisition of Courage from Australian brewer Fosters last year helped give a 67 percent push to 89.9 million pounds in trading profits from its beer divisions.
""Overall, I think our 10 percent dividend increase, at the top end of the (forecast) range, is a measure of our confidence for the second half of the year,"" chief executive Brian Stewart told Reuters in an interview.
The dividend rise to 7.21 pence per share beat most analysts' forecasts which were centred on a 7p payout.
""General trading conditions are at least as good as they were this time last year and there has been a bit of an improvement in mainland Europe,"" he added.
The company's shares rose 7p to 647p. ""The results were well ahead of our expectations. The really surprising number was the one that came in from beer. We were very impressed,"" said James Wheatcroft, an analyst at Panmure Gordon.
A Reuter poll of analysts produced a forecast range of 178 to 198 million pounds for pretax profits.
Beer sales fell by just over one percent compared with the first half of 1995 which was bolstered by outstanding summer weather, said the company. Despite this, S&N said sales of John Smith's, the country's leading ale, were up 17 percent and sales of Foster's lager grew 6.5 percent to its highest ever volume.
Stewart, however, bemoaned the failure of Chancellor Kenneth Clarke to reduce excise duty on beer in his Budget last week.
Profits from its S&N's Center Parcs activity holiday resorts were down 11 percent at about 44 million pounds due to the weak economic background in mainland Europe and the cost of improving its facilities in the Netherlands and Belgium.
The company sold its smallest village at Lommerbergen, Netherlands, and had to close its De Eemhof parc in Belgium while it upgraded the centre.
""We would expect Center Parcs to be much more on the front foot in the second half and we would quite clearly spell out that conditions in Germany are now more positive,"" said Stewart.
Profits from the company's pubs grew 8.2 percent to 87 million pounds, driven by its managed outlets where like-for-like food sales across the estate grew by 13 percent as the company put more restaurants into its premises.
The company will open 35 new Chef & Brewer pub restaurants by the end of the year and push the Barras & Co community pub brand very strongly, said Stewart.
""We will really be pushing down the accelerator on our community pubs Barras. Our focus has previously been on the high street or city centre and these community pubs really have a great deal of potential,"" he said.
Profits from S&N's tenanted pubs fell some nine percent to 11.8 million pounds after the company was forced to sell off outlets to comply with a government requirement, imposed as a condition of S&N's acquisition of Courage.
($1=.5953 Pound)
",47
"John McGrath, chief executive of drinks and food company Grand Metropolitan, said the company should be able to return cash to shareholders in 1998 when its debt will be at least one billion pound lighter.
""By early next year our debt should be down in the low to middle two billion (stg) area and interest cover will be seven times or thereabouts. But we cannot afford buybacks at the moment. They depend entirely on our ability to sweat our assets and our ability to throw off enough cash in the next financial year.""  
Market forecasts for 1997 pre-tax profits centre on a range of 1.04-1.06 billion stg for the full year to September 30, 1997 with many brokers cutting their estimates as sterling started its run up against the dollar in May. Estimates for GrandMet's 1996 pretax profits are bunched around the 980 million stg mark.
""We are really being hit by the dollar at the moment. At a rate of 1.60 it will hit us by about 16 million pounds a year, assuming this rate continues into 1997,"" McGrath said.
The dollar stood at 1.493 against the pound on May 1 before climbing to its 1.638 level today.
Pillsbury, GrandMet's U.S. foods business and Burger King generate about 60 percent of group earnings in dollars.
At GrandMet's spirits arm International Distillers and Vitners price rises have ""stuck very well, probably better than they have done in a decade. Volumes are also up and we have had a good year in the U.S.""
""I think what will surprise the competition will be our performance in Europe,"" he said.
-- London Newsroom +44 171 542 7717
",47
"Derek Pretty, finance director of troubled U.K. discount supermarket chain Kwik Save, said on Thursday a radical shake-up of the group, including the closure of 107 stores at a cost of 87.5 million stg, was the best way to ensure its future.
""We researched opportunities in other areas and we reviewed, among other options, mergers. We looked at whether we should go back to being a limited range discounter, with much lower choice, and little in terms of chilled food,"" he told Reuters.
""But that would have meant losing nine million customers.""  
He said the store closure programme would involve less than 200 job losses, as 90 percent of the staff would be redeployed in Kwik Save's remaining 900 stores.
About 1,900 work in the 107 stores to be shut. ""Yes, we are confident that the provisioning is solid and appropriate. Anything more than that would have put us in the realms of big baths and contigency buckets.""
""We have looked at this particularly carefully, the days of doing big bath provisioning have gone. We have looked very specifically at the stores we plan to close. We are confident it is the proper provision to take us forward."" he said.  
At a news conference chief executive Graeme Bowler said the company would introduce a new range of chilled foods, health and beauty products and over the counter medicines as well as widening its existing product range.
""We are going for width rather than depth in brands,"" he said. Kwik Save will have 100 own-label products in its stores from the spring 1997.
""We are not moving away from discounting prices. It is our core proposition and we will not dilute it,"" said Bowler. ""We are not trying to be a mini-version of someone else, we want to be ourselves.""  
""Kwik Save made its reputation because it sold quality products cheaply. We will not engage in selling cheap products cheaply,"" Bowler told reporters.
Stores will also be upgraded after research conducted by outside consultants Anderson Consulting, initiated in February, showed customers wanted stores to be more welcoming and easy to use, said Bowler.
Kwik Save would need to invest heavily in technology, where it was about two to three years behind the competition, said Bowler, so that, for instance, debit cards could be used at all its tills and stock levels could be better controlled.  
He acknowledged that the group had failed to invest enough in upgrading the fabric of its stores in previous years.
The new-style Kwik Save stores will be rolled out in geographical clusters over the next three years at a cost of some 300 million stg, funded from cost savings.
The 107 stores will be closed progressively next year.
Research had identified the need to beef up the management team and as a result Kwik Save has appointed a group marketing director and a supply chain director, and planned to appoint a new buying director, Bowler said.  
He stressed the underlying performance of the group remained strong, generating sales of seven billion stg over the last two years despite fierce price pressure from superstores, and a return on capital of 20 percent in line with the industry average.
-- London Newsroom +44 171 542 6437
",47
"Drinks, food and retail group Grand Metropolitan Plc will post a strong rise in its underlying business performance in its full-year results on Thursday driven by its North American foods business Pillsbury, but it also stands to take a huge 522 million stg loss on disposals.
""The growth will really come through from Pillsbury, particularly on dough and pizza,"" said Goldman Sachs analyst Colin Davies. Analysts forecasts for pretax profits range from 948 to 999.0 million stg, before the loss on disposals.  
GrandMet posted pre-tax profits of 920 million stg last year. Dividend forecasts are centred on 15.8p, up from 14.9p.
The loss on disposals is made up of 265 million stg of goodwill written off on the sale of its optician business Pearle, a 36 million stg hit on the disposal of William Hill and Mecca to leisure group Brent Walker and a 14 million stg loss on the disposal of its Erasco food business in Germany, to the Campbell Soup Company.
At the time of the Erasco sale GrandMet said it would take a further 207 million stg of goodwill written off on the sale of a batch of European foods businesses.  
The sell-off is designed to enable GrandMet to focus in Europe on its major international brands - Pillsbury,  Green Giant, Haagen-Dazs and Old El Paso.
Aside from the exceptional charges analysts see a 26 percent profit improvement from GrandMet's food business to an estimated 456 million stg.
Pillsbury has achieved prices rises and gained market share since the first half, GrandMet said in September.  
Analysts expect Pillsbury to contribute about 274 million stg of the estimated 456 million while Pet, producer of Old El Paso and Italian foods and soups acquired in January 1995 for some 2.0 billion stg, is expected to chip in about 160 million.
Sector analysts also anticipate a near 15 million stg improvement in profits to 470 million from the company's spirits arm International Distillers and Vintners (IDV). ""We expect GrandMet's drinks business to do better than either Allied Domecq or Guinness,"" said Merrill Lynch, analyst Mark Puleikis.  
""They have been a lot more proactive and aggressive in their advertising expenditure over the last two years and they are more exposed to the vodka category which is standing them in good stead,"" he said.
",47
"Larry Pillard, chief executive of British sugar and starch producer Tate and Lyle, said on Wednesday the company's beleagured North American unit Staley should benefit from improved market conditions this year.
""Conditions have reversed this year so that corn milling companies can divert some of their excess capacity into ethanol and that could tighten up the market a bit,"" he said.
Wet corn miller Staley posted a 50 percent fall in earnings because of a record increase in maize costs, dragging down group pretax profits for the year by some 35 million to 276.3 million.
",47
"Britain's largest brewer Scottish & Newcastle Plc will see more benefit from its Courage brands in its half year results due on Monday, but its holiday village business Center Parcs will hold it back, analysts said.
""The company will see an improvement from a full contribution at Courage, but what is really holding it back is Center Parcs and there could be a worry on the currency with the recent strength in the pound,"" said Nikko analyst Dermott Carr.
Analysts forecasts for pretax profits range from 178 to 198 million stg up from 154.5 million last time.  
Dividend forecasts centre on 7.0p. Brewing is expected to contribute some 80 million stg, with 45 million of this total anticipated from Courage. Courage made just 9.0 million stg in operating profit, on turnover of 298.9 million stg, to overall group profits in the first half of 1995.
S&N acquired Courage from Australian brewer Foster's in August, 1995 to create Britain's largest brewing group in a deal that cost about 550 million stg. Since then S&N has quickly set about reducing its brewing capacity by some 1.5 million barrels a year, initially by closing two breweries and shedding some 1,600 jobs.  
John Smith's Courage is now Britain's leading ale brand.
The group's Center Parcs holiday resorts are expected to suffer from continued weak consumer leisure spending in Belgium, the Netherlands and Germany. Center Parcs made operating profit of 82.0 million stg in the year to April 28, 1995 down 2.1 percent on turnover of 365.3 million. S&N's new village at Bispinger Heide in Germany was opened against a very weak economic background in July 1995 and the cost of opening was higher than the company expected.  
Pontin's, S&N's other leisure brand, made trading profits of 3.6 million, down from 4.1 million due to the sale of four sites and major refurbishment work at two others.
The performance of its Center Parc villages in the Netherlands and Belgium were adversely affected by a lack of consumer confidence and cut price competition from operators and it responded by investing heavily in those countries.
Analysts expect this trend to have carried on into the first half of the year, forcing the leisure division to report profits down some 5.0 million at 45 million.  
The company has three Center Parcs in Britain at Nottingham in the Midlands, East Anglia and Longleat, in the west of England. It owns two in France, one in Germany, two in Belgium and six in Holland.
However, S&N's retail division, which includes the 1,600 strong chain of Chef & Brewer restaurants, should see trading profits improve by increased investment aimed at rebranding and lifting the image of some outlets.
The company's managed pub estate has been rebranded to include pub-cafe bars like Rat & Parrot and entertainment pubs like Big Hand Mo.  
The consensus of analysts forecasts for profits from the retail division rests at 88 million stg, up some 8.0 million on the first half of 1995. The division includes an estate of 740 tenanted and about 1,850 managed pubs as well as Chef & Brewer.
The company's shares have outperformed its peers by about eight percent since February, but started underperforming the FTSE100 index by some six percent since late September.
The shares were up 142p at 642 on Friday from their 500p close on January 3. Return on equity is currently running at 5.62 percent, half its 11.32 percent level in 1995, against 10.44 percent currently for Bass.  
Operating margins have fallen to 12.27 percent from 15.46 percent in 1995.
A Reuter poll of 23 brokers estimates produced a consensus estimate EPS of 44.8 for the year ended April 28, 1997 rising to 49.5 for year end 1998.
-- London Newsroom +44 171 542 6437
",47
"Scotch whisky maker Highland Distilleries posted a 14 percent fall in its full year profits on Monday, saying sales of its brand leader The Famous Grouse blend fell in Britain and the home market remained tough.
""The UK continues to be a very competitive market. However there are indications that prices are moving up with more emphasis being given to brand building activities,"" it said.
Pretax profits fell to 37.1 million pounds ($58.43 million) in the year ended August 31, 1996 down 14 percent. Before reorganisation costs, profits were flat at 36.5 million pounds, below the market forecast range of 39.2 million to 42.5 million. Highland's shares fell 10p to 332p in early trade.
The British market for Scotch whisky fell by four percent, despite a cut in excise duty in the November 1995 Budget, while sales of The Famous Grouse fell by three percent.
""These results illustrate the problem Highland has got; the fact it still makes about 60 percent of its profits out of Famous Grouse sales in the UK where the market continues to be very competitive,"" said BZW analyst Charles Winston.
In the England and Wales off trade, which represents 65 percent of the home market, the Famous Grouse market share rose 0.5 percent to 9.3 percent.
However, sales in the on-trade or in pubs and restaurants remained tough and The Famous Grouse share fell by one percentage point. But overall market share for The Famous Grouse rose slightly to 13.3 percent.
Overall export sales of The Famous Grouse were up five percent and sales in Europe rose 13 percent, with strong performances in France, Greece and the Netherlands, although conditions were more difficult in Asia.
Single malt whiskies continued to grow both at home and overseas with Highland's key brands, Highland Park from Orkney and Bunnahabhain from Islay, up 12 percent on a global basis.
Profits from associate Robertson & Baxter fell nine percent to about 10 million pounds mainly because of increased advertising behind the Cutty Sark brand.
Sales of new and mature whiskies to blenders have grown considerably with new filling orders for the calendar year 1996 up by 31 percent.
The interest charge rose by 2.8 million pounds mainly due to the cost of carrying a 26 percent shareholding in distiller Macallan-Glenlivet Plc from January 1996.
Highland and Suntory, Japan's leading Whisky distiller, already owned 51 percent of Macallan but decided in July to pay up to 88 million pounds to take control of the remaining 49 percent.
Highland argues that the Macallan malt whisky brand has substantial growth potential.
Highland reported an exceptional charge of 3.0 million pounds in the year to cover reorganisation costs at Macallan and Macallan bid defence costs. ($1=.6350 Sterling)
",47
"America Online Inc.'s new flat-rate pricing plan and moves to meet spiraling subscriber demand suggest it is on track to become a major media player, comparable to broadcast or cable TV networks, analysts said Tuesday.
Analysts cautioned, however, that underlying this success loomed a real threat that the online network's capacity to serve its more than 7 million subscribers could soon be overwhelmed.
They warned that the additional demand on AOL's network generated by the company's offer of unlimited usage for $19.95 per month imperilled its near-term capacity to handle demand.
If only a small fraction of AOL's millions of subscribers were to take up the company's offer of unlimited access and remain connected to the service for long periods of the day, the service would quickly grind to a halt, detractors said.
Clearly, investors are betting the company can surmount such challenges, as AOL has done repeatedly in mushrooming sevenfold from less than 1 million users three years ago.
In recent weeks, the stock's momentum has revived, doubling from a year-low of $22 to reach $44 earlier Tuesday. An afternoon sell-off caused the stock to fall back to $37.50. down $2.375.
""The market appears to have taken a very bullish view of the new pricing scheme,"" said Arthur Newman, an analyst with brokerage firm Gerard Klauer of the stock's recent run-up.
""But you have to balance this with the realisation that the more time users spend online, the higher the cost of adding capacity"" requiring new equipment investments, he said.
AOL officials have warned repeatedly that they expect the next two quarters to be transitional ones, both operationally and financially, as the company seeks to gain revenues from advertising and commercial transactions instead of mainly subscriber fees.
But Abishek Gami, an analyst with Nesbitt Burns Securities, said he believed AOL had proven its capacity to weather the pressures of the explosively growing online medium.
In particular, Gami said AOL has measures in place to limit excessive connection times by users who now have little incentive to disconnect and free up network time for other users.
""Will this demand on its network be enough to destroy the company? I think not,"" said Gami. ""What the company will do is build out to meet demand and stage a comeback,"" said the analyst.
""Anyone who is writing this company's obituary is going to be disappointed,"" agreed Gary Arlen, an online industry analyst at Arlen Communications Inc.
AOL said Monday it was greatly expanding its online network and planned to spend $250 million by next June to double its network capacity and improve service.
",9
"MCI Communications Corp. said Monday it reached a 10-year deal with NextWave Telecom Inc. that thrusts MCI into the top tier of U.S. wireless communications providers.
However, analysts said that while the NextWave deal should allow MCI to compete with other wireless industry heavyweights like AT&T Corp., and the Sprint Spectrum and PCS PrimeCo joint ventures, MCI's wireless investment remains a cautious one.
MCI has opted to function as a major reseller of wireless services instead of paying the hefty price required to buy cellular operating licenses and to build the network infrastructure needed to offer the new services.
Under terms of the NextWave deal, MCI will offer wireless services to more than 110 million potential customers in 63 U.S. cities, including 29 of the top 50 metropolitan markets.
Washington-based MCI said it will purchase from NextWave over the next 10 years at least 10 billion minutes of capacity to offer wireless personal communications services.
MCI also said it will plug the MCI network into NextWave's, enabling MCI to offer wireless services as a seamless part of its overall package of long-distance, local access, Internet and data communications services.
""This agreement with NextWave establishes an immediate nationwide PCS footprint for MCI and represents an important next step in MCI's wireless strategy,"" said Whitey Bluestein, vice president for MCI wireless strategy and development.
""This is the first full interconnection agreement of its kind and brings new competition to the wireless marketplace,"" he said, noting that with full interconnection, MCI does not need to own wireless facilities.
Personal Communications Services (PCS) represent a new generation of cellular communications services, allowing customers to send both voice and data transmissions over wireless telephones.
Terms of the deal were not disclosed, but the MCI official said the price per minute would be ""competitive"" with expected rates for wireless phone services over the coming years.
As part of the deal announced Monday, NextWave selected MCI to provide telecommunications and other services supporting the development and ongoing operations of its personal communications services system, MCI said.
NextWave, which is based in San Diego and New York, was founded only a year ago by Allen Salmasi, a former executive at Qualcomm Inc., developers of the wireless communications technology NextWave plans to use on its proposed network.
NextWave is backed by a host of blue-chip venture capital funds and consumer electronics makers who have chipped in a total of $450 million in private financing. The company also is planning an initial public offering of stock.
The MCI deal will help underpin the financial future of debt-laden NextWave, which was the largest bidder in the U.S. Federal Communications Commission's auctions for ""C-band"" wireless radio spectrum held earlier this year.
NextWave paid $4.7 billion for its 63 city licenses. Among the major markets where Nextwave has won the chance to operate are New York, Los Angeles, Washington D.C., Boston and Denver.
That bidding process, and additional auctions that coincidentally got under way in Washington Monday, are designed to allow entrepreneurial companies a shot at competing in the emerging markets for wireless communications services.
For MCI, the deal enables it to expand quickly into the rapidly growing market for wireless personal communications services after having missed several chances to enter the business in prior years.
In early 1995, MCI dropped out of an earlier round of ""big-league"" auctions for PCS licences after the bidding became too rich for its taste.
Previously, MCI had flirted with the acquistion of Nextel Communications Inc. as a route into the wireless arena.
While impressive sounding, analysts noted that MCI's committment to buy an average of one billion minutes per year over 10 years from NextWave represents a conservative bet on the growth of the wireless phone market.
One billion minutes of air-time amounts to a fraction of current cellular phone use, which is estimated to be running at about 40 billion minutes this year, based on industry calculations of roughly 36 million subscribers.
MCI said the NextWave agreement is a model for additional agreements it expects to sign with other wireless providers as part of its wireless interconnected network strategy.
""This was MCI's strategy all along,"" said Jeffrey Kagan, an Atlanta-based telecommunications industry analyst.
""Reselling service was how they became a heavy hitter in long distance in the first place,"" Kagan said. ""What their plan is, is to resell service from other providers and build networks where they see the need to do so,"" he said.
Industry analysts expect to see ferocious price-cutting among wireless telephone service providers as competition heats up, and the latest deal will make it even more intense.
MCI's stock gained $1.25 to close at $26.75 on the Nasdaq.
",9
"Computer Associates International Inc., a leading maker of software for businesses, said Monday it agreed to pay about $1.2 billion for Cheyenne Software Inc.
Computer Associates, the largest independent maker of business software for mainframe computers, said it will offer $30.50 in cash for each share of Cheyenne. Cheyenne's stock jumped $7.625 to $30 in afternoon trading on the American Stock Exchange.
Computer Associates' stock gained 62.5 cents to $63.375 on the New York Stock Exchange.
While investors applauded the announcement, industry analysts said they were puzzled by what they viewed as the expensive price Computer Associates agreed to pay.
""This is departure from their standard practice,"" said UBS Securities analyst Joseph Farley. ""They are paying more than they ever have. There's clearly some synergies,"" he added. ""The question is whether those synergies are worth seven times sales.""
Cheyenne reported revenues of $174.1 million in its fiscal year ending June 1996.
The deal, which has been rumoured for several months, has been unanimously approved by the boards of directors of both Cheyenne and Computer Associates, the companies said.
Roslyn, N.Y.-based Cheyenne makes storage management, anti-virus and communications software products designed to run on client/server networks in which personal computers are tied together in a network run by a larger computer, or server.
Computer Associates said Cheyenne's products will bolster its own systems management software offerings, which run on both client/server and mainframe computer networks. CA derives a majority of its revenues from mainframe software.
""We are extremely excited by the synergistic nature of this acquisition,"" said CA Chairman Charles Wang.
Computer Associates said it will fund the acquisition through cash balances and existing credit facilities.
""Cheyenne is the recognised leader in storage management solutions for the Windows NT and NetWare environments,"" Wang said in a statement. ""The addition of its product suite will strengthen our efforts in the desktop and LAN environments.""
Computer Associates said it intended to retain all of Cheyenne's employees. It is expected that Cheyenne will operate as a division of Computer Associates and will continue to support its current distribution channel strategy.
Both companies are based on New York's Long Island.
Earlier this year, Cheyenne successively waged an aggressive fight to fend off a $1 billion unwelcome takeover bid by McAffee Associates Inc, a rival maker of systems management and anti-virus software.
Since 1976, Computer Associates has grown through a campaign of approximately 60 acquisitions to become of the world's leading independent supplier of software.
Paul Mason, a software analyst with technology research firm International Data Corp. in Framingham, Mass., said the latest acquisition does not fit what he called ""the CA model, both in terms of acqusisitions and product strategy.
""It's hard to see where this fits in. If they were getting this at a great price, I could understand the deal,"" he said.
The companies scheduled a teleconference with Wall Street analysts Monday afternoon.
",9
"Iomega Corp. said Thursday it plans to apply its computer storage technology to handheld consumer electronics in a way that could lower the cost of saving and transfering data to such devices.
The reusable data storage system, to be known as ""n-hand,"" could be used in digital cameras, computer game devices, cellular phones and handheld personal computers known as digital assistants.
In cameras, for example, the technology could function as a removable ""digital film"" that would replace existing chemical photographic film.
""Our n-hand technology ... has the potential to change the way consumers use portable electronic devices,"" said Kim Edwards, president and chief executive of the Roy, Utah-based company, in a statement.
""We are bringing personal computer-like storage to portable devices,"" added George Meyer, Iomega's director of marketing for new business, in a telephone interview.
The n-hand disks are expected to be priced at less than $10 for a 20-megabyte disk, and could be available by the second half of 1997. Iomega said the n-hand disks are about half the size of a business card.
Several industry analysts said they believe Iomega's technology could help propel digital cameras into the consumer mainstream within a matter of years, by freeing users from the fixed capacity of existing flash memory storage and by substantially reducing the overall cost of such cameras.
A digital camera could store from 50 to 80 images on a single $10 n-hand disk, Iomega said, depending on image resolution. Consumers now pay hundreds of dollars for a flash memory card capable of holding the same number of images, it noted.
Jim Porter, a data storage analyst with market research firm Disk/Trend Inc. of Mountain View, Calif., said the Iomega technology could cut the cost of storing photographs by a factor of 20 times.
A Kodak digital camera costing $499 currently could be priced as low as $300 within a matter of years, he said, reflecting the elimination of more costly digital storage methods.
Iomega's plans pose a theat to makers of flash memory chips that are used to store digital information in such small electronic devices currently. Leading makers including Sandisk Corp., Intel Corp. and Toshiba Corp.
In addition, the Iomega system could help accelerate the current digital transformation of the camera industry, leading to a decline in revenues that cameramakers receive from conventional silver halide-based photo film and equipment.
""With 'n-hand' you have a digital camera that you can treat like a regular camera,"" Meyer said, referring to the replaceable nature of the Iomega high-density floppy disk system.
""This technology can make digital cameras much more competitive with regular ones,"" he said.
Besides lacking a low-cost removable storage medium, digital cameras offer inferior picture quality but image resolution is improving rapidly, analysts said. This could lead to explosive growth of the new cameras in coming years.
Shares of the company closed up $1.375 to $25.375 on active trading on Nasdaq. On Friday, Iomega's stock will begin trading on the New York Stock Exchange.
",9
"Computer Associates International Inc. is expected to unveil Monday a new Internet division that promises to save businesses from the headaches of seeking numerous vendors now needed to set up and manage a Web site.
The company, which manages Web sites for large corporate customers, also plans to sign up hundreds of thousands of small businesses to use the service whether they own computers or not, sources close to the company said.
In this ""community"" Internet service, neighbourhood businesses such as pizza parlours would contract with Computer Associates to establish an Internet presence, allowing customers to call up a shop's Web site to place an order.
Currently, a company wishing to establish itself on the the Internet is confronted with a maze of separate vendors from which they must buy the necessary hardware, software and consultanting services to put together the disparate elements.
The aim of Computer Associates' one-stop Internet service would be to shoulder all the messy technical responsibilities for customers, allowing them to focus on their own business.
""Computer Associates wants to ride the electronic commerce wave that is coming down the pike,"" said one source familiar with the CA Internet unit strategy. ""CA will provide a company the capacity for electronic commerce (on Web) sites in return for a revenue-sharing arrangement.""
Although not nearly so well known as Microsoft Corp. and other brand name PC software makers, Computer Associates is the world's top mainframe software supplier and the second largest independent software firm overall after Microsoft.
Launching the new business unit is one of several major announcements the company is expected to make at its three-day CA World conference that started Sunday in New Orleans.
In addition, Islandia, N.Y.-based Computer Associates has slated separate press conferences with Microsoft, Intel Corp. and Tandem Computers Inc. Monday and Tuesday.
Microsoft Chairman Bill Gates is scheduled to deliver a keynote speech Tuesday evening that is likely to centre on the further integration of Consumer Associates and Microsoft software strategies.
Computer Associates declined to comment on announcements that may be in the works. Specifically, officials would not discuss plans to launch a separate Internet business unit.
But sources familiar with Consumer Associates' plans confirmed that the new Internet unit has been formed to help customers create dynamic Web sites tied to internal corporate database systems.
A special focus would be to make customer information stored on legacy mainframe systems available via the Web.
Web-based electronic commerce tools would tie the system directly to a company's back-office accounting department.
The division will account for only a few hundred out of Computer Associates' 9,000 total employees, the sources said.
The planned business, which has been in the works since April, would be a natural extension of CA's systems management and database products target its existing customer base of the world's largest corporations, as well as smaller firms.
In the pizza parlour example, a customer order would be routed over Computer Associates computers to the local pizza parlour, which would bake the pizza, bill the customer's credit card account and then deliver the order.
Customer data storage would be hosted on Consumer Associates mainframes, an unusual feature compared to the hundreds of other Web service providers, who tend to leave information management in the hands of customers once Web site development work is complete.
In effect, Computer Associates' plans would resurrect mainframe time-sharing, where in companies rent time on remote computers and pay service providers to assume responsibility for the headaches of managing the systems.
Computer Associates stock, which has been trading at historic highs recently, rose $1 to close at $58.25 on the New York Stock Exchange Friday.
",9
"Iomega Corp's plans to apply its computer storage technology to handheld consumer electronics may fundamentally lower the cost of saving and transfering data to such devices.
The reusable data storage system, to be known as ""n-hand,"" could be used in digital cameras, computer game devices, cellular phones and handheld personal computers known as digital assistants.  
In cameras, for example, the technology could function as a removable ""digital film"" that would replace existing chemical photographic film.
""Our n-hand technology ... has the potential to change the way consumers use portable electronic devices,"" said Kim Edwards, president and chief executive of the Roy, Utah-based company, in a statement.
""We are bringing personal computer-like storage to portable devices,"" added George Meyer, Iomega's director of marketing for new business, in a phone interview.  
The n-hand disks are expected to be priced at less than $10 for a 20-megabyte disk, and could be available by the second half of 1997. Iomega said the n-hand disks are about half the size of a business card.
Several industry analysts said they believe Iomega's technology could help propel digital cameras into the consumer mainstream within a matter of years, by freeing users from the fixed capacity of existing flash memory storage and by substantially reducing the overall cost of such cameras.  
A digital camera could store from 50 to 80 images on a single $10 n-hand disk, Iomega said, depending on image resolution. Consumers now pay hundreds of dollars for a flash memory card capable of holding the same number of images, it noted.
Jim Porter, a data storage analyst with market research firm Disk/Trend Inc. of Mountain View, Calif., said the Iomega technology could cut the cost of storing photographs by a factor of 20 times.
A Kodak digital camera now costing $499 could be priced as low as $300 within a matter of years, he said, reflecting the elimination of more costly digital storage methods.  
Iomega's plans pose a theat to makers of flash memory chips that are used to store digital information in such small electronic devices currently. Leading makers include Sandisk Corp, Intel Corp and Toshiba Corp.
In addition, the Iomega system could help accelerate the current digital transformation of the camera industry, leading to a decline in revenues that cameramakers receive from conventional silver-halide-based photo film and equipment.
""With 'n-hand' you have a digital camera that you can treat like a regular camera,"" Meyer said, referring to the replaceable nature of the Iomega high-density floppy disk system.
""This technology can make digital cameras much more competitive with regular ones,"" he said.
Besides lacking a low-cost removable storage medium, digital cameras offer inferior picture quality but image resolution is improving rapidly, analysts said. This could lead to explosive growth of the new cameras in coming years.
Shares of the company closed up $1.375 to $25.375 on Thursday in active trading on the Nasdaq. On Friday, Iomega's stock will begin trading on the New York Stock Exchange.
-- New York Newsdesk, 212-859-1736
",9
"Shares of leading U.S. technology companies, already trading near all-time highs, languished on Tuesday as quarterly earnings raised concern that growth would be strong enough to push them to new peaks.
Intead, the sector was raked by profit-taking after a strong run-up in stock prices earlier in the fall season.
Several analysts and traders expressed concern over the lagging performance of top issues such as Microsoft Corp and International Business Machines Corp, which have taken hits even after healthy earnings reports.  
Microsoft was down 2-3/8 at 131-1/2 Tuesday, despite third quarter earnings that beat expectations by a nickel a share.
IBM slid 1-1/2 at 128-1/2, the day after it reported quarterly earnings two cents above the Wall Street consensus.
Intel Corp was trading 2-5/16 points lower Tuesday at 105-7/16, continuing a retreat from the record level of 114-1/4 it hit after its earnings release last week.
""Some companies are doing better (earnings-wise) and stocks are trading down,"" said one trader. ""Not that there's anything we have seen in the quality of earnings or the outlooks coming from a lot of major companies,"" he said.  
But other analysts argued that the lack of follow-through on recent share gains showed appropriate concern over valuations on the stocks, which had enjoyed a healthy rebound after the beating they took in early summer.
""They had a big run and they basically delivered what they are supposed to deliver,"" said James Cramer, president of trading firm Cramer & Co.
IBM stock, for example, had been trading at record highs for the year recently. It reached above 135 at one point on Monday, a record intraday level for the past several years.  
""These stocks have come very far in a short amount of time,"" said Phil Orlando, market strategist for Value Line Asset Management of the sector's lagging share prices.
""We have just got earnings out of the way and now we are going to take some profits,"" he said of the market's reaction.
Other analysts noted how several once high-flying computer stocks have yielded disappointments this earnings season.
Silicon Graphics Inc shares suffered a pounding last week after it reported a net loss. The stock was down 1/4 of a point on Tuesday afternoon at 19-7/8, a new year-low.  
Earlier on Tuesday, Digital Equipment Corp reported a loss in its latest quarter of $0.48, well below the estimated loss of $0.14 per share analysts had been expecting. Digital was trading at a new year low of 29-1/8, off 5-1/4.
Sun Microsystems Inc was down 2-13/16 at 57-1/2 on Tuesday, continuing a decline seen since it disappointed investors last week by failing to deliver the strong upside earnings surprise now demanded of such high-growth companies.
Prior to Sun's report, the stock had reached above 70, or 30 percent above its level in the first week of September.  
A few analysts speculated that the lack of follow-through as expressed in share price gains may be tied to a retincence by technology executives to offer guidance on the future and thereby offer fresh reasons to propel these stocks forward.
Last week, officials at industry bellwether Intel refused to offer their typical outlook on industry trends, citing fears of shareholder lawsuits that might result if a California ballot proposal were to pass in November.
But others heaped scorn on the idea that possible passage of state initiative Proposition 211 was in any way depressing the stocks.  
""Proposition 211 is irrelevant to the market activity we are seeing,"" said John Kinnucan, a technology stock portfolio manage with Strome, Susskind Investment Management LP in Santa Monica, Calif.
""The reason is that people are looking at the quarterly financial results and the share price valuations and they see a mismatch,"" he said.
Kinnucan said it was reasonable to question the valuations of even a premier name like Microsoft, shares of which he noted have appreciated more than 1000 since late 1992.
""What would be of concern would be if people weren't asking questions about the valuations of these stocks,"" he said.
-- Eric Auchard, New York Newsdesk, 212-859-1736
",9
"More than $1 billion in royalty payments to Texas Instruments Inc from Samsung Electric Co Ltd will bolster Texas Instruments's net income, and allow it to focus on more profitable lines of business.
But while the deal reassured some Wall Street analysts who were not already counting on the additional earnings from the settlement, others noted the terms appeared to be far less generous than one with Samsung in 1995.
The stock, which gained 4-3/8 to 60-7/8 by late Wednesday, was among the most actively traded stock on the NYSE.  
Earlier, Texas Instruments said it expected Samsung to pay it more than $1 billion as part of a 10-year technology cross-licensing pact. In exchange, each side agreed to drop pending patent infringement lawsuits against each other.
""Our assessment is that the agreement is at roughly 40 to 50 percent of the rate of the old agreement,"" Merrill Lynch analyst Tom Kurlak said, referring to the royalty formula for Samsung to pay Texas Instruments.
""Texas Instruments appears willing to take a lower number to get the suits dropped against them,"" Kurlak said. The analyst maintained an attractive rating on the stock.
",9
"Bay Networks Inc shares bounded higher on Wednesday on news the company had named a senior Intel Corp official as chairman and chief executive, a move analysts said could give Bay the strong hand it has lacked.
""It's quite a positive,"" said Bear Stearns networking analyst Eric Blachno of the long-time Intel executive David House's selection. ""It's good to know the company is not going to be rudderless.""  
Bay shares gained 1-3/4 to 20-1/8 on Wednesday, rising from their 52-week basement.
The shares were among the five most active on the NYSE.
Blachno said he will remain on the sidelines before once again backing the stock until he sees what strategies House may have in store to return Bay to prominence within the networking industry.
The analyst downgraded the stock to neutral from buy after Bay's last earnings report, which he said included ""ominous"" signs of trouble in the company switching business, which accounts for about 20 percent revenues.  
Bay's switch business has shown sequential declines in revenues for the last two quarters, even as rivals Cisco Systems Inc and 3Com Corp have delivered double-digit growth on larger revenue bases, Blachno noted.
Despite its reputation as a technology leader in the networking industry, Bay's finanical performance has marked it as a laggard within the group over the last several years.
By contrast, Cisco and 3Com have positioned themselves in front of an avalanche of demand for networking products and their shares have reflected that success.  
Wall Street analysts have complained that the company has suffered from a crisis of leadership in recent months.
Leadership has been an issue for Bay ever since it was formed by the merger of Wellfleet and Synoptics and 1994.
Analysts said difficulties encountered in combining the predecessor companies' product lines became magnified by an attempt to operate the companies out of headquarters on two coasts: in Santa Clara, Calif. and Billerica, Mass.
The hiring of David House as chairman, president and CEO consolidates in one leader's hands the role of chairman, which had been held by Paul Severino founder of Wellfleet, and former chief executive Andrew Ludwick, a founder of Synoptics.
Severino remains a director of the company and is expected to play an important role in defining technology strategy.
Ludwick resigned two weeks ago from the company, following several months of speculation that he planned to leave.
""We continue to believe Bay is going to be a long-term player and one of the leading companies in its industry,"" said Blachno, adding that, ""Of course, it will take some time before the new leader maps his course.""
-- Eric Auchard, New York newsdesk, 212-859-1736
",9
"H&R Block Inc., citing problems facing the online service industry, said Wednesday it has decided not to complete the spin-off of the rest of its CompuServe online unit, at least for now.
The Kansas City, Mo.-based company, which owns 80 percent of CompuServe after spinning off part of the online service earlier this year, cited CompuServe's recent financial troubles and uncertainties facing the online industry.
Industry analysts said the problems reflect the changes rippling through the online industry but were also partly unique to Columbus, Ohio-based Compuserve, which has about 5.2 million subscribers, slightly more than half of them outside of the United States.
America Online Inc., the largest with more than 6 million subscribers, No. 2 Compuserve and Prodigy have all been hurt as users have gone directly to the Internet with lower-cost Internet access providers rather than online services.
Some analysts have said that the online services, which offer packages of specialised information as well as Internet access, may not survive in the long run, though the eventual shape of the online industry remains far from certain.
""A lot of the people are going to read this as the online market is at a crossroads and pretty shaky,"" said one analyst who follows the industry.
H&R Block spun off 20 percent of CompuServe in April and had planned to distribute the rest to its shareholders.
But it said Wednesday that it has decided not to present the proposed spin-off of the rest of CompuServe to shareholders at its annual meeting scheduled for Sept. 11.
""The board continues to believe that a separation of CompuServe is in the best interests of H&R Block shareholders and will continue to consider the matter,"" H&R Block interim President Frank Salizzoni said.
CompuServe's stock has dropped from a high of $35.50 on its first day of trading to near $10 recently. The stock rose after Wednesday's announcement because new CompuServe shares still owned by H&R Block will not come onto the market.
CompuServe added 93.75 cents to $13.25 on Nasdaq, while H&R Block fell $2.125 to $25.75 on the New York Stock Exchange. America Online added 75 cents to $31.625, also on Nasdaq.
In July, CompuServe shocked Wall Street with a warning that it expected a loss for its first quarter ended July 31, its first as a publicly traded company.
The company blamed the high costs of introducing its new Wow! consumer online service and investing in an overhaul of its network infrastructure, as well as a decline in overall subscriber growth as cancellations outpaced new customers.
In response, CompuServe and H&R Block were slapped with a shareholder lawsuit alleging they had misrepresented the online service's prospects in the prospectus for the stock offering.
When the company last week reported a first-quarter loss of $29.6 million, or 32 cents a share, it also warned investors that losses would continue for the second quarter ending in October.
H&R Block, which is also the nation's largest consumer tax filing service, is likely to wait for the online industry to settle down before completing the spin-off, analysts said.
In addition to the losses, H&R Block cited the planned introduction next month of new technology for CompuServe and its new Wow! service.
Meanwhile, America Online has had problems of its own, including price cuts to stay competitive with Internet access providers and an embarrassing 19-hour service blackout earlier this month. But analysts said that in contrast to CompuServe, America Online has continued to grow, though at a slower pace.
""The problems CompuServe is having are likely to benefit America Online in the next nine months,"" one analyst said.
",9
"Shiva Corp stock rose five points Wednesday amid resurgent speculation that it may be an acquisition target of a major network equipment player.
    ""It sure looks like people are speculating that its going to be taking over,"" said Robertson Stephens analyst Paul Johnson, who maintains a long-term attractive on the stock.
    Shiva shares have risen nearly 14 percent in the last two days. By early afternoon Wendesday, the stock was trading at 53-3/4, up 5 points on the day.
    Shiva declined comment on what it called ""a market rumor.""
 ""We have had rumors like this before,"" said Cynthia Deysher, Shiva's chief financial officer. ""Our firm policy on this is not to comment on market rumors,"" she said.
    Several analysts said signs of merger speculation were apparent in the stock's recent gains.
    Cowen & Co analyst Chris Stix noted that Shiva was mentioned in a trade magazine gossip column published Monday as among potential merger candidates in the network industry.
    The article, published in the November 11 issue of Communications Week, spoke of a possible tie-up between rival Ascend Communications Inc and Shiva, among others.
    Stix said another factor behind the rebound in recent weeks of Shiva's share price may be the company's comments in public forums that it has a potential major contract win with a major telecom carrier it has declined to name.
    The Cowen analyst maintains a strong buy on Shiva.
    The stock hit a low of 38 in late September, following a steep three-month decline from its historic high of 87 reached in June, when it was a favorite among momentum investors.
    Although enthusiastic about Shiva's business fundamentals, Johnson discounted any recent product announcements as the cause behind the recent share price moves.
   ""This doesn't appear to me that its product-related. It's too violent,"" he said. ""It's not valuation-related either.""
    Analysts consider Shiva one of two pure plays in the explosively growing market for remote access
telecommunications equipment. The other is high-flying Ascend, the dominant player in the market.
    Johnson said Shiva might also prove attractive to any of the large data networking companies seeking to gain quick market share in the remote access business.
    ""With a company in Shiva's position, I can't think of a company that wouldn't be interested,"" he said.
 Johnson said that Shiva, which by his estimates has 13 percent of the remote access market, may prove attractive to any of the major network industry leaders -- Cisco Systems Inc, 3Com Corp or Bay Networks Inc.
    He left off Cabletron Systems Inc from the list of potential buyers, noting that Cabletron had acquired Network Express Inc in May to beef up its remote access line.
    Shiva has carved out a strategic niche in the market for remote acccess products, which are used by companies, Internet service providers and telecommunications carriers to handle data communications over far-flung wide-area networks.
    Shiva is the No. 3 supplier in remote acccess, behind Ascend, which  holds 40 percent of the market, and U.S. Robotics, a more diversified company with a 31 percent share, according to Johonson's estimates.
    Stix said Shiva, in partnership with Northern Telecom Ltd, has the lead in a new type of network switching product that allows telephone carriers to address the growing overload of their voice networks by Internet data traffic.
    -- Wall Street bureau, 212-859-1736  REUTER
",9
"Intel Corp shares slid another four points on Friday, continuing a three-day retreat triggered by smaller rival Advanced Micro Devices Inc's statement that its turnaround plan is on track.
But analysts and money managers were unruffled by what they said was profit-taking in Intel and a temporary shift among some momentum investors to AMD and away from Intel.
Intel stock has lost about six percent of its value since Wednesday, when Advanced Micro said it was sampling its Pentium-like K6 chip, which its expect to ship in early 1997.  
Intel closed at 115-7/8, down 4, on volume of 15 million shares, marking it as the most active Nasdaq stock. Intel, a key component in the Nasdaq Composite index, has acted as a drag on the market even as the NYSE has hit new record highs.
The Nasdaq Composite Index closed at 1261.81, off 8.55.
Edwin Turney, a Silicon Valley-based technology money manager who runs the Panagea fund, agreed, saying: ""You have a lot of profit-taking and then you have got the momentum players who have had a hell of a run in the last 6 months.
""So now they are looking at the secondary players,"" Turney said, referring specifically to Advanced Micro.  
""AMD has been a catalyst for other people to take profit,"" agreed Merrill Lynch semiconductor analyst Thomas Kurlak.
""There is really nothing specifically to explain (Intel's recent decline). It's just another wiggle in the chart.""
Soundview President James Townsend agreed AMD's announcement may have provided an excuse for some investors to temporarily shift out of Intel.
""With a stock that has been this incredibly successful, it may be enough to take some profits off the table,"" Townsend said. He was referring to Intel's impressive 50 point rise to new record levels since mid-summer.  
AMD stock has languished in recent years after repeated failures to match Intel's Pentium technology. However, since Wednesday, the stock has gained more than 20 percent. It closed at 25-1/8, up 1/2 point on the day on Friday.
Analysts said AMD's new K6 chips are not compatible with Intel latest Pentium Pro chips, but the chip could do a healthy business as a simple Pentium alternative.
""There's clearly room enough for both companies to do well,"" said C.B. Lee, an analyst at Hancock Institutional Partners, who follows both Intel and AMD.  
""Clearly, AMD has had some impact in the minds of some investors,"" Lee said of Intel's declines in recent days, but added: ""In my mind AMD is not a threat.""
Analysts expect Intel to produce 20 million Pentium microprocessors in the current quarter, while AMD will build only a tiny fraction of that number -- and less powerful processers at that.
Like most chip sector securities analysts, Kurlak maintains a strong buy on Intel and a neutral rating on AMD.
Lee said he also remains neutral on AMD, ""but its back in my good graces"" with its plans to introduce the K6 chip.
In the last week, Prudential Securities analyst Mark Edelstone was alone among Wall Street analysts in upgrading AMD to a buy from a hold in response to the K6 announcement.
-- New York newsdesk, 212-859-1736
",9
"Microcom Inc and Rockwell Semiconductor Systems said Wednesday they plan to beef up their technology partnership to speed development of higher speed 56-kilobit modems for central switch equipment.
The 56 kilobit modems would allow computer users to connect to the Internet at speeds nearly double the rate of current 28.8 kilobit modems now available using standard phone lines.
The deal builds on a decade-old product development partnership between Microcom and Rockwell. Rockwell Semiconductor is a unit of Rockwell International Corp.  
New Microcom central site switch equipment would give the receiving end -- phone carriers, Internet Service Providers (ISPs) and corporate central offices -- the capacity to handle incoming calls from computers with 56 kilobit modems.
""It increases the market scope of Rockwell's 56k offering,"" said Prudential analyst Jim Thayer of Rockwell's 56 kilobit modem plans. He maintains a buy rating on Microcom.
However, Hambrecht & Quist analyst Rakesh Sood said the Microcom/Rockwell pact was a defensive response to a U.S. Robotics Inc initiative already well under way by the company to offer its own set of 56 kilobit modem products.  
In the Rockwell/Microcom pact, Rockwell will contribute its K56Plus modem chipset to the venture, while Microcom will offer its Modemware technology, a software interface that other equipment providers license to build their own modems.
To speed 56k development, Rockwell said it is opening an East Coast development center with 15 to 20 Rockwell engineers working alongside Microcom staff. The center will initially be at Microcom's headquarters in Norwood, Massachusetts. Rockwell is based in Seal Beach, Calif.  
As part of the partnership, Rockwell and Microcom are working together to drive standards development of a new high speed modem standard that would incorporate Microcom's MNP (Microcom Networking Protocol) standard.
Modems based on the Rockwell chip design would not be compatible with those from Robotics until an industry-wide standard for compatability can be hammered out, which no industry player seriously expects before 1998.  
In the intervening period, modems based on Rockwell's standard will work only with central office switches from partners such as Microcom, while Robotics modems will work only with equipment offered by backers of its standard.
U.S. Robotics has licensed its X2 56 kilobit technology to chipmakers Texas Instruments Inc and Cirrus Logic Inc and to modem supplier Cardinal Technologies Inc CRTK.O.
Robotics plans to introduce 56 kilobit modems in January and remote access equipment in February, a spokeswoman said.
Rockwell's own 56 kilobit plans have been slower getting off the ground, but the company has said it too plans to introduce new 56k modems in the first quarter of 1997.  
Nonetheless, Rockwell's technology has been embraced by Ascend Communications Inc and consumer modem makers Boca Research Inc, Hayes Microcomputer Inc and Zoom Telephonics Inc, who are unhappy doing business with rival U.S. Robotics Inc, the dominant consumer modem supplier.
Microcom said it plans to incorporate the Rockwell K56Plus technology into central site modem systems that it sells both directly and indirectly, through partnerships with Cisco Systems Inc, Bay Networks Inc, Digital Equipment Corp and Gandalf Technologies INc.  
Microcom officials said they expect Rockwell/Microcom modems to be adopted by many network equipment makers who fear relying on Robotics, which is seen as a competitive threat.
Microcom said products based the Rockwell design will be available for test and evaluation early in 1997 and that finished products will ship in central site and remote modem equipment by late in the first quarter of 1997.
Thayer argued the schism over standards should buy time for the Rockwell camp and may allow it to gain market share from Robotics due to Rockwell's wider base of support.
""They should have a fairly high share of 56 kilobit market over time,"" Thayer said of the Rockwell/Microcom partnership.
However, Sood argues the market for 56 kilobit modems will come largely from home computer users not office workers, who have access to other high-speed communications alternatives.
This plays to U.S. Robotics' strength as an equipment supplier to a majority of the top 10 Internet access providers aimed at consumers, like America Online Inc and Netcom On-line Communications Inc, Sood said.
-- New York Newsdesk, 212-859-1736
",9
"Intel Corp stock surged ahead in heavy trading on the strength of its third quarter earnings report, but while its success fueled gains in the stocks of PC makers, the Intel report did little to buoy other chipmakers.
Still, analysts said Intel's share gains Tuesday remained restrained by uncertainties over whether the third quarter ramp-up might lead to a reduction in fourth quarter orders, a concern magnified by Intel's unwillingness to make forecasts.
At midday Tuesday, Intel stock was up 3-3/8 at 111, after trading as high as 114-1/4 near the opening of trading.  
Stocks of personal computer manufacturers who rely on Intel micrprocessors also showed significant gains, as investors saw Intel's order surge as confirmation of strong demand for the machines themselves.
Compaq Computer Corp was up 1-1/2 to 73-3/8. Dell Computer Corp gained 1-1/4 to 86-1/8. Gateway 2000 Inc swelled two to 55-3/8.
""The Intel report was clearly a positive for the whole PC industry,"" said veteran chip analyst Dan Klesken of Robertson Stephens. ""It is an endorsement of our view that we are in for a strong upgrade cycle for the second half of year,"" he said.  
Chips, a PC graphics chip maker, released its own strong earnings report Monday, with income of $0.42 per share in its first quarter ended September 30 versus $0.20 per share in the year ago fiscal first quarter.
Other gainers in the segment included Trident Microsystems Inc, which was up 7/8 to 20-1/8, after rising nearly two points earlier Tuesday.
Despite these gains, the Philadelphia Semiconductor Index of 16 leading chipmakers was down 1.69 points on the day to 197.97. There were only three advancers, including Intel, compared with 12 losers. One was unchanged.  
Securities analysts said Intel's latest results demonstrate how fundamentally different it is from other semiconductor makers, operating as it does with a virtual monopoly over microprocessors, the core chips of PCs.
Indeed, Intel has benefited from the pain endured by other segments of the seminconductor industry throughout the past year, especially suppliers of memory chips used in PCs.
Memory chip prices have fallen by 80 percent in the last year.  A 32-megabit memory now sells for one-third less than an eight-megabit memory did a year ago but has four times the processing power, noted Robertson's Klesken.  
Earlier Tuesday, for instance, Texas Instruments Inc, a leading U.S. memory chip maker, reported sharply lower operating income for its third quarter of $44 million versus $289 million a year ago.
Correspondingly, the percentage of revenues Texas Instrument derived from Dynamic Random Access Memory (DRAM) computer memory chips in its recent quarter fell to about 25 percent of company revenues from almost 40 percent last year.
Intel has cut its own prices by up to 50 or 60 percent on processors since last year.  The combined price cuts have spurred order growth Intel is now seeing, Klesken said.  
Robertson's Klesken noted that while the industry revenues are expected to down 10 percent in terms of dollar growth, ""Intel will grow 25 percent in terms of top line, full-year revenues.""
Excluding the wounded memory chip makers, which account for roughly 30 percent of the semiconductor industry, the chip industry is due to grow only five percent worldwide this year.
""That says it all,"" Klesken said adding that, ""Intel is so clearly head and shoulders above the rest of the industry.""  
Intel, which Monday had reported earnings of $1.48 per share in its September quarter, swept past Wall Street's consensus expectations of $1.25 per share for the quarter.
Securities analysts responded Tuesday with a wave of higher earnings estimates for Intel's 1996 and 1997 years.
While trading volume in Intel had reached more than 17 million shares by mid-afternoon, gains in the share price were tempered by lingering questions about whether Intel would see its surge in sales carry through the fourth quarter of 1996.
Intel did not respond directly to such concerns in a conference call with analysts Monday, citing a proposed law on the California ballot in November that would make executives and directors liable for financial forecasts they made.
In addition, some investors appeared to be capturing the recent gains in Intel stock, said Lehman analyst Michael Andrew Gumport, who nontheless reaffirmed his buy rating and set a new 12-month target price of $150 on the stock.
""The stock has done so well that clearly some people are going to take some profits,"" Gumport said.  Intel traded at around 100 only last Thursday.  The stock hovered around 72 in late July.
-- Eric Auchard, New York Newsdesk, 212-859-1736
",9
"Computer distribution powerhouse Ingram Micro Inc. is set to hold its widely anticipated initial public offering on Wall Street Thursday despite some last-minute delays, including management changes.
""We haven't seen anything comparable in the technology sector with its kind of name this year,"" said Manish Shah, editor and publisher of the IPO Maven, of the new issue.
Anticipating heavy demand, the estimated price on Ingram's 20 million share offering was boosted to $17 to $19 a share Wednesday from $14 to $16, said underwriter Morgan Stanley.
As the world's leading distributor of computer hardware, software and networking equipment to corporate resellers and computer retailers, Santa Ana, Calif.-based Ingram is a veritable steam-engine of computer industry growth.
There are really only three world-class distributors of computer products: Ingram, with revenues expected to hit roughly $10 billion this year, Merisel Inc. with $6 billion and Tech Data Corp. at $4 billion.
That size advantage is crucial said Seymour Merrin, a leading industry analyst, who heads Merrin Information Services Inc. in Palo Alto, Calif. ""Market share isn't just an important factor,"" Merrin said. ""It's the only factor.""
Ingram's suppliers read like a Who's Who of the leading computer brands -- names like IBM, Intel, Microsoft, Cisco, Apple, Novell and U.S. Robotics. And like many of those names, Ingram is seen as the undisputed leader in its own industry.
Its main customers are not end-users of technology products, but the middlemen of distribution -- corporate resellers, systems intergrators and computer retailers.
""Ingram's got it all: distribution power, brand quality and customer or franchise loyalty,"" Shah said.
Underlying excitement about the new stock is a belief that Ingram is positioned to benefit directly from a multi-year computer buying boom expected to take hold later this year or early in 1997 and last for anywhere from two to four years.
Companies are preparing to upgrade to faster Intel Pentium PCs running Microsoft Windows NT and buy a host of related products made passible by the more powerful machines.
""We are coming close to the proverbial elbow of the hockey stick,"" said Merrin, referring to the hook upwards on sales charts that signifies explosive growth.
In one important respect, however, Ingram should not be classified with other top technology names famous for their explosive earnings growth and spiraling stock prices.
Ingram competes in a brutal low-margin business that has more in common with supermarkets or trucking than computers -- its profit margins have in fact declined to 6.8 percent in the first half of 1996 from 8.1 percent in 1993.
The company's path to Wall Street has not been without its detours and mishaps.
An anticipated public offering was temporarily derailed earlier in the year when Linwood ""Chip"" Lacy -- the engineer credited with driving Ingram Micro's growth over the years -- resigned as chairman and chief executive.
Ingram located a prominent replacement in Jerre Stead, the former head of mainframe software maker Legent Corp. until its 1995 acqusition by Computer Associates International Inc. It named Michael Grainger chief finacial officer two weeks ago.
But any Ingram doubters will remain on the sidelines Thursday.
""It is definitely one of the best offerings of the year. There is great demand,"" said Shah for shares of the stock. ""I think it will remain strong and by the end of year, it could be a $30 stock,"" he added.
",9
"Apple Computer Inc shares crumbled 17 percent on Monday as hope faded on Wall Street for a short-term turnaround in the computer maker's fortunes and further darkened the company's long-term outlook.
Several brokerages urged investors to dump the stock, with Wall Street analysts turning gloomy about the ability of Apple management to put the company's business strategies in order.
Apple fell four points to 17-3/4, and was the most actively traded Nasdaq issue with more than 10 million traded.  
The company said Friday it expected an operating loss of $100 to $150 million in the first quarter, ended December 27.
Apple blamed weak U.S. demand for its Performa consumer PC line and continued shortages of PowerBook notebook computers.
The company said these factors contributed to a 10 percent decline in December quarter revenues, versus the September quarter, when Apple reported $2.3 billion in revenues.
""You can't dismiss this as a one-time issue,"" Montgomery analyst Kurt King said. ""It really does say something about Apple's long-term position in the consumer market."" King said he maintained his hold rating on the stock.  
Beyond the earnings disappointment, analysts expressed concern over the impending onslaught of rival machines that will be based on new multimedia chip technology from Intel Corp and will run Microsoft Corp Windows software.
The latest financial disappointment is likely to deepen Apple's image problems among PC buyers, where widespread doubts have lingered about the company's ability to compete with rival PCs that run Windows software.  
In recent years, the distinctions separating Apple's easy-to-use Macintosh operating system from the more complex Microsoft Windows system have narrowed. The changes have led many consumers to abandon Apple for lower cost Intel-based machines that offer a greater variety of software programs.
There is also confusion over Apple's future operating system and whether it can introduce a new, distinctive system, based on the NeXT system, which it acquired last month.
Apple's latest earnings disappointment arrived just ahead of the company's annual in-gathering of Macintosh loyalists at the MacWorld trade show in San Francisco, which begins Monday.  
In a speech slated for Tuesday, Apple Chairman Gil Amelio was expected to chart the company's future course.
But Prudential's Young doubted whether Amelio could say anything to reignite enthusiasm for the stock.
Young said the speech simply comes too soon after Apple's acquisition of NeXT for Amelio to provide much concrete guidance on the company's future strategy.
""The problem is that he now has to start talking about futures, but he doesn't know enough now to be making this speech,"" he said.
""(Amelio) is not going to be able to say a whole lot about the technical plan, or what they are going to do to bring the new operating system to market,"" Young said.
-- Wall Street bureau, 212-859-1736.
",9
"America Online Inc unveiled a broad strategy to transform the online service provider into a mass media company in a move that further renders Internet access services a commodity business.
Earlier Tuesday, the world's leading online service introduced a flat-rate Internet pricing option as a part of a comprehensive restructuring plan, ending years of resistance to competing directly with Internet access providers on price.  
In addition, AOL said it hired Robert Pittman, a prominent media executive, to head its flagship online service, and put forth measures aimed at shoring up its image with investors.
AOL had said it planned to take $460 million in charges spread over the recently ended September quarter and the upcoming December period, mainly to cover its switch to a more conservative method of accounting for marketing costs.
The stock see-sawed as investors digested whether the near-term profits impact was compensated for by the prospect AOL would become a stable, but growing, mass media enterprise.
AOL shares had risen 1 to 25-5/8 in late trading Tuesday.  
Gary Arlen, an online industry analyst, said ""the market is responding to the financial announcements and not to the promise of all these other plans, including what Pittman brings to the company.""
Arlen added that the restructuring plan demonstrates that AOL ""is a dynamic company that can respond to challenges decisively.
In an interview, AOL chairman Steve Case said Pittman -- the broadcast executive who created MTV and made it the first profitble cable TV company -- was hired to help lead AOL into a new era of growth by addressing the mass media market.  
While Case expects AOL to pass the 10 million mark in subscriptions late in calender year 1997, ""The focus is not on getting to 10 million, but getting out to tens of millions and that's what (Pittman) is focused on,"" he said of the new divsion head.
Pittman, who also took part in the phone interview, said that with TV-sized audiences on the horizon, AOL planned to accelerate its emphasis on advertising, online merchandising and sources of revenue other than subscriber fees.
""The main point is that we are really shifting the business model toward these new sources of revenues,"" he said.  
Analysts said AOL's thrust into the Internet access business will have reprucussions for rival online companies, Internet access providers and even the firms that create special entertainment and other programming for the Internet.
Arlen said the first casualty of AOL's plans to offer seemless access to the Internet will be its own GNN Internet service, which AOL told analysts it plans to discontinue.
At a new rate of $19.95, AOL puts itself in the same pricing league as ""pure"" Internet access providers, such as Netcom On-Line Communications Inc and Earthlink Network Inc, which offer little or no proprietary content.  
""What happens is that access becomes a commodity service,"" said Arlen, who heads Arlen Communications Inc in Bethesda, Md. ""AOL has now defined the $20 a month Internet access rate as a commodity,"" he said.
However, in a phone interview, David Garrison, Netcom's chief executive said he expects to feel little direct impact from the AOL move, since Netcom is mainly focused on serving and ""adding value"" for business customers.
Netcom, with 562,000 paying subscribers as of September 30, is the largest independent provider of Internet access. More than 98 percent of Netcom's customers already pay $19.95.  
""The difference is that our product is not aimed at the consumer, the entertainment sector if you will,"" he said in contrasting AOL's core market with Netcom's business focus.
Reflecting the differing demand of his base of small and medium-sized business customers, Garrison claimed that Netcom turnover rates have remained relatively low and stable over the last seven quarters -- in striking contrast to AOL.
Arlen noted that America Online also discussed ambitious plans to develop an increasing amount of programming content for the Internet in its newly created AOL Studio division, led by long-time executive Ted Leonsis.  
In effect, AOL is commodifying the programming content on the Web, much in the way the big Hollywood movie studios have dominated film and broadcast production, Arlen said.
""AOL is becoming a one-stop source for Internet access, programming content and other services,"" Arlen said. ""I expect that AOL's offerings will be totally satisfactory to the millions of users who are newbies to the Internet and a large number of heavy users who are fed up with shopping for deals.""
Abhishek Gami, an analyst at Nesbitt Burns Securities, added that, ""Now there will be less confusion both for investors and for consumers as well.""
-- New York newsdesk, 212-859-1736
",9
"The stock of General Electric Co. rose in active trading Tuesday, boosted by speculation it might raise its dividend and increase its share buyback programme following upbeat comments by Chairman John Welch.
Salomon Brothers analyst Russell Leavitt said Welch told analysts who attended a private meeting with him on Monday that he ""expected earnings to be up about 13 percent this year, in line with expectations.""
According to First Call, which monitors Wall Street analysts' earnings projections, GE's profits for the 1996 calendar year are expected to equal $4.40 per share.
In 1995, GE earned profits of $3.90 per share, or $6.6 billion, on revenues of $43 billion.
Analysts said news from the meeting helped propel General Electric's stock onto the NYSE most actives list. The stock was up $2.25 to $97.50 in late afternoon trading after earlier climbing as much as $3.25.
A GE spokesman declined to comment on Welch's remarks to analysts. He said the company had gone on record in its third-quarter earnings report, released Oct. 10, as being on track for a ""record year"" in 1996.
The spokesman confirmed, however, that GE's board would meet on Friday.
After the meeting, CS First Boston said analyst Martin Sankey reiterated his strong buy recommendation on GE's stock and boosted his 1997 earnings estimate 5 cents to $5 per share.
""They are looking for good progress next year,"" Leavitt said, adding that while little new was disclosed at the twice-yearly briefing, ""There seems to be a high level of conviction that progress is in place.""
Welch specifically cited a turnaround in the company's power businesses and strong growth in its NBC broadcasting unit, Leavitt said.
""You've got everything pretty much clicking in the company,"" said NatWest Securites analyst Nicholas Heyman, who also attended the meeting. He said Welch spoke of 13 percent earnings growth for both the current year and for 1997.
More good news could come as early as Friday, when GE's board of directors is scheduled to meet.
At that meeting, several analysts said they believed the board will authorise a two-for-one split of GE shares and increase its authorisation to buy back the company's shares to $13 billion from its current level of $9 billion.
Company share buybacks increase the value of remaining shares by decreasing the number of shares outstanding, a move looked on with favour by investors, since the underlying value of each share held increases.
In addition, NatWest's Heyman said he expected the board to boost the stock's annual dividend by 13 percent to $2.08 from its current level of $1.84 per share.
Since early 1995, General Electric's stock has proven one of Wall Street's best perfomers, more than doubling in value.
""Most of the Wall Street analysts came away comfortable that the earnings estimates will be realised this year and next year,"" one fund manager said of the meeting with Welch. ""It's his usual magic with Wall Street.""
",9
"MCI Communications Corp. said Monday it reached a 10-year deal with NextWave Telecom Inc. that thrusts MCI into the top tier of U.S. wireless communications providers.
Under terms of the deal, MCI said it will connect its network to a system planned by NextWave to provide personal communications services, giving it the capacity to offer service to more than 110 million individuals in 63 areas, including 29 of the top 50 markets.
Washington-based MCI said it will buy at least 10 billion minutes of capacity for its personal communications services from NextWave over 10 years. Terms of the deal were not disclosed.
Personal communications services represent the new generation of celluar communications services, allowing customers to send both voice and data transmissions over wireless telephones.
The deal will help underpin the financial future of debt-laden NextWave, which was the largest bidder in the U.S. Federal Communications Commission's auctions for ""C-band"" wireless radio spectrum held in early July.
NextWave, based in San Diego and New York, also plans to sell stock to the public.
For MCI, the deal enables it to expand quickly into the rapidly growing market for wireless personal communications services.
Two years ago, MCI dropped out of the auctions for U.S. PCS licences after the bidding became too rich for its taste.
But with the NextWave pact and previous smaller deals, MCI has moved to become a major reseller of wireless services.
As part of the deal, NextWave selected MCI to provide telecommunications and other services supporting the development and ongoing operations of its personal communications services system, MCI said.
""This agreement with NextWave establishes an immediate nationwide PCS footprint for MCI and represents an important next step in MCI's wireless strategy,"" said Whitey Bluestein, vice president for MCI wireless strategy and development.
""This is the first full interconnection agreement of its kind and brings new competition to the wireless marketplace,"" he said, noting that with full interconnection, MCI does not need to own its own wireless facilities.
MCI said the NextWave agreement is a model for additional agreements it expects to sign with other wireless providers as part of its wireless interconnected network strategy.
The strategy is MCI's blueprint for developing a full range of wireless services and features that will be integrated into MCI's existing communications services.
""This was MCI's strategy all along,"" said Jeffrey Kagan, an Atlanta-based telecommunications industry analyst.
Kagan said MCI has historically preferred to resell communications services initially rather than investing in its own infrastructure. Over time, the company selectively builds its own infrastructure as it proves profitable to do so.
""Reselling service was how they became a heavy hitter in long distance in the first place,"" Kagan said. ""What their plan is, is to resell service from other providers and build networks where they see the need to do so,"" he said.
Kagan said MCI's deal with NextWave marks the rapid realisation of its reseller strategy. ""This all of a sudden puts MCI on the wireless communications map in a big way.""
Still, he noted that AT&T Corp.'s AT&T Wireless unit, the former McCaw Cellular business, remains twice as large as MCI's cellular business, with about 6.5 million subscribers in geographic regions covering 207 million potential customers.
MCI's deal with NextWave covers about 110 million potential customers living in a mix of metropolitan and less-densely populated areas.
MCI's stock traded at $25.25 a share Monday, down 25 cents, on Nasdaq.
",9
"Chips stocks, especially those of PC-related manufacturers, posted across-the-board gains Tuesday after the release of a monthly industry report showing robust demand in the North American semiconductor market.
Also showing strength in early trading were stocks of companies that make programmable logic devices, including Altera Corp Lattice Semiconductor Corp and Xilinx Inc.  
""I think most of the upside is still coming from the PC industry,"" said Nimal Vallipuram, a Bear Stearns chip analyst. ""I dont think this is information for an industry turnaround.""
The upswing in the industry ratio of chip bookings to orders rose to 1.10 in October from 0.98 in September, while expected to a degree, surprised analysts by its extent.
The report was largely a sign of general industry health, as the ratio offers little insight into specific segments.
Still, it lifted commodity chipmakers, which had stumbled badly recently, including Motorola Inc, up 1-1/8 to 51-1/8 and Texas Instruments Inc, up 1/2 to 56-1/2.  
Microprocessor giant and industry flagship Intel Corp rose 1-1/4 to 125-1/8, while PC graphics suppliers Chips and Technologies Inc swelled 2 to 26-3/8 and Trident Microsystems Inc gained 1-1/4 to 22-1/8.
""The magnitude of the improvement was a surprise, but Wall Street has been expecting an improvement,"" said Mona Eraiba, semiconductor analysts at Gruntal & Co.
Among Eraiba's favorites are market niche players such as VLSI Technology Inc, up 1-1/16 Tuesday to 21-1/8, National Semiconductor Corp, which nudged up only 1/8 to 22-5/8 and Lattice, up 5/16 to 40-1/4.
She also cited Motorola and Texas Instruments, which she considers to have relative upside potential based on the shellacking their stocks have taken in recent quarters.
Vallipuram recommends Intel and Adaptec Inc, which makes PC interconnection devices. He also favors Xilinx and Altera, both up 7/8 to 41-1/4 and 70-3/8, respectively.
Reflecting broad sector strength, the Philadelphia Semiconductor Index .SOXX of 16 leading chip stocks gained nearly five points in early trading. At 1039 EST/1539 GMT, the index stood at 3.32, up 1.56 percent on the day with 12 stocks posting gains, two losing ground and two unchanged.
-- Wall Street bureau, 212-859-1736
",9
"Intel Corp stock surged on Tuesday, lifted by a quarterly earnings report that substantially outpaced Wall Street expectations and confirmed its status among analysts as the shooting star of technology stocks.
The earnings report released Monday spurred gains in the stocks of personal computer makers who build machines based on Intel microprocessors but it did little to buoy other chip makers.
""The Intel report was clearly a positive for the whole PC industry,"" said veteran semiconductor analyst Dan Klesken of Robertson Stephens & Co.
""It is an endorsement of our view that we are in for a strong upgrade cycle for the second half of the year,"" said Klesken.
Still, analysts said Intel stock gains were restrained by uncertainties over whether the third quarter's sharp rise in orders may have come at the expense of the fourth quarter.
The concern was magnified by Intel's decision to at least temporarily halt the practice of forecasting its business prospects.
Intel stock rose $3.50 to $111.125 Tuesday on Nasdaq in a volatile day of trading in which just under 20 million Intel shares changed hands. Intel's gains sparked the technology-heavy Nasdaq index to 1,258.10, up 1.74, its second consecutive record closing high.
On Monday Intel reported third-quarter profits of $1.3 billion, up from $931 million in 1995's third quarter. Wall Street had predicted profits of $1.1 billion.
Brokers responded to the results with a wave of higher earnings projections for Intel for 1996 and 1997.
Personal computer makers who rely on Intel micrprocessors also saw significant gains, as investors viewed Intel's order surge as confirmation of strong demand for the machines themselves.
Compaq Computer Corp. gained $2 to close at $74.75 in consolidated trading on the New York Stock Exchange, a day ahead of its own earnings report, due Wednesday.
Dell Computer Corp. rose $3.50 to $88.375 and Gateway 2000 Inc. climbed $3.375 to $56.75, both on Nasdaq.
But Intel's swelling fortunes were seen as having only limited effect on other semiconductor suppliers.
Montgomery Securities analyst Clark Westmont said the main beneficiaries were a handful of custom PC chip makers who sell graphics controllers and other PC-related devices.
Every Intel processor that goes into a PC is accompanied by serveral such ancillary chips.
""Intel is the locomotive who drags along all the other guys in this food chain,"" Westmont said. ""As a result, these other guys are enjoying higher recognition today.""
He pointed in particular to PC graphics component supplier Chips and Technologies Inc. stock, which jumped $4.875 to $19.75, or roughly 25 percent, after it released its own strong quarterly earnings report.
",9
"Computer Associates International Inc said Wednesday it would focus an increasing share of its resources on its midrange software business and reduce its reliance on mainframe software sales.
In addition, CA President Sanjay Kurmar said in a phone interview he expected a charge ""in the $500 million range"" related to the planned acquisition of Cheyenne Software Inc. It would be taken its quarter ending in December.
Kumar also said the company's international sales growth had ""slowed some"" in the quarter ended in September.  
He said the acquisition was likely to be accounted for as an asset purchase with a one-time writedown for research and development costs instead of a ""pooling of interests.""
Kumar was confirming comments he and other Computer Associates executives had made in a meeting with Wall Street analysts Wednesday morning.
Analysts who attended the meeting said news of the planned revenue transition and slowing in international sales led to a sharp drop in the company's stock. The decline came in spite of the announcement of fiscal second-quarter results that beat Wall Street expectations.
",9
"Blue chip technology stocks charged ahead Wednesday in a new buying spree spurred on by optimism about holiday PC sales and year-end book-squaring by money managers, traders and market analysts said.
Market participants said the rally was spurred by positive comments from a Soundview analyst about Compaq Computer Corp, and waning fears that the holiday sales season would prove a failure for consumer personal-computer makers.
The enthusiasm swept up other PC makers such as Dell Computer Corp and spilled over to other top technology names.  
By late afternoon, Compaq had added 6-1/2 points on the day to 78-3/4 while International Business Machines Corp gained 6-1/8 to 157-3/4.
Leading Nasdaq's most actives was Intel Corp, which swelled 5-3/8 to 135-3/8, Dell, up 3-5/8 to 57 and Microsoft Corp, which gained 2-3/4 to 82-5/8.
""It looks like they're going after the group again,"" said one trader, pointing in particular to Compaq, Intel and IBM.
""They are just buying the techs in a dramatic way again,"" agreed another trader. ""The PC scare isn't what they thought it would be,"" he said.  
""It's a group move, if you look at other names, like Compaq up six, Intel up 5-1/8, Dell up 4-1/8,"" said Peter Jenkins, director of global equity trading at Scudder Stevens & Clark, listing some of the most active names.
""We're coming to the end of the year,"" he said, ""and these are big (institutional) holdings.""
""IBM and Intel I think have sold here over last couple of weeks, and whatever had to be done has been done,"" he argued, laying the groundwork for institutional buyers to add to their holdings.
""All (these) stocks are in a year-end window-dressing rally,"" said Philip Orlando, chief investment officer at Value Line Asset Management, who concurred that several of these stocks had been oversold in the past two weeks.
""IBM is the one all the money managers want in their portfolios,"" Orlando said, referring to the desire to put the best face on their end-of-year report cards by which investors judge the relative performances of funds.
Earlier, Soundview PC analyst Mark Specker upgraded his short-term rating on Compaq to buy from hold and retained his long-term buy position on the stock.
-- Wall Street bureau, 212-859-1736
",9
"Semiconductor equipment stocks surged Friday on fresh signs the downturn in the chip industry has hit bottom, and the buying spilled over into some computer chip makers as well.
Investors jumped in after the leading maker of equipment used to produce computer chips, Applied Materials Inc., gave support to the growing consensus in the industry that the market for chip-making machinery would turn up in 1997.
Applied Materials on Thursday reported lower earnings for the latest quarter but also said that even at the low point in the current technology spending cycle, it expected profit margins to stay higher than in prior downturns.
That was enough for investors to rush in, even while the industry's profits have yet to start a meaningful rebound. Semiconductor equipment stocks are often seen by investors as bellwethers for the next wave of technology growth.
""Now we have an indication out of Applied Materials that the bottom is not as deep as some may have worried or suggested,"" said Deutsche Morgan analyst Elliott Rogers, who was one of several analysts to raise Applied to ""buy"" from ""hold"" Friday.
Applied Materials stock surged $6.625 to $38.625 in afternoon trading on Nasdaq, where it was the most active issue with more than 21 million shares traded.
In addition to Applied Materials, KLA Instruments Corp. rallied $5 to $38.25, Tencor Instruments rose $5.50 to $26.75, and Lam Research Corp. increased $4.625 to $34.125.
The four equipment stocks were among Nasdaq's 10 most active, while Intel Corp., the world's biggest chip maker, rose $3.125 to $122.
Other chip equipment makers also rose, including PRI Automation Inc., up $6.375 to $42.875, and Novellus Systems Inc., up $8 to $57.875.
After the market closed Thursday, Applied Materials said profits fell 53 percent to $73.1 million, or 40 cents a share, for its fourth fiscal quarter, which was about in line with expectations.
But Wall Street analysts widely believe a new chapter has begun to unfold for the chip industry, which could lead to a rebound in orders for production equipment.
The recovery is expected since sales of personal computers appear to be picking up, which means renewed demand for additional chip-making equipment cannot far behind. PCs soak up about half of all semiconductors produced worldwide.
The chip industry over the years has become notorious for its boom-to-bust cycles. Many now argue that the latest year-long slow-down in semiconductor equipment spending has stabilised, leaving the industry poised to begin another of its cyclical upturns early next year.
This could come even after chip makers aggressively built plants and added capacity last year, which flooded the market and led to a glut of chip inventory earlier this year.
Alex. Brown analyst Byron Walker said that during a conference call Thursday, Applied Materials executives said they saw equipment order rates stabilising.
But while Walker upgraded Applied Materials and other stocks in the group, he cautioned the companies might be hurt next year by a continued glut of computer memory chips, the biggest category of semiconductors.
",9
"Microsoft Corp. and Fore Systems Inc. plan to annouce Tuesday a deal in which Microsoft will license Fore's high-speed networking technology for use in future versions of its Windows operating system software, according to sources familiar with the deal.
Asynchronous Transfer Mode (ATM) is an emerging technology on which a new generation of higher speed networks are being built that are better able to handle voice, video and data simultaneously.
The sources said the deal will integrate Fore's ATM emulation software directly into the Windows operating system, allowing desktop office computers to use ATM technology without changing other existing computer software.
As a result, the deal could open up a potential market of millions of PC users to adopt ATM network technology, while ensuring compatability with older network technologies.
Neither Microsoft nor Fore Systems would confirm the deal.
But industry analysts said Microsoft's backing of ATM should boost the technology's legitimacy with corporate network administrators, who to date have proved reluctant to install higher-cost ATM networks in place of existing ones.
""It will make connecting PCs to ATM networks easier because all you will have to do is buy an ATM switch, buy an adapter card and a PC is up and running,"" said Mary Petrosky, a network analyst with The Burton Group in San Mateo, Calif., referring to the basic equipment necessary to install ATM.
Petrosky was one of a handful of analysts who were pre-briefed by the companies about outlines of the deal.
Existing technologies such as Ethernet and Token Ring have been around since the 1970s and remain the dominant standards for networks that connect corporate office computers.
ATM is considered more expensive because it requires investments in existing network infrastructure like cabling, switches and other equipment to be ripped out and replaced.
Sources said integration of ATM into Windows software will help standardize ATM networking products, making it easier to develop ATM products, while driving down customer costs.
Microsoft's own software business is likely to benefit from enabling networks able to transmit multimedia-rich information to become more widely available, Petrosky said.
To date, ATM backers, including Fore, the recognized industry leader in ATM technology development, have failed to win widespread adoption of it in corporate office networks.
Instead, Fore has built a fast-growing business selling ATM technology to telephone carriers who use it to transmit large volumes of data at high speeds over the backbone sections of their wide area telecommunciations networks.
Fore also sells adapter cards that can be installed inside personal computers that allow them to accept information transmitted over these wide area networks.
Here, it faces growing competition from Cisco Systems Inc, Cascade Communications Corp. and others.
Jeremy Duke, a network hardware analyst with the market research firm InStat, based in Scottsdale, Ariz., said Microsoft's intergration of ATM would eliminate some of the hurdles of connecting ATM networks to desktop PCs.
However, he expected the deal's main impact would be to lend visibility to Fore's wide area network ATM business, by providing a broader base of PCs ready to communicate over networks using a mix of ATM and non-ATM technology.
""The deal puts ATM on a little bit more of an even-footing,"" Petrosky said, but noted, ""There are still cost issues and competing technology issues.""
Petrosky was referring to how ATM has been upstaged in corporate office networks by an intermediate class of technology known as Fast Ethernet, which allows networks using existing hardware to handle some multimedia communications.
In addition, she said the network industry was beginning to embrace a new method known as Gigabit Ethernet that could rival ATM capabalities in many repects. Gigabit Ethernet allows video transmission at speeds roughly similar to ATM.
""It's another thing that can help ATM, but I don't think it's going to drastically change the odds for ATM acceptance,"" Duke agreed. ""There are other cost-effective technologies available today,"" he said, referring to Fast Ethernet systems.
It was not clear from the sources whether Microsoft's plans extended beyond its Windows NT and Window 95 operating systems to include its older Windows 3.1 system.
",9
"The picture for personal computer demand in the third quarter of 1996 was either half-empty or half-full, depending on which of two market research firms' data is used.
Technology market research firm International Data Corp. said Monday that growth in U.S. PC shipments from a year ago slackened to 12 percent, ""the slowest pace in five years,"" based on its preliminary third-quarter statistics.
A second firm, Dataquest, said PC makers ""prospered"" in the third quarter as worldwide shipments rose 16.3 percent from the same period a year ago.
The conflicting conclusions reflect IDC's focus on the U.S. market, which accounts for a substantial majority of world PC demand, versus Dataquest's emphasis on overall global shipments.
""We're making mountains out of molehillls,"" Dataquest PC analyst Kimball Brown said of concerns that PC growth may be slowing. ""The point here is that we had a strong PC market all year ... What other market of this size grows at 20 percent?""
Reflecting a more sombre view of the industry's recent performance, IDC analyst Eric Lewis said ""PC vendors are being extra careful this year, after getting burned by excess inventory at the end of 1995.""
However, the researchers agreed on which companies ended up as winners and losers in the third period.
They said Compaq Computer Corp. once again led in shipments of PCs both worldwide and in the United States. At the same time, Apple Computer Inc. and the combined force of Packard Bell Inc. and NEC Corp. saw declines, compared with very strong year-ago periods.
Both research firms agreed that fourth quarter PC shipments are likely to pick up the pace over the third quarter, boosting the totals for the full year.
IDC forecast that worldwide personal computer shipments will grow 18.5 percent for 1996 as a whole, while Dataquest projects the global PC market will grow by 19.7 percent.
Underlying the dispute over the health of the current market is a comparison with last year's banner year, viewed by analysts as a historic upswing in demand that is unlikely to be repeated anytime soon.
IDC reckoned that worldwide PC shipments grew 23.8 percent in 1995, while Dataquest put the figure at 24.7 percent.
Dataquest said U.S. PC shipments rose 12.5 percent during the third quarter, or roughly the same level as reported by International Data.
IDC said quarterly unit shipments rose 16 percent worldwide, down slightly from what Dataquest reported.
PC makers showed greater caution in the latest third quarter, compared with the same period a year ago, IDC said.
In the 1995 third quarter, a number of vendors, especially Apple and Packard Bell, had shipped large quantities of PCs to retailers in anticipation of strong holiday sales.
That jump led to an over-supply of inventory that hurt the industry late last year and resulted in greater caution this time around. PC vendors now appear to be holding back on shipments while they gauge holiday buyers' demand, IDC said.
In the upcoming quarter, IDC's Lewis predicted, ""Shipments will pick up as we move through the fourth quarter, leading to a happy holiday season for the PC industry.""
Though he too is optimistic about fourth quarter market growth, Dataquest's Brown cautioned that ""Every year it gets tougher to maintain 20 percent annual growth.""
",9
"Leading data networking stocks settled back for a round of profit-taking Tuesday after the strong price gains of recent weeks, securities analysts said.
After opening at a 52-week high of 67, industry flagship Cisco Systems Inc retreated throughout the day and was trading off 1-3/8 to 65-1/8.
Similarly, Cabletron Systems Inc and 3Com Corp began to fall immediately after Tuesday's opening. By mid-afternon, Cabletron had lost 1-1/8 to 67-3/4, while 3Com was down 2 to 70-1/8.
",9
"CompuServe Corp., acknowledging its failure to attract U.S. consumers, said Thursday it would disband its family-oriented Wow! online service and focus on its business and technical customers.
The world's second-largest online service also said it would accelerate the way it expenses customer marketing costs and that it was taking a $28.6 million charge in the latest quarter for previously incurred subscriber acquisition costs.
The company said it would pursue businesses with higher profit margins, including international consumer markets, espcially those in Europe.
""For CompuServe, this represents a strategic retreat back to its basics,"" said Peter Krasilovsky, a veteran analyst of the online industry at Arlen Communications in Bethesda, Md.
""CompuServe will never contend for the king's mantle among the online service/Internet service providers in North America again,"" he said.
CompuServe officials stressed no layoffs would result from the latest moves. Wow!'s 35 employees have already been absorbed into CompuServe Interactive, they said. The company's total head count stands at about 3,200 worldwide.
The company laid off 150 employees, or 4 percent of its work force, in an earlier cutback announced last summer.
CompuServe's moves come on the heels of recent aggressive actions by rival America Online Inc. to stay on top by offering a series of new pricing options, including a flat monthly rate of $19.95, and by shutting down its direct Internet access service.
Since CompuServe's parent, H&R Block Inc., sold 20 percent of the online service to the public in April, CompuServe has struggled to keep up with America Online, the largest online service, and with a host of Internet-based competitors.
America Online has more than 7 million subscribers. As of Oct. 31, CompuServe said it had 3.3 million direct worldwide subscribers. NiftyServe, its Japanese licensee, had a total of 5.3 million, roughly the same level as in July.
In reaction to CompuServe's continuing troubles, H&R Block in August shelved plans to spin off the 80 percent of CompuServe it still owns.
Since CompuServe's initial public stock offering in April, its prospects have dimmed, with its stock tumbling from an initial price of $30 a share. The stock fell 94 cents Thursday to $10.69 on Nasdaq.
Earlier Thursday, H&R reported a substantial loss for its second quarter ended Oct. 31, citing CompuServe's turmoil.
Krasilovsky said CompuServe's plan to go back to basics was ""very realistic,"" but added ""too bad they didn't do it a year-and-a-half ago.""
The analyst said he expects the company to reposition itself to provide niche services to business customers who don't want to pay for a high-level premium online service.
In a telephone interview, CompuServe spokesman Steve Conway said that while his company was abandoning further mass-marketing efforts aimed at U.S. consumers, ""If you are currently a subscriber, you will not notice a change.""
Nontheless, the Columbus, Ohio-based company said it would target its efforts and investments at business and professional users, its traditional strength.
Wow! was introduced seven months ago to much fanfare, but failed to get off the ground. Wow! customers numbered 102,000 at latest count, the company said.
The company blamed the failure of Wow! on new market entrants, or Internet service providers, pricing competition and the high costs of consumer marketing.
The company also said it plans to launch early next year a new ""CompuServe for Business"" service, an enhanced version of its core CompuServe Interactive with a new interface and added content from ""thousands"" of information providers.
Despite a series of missteps in the United States, growth remains robust overseas where CompuServe's brand is the best recognised name among online and Internet access providers.
In Europe, for example, CompuServe said subscribers to its main CompuServe Interactive online service had nearly doubled to more than 800,000 in the past year.
",9
"Texas Instruments Inc. said Tuesday it set a licensing pact with Samsung Electronics Co. Ltd. of Korea that will generate royalty payments of more than $1 billion over 10 years.
In exchange, each side agreed to drop pending patent infringement lawsuits against each other.
The agreement replaces a previous five-year deal that expired at the end of 1995, the Dallas-based maker of computer chips, notebook computers and other electronics products said.
While the deal reassured some Wall Street analysts who were not already counting on additional earnings from the settlement, others noted the terms appeared to be far less generous than one with Samsung in 1995.
""Texas Instruments appears willing to take a lower number to get the suits dropped against them,"" Merrill Lynch analyst Thomas Kurlak said.
""Our assessment is that the agreement is at roughly 40 to 50 percent of the rate of the old agreement,"" Kurlak said of the royalty formula Samsung will use to pay Texas Instruments.
The new license, which runs until the end of 2005, covers a broad base of patents from both companies, including those for semiconductors, personal computers, consumer products and telecommunications equipment, Texas Instruments said.
""We are pleased with this agreement and the value it places on our patented technology,"" said Richard Agnich, a senior vice president and general counsel at Dallas-based Texas Instruments.
The company in 1985 started to more aggressively defend alleged unauthorised use of its technology in a bid to improve the value of its intellectual property within the semiconductor industry. In the intervening decade, the company has won billions of dollars in additional royalties, a spokesman said.
Texas Instruments said it expected Samsung to pay it about $105 million in the fourth quarter for ""catch-up royalties"" covering the first nine months of 1996 when the companies were battling in court.
Analysts said the ""catch up"" payments should substantially boost earnings for the quarter ending in December, but the gain will be offset by a charge for an undisclosed amount the company plans to take for an early retirmement programme.
Kurlak estimated Texas Instruments will see $35 million in additional quarterly royalties going forward as a result of the Samsung deal, but that is down from the roughly $85 million it received quarterly from Samsung at the end of 1995.
With this deal, Texas Instruments said it has almost completed its 1995 round of patent cross-license agreements with major semiconductor makers.
Earlier in the year, Texas Instruments reached 10-year deals with Fujitsu Ltd., Oki Electric Industry Co. Ltd. and Matsushita Electric Industrial Co. Ltd.
It said talks continue with NEC Corp. and several smaller producers.
The royalty payments will bolster Texas Instruments's net income, and allow it to focus on more profitable lines of business, analysts said.
Texas Instrument stock jumped $4.375 to $60.875 on the New York Stock Exchange.
",9
"Cascade Communications Corp's earnings for the third quarter ended September blew past the published analysts' consensus estimate by a solid $0.02 a share, but fell shy of Wall Street expectations nonetheless.
Despite year-on-year quarterly earnings growth of roughly 200 percent, investors dumped the stock in after-hours trading on Thursday evening, sending the stock down 6-1/2 to 80, traders said. Cascade reported $0.21 versus $0.07 a year ago.
Securities analysts said the disappointment lay in comparing Casade's sequential quarterly earnings growth.
""The issue was that it was trading at 60 times over the 1997 earnings forecast,"" said Hambrecht network equipment analyst Joe Noel, who holds a strong buy on the stock.
""They really needed $0.04 per share on the upside to maintain that price on the upside in my opinion,"" he said.
Investors were betting Cascade could once again blow past analysts earnings estimates on the same scale it had done in the second quarter ended in June, the analyst said.
In the June quarter, Cascade reported earnings that were 43.5 percent greater than seen in the first quarter of 1996.
""The second quarter had a big revenues spike and the third quarter was expected to be up on a similar basis sequentially,"" Noel said.
By contrast, the most recent third quarter showed sequential growth of only 17 percent versus the strong second quarter. Cascade had reported above 20 percent sequential growth in quarterly earnings for every period since June 1995.
There was nothing in the report or the conference call that followed which suggested problems in the company's business fundamentals, several analysts stressed.
Noel said he expected the sell-off to continue to play out on Friday morning, but for bargain-hunters to then snatch up the stock, as it remains one of the strongest plays in its sector.
In a phone interview after a conference call with analysts, Cascade chief executive Daniel Smith said he could point to nothing in the company's third quarter experience that would explain the sell-off in the company's stock.
To demonstrate it health, Smith pointed to how the company had derived between 10 and 15 percent of its overall revenues from Asynchronous Transfer Mode (ATM) products, an entirely new line of business introduced only early this year.
In addition, Smith said Cascade's strategic alliance with International Business Machines Corp was performing according to plan.
""We are pleased with the progress we are making and our plans are on track with IBM,"" he said.
Noel said the principal hazard for an investor in a telecommunmications equipment supplier like Cascade was the lumpiness of earnings from quarter to quarter.
He noted that Cascade's small number of telephone company customers thought in terms of year-long buying cycles, causing Cascade shipment volumes to fluctuate from quarter to quarter, and leaving it exposed if even one customer delays a purchase.
In its earnings report, Cascade said its revenues for the third quarter increased 162 percent to $94.2 million from $36.0 million recorded for the same period in 1995.
Net income for the quarter increased to $20.3 million, or $0.21 per share, compared with net income of $6.8 million, or $0.07 per share, for the same period in 1995. Analysts had expected $0.19 per share in the most recent quarter.
-- New York Newsdesk, 212-859-1736
",9
"Computer Associates International Inc is set to announce a series of deals designed to extend the reach of its systems managment software onto new computer platforms and to strengthen its existing ties to Microsoft Corp's Windows NT, analysts said.
They said CA is likely to announce deals that allow its software to run on Novell and Tandem computer systems as well.
Computer Associates has scheduled separate press conferences Monday and Tuesday with Microsoft, Intel Corp and Tandem Computers Inc.  
CA officals declined to comment on what may be announced.
But analysts say the announcements will be made at the company's three-day CA World conference that starts Sunday in New Orleans.
Chet Geschickter, an industry analyst Hurwitz Consulting Group based in Newton, Mass., said he expected CA and Microsoft to announce a tighter integration of CA's Unicenter systems management product with Microsoft's BackOffice suite.
The two software giants already have a co-marketing pact for CA/Unicenter for Windows NT which was announced in 1995.  
""Where the rubber hits the road with Microsoft is bundling and co-marketing,"" Geschickter said, noting how this relationship distinguishes CA from all but a handful of the thousands of firms developing software to run on Windows.
""This would represent a downward proliferation strategy for CA,"" resulting in far greater use of Computer Assocates software at the desktop level of corporate offices, he said.
Morgan Stanley analyst Chuck Philips speculated that CA and Tandem have agreed to a partnership where CA will port its software to Tandem's large-scale transaction computers commonly used in banking and telecommunications.  
""The agreement is likely to be strategic, with little in the way of actual technology or products to annouce intially,"" said Philips, who is attending the CA World conference.
It is less evident what the business software firm might be planning with Intel, but one analyst predicted the two would announce a deal for CA to market Intel's LANdesk Novell network management software.
Intel, best known as the kingpin of microprocessors, also develops a variety of software, including LANdesk, the second leading set of network managent tools for Novell NetWare systems behind Novell Inc's own ManageWise software.  
Microsoft chairman Bill Gates is scheduled to deliver a keynote speech Tuesday evening that is likely to center on the further integration of CA and Microsoft software strategies.
Although not nearly so well known as Microsoft and other brand name PC software makers, Computer Associates is the world's top mainframe software supplier and the second largest independent software firm overall after Microsoft.
The two have forged a strategic partnership based their respective market strengths.
CA's expertise in the complicated software used to manage large-scale computer systems complements Microsoft's dominance of the high-volume corporate desktop software market and helps beef up Microsoft's suite of ""BackOffice"" software products.
-- Eric Auchard, New York Newsdesk, 212-859-1736
",9
"Semiconductor stocks, Wall Street's whipping boys for the past year, are headed toward becoming prized performers amid signs that double-digit growth is returning to the once hot sector, analysts said.
North American sales and bookings data for September due out on Tuesday afternoon are expected to confirm that the industry has reached a cyclical bottom and is poised to see a rebound in profits -- perhaps as early as the fourth quarter.
""They should definitely reaccelerate from here,"" said Montgomery analyst John Joseph of chip sales.
",9
"Computer distribution powerhouse Ingram Micro Inc. is set to hold its widely anticipated initial public offering on Wall Street Thursday despite some last-minute delays, including management changes.
""We haven't seen anything comparable in the technology sector with its kind of name this year,"" said Manish Shah, editor and publisher of the IPO Maven, of the new issue.
Anticipating heavy demand, the estimated price on Ingram's 20 million share offering was boosted to $17 to $19 a share Wednesday from $14 to $16, said underwriter Morgan Stanley.  
As the world's leading distributor of computer hardware, software and networking equipment to corporate resellers and computer retailers, Santa Ana, Calif.-based Ingram is a veritable steam-engine of computer industry growth.
There are really only three world-class distributors of computer products: Ingram, with revenues expected to hit roughly $10 billion this year, Merisel Inc. with $6 billion and Tech Data Corp. at $4 billion.  
That size advantage is crucial said Seymour Merrin, a leading industry analyst, who heads Merrin Information Services Inc. in Palo Alto, Calif. ""Market share isn't just an important factor,"" Merrin said. ""It's the only factor.""
Ingram's suppliers read like a Who's Who of the leading computer brands -- names like IBM, Intel, Microsoft, Cisco, Apple, Novell and U.S. Robotics. And like many of those names, Ingram is seen as the undisputed leader in its own industry.
Its main customers are not end-users of technology products, but the middlemen of distribution -- corporate resellers, systems intergrators and computer retailers.  
""Ingram's got it all: distribution power, brand quality and customer or franchise loyalty,"" Shah said.
Underlying excitement about the new stock is a belief that Ingram is positioned to benefit directly from a multi-year computer buying boom expected to take hold later this year or early in 1997 and last for anywhere from two to four years.
Companies are preparing to upgrade to faster Intel Pentium PCs running Microsoft Windows NT and buy a host of related products made passible by the more powerful machines.  
In one important respect, however, Ingram should not be classified with other top technology names famous for their explosive earnings growth and spiraling stock prices.
Ingram competes in a brutal low-margin business that has more in common with supermarkets or trucking than computers -- its profit margins have in fact declined to 6.8 percent in the first half of 1996 from 8.1 percent in 1993.
The company's path to Wall Street has not been without its detours and mishaps.  
An anticipated public offering was temporarily derailed earlier in the year when Linwood ""Chip"" Lacy -- the engineer credited with driving Ingram Micro's growth over the years -- resigned as chairman and chief executive.
Ingram located a prominent replacement in Jerre Stead, the former head of mainframe software maker Legent Corp. until its 1995 acqusition by Computer Associates International Inc. It named Michael Grainger chief finacial officer two weeks ago.
But any Ingram doubters will remain on the sidelines Thursday.  
""It is definitely one of the best offerings of the year. There is great demand,"" said Shah for shares of the stock. ""I think it will remain strong and by the end of year, it could be a $30 stock,"" he added.  
In an industry known for its love of jargon, computer business insiders speak with a mix of reverential awe about ""the Channel"" - short for distribution channel and the delivery mechanism that has make-or-break control over the future of any computer product.
Ingram is to ""the Channel"" what Microsoft is to software, Intel is to microprocessors and Cisco is to networking.
",9
"Computer Associates International Inc will unveil on Monday a new Internet business unit that provides one-stop hosting and managing of corporate Web sites, sources close to the company told Reuters.
Launching the new business unit is one of several major announcements the company is expected to make at its three-day CA World conference that starts Sunday in New Orleans.
In addition, the business software firm has slated separate press events with Microsoft Corp, Intel Corp and Tandem Computers Inc Monday and Tuesday.  
Microsoft chairman Bill Gates is scheduled to deliver a keynote speech Tuesday evening that is likely to center on the further integration of CA and Microsoft software strategies.
Computer Associates declined to comment on announcements that may be in the works. Specifically, CA officials would not discuss plans to launch a separate Internet business unit.
But sources familiar with CA's plans confirmed that a new Internet unit has been formed to help customers create dynamic Web sites tied to internal corporate database systems.  
""Computer Associates wants to ride the electronic commerce wave that is coming down the pike,"" said one source familiar with the CA Internet unit strategy.
""CA will provide a company the capacity for electronic commerce sites in return for a revenue-sharing arrangement,"" he said.
Customers would be offered turn-key systems that would allow them to erect a sophisticated business presence on the Web. A special CA focus would be to make customer information stored on legacy mainframe systems available via the Web.  
Web-based electronic commerce tools would tie the system directly to a company's back-office accounting department.
A set of basic pricing plans for the services will be disclosed Monday, starting at a minimum of $5,000 to $20,000. Pricing will be kept low by revenue sharing deals in which CA takes a cut of transactions done on the customer's Web site.
Morgan Stanley analyst Chuck Philips, who is attending the show, said he expected that the unit's main focus would be to provide Internet infrastructure equipment rather than making an extensive push into the computer consulting business.  
Company information would be delivered to a Web browser using CA-OpenIngres database software and CA-Unicenter TNG systems management tools and other Web management software.
CA's Internet system also will take advantage of its Jasmine multimedia object-oriented database for combining not just text but voice, graphics and video into an information management system that can be used for electronic commerce.
For example, a shoe company's catalog could be published over the Internet with detailed product descriptions and pricing which could be instantly updated as changes occurred.  
The division will account for only a few hundred out of CA's 9,000 total employees, the sources said.
The planned business, which has been in the works since April, would be a natural extension of CA's systems management and database products target its existing customer base of the world's largest corporations, as well as smaller firms.
The new unit would involve CA providing customers various levels of operations managment support, the sources said.
Customer data storage would be hosted on CA mainframes, an unusual feature compared to the hundreds of other Web service providers, who tend to leave information management in the hands of customers once Web site development work is complete.
In effect, Computer Associates' plans would resurrect the mainframe time-sharing business, where companies rent time and space on remote computers and pay service providers to assume responsibility for the headaches of managing the systems.
Computer Associates stock, which has been trading at historic highs recently, closed at 58-1/4, up 1 point Friday.
",9
"Shiva Corp. stock lost almost half its value Wednesday after the data communications equipment maker stunned Wall Street by revealing that fourth-quarter earnings were likely to be no more than a third of expectations.
The company's stock plunged $15.625, or 45 percent, to $19.25 on Nasdaq after it said late on Tuesday it expected earnings for the fourth quarter of 1996 to be between 5 cents and 7 cents a share.
That would be sharply below consensus estimates of 21 cents a share, according to First Call, which tracks analysts' estimates. Twenty-four million shares exchanged hands, making it the day's most actively traded issue.
Securities analysts said the earnings shortfall triggered the massive sell-off, but that the decline was accelerated by plans by company officials to make changes in Shiva's business strategy that analysts said could imperil earnings further.
""I think the drop was to a large extent a reaction in the stock to the warning of lower earnings,"" said Smith Barney analyst Therese Murphy. ""But I think when people sit back they are also going to be concerned about the change in strategy.""
In a brief statement released after the markets closed on Tuesday, the Bedford, Mass.-based company said the shortfall was based on preliminary calculations.
Chief Financial Officer Cynthia Deysher said in a phone interview on Tuesday that the shortfall was mainly due to weakness in domestic sales and a decision by International Business Machines Corp. to delay an order during the quarter.
""We didn't receive the Q4 (order) from IBM,"" Deysher said. IBM is a key reseller of Shiva's networking products. She also said the company did not ship as much product as it expected in the quarter.
The Shiva official said the company would take steps to address the shortfall, including reorganizing its sales force.
Deysher said Shiva had renegotiated terms of its strategic alliance with Canada's Northern Telecom Ltd., a move she said is likely to cause revenues to decline but profit margins to rise, ensuring it can still meet its earnings goals.
Deysher said NorTel will assume the costs of manufacturing products resulting from the alliance and cover a larger share of the partnership's research and development costs.
Shiva's switching equipment is one piece of a larger Northern Telecom communications system that allows remote callers such as telecommuters or traveling sales staff to dial into central office computers.
""We felt it would be more profitable because we are moving to a royalty arrangement"" with Nortel, Deysher said. Shiva will be paid a percentage of sales instead of for each product it builds, as called for under the prior terms of the alliance.
Before its fall from grace, many Wall Street analysts classified Shiva as one of the fast-growing companies best-positioned to participate in the massive demand for network equipment used to build the Internet's infrastructure.
While executives said they remained confident Shiva could make up the lost ground in future quarters and still meet the Wall Street consensus expectation of $1.06 per share for fiscal 1998, Wall Street analysts refused to buy the argument.
Analysts slashed earnings estimates well below company forecasts and those who had not previously done so downgraded their ratings on the stock. Most advised investors to dispose of shares and remain on the sidelines until Shiva shows concrete evidence it can meet earnings targets again.
According to First Call, of nine Wall Street analysts who follow the company, seven cut earnings forecasts and or stock ratings on Shiva.
In spite of Shiva's optimism long-term, the new earnings consensus for the year ending January 1998 of the seven analysts was $0.83 per share, down from $1.07 previously.
Murphy said that even if Shiva's plans to focus on its newer switching equipment products succeed, it faces stiff competition from larger rivals like Ascend Communications Inc., Cascade Communications Corp. and U.S. Robotics Inc.
""I didn't encourage people to bottom-fish on this correction,"" she said, referring to her recommendation to brokerage clients.
""When you miss numbers as significantly as they did, it draws a lot of different questions,"" said Matt Barzowskas, an analyst for First Albany. ""You get a lot more conservative.""
""After a quarter like this you have to just step back and evaluate,"" Barzowskas said. ""I am not ready to believe they can do what they think they can do at the moment.""
But while he slashed his earnings estimates for the foreseeable future, the First Albany analyst maintained his buy rating on the stock at its now severely reduced price.
Shiva said it expected revenue for the three months ending Dec. 28 to be $48 million to $50 million, compared with $57.1 million for the prior quarter, which ended in September. The company reported $35.6 million in revenues for the fourth quarter of 1995.
Shiva said it will report final results for the fourth quarter and year on Jan. 23 after the close of the market.
",9
"AT&T Corp's decision to name outsider John Walter as heir to Chairman and Chief Executive Robert Allen boils down to a basic gamble the company believes it must take to prepare for the torrent of competition ahead.
The nation's largest phone company rejected the standard telecoms pedigree shared by most top executives in the industry -- including Allen -- in favor of a more general set of business leadership skills Walter has demonstrated.  
Wednesday, AT&T said Walter, until recently the chief executive of commercial printer R.R. Donnelley & Sons Co, would replace Allen as CEO and chairman in 18 months.
""The magnitude of the challenge has got to be at least of the same magnitude as the one that IBM faced,"" said Robert Miles, a top corporate turnaround consultant and author of a forthcoming book of case studies called, ""Corporate Comeback.""
But analysts who followed his tenure at Donnelley credited Walter with being a tough-minded visionary who successfully guided the expansion of his commercial publishing firm into a computer-savvy marketing services firm.  
""Walter understands how to run a business and make money,"" said Frank Dzubeck, president of Communcations Network Architects, a Washington, D.C.-based technology consulting firm.
At Donnelley, he closed businesses which could not carry their own weight. Earlier this year Donnelley spun off direct mailer Metromail Corp and is planning the spinoff of Donnelley Enterprise Solutions Inc, a provider of information management services to large law firms and investment bank.
This crucible of experience will come in handy for Walter at AT&T as the giant company undergoes a similarly wrenching business and technology transition, but on a massive scale.  
Walter is certainly not without his critics on Wall Street. Financial analysts must be convinced he can scale his Donnelley lessons upward to address $80 billion-a-year AT&T. Donnelley had 1995 revenues of $6.5 billion.
Wednesday, SBC Warburg analyst Barry Sine cut his rating on AT&T to hold from buy, citing disappointment about the naming of Walter to lead the company. ""In our view what was needed was a fresh face with a high-tech resume,"" he said.
Donnelley's growth came at a price, other analysts added, noting how despite Walter's visionary style the publisher struggled with falling earnings and restructuring issues.  
""A lot of things have been going wrong,"" said one analyst, citing the lower earnings outlook and falling stock price. The stock price has performed listlessly recently, trading near its 52-week lows. The stock Thursday was at 38-1/8, up 1/4.
Still, several analysts classified Walter among the new breed of top technology managers who earn their stripes as sophisticated consumers of technology but who know how to delegate decisions about the nuts and bolts of technology.  
Perhaps the most famous example of this type is an executive like Louis Gerstner, who joined IBM Corp in 1993 from consumer products distributor RJR Nabisco Holdings Corp and was with American Express Co prior to that.
""Maybe you don't actually have to have a guy who has time to get his hands dirty,"" Dzubeck said.
""I think the operating issues, the strategic issues become paramount,"" he said, while technology strategy can best be left to second and third-tier managers.
Other outsiders who have become the top-guns at successful technology companies include Jim Barksdale of Netscape Communications Corp, the former chief information officer of air freight forwarder Federal Express Corp.
Another example would be Alex Mandl, the man Walter has initially been hired to replace as second-in-command at AT&T, following Mandl's departure in August to join a wireless communications venture of Associated Group Inc.
Before joining AT&T in 1991, Mandl headed SeaLand Services.
""He's transformed a large, old-line company challenged by new technologies and changing markets into a tough global competitor,"" said Allen in a statement. ""Meeting those challenges is what leading the 'new' AT&T is all about.""
",9
"Investors snatched up semiconductor equipment stocks Friday amid further signs the cyclical downturn in chips has hit bottom, spurring a round of buy ratings to be issued for leading industry names.
The buying spree followed comments by sector flagship Applied Materials Inc that even at the low-point in the current cycle, the company expects its profit margins to remain higher than in previous market cycles, analysts said.
Applied shares gained 4-3/4 points to 36-3/4 in early trading Friday on extremely heavy volume of 11 million shares.  
""Now we have an indication out of Applied Materials that the bottom is not as deep as some may have worried or suggested,"" said Deutsche Morgan analyst Elliott Rogers, who was one of several to raise Applied to buy from hold Friday.
Besides Applied, KLA Instruments Corp rallied 5-7/8 to 39-1/8 while both Tencor Instruments and Lam Research Corp sailed up 4-3/8 points, to 25-5/8 for Tencor and 33-7/8 for Lam, respectively.
The four equipment stocks were among Nasdaq's six most active, while microprocessor giant Intel Corp, the most likely benificiary of a recovery, was up 2-1/8 to 121.  
Chip equipments were also marquee names among net percentange gainers on Nasdaq, with Novellus Systems Inc and PRI Automation Inc featured. Novellus rose 6-41/64 points to 56-5/8 and PRI gained 4-1/4 to 40-3/4.
Alex. Brown analyst Byron Walker said that during a conference call Thursday, Applied Materials executives had spoken of a potential stabilization of equipment order rates.
But while Walker joined the rush to upgrade Applied and others in the group to buy from neutral, he cautioned that he considered these stocks near-term ""trading vehicles"" that could be hurt by the continued glut of memory chips in 1997.  
Several analysts said the rush to buy semiconductor equipment stocks reflected a positive upturn in chip industry book-to-bill figures released earlier this month, which suggested the rebound in the chip market is expanding beyond PC-related chip sets to include other industrial markets.
""Clearly the IC (integrated circuit) industry, lead by Intel is posting a nice rebound,"" Rogers said.
""More importantly at least for (Applied is that) their margins are more sustainable at the trough than was the case in the prior cycle,"" Rogers said of the 1991-1992 downturn that crunched profits in the typically boom-to-bust industry.
He said Applied's operating margins were unlikely to dip under ""the low to mid-teens"" in the current cycle of inventory correction compared with the low-point of the 1991-1992 cycle, when operating margins of eight to nine percent obtained.
Several analysts, including PaineWebber's Gunnar Miller and DMG's Rogers, argued that valuations of the group did not reflect the sector's rebounding earnings potential.
Rogers said he had bumped up his earnings estimates on Applied's fiscal 1997 year to $1.90 per share from $1.85. He maintained his estimate of $3.40 per share for fiscal 1998.
Thursday, after the market close, Applied Materials had released earnings for the fourth quarter ended October 27 of $0.40 per share, excluding a $0.09 per share charge, which analysts described as in line with expectations.
""More to the point, prior to last night I thought I was going to have to cut the number,"" Rogers said of his decision to increase his earnings projection for fiscal 1997.
-- E. Auchard, New York newsdesk, 212-859-1736
",9
"CompuServe Corp investors' fears were allayed Wednesday by parent company H&R Block Inc's move to postpone plans to spin off the remaining 80 percent interest in the ailing online service.
Analysts said the looming innundation of the market by the 74.2 million CompuServe shares still held by H&R Block had weighed heavily on prospects for the already troubled issue.
""I'm glad that H&R Block came to their senses,"" said analyst Peter Krasilovsky of Arlen Communications.  
The analyst noted CompuServe has enough worries from sliding online membership counts and the failure of its new WOW! consumer service to attract a following. It didn't need added pressure from the pending share distribuion.
Other analysts hailed H&R Block's decision to postpone indefintely a shareholder vote on its proposed spin-off, but were concerned about what the move suggests for the future of stocks such as CompuServe and America Online Inc.
""A lot of the people are going to read that the online market is at a crossroads and pretty shaky,"" said one analyst of online providers who does not officially follow CompuServe.  
""A lot of people are going to relate this to the online industy in general,"" he said of how CompuServe's troubles have acted as a weight on America Online's stock price, as well.
But analysts said that while competition by Internet access providers may have played a part in slowing the growth of the established online service providers, most of CompuServe's problems remain unique and are not shared by AOL.
CompuServe stock rose 1-3/16 to 13-1/2 Wedndesday, but H&R Block fell 1-5/8 to 26-1/4 in active trading. America Online stock gained 3/4 to 31-5/8 by mid-afternoon.  
""The problems are 85 percent CompuServe and 15 percent due to general industry issues,"" said another Wall Street analyst. ""If anything there may be a bit of an industry shake-out here.""
The Columbus, Ohio-based online service has weathered difficult months since its debut as a separately traded stock.
In April, H&R Block spun off nearly 20 percent to the public, retaining 80 percent or so for eventual distribution to shareholders. Shares of the online service have slid from a first-day high of 35-1/2 to just above 10 recently.  
In July, CompuServe surprised Wall Street with a warning that it expected a big loss for its first quarter ended July 31, its first as a publicly traded company.
The company attributed the loss to the high costs of introducing its new WOW! consumer online service and investing in an overhaul of its network infrastructure. It also cited a decline in overall subscriber growth as cancellations outpaced new customers.  
In response, CompuServe and H&R Block were slapped with a shareholder lawsuit alleging the company had misrepresented the online service company's prospects for subscriber growth and profitability in its initial offering prospectus.
When the company actually reported first-quarter earnings August 20, it warned that investors to expect a further loss of $0.10 to $0.15 per share for the second quarter ending in October. It cited product-introduction costs.  
Fearing it might be adding fuel to the fire, H&R Block officials opted to delay the final CompuServe share distribution vote set for September 11 until more favorable market conditions develop, Wall Street analysts said.
America Online has had to contend with business issues of its own, including a price cut to remain competitive with rival Internet access providers and an embarrassing 19-hour service blackout earlier this month.
But analysts said that in contrast to CompuServe's falling subcriber rates, America Online has continued to grow, albeit at a slightly slower pace in the summer months.
In contrast to CompuServe, they said America Online is poised to see strong membership growth in the coming quarters, and may in effect be taking customers away from CompuServe.
""The problems CompuServe is having are likely to benefit America Online in the next nine months,"" an analyst said.
-- Eric Auchard, New York Newsdesk, 212-859-1736
",9
"MCI Communications Corp. said Monday it reached a 10-year deal with NextWave Telecom Inc. that thrusts MCI into the top tier of U.S. wireless communications providers.
Under terms of the deal, MCI said it will connect its network to a system planned by NextWave to provide wireless personal communications services, giving it the capacity to offer service to more than 110 million individuals in 63 areas, including 29 of the top 50 markets.
Washington-based MCI said it will buy at least 10 billion minutes of capacity for its personal communications services from NextWave over 10 years.
Terms of the deal were not disclosed.
Personal communications services represent the new generation of celluar communications services, allowing customers to send both voice and data transmissions over wireless telephones.
The deal will help underpin the financial future of debt-laden NextWave, which was the largest bidder in the U.S. Federal Communications Commission's auctions for ""C-band"" wireless radio spectrum held in early July.
NextWave, based in San Diego and New York, also plans to sell stock to the public.
For MCI, the deal enables it to expand quickly into the rapidly growing market for wireless personal communications services.
Two years ago, MCI dropped out of the auctions for PCS licences after the bidding became too rich for its taste. But with the NextWave pact and previous smaller deals, MCI has moved to become a major reseller of wireless services.
As part of the deal announced Monday, NextWave selected MCI to provide telecommunications and other services supporting the development and ongoing operations of its personal communications services system, MCI said.
Among the major markets where Nextwave has licenses are New York, Los Angeles, Washington D.C. and Baltimore, Boston and Denver.
""This agreement with NextWave establishes an immediate nationwide PCS footprint for MCI and represents an important next step in MCI's wireless strategy,"" said Whitey Bluestein, vice president for MCI wireless strategy and development.
""This is the first full interconnection agreement of its kind and brings new competition to the wireless marketplace,"" he said, noting that with full interconnection, MCI does not need to own its own wireless facilities.
Industry analysts expect to see some ferocious price-cutting in wireless telephone as competition heats up, and the latest deal will make it even more intense.
""It is going to be a battle of the Goliaths,"" said Bill Bane, a consultant at Mercer Management Consulting.
MCI said the NextWave agreement is a model for additional agreements it expects to sign with other wireless providers as part of its wireless interconnected network strategy.
The strategy is MCI's blueprint for developing a full range of wireless services and features that will be integrated into its existing communications services.
""This was MCI's strategy all along,"" said Jeffrey Kagan, an Atlanta-based telecommunications industry analyst.
He said MCI has historically preferred to resell communications services initially rather than investing in its own infrastructure. Over time, the company selectively builds its own infrastructure as it proves profitable to do so.
""Reselling service was how they became a heavy hitter in long distance in the first place,"" Kagan said. ""What their plan is, is to resell service from other providers and build networks where they see the need to do so,"" he said.
Kagan said MCI's deal with NextWave marks the rapid realisation of its reseller strategy. ""This all of a sudden puts MCI on the wireless communications map in a big way.""
MCI's plunge into the wireless market makes it a viable competitor to the several existing national players in the wireless business and is bound to heat up the competition in the increasingly crowded market for cellular services.
Other national players include AT&T Corp.'s AT&T Wireless unit, Sprint Corp.'s Sprint Spectrum venture with several cable companies, and PCS PrimeCo L.P., a joint venture of AirTouch Communications, Bell Atlantic Corp., NYNEX Corp. and U.S. West Communications Group.
Still, Kagan noted that AT&T's wireless unit, the former McCaw Cellular business, remains twice as large as MCI's cellular business, with about 6.5 million subscribers in geographic regions covering 207 million potential customers.
MCI's deal with NextWave covers about 110 million potential customers living in a mix of metropolitan and less-densely populated areas.
MCI's stock added 75 cents to trade at $26.25 on Nasdaq in late afternoon trading.
",9
"Small capitalization technology stocks shrugged off a wave of profit-taking that socked blue chip stocks Monday as investors shopped for values among beaten- down or lesser known names, especially in the Internet sector.
""Some of the second- and third-tier technology names have become the focus,"" agreed Scott Bleier, chief investment strategist at Prime Charter Ltd.  
Among the beneficiaries of this broadening interest in technology stocks were America Online Inc, up 4-1/8 to 39-1/2 and Adobe Systems Inc, up 2-1/4 to 41-3/4.
Informix Corp was the most actively traded issue on the Nasdaq, gaining 1-1/4 to 25 by mid-afternoon Monday, following reports that its next-generation Universal Server database has the edge over rival Oracle Corp.
Other strong gainers included Netscape Communications Corp, which rose 2-1/8 to 58 and electronic payment company CyberCash Inc, which gained 2-7/8 to 28-1/8.  
""We are stepping down the liquidity and quality ladder,"" said Paul Rabbit, Oppenheimer's chief portfolio strategist. ""(Investors) are trying to find some of the beat up ones,"" he said, adding, ""There is a search for less exploited areas.""
""Today is the first (trading) day of a new month and there appears to be a little profit taking here, but it doesn't appear to be affecting the technology stocks,"" Bleier said.
Analysts said investors were shying from bellwethers Intel Corp and Microsoft Corp following their strong run-up in November, even as International Business Machines Corp hit a new year-high.  
Intel was down 1-1/8 to 125-3/4 on volume of nearly five million shares, while Microsoft shed 1-1/4 to 155-5/8. Both stocks remain near historic price levels. The Dow Jones composite index was off 41.74 to 6479.96.
-- Wall Street bureau, 212-859-1736
",9
"Intel Corp. stock surged Tuesday, lifted by a quarterly earnings report that substantially outpaced Wall Street expectations and confirmed its status among analysts as the shooting star of technology stocks.
The earnings report released Monday spurred gains in the stocks of personal computer makers who build machines based on Intel microprocessors but it did little to buoy other chip makers.
""The Intel report was clearly a positive for the whole PC industry,"" said veteran semiconductor analyst Dan Klesken of Robertson Stephens & Co.
""It is an endorsement of our view that we are in for a strong upgrade cycle for the second half of the year,"" said Klesken.
Still, analysts said Intel stock gains were restrained by uncertainties over whether the third quarter's sharp rise in orders may have come at the expense of the fourth quarter.
The concern was magnified by Intel's decision to at least temporarily halt the practice of forecasting its business prospects.
Intel stock rose $3.50 to $111.125 Tuesday on Nasdaq in a volatile day of trading in which just under 20 million Intel shares changed hands. Intel's gains sparked the technology-heavy Nasdaq index to 1,258.10, up 1.74, its second consecutive record closing high.
On Monday Intel reported third-quarter profits of $1.3 billion, up from $931 million in 1995's third quarter. Wall Street had predicted profits of $1.1 billion.
Brokers responded to the results with a wave of higher earnings projections for Intel for 1996 and 1997.
Personal computer makers who rely on Intel micrprocessors also saw significant gains, as investors viewed Intel's order surge as confirmation of strong demand for the machines themselves.
Compaq Computer Corp. gained $2 to close at $74.75 in consolidated trading on the New York Stock Exchange, a day ahead of its own earnings report, due Wednesday.
Dell Computer Corp. rose $3.50 to $88.375 and Gateway 2000 Inc. climbed $3.375 to $56.75, both on Nasdaq.
But Intel's swelling fortunes were seen as having only limited effect on other semiconductor suppliers.
Montgomery Securities analyst Clark Westmont said the main beneficiaries were a handful of custom PC chip makers who sell graphics controllers and other PC-related devices.
Every Intel processor that goes into a PC is accompanied by serveral such ancillary chips.
""Intel is the locomotive who drags along all the other guys in this food chain,"" Westmont said. ""As a result, these other guys are enjoying higher recognition today.""
He pointed in particular to PC graphics component supplier Chips and Technologies Inc. stock, which jumped $4.875 to $19.75, or roughly 25 percent, after it released its own strong quarterly earnings report.
",9
"Battling competition in its core long-distance phone business, a need to enter new markets and a looming management transition, AT&T Corp. faces an even broader challenge in the proposed merger of British Telecommunications Plc and MCI Communications Inc., two of its biggest adversaries.
British Telecom announced Sunday it planned to acquire the remaining 80 percent of MCI it does not already own in a complicated cash and stock transaction that values MCI at more than $20 billion.
AT&T responded to news of the huge cross-border deal by calling on U.S. and European regulators to condition approval of it on a further freeing of competition in British Telecom's home market in the United Kingdom, even as British Telecom argued that it was already among the world's most open.
The merger would bring together the aggressive marketing skills of MCI -- the No. 2 U.S. long distance provider behind AT&T -- with the deep pockets of the former British phone monopoly to form Concert, a combined entity with unprecedented global reach.
Analysts said the merger increases British Telecom's and MCI's scope for global pooling of resources and strategy coordination and puts pressure on AT&T to beef-up its international strategies even as it must contend with an array of distractions at home.
""AT&T is the one with the most to lose,"" said Forrester Research industry analyst David Goodtree. ""The company is in danger of becoming just another player,"" he said, noting how rivals large and small have begun to erode AT&T's long-held dominance of the U.S. long-distance business.
The former U.S. phone monopoly has seen its share of the country's $75 billion long-distance market slip to under 55 percent from 60 percent two years ago.
""This deal really forces AT&T to respond and unfold its strategy,"" said Berge Ayvazian, senior telecoms analyst with Yankee Group in Boston.
With British Telecom's financial backing, MCI is expected to step up its attack on the $90 billion local U.S. phone market, Ayvazian said. MCI already plows nearly $1 billion a year into the fiber optic networks that will allow its MCI Metro unit to supply local phone service in roughly half the United States.
AT&T has been groping for a strategy to enter the U.S. market for local telephone services, even as another set of rivals, the regional Bell companies like Bell Atlantic/NYNEX Corp. and SBC/Pacific Telesis Group seek permission to enter the long-distance business.
""AT&T must now find some counterpoint to the BT-MCI strategy by trying to open up and reveal its local plans,"" Ayvazian said.
""The company has become more and more isolated as the Bell companies prepare to enter the long-distance market and as AT&T still relies on a go-it-alone strategy,"" agreed David Roddy, chief telecommunications economist at the Deloitte & Touche Consulting Group.
The proposed merger of BT and MCI is just the latest in a succession of threats to AT&T's status as a global telecommunications carrier and its leadership of the U.S. phone business.
In September, AT&T shocked Wall Street by warning that its second-half earnings would be dampened by continuing pressures in its long-distance business and efforts to gear up to offer local phone service in most of the 50 states. AT&T also said its near-term earnings were being hurt by investments in new online and wireless services.
The decline in its financial results comes on the heels of AT&T's year-long split-up of the company into three separate pieces, a move widely praised as necessary but one which nonetheless appears to have been a major distraction to its management. AT&T recently completed the spin-off of Lucent Technologies Inc., its former telecom equipment arm, and is planning to spin off its NCR computer operation in coming months.
The break-up of AT&T  has heightened dependence on its imperiled long-distance phone revenues. Responding to mounting concerns about AT&T Chairman Robert Allen's leadership, the company recently named printing industry executive John Walter as its new president and chief operating officer and Allen's eventual successor after an 18-month transition.
Wall Street securities analysts have questioned the choice of Walter, an outsider to the telecommunications industry, while simultaneously criticizing the delay in handing over responsibility to him. Even those who praise Walter's track record as chief executive at R.R. Donnelley -- where he successfully engineered a complex transformation of the old line catalog printer into marketer of digital printing services -- said Walter faces a daunting learning curve at AT&T.
BT still controls the lion's share of the British telephone market, with its grip on local service still amounting to 90 percent. But recent deregulation of the local service market has allowed rivals, including AT&T through its AT&T U.K. operation, to begin competing on BT turf.
",9
"America Online Inc's new flat rate pricing plan and moves to meet spiraling subscriber demand suggest AOL is securely on course for becoming a major media player comparable to broadcast or cable TV networks.
But analysts caution that underlying this success looms a real threat that the online network's capacity to serve its more than seven million subscribers could soon be overwhelmed.
They warn that the additional demand on AOL's network generated by the company's offer of unlimited usage for $19.95 per month imperil its near-term capacity to handle demand.  
If only a small fraction of AOL's millions of members were to take up the company's offer of unlimited access and remain connected to the service for long periods of the day, the service would quickly grind to a halt, detractors say.
Clearly, investors are betting the company can surmount such challenges, as AOL has done repeatedly in mushrooming sevenfold from under one million users three years ago.
In recent weeks, the stock's momentum has revived, doubling from a year-low of 22 to reach 44 earlier Tuesday. An afternoon sell-off caused the stock to fall back to 37-1/2.  
""The market appears to have taken a very bullish view of the new pricing scheme,"" said Arthur Newman, an analyst with brokerage firm Gerard Klauer of the stock's recent run-up.
""But you have to balance this with the realization that the more time users spend online, the higher the cost of adding capacity"" requiring new equipment investments, he said.
""All of a sudden its free candy at the candy store,"" Newman said of the paradoxical downside of a sudden explosion in demand. Although a long-time follower of AOL, the analyst currently maintains no stock recommendation on the stock.  
To be fair, AOL officials have warned repeatedly that they expect the next two quarters to be transitional, both operationally and financially, as the company shifts to a new business model that derives revenues from advertising and commercial transactions instead of mainly subscriber fees.
But Abishek Gami, an analyst with Nesbitt Burns Securities, believes AOL has proven its capacity to weather the pressures of the explosively growing online medium. In particular, AOL has measures in place to limit excessive connection times by users who now have little incentive to disconnect and free up pressure network time for others.  
""Will this demand on its network be enough to destroy the company? I think not. What the company will do is build-out to meet demand and stage a comeback,"" said Gami, who maintains a strong buy rating on AOL stock.
Gary Arlen, a veteran online industry analyst at Arlen Communications Inc in Bethesda, Md, agreed.
""Anyone who is writing this company's obituary is going to be disappointed,"" he said.
Monday, AOL said it was undertaking a major expansion of its online network and planned to spend $250 million by next June to double its network capacity and improve service.  
Gami estimated the company has about 200,000 modems now available to handle incoming customer calls for its online service and that this number will rise to about 400,000 by next June, the end of its fiscal year.
In its Monday announcement, the world's largest online service provider said it was upgrading its network to meet the surge in demand generated by its new pricing and recent marketing initiatives.
As of Sunday, AOL began offering the new flat-rate pricing plan, one of several pricing options available to customers.  
An America Online spokesman said that, despite heavy usage over the Thanksgiving holiday weekend, there were no serious problems with its online network.
The Dulles, Va.-based company said that, since July 1, it has added tens of thousands of new modems to AOLnet, which it said was the world's largest dial-in network. The expansion is to accelerate through the spring with tens of thousands of new modems being installed monthly.
Analysts said that, with more new users expected, AOL needs to upgrade its network, especially after its nearly 19 hour outage on August 7, which happened during regular maintenance caused by a software glitch and angered many users.
Already this quarter, AOL's subscriber growth is on the rebound and, in October, the company added 275,000 new members. In the summer, AOL was hurt by a seasonal slowdown in subscriber growth, a phenomenon common to all online services.
Still, in its latest quarterly SEC filing, AOL said profit margins will be hurt in the near-term and it is only likely to break into profitability again in the June 1997 quarter.
",9
"Computer Associates International Inc. issued its quarterly financial results, soundly beating Wall Street's consensus forecast.
But the stock fell sharply Wednesday morning after company executives told securities analysts they planned to acclerate investments in its personal computer-based corporate software products and de-emphasise mainframe software sales.
Analysts also said some investors were spooked by a slowdown in the company's international sales, which fell about 5 percent in the latest quarter ended in September compared to a year ago.
Computer Associates shares lost more than than $4 in early trading but regained some ground later in the day after several analysts reaffirmed ""buy"" ratings on the stock and raised their future earnings projections on the company.
The stock closed at $62.875, down $2.75 on the day, in composite trading on the New York Stock Exchange.
In a phone interview, Computer Associates President Sanjay Kumar confirmed the company planned to increase its investments in its PC-related mid-range software business.
""In reality, (mid-range software) is the right place to be,"" Kumar said of the company's planned shift in emphasis. ""It is the high-growth business.""
The executive said mid-range software amounted to about 31 percent of overall revenue in the latest quarter and was the fastest-growing portion of its business, with sales rising 56 percent above last year's September quarter, he said.
""What we neeed to do is engineer the business to move in that direction,"" Kumar said.
But mainframe software continues to account for more than twice the revenues of mid-range products, or 63 percent of the latest quarter's total reveneues of $990 million.
Mainframe sales rose 10 percent compared to the year-ago quarter, a rate Kumar said he expected would continue.
The remaining 6 percent of revenues derived from its small consumer accounting software and systems integration business.
Computer Associates has long been the world's leading supplier of mainframe software, but in recent years has sought to extend this dominance throughout corporate organisations by developing software used to manage personal computers.
This shift in focus to the smaller, albeit faster-growing part of its business prompted fears among some investors that Computer Assocites was entering a complicated transition.
""In general, you have to be concerned when a company says that it is going to be de-emphasising a part of its business that amounts to 60 percent of (its) revenues,"" said UBS Securities analyst Joe Farley.
But Farley discounted such concerns, saying the company's move came as no surprise to long-time observers of the business software maker. He embraced the choice to accelerate the company's commitment to the newer, higher-growth business.
""Their actions have already indicated that they are moving that way,"" Farley said of Computer Associates' increasing shift to PC-based mid-range products. ""Their words are following their actions,"" he said.
Kumar said the company contemplated a ""smooth transition"" over the next two years.
Mid-range sales will ""cross the threshold in fiscal 1998 probably"" and become the dominant source of revenue, he said.
In the interview, Kumar also said he expected the company to take a charge ""in the $500 million range"" related to a writedown of assets in its planned acquisition of Cheyenne Software Inc. during the current quarter ending in December.
The company began a $30.50 per share cash tender offer last Friday for Cheyenne.
The company expects the total cost of the Cheyenne acquisition to come to $1.2 billion, which it plans to fund through a combination of cash reserves and existing credit.
",9
"General Electric Co Chairman John Welch was upbeat about GE's prospects for the current year and beyond during a private meeting with Wall Street analysts, several of those who attended said on Tuesday.
In particular, Welch told analysts he was comfortable with current Wall Street estimates for the 1996 calendar year. The First Call consensus is $4.40 per share for the year.
Salomon Brothers analyst Russell Leavit said the GE executive had said on Monday he ""expected earnings to be up about 13 percent this year, in line with expectations.""  
Analysts said the meeting with analysts helped propel General Electric stock on to the NYSE most actives list on Tuesday. The stock was up 1-1/8 in early afternoon trading after gaining more than two points earlier in the day.
A GE spokesman declined to comment on Welch's remarks to analysts. He said the company had gone on record in its third-quarter earnings report, released October 10, as being on track for a ""record year"" in 1996 in terms of earnings.
After the meeting, CS First Boston said analyst Martin Sankey reiterated his strong buy on GE and boosted his 1997 earnings estimate by a nickel to $5.00 per share.  
""They are looking for good progress next year,"" Leavitt said of Monday's meeting, one of the company's regular briefings with Wall Street analysts.
While litle new was disclosed at the meeting, ""there seems to be a high level of conviction that progress is in place,"" the analyst said.
GE's leader specifically cited the company's aircraft engine and power businesses as being well-positioned for growth in the coming year, along with its NBC broadcast unit, Leavitt said.
Leavitt retained his buy rating after the meeting and left his current estimates intact. He said he expected GE to report earnings of $4.40 for 1996 and $4.95 per share for 1997, which is a penny above the First Call consensus.
""Most of the Wall Street analysts came away comfortable that the earnings estimates will be realized this year and next year,"" one fund manager said. ""It's his usual magic with Wall Street,"" a reference to Welch's popularity.
-- Wall Street bureau, 212-859-1736
",9
"Technology stocks rose Wednesday on a growing belief that recent price-cutting has spurred holiday personal computer sales as money managers loaded up on stocks to dress up their portfolios at year-end.
Traders and analysts said the rally was sparked by positive comments from a Soundview analyst about Compaq Computer Corp., and waning fears that the holiday sales season would be a dismal one for makers of PCs for consumers.
Soundview Financial analyst Mark Specker upgraded his short-term rating on Compaq to buy from hold and continued to recommend buying the stock for long-term gains.
His recommendations on technology stocks hold strong sway among institutional investors.
The enthusiasm swept up other PC makers like Dell Computer Corp. and spilled over to other top technology names.
Compaq rose $6.375 to $78.625 on Nasdaq while International Business Machines Corp. added $6.75 to $158.625 on the New York Stock Exchange.
Leading Nasdaq's most actives was Intel Corp., which added $5.75 to $135.75, Dell, up $3.125 to $56.50 and Microsoft Corp., which gained $2.75 to $82.625.
The Nasdaq composite index, laden with technology stocks, jumped 19.06 points to 1,285.38, a gain of 1.5 percent compared with a rise of 0.6 percent for the Dow Jones industrial average.
""It looks like they're going after the group again,"" said one trader, pointing in particular to Compaq, Intel and IBM.
""They are just buying the techs in a dramatic way again,"" agreed another trader. ""The PC scare isn't what they thought it would be,"" he said.
Both IBM and Intel shares had reached 52-week highs in recent weeks, only to fall back in end-of-year profit-taking and a broader market downturn.
Peter Jenkins, director of global stock trading at Scudder Stevens & Clark said, ""It's a group move ... we're coming to the end of the year and these are big (institutional) holdings.""
""IBM and Intel, I think have sold here over last couple of weeks, and whatever had to be done has been done,"" he said, which laid the groundwork for institutional buyers to add to their holdings.
""All (these) stocks are in a year-end window-dressing rally,"" said Philip Orlando, chief investment officer at Value Line Asset Management, who concurred that several of these stocks had been oversold in recent weeks.
""IBM is the one all the money managers want in their portfolios,"" Orlando said, referring to the desire to put the best face on their end-of-year report cards by which investors judge a fund's relative performance.
",9
"Acknowledging its failure to attract U.S. consumers, CompuServe Corp said it would disband its family-oriented Wow! online service and plans to defend its business and technical customer base.
The world's second-largest online service also said it would accelerate the way it expenses customer marketing costs and that it was taking a $28.6 million charge in the latest quarter for previously incurred subscriber acquisition costs.
Instead, it said it would pursue higher margin businesses, including international consumer markets, such as Europe.  
""For CompuServe, this represents a strategic retreat back to its basics,"" said Peter Krasilovsky, a veteran analyst of the online industry at Arlen Communications in Bethesda, Md.
""CompuServe will never contend for the King's mantle among the online service/Internet service providers in North America again,"" he declared.
CompuServe stock fell 1-5/8, to 10-1/8, in early trading. H&R Block Inc, which several months ago suspended plans to spin off its remaining 80 percent stake in CompuServe to shareholders, fell 1-1/2, to 26-7/8.  
Earlier today, H&R had reported a substantial loss for its quarter ended October 31, citing CompuServe's turmoil, and said it planned to go ahead with a cut in its quarterly dividend payment to $0.20 per share from $0.32 previously.
In its own report, CompuServe said it lost $0.63 per share for the second quarter ended in October, after charges for exiting the Wow! business and other accounting changes. This compared to a $0.19 a share profit in the year-ago quarter.
Disbanding Wow! resulted in an after-tax charge of $4.9 million, or $0.06 a share, and amortization of prior marketing costs led to the charge of $28.6 million, or $0.31 a share.  
""CompuServe's core users have always appreciated that service most for its independent forums and bulletin boards. They don't have any other place in cyberspace to get those services,"" Krasilovsky said.
CompuServe officials stressed that no new layoffs would result from the latest moves. Wow!'s 35 employees have already been absorbed into CompuServe Interactive, they said. The company's total headcount stands at about 3,200 worldwide.
In a telephone interview, CompuServe spokesman Steve Conway maintained that while his company was abandoning further mass marketing efforts aimed at U.S. consumers, ""If you are currently a subscriber, you will not notice a change.""  
Nontheless, the Columbus, Ohio-based company said it would focus its efforts and investments going forward on business and professional markets, its traditional selling point.
Besides defending its core online services customer base, they said CompuServe will focus on other profitable operations like its network systems infrastructure unit, which generates 30 percent of total revenues.
In disbanding its Wow! service, the company blamed new market entrants, or Internet service providers, pricing competition and the high costs of consumer marketing.
The company announced plans to launch early next year a new ""CompuServe for Business"" serivce, an enhanced version of its core CompuServe Interactive with a new software interface and added content from ""thousands"" of information providers.  
Despite a series of missteps in the United States, growth remains robust overseas, where CompuServe's brand is the best recognized name among online and Internet access providers.
Conway said CompuServe Interactive's service has nearly doubled in its number of subscribers in Europe during the past 12 months, rising to more than 800,000 from about 450,000. ""It's a growing market for these services, and we outpaced the market,"" he said.
About 60 percent of CompuServe's European customers are for business, professional and technical users, while 40 percent fall in the consumer category, Conway said.
That's roughly the inverse of North America, where about 55 percent of CompuServe's main service are consumers.
The 800,000 customers represent the bulk of CompuServe's international base, which totaled 1.12 million at October 31.
The Wow! service had been introduced only seven months ago to much fanfare, but failed to get off the ground.
CompuServe Vice President Scott Kaufman, the man in charge of developing the Wow! service, promised at the time Wow! was lauched to carpet bomb consumers with free software disks promoting the new service.
""They'll be falling out of cereal boxes,"" he had vowed at the time.
-- New York newsdesk, 212-859-1736
",9
"Promising the computer industry equivalent of universal harmony, a U.S.-based start-up formed by a brain trust of Israeli computer scientists Monday unveiled a technology that promises to overcome barriers dividing users of rival software programs.
Anysoft Inc. said its set of software technologies allows computer users to manipulate information from any application while retaining all formatting and other properties.
The system functions as an underlying layer of operating system software, but independent of any one operating system. An operating system controls the basic functions of a computer. Anysoft officials asserted the system can handle text, numerical data, graphical images, video and other data, including information available only at remote Internet sites.
""This is the beginning of true software interoperability,"" Anysoft Chief Executive Illan Poreh said in a statement. ""For the first time, all applications, including those that have not incorporated the ANY Technologies, will work together.""
The private Cambridge, Mass.-based firm is backed by Bank Leumi, Israel's largest bank, and 21 private investors, including several senior executives at modem maker U.S. Robotics Corp..
In an interview, Anysoft founder Poreh said the company's team of software programmers was handpicked from among top professors and graduate students at leading Israeli universities, including Technion, the Israeli Institute of Technology.
Industry analysts briefed on the technology hailed it as a decisive breakthrough, based on its potential to liberate computer users from dependence on any single operating system, such as Microsoft Corp.'s Windows.
""This is certainly one of the most significant technologies I've seen in the past five years,"" said veteran industry analyst Tim Bajarin, who heads Creative Strategies, a San Jose, Calif.-based consulting firm.
""What Anysoft has done is taken software interoperability beyond a forced Windows-X86 environment,"" Barjarin said, referring to the ruling combination of Microsoft software and Intel Corp. software and hardware systems.
Nonetheless, Anysoft's audacious goal is set against a history of failed industry attempts to create a universally accepted format capable of handling all types of computer data.
In recent years, leading computer makers like International Business Machines Corp., Digital Equipment Corp. and Hewlett-Packard Co. have rallied around a common software compabability standard known as CORBA.
However, this and similar initiatives have been hamstrung by competitive rivalries among industry players and the belief that programmers must unify around a single standard for creating software.
Microsoft's own effort at ushering in a ""Golden Age"" of software compatability has gone by several names, such as Object Linking and Embedding (OLE), and ActiveX, its Internet-based compatability standard.
But Microsoft's efforts have met with foot-dragging by companies unwilling to cede the software giant any more standard-setting power than it already has.
By contrast, the ANY concept is based on the seemingly simple idea that the only univeral information from different operating systems is what computer users see displayed on a screen.
""The screen is the only standard that everyone is using,"" Poreh maintained.
Anysoft has created software extensions that give computer users the perception of compatibility without having to address underlying programming differences that have ensnared previous efforts, he said.
Anysoft's go-it-alone strategy depends on seeding its technology widely among software companies, Internet service providers and large corporations developing their own software applications, all of which might include Anysoft's universal data routing features in their own products.
Consumers would have to wait until products using the technology become available from these companies.
Poreh said he plans to charge companies using Anysoft technology in their products a licensing fee starting at around $20,000 and running up to $400,000, depending on the potential number of users of the product.
In addition, Poreh said Anysoft plans to ask for a royalty of 1 percent to 3 percent, or a flat fee, again depending on the potential number of customers.
ANY technology is designed to extend software systems such as Windows or Lotus Notes, and existing compatibility programs such as Adobe Systems Inc.'s  Acrobat, Sun Microsystems Inc.'s Java or even the Internet, rather than replace them, Anysoft officials said.
Anysoft said it has held licensing talks with five of the world's top 10 independent software development companies, including IBM.
Poreh said IBM's main interest appeared to be in using ANY technology to recover data from so-called ""legacy"" applications running on older mainframe computers where the underlying software is no longer being actively maintained.
ANY technology currently works with software running on Microsoft's Windows operating systems. The technology is in the process of being made compatible with Apple Computer Inc.'s Macintosh, IBM's OS/2 and the Unix-based X/Windows operating system, company officials said.
",9
"Flextronics International Inc Chief Executive Michael Marks said he expects revenues of around $1 billion during fiscal 1998, more than double the $500 million expected in the fiscal 1997 year ending in March.
Marks was responding to the nose-dive in Flextronics stock price Wednesday morning that send the stock down 12-1/4 to 25. The sharp decline came after the company announced a restructuring plan that is likely to dampen near-term profits.
""We are going to more than double our revenues next year... to somewhere around $1 billion,"" Marks said.  
""There is nothing but good news here,"" Marks told Reuters by phone from San Jose, Calif.. He was referring to the company's business prospects going forward.
He said Flextronics' restructuring was designed to allow it to continue to gain market share and position for it for annual earnings growth of 35-40 percent through the year 2000.
""Next year we will be third in the market by revenues,"" Marks said, rising from its current fourth place position. Only SCI Systems Inc and Solectron Corp remain larger, he said. ""We are on fire as a company,"" he added.  
The executive blamed the volatility of the Nasdaq market and the departure of momentum players who had invested in his company recently for the tumble in Flextronic stock price.
In particular, he said the sell-off was sparked Wednesday when sellers dumped a relatively small volume of about 80,000 shares, creating the downward spiral in the stock price.
""It's one of the reasons why everyone thinks about getting out of Nasdaq,"" Marks said.  
Asked if he considered the stock a buy at current levels, he declined to comment.
In a statement released earlier, Flextronics said its restructuring would include charges of $5 to $7 million spread over the December and March quarters, to ""prepare for accelerated growth over the next several years.""
The company also said it had told analysts in a briefing Tuesday of new contract wins with Ascend Communications Inc, Harris Corp's Communications unit and Philips Electronics NV.
With Ascend in particular, he said the company would be manufacturing the company's mainstream MAX TNT remote access network equipment. ""We expect (Ascend) will be one of our top 10 customers,"" Marks said.
These latest wins follow a recent $350 million contract win with Telefon AB L.M. Ericsson, bolstering its already strong activity in the contract manufacturing of telecommuncation and data communciation products, he said.
Other major customers include Microsoft Corp MSFT.O and LifeScan Inc, a unit of Johnson & Johnson.
Flextronics is Singapore based.
-- New York newsdesk, 212-859-1736
",9
"Coupon clipping is coming to cyberspace.
SaveSmart Inc., a start-up company based in Mountain View, Calif., plans to unveil on Monday a credit card-based scheme to allow computer users to browse for and take advantage of bargains offered by a wide range of local, regional and national merchants.
Consumers will be able to qualify for automated discounts on groceries, dining out, movies, clothing, furniture and auto repairs, among other items.
The company said that using its special credit card eliminates the inconvenience and inefficency of paper-based promotional coupons delivered in newspapers or by direct mail. Industry figures show that only about 2 percent of paper coupons are actually redeemed.
SaveSmart said the service dramatically enhances sales promotions by making it easier for consumers to find and use them, while making them cost-effective for merchants to offer.
""We are driving physical traffic into the merchants' stores,"" said Bernard David, SaveSmart's executive vice president of business development.
Advertising analysts said the new interactive promotion service could play a key role in transforming the industry, which generates about $120 billion a year, according to the media research firm of Veronis, Suhler and Associates.
""All Web promotions need to be attractive in the real world, not just the virtual world of cyberspace,"" said Mary Doyle, a Web marketing analyst for IDC/Link Resources.
What differentiates SaveSmart from thousands of other Internet-based commerce efforts is the linkage the service makes between computer users and actual businesses, she said.
The company's Web site -- www.savesmart.com -- offers an online database of merchant promotions personalized to fit the individual's interests.
Consumers can browse through promotional offerings and when they find a promotion they want, ""select"" it and reserve it. They can then redeem the promotion by presenting the SaveSmart card at a merchant's store at the time of purchase.
SaveSmart targets what it describes as ""neighborhood trading areas"" of roughly 100,000 people.
The service will be launched Monday in the area around Palo Alto, Calif., with service expanding to include the entire San Francisco Bay Area by the end of the year.
In 1997, the company plans to roll the system out in 10 additional U.S. cities where Internet use is most heavily concentrated, including Boston, New York, Washington D.C./Baltimore and Orange County, just south of Los Angeles.
The company said it plans a coordinated direct marketing campaign in each city where the service is introduced to sign up individual card members using mail and newspaper ads.
In addition, SaveSmart said it has been successful in promoting the card as an employee benefit offered by large computer companies.
""Our target is to have tens of thousands of SaveSmart members within each neighbourhood trading area,"" David said, adding that he expected to meet that goal in SaveSmart's first service areas ""within a couple of months, to be quite frank.""
To date, SaveSmart said it has signed up 400 merchants, representing a cross-section of locally available goods and services. McDonald's, Domino's Pizza and Subway Sandwiches are participating. In addition, it has agreed to a deal with at least one major movie studio, which it declined to name.
While the system would appear to be a threat to traditional promotional outlets like direct mail marketers and newspaper publishers, SaveSmart said it is working with one leading U.S. household direct marketer and that there is nothing to preclude it from linking up with news publishers.
David said SaveSmart would also make a logical fit with local telephone companies, but declined to say whether the company had reached any such agreements.
The company, which has about 30 employees,. was founded by executives from VeriFone Inc. and other Silicon Valley computer firms. VeriFone is a leading global supplier of merchant credit card transaction terminals.
SaveSmart provides special VeriFone-built terminals to merchants using its credit-card system.
Company officials said SaveSmart is designed to leave open the possibility that the system could be adopted by a major credit card company, so that consumers could use their normal credit card to conduct SaveSmart transactions.
The company has held talks with major credit card companies, but there are no deals to announce, officials said.
SaveSmart has not disclosed its financial backers. Industry consultants familiar with the company said they include Bill Melton, founder of VeriFone, and also CyberCash Inc., an Internet commerce company.
Other backers include members of Germany's Quandt family, who are ranked among the world's richest families, they said.
",9
"The head of one of Lloyd's of London's largest corporate investors said on Wednesday he expected the number of traditional Names at Lloyd's of London to continue to fall to a core of between 4,000 and 5,000.
John Stace, chief executive of Angerstein Underwriting Investment Trust, told Reuters it was likely that the number of members' agencies looking after Names' interests would drop to just four or five.
Angerstein owns Stace Barr, one of the biggest remaining members agents, representing 933 Names.  
Stace said the aim was for Stace Barr to remain one of the top surviving members' agencies with around 1,000 Names.
Angerstein's operations director James Illingworth said Lloyd's 12,000 plus remaining Names would be faced with resigning membership, converting to some sort of limited liability or remaining as unlimited liability backers.
Around half are expected to resign in the coming years or convert to limited liability schemes.
Despite a number of schemes being set up to allow conversion to limited liability, these had so far been small and unsuited to mass conversion.  
""Scottish limited liability Partnership has not been that succesful. I don't think it is the answer to mass conversion,"" said Illingworth.
Angerstein has an interest in finding a solution to the conversion problem and like many others was working on it, but it was too early to say how long this would take, he said, adding that any scheme must be relatively simple.
An announcement is also likely by the end of April on the question of solvency ratios for individual names, Stace said.
At present, names must put up liquid assets of 20 to 30 percent of their underwriting limit, while Names in pooled underwriting arrangements, known as MAPAs, must put up 25 percent.
Most corporate investors do not enjoy such a high level of gearing and pressure is mounting for a change in the rules applying to Names.
""Four-to-one MAPAs solvency will change,"" Stace said, adding that his personal opinion was that three-to-one for Names was probably appropriate.
-- London Newsroom +44 171 542 7721
",44
"The drive to cut costs and offset falling margins in insurance broking continued apace on Thursday as Lowndes Lambert Group Holdings Plc and Fenchurch Plc confirmed that they are to merge.
The two London-based brokers announced last week they were in talks and said the complementary nature of their businesses would offer significant benefits to clients, employees and shareholders.
The merger comes against a background of industry over-capacity and intense competition which has put increasing pressure on margins and led to an acceleration in consolidation as companies search for economies of scale.
The companies said they believed the deal would create a stronger, more broadly based and competitive group better positioned to win new business and revenues.
Another attraction of the deal is the scope it offers for cutting costs through the merger of head offices, the companies' branch networks and the rationalisation of support and administrative functions.
Such moves will produce cost saving of at least five million pounds in the 12 months to March 1998 and together with the improved prospects for revenue growth will significantly enhance earnings and dividend propects, the company said.
Fenchurch shareholders are to be offered 628 shares in the new company, to be called Lambert Fenchurch Group, for every 1,000 shares they hold, valuing Fenchurch at around 27.6 million pounds ($46.18 million).
Last year's results for the two groups highlight the difficulties faced in the industry with Lowndes' reporting a nine percent fall in pre-tax profits to 13.9 million pounds.
Fenchurch's profits dropped 27 percent to 5.9 million pounds, prompting it to more than halve its final dividend.
The deal comes just weeks after Lloyd Thompson Group Plc and JIB Group Plc announced they are to merge in a deal worth just under 300 million pounds.
The companies believe today's move will reinforce operations in areas where both are strong such as the the UK retail, marine cargo, international non-marine and reinsurance markets.
Lowndes position in marine, fine art and entertainment will also be complimented by Fenchurch's position in North American non-marine and aviation and the broad spread of operations would offer improved growth potential, they said.
Future growth is to be pursued through a combination of organic growth and acquisition.
Lowndes chief executive David Margrett is to become chief executive of the new group with Lowndes chairman Sir Robert Clark becomning non-executive chairman.
The costs of the merger are expected to amount to around 11 million pounds.
($1=.5976 Pound)
",44
"The second large merger between insurance brokers in the space of a week highlights the dilemma many in the industry face over how to counter overcapacity and increasing competition, analysts said on Monday.
The latest move, a 300 million pound ($500 million) merger between Britain's Lloyd Thompson Group and JIB Group comes hard on the heels of last week's $1.23 billion acquisition of New York's Alexander & Alexander Services (A&A) by U.S. broking giant Aon Corp.
Different in scale, the two deals are also very different in motivation but both point to a clear trend in the sector -- consolidation.
Vast overcapacity in broking has left the industry struggling in recent years.
The Aon/A&A deal was driven by a desire to attack costs, increasingly seen as one of the few ways forward for an industry beset by falling rates and declining revenues.
But the merger of Lloyd Thompson and JIB to create Jardine Lloyd Thompson Group is different. It has not been prompted by a search for cost savings but by an effort to release the benefits from the two companies' ""complementary"" businesses.
Cost savings will be restricted largely to the companies' London operations and the opportunities to build upon each others existing businesses, particularly in Asia Pacific, will be the main drive in future growth, according to Lloyd Thompson chief executive Ken Carter.
However, elsewhere in the sector the need to find ways of offsetting the pressure on rates by stripping out costs, like Aon, has raised the prospect of further deals to come.
Rumours that Aon or Marsh & McLennan were about to launch a takeover bid for British-based broker Sedgwick swept the insurance markets on Friday.
Such rumours are fuelled by the the hand-in-glove nature of the business, say analysts.
""The brokers are constantly in discussions about mergers; they chat all the time. And one is always surprised by seeing the industry bash on, trying to purge overcapacity through consolidation,"" said one analyst.
One of the main problems with any merger between brokerages is defection of staff. Another is the diminishing number of would-be predators.
While Aon refused to comment on Friday's Sedgwick rumours, a spokeswoman for the company did point out the need to ""digest"" its most recent prurchases.
The newly merged Jardine Lloyd Thompson will be positioned between global brokers such as Britain's Sedgwick and Willis Corroon and smaller niche brokers such as Lowndes Lambert and C.E. Heath. It is also likely to leave them in something of a dilemma.
As the number of more obvious deals are done, the pressure on those remaining to come up with a means of remaining competitive is likely to rise. Mergers or acquisitions may, however, become less attractive as the more logical tie-ups in the sector are done, leaving those left with fewer options.
""Brokers are all cutting costs but if rates continue to fall, they'll all be cutting back to keep up with the revenue stream coming down. There has to be a huge shock to the industry which will take out a few of the players. Until that happens brokerage isn't going anywhere,"" said one analyst.
-- London Newsroom +44 171 542 7721 ($ = 0.602 British Pounds)
",44
"British insurer General Accident PLC reported a fall in annual profits on Tuesday, despite a record final quarter in 1996.
Operating profits slipped 15 million pounds to 421 million ($680 million) although a rise in weather-related losses of 30 million pounds more than accounted for the decline.
The recent strength of the pound was offset by a change to an average translation of overseas earnings instead of a year-end translation which added 10 million pounds to the operating line.
Despite the fall, profits were above market forecasts and a 10.5 percent increase in dividend for the year to 34.25 pence per share also beat expectations.
Net assets per share rose to 675 pence from 653 pence.
By late morning General Accident shares had added 8-1/2 pence to 845-1/2 pence.
General Accident chief executive Bob Scott described the market as increasingly competitive but added that the strategy of focusing on underwriting skills and building the life business was bearing fruit.
Scott said the group wanted to focus life operations in Britain and the goal was to increase the proportion of life earnings to a level that covered dividends each year.
The proportion of dividend covered by net life earnings in 1996 was 44 percent but Scott ruled out any major acquisitions in the drive to expand the business.
""At the present time there's nothing wrong with organic growth in life. We've proved we're capable of achieving that,"" said Scott.
Provident Mutual, acquired in January 1996, contributed 18 million pounds to the results, net of reorganisation costs of 16 million pounds and General Accident said it was now looking to capitalise on the pension expertise which Provident brought to the group.
The key for the life company was the profitability of new business and the group had done well in a year which included the integration of Provident, said Scott.
Scott dismissed speculation of a possible merger or takeover of General Accident.
""We've got the benefits of scale in our major businesses. We don't have to do anything,"" he said. ""We'd like to make further acquisitions in the U.S. Midwest but don't see any need to dramatically change our current shape.""
The rating environment continues to be mixed and General Accident echoed comments from Commercial Union and Guardian Royal Exchange that there were signs of firming motor rates.
""There are certainly signs that in personal motor rating increases are coming through. We're putting another rate increase through in commercial motor,"" said Scott.
There were, however no signs of rate increases in the homeowner or commercial sectors.
Like other insurers, General Accident results saw an increase in weather losses over the year and said that results from Australia were also disappointing. ($ = 0.619 British Pounds)
",44
"Britain's Ladbroke Group Plc on Monday concluded a long-awaited global alliance with Hilton Hotels Corp (HHC) of the U.S., reuniting the Hilton brand worldwide for the first time in 32 years.
Despite the tie-up, which covers 400 hotels in 49 countries, the two companies denied there was a hidden agenda to progress to a full merger of the two groups.
""We're taking a first step in bringing the hotels business much closer. We're putting the relationship back together and who knows what may come of it,"" said Ladbroke chief executive Peter George.
Shares in Ladbroke initially firmed on the earlier-than-expected conclusion of the agreement, adding 2-1/2 pence to 236 pence in morning trading.
The companies said that the deal covering sales and marketing, loyalty programmes and development would fuel top-line growth and dispel the confusion that has surrounded the two groups in recent years.
Hilton has operated separately within and outside the U.S. since 1964 when Hilton International was spun off from HHC.
""From our customers' point of view this will look as if it's one company for the first time in 32 years. For many years we've confused our guests...They'll now no longer see a difference between a London Hilton and a Hilton in New York,"" said Stephen Bollenbach, chief executive of HHC.
""These two companies will have such a close alliance and so many points of contact with each other that I believe you will get all the benefits of one legal entity whether or not you become one legal entity.""
The reunification would also help both groups capitalise on industry growth and make them more resilient in cyclical downturns, said George.
Announcing the signing of the agreements for the hotel deal, which was first unveiled last summmer, the companies also said a worldwide loyalty programme -- Hilton HHonors Worldwide -- would start on February 1.
That would be the single most important marketing link up between the two, George said, but there was scope for further cooperation in other areas such as gaming.
""There is a gaming provision as well whereby we're looking at doing some gaming projects together,"" said George.
""It's not a deal that involves a great deal of cost savings but the primary benefit is the top line -- it'll be driving revenues. It can be valued in the tens of millions of dollars to each company.""
As expected the agreements provide for taking cross shareholdings of up to 20 percent. Hilton said it intended to acquire a five percent stake in Ladbroke in due course.
Mutual participation in future hotel development will focus primarily on management contracts and franchises, but the companies said it was no longer proposed that each make minority investments in the other's hotel real estate.
The deal is to be Ladbroke's number one priority in the near term but, said George, the company was still looking to develop the business by increasing the number of hotels around the world, and was always on the look out for additions to the existing business.
",44
"British insurers said on Tuesday they would require those wishing to take out new life insurance policies to reveal the results of genetic tests.
But the Association of British Insurers (ABI) said it would not ask people to take genetic tests when applying for life insurance for the next two years.
The policy statement, backed by all 440 ABI member companies, was a response to rapid developments in the area of genetics in recent years.
While still in its infancy, there is the possibility that new genetic tests will soon be developed that will be able to predict the chances of someone contracting certain diseases or their life expectancy.
Many U.S. companies already require applicants for insurance to undergo genetic testing. At present, Britons are asked to give results of tests they have undergone but are not asked to take tests to qualify for insurance.
Doctors can already diagnose the most common single gene defects such as muscular dystrophy and cystic fibrosis and screen for an individual's susceptibility to certain cancers.
Experts say it will soon be possible to predict the risk of more common disorders such as diabetes or rheumatoid athritis.
The ABI specifically pointed out Huntington's disease, a rare and untreatable hereditary disease that usually does not show up until middle age.
It is characterised by involuntary twitching and causes mental deterioration and eventual death.
Tuesday's announcement is likely to raise fears that an underclass may be created of people unable to insure themselves because of their genetic make-up.
But a spokesman for the ABI dismissed this possibility and said if new tests became available they were likely to benefit people, enabling them to adjust their lifestyles to the risks they run of heart and other diseases.
One expert on the ethics of genetics testing called the decision a good compromise.
""I very much welcome this decision because it seems to me to strike a balance between the private interests of individuals and the interests of insurance companies,"" said Ruth Chadwick, a University of Central Lancashire geneticist who coordinates Euro-Screen, a committee watching such developments.
Not requiring tests protected individuals, she said, while forcing people to disclose tests prevented those with genetic defects from taking out policies hoping for big payoffs.
But Chadwick warned: ""There is a danger that genetic predisposition will be thought of as predicting conditions, which it is not.""
Actuaries said they were concerned the debate on health insurance and genetic testing had barely started.
A statement from actuaries' professional organisations noted that Britain's National Health Service accepted good or bad risks without extra charge.
""The profession does not favour legislation on the use of genetic tests as it feels that no case has yet been made for such severe action nor has society discussed how commonplace such tests will be in future medicine,"" it said.
Genetic tests detrimental to applicants for life insurance up to a total of 100,000 pounds ($160,000) will be ignored where the insurance is linked to a new home mortgage under the new policy.
For new applications for other life insurance policies, individual companies will decide whether they wish to take account of the results of genetic tests previously taken.
($ = 0.621 British Pounds)
",44
"Insurance group Guardian Royal Exchange Plc on Tuesday blamed competition and bad weather in the United States and Britain for a sharp fall in trading profits for 1996.
But despite continuing pressures on margins, Guardian chief executive John Robins said there were bright spots.
The company had seen some hardening of premiums in selected sectors and regions such as British motor insurance, and difficult conditions in Germany had not been as severe as had some commentators had forecast.
Trading profits for the year, however, were down over 17 percent at 281 million pounds ($458 million), before restructuring costs of 39 million pounds.
Pre-tax profits including investment gains dropped to 651 million pounds from 812 million pounds last year. Worldwide general insurance premium income was broadly unchanged at 2.91 billion pounds.
The figures were broadly in line with market expectations and Guardian shares were trading eight pence higher at 296 pence by mid-morning.
The dividend payout for the year was raised by 11 percent to 10.0 pence per share.
Robins said the results were achieved amid continuing competitive pressure, abnormally bad weather in North America and adverse weather and continuing subsidence costs in Britain.
But finance director James Morley told Reuters that the group expected premiums in the motor and household insurance markets to strengthen in the coming year although commercial rates were expected to continue to be weak.
""In UK household during 1996 we saw a rating environment where prices were going down. The particularly cold spell at the beginning of the year will have reminded people not to underprice household and we would expect the second half of the year to be flattish or slightly positive,"" said Morley.
Guardian said it wanted its business to grow organically and by acquisition. But it was not prepared to overpay and was determined to write for profit, not volume.
The results included a second half provision for the integration of the Legal & General business and fundamental restructuring of the British insurance business. Robins said he believed they had achieved a great deal in effectively positioning the group for the future.
A new management structure was set up at the beginning of 1997 and cost savings in the next two years would equal this year's 39 million pounds of exceptional charges.
Those charges are expected to cover all the costs required to complete the restructuring over the next 12 to 18 months.
There will be some facility closures and further staff losses to come, said Morley, but he declined to put an overall figure on the number of likely layoffs.
The company said it continued to withdraw from non-core, non-performing markets and had three objectives -- greater attention to customer needs, greater focus on the cost base and increasing return on shareholders funds.
It continued to target increases in premiums only in sectors and regions where it was confident of profitable growth and acceptable underwriting margins.
""Where we have a strategic benefit from being in a market segment, then we will use our market presence to ensure we get the rate we require over the medium term. In the shorter term we will walk away from certain business if we can't get the right rates,"" said Morley.
($ = 0.613 British Pounds)
",44
"Scottish Amicable adviser SBC Warburg is hoping to close the first stage in the sale of the life assurance group with the signing of confidentiality agreements with all potential bidders by the weekend, a source close to the deal said on Friday.
So far three companies, Abbey National, Prudential Corp and Australia's largest life insurer Australian Mutual Provident (AMP) have signed the agreements.
These give the bidders detailed financial information on ScotAm to enable them to finalise their offers.
The agreements go further, however, in preventing the bidder from publicly disclosing any details of the offers and forcing them to accept the ScotAm board's decision as final.
A number of other companies are reported to have expressed interest in ScotAm but have yet to sign the agreements.
One company rumoured to have contemplated a bid, Belgian-Dutch insurer Fortis, is said to have ruled itself out of the auction process, but the company has consistently declined to comment.
Another tipped to make a bid, Dutch group Aegon, has yet to show its hand.
The whole process is expected to take between four and six weeks before a final offer is recommended to policyholders by the ScotAm board.
Mutually-owned ScotAm effectively put itself up for auction earlier this month when it said it was to seek definitive offers from parties interested in acquiring it.
The sealed bid process has come in for some criticism and Warburgs and the ScotAm board are likely to go to great lengths to ensure fairness is seen to be done.
""I suspect they are aware that they may have to give more detail than otherwise they may have done under a controlled auction,"" commented one industry observer.
Abbey National, Britain's fifth largest bank, sparked the auction when it announced at the end of January that it was prepared to make an offer worth up to 1.4 billion pounds ($2.27 billion) for ScotAm.
The move came barely two weeks after ScotAm had published its own proposals to drop its mutual status through a flotation on the London stock market.
Prudential threw its hat into the ring with a 1.9 million pound bid last week, a move which prompted ScotAm to open the way for other interested parties to declare their interest.
Abbey National has said it may raise its offer once it has had access to ScotAm's financial details.
In deciding who wins the race, the question of the value of the bid is likely to include not just how much policyholders get up front but where that money comes from, how much goes into policies and what the bidder can offer in terms of future investment flexibility. ($1=.6167 Pound)
",44
"Insurance group Guardian Royal Exchange PLC on Tuesday reported a sharp fall in 1996 profits and said it was considering a major acquisition within the next twelve months, possibly in the life sector.
The company blamed tough competition and the worst catastrophe weather claims in the U.S. for 75 years for the profits decline, while bad weather and continuing subsidence losses in Britain also taking a toll.
But news that Guardian may spend around one billion pounds ($1.6 billion) on a life acquisition and disappointment that it had no plans to return capital to shareholders prompted the shares to reverse an initial rise on the back of the results.
The company told industry analysts that a UK life acquisition was top of the list, that it could comfortably spend one billion pounds and would be prepared to spend more if necessary.
Guardian is not a major player in the UK life market and on the plus side an acquisition could give it critical mass and economies of scale.
But the possible goodwill write off such an  acquisition could prompt was a concern, analysts said.
""Guardian looks very expensive on both an earnings and a dividend basis. The asset value is the only rationale as to why the shares are sitting at current levels,"" said one.
""Any large life acquisition would almost certainly result in paying a very substantial premium to asset value.""
The decline in 1996 profits was broadly in-line with market expectations. Despite continuing pressures on margins, Guardian chief executive John Robins said there were bright spots.
The company had seen some hardening of premiums in selected sectors and regions such as British motor insurance and difficult conditions in Germany had not been as severe as some commentators had forecast.
It predicted rates in the motor market could rise by as much as eight percent over the next twelve months with household rates likely to see smaller increases of the order of two percent.
Competition in commercial markets continued to be fierce, though even here there were hopes of an upturn in rates by the end of the year.
For 1996, however, Guardian trading profits were down over 17 percent at 281 million pounds, before restructuring costs of 39 million pounds.
Pre-tax profits including investment gains dropped to 651 million pounds from 812 million pounds last year. Total premium income was down only slightly at 3.73 billion pounds.
While competition had risen and was likely to increase further, Guardian said it was confident about the future and that this was reflected in the increase in the dividend payout for the year by one pence to 10.0 pence per share.
The figures were broadly in line with market expectations although the headline operating profit was flattered by reserve releases to the tune of 10 to 15 million pounds and by a profit contribution from the internal reinsurance operation which may not be repeated.
Progress had been made on the integration of last year's acquisition of Legal & General's commercial business and of the RAC insurance business.
Restructuring of the group's operations in Britain was also moving ahead, the company said.
A new management structure was set up at the beginning of 1997 and cost savings in the next two years are expected to equal this year's 39 million pounds of exceptional charges.
Those charges are expected to cover all the costs required to complete the restructuring over the next 12 to 18 months and while these might include further redundancies, these were unlikely to be of the same order of previous rounds of layoffs. ($ = 0.612 British Pounds)
",44
"The London Stock Exchange launched its new integrated trading and information computer system, Sequence 6, on Tuesday, the last stage in a three-year programme to take the London stock market into the next century.
The new system completes the introduction of electronic trading begun at the time of the Big Bang' shake up of the London market in 1986.
It also paves the way for the shift to electronic trading in Britain's largest shares on the transition from quote-driven trading for FTSE 100 stocks next summer.
""We are delighted that Sequence 6 has been implemented successfully, on time and under budget. The launch has gone very well today and the users appear to be very happy,"" said a spokeswoman for the Exchange.
However some market-makers in London said they experienced problems in posting prices on Tuesday, citing difficulties with the Reuters system.
A Reuters spokesman said the company's link to Sequence 6 was operating as planned but that there was an unrelated temporary operational problem with feeds from several European exchanges including London which affected prices in the morning.
The completion of the Sequence programme at a cost of 81 million pounds marks the culmination of an modernisation process by the Exchange and Andersen Consulting which will provide the flexibility to adapt to the future needs of the market place.
It will help ensure that London retains its competitive edge, and reduce ongoing costs for both the Exchange and its participants, the Exchange said.
Sequence 6 will provide the basis for new electronic trading in FTSE 100 shares once the structure of a new order-driven regime is agreed and implemented in 1997.
That will signal the end of the current, quote-driven system where prices are set exclusively by dealers authorised to act as ""market-makers"" and deals struck over the telephone.
It will also enable electronic as well as telephone-based trading in the Alternative Investment Market (AIM) and the Seats -- Stock Exchange Alternative Trading Service -- market for less liquid stocks.
During extensive market testing over five weekends this summer, the new trading platform succesfully coped with up to five times the average levels of daily activity in the London market, the Exchange said.
The Exchange entered into the outsourcing agreement with Andersen in April 1992 and today's launch marks the final phase of a four-stage delivery process.
The successful completion of the project, on time and nearly five million pounds ahead of budget, will come as a relief to the Exchange after its ill-fated and costly attempt at building a paperless share settlement system - TAURUS - was abandoned four years ago.
The collapse of the project resulted in the resignation of then chief executive Peter Rawlins and subsequent involvement of the Bank of England in supervising the development of Crest, a replacement for the Exchange's antiquated Talisman system.
It may also mark a turnaround in its fortunes after a year which began with the sacking of its chief executive, Michael Lawrence, amid disagreement over how to counter competition from overseas bourses.
-- London Newsroom +44 171 542 8712
",44
"British insurer Legal & General (L&G) on Thursday reported a double digit rise in profits for 1996 and gave an upbeat assessment of the outlook for the group.
But the company ruled out acquisitions in the life and pensions business and said that despite stiff competition, rising sales and profits would continue to underpin strong dividend growth in the future.
""Our strategy is not dependent on mergers and acquisitions. We don't want our efforts diverted by someone else's problems,"" said L&G chief executive David Prosser.
The in-line results and prospects for dividend growth helped L&G shares to a new all-time high of 423 pence. By late morning the shares were trading at 415-1/2 pence, a rise of 9-1/2 pence on the day.
Analysts said there were few surprises in the figures, though the dividend was slightly ahead of forecast.
The trebling of the value of new business, was singled out as particularly positive.
""There were exceptional factors in there but nevertheless they've done a tremendous job in taking the new business value up from 20 million ($31.9 million) to 60 million pounds. That was the most striking piece of good news,"" commented one analyst.
Despite a ""very competitive"" trading environment, which he said was likely to continue, Prosser expressed satisfaction at the year's performance.
Sales growth continued to be based on competitive pricing and product innovation but reductions in profitability produced by cutting prices were being offset by increases in business volume, he said.
""There's a lot of market share about if you do this business sensibly and we do appear to be in a virtuous circle. We're winning additional sales growth, getting lower unit costs as a result, good growth in embedded value of new business and a good increase in shareholder value,"" he told Reuters.
More competitive products, supported by lower administartion costs, cost effective sales distribution and good investment returns, result in higher sales, greater customer loyalty and increased profit, said Prosser.
Despite a 54 percent jump in new business in 1996, L&G still had less than five percent market share and the focus going foward would continue to be on growing volume, said Prosser.
But the sharp increases in British bulk annuity business in 1996 which saw single new premium business rise to more than four times 1995 levels, is unlikely to be replicated in 1997.
Operating profits for the twelve months were up over 15 percent to 291.4 million pounds and the dividend was raised 14 percent to 11.13 pence per share.
Profits from life and pensions businesses rose nearly 14 percent to 250 million pounds while general insurance profits rose to 29.9 million pounds from 23.4 million pounds the previous year.
The sale of the company's commercial lines business resulted in a pre-tax exceptional profit of 70 million pounds.
The investment maangement arm had a good year in winning new business and with 48.1 billion pounds under management, a 20 percent increase on the year, the group is now one of Britain's largest fund managers.
Like rival insurers the group had seen some firming in motor rates but this was slow and very selective.
""Household is more dificult. I think some people are seeing rate reductions and some are getting rate increases. Household is becoming more selective on underwriting and pricing of risk -- the shape of pricing is changing,"" said Prosser.
($ = 0.626 British Pounds)
",44
"Britain's B.A.T Industries said on Monday it was keeping an open mind about opportunities to restructure its operations after news reports that the group is continuing its search for a partner for its financial services businesses.
Tobacco and financial services company B.A.T, however, refused to comment directly on reports that talks with another company -- said to be insurance group Commercial Union Plc -- had foundered. Commercial Union was similarly tight-lipped, declining to confirm or deny the rumours.
Bolstered by the deal talk, B.A.T shares pushed 17p higher to 468-1/2p on Monday, but a spokesman for the company said its position had not changed.
""We were widely reported as having ruled out a demerger at the third quarter (results) and now we're reported to be ruling it in. The true position is that we have an open mind.""
Pressure on B.A.T, whose operations include Eagle Star, Allied Dunbar and U.S. insurance unit Farmers, to enhance shareholder value after a disappointing share price performance over the past year is seen as behind the move.
The exposure of B.A.T's tobacco business to litigation in the United States has proved a particular drag on the share, reviving talk about a possible separation of the financial services business.
Add to this the potential for cost-cutting and the perceived need for B.A.T to bolster management in its financial services arm and the attractions of a merger are clear.
Britain's biggest insurer Royal & Sun Alliance is currently reaping the rewards of just such a move with the group forecasting annual savings of 175 million pounds ($287.5 million) by 1998 after the merger of Royal and Sun back in July.
A lack of any distinct competitive advantage and a number of strategic questionmarks at B.A.T's Eagle Star and Allied Dunbar operations are compounding the desire to find a partner and to follow Royal Sun in the achieving critical mass in the highly competitive domestic market, industry analysts said.
""The idea of a demerger has been doing the rounds for ages and B.A.T must be looking at the options. There is value trying to get out but I don't think a deal is imminent and I don't think it would be easy,"" said one analyst.
Rates are under pressure, the market is in a downturn and pressures from new entrants are severe but the prospect of some sort of a deal before too long in the sector has boosted share prices in recent months, traders said.
The industry itself is no stranger to such moves with the drive to create economies of scale and cut costs in fragmented markets producing a number of big insurance deals in the last 12 months -- in the U.S., France and the UK.
""There probably will be more agreed mergers but the big debate is whether they're worthwhile or not; the jury's still out on that,"" said one analyst who preferred not to be named.
""There's no doubt that you can achieve reductions in costs pretty rapidly. The question is are they sustainable. In the UK, U.S. and German markets over the past 10 years, for example, there hasn't been much correlation between efficiency, profitability and size in the insurance industry.""
Hostile bids in the industry are likely to remain a rarity, however, with regulatory barriers, especially in the U.S., and a reluctance on the part of companies to take the hit from the required goodwill write-off.
""Most of the recent merger activity in the industry has been between companies that are large in their own domestic market but perceive themselves to have weaknesses that can be solved by cost-cutting, rationalisation and getting a bit more market share in their key areas,"" said one of the analysts.
-- London newsroom +44 171 542 7721  
($1=.6087 Pound)
",44
"Scottish Amicable on Monday confirmed that three companies had submitted final offers for the mutually-owned insurance group by last Friday's bid deadline.
High street bank Abbey National plc and insurers Prudential Corp plc and Australian Mutual Provident (AMP) must now wait until the end of the month to find out who has won the fight for control of the hotly-pursued ScotAm.
None of the bidders have taken up the option of making their offers public, allowing the company's board and its advisers SBC Warburg to weigh up the competing bids behind closed doors.
In an effort to deflect criticism of the sealed-bid process ScotAm had agreed to publish details of offers, if asked to do so by a bidder.
But for the moment all three seem content to abide by Scotam's preference for confidentiality. They have also committed themselves to accepting its decision at the end of March as final.
The board's endoresement will go a long way in ultimately securing ownership of the group but does not guarantee it.
Two-thirds of the 1.1 million policyholders who own the company must approve the choice and after widespread criticism of management's handling of both its own plans to float ScotAm and the auction process, its recommendation is likely to come under close scrutiny.
ScotAm, based in Stirling in central Scotland, has arranged for an independent tribunal to resolve any dispute arising from the takeover battle and has repeatedly stressed that the interests of its policyholders will be uppermost in its decision.
Those interests are likely to be focused upon bidders' long-term investment plans rather than upfront payouts and one of Warburg's main difficulties will be comparing very differently structured proposals.
Independent actuaries and the Department of Trade & Industry are to be consulted before the final decision is made.
Job security for ScotAm's 2,200 employees is also likely to play a major part and all three bidders have been quick to calm fears of job cuts.
AMP has said it would consider moving its Bristol-based London Life business to Scotland if it won while both Abbey and the Pru have said job preservation in Stirling would be a priority.
AMP, Abbey and the Pru are all that are left of half a dozen companies, including National Westminster Bank and Lloyds TSB who last month signed confidentiality agreements with ScotAm to evaluate the company as a takeover prospect.
The price tag -- widely expected to top two billion pounds ($3.2 billion) -- has been cited by many companies as the reason for withdrawing from the race with acquisition goodwill likely to top one billion pounds.
AMP has made no effort to disguise its desire to expand in both the British and U.S. market and has said it would shift its attention to another target if it were to miss out on ScotAm.
Both the Pru and Abbey have already said that their original proposals might be increased once they had access to more detailed financial detail on ScotAm.
Abbey's original bid was worth up to 1.4 billion pounds while the Pru's 1.9 billion pound offer included a loan element to bolster ScotAm's life fund.
Those bids came barely two weeks after ScotAm had published its own proposals to shed its mutual status and float itself on the stock market.
($ = 0.624 British Pounds)
",44
"The Securities and Investments Board (SIB), responsible for overseeing financial regulation in Britain, has clamped down on the use of stockmarket derivatives to profit from inside information.
SIB said on Thursday that firms should ensure they do not use derivatives to buy or sell stakes for themselves or customers where inside information would have prevented them from doing so in the open market.
Front-line regulators such as the Securities and Futures Authority are to have day-to-day responsibility for enforcing the guidance, designed to ban the improper use of inside information in the derivatives market.
Derivatives such as futures or options, are financial instruments derived from the value of an underlying asset such as a stock or a bond.
The 1993 Criminal Justice Act which made insider dealing a criminal offence only covers individuals, but firms are expected to observe the spirit, as well as the letter, of the new advice, said SIB.
It also said that firms should not rely on arguments about equality of information' -- that the information is widely known -- to justify such stakes, even where this defence could be relied on in relation to the criminal law.
Neither should they rely on the defence, called bid facilitation', if taking a stake provides only a cash benefit rather than a step towards completing a takeover bid for a client.
The SIB said its advice was based partly on the standards set in the criminal law on insider dealing, and that authorised firms are required under SIB principles to meet a higher standard in some areas than may be imposed on individuals by the criminal law.
The SIB published a consultative paper on the issue in June.
-- London Newsroom +44 171 542 7721
",44
"The head of the Securities and Investments Board (SIB), Britain's top financial regulator, on Friday criticised slow progress made in compensating victims of pensions mis-selling in Britain, and called on all parties to ensure a speedy conclusion to the situation.
SIB chairman, Sir Andrew Large, said that progress had hitherto been ""unacceptably slow"" but welcomed signs of increased commitments to a rapid resolution emerging from meetings with major firms.
Large's comments followed a statement from British Treasury minister Angela Knight on Thursday urging the pensions industry to speed up payment to individuals hit by pension mis-selling in the late 1980s and early 1990s.
She said that she was looking for ""rapid and decisive results from the pensions industry. Targets will be set to ensure that people are put right"".
Large said he was determined to secure redress for those missold personal pensions and welcomed any contribution which helped secure that aim.
""All parties have a responsibility for bringing this review to a speedy conclusion - the industry, the occupational pension schemes, the regulators and the government.""
Large is due to stand down as chairman of the SIB in May.
Knight's comments came just two days after the ruling Conservative Party, facing a General Election expected to be held on May 1, announced plans to overhaul the pension system in Britain.
As many as 1-1/2 million people in Britain may have been affected by being wrongly advised to take out personal pensions when they would have been better off remaining in occupational pension schemes.
An industry review was launched in 1994 but only a small proportion of those affected have so far been compensated.
Latest figures on the review published two weeks ago revealed that of nearly 500,000 ""priority cases"" just over 10,000 people had been offered compensation.
The SIB announced a simplified pensions review process last November in order to break the log-jam on the issue, but the results of this will not start feeding through until later this year.
The Personal Investment Authority, which regulates the sale of investment products to the public, has been holding discussions with major pensions providers to clear the backlog.
About 40 of the largest life companies account for around 90 percent of personal pension business. The discussions are likely to be concluded in the next three weeks.
",44
"Britain's Ladbroke Group Plc Monday concluded a long-awaited global alliance with Hilton Hotels Corp., reuniting the Hilton brand worldwide for the first time in 32 years.
Despite the tie-up, which covers 400 hotels in 49 countries, the two companies denied there was a hidden agenda to progress toward a full merger of the two groups.
""We're taking a first step in bringing the hotels business much closer. We're putting the relationship back together and who knows what may come of it,"" said Ladbroke Chief Executive Peter George.
The companies said the deal covering sales and marketing, frequent customer programmes and development would fuel top-line growth and dispel the confusion that has surrounded the two groups in recent years.
Hilton has operated separately within and outside the U.S. market since 1964, when Hilton International was spun off from HHC.
""From our customers' point of view this will look as if it's one company for the first time in 32 years. For many years we've confused our guests ... They'll now no longer see a difference between a London Hilton and a Hilton in New York,"" said Stephen Bollenbach, chief executive of HHC.
""These two companies will have such a close alliance and so many points of contact with each other that I believe you will get all the benefits of one legal entity whether or not you become one legal entity.""
The reunification would also help both groups capitalise on industry growth and make them more resilient in cyclical downturns, George said.
Announcing the signing of the agreements for the hotel deal, which was first unveiled last summmer, the companies also said a worldwide loyalty programme -- Hilton HHonors Worldwide -- would start Feb. 1.
That would be the single most important marketing link between the two, George said, adding that there was scope for further cooperation in other areas such as gaming.
""There is a gaming provision as well whereby we're looking at doing some gaming projects together,"" said George.
""It's not a deal that involves a great deal of cost savings but the primary benefit is the top line -- it'll be driving revenues. It can be valued in the tens of millions of dollars to each company.""
As expected, the agreements provide for taking cross shareholdings of up to 20 percent. Hilton said it intended to acquire a 5 percent stake in Ladbroke in due course.
Mutual participation in future hotel development will focus primarily on management contracts and franchises, but the companies said it was no longer proposed that each make minority investments in the other's hotel real estate.
",44
"Composite insurer Royal & Sun Alliance Group Plc on Thursday reported lower results in its first year since it merged and said it would seek shareholder approval to buy in up to five percent of its shares.
But large provisions for U.S. environmental claims and the impact of the pound's strength took the gloss off the figures reported by the group, formed in a six billion pound ($9.7 billion) merger last year.
Including the increased provisions and 32 million pounds for currency movements, operating profits fell to 706 million pounds from 915 million in 1995 for the combined group.
After an initial gain on the buyback news, the shares closed down 9-1/2 pence at 494 pence.
A lower-than-expected net asset value and a poor performance in the British motor insurance market compounded the market's disappointment.
The 167 million pounds in provisions, largely put aside for U.S. asbestos and environmental claims dating back to the 1960s and 1970s, follows a change in the way the group assesses possible liabilities.
On Wednesday, B.A.T Industries subsidiary Eagle Star set aside 160 million pounds in a similar move.
Both companies have said that they expect it to mark the end to such provisioning.
The dividend for the year was raised to 19 pence per share in line with last year's management forecasts.
The operating figures did not include 201 million pounds relating to consolidation costs, some 30 or 40 million more than analysts had expected.
But management declared themselves pleased with the results and said the group remained on target to achieve the annual cost savings of at least 175 million pounds identified at the time of the merger.
Chief executive Richard Gamble said the integration was progressing well, especially on the staffing front, and the group was continuing to hold on to business.
But he played down the possibility of an acquisition to strengthen its life operations or exposure to Continental Europe, emphasising that the current focus was on integration.
The group had decided to buy back shares in anticipation of continued strengthening of its capital position, said deputy chairman Roger Taylor, who hinted that it could be repeated in the future.
The company will need shareholders' permission at the annual meeting in May before it can carry out the buyback.
U.S. weather costs mirrored the experience of competitors who have all highlighted the impact on profits of some of the worst weather on record in North America last year.
U.S. weather losses at 96 million pounds were 36 million higher for the year. Together with the reserving for environmental claims, this turned a 134 million pound profit in 1995 into a 14 million pound loss.
Profits for the general insurance business as a whole after the changes in claims reserving were 480 million pounds, down from 754 million in 1995.
In Britain, a 28 percent fall in profits reflected an increase in the frequency and average cost of personal lines claims -- motor claims frequency was up eight percent and costs seven percent -- and continuing competition.
The figures also included an unexpected 50 million pound increase in reserves split between reinsurance of the U.S. environmental costs and domestic insurance indemnity.
On a brighter note, Royal & Sun said it was confident motor rates had bottomed out and was scheduling increases for 1997.
Worldwide life profits increased by 15 percent to 213 million pounds and were up 13 percent to 150 million pounds in Britain.
The company said it was appointing Patrick Gillam, chairman of Standard Chartered bank, as non-executive chairman from May 9. ($ = 0.620 British Pounds)
",44
"Pensions and property group Liberty International Holdings  said on Thursday it might go on the acquisition trail to develop its financial services interests.
The company, 69 percent-owned by South African insurance giant Liberty Life, said it was always open to acquisitions and was willing to use its strong balance sheet to fund them.
""We've got various developments in the financial services area -- unit trusts, pensions and offshore. Those are the areas we want to be in long term and if they lead us into acquisitions that's fine - but we don't feel any pressure to do them,"" said Liberty managing director David Fischel.
Liberty currently has around 380 million pounds ($619.1 million) in cash on its balance sheet though this may have little bearing on the size of any future acquisition.
""We could spend one billion, two billion or 50 million pounds, it depends on the quality of the acquisition,"" said Fischel.
Liberty, which has a 72 percent stake in Britain's fourth largest quoted largest property company Capital Shopping Centres, which it floated as a separate company in 1996, launched a new, low-cost pension vehicle -- PensionStore -- in January.
It also controls Portfolio Fund Management Limited, a British unit trust group with some 50 million pounds under management.
In October, the group announced an alliance with British Telecom and post office fund managers Hermes which it promised would ""demystify"" the British pension market.
At the launch of the venture which offers specialised investment services to the UK pensions industry, Liberty chairman Donald Gordon said he believed pensions would be the fastest growing business in the world over the next 20 years.
The possibility of an acquistion was raised as Liberty reported a seven percent increase in pre-tax profits for 1996 to 100.4 million pounds.
The dividend at 16 pence per share was up 10 percent on the previous year. Liberty shares, however, slipped on the results ending the day 13-1/2 pence lower at 466-1/2 pence.
The advance in profits was helped by the performance of CSC which owns two of Britain's largest out of town shopping centres - Lakeside, Thurrock, east of London, and the MetroCentre, Gateshead, in north east England..
Strong underlying rental growth - up 38 percent at Lakeside - in an improving retailing environment was the main factor behind the performance.
CSC, which has five of the top ten shopping centres in Britain and attracts over 155 million customers annually, was enjoying a ""very good growth phase"" and had a strong position in the market according to Fischel.
The group could grow it further by expanding existing centres or building new ones such as the 250 million pound shopping centre development at Braehead Park, Glasgow, he said.
Shares in CSC climbed 69 percent to 366 pence in 1996. Adjusting for the CSC share price, Liberty's net asset value per share would have amounted to around 500 pence per share at year-end.
The shares finished the day 1-1/2 pence lower at 392-1/2 pence. ($= 0.613 British Pounds)
",44
"B.A.T industries said on Wednesday it was interested in expanding its British life insurance activities through acquisition but had been put off bidding for mutual insurer Scottish Amicable by the price.
B.A.T. Chief Executive Martin Broughton made the comments as the group, which also has extensive tobacco interests, reported a three percent fall in trading profits at its financial services arm.
Those figures included a 160 million pound ($257.8 million) charge for U.S. environmental claims dating back to the 1960s.
""We've said in the past that the portfolio of brands in our British American Financial Services unit would benefit from filling out in the life broker business,"" said Broughton.
""Too many people were looking at Scottish Amicable, I think it would have turned out to be too high a price.""
Scottish Amicable effectively put itself up for sale in February and is considering bids from Prudential Corp, Abbey National and Australian Mutual Provident.
Broughton's remarks mirrored comments made at the half-year stage that the group wanted to build its presence in the independent financial advice sector which accounts for around half of all British life insurance and pension business.
But B.A.T chairman Lord Cairns refused to comment on speculation that the group had approached Commercial Union as a possible partner.
He did say the company remained open-minded about its future structure, leaving the door open to a possible demerger.
B.A.T owns insurance groups Allied Dunbar and Eagle Star in Britain and Farmers in the U.S.
""We are not wedded to a particular structure... We have an open mind,"" said Cairns.
The unexpected provisioning in the 1996 figures came after a change in the way the group quantified possible environmental claims.
In the past these had been assessed on estimates based on claims experience.
Wednesday's provision followed a study by consultants Tillinghast-Towers Perrin which looked at individual sites in the U.S. to calculate B.A.T's possible exposure.
Given all the available information, the company said today's move would signal an end to such provisioning.
""They do now look fairly well reserved compared with the industry average,"" one analyst said.
In the United States, many companies have moved across to the more prudent way of reserving now used by B.A.T.
Echoing comments from competitors, Broughton said the general insurance trading environment remained difficult in 1996. The company had seen a slight pickup in motor rates but commercial lines remained very competitive, he said.
Excluding the environmental charge, general insurance profits were up three percent at 686 million pounds while life and investment businesses were up 16 percent at 495 million pounds.
Total premium income rose nine percent to 10 billion pounds.
Analysts said the results and comments on the state of the markets were broadly as expected.
Allied Dunbar trading profits rose 32 percent to 203 million pounds over the 12 months, though the comparison was flattered by a 1995 provision for costs associated with the Securities & Investment Board pensions review.
Eagle Star profits fell 135 million pounds to 85 million pounds with competitive markets and the shedding of unprofitable businesses leading to a 12 percent fall in premium income.
Premium income in Eagle Star's life business was 18 percent higher at one billion pounds.
Profits at B.A.T's North American insurance business Farmers rose nine percent to 632 million pounds. Profits at the general insurance management business rose 12 percent to 476 million pounds and in the life business three percent to 156 million pounds. ($ = 0.620 British Pounds)
",44
"Britons wishing to take out new life insurance policies will have to reveal the results of genetic tests under a new industry policy announced by the Association of British Insurers (ABI) on Tuesday.
But life insurers will not ask people to take genetic tests when applying for life insurance under the scheme, which will run for the next two years.
The policy statement is backed by all 440 ABI member companies and is a response to the rapid developments in the area of genetics in recent years.
While still in its infancy, there is the possibility that new genetic tests will soon be developed which will be able to predict the chances of someone contracting certain diseases or their life expectancy.
Many U.S. companies already require applicants for insurance to undergo genetic testing. At present, Britons are asked to give results of tests they have undergone but are not asked to take tests to qualify for insurance.
Doctors can already diagnose the most common single gene defects such as muscular dystrophy and cystic fibrosis and screen for an individual's susceptibility to certain cancers.
Experts say it will soon be possible to predict the risk of more common disorders such as diabetes or rheumatoid athritis.
Tuesday's announcement is likely to raise fears that an underclass may be created of people unable to insure themselves because of their genetic make-up.
But a spokesman for the ABI dismissed this possibility and said if new tests became available they were likely to benefit people, enabling them to adjust their lifestyles to the risks they run of heart and other diseases.
The ABI said insurance companies did not wish to be perceived as delaying the development of genetic science and said the statement represented a ""very carefully considered and responsible contribution"" to the challenges presented by genetic developments.
""It is important that insurance companies continue to see the results of genetic tests so they can monitor developments and gauge any financial impact on their company,"" it said.
Actuaries noted the long-awaited statement of policy by the ABI, saying they were concerned the debate on health insurance and genetic testing had barely started.
A statement from actuaries' professional organisations noted that Britain's National Health Service accepted good or bad risks without extra charge.
""The profession does not favour legislation on the use of genetic tests as it feels that no case has yet been made for such severe action nor has society discussed how commonplace such tests will be in future medicine,"" it said.
Genetic tests detrimental to applicants for life insurance up to a total of 100,000 pounds ($160,000) will be ignored where the insurance is linked to a new mortgage under the new policy.
For new applications for other life insurance policies, individual companies will decide whether or not they wish to take account of the results of genetic tests previously taken.
Insurers are considering collating information where genetic test results are given to help with future policy development.
The policy will be fully reviewed in 1999 to take account of future developments in genetics ($ = 0.621 British Pounds)
",44
"British telecoms regulator OFTEL said on Wednesday it proposed to reduce the regulatory demands which were imposed on telephone group Mercury Communications in the early 1980s.
OFTEL said Mercury, part of the Cable & Wireless Group, would have a simplified licence covering both domestic and international operations and that a number of obligations would be removed to reflect Mercury's non-dominant position, particularly in the domestic market.
Mercury, the second largest telecom company in Britain, has 11.5 percent of the UK's domestic telecommunications market compared with BT's 80 percent share.
Mercury welcomed the changes saying they provided more flexibility on pricing.
""We are delighted. Under the new regime we can be more flexible in our prices. It increases our ability to be more competitive,"" a Mercury official told Reuters.
OFTEL also said that rapidly developing competition in the international market may allow it to withdraw further still from detailed regulation and it would be keeping the proposals under review, with a view to lifting them in whole or in part as soon as competition was sufficient to allow it to do so.
The proposals include replacing Mercury's existing service obligation for inland services by standard obligations for non-dominant operators and draft licence proposals from the Department of Trade. International service obligations will remain unchanged.
OFTEL is also backing new conditions to ensure fair trading and effective competition in international markets.
In addition, it proposes to replace Mercury's obligation to publish its prices with more flexible conditions. These will be modelled on the price publication requirements in the draft International Facilities Licence, on which the Department of Trade and Industry is currently holding consultations.
The Mercury official described the measures as ""another milestone"" saying it would help close the gap with its much bigger rival British Telecommunications Plc (BT) as far as marketing of services were concerned.
""This reflects our relative market position and gives us the flexibility to offer our customers truly bespoke solutions, designed to meet their specific business needs. At the end of the day it's the customers who will be the winners,"" he said.
Analysts said the Oftel move was expected and would probably not lead to substantially more customers: ""They can price services for different customers, but it is not a big deal,"" said James Golob at Deutsche Morgan Grenfell.
",44
"Two of Britain's leading insurance brokers Lloyd Thompson Group and JIB Group said on Monday they are to merge in a deal worth 300 million pounds ($496.4 million)
Lloyd Thompson chief executive Ken Carter said the main attraction of the deal was the complementary nature of the two companies' operations and the merger will create an international firm focused on profitable, growth businesses.
""The driver is not cost savings, it's entirely the business enhancements we can get out of the two groups coming together. The cost savings will be there but they would come out in the merger of any two companies,"" he said.
Carter will become chief executive of the new group which is to be renamed Jardine Lloyd Thompson Group Plc.
The deal comes at a time of increasing problems for brokers as insurance rates fall and revenues decline. Increasing competitive pressures are forcing many to contemplate deals to find a way of cutting costs and achieve economies of scale.
Only last week U.S. broking giant Aon Corp announced it was buying New York's Alexander & Alexander services for $1.23 billion.
""Insurance brokers are going through very difficult times and any activity that will enhance margins has to be beneficial,"" said one analyst. ""It's becoming quite evident that size is more and more important."" Under the terms of the Lloyd's Thompson offer, JIB shareholders will receive four new Lloyd Thompson shares for every five JIB shares held. The companies said that deal was expected to be ""significantly earnings enhancing"" in 1998.
The merger has received the backing of Jardine Matheson Holdings which has a 60 percent stake in JIB. On completion of the merger it will have a 34 percent interest which it said, it intended to hold ""for the long term"".
The stock market reacted positively to the news. JIB shares rose 20-1/2p to 129-1/2p and Lloyd Thompson 1-1/2p to 174p.
The companies said they believed that the merger would bring significant strategic advantages allowing the development of new products, enhancing JIB's international operations and creating a leading international reinsurance business.
The deal would also deliver cost savings, in particular in the two London market operations' information technology and head office expenditure.
Lloyd Thompson, is currently involved predominantly in the London wholesale and reinsurance broking business. In contrast, JIB, operates in 30 countries worldwide and brings with it an international presence with the ""very significant jewel in the crown"" of its high quality Asia Pacific business, said Carter.
The newly merged group will be positioned between global brokers such as Britain's Sedgwick and Willis Corroon and smaller niche brokers such as Lowndes Lambert and C.E. Heath.
""We see Jardine fulfilling an essential demand from clients by being a strong international broker focussed on handling business wherever it is in the world outside the U.S. rather than looking to get a flag in every city in the world,"" said Carter.
Following the merger John Barton, currently chief executive of JIB will become chairman of the new group which is to be headquartered in London.
The company is to pay a special dividend of 6.0 pence per Lloyd Thompson share, subject to the merger with JIB proceeding. ($1=.6043 Pound)
",44
"Scottish Amicable on Monday confirmed that three companies had submitted final offers for the mutually-owned insurance group by last Friday's bid deadline.
High street bank Abbey National plc and insurers Prudential Corp plc and Australian Mutual Provident (AMP) must now wait until the end of the month to find out who has won the fight for control of the hotly-pursued ScotAm.
None of the bidders have taken up the option of making their offers public, allowing the company's board and its advisers SBC Warburg to weigh up the competing bids behind closed doors.
In an effort to deflect criticism of the sealed-bid process ScotAm had agreed to publish details of offers, if asked to do so by a bidder.
But for the moment all three seem content to abide by Scotam's preference for confidentiality. They have also committed themselves to accepting its decision at the end of March as final.
The board's endoresement will go a long way in ultimately securing ownership of the group but does not guarantee it.
The plans must be approved by three-quarters of those policyholders voting on the board's recommendation (corrects from ""Two-thirds of the 1.1 million policyholders who own the company must approve the choice"") and after widespread criticism of management's handling of both its own plans to float ScotAm and the auction process, its recommendation is likely to come under close scrutiny.
ScotAm, based in Stirling in central Scotland, has arranged for an independent tribunal to resolve any dispute arising from the the takeover battle and has repeatedly stressed that the interests of its policyholders will be uppermost in its decision.
Those interests are likely to be focussed upon bidders' long-term investment plans rather than upfront payouts and one of Warburg's main difficulties will be comparing very differently structured proposals.
Independent actuaries and the Department of Trade & Industry are to be consulted before the final decision is made.
Job security for ScotAm's 2,200 employees is also likely to play a major part and all three bidders have been quick to calm fears of job cuts.
AMP has said it would consider moving its Bristol-based London Life business to Scotland if it won while both Abbey and the Pru have said job preservation in Stirling would be a priority.
AMP, Abbey and the Pru are all that are left of half a dozen companies, including National Westminster Bank and Lloyds TSB who last month signed confidentiality agreements with ScotAm to evaluate the company as a takeover prospect.
The price tag -- widely expected to top 2 billion pounds ($3.2 billion) -- has been cited by many companies as the reason for withdrawing from the race with acquisition goodwill likely to top one billion pounds.
AMP has made no effort to disguise its desire to expand in both the British and U.S. market and has said it would shift its attention to another target if it were to miss out on ScotAm.
Both the Pru and Abbey have already said that their original proposals might be increased once they had access to more detailed financial detail on ScotAm.
Abbey's original bid was worth up to 1.4 billion pounds while the Pru's 1.9 billion pound offer included a loan element to bolster ScotAm's life fund.
Those bids came barely two weeks after ScotAm had published its own proposals to shed its mutual status and float itself on the stock market.
($ = 0.624 British Pounds)
",44
"Scottish Amicable's plans to float on the stock market were under threat on Friday after Abbey National launched a surprise bid for the mutually-owned life assurance company.
The offer from the retail banking group values ScotAm at up to 1.4 billion pounds ($2.25 billion) and includes an immediate minimum payout of 400 million pounds to policyholders in cash or Abbey shares.
ScotAm was quick to denounce the bid as both ""vague"" and ""inadequate"" and said it intended to press ahead with its two stage plans to drop its mutual status and float the group over the next three to five years.
Those proposals, due to be detailed in a circular within the next two weeks, have themselves been criticised for not being generous enough to policyholders while offering the prospect of a windfall to management if growth targets are met.
Under the plans the 1.1 million policyholders will receive up to 1,500 pounds while 12 ScotAm directors stand to share around 14 million pounds.
The offer from the Abbey raises the possibility of a bidding war for ScotAm, which has made no secret of past approaches.
ScotAm chairman Sandy Stewart said that indications of interest from other parties had already been received.
""As you would expect there have been quite a number of telephone calls (from other interested parties) but there have been no firm approaches,"" Stewart told Reuters.
""I suspect some of them are competitors of Abbey National"".
Stewart said Abbey National's offer had not been dismissed out of hand and that the interests of policyholders were uppermost in the management's mind.
""If we have on the table a firm offer which is quite clearly likely to be more beneficial to policyholders then we have to consider it. If we decide that is the case then we will put it to policyholders,"" Stewart said.
""At this stage the bid doesn't meet our requirements. It's vague and on the basis of what it (Abbey National) has said it appears to be inadequate.""
Analysts agreed the two businesses would fit well together and that the Abbey, with its good cash generation ability, would have no problem financing the deal.
BZW analyst Hugh Pye upgraded its recommendation on Abbey National shares on the potential offered by the deal, which he said would improve the quality of the group's earnings and return on equity.
By early afternoon the shares were trading 6-1/2 pence higher on the day at 775-1/2 pence.
Despite the rejection by Scottish Amicable, the Abbey, Britain's fifth largest bank, said it was still hoping to persuade ScotAm, which has 14 billion pounds under management, to accept the offer and put it to its policyholders.
""We believe this offer will by very attractive to Scottish Amicable policyholders, providing them with immediate value and the long-term security of being part of one of the UK's strongest financial groups,"" Abbey chief executive Peter Birch said in a statement.
No discussions have been held between the two groups and ScotAm said it had no intention of talking to the Abbey ahead of the release of details on its demutualisation. ($1=.6237 Pound)
",44
"Abbey National on Monday called for Scottish Amicable to put on hold proposals to drop its mutual status and allow policyholders time to consider last week's offer for the life assurance group.
But ScotAm were quick to reject the demand together with renewed requests by Abbey for access to its books.
ScotAm said it had no intention of altering its plans and would proceed according to its own timetable and not one dictated by Abbey.
""They're asking for privileged access to information before policyholders,"" said a ScotAm spokesman.
""The policyholders have to get that information, see the detail of what we're offering and at that time Abbey can make a proper judgement of its offer.""
The details of ScotAm's demutualisation and flotation plans are due to be published at the beginning of next week.
Until then an impasse looks likely with ScotAm refusing to discuss Abbey's approach and Abbey prevented from seeing more detailed financial information it says it needs.
It argues that policyholders should have the opportunity to compare ScotAm's plans with alternative offers based on the same information.
""Ours is a firm offer based on published information and it is a minimum offer. If we had the information they have, we'd be on the same level playing field,"" said an Abbey spokesman.
""The policyholders should be given the chance to vote on the best deal on the table. If Scottish know there's a firm offer from us - and there may be other interested parties - they should consider all of these and put them to policyholders at one go.""
Many industry observers expect the move by Abbey which already owns Glasgow-based Scottish Mutual, to prompt an auction for ScotAm with interest anticipated from both Britain and overseas.
Insurance group Prudential has said it was ""watching the situation with interest"" and has made no secret that it is on the lookout for an acquisition in the life assuarnce sector.
Britain's Halifax building society, high street banking group National Westminster, Fortis, the Dutch-Belgian financial services company, and Dutch firm ING Groep have all declined to comment on reports they might throw their hats in the ring.
No talks have been held with any other parties and according to the ScotAm, none are planned ahead of the publication of its proposals. For the time being at least, the company remains dismissive of Abbey's approach.
It has repeatedly attacked what it describes as the ""vagueness"" of Abbey's offer - a minimum of 400 million pounds ($641 million) and between 700 million and one billion pounds for the embedded value of the with-profits fund.
But the company was keen to stress that the interests of policyholders remained the most important consideration and if a suitable offer emerged it would be put to policyholders.
""The kite being flown by Abbey has all the superficial attractions of an upfront cash offer to policyholders without any assurance of the long term welfare of policies,"" ScotAm chairman Sandy Stewart told Reuters.
""Abbey has said more to the press than it has put in writing to the board and that should alert policyholders that it's time for very careful reflection.""
While ScotAm may be irked at what it sees as the way Abbey has conducted its bid through the press, Abbey contend it is the only way it can get its message across to policyholders. ($1=.6237 Pound)
",44
"United Nations' plans to delay Iraq's re-entry to world oil markets lifted oil shares in Europe on Monday as a sharp rise in oil prices fed through to the stock markets, traders said.
Iraqi military activity in the Kurdish north, prompted the U.N. to put on hold a planned humanitarian Iraqi oil-for-food exchange, stopping the first sales of Iraqi oil since the Gulf War six years ago.
The increased tension in the Middle East and delays to Iraqi supplies lifted crude prices and, said analysts, was likely to raise market estimates for the third and probably fourth quarter.
October futures for benchmark Brent crude opened 70 cents a barrel higher on London's international Petroleum Exchange.
Shares in Enterprise Oil climbed 10-1/2p to 520p, while Lasmo rose three to 196-1/2. British Petroleum was up 5-1/2p at 628p and Shell Transport 6-1/2p at 939p. In Amsterdam, Royal Dutch rose 2.70 guilders to 250.70.
The Iraqi humanitarian oil sales had been expected to hit markets in the next few weeks but after the latest developments traders were questioning when and if those supplies would come back on stream.
That could mean an upward revision of as much as $1.50 on Brent crude oil prices for the next few months with the possibility of the Iraqi sales ban lasting into 1997.
""I'd rather wait and see how likely or how long delays to Iraqi sales are going to be before I get too panicky,"" said one leading oil analyst.
""Almost certainly there is going to be a strong fourth quarter now as well as the third. People are going to have upgrade numbers for this year but for next year it's a bit early to say.""
The resultant boost to earnings forecasts are likely to provide support to share prices across the sector with most analysts having expected an oil price fall in the fourth quarter as the humanitarian sales came through.
Consensus forecasts had been around $17.70 per barrel for the fourth quarter compared with an average of just under $20 in the third, analysts said.
""We were forecasting $19.50 for the third. We'll have to raise that in the light of this news and also our fourth quarter which was $17.50 by between $1 and $1.50 per barrel,"" said Lehman Bros' Wendy Anderson.
""The purest plays are the exploration and production companies - Enterprise, Lasmo and Saga. You pick a pure play if you believe the delay will last into 1997,"" said Anderson.
Integrated majors Norsk Hydro, BP, Elf, Total and Royal Dutch/Shell also provided fairly good exposure, she said.
Total shares rose 4.2 francs at 376.7 in Paris and Elf gained 7.6 francs to 376.4. Norsk Hydro added two Norwegian crowns to 296.50.
But while the Iraqi situation will underpin stocks in the near term, it is long-term trends that will determine significant outperformance in the sector.
The real issue was at what point -- if at all -- people decided that forecasts for oil prices through 1997, 1998 and 1999 should be higher, said Nick Antill of BZW.
""At this stage I don't see anything that would make one want to do that. In investment terms, the sector is only really going to start motoring if people start bumping up the long-term trend rather than just this year's estimate,"" he said.
",44
"Fund manager Nicola Horlick's row with her ex-employer Morgan Grenfell Asset Management (MGAM) continued to be played out in public on Wednesday as she admitted that she had been in talks with a rival banking group until several days before she was suspended.
But Horlick stressed that the talks with Dutch firm ABN AMRO were of an ""informal and preliminary nature"" and at no time had she provided confidential information about the business or colleagues.
""The talks terminated several days before I was suspended,"" said Horlick. ""My aim was always to keep the clients and the team together for the benefit of all.""
The benefit of all included MGAM whom, she said, she had never intended to leave.
Horlick, one of London's most prominent fund managers, resigned last week after being suspended amid allegations she planned to defect to ABN AMRO and was soliciting MGAM colleagues to go with her.
The suspension came just days after she had been promoted to be managing director of MGAM and since then her fight to be reinstated or compensated for the loss of her job has rarely been out of the headlines.
Once again the lure of the cameras proved difficult to resist on Wednesday and in a television interview, Horlick repeated her determination to clear her name.
""When you're faced with the fact that people are saying that you've done something wrong and you know you haven't you have to fight for yourself. It's one individual versus a very large bank,"" she said. ""All I have is my reputation and I must defend myself.""
The 35 year-old mother-of-five's battle with MGAM has raised eyebrows in the traditionally discreet and conservative banking industry but she maintained she saw no alternative to the action she had taken.
Horlick was catapulted onto the front pages last Friday when she turned up on MGAM's doorstep with a posse of journalists to confront her former employyers after her resignation.
Later to the surprise of everbody -- including her own lawyers -- she flew to Frankfurt to put her case to officials at MGAM's parent company Deutsche Bank.
ABN AMRO has denied trying to poach Horlick and her team and today said they had nothing to add to earlier statements.
Horlick has been in talks with her lawyers for the past few days and is considering taking legal action against her former employer for constructive dismissal.
MGAM is holding fast to its line that it will not reinstate Horlick nor offer compensation since she took the decision to resign her position.
",44
"Britain's National Westminster Bank Plc said on Friday it would be making a first half provision of 50 million pounds ($81.4 million) after finding mispricing errors in the interest rate options book of its Natwest Markets unit.
The bank said a senior trader had been suspended for ""failure to supervise"", pending the conclusion of an internal inquiry.
A second trader, who had resigned from NatWest before the errors had been discovered, has been reported to the Securities & Futures Authority (SFA) regulator.
NatWest said that no clients had been affected by the discovery, adding that the Bank of England was being kept informed.
The SFA confirmed NatWest Markets had sent it information which it was now studying.
An SFA spokesman said no statement was planned at the moment.
""Clearly we have to look at the information, assess the situation and decidewhat is the next step foward.""
A Bank of England spokesman also declined to comment further.
Dealers were left guessing who was behind the transactions that led to the provision or even whether they took place on an exchange or the over-the-counter options market.
The London International Financial Futures and Options Exchange, the site for a large part of London's options trading, had no immediate comment on the news.
Options are contracts which give buyers the right, but not the obligation, to buy or sell an underlying security at a set price in the future.
Mispricing could arise in various ways, for instance, a broker could be given a price from clients but somehow get the price wrong in executing the trade.
One options dealer suggested it could be down to how an individual dealt with issues such as margins on his firm's trades.
""Basically if you're a senior trader or a top person you can actually change prices or positions for margining,"" the dealer said.
One highlight of Natwest Markets' results released earlier this week was a 25 percent rise in profits from what it called ""other dealing"" to 171 million pounds.
That was mainly the result of strong increases in rate risk management products, among them interest rate options.
Derivatives markets have been involved in a string of large losses for companies around the world.
While the exact nature of the ""mispricing errors"" is unknown at this stage, the memory of Nick Leeson's activities in the derivatives market is still fresh in many minds.
The $1.4 billion losses run up by Leeson eventually led to the collapse of Barings in 1995 and its subsequent acquisition by Dutch bank ING .
The banking industry attracted more bad publicity last year after Morgan Grenfell sacked fund manger Peter Young after it was discovered he had breached rules on investing in unlisted companies.
The huge bonuses paid out by banks has been cited by some as one reason for the high risks some, like Leeson, are prepared to take.
Only yesterday Donald Gordon, a leading figure in the financial services industry and chairman of Liberty International attacked the payment of large bonuses by investment banks as a ""massive over-incentivisation of personnel"".
He said it had produced an ""excessively materialistic culture"" in the world's finacial markets which had led to a number of financial accidents and would undoubtedly lead to more dramatic catastrophes in the years to come. ($ = 0.614 British Pounds)
",44
"Prudential Corp Plc, Britain's biggest life insurance group, reported a healthy rise in profits on Wednesday and said British operations were expected to perform strongly again in the coming year.
But the company made no comment about negotiations with the Department of Trade and Industry (DTI) over the ownership of so-called orphan assets.
Prudential (Pru) finance director Jonathan Bloomer said discussions with the DTI were continuing, but said it was difficult to say how long they would last.
""We always thought they would take a long time and there's nothing sensible that can be added to that. I think discussions will continue for a while yet this year.""
One analyst suggested that it was encouraging that the company had passed up the opportunity to tone down expectations.
The Pru is believed to be looking to free up around three billion pounds ($4.9 billion) of orphan assets -- money built up in with-profits funds surplus to policyholders' needs.
Pru operating profits for the year rose over eight percent to 873 million pounds, with profits from continuing operations of 691 million pounds.
The combination of the confidence about new business prospects in 1997 and a higher-than-expected level of profitable new business in 1996 helped lift the shares by 11 pence to 574 pence.
A 10 percent rise in the dividend to a slightly higher than forecast 17.3 pence per share also provided support.
Pru's chief executive Sir Peter Davis called it a very successful year and said the results demonstrated the strength of the group's core business.
With the disposal of Mercantile & General (M&G) and the launch of Prudential Banking, considerable progress had been made in focusing the group on markets where the Pru had the expertise and the critical mass to generate real value for shareholders, he said.
The sale of M&G for 1.75 billion pounds in December realised a profit of 766 million pounds.
Prudential Banking, launched on October 1, is already processing applications for 103 million pounds of mortgages and has taken 98 million pounds in deposits.
The company plans to expand the product range and move in to the personal loan market later this year.
Bloomer repeated the Pru's interest in establishing the high street distribution network which a building society acquisition would provide. With net cash at year-end standing at 1.1 billion pounds, the group has the financial strength to contemplate such a move.
But Bloomer said it was unlikely to make a move unless it enhanced shareholder value which, given current price levels in the sector, may be difficult to pull off.
The Pru is currently involved in a takeover battle for Scottish Amicable and made an initial 1.9 billion pound offer for the mutually-owned life insurer earlier this month, only 250 million pounds of which will come from shareholders' funds.
Prudential UK operating profits from the insurance business increased eight percent to 398 million pounds and profits for the savings and investment business were 323 million pounds, an increase of six percent.
After cutting Prudential UK's cost base by 170 million pounds over the past four years, it was approaching a point of diminishing returns, though the group was looking to reduce unit costs further, Bloomer said.
U.S. operations Jackson National Life saw operating profits growing 35 percent to $512 million.
While confident about the outlook for the business, Bloomer said growth was unlikely to continue at the 40 percent rate seen in recent years. ($ = 0.610 British Pounds)
",44
"Mutually-owned life assurance company Scottish Amicable on Friday rebuffed a takeover bid worth up to 1.4 billion pounds ($2.3 billion) from British retail banking group Abbey National Plc.
Scottish Amicable said it would pursue its own plan, announced earlier this month, to shed its mutual status and seek a stock market flotation in three to five years time.
""We believe this offer will by very attractive to Scottish Amicable policyholders, providing them with immediate value and the long-term security of being part of one of the UK's strongest financial groups,"" Abbey National chief executive Peter Birch said in a statement.
The Abbey offer, which surprised the market and sent its shares up 6.5 pence to 775.5, includes a minimum of 400 million pounds to policyholders in cash or Abbey shares and an immediate investment into the funds of 1.1 million with-profit policyholders of between 700 million to one billion pounds.
Despite the rejection by Scottish Amicable, the Abbey, Britain's fifth largest bank, said it was still hoping to persuade the life assurer, which has 14 billion pounds under management, to accept the offer and put it to its policy holders.
""We feel that we can offer something much more attractive to the Scottish Amicable policy holders,"" Abbey deputy chief executive Charles Toner told Reuters. ""That's why we really want to talk to Scottish Amicable and we hope still to persuade them to put this more attractive deal to their policy holders.""
Toner said that the ScotAm board had not yet had time to stand back and examine the proposals properly.
""They've been working on their scheme for some time and they probably can't consider anything else in their minds,"" he added. ""In truth, they don't seem to want to discuss it at the moment but we hope that they will. It's early days, there's plenty of time for them to draw breath and talk to us.""
The second element of the offer would see Abbey National invest between 700 million and one billion pounds into the with-profits fund, where the policyholder is entitled to a share of the profits from the growth of the fund.
Scottish Amicable said the approach from Abbey was vague and it was unclear how it was valuing the group. The insurer, based in Stirling, Scotland, said it intends to publish in 10 days time detailed proposals about a twin-phased transformation, involving losing its mutual status on May 1 and a 1.0 billion pound flotation in three to five years time.
""The start of a growth phase is the wrong time in the cycle for policyholders to put their businesss on the market,"" said Sandy Stewart, chairman of Scottish Amicable.
Later, a spokesman for Scottish Amicable's advisers said there was a ""grave danger of policy holders being misled by the vague terms of Abbey National's pronouncements. They have misunderstood Scottish Amicable's proposals.""
The spokesman said the benefits to policy holders of the flotation proposal had been conservatively stated and the actual value would be considerably higher.
Abbey's Toner said the Scottish Amicable business would be an excellent fit for its Scottish Mutual business which it bought in 1992. It has 8.0 billion pounds under management and sells its products through the independent financial adviser (IFA) network.
""We started quite cautiously with Scottish Mutual but now it's growing very strongly under our management but as the whole life sector continues to consolidate, we do think it would be good, with the right partner, to link Scottish Mutual with something else,"" he added.
Analysts agreed that the businesses would be a good fit and John Leonard of Salomon Brothers said the Abbey would have no problem financing the bid with its good cash generation ability. ($1=.6172 Pound)
",44
"Scottish Amicable said on Tuesday it will be giving policyholders information about Abbey National's bid for the company when it details its own proposals to shed its mutual status and float on the stock market.
A spokesman for the life assurer, which has been fighting a public campaign against Abbey's offer said: ""It's obviously only right that we tell policyholders that they made an approach for us...we don't want to hide anything from them.""
It is unclear how much detail will be put before policyholders by ScotAm which has repeatedly rebuffed Abbey demands that the timetable for its demutualisation proposals be stopped to allow policyholders to consider the offer.
ScotAm has also turned down Abbey requests for access to its books or meetings to discuss the bid which values ScotAm at up to 1.4 billion pounds ($2.25 billion).
It includes an immediate 400 million pound minimum payout to policyholders in cash or Abbey shares.
Abbey, Britain's fifth largest bank, has complained that policyholders should have the opportunity to compare the ScotAm proposals with alternative offers based on the same information.
The public campaign between the two companies was stepped up on Tuesday with a full-page advertisement in the form of an open letter to policyholders, promising to give them all the information required to make a choice on the firm's future.
""At the precise moment when calm and considered reflection is of the utmost importance, the accent appears to be wholly on how much can be extracted by way of cash payments in the very short term, rather than on policyholders' long term best interests,"" said the letter which appeared in the Financial Times, the Daily Mail and Daily Telegraph newspapers.
It went on to promise that policyholders would be informed if a ""definitive and demonstrably better offer"" was made before any vote on the proposals was taken.
The ScotAm board's fiduciary duty is to policyholders who own the company and there has been speculation that it may be holding off from embracing Abbey in the hope of encouraging other bidders to come forward.
The bid is expected to spark an auction for ScotAm but other interested parties may decide to stay on the sidelines ahead of the publication of ScotAm's float plans within the next week.
""The board obviously has a duty to do the best by policyholders - they should be exploring all the avenues they can. By refusing to cooperate with Abbey they're making things harder for themselves,"" said one fund manager.
Martin Lees, life insurance specialist at ratings agency Standard & Poors tipped Dutch insurance group Aegon and Australian Mutual Provident (AMP) as front-runners to enter the race for ScotAm.
AMP had already stated its interest in more British acquisitions and a company that used independent financial advisors as its main means of distribution would be a good fit, said Lees.
Aegon's previous acquisition of Scottish Equitable had demonstrated its ability to provide extra capital to allow aggressive development, he said.
Other companies reported to be interested include the Prudential, the Halifax building society, Dutch group ING Groep and Belgian-Dutch financial services firm Fortis.
All have declined to comment on the reports. ($1=.6237 Pound)
",44
"Britain's Guardian Royal Exchange said on Tuesday that 350 jobs are to go in a restructuring of the insurance group's area and branch network.
The job losses follow the 48 million pound ($79.2 million) acquisition of Legal & General's commercial insurance operations in July and are the latest in a series of industry moves to cut costs.
Guardian said the restructuring is intended to enhance the level of service and to benefit from the opportunities for economies of scale flowing from the Legal & General acquisition.
But the job losses were attacked on Tuesday as ""arbitrary"" by the Banking, Insurance and Finance Union (BIFU) who accused Guardian of trying to please industry analysts and the stock market.
The Guardian announcement comes at the end of an unsettling year for insurance company employees with consolidation within the industry leading to sharp cutbacks in staff levels as businesses look to reduce their cost base.
After the merger of Royal Insurance and Sun Alliance in May, it was announced that 5,000 jobs would be cut across the group, the majority in the UK where both had head offices. The merger of United Friendly and Refuge Group in August will lead to the shedding of 1,800 staff over the next two to three years.
The drive for cost savings, economies of scale and critical mass in an increasingly competitive market are widely expected to fuel further consolidation in the industry.
Britain's B.A.T industries is rumoured to be looking for a partner for its financial services arm which includes Eagle Star and Allied Dunbar after press reports that talks with Commercial Union have foundered.
Commercial Union has also been linked with General Accident and Guardian Royal Exchange while Legal & General and Norwich Union have both been the subjects of bid speculation.
""Markets are remaining very competitive and companies are looking for ways to gain an edge,"" said one industry analyst. ""Companies do take the opportunity to tackle their cost base with consolidation.""
The insurance industry which is estimated to employ around 200,000 staff directly shed around 40,000 staff between 1991 and 1995.
Including brokers and the self-employed the industry provides work for around 350,000, one third of whose jobs could be at risk over the next couple of years according to BIFU.
Alongside the announcement of the closure of offices in Belfast, Birmingham, Bristol, Glasgow, Leeds, Manchester and Plymouth where there are currently both Guardian and former Legal & General offices, Guardian said offices in five other locations would also shut. These include Bedford, Ealing, west London, Farnham, Surrey, Liverpool and Maidstone, Kent.
The restructuring is expected to be completed by mid-1997. -- London Newsroom +44 171 542 7721 ($ = 0.605 British Pound)
",44
"British life assurance group Scottish Amicable on Thursday announced plans to shed its 170-year old mutual status in preparation for a 1.0 billion pounds ($1.68 billion) flotation on the London stock market in three to five years' time.
The group, based in Stirling, Scotland, said it is to use capital raised by the two-stage proposals to take advantage of opportunities for growth and increase its share of the life and pensions market.
Policyholders are to receive an initial special bonus totalling 75 million pounds after demutualising on May 1 this year, based on the length of time policies have been held.
At the top end of the scale, an individual with a 25-year policy maturing this April will receive 1,503 pounds.
On flotation another, larger payout - expected to amount to at least 200 million pounds but possibly ""substantially higher"" - will be made.
The move to seek a flotation is the second by a British life group, following plans announced last year by Norwich Union.
Scottish Amicable had been rumoured to be a takeover candidate but chairman Sandy Stewart said the group intended to hold on to its independence.
""Our plans do not include being gobbled up by anybody,"" Stewart told a news briefing.
Industry analysts said today's move would make any takeover ""The policyholders are likely to get more by hanging on in there and having an interest in the future than a straight sale now,"" said one.
Scottish amicable said it believed the market was entering a growth phase and that it was well positioned to take advantage of an upturn but needed capital and a more flexible structure to take advantage of the opportunities.
The period before flotation is intended to allow it to develop the business and necessary profit-focused corporate culture.
Managing Director Roy Nicolson said that there remained value to be realised in the group and that an immediate flotation would have failed to reflect the true value of the business and sold policyholders short.
Industry analysts described the proposals as a good compromise between raising some capital in the near term but not selling out too cheap.
Under the proposals, the business, staff and operations of the group are to be transferred to a new company, Scottish Amicable Life, a 100 percent owned subsidiary of the newly formed Scottish Amicable Holdings.
Nicolson, is to become group chief executive of a new holding company Scottish Amicable Holdings. Paul Bradshaw, deputy managing director, will become chief executive of Scottish Amicable Life.
The first stage of the group's plans involves a deal with reinsurance giant Swiss Re and its affiliate Securitas Capital to provide an injection of cash of 395 million poounds.
Scottish Amicable's existing with-profit fund will receive an immediate cash contribution of 350 million pounds while Securitas Capital will invest up to 45 million pounds in return for approximately 20 percent of a new business fund being set up to transact all new business leading up to flotation.
The plans have to be approved by three-quarters of policyholders who vote and a special general meeting is expected to be held in March.
($1=.5958 Pound)
",44
"Britain's Britannic Assurance declared on Tuesday a 209 million pound ($336 million) special bonus for life insurance policies, following discussions with the government on ownership of surplus insurance funds.
The payout will apply to all ""with profits"" policies in force on February 17, 1997. Details will be given with the 1996 bonus due to be announced next month.
The company said last year it discussing with the Department of Trade and Industry (DTI) ownership of long-term assets, and a way to distribute the surplus to policyholders and shareholders.
Britannic has now agreed with the DTI that 902 million pounds of the excess assets within the long term fund can be attributable to shareholders.
Britannic also said it intended to increase its dividend for the year by 82 percent to 23 pence per share following an increase in life profits. This would be the basis for continuing the company's progressive dividend policy.
The news boosted Britannic shares, which jumped 71 pence, or nearly nine percent, at one stage before settling for a rise of 29 pence at 832.5.
The money attributable to shareholders forms part of total assets in the life funds which amounted to 5.682 billion pounds at the end of 1995.
Those assets were estimated to have risen by the end of 1996, Britannic chief executive Brian Shaw said, and updated figures would be released on March 18.
Britannic also announced a restructuring of its long-term funds and the results of a strategic review of its business.
The review will lead to new sales management and premium collection systems, streamlining of head office and investment in market analysis and product research.
The initiatives are expected to cut operating costs by around 25 million pounds, based on 1995 figures.
Britannic said it planned to build on its brand, investment management and distribution skills, financial strength and product development abilities to strengthen its position and improve value to policy and shareholders.
Restructuring the long-term fund will create two continuing ""with profits"" funds, one for its industrial branch and the other for the ordinary branch -- life and pensions business.
In future at least 90 percent of the surplus in the with profits funds will be allocated each year to with profits policies. The balance will be shareholders' profit for transfer to the profit and loss account.
The company has also created two separate non-profit sub funds -- one for life, one for pensions -- which will contain non-profits business and both of which will be owned by shareholders.
The shareholder transfer for 1996 will be increased by 23 million pounds following the declaration of the 209 million pound special bonus. ($ = 0.621 British Pounds)
",44
"International insurance broker Willis Corroon, reported a rise in 1996 profits on Thursday but gave a gloomy assessment of the problems of overcapacity and falling rates currently afflicting the industry.
The company said insurance rates were declining almost universally and competition in the U.S. retail market was intensifying.
It also warned that the recent rise in sterling which reduced 1996 profits by 3.1 million pounds ($5.1 million) may hit 1997 results and that profits from its Lloyd's members agency were unlikely to be repeated at the 1996 level.
The comments were made as Willis unveiled pre-tax profits for the year of 91.6 million pounds, a rise of 83 percent over 1995, which included 30 million pounds in exceptional charges.
Stripping out exceptionals and disposals, profits from continuing operations were up 13 percent at 89.1 million pounds.
Willis said it expected to benefit from a programme designed to enhance performance and competitiveness but the shares lost ground after the results, slipping eight pence by early afternoon to 131-1/2 pence.
Analysts said the results merely confirmed the difficulties the sector faced.
Willis chairman John Reeve, however, pointed to the rise in profits and elimination of net debt as evidence of the successful implementation of plans to restore the group's financial health.
""The group is now focused on its core operation, following a programme of disposal, profitability has been improved and the balance sheet has been significantly strengthened,"" Reeve said.
Willis also drew comfort from its success in growing revenues and despite the difficult market conditions. it said it remained sceptical about the benefits of the recent industry trend of pursuing cost economies through mergers.
""We think there are huge risks in people businessses associated with that. We have a strategy for growing our business which we're comfortable with and as far as we're concerned that's what we're concentrating on,"" group executive director Max Taylor told Reuters in an interview.
Following the implementation of the Lloyd's of London Reconstruction and Renewal plan (R&R) the group's members agency returned to profit for the first time since 1992.
The 14.5 million pound profit commission for the 1993 year included reserves from prior years. These were partly offset by contributions of 6.3 million pounds to the R&R plan.
Willis said present indications were that profit commission on the 1994 year, receivable in 1997, will be around half those of 1993.
Profits for the 1995 year were likely to be significantly down, however, said one analyst, and there were big questions over whether it would be profitable at all in 1997 given the rating environment.
After severance costs of 11.3 million pounds in the 1996 figures related to the change programme, Taylor said he expected further costs in 1997 to be lower.
He said a fall in staff numbers of 11 percent in 1996 was unlikely to be repeated and further reductions were expected to be on a smaller scale and absorbed through natural wastage.
The change programme is expected to span three to five years and last year's actions were taken to underpin it. The real effort would now be going into the longer term effort of building capabilities, skills and resources, said Taylor.
($ = 0.612 British Pounds)
",44
"Almost 8 out of 10 people in Britain are opposed to insurance companies using genetic test results as the basis for charging higher premiums or refusing to provide cover, according to an opinion poll commissioned by The Genetics Forum released on Wednesday.
The news comes just a week after the Association of British Insurers (ABI) announced that people seeking life insurance would be required to report the results of any genetic tests to enable insurers to assess the financial impact on the industry over the next two years.
The poll also underlined fears that the ABI's stance would discourage people from undergoing genetic testing with almost three out of ten people asked saying they would not take a test now they are required to disclose the results to an insurer.
This could lead to people being deterred from seeking diagnosis of some treatable conditions or prevent them being able to make informed decisions about starting a family.
According to the ABI guidelines detrimental test results may be taken into account for any type of insurance except life cover linked to mortgages of less than 100,000 pounds though several larger companies have distanced themselves from this.
Standard Life, for instance, has said it would not seek the results of genetic tests for any policies.
Julie Sheppard of The Genetics Forum, a non-profit organisation committed to the socially responsible use of genetic engineering said that the poll showed that the public did not trust insurance companies with genetic information.
""Genetic tests are still in their infancy and their conclusions may remain uncertain and imprecise for many years. Many tests will only tell an individual that they may, as opposed to will, develop a disease in later life.""
""It isn't sensible or fair to be charged more for your insurance or refused it altogether on the basis of a condition you may never get.""
The Genetic Forum poll also found that almost four out of 10 people would object if a tissue sample which they had given anonymously was used for research without their knowledge or consent.
Seven out of 10 said they would object if their anonymous tissue was sold to a pharmaceutical company for research without their knowledge or consent.
The Genetic Forum said too much was being left to the discretion of insurance companies and individual researchers.
The Human Genetics Advisory Commission (HGAC) set up last year after a British parliamentary committee called for the creation of a body to consider the ""broad social, ethical and/or economic consequences of developments in human genetics"" meets for the first time on February 27.
",44
"Stiff competition and severe weather in the U.S. led to a 15 million pound ($24.2 million) fall in 1996 profits from British insurer General Accident Plc on Tuesday, despite a record final quarter.
The weather-related losses knocked 30 million pounds off operating profits which slipped to 421 million pounds over the year.
Echoing recent remarks from rival insurers, chief executive Bob Scott described the market as ""increasingly competitive"", although he was hopeful of a rise in motor premiums in the coming year.
General Accident intends to raise all motor rates, covering about 800,000 vehicles, by around 3.2 percent in April.
That increase will be reviewed in July and Scott said an eight percent rise for the year as a whole was the sort of increase needed given current market conditions.
The big question is whether such rises stick. Last year's four percent April increase resulted in an eventual rise of between two and three percent.
There were, however, no signs of rate increases in the homeowner or commercial sectors, said Scott.
Despite the fall in 1996 profits and even allowing for a 10 million pound boost from a change in the way the group accounts for overseas earnings, the results were at the top end of market expectations.
Year-end net assets per share, up a slightly less-than-expected three percent at 675 pence by year-end, have since risen to 734 pence.
A 10-1/2 percent increase in the dividend for the year to 34.25 pence per share was also ahead of forecast and by late afternoon the shares had added 11 pence to 848 pence.
Analysts welcomed a resilient underwriting performance, especially in the fourth quarter in Britain and the United States, and the level of profitability in new business in the group's life operations.
""There's some justification in adding some goodwill over the net asset value (NAV) into the share price for future profitable new business in life,"" commented one analyst.
The acquisition of Provident Mutual in January 1996 helped fuel a 37 percent increase in life and pension profits over the year to 108 million pounds.
Provident contributed 18 million pounds after reorganisation costs of 16 million pounds and Scott said the group was now looking to capitalise on the pension expertise which Provident had brought.
The key for the life company was the profitability of new business, said Scott, but he ruled out any major acquisitions in the drive to expand the business.
""At the present time there's nothing wrong with organic growth in life. We've proved we're capable of achieving that.""
The group has set itself the goal of increasing the proportion of more stable life earnings to a level which covers dividends each year. In 1996 the proportion of dividend covered by net life earnings in 1996 was 44 percent.
Scott also dismissed speculation of a merger or takeover involving General Accident.
""We've got the benefits of scale in our major businesses. We don't have to do anything. We'd like to make further acquisitions in the U.S. Midwest but don't see any need to dramatically change our current shape,"" said Scott.
Investment income over the year was up seven percent but the rise in stock markets to record levels over 1996 has prompted the company to reduce exposure to British and North American equities over the past three quarters and shift money into bonds. ($ = 0.619 British Pounds)
",44
"Royal & Sun Alliance Group plc , one of Britain's leading insurers, on Thursday unveiled its first set of annual results following last year's merger and said it would be seeking shareholders' permission to buy in up to five percent of its shares.
But large provisions for U.S. environmental claims and the impact of the pounds's recent strength took the gloss off the figures, the first since Britain's Royal Insurance and Sun Alliance were put together in a six billion pound ($9.7 billion) merger last year.
The 167 million pounds in provisions, largely put aside for U.S. asbestos and environmental claims, follows a change in the way the group assesses possible liabilities.
On Wednesday, B.A.T Industries subsidiary Eagle Star on Wednesday set aside 160 million pounds in provisions.
Both companies have said that they expect it to mark the end to such provisioning.
Including the currency and environmental charges operating profits for the year were 706 million pounds compared with 915 million pounds in 1995 for the combined group.
By late morning Royal & Sun shares were trading eight pence lower at 495 pence despite an earlier jump to the day's high of 515 on initial reaction to the share buyback.
The operating figure did not include 201 million pounds related to the cost of consolidating operations, some 30 or 40 million pounds more than analysts had expected.
But management declared themselves pleased with the results and said the group remained on target to achieve the annual cost savings of 175 million pounds identified at the time of the merger.
Royal & Sun chief executive Richard Gamble said the integration was progressing well, especially on the staffing front, and the group was continuing to retain business.
But he dismissed the possibility of an acquisition to strengthen its life business or exposure to Continental Europe.
""There's an awful lot going on in integrating the two companies and that is where our mind is focused. That's where we have to keep our concentration.""
The dividend for the year was raised to 19 pence per share in line with management's forecast at the time the merger was announced last May. Net asset value per share was 399 pence at year-end and had increased to 417 pence by March 5.
""This was a very good operating result in a difficult year which was affected by exceptional weather in the U.S. and continuing soft markets,"" said Royal & Sun deputy chairman Roger Taylor.
The group had decided to buy back shares in anticipation of continued strengthening of the group's capital position, added Taylor.
The weather related costs mirrored the experience of competitors who have all highlighted the impact on profits of some of the worst weather on record in North America last year.
Profits for the general insurance business after the changes in claims reserving were 480 million pounds, down from 754 million pounds in 1995. Improvements in Canada and Scandinavia were offset by reduced profits elsewhere.
U.S. weather losses at 96 million pounds were 36 million pounds higher than in 1995. Together with the reserving for environmental claims this turned a 134 million pound profit in the U.S. in 1995 into a 14 million pound loss and more than offset an improvement in the core book of business, the company said.
In Britain, a 28 percent fall in profits reflected an increase in the frequency and average cost of personal lines claims, changes in claims reserving and continuing competition.
Life profits increased by 15 percent to 213 million pounds with increases in both British and overseas operations.
($ = 0.620 British Pounds)
",44
"Britain's largest insurance group Prudential Corp has become early favourite to win the auction for Scottish Amicable after its 1.9 billion pound ($3.0 billion) bid for the mutually owned life assurance group.
Industry analysts said the offer, which uses excess capital in the Pru's 50 billion pound life fund, will make it difficult for rivals to compete and may have delivered a knockout blow to Abbey National's hopes of buying ScotAm.
Pru shareholders are also likely to be pleased with the finacial engineering which has gone into the offer. Only 250 million pounds is coming from shareholders funds and Prudential shares added 12 pence to 566 pence on Thursday as the market digested the details of the deal.
The Pru's offer contains elements of both the Abbey bid and ScotAm's own flotation proposals but it is in its structuring that the deal may have stolen a march and narrowed the field of potentials bidders.
The 400 million pound bonus in cash and shares matches Abbey's payout but the Pru says it will add another 150 million pounds to policies as soon as practicable and pay a minimum additional 250 million pounds when policies mature.
It also says it will pay 1.1 billion pounds into ScotAm's life fund - a loan from its own life fund, allowing investments in equities to be increased, which historically have provided the best returns.
The Pru will close ScotAm's life fund to new business, the existing free assets which it estimates to be at least 400 million pounds, will no longer be required to write new business and so can be paid out to ScotAm policyholders.
""The deal returns all the working capital to policyholders which under the Abbey deal would have been retained in the fund to write the new business. For others to replicate that is difficult,"" said one industry analyst.
Other potential bidders such as the Halifax building society, National Westminster Bank, Belgian-Dutch financial services company Fortis, Dutch firms ING Groep and Aegon may now be having second thoughts about throwing their hats in the ring.
Only a couple of the stronger life companies mentioned as potential acquirors could come up with a similar structure.
Australian Mutual Provident which also has substantial excess capital in its life fund could in theory do so.
""I would struggle to name another one,"" said an analyst.
But Abbey, whose 1.4 billion pound offer last week sparked the bidding war is likely to find it very difficult to compete.
It lacks the capital strength in its life funds to readily replicate the Pru deal and would probably have to turn to external capital to raise its bid substantially, said analysts.
""Abbey could match the Pru's offer. Whether it would be sensible is another issue. It's hard to match and satisfy its own shareholders that its in its best interests."" said one
The Pru may also hold the advantage it terms of the benefits accruing from a ScotAm acquisition.
There would be less overlap in the businesses than Abbey which already owns Scottish Mutual and it would lift the Pru's exposure to the independent financial adviser market (IFA).
Abbey has yet to detail its offer but said yesterday after the Pru's approach that once it had access to full financial information it was sure its final offer would be extremely attractive to ScotAm's policyholders, management and staff.
Industry analsysts, however, were sceptical that Abbey after setting the ball rolling in the battle for control of ScotAm, it could manage to compete with the Pru's financial muscle.
",44
"Three companies are expected to be left in the running for control of mutually-owned life insurance company Scottish Amicable at the deadline for final offers on Friday evening.
Insurance groups Prudential Corp and Australian Mutual Provident (AMP) and high street bank Abbey National have all been working on offers to be weighed up by the ScotAm board and its advisers SBC Warburg.
A source close to Warburgs said a bidder from outside the three front-runers was not anticipated.
The sifting of the offers is likely to take place behind closed doors with not one of the likely bidders opting to make public details of its proposals.
In an effort to deflect criticism of the sealed-bid process ScotAm had agreed to publish details of offers, if required by a bidder.
For the moment, none have asked it to do so.
""We're not at this stage asking for our bid to be revealed. I think everybody's waiting to see whether anyone wants to have a shootout now - it's a bit of a stand off... it's very much a case of playing by ScotAm's rules,"" said a source close to one of the bidders.
Those rules include confidentiality agreements and an undertaking to accept the board's decision, expected by the end of the month, as final.
ScotAm, based in Stirling in central Scotland, has arranged for an independent tribunal to resolve any dispute arising from the the takeover battle.
The board has repeatedly stressed that the interests of its 1.1 million policyholders will be uppermost in its final decision.
Those interests are not limited to headline figures and upfront payouts but extend to the bidders long-term investment plans.
One of Warburg's main difficulties will be comparing what are likely to be very differently structured proposals, and independent actuaries and the Department of Trade & Industry will be consulted before a decision is made.
Job security for ScotAm's 2,200 employees is also likely to play its part and all three bidders have been quick to calm fears of job cuts at ScotAm.
AMP has said it would consider moving its Bristol-based London Life buisness to Scotland if it won while both Abbey and the Pru have said job preservation in Stirling would be a priority.
AMP, Abbey and the Pru are all that are left of half a dozen companies, including National Westminster Bank and Lloyds TSB who last month signed confidentiality agreements with ScotAm to evaluate the company as a takeover prospect.
The final price -- widely expected to top two billion pounds ($3.2 billion) -- is said to have deterred many from taking their interest further and Lloyds admitted recently that after running the slide rule over ScotAm, it felt the bid premium looked too high.
Both the Pru and Abbey have already said that their original proposals might be increased once they had access to more detailed financial detail on ScotAm.
Abbey's original bid was worth up to 1.4 billion pounds while the Pru's 1.9 billion pound offer included a loan element to bolster ScotAm's life fund.
Those bids came barely two weeks after ScotAm had published its own proposals to shed its mutual status and float itself on the stock market.
AMP has not yet given any indication of what it might be prepared to pay for ScotAm, but is financially strong has said it was keen to make acquisitions in both the British and U.S. market.
($ = 0.627 British Pounds)
",44
"Britain's NatWest Group said on Thursday it was setting up a new business grouping, NatWest Wealth Management, to tap the potential of private banking, long-term savings and investment markets.
The unit will bring together asset management company Gartmore, life insurance and pensions unit NatWest Life and Investment Services and NatWest Ventures.
Private banking unit Coutts Group will join the new arm in January 1998 following the completion of a restructuring process.
NatWest group chief executive Derek Wanless said the new business offered ""potentially very strong growth"" for the group.
""It's a market with major growth potential because of demographic changes, people's need to save for sickness and old age,"" he said in an interview.
""It's an area where we've put a fair number of the building blocks in place over the past few years, particularly last year, when we bought Gartmore and integrated it with our own investment management company.""
NatWest Wealth Management will have funds in excess of 60 billion pounds ($98 billion) under management.
It will be positioned to offer a comprehensive range of products and services to clients, ranging from the private investor through to the most sophisticated pension fund sponsor.
Paul Myners, chairman of Gartmore, Britain's fifth-largest fund manager, which NatWest acquired in April 1996, will be chief executive of the new unit from April 1 and will report directly to Wanless.
Myners said the businesses in the new group were already well-established and successful and together represented a ""substantial force in the provision of long-term savings and investment products"".
Wealth management was a significant market for the group's future and the creation of a dedicated sector represented a logical progression of its strategy, said Wanless.
It was also looking to ensure it got the best out of combining the Gartmore and NatWest brands and making use of the groups' distribution channels to independent financial advisers (IFAs).
""Cost savings were essentially in the integration of Gartmore and NatWest investment management which took place last year. The benefits are really on the growth side; the income, not the cost side of the business,"" Wanless said.
""It has no negative implications for headcount. We genuinely think this is a growth opportunity where we're growing together some interesting businesses both in terms of distribution and fund mangement.""
He said that last year's investment in Gartmore was the principal building block from outside needed for the move and that it was now substantially a case of organic growth, building the distribution channels and capitalising on the other strengths of NatWest UK and Coutts. ($1=.6120 Pound)
",44
"Scottish Amicable on Thursday asked for firm offers for the company to be tabled by the end of February as it emerged that more potential bidders had joined the auction for the mutually-owned insurance group.
Three companies were already known to have signed confidentiality agreements which give access to ScotAm's books - Abbey National, Prudential Corp and Australian Mutual Provident (AMP).
But a source close to the deal said that others had also signed the agreements and that potential bidders were now ""certainly more than three.""
ScotAm said that all interested parties would be requested to table firm offers by February 28.
A spokesman for ScotAm declined to comment on either the number or the identity of companies who had signed the confidentiality agreements.
One possibility is Dutch insurance group Aegon whose acquistion of Scottish Equitable has already demonstrated its ability to provide extra capital to develop the business according to industry experts.
Another firm rumoured to have contemplated a bid, Belgian-Dutch insurer Fortis is reported to have ruled a bid out and Lloyds TSB said earlier this week it was not interested in bidding.
Lloyds chief executive Peter Ellwood said that the company had run a slide-rule over ScotAm but that the bid premium looked too high.
Meanwhile, The Scotsman newspaper on Thursday reported that AMP is considering moving its Bristol-based subsidiary London Life to Scotland if its Scottish Amicable bid is successful.
The paper said that AMP would use Scotland to expand into Europe, and that it placed considerable importance on the Glasgow office of Scottish Amicable Investment Managers (SAIM).
The Prudential and Abbey National are believed to have plans to downscale or close SAIM, the paper said.
Following the receipt of bids, ScotAm will hold further discussions after which bidders will be required to submit final, binding proposals.
At the end of the process, the board will recommend a single proposal and an announcement of the recommended acquiror is expected to be made by the end of March.
Under the terms of the confidentiality agreements the decision of the board is final.
""We believe the process we are publishing today will maximise value for policyholders and will be seen to have done so,"" ScotAm's chairman Sandy Stewart said.
In a move which may help deflect criticism of the sealed bid process, ScotAm said it would make firm offers public, if required to do so by a bidder.
In addition, the Department of Trade & Industry and an independent actuary will be consulted fully prior to the announcement of the recommended offer.
ScotAm will also outline the board's reasons for its recommendation, the criteria used and summarise the relevant information on all ""competitive proposals"".
The circular to policyholders outlining the final bid is likely some time in May.
Abbey National sparked the auction at the end of January when it announced it was prepared to pay up to 1.4 billion pounds for ScotAm, barely two weeks after ScotAm unveiled its own proposals to drop mutual status and float on the stock market.
The Abbey offer was topped a week later by the Pru's 1.9 billion bid.
Both companies have said that their offers may be raised when they have more detailed financial information on ScotAm.
",44
"Britannic Assurance on Tuesday promised to speed-up the settlement of cases of pension mis-selling as the insurance group reported a near 50 percent jump in its profits for 1996.
The company admitted it had between 12,000 and 13,000 cases classified as priority cases but said that the resources already committed to the issue would help accelerate the resolution of those outstanding.
""Our objective is to complete a substantial proportion of priority cases this year... But that depends not only on our own resources but on the ability of occupational schemes to answer our queries,"" said Britannic chief executive Brian Shaw.
The industry was now in a much better position to clear up the backlog, he said, thanks to the work done over the past couple of years.
Pension providers have come under increasing criticism for the delays in compensating victims of pensions mis-selling in the late 1980s and early 1990s.
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 only a tiny proportion of those affected have so far received compensation.
The Personal Investment Authority (PIA), which regulates the sale of investment products to the public, came under heavy fire last week for its handling of the scandal.
Shaw made his comments as Britannic reported a 47 percent increase in pre-tax profits to 93.9 million pounds ($149 million), helped by a 23 million pound boost related to February's announcement of a 209 million pound special bonus for policyholders.
The bonus resulted from a government clarification of ownership of 'orphan' assets -- money surplus to policyholders' needs in with-profit funds.
Under an agreement with the Department of Trade and Industry (DTI), 902 million pounds of the 5.68 billion pound life fund has been attributed to shareholders.
That helped lift the dividend by 82 percent to 28 pence per share, which Shaw said would provide the basis for double-digit dividend increases in the future.
Britannic shares added 12 pence to 871 pence.
Following a strategic review of its businesses, the company said it would be looking to build on its brand, investment management, distribution skills and product development capabilities to deliver enhanced value to shareholders and policyholders.
It also said that reversionary bonus scales for traditional business -- bonuses added to policyholder's investment during the course of the policy -- would be unchanged with modest reductions in annual bonus rates for unitised business.
Terminal bonuses for traditional business have been maintained.
New regular premiums rose 7.7 percent to 37 million pounds in 1996 and single premiums 16.8 percent to 137 million pounds.
It was also announced that William Haynes has been appointed to the Britannic board as sales and marketing director. ($ = 0.630 British Pounds)
",44
"The battle for control of Scottish Amicable became a three-way race on Friday as the deadline for firm offers for the mutually-owned life insurer passed.
The company said that it had received three initial bids from high street bank Abbey National Plc and insurance groups Prudential Corp Plc and Australian Mutual Provident (AMP).
Details of the bids were not released.
While technically the door is still open for other bidders to come in, a source close to the deal said that was ""unrealistic"" at this stage.
Under the terms of the auction process, ScotAm agreed it would make firm offers public if required by a bidder. It said none had asked it to do so.
With the auction effectively a sealed-bid process and bidders unable to see competing offers, there would appear to be little advantage in one company giving rivals a target by making public its own proposals.
AMP development director Jonathan Schwarz said the group believed it would be wrong to handicap discussions with ScotAm by conducting them in the ""glare of publicity"".
Both the Pru and Abbey said they had nothing to add to earlier statements.
Discussions with the three companies will be held with a view to obtaining final offers by mid-March.
ScotAm chairman Sandy Stewart said the three proposals represented an ""excellent outcome to this phase of the process"".
""We can now move on to the next phase with every expectation of delivering maximum value to policyholders.""
The company said it would not be expressing an opinion on the merits or otherwise of any proposal until the evaluation process was complete. Last week ScotAm asked for firm offers for the company by today. It hopes to recommend a single proposal to policyholders by the end of March.
National Westminster Bank was among a ""about half a dozen"" companies which signed confidentiality agreements to gain access to ScotAm's books but pulled out earlier this week. Lloyds TSB has also admitted it ran the slide rule over ScotAm but said it felt the bid premium looked too high. Schwarz said ScotAm was one of a number of current opportunities which fulfilled the group's criteria. He said the group was looking to acquire British and U.S. businesses with quality local management, marketing and distribution in place which, with the backing of AMP's financial strength, could deliver ""substantial organic growth"". The auction was sparked by Abbey National's bid for the company at the end of January. That came barely two weeks after ScotAm had released its own proposals to drop mutual status and float on the London stock market. Abbey's offer was topped a week later by the Pru's 1.9 billion pound ($3.1 billion) bid, though that figure includes a 1.1 billion pound loan element. Both companies have said that their offers may be raised when they had more detailed financial information on ScotAm.
($ = 0.614 British Pounds)
",44
"British life assurer Scottish Amicable said on Thursday it planned to shed its 170-year-old mutual status in favour of a stock market flotation aimed at taking advantage of opportunities for profit growth.
The Stirling-based group outlined plans to float on the London Stock Exchange in three to five years' time and said it would pay policy-holders an initial special bonus of 75 million pounds ($125 million) after demutualising on May 1.
Scottish Amicable said pay-outs would be based on the length of time policies had been held by members.
The fist payment would be followed by benefits worth more than 200 million pounds as a result of flotation, which will give the group access to long-term capital, it added.
The group said it expected to have a market capitalisation of around 1.0 billion pounds on flotation.
Scottish Amicable said significant opportunities existed for profitable growth in its businesses. But it said in a statement that to take full advantage ""requires access to external capital in both the short and long term.""
There has been intense speculation that Scottish Amicable, founded in 1826, would be the subject of a takeover bid but chairman Sandy Stewart said the group intended to hold on to its independence.
""Our plans do not include being gobbled up by anybody,"" he told a news briefing.
The group said the process would be in two stages. Under the plan, the business, staff and operations of the group would be transferred to a new company, Scottish Amicable Life, a 100 percent subsidiary of newly formed Scottish Amicable Holdings.
The first stage involves a deal with reinsurance giant Swiss Re and its affiliate Securitas Capital ""to provide substantial financial backing initially totalling 395 million pounds"".
Under this agreement Scottish Amicable's existing with-profit fund will receive an immediate cash contribution of 350 million pounds ""from the reinsurance by Swiss Re of certain categories of existing policy"".
Securitas Capital has committed to invest up to 45 million pounds in return for approximately 20 percent of a new business fund being set up to transact all new business from the date on which the scheme becomes effective.
Swiss Re has also agreed to provide further reinsurance ""expected to reach a level of 150 million pounds over the next five years in respect of future new business"".
Scottish Amicable said Roy Nicolson, currently managing director of the group, would become group chief executive of Scottish Amicable Holdings, while Paul Bradshaw, deputy managing director, will become chief executive of Scottish Amicable Life.
Policyholders must first approve the plans at a special general meeting expected to be held in March. The group said detailed discussions had already been held with Britain's Department of Trade and Industry. ($1=.5958 Pound)
",44
"Lloyd's of London said on Thursday it had been granted judgements in two test cases against members who had failed to pay debts under the insurance market's reconstruction and renewal (R&R) settlement.
The defendants, Dennis Leighs and David Wilkinson, had claimed they were not liable to pay their premium to Equitas, the company set up to reinsure and run-off pre-1993 liabilities of Lloyd's syndicates.
But the judge, Mr Justice Colman, said that they had failed to establish that any of the grounds argued represented ""arguable defences or, if these actions were permitted to go to trial, would have any realistic prospect of success"".
Lloyd's welcomed the decision and said it would now be pursuing other non-acceptors.
""This judgement enables Lloyd's to pursue all non-acceptors of the settlement who have argued that they are not obliged to pay their Equitas premium,"" said Philip Holden, head of Lloyd's financial recovery department.
""Our pursuit will be vigorous and, by virtue of this judgement, will be effective.""
He said it was in the interests of all members that Lloyd's now proceeded to recover all outstanding debts.
It originally brought proceedings against three Names but dropped one because of concern over the defendant's age and ill health.
Under the terms of R&R and at the discretion of the Council of Lloyd's, members who have not yet accepted have until February 28 to do so.
The rights to settlement credits or benefits, lost due to non-acceptance may also be reinstated at the discretion of the Council.
",44
"Shares in British insurer Commercial Union (CU) jumped on Friday amid renewed speculation the insurance group may become the next victim in the industry's push to consolidate.
Rumours that a merger were in the offing were given a new lease of life after buying of CU shares late on Thursday. The shares rose on Friday, jumping in late trading to close 19-1/2p at 663-1/2p, ignoring worries about interest rates which sent stock prices across the rest of the London market tumbling.
Tobacco and financial sevices giant BAT Industries has been at the centre of the most recent rumours with reports last weekend that discussions between the two had foundered.
Both companies have maintained their silence on whether discussions have actually taken place but earlier this week BAT said it was keeping an open mind about the opportunities for finding a partner for its financial services arm.
The search for cost savings and economies of scale are behind the latest drive to consolidate in Britain's increasingly competitive and fragmented insurance industry.
New entrants selling insurance over the telephone such as Direct Line have added to competition while the selling of insurance products through banks, building societies and shops is also expected to gather momentum.
Royal Insurance and Sun Alliance combined operations back in July to create Britain's biggest insurer and estimates it will be able to cut costs by 175 million pounds ($289.6 million) annually by 1998, shedding some 5,000 employees in the process.
Like the retail banking industry, insurance companies tend not to be dependent on key individuals and mergers are not fundamentally difficult to achieve, said analysts.
One estimated that cost savings in a tie-up between Commercial Union and BAT Industries could probably add another 20 percent to combined operating profits.
While analysts conceded that reports the company has been discussing a deal with others in the industry may be true, they were quick to point out that such discussions have been commonplace in recent years.
""Anyone who wanted to talk to CU would at least be listened to -- they've got shareholders to consider. But these things are not new. These companies have been talking to each other for as long as I can remember on a regular basis,"" said one analyst.
""But I think CU feels quite capable of controlling its own destiny and I'm not convinced that they would think another insurance company had much to offer.""
The question of which management would come out on top in any merger is another tricky issue and was said to have been behind the breakdown in talks with BAT.
Interest from abroad has also been rumoured with German insurance group Allianz said to have been contemplating a move for CU. General Accident and Guardian Royal Exchange have also been linked with CU.
A full-scale takeover is a more remote possibility with the necessary premium on the current share price likely to offset many of the cost savings.
But even a merger would bring with it a multitude of problems and would put questionmarks over relationships built up with banks and financial institutions in its continental European businesses.
""There's pressure on both the non-life and life industries to get together and cut costs and CU is as much a part of that as anybody else. I'm sure that most companies have talked or thought about talking to other companies. Whether anything comes of it or not is a completely different matter,"" said an analyst.
Takeover talk also extended to the insurance broking market late Friday as rumours circulated of a predator stalking Sedgwick Group Plc whose shares closed 5p higher at 125-1/2p.
($1=.6043 Pound)
",44
"Commercial Union (CU) became the latest victim of sterling's recent strength on Wednesday, as the British insurance giant reported a sharp fall in profits for 1996.
A 64 million pound ($104.8 million) currency loss by the company, three-quarters of whose profits come from outside Britain, largely accounted for a near 13 percent fall in operating profits for the year to 444 million pounds.
U.S. weather related losses of 41 million pounds and severe competition in the general insurance market were a further drag on profits.
But overall the results broadly matched market expectations with the life business, which accounts for around 44 percent of premiums, showing healthy growth once currency effects were stripped out.
CU said it intended to continue to expand its life operations to take advantage of its ""more consistent profit streams and its exciting growth prospects"".
Finance director Peter Foster said the group would not rule out acquisitions to stimulate further growth.
""Our strategy of more emphasis on life business has proved viable so far...we will be looking at any suitable acquisition that we may come across,"" Foster said.
This might include overseas businesses but the company stressed it did not mean it would grow solely through acquisitions and that the focus remained on organic growth.
According to CU the strength in sterling had masked significant profit rises in continental Europe.
Over the year as a whole, the pound advanced 10 percent against the dollar, 17 percent against the French franc and around 12 percent against the mark.
After adjusting for the exchange rate, overall operating profits were down just three percent on 1995 and life profits 13 percent higher at 241 million.
Despite the underlying operating performance worries about the impact of the currency on CU's net asset value (NAV) prompted a sharp markdown in the shares.
The NAV was down to 545 pence at year-end 1996 from 582 pence a year earlier, though analysts said there had been quite a strong recovery in net asset value in the last six weeks.
By late afternoon, CU shares were 21 pence lower at 669 pence.
In general insurance, good results in France, the Netherlands and Canada helped offset part of the effects of competition in the British market and U.S. weather claims.
Despite this and even adjusting for the currency, general insurance profits were 21 percent lower at 356 million pounds.
Echoing comments from Guradian Royal Exchange (GRE) which reported results yesterday, CU said it was seeing signs of a rise in motor market rates.
Like GRE it expected to see motor rates firming through 1997. Household rates were also likely to edge ahead, particularly given recent storms in Britain and a cold snap at the start of the year.
($ = 0.610 British Pounds)
",44
"Prudential Corp Plc, Britain's largest life insurance group, reported a healthy rise in profits on Wednesday and said it expected British operations to continue to perform strongly in the coming year.
But the company remained tight-lipped about negotiations with the Department of Trade and Industry (DTI) over the ownership of so-called orphan assets.
Prudential (Pru) finance director Jonathan Bloomer said discussions with the DTI were continuing, but said it was difficult to say how long they might last.
""We always thought they would take a long time and there's nothing sensible that can be added to that. I think discussions will continue for a while yet this year.""
Analysts believe the Pru is looking to free up around three billion pounds ($4.9 billion) of the orphan assets -- money built up in with-profits funds surplus to policyholders' needs.
Pru operating profits for the year rose over eight percent to 873 million pounds, with profits from continuing operations of 691 million pounds. Reflecting the 1996 performance and the group's confidence for the future, the dividend was raised by 10 percent to 17.3 pence per share.
Pru shares gave a muted response to the figures, adding seven pence to 570 pence by mid-morning.
Pru's chief executive Sir Peter Davis called it a very successful year and said the results demonstrated the strength of the group's core business.
With the disposal of Mercantile & General (M&G) and the launch of Prudential Banking, considerable progress had been made in focusing the group on markets where the Pru had the expertise and the critical mass to generate real value for shareholders, he said.
The sale of M&G for 1.75 billion pounds in December realised a profit of 766 million pounds.
Prudential Banking, launched on October 1, is already processing applications for 103 million pounds of mortgages and has taken 98 million pounds in deposits.
The company plans to expand the product range and move in to the personal loan market later this year.
Bloomer repeated the Pru's interest in establishing the high street distribution network which a building society acquisition would provide. With net cash at year-end standing at 1.1 billion pounds, the group has the financial strength to contemplate such a move.
But Bloomer said it was unlikely to make a move unless it enhanced shareholder value which, given current price levels in the sector, may be difficult to pull off.
The Pru is currently involved in a takeover battle for Scottish Amicable and made an initial 1.9 billion pound offer for the mutually-owned life insurer earlier this month, only 250 million pounds of which will come from shareholders' funds.
Prudential UK operating profits from insurance business increased eight percent to 398 million pounds and operating profits for the British savings and investment business was 323 million pounds, an increase of six percent.
After cutting Prudential UK's cost base by 170 million pounds over the past four years, it was approaching a point of diminishing returns, though the group was looking to reduce unit costs further, Bloomer said.
U.S. operations Jackson National Life saw operating profits growing 35 percent to $512 million.
While confident about the outlook for the business, Bloomer said growth was unlikely to continue at the 40 percent rate seen in recent years. ($ = 0.610 British Pounds)
",44
"About three million Norwich Union  policyholders are to receive free shares under flotation plans announced on Thursday that would value the insurer at about five billion pounds ($8 billion).
Almost two million will receive shares worth 800 pounds on average and another one million ""non-profit"" members of the mutually-owned insurance group will receive a fixed hand-out of shares worth between 330 and 400 pounds on the group's flotation in June.
The demutalisation and flotation - the first by a British insurer - will rank Norwich among Britain's largest 50 companies.
Norwich Union's 10,000 employees will share in the giveaway, receiving 150 shares each.
Norwich's adviser Dresdner Kleinwort Benson estimated the shares would be worth between 220 and 265 pence each had they been listed at the end of February.
The company, Britain's third largest life insurer, also unveiled plans to raise a further 1.75 billion pounds through an offer of new shares in May.
Existing Norwich members will be able to purchase shares at a discount, the size of which has yet to be finalised.
Members will vote on the proposals at an extraordinary meeting in London on April 18 with the company needing the backing of three-quarters of those who vote.
The size of the planned payouts is comfortably ahead of the 500 pounds many industry observers had expected.
Norwich chief executive Allan Bridegwater said he believed the group's mutual structure was no longer appropriate and that flotation was the best way forward for the company and its members.
""The distribution of free shares represents a significant release of value to qualifying members,"" he said.
""The discounted offer of additional shares will give members a further opportunity to participate in the future of Norwich Union.""
The share handout will be worth a total of around 3.1 billion pounds. The two million with-profit members will receive a minimum of 300 shares with additional shares based on the value and duration of their holdings as of October 1, 1996.
Three-quarters of with-profit policyholders - life insurance policies which share in the investment profits of the life fund through bonuses - will get between 300 and 600 shares. Non-profit members will get a fixed allocation of 150 shares.
Most of Norwich Union's half-a-million overseas members will have the choice of a cash payment instead of free shares.
The flotation will allow the separation of the group's life operations from the risks associated with its more volatile and cyclical general business.
It will also strengthen the group's financial position and allow the core life business greater investment freedom.
The general insurance business will be transferred from the life fund to shareholder ownership and the life and pensions operations to a subsidiary company.
Norwich Union, which reported pre-tax profit in 1996 of 483 million pounds, said it believed the opportunities for sustained growth were good but that results in its general insurance arm would continue to be affected by pricing pressure in 1997, particularly in Britain.
Around 1.5 billion pounds of the money raised under today's plans will go into the with-profits fund to enable the company to continue to keep up policy benefits to existing policyholders.
The balance, less the 120 million pound cost of the flotation, will be used for corporate purposes.
While the company did not rule out the possibility of future acquisitions, it said it had no immediate plans to do so and was not ""raising a war chest.""
Policyholders circulars were due to be mailed on Thursday and the group expects the prospectus for the additional share offer to be issued in May. ($ = 0.624 British Pounds)
",44
"China's Shanghai Pudong Development Bank will rent the former headquarters of the Hongkong & Shanghai Banking Corp, the most impressive building on the city's waterfront Bund, an official said on Tuesday.
The official said a signing ceremony would be held on Thursday in the grand main hall of the building, opened in 1925 as a symbol of the financial might of the British Empire.
""The building will be leased to the Pudong Development Bank,"" said the official with the Shanghai city government office set up to find new tenants for the old banks and trading houses along the Bund.
The Pudong Development Bank is a state-owned Chinese bank based in the Pudong Development Zone, across the Huangpu River from the Bund. It is majority owned by the bank building's landlord -- the Shanghai city government.
An official with the Pudong bank said they had agreed to a lease of 30 years duration. But he declined to give details of the lease terms for the building, which has a total floorspace of 24,000 square metres.
The general manager of the Bund Buildings Function Transformation Office, Zhou Jinbao, said last month that he believed the property was worth at least $3 per square metre.
A real estate analyst said he felt it was unlikely a Chinese bank, particularly one closely linked to the Shanghai city government, would pay anything close to that figure.
Another businessman said he understood the new tenant would be allowed to sub-let space in the building to other companies.
The lease announcement marks the failure of the city authorities to find a foreign bank that would be willing to lease the most prestigious building in Shanghai.
The building was the main office of the Hongkong & Shanghai Bank until the Communist takeover in 1949 and then served as the Shanghai headquarters of the Chinese Communist Party until last year when the city officials moved into a new building.
Since then, the building, with its huge main banking hall featuring magnificent marble pillars and curved glass roof, has been empty.
The Hongkong Bank had more than two years of discussions with Shanghai city officials on terms for resuming control of their former headquarters but finally announced that they had decided not to proceed with the proposal.
Zhou said the Hongkong Bank had wanted to demolish several buildings behind the main structure and erect a modern office tower.
But he said this proposal would have had an impact on the wider development plans for the area which have not yet been fixed and are unlikely to be finalised for at least another year or two.
",11
"China has approved three foreign banks to conduct local currency business, the official Shanghai Star newspaper reported Tuesday, but bankers said the deals could not start until a thorny tax rate issue was solved.
The newspaper said the three banks -- Citicorp's Citibank, Tokyo-Mitsubishi Bank and Hongkong & Shanghai Banking Corp. -- would be granted licenses to handle Chinese yuan business this month.
Until now, foreign banks with branches in China have been restricted to doing foreign currency business only, with Chinese banks retaining a monopoly on the huge local currency (yuan) loan and deposit market.
The Star said the banks will be allowed to handle yuan deposits, loans and other business, adding that the business would be opened to more foreign banks starting early next year.
Bankers have said they expect the business licenses to restrict them to taking deposits from and making loans to only foreign-funded firms for the foreseeable future.
An official with one of the three banks said they had not yet been given formal notification that their applications to do local currency business had been accepted.
""But the PBOC has let us know we have been chosen in a more informal way,"" he said, asking not to be identified.
The main problem is the differing rates at which the authorities tax the profits of banks in China. Foreign banks are taxed at 15 percent, Chinese commercial banks at 33 percent and the main state banks at 55 percent.
Bankers say there is still no agreement on how profits made by foreign banks doing local Chinese currency business would be taxed.
""That issue still rests with the State Council, it is beyond the control of the Shanghai city government, or even of the PBOC,"" said a foreign banker.
He said the authorities wanted to unify the tax rate between the various banks, but there were huge wrangles over what rate to choose.
""Until the tax rate issue is resolved, I doubt if the foreign banks will start any local currency business,"" said the banker. ""They will want clarification beforehand.""
",11
"Last week's stern crackdown on China's stock markets has increased the speculative instinct of investors to trade on rumours of policy shifts rather than on fundamentals, analysts said on Monday.
The share markets started their latest bull run in April when Beijing announced it would support the markets.
Rumours and guesses about Beijing's attitude and plans have been the primary trading factor ever since, the analysts said.
While the Beijing authorities have been trying to convince investors to look more at long-term investment based on the fundamentals of the economy and of individual companies, they again chose an old-fashioned means of reining in the markets.
""The crackdown has shown again the risk of policy changes for China's stock markets,"" said an executive with a major Chinese securities house.
""Policy changes have been a very hot speculative topic in the past and the use of administrative orders like this to cool down the markets will make them an even hotter topic in the long run,"" he added.
Beijing last Monday charged that China's two stock markets in Shanghai and Shenzhen were overheated and warned that Beijing would not come to investors' rescue if the markets crashed.
""The action has cooled speculative activity for now,"" said an analyst with a foreign brokerage in Shanghai. ""But the investment pattern has not changed. It is still political issues which drive the stock market up and down.""
In the shake-out last week, investors generally took refuge in blue-chip shares and dumped the so-called ""rubbish shares"" which have soared in recent months on the basis of little more than an impression that Beijing wanted the markets up.
""Retail investors have turned more to blue-chip shares,"" said a trader. ""Their prices have been stable despite the crackdown.""
Analysts said market psychology could have been better influenced if the authorities had pulled share prices back down using market means such as the issue of more shares or the listing of some state or institutional shares.
One key problem of the Chinese share markets is the lack of suitable supervisory mechanisms and regulations, leading to widespread irregularities such as share price manipulation and the use of credit for stock trading, the analysts said.
""With a stock market law lacking and regulations incomplete, many trading activities are in a legal no-man's land, making it difficult to check irregularities,"" said one stock analyst.
The draft Securities Law, the topic of hot debate in the corridors of power in Beijing for years, is not expected to be enacted any time soon partly due to differences over who will have the final say on securities policy, the analysts said.
Responsibility for securities policy at present overlaps between the Securities Commission under the State Council (cabinet), the China Securities Regulatory Commission and the People's Bank of China, or central bank.
Shanghai's domestic A share index rose 17.606 points or 1.91 percent on Monday to end at 939.946 after losing about 20 percent in last week's trading. The foreign currency B share index was up 0.944 points or 1.48 percent to 64.687.
In Shenzhen, the A share index fell 6.71 points or 2.04 percent to 322.25, while the B share index soared 6.11 percent or 7.68 points to 133.24.
",11
"The most magnificent building of old Shanghai -- the former Hongkong & Shanghai Bank headquarters on the waterfront Bund -- became a bank once again on Thursday, with a state-run Shanghai bank renting it from the city.
In a signing ceremony in the huge main banking hall of the building, first opened in 1925, the Shanghai Pudong Development Bank took out a 30-year lease on the structure.
The ceremony marked the failure of the city's search to find a foreign bank to rent or buy the structure, long the city's main landmark.
The city had tried to interest a foreign bank in the 24,000-square-metre building, and spent two years discussing terms with Hongkong Bank.
But they failed to reach agreement and Hongkong Bank, which is owned by HSBC Holdings Plc, finally announced it would not to take it back.
Bankers said the city asked for an unrealistically high price and that the building was unsuited for modern banking.
The bank, once a symbol of the financial power of the British empire, was also the Shanghai headquarters of the Chinese Communist Party from 1949 until last year, when city officials moved out, leaving it empty and echoing.
The chairman of the Pudong bank, Zhuang Xiaotan, told reporters that his bank would pay an annual rent of 145 million yuan ($17.47 million) for the building, amounting to about $2 per square metre per day.
Pudong, Shanghai's main development zone across the Huangpu River from the Bund and the bank building, is earmarked to become the new financial heart of the city.
The Pudong Development Bank is building its own multi-storey headquarters there that will be ready in about the year 2000, Zhuang said.
""We will use this building as the bank's headquarters until the new building is ready,"" Zhuang said.
The building and the Pudong development bank are both basically owned by the Shanghai city government, and some analysts said the lease agreement had little significance.
""It's the left hand moving money to the right hand,"" said one analyst with a foreign bank in Shanghai.
But Zhuang denied this was the case.
""We are an independent economic unit and this is a commercial deal,"" he said, adding that the bank would consider sub-letting space in the huge building.
($1=8.3 yuan)
",11
"China's top cashmere producer, Inner Mongolia Erdos Cashmere Products Co Ltd, reported good interim results on Monday and brokers expect a solid second half as raw material prices fall.
The company, a favoured stock among Shanghai's B share market bucked the trend of disappointing mid-term results with a 25 percent increase in profits over the same period last year to 67 million yuan ($8.07 million), despite lower revenue.
A spokesman for Erdos said he expected net profits for the year to rise to around 180 million yuan from 170 million yuan in 1995. Turnover in the first half fell to 252.7 million yuan from 349.4 million yuan.
""The jump in net profit was due to lower costs, primarily a drop in the price of raw materials in the first half of 1996,"" company director Guo Enzhe said in an interview.
He gave no further details but a foreign stock analyst based in Shanghai said the price of raw cashmere had fallen 15 percent from its 1995 highs.
The analyst said Erdos had indicated it had exhausted its stockpiles of 1995 raw cashmere and was replacing them with new stocks that were 15 percent cheaper.
""Generally we're fairly positive about the company,"" said Jardine Fleming's Shanghai representative John Crossman. ""We will probably upgrade them from a hold to a buy.
""We're expecting a better second half because they're using cheaper raw materials and looking for really good stuff to happen in the first half of 1997,"" he added.
Analysts said a large portion of Erdos' sales to the United States and Europe were booked in the July-to-September period which should boost the company's position.
The positive effect of lower raw materials prices is expected to help the firm well into 1997.
Analysts said another factor helping to lift Erdos profits despite falling revenues was a move by the company into garment manufacturing, which has higher profit margins.
The company bought four textile manufacturing firms in the first half of the year, each of which has a 25 percent Japanese equity stake.
A company statement in the Shanghai Securities News on Monday said Erdos planned to establish five more joint ventures with domestic companies in the second half of 1996 for garment production.
Erdos shares closed on Monday at $0.506, up 0.006 on the Shanghai exchange. The shares were first listed last October at their issue price of $0.469.
($1=8.3 yuan)
",11
"China's foreign currency B shares in both Shanghai and Shenzhen surged on Wednesday as investors piled in money on the back of rumours the government was planning measures to support the markets, brokers said.
Shanghai's B share index soared 5.49 percent to 49.689 points, while the Shenzhen index was up 8.25 percent to 111.35 in heavy trade.
""There have been widespread talk that regulators are meeting somewhere discussing ways to turn around the long bearishness of the Hong Kong dollar-denominated stock market,"" a broker at China Southern Securities in Shenzhen said.
""Such rumours triggered a steady inflow of fresh money,"" he added.
In Shanghai, brokers said the sharp rise was a reflection of the activity in the Shenzhen market with overseas investors buying selected stocks with relatively good prospects.
""B shares prices had become too cheap to drop any further, with the domestic economic situation improving,"" one broker said. ""And recent rises in Shenzhen B shares also provided a chance for Shanghai B shares to follow.""
In Shenzhen, brokers and analysts said the recent surges were linked to a report in the Shenzhen-based Securities Times last Thursday that the China Securities Regulatory Commission has been concerned about the market's prolonged bearishness.
The newspaper quoted the CSRC's chairman Zhou Daojiong as saying at an international business forum in Beijing that the poor performance of the country's B markets had negatively affected China's reform and open policy.
The buying is being led by Chinese domestic institutional investors, with increasing amounts of money from overseas investors, said brokers.
""There is also money coming from Chinese individual investors, but the amount is imposssible to calculate because it's illegal,"" said one analyst.
China's B shares are supposed to be for foreign investors only, but most of the trading is now done by domestic investors through a variety of means.
Stock analysts were at a loss to come up with suggestions as to what market-boosting measures may be implemented, assuming the rumours of an impending announcement from Beijing are correct.
""Beyond quietly allowing local Chinese investors to come back into the market, I can't think what they could do,"" said one analyst. ""The problem has always been that the companies listed on the B share market are not performing well enough.""
Another analyst said that the B share market will face a correction over the short term, given the fast pace of its ascent and that its medium-term trend should be decided by whether regulators announced stimulative policies.
""The rumours are responsible for the current rises but market fundamentals have changed little,"" said a Shanghai broker. ""The upward trend can only be established after concrete governmental measures are announced. Otherwise, it will shortly be reversed.""
",11
"Chen Yifei, China's top-selling modern artist, is back home in Shanghai, basking in the glow of his international success and planning a shift in subject matter -- this time to illustrate China's Generation X.
The artist, best known for his almost photographic paintings of Chinese beauties, opened his first-ever retrospective exhibition on Saturday in the new Shanghai Museum.
The show, running through to January 19 before going on tour to other cities, is Chen's first exhibition in China.
It brings together more than 40 works from a variety of public and private sources, including drawings from Chen's youth during the 1960s Cultural Revolution, through to his latest paintings depicting the strong faces of Tibetan peasants.
But his next artistic goal is to capture on canvas the feel of Chinese urban youth in the mid-1990s, increasingly influenced by trends and concepts from beyond the borders of China, particularly Western culture.
""I want to do something on the life of the new generation, the ones I see dancing at the Hard Rock Cafe or New York New York (a Shanghai disco),"" Chen said in an interview.
""This is a new generation of China after the revolution. I look at them and I think about the value of life. They look very happy, but maybe thinking a different way,"" he said.
MODERN CHINA'S TOP-SELLING ARTIST
Chen holds the record for the highest price paid at auction for a modern Chinese painting -- 2.86 million yuan ($344,000) for a Tibetan-theme painting called Wind of the Mountain Village, now owned by a Chinese securities firm.
Now 50 years old, Chen left China in 1980, the first mainland Chinese artist to emigrate to the United States in modern times.
But in spirit and in terms of artistic inspiration, he never really left.
His most famous paintings so far are a series of life-like portraits of Chinese women dressed in traditional garb, while his paintings reflecting the atmosphere of old Shanghai are well-known.
He continues to produce landscapes showing the canals and villages of the east China region that is his ancestral home and looking at his Tibetan portraits, you can almost smell the yak butter.
China is also at the heart of his other artistic interest -- making movies. In recent years, he has directed several movies with mixed commercial success but he says he is determined to press on with this branch of the visual arts.
He is currently working on three film projects, the first of which will be a documentary on the Jews who lived in Shanghai in the years before the Communist take-over in 1949, most of them refugees from repression in Europe.
CHINA'S NEW GENERATION OF ARTISTS
Chen said he was impressed by the standard of younger Chinese artists, particularly in Beijing and Shanghai, but declined to name any favourites.
""Many of the new generation are very hopeful. China will become very important on the world art market, the standard is really very high,"" he said.
He maintains apartments in New York and Shanghai, but there's an important difference.
""In my heart, Shanghai is my home,"" he said. ""This is where I grew up. In New York, it's just a room.""
He said he was really happy to see Shanghai developing so fast and so strongly.
""Everyone is watching Shanghai. If it can continue this level of development, this place has a lot of hope.""
",11
"""Why can't I access the Playboy Website?""
That, say computer experts, is one of the most common complaints from the growing number of Internet users in China.
China, which controls information more carefully than most countries in the world, is cautiously opening up access to the Internet, in spite of the problems raised by such an anarchically free information dissemination medium.
Officials said security filters were placed on the main Internet access servers in Beijing and Shanghai in the middle of this year and, after a testing period, restrictions on ordinary people opening Internet accounts have been removed.
The filters stop access to politically sensitive sites on the Internet's World Wide Web supporting such causes as independence for Tibet or release of Chinese political prisoners.
They also attempt, often unsuccessfully, to stop access to the thousands of sexually-explicit sites such as Playboy magazine's Web page.
""Our customers using the Internet have complained they can't get through to the some sites, particulary sites like Playboy,"" said a computer industry expert working in Shanghai. ""You'd be surprised at how many customers we have calling about that.""
Meanwhile, usage of the Internet in China is growing so fast that phonelines on the main services are often engaged all day and far into the night.
""Growth is out-running infrastructure investment, so the system is being inundated,"" the computer expert said.
""Popularity is no problem, it's super-popular, but the government is not re-investing the money at a fast enough rate. So there's still a lot of technical problems. People are having trouble with access and speed once they get on,"" he added.
A senior official with Shanghai's Post and Telecommunications Bureau said there were no longer any restrictions on Chinese people signing up for Internet access.
""Some time ago, our security arrangements were incomplete and there was a problem with pornographic and politically unacceptable material,"" said the official, Zhang Weihua.
""But our arrangements have been improved and new accounts are being added without restriction,"" he added.
Zhang said there were a total of 3,200 registered Internet accounts on the Shanghai server at the end of August with the number increasing at several hundred a month.
But there are indications that several other organisations are selling Internet access and the real number of users is probably much higher, analysts said.
Chinese users going through the two main servers can access the World Wide Web and use e-mail, but the Internet's freewheeling discussion news groups are restricted.
And while users are able to establish their own Web sites, they are not supposed to load the material onto the Web themselves, said an attendant at one of Shanghai's two new Internet Cafes.
""You must give us the files to allow for inspection and we will upload them for you,"" the attendant said.
Analysts said the main priority of the authorities at present seemed to be to control the number of lines through which the worldwide Internet material enters China to just two -- one in Beijing and one in Shanghai.
""There's is upposedly another line going through from (the southern city of) Guangzhou to Hong Kong, but for political reasons, Beijing wants to keep very tight control,"" said the computer expert.
""I think Beijing and Shanghai will continue to be the main filtering points because otherwise they can't filter it. If they have a lot of international links then you can forget about any kind of filtering,"" he added.
The question, he said, is whether the Chinese authorities can stay ahead of the ever-changing technology of the Internet and ahead of the ability of local computer whiz-kids to find ways round any barriers that are set up.
""Given the number of hackers in China, I would say there's no way in hell (they can stay ahead),"" the expert said. ""This is a country full of hackers. These guys have found so many holes in the (Chinese) servers it's ridiculous.""
""The servers don't have the latest security equipment installed and these guys are brilliant. They can see all of our e-mails. I know there are people who have all our account names and passwords,"" he added.
",11
"China issued another strong signal Sunday that its stock and bond markets have been given the green light for fast growth to provide the economy with more efficient means of investment.
A report in the official Shanghai Securities News was the latest in a series of indications that Beijing's previous suspicion of the securities markets has been replaced by a determination to expand and strengthen them.
Shanghai Securities News quoted a report that said the stock and bond markets must be developed vigorously to provide a stronger foundation for national economic development.
The newspaper quoted a report from the Chinese Academy of Social Sciences, a think-tank, as saying the efficiency of investment channels was a key question affecting the long-term development of China's economy.
""The sluggish development of the direct investment markets is one of the factors affecting the long-term development of the national economy, so it is necessary to speed up the development of stocks, bonds and other direct investment markets,"" it said.
More direct investment would help to reduce the tangle of problems surrounding heavily indebted state enterprises and the state banks, which are currently forced to support the enterprises with a constant supply of loans, the report said.
""Banks are being squeezed from both sides, given the high risk (of loans to state enterprises) and the ever-growing deposits they are taking in,"" the paper said.
It said that it would be better for all parties if depositors put less cash into bank deposits and invested it directly in companies through the securities markets.
""Most of the money in the hands of ordinary people is currently put into bank accounts, which increases total bank deposits even as enterprises are short of money, resulting in capital being left idle and wasted,"" the report said.
The current small scale of the direct investment markets was a key reason for this imbalance, it said.
""So how to standardise, develop and strengthen the direct investment markets to allow for more reasonable usage of deposits is an important part of raising the efficiency of banks and making more efficient use of capital,"" it added.
The report gave no details on shifting the focus of enterprise investment from banks loans to securities, but Beijing has implemented a number of measures recently aimed at expanding the securities markets.
A record number of companies have been given approval this year to list shares on the country's two stock markets in Shanghai and Shenzhen.
The Shenzhen market was strongly affected last week by rumours, denied in Beijing, that securities authorities were about to release the quotas for company listings for next year.
But authorities last week did announce a major relaxation of policy on mutual funds, which are seen as an important conduit for funnelling funds from ordinary people into the securities markets.
Regulations allowing existing mutual funds to list on the stock exchanges are due to be released before the end of the year, official media reports said.
In another development, a senior Chinese official was quoted as saying Sunday that China is preparing to tap overseas capital markets by listing shares of one or two of its chemical companies abroad.
Chemical Industry Minister Gu Xiulian told Business Weekly that one or two chemical companies were getting ready for share offerings abroad, though she did not name the companies or the exchanges.
",11
"China's foreign currency B shares went on another roller-coaster ride on Tuesday, with Shenzhen stocks rising 9.5 percent at midday before falling back to score a modest 1.27 percent increase on the day.
The Shanghai B share index was up 2.1 percent at the close after hitting its year-high of 54.475 at the end of the morning session.
Brokers said domestic investors were heavily in the market again in spite of a ban on the purchase of the B shares by local Chinese and selling by overseas investors was much in evidence, particularly in Shenzhen.
The B shares in both of China's stock markets have soared in the past 10 days on persistent rumours that the authorities plan to take measures to boost the market.
But one foreign analyst in Shanghai said it appeared that the implication the authorities would take no further action to limit domestic buying of B shares was enough to push them up.
""They're not going to make an announcement, but it would appear the authorities have let it be known that local investors can participate in the market,"" the analyst said.
""If that is true, then there will be some sustained momentum to the market,"" the analyst added.
The Shanghai B index rose 1.104 points or 2.10 percent to 53.766 points, on volume of 36.4 million shares worth $15.7 million, but off the intra-day year-high of 55.097 points due to profit-taking in the afternoon, brokers said.
In Shenzhen, the B index rose 1.70 points, or 1.27 percent, to end at 135.14 after touching an intraday high of 147.70 on turnover of HK$415.10 million, compared with Monday's HK$347.13 million.
""Heavy profit-taking pushed the index off its day high,"" said a broker at China Southern Securities. ""But the (Shenzhen) index still has space to go up if there is no official denial of rumours that Beijing is considering market-boosting plans.""
""With the index having gained about 50 percent over the past few sessions, the risk has become gradually higher,"" another Shenzhen analyst said.
Shanghai shares were pushed up largely by domestic buying of shares related to the Pudong development zone. But interest in the markets from foreign investors is gradually reviving as a result of the booming trade.
""Foreign investors are looking at China's B share markets again, encouraged by improved fundamentals of the B share companies and especially encouraged by the liquidity shown over the last few trading sessions,"" said Bruce Richardson of HG Asia in Shanghai.
",11
"More foreign firms are finally beginning to realise the dream of the China market that has long tantalised 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 loss-making 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.
PERSISTENCE PAYS OFF
""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 thoughout China,"" he added.
Coca-Cola 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.""
Coca-Cola 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.
MARCHING WITH THE CONSTRAINTS
""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 and Ericsson, 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.
BIGGER INVESTMENT EQUALS BIGGER RISK
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 aeroplanes or something.""
The automobile industry has seen its share of troubles for foreign firms who 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, 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 group 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.""
CHOOSING MARKET SHARE OVER PROFITS
Making money is anyway 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, for instance, which set up a joint venture last month, said it doesn't expect to see a profit for at least seven years.
""Many companies are ploughing everything back into expansion and advertising,"" said a Western diplomat. ""In many cases, headquarters doesn't care if you make money, it's whether you're getting greater market share.""
""If you're a global company you have to be here, and the potential risk of not being here is greater than losing your shirt for a while when you come in,"" said Richard Graham, representative of ING Barings in Shanghai.
Success and failure for a foreign company in China is also closely related to who they work with.
""The reasons for people failing are usually related to joint venture problems. Choosing the wrong partner is the source of a lot of difficulties,"" the diplomat said.
But analysts said profits and market share aside, major advances have been made by foreign firms in recent years in the areas of experience and staffing.
""There are many companies now which have a lot of experience of operations in China, their staff are more used to operating in Chinese ways, and local staff are more used to operating under international practice,"" said Barings' Graham.
""This should allow them to go forward more positively.""
",11
"China's state debt has become the top investment choice among local investors in 1996, thanks to a slew of market reform measures, but further reforms are needed to ensure a continued boom, analysts said on Tuesday.
Beijing ended a record issue of 195.2 billion yuan ($23.52 billion) worth of treasury bills and bonds for 1996 last Friday when it allocated the last batch of the seven-year bond to underwriters.
Analysts said the instruments had become best sellers this year mainly due to reforms of the process for issuing treasury bills and bonds.
""The most important has been the widespread adoption of a public tender system,"" said one T-bill trader. ""This has made the coupons on state debt more reflective of market changes and needs.""
Beijing had, in the past, allowed the Finance Ministry to decide the coupon rates and use adminstrative edict to allocate state debt to banks and other financial institutions for them to sell. But this year, the ministry organised public tenders for each new bond issue.
Under the new system, about 75 percent of each new batch was distributed to bidders according to the interest rates and amounts lodged by the bidders in public tenders. The rest was distributed according to adminstrative decision.
The coupons were largely based on the weighted averages of the valid bids at the public tenders, but industry sources said the ministry also ""fine-tuned"" them to some extent to come up with the final rates.
""The ministry usually raised the coupons to some extent to make it easier to sell the state debt,"" said one source. ""This resulted in many underwriters retaining the bonds themselves to gain easy profits when the bonds were listed.""
""Individual investors were in many cases disappointed when they were unable to buy the bonds even after standing in line for many hours,"" said a second T-bill trader. ""This hurt their enthusiasm, with institutions making most of the profits.""
Analysts said there is room for further improvement in the government's method of issuing debt.
They said they want to see a reduction in the proportion of the bond issues held back from the public tenders.
Another improvement would be if the ministry used market means to encourage the underwriters to sell a greater proportion of the bonds they obtained, and not hold them on their own account, the analysts said.
However, the market's maturity spectrum expanded as its popularity grew. A greater variety of bills and bonds have been issued this year -- three-month, seven-year and 10-year issues have been added to the traditional six-month, one-year, three-year and five-year bonds.
Also, discount bonds, sold at below face value with the pay-back at face value on maturity, were introduced for the first time.
Yet another innovation was the payment of interest on an annual basis instead of on maturity, for the first-ever seven-year bond and the 10-year bond.
""This method of payment allows investors to re-invest their interest and has been widely welcomed,"" said Lu Weiming, a T-bill trader with China Guotai Securities. ""Its success is likely to lead the central government to use it more and more in future bond issues.""
Chinese analysts believe Beijing will issue a new record amount of T-bills and T-bonds next year, probably around 250 billion yuan.
But they said this amount as a proportion of China's gross domestic product is still below that of advanced western countries.
($1 = 8.3 yuan)
",11
"Last week's stern crackdown on China's stock markets has increased the speculative instinct of investors to trade on rumours of policy shifts rather than on fundamentals, analysts said Monday.
The share markets started their latest bull run in April when Beijing announced it would support the markets.
Rumours and guesses about Beijing's attitude and plans have been the primary trading factor ever since, the analysts said.
While the Beijing authorities have been trying to convince investors to look more at long-term investment based on the fundamentals of the economy and of individual companies, they again chose an old-fashioned means of reining in the markets.
""The crackdown has shown again the risk of policy changes for China's stock markets,"" said an executive with a major Chinese securities house.
""Policy changes have been a very hot speculative topic in the past and the use of administrative orders like this to cool down the markets will make them an even hotter topic in the long run,"" he added.
Beijing last Monday charged that China's two stock markets in Shanghai and Shenzhen were overheated and warned that Beijing would not come to investors' rescue if the markets crashed.
""The action has cooled speculative activity for now,"" said an analyst with a foreign brokerage in Shanghai. ""But the investment pattern has not changed. It is still political issues which drive the stock market up and down.""
In the shake-out last week, investors generally took refuge in blue-chip shares and dumped the so-called ""rubbish shares"" that have soared in recent months on the basis of little more than an impression that Beijing wanted the markets up.
Analysts said market psychology could have been better influenced if the authorities had pulled share prices back down using market means such as the issue of more shares or the listing of some state or institutional shares.
One key problem of the Chinese stock markets is the lack of suitable supervisory mechanisms and regulations, leading to widespread irregularities such as share price manipulation and the use of credit for stock trading, the analysts said.
""With a stock market law lacking and regulations incomplete, many trading activities are in a legal no-man's land, making it difficult to check irregularities,"" said one analyst.
The draft Securities Law, the topic of hot debate in the corridors of power in Beijing for years, is not expected to be enacted any time soon, due partly to differences over who will have the final say on securities policy, the analysts said.
Responsibility for securities policy at present overlaps between the Securities Commission under the State Council (cabinet), the China Securities Regulatory Commission and the People's Bank of China, or central bank.
Shanghai's domestic A share index rose 17.606 points or 1.91 percent on Monday to end at 939.946 after losing about 20 percent in last week's trading. The foreign currency B share index was up 0.944 points or 1.48 percent to 64.687.
In Shenzhen, the A share index fell 6.71 points or 2.04 percent to 322.25, while the B share index soared 6.11 percent or 7.68 points to 133.24.
",11
"China's stock markets surged anew on Wednesday following two days of dramatic falls, as investors recovered from the shock of an official crackdown on speculation, traders said.
Shanghai's B share index closed up 9.84 percent at 64.252 points and the A index was up 7.34 percent at 1016.241.
In Shenzhen, the B share index closed limit-up 10 percent at 133.8 points while the domestic A index gained 4.37 percent to 391.92 points.
The gains followed two days of precipitous falls after an announcement from Beijing that the stock markets were overheated and that the authorities would not step in to help investors if they collapsed.
""Investors are recovering from the shock,"" one trader said. ""Reassurances to investors from exchange officials and local media that Beijing will continue to develop the markets has helped.""
The China Securities newspaper on Tuesday quoted the presidents of the Shanghai and Shenzhen exchanges as welcoming the crackdown, saying the markets needed stability to develop.
The newspaper also urged investors to be fully confident that the central government would continue to develop the stock markets on the basis of standardisation.
""Active buying emerged in the early afternoon, with an increasing number of investors reluctant to reduce their B share holdings after the nosedives of the past couple of days,"" a Shenzhen-based broker with Shanghai Guotai Securities said.
""Institutional buying targeted shares of firms with strong earnings records,"" he added.
Traders said that both domestic institutions and overseas investors built new positions on the B share market in the belief that the impact of the crackdown would be limited.
They said many investors believed B share prices were now very cheap and would rise in the short term. One analyst said Shanghai's B shares on average were priced at only one-third the level of their A-share counterparts.
Most B shares mostly ended limit-up on Wednesday.
Traders said A-share trading was dominated by speculators who wanted to take advantage of plunges in the past two days to build positions.
Some retail investors who had bought at higher levels also built positions on Wednesday to reduce the average cost of their shares, they added.
Several A shares, mostly blue-chips, closed limit-up. Market giant Shanghai Petrochemical rose 0.50 yuan to 6.50 yuan on volume of 42.5 million shares, making it the day's most active stock.
""The markets might be over-speculative on the whole, but blue chips have not been the target of excessive speculation,"" said one trader. ""Shanghai Petrochmical, for instance, had a P/E (price-earnings) ratio of only 18 percent against an average of 40 for the market.""
Traders believe the B share market is likely to continue to rise in the next few days, but that A share rises will be limited.
",11
"The threat of a Sino-U.S. textiles trade war is having little impact on Chinese firms as it is unlikely to go beyond words and because the companies are performing poorly, company officials and brokers said on Wednesday.
Company officials said they had got used to the continual verbal duelling between Beijing and Washington with concrete measures being avoided at the last minute.
""With the interests of both sides at stake, the verbal warnings will finally be replaced by mutual concessions,"" said Li Shounan, head of the general manager's office in Shanghai Lianhua Fibre Co Ltd.
""The overall amount under threat is not large and when it comes to an individual company, the impact is even less. We do not expect much effect,"" said an official with Shanghai Sanmao Textile Co Ltd.
But a spokeswoman for Shanghai Jiafeng Co Ltd said its products were involved in the dispute.
""There will surely be some impact if a trade war breaks out though it is hard to immediately to assess to what extent,"" she said.
China's annual apparel and textile exports to the United States are estimated at around $4.2 billion. About 30 garment and textile companies are listed in Shanghai and Shenzhen.
In the most recent clash in Sino-American trade relations, Beijing said on Sunday it would temporarily ban imports of selected U.S. textiles, farm goods, fruits and alcoholic drinks from December 10 in retaliation for U.S. sanctions taken against Chinese textiles.
Washington announced in September that it would cut China's textile import quota for 1995 by $19 million in retaliation after accusing China of shipping through third countries to avoid quotas agreed upon in a bilateral textile accord.
""Textile companies have performed very poorly in the past two years due to a slump of the industry and we do not expect any major impact even with a trade war,"" said one broker with China Shandong Securities Co.
""But a handful of firms closely linked to Chinese-U.S. trade will possibly be affected,"" he added.
""Who cares?"" said a Shanghai-based investment analyst with a Hong Kong securities brokerage. ""They (the listed textile firms) have done so poorly that few investors are interested in them.""
Some Chinese officials have said they believe there is a political agenda behind the U.S. trade threats against China.
""The U.S. penalties were announced before the U.S. elections and we believe they were closely linked to (U.S. President Bill) Clinton's political needs,"" said one official.
",11
"China's crackdown on the stock markets this week is partly fuelled by fears in Beijing that the incredible volatility of the exchanges could lead to social instability, analysts said on Tuesday.
They said the move was also aimed at avoiding disruption caused by foreign and domestic speculators who had planned to pump money into the markets up to the mid-1997 handover of Hong Kong to Beijing, then pull their funds out again.
""In a transitional period when the ailing leader Deng Xiaoping is gradually moving out of political arena, social stability is the primary concern of the leadership,"" said one executive with a Chinese brokerage.
""Stock boom and bust cycles do not fit in with the aim of social stability,"" he added.
A Shenzhen-based broker said there had been many rumours that the surges on the Shenzhen market were supported by overseas funds from Hong Kong and Macau.
""Some rumours said that foreign funds wanted to push up the Chinese markets before the (Hong Kong) takeover and depress them afterwards,"" the broker said.
The official People's Daily said in a harshly worded commentary on Monday that China's stock markets had overheated on widespread speculation. It warned that if the markets crashed, the government would not step in to support them.
In anticipation of the response to the commentary, the stock exchanges last Friday evening introduced a 10 percent limit on movements of prices for individual shares.
On Monday and again on Tuesday, most shares on the Shanghai and Shenzhen stock exchanges plunged to the 10 percent limit-down level.
Since April, both domestic and foreign currency share prices on the two markets had surged on average by well over 100 percent.
""The central government has chosen the right time,"" said one political analyst. ""There are still a few months to go before the Hong Kong takeover and stock prices had not surged so far that falls would push investors out on to the streets (to demonstrate).""
Some stock traders said that, by talking down the markets, Beijing had effectively prevented heavy fresh liquidity to flow into the markets.
""The inflow of hot money (speculative funds) has been cut off with retail investors frightened away and institutions taking heed of the warning,"" one trader said.
""It seems now that the markets will be 'stable' around the date of the Hong Kong takeover,"" he added. ""Prices are expected to move little after the impact of the crackdown is gradually digested.""
On Tuesday, a spokesman of the China Securities Regulatory Commission was quoted by local media as saying that the crackdown was aimed at protecting retail investors and that Beijing would continue to develop the markets.
""Our government has always insisted on the principle of steady development of the securities markets on the basis of their standardisation,"" he was quoted as saying.
""We do not care what kind of development the central government chooses,"" said one investor. ""But periodic policy changes reflected in official statements really make us frustrated.""
The strong surge in prices on China's two stock exchanges since April had been largely fuelled by expressions of support for the share markets from Beijing.
",11
"China's B share markets in both Shanghai and Shenzhen slid on Wednesday on profit-taking following huge increases in recent weeks and reports of tighter controls in Shenzhen, analysts said.
The Shanghai B share index fell 3.649 points or 4.55 percent to 80.685 on Wednesday, with volume heavy at 95 million shares worth $44 million.
Shenzhen's B index lost 7.42 points or 3.83 percent to close at 186.45 largely on talk of tighter control over local investors trading B shares, traders said.
""It's a technical correction,"" said a foreign brokerage analyst in Shanghai. ""Shanghai and Shenzhen have risen substantially over the past few weeks, so it's a natural move by investors to take profits.""
""Today's loss was a technical correction partly sparked by a fall on the Shenzhen market,"" said a trader. ""The correction is likely to continue for the rest of this week. But market sentiment is good and the index will recover next week.""
Shenzhen securities authorities have warned brokerages in the city not to allow local investors to buy B shares unless the money comes from outside the country, an official of the Shenzhen Securities Management Office (SSMO) said on Wednesday.
A senior official at the SSMO said the notice had been released at the urging of the Foreign Exchange Management Bureau under the People's Bank of China and the China Securities Regulatory Commission.
""The inflow of fresh money into the market will definitely slow with the implementation of the policy, but many Chinese can still enter the market by some means or other,"" a broker said.
Brokers in Shanghai said they did not know of any such notice being distributed to brokers in Shanghai. Officials of the central bank and the national regulator in Beijing declined to comment.
""We've heard such reports (about crackdowns) from Shenzhen from time to time,"" said the Shanghai-based foreign analyst. ""Whenever such reports come out, the B shares go down but after a while, speculation resumes again.""
In Shanghai, all 42 B shares traded, with 34 down, one flat and seven up. Cheap stocks with poor results led the falls after speculative jumps in the past few days, brokers said.
""Technical charts indicate the market has entered a correction phase and the index is likely to test the 75-point support level,"" one broker said.
""The market trend mainly depends on the attitude of the securities authorities,"" he added.
Shanghai Erfangji was the biggest loser, plunging $0.060 or 21.42 percent to $0.220, on volume of 3.8 million shares.
Shanghai Rubber Belt followed, tumbling $0.054 or 17.08 percent to $0.262, on volume of 718,000 shares. Shanghai Jintai traded the most on institutional liquidation, down $0.012 or 4.28 percent to $0.268, on volume of 6.2 million shares.
The Shanghai A share index rallied after falls on Tuesday, but the market was still in a mood of consolidation amid uncertainty over its direction, brokers said.
The index rose 17.559 points or 1.37 percent to 1301.322 points, on volume of 1.1 billion shares worth 13.8 billion yuan ($1.66 billion). The SSE 30 blue-chip index jumped 99.013 points or 3.34 percent to 3064.238 points.
($1=8.3 yuan)
",11
"China's domestic A shares continued to plummet on Thursday with investor confidence still in tatters following the rude shock of a government crackdown on the markets on Monday, traders said.
Shanghai's foreign currency B share index ended little changed at 64.343 points with bargain-hunting support prices, but A shares on the market fell 7.54 percent to 940.548.
On the Shenzhen stock market next to Hong Kong, the A share index plunged 8.7 percent to 357.85 points, while the B shares were also down sharply, losing 5.42 percent to 126.54 points.
""A growing number of investors want to leave the A and B markets, at least for a while,"" a Shenzhen trader said.
Brokers said Shanghai A shares plunged on unstable market sentiment and reported seeing some panic selling on rumours that more negative market news could be announced at the weekend.
""Retail investors used the opportunity of a technical rebound on Wednesday to offset their positions,"" said one broker. ""Sentiment is still weak.""
The Shanghai B share market is looking the healthiest of the China share markets in the wake of the crackdown in which the Beijing authorities said stock trading was overheated and warned of a crash if speculative trading was not stopped.
""Technical charts show the B share index is likely to consolidate between 63 and 65 points in the short term with investors targeting stocks with strong profits records,"" a second broker said.
Inner Mongolia Erdos Cashmere was the star on expectation of good results, rising $0.052 or 9.84 percent to $0.580, on volume of 1.7 million shares.
Shanghai Tyre & Rubber followed on institutional buying, up $0.034 or 8.21 percent to $0.448, on volume of 1.2 million shares.
In Shenzhen, brokers said the market was hit by institutions taking profits on the B share market with investors still jittery over Beijing's crackdown.
""Investors offset their positions whenever prices rose because they have little confidence in the market's short-term outlook after the falls earlier this week,"" an analyst said.
Many Shanghai B shares closed at the 10 percent limit-down with Dadonghai falling HK$0.36 to HK$3.20 on volume of 5.84 million shares on institutional selling, brokers said.
Changan Automobile traded the most on volume of 11.86 million shares, losing HK$0.20 to HK$3.55.
The A market plummeted with the majority of A shares closing at the 10 percent limit-down due to heavy selling in ""rubbish stocks"" -- shares of smaller firms with poor business results over the past few years, brokers said.
One Shenzhen broker predicted that the A shares could have a long way further to fall given their strong gains in the past few months.
But several Shenzhen counters with strong earnings records were seen being supported by institutional demand, brokers said.
Guangdong Power's A shares rose 0.93 yuan or 5.72 percent to 13.49 yuan, with its B shares up HK$0.35 or 6.36 percent to HK$5.85 per share, making them the best performers on the city's A and B share markets on Thursday.
",11
"China has approved three foreign banks to do local currency business, the official Shanghai Star newspaper reported on Tuesday, but bankers said deals could not start until a thorny tax rate issue was solved.
The newspaper said the three banks are Citibank, Tokyo-Mitsubishi Bank and Hongkong & Shanghai Banking Corporation and that they would be granted licences to handle Chinese yuan business this month.
Up to now, foreign banks with branches in China have been restricted to doing foreign currency business only, with the Chinese banks retaining a monopoly on the huge local currency (yuan) loan and deposit market.
The Star said the banks will be allowed to handle yuan deposits, loans and other business, adding that the business would be opened to more foreign banks from early next year.
Bankers have said they expect the business licences to restrict them only to taking deposits from and making loans to foreign-funded firms for the foreseeable future.
The deputy governor of the People's Bank of China, Chen Yuan, said on Tuesday that China would grant licences for foreign banks to conduct local currency renminbi (yuan) business ""very soon"".
""We will very soon introduce foreign banks into the renminbi business in Shanghai,"" he told reporters after a Hong Kong Monetary Authority conference. ""We will announce that very soon. It is a matter of days not weeks,"" Chen said.
He declined to say how many licences would be granted.
An official with one of the three chosen banks, said they had not yet been given formal notification that their applications to do local currency business had been accepted.
""But the PBOC has let us know we have been chosen in a more informal way,"" he said, asking not to be identified.
The main problem is the differing rates at which the authorities tax the profits of banks in China. Foreign banks are taxed at 15 percent, Chinese commercial banks at 33 percent and the main state banks at 55 percent.
Bankers say there is still no agreement on how profits made by foreign banks doing local Chinese currency business would be taxed.
""That issue still rests with the State Council, it is beyond the control of the Shanghai city government, or even of the PBOC,"" said a foreign banker.
He said the authorities wanted to unify the tax rate between the various banks, but there were huge wrangles over what rate to choose.
""Until the tax rate issue is resolved, I doubt if the foreign banks will start any local currency business,"" said the banker. ""They will want clarification beforehand.""
The Star newspaper said the three banks chosen to begin local currency business all had registered branches in the Pudong Development Zone to the east of Shanghai's city centre.
Officials had long said that only banks with Pudong branches would be considered for the licences.
",11
"A sudden crackdown on China's fledging stock markets pushed most shares to limit-down levels on Monday and triggered an outcry from securities brokerages and retail investors.
The People's Daily, mouthpiece of the Communist Party, said in a commentary on Monday that the country's stock markets had overheated on widespread speculation and warned that Beijing would not step in to help if the stock markets plunged.
Virtually all shares on the Shanghai and Shenzhen stock markets fell 10 percent, the daily limit announced by the authorities last Friday afternoon to prevent sharp fluctuations.
""This is very, very disappointing and outrageous,"" said one local stock analyst. ""With this simple decision they can wipe out nearly all the gains in the securities business in a hard year.""
""I can't understand it,"" said a trader. ""Such administrative edicts will eventually kill the markets one day.""
Analysts said they were shocked by the sudden change of direction by officials in Beijing.
Since April there have been many official statements, messages and hints indicating clearly that the stock markets had the official blessing of Beijing.
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.
Shanghai's A share index had surged more than 100 percent and Shenzhen's A share index nearly 300 percent since April.
""They had been talking about encouraging stock invesment and suddenly here comes the new policy,"" said a retail investor. ""Most of us will have our money caught in the markets. It looks like prices will plunge and no one wants to buy.""
Foreign brokers and analysts also slammed the sudden official intervention, saying it went counter to the trend in China of gradually allowing market forces and controls to play a greater role.
""Foreign investors will not welcome such administrative interference in the markets,"" said a Shanghai-based brokerage analyst. ""What is worse is that it seems from the People's Daily editorial that they wanted to force prices down.""
Shanghai's domestic A share index plunged 9.92 percent to 1,047.680 points and the foreign currency B shares fell 9.6 percent to 59.929 points.
In Shenzhen, the B share index dived 10 percent to 134.43, and the A share index also 10 percent to 417.20.
Brokers and analysts said they expected another 10 percent limit-down day for the markets on Tuesday, with virtually no buyers in sight, and a great sense of unease amongst investors about how quickly the market can be turned by officials edicts.
""For Shanghai B shares, tomorrow will be another 10 percent, but on the third day it may be less,"" said another foreign brokerage analyst. ""Buying interest is very limited.""
""Panic selling occurred in many securities trading halls in major brokerages,"" said one trader. ""But nobody wants to buy. Investors believe current prices are very high taking into account the changed market fundamentals after the crackdown.""
A second trader said market confidence was destroyed. ""We can see no support for the time being,"" he said. The B index is likely to head for a historical low at around 45 points shortly.""
In Shenzhen, local brokers said most Shenzhen-listed stocks were likely to register limit-down closes over the next few sessions as investors have been intimidated by the People's Daily commentary.
""They could have adopted other measures such as an effective ban on widespread illicit trading by institutional punters to cap share prices,"" a Shenzhen trader complained. ""Instead, this method sacrifices many innocent, small investors.""
Many investors, including institutions, were sitting on heavy losses on today's fall and investor confidence was unlikely to recover over the short term, brokers said.
($1=8.3 yuan)
",11
"China's financial markets have made significant steps towards maturity in 1996, with Beijing more willing than ever to allow them to gradually take on the mantle of economic control, analysts said on Friday.
But the Chinese securities, futures and money markets, less than six years old and still suffering the volatility of youth, have a long way to go to reach the level of standardisation and stability found in many other Asian countries, they said.
""In the past the central government always used the word 'experimental' when referring to the markets, but this year they instead started saying they are 'in the initial stages of development',"" said a Chinese brokerage analyst.
""This shows that it is more determined than ever before to let the markets survive and develop,"" he said.
Beijing gave its official blessing to the stock markets in April, and since then, the exchanges in Shanghai and Shenzhen have expanded faster than ever before, adding a total of 178 companies between them so far this year.
Total market capitalisation of the two markets is now 1,271 billion yuan ($153 billion) compared with 350 billion yuan at the start of the year.
The treasury bill market also boomed in 1996 with a record issue of 195.2 billion yuan worth of debt.
An interbank market for local currency, set up in January, has become an indispensible mechanism for banks to swap short-term funds, and has started the process of making interest rates responsive to market forces.
The developments all take China significantly further along the road from the state-planned past towards the market-influenced future.
Analysts said that while the Beijing leadership remains highly cautious about relaxing its controls over the main economic levers, it understands that it must do so eventually.
""The key motive behind the new approach is to gradually relieve the central government of the heavy burden of (the) money-losing state sector,"" said one economist.
""Beijing has urged state enterprises to resort more to market means to develop themselves instead of relying on loans from the state banks.""
But this year, the authorities have also made it very plain that they will not allow rampant irregularities in the markets.
China's futures exchanges, which have largely operated as speculative casinos for years, have been firmly brought to heel over the past year.
The ""hot money"" which until early this year used to shift at lightning speed from Beijing green beans to Hainan plywood and on to Tianjin red beans has been squeezed out of the futures exchanges and shifted into the share markets, analysts said.
In the past month, branches of virtually all of China's top banks, securities houses and financial institutions have also been publicly accused of running illegal securities scams of one kind or another, with fines and warnings liberally dispensed.
""Serious efforts have been made to standardise the market,"" said a treasury bond trader. ""No one, even the influential banks and key securities houses, are exempt from punishment if they breach the rules.""
Analysts said the main shortcoming at the moment is the legal framework for the markets, which consists of a series of overlapping and often contradictory regulations.
The overall Securities Law and Futures Law, which will provide the basis for the future development of the markets, has been trapped in Beijing's bureaucracy for more than three years now with no sign of emerging soon, they said. ($1= 8.3 yuan)
",11
"Shanghai's foreign currency B share market has been consistently hitting historic lows over the past two weeks, and there's little prospect of a recovery at least until the middle of next year, analysts said on Monday.
They said there was no sign of a bottom to the market, with the foreign investors for whom the market was created having largely sold up and left, leaving it to local investors.
The confidence of the foreign investors has been killed by an unending string of disappointing company results and by the failure of the authorities to add new, sizeable and well-run companies to the market as promised, the analysts said.
""Confidence is totally destroyed and even long-term investors have begun to liquidate their positions,"" said a Shanghai-based investment analyst with a Western brokerage. ""A recovery of confidence will not happen overnight.""
The B share index closed down 0.809 points or 1.77 percent to hit another record low close of 44.867 points on Monday. It has hit all-time lows on five separate days over the past two weeks.
""There is no hope for the market to recover at least until the middle of next year,"" said a B share broker. ""The most important factor is that company performance for 1996 full-year is unlikely to improve.""
The dismal state of the B share is in sharp contrast to the local A share market which continues to attract huge amounts of cash, setting two-year year highs on a regular basis.
It is also at variance with the general level of interest among foreign investors in participating in the Chinese economic boom that continues unabated, with national growth this year expected to hit at least nine percent.
""If they listed a good company on the B share market even at this point, people would be willing to buy it,"" said a stock analyst with a foreign brokerage in Shanghai.
Many B share firms were formerly state-run enterprises and the leadership, methods and attitudes of many are little changed from the days when they were accountable to no one by the state planners in Beijing.
""Unstable performance and declining profits of some key firms listed on the B shares market have made foreigners more and more doubtful about the future of the B share market as a whole,"" said a second B share broker. ""There is no immediate support or bottom line that we can see.""
""Few people are willing to buy because there is a fear that the market will just keep falling,"" said a Chinese analyst with a major local brokerage.
""But the falls have become meaningless with the volumes so thin,"" he added. ""The market has no momentum to rise due to lack of positive news.""
",11
"China's futures markets, which fell deeper into the gloom of official disapproval in 1996, look set for an even tighter year in 1997 with some small exchanges likely to be swallowed by bigger ones, analysts said on Friday.
There is still no sign of the long-awaited Futures Law being unveiled, but the analysts said the securities authorities have promised some new regulations in the first half of 1997 to provide a stronger regulatory basis for futures trading.
The markets, set up in the early 1990s, quickly became casinos with huge trading on commodities with often very small physical quantities for delivery, making the use of the markets for hedging -- the original purpose -- virtually impossible, analysts said.
In the past two years, trading volumes on China's futures exchanges have plummeted in the face of a relentless campaign by the securities authorities in Beijing to squeeze speculative activity out of the markets.
""The official measures, especially the ban on many institutions from trading futures, have pushed large amounts of money out of the markets and dramatically pulled down trading volumes on most exchanges,"" a local futures analyst said.
The Shanghai Metal Exchange, which is the least speculative of the 14 futures exchanges left open, expects total trade volume of 230 billion yuan in 1996, down from 455.8 billion yuan in 1995 and a high of 682 billion yuan in 1994, an exchange official said.
The authorities have ruthlessly hounded the speculative ""hot money"" which used to chase its way round from Suzhou red beans to Zhengzhou green beans and Hainan coffee, and have largely succeeded in killing the enthusiasm of speculators for futures.
In March, the China's Securities Regulatory Commission (CSRC) banned securities brokerages, trust and investment firms and state-run enterprises from trading commodities futures, forcing many traders out of the industry, traders said.
All commodity futures exchanges have been ordered to cap daily price movements and total holdings.
In October, the CSRC also abolished limits on the total amounts of goods for physical delivery, which was used to make it possible for wealthy institutions to build up huge long positions and then short-squeeze the market.
""Beijing has stressed restrictions rather than development for the futures markets because officials are angry about the repeated violations of rules and rampant irregularities,"" a local trader for metal futures said.
""No new money is coming into the futures markets,"" he added. ""There are several safer investment methods, such as stocks and treasure bonds. Why take the extra policy risk?""
""Few people will pay much more attention to China's futures markets until the long-awaited Futures Law is introduced, which will indicate that the government has accepted the industry,"" a second trader said.
""It will still take some time for the Futures Law to be completed,"" a local exchange official said. ""But the CSRC has said it will announce five new rules for the industry in the first half of the next year to fill up the regulatory vacuum.""
Analysts said some of China's 14 existing futures exchanges will probably be closed down, merged or taken over in 1997 as the authorities continue their efforts to clean up the industry.
It is believed the authorities want to end up with four or five big exchanges.
In October, China's securities authorities ordered the Changchun United Commodity Exchange to merge with the Beijing Commodity Exchange, which was seen as the first of an expected series of mergers of exchanges, the analysts said.
""There are too many exchanges in China with most of them trading similar contracts and trading volumes for most contracts are too thin for hedging,"" a Shanghai-based dealer said.
",11
"China is firming up a shortlist of foreign banks that will be allowed to do local renminbi currency business, foreign bankers said on Monday.
Hongkong Bank, Citibank and Bank of Tokyo-Mitsubishi are expected to be among the winners, they said.
Foreign banks with branches in China, currently restricted to doing business in foreign exchange, have been promised that a handful will be given the right to take deposits and make loans in the Chinese currency before the end of the year.
""The Hongkong Bank, Citibank and Bank of Tokyo are in, the Chinese have made that clear,"" said one banker. ""There may also be a European bank and a Hong Kong-based bank added as well, but they may not. They are being very cautious.""
""The decision will be made as always on a geopolitical basis -- one from America, one from Japan, one from Europe,"" said a Hong Kong-based European banker.
Officials from Hongkong Bank and Citibank declined to comment on their chances and Bank of Tokyo executives were not available.
But other bankers said there were still conflicting reports as to when the announcement would be made.
""It has to happen soon,"" said a Shanghai-based banker. ""We've waited far too long. We're all tired and bored with the waiting.""
Once the announcement has been made, foreign bankers said they expected it to offer only very limited renminbi business rights, restricted to taking in money from, and lending money to, foreign-funded enterprises in China.
""The funding problem is the key one,"" said a foreign banker. ""Foreign-funded firms wouldn't generally want to put their renminbi on deposit with a bank, it's their working capital. If they did, it would be an act of charity (towards the banks).""
The foreign banks will definitely not be allowed in the foreseeable future to take in deposits from Chinese firms or individuals, bankers said.
The answer may be that the People's Bank of China, the central bank, will lend renminbi funds to the foreign banks to lend on to customers, thereby giving the central bank power to control the extent of the business, they said.
Once the first batch of banks have begun to do limited renminbi business, it could be as much as a year before any other foreign banks are allowed to join them, bankers said.
""They are being very careful; this will be an experiment that they will watch very closely before taking another step forward,"" said one banker.
",11
"The crackdown on China's young stock markets has triggered huge losses in share values and highlighted problems, particularly widespread irregularities and the lack of a regulatory structure, analysts said Friday.
The week of losses on the exchanges in the wake of a Beijing warning on speculation was also a re-run of the age-old Chinese boom-and-bust cycle: controls are relaxed, rule-breaking surges, the screws are tightened and the machine almost breaks.
""Widespread irregularities are partly a legacy of the old planned economy,"" said one economist. ""But given the power of administrative edicts to influence the markets, some firms have no choice but to resort to irregularities to survive.""
The sudden announcement of Beijing's wrath at the unruly stock markets, expressed in a People's Daily commentary on Monday, aimed to dampen speculative trading, but ironically could have the opposite effect, some analysts said.
""Policy changes have always been a key speculative topic on China's stock markets,"" said one trader. ""To regulate the markets with official orders like this time might temporarily depress the speculative mood, but in longer term, it will further add weight to the speculative fever on policy shifts.""
Market sources said that had Beijing used market means rather than administrative edicts to check the dangerous roller-coaster trend in share trading, the response of the markets would have been much less volatile.
As it was, Shanghai's domestic A share index plunged 20.07 percent to 922.34 points at the close of Friday's trading against Friday's close last week, while the foreign currency B index was down 3.84 percent to 63.743 points.
In Shenzhen, the A share index nosedived 29.07 percent on the week to 328.96 points, while the B index lost 15.94 percent to 125.56.
""Most investors are pessimistic about the short-term trend with turnover sharply down this week against last week,"" said one broker. ""We had nearly no new accounts opened this week.""
""The inflow of fresh money into A shares has almost stopped completely,"" a Shenzhen-based trader said. ""Many investors are in despair seeing the price of their shares diving nearly every day.""
Analysts said the dramatic changes this week sparked reflections on the bust-boom cycle which has dominated China's stock markets since they were re-established in 1990.
At its height, Shanghai's A share index had surged more than 100 percent and its Shenzhen counterpart over 300 percent since April when Beijing announced that it supported stock market development.
""The markets are poorly regulated,"" said one stock analyst. ""One of the reasons for this is the lack of a national securities law governing the stock market.""
The draft Securities Law, the topic of hot debate in the corridors of power in Beijing for years, is not expected to be enacted soon, analysts say.
Irregularities, including manipulation of selected share prices, have been rife in the Chinese markets for years.
In an effort to bring the industry to heel, authorities over the past month have punished branches of nearly all major state-run banks and securities houses for involvement in shady stock dealings.
",11
"China unveiled on Tuesday the country's first major shipping exchange which it hopes will consolidate and standardise ship chartering and cargo fixing in East China and be a focus for the shipping trade nationwide.
Officials told a news conference that all shipping and freight companies in the east China region had been told to move their business as soon as possible to the new Shanghai Shipping Exchange.
Like the Baltic Exchange in London, the Shanghai Shipping Exchange will allow ship owners and charterers to arrange deals and fix prices for carrying cargoes.
The exchange, which has the direct support from the Beijing authorities, has been under preparation for two years and has as its founding members 116 companies, mostly shipping firms in Shanghai and the adjacent provinces of Zhejiang and Jiangsu.
""The foundation of the exchange shows the government's determination to make Shanghai into an international shipping centre,"" said Zhang Jinxiang, an official with China's biggest shipping firm, COSCO.
""Other world shipping centres such as London and New York also have such exchanges,"" Zhang added. ""With China's fast-growing economy and Shanghai's good location, the exchange should help attract more shipping companies here.""
Zhu Yongguang, a senior Ministry of Communications official told the news conference that the Shanghai exchange was one of a number of shipping and freight exchanges planned for China.
""There will be Tianjin in the north, Shanghai in the east, Guangzhou in the south and Wuhan inland. But the focus of the business nationwide will be the Shanghai exchange,"" he said.
Zhu declined to speculate on how much business the exchange would attract, but said:
""This will be a gradual thing. The shipping companies (in East China) will be expected to move their business to the exchange, but it won't happen overnight.""
Members of the exchange include ship-owners, mostly state-run companies in Shanghai and surrounding areas, and freight forwarders.
The exchange will handle international cargo-fixing, but most of the business in the initial stages is expected to be domestic.
The establishment of the exchange was welcomed by an official for Shanghai Haixing Shipping Co, China's second-largest shipping company and its largest in domestic trade.
""The exchange may help cut illegal competition in the shipping market,"" the official said. ""At present, there are some small shipping firms which make use of improper relationships or offer high commissions to get business.""
Exchange officials said the exchange was under the supervision of the Ministry of Communications and the Shanghai city government and would be treated for the foreseeable future as ""experimental"", in line with other new markets in China.
",11
"China's effort to push domestic investors out of foreign currency B shares on its stock markets has so far failed, but volumes on the B markets have fallen significantly, analysts said on Monday.
The official media on September 21 announced that local investors were banned from buying any more of the B shares listed on the Shenzhen and Shanghai stock exchanges and supposedly reserved for foreign investors.
Domestic investors, who in recent months have accounted for more than 50 percent of B share trading on both of China's stock exchanges, were told to sell their B share holdings as soon as possible.
But traders and analysts said local investors were still in the market and continued to be an important support for B share prices, which are dragging along at low levels.
""The ban on local people buying B shares has not been implemented very seriously, people can still buy them,"" said one trader. ""But volumes have come down because of a fear that the authorities might make further measures to clean things up.""
""Trading by domestic investors in B shares is still continuing,"" said a broker with China Guotai Securities. ""Brokers find it difficult to check all identification cards when old faces turn up.""
B share trading volumes on both the Shanghai and Shenzhen exchanges have dropped significantly since the ban was announced, and many analysts believe the market could collapse altogether if the authorities seriously press home the ban.
Foreign investors took advantage of a surge in domestic B share buying in the middle of this year to dump their shares and get out of the market, particularly in Shenzhen.
Beijing authorities are unhappy about this largely due to a fear of a serious outflow of foreign exchange if foreign investors are allowed to sell their B shares to local people, analysts say.
A Shenzhen stock analyst said he felt the ban on domestic investors buying and holding B shares would not be pushed through with any greater vigour and would anyway be relaxed after the return of Hong Kong to China in mid-1997.
""I would forecast that by the second half of next year, the B share market in Shenzhen will be gradually opened up to domestic investors,"" the analyst with Guotai Securities said.
""By that time, Hong Kong will be back as part of China, and the Hong Kong dollar will be a Chinese currency,"" he added.
B shares listed in the southern city of Shenzhen adjacent to Hong Kong are denominated in Hong Kong dollars.
A trader with Nanfang Securities said he expected further big changes to policy on the B shares markets over the next year leading to a second, and this time officially-approved, relaxation of restrictions on domestic investment in B shares.
""The B share market will undergo significant changes by the second half of next year. By then, it will be easier and easier for Guangdong people to get hold of Hong Kong dollars,"" the analyst said.
""By the end of next year, Shenzhen B shares should at least be open to investors in Guangdong,"" he added.
The Shanghai B share index closed on Monday at 48.588, up a fractional 0.302, in sluggish trading, while the Shenzhen B share index closed at 89.79, down 0.10, also in slow trade.
",11
"China will open its domestic A share markets to overseas investors through Sino-foreign joint venture mutual funds early next year, a Hong Kong newspaper said on Tuesday, but analysts predicted a cautious approach.
Brokers and analysts in Shanghai said the long-awaited experiment in foreign investment in China's A share markets would probably involve only a handful of funds in the first few years.
The Beijing-controlled Hong Kong newspaper Wen Wei Po quoted the executive deputy governor of the People's Bank of China, Chen Yuan, as saying China will allow some foreign joint venture firms to invest in A shares from early next year.
The newspaper quoted Chen as saying regulations governing Sino-foreign investment funds would be issued soon.
""Rumours on this have been circulating in the markets since the start of this year,"" said one A share trader. ""It is certain that the regulations are under consideration, but a timetable has yet to be confirmed.""
Officials at the central bank and the China Securities Regulatory Commission, the top securities watchdog, declined to comment.
Shanghai's A share index surged 9.94 percent on Monday, partly on speculation that Beijing was considering opening the A share market. It consolidated down 1.02 percent on Tuesday on a technical correction.
Analysts said a major problem is the Chinese yuan. While convertible on the current account since December 1, it is still a long way from full convertibility, and officials have given no hint as to the timetable for making it convertible.
""Solving the convertibility issue is a major obstacle,"" said a broker with a Chinese brokerage.
""There are also no definite candidates for establishing the funds. In the initial stages, the impact will be more psychological than real,"" said the broker.
An analyst with a foreign brokerage in Shanghai said the Chinese would probably seek to establish joint ventures with U.S. firms in the initial stages to learn from the highly developed and sophisticated U.S. mutual fund industry.
Without convertibility, it is unclear how foreign money will be exchanged for yuan to invest in A shares, and how funds being retrieved by foreign investors would be shifted back into foreign currency, analysts said.
""The key issue is how much liquidity from the funds the authorities will allow to be invested in the markets,"" said Xu Zhiling, deputy general manager of the securities trading department of China Guotai Securities.
Traders said introduction of joint venture funds would help stabalise the highly-volatile A share markets and create a secure vehicle for long-term investment.
""Funds from developed countries are often very large, seeking long-term investment,"" said a broker with China Finance Trust and Investment Co. ""Their entrance into the market will alleviate a trend of excessive speculation.""
",11
"China on Monday named the first four foreign banks, based in Shanghai, to be allowed to conduct business in the local Chinese currency, ending months of speculation.
The four banks are the Hongkong & Shanghai Banking Corp, Citibank, Tokyo-Mitsubishi Bank and the Industrial Bank of Japan.
A spokesman for the Shanghai branch of the People's Bank of China, the central bank, said the foreign banks would be allowed to do Chinese currency loans, deposits and some other business.
""The scope of the business was defined in the rules issued recently,"" he said but declined to give further details.
A report from the official Xinhua news agency two weeks ago said the chosen foreign banks would not be allowed to have oustanding local currency loans exceeding 35 percent of their foreign currency loans.
All foreign banks in China are currently restricted to do business in foreign currency and have been eager to gain a share of the huge local market for Chinese yuan deposits and loans.
Foreign banks doing China yuan business would have to adopt the regulations that applied to Chinese financial institutions, Xinhua said.
It did not elaborate, but that appeared to mean foreign banks would have to accept the same tax rate used for Chinese banks -- one of the key obstacles to implementing the policy change.
Foreign bank profits are currently taxed at a 15 percent rate while Chinese commercial banks are taxed at 33 percent and the main state banks at 55 percent.
A foreign banker working with one of the chosen banks said formal confirmation had been received today.
""But there were no details at all, no conditions of business given,"" he said.
A foreign banker with one of the other banks said he had not yet received formal notification.
""There has been no news,"" he said. ""But even after we hear, it will still be at least a month or two before business would start. My impression is it will take quite a while. There are many things to sort out.""
The tax rate issue remains unclear and is still the main obstacle to foreign banks starting up local currency business, he said.
The China manager of Credit Lyonnais, Jacques Bertholier, said he hoped his bank would be included within the second batch of banks to be granted approval to do yuan business, hopefully within a couple of months.
""It is not perfectly clear what the terms of business are, but there appears to be a good scope for activity,"" he said.
",11
"China's personal bank deposits, which surged in the past two years to stratospheric levels, have begun to grow more slowly as a result of two bank interest rate cuts this year, bankers and analysts said on Wednesday.
But the growth rate is still high -- more than 30 percent year-on-year -- and the huge deposits in the banks still pose a threat to the economy, with the possibility of fanning inflation, if the money is released into the market, they said.
However, there is little chance that the deposits will be unleashed in the short term because the authorities are determined to maintain their tight monetary policy, they said.
By the end of 1995, individual Chinese deposits totalled 2,970 billion yuan ($3,578 billion), thanks largely to high interest rates set by authorities to drain money from the system and cool inflation, which hit a high of 21 percent in 1994, analysts said.
But the growth of the deposits began to slow down this year.
In the first quarter of 1996, individual bank deposits increased by 40.1 percent year-on-year, slowing to 34.5 percent growth in the third quarter, according to figures by the People's Bank of China, the central bank.
""The trend is changing,"" said a Beijing-based banker with the Industrial and Commercial Bank of China (ICBC). ""With the central government reducing interest rates and supporting the securities market, some money is moving elsewhere.""
""Despite the change, the huge amount (of deposits) continues to be a tiger in a cage,"" said another banker with Shanghai-based Communications Bank. ""If released into the market, it would pose a serious threat to push inflation up again.""
The central bank sliced interest rates in May and August with the annual rate for one-year fixed deposits reduced to 7.47 percent after both cuts, from a very high 10.98 percent rate up to May.
In April, it also abolished an inflationary subsidy for long-term bank deposits of three years and above.
The cuts followed steady declines in the nation's inflation rate, which has dropped to about six percent this year from 14.7 percent last year.
Analysts said the interest rate cuts signalled a cautious relaxation of Beijing's tight monetary policy, begun in mid-1993 to cool an overheated economy characterised by surging inflation.
But Beijing will continue to keep a tight control on credit with the money supply remaining very high and the danger of reigniting inflation still present, they said.
""Experience since 1993 has proved that if we do not insist on tight monetary policy, high economic growth rates and the downward trend on inflation will be unsustainable,"" a central bank official said last week.
China's broad M2 supply increased by a year-on-year 26.9 percent by the end of September, slightly less than last year's 29.5 percent growth.
Beijing has set the M2 target at 25 percent for this year.
""The problem can only be solved when macro-economic conditions allow a complete relaxation of austerity measures and when interest rates are further cut to the level (where) the deposits can be gradually absorbed,"" said an ICBC official.
($1 = 8.3 yuan)
",11
"Trading on most of China's futures markets, under pressure from Beijing to curb speculation, has now dropped so far that hedging has become virtually impossible, traders and analysts said on Tuesday.
A trader with a futures firm in Shanghai said only the metals contracts market, the Shanghai Metal Exchange, still had enough liquidity and flexibility to allow companies to hedge risk.
Beijing has recently issued two key documents encouraging the securities markets but warning the futures markets of more clean-ups and restructuring to come.
Rumours have swirled around the futures markets in recent days that Beijing plans to merge or close many of the 15 futures exchanges in the country, possibly concentrating all futures trading into five exchanges.
""From what I hear about the feedback from the China Securities Regulatory Commission (CSRC), there is no such plan,"" said Xie Boxing, deputy manager of the Information Department of the Shanghai Cereals and Oils Exchange (SCOE).
""There is no change to the basic policy of developing these markets,"" he added.
But Xie said liquidity on the exchange, particularly in rice, had fallen off as a result of the Beijing statements on the futures markets, making it difficult for companies to use the exchange for hedging.
""The scale of trading at this point is a bit small for hedging,"" he said.
The irony of the crackdown on the futures markets is that it has removed the basis for hedging and left only speculators in the market, one analyst said.
A second Chinese futures company trader said the trading volume of most commodity futures contracts on Chinese exchanges was now so small that there was no opportunity for hedging operations to take place.
""The only people trading the contracts for most of these commodities are speculators,"" the trader said.
A spokesman for the CSRC in Beijing on Monday told Reuters that the authorities still wanted the futures markets to develop despite the recent documents on the futures markets stressing current problems.
""This does not mean that futures market should cease to develop, development is a constant theme for China's futures market,"" he said.
But the spokesman declined to comment on the rumours of impending closures and mergers of futures exchanges.
""I cannot say anything on measures to deal with the markets in the future, I don't know whether some futures exchanges would be closed,"" he added.
One trader said that while the authorities would probably not formally close any of the exchanges, they could take other measures to in effect slowly strangle them such as raising the margin requirements on various contracts.
SCOE's Xie said the authorities still viewed the futures exchanges, set up in the early 1990s, as an experiment, but he felt that in the end they would prove their value.
""There should be a bright future for futures, particularly for contracts for agricultural products. That's how the futures business began in other parts of the world, and China is a big agricultural producer,"" he said.
But for now, trading volumes are down significantly on the SCOE compared to last year.
Up to Monday, 6.40 million lots on all contracts changed hands on the exchange this year compared to a full-year total of 13.5 million lots last year, he said. One lot is five tonnes of commodities.
",11
"Chinese authorities have closed their eyes to the booming illegal trade by domestic investors in foreign currency B shares and will not interfere unless the market becomes too speculative, analysts said on Friday.
The B shares listed on China's two stock markets, in Shanghai and Shenzhen, were created to attract funds from foreign investors.
But in the past six months the vast majority of trading has been done by domestic investors who have opened trading accounts by various means in contravention of the rules.
""The authorities have just closed their eyes to the issue,"" said an analyst with a foreign securities firm in Shanghai. ""It looks like they will just leave it alone, as long as the markets don't become too speculative.""
Given the huge volatility of the B shares over the past two weeks, it would appear the threshold of the authorities on the issue is high.
Shenzhen's B shares have risen more than 50 percent since mid-November and Shanghai's B shares are up over 15 percent in the same period, but with huge falls on some days.
Brokers have attributed the rapid rises and falls largely to rumours that the Beijing authorities plan either to allow domestic investors to buy B shares or to reaffirm the ban.
""The Beijing ban is there, but Beijing knows it is unenforceable,"" said another brokerage analyst. ""And the brokers want local people to buy B shares because turnover would be so low without them.""
A broker in Shenzhen said many domestic securities firms had opened B share trading accounts in Hong Kong, while Chinese individuals encounter no problem in opening the accounts, particularly in Shenzhen, which is just across the border from the wealthy British colony.
B-share trading is supposed to be restricted to people with foreign passports or residents of Hong Kong and Taiwan, but the Shenzhen and Shanghai exchanges are interpreting the rules with great flexibility, analysts said.
""The Shanghai exchange handled it in an interesting way,"" said a broker in Shanghai.
""A couple of months ago they required all B-share trading account holders to re-register, but all that they required was that people present a passport or a copy of a passport that didn't even have to be theirs,"" he said.
Analysts have said the basic reason for the ban on domestic investors holding B shares is to prevent an outflow of foreign exchange as foreign investors sell their holdings to local people.
But the announcement on Thursday that the Chinese yuan would become fully convertible on the current account this Sunday was taken as a sign by traders that the day was approaching when the ban on B share trading by locals would be dropped.
The Shenzhen B-share index rose 5.35 percent to 142.71 points on Friday on the news, brokers said. Shanghai B shares closed up 1.14 percent to 53.421.
""It is pretty hard for the securities regulators to curb the inflow of money from mainland Chinese into the Shenzhen B market because Hong Kong dollars are so easily available here due to the proximity to Hong Kong,"" said one Shenzhen analyst.
""I believe more and more Chinese will put their hard currency into the market after mid-1997 when Hong Kong reverts to Chinese rule,"" he added.
",11
"China's top securities watchdog on Monday issued new requirements for exchanges and securities houses to strengthen risk control with the aim of cooling its over-heated domestic A share markets.
But the markets in Shanghai and Shenzhen responded with fresh rises in active trading with the A share indices hitting new 1996 highs, and analysts said the warnings would have little impact on the current active trading.
The China Securities Regulatory Commission (CSRC), in a circular, ordered the two stock exchanges to investigate the risk control mechanisms of their members, the Shanghai Securities News reported.
All securities houses must now display in their business halls warnings about the risks of trading on the stock markets, the circular said.
""The exchanges must quickly organise several groups to investigate the risk control systems of their members and report the results to the CSRC,"" it said.
It also ordered designated newspapers and magazines to report more on the risks of stock investment.
""Any comments on stock markets must avoid encouraging speculation in order to prevent investors being misguided,"" it added.
The new instructions follow dramatic surges on the domestic A share markets in Shanghai and Shenzhen this year.
Beijing announced a new positive policy towards the stock markets in April, and since then Shanghai's A share market has risen more than 100 percent and its Shenzhen counterpart more than 250 percent.
By the end of November, China had 20 million retail investors in stocks, double the number at the end of 1995, according to media reports.
""The central government is concerned about surges on the markets which might be out of control,"" said Yuan Ji, an A share trader with China Guotai Securities. ""It hopes the markets will rise more steadily.""
The surges apparently have been beyond the expectations of the securities authorities and, to cool the over-heated markets, the CSRC has over the past few weeks issued a series of new rules and punished many brokerages for irregularities.
But, despite the fresh warnings, Shanghai's A share index hit a new 1996 high of 1,312.295 points in the morning session on Monday and its Shenzhen counterpart a high of 486.22.
""Investors believe the authorities do not want to depress the markets, but are just worried over prices rising too fast,"" said a trader with a major Chinese brokerage. ""Because of this belief, the new warnings will have only a slight impact.""
The CSRC in the circular also ordered local securities authorities to ensure the securities institutions have displayed the information by January.
",11
"China's B shares fell once again on Thursday with investors running scared in the face of reports that securities authorities would restrict mainland Chinese from trading in B shares, traders said.
Shanghai's foreign-currency B share index closed down 5.127 points or 6.35 percent to 75.558 points while Shenzhen's B index fell 11.23 points, or 6.02 percent, to 175.22.
Securities authorities in Shenzhen have contacted brokerages in the city, located across the border from Hong Kong, telling them to not accept money from domestic investors for stock purchases unless they had proof the money came from abroad, traders said.
An influx of funds from local investors has been at the heart of the spectacular rise in B shares over the past month, and fears that the tap would be turned off is making investors re-assess their positions, analysts said.
Chinese authorities have in the past expressed concern at domestic investors buying B shares, which were intended for foreign investors, saying it left locals vulnerable to the inflows and outflows of foreign money.
Shanghai stocks reacted on Thursday to the Shenzhen reports, but analysts said Shanghai securities authorities had so far not issued the same warning to the city's brokerages.
""The Shenzhen crackdown has triggered fears it will spread to Shanghai,"" said a trader. ""Sentiment has been badly hurt.""
""We have not heard of any crackdown in Shanghai. There is no indication of a crackdown here,"" said one foreign broker.
The broker said other factors in the Shanghai B market's fall were profit-taking and the issue of new Shanghai Diesel Engine Co Ltd B shares, which started trading today at a lower price than the company's existing shares.
He said the three largest brokerages in Shenzhen were believed to have stopped opening B share accounts for Chinese nationals.
""But large punters have ways to circumvent these regulations and have capital offshore,"" he said, adding that many retail investors could also easily call relatives abroad or in Hong Kong to arrange transfers.
""The CSRC (China Securities Regulatory Commission) is going for one weak link in the trading arrangements... the flow of funds,"" said Bruce Richardson, chief representative of HG Asia in Shanghai.
The Shanghai B index has risen 80 percent over the past month on expectations that Beijing would take measures to support the market.
""Profit-taking focused on cheap shares which rose the most during the surges of recent weeks,"" a trader said.
Shanghai Sanmao Textile was the biggest loser, plunging $0.072 or 20.11 percent to $0.286 on volume of 643,700 shares.
Shanghai Lianhua Fibre, which had surged 200 percent in recent weeks, was the second biggest loser, shedding $0.044 or 13.75 percent to $0.276, on heavy volume of 1.4 million shares.
Shanghai Diesel Engine, which listed an additional 85 million shares on Thursday, had the highest volume in inter-institutional trading, traders said. It lost $0.036 or 6.21 percent to $0.544 on volume of 6.0 million shares.
Shanghai's A share index closed down 70.491 points or 5.42 percent to 1230.831 points on a technical correction after repeatedly hitting three-year highs over the past few sessions, traders said. The Shanghai Stock Exchange's 30-share blue-chip index lost 111.482 points or 3.64 percent to 2952.753 points.
Brokers said A share market sentiment was still good and the index would recover next week after the powerful correction.
",11
"China's biggest electronics investment, a $1.2 billion integrated circuit (IC) production facility in Shanghai, is looking for foreign joint venture partners, the firm's president said.
Lu Dechun, director and president of the Shanghai Hua Hong Microelectronics Co Ltd, said the firm was in discussion with a number of major IC makers to find a partner to supply IC production technical know-how in return for an equity share.
""We are discussing joint venture possibilities with a number of companies, we want to do some kind of JV,"" Lu said in an interview on Monday.
""But the JV partner's share won't be large. This project is too big for anyone to bear the cost,"" he added. He declined to name the companies involved in discussions.
China's IC production lags far behind the world standard in both quantity and quality, and the five plants now in operation can meet only 20 percent of the country's demand for ICs.
The new Shanghai IC production plan, known as Project 909, will put China closer to the cutting edge of IC development when production begins in the second quarter of 1998, Lu said.
""But we will still be behind the highest international levels,"" said Lu. ""We will produce eight-inch wafers of 0.5 microns in thickness, but by the time production begins the world standard will probably be down to 0.3 microns.""
The production factory at the core of Project 909 involves four billion yuan in investment, with 2.1 billion yuan from the central government and 1.9 billion from the Shanghai city government.
The project has the support of the highest levels of the Chinese government -- Premier Li Peng attended the opening ceremony for the project last week in the Pudong Development Zone to the east of Shanghai's city centre.
But Lu said he was treating the project very much as a commercial venture.
""From Beijing's point of view, this may be a strategic policy project, but we have to run it as a commercial proposition,"" he said. ""IC production is too expensive, the state is not going to keep giving us money.""
It will have a monthly production capacity of 20,000 wafers, each one packed with IC chips.
Lu said output would fall into three categories, each with big potential in the China market -- IC ""smart"" cards, ICs used in communications equipment, and micro-controllers used to control household electrical appliances.
If things go smoothly it should move into profit in 2001, three years after production starts.
""But this is a highly competitive business, I know it won't be easy to make money,"" Lu said.
The factory itself is being designed by a Dutch firm, Crystal Consulting Engineers B.V. based in Eindhoven, which specialises in IC plant design.
Discussions are also under way with major producers of IC production equipment around the world. Lu declined to say which companies, but said most of the equipment would probably come from the United States.
Asked if the equipment could fall within the category of technology restricted for export from the United States to China, Lu said:
""There are some pieces of equipment that would require export approval. But relations between China and the United States seem to be getting better these days.""
($1 = 8.3 yuan)
",11
"The Chinese authorities acted decisively on Friday to stop extraordinary price movements on the country's two stock markets by imposing a limit of 10 percent in the movement of any stock on one day.
In announcements made after the market closed on Friday, the Shanghai and Shenzhen stock exchange set daily movement limits for all shares and investment fund units at 10 percent in either direction, with effect from next Monday.
""From Monday on, all bids and asks exceeding the limits are null and void,"" the announcement said. ""No brokerage must accept invalid bids and asks.""
The announcements followed several days of dramatic falls in the B share indices of both Shanghai and Shenzhen, which on Friday alone plunged 12.26 percent and 14.75 percent respectively.
On Friday, the exchanges also ordered brokerages to make public the top losing and gaining stocks on any one day and the names of the key institutions involved in trading.
Brokers said the order would tend to limit institutional speculation, adding that while restriction of market manipulation was good, the move would also hinder the activity of the markets.
The announcements all made clear that they had been approved by the China Securities Regulatory Commission (CSRC), which supervises all securities and futures markets.
Chinese brokers generally welcomed the new limits, saying they would effectively help control erratic trading on the fledging markets founded in 1990.
""The decisions indicate the securities authorities are determined to standardise the markets and will be a key step in stabilising share prices,"" said Xu Zhiling, deputy general manager of the securities trading department of China Guotai Securities.
But some brokers said setting the limits would benefit buyers and help creating buyers' markets.
""Unlike futures contracts, investors cannot build short positions on the stock markets,"" said one broker. ""Price limits thus will help buyers who can build large positions without much risk of price plunges.""
A foreign broker in Shanghai said the limits were overall not beneficial to the market or its development.
""Trading limits generally distort markets rather than rationalise trading,"" he said. ""But the real question is how long can this can go on.""
Shanghai's B share index ended down 9.267 points or 12.26 percent at 66.291 points on Friday on fears that Beijing would crack down on domestic investors trading B shares, traders said.
The fears were sparked by news reports that the securities authorities in Shenzhen had ordered local brokerages not to accept foreign exchange to buy B shares from local people unless they could prove the money originated from outside China, they said.
Shanghai's A share index lost 67.781 points or 5.51 percent to 1,163.050 on news that checks had begun in some parts of China on the risk management systems of securities brokerages.
Meanwhile, Shenzhen's B share index plunged 25.85 points or 14.75 percent to end at 149.37 in heavy trading because of the crackdown by local securities authorities on mainland Chinese buying B shares, brokers said.
The Shenzhen A share index lost 23.60 points, or 4.84 percent, to 463.81 on turnover of 9.26 billion yuan compared with 14.24 billion on Thursday.
",11
"China's securities authorities Tuesday ordered the takeover of a futures exchange in what analysts said was the beginning of a clean-up campaign that may leave China with only four or five large futures exchanges.
The China Securities Regulatory Commission said the Changchun United Commodity Exchange would merge with the Beijing Commodity Exchange, according to the Beijing-based Financial Times.
The Changchun exchange, which was forced to suspend trading for six months from last October after the securities authorities accused it of irregularities, would become a trading floor of the Beijing exchange, the official newspaper said.
Analysts said the merger was the first of an expected series aimed at closing many of the smaller commodities exchanges around China that have been the focus of intense market speculation.
""This shows the determination of the authorities to restrict and clean up the futures industry and is a sign of more mergers to come,"" said an analyst with a metals trading company active in the futures markets.
China recently launched a sweeping crackdown on its futures markets and authorities last month issued two documents stressing the need to further clean up the industry.
Rumours have circulated for weeks on the futures markets that authorities would close most of the nation's 15 exisitng commodity exchanges, mainly through mergers that would allow only four or five of the largest and best-run to survive.
The Financial Times said Changchun was selected as the first to be merged among the 15 because of rampant trading irregularities on the exchange.
Analysts said there were currently too many exchanges trading similar futures contracts, particularly cereals and metals.
But they said the takeover process would be far from easy due to opposition from local governments and a range of technical difficuties. The exchanges provided significant tax income for local governments, said one analyst, who noted that differences in the contracts and rules of trading also presented many problems for combining various exchanges.
",11
"To hear the Shanghai Film Studio tell the story, it is a classic drama of a poor, brave underdog challenging a greedy, monopolising giant.
But the studio, one of the oldest and biggest film-making operations in China, says it is gaining ground in its cinema chain war against the main movie distributor in Shanghai, the Yongle chain.
The studio boss, Zhu Yongde, said he created his own chain of cinemas last year after Yongle refused a re-division of box offices receipts.
""I didn't want to do it but we had no choice, the Shanghai movie market is becoming more and more important,"" he said in an interview.
The Shanghai Film Studio has made only paper-thin profits in recent years largely due, Zhu says, to the unreasonably high demands of Yongle and other film distributors around China.
With cinema attendance well below half what it was in the days before China's 1980s television revolution, revenue has plummeted and costs have exploded.
What's a film studio boss to do but try to shave the distributor's box office share?
Zhu says he originally went to Yongle to ask for a re-division of profits, which used to be 30 percent for Yongle, 20 percent for the film studio and 50 percent for the cinema operators.
His final offer was a straight split: 25 percent for Yongle, and 25 percent for the film studio. Yongle refused, he said.
""I said to them: we spend the money to make the movies, we take all the investment risk, while you do nothing. You make profits on the basis of almost no costs. But they wouldn't do it,"" he said.
So Zhu went off and set up his own cinema chain instead.
Yongle's story is slightly different.
A spokeswoman said the Dongfang cinema chain was set up as part of a national process of diversifying ownership of cinemas and distribution. She said Yongle currently received only 15 percent of box office receipts.
Shanghai now has a total of 100 movie screens, ranging from some of the world's classiest picture houses dating from the golden age of cinema, to down-at-heel workers' clubs which put on movies each night in their main hall.
Yongle controls all of the top cinemas, including the magnificent Daguangming movie house on Nanjing Road, a major shopping and entertainment thoroughfare for more than a century.
Zhu's rival chain, called Dongfang (Orient), controls 22 screens which tend to be more basic and local, cinemagoers say.
""It took a lot of effort, a lot of negotiating with each cinema operator, the whole process took more than a year,"" said Zhu.
He said he only managed to prise many of the cinema operators away from Yongle by guaranteeing them a minimum level of income.
""Box office receipts for all of them are up since we took over their distribution, some up 70 percent, some up as much as 200 percent,"" he said. ""The 22 cinemas used to account for eight percent of Shanghai's box office receipts, but it's gone up to 24 percent.""
Yongle has been fighting back over the past year with the release of a series of blockbuster Hollywood epics, including most recently ""Twister"" and ""True Lies"", which have proved very popular.
Zhu declined to say how many movies the studio would produce this year, and a member of his staff later only said it would be less than 15, far below production levels of a decade ago.
But Zhu did say he was looking to diversify the studio's finances away from movies into a wide range of other activities including hotels, real estate, television production, advertising and a steel tube factory.
He said his aim was to make films responsible for less than 20 percent of the film studio's total profits by the year 2000.
""We can't make money out of films the way things are,"" he said.
",11
"The crackdown on China's young stock markets has triggered huge losses in share values and highlighted problems, particularly widespread irregularities and the lack of a regulatory structure, analysts said on Friday.
The week of losses on the exchanges in the wake of a Beijing warning on speculation was also a re-run of the age-old Chinese boom-and-bust cycle: controls are relaxed, rule-breaking surges, the screws are tightened and the machine almost breaks.
""Widespread irregularities are partly a legacy of the old planned economy,"" said one economist. ""But given the power of administrative edicts to influence the markets, some firms have no choice but to resort to irregularities to survive.""
The sudden announcement of Beijing's wrath at the unruly stock markets, expressed in a People's Daily commentary on Monday, aimed to dampen speculative trading, but ironically could have the opposite effect, some analysts said.
""Policy changes have always been a key speculative topic on China's stock markets,"" said one trader. ""To regulate the markets with official orders like this time might temporarily depress the speculative mood, but in longer term, it will further add weight to the speculative fever on policy shifts.""
Market sources said that had Beijing used market means rather than administrative edicts to check the dangerous roller-coaster trend in share trading, the response of the markets would have been much less volatile.
As it was, Shanghai's domestic A share index plunged 20.07 percent to 922.34 points at the close of Friday's trading against Friday's close last week, while the foreign currency B index was down 3.84 percent to 63.743 points.
In Shenzhen, the A share index nosedived 29.07 percent on the week to 328.96 points, while the B index lost 15.94 percent to 125.56.
""Most investors are pessimistic about the short-term trend with turnover sharply down this week against last week,"" said one broker. ""We had nearly no new accounts opened this week.""
""The inflow of fresh money into A shares has almost stopped completely,"" a Shenzhen-based trader said. ""Many investors are in despair seeing the price of their shares diving nearly every day.""
Analysts said the dramatic changes this week sparked reflections on the bust-boom cycle which has dominated China's stock markets since they were re-established in 1990.
At its height, Shanghai's A share index had surged more than 100 percent and its Shenzhen counterpart over 300 percent since April when Beijing announced that it supported stock market development.
""The markets are poorly regulated,"" said one stock analyst. ""One of the reasons for this is the lack of a national securities law governing the stock market.""
The draft Securities Law, the topic of hot debate in the corridors of power in Beijing for years, is not expected to be enacted soon, analysts say.
Irregularities, including manipulation of selected share prices, have been rife in the Chinese markets for years.
In an effort to bring the industry to heel, authorities over the past month have punished branches of nearly all major state-run banks and securities houses for involvement in shady stock dealings.
",11
"China is cleaning up its market for mutual funds to prepare them to become a key vehicle to channel huge bank deposits back into the economy and stabilise its volatile stock markets, analysts said on Monday.
Among the most important steps, Beijing last week lifted a three-year ban on new listings of stock investment funds and has said it will shortly promulgate a set of rules governing the management of such funds.
Three funds listed last week surged as investors sought to buy into what analysts see becoming a major focus for the market in the months ahead.
The first effort to establish investment funds in the early 1990s collapsed in disarray because of a lack of adequate regulations and supervision with many losing money.
A total of 75 funds were set up, but only a few received approval from the central bank, and only 22 have been listed on China's two stock exchanges. Investors in unlisted funds will be unable to recover their cash for years to come.
""The central government first of all wants to clean up the fund market,"" said Shao Jiejun, a manager at Shenyin & Wanguo Securities which manages Baoding Fund, one of China's existing stock investment funds.
""The fund money is expected to gradually flow into stocks, which should benefit the market greatly,"" he added.
At the moment, less than 10 percent of the money in existing funds is invested in stocks, Zhou Daojiong, chairman of the China Securities Regulatory Commission (CSRC), told a recent seminar in Beijing.
""Quality of fund managers is poor,"" Zhou was quoted by the China Securities as saying. ""There have been many cases of irregularities and some funds have been used to participate in market manipulation and insider trading.""
Most of the money was invested by the fund managers in industry and real estate projects two or three years ago when the stock markets were in a deep slide.
""Time is needed for old funds to withdraw from industrial and real estate projects and to establish new funds,"" said Xu Zhiling, deputy general manager of the securities trading department of China Guotai Securities.
Beijing has given strong indications that it supports the establishment of new investment funds and sees them as a major means of funnelling money from bank deposits, currently at record levels of more than three trillion yuan ($361.4 billion), back into the economy.
Experts say the authorities want to gradually replace the system of bank loans which currently support enterprises with a share system in which firms obtain money through investment rather than borrowing.
China's two stock markets in Shanghai and Shenzhen also suffer from huge volatility because of an absence of large funds and institutional money providing a non-speculative base to trading, they said.
Currently, stock funds account for less than one percent of China's stock investment with the share market being dominated by retail investors, searching for quick profits instead of long-term investment, Shanghai brokers said.
In new rules to be issued shortly, there will be provisions that require stock funds to invest at least 60 percent of their cash in securities, industry sources said.
($1 = 8.3 yuan)
",11
"Shanghai copper futures, which have fallen steadily over the past year, will see further declines in early 1997 with fundamentals poor and domestic demand stable, analysts and traders said on Wednesday.
Shanghai copper has fallen from its record high of around 32,000 yuan a tonne in mid-1995 to the 20,000-yuan level, although it is slightly up on its lowest levels of below 19,000 yuan touched in October.
""The downward trend in copper prices is world-wide with the supply of copper rising fast due to higher prices a couple of years ago, while demand is increasing more slowly in line with the world economy,"" a local metals analyst said.
The analyst, who works for a financial markets consulting firm, said the current price trend could conceivably continue for more than a year.
""From a long-term view, copper will not stop its downward trend until the middle of 1998 as there is usually a three- to five-year cycle of prices on the world market,"" the analyst said.
China's domestic demand for copper is also stable due to the government's continued tight monetary policy in place since 1993 to prevent the economy from over-heating, analysts said.
In the first nine months of 1996, China's consumption of copper was about 530,000 tonnes, about the same as the 1995 level, local traders said.
""In China, a shortfall of 250,000 tonnes of copper is expected in 1996,"" a local trader said. ""But if you include imports, supplies are sufficient.""
China imported 177,500 tonnes of copper in the first nine months of this year, up 60,900 tonnes from the same 1995 period, official figures show.
A local trader said Shanghai copper is likely to fall further to 19,000 yuan, possibly hitting a low of 17,000 yuan before the end of the year.
""In 1997, Shanghai copper will continue its steady downward movement, but it is possible for particularly sharp falls or rebounds in futures prices in certain periods of high speculation,"" he said.
""The recent rebound in prices both in London and Shanghai, triggered by falls in stockpiles on the London Metal Exchange, is a good example of such speculative movements,"" he said.
""Mature Chinese speculators will not miss any chances to make prices fluctuate for profits,"" he said.
($1=8.3 yuan)
",11
"Shanghai city is on the verge of renting out the former Hongkong & Shanghai Bank building on the riverside Bund to an unnamed bank but definitely not the Hongkong Bank, a senior official said on Wednesday.
The official, Zhou Jinbao, said final negotiations were in progress with two or three contenders for the huge building, built in 1925 as a symbol of the financial might of the British Empire.
""I will invite you to the signing ceremony. It will be held very soon,"" Zhou, general manager of the Bund Buildings Transformation Corp, said in an interview. ""The basic issues have now been basically agreed upon.""
He declined to say which companies were in the final running but said he expected the winner to be a bank.
""It is not the Hongkong & Shanghai Bank,"" he added.
The Hongkong & Shanghai Banking Corp Ltd, a unit of HSBC Holdings Plc, had more than two years of discussions with Shanghai city officials on terms for resuming control of their former headquarters but finally announced that they had decided not to proceed with the proposal.
Zhou said the Hongkong Bank had wanted to demolish several buildings behind the main structure and erect a modern office tower.
But he said this proposal would have had an impact on wider development plans for the area which have not yet been fixed and are unlikely to be finalised for at least another year or two.
The main building has 24,000 square metres of space and Zhou said he was looking at around three U.S. dollars per square metre per day in rental. The lease can be for any period up to 30 or 40 years.
""The rental fee we are looking for is based on the fact the Bund should be the highest priced piece of land (in Shanghai). If other buildings are currently renting for two dollars a day (per square metre), then this building should be three dollars,"" he said.
At that price, the monthly rental fee for the building would be over $2 million per month. Renovation costs, he estimated, would cost around $15 million.
The building is steeped in history. After serving in effect as the East Asian financial headquarters of western imperialism for a quarter of century, it became after 1949 the Communist Party's Shanghai headquarters and city hall.
The city officials finally moved into a new building last year, leaving the old bank empty and echoing, waiting for a new tenant.
The main banking hall, with its magnificent marble pillars and curved glass roof, has had its banking counters removed and the murals which adorned the main domed entrance hall have been painted over.
The room just off the hall which served as the bank's general manager's office and later the office of a succession of Shanghai city Communist Party chiefs, is small and airless.
""This building has not only huge architectural value, but also great cultural and historical significance,"" said Zhou. ""That is why we will only rent it. We will not sell it. It is a treasure.""
",11
"China's B shares continued their sensational surge on Tuesday with Shanghai's index gaining 11.63 percent and Shenzhen 4.7 percent as foreign and Chinese investors poured funds into the markets.
Trading volume on the Shanghai B share market hit a 15-month high of 63.595 with the index ending up 6.525 points or 11.63 percent at 62.639 points.
Brokers said market sentiment had been boosted by the recent strong performance of the Shenzhen B share market on expectations that Beijing plans measures to boost B share trading.
The Shenzhen B share index rose 7.42 points, or 4.70 percent, to end at 165.10.
The Shenzhen market has risen far further and faster than Shanghai in the past two weeks, but dealers said there were signs that the action was now moving north to Shanghai.
""There's a feeling that foreign investors largely missed the boat on Shenzhen and they don't want to miss out on Shanghai as well,"" said an analyst with a foreign brokerage in Shanghai.
ING Barings said that as a result of the heavy volume of trading, the company had today activated both its seats on the Shanghai Stock Exchange for the first time ever.
""There were signs that overseas institutions are paying more attention to B shares,"" one broker said. ""The short-term market trend is bright.""
But a second broker said the sharp rises woiuld inevitably be followed by a tumble, possibly as early as Wednesday.
""The market will see a technical correction after the sharp rise today,"" he said.
Shanghai Dajiang was the star on the Shanghai market, surging $0.132 or 34.37 percent to $0.516 on volume of 1.1 million shares.
Shanghai Jintai followed on bargain-hunting, soaring $0.038 or 28.78 percent to $0.170 on volume of 712,000 shares.
A foreign broker said the money coming into the market appeared to be about half-and-half foreign and domestic Chinese, in spite of the theoretical ban on local Chinese investors buying the foreign currency B shares.
Given the obvious lack of measures by the authorities to revive the supposed ban, the markets appear to be gaining confidence that local investors will not face being forced out of the market, at least for now, analysts said.
""The bull run may extend into later this week with the inflow of fresh money continuing,"" one broker said.
",11
"China's crackdown on stock markets this week is partly fuelled by fears in Beijing that the volatility of the exchanges could lead to social instability, analysts said on Tuesday.
They said the move was also aimed at avoiding disruption caused by foreign and domestic speculators planning to pump money into the markets up to the mid-1997 handover of Hong Kong from London to Beijing and then pull it out again.
""In a transitional period when the ailing leader Deng Xiaoping is gradually moving out of polical arena, social stability is the primary concern of the leadership,"" said one executive with a Chinese brokerage.
""Stock boom and bust cycles do not fit in with the aim of social stability,"" he added.
A Shenzhen-based broker said there had been many rumours that the surges on the Shenzhen market were supported by overseas funds from Hong Kong and Macau.
""Some rumours said that foreign funds wanted to push up the Chinese markets before the (Hong Kong) takeover and depress them afterwards,"" the broker said.
The People's Daily newspaper, mouthpiece of the Communist Party, said in a harshly-worded commentary on Monday that China's stock markets had overheated on widespread speculation. It warned that if the markets crashed, the government would not step in to support them.
In anticipation of the response to the commentary, the stock exchanges last Friday evening introduced a 10 percent limit on movements of prices for individual shares.
On Monday and again on Tuesday, most shares on both the Shanghai and Shenzhen stock exchanges plunged to the 10 percent limit-down level.
Shanghai's domestic A share index lost 100.964 points or 9.64 percent to 946.716 points after falling 9.92 percent on Monday. The B share index shed 1.431 points or 2.39 percent to 58.498 points.
In Shenzhen, the A index plummeted 9.99 percent to 375.51 points while the B index dived 9.51 percent, to 121.64 points.
Most shares hit the daily limit-down of 10 percent shortly after the opening, as on Monday, and stayed there for the whole session, brokers said.
Since April, both domestic and foreign currency share prices on the two markets have surged on average by well over 100 percent.
""The central government has chosen the right time,"" said one political analyst. ""There are still a few months to go before the Hong Kong takeover and stock prices had not surged so far that falls would push investors out on to the streets (to demonstrate).""
Some stock traders said that by talking down the markets, Beijing had effectively prevented heavy fresh liquidity flowing in.
""The inflow of hot money (speculative funds) has been cut off with retail investors frightened away and institutions taking heed of the warning,"" one trader said.
""It seems now that the markets will be stable around the date of the Hong Kong takeover,"" he added. ""Prices are expected to move little after the impact of the crackdown is gradually digested.""
",11
"Too many futures exchanges in China are presently trading metals contracts, which should realistically be limited to just one or two given the current low trading volumes, officials and analysts said on Thursday.
Five of China's 14 futures exchanges have metals contracts but only two of them, the Shanghai and Shenzhen exchanges, see substantial trading, mostly in copper, a local broker said.
The other three exchanges which have at least some trading in metals futures contracts are the Chongqing exchange in southwestern Sichuan province, the Shenyang exchange in the northeast and Tianjin.
""Five exchanges doing metals are too many, I think one or two would be enough,"" Gu Jianxing, manager of information department of the Shanghai Metal Exchange, said in an interview.
""There have been rumours about mergers, but we have heard nothing official,"" he added.
China's securities authorities, while encouraging the stock and bond markets, have been cracking down mercilessly on the futures markets in recent months due to massive over-speculation on some contracts.
The futures exchange in the northeast city of Changchun last month became the latest casualty, being forced to merge with the Beijing futures exchange.
The Shanghai Metal Exchange's Gu said the pressure from Beijing to stamp out speculative activity had had a dramatic impact on trading volumes on the exchange.
""The restrictions have had a negative impact on market sentiment with turnover dropping,"" Gu said. ""State-owned firms have been banned from speculating and financial institutions have been pushed out of the futures markets.""
Gu said he expected trading volume on the Shanghai exchange this year to be only about 300 billion yuan ($36.14 billion), compared with 455.8 billion yuan in 1995 and a record 682 billion yuan in 1994.
""In a way, the metals trading has already been focused on one or two exchanges given the low trading volumes seen in the other three exchanges,"" said an analyst with a Shanghai futures trading company.
Gu said there were rumours the securities authorities planned to raise margin requirements for all futures trading from the current five percent to 15 or 20 percent, depending on the contract, to crack down further on speculation.
""If it happened, it wouldn't have a big impact on the Shanghai metals contracts, which are relatively mature and less speculative,"" Gu said.
But he said there was no need for the authorities to take a tough line on the Shanghai Metal Exchange.
""The speculative element in copper trading in Shanghai is relatively small and the futures trading here provides a valuable opportunity for hedging,"" he said.
He said that, currently, hedging accounted for about 20 percent of the trading in copper futures on the exchange, which he said was about the right level.
""The current margin requirement of metal contracts should be kept or at most increase it slightly,"" Gu added.
($1=8.3 yuan)
",11
"Shanghai's real estate market is showing signs of recovery thanks to growing numbers of individual home-buyers and policy support from the city government, analysts and officials said on Thursday.
Increasing numbers of people are buying their own homes in the city as a result of lower interest rates, a state-run house-buying fund and the inability of many state firms to provide homes for their employees, they said.
People from other parts of China are also showing a growing interest in buying apartments in Shanghai, partly due to new rules that allow home purchasers from elsewhere to obtain residency permits in the city.
In the first nine months of 1996, private citizens bought 1.21 million square metres of commercial housing in Shanghai, or 55 percent of the city's housing space sold in the period, the city's Business News said on Wednesday.
""Two years ago, all our buyers were enterprises,"" said a salesman from a Shanghai real estate company. ""But this year nearly half the houses we sold were bought by individuals.""
A key element in this growth is a public housing loan fund set up by the city government in 1992, into which most employers and employees each pay five percent of an employee's salary.
""More people have bought and plan to buy houses with the help of these funds due to lower interest rates on loans after two cuts in bank interest rates this year,"" said an official of the Construction Bank of China, which administers the fund.
""In the first half of this year, we lent about 500 million yuan ($60.24 million) from the fund and expect to lend 1.2 billion for the whole year,"" he said.
""Between 1992 and 1994, individuals borrowed a total of only 220 million yuan from the fund and in 1995 the figure reached 440 million yuan,"" he added.
To encourage more individuals to buy, the city government in September cut the tax on house purchases by half and in August raised the rents on state-owned apartments by 50 percent, a Shanghai Bureau of Real Estate Administration official said.
""These measures, including allowing non-Shanghai people the right to obtain a residence permit by buying property, show the determination of the local government to help real estate become a key industry in the city,"" she said.
In August, Shanghai started giving residency permits to out-of-city people if they bought an apartment worth more than 400,000 yuan in the Pudong New Area, and have since extended the offer to all districts of Shanghai.
Pudong is on the east side of the Huangpu River that runs through the city. Puxi, the main area of the city, is on the west side.
Pudong has so far sold 327 apartments worth 86.2 million yuan to people from outside of the city, an official of the Pudong Real Estate Exchange said.
""Sales of property in Puxi, despite higher prices, are hotter than in Pudong which is still seen as less convenient in terms of traffic,"" said an official of the Shanghai Real Estate Trading Centre said.
""Buyers from outside the city, mainly successful business people and enterprises, regard Shanghai as the best place in China to do business,"" he said.
Shanghai's economy continues to power ahead of the rest of China, with 12.8 percent growth in the first 10 months of 1996, official figures show.
China's GDP growth this year has been officially forecast at around 9.6-9.7 percent, compared to 10.5 percent last year.
Shanghai real estate prices have changed little in the first nine months of 1996 despite the increased sales due to a parallel growth in supply.
The average price of an apartment in Shanghai is now 4,020 yuan ($484.30) per square metre and office space 6,880 yuan ($828.90) per square metre, the Business News newspaper said.
""No one doubts that prices of property in the city will rise in the coming years,"" an analyst said.
($1=8.3 yuan)
",11
"China is expected to end the year without loosening its three-year old tight credit policy as rampant local fixed asset investment continues to threaten economic over-heating, analysts said on Thursday.
Earlier this year, China seemed poised to modify the austerity measures, but a surge in fixed asset projects since July has led Beijing to change its mind, they said.
In the latest high-level clue to credit policy, Vice-Premier Zhu Rongji was quoted by the official media on Thursday as saying there was a need to strictly control new fixed asset investment projects.
""There is the need to continue to curb inflation and strictly control new industrial projects,"" Zhu was quoted as saying during a recent visit to the eastern coastal province of Fujian.
The People's Daily, mouthpiece of the ruling Communist Party, on Wednesday also criticised a rush by provinces to invest in high-profile industries, citing 22 provinces that had listed car production as one of their key industries.
""There is still the threat of a resurgence of inflation and of the economy over-heating with fixed asset investment climbing again since the central bank cut bank interest rates earlier this year,"" said a Beijing-based official with the Industrial and Commercial Bank of China (ICBC).
Growth in retail price inflation is expected to slow to six percent year on year in 1996 against 14.8 percent last year.
Official figures show that local governments around the country have allowed 700 new fixed asset investments since July.
China's State Planning Commission estimates that fixed asset investment will hit 2.3 trillion yuan ($277.1 billion) this year, about three times the level of 1992.
""The resurgence of fixed asset investment in the second half of this year seems to have made the central bank more cautious about loosening credit,"" a banker with the Bank of China said. ""The most important signal is that the much-discussed bank reserve ratio cut now seems to be off the near-term agenda.""
In mid-July, Dai Xianglong, president of the People's Bank of China, said the central bank would shortly cut bank reserve ratios by a margin possibly as large as three percent. This would release huge amounts of money into the market.
Chinese banks and other financial institutions are required to place 13 percent of their deposits with the central bank and keep another five to seven percent themselves as reserves.
Between July and October, central bank officials talked frequently about cutting the bank ratios, which were set eight years ago and have never been changed.
""But now they are focusing on the need to continue the austerity measures,"" said an analyst with the Communications Bank of China. ""The main concern is the large amount of money in the system beyond the direct control of the central bank.""
China's central bank has direct control of the four major state banks -- the ICBC, the Bank of China, the Agricultural Bank of China and the Construction Bank of China.
Credit supplied by the four banks once accounted for more than 90 percent of total loans but this proportion has now shrunk to around 70 percent and is still falling.
Analysts said the impact from a cut in bank reserve ratio could be balanced by other policy controls such as the credit quota system.
But the bulk of money liberated from other banks and financial institutions would inevitably enter the markets with the central bank being unable to directly intervene.
($1 = 8.3 yuan)
",11
"Shanghai B shares soared a stunning 12.22 percent on Tuesday as new money poured into the market from both local and foreign investors, and analysts said there was a lot more capital waiting to enter the market.
The Shanghai foreign currency B share index closed at 84.534 points, its highest level since September, 1994, with the supply of shares unable to meet the demand, traders said.
One foreign analyst said he expected the B share index to top the 100-point mark before the end of the year, with investors increasingly confident the authorities had decided to allow local Chinese investors to stay in the B share market.
""What we're seeing is a lot of stir-frying of dog stocks,"" said Bruce Richardson, chief Shanghai representative for HG Asia, referring to widespread buying of weaker counters.
""There's nothing in the fundamentals to justify this. But this is liquidity-driven and there's a lot more money waiting to come in,"" he said.
Shenzhen B shares, however, which surged a week or so earlier than Shanghai, fell back 2.15 percent on Tuesday to end at 193.87 on profit-taking after steep rises over the past few sessions, brokers said.
A fundamental factor in the Shanghai B market is a growing feeling that the merger of the foreign currency B shares and the A shares denominated in local currency on China's two stock exchanges will come sooner than expected.
""The spread between the A and B share P/Es is substantial,"" said a foreign analyst in Shanghai. ""The market average for the Shanghai A shares is 55 and 19 for the B shares, so local investors see the opportunity for capital gains in a unification of the two.""
A Chinese broker agreed.
""Every day we are seeing so much fresh capital flowing into the market because investors believe the B share prices are going to move closer to their counterparts in the A share market,"" he said.
The Chinese authorities have so far made no predictions on when the two types of shares might be merged, saying only that the day is a long way off.
John Crossman, general manager of Jardine Fleming in Shanghai, said both locals and foreigners wanted to get into the Shanghai B share market.
""For locals, it is an easy decision when B shares are at a 75 percent discount to A shares,"" he said. ""Foreigners are well disposed to China in 1997 and 1998 and do not want to be net sellers of Chinese equities.""
He said the current bull run could continue for another couple of months.
But other analysts said the extreme volatility of the market posed a threat, particularly for holders of many of the weaker and smaller B shares, when the correction begins.
""Locals are not so discriminatory in the shares they buy and have bought shares simply because they were cheap,"" said one analyst.
""But for some poor-quality shares the prices are not sustainable. As soon as the momentum peters out, there will be a lot of sifting and these shares will go down quickly,"" the analyst added.
",11
"China's cautious and much-delayed experiment with convertible bonds as a way of raising corporate funds is expected to move forward next year with up to 6-10 foreign currency issues, brokers and analysts said on Wednesday.
Chinese securities authorities have said on a number of occasions they want to conduct test issues of convertible bonds, which give holders an option to convert the debt into stock.
Only a small handful of cases have been tried so far with very mixed results. But analysts said they believed authorities were increasingly taking a favourable attitude towards the concept of convertible bonds.
This is reflected in the many listed Chinese firms which have said in recent months they are considering or planning to launch bonds convertible into their foreign currency B shares, listed on China stock markets, or H shares listed in Hong Kong.
""The prospects for convertible bonds next year look good,"" said a senior analyst with a foreign brokerage in Shanghai. ""I would say there could be up to 10 issues in 1997. The process has been slower than expected, but China has a need for more funds.""
""There's a lot of momentum on convertible bonds at present,"" said John Crossman, general manager of Jardine Fleming in Shanghai. ""We've been pushing the concept with companies and officials and it's now taken on a momentum of its own.""
The China Securities Regulatory Commission (CSRC) is believed to have received a pile of applications for such issues but is cautious about proceeding partly because of a number of unsuccessful past attempts at issuing convertible bonds.
""China Textile Machinery's issue of convertible bonds, for instance, was a disaster,"" said the senior analyst. ""Nobody has converted the bonds to shares, so they have to pay back the money by the end of this year.""
But a stock analyst in Shenzhen said the market was ready to accept convertible bonds as a concept.
""The overall financial environment has matured to the point where it's possible to look at convertible bonds. But the companies which issue them need to be relatively good to ensure they have the ability to repay,"" the analyst said.
He said the prospect of convertible bonds as a means of raising capital is extremely attractive to China's listed companies because, unlike direct equity, it does not immediately dilute earnings.
The latest Chinese company to announce a convertible bond is Zhenhai Refining & Chemical Co Ltd which said last month it would issue US$200 million of bonds convertible into the firm's H shares.
Other companies that have indicated an interest include truck maker Qingling Motors Co and Shenzhen-listed Jiangling Motors
But the experience of China Textile Machinery indicates that there is risk involved in issuing convertible bonds for companies as well as for investors.
""The advantage over a straight bond is that the company is placing a bet that it will be able to pay back with shares rather than cash. But there's a risk involved,"" said one foreign analyst.
""The authorities want to choose large, stable companies that are going to have the cash income to repay the bonds if the conversion proves difficult because of problems with the share price,"" he added.
",11
"China issued another strong signal on Sunday that its stock and bond markets have been given the green light for fast growth to provide the economy with more efficient means of investment.
The official Shanghai Securities News said the stock and bond markets must be developed vigorously to provide a stronger foundation for national economic development.
The newspaper quoted a report from the Chinese Academy of Social Sciences, a think-tank, as saying the efficiency of investment channels was a key question affecting the long-term development of China's economy.
""The sluggish development of the direct investment markets is one of the factors affecting the long-term development of the national economy, so it is necessary to speed up the development of stocks, bonds and other direct investment markets,"" it said.
The report was the latest in a series of indications that Beijing's previous suspicion of the securities markets has been replaced by a determination to expand and strengthen them.
It said more direct investment would help to reduce the tangle of problems surrounding heavily indebted state enterprises and the state banks that are currently forced to support the enterprises with a constant supply of loans.
""Banks are being squeezed from both sides, given the high risk (of loans to state enterprises) and the ever-growing deposits they are taking in,"" the paper said.
It said that it would be better for all parties if depositors put less cash into bank deposits and invested it directly in companies through the securities markets.
""Most of the money in the hands of ordinary people is currently put into bank accounts, which increases total bank deposits even as enterprises are short of money, resulting in capital being left idle and wasted,"" the report said.
The current small scale of the direct investment markets was a key reason for this imbalance, it said.
""So how to standardise, develop and strengthen the direct investment markets to allow for more reasonable usage of deposits is an important part of raising the efficiency of banks and making more efficient use of capital,"" it added.
The report gave no details on shifting the focus of enterprise investment from banks loans to securities, but Beijing has implemented a number of measures recently aimed at expanding the securities markets.
A record number of companies have this year been given approval to list shares on the country's two stock markets in Shanghai and Shenzhen.
The Shenzhen market was strongly affected last week by rumours, denied in Beijing, that securities authorities were about to release the quotas for company listings for next year.
But authorities last week did announce a major relaxation of policy on mutual funds, which are seen as an important conduit for funnelling funds from ordinary people into the securities markets.
Regulations allowing existing mutual funds to list on the stock exchanges are due to be released before the end of the year, official media reports said.
",11
"Volkswagen AG Czech unit, Skoda Auto a.s., on Friday launched sales of its new sedan, the Octavia, hoping to kill off jokes about Communist-era quality, and pull the company into profit.
Officials said the new model, built on a common VW platform designed for the 1998 Audi A3 and upgraded Golf, would expand Skoda's market penetration by putting the company's first post-Communist mid-sized car in showrooms worldwide.
""Our strategic markets are in central and eastern Europe, western Europe, and we are present in some Asian markets. We expect to sell Octavias successfully in all of our 66 markets,"" marketing director Frank Farsky told Reuters.
The new sedan received a hero's welcome at showrooms around the capital Prague on Friday as crowds gathered to watch dealers mount the Octavia on viewing pedestals.
Exports of the front-grilled Octavia -- a major step away from the boxy sub-compacts which made the Communist-era Skoda the butt of automotive jokes worldwide -- to Europe and beyond later this year or in the first quarter next year.
The car will be available on the domestic market with a choice of three petrol and two diesel engines, with the top-of-the-line SLX automatic model priced at 497,900 crowns, and a base model priced at 335,700 crowns.
""In the Czech market its more or less toward a luxury- class car by the nature the purchasing power and the nature of the car market itself,"" Farsky said.
""In western Europe it is a medium sized car that will belong to the middle class market, and in Asian markets I think it will be toward the luxury class,"" he added.
Skoda will make 64,000 Octavias in 1997 at its new purpose-built plant in Mlada Boleslav north of Prague, and raise production to 90,000 in 1998.
Skoda Chairman Ludvik Kalma said earlier this year he expected 20,000 Octavias to be sold annually on the home market, with the rest exported to Europe and points East.
""I think customers who would be looking for a used car would look at a Skoda Octavia, I think that people who own a smaller car would look at Octavia,"" Farsky said.
The company lost 1.621 billion crowns last year due to heavy investments into the new factory, but Kalma said the firm should come close to breaking even this year.
-- Prague Newsroom, 42-2-2423-0003
",18
"The Czech crown rose on Thursday to its highest level against its mark/dollar basket, buoyed by comments by Prime Minister Vaclav Klaus that devaluation was not needed despite a widening trade gap.
The crown rose to 4.5 percent above the cross rate of the two-currency basket late in the afternoon and dealers said that, barring any central bank intervention, the newly-liberalised currency could go still higher.
By mid-morning heavy buying had pushed the Czech currency to 4.3 percent above the basket from just under four percent at the opening.
The crown strengthened to 26.014 to the dollar and 17.591 to the mark by 1430 GMT from Thursday's central bank fixing of 26.039 and 17.638.
The central bank followed the market up at its midday fixing, setting the crown at 4.24 percent above parity with the basket, compared with 3.9 percent on Wednesday.
Traders saw the fixing as a signal that the bank was content with the crown's rise and the market responded.
""When the central bank followed the market, the banks realised it was still time to sell (foreign) currencies again and the central bank won't be taking any action,"" said trader Tomas Novak at Ceskoslovenska Obchodni Banka.
Traders said as long as the government kept talking up the crown, foreign investors would respond until the bank decided to jump in and buy foreign currency.
The catalyst for recent strength of the crown has been official comments dismissing any need to devalue the currency.
Although the trade balance showed a record monthly deficit in July of 16.4 billion crowns, the market responded to comments made by Klaus in Austria late on Wednesday.
""The first (reason for the crown's rise) is Klaus's comments in Austria,"" Tomas Becvar, trader at Komercni Banka, said. ""Another reason of course is the following of the market by the central bank at the fixing.""
At an economic conference, Klaus backed central bank Governor Josef Tosovsky's view that a stronger crown would be better for the economy in the long term.
""We think that a devaluation is not necessary and that it wouldn't be useful,"" Klaus told Reuters in Alpbach, Austria.
While some economists have recommended devaluing the crown to help the trade position, many said it was not fundamentally necessary as capital inflows remain strong and the balance of services, especially tourism, narrows the current account gap.
The Czech currency last dipped below the parity rate against the basket in mid-June, soon after elections stripped Klaus's conservative coalition of its majority in parliament and strengthened the hand of the opposition Social Democrats.
Klaus was finally able to form a minority government of his centre-right coalition while the centre-left Social Democrats have been conciliatory on economic issues, including a 9.3 billion crown cut in spending to balance this year's budget.
The crown has since been on a steady upward path, first hovering around three percent against the basket in recent weeks, then surging after comments by Tosovsky's on Friday.
Since February, the central bank has had the option of fixing the crown in a band of plus/minus 7.5 percent from parity with the basket instead of its previous tightly controlled plus/minus 0.5 percent band,
The move brought the crown more in line with supply and demand on the open market.
-- Prague Newsroom, 42-2-2423-0003
",18
"Czech President Vaclav Havel said on Thursday he was deeply disturbed by a Chinese court's 11-year prison sentence on dissident Wang Dan on charges of plotting to overthrow the government.
Havel, himself a former dissident against a Communist government, said in a statement that after last year's jailing of Wei Jingsheng, father of China's small democracy movement, on similar subversion charges, Wang's sentence was ""unacceptable"".
Wang, 27, was jailed for 11 years on Wednesday after a brief hearing.
Wei Jingsheng, freed in 1993 after serving all but six months of an earlier 15-year term for subversion, was rearrested the following year and formally sentenced in December 1996 to another 14-year term. He is now 47.
Havel's statement, issued by his spokesman, said that Wang's sentence ""was another example of the unacceptable understanding of the position of the citizen in society.""
The statement added that Havel expressed his ""deep dissatisfaction"" over the decision.
It said Havel ""considers it his obligation to express his solidarity with those who anywhere around the world express, in a non-violent way, their free-mindedness and desire for justice and elementary human rights.""
Havel, who as a dissident playwright was imprisoned several times by the Communist government before its fall in 1989, has been a frequent diplomatic thorn in China's side.
He angered China last year with a highly publicised meeting with Taiwan's Premier Lien Chan, forcing a hurried restatement of the Czechs' official ""One-China Policy"".
Earlier this year the Czech president said that he regretted that Chinese Nationalist-ruled Taiwan, which Bejing regards as a renegade province, is not a U.N. member. However, the Czechs officially still recognise only China as a sovereign state.
Earlier on Thursday, the Czech Foreign Ministry called in China's chief diplomat in Prague, charge d'affaires Wang Zizhen, to read him a statement of protest.
""The Czech Republic expresses its dissatisfaction over the conduct of the trial and the judgment carried out,"" said a text of the statement issued by the Foreign Ministry.
It said that, although there were differences in traditions of understanding questions of human rights in different regions, ""there exist certain universal principles of maintaining human rights which are necessary to respect"".
Chinese Foreign Ministry spokesman Shen Guofang said in Beijing on Thursday that the jailing was not a human rights issue but an ordinary legal matter.
The Czech ministry statement said, however, that criminalisation of freedom of speech was ""a violation of elementary human rights"".
",18
"Italy, seeking a larger role in helping to fold former East Bloc countries into NATO, believes it is better to integrate, and not isolate, fringe candidates like Slovakia and Romania, a senior Italian diplomat said.
During an official visit to Prague, Undersecretary for Foreign Affairs Piero Fassino told reporters late on Wednesday that Italy, as part of its new focus he called ""Italian Ostpolitik"", saw four countries as primary candidates for NATO's expansion.
""The position of Italy...is that the group of countries which definitely belong to NATO is Hungary, the Czech Republic, Poland and Slovenia,"" he said, but added: ""There's also a possiblity that Slovakia and Romania belong to that group.""
He said it was important for Slovakia and Romania to implement agreements with Hungary aimed mainly at protecting the rights of ethnic Hungarians living in both countries.
Fassio said that before the West says ""no"" to Slovakia and Romania it was necessary to determine carefully whether they meet NATO's standards of democracy, but he added:
""If a country is integrated then we also have the right to require it to meet standards of the organisation it has joined.
""If it's isolated we can't demand anything,"" he said.
Both the EU and the United States have repeatedly lambasted Slovakia's government for slow democratic reforms and adopting laws threating to political opponents and ethnic minorities saying they might delay membership into ""Western structures"".
Fassio said it would be more useful to put fringe countries like Slovakia into the fold where more pressure can be applied.
""It is true that Slovakia is having problems fulfilling democratic principles, but the question is, 'Do we isolate Slovakia or integrate Slovakia?'. I believe it is more useful to integrate it,"" he said. REUTER
",18
"The Czech Republic has its first Senate since before World War Two, but an electoral win by the governing coalition appeared to have smothered talk of early general elections.
The three centre-right coalition parties took 52 seats in the new upper house of parliament on Saturday, but voter turnout of only 30 percent confirmed surveys showing many believe the Senate, with limited powers, is unneccessary.
Still, the result marked something of a turnaround for the coalition, central Europe's last centre-right government, which lost its majority in the more powerful lower house, the Chamber of Deputies, six months ago.
The Senate, written into the new 1993 constitution when Czechoslovakia split into separate Czech and Slovak states but not given authority until this year, was designed to be the reincarnation of the body of elder statesmen who sat in Prague until the Nazi invasion in 1939.
Klaus's Civic Democratic Party (ODS) won 32 seats ahead of the strongest opposition party, the Social Democrats, with 25.
But Klaus dampened speculation that his conservative minority government might use the victory this weekend to seek an early vote to the lower house.
While leaving his party's headquarters late on Saturday, Klaus was asked if the results confirmed his opinion, given after last week's first-round Senate vote, that early elections to the lower house should not be necessary.
""I think they did,"" he told Reuters. He did not elaborate.
His three-party conservative coalition won 52 seats after this weekend's runoffs for the 81-seat Senate.
After last week's first-round Senate vote, which gave Klaus's Civic Democratic Party the potential to win up to 79 seats, Klaus told Czech Television: ""This country does not need another (lower house) election. It needs to function, work.""
The opposition Social Democrats won 25 Senate seats, while the junior coalition parties, the Christian Democrats (KDU-CSL) and Civic Democratic Alliance (ODA) won 13 and seven seats respectively.
Analysts once viewed the Senate elections as a gauge for whether the coalition or the opposition would be in a position to seek a majority in the lower house through an early poll.
But voter turnout of only 30 percent made it hard for anybody to draw conclusions on what might be the result if early elections to the more powerful lower house were called.
""Most importantly the Senate won't be one-coloured or two-coloured as was expected, but multi-coloured,"" said analyst Jiri Pehe of Prague's Open Media Research Institute.
The little-reformed Communists clinched two seats and two went to independents.
",18
"Czech pundits once looked at mid-November Senate elections as a possible beacon to cut through the political fog created by indecisive June lower house elections.
What is clear after the two-round vote completed this past weekend is only that many Czechs do not care about the Senate.
Prime Minister Vaclav Klaus and his centre-right coalition spent most of Sunday proclaiming that the results, in which the three parties won 52 of 81 seats in the newly created Senate, provided a strong mandate for the minority cabinet.
Klaus panned a Sunday headline in the daily Mlada Fronta Dnes calling the results in thin turnout a political ""draw"".
""(A draw) would be if it happened that the opposition won also in the Senate,"" he said in a debate on Czech Television. ""That draw has been avoided.""
Klaus's conservative Civic Democratic Party alone won 32 seats despite having a potential of winning 79 seats going in to the run-offs. Only a stronger-than-expected showing by the two junior partners gave the coalition control of the Senate.
The opposition Social Democrats, led by lower-house chairman and Klaus arch-rival Milos Zeman, mustered only 25 Senate seats after their strong June second-place showing moved Czech politics from centre-right domination into cohabitation.
With voter turnout a paltry 30 percent, it would be hard to argue that the Senate vote did much to alter Czech politics. Nor did it give a signal that the coalition might have enough support to seek new lower house elections.
""The result does not mean any move toward early elections... They would probably end in a draw,"" said political analyst Jiri Pehe of Prague's Open Media Research Insitute.
Klaus said that the vote confirmed that what the country needed was a functioning government, not new elections.
What the results primarily mean is that Klaus and his allies simply gain control of the upper house, which will be mostly a talking shop with few legislative powers.
But they are two votes shy of having a majority in the more powerful lower house, and the opposition could scuttle the legislative agenda of the coalition which remains as post-Communist Europe's last centre-right government.
Charles Robinson, an eastern Europe analyst at the independent research house Hilfe, said investors would welcome the relatively meaningless result for not giving any more power to the more interventionist Social Democrats.
""With the win there wil be certainly no added complications in getting (Klaus's) legislation through, and that's good news for stability, and it does mean that elections can be delayed until 1998 perhaps,"" Robinson told Reuters.
He said however that the Senate result might cause Zeman to sharpen his tactics against the government to draw deeper distinctions before any new elections might be called.
The biggest loser might be President Vaclav Havel who fought to give the Senate life after it was built into the 1993 constitution adopted after the split of Czechoslovakia, despite early moves by Klaus and others to block its creation.
Before the second-round vote, the politically neutral Havel called on his countrymen to turn out in force after just 35 percent voted in last weekend's first round.
His pleas were ignored.
On Sunday, Havel told Czech radio from his weekend retreat that politicians waged an ""anti-campaign"" against the creation of the Senate, and let pre-election partisan bickering take the place of discussing the choice of intelligent individuals.
Havel argued that after a few more elections, Czechs would come to realise that the Senate was important as the house of last resort in case of a constitutional crisis.
""The Senate is not dispensable,"" he said on Sunday.
",18
"Czech Justice Minister Jan Kalvoda, a deputy premier and leader of a junior partner in the ruling coalition, quit the government and parliament on Tuesday for falsely using an academic title, the CTK news agency said.
Kalvoda, aged 43, resigned for falsely claiming he was a doctor of law amid a growing row over the academic credentials of Czech politicians after deputies began questioning whether they were all genuine.
""Yes, (Kalvoda resigned) and he delivered his resignation to the president,"" Mariana Cerna of the parliament's press office told Reuters.
Another member of parliament from a party in the centre-right ruling coalition also quit the house for the same reason, while three other deputies admitted using false titles but did not step down, the news agency reported.
Officials of Kalvoda's party, the Civic Democratic Alliance (ODA), were not immediately available for comment, and it was not yet clear who would take Kalvoda's place in the cabinet or what his status would be within his party.
Prime Minister Vaclav Klaus, head of the senior Civic Democratic Party, said he would meet on Wednesday morning with Christian Democrat chairman Josef Lux and a designated member of Kalvoda's party to assess the situation in the three-party coalition.
""It's a political swerve, it's disquieting and unsettling, and the aim of all of us is that it would happen without any teetering,"" Klaus told reporters after Kalvoda's resignation.
ODA's press department said it would not comment until a meeting of its party leaders on Wednesday.
Kalvoda, who headed the most pro-business party in the coalition, often bumped heads with Klaus on issues such as speeding up the deregulation of heating prices and rents and lowering taxes.
Pavla Jurkova, a member of the Christian Democrats (KDU-CSL), resigned her seat in the 200-seat lower house -- where the centre-right coalition has 99 seats -- for falsely claiming a law doctorate, CTK said.
Two members of Klaus's party also admitted that their law doctorates, used in campaign material earlier this year, were false, CTK said, but Anna Roeschova and Ondrej Zemina had not resigned their seats.
Also staying put in parliament was a member of the opposition Social Democrats, Marie Noveska, after admitting she had not finished university but still used the title doctor of law.
",18
"Elections to the new Czech Senate over the next two weekends will only thicken the country's political fog, but an indecisive electorate has already been priced into the financial markets, analysts said on Monday.
Prime Minister Vaclav Klaus has been stuck in an uneasy political co-habitation since his centre-right coalition fell two seats short of a majority in the lower house on a strong second place showing by the Social Democrats in June.
Analysts say the Senate elections should not signal any clear shift in the political winds, and the markets will be stuck wondering if the three-party conservative government can hang on for its four-year term which runs through the year 2000.
They say only an unexpected clear victory for the opposition Social Democrats over Klaus's Civic Democratic Party (ODS) would hurt the Czech crown or capital markets.
""The markets will definitely turn down (on a Social Democrat victory), same as in the (lower house) elections,"" said Vladimir Jaros, research director at Prague investment house Wood & Co.
But he added that market expectations ""are for ODS to win"".
Klaus and his team of economists and technocrats became standard-bearers for post-Communist reforms after taking power in 1992 with a 12-seat majority in the lower house.
The markets, pollsters and pundits were caught off guard when the Social Democrats -- who have been ambivalent to balanced budgets and privatisations -- did so well.
The crown fell a full percentage point on the June results, and the stock market lost more than four percent of its value before stabilising when a minority government was confirmed.
""I think investors (this time) have already included in their behaviour expectations of inconclusive results,"" said Zdenek Bakala, chairman of Prague-based Patria Finance.
ODS and the Social Democrats are running close in recent opinion polls at around 25 percent support each, after ODS won the June vote with 29.6 percent, with CSSD at 26.4 percent.
But since the Senate vote is a first-past-the-post poll in individual constituencies, forecasting victory is difficult when gauged only by available party preference surveys.
Local analysts see Klaus's ODS and its two coalition allies winning a majority of the Senate's 81 seats, but they do not expect a result giving the coalition or opposition a clear advantage to push for an early election in the lower house.
""I don't think we are going to be facing a risk of extraordinary (lower house) elections, and I doubt that ODS will be willing to take that risk,"" Jaros said.
The two-round Senate polls, beginning on Friday with runoffs the next weekend, are not likely alter the course of the country's legislative agenda.
The stock market and the Czech crown have had diverging fates since the June vote, for reasons beyond election fears.
The crown has remained strong, despite a growing trade gap, consistently trading in a tight range between 2.5 to 3.0 percent above the central bank's mark/dollar basket.
The crown got a boost in October when four Social Democrats crossed over to vote with the government in approving the first draft of the 1997 budget.
Meanwhile, the Prague Stock Exchange (PSE) has been rocked, not by the political situation, but by discontent from foreign investors unhappy with the country's opaque trading environment.
The PSE's official PX50 index has been on a steady slide since late summer, dipping below 500 last week, heading toward its historic record low of 387.
Few think the Senate elections will serve to revive the securities markets, as market reform is not a high priority.
",18
"The Czech consumer price index rose 0.5 percent in October putting year-on-year inflation at 8.7 percent, down from 8.9 percent in September, the Czech Statistical Bureau said on Friday.
The moving 12-month average of inflation remained unchanged at 8.7 percent in October. The figures were most influenced by a full percentage point rise in food, drinks and tobacco prices during the month and a 1.2 percent rise in clothing prices.
Analysts said the overall result was in line with expectations or even a bit lower, as the second consecutive month of slowing in the year-on-year figure convinced some that the year-end rate would end below nine percent.
""This (October's inflation result) is slightly better than expected, but not a big surprise,"" said Vladimir Kreidl, analyst at Patria Finance said.
""Our forecast in unchanged at nine percent for average inflation (at the end of 1996), but 8.8 percent seems to be achievable,"" he said.
Kreidl added that October's result was aided more by a strong Czech crown keeping import prices in check and relatively slow growth in industrial producer prices which have been rising at a roughly four percent annual rate.
Industry and Trade Minister Vladimir Dlouhy told a news conference the result was expectated and ""for the whole year, I would like to see (average inflation) at below 8.7 percent.""
The government had forecast average inflation to slow a full percentage point in 1996 to 8.0 percent, but a surge in domestic demand kept prices stubbornly over nine percent in the first half of the year.
The Czechs have been encouraged by the Organisation for Economic Coopoeration and Development (OECD), the group of the most industrialised countries to which the Czechs now have membership, to do more to stem inflation.
""From the perspective of an OECD member, our inflation is high ...our economic policy has to lead to a lowering inflation suggested by OECD and the Maastricht treaty,"" Dlouhy said.
The Czech National Bank (CNB) in June tightened monetary policy by raising its key interest rates and expanding minimum reserve requirements to dampen domestic demand.
The central bank said last week the moves served to pull its key M2 measure of money supply growth at the end of August to the low end of its 13-17 percent 1996 target at 13.2 percent, from over 20 percent earlier this year.
But Kreidl said the effects of the money supply tightening should not be evident until well into 1997, and he did not expect the CNB to ease credit rates at least until then.
-- John Mastrini, Prague Newsroom, 42-2-2423-0003
",18
"The Czech Statistical Bureau (CSU) on Friday cut its forecast for 1996 real gross domestic product (GDP) growth as lower export demand, especially from neighbouring Germany, fuels the trade deficit and eases Czech expansion.
The CSU cut its full-year 1996 GDP projection to 4.8 percent growth -- the same as the real result for 1995 -- from its 5.1 percent year-on-year prognosis made at the beginning of August.
Czech GDP grew a real 4.3 percent in the first half of this year, according to the latest results.
In its report on Friday, the CSU said it expected full year 1997 real GDP growth at between 5.1 to 5.6 percent.
The CSU revised its forecast for the full-year 1996 current account deficit to 6.9 percent of GDP from 5.7 percent as a ballooning merchandise trade deficit continues to bite.
It said the current account deficit would grow to between 6.8 to 7.4 percent of GDP in 1997.
The bureau said the merchandise trade deficit would grow to 163.3 billion crowns by end-1996 from the roughly 111 billion crown deficit posted for the first three quarters this year and compared with roughly 96 billion crowns for the whole of 1995.
But the bureau said export growth should accelerate in 1997 to between 10.0 to 11.4 percent from 6.2 percent this year, while import growth would be between 14 to 16.2 percent next year from 15.4 percent in 1996.
It forecast the 1997 merchandise trade deficit at 200 to 210 billion crowns.
""It is realistic to forecast, in view of the massive investment into the (Czech) economy in the past several years and expected growth of (EU) economies... that the development of the (current account deficit) at the turn of 1997-98 would switch toward (the deficit's) reduction,"" the CSU said.
The bureau blamed mainly a stagnation in the first three quarters in the German economy -- which accounts for just over a third of Czech export demand -- and in the whole EU for the revised trade figures and the lower GDP forecast.
""I think it's realistic to suggest that the (Czech trade situation) won't be much different next year,"" said Charles Robertson an independent East Europe analyst.
""But the big question will be whether there will be some improvement toward the end of next year. If this carries on into 1998 and 1999 there are going to be big worries.""
He expected that, despite the poor trade results, the Czech crown should be able to stay within the central bank's band of plus/minus 7.5 percent from the mid-point of the mark/dollar basket to which it is fixed each day.
After the CSU announcement, the crown remained steady, trading in a tight range around the central bank's Friday fixing at 26.960 to the dollar and 17.739 to the mark, or 2.75 percent above parity with the basket.
The CSU slightly eased its forecast for full-year 1996 inflation to 8.9 percent from 9.0 percent in August, and said consumer prices would slow to between 7.5 percent to 8.0 percent for the whole of next year.
It said unemployment would remain at one of the lowest levels in Europe, but said it would edge up slightly to between 3.3 to 3.5 percent by the end of 1997 from 3.3 percent at the end of this year.
The slowdown of inflation -- to an average of 7.5 to 8.0 percent by the end of 1997 from 8.9 percent at the end of 1996 -- would be helped by a slowing in real wage growth to between 8.1 to 8.5 percent next year from 9.1 percent in 1996, the CSU said.
-- Prague Newsroom, 42-2-2423-0003
",18
"Czech National Bank (CNB) Governor Josef Tosovsky said that despite objections from some cabinet officials, it was too early to write off the central bank's plan to create post-Communist Europe's largest bank.
Tosovsky said he expected the full cabinet to consider ""in a few weeks"" the CNB's plan which includes the proposed merger of the savings bank Ceska Sporitelna a.s. with the foreign trade bank  Ceskoslovenska Obchodni Banka a.s. (CSOB).
""There are only some preliminary opinions of some official who saw our proposal. Because most of the members of the cabinet didn't see our proposal, so it's too early,"" he told Reuters Financial TV in an interview to be broadcast later.
""I don't know what will be the decision of the government.""
The central bank has submitted a broad plan seeking to fully privatise state holdings in the ""Big Four"" largest banks, but Prime Minister Vaclav Klaus said last week the cabinet needed more concrete details.
The most controversial plan calls for Sporitelna and CSOB to merge to create a bank with over $20 billion in assets and then to privatise the state's stake in the newly-created bank several years later after the merger is analysed.
Klaus has reacted coolly to the merger plan, saying it was akin to fusing Prague's top two soccer teams Sparta and Slavia, something unthinkable for many Czechs.
The plan has also been criticised by a key Klaus adviser, Martin Kocourek, and by officials at both institutions who said they want to preserve the specific character of each bank.
But the central bank's plan, which Tosovsky said is from the point of view of a regulator to promote stability of the entire banking system, seeks to create a bank which would compete better against large western European institutions.
""We feel that it would be possible to find some closer ties between CSOB and (Sporitelna), and we see a merger could be made,"" Tosovsky said, but added that ""it would require more professional analysis.""
Tosovsky said that if the merger plan was not adopted then a strategic foreign partner ""would be welcome in CSOB -- this means the fast privatisation with a foreign strategic partner, but this is only if the idea about the merger is not accepted.""
A variety of Czech and Slovak state institutions, including the central banks, hold CSOB shares. Ceska Sporitelna has had some stakes privatised through the voucher-privatisation programme, but the state still holds a 45 percent stake.
The CNB and the Finance Ministry have both called for the fast privatisation of the state's roughly one-third stake in Investicni a Postovni Banka to a strategic foreign partner. Japan's Nomura and Dutch ING NV are widely seen as frontrunners seeking IPB shares.
Tosovsky said the roughly 49 percent stake in the largest commercial bank, Komercni Banka a.s. should be divided into smaller units and sold to a variety of investors, not a single foreign strategic partner.
""As concerns Komercni Banka, there is no rush as concerns the privatisation but no reason to delay as well,"" he said.
""(Komercni), in our opinion, doesn't need a foreign strategic partner, and there could be small stakes and more investors could be invited to enter into the this bank.""
-- Prague Newsroom, 42-2-2423-0003
",18
"A stronger showing by Prime Minister Vaclav Klaus's rightwing Civic Democratic Party in the first round of Senate elections may give a mild fillip to local financial markets, Czech analysts predicted.
But a thin turnout made it hard for the three-party coalition government, which lost its lower house majority in June, to claim it had recaptured voters' hearts, the analysts said.
""Nobody can jump to conclusions based on these figures, because if you take the total turnout, it's nothing,"" said Radek Maly, economist at Citibank Prague.
""We might see a mild strengthening of the crown, but we don't think any major movement,"" he added.
The currency has traded in a tight range recently at around 26.9 to the dollar and 17.8 to the mark or roughly 2.5 percent above parity with the central bank's mark/dollar basket.
But Maly stressed that the market was focused on macroeconomic fundamentals, not political influences.
Klaus's Civic Democratic Party won 36 percent of the nationwide vote on Saturday.
The centre-left opposition Social Democrats were second with 20 percent. The rest of the vote was thinly split among coalition parties and the Communists. Only 35 percent of the electorate voted.
Of the 81 Senate seats, Civic Democrats won three outright in the first round and 73 of their candidates go into next weekend's runoff as the top vote getter in their district.
The Civic Democrats took less that 30 percent of the vote in June's general elections, costing the coalition its majority in the lower house.
Miroslav Nosal, equities analyst at Prague investment house Patria Finance, said that a premature general election was probably not on the cards, and said the stock market had other concerns than party politics.
""Poor regulation and transparency is already included in the share prices, but from a fundamental point of view many stocks are quite attractive,"" said Nosal,
He said some foreign investors might be tempted to play on Klaus's victory early on Monday, but any gain based on the political situation would be short lived.
",18
"The Czech merchandise trade deficit jumped 16.4 billion crowns in July, the largest monthly increase in the country's history, but forecast tourism revenue and the structure of imports tempered analysts' concerns.
The Czech Statistical Bureau (CSU) said on Monday that the July increase put the seven-month trade deficit at 85.3 billion crowns, after a 14 billion crown shortfall in June drove the half-year deficit to 68.87 billion crowns.
""This shows that the trade gap is still widening, this is the bad news,"" said Radek Maly, economist at Citibank Prague.
""But when you look at the actual composition of the deficit... a large part of this is stemming from the investment needs of Czech industry.""
Imports between January to July grew 15.9 percent over the same seven-month period last year, while exports, hampered especially by lower demand in Germany, were up only 7.2 percent, the CSU said.
""Exports are lagging behind our expected growth rate,"" said Patria Finance economist Martin Kupka. ""But the services balance will help improve the account.""
Machinery and transport equipment accounted for 52.5 billion crowns of the total seven-month deficit, while the balance for consumer goods actually showed an 857 million crown surplus, despite a sharp increase in domestic demand.
Comments by the Czech National Bank Governor Josef Tosovsky on Friday ruling out a devaluation of the crown to boost exports convinced analysts that the central bank was not overly concerned with the overall Czech balance of payments picture.
""There really isn't a strong convincing reason why (the crown) should be devalued at this point of development,"" Kupka said, adding that the country's capital account surplus still should comfortably cover the current account deficit.
The services balance will be especially helped by the expected expansion of income from tourism, as strong first half revenues raised forecasts for total income from tourism in 1996 to $3.2 billion to $3.5 billion after $2.6 billion in 1995.
""The overall balance of invisibles (services including toursim) for this year should be around $1.8 to $1.9 billion, which will decrease the current account deficit,"" Maly said.
Economists are forecasting the 1996 current account deficit at between five to six percent of gross domestic product, compared with about four percent last year.
The overall number of tourist visits in the country was up 9.3 percent in the first half, year-on-year, and airport arrivals were up 48.4 percent.
Czech National Bank balance of payment figures for the first half of the year -- which will give clearer picture of the balance of services -- are expected to be released in the early weeks of September.
The tourism component of the first quarter balance of payments showed a net income of $261 million, on total tourism revenue of $581 million.
The overall current account however, posted a $505 million deficit in the first quarter.
-- Prague Newsroom, 42-2-2423-0003
",18
"Volkswagen AG Czech unit, Skoda Auto a.s., on Friday launched sales of its new sedan, the Octavia, hoping to kill off jokes about Communist-era quality, and pull the company into profit.
Officials said the new model, built on a common VW platform designed for the 1998 Audi A3 and upgraded Golf, would expand Skoda's market penetration by putting the company's first post-Communist mid-sized car in showrooms worldwide.
""Our strategic markets are in central and eastern Europe, western Europe, and we are present in some Asian markets. We expect to sell Octavias successfully in all of our 66 markets,"" marketing director Frank Farsky told Reuters.
The new sedan received a heroe's welcome at showrooms around the capital Prague on Friday as crowds gathered to watch dealers mount the Octavia on viewing pedastals.
Exports of the front-grilled Octavia -- a major step away from the boxy sub-compacts which made the Communist-era Skoda the butt of automotive jokes worldwide --  to Europe and beyond later this year or in the first quarter next year.
The car will be available on the domestic market with a choice of three petrol and two diesel engines, with the top-of-the-line SLX automatic model priced at 497,900 crowns, and a base model priced at 335,700 crowns.
""In the Czech market its more or less toward a luxury- class car by the nature the purchasing power and the nature of the car market itself,"" Farsky said.
""In western europe it is a medium sized car that will belong to the middle class market, and in asian marekts I thinik it will be toward the luxury class,"" he added.
Skoda will make 64,000 Octavias in 1997 at its new purpose-built plant in Mlada Boleslav north of Prague, and raise production to 90,000 in 1998.
Skoda Chairman Ludvik Kalma said earlier this year he expected 20,000 Octavias to be sold annually on the home market, with the rest exported to Europe and points East.
""I think customers who would be looking for a used car would look at a Skoda Octavia, I think that people who own a smaller car would look at Octavia,"" Farsky said.
The company lost 1.621 billion crowns last year due to heavy investments into the new factory, but Kalma said the firm should come close to breaking even this year.
-- Prague Newsroom, 42-2-2423-0003
",18
"The Czech Republic's tenuous coalition government sought on Wednesday to repair the damage caused by the shock departure of Justice Minister Jan Kalvoda, who quit after admitting using a phoney academic title.
A cabinet aide said Prime Minister Vaclav Klaus and key members of the three-party coalition government were waiting for Kalvoda's party to meet later in the day before serious talks on his replacement could begin.
President Vaclav Havel asked Kalvoda, leader of the Civic Democratic Alliance (ODA) a junior coalition partner, to reconsider his decision to quit.
Kalvoda, a deputy premier, resigned his cabinet posts and parliamentary seat on Tuesday in a speech which caught everybody off guard.
He quit after telling parliament that he ""wasn't happy to be the next episode of a soap opera, but the title Juris Doctor does not belong to me.""
He later explained his decision to Havel, who is recuperating in a Prague clinic from lung surgery on a cancerous tumour.
""The president, not being bound constitutionally by any deadline, called on Jan Kalvoda to think about his intended step for several more days,"" said a statement issued by the president's office after the meeting.
It said Klaus gave the president a request for Kalvoda's dismissal, as protokol requires, and added that Havel would consider it further. Kalvoda was not available for comment.
As accusations spilled across the floor of parliament, four other members had previously admitted to using ""Doctor of Law"" falsely in a country where academic titles are more often used than first names.
Leaders of the ODA, which has four ministers in the 16-member cabinet, were to meet later to consider who to nominate in Kalvoda's place, a decision which rests with the party according to an agreement which set up the government.
They were also expected to discuss whether Kalvoda should remain as chairman of the strongly pro-business party, which he helped to set up ahead of general elections in 1992.
Political analysts said Kalvoda's confession was damaging but the government, which lost its parliamentary majority in June elections, could survive entact if the ODA agreed speedily on who should lead it in the cabinet.
Two factions within the ODA, one associated with Industry and Trade Minister Vladimir Dlouhy and the other with minister at large Pavel Bratinka, were likely to fight for control of the party.
""If the ODA does not have a good candidate quickly, the government could do some reshuffling,"" Jiri Pehe, director of research at Prague Open Media Research Institute, told Reuters.
The government's stability could be endangered if the coalition agreement, pounded out in a month of tense negotiations following the June elections, was reopened.
Klaus told reporters on Tuesday that Kalvoda's resignation was disquieting and unsettling and ""a political swerve"" but the government would aim to take it in its stride.
The foreign exchange market, wary of any instability, reacted sharply and the Czech crown was volatile throughout morning trading.
The usually stable currency fell 50 basis points against the Czech National Bank's mark/dollar basket before recovering when the central bank fixed it at 2.32 percent above parity and then returned to Tuesday's levels later in the day.
",18
"The head of the Czech Republic's largest bank is on a crusade to clean up the emerging post-communist banking sector from within and, he hopes, from a seat in the Senate.
Dr Richard Salzmann, the bow-tied president of Komercni Banka, says the Czech banking system is fundamentally sound and getting stronger despite a handful of recent failures among smaller institutions.
But, he says, the whole Czech economy needed a dose of ""fairness and transparency"" to clean up old habits of secrecy and ensure banks are not run as private fiefdoms.
He is standing for a seat in the newly-established Czech Senate at elections in November, saying he wants to help bring back ""good manners"" to the banking industry and restore the reputation of the Czech finance sector.
Better risk management is crucial, according to Salzmann.
He said that Komercni and the three other large banks -- which comprise about 80 percent of all Czech banking activity -- had bolstered their reserves to meet Western banking standards, and had developed more effective risk management techniques.
""As concerns ""The Big Four', (the situation) is, for sure, very good, because all these big four banks in the last years have built up huge reserves,"" Salzmann said during a visit to the PGA Czech Open golf tournament here recently.
""It's true that we have an unusually high proportion of risky loans in our portfolios, which is partially inherited from the past. Other (bad loans) were made in this era of euphoria, after the (1989 revolution ending Communism).""
He said from branches to front office, Komercni has stepped up risk management techniques which have now been also adopted by Ceska Sporitelna,  Ceskoslovenska Obchodni Banka, and Investicni a Postovni Banka -- the others in ""The Big Four"".
""Now we are in the final stage when we are building a central risk assessment department, which supervises all kinds of risks, not only from credit but also from the capital market operations and from the foreign operations.""
FAILURES EXPOSE PROBLEMS
Salzmann said he believed the recent failure of Kreditni Banka a.s., a medium-sized bank which became the eighth to shut in the post-communist era, stemmed, like others before it, from greed and naivete.
""I would blame mostly the founders of the banks, because they provided for themselves various kinds of privileges. They were, in most cases in my opinion, those who did not come with the intention to rob the money and disappear or something like that, I don't say that,"" Salzmann contended.
""But many of them founded the bank with false ideas that (their) bank would be able to provide themselves with easier conditions and lower prices for money for their internal use.""
Salzmann said these bad lending practices spiraled until the banks were forced to raise their rates and tighten lending conditions for regular customers.
""This snowballed from the naivete at the beginning,"" he said.
Kreditni suffered losses reportedly at more than 10 billion Czech crowns ($381.1 million) through a series of large loan defaults and on August 8 the central bank withdrew its banking licence.
The local press has been ripe with allegations of mismanagement and murky loan operations at many of the failed institutions, but criminal investigations have yet to produce any charges.
Officials from Kreditni Banka have refused to comment on reasons for its failure, but its controlling shareholder, the large insurer Ceska Pojistovna, chalked it up simply to bad decisions by bank management on loans and loan guarantees.
Salzmann, 67, said problems in the banking system were part of a bigger problem of honesty and fairness throughout the economy.
He said that if elected, he would push to expand the enforcement power of regulators to police dubious practices in banks, investment funds, and on the capital market, which is consistently hampered by charges of insider trading.
BANKER SEEKS POLITICAL PLATFORM
""My (candidacy), is to bring to this freshly-introduced capitalism more decency...a better field for good business,"" said Salzmann.
The erudite banker, who often recalls the days of thriving Czech capitalism between wars, said he would work in the Senate to establish an independent capital market watchdog like the U.S. Securities and Exchange Commission.
Salzmann resigned as the chairman of the Prague Stock Exchange earlier this year -- a mostly honorary position -- to allow his friend and party colleague Tomas Jezek to take over as a full-time, hands-on leader of the bourse.
Both Jezek and Salzmann will run for the Senate in separate constituencies, and both support starting up a market-supported watchdog beefed up from the currently understaffed and underfunded Finance Ministry regulation department.
But Salzmann, who said he cannot by contract retire from the bank for at least one more year, rejects charges that his membership in the Senate while heading the country's largest banking group would constitute a conflict of interest. There is no legal requirement in the Czech Republic for legislators to suspend their business interests when they enter parliament.
Salzmann insists he would never use his Senate seat to gain advantages for his bank, but he makes no apologies about using his seat to try to improve the banking and business environment overall.
""I will support all such measures to bring more fairness, decency, good manners, transparency, all those principals which are, of course, favourable for the banks. So in that sense I will be perhaps in a conflict of interest,"" Salzmann said.
When asked if that meant he would support laws which would separate the banks and their investment arms, many of which control major chunks of the Czech economy -- like at Komercni Banka -- Salzmann answered:
""Yes, transparency, mandatory transparency."" ($1=26.24 Czech Crown)
",18
"A stronger showing by Prime Minister Vaclav Klaus's centre-right Civic Democratic Party in the first round of Senate elections may give a mild fillip to local financial markets, Czech analysts predicted.
But a thin turnout made it hard for the three-party coalition government, which lost its lower house majority in June, to claim it had recaptured voters' hearts, the analysts said.
""Nobody can jump to conclusions based on these figures, because if you take the total turnout, it's nothing,"" said Radek Maly, economist at Citibank Prague.
""We might see a mild strengthening of the crown, but we don't think any major movement,"" he added.
The currency has traded in a tight range recently at around 26.9 to the dollar and 17.8 to the mark or roughly 2.5 percent above parity with the central bank's mark/dollar basket.
But Maly stressed that the market was focused on macroeconomic fundamentals, not political influences.
Klaus's Civic Democratic Party won 36 percent of the nationwide vote on Saturday.
The centre-left opposition Social Democrats were second with 20 percent. The rest of the vote was thinly split among coalition parties and the Communists. Only 35 percent of the electorate voted.
Of the 81 Senate seats, Civic Democrats won three outright in the first round and 73 of their candidates go into next weekend's runoff as the top vote getter in their district.
The Civic Democrats took less that 30 percent of the vote in June's general elections, costing the coalition its majority in the lower house.
Miroslav Nosal, equities analyst at Prague investment house Patria Finance, said that a premature general election was probably not on the cards, and said the stock market had other concerns than party politics.
""Poor regulation and transparency is already included in the share prices, but from a fundamental point of view many stocks are quite attractive,"" said Nosal,
He said some foreign investors might be tempted to play on Klaus's victory early on Monday, but any gain based on the political situation would be short lived.
-- Prague newsroom  (42 2) 24 23 0003
",18
"Czech President Vaclav Havel has been moved out of intensive care three weeks after surgery to remove a malignant tumour from his lung, but he will have to spend Christmas in hospital, doctors said on Monday.
""Mr. President has ended his stay in the intensive care unit and has been moved to a standard-care room,"" the head of Havel's medical team, Dr. Pavel Pafko, told a news conference.
He said that there were no further complications and the 60-year-old Havel's health was improving, but doctors felt his recuperation would be handled better in hospital.
It was not yet clear how long it would be before Havel could go home.
Havel, who had been fighting complications from the surgery which removed half of his right lung, was taken off a respirator which had been installed through his throat late last week. He has been able to speak occasionally.
His team of doctors have said that the cancer was caught at an early stage, and that there was no sign of the disease spreading to other tissue.
Pneumonia developed in the other lung after the surgery and caused a high fever, but both the pneumonia and the fever have subsided.
Havel, the chain-smoking dissident playwright who helped lead Prague's 1989 bloodless revolution which overthrew communism, entered hospital on November 25, after his office said he had been fighting a case of pneumonia.
Presidential spokesman Ladislav Spacek said Havel would write his traditional New Year's address, but it would be shorter than speeches given in the past.
He said it would be determined next week whether or not Havel himself would give the speech.
Havel's New Year speeches usually take stock of the moral state of Czech society and the development of democracy in the country.
The president, a widower after his wife Olga died of cancer last January, has received get-well wishes from heads of state around the world, and thousands of letter from Czechs.
Spacek has publicly thanked Havel's companion, the Czech actress Dagmar Veskernova, for her support in helping the president through his recovery.
Havel, whose position is more ceremonial than executive, has relinquished none of his constitutional powers.
",18
"Czech analysts on Sunday said the domination of pro-market Prime Minister Vaclav Klaus's party in the weekend's first-round Senate elections would have a neutral to mildly positive effect on local financial markets on Monday.
But they said thin voter turnout made it hard for Klaus and his three-party coalition to conclude that the electorate had swung back to their clear favour after they lost their majority in June lower house elections.
""Nobody can jump to conclusions based on these figures, because if you take the total (voter) turnout, it's nothing,"" said Radek Maly, economist at Citibank Prague.
""We might see a mild strengthening of the crown, but we don't think any major movement,"" he added.
The currency has traded in a tight range recently at around 26.9 to the dollar and 17.8 to the mark or roughly 2.5 percent above parity with the central bank's mark/dollar basket.
But Maly stressed that the market was focused more on macroeconomic fundamentals and not political influences.
Klaus's rightwing ODS on Saturday won 36.47 percent nationwide compared with 20.47 percent for the second place centre-left opposition Social Democrats (CSSD), with the rest thinly split among coalition parties and the Communists.
That after ODS won by just three percentage points at 29.6 percent over CSSD in the June general elections, costing the coalition a 12-seat majority in the lower house.
The ODS won three seats of the total 81 Senate seats outright in the first round of the Senate vote by taking over 50 percent, and put 73 of their candidates in next weekend's runoff election as the top vote getter in their district.
But only 35 percent of a confused and uninspired Czech electorate voted in the poll for the newly-created Senate, after more than 70 percent voted in the June general elections.
Miroslav Nosal, equities analyst at Prague investment house Patria Finance, said that a premature general election was probably not on the cards, and said the stock market had other concerns than party politics.
""Poor regulation and transparency is already included in the share prices, but from a fundamental point of view many stocks are quite attractive,"" said Nosal,
He said some foreign investors might be tempted to play on Klaus's victory early on Monday, but any gain based on the political situation would be short lived.
Unless the runoffs build on ODS's success next weekend with much higher turnout, analysts said it was unlikely that Klaus would move for new lower house polls in an effort to win back the coalition's majority in the more powerful lower house.
""If ODS sees a sweeping victory next week...then they might feel tempted for a possible early election in a year or so, but I think they should be very careful about it,"" said Maly.
Klaus, who as with other ministers is a member of the lower house, late on Saturday was reserved on possible early general elections.
""I've said many times this country does not need another election. It needs to function, work,"" Klaus said in a panel discussion on Czech Television, adding, ""If the Senate vote gives a chance to go forward, it'll be good for all of us.""
",18
"Germany and the Czech republic announced on Monday that a long-awaited declaration on post- World War Two reconciliation would be initialled this week but politicians on both sides withheld final approval of the text.
The two foreign ministries said Czech Foreign Minister Josef Zieleniec and Germany's Klaus Kinkel would sign the document in Prague on Friday, at a ceremony ending two years of talks.
The declaration, expressing regret at both Nazi atrocities during the war and the expulsion of ethnic Germans from former Czechoslovakia afterwards, then has to be signed by the two countries' presidents and confirmed by the two parliaments.
But Germany's Christian Social Union (CSU), political sponsor of the expelled Germans, said its support for the text was not guaranteed.
""I would speak of a conditional 'yes',"" Finance Minister and CSU chairman Theo Waigel told reporters. He said last-minute changes to the text could not be ruled out.
Final approval from the CSU, a partner in the Bonn coalition, would depend on assurances that the Sudeten Germans, as they are known, would be ""involved at an appropriate level"" in a dialogue between Prague and Bonn, he said.
The Bavarian-based CSU has in the past hinted it could use its weight in the government to block the declaration or oppose the Czech Republic's application to join the European Union unless the Sudeten Germans were given better terms.
In the Czech parliament the mainstream parties have backed the declaration, but the extreme-right Republican Party and far-left Communists have ruled out voting for it in any form.
Members of the largest Czech opposition party, the Social Democrats, whose votes may be crucial for approval by parliament, said on Sunday that they still had concerns about vaguely-worded compensation for victims of Nazi aggression.
""(The party) has done all it can for the declaration to be accepted, but it still expects a bit more work (on the text),"" a Social Democrat senator from the once German-annexed district of Upper Moravia, Petr Moravek, told Czech Television.
Stanislav Gross, the head of the Social Democrat caucus in the house, was quoted in the daily Pravo on Monday as saying he would not vote for the declaration in its present form.
The Czech foreign ministry said in a statement that Zieleniec and Kinkel would ""sign a protocol on the completion of negotiations of the Czech-German Declaration of mutual relations and their future development"".
The full declaration, leaked to news media last week, contains mutual expressions of regret for the Nazi occupation from 1938 to 1945 and for excessive brutality during the post-war expulsion of the Sudeten Germans.
The text angered groups representing families of the Sudeten Germans, who complained that it did not compensate those who had lost property during the expulsions.
The declaration sets up a Czech-German Future Fund with the German side paying in 140 million marks ($90 million), and the Czechs paying about one-seventh of that.
The text says the fund is to finance ""projects of common interest"" including joint environmental, historical, and scientific projects, youth meetings, and partnership projects.
But the text adds that: ""The German side acknowledges its obligation of responsibility to all who became victims of National-Socialist violence. That is why the projects, wherever appropriate, should work mainly for the benefit of the victims of National-Socialist violence.""
German Chancellor Helmut Kohl is expected to visit the Czech Republic, probably on January 21 and 22, to sign the text with Czech Prime Minister Vaclav Klaus.
In early February Czech President Vaclav Havel and German President Roman Herzog are expected to address the parliaments of each other's countries in ceremonies giving final approval to the declaration.
",18
"Czech Prime Minister Vaclav Klaus kept his options open on whether the domination of his Civic Democratic Party (ODS) in this weekend's first round of Senate elections might encourage a quest for a larger mandate.
As results for the new upper house came in late on Saturday, Klaus reserved comment on possibly using his party's strength in the Senate races as a signal to seek new elections to the lower house in order to win back a majority government.
Klaus's ODS won 36.47 percent of the total vote on Saturday in the first test since his conservative three-party coalition lost its majority in June lower-house elections when the Social Democrats (CSSD) posted a surprising second place result.
This time the opposition CSSD won just 20.27 percent of the vote after falling about three percentage points short of the ODS's 29.6 percent in June. But voter turnout this time was very light making it difficult to draw broad conclusions.
Klaus, who like all ministers sits in the lower house, hedged his bets on possible early lower house elections.
""I've said many times this country does not need another election. It needs to function, work,"" Klaus said in a panel discussion on Czech Televisoin after the vote.
But he added: ""If the Senate vote gives a chance to go forward, it'll be good for all of us.""
The ODS put 76 candidates through to next weekend's runoff elections out of the 81 constituencies, and won three seats outright by taking more than 50 percent of the vote.
In 73 districts, ODS had the top candidate go into the runoff, while CSSD had 48 candidates in a runoff, but won no seats outright and had nobody on top in any constiuency.
Exactly seven years since the revolution which would end Communism began, only about one in three eligible Czechs voted, less than half the turnout for the previous three lower-house elections since the 1989 revolution.
Analysts said many Czechs felt that the upper house, which will have limited legislative powers and act more as an advisory body, was redundant.
Pre-election opinion polls showed many people did not did not know who was running in their district, and there was a wide misunderstanding of the two-round voting system.
But no one really knows how the dynamics will change in next weekend's runoffs or if turnout will improve.
""The situation is not as rosy as it may appear..."" cautioned ODS party vice-chairman, Foreign Minister Josef Zieleniec even after the strong result for ODS was apparent.
Analysts said that it would be too soon to declare the first round vote an unmitigated success for ODS, as the second round will be much more polarised and the choices between two candidates instead of many will be distinct.
",18
"The Czech crown firmed from the central bank fixing on Thursday, building on gains after a strong showing of the senior coalition party in Senate elections last weekend and prospects for the second round vote.
Analysts said Prime Minister Vaclav Klaus's pro-business Civic Democratic Party (ODS) was expected to take a majority of the 81 seats in the newly-created Senate after runoff elections this weekend should keep the crown firm.
The crown was trading mid-afternoon on Thursday at 26.661 to the dollar and 17.757 to the mark, or 3.05 percent above the Czech National Bank's dollar/mark basket.
""Mostly the expectations are that the ODS will win a majority in the Senate which I think is fairly likely,"" Citibank economist Radek Maly said.
The ODS already won three seats outright last Saturday and has 76 candidates through to the runoff this Friday and Saturday in the 77 constituencies remaining to be contested.
The crown, despite a ballooning trade deficit, has remained above well above parity with the basket, and has this week strengthened from last Friday's level of +2.45 percent.
Maly said he saw the currency staying close to Thursday's levels, and possibly getting a further bump up on Monday.
""I would personally see this level until the vote... Perhaps Monday we will see a similar situation, a quick strengthening, a quick speculative reaction,"" he said.
Petr Korous, a dealer at Ceskovslovenska Obchodni Banka, said that despite voter turnout of only 35 percent in the first round of the elections, the market was still firming on the ODS showing.
""There will be some bias toward a stronger Czech crown,"" he said. ""More or less the basic impulse for that is really because of the elections, and then the subsequent recovery of the capital markets.""
The Senate has limited political power, but the vote would at least confirm that ODS had not suffered a further loss of confidence after the coaltion saw its majority in the more-powerful lower house evaporate in June general elections.
This week the Prague Stock Exchange has shown its first signs of life since the summer. 
Meanwhile fixed income and crown deposit investors are getting more confident that Klaus's tight fiscal and monetary policies will not be threatened.
""Those who want to play the interest rate differential (with foreign currencies) feel quite comfortable right now,"" Korous said.
-- Prague Newsroom, 42-2-2423-0003
",18
"The Czech coalition government on Wednesday looked to recover from the resignation of Justice Minister Jan Kalvoda, a deputy premier who joined four other politicians in admitting they used phoney academic titles.
A cabinet aide said on Wednesday that Prime Minister Vaclav Klaus and key members of the tenous three-party coalition government were waiting for Kalvoda's party to meet later on Wednesday before serious talks on his replacement can begin.
Kalvoda, leader of the Civic Democratic Alliance (ODA) a junior coalition partner, resigned his cabinet and parliament seat on Tuesday, in a speech which caught everybody off guard.
He rose to tell the house that he ""wasn't happy to be the next episode of a soap opera, but the title Juris Doctor does not belong to me"". Then he quit.
Kalvoda joined four more members of parliament who have admitted to using ""Doctor of Law"" falsely, as accusations spilled on to the floor of the chamber in a country where academic titles are more often used than first names.
Leaders of ODA, a party with four seats in the 16-member government, were to meet on Wednesday evening to consider who to nominate in Kalvoda's place, a decision which rests with the party according to the agreement which set up the cabinet.
They are expected to discuss whether Kalvoda will remain as head of the strongly pro-business ODA, which he helped establish ahead of general elections in 1992.
A member of parliament from the coalition partner Christian Democrats, resigned for the same reason on Tuesday.
But two members of Klaus's senior Civic Democratic Party, and a member of the opposition Social Democrats have said they will not step down after similar confessions.
Political analysts said that Kalvoda's confession was damaging, but Klaus's tenous government -- which lost its parliamentary majority in June elections -- can survive in tact if the ODA can agree on who can lead the party in the cabinet.
However, two factions within the ODA -- one associated with Industry and Trade Minister Vladimir Dlouhy, and anothter with minister at large Pavel Bratinka -- are likely to fight for control of the party.
""If they (ODA) does not have a good candidate quickly, the government could do some reshuffling,"" Jiri Pehe, director of research at Prague Open Media Research Institute, told Reuters.
The danger to the government's stability would be if the coalition agreement, pounded out after a month of tense negotiations following the June elections, is reopened.
Klaus told journalists that Kalvoda's resignation was ""a political swerve, it's disquieting and unsettling"" but that the government would aim to take it in stride.
The foreign exchange market, wary of any instability within the tenous centre-right cabinet reacted sharply and the crown was volatile throughout morning trading.
The usually stable currency fell 50 basis points against the Czech National Bank's mark/dollar basket before recovering when the central bank fixed the crown at 2.32 percent above parity with the basket, down from +2.75 percent on Tuesday.
By mid-day it had recovered to +2.50 above the basket.
Kamil Janacek, chief economist at the largest Czech Bank Komercni Banka, said he did not think Kalvoda's resignation would damage the government.
""The stability of the government does not depend on Mr. Kalvoda. What happened has nothing to do with the ministry itself, it's a personal thing for Mr. Kalvoda,"" Janacek said.
Pehe said that more phoney-title confessions might still add to the growing drama in parliament.
""In this society it plays such a role -- whether or not you have (an advanced) degree -- I suspect that there may be a few more deputies or government officials in some positions who are claiming to have degrees which they in fact do not,"" he said.
",18
"The ancient Czech capital has suffered invasions of dictators and demonstrators but nothing and no-one so extraordinary as Michael Jackson and his cohorts.
The controversial and self-styled ""King of Pop"" plays his first concert in two years when the ""HiStory"" world tour starts on Saturday on Prague's Letna Plain, where Communist leaders once reviewed troops and Pope John Paul II held mass.
On Tuesday, Jackson is expected to receive the kind of welcome usually reserved for heads of state when his jet lands at Prague's VIP terminal and he is wisked away in a Rolls Royce.
This tour is Jackson's first since he was cleared of child molestation charges by a U.S. court because of lack of evidence.
Like Britain's Queen Elizabeth in May, he will get a full police escort through the ancient Czech capital, but not even monarchs can compete with the huge fleet of luxury cars readied to carry the star's entourage.
Police have asked Czechs to stay away from the airport, but officials have encouraged well-wishers to come out and wave along the 15 km (10 mile) route into the city.
Jackson's Prague date has avoided the controversy at other stops on his three-month tour through Europe, Africa and Asia.
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.
Jackson's Prague promoter, Serge Grimaux, said the normally reclusive Jackson wanted to arrive several days before the concert to mix with the thousands who throng the bridges and palaces of the Bohemian capital ""like a normal tourist"".
""He has a big interest in meeting people and doesn't want to be too incognito,"" Grimaux told reporters.
For those who don't see enough of Jackson, organisers are planning to erect a 10-metre (33 foot) water-filled statue of the singer on the same rock platform hovering above Prague where a monument to Soviet-leader Josef Stalin once stood.
Never before has the sprawling parade ground adjacent to Prague Castle prepared for a spectacle like the one planned for the expected 130,000 paying guests on Saturday.
Huge walls for two security perimeters -- to keep out those not paying the $21 for a ticket -- are being built on the Letna grounds which usually host ball fields, car parks, and a major east-west thoroughfare.
""I'm not building Alcatraz, I'm just building a perimeter for the people that have paid for their tickets to get what they deserve,"" Grimaux said.
",18
"In May 1945, seven-year-old Madlenka Korbelova sat glued to a radio in London, listening with her exiled Czech diplomat father to news of the U.S. army's liberation of the western part of her native land.
They cheered when General George Patton's army forced Nazi soldiers out of the famous brewery town of Pilsen.
They cursed when the general was forced to hold back his troops and let the Red Army take Prague according to the deal struck with the Soviets at Yalta many months before.
""I remember the broadcasts as the Nazis were pushed back across Czechoslovakia, and I remember my parents cheering and wishing they had gone further,"" she told hundreds American and Czech veterans in Pilsen a half century later.
Weaned in London bomb shelters and reared on the Cold War, the diplomat's daughter, now known as Madeleine Albright, is in line to be the first woman to serve as U.S. Secretary of State.
On Thursday, the ruddy-faced girl, who returned to Prague after Nazi occupation only to leave her homeland again after a Communist coup, was chosen by President Bill Clinton to be the highest-ranking woman ever in the U.S. government.
Senate confirmation of her appointment is still required.
By the accounts of friends and diplomats who know her, Albright's life has consistently shown the influences of her father and her post-war childhood.
""Her relations to this country is deep,"" Czech ambassador to Washington Michael Zantovsky told Reuters. ""Her's is still the Czech of a native. This country has a big friend in her.""
Her father, Josef Korbel, a close aide to Czechoslovak Foreign Minister Jan Masaryk during the World War Two government-in-exile in London, served as post-War ambassador to Belgrade and later a delegate to the new United Nations.
During that period, family photos show his young daughter Marie -- Madlenka in the Czech dimunitive -- dressed in frilly traditional Czech costume to greet visiting dignitaries.
After the post-War government was deposed by communists in 1948, Korbel sent a cable from Belgrade saying he was leaving with his family on vacation. The last entry from his Foreign Ministry file showed Korbel being ""sent for holidays"".
Korbel received asylum with his family of five in America, and settled in Colorado. Madlenka started a new life at age 11.
The father became a professor of European history and politics and eventually a dean at the University of Denver, and earned worldwide respect as an expert on 20th century Central and Eastern Europe. He died in 1977, aged 69.
Albright became fully ""Americanised"" attending a Denver high school and then Wellesley College in Massachusets, but she kept Prague close to her heart -- in her academic studies and later in her career as a diplomat.
After earning a doctorate in political studies at Columbia University, Albright -- who married newspaper heir Joseph Albright and later divorced -- made the Communist takeover of her homeland a frequent focus of her lectures and papers.
As a tough-nosed diplomat she repeatedly has spoken of the effects of Europe's appeasement of Adolph Hitler in 1938's Munich agreement which led to Germany's occupation of Czechoslovakia in 1939, causing her family to flee to London.
After Prague's 1989 fall of communism, the leader of the bloodless ""Velvet Revloution"", the playwright-turned-president Vaclav Havel asked her to advise his new democratic government.
On her first official visit to Prague as U.S. ambassador to the U.N. in 1994, she walked into the palacial Foreign Ministry and memories came flooding back.
""I came here in 1945 when I was eight-years-old. This is an emotional and sentimental moment for me,"" Albright said while gazing at the palace ceiling.
She has acted as Bill and Hillary Clinton's tour guide in her home town -- once joining Havel to hear the American president play saxaphone in a smoky jazz concert in a Prague club during a 1995 state visit.
Prague sees her as a strong advocate of Czech membership in NATO and the alliance's expansion to former Soviet satellites.
Havel, recently speaking on the prosepcts of Albright becoming Secretary of State said what ""matters, is the fact that she is a lady with a good knowledge of the European situation, Central European situation.""
""She is, thanks to her origins, more sensitive to the issues which concern us,"" Havel said.
Clinton has called for the first wave of NATO expansion by the year 2000, and diplomats widely believe that the Czechs are at the top of the list along with Poland and Hungary.
""I think that the problems of this area are well understood in the heart of the American government,"" Albright said during of one her visits to Prague as U.N ambassador.
",18
"Czech Justice Minister Jan Kalvoda, a deputy premier and leader of a junior partner in the ruling coalition, quit the government and parliament on Tuesday for falsely using an academic title, the CTK news agency said.
Another member of parliament from a coalition party also quit parliament for the same reason, while three other deputies admitted using false titles but did not step down.
Kalvoda, aged 43, resigned for falsely claiming he was a Doctor of Law amid a growing row over the academic credentials of Czech politicians after deputies began questioning whether they were all genuine.
""Yes, (Kalvoda resigned) and he delivered his resignation to the president,"" Mariana Cerna of the parliament's press office told Reuters.
Officials of Kalvoda's party, the Civic Democratic Alliance (ODA), were not immediately available for comment, and it was not yet clear who would take Kalvoda's place in the cabinet or what his status would be within his party.
He told the house however that there would be no changes in the party, CTK reported.
ODA's press department said it would not comment until a meeting of party leaders on Wednesday.
Kalvoda, who headed the most pro-business party in the coalition, often bumped heads with Prime Minister Vaclav Klaus on issues such as speeding up the deregulation of heating prices and rents and lowering taxes.
Earlier on Tuesday, Pavla Jurkova, a member of another coalition party, the Christian Democrats (KDU-CSL), resigned her seat in the 200-seat lower house -- where the centre-right coalition has 99 seats -- for falsely claiming a law doctorate.
Meanwhile two members of Vaclav Klaus's senior party in the three-member coalition, the Civic Democratic Party (ODS), also admitted today that their law doctorates, used in campaign material earlier this year, were false, CTK said.
However Anna Roeschova and Ondrej Zemina had not resigned their seats, CTK reported.
Also staying put in parliament was a member of the opposition Social Democrats, Marie Noveska, after admitting she had not finished university but still used the title doctor of law.
",18
"Germany and the Czech Republic on Friday concluded nearly two years of sensitive talks on a joint declaration aimed at finally healing the wounds of World War Two and the communist era that followed.
German Foreign Minister Klaus Kinkel and his Czech counterpart Josef Zieleniec signed a protocol which sends forward a text expressing regret for injustices on both sides, and setting up a fund for joint projects.
The declaration expresses Bonn's sorrow for the 1938-45 Nazi occupation of the Czech lands and Prague's regret for Czech brutality in the post-war expulsion of ethnic Germans.
It marks Germany's final reconciliation with neighbours who fell under Nazi occupation.
""We Germans regret the suffering and injustice caused to the Czech people by National-Socialist (Nazi) crimes, and we are recognising our responsibility,"" Kinkel told diplomats and journalists after signing the protocol.
The text was approved by both governments earlier this week, and is to be signed by prime ministers in January, but politicians on both sides of the border are calling for changes before parliaments and presidents give it their final approval.
Both Kinkel and Zielenec insisted the text would not be reopened for negotiation.
Czech opponents of the text claim it fails to pay direct compensation to victims of Nazi agression, while German groups are furious that it avoids paying restitution for Prague's expropriation of property of the so-called Sudeten Germans.
The declaration sets up a Czech-German Future Fund with the German side paying in 140 million marks ($90 million), and the Czechs paying about one-seventh of that.
The text says the fund is to finance ""projects of common interest"" including joint environmental, historical, and scientific ones, adding that ""the projects, wherever appropriate, should work mainly for the benefit of victims of (Nazi) violence.""
""The declaration which we have agreed on means simply a clarification of understanding,"" Zieleniec said.
""This declaration is not a full stop after history. It only closes one sentence and one paragraph. It also is a semi-colon and starts a discussion on the topic of joint projects focused on the future,"" he added.
The main political critic in Germany is the Bavarian-based Christian Social Union (CSU) which acts as mentor to the Sudeten Germans, survivors and relatives of the 2.5 million ethnic Germans who were collectively blamed for the Nazi occupation and summarily driven out.
Leaders of Bavaria, where most Sudetens settled, had demanded changes in the text, but the Czech government has insisted it will negotiate only with Bonn.
Chancellor Helmut Kohl is due to sign the declaration with Czech Prime Minister Vaclav Klaus in January and the presidents of the two countries will then address each other's parliaments to seal the matter.
A major German daily newspaper, the Frankfurter Allgemeine Zeitung, on Friday called the declaration a political sham.
""Perhaps one day there will be a German-Czech declaration which in its honesty and sincerity does provide a historic sign of reconciliation,"" the daily said in a commentary.
""The great majority of the Czech nation, above all the great majority of politicians, is convinced that the Czechoslovak state was not only politically clever but also morally and legally in the right when it got rid of the German minority."" ($1=1.5570 Mark)
",18
"The Czech engineering company CKD Holding a.s. said on Thursday that it had won two contracts totalling roughly $200 million to supply trams to the city of Manila in the Philipines.
The order by Manila's MRTC for trams to be used in its massive new mass transit project -- and to be produced at the CKD Tatra plant in Prague -- is welcome news to Czech industry which has been reeling from a rapidly expanding trade deficit.
""The object of the contracts is the supply of large-capacity trams to Manila,"" CKD spokesman Vaclav Brom told Reuters adding the order was for more than 70 large tram units.
The Czech Foreign Ministry said in a statement issued concurrently that the CKD contract was part of a ""package of contracts"" with Japan's Sumitomo Corp and Mitsubishi Heavy Industries as general suppliers for the project.
CKD said one contract was for the supply of trams totalling $104 million, the assembly of which would begin in the second half of 1997 with supply scheduled for sometime in 1998.
The second contract was a joint 10-year contract in which CKD would be responsible for maintenance and technical assistance for the trams along with training of the drivers, while Sumitomo would maintain the tracks and the depots.
The maintenance contract is worth $95 million to the Czech side alone, CKD said.
The Czech foreign ministry said the contracts were signed last week with the owner of the Manila project, MRTC.
""(The contracts' signing), in cooperation with the Japanese partners, open for Czech suppliers of tram units the possibility to penetrate into other Asia markets as well,"" the Czech foreign ministry said in a statement.
It said that Indonesia and the Peoples' Republic of China, were strong prospects for CKD trams, ""especially since Mitsubishi does not produce trams, and with success in Manila, is prepared to coooperate with CKD.""
The Czech merchandise trade deficit grew to a record eight-month total of 100 billion (corrects from million) crowns from January to August, the same as for the whole of 1996.
Many analysts see the Czech electric rail industry, which supplied trams for decades to the countries of the former Soviet Bloc, as a potential area where the country can narrow its yawning trade gap.
",18
"The Czech crown firmed on Thursday to its highest level against its mark/dollar basket, buoyed by Prime Minister Vaclav Klaus' comments that devaluation was not needed despite a widening trade gap.
By mid-morning the crown moved to around 4.3 percent above its daily parity rate set by the Czech National Bank (CNB) against the dollar/mark basket from a four percent level in the morning.
The crown stood at 26.005 to the dollar and 17.600 to the mark at 1130 GMT.
The CNB followed the market up, fixing the crown 4.24 percent above parity with the basket after +3.9 percent on Wednesday.
Dealers said the crown could challenge 4.5 percent against parity before levelling off to end the week.
""Probably we will attack 4.5 percent (over parity),"" Tomas Becvar, dealer at Prague's Komercni Banka, told Reuters.
Although the Czech trade balance earlier this week showed a record monthly deficit in July of 16.4 billion crowns, the market was encouraged by Klaus's comments.
""The first (reason for the crown's rise) is Klaus's comments in Austria,"" Becvar said. ""Another reason of course is the following of the market by the central bank at the fixing.""
At an economic conference in Austria, Klaus backed the CNB's Governor Josef Tosovsky view that a stronger crown would be better for the economy in the long-term.
""We think that a devaluation is not necessary and that it wouldn't be useful,"" Klaus told Reuters.
While some economists have recommended devaluing the crown to help the trade situation, many said it is not fundamentally necessary as capital inflows remain strong and the balance of services, especially toursim, softens the current account gap.
The Czech currency last dipped below the parity rate against the basket in mid-June, soon after elections stripped Klaus's conservative coalition of its majority in parliament and strenghthend the hand of the opposition Social Democrats.
But since then, the Czech currency has been on a steady march up, first hovering around three percent against the basket, then surging after Tosovsky's comments last Friday.
Klaus was finally able to form a minority government of his centre-right coalition while the centre-left Social Democrats have been concilliatory on economic issues, including a 9.3 billion crown cut in spending to balance this year's budget.
Dealers said positive preliminary results on Thursday for July's industrial production, showing a moderate recovery from disappointing June figures, also helped the crown.
",18
"In May 1945, seven-year-old Madlenka Korbelova sat glued to a radio in London, listening with her exiled Czech diplomat father to news of the U.S. army's liberation of the western part of her native land.
They cheered when General George Patton's army forced Nazi soldiers out of the brewery town of Pilsen.
They cursed when Patton was forced to hold back his troops and let the Red Army take Prague according to the deal struck with the Soviet Union at Yalta months before.
""I remember the broadcasts as the Nazis were pushed back across Czechoslovakia, and I remember my parents cheering and wishing they had gone further,"" Madlenka, now known as Madeleine Albright, told hundreds of American and Czech veterans in Pilsen a half century later.
Weaned in London bomb shelters and reared on the Cold War, Albright has been nominated U.S. secretary of state -- the first woman to fill the post.
Albright, who returned to Prague after the Nazi occupation only to leave again after a Communist coup, was chosen by President Bill Clinton on Thursday to be the highest-ranking woman ever in the U.S. government.
Friends and diplomats who know her say Albright's life has consistently shown the influences of her father and her post-war childhood.
Her father, Josef Korbel, a close aide to Czechoslovak Foreign Minister Jan Masaryk in the World War Two government-in-exile in London, served as post-war ambassador to Belgrade and later a delegate to the United Nations.
During that period, family photos show his young daughter Marie -- Madlenka in the Czech dimunitive -- dressed in frilly traditional Czech costume to greet visiting dignitaries.
After the post-war government was deposed by communists in 1948, Korbel sent a cable from Belgrade saying he was leaving with his family on vacation.
Korbel received asylum with his family of five in America, and settled in Colorado. Madlenka started a new life at age 11.
Her father became a professor of European history and politics and eventually a dean at the University of Denver, and earned worldwide respect as an expert on 20th century Central and Eastern Europe. He died in 1977, aged 69.
Albright attended a Denver high school and then Wellesley College in Massachussetts. She earned a doctorate in political studies at Columbia University.
Albright, who married and was later divorced from newspaper heir Joseph Albright, made the Communist takeover of her homeland a frequent focus of lectures and papers.
She became a tough-talking diplomat and liked to speak of the effects of Europe's appeasement of Hitler in the 1938 Munich agreement which led to Germany's occupation of Czechoslovakia.
After the collapse of communism in Prague in 1989, playwright-turned-president Vaclav Havel asked her to advise his new democratic government.
On her first official visit to Prague as U.S. ambassador to the U.N. in 1994, she walked into the palacial Foreign Ministry and said: ""I came here in 1945 when I was eight years old. This is an emotional and sentimental moment for me.""
She has acted as Bill and Hillary Clinton's tour guide in her home town -- once joining Havel to hear the U.S. president play the saxophone in a jazz concert in a Prague club during a 1995 state visit.
Prague sees her as a strong advocate of Czech membership in NATO and the alliance's expansion to former Soviet satellites.
Havel, speaking recently on the prospects of Albright becoming Secretary of State, said: ""She is, thanks to her origins, more sensitive to the issues which concern us.""
",18
"The Czech government's tourism office on Wednesday forecast record income from foreign visits in 1996, as ""Golden Prague"" and its environs put a silver lining in otherwise dreary Czech trade figures.
Income from foreign visitors, crucial in stemming the Czech current account deficit, could surge to top $3.5 billion this year, up from a record $2.87 billion in 1995, director Jiri Cech of the Economics Ministry's tourism division told Reuters.
He said 1996 record revenue from tourism in the Czech Republic, which has yet to see any slowing in the flood of tourists which burst in after the end of Communism in 1989, would range ""from $3.2 to $3.5 billion or more"".
The Czech National Bank balance of payment figures for the first half of the year -- which will give clearer picture of the balance of services -- are expected to be released in the first half of September.
The tourism component of the first quarter balance of payments showed a net inflow of $261 million with total tourism receipts of $581 million, and analysts have forecast first half total tourism revenues at about $1.6 billion.
The overall current account however posted a $505 million deficit in the first quarter, mostly due to a ballooning merchandise trade deficit.
The trade deficit in goods has accelerated in recent months, and a record gap in July of 16.4 billion crowns ($627 million) raised the seven-month 1996 deficit to 85.3 billion crowns ($3.26 billion).
Economists are forecasting the 1996 current account deficit at between five to six percent of gross domestic product, compared with about four percent last year.
But just in the first half of the year, record tourist visits to the country, and especially to the historical centre of the capital Prague where tourists often outnumber residents in the high season, topped most expectations.
The overall number of tourist visits in the country was up 11.6 percent in the first half, year-on-year, to 44.7 million and airport arrivals were up 48.4 percent to 7.3 million, according to the Czech Statistical Bureau.
Czech foreign travel abroad rose 10.2 percent in the first half of the year to 4.3 million visits abroad for a country of 10.4 million residents. Czechs spent $320 million abroad in the first quarter.
Independent analysts are forecasting a surplus in the Czech balance of services, including tourism of $1.8 to $2.0 billion this year. ($1=26.17 Czech Crowns)
-- Prague Newsroom, 42-2-2423-0003
",18
"A senior U.S. Defence Department official on Tuesday dismissed Czech army detections of chemical agents released in the early days of the Gulf War, saying the incidents were not verifiable by American equipment.
Amid growing criticism that the Pentagon fumbled reports of U.S. troops' exposure to nerve gas agents in 1991, U.S. Assistant Secretary of Defence Theodore Prociv said the Pentagon still viewed the Czech findings as false alarms.
""What we agree to is what we can verify,"" Prociv, who is in charge of the Pentagon division on chemical weapons use, told reporters during a visit to the Czech Defense Ministry.
""Every now and then (during the Gulf War) we would get an alarm and we couldn't verify it. So our position is that without the verification, it's not a true detection.""
Thousands of troops based in northern Saudi Arabia during the Gulf War -- mostly Americans and Britons -- have reported respiratory ailments, skin rashes and muscle pain which they believe resulted from exposure to low-level chemical agents released during several U.S. bombings of Iraqi weapons caches.
The conditions, which have been dubbed the ""Gulf War Syndrome"", have been linked by veterans groups to several detections of chemical fallout from the bombings, including several detections by the Czech unit.
On Saturday, the New York Times newspaper quoted Czech soldiers and combat logs as saying that U.S. commanders ignored the warnings of chemical detections made by the Czech unit in January 1991 at the beginning of the war.
Prociv, specifically speaking about the Czech detections, said U.S. equipment could not verify these warnings. He did not discuss other incidents.
""We have looked at the Czech equipment as excellent, our verification system is excellent. The Czech detections were part of problem we were experiencing with some of the other detections,"" said Prociv, whose visit was officially to discuss U.S.-Czech cooperation to develop better chemical detection.
The Gulf issue exploded recently when Pentagon officials admitted that more than 15,000 American troops may have been exposed to nerve gas when American combat engineers blew up an Iraqi munition depot in March 1991.
In a heated hearing of the Senate Intelligence and Veterans Affiars committee in late September, several senior senators blasted the Pentagon for dragging its heels on the issue.
Alabama Senator Richard Shelby accused the Pentagon of ""a shameful campaign of obstruction"" in answering veterans claims, adding: ""I found that Czech chemical units...accurately reported"" the presence of chemical agents at various locations.
But the Pentagon's recent admission focused on the destruction of a chemical munitions cache near the southern Iraqi town of Kamisiyah in March 1991, a few days after the end of the war, not the Czech detections.
The Pentagon on Tuesday in Washington announced that it was notifying about 20,000 U.S. Gulf War troops that they may have been exposed to chemical weapons in the Marhc 1991 incident.
The Czech army experts serving in the allied forces against Iraq detected category ""G"" agents such as Sarin on January 19, 1991 in a 30 square km (19 sq mile) area near the town of Khafr al-Batn, in northern Saudi Arabia near the border with Iraq.
The Czech unit said it also detected incidents of a type of mustard gas between January 20 and 24, in an area 10 km (six miles) from the King Khaled military city which housed thousands of Saudi soldiers.
",18
"The head of the Czech Republic's largest bank is on a crusade to clean up the emerging post-communist banking sector from within and, he hopes, from a seat in the Senate.
Dr Richard Salzmann, the bow-tied president of Komercni Banka, says the Czech banking system is fundamentally sound and getting stronger despite a handful of recent failures among smaller institutions.
But, he says, the whole Czech economy needed a dose of ""fairness and transparency"" to clean up old habits of secrecy and ensure banks are not run as private fiefdoms.
He is standing for a seat in the newly-established Czech Senate at elections in November, saying he wants to help bring back ""good manners"" to the banking industry and restore the reputation of the Czech finance sector.
Better risk management is crucial, according to Salzmann.
He said that Komercni and the three other large banks -- which comprise about 80 percent of all Czech banking activity -- had bolstered their reserves to meet Western banking standards, and had developed more effective risk management techniques.
""As concerns 'The Big Four', (the situation) is, for sure, very good, because all these big four banks in the last years have built up huge reserves,"" Salzmann said during a visit to the PGA Czech Open golf tournament here recently.
""It's true that we have an unusually high proportion of risky loans in our portfolios, which is partially inherited from the past. Other (bad loans) were made in this era of euphoria, after the (1989 revolution ending Communism).""
He said from branches to front office, Komercni has stepped up risk management techniques which have now been also adopted by Ceska Sporitelna, Ceskoslovenska Obchodni Banka, and Investicni a Postovni Banka -- the others in ""The Big Four"".
""Now we are in the final stage when we are building a central risk assessment department, which supervises all kinds of risks, not only from credit but also from the capital market operations and from the foreign operations.""
FAILURES EXPOSE PROBLEMS
Salzmann said he believed the recent failure of Kreditni Banka a.s., a medium-sized bank which became the eighth to shut in the post-communist era, stemmed, like others before it, from greed and naivete.
""I would blame mostly the founders of the banks, because they provided for themselves various kinds of privileges. They were, in most cases in my opinion, those who did not come with the intention to rob the money and disappear or something like that, I don't say that,"" Salzmann contended.
""But many of them founded the bank with false ideas that (their) bank would be able to provide themselves with easier conditions and lower prices for money for their internal use.""
Salzmann said these bad lending practices spiraled until the banks were forced to raise their rates and tighten lending conditions for regular customers.
""This snowballed from the naivete at the beginning,"" he said.
Kreditni suffered losses reportedly at more than 10 billion Czech crowns ($381.1 million) through a series of large loan defaults and on August 8 the central bank withdrew its banking licence.
The local press has been ripe with allegations of mismanagement and murky loan operations at many of the failed institutions, but criminal investigations have yet to produce any charges.
Officials from Kreditni Banka have refused to comment on reasons for its failure, but its controlling shareholder, the large insurer Ceska Pojistovna, chalked it up simply to bad decisions by bank management on loans and loan guarantees.
Salzmann, 67, said problems in the banking system were part of a bigger problem of honesty and fairness throughout the economy.
He said that if elected, he would push to expand the enforcement power of regulators to police dubious practices in banks, investment funds, and on the capital market, which is consistently hampered by charges of insider trading.
BANKER SEEKS POLITICAL PLATFORM
""My (candidacy), is to bring to this freshly-introduced capitalism more decency...a better field for good business,"" said Salzmann.
The erudite banker, who often recalls the days of thriving Czech capitalism between wars, said he would work in the Senate to establish an independent capital market watchdog like the U.S. Securities and Exchange Commission.
Salzmann resigned as the chairman of the Prague Stock Exchange earlier this year -- a mostly honorary position -- to allow his friend and party colleague Tomas Jezek to take over as a full-time, hands-on leader of the bourse.
Both Jezek and Salzmann will run for the Senate in separate constituencies, and both support starting up a market-supported watchdog beefed up from the currently understaffed and underfunded Finance Ministry regulation department.
But Salzmann, who said he cannot by contract retire from the bank for at least one more year, rejects charges that his membership in the Senate while heading the country's largest banking group would constitute a conflict of interest. There is no legal requirement in the Czech Republic for legislators to suspend their business interests when they enter parliament.
Salzmann insists he would never use his Senate seat to gain advantages for his bank, but he makes no apologies about using his seat to try to improve the banking and business environment overall.
""I will support all such measures to bring more fairness, decency, good manners, transparency, all those principals which are, of course, favourable for the banks. So in that sense I will be perhaps in a conflict of interest,"" Salzmann said.
When asked if that meant he would support laws which would separate the banks and their investment arms, many of which control major chunks of the Czech economy -- like at Komercni Banka -- Salzmann answered:
""Yes, transparency, mandatory transparency.""
($1=26.24 Czech Crown)
",18
"As Czech leaders finally get around to discuss a worrying surge in the trade deficit, analysts suggest a mixed bag of macro and micro-economic fixes, but most say devaluing the crown should be avoided.
Some say the deficit is a necessary product of economic reform and will turn around next year, while the gap between growth in imports, up a nominal 15.2 percent in January-August year-on-year, and exports, up 6.4 percent, will close.
Prime Minister Vaclav Klaus, who for months said there was nothing to worry about as the deficit soared, finally bowed to pressure and called a meeting for Tuesday to confront the gap.
But the meeting was abruptly postponed on Monday with cabinet officials citing the rising pressure of October's parliament session as a reason. A new date for the meeting has yet to be set, but officials say it will be ""soon"".
The trade deficit grew to a record 100 billion crowns ($3.68 billion) from January-August, the same as for the whole of 1995, and the markets are anxiously awaiting to see what, if anything, might be done.
Forecasts say that the current account deficit will also grow to around six percent of gross domestic product in 1996 from four percent last year.
When Klaus and three cabinet members, plus central bank Governor Josef Tosovsky and Czech Statistical Bureau chairman Edvard Outrata, finally discuss possible fixes for the rapidly expanding gap, they will have heard plenty of advice.
Many analysts say capital inflows can finance the deficit in the short term and urge moves, other than devaluation, that would gradually improve the competitiveness of Czech exporters.
Others suggest measures that could bring immediate relief, including import charges and fiscal adjustment.
GOVERNMENT SHOULD AIM FOR BUDGET SURPLUS NEXT YEAR
""The reaction should come immediately, before the deficit becomes unmanageable,"" said Vladimir Kreidl, economist at Prague's Patria Finance.
Klaus's government should not only pass its fifth straight balanced budget, but fight for a 1997 surplus of one or two percent of GDP. Other fiscal restrictions could be imposed to help cut domestic demand for imports, he said.
""Fiscal restriction is the most effective tool for reducing the deficit,"" Kreidl said, adding that the government should back private savings and a fully-funded pension system.
STRUCTURAL REFORMS NEEDED TO BOOST COMPETITIVENESS
Kreidl said more attention was needed to improve the capital markets which would strengthen currency inflow. Speeding up privatisation by sell-offs to strategic foreign investors would also boost competitiveness, he said.
""Czech exporters must become more cost competitive,"" said Jiri Huebner, Czech and Slovak team director for the European Bank for Reconstruction and Development (EBRD).
""There is a need for substantial investments in new plant and technology...to improve productivity.""
The government has contended that many of the imports which are fuelling the deficit are modernising Czech industry, which should eventually produce higher export output, but Huebner said more targeted policies were necessary.
He advocated an acceleration of depreciation on new capital expenditures and relaxing tax write-offs of bad debts to spark The government must separate investment funds from bank management to ensure shareholders' interests are a priority, not the credit activity of the parent bank, he said. ""The government should prohibit bankers from the credits side of the business (from sitting) on company boards,"" he said.
IMPORT CURBS MAY HELP AS WESTERN ECONOMIES STAGNATE
Josef Poeschl, Czech specialist at the Vienna Institute for Comparative Economic Studies (WIIW) said that the immediate problem was the poor economic performance of West European economies.
""It is an economic law that if a stagnating economy is trading with a growing one, the latter will be faced with a deterioration of the trade balance,"" he said.
Poeschl suggested imposing temporary import surcharges and higher taxation on some commodities which are mostly imported.
""But if the Czech deficit does not shrink, a devaluation (of the Czech crown) will remain the only way out.""
WORRIES ARE EXAGGERATED, EXPORTS WILL GROW NEXT YEAR
Some economists said the government should not panic.
""The increase of the trade deficit will stop in 1997 at 150 to 160 billion crowns,"" said Kamil Janacek, chief economist at Prague's Komercni Banka.
In 1997, the first effects of an investment wave will be felt, boosted by reviving demand on EU markets, especially the acceleration of economic growth in Germany, he said.
The Czechs will also benefit from a partial re-orientation of exporters toward neighbouring post-communist countries and the former Soviet Union.
Janacek said there will be a market-based weakening of the crown, from currently above parity with the central bank mark/dollar basket to below parity in the first half of 1997.
""This will help to accelerate exports, and to slow down imports,"" he said.
DEVALUATION WOULD DO MORE HARM THAN GOOD
""We think the country's trade deficit will likely stabilise in 1997...so, as you can guess, we have plenty to say about what the government shouldn't do,"" said Boris Gomez, analyst at ING Barings in Prague.
He pointed to a positive, yet gradual shift of exports from commodities to sophisticated finished goods, and development of eastern export markets with higher economic growth potential.
A crown devaluation ""is not a painless cure and would do more damage than good to the small and open Czech economy that is heavily dependent on imports at this stage"".
It would ""generate a wage-price spiral"" and hurt credibility, Gomez said. Import surcharges would also sap the economy of needed modernisation.
Gomez concludes that the government must remain committed to faster corporate restructuring, increased labour productivity growth and competitiveness, lower inflation, and continued fiscal discipline. ($1=27.18 Czech Crown)
",18
"Volkswagen AG's Czech unit Skoda Automobilova a.s. launched its first up-market post-Communist model on Sunday, the ""Octavia"" sedan, with a street party in Prague's Old Town Square.
The new model, built on a common VW platform designed for the 1998 Audi A3 and upgraded Golf, burst through a wall onto a stage in the centre of Prague's old marketplace where thousands of Czechs and foreign tourists had gathered.
The Octavia will get its international test at the Paris International Auto Show in October and should be delivered to Czech dealers in November, followed by launches on European and other foreign markets, company officials said.
Skoda is hoping to build on the success of its Felicia economy five-door hatchback by offering an affordable middle-range sedan and take back chunks of its home market lost to Czechs seeking a more western-looking status symbol.
The front-grilled new Skoda is 4.51 metres long, 1.73 metres wide, and stands 1.43 metres high.
Continuing the break from the boxy Communist-era Skodas, the Octavia has more modern but conservative lines, somewhere between a Ford Mondeo and Audi's A-line.
As with the Felicia, Skoda's larger offering will try to find its niche at the low end of the price scale in its class.
The Czech daily Mlada Fronta Dnes quoted Skoda's general director Ludvik Kalma as saying that suggestions of a 350,000 Czech crowns ($13,460) price tag for the basic model of the Octavia on its home market -- with a 1.6 litre engine and two airbags -- would be ""too expensive"".
Skoda plans to produce some 5,000 Octavias before the end of this year, and between 70,000 and 80,000 in 1997 at its purpose-built modern plant at Mlada Boleslav, north of Prague.
After VW took 70 percent of Skoda under the Czech government's 1992 privatisation plan, it introduced the Felicia in late 1994 which has sold well and put to rest jokes about the former communist brand's poor quality.
Skoda plans to make a total of 251,000 cars -- including the Octavia -- this year after 208,279 Felicias in 1995.
The company lost 1.621 billion crown last year due to heavy investments into the new factory, but company officials have said the firm should come close to breaking even this year.
",18
"Czech President Vaclav Havel, the only man who can smoke next to militant Hollywood anti-smoker Barbra Streisand, is facing a life without his beloved cigarettes after surgery revealed a cancerous lung.
Havel's heavy smoking is a fixture of his Bohemian intellectual image, but it is widely believed that it caused the malignant tumour which was radically removed on Monday.
It certainly startled some Czechs who awoke on Tuesday to a huge headline in the tabloid Blesk which simply bleated ""CANCER"" next to an archive picture of a happily-smoking Havel.
But just as Boris Yeltsin's multiple by-pass heart surgery will hardly dry up a Muscovite's taste for vodka, which many blamed for the Russian president's ills, Havel's surgery probably will not cause chain-smoking Czechs to kick the habit.
""Ooh, I should quit,"" said Hana Haskova, a 19-year-old student reacting to news of Havel's cancer. ""Well, I probably won't, but I'll be forced to think about it when I smoke.""
Doctors said the surgery, which cost the 60-year-old Havel half of his right lung, gave him good prospects for a full recovery, and he might return to work soon after the new year.
But his spokesman said that Havel, a multiple-pack-a-day man, will probably be limited to being a ""holiday smoker lighting up once a week with afternoon coffee.""
The world sees Havel like this -- the mustached but impish Bohemian philospher-playwright crumpled in a sweater, cigarette smoke pouring from his fingers as he mulls life's problems.
His dissident musings from a prison cell won the respect of the western world and helped spark Prague's non-violent 1989 ""Velvet Revolution"" over communism.
""Vaclav Havel is the only person who can smoke in my presence,"" said Barbra Streisand, one of America's prominent anti-smokers, at a Washington picnic last year in honour of the visiting Czech President.
The unlikely rise from prison to Prague Castle made Havel one of the most famous unabashed public smokers.
But news of Havel's cancer confirmed what many here feared when he entered hospital last week with an alleged case of pnuemonia -- his ubiquitous smoking caught up with him.
Czech surgeon Dr. Pavel Pafko said after performing the operation that it would be difficult to pinpoint smoking as the primary cause of Havel's cancer.
""The composition of this tumour is problematic in relation to smoking. You can't definitely tell,"" Pafko told reporters.
But to many Czechs, the cause was clear:
""It has to be the smoking,"" was the oft-repeated phrase of workers in central Prague, many of them smokers.
""Stopping now won't help anyway. I was smoking before you were born,"" said Karel, 43, a maintenence man puffing away over beer in one of the hundreds of Prague's smoke-blanketed pubs.
Dr. Pavko said Havel smoked one last pre-surgery cigarette with Jan Strasky, a chain smoker who happens also to be minister of health, whose warning on smoking's link to cancer is on every legally-sold pack of cigarettes in the country.
Havel, as many Czechs, came of age smoking heavy Communist cigarettes, and has moved to more expensive western brands.
A country of 10 million people smokes 23 billion cigarettes each year. Consumption has grown from five cigarettes per day to more than six averaged out for every man, woman, and child.
Amid an influx of western brands -- U.S. Philip Morris bought a controlling stake in the former monopoly state tobacco packager, and has made Marlboro a status symbol -- Havel vetoed measures to regulate public smoking and cigarette advertising.
The president once also was blamed for a nuclear alert by lighting up while touring a power plant, but an official re-enactment of the incident declared it was photographers' flashes, not Havel's smoke, which set off the alarm.
",18
"Czech economic growth should slow
in 1997, before accelerating again as an ailing foreign trade
balance improves, the Organisation for Economic Cooperation and
Development (OECD), said on Thursday.
Czech inflation, it said, should ease a bit in 1997 and
more decisively the following year.
In its twice-yearly report, the Paris-based organisation of
the world's most industrialised countries forecast gross
domestic product (GDP) growth to slow to 4.6 percent next year
from 4.8 percent in 1996 but then rise to 5.3 percent in 1998.
""Growth is projected to become better balanced with
investment expected to continue to grow at double digit rates
and household consumption playing a smaller role in GDP
growth,"" the report said.
The current account deficit as a percentage of GDP would
dip to 5.4 percent in 1997 from 5.8 percent this year, but then
ease to 4.9 percent of GDP in 1998, it said.
Export growth should accelerate to 7.5 percent year-on-year
in 1997 and 8.7 percent in 1998 from 5.5 percent this year,
while import growth should slow to 9.5 percent in the next two
years from 11.3 percent.
""The foreign (trade) balance is expected to improve since
import growth will weaken while exports should recover from the
recent slowdown in line with the projected economic recovery in
the main export markets,"" the OECD said.
The Czech National Bank however has warned that the
country's current account deficit could grow to as much as
seven percent of gross domestic product in 1996.
The OECD said annual inflation should slow to 8.5 percent
in 1997 and 7.5 percent in 1998 from 9.1 percent this year.
As consolidation continues in the economy, unemployment
should rise to 3.6 percent next year and 4.1 percent in 1998
from about three percent this year, still one of the lowest
rates in the industrialised world.
It said ""higher labour productivity and projected wage
moderation will have a favourable effect on price dynamics, but
the inflation rate will still be higher than the OECD average
by the end of the projection period.""
But the OECD, which the Czechs joined at the end of 1995,
warned of risks if real wage growth fails to moderate after
growing faster than productivity over the last three years.
""The consumption boom could continue and, despite the
announced fiscal prudence, the trade deficit could widen
further,"" it said.
- - - - - - - - - -  -
 CZECH REPUBLIC			 1995     1996    1997    1998
 private consumption (pct chg y/y) 6.4	6.0     5.0     4.5
 government consumption	     -4.3     -1.5    -2.0	 0
 gross fixed capital formation    16.1     16.0    13.5    12.5
  final domestic demand		7.2	7.9     6.8 6.7
  * stockbuilding			5.2	1.4	 0	 0
 TOTAL domestic demand		12.1	8.7     6.4     6.4
 exports of goods and services     7.9	5.5     7.5     8.7
 imports of goods and services    19.2     11.3     9.5     9.5
 GDP at market prices		  4.8	4.8     4.6     5.3
 GDP (implicit price deflator)    11.5     12.0    10.5     9.5
--------------------------------------------------------------
Memorandum items
 Private consumption deflator	9.1	9.1     8.5     7.8
 Industrial production		 9.2	8.5     7.5     8.5
 Unemployment rate		     3.0	3.0     3.6     4.1
 Gen. gov't financial bal (pct/gdp)0.3	  0	 0	 0
 Current account balance	    -4.1     -5.8    -5.4    -4.9
Note. All results and estimates are by the OECD and are
adjusted using 1992 prices as a base.
-- Prague Newsroom, 42-2-2423-0003
",18
"The Czech crown firmed from the central bank fixing on Thursday, building on gains after a strong showing by the senior coalition party in Senate elections last weekend and prospects for the second round vote.
Analysts said Prime Minister Vaclav Klaus's pro-business Civic Democratic Party (ODS) was expected to take a majority of the 81 seats in the newly-created Senate after runoff elections this weekend, and that should keep the crown firm.
The crown was trading in mid-afternoon on Thursday at 26.661 to the dollar and 17.757 to the mark, or 3.05 percent above the Czech National Bank's dollar/mark basket.
""Mostly the expectations are that the ODS will win a majority in the Senate, which I think is fairly likely,"" Citibank economist Radek Maly said.
The ODS won three seats outright last Saturday and has 76 candidates through to the runoff on Friday and Saturday in the 77 constituencies remaining to be contested.
The crown, despite a ballooning trade deficit, has remained well above parity with the basket and has continued to strengthen this week from last Friday's level of +2.45 percent.
Maly said he saw the currency staying close to Thursday's levels and then getting a possible further bump up on Monday.
""I would personally see this level until the vote...Perhaps Monday, we will see a similar situation -- a quick strengthening, a quick speculative reaction,"" he said.
Petr Korous, a dealer at Ceskovslovenska Obchodni Banka, said despite voter turnout of only 35 percent in the first round of the elections, the market was still firming on the ODS showing.
""There will be some bias toward a stronger Czech crown,"" he said. ""More or less, the basic impulse for that is really because of the elections and then, the subsequent recovery of the capital markets.""
The Senate has limited political power, but the vote would at least confirm that ODS had not suffered a further loss of confidence after the coaltion saw its majority in the more powerful lower house evaporate in June general elections.
This week, the Prague Stock Exchange has shown its first signs of life since the summer, while fixed income and crown deposit investors are getting more confident that Klaus's tight fiscal and monetary policies will not be threatened.
""Those who want to play the interest rate differential (with foreign currencies) feel quite comfortable right now,"" Korous said.
-- Prague Newsroom, 42-2-2423-0003
",18
"Slower-than-expected third quarter economic growth might force the Czech National Bank (CNB) to make a modest interest rate cut early next year, but analysts said the priority would still be to fight inflation.
The Czech Statistical Bureau (CSU) said on Thursday that third quarter gross domestic product (GDP) grew by 3.6 percent year-on-year, putting GDP 4.0 percent higher for the first three quarters of 1996.
A Reuter survey of economists on Wednesday had predicted growth for the first three quarters of 1996 of about 4.2 percent, slowing from the official 4.3 percent for the first six months, and 4.8 percent for the whole of 1995.
Analysts said that the real figures, when combined with recent results showing a rapid slowing of money supply growth, proved that while the Czech National Bank's (CNB) mid-year tightening had been effective, it may have gone too far.
""This turned out to be somewhat worse than we hoped...we do expect a slight cut in rates early next year. I think we'll wait just to see the development of prices in January,"" said economist Radek Maly at Citibank Prague.
Inflation has been stubborn in 1996, with the annual rate hovering above nine percent until recent months. But by November, inflation had slowed to 8.6 percent, year-on-year.
Maly however added that he expected ""the central bank still will be looking more after inflation than growth"".
He said the government should consider ending incremental price deregulations on energy and rents and instead quickly lift the controls to allow inflation to settle to its core rate, and allow for longer-term investment planning.
The key measure of money supply growth, M2, slowed to 13.8 percent, year-on-year, by the end of September from over 20 percent earlier in the year.
That came after the CNB's hiked its discount rate a full percentage point to 10.5 percent in June and raised minimum reserve requirements to 11.5 percent from 8.5. The M2 rate then slowed to 11.4 percent by the end of October.
""The interest rates are really high, that's why the tight monetary policy is working and slowing the growth,"" said Petr Kukla, a foreign currency dealer at Girocredit Banka in Prague.
""We will have to wait probably for the beginning of the second half of the next year so that the GDP can improve together with a rate cut,"" he said.
Domestic demand remained strong but flat at 5.2 percent for the latest quarter, and 5.3 percent for the nine-month period, but well below 1995 levels.
A major harness on growth expansion has been relatively stagnant exports, stifled by the slowdown in demand in western Europe and especially neighbouring Germany.
""The most dynamic growth influence, as it was in the first half, was the development of trade,"" the CSU said in its statement.
In the third quarter, the CSU said, imports were 222.9 billion crowns, a year-on-year increase of some 21.8 percent.
Imports for the first three quarters totalled 618.0 billion crowns, an increase of 14.7 percent over the previous year.
Meanwhile, the CSU said third quarter exports grew by 6.1 percent, year-on-year, to 183.7 billion crowns, putting the three-quarter combined total at 529.9 billion crowns, or 5.1 percent.
""In the area of foreign trade, dynamic growth in the importing of goods and services was seen, with the yearly growth accelerating from 9.4 percent in the first quarter to 21.8 percent in the third quarter,"" the statement said.
-- Prague Newsroom, 42-2-2423-0003
",18
"Czech Unipetrol a.s. on Wednesday announced a long-awaited plan to convert shares in Kaucuk a.s. and Chemopetrol a.s. into Unipetrol shares.
In a joint statement the boards of Chemopetrol, Kaucuk and Unipetrol, the country's new petrochemical holding company, said they agreed to swap one Chemopetrol share for between 1.05 to 1.20 Unipetrol shares, and one Kaucuk share for between 1.10 to 1.25 Unipetrol shares.
The plan, to complete the complex partial privatisation of the two largest Czech petrochemical concerns, was agreed at a meeting on Tuesday of the respective boards, but an exact ratio must still be approved by general shareholders meetings.
Kaucuk and Chemopetrol shares have traded virtually level for months as investors hoped for possible arbitrage trades if either firm's shares got an advantage in the swap.
Ahead of the news on Wednesday, Kaucuk shares were fixed 11 crowns above Tuesday's close on the Prague Stock Exchange (PSE) at 1,105, while Chemopetrol finished the PSE's Wednesday trading session 12 crowns higher at 1,106.
The Unipetrol statement said the ratio range was determined by ""the current results of appraising the assets and liabilities of the involved companies.""
Equities analysts said that because the announced range of the conversion still allowed for overlap in the final decision and did not give a clear advantage to one company's shares, immediate arbitrage possibilities were slim.
But they said that the fact that the boards were nearing a decision on a very complicated issue should give a mild boost to shares in Kaucuk and Chemopetrol.
""I don't see any arbitrage opportunity at this moment,"" said Patria Finance's Miroslav Nosal. ""But now that the exchange ratio is being announced, I believe it will help the shares in both companies.""
Tomas Michalek, at Raiffeisen Capital and Investment Prague, agreed that the movement toward a decision would be a plus to the shares.
""What is positive is that they agreed on a ratio (range). It's important so that both companies can finally be folded into Unipetrol and more foreign capital can come in,"" Michalek said.
Under a complicated privatisation of the Czech petrochemical industry, Kaucuk and Chemopetrol's refining operations were merged into a subsidiary of the newly-created Unipetrol last year called Ceska Rafinerska a.s..
Unipetrol, in which the government currently holds a 100 percent stake, has a 51 percent stake in Ceska Rafinerska,
The IOC consortium -- comprising U.S. Du Pont de Nemours unit Conoco, Royal Dutch/Shell, and Italy's Agip SpA -- acquired a 49 percent stake in Rafinerska under agreement with the government last year.
The share swap would complete the transfer of the rest of Kaucuk and Chemopetrol as subsidiaries under Unipetrol, which acts as a holding company, and would dilute the state's 100 percent stake in Unipetrol.' -- Prague Newsroom, 42-2-2423-0003
",18
"Czech fund manager Harvard Capital & Consulting (HC&C) said on Tuesday it paid a one million crown ($36,500) fine for illegal trading practices from 1993 to 1995, and was making amends.
In a statement HC&C said that Viktor Kozeny, the young Czech-born entreprenuer who founded HC&C, which is not connected to the U.S. college where he once studied, confirmed from his home in the Bahamas that the fine was paid in June.
""The discovered deficiencies from 1993 to 1995 have mostly been removed. We are working on correcting the others,"" HC&C vice-president Boris Vostry said in the statement obtained from Harvard's Prague public relations agency.
The Finance Ministry on Monday said it had levied the maximum fine allowed by Czech law on HC&C, which became one of the most visible symbols of renascent Czech capitalism during the country's privatisation wave of the early 1990s.
The firm was cited for several violations of the law on investment companies and funds and forced it to pay additional compensation, the ministry said, but did not elaborate.
Marie Jezkova, the head of the ministry's department of fund supervision, told Reuters that Harvard was cited primarily for the manipulation of assets of its publicly-held closed-end Harvard Guarantee & Multiple Fund.
She said that the violations included ""dealing with the assets of the fund with unprofessional care"".
Jezkova said that Harvard conducted trades which ""did not indicate that they were done with the aim to increase the value of the assets of the fund"".
Vostry said one of the reasons for the fine was the frequent encroachment of the maximum limits for the purchase of shares in individual companies.
At the time, funds were limited to holding a maximum 20 percent stake in any one company.
Vostry did not list other infractions.
Jezkova was reacting to repeated inquiries concerning a story published last week in the U.S. magazine Fortune.
The magazine quoted a still unpublished ministry decision which it said was handed down in July, which required Harvard to pay a one million crown penalty and $6.8 million in compensation to its funds for various activities.
Jezkova declined comment on the total amount of compensation Harvard was required to pay, but she said that the ministry did impose the maximum fine allowable by law, and that Harvard did have to pay additional compensation.
She also declined to discuss any details of the decision, and said it was up others at the ministry to publish such information.
It is not clear why the decision had been kept secret.
Key ministry personnel have been unavailable during the holiday season.
The infractions described by Fortune concern Harvard's management of funds which were set up during the massive Czech voucher privatisation programme, which gave share vouchers to citizens for a nominal fee.
Kozeny, like many banks and private entrepreneurs, set up funds based on shares gained from citizens who transferred their vouchers to the funds. The citizens received shares in the funds for the vouchers.
($ = 27.34 Czech Crowns)
",18
"Czech President Vaclav Havel, former dissident playwright and leader of Prague's 1989 revolution against Communism, will undergo exploratory surgery on his lungs next week, the presidential office said on Tuesday.
In a statement, Havel's spokesman Ladislav Spacek said the president would have ""a necessary operative procedure"" on his lungs. A surgeon described the procedure as ""medium-serious"".
Havel, 60, was admitted to hospital on Monday more than a week after his office said he was suffering from pneumonia, causing him to cancel his official commitments for the rest of November and early December.
""X-ray findings cannot be specifed until a diagnostic operative measure is carried out,"" Spacek said. The symptoms or extent of Havel's illness have not been fully disclosed.
The Czech news agency CTK quoted the chief of staff at the Third Surgical Clinic in central Prague where Havel will be treated as saying the procedure was considered to be a ""medium-serious operation as would be any lung surgery"".
Havel is known to be a heavy smoker, but the illness has not been officially linked to his smoking.
The president cancelled a planned two-day state visit to Ukraine last week and on Monday called off plans to attend a summit of the Organisation for Security and Cooperation in Europe (OSCE) on December 2 and 3 in Lisbon.
Spacek said the president was in ""good physical and psychological condition"" and is in constant contact with his office, monitoring events in the country.
Prime Minister Vaclav Klaus visited Havel on Tuesday, Spacek said.
The illness comes just as a sensitive post-World War Two reconciliation treaty with Germany, on which Havel has spent much effort, nears completion.
The treaty is to address issues arising from the Nazi occupation of Bohemia and Moravia and subsequent expulsion of ethnic Germans after the Czech lands were liberated in 1945.
German Chancellor Helmut Kohl said recently he hoped the treaty could be signed before the end of the year, and Czech politicians have been quoted in local media saying they expected a signing in mid-December.
The president's office has not commented on how his illness might affect the treaty.
Havel has had various ailments, none considered serious, during his nearly seven years as president of Czechoslovakia and later of the independent Czech Republic, after a peaceful split with Slovakia at the beginning of 1993.
He had urgent surgery last February after a polyp in his mouth started bleeding, but that incident was not considered serious.
Last January the president lost his wife Olga, who died of complications from tumors.
",18
"Finance Minister Ivan Kocarnik on Monday, for the second week in a row, skipped a meeting with the Prague bourse's governing chamber, amid growing calls for his ministry to tackle problems in Czech securities trading.
""At two o'clock (Kocarnik) cancelled his participation in this afternoon's meeting,"" Prague Stock Exchange (PSE) spokesman Milan Vodicka told Reuters.
The bourse's Chamber, which has been seeking stronger ministry action to ease investors' concerns about market transparency, later declined Kocarnik's return invitation for a ""future"" meeting at his ministry.
The meetings had been scheduled to discuss taking tougher regulatory action to address concerns of transparency and insider trading on Czech capital markets.
Jiri Spicka, director of the Finance Ministry's banking division, told Reuters that Kocarnik was ""too busy with the preparation of the state budget"" and ""it was impossible for him to leave the ministry"".
The budget has been expected for weeks to go to the floor of parliament for its second reading in the session which begins on Tuesday.
Kocarnik then invited the 18-member Chamber to his ministry for a ""future"" meeting, Spicka said.
The Chamber later declined that invitation, an official at the office of Chamber Chairman Tomas Jezek told Reuters.
Jezek lambasted Kocarnik on Sunday for lax regulation of the capital markets during the annual national congress of the ruling Civic Democratic Party, of which both men are members.
Jezek told the party meeting that the reluctance of finance ministry officials to more strongly regulate the capital markets was ""absurd"" and investors' lack of confidence could eventually do major damage the country's balance of payments.
""The capital account of our payments balance is alreday unable to level with a growing deficit in our trade balance, and the capital market needs to gain back the lost confidence,"" Jezek was quoted by the daily Pravo as saying.
Jezek warned that poor capital market regulation might even force a devaluation of the crown if confidence is not restored.
Jezek is leading plans to set up an independent markets watchdog akin to the U.S. Securities and Exchange Commission (SEC), funded by transaction fees, by the middle of next year.
The finance ministry has balked at the plan, but Jezek is widely believed to have the backing of the parliament's budget committee which he has said will probably submit legislation permitting a Czech SEC to be set up in the first half of 1997.
Kocarnik has rejected criticism that his ministry is failing in its responsibility to properly regulate the system, and says stronger regulations would be ""anti-market"".
Still, foreign and domestic investors have repeatedly called for steps to beef up the supervision of the Czech capital market, and the ministry has said it is considering its own plan to re-regulate securities trading.
Richard Salzmann, chairman of the largest Czech bank Komercni Banka a.s., told Pravo that ""none of the more important groups want to trade on this capital market.""
-- Prague Newsroom, 42-2-2423-0003
",18
"The Czech National Bank (CNB) has proposed merging savings bank Ceska Sporitelna, with foreign trade bank Ceskoslovenska Obchodni Banka a.s.(CSOB), and then privatising the new megabank which would be the largest in post-Communist Eastern Europe.
CNB spokesman Martin Svehla told Reuters that the proposal was part of a wide-ranging plan to privatise major stakes in the ""Big Four"" Czech banks, which had been submitted to the cabinet to prepare the banks for stiffer foreign competition.
""Continuing with the privatisation of these banks has the aim of increasing the competitiveness of banks, to fit them more towards (entry into) the European Union and to increase their performance,"" Svehla said.
The CNB however proposed holding off on privatisation of the new combined Sporitelna and SOB for three to five years until the effects of the merger were analysed.
Analysts said the new bank, based on 1995 results, would have combined assets of roughly 540 billion crowns ($20 billion), making it by far the largest bank in Eastern Europe and over twice the size of the next largest bank, Komercni Banka.
It is not clear when the cabinet will debate the CNB proposals, but a senior central bank official said it might be on the agenda of next Wednesday's government meeting.
Jack Schrantz, equities analyst at Creditanstalt Prague, said the merger would bring economies of scale from necessary cuts in Sporitelna's and CSOB's bloated workforces.
""There's got to be a lot of overlap. In many of these departments you would see big staffing cuts,"" he said.
The CNB plan calls first for quick privatisation of the state's 31.5 percent in Investicni a Postovni Banka (IPB), a suggestion endorsed by the Finance Ministry earlier this month.
Nomura and Dutch ING NV are widely seen as potential partners for IPB, although top officials have declined comment on their possible interest in IPB.
The CNB plan proposes privatising shares in Komercni Banka -- seen as the plum of the Big Four in which the state holds a 49 percent stake -- only as a final step.
Svehla said the plan was written from the perspective of the CNB as a regulator, aiming to consolidate the strengths in the core of the the Czech banking system.
Whether it has the support of the full cabinet is still unclear. Privatisation of the Big Four has been a delicate political issue despite the country's reputation as the most aggressive post-Communist reformer.
Svehla said however that there was broad agreement in the CNB and the government on the need to go forward with privatisating remaining state stakes in the Big Four, which control more than 70 percent of the country's banking activity.
Ceska Sporitelna, in which the state still holds a 45 percent stake after the government's stock-for-citizens privatisation programme, is the largest state savings bank, where most Czechs kept their money during the communist era.
It still holds a majority of Czech retail deposits.
CSOB, born as a foreign trade bank in the former communist state system, is owned by a variety of Czech and Slovak state institutions including both central banks and the Czech National Property Fund, with small stakes privately held.
""I think it will take a lot of time to agree on the merger price (with Slovak institutions),"" Schrantz warned. Slovak state institutions hold nearly 26 percent of CSOB shares
The daily Hospodarske Noviny quoted CNB governor Josef Tosovsky on Wednesday as saying large banks needed strong foreign partners which could cover share purchase from their own funds.
The market value of state stakes in the Big Four is about 55 billion crowns, according to the CNB, while the total value of Big Four shares is estimated at 111 billion crowns.
Such well-funded investors do not exist domestically, and the CNB wants to find them abroad through tenders.
Finance Minister Ivan Kocarnik said earlier this month that he also wanted the state's stake in IPB to be the first to be privatised, and that a strategic foreign partner taking the stake would be the most likely option. ($ = 26.87 Czech Crowns)
",18
"Germany and the Czech republic will initial a long-awaited declaration on post-World War Two reconciliation between their two states on Friday in Prague, the Czech foreign ministry said on Monday.
A ceremony ending the two-year-long talks on the text will be held with Czech Foreign Minister Josef Zieleniec and Germany's Klaus Kinkel in the first part of a three-stage confirmation.
The ministry said in a statement that the two would ""sign a protocol on the completion of negotiations of the Czech-German Declaration of mutual relations and their future development"".
The full declaration, leaked to news media last week, contains mutual expressions of regret for the Nazi occupation from 1938 to 1945 and for excessive brutality during the post-war expulsion of ethnic Germans from former Czechoslovakia.
The text angered groups representing families of expelled Germans, known as Sudeten Germans, who complained that it did not compensate those who lost property during the expulsions.
But the Christian Social Union (CSU), the political sponsors of the Sudeten Germans, signalled on Monday it would no longer oppose the agreed text.
""By and large, the declaration will stand,"" Finance Minister and CSU chairman Theo Waigel told reporters.
The Bavarian-based CSU has in the past hinted it could use its weight in the government to block the declaration or oppose the Czech Republic's application to join the European Union unless the Sudeten Germans were given better terms.
But Waigel said it was a ""great success"" that Prague had gone as far as it had in apologising for the expulsions.
In the Czech parliament the mainstream parties have backed the declaration, but the extreme-right Republican Party and far-left Communists have ruled out voting for it in any form.
Members of the largest Czech opposition party, the Social Democrats, whose votes may be crucial for approval by parliament, said on Sunday that they still had concerns about vaguely-worded compensation for victims of Nazi aggression.
""(The party) has done all it can for the declaration to be accepted, but it still expects a bit more work (on the text),"" a Social Democrat senator from the once German-annexed district of Upper Moravia, Petr Moravek, told Czech Television.
Stanislav Gross, the head of the Social Democrat caucus in the house, was quoted in the daily Pravo on Monday as saying he would not vote for the declaration in its present form.
The declaration sets up a Czech-German Future Fund with the German side paying in 140 million marks ($90 million), and the Czechs paying about one-seventh of that.
The text says the fund is to finance ""projects of common interest"" including joint environmental, historical, and scientific projects, youth meetings, and partnership projects.
But the text adds that: ""The German side acknowledges its obligation of responsibility to all who became victims of National-Socialist violence. That is why the projects, wherever appropriate, should work mainly for the benefit of the victims of National-Socialist violence.""
Diplomats said privately that the signing ceremony might take place somewhere outside Prague, but Czech officials said last week it would not take place in those areas which Germany annexed in 1938, known as the Sudetenland.
Prague is not part of the area Germany considered as the Sudetenland.
German Chancellor Helmut Kohl is expected to visit the Czech Republic, probably on January 21 and 22, to sign the text with Czech Prime Minister Vaclav Klaus.
In early February Czech President Vaclav Havel and German President Roman Herzog are expected to address the parliaments of each other's countries in ceremonies giving final approval to the declaration.
",18
"Czech President Vaclav Havel on Thursday said he was deeply disturbed by a Chinese court's 11-year prison sentence on dissident Wang Dan who was accused of plotting to overthrow the government.
Havel, himself a former dissident against a Communist government, said in a statement that after the 14-year sentence last December against Wei Jingsheng, a leader of China's small democracy movement, Wang's sentence was ""unacceptable"".
Wang, 27, was sentenced to 11 years in prison on Wednesday after a brief hearing. Wei was sentenced to 14 years in jail last December on a similar charge.
Havel said in the statement issued by his spokesman, that Wang's sentence ""was another example of the unacceptable understanding of the position of the citizen in society.""
The statement added that Havel expressed his ""deep dissatisfaction"" over the decision.
It said Havel ""considers it his obligation to express his solidarity with those who anywhere around the world express, in a non-violent way, their free-mindedness and desire for justice and elementary human rights.""
Havel, once a dissident playwright imprisoned several times by a Communist government before its fall in 1989, has been a frequent diplomatic thorn in China's side.
The Czech president said earlier this year he regretted that Taiwan, which Bejing regards as a renegade province, is not a U.N. member. However, the Czechs officially still recognise only China as a sovereign state and not Taiwan.
Havel angered China last year with a highly publicised meeting with Taiwan's Premier Lien Chan, forcing a hurried re-statement of the Czechs' official ""One-China Policy"".
Earlier on Thusday, the Czech foreign ministry asked China's chief diplomat in Prague, charge' d'affaires Wang Zizhen, to the ministry where a statement of protest was read.
""The Czech Republic expresses its dissatisfaction over the conduct of the trial and the judgment carried out,"" said a text of the statement issued by the foreign ministry.
It said that although there were differences in traditions of understanding questions of human rights in different regions, ""there exist certain universal principles of maintaining human rights which are necessary to respect"".
Chinese foreign ministry spokesman Shen Guofang said in Beijing that the jailing was not a human rights issue but an ordinary legal matter.
The Czech ministry statement said criminalisation of freedom of speech was ""a violation of elementary human rights"".
",18
"The Czech government's tourism office on Wednesday forecast record income from foreign visits in 1996, as ""Golden Prague"" and its environs put a silver lining in otherwise dreary Czech trade figures.
Income from foreign visitors, crucial in stemming the Czech current account deficit, could surge to top $3.5 billion this year, up from a record $2.87 billion in 1995, said director Jiri Cech of the Economics Ministry's tourism division.
He said 1996 record revenue from tourism in the Czech Republic, which has soared since Communist rule there ended in 1989, would range ""from $3.2 to $3.5 billion or more"".
The Czech National Bank balance of payment figures for the first half of the year -- which will give clearer picture of the balance of services -- are expected to be released in the first half of September.
The tourism component of the first quarter balance of payments showed a net inflow of $261 million with total tourism receipts of $581 million, and analysts have forecast first half total tourism revenues at about $1.6 billion.
The overall current account however posted a $505 million deficit in the first quarter, mostly due to a ballooning merchandise trade deficit.
The trade deficit in goods has accelerated in recent months, and a record gap in July of 16.4 billion crowns ($627 million) raised the seven-month 1996 deficit to 85.3 billion crowns ($3.26 billion).
Economists are forecasting the 1996 current account deficit at between five to six percent of gross domestic product, compared with about four percent last year.
But just in the first half of the year, record tourist visits to the country, and especially to the historical centre of the capital Prague where tourists often outnumber residents in the high season, topped most expectations.
The overall number of tourist visits to the country was up 11.6 percent in the first half, year-on-year, to 44.7 million and airport arrivals were up 48.4 percent to 7.3 million, according to the Czech Statistical Bureau.
Czech foreign travel abroad rose 10.2 percent in the first half of the year to 4.3 million visits abroad for a country of 10.4 million residents. Czechs spent $320 million abroad in the first quarter.
Independent analysts are forecasting a surplus in the Czech balance of services, including tourism of $1.8 to $2.0 billion this year. ($1=26.17 Czech Crowns)
",18
"Italy, seeking a larger role in helping to fold former East Bloc countries into NATO, believes it is better to integrate, and not isolate, fringe candidates like Slovakia and Romania, a senior Italian diplomat said.
During an official visit to Prague, Undersecretary for Foreign Affairs Piero Fassino said in an interview that Italy, as part of its new focus he called ""Italian Ostpolitik"", saw four countries as primary candidates for NATO's expansion.
""The position of Italy...is that the group of countries which definitely belong to NATO is Hungary, the Czech Republic, Poland and Slovenia,"" he said, but added ""There's also a possiblity that Slovakia and Romania belong to that group.""
He said it was important for Slovakia and Romania to execute agreements with Hungary aimed mainly at protecting the rights of ethnic Hungarians living in both countries.
Fassio said that before the West says ""no"" to Slovakia and Romania it was necessary to carefully determine whether they meet NATO's standards of democracy, but he added:
""If a country is integrated then we also have the right to require it to meet standards of the organisation it has joined.""
""If it's isolated we can't demand anything,"" he said in the interveiw conducted late on Wednesday.
He gave an example of Turkey with which the EU has blocked establishing a free trade area because of concerns over Ankara's treatment of the country's Kurdish minority -- a move which, he said, has shown no results in solving the problem .
Both the EU and the United States have repeatedly lambasted Slovakia's government for slow democratic reforms and adopting laws threating to political opponents and ethnic minorities saying they might delay membership into ""western structures"".
Two such warnings came last week on the same day U.S. President Bill Clinton, without naming countries, set 1999 as his target for integrating the first wave of former Soviet bloc countries into NATO.
Fassio said it would be more useful to put fringe countries like Slovakia into the fold where more pressure can be applied.
""It is true that Slovakia is having problems fulfilling democratic principles, but the question is, 'do we isolate Slovakia or integrate Slovakia?'. I believe it is more useful to integrate it,"" he said.
He also stressed Slovakia's geographical position between the Czech Republic and the frontier of the former Soviet Union.
""I believe it is necessary to consider very carefully the position of Slovakia because Slovakia is in a geographically strategic place,"" he said.
Fassio said central and eastern Europe was now a priority of our Italy's foreign policy.
""Central Europe is a place which is key to the security of Europe, in this Italy has a direct interest in its political dynamics,"" he said. ""And we have an interest to intenify our presence to support Italian economic considerations.""
He said while Italy would ""intensively"" pursue stronger ties to the group of countries most likely to join NATO and the European Union, it would also instensively seek to strengthen relations with other post Communist countries.
He said this was especially true for Italy's Balkan neighbours, such as Bulgaria, Croatia and Albania.
",18
"Czech Prime Minister Vaclav Klaus said on Thursday his ruling Civic Democratic Party (ODS) would end the governing coalition if his partners backed opposition plans to lower the pension age and boost farm subsidies.
In a blistering statement aimed not only at the opposition Social Democrats, but also his party's centrist coalition partners, the Christian Democrats (KDU-CSL), Klaus warned of a potential collapse of Czech post-Communist reforms if the plans were adopted.
Klaus said that ""laws were in play whose approval we would interpret as a basic threat to the very basics of the (post-Communist economic) transformation.""
It said approval of Social Democrat plans would be ""something in which we could not participate, and we would have to leave the government.""
It also said that steps by KDU-CSL to push through their candidate as chairman in the new Senate, as well as KDU-CSL's voting with the opposition on the new pension proposal violated the agreement which formed the coalition minority government.
ODS also objected to a plan put forward by the Social Democrats, the largest of three opposition parties, to boost state intervention to help support agriculture.
Klaus's party, which lays claim to the blueprint for the fiscal prudence and currency stability which has given the country the best investment ratings in post-Communist Europe, warned that the proposals could have devastating effects.
""We consider the current political situation in our country to be very serious, and unprecedented in a certain sense,"" Klaus said in a preamble to the statement.
""If these laws are passed and the threatening development happens, it would mean an imbalance and burden for the budget, and demands on the taxpayers, which we consider to be absolutely impossible and unbearable,"" it said.
Before falling two seats short of a majority in the 200-seat lower house of parliament in June, Governments led by Klaus approved five consecutive balanced budgets, although the 1996 account expects to actually end with a roughly 1.2 billion crowns deficit, due to lagging tax collection.
The government was able to push through its 1997 balanced budget plan last week after two Social Democrats voted with the government, and then were sacked by their party for it.
The Czech agency CTK later quoted KDU-CSL chairman Josef Lux as saying that the ODS statement did not respond to reality and his party rejected such threats, but he added that he did not see it as a signal to end the coalition.
The lower house recently agreed to continue debate -- in the first of three required readings in parliament -- on a Social Democrat proposal which would lower the retirement age to 60 years for men and 53 to 57 for women.
The plan would replace a government programme to gradually raise the pension age.
Parliament last year had approved the plan of Klaus's then-majority coalition government to raise the retirement age as a way to head off an expected crisis in financing pensions in the long term.
The soonest any of the new controversial proposals could go to parliament for a second reading would be in its February session. They must still have two more readings in the lower house, and then be confirmed by the new upper house.
The government plan, effective at the beginning of this year, sets out a gradual raising of the pension age until the 2007 when the official age would be 62 for men and 60 across the board for women, unifying a system which once allowed women with children to take an earlier retirement.
It has begun to gradually change from the Communist-era schedule of 60 years for men and 54 to 57 for women.
",18
"The health of Czech President Vaclav Havel has improved considerably as he recuperates from lung cancer surgery last week, his spokesman said on Sunday.
Havel, 60, who had a small malignant tumour removed along with half of his right lung on December 2, required an emergency tracheostomy on Thursday to connect a respirator through his throat after he developed severe breathing problems.
""The worst is behind us,"" presidential spokesman Ladislav Spacek told Czech Radio on Sunday. ""The tendency, the return to improvement (in Havel's health) is distinct, and we hope it will continue into the future.""
Spacek took the place of Havel on the president's regular national Sunday radio programme.
The president had hoped to record at least a sentence for the show, but his condition on Sunday morning, when it was was recorded, kept him to the role of a listener, Czech radio said.
The president has been communicating by writing notes to doctors and his staff.
Czech Archbishop Miloslav Vlk led a national prayer mass for Havel on Sunday at St Vitus Cathedral in Prague Castle.
Dozens of friends and leaders around the world, including U.S. President Bill Clinton and Russian President Boris Yeltsin, have sent get-well wishes to the hero of Prague's non-violent 1989 revolution over communism.
Havel, a heavy smoker, entered the Third Surgical Clinic in central Prague on November 25 after his office said he had been suffering from pneumonia.
After the surgery, he developed pneumonia in the opposite lung and had been fighting a fever, but his spokesman said on Sunday that Havel's temperature had returned to normal.
Doctors say Havel will probably remain connected to the respirator another four to six days, and if his recovery goes well, he might be back to work as soon as mid-January.
The former dissident-playwright who helped lead Prague's so-called ""Velvet Revoution"" over communism has limited executive powers as president, and did not relinquish any of his duties during his surgery or his recovery.
",18
"Toronto stocks closed weaker on Tuesday, dragged into negative territory by tarnished gold stocks and profit-taking.
The Toronto Stock Exchange's key 300 Composite Index fell 37.92 points to finish at 6075.98, the TSE's second straight day of losses. Trading was brisk at 120.9 million shares worth C$2.1 billion ($1.57 billion).
Heavily-weighted gold stocks began the day stronger, but turned softer amid volatile bullion prices.
""We had a negative reversal in gold,"" said MMS International analyst Katherine Beattie.
Midland Walwyn analyst Dunnery Best said investors reaped the benefits of Toronto's recent rally by selling some holdings.
""Little bit of profit-taking here and there,"" Best said, adding ""it's been a heck of a run.""
Toronto posted four record closing highs during a seven-day winning streak which was broken by Monday's decline.
Beattie said short-term losses could be expected after a gain of about 215 points. ""A one-to-three day pull-back is not surprising,"" she said.
Traders began the day nervously awaiting comments by U.S. Federal Reserve Chairman Alan Greenspan on the U.S. economy, but his generally upbeat assessment was a boost for Wall Street equities.
In Toronto, all 14 sub-indices slipped except transportation, pipelines and real estate. Falling sectors included consumer products, conglomerates, oils and media.
Declining stocks outnumbered advances 559 to 454 with 274 issues unchanged.
Active stocks included oil and gas shares. Petro-Canada fell 0.20 to 21.50 on almost 6.1 million shares, topping the most-active list.
Gold prospector Bre-X Minerals Ltd. fell 0.40 to 22.60 while Barrick Gold Corp. inched up 0.05 to close at 36.15.
Barrick said on Tuesday the only obstacle to a joint venture over the Busang gold deposit is agreements with two of Bre-X's Indonesian partners.
Northrock Resources Ltd. rose 0.35 to a close at a 52-week high of 15.35 after announcing it would be flush with cash following a sale of non-strategic oil and gas properties.
",26
"Toronto stocks ended mixed in thin dealings on Monday, resisting New York's continued sell-off with the help of stronger key gold issues.
The Toronto Stock Exchange's key 300 Composite Index rose 7.18 points to reach 6040.76 in turnover of 87 million shares worth C$1.29 billion ($961 million).
But declining issues beat out advancing ones 510 to 460. Another 296 ended flat.
""Stocks didn't do too badly today, thanks to strength in the gold sector,"" said ScotiaMcLeod's senior vice-president Fred Ketchen.
Trading was thin ahead of Tuesday's U.S. fourth quarter Employment Cost Index. Last week, U.S. Federal Reserve Chairman Alan Greenspan expressed concern over rising wages.
Toronto's 14 sub-indices were evenly split. The strong side was led by a 1.6 percent gain in precious metals, followed by consumer products and conglomerates.
Weak groups included transportation, forestry products and financial services.
Golds were among actively traded issues. Golden Rule Resources Ltd. added 0.55 to 13.10 while Placer Dome Inc. rose 0.80 to 28.30.
Telecommunications conglomerate BCE Inc., Canada's largest publicly traded firm, slipped 0.10 to 65.65 after posting fourth quarter results that were in line with market expectations, traders said.
Beer and entertainment conglomerate Molson Companies Ltd. rose 1.10 to 22.95. Molson announced plans to sell a 50-percent stake in retailer Reno-Deport Inc. for C$62.25 million ($46.34 million).
Telecommunications firm Northern Telecom Ltd. saw shares dip 1.30 to 92.30 despite posting a strong fourth quarter profit of $1.23 a share versus year ago $0.98.
",26
"Toronto stocks posted their 51st record close of 1996 on Monday, powered by a rally in interest-sensitive issues ahead of an expected cut in Canadian interest rates, analysts said.
""(The) market is looking for yet another Bank of Canada cut,"" said MMS International analyst Katherine Beattie.
Canada's central bank has dropped short-term interest rates 19 times since May 1995, slashing the key bank rate by 4.75 percent to stimulate a lackluster economy.
""If there's another Bank of Canada cut, the bank stocks will continue rallying,"" Beattie said.
The Toronto Stock Exchange's key 300 Composite Index gained 17.95 points to close at 5609.26 points, reaching its 51st record close of 1996.
However, the overall market was mixed despite the rally in bank stocks. Declining issues outnumbered advances 478 to 447 with 300 issues unchanged.
A total of 88.7 million shares were traded worth C$1.28 billion (US$958 million) at Canada's largest stock exchange.
""Everybody is still looking at low interest rates and wondering where to put their money. They jump on the bandwagon of recent movements,"" said Ron Meisels, president of P & C Holdings Ltd.
The financial services sector extended its long rally, adding more than two percent on Monday. The group led half of Toronto's 14 sub-indices higher.
Other strong sectors included real estate and utilities. Base metals, conglomerates and communications led the weak side.
Among hot stocks, Edper Group Ltd. receipts soared C$7.50 to close at C$78.50 on 4.2 million shares amid market speculation that talks over the World Financial Center in New York would soon conclude, leaving majority shareholders' Bronfman group in clear control.
* Bank of Montreal jumped C$1.10 to C$42.70, while National Bank of Canada rose C$0.40 to C$13.65.
* Air Canada shares gained C$0.45 to close at C$5.80 as investors appeared to shun troubled Canadian Airlines Corp. in favor of Canada's largest air carrier.
* Canadian Airlines fell C$0.36 to C$1.25 today after announcing a four-year C$800 million (US$599 million) restructuring plan on Friday.
",26
"- The chief financial officer of debt-ridden Rogers Communications Inc., resigned suddenly Monday.
Graham Savage, well-respected by analysts and considered a restraining force on flamboyant president Ted Rogers, had been with the firm for 21 years. He resigned to ""pursue other interests,"" the company said.
""Of all the senior individuals who have left Rogers in recent times, the departure of Savage is the most detrimental to the company, given Savage is the man who has held it all together for the past few years,"" said Lawrence and Co. analyst Andrew McCreath.
Analyst John Drolet at Toronto's Yorkton Securities said, ""This is not good for Rogers at all. I wouldn't be surprised if other people left.""
Rogers, which also owns Rogers Cantel, a wireless communications firm, has shed U.S. and Canadian assets in the past year in an attempt to cut its debts. Rogers piled up most of its debt load when it acquired Maclean Hunter Ltd., along with the Toronto Sun group, for C$3.1 billion ($2.26 billion).
Total long-term debt grew to C$4.88 billion ($3.56 billion) as of June 30 from a year-earlier C$4.07 billion ($2.97 billion).
In 1995, Rogers had revenue of C$2.69 billion ($1.96 billion).
""Graham Savage was a pretty good guy. He was able to keep the wolves away as ... Ted Rogers kept adding on assets. But I guess he finally realized that there's an end to the line,"" Drolet said.
Alan Horn, vice-president of administration, will serve as acting chief financial officer until another is found, the company said.
In a statement, Ted Rogers said: ""We remain committed to the near-term financial priorities of improving our balance sheet and increasing revenues as we invest in new businesses.""
Rogers' stock, after being halted earlier in the day on the Toronto Stock Exchange, fell 80 cents to close at C$9.25.
In New York, Rogers fell 50 cents to $6.875 on the New York Stock Exchange.
",26
"Heavily weighted bank stocks pushed the Toronto Stock Exchange to stronger territory at Monday's close, despite the fact that more issues fell than climbed.
The TSE's key 300 composite index gained 34.61 points to end at 5952.41, a little shy of its recent record close of 5966. Turnover was 94.1 million shares worth C$1.4 billion (US$1.04 billion).
""At the end of the day, it was only the banks and the utilities,"" said John Kellett, Royal Bank's vice-president of equities. ""When the banks do well, it certainly gives a good tone to the market.""
Declining issues edged out advancing ones 486 to 473. Another 288 traded flat.
Bank stocks soared ahead of year-end results, which will kick off with Bank of Montreal earnings on Tuesday. Canada's big six banks are forecast to unveil record profits for the third year in a row.
And analysts consider Canadian bank stocks still undervalued compared to U.S. issues.
""Today I think really what happened was U.S. banks were really on wheels,"" Kellett said. ""Suddenly Canadian banks, which already had gone a long way, looked good.""
The important bank sector led eight of Toronto's 14 sub-indices higher, gaining nearly 3.3 percent. Transports, consumer products and utilities followed.
The key gold group and base metals lost the most ground.
Among the hot stocks, the nation's second largest bank Canadian Imperial Bank of Commerce rose C$2.25 to C$59.60 on 640,000 shares. The Royal Bank of Canada, the largest, gained C$2.10 to C$48.75 on more than one million shares.
Weakness in gold bullion prices in both London and New York hit gold stocks. However, Bre-X Minerals Ltd., which still embroiled in an ownership dispute over its huge Busang gold discovery in Indonesia, lost more ground due to the uncertainty. Shares fell C$1.35 to reach C$22.55.
Biotechnology firm Biovail Corp. International rose C$2.25 to C$40 in light trading after news that it settled patent litigation with Elan Corp. Plc after Elan had alleged infringement of drug patents by Biovail. Biovail, which also announced that it would list on the New York exchange on December 12, said it and Elan agreed to various cross-royalty payments on some current and future products.
Convenience store company Silcorp Ltd. rose C$0.15 to C$18.40 after news that it signed a definitive deal to buy the assets of Becker Milk Co Ltd. Alimentation Couche-Tard Inc. said it extended its takeover offer for Silcorp to December 23.
",26
"The Toronto Stock Exchange's key index ended higher on Wednesday, but the overall market finished mixed in thin trading as many money managers decided to place their bets on fixed income investments.
The TSE 300 Composite Index rose 24.57 points to close at 6071.28 in turnover of 105.3 million shares worth C$1.4 billion ($1.04 billion).
Almost all of Toronto's 14 sub-indices ended higher except transportation. Despite these gains, declining stocks outpaced advances 492 to 483 with 281 issues unchanged.
""I think the market's kind of jittery,"" said Oppenheimer & Co Inc chief strategist Michael Metz.
ScotiaMcLeod's director of investment research Jim Doak agreed. ""People are being cagey, not going to equity funds,"" he said.
Many mutual fund managers are trading cautiously and awaiting direction in the market after this week's volatility, analysts said.
New York soared 84.7 points to close at 6740.7 following yesterday's roller-coaster ride in North American markets.
Media, consumer products, golds and real estate posted the strongest gains among Toronto's rising sectors.
Smaller issues, including some heavyweight gold stocks, we're sold off in thin trading, one trader said.
Golden Rule Resources Ltd. lost 2.70 to 10.05 on more than three million shares. Brokerage firm ScotiaMcLeod recommended selling the prospector after shares nearly tripled since January 6 on initial results from its Ghana property.
Bre-X Minerals Ltd. slipped 0.05 to 21.65 while potential partner Barrick Gold Corp. rose 0.20 to 37.05. Both denied an earlier report which said Bre-X may be able to hold an auction for control over its huge Busang gold deposit in Indonesia.
Shares in Placer Dome Inc., Barrick's possible rival, rose 0.70 to close at 28.60.
",26
"Toronto stocks ended mixed on Tuesday, with a focus on falling pipeline and gold issues after the market gained nearly 300 points thus far in August.
""This is a momentum that cannot be maintained, so this market is giving back some of its gains,"" said P and C Holdings President Ron Meisels. ""I think it'll take a few more days before it sells off enough"" for investors to return and hunt for bargains.
The Toronto Stock Exchange's key 300 Composite Index lost 12.8 points to close at 5173.9 points for its second straight losing session. However, advancing issues edged out declining ones 444 to 438.
Another 310 stocks ended unchanged.
More than 88 million shares were traded worth C$1.42 billion (US$1.04 billion.)
Since July 30 the key 300 index has climbed from 4891 points to today's close of 5173, a gain of 282 points.
Market players have been hurt by vacations ahead of a long holiday weekend, Meisels said. Canadian markets will be closed on Monday, September 2, for Labor Day.
All of Toronto's 14 sub-indices fell except for conglomerates and retail issues. Pipelines, golds, transports and forestry products dropped the most.
Among the hot stocks, banks were briskly traded. National Bank of Canada rose C0.10 to C$11.90 in turnover of 2.5 million shares.
Today Canada's third and fourth largest banks, the Bank of Montreal and the Bank of Nova Scotia, kicked off the reporting period for financial institutions by posting better-than-anticipated third quarter profits, said Richardson Greenshields of Canada analyst Dunnery Best.
Rogers Communications Inc. was also active. The nation's largest cable-television firm saw shares slip C0.05 to C$9.20 on 2.4 million shares, continuing Monday's fall. Chief financial officer Graham Savage resigned yesterday, the second senior executive to jump ship this year.
Barrick Gold Corp. closed its deal with small gold prospector Arequipa Resources Ltd. today, paying C$30 a share in cash and Barrick shares after sweetening its original offer of C$27. Barrick stock slipped C$0.15 to C$37.55 on nearly 1.6 million shares.
",26
"Toronto stocks ended softer on Thursday, snapping a recent winning streak despite strength in the gold and real estate sectors.
The Toronto Stock Exchange's key 300 Composite Index slipped by 10.69 points to reach 5739.23 points, after adding more than 1.5 percent yesterday.
""After yesterday's remarkable action, it's time for a pause,"" said RBC Dominion Securities analyst Dunnery Best in a report.
""The golds have ignited on the quick rise in bullion prices that came late morning,"" Best said.
COMEX December gold ended up US$0.90 at US$379.60 an ounce, after hitting a six-day intraday high at US$382.00. The yellow metal soared briefly after comments by a Japanese official which indicated Japan will no longer tolerate a weak yen.
This pushed the U.S. dollar lower while investors rushed to sell the currency and buy gold, but the dollar recovered after the U.S. government had a strong 30-year Treasury bond auction, said Maison Placements Canada trader Rolie Bradley.
Toronto trading was brisk at 99.8 million shares worth C$1.7 billion (US$1.28 billion). Advancing issues outnumbered declining ones 522 to 488 and 289 traded flat.
Half of Toronto's 14 sub-indices eased, led by pipeline stocks, banks and consumer products. Golds, conglomerates and real estate issues rolled higher.
""The lower interest rates are really stimulating the whole real estate situation,"" Bradley said.
Among hot stocks were the banks, which sank after a month's worth of gains. Royal Bank of Canada topped Toronto's most active stocks, falling C$0.90 to C$47.90 on nearly 2.7 million shares.
""Our favourite group, the banks, which got a pasting today, likely will go up tomorrow,"" Bradley said.
Telecommunications firm Northern Telecom Ltd. lost C$2.55 to reach C$86.95 in heavy trading. It said on Thursday that it agreed to buy the assets of a California-based software firm, AGL Systmes Inc., for an undisclosed sum.
Funeral homes operator Loewen Group Inc. slipped C$0.75 to C$51.75 in light dealings. The closely watched firm, which has made headlines for its battle against hostile bidder Service Corp. International, said it expects to make acquisitions worth US$600-US$700 million next year.
",26
"The Toronto stock market ended weaker on Friday, but recovered most of its losses after sinking nearly three percent on comments by U.S. Federal Reserve Chairman Alan Greenspan.
The Toronto Stock Exchange's key 300 Composite Index fell 31.69 points to close 5810.06 after experiencing its worst intra-day decline in nine years.
The key index sank 171 points, the most severe fall since a 176.5-point decline on October 22, 1987.
Trading was moderate with 80.8 million shares changing hands worth C$1.4 billion (US$1.03 billion).
""For a volatile market that has been looking for a reason, any reason, to correct, last night's comments by Federal Reserve Chairman Alan Greenspan were just the ticket,"" RBC Dominion Securities analyst Dunnery Best said in a report.
In a speech Thursday night, Greenspan warned that ""irrational exuberance"" was infecting financial markets, sparking heavy selling in equities markets worldwide.
By the end of Friday's session, Toronto recovered most of its losses, while the Dow Jones average lost 55.16 points.
Analysts said mutual fund institutions were bargain hunting on the TSE today.
""Canadian institutions came in late in the day and established themselves for the RRSP (Registered Retirement Savings Plan) season,"" said Jim Doak, investment research director of ScotiaMcleod Inc.
Despite Toronto's steep decline, analysts expect the Canadian market to resume its upward march and outperform Wall Street in 1997.
All of Toronto's 14 sub-indices lost ground except pipelines and industrial products. Declining stocks outnumbered advances 705 to 320, while 259 traded flat.
Among hot stocks, Bre-X Minerals Ltd. rose C$0.15 to C$20.15 in heavy trading.
Barrick Gold Corp. is in the midst of finalizing a deal with Bre-X over ownership of Bre-X's massive gold deposit in Busang, Indonesia.
Barrick closed down C$0.05 at C$40.20.
Canadian Imperial Bank of Commerce, Canada's second largest bank, fell C$0.85 to C$56.15 on 1.8 million shares.
Fuelled by record earnings and low interest rates, bank stocks have soared to new heights since September.
",26
"Toronto stocks added almost one percent in value on Tuesday, posting their 52nd record close of 1996 on rallying bank stocks and stronger bond and currency markets, analysts said.
""We got a new high on the Canadian dollar. Second, we have a big increase in the Canadian bonds. Thirdly, we had a very strong Dow Jones (Industrial Average),"" said Rolie Bradley, an institutional salesman with Maison Placements Canada Inc.
""As a result of all that, you have almost panic buying in Canadian interest-sensitive stocks,"" Bradley said.
The dollar rallied to close at C$1.3301 (US$0.7518), its strongest level since October 30, 1995. Currency traders said the unit was helped by bullish technical momentum and strong U.S. interest in Canadian bonds.
The Canadian 30-year benchmark bond jumped C$2.00 to close around C$114.55 to yield 6.807 percent.
The TSE, Canada's largest equity market, gained 55.21 points to close at 5664.47. In New York, the Dow Jones Industrial Average added 39.50 points to end at 6081.18.
Toronto traded a total of 105 million shares worth C$1.83 billion (US$1.37 billion).
Advancing issues outnumbered declines 505 to 445 with 300 stocks unchanged.
""The banks are driving Toronto to yet another new high,"" said RBC Dominion Securities analyst Dunnery Best. The financial services sector rose by 2.8 percent, leading 12 of Toronto's 14 sub-indices higher.
Other strong groups included pipelines, conglomerates, consumer products and transports. The only weak sectors were golds and oils.
Among hot bank stocks, Bank of Montreal added C$1.75 to C$44.45 on 1.8 million shares.
Toronto-Dominion Bank gained C$1.15 to C$34.25 in heavy trading after it was upgraded to an outperform rating by U.S. brokerage Morgan Stanley.
Canada's largest publicly traded firm, BCE Inc., rose C$1.10 to close at C$62.20 on over 1.5 million shares.
Growing interest in the Internet, the world-wide computer link-up, is attracting investors to telecommunications firms like BCE, Bradley said.
",26
"At Wednesday's closing siren the Toronto Stock Exchange rang up a 60 point gain for its key 300 Composite Index, driven by an investor buying frenzy.
The TSE 300 Composite Index added 60.55 points to end at 5966.10 points, which was its 61st record close of 1996. Canada's largest exchange also hit an new intra-day high of 5986.80 points on Wednesday, closing in on the important 6000-point level.
Toronto, which handles more than 80 percent of Canada's equities transactions, has gained 85 points in the past two sessions.
""The big stocks are doing extremely well, and at this stage it's a momentum driven market,"" said Wood Gundy Inc's chief strategist Subodh Kumar. ""It's being driven by two things: ... lower interest rates and cash inflows for investors from the mutual fund areas.""
Bond yields have dropped in Canada and the U.S. this year as central banks in both countries slashed short-term interest rates to stimulate their sluggish economies, analysts said.
Investors and mutual fund companies are searching for high yield vehicles to improve their returns. ""Right now the pressures (by mutual funds) are to allocate funds,"" Kumar said.
ScotiaMcLeod's senior vice-president Fred Ketchen said Toronto's gains has lagged behind New York's rallies for the last year and a half. Toronto lost ground during Canada's political uncertainty in late 1995 when residents of the French-speaking province of Quebec deliberated whether to separate from Canada.
New York powered ahead during that time but Toronto is slowly closing in. ""I think we're sort-of playing catchup and will continue to play catchup because we're further behind than what we should be,"" Ketchen said.
Today the Dow Industrial Average gained 32.42 points to close at 6430.02 points.
Toronto also has enjoyed a near-continuous rally since mid-September when the 300 index broke through the 5300-point level.
Today 132.8 million shares were traded worth C$2.1 billion (US$1.57 billion), Toronto's fifth highest trading value on record.
All of Toronto's 14 sub-indices powered ahead, except for the financial services sector. The key gold group added more than two percent of its value today, leading media, transportation, consumer product and other issues higher.
On the broader market 616 stocks advanced, beating out 370 declining issues. Another 280 issues traded unchanged.
Among the hot stocks, Edper Group Ltd. shares bucked the slipping trend in the financial services area. The conglomerate saw C$0.25 added to close at C$7.95 on 6.1 million shares.
Fertilizer firm Potash Corp. of Saskatchewan gained C$2.90 to C$96.40 in active dealings.
",26
"Toronto's stock market drifted lower in moderate trading to close softer on Monday, weighed down by a battered oil and gas sector despite firmer bank issues.
The key 300 Composite Index fell 20.47 points to end at 6081.27 in trading of 93.9 million shares worth C$1.4 billion ($1.04 billion).
""The energy sector's the one that got clipped here,"" said fund manager Josef Schachter.
The oil and gas group lost almost 2.4 percent and led eight of Toronto's 14 sub-indices south.
Other falling sectors included conglomerates, transportation and golds. The stronger side was led by consumer products, heavily weighted banks and pipelines.
Wilf Gobert, Peters & Co. analyst, said several factors hit energy issues including weaker oil prices for most of Monday, recent news that Canadian Natural Resources Ltd. will cut back on production soon and Canadian 88 Energy Corp.'s failure to take over Morrison Petroleum Ltd.
In a surprise move Canadian 88 said on Sunday that it withdrew its hostile bid for Morrison Petroleum.
Declines raced ahead of advances 456 to 362 while another 283 traded unchanged.
Schachter forecast that Toronto's weakness was only short term. ""This is just a buying opportunity.""
Energy stocks were heavily traded on Monday. Morrison shares lost 0.35 to end at 9.65 on half a million shares while Canadian 88 slipped 0.25 to 5.15 on 1.1 million shares.
Poco Petroleums Ltd. lost 0.30 to reach 13.75 on more than two million shares.
Pacalta Resources Ltd. managed to buck the falling trend, gaining 1.45 to hit a new high of 12.90.
Fairfax Financial Holdings Ltd. topped Toronto's gainers after rising 3.50 to 299.00.
",26
"The chief executive of Zellers, a major Canadian retailer, aims to boost sales per square  foot by more than a third over three years as the discount chain seeks to regain market  leadership from U.S. invader Wal-Mart.
Millard Barron, a former executive at Wal-Mart Inc. - which ousted Zellers as Canada's top discount store chain --  told Reuters in a recent interview he planned to increasesales from  C$157 ($117) a square foot for fiscal 1997 ending Jan. 31.
""We are at least a third below where we should be. We should be (C$)225 ($168) to (C$)250 ($187) a square foot and my goal is (that) over the next three years,"" said Barron, who took the top job at Zellers last September.
Zellers is a unit of Toronto-based Hudson's Bay Co.,  the owner of Canada's biggest department store chain.
Wood Gundy retail analyst David Brodie called Barron's goal ambitious.
""Wal-Mart has the momentum. These guys (Zellers) don't,"" said Brodie, who estimated that Wal-Mart had sales of C$220 ($164) a square foot in Canada, a number Barron called ""overstated.""
Brodie estimated Zellers' market share had fallen to 42 percent since Wal-Mart's arrival in 1994 from about 50 percent. Wal-Mart's Canadian market share was estimated at about 43 percent.
Barron landed the chief executive's job at Zellers at a crucial time. The commpany's operating profit was halved by the arrival in Canada of Bentonville, Ark.-bbased Wal-Mart, America's bigg 536870913 1702065184
Zellers' fiscal 1996 operating profit plunged to C$106.7 million($79.8 million) ffrom C$215.6 million ($161.2 million) in 1995.
Barron said his mission was to improve technology and communications, move more staff to the sales floor, pay more attention to rural stores and renovate the chain's 299 outlets.
He did not forecast fiscal 1998 sales, but said Zellers would post fiscal 1997 revenues of about C$3.4 billion ($2.5 billion), versus C$3.5 billion ($2.6 billion) in fiscal 1996.
He said that crucial holiday sales in December jumped by double digits for the first time in three years.
Barron said that Zellers' capital spending would increase to between two and three percent of fiscal 1998 sales. Retailers usually spend one to two percent.
About 20 percent of planned capital spending would be for technological upgrading, with Barron saying Zellers was four years behind other retailers in technology.
""By the end of 1997, we will be as technologically proficient and productive as any retailer in North America,"" Barron said.
Zellers said Canada would open up to 12 stores this year, expand 10 and update up to 70.
",26
"The Toronto Stock Exchange closed mixed in heavy trading on Friday, but its key index managed to stay above to the 6000 point mark.
The TSE 300 Composite Index closed 1.98 points lower at 6016.67, after falling 6000 points earlier.
On the broader market, advancing stocks outnumbered declining ones 558 to 398. Another 318 traded unchanged.
""These markets are holding up really well,"" said RBC Dominion Securities private client strategist Dunnery Best. ""The fact that Canada held on to big gains is very powerful.""
The TSE 300 Index gained about 90 points this week.
Trading volume was 96.7 million shares worth C$1.58 billion (US$1.17 billion).
The activity was surprisingly heavy since analysts had expected trading to fall off after the New York Stock Exchange closed early for the U.S. Thanksgiving long weekend.
Best expected further gains for the TSE as the year end approaches and Canadians think about buying mutual funds for their registered retirement savings plans.
Ten of Toronto's 14 sub-indices ended higher, led by conglomerates, media, transport and real estate. But the key index was depressed by soft bank stocks and a weak gold sector which lost nearly one percent.
Among the hot stocks, the bank stocks suffered profit taking after strong gains earlier this week on record year-end earnings. Canadian Imperial Bank of Commerce fell C$1.10 to close at C$60.70. Toronto-Dominion Bank dropped C$1.00 to C$36.00 on 1.3 million shares.
Barrick Gold Corp lost C$0.70 to end at C$40.50 on 3.7 million shares as it continued talks with Bre-X Minerals Ltd. Barrick said on Friday it expects to strike a deal with Bre-X over the Busang gold deposit early next week. Bre-X shares fell C$0.35 to C$20.65 on 2.4 million shares.
Copper and base metals miner Aur Resources Inc gained C$0.10 to reach C$8.35. Cominco Ltd. sold its minority stake in one block of 4.2 million shares.
Geac Computer Corp Ltd. rose C$3.25 to C$26.00 in active dealings.
",26
"The Toronto Stock Exchange snapped a seven-session winning streak to close softer on Monday, depressed by weak gold stocks.
The TSE's key 300 Composite Index lost 24.90 points to end at 6113.90 points, in turnover of 104 million shares worth C$1.58 billion.
""We had a really nice seven-day rally,"" said MMS International analyst Katherine Beattie. ""You're bound to have some kind of correction.""
Gold bullion prices tumbled today in both London and New York, pushing Toronto's heavily weighted gold stocks into weaker territory. Some U.S. traders were off for the U.S. Martin Luther King holiday.
Despite weaker golds, Toronto stocks did not fall that far. ""Actually we didn't have such a bad day today,"" said Maison Placements Canada president John Ing.
Investors are nervously awaiting comments by U.S. Federal Reserve Chairman Alan Greenspan on Tuesday, Beattie said. ""The market's on edge.
Greenspan is scheduled to testify on the state of the economy to a Senate Budget committee hearing starting at 1000 EST/1500 GMT.
All of Toronto's 14 sub-indices lost ground except for oil and gas. The weak side was led by a 1.7 percent drop in golds, followed by media, transportation and forestry products.
Declining issues outnumbered advances 528 to 474, with 291 stocks unchanged.
Gold stocks were active today. Bre-X Mineral Ltd. fell 1.40 to 23.00 on over 1.8 million shares. Indonesia's Mines and Energy Minister Ida Bagus Sudjana earlier today gave Bre-X and potential partner Barrick Gold Corp. one month to settle with their local partners in the huge Busang gold find.
Barrick's shares dipped 0.75 to 36.10.
Golden Rule Resources Ltd. closed up 0.95 to 9.35 after earlier hitting a 52-week high of 9.65.
Oil firm Canadian Occidental Petroleum Ltd. rose 0.30 to 25.60, topping Toronto's most active list on volume of nearly four million shares.
",26
"Toronto stocks closed on a firmer note on Friday, boosted by a party in the bond market and strength in the heavily weighted banking and gold sectors.
The Toronto Stock Exchange's key 300 Composite Index rose 29.85 points to reach 6101.74, with 111 million shares traded worth C$1.74 billion ($1.29 billion).
North American markets surged after the release of the U.S. January jobless rate. It edged up to 5.4 percent from 5.3, providing indications that the job market has not tightened enough for employers to bid up wages and that the Federal Reserve may not raise interest rates.
Bonds rallied dropping yields, so Canadian investors fled to the high-yielding Toronto stock market.
""It's acting on any piece of news,"" said Montreal-based strategist Bill Ram.
Advances inched ahead of declines 507 to 490 while another 276 traded flat.
Of Toronto's 14 sub-indices, banks rose the most, adding two percent to hit a new high of 5972.59 points. Other strong groups were consumer products, golds and base metals.
The weaker side included conglomerates, oils and pipelines, which kept Toronto from jumping as high as Wall Street. The Dow Jones Industrial Average soared 82.74 points to 6855.80.
Over the course of the week Toronto's stock exchange retraced its steps from a new lifetime high of 6159.18 points on Wednesday to today's close.
Among active issues, food services firm Cara Operations Ltd. class A rose 0.05 to 4.15 on three million shares after announcing positive third quarter results yesterday.
Viceroy Homes Ltd. shares lost more than half their value, falling 5.40 to 5.00 after reporting lower than forecast fourth quarter earnings today. Net income for the quarter plunged 61 percent to C$409,000 ($300,740).
Royal Bank of Canada, the nation's largest, rose 1.40 to 52.40 on more than 1.7 million shares. Shares in the Canadian Imperial Bank of Commerce, the second biggest, gained 1.35 to 64.60.
",26
"Toronto stocks ended firmer in brisk dealings on Friday, adding another 10 points to the week's gains of 90 points and bringing the key 300 index closer to breaking its all-time high.
""We just refuse to move lower,"" said MMS International analyst Katherine Beattie. ""We're just ignoring all the bad news."" The Toronto Stock Exchange key 300 Composite Index rose 10.9 points to end at 5193.0 points on Friday.
The TSE 300 has recovered from its lows in July and is climbing towards its all-time high of 5248.37 points reached in late May.
The index may test the high next week, Beattie said.
On Thursday Canada's central bank cut short-term interest rates by 25 basis points, easing the key bank rate to 4.25 percent. This will help keep up interest in Toronto's important bank issues, analysts have said.
During the week, investors picked up the heavily weighted gold stocks as gold prices edged closer to the psychological high of US$400 on New York's COMEX, analysts have said.
Canadian forestry products were hot today with U.S. market players as well, said ScotiaMcLeod's director of investment research Jim Doak.
Nine of Toronto's 14 sub-indices rose, led by golds, forestry products, base metals and transports. Falling sectors included media issues, oils and utilities.
Advancing stocks outnumbered declining ones 481 to 371, while 310 traded flat.
Golds were among the most actively traded issues. Meridian Gold Inc. led the pack, rising C0.30 to C$6.20 on more than two million shares. It topped Toronto's most actives list.
Forestry products firm MacMillan Bloedel Ltd. gained C0.30 to C$20.00 in heavy trading.
Fertilizer firm Potash Corp. of Saskatchewan Inc. rose C$2.00 to C$106.00 on strong turnover.
",26
"Despite the Toronto Stock Exchange's steep decline this week, analysts expect Canada's biggest equity market to resume its upward march and continue outperforming Wall Street in the New Year.
Early on Friday, Toronto's key 300 Composite Index posted its largest intraday drop in nine years, losing 171 points or almost three percent to 5670.
It was Toronto's biggest intraday fall since a 176.5 point slide on October 22, 1987, a few days after the Black Monday market crash of October 19, 1987.
The index has slid from a record of 6018 on November 28.
Toronto stocks recovered partly by Friday afternoon, when they were down 40.55 points to 5801.20.
Toronto's losses on Friday were sparked by comments late Thursday by U.S. Federal Reserve Chairman Alan Greenspan that were interpreted as suggesting that U.S. equity markets may be overvalued.
Profit-taking also hit Toronto stocks this week as investors cashed in on recent spectacular gains.
Montreal-based investment adviser Ron Meisels forecast more weakness in the next few weeks, before a return to strength.
""I think Toronto will probably outperform New York in the first quarter of 1997,"" Meisels said.
Meisels said Toronto stocks traditionally outpace Wall Street in the late stages of a bull market as investors flock to Toronto's natural resource sector.
This year's boom has been fueled by U.S. economic growth and declining interest rates that prompted low returns on bonds and other fixed-income instruments, analysts said.
Toronto's key index has jumped almost 28 percent this year, versus a 23 percent gain by New York's Dow Jones Industrial Average.
Meisels said Toronto should also benefit later this year as Canadians make their annual contributions to tax-sheltered pension funds, many of which include mutual funds.
""There's an enormous amount of mutual fund money being committed to the market,"" ScotiaMcLeod's director of investment research Jim Doak said.
In the near term, Toronto could extend this week's 4.3 percent decline, some analysts said.
""I think we're looking at at least a (total) 10 percent correction,"" said MMS International analyst Katherine Beattie.
",26
"The Toronto Stock Exchange's key index turned in another solid performance on Friday, posting a fourth record close for 1997 and hitting a new intra-day high as well.
The TSE 300 Composite Index added 35.14 points to close at 6138.80 in a seven session winning streak. Trading again was brisk: 120.3 million shares moved worth C$1.85 billion ($1.38 billion).
The new lifetime high is now 6144.29 points.
""Stocks are terrific. Another up day, in Toronto, across the board,"" said Maison Placements Canada president John Ing. ""Gold stocks were very strong.""
Bullion prices managed to push heavily weighted golds higher. Comex February gold rose $1.40 to finish at $356.40 on Friday.
Toronto's market has also benefitted from a recent influx of cash. Canadians are turning some bank savings into tax sheltered pension funds ahead of an end-February deadline for 1996 retirement plans, analysts said.
Of Toronto's 14 sub-indices, all but three -- real estate, forestry products and utilities -- climbed. Consumer products, golds, conglomerates and media stocks surged the most.
Advancers outpaced decliners 603 to 430 while 263 traded unchanged.
Tiny Mineral Resources Corp. topped Toronto's most actives. Shares rose a cent to seven and a half cents after news it plans a takeover bid for ailing Anvil Range Mining Corp.
Canadian Occidental Petroleum Ltd. jumped 1.25 to 25.30 on nearly 3.5 million shares, helped by firmer energy prices.
Bre-X Minerals Ltd. slipped 0.30 to 24.40. It said it was reviewing Placer Dome Inc.'s C$5 billion ($3.7 billion) offer and comparing it to Barrick Gold Corp.'s unpriced bid.
Despite Bre-X's response, a source in the Indonesian mines ministry said the Indonesian government, which suggested a Bre-X-Barrick partnership, was not likely to approve Placer's plan. The government has the final say over which companies will develop the huge Busang gold deposit in Indonesia.
Placer shares gained 0.20 to 29.15 while Barrick rose 1.05 to 36.85.
",26
"Toronto's stock market ended lower on Wednesday, dragged down by Wall Street after U.S. high technology stocks were hit by profit-taking.
The Toronto Stock Exchange's key 300 Composite Index lost 33 points to end at 6112.41. Turnover was heavy at 130.5 million shares worth C$2.04 billion ($1.52 billion).
The Dow Jones Industrial Average lost 86.51 to close at 6746.90 as major high tech issues sold off, traders said.
North American markets were looking for an excuse to reap profits after recent highs, said portfolio consultant Ron Meisels.
Investors decided to sell after the U.S. Federal Open Market Committee decided to keep short-term interest rates unchanged as expected by analysts.
""In spite of the good news, people decided to take profits,"" Meisels said.
All but three of Toronto's 14 sub-indices slipped into negative territory. Transportation posted the biggest decline, followed by oils, golds and conglomerates. The TSE posted gains in pipelines, consumer products and real estate.
Declining issues outpaced advances 441 to 539 with 300 stocks unchanged.
Among active stocks, Morrison Petroleum Ltd. lost 0.15 to close at 10.15 on over three million shares. Morrison is still seeking a white knight to oppose a hostile takeover bid from Canadian 88 Energy Corp.
Canadian 88 shares rose 0.25 to close at 6.00 in active trading.
Bank of Montreal lost 0.50 to finish at 47.95 after hitting a new high of 49.15 earlier in the session. Canadian Imperial Bank of Commerce rose 0.70 to 63.40 on 1.7 million shares after reaching a 52-week peak of 63.95.
Potash Corp. of Saskatchewan Inc. continued to lose ground after Tuesday's drop, falling 4.50 to 105.00 on 86,000 shares.
",26
"Toronto stocks rallied to close higher on Tuesday, surging ahead on strength in the important resource sectors.
""Canadian gold stocks led Canadian stock prices higher,"" said Richardson Greenshields analyst Linda Lehman in a market report. The Toronto Stock Exchange's key 300 Composite Index jumped 33.32 points to reach 5150.89 points.
So far in August the key index has climbed out of its July lows to reach heights it has not hit since early June.
""We're not far from our highs,"" said P and C Holdings president Ron Meisels. Toronto's key index hit its all-time high of 5248 points on May 28, 1986.
At this point in the bullish economic cycle, market players are investing in resource stocks, Meisels said.
Trading reached 87.98 million shares valued at C$1.25 billion (US$910.4 million.)
Markets are also now debating whether the Bank of Canada will ease short-term interest rates since the U.S. Federal Open Market Committee did not raise rates at its meeting today, analysts have said.
Canada's central bank can risk the rate cut without excessively widening bond spreads between the two nations. This may help boost interest in equities.
Golds led all of Toronto's 14 sub-indices higher, gaining 1.38 percent. They were followed by transportation issues, base metals and media issues.
Advancing stocks beat out declining ones 507 to 361, while 275 traded unchanged.
Among active stocks, heavyweight Barrick Gold Corp. jumped C$0.35 to C$37.90.
Black Swan Gold Mines Ltd. was Toronto's most active stock in turnover of 2.7 million shares. The small prospector slipped 0.06 to 1.44 after recent strength as investors await drill results.
-- Reuters Toronto Bureau (416) 941-8100
",26
"The Toronto Stock Exchange's key index set records for a second straight session on Wednesday, achieving new closing and intra-day highs.
The TSE 300 Composite Index rose 10.48 points to end at 6065.34, after earlier setting an intra-day high of 6080.15.
Trading was brisk with 114.6 million shares changing hands worth C$1.7 billion ($1.27 billion).
A rally in Canada's currency boosted investor interest in equities. ""It is encouraging that we're up despite the 35-point drop in the Dow,"" said MMS International analyst Katherine Beattie.
The dollar strengthened by more than a full Canadian cent, ending at C$1.3413 (US$0.7456) from Tuesday's close of C$1.3519 (US$0.7397) and propelled the TSE to its second record close of 1997.
A bullish article on Canada in Britain's Financial Times newspaper sparked the rally, a dollar trader said.
Toronto posted gains in all but three of its 14 sub-indices -- forestry products, real estate and industrial products. The strong side was led by base metals, pipelines, banks and transports.
Advancing stocks outpaced declines 508 to 466, with 294 flat.
Small gold prospector Bre-X Minerals Ltd. was among the hotly traded stocks. Bre-X rose 1.10 to 24.45 on 2.2 million shares after Tuesday's announcement that Placer Dome Inc. offered a deal to share in the huge Busang gold deposit.
Placer finished flat at 28.10 while shares in Barrick Gold Corp., which is also negotiating a deal with Bre-X, dipped 0.40 to 35.05.
Investors shrugged off news that Indonesian businessman Jusuf Merukh had filed a C$2 billion ($1.49 billion) lawsuit in Canada against Bre-X, claiming part ownership of Busang.
Repap Enterprises Inc. fell 0.47 to 2.90 on doubts that its Avenor Inc. takeover would proceed.
Telecommunications firm Mitel Corp. jumped 0.90 to a new closing high of 10.10 after an analyst upgraded Mitel to buy from market perform and raised his 12-month target to 14 from 11.
Copper giant Rio Algom Ltd. fell 2.00 to 31.90 on 1.5 million shares after some investors decided to buy into a newly announced convertible debenture issue.
",26
"Toronto stocks ended softer on Monday after the important gold sector crumbled under the weight of falling bullion prices.
The Toronto Stock Exchange's key 300 Composite Index fell 31.70 points to 5984.97, below the 6000 level. Trading was brisk at 92.6 million shares, worth C$1.6 billion (US$1.2 billion).
The heavily weighted golds group lost more than 2.5 percent after bullion prices dropped in New York. February COMEX gold finished the day US$4.10 cheaper at US$370.90 an ounce.
""The gold index is finally bowing to reality"" after recent gains, said RBC Dominion Securities strategist Dunnery Best in a market report.
This year the TSE's 300 index has jumped about 27 percent since the start of trading, aided by a surge in gold stocks.
Ten of Toronto's 14 sub-indices finished weaker, led by golds and financial services. The gaining groups were conglomerates, transports, retail and pipelines.
""The banks were significantly weaker,"" one trader said. ""That's going to take the market lower.""
Falling issues powered ahead of advancing ones 596 to 380. Another 277 traded flat.
However, traders said today's weakness was a temporary blip ahead of more year-end gains. In the past mutual fund managers tended to shuffle portfolios before Christmas to provide a strong finish to their year, which has boosted equities markets, they said.
Among the hot stocks, shares in gold prospector Bre-X Minerals Ltd. were still volatile ahead of a potential partnership deal with Barrick Gold Corp. over Bre-X's huge gold discovery in Busang, Indonesia.
Bre-X dropped C$2.90 to C$17.75 on trading of nearly six million shares while Barrick, the world's third gold producer, lost C$0.95 to C$39.55, also in brisk dealings.
The nation's largest bank, Royal Bank of Canada, fell after influential U.S. investment firm Morgan Stanley & Co Inc. downgraded the stock to neutral from outperform, saying it was fairly valued. Shares in Royal closed C$0.85 weaker at C$49.00 after sky-rocketing this month.
Integrated oil company Suncor Inc. climbed to new year highs in Toronto as rumors circulated that it could be the target of a takeover bid. Suncor shares rose C$1.40 to C$60.30 in light trading.
",26
"The Toronto stock market ended weaker in brisk trading on Wednesday, pulled down by investor profit-taking in every sector except for surging golds.
The TSE's key 300 Composite Index dropped 30.08 points to 5910.65, losing ground for the third day in a row.
Since Monday the 300 index has fallen 106 points or more than 1.7 percent.
""The market is a little shaky right now, and I imagine there's some people taking profits,"" said MMS International analyst Katherine Beattie. Market players sold stocks to reap profits after big gains earlier this year.
Trading was brisk with 111.3 million shares changing hands worth C$1.8 billion.
""Another one of those middle-cycle corrections,"" said ScotiaMcLeod senior vice-president Fred Ketchen. ""I expect this to be short-lived.""
Ketchen said he expected Toronto to continue to rise since investors have nowhere to turn. Fixed income markets generally provide lower returns than equities, especially since Canadian interest rates have fallen dramatically this year.
The important gold sector rose nearly three percent today, which prevented a further decline in the index. The other 13 sub-indices were led lower by conglomerates, media, transports and banks.
Declining issues beat out advancing ones 581 to 428 while 272 were left unchanged.
Among the active stocks were Bre-X Minerals Ltd. and Barrick Gold Corp. Bre-X jumped C$1.30 to C$20.20 on more than five million shares.
Bre-X said today that it and Barrick have made some progress on an ownership deal over Bre-X's huge Busang gold discovery in Indonesia. The Indonesian government, which advised a joint venture between the two, has not yet extended today's deadline.
Barrick stock rose C$1.45 to C$39.30.
Northern Telecom Ltd. fell C$2.50 to C$84.30 in brisk dealings after news that delays in testing software would stall the roll-out of a personal communications network for Sprint. Officials said Nortel would not sustain a material financial impact from the delay.
Biovail Corp. fell C$2.35 to C$35.85. Partner Forest Laboratories Inc. said it would reduce inventory levels but Biovail said it would not affect inventories of its flagship hypertension drug Tiazac.
",26
"Canada's largest stock exchange's key index broke through the psychological barrier of 5500 points on Monday to a new closing high of 5518 points.
The Toronto Stock Exchange's 300 Composite Index rose 25.5 points to hit 5518 points by day's end, propelled by soaring gold issues and surging oil stocks.
The 300 Index reached 5000 points on Feb. 1.
Today, ""we have gone through the 5500 barrier,"" noted ScotiaMcLeod's senior vice-president Fred Ketchen.
Another trader said: ""There seems... to be foreign interest in Canada.""
Overseas investors are eyeing Canada's falling interest rates and declining deficit financing needs, analysts said.
Trading volume totalled 858 million shares valued at C$1.25 billion (US$929 million).
Advancing issues beat out declining ones 561 to 420, while 276 traded unchanged.
Nine of Toronto's 14 sub-indices gained ground, led by the heavily weighted gold sector, which rose 1.2 percent, and the oil group which jumped 1.7 percent, along with stronger base metals and media issues.
Falling groups included consumer products, conglomerates and forestry products.
Among Toronto's hot stocks were fertilizer firms. Viridian Inc. said it agreed to a friendly C$1.33 billion (US$988 million) merger with Agrium Inc.
Viridian shares jumped C$1.25 to C$17.75 on more than 4.1 million shares, while Agrium lost C$0.35 to hit C$18.55 in heavy dealings. The merger would create one of North America's largest integrated fertilizer firms.
Nickel giant Inco Ltd. jumped C$1.05 to C$41.80 in heavy trading, after it announced higher-than-expected third quarter earnings at US$0.19 a share compared to year-earlier US$0.33 a share.
Stampeder Exploration Ltd topped Toronto's most active stocks, rising C$0.10 to reach C$6.55.
",26
"This year's rally at the Toronto Stock Exchange, Canada's biggest equity market, will stretch through 1997 and may last until the turn of the century, analysts forecast.
""I think the Toronto Stock Exchange is in the middle of a bull market,"" said Michael Metz, chief investment strategist with Oppenheimer & Co Inc in New York.
Canadian equities investors have enjoyed spectacular gains this year. Toronto's key 300 Composite Index jumped as much as 28 percent in 1996 and was now up 21 percent after a correction this month.
By contrast, the Dow Jones Industrial Average, which Toronto generally tracks, was up 23 percent this year, down from a peak of 26 percent.
Analysts said Toronto's market -- the 10th most active worldwide -- would continue to benefit from poor bond yields, which make stocks more attractive.
Bond yields have dropped across the board this year, with 50 basis points shaved off the return of Canada's 30-year benchmark bonds.
Most of the seven analysts polled by Reuters said Toronto's 300 index next year would break its all-time high of 6018 points, set on November 28. The index was at about 5700 on Friday.
Analysts' median estimate for the 300 index was 6600 points by the end of 1997, rising to 7600 by 1998's close.
""We're in a general long-term uptrend,"" said Katherine Beattie, technical analyst for MMS International in Toronto. ""The stock market is still going to be the best place to invest given the relatively low interest rates.""
""We will start inching up, but even if we do get two or three interest rate hikes in the first couple of quarters next year - which I think is going to cause a correction in the markets - it's not going to put bonds or bills at a competitive enough level,"" Beattie said.
Fred Ketchen, senior vice-president at brokerage ScotiaMcLeod Inc, said Canadian equities were being snapped up by the large baby boom population, which was now focusing on generating wealth for retirement amid the uncertain future of government pensions.
""I think that basically we're into fairly firm markets right through until the end of the century,"" Ketchen said. ""Demographics are certainly helping here.""
Josef Schachter, president of Schachter Asset Management Inc, predicted Toronto's heavily weighted resource sectors could push the 300 index to 7000 by the end of 1997 and to at least 8500 a year later.
""I see (it) potentially higher than that if we can get precious metals...and base metals joining the party,"" Schachter said.
Montreal-based portfolio consultant Ron Meisels forecast th index would climb to 8000 by the end of 1998 and 10000 by the year 2000.
But some analysts were more bearish, with John Ing, president of Toronto-based Maison Placements Canada Inc, predicting the index would sink to 5750 by the end of 1997 and 5400 by the end of 1998.
Ing said interest rate hikes would cut short the party.
""The inevitable increase in rates has got to happen sometime within the next 12 months and that will test the markets,"" Ing said.
",26
"This year's rally on the Toronto Stock Exchange, Canada's biggest equity market, will stretch through 1997 and may last until the turn of the century, analysts forecast.
""I think the Toronto Stock Exchange is in the middle of a bull market,"" said Michael Metz, chief investment strategist with Oppenheimer & Co. Inc. in New York.
Canadian equities investors have enjoyed spectacular gains this year. Toronto's key 300 Composite Index jumped as much as 28 percent in 1996 and was up 21 percent after a correction in December.
By contrast, the Dow Jones industrial average, which Toronto generally tracks, was up 23 percent this year, down from a peak of 26 percent.
Analysts said Toronto's market -- the 10th most active worldwide -- would continue to benefit from poor bond yields, which make stocks more attractive.
Bond yields have dropped across the board this year, with 50 basis points shaved off the return of Canada's 30-year benchmark bonds.
Most of the seven analysts polled by Reuters said Toronto's 300 index next year would break its all-time high of 6,018 points, set on Nov. 28. The index was at about 5,700 on Friday.
Analysts' median estimate for the 300 index was 6,600 points by the end of 1997, rising to 7,600 by 1998's close.
""We're in a general long-term uptrend,"" said Katherine Beattie, technical analyst for MMS International in Toronto. ""The stock market is still going to be the best place to invest given the relatively low interest rates.
""We will start inching up, but even if we do get two or three interest rate hikes in the first couple of quarters next year -- which I think is going to cause a correction in the markets -- it's not going to put bonds or bills at a competitive enough level,"" Beattie said.
Fred Ketchen, senior vice-president at brokerage ScotiaMcLeod Inc, said Canadian equities were being snapped up by the large baby boom population focusing on generating wealth for retirement amid the uncertain future of government pensions.
""I think that basically we're into fairly firm markets right through until the end of the century,"" Ketchen said. ""Demographics are certainly helping here.""
Josef Schachter, president of Schachter Asset Management Inc., predicted Toronto's heavily weighted resource sectors could push the 300 index to 7,000 by the end of 1997 and to at least 8,500 a year later.
""I see (it) potentially higher than that if we can get precious metals ... and base metals joining the party,"" Schachter said.
Montreal-based portfolio consultant Ron Meisels forecast the index would climb to 8,000 by the end of 1998 and 10,000 by the year 2000.
But some analysts were more bearish, with John Ing, president of Toronto-based Maison Placements Canada Inc., predicting the index would sink to 5,750 by the end of 1997 and 5,400 by the end of 1998.
Ing said interest rate hikes would cut the party short.
""The inevitable increase in rates has got to happen sometime within the next 12 months and that will test the markets,"" Ing said.
",26
"Toronto stocks ended sharply lower on Thursday, pulled down by investor profit-taking and a sell-off in the heavily weighted gold issues.
The Toronto Stock Exchange key 300 Composite Index lost 43.9 points to end at 5922.2 points, after nearly touching the 6000-point level yesterday.
Ron Meisels, president of P & C Holdings Ltd, said some profit-taking was justified after the 300 Index's bold move upward this month.
Investors sold off some holdings to reap profits since the closely-watched 300 Index gained more than five percent since the beginning of November, Meisels said.
Trading was heavy, with 124 million shares turned over worth C$1.85 billion (US$1.38 billion).
An equities trader agreed. ""We could be in for a corrective phase here.""
Other analysts have said a pull-back was possible.
Weak gold bullion prices exacerbated the situation, dragging Toronto's gold stocks down. London gold prices dropped to their lowest level in nearly two years after heavy selling forced it through a technical support level of US$377 an ounce to as low as C$375.70.
Banks stocks, which also enjoyed recent gains, suffered from profit-taking, the trader said.
Only three of Toronto's 14 sub-indices rose: conglomerates, oils and pipelines.
The gold sector lost nearly 2.9 percent today, followed lower by banks, transports and consumer products.
Declining stocks raced ahead of declining ones 593 to 395. Another 272 traded flat.
Among the hot stocks, gold prospector Bre-X Minerals Ltd. was in the spotlight again after days of turbulent activity. Shares rose C$1.10 to C$23.70 on more than 2.7 million shares as investors eyed a November 22 deadline for the settlement of an ownership dispute over a huge Indonesian gold discovery.
Toronto-Dominion Bank lost C$1.15 to C$36.75 in heavy turnover.
Barrick Gold Corp., the world's third largest gold producer, lost C$1.15 to hit C$36.75 on Thursday.
",26
"The Toronto Stock Exchange closed weaker in heavy trading on Tuesday, hit by plunging gold stocks and a sell-off on Wall Street.
The TSE's key 300 Composite Index lost 44.24 points to finish the day at 5940.73. The Dow Jones Industrial Average in New York fell nearly 80 points to 6442, its largest loss in a single day since a 161-point drop in mid-July.
Toronto was also dragged down by its heavily weighted gold index, which fell 2.7 percent in the second day of a retreat.
""A dominant theme in Canadian markets today is gold,"" noted RBC Dominion Securities analyst Dunnery Best.
Turnover was brisk at 119.7 million shares worth C$2.1 billion (US$1.6 billion), Toronto's fourth highest trading value ever.
Analysts said Wall Street was submerged under a wave of profit-taking as investors decided to lock in profits and sell some stocks following recent gains.
All of Toronto's 14 sub-indices lost ground except for media and transportation. Golds led the weaker side, followed by conglomerates, base metals and utilities.
Gold stocks fell after bullion prices slipped in both London and New York.
Declining issues beat out advancing ones 575 to 424. Another 292 traded flat.
More losses may be seen ahead because investors will sell poorly-performing stocks to realize tax losses after a spectacular year, said Josef Schachter, fund manager and Schachter Asset Management Inc president.
""They usually plan on liquidating during this period of time, so they offset the gains they booked earlier in the year,"" Schachter said.
Shares in Bre-X Minerals Ltd., halted at the end of the day, were active today. Earlier the stock rose C$0.95 to C$18.70 on more than five million shares before the gold prospector announced it increased the resource calculation of its Busang gold discovery in Indonesia by 10.4 million ounces of gold to 57.3 million ounces.
Barrick Gold Corp. is still in the midst of negotations with Bre-X over ownership of the deposit. The Indonesian government set a December 4 deadline for a deal between the two.
Placer Dome Inc. and other miners said said they would challenge Barrick for control of Bre-X's discovery by pressuring the Indonesian government to allow competing offers.
However the Indonesian government said on Tuesday it was expected confirmation tomorrow of a deal between Bre-X and Barrick. It did not mention other potential partners. Barrick fell C$1.70 to C$37.85 and Placer dipped C$0.45 to C$30.60.
Potash Corp. of Saskatchewan surged C$5.05 to end at C$108.50. The fertilizer firm told clients it planed to riase domestic potash prices in mid-February.
",26
"Toronto stocks ended softer due to a sell-off in financial services on Wednesday, while the value of trading was the third-highest ever.
The Toronto Stock Exchange key 300 Composite Index fell 7.96 points to close at 5799.01 points, before setting a new intra-day high of 5816.40 points.
Trading volume was 133.2 million shares worth C$2.29 billion (US$1.7 billion). The TSE's highest trading value was C$2.53 billion (US$1.9 billion), set in April 1986.
RBC Dominion Securities analyst Dunnery Best noted that bank stocks were retreating from their recent rally.
""Weaker bond markets are fueling the shift away from the interest sensitives into the more glorious investing terrain of golds and the cyclicals,"" Best said in a market report.
Ron Meisels, president of P and C Holdings Ltd., added that a pause was warranted since the TSE 300 Index has added about 200 points since November 5.
""It would be quite normal and understandable for it to have a correction after such a robust move,"" Meisels said.
Toronto's 14 sub-indices were evenly split between rising and falling groups. Pipelines lost the most ground, followed by banks, utilities, and conglomerates.
Golds, base metals and communications led the strong side.
Advancing issues edged out declining ones 492 to 473 while 315 traded flat.
Among hot stocks, nickel giant Inco Ltd. rose C$1.80 to finish at C$45.95 in heavy trading.
Gold firm Euro-Nevada Mining Corp Ltd. topped net gainers, adding C$2.55 to close at C$42.80 in moderate trading.
Royal Bank of Canada lost C$0.95 to finish at C$45.05 in brisk trading, while Toronto-Dominion Bank fell C$0.75 to end at C$32.65.
Canada's largest publicly traded firm, telecommunications conglomerate BCE Inc., lost C$1.15 to close at C$62.60 on volume of about one million shares.
",26
"The Toronto Stock Exchange soared and posted its 53rd record close of 1996 on Wednesday, driven by excitement in interest-sensitive issues and conglomerates.
The key TSE 300 Composite Index rocketed 85.45 points to close at 5749.92 points on 118.1 million shares.
The value of shares traded on Canada's largest equity exchange was the third-ever highest at C$2.18 billion (US$1.64 billion).
Toronto reached its highest value traded in one day in 1986, the exchange said.
Toronto is ""a market that's generally under-owned in North America,"" said chief investment strategist Michael Metz of Oppenheimer & Co, Inc.
Canadian bank stocks have benefitted from foreign interest, especially after U.S. brokerage Morgan Stanley upgraded Toronto-Dominion Bank and Royal Bank of Canada this week.
""The multiple revision that has taken place is not pushing the (banking) group into untenable territory, rather it is a valuation range that the Canadian banks deserve, relative to their peers in the U.S.,"" Best said.
In today's action, all of Toronto's 14 sub-indices surged higher except for gold issues, which fell on slipping bullion prices.
The conglomerate group gained the most, adding more than five percent. It was followed by consumer products, banks and transports.
Banks and interest-sensitive issues were among today's most heavily traded stocks.
Bank of Montreal, Canada's third largest bank, jumped C$0.95 to C$45.00 on more than three million shares while smaller National Bank of Canada rose C$0.35 to C$14.25.
Another hot stock was Canada's largest publicly traded firm BCE Inc., which gained C$2.00 to C$64.20.
",26
"She once jokingly thought of calling her autobiography ""Fascist Bitch,"" and now Canadian journalists are wondering what epithet to use as she plays an expanding role in the country's largest newspaper empire.
British-born Barbara Amiel, the wife of Hollinger Inc. chairman Conrad Black, is an accomplished journalist who counts many fans in Britain, where she writes a rightwing shoot-from-the-hip column for the Daily Telegraph, the centerpiece of the Hollinger empire.
Although she honed her craft in Canada, she makes many Canadians bristle by standing out from the mass of generally liberal journalists. She says she has never managed to reap the accolades she desires from Canadians, the ones she routinely receives from the British.
A sought-after London party guest, Amiel now is in the Canadian spotlight through her position as vice president of editorial in her husband's newspaper empire. Hollinger added a majority shareholding in Southam Inc., the country's largest daily newspaper chain, to its media stable, substantially boosting its control to more than 40 percent of the industry.
The move left some Canadians worried about Hollinger's influence on their media and many Southam journalists fearful for their jobs as Black's well-known road to profits often involves cutting newspaper staff.
HUSBAND CAN SPEAK FOR HIMSELF
At a recent conference of journalists in Ottawa, Amiel, a former Toronto Sun editor, was repeatedly asked about Black's intentions. She replied that he could speak for himself. But she added, ""I think the Southam papers ... have not done their best but have terrific potential.""
Amiel, who still writes for Maclean's magazine, hesitated when asked if she was treated differently in Canada than abroad. ""I think Canada's been very good to me. I became editor of a newspaper, (former editor) Peter Newman gave me a column in Maclean's magazine, how many people have got that? You can't complain.""
But then she added, ""I've never, although one always wants it, had the recognition of my peers that I've had in England, but then maybe I didn't deserve it in Canada.""
Television personality Alan Edmonds, an admirer of Amiel who disagrees with her views, said Canadians have refrained from praising Amiel's talents because of her rightwing bias. ""In the years that she was in Canada ... the prevailing mindset in the media was in the opposite direction.""
Edmonds said other journalists were jealous of the openings that came her way. ""She's used her undoubted feminine attraction to ... create opportunities to use her undoubted superior intellect.""
In person and in print, Amiel has a knack for sparking debates. For instance, she once wrote that Quebec's moves toward independence, culminating in a narrow 1995 defeat for the separatists, could be blamed on Canada's liberal elite, which promoted multi-culturalism, thereby strengthening French-Canadian nationalism.
CASTIGATING LEFTWINGERS
Her columns have castigated Ontario's former leftwing government, led by the New Democratic Party, for allegedly being swayed by special interest groups like the disabled. She also wrote that Ontario, which gave homosexual couples the same rights as heterosexual ones, had weakened the family.
Canada's most widely read satirical magazine, Frank, noted ""a favorite theme in her columns is the insidiousness of self-pity, that the poor should get on with their lives and quit carping about it."" And columnist Allan Fotheringham once observed, ""Barbara Amiel, otherwise known as Mrs. Conrad Black, can take out any opponent in the world and eat them for breakfast. As she does regularly in print.""
Amiel has even joked about her reputation, saying she thought about calling her surprisingly frank 1980 autobiography ""Fascist Bitch,"" a name suggested by irate readers. Instead the book was titled ""Confessions.""
Now in her mid-50s, the much-married Amiel began her path at the tender age of eight at a ""grotty little newspaper"" in her hometown of Hendon, England. Her parents divorced, her mother remarried and her new Canadian stepfather dragged his new family back home. Amiel, used to fine surroundings, ended up in Hamilton, a gritty steel town in southern Ontario about 40 miles (70 km) from Toronto.
Before her 1991 marriage to Black, she was married to student Gary Smith, philosopher George Jonas and cable magnate David Graham, with whom she returned to England in 1985.
In 1993 well-known Canadian author Margaret Atwood published ""The Robber Bride"" about a scapel-assisted femme fatale named Zenia. The Canadian rumor mill identified Amiel as the model for Zenia, but she denied it.
",26
"A small but growing number of Canadians intend to raid the electronic halls of the Internet for holiday gift-buying instead of strolling through local malls, according to a new survey.
Three percent of Canadians with access to the worldwide computer network said they planned to buy a gift using the Internet, a Deloitte & Touche Consulting Group survey said this week.
""It's 3 percent. It's much more than zero, one or two,"" said Augustin Manchon, a retail and consumer business consultant.
About 3 million Canadians will have access to the Internet by year-end, according to Michael O'Neil, senior vice-president of marketing research firm International Data Corp.
Once they are on the net, Canadians will have access to some 700 electronic malls, Manchon said.
Jason Zandberg, Pacific International Securities Inc. analyst, said that online shopping is starting to evolve. However, ""it's not going to replace walking to a store and buying something.""
Many people still like to feel the items they buy.
Recently International Business Machines Corp. unveiled partnerships to develop an Internet retailing outlet that would include a Web site for Canada's largest department store chain, Hudson's Bay Co..
Americans are more progressive than Canadians when it comes to online shopping but not by much, Manchon found. ""(Interest is) still slightly under the U.S. but it's not bad for the first or second year,"" Manchon said.
Manchon also said that up to half of the people who have access to the Internet, estimated at 40 million worldwide, have already bought something using their computers.
And more retailers intend to take advantage of this increasing Internet use, the survey found.
Thirty percent of retailers said they're going to invest in the next few months in Internet-related technologies whereas only 16 percent said that last fall.
""So that's a dramatic increase,"" Manchon said.
Popular shopping items online tend to be electronic goods, which consumers like to comparison-shop, price-sensitive products and everyday purchases such as toothpaste and cleaning powders, Manchon said.
Companies such as Wal-Mart Stores Inc., the United States' largest retailer, have used the Internet to collect research about customers and test new products before installing them on their shelves.
Manchon also said Canada's retailers were expecting a better holiday season compared to last year's dismal showing. ""The optimism is growing from month to month,"" Manchon said.
""It shows in the numbers of several retailers that we know,"" Manchon said. ""We can confirm that numbers of many of them are going up, slowly.""
",26
"The Toronto stock market ended weaker in brisk trading on Thursday, hit by a sell off in Canadian bonds and heavily weighted bank stocks.
The Toronto Stock Exchange's key 300 Composite Index fell 68.54 points to close at 5842.11, down almost 1.2 percent. Trading totalled 108.3 million shares worth C$1.9 billion (US$1.4 billion.)
""It was a bond-led downdraft,"" one trader said of today's market action.
Canadian bonds recorded their biggest one-day drop in more than two years. Investors sold off bonds with Canada/U.S. spreads at near record lows, while a flood of new corporate supply also depressed bonds today, traders said.
Weakness in Canada's currency also helped spark the bond sell-off. The 30-year benchmark bond fell C$3.17 to C$110.85 to yield 7.086 percent.
""This is a made-in-Canada meltdown,"" RBC Dominion Securities analyst Dunnery Best said in a stock report.
Investors are now likely to buy more natural resource stocks after selling holdings in the financial services, one trader said. ""This signals a rotation out of the interest sensitives to some more cyclical names,"" he said.
The shift already started, with stronger golds helping restrain Toronto's fall.
Of Toronto's 14 sub-indices, banks fell the most at 3.65 percent, followed by media, utilities and pipelines. Financial services and banks are the most important group on the index.
Golds, real estate, and retail rose.
Falling issues powered ahead of advancing ones 600 to 407, while 284 traded flat.
Among hot stocks, the Canadian Imperial Bank of Commerce fell C$2.50 to C$57.00 on 1.7 million shares. Canada's second largest bank reported net profits rose to almost C$1.4 billion for 1996 from C$1.0 billion last year.
The Bank of Montreal, Canada's third largest bank, fell C$2.00 to C$40.40 on 1.8 million shares.
Bre-X Minerals Ltd. and Barrick Gold Corp. were heavily traded.
Bre-X, which has been advised to do a deal with Barrick over the ownership of its huge Busang gold discovery by the Indonesian government, said it is seeking clarification on what kind of arrangement it should negotiate.
Bre-X shares ended flat at C$20.00 while Barrick rose C$0.95 to C$40.25.
",26
"Toronto stocks ended weaker in light trading on Thursday, swept lower by a downdraft in the oil and gas sector.
Toronto's key 300 Composite Index fell 40.52 points to 6071.89. Trading was lackluster at 107.3 million shares worth C$1.4 billion ($1.04 billion).
""Toronto committed suicide,"" said portfolio manager Josef Schachter. ""The oils and golds ... got clipped and took the market lower,"" he said.
Oils took a beating after March Nymex oil lost US$0.81 today to close at US$23.10 a barrel. The TSE's energy group surrendered 172 points, leading 11 of 14 sub-groups lower.
The heavyweight gold sector also fell along with softer bullion prices in New York. Comex April gold lost US$1.30 to close at US$345.10 an ounce.
The three strong sectors were real estate, transportation and retailing.
Declining stocks edged out advances 545 to 402 while 276 issues were unchanged.
Schachter said he expected the downdraft to continue for the next few sessions, pulling the Canadian market down by another 100 points. However, oil stocks may bounce back if the rest of the North American winter remains cold and demand for energy improves.
Among active stocks, oil producer Canadian Natural Resources Ltd. fell 1.95 to close at 34.25 on 2.6 million shares.
Food services firm Cara Operations Ltd. topped Toronto's most-active list. Its class A stock gained 0.35 to close at 4.10 on 6.6 million shares after reporting stronger third quarter earnings.
Among active golds, Barrick Gold Corp. fell 0.60 to close at 35.25 on 1.7 million shares.
",26
"Several large-capitalization Canadian stocks could benefit, while others may be hurt when the Toronto Stock Exchange changes rules governing control blocks in its key 300 Composite Index on Friday.
Stocks such as Barrick Gold Corp, funeral home operator Loewen Group Inc and energy firm Petro-Canada should get snapped up by fund managers when the rules change, analysts said.
""Index funds, which try to match the weighting of the index, are going to have to scramble to buy X percent more Barrick shares...by Friday,"" said an analyst who declined to be identified.
The Toronto Stock Exchange, which handles more than 80 percent of Canada's equity trading, will increase the relative weighting of 30 stocks on Friday by raising the level of control blocks to 20 percent from 15 percent.
The change will take effect at the start of trading on Friday.
Relative weighting describes the impact a stock or sub-group has on the overall TSE 300 Composite Index.
A control block is a group of shares owned by a single entity. Control blocks are not considered part of a stock's weighting because these shares cannot freely trade in the market.
Under the new rules, the federal government's 18.26 percent holding in Petro-Canada Inc will be included in the company's overall float. Petro-Canada's will therefore see its weighting rise to 1.22 percent from about 1.03 percent.
The TSE is changing the definition of a control block to comply with Ontario Securities Commission reporting rules, said Tara O'Donnell, director of derivative markets management.
The Ontario Teachers' Pension Plan Board, one of Canada's biggest pension fund managers, will need to make some changes, said Zev Frishman, manager of quantitative products.
Teachers' has almost C$45 billion in assets with a third of its money in Canadian equities.
""I cannot go into specific numbers or anything like that, but in essence we will have to, to some extent, adjust positions,"" Frishman said.
Barrick will likely be one of the stocks snapped up, analysts said.
Barrick, which is 15.7 percent owned by Trizec Hahn Corp, will now be weighted based on 100 percent of its shares from 84.3 percent. As a result, the world's third largest gold producer will see its relative weighting in the TSE 300 increase to 3.28 percent from 2.84 percent.
Loewen's weighting will jump to about 1.74 percent from about 0.64 percent, after a control block held by chief executive Raymond Loewen and his wife is included.
Ontario Municipal Employees Retirement Services (OMERS) said it expected the control block changes to have little impact on its funds.
""You have to remember that the actual changes relative to the market overall are quite small,"" said Tom Gunn, senior vice-president of OMERS' investment division.
The list of 30 affected stocks also includes gold producer Franco-Nevada Mining Corp Ltd, Quebecor Printing Inc, publisher Hollinger Inc, energy firm Gulf Canada Resources Ltd and Shaw Industries Ltd.
Others are Astral Communications Inc, BC Sugar Refinery Ltd, CCL Industries Inc and Co-Steel Inc, Corel Corp, Cognos Inc, Cinram Ltd., Edper Group Ltd and First Marathon Inc and Tee-Comm Electronics Inc.
",26
"The chief executive of Zellers, a major Canadian retailer, aims to boost sales per square foot by more than a third over three years as the discount chain seeks to regain market leadership from U.S. invader Wal-Mart.
Millard Barron, a former executive at Wal-Mart Inc. - which ousted Zellers as Canada's top discount store chain -- told Reuters in a recent interview he planned to increase sales from C$157 ($117) a square foot for fiscal 1997 ending Jan. 31.
""We are at least a third below where we should be. We should be (C$)225 ($168) to (C$)250 ($187) a square foot and my goal is (that) over the next three years,"" said Barron, who took the top job at Zellers last September.
Zellers is a unit of Toronto-based Hudson's Bay Co., the owner of Canada's biggest department store chain.
Wood Gundy retail analyst David Brodie called Barron's goal ambitious.
""Wal-Mart has the momentum. These guys (Zellers) don't,"" said Brodie, who estimated that Wal-Mart had sales of C$220 ($164) a square foot in Canada, a number Barron called ""overstated.""
Brodie estimated Zellers' market share had fallen to 42 percent since Wal-Mart's arrival in 1994 from about 50 percent. Wal-Mart's Canadian market share was estimated at about 43 percent.
Barron landed the chief executive's job at Zellers at a crucial time. The company's operating profit was halved by the arrival in Canada of Bentonville, Ark.-based Wal-Mart, America's biggest retailer.
Zellers' fiscal 1996 operating profit plunged to C$106.7 million($79.8 million) from C$215.6 million ($161.2 million) in 1995.
Barron said his mission was to improve technology and communications, move more staff to the sales floor, pay more attention to rural stores and renovate the chain's 299 outlets.
He did not forecast fiscal 1998 sales, but said Zellers would post fiscal 1997 revenues of about C$3.4 billion ($2.5 billion), versus C$3.5 billion ($2.6 billion) in fiscal 1996.
He said that crucial holiday sales in December jumped by double digits for the first time in three years.
Barron said that Zellers' capital spending would increase to between two and three percent of fiscal 1998 sales. Retailers usually spend one to two percent.
About 20 percent of planned capital spending would be for technological upgrading, with Barron saying Zellers was four years behind other retailers in technology.
""By the end of 1997, we will be as technologically proficient and productive as any retailer in North America,"" Barron said.
Zellers said Canada would open up to 12 stores this year, expand 10 and update up to 70.
",26
"Toronto stocks ended softer on Thursday but avoided the massive sell-off on Wall Street as heavyweight bank and transport issues restrained losses in the Canadian market, analysts said.
The Toronto Stock Exchange's key 300 Composite Index slipped 18.16 points to end at 6040.51, while the Dow Jones Industrial Average dropped 94.28 points to 6755.75.
Trading was brisk with 117 million shares changing hands worth C$2.19 billion ($1.63 billion), the fourth highest on record.
""This is mostly a Dow-blue chip sell-off,"" one trader said.
Strength in the TSE's financial services and transport sectors restrained Toronto's decline.
Computer trading programs drove Wall Street lower after selling was triggered by fears that the Dow was reaching stratospheric levels, traders said.
""They were hysterically euphoric in the morning and hysterically nervous in the afternoon,"" said Oppenheimer & Co. Inc. chief investment strategist Michael Metz.
Traders attributed some of the bearish sentiment to news that investment strategist Elaine Garzarelli had turned bullish on U.S. stocks, reversing her call for a 10 to 15 percent correction. Traders said this latest conversion to the bull camp raised concerns among some investors.
Of the TSE's 14 sub-indices, 10 lost ground led by media, golds, base metals and utilities. Gaining sectors included transports, real estate and financial services.
Declining stocks outpaced advances 525 to 456 with 288 issues unchanged.
--- HOT STOCKS ---
* Agrium Inc. topped the most-active list, rising 0.60 to 20.50 on 3.9 million shares. Agrium announced plans for a share buyback and US$300 million debt issue on Thursday.
* In financial services, Royal Bank of Canada slipped 0.10 to 49.80 on 3.0 million shares. The bank urged shareholders to reject an activist's proposals to limit senior executive pay at its annual meeting in March.
Among other banks, Canadian Imperial Bank of Commerce rose 0.60 to 59.10, while Bank of Nova Scotia improved 0.10 to 46.75.
* Gold miner Placer Dome Inc. sank 0.70 to 26.90 after announcing a construction delay at its Las Cristinas gold mine in Venezuela.
",26
"The Toronto Stock Exchange's key index closed at new highs for the third consecutive session on Thursday, soaring into record territory and ending above the 6,100 point level.
The TSE 300 Composite Index climbed 38.32 points to end at 6103.66, after earlier reaching a new intra-day high of 6112.32.
Toronto, which set records for the third time this year, was boosted by stronger gold stocks. Portfolio consultant Ron Meisels said investors were looking to snap up cheap gold issues which had recently weakened on plunging bullion prices.
Bullion prices have weakened since Monday on news that the Dutch central bank had sold 300 tonnes of gold reserves.
""Despite the decline in the price of gold, gold stocks have done reasonably well,"" Meisels said. ""People could have gone bargain-hunting today.""
Trading was heavy at 121.9 million shares worth C$2.09 billion ($1.56 billion).
Almost all of Toronto's 14 sub-indices rose except for four -- conglomerates, pipelines, forestry products and real estate. Golds led the strong side, followed by oils, banks and consumer products.
Advancing stocks outpaced declines 591 to 400 with 278 issues unchanged.
Among the active issues, Bre-X Minerals Ltd. jumped 0.25 to 24.70 on 2.3 million shares, as some investors laid bets on whether the junior miner would merge with Placer Dome Inc. Placer recently offered to partner with Bre-X to develop the huge Busang gold deposit in Indonesia. Barrick Gold Corp. is also bidding to develop the site with Bre-X.
However Bre-X's fate is in the hands of the Indonesian government, which has the final say on any deal. Placer shares soared 0.85 to 28.95 while Barrick jumped 0.75 to 35.80.
Wascana Energy Inc. topped Toronto's most actives, gaining 0.40 to 16.10 on 3.4 million shares.
Potash Corp of Saskatchewan Inc. fell 2.35 to 113.55 after J.P. Morgan Securities cut its rating on Potash to market perform from buy.
",26
"The Toronto Stock Exchange posted another record close on Wednesday on the back of stronger financial service and conglomerate stocks.
The TSE's key 300 Composite Index rose 10.85 points to 5986.41 in heavy trading. Trading volume was 108.2 million shares worth C$1.9 billion (US$1.4 billion).
Of Toronto's 14 sub-indices, eight rose led by conglomerates, banks, pipelines and media.
""This is an interest-sensitive area and where buyers tend to conglomerate,"" said ScotiaMcLeod senior vice-president Fred Ketchen.
Falling sectors included oils, transports and real estate.
Barrick Gold Corp. led Toronto's active issues after news on Tuesday of a deal which will give it a majority share in a rich Indonesian gold deposit.
One dealer said he had only traded Barrick -- the world's third largest gold producer -- and Bre-X Minerals Ltd. which discovered the Busang gold deposit.
""I think both are buys at this point in time,"" he said.
Bank stocks were snapped up by investors as Canada's Big Six banks began reporting year-end earnings this week.
Bank of Nova Scotia posted its first C$1 billion ($750 million) annual profit on Wednesday.
On the broader market, declining stocks edged out advances 556 to 437, despite gains in the key index. Another 294 shares were unchanged.
U.S. markets will be closed on Thursday due to the U.S. Thanksgiving holiday.
--- HOT STOCKS ---
* Barrick Gold rose 0.75 to 39.65 on more than 7.1 million shares, while Bre-X Minerals gained 0.65 to 21 on 6.5 million shares.
* Bank of Nova Scotia climbed 0.20 to 46.05 on 745,000 shares. Toronto-Dominion Bank jumped 0.80 to 36.85 in heavy turnover of 1.3 million shares.
T-D Bank is scheduled to report its fourth quarter results on Thursday.
* Newbridge Networks Corp. jumped 1 to 38.60 on 1.5 million shares. The stock regained some lost ground since analysts' downgraded Newbridge last week.
",26
"The Toronto Stock Exchange's key 300 Composite Index rallied to close at a new all-time high of 6055 points on Tuesday, posting its first such record in 1997.
The influential index jumped 53.38 points to end at 6054.86 in brisk turnover of 129.3 million shares worth C$2.1 billion ($1.55 billion).
It busted through a previous record of 6018.65 points set on November 28, 1996, partly powered by a Wall Street rally.
Wall Street rose 53.11 points to close at 6762.29 on stronger-than-expected fourth quarter earnings from computer chip maker Intel Corp. Earnings per share jumped to $2.13 from a year-earlier $0.98.
Today's rally in Toronto was also aided by the start of the 1996 pension season, when Canadians rush into last-minute investing in tax sheltered funds before the traditional end-February deadline.
""The RRSP (Registered Retirement Savings Plan) season is beginning,"" said Midland Walwyn's director of private client investing Dunnery Best.
Fund manager Josef Schachter of Schachter Asset Management said that managers have been cautiously eyeing the market and waiting on the sidelines but have been forced to invest since more fund money will soon arrive. ""They're sitting on too much cash,"" Schachter said.
All of Toronto's 14 sub-indices spiralled upward, except for golds which tumbled on lower bullion prices.
The consumer products sector soared 3.0 percent, followed by conglomerates, transports and base metals.
Advancing issues outnumbered decliners 514 to 443 and another 299 traded flat.
Takeover targets hogged the spotlight. Gold prospector Bre-X Minerals Ltd. soared 1.90 to $23.35 on today's news that Placer Dome Inc. proposed a rival merger bid to Barrick Gold Corp.'s joint-venture offer. Placer shares slipped 0.90 to $28.10 while Barrick fell 0.95 to 35.45.
The Indonesian government originally suggested Barrick and Bre-X team up to develop the deposit but Placer was encouraged to bid for Bre-X by some Indonesian sources.
Morrison Petroleums Ltd. rose 0.20 to 10.15 and was Toronto's most active stock. It is expected to fight a hostile bid from smaller oil firm Canadian 88 Energy Corp., announced on Monday.
",26
"The Toronto stock market closed softer for a third straight day on Wednesday, depressed by losses on Wall Street.
""Canada very often is just following New York,"" said Montreal-based portfolio consultant Ron Meisels.
The Toronto Stock Exchange's key 300 Composite Index fell 17.31 points to close at 6058.67. Trading was brisk on turnover of 123.1 million shares worth C$1.97 billion ($1.47 billion).
Wall Street was volatile after analysts were disappointed with fourth quarter earnings from computer giant International Business Machines Corp., they said.
Toronto's three-day decline is considered a healthy breather after strong gains earlier this year, Meisels said. ""A pause is perfectly natural.""
Toronto's 14 sub-indices were equally split between gaining and losing ones. The weaker side was led by battered golds, oils, base metals and consumer products. Stronger sectors included media, transports and pipelines.
Declining stocks outnumbered advances 559 to 450 while 271 traded unchanged.
Shares in the nation's largest airline Air Canada rose 0.75 to 8.00 on ten million shares. Investors were comparing Air Canada's favourable outlook with financially troubled competitor Canadian Airlines Corp. as both waded back into a profit-cutting seat sale, one analyst said.
Small prospector Golden Rule Resources Ltd. rose 1.10 to close at 12.00 on speculation about a property in Ghana.
Barrick Gold Corp. slipped 0.60 to 35.55 after news that potential partner Bre-X Minerals Ltd. said it acknowledged the 30-day deadline provided by the Indonesian government and will strive to resolve issues with its Indonesian partners. Bre-X shares rose 0.05 to 22.65.
",26
"Lower profits from base metals producers are clouding the otherwise improving corporate earnings picture for Canadian companies in the third quarter, analysts said.
Richardson Greenshields of Canada analyst Dunnery Best forecast ""very substantial declines in earnings"" for major base metal firms.
""I think almost everywhere else you're going to see improvements year-over-year,"" Best said.  
Canada's third-quarter earnings season kicks off when Alcan Aluminium Ltd reports on Thursday.
Best said he expected Alcan third-quarter earnings to fall to US$0.35 a share from year earlier US$0.61 a share, which came before an extraordinary loss of US$1.24 a share for an asset writedown.
""There's some concerns that the metal group may not exactly report the (expected) numbers,"" Griffiths McBurney analyst Greg Misztela said.  
Companies such as Inco Ltd, Noranda Inc and Falconbridge Ltd would likely see earnings declines, Best said. A likely exception was Teck Corp, which Best said ""has a lot of coal in its production lineup and coal's been strong, so that will be the one offset.""
Investors had anticipated disappointments, causing metal stock prices to slide after second-quarter earnings were hit by a drop in copper, nickel and other prices.  
Markets were rocked in mid-June by the news that Sumitomo Corp fired its head copper trader after he allegedly ran up a US$1.8 billion loss.
Analysts forecast that Canada's major banks would lead the pack in earnings gains. The banks are expected to report their results for the fourth quarter ended October 31 in early December.
""They'll have a very good year-over-year comparison. I think quarter-over-quarter won't be quite as good,"" said Royal Bank of Canada vice-president of equities John Kellett.  
The six big banks, including Royal Bank of Canada and Canadian Imperial Bank of Commerce, have posted a string of record profits in recent years.
Best said Richardson Greenshields had increased earnings estimates for Canadian Imperial Bank of Commerce six times so far this year.
Consumer products earnings will also rise, analysts said.
Another strong area will be Canada's important gold sector, which was buoyed by firmer bullion prices.
Earnings at energy firms will be fueled by higher crude oil prices, analysts said.  
Retail firms will benefit from recent cuts in short-term interest rates by Canada's central bank, spurring consumers to borrow and shop. ""Bit by bit the underpinnings are being put in place for a more confident consumer that would eventually lead to better times,"" Kellett said.
Some high-technology firms have said they would report losses in the upcoming quarter, including Gandalf Technologies Inc and Corel Corp, due to problems getting their products to market.  
Technology heavyweights such as Northern Telecom Ltd and Newbridge Networks Corp will see higher earnings, Best said.
-- Reuters Toronto Bureau 416-941-8100
",26
"The Toronto market was boosted to another record close on Tuesday by strong buying interest in Barrick Gold Corp. after news broke that it is negotiating to gain control of a huge gold deposit in Indonesia.
The Toronto Stock Exchange's key 300 Composite Index gained 23.15 points to end at 5975.56. Turnover was heavy, with 123 million changing hands worth C$2.12 billion (US$1.58 billion). Trading value was the fifth highest ever.
Barrick Gold, the world's third largest gold producer, announced that it was in talks with Bre-X Minerals Ltd. over its massive Busang discovery in Indonesia.
The market opened stronger, turned mixed at midday but surged again after Barrick and Bre-X announced their negotiations. The Indonesian government had asked Bre-X to form a joint venture with Barrick.
""That pulled the gold and precious metals sub-sector higher,"" said MMS International analyst Katherine Beattie.
Barrick, the world's third largest gold producer, has a relative weighting of 3.28 percent on the TSE's list of its top 300 stocks. Relative weighting describes the impact a particular share issue has on the 300 list.
Bre-X, which saw its shares tumble, is not included in the TSE 300 index.
Ten of Toronto's 14 sub-indices rolled higher, led by golds, transports, consumer products and real estate issues.
Sectors which lost a bit of ground were media, base metals, oils and forestry products.
On the broader market, declining issues still outpaced advancing ones 553 to 412. Another 305 traded flat.
Barrick rose C$2.45 to close at C$39.00 while Bre-X fell C$2.20 to end at C$20.35. Bre-X topped the most actives list, with 8.2 million shares traded, followed by Barrick at 5.9 million shares.
Other active stocks included Newbridge Networks Corp., which fell after brokerage Merrill Lynch cut the stock's rating to near-term neutral from near-term accumulate. Shares in the high technology products maker fell by C$2.25 to reach C$37.60.
The Bank of Montreal, which is Canada's third largest bank, slipped after it announced record yearly profits as expected. Annual profit soared past C$1 billion (US$745 million) but the stock, which had surged in recent weeks, dipped C$0.45 to C$44.20.
",26
"The Toronto stock market posted its sixth record close of the year on Tuesday, led by a rally in Canada's so-called Big Six banks.
Toronto's key 300 Composite Index rose 4.48 points to close at 6145.41 in turnover of 115.4 million shares worth C$1.8 billion ($1.3 billion).
Investors snapped up banks and other financial service stocks in anticipation that the U.S. Federal Open Market Committee will announce it is keeping short-term interest rates unchanged following a two-day meeting which ends on Wednesday, analysts said.
""The most exciting group today was none other than the financial services,"" said RBC Dominion Securities investment advisor Ira Katzin.
""The feeling is that interest rates are not going to rise,"" he said.
Advancing stocks outpaced declines 506 to 464 while another 303 issues were unchanged.
The banks led Toronto's six strong groups with a 1.8 percent gain, followed by pipelines and utilities. The TSE's eight weak sectors included media, golds and oils.
--- HOT STOCKS ---
* The Bank of Montreal, Canada's third largest bank, jumped 1.15 to finish at 48.85 on more than two million shares. Bank of Nova Scotia gained 1.40 to close at 50 on 491,000 shares.
* Junior minerals explorer Pure Gold Resources Inc. continued to lead active stocks, rising 0.05 to 0.415 on 7.6 million shares.
* Potash Corp. of Saskatchewan Inc. fell 3.50 to 109.50 on turnover of 197,000 shares, depressed by weak potash prices.
ScotiaMcLeod analyst Sam Kanes said Russia has been exporting potash at cheaper rates recently.
""It's the number one competitor for Potash in Saskatchewan for the moment and they continue to sell their potash at aggressive pricing,"" Kanes said.
",26
"Toronto's stock market extended Friday's rally and closed firmer on Monday, boosted by stronger oil and gold issues to end under its all-time high of 6018 points.
Canada's largest equity market closed barely above the watershed 6000 point mark, up 16.55 points at 6001.48. Turnover was brisk at 111.7 million shares worth C$1.58 billion ($1.17 billion).
ScotiaMcLeod's senior vice-president Fred Ketchen noted ""the stock market didn't do too badly today.""
Despite a rally in oils, Toronto could not breach its all-time high of 6018 points, set on November 28, 1996.
Oils were in focus after Canadian 88 Energy Corp. said it would launch a C$652 million ($476 million) takeover offer for much larger Morrison Petroleums Ltd.
""That added a little juice to the oils sector,"" Ketchen said.
On the broader market, only four of Toronto's 14 sub-indices lost ground: consumer products, conglomerates, pipelines and base metals. The gaining sectors were led by oils, golds, transports and industrial products.
Advancing stocks outnumbered decliners 544 to 435 and 294 traded flat.
Among active stocks, Morrison Petroleums topped Toronto's most actives, gaining C$1.45 to hit C$9.95 on more than 14.7 million shares. Canadian 88 Energy slipped C$0.30 to C$6.45 in light dealings.
Canada's largest department store retailer, Hudson's Bay Co., saw shares rise C$0.75 to reach C$24.10 in two large block trades.
",26
"Canadian consumers are set to play Scrooge again this holiday season to the despair of long-suffering Canadian retailers, according to a survey of consumers by accounting firm Arthur Andersen.
""Overall, the holiday season will not be too much different from last year,"" said Anderson partner Frank Anderson, who heads the firm's consumer products division.
In 1995, Canadian retailers posted one of their worst holiday seasons in recent years, followed by an unseasonably cool spring that hurt sales and forced chains to discount their stock.
Many chains have said they are counting on the holidays to boost results in 1996.
In the survey released this week, 58 percent of respondents said they would spend the same amount as last year, while 28 percent forecast lower spending and 14 percent said they would spend more.
The survey by Arthur Andersen and Quebec firm Le Groupe Mallette Maheu polled 1,220 Canadians in the second week of October.
The results were little changed from last year's poll when 58 percent said their spending would equal 1994 levels, while 29 percent said they would spend less and 13 percent more.
The findings came despite Canada's lowest interest rates in almost 40 years after a series of rate cuts by the central bank and commercial lenders.
Anderson said this year's survey ""just shows you there's some underlying problems people have with respect to the level of debt and job security.""
Canadians have opted for paying down heavy debt loads rather than being spendthrift, he said. Many people still also fear for their jobs after years of layoffs, Anderson added.
""It's almost like (you are) looking for an excuse to curtail your spending,"" he said.
""But then again,"" he added, ""historically people have tended to say these things in October and then sort of spend normally when they get involved in the Christmas atmosphere.""
",26
"The Toronto stock market joined a rally in bonds and finished stronger on Friday, resisting a late session downturn in New York and weakness in heavyweight gold stocks.
Toronto's key 300 Composite Index rose 24.48 points to close at 6109.58. About 105 million shares changed hands worth C$1.48 billion ($1.1 billion).
""It's the strength in the bond market and the bill market,"" said MMS International analyst Katherine Beattie.
North American bonds rallied after U.S. gross domestic product data released early Friday suggested inflation is not accelerating. The data eased fears of higher U.S. interest rates following next week's rate-setting Federal Open Market Committee meeting.
Canada's benchmark 30-year bond jumped C$1.20 to close at C$109.15, yielding 7.215 percent.
The Dow Jones Industrial Average closed down 10.77 points at 6813.09, but partly recovered from earlier lows due to profit taking, analysts said.
In Toronto, the TSE suffered losses in only four of 14 sub-groups. The key gold sector lost 0.7 percent followed by conglomerates, transportation and base metals.
The strong side was led by retail, pipelines, forestry products and consumer products.
Advancing issues outpaced declines 539 to 436 with 290 stocks unchanged.
Among hot stocks, high technology firm Mitel Corp. fell 0.85 to 9.85 on turnover of 2.4 million shares after reporting relatively flat third quarter profits.
Northern Telecom Ltd. rose 2.25 to close at 99.50. Nortel said after the market closed on Thursday that it is bullish on Latin America and will seek further business in Mexico.
Takeover target Morrison Petroleum Ltd. fell 0.15 to close at 10.25 on 2.34 million shares as it battles a hostile bid from Canadian 88 Energy Corp.
Canadian 88's stock dipped 0.10 to finish at 6.30 on 142,000 shares.
",26
"Investors, who last week helped drive the Toronto Stock Exchange to its 50th record close this year, are unlikely to cool on Canadian stocks any time soon, attracted by Canada's improving economic fundamentals.
""Canada really has begun to address its deficit problems with rather Calvinistic virtue and I think this is going to help that market and also tend to focus other investors on the opportunities in Canada,"" said Michael Metz, chief investment strategist at Oppenheimer & Co. Inc. in New York.
Toronto's key 300 Composite Index set its 50th record high close last Thursday, the most in a single year since Canada's largest stock exchange began tracking such figures. The previous record was 45 record closes in 1987.
The 300 index has risen almost 19 percent this year.
After the stock market crash of Oct. 19, 1987, Toronto posted no record closes from 1988 through 1992.
But analysts said Toronto's latest bull run will likely extend to mid-1997.
""I don't think the run in the Canadian market is over by any means,"" said Metz.
""There's such a rosy view out there on Canada,"" said HSBC James Capel Canada strategist Bob Boaz.
""Inflation is low. The federal deficits are coming down, especially in relation to GDP (gross domestic product). Current account surpluses are happening. The political situation (Quebec separatism) has faded away and that has buoyed the Canadian dollar,"" Boaz said.
Canada's inflation rate is about 1.4 percent, while the federal government has forecast its yearly borrowing requirements will drop to zero in 1998/99 from C$28.6 billion ($21.4 billion) in 1995/96.
Booming exports have pushed Canada's current account to a surplus due for the first time since 1984.
Political uncertainty has also waned after last year's narrow loss by separatists in a referendum on independence for the French-speaking province of Quebec.
On Friday, Canada's dollar reached the 75 U.S. cent mark for the first time in a year.
""I think Canada's in a different situation"" than in 1987, Metz said. ""We're on the early stages of what I would call a boomlet worldwide, which is going to result in I think strengthening industrial and commodity prices, which I think are going to be very bullish for Canada.""
""I'm still tremendously bullish on stocks,"" said Boaz, who does not rule out the index hitting 6500 points by mid-1997.
The 300 index closed at 5,591.31 on Friday, down 7.51 points.
",26
"Investors, who last week helped drive the Toronto Stock Exchange to its 50th record close this year, are unlikely to cool on Canadian stocks any time soon, attracted by Canada's improving economic fundamentals.
""Canada really has begun to address its deficit problems with rather Calvinistic virtue and I think this is going to help that market and also tend to focus other investors on the opportunities in Canada,"" said Michael Metz, chief investment strategist at Oppenheimer & Co Inc in New York.  
Toronto's key 300 Composite Index set its 50th record high close last Thursday, the most in a single year since Canada's largest stock exchange began tracking such figures. The previous record was 45 record closes for all of 1987.
The 300 index has risen almost 19 percent this year.
After the stock market crash of October 19, 1987, Toronto posted no record closes from 1988 through 1992.
But analysts said Toronto's latest bull run will likely extend to mid-1997.
""I don't think the run in the Canadian market is over by any means,"" said Metz.  
""There's such a rosy view out there on Canada,"" said HSBC James Capel Canada strategist Bob Boaz.
""Inflation is low. The federal deficits are coming down, especially in relation to GDP (gross domestic product). Current account surpluses are happening. The political situation (Quebec separatism) has faded away and that has buoyed the Canadian dollar,"" Boaz said.
Canada's inflation rate is now about 1.4 percent, while the federal government has forecast its yearly borrowing requirements will drop to zero in 1998/99 from C$28.6 billion in 1995/96.  
Booming exports have pushed Canada's current account to a surplus for the first time since 1984.
Political uncertainty has also waned after last year's narrow loss by separatists in a referendum on independence for the French-speaking province of Quebec.
On Friday, Canada's dollar strengthened to the US$0.75 mark for the first time in a year.  
""I think Canada's in a different situation"" than in 1987, Metz said. ""We're on the early stages of what I would call a boomlet worldwide, which is going to result in I think strengthening industrial and commodity prices, which I think are going to be very bullish for Canada.""
""I'm still tremendously bullish on stocks,"" said Boaz, who does not rule out the index hitting 6500 points by mid-1997.
The 300 index closed at 5591.31 on Friday, down 7.51 points.
",26
"Eurotunnel Plc, the debt-laden Channel Tunnel operator, pledged on Monday to recover from the public relations disaster which followed last November's tunnel fire and said it expected to restore lost market share in 1997.
Speaking from Eurotunnel's Folkestone base in England, Patrick Ponsolle, chairman, outlined the group's review of 1996 with an update on sales and the debt refinancing in the aftermath of the fire which caused a partial shutdown of services in the key Christmas period.
Ponsolle assured investors that the financial fallout from last November's fire would not hit its debt rescue plan clinched in October 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 shareholder meeting to approve the debt plan has been delayed to June, when all tunnel services resume.
Eurotunnel said its banking syndicate had taken the opportunity of the delay to the meeting to ask the remaining syndicate of bankers to extend the debt standstill arrangement to December.
Richard Hannah, analyst at UBS, said ""The fact that the refinancing will not have to be restructured is the key message for investors.""
Eurotunnel also provided evidence of its sales surviving last year's fire, with passenger numbers sharply ahead and an ""encouraging"" outlook for 1997.
Ponsolle told the Folkestone press briefing that revenues in the fourth quarter of 1997 were expected to be ""substantially higher"" than the same 1996 period, making him ""cautiously optimistic"" for 1998.
The embattled Anglo-French group which recently restructured near to nine billion pounds in debt, said its efforts to claw back lost sales coupled with cutbacks in cross-Channel capacity by the ferry companies would fuel the rise in revenues.
In the first major trading review since the fire, the group 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.
Eurotunnel said once full services resumed in June it should be able to increase 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,"" added UBS' Hannah. Sales growth was in line with expectations.
Eurotunnel sought to stress that no damage had been done to consumer confidence by publishing the results of a commissioned Gallup survey which found 77 percent of French questioned and 68 percent of British believed the tunnel was safe.
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 coach 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 two pence to 78 in London and rose 20 centimes to 7.10 francs in Paris.
",38
"Anglo-French Eurotunnel SA/Plc on Wednesday sought to reassure the public about the safety of the Channel Tunnel following last week's fire which halted most rail services between France and Britain.
""There is no doubt the tunnel is at least as safe as other Channel transport systems,"" French co-chairman Patrick Ponsolle told a news conference.
A fire in a truck on a freight train seriously damaged a section of the tunnel on Monday last week, injuring 34 people and raising doubts over the safety of the cross-Channel service.
The Eurostar high-speed passenger train and Le Shuttle car and passenger services have been halted ever since, although a limited freight service has resumed.
""Safety is our first consideration, ahead of commercial considerations,"" British co-chairman Robert Malpas said. ""The emergency evacuation procedure which forms the backbone of the safety system worked after two other measures failed.""
The cause of the fire remains a mystery, although sabotage is seen as one possibility by the French magistrate investigating the fire.
""The judge has not ruled out the theory of foul play,"" said a Eurotunnel spokeswoman.
But legal sources said the idea that the fire was started deliberately was regarded as a remote possibility and not the most likely cause.
Ponsolle said Eurotunnel's maximum potential loss from the fire was five to seven million pounds ($8.40 million to $11.75 million).
""The ultimate maximum loss for the company after receiving insurance indemnities could be of the order of five or six or seven million pounds,"" he said.
Eurotunnel's monthly turnover before the fire was between 350 and 400 million francs ($67.75 million and $77.43 million). Loss of revenues would depend on the re-establishment of a partial service, he said.
If passenger and freight services resumed to 50-60 percent of previous capacity this would mean a maximum monthly loss of 200 million francs, Ponsolle said.
Eurotunnel's maximum insurance coverage is 1.5 billion francs for equipment and 4.5 billion for earnings losses, Ponsolle said.
Eurotunnel hopes to resume partial passenger service early next week, if the safety commission that oversees the tunnel approves a new set of temporary evacuation measures, Ponsolle said.
Because a two km (1.243 mile) section of one of the tunnel bores cannot be used for evacuation, the company is laying on special fire-fighting and ambulance crews on 24 hour alert, with two wagons for extricating passengers.
The train which was destroyed in the fire was worth nearly 100 million francs and repairs to the tunnel and related equipment would cost between 200 million and 500 million. But Eurotunnel is awaiting the results of insurance investigations into the costs of the fire.
Ponsolle said the blaze should not affect a complex plan to restructure the company's 70 billion francs of junior bank debt which took a year to negotiate.
""There is no reason for us to put into question the restructuring,"" he told reporters.
""We do not see at this stage there needs to be any delay in the rescheduling of the debt,"" Malpas told Reuters Financial Television when asked whether the banks had asked for new clauses to be added to its restructuring because of the fire.
""The creditor banks have been very understanding; they wish us well...they see it as an incident which we will get over and which will be contained in insurance arrangements and the financial arrangements we have set up,"" Malpas said.
Ponsolle said the company did not face any problems with cashflow. Eurotunnel had 100 million pounds ($167.7 million) in cash holdings and ""it is not under financial pressure to reopen services"". ($1=.5956 Pound) ($1=5.166 French Franc)
",38
"Just as the submarine changed the face of naval warfare in World War Two, Europe's shipbuilders are hoping a new breed of ""stealth"" warships will do the same in the 21st century.
At a trade fair at the business airport of Le Bourget, north of Paris, three shipbuilders were presenting their own version of combat ships with the ability to hide and deceive the enemy.
British shipbuilder Vosper Thornycroft was due on Tuesday to unveil its design for the Sea Wraith corvette at the Euronaval exhibition, which gathers the world's navies.
BAeSema, a joint venture between British Aerospace Plc and France's Sema Group, launched its Cougar coastal corvette project on Monday.
And French state-owned DCN shipyard presented its La Fayette frigate which it boasted was the first operational warship fully to use stealth features in its design.
DCN builds the hulls, while it has linked up with French defence company Thomson CSF to provide the ship's communications, detection and weapons control systems.
Stealth warships use similar principles to the radar-beating technology developed by the U.S. aircraft industry and used in the 1991 Gulf War against Iraq. The diamond-shaped F117 and batwing B2 bombers were designed to absorb or deflect radar.
But traditionalists who admire the sleek greyhound lines of warships would be dismayed to see the flat, angular shapes forced by the stealth technology which makes modern ships mere ""platforms"" for weapons and detection systems.
The La Fayette uses a slab-sided superstructure and non-metallic composite materials to confuse radar and missiles. The second of eight La Fayette-class ships ordered by Taiwan entered service last week, while Saudi Arabia has also ordered the French ship.
But the British are in hot pursuit with their own designs for a new generation of stealth vessels, which they say they are ready to build now. They have set their sights firmly on export markets for the first customers.
""We believe this is the warship of the future and all warships will need to use these techniques,"" Brian Spilman, Vosper's manager of future projects shipbuilding, told Reuters.
The Sea Wraith design puts the distinctive clutter of mast, radar dishes and aerials inside flat-sided towers and has shaped topsides, rather like diamond facings, to make it hard for radars to lock on. It also uses non-reflective composites.
Sea Wraith can alter its ""radar signature"" by lowering or raising the mast, making it difficult to recognise the craft. Two asymetrically-located masts are meant to confuse radar-guided missiles.
To counter new infra-red, or heat-seeking, missiles, the ship sprays a fine mist of water to conceal itself and its ""hot spots"" such as the exhaust.
BAeSema is showcasing the Cougar patrol vessel, which uses low-acoustic waterjet propulsion instead of traditional noisy engines which are easily picked up by sonar.
Its low, angular lines are typical of stealth designs for throwing off radar beams.
BAe last week announced it was merging its naval systems activities into BAeSema, to boost its prime contractor role.
Prime contractors bid for contracts in which their integration of radar, communications and defence systems provide the added value.
Both BAeSema and Vosper have declined to give prices for their ships, saying these depend on the systems requested.
Thomson-CSF, part of the French state-owned Thomson SA electronics group which is being privatised to the Lagardere conglomerate, is the prime contractor for the La Fayette under Sawari 1 and 2 contracts signed with Saudi Arabia.
",38
"Just as the submarine changed the face of naval warfare in World War Two, Europe's shipbuilders are hoping a new breed of ""stealth"" warships will do the same in the 21st century.
At a trade fair at Le Bourget airport, north of Paris, three shipbuilders presented their own version of combat ships with the ability to hide and deceive the enemy.
Britain's Vosper Thornycroft on Tuesday unveiled its design for the futuristic Sea Wraith corvette.
""We believe it has the potential to make other vessels of its class obsolete,"" Brian Spilman, Vosper's manager of future projects shipbuilding, told a news conference at the Euronaval exhibition, which gathers the world's navies.
BAeSema, a joint venture between British Aerospace and France's Sema Group, presented its Cougar corvette on Monday.
And French state-owned DCN shipyard presented its La Fayette frigate which it boasted was the first operational warship fully to use stealth features in its design.
Unlike the first two, designed for patrolling regional waters, the French ship is a full-scale deep-water frigate.
Stealth warships use similar principles to the radar-beating technology developed by the U.S. aircraft industry and used in the 1991 Gulf War against Iraq. The diamond-shaped F117 and batwing B2 bombers were designed to absorb or deflect radar.
Built in flat, angular shapes, stealth warships are ""platforms"" for weapons and detection systems.
The La Fayette uses a slab-sided superstructure and non-metallic materials to confuse radar. The second of eight La Fayette-class ships ordered by Taiwan entered service last week, while Saudi Arabia has also ordered the French ship.
The British are in hot pursuit with their own designs for a new generation of stealth vessels.
""We believe this is the warship of the future and all warships will need to use these techniques,"" Vosper's Spilman said. ""We have made it difficult to detect, classify and engage with a missile,"" he told the news conference.
The Sea Wraith design puts the distinctive clutter of mast, radar dishes and aerials inside flat-sided towers and has shaped topsides, rather like diamond facets, to make it hard for radar to lock on. It also uses non-reflective composites.
Sea Wraith can alter its ""radar signature"" by lowering or raising the mast, making it difficult to recognise the craft. Two asymetrically-located masts are meant to confuse radar-guided missiles.
To counter new infra-red, or heat-seeking, missiles, the ship sprays a fine mist of water to conceal itself.
BAeSema is showcasing its low angular Cougar patrol vessel, which uses low-acoustic waterjet propulsion instead of traditional noisy engines which are easily picked up by sonar.
The basic Cougar ""hull-in-the-water"", excluding weapons and other systems, costs around 30 million sterling ($37.56 million), according to Keith Figg, the craft's designer.
BAe last week announced it was merging its naval systems activities into BAeSema, to boost its prime contractor role.
Prime contractors bid for contracts in which integration of radar, communications and defence provide the added value.
BAeSema would act as prime contractor while the ship would typically be built in the customers' own shipyards.
""We're going for indigenous building and procurement, which would be a more cost-effective solution and involve ownership at an earlier stage"" Figg said.
South East Asian delegations have shown interest in both the Cougar and Sea Wraith, company executives said. ""We view that part of the world as a very important market,"" Spilman said.
Strong economic growth and regional rivalries particularly over natural resources and territorial waters have fuelled an arms race in South-East Asia.
French defence electronics group Thomson-CSF TCFP.PA is the prime contractor for the La Fayette under Sawari 1 and 2 contracts signed with Saudi Arabia.
($1=.7986 Sterling)
",38
"The European Airbus consortium said on Tuesday it was confidently pressing ahead with studies on a 555-seat passenger plane despite a decision by archrival Boeing to scale back work on a larger jumbo jet.
Boeing on Monday said market conditions did not justify the risk and expense of building a new version of its 747 jumbo jet, the 747-X, and it was diverting half the 1,000 staff on that project to smaller planes.
""We are confident the A3XX will meet market needs,"" an Airbus spokesman said. ""The signs from major airlines working with us on shaping the A3XX are definitely encouraging.""
Airbus, ever quick to seize on any perceived gaps in Boeing's armour, says airlines want an all-new plane rather than Boeing's 747-X, which the Airbus spokesman said was the ""end of the line for a product developed in the late 1960s"".
""Airlines want to fly into the 21st century facing forward, not backwards,"" the spokesman added.
Airbus must attack Boeing's monopoly on the large-capacity segment and is studying designs for an A3XX product family which it hopes to launch in 1998 for service in 2003.
It wants to grab at least half of the aircraft market by the end of the decade, up from its estimated historic share of 35 percent. But it lacks large planes to compete with Boeing's 777 giant twinjet and the best-selling 747 jumbo.
The four-nation consortium differs with Boeing over the potential market and development costs for a new large plane.
Airbus forecasts a market of 1,383 planes seating more than 400 passengers over the next 20 years, while Boeing believes demand would only stretch to 470 planes seating 500 or more, which would not allow it to get a return on its money.
A basic A3XX would cost around $200 million, giving potential sales worth more than $275 billion on the Airbus forecast.
""A split market would have been a big challenge for two manufacturers but now Boeing is opting out, that enhances our prospects,"" the Airbus spokesman said.
Airbus accepts the view that the market will fragment further as people want to fly more frequently, non-stop, long distance between city pairs.
The ""fragmentation"" effect was one of the factors cited by Boeing for cutting demand for larger planes and reducing the importance of big airport hubs.
But Airbus believes it will meet that market change with its A340 long-haul plane and that the A3XX will co-exist.
Saturation of air routes and airport landing slots calls for higher capacity planes, it argues. Countering critics who point to the already lengthy waits at airports, it says its A3XX designs would allow a quicker passenger turnaround than the jumbo.
Airbus is talking to 14 leading airlines on what the plane should offer and is confident that it can match or better the airlines' operating demands. These include fitting within an 80 metre ""box"" at the airport terminal.
It is officially sticking to its estimated $8 billion development cost for the A3XX, despite scepticism among some experts that it cannot be done for less than $15 billion.
Even though, privately, Airbus executives concede that the cost could be nearer $10 billion, they say they will try to contain costs to $8 billion.
Airbus is a consortium made up of 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
"French aviation executives said on Tuesday they feared renewed turbulence with the United States over airline market access in France, with flagcarrier Air France caught up in a looming ""air war"".
The U.S. government wants France to sign a bilateral treaty which would grant more landing rights to American airlines, while Paris seeks a gradual market liberalisation.
A spokeswoman for the U.S. embassy in Paris told Reuters the U.S. authorities had not rejected the new winter schedule for state-owned Air France.
""However, Air France has requested increased services over last winter,"" she said.
""The Department of Transportation has extended the deadline to rule on Air France's request until October 27, thereby giving our government time to discuss the schedule with the French authorities.""
That delay on approving Air France's schedule was seen as a strongarm measure to force Paris into agreeing a new aviation treaty.
""It's like placing a dagger at our throat,"" an aviation executive said. Air France's winter schedule was due to enter service on October 27.
Air France has requested an extra flight to San Francisco, two to Los Angeles and one to Chicago this winter, compared to the 1995 winter schedule. It wants to add extra cargo capacity from March to Miami and Chicago.
A second French executive said if the United States took unilateral measures, Paris would not hesitate to retaliate against U.S. airlines, as it did in March when U.S. Transportation Secretary Federico Pena rejected Air France's summer schedule.
Paris cut landing rights of six U.S. airlines before the junior transport ministers of both countries, meeting in Paris, agreed to open talks aimed at reaching a treaty to replace one which expired in 1992.
Without such a treaty, each route and landing rights have to be negotiated on a case-by-case basis, whereas Washington would like a global, market-driven solution.
Separately, Washington is withholding approval of a planned alliance between American Airlines and British Airways Plc until Britain agrees an ""open skies"" treaty with the United States.
",38
"State-owned Air France on Wednesday reported dramatically improved earnings of 802 million francs ($158 million) in the first half and placed a bumper order for 20 Boeing and Airbus aircraft, plus options.
The profit estimate for the six months to September 30, which emerged in an Air France board statement, compared with a loss of 335 million francs a year ago.
The improved results and Air France's aim to break even in 1996/97 was underlined with orders for 10 Boeing 777 twinjets, and options for 10 more. The airline also ordered five Airbus A340s, confirmed five orders made in June and options for a further five.
Air France chairman Christian Blanc won vital support from Prime Minister Alain Juppe to buy from Seattle-based Boeing instead of ordering solely from its archrival Airbus Industrie , the European consortium based in southwest France.
At catalogue prices, which are rarely paid, the orders and options for the Boeing 777-200 version ordered could be worth around $2.7 billion. Airbus would stand to gain $1.75 billion.
List prices for the B777-200 range between $128 and $146 million, while the Airbus A340-300 costs $110 to $120 million.
""In the reorganisation of its fleet, Air France is obliged to buy Boeing,"" Transport Minister Bernard Pons told parliament.
""It is obliged to meet commitments made in 1989, unless it accepts losing deposits and taking legal action which risks being much more expensive than taking this decision.""
The French airline had orders outstanding with Boeing worth $994 million and $2 billion of options, Pons said, adding that the airline had skillfully negotiated the latest order to respect the initial undertaking.
The three state representatives on the Air France board approved the Boeing 777 purchase ""not because they are the best or the most profitable but because they best meet the company's needs,"" Pons said.
Air France had also accepted to be a launch customer for the planned A340-600, a ""stretched"" version of the A340, he said.
Airbus hopes to build the 375-seater to smash Boeing's monopoly at the large capacity aircraft segment.
Air France said that due to financial problems, it froze at the end of 1994 all aircraft orders, including the 1989 Boeing order, and opened talks with the two plane-makers.
Air France has since rationalised its fleet, restructured its network around a centralised ""hub"" at Paris Charles De Gaulle airport and optimised aircraft use. It has over the past two years increased the number of flying hours by 14 percent.
Pons welcomed Air France's financial results, saying: ""The results are very encouraging.""
The company said it made its profit despite a rise in spending on fuel of nearly 500 million francs for the period.
Turnover was up nearly five percent to 21.3 billion francs due to a 14.8 percent increase in passenger traffic and a 6.7 percent rise in freight.
Operating profit rose nearly 30 percent to 1.1 billion francs, compared with 849 million in the year-earlier period. The pretax, pre-exceptional result tripled to 660 million francs.
Air France was ahead by ""a little more than 250 million francs of its budget"" at the six months stage, the company said. The first half is traditionally better for seasonal reasons and should not be used to extrapolate for the full year, it added.
Debt stood at 12.9 billion francs at September 30, versus 19.2 billion at March 31, 1996. The repayment of 6.3 billion francs significantly exceeded the last tranche of its state recapitalisation paid in September.
The Boeing order consists of the heavier ""Increased Gross Weight"" version of the basic 777-200, equipped with GE90 engines built by General Electric and France's Snecma. The B777-200 will seat 288 passengers in three-classes.
The Airbus order is for the A340-200E version equipped with CFM56-5C4 engines. ($1=5.075 French Franc)
",38
"Air France is linking up with two major U.S. carriers, Delta Air Lines and Continental, in a transatlantic alliance crucial to its ability to keep up with its major European rivals.
The French state airline said on Wednesday it had signed separate letters of intent for cooperation with Delta and Continental after a lengthy search for a U.S. partner.
The long-awaited agreements mark a strategic step in Air France's development and tap the huge U.S. travel market to feed its global network while the U.S. companies will carry the French airline's passengers on their domestic routes.
""These agreements crystallise the company's wish to forge a network of global alliances,"" Air France said in a statement.
The alliances allow so-called code-sharing arrangements between Air France and the U.S. companies, which is a low-cost way of gaining more customers without direct investment.
It means passengers can be issued with a through-ticket by one carrier to be used on its partner airline -- making it possible for airlines to feed passengers to each other without setting up their own routes.
The companies will also harmonise their flight schedules, share a common frequent flyer programme, and provide ground facilities.
Delta operates from its hub at Atlanta, Georgia, while Continental works from Houston, Texas and Air France uses Paris Roissy-Charles De Gaulle airport.
Air France gave no financial details of the link-ups but a spokeswoman said they were expected to bring the loss-making airline savings of $100 million a year.
The airline racked up a net loss of more than two billion francs last year after heavy provisions for restructuring, but has said it hopes to be in profit this financial year.
Air France chairman Christian Blanc has for months been looking for a heavyweight partner to give the airline a global reach and counter the spread of alliances between its rivals.
Air France has previously said it was talking to Continental and Delta, as well as American Airlines of AMR Corp, United Airlines of UAL Corp and USAir Group.
German airline Deutsche Lufthansa AG started code-sharing flights with United Airlines in 1994, paving the way for several other high-profile cooperation deals.
American Airlines this year agreed a controversial alliance with British Airways Plc but regulatory approval has been held up by a row between the British and U.S. governments over an ""open skies"" agreement.
The planned BA-American alliance has been attacked by rivals as anti-competitive.
French newspapers have said Washington is squaring up for another struggle with France over a bilateral ""open skies"" pact and would use any alliance by Air France as a lever to push the French to further open up the domestic market.
Air France cautioned the through-ticketing accords with Continental and Delta were subject to government approvals.
Washington and Paris clashed earlier this year when the United States wanted to open bilateral talks on market access and held up U.S. approval of Air France's summer schedule until the French agreed to start negotiations.
Air France and Continental signed a commercial accord back in 1993 but it has never been implemented due to changes in top management at both companies. Continental, among the U.S. majors, does not have a European partner.
",38
"French subscriber television company Canal Plus said on Friday that it was merging with Nethold, a Dutch satellite television company, to create one of the world's largest pay-TV groups.
Nethold is jointly held by Richemont SA, which is quoted on the Zurich and Johannesburg stock exchanges and MIH Holdings Ltd, a listed holding company.
""This merger is a major strategic move, resulting in the creation of one of the largest television groups in the world...particularly in the field of pay-TV with over 8.5 million subscribers,"" Canal Plus said in a statement.
The new group will have significant positions in France, Italy, Spain, Scandinavia, the Benelux countries and Germany, as well as a presence in several growing markets in central Europe.
The Paris stockmarket authorities had suspended trading in Canal Plus shares on Friday morning, sparking speculation of a link up between the French firm and Nethold.
Its stock closed at 1,169 francs on Thursday.
Utilities group Cie Generale des Eaux, a key shareholder in Canal Plus, said in a separate statement that it was delighted with the merger plan, which marked big step in Canal Plus's international development.
The pact would give the French company access to the fast growing Italian market, Generale des Eaux said.
It would also give the new group greater weight in negotiating purchases of copyrights and open opportunities for the launch of European theme channels.
Generale des Eaux said it was comfortable with its investment in Canal Plus. It said that, in agreement with other Canal Plus shareholders, it would seek to maintain the same scale of investment in the new company.
Under the terms of the deal, Canal Plus will buy 100 percent of Nethold from Richemont and MIH, paying with 6.1 million new Canal Plus shares and $45 million in cash.
Following the issue of new Canal Plus shares, Richemont and MIH will respectively own 15 and five percent of Canal Plus. Cie Financiere Richemont has interests in luxury goods and tobacco and owns such famous brandnames as Cartier, Mont Blanc, Rothmans and Dunhill.
Canal Plus said the deal had the backing of its main shareholders, media group Havas, Generale des Eaux, bank Ste Generale and state bank Caisse des Depots et Consignations. It is subject to regulatory and shareholder approval.
",38
"Partners in European aircraft consortium Airbus must speed up plans to convert the partnership into a single company after news of a merger between its two U.S. competitors, an aerospace executive said on Sunday.
Boeing Co and McDonnell Douglas announced a $13.3 billion merger plan which would create the world's largest aerospace firm, with 1997 sales of about $48 billion and employing 200,000 people, dwarfing rival Airbus.
The merger meant Airbus shareholders had ""to get their act together quickly"", the executive said.
Airbus is a consortium made up of France's Ste Nationale Industrielle Aerospatiale, British Aerospace Plc (BAe), Daimler-Benz Aerospace, a unit of Germany's Daimler-Benz AG, and Construcciones Aeronauticas SA (CASA) of Spain.
The European company has historically held around a 30 percent share of the market, with Boeing holding around 60 percent and McDonnell 10 percent.
Airbus expects to notch up firm orders for more than 300 aircraft in 1996, worth around $20 billion, compared to 106 sales last year, worth $7 billion. Boeing said it has received orders for 621 planes at the end of November.
The Airbus partners, who are also Airbus subcontractors, are in talks on how to change the grouping into a joint stock company from the present ""groupement d'interet economique"" (economic interest group) partnership. The aim is to create a more competitive and responsive organisation.
""The need for the Europeans to integrate becomes more urgent,"" said the executive, who asked not to be identified. The merger move showed ""the arguments (between partners) are trivial"".
BAe's group managing director John Weston has said the future Airbus should be a large, integrated company with design offices and manufacturing and sales functions, and have a solid balance sheet to finance aircraft sales, to better rival Boeing.
But Aerospatiale's chairman Yves Michot has said he sees the new Airbus as essentially a large prime contractor, directing its suppliers' work but retaining its design offices.
Some executives see the design office as the heart of the business, with the ability to create new aircraft. Aerospatiale's design offices are in the southwestern French city of Toulouse, next to Airbus headquarters.
Eventually, BAe wants Airbus to be the civilian arm of a huge pan-European aerospace grouping, with a military wing to build future generations of combat planes, built from the national companies.
But for the time being, the partners also need to resolve differences over the valuation and transfer of assets.
Airbus officials in France declined comment. ""We can't comment on things happening in North America,"" a spokeswoman said. Officials at Aerospatiale were not available for comment.
The Airbus negotiations slowed over the summer, when the French government moved the then chairman, Louis Gallois, to the helm of troubled state railway operator SNCF and promoted his number two, Yves Michot.
A memorandum of understanding was due to be signed by the end of this year setting out the main lines of the new company but the industry executive said the talks are due to last up to March 31.
U.S. broker Lehman Brothers has estimated Airbus could be worth between $15-18 billion after its conversion, based on historical and prospective financial data.
Previous major consolidation moves in the United States between fierce rivals such as Lockheed and Martin Marietta, and now Boeing and McDonnell Douglas, showed all that was needed was the ability to look ahead and for the political will to exist.
The internal debate over the shape and scope of the future Airbus has run on for years, with managing director Jean Pierson a fervent enthusiast for an integrated company. The new Airbus company is supposed to be formed by the end of 1999.
The irony is that Airbus held merger talks with McDonnell Douglas in 1988 but the U.S. firm was stronger in those days and Airbus had not consolidated its position in the world market.
",38
"Partners in European aircraft consortium Airbus must speed up plans to convert the partnership into a single company after news of a merger between its two U.S. competitors, an aerospace executive said on Sunday.
Boeing Co and McDonnell Douglas earlier announced a $13.3 billion merger plan which would create the world's largest aerospace firm, with 1997 sales of about $48 billion and employing 200,000 people, dwarfing rival Airbus.  
The merger meant Airbus's shareholders had ""to get their act together quickly,"" the executive said.
Airbus is a consortium made up of Ste Nationale Industrielle Aerospatiale, British Aerospace Plc (BAe), Daimler-Benz Aerospace, a unit of Daimler-Benz AG and Construcciones Aeronauticas SA (CASA) of Spain.
The partners, who are also Airbus subcontractors, are in talks on how to change the grouping into a joint stock company from the present ""groupement d'interet economique"" (GIE) partnership. The aim is to create a more competitive and responsive organisation.  
""The need for the Europeans to integrate becomes more urgent,"" the executive said. The merger move showed ""the arguments (between partners) are trivial.""
BAe's group managing director John Weston has said the future Airbus should be a large, integrated company with design offices, manufacturing and sales functions, and have a solid balance sheet to finance aircraft sales, to better rival Boeing.  
But Aerospatiale's chairman Yves Michot has said he sees the new Airbus as essentially a large prime contractor, directing its suppliers' work, but retaining its design offices.
Some executives see the design office as the heart of the business, with the ability to create new aircraft. Aerospatiale's design office are in the southwestern city of Toulouse, next to Airbus headquarters.  
Eventually, BAe wants Airbus to be the civilian arm of a huge pan-European aerospace grouping, with a military wing to build future generations of combat planes, built from the national companies.
But for the time being, the partners also need to resolve differences over the valuation and transfer of assets.
Airbus declined comment. ""We can't comment on things happening in North America,"" an Airbus spokeswoman said.
Officials at Aerospatiale were not available for comment.  
The Airbus negotiations slowed over the summer, when the government moved then-chairman Louis Gallois to the helm of troubled state railway operator SNCF and promoted his number two, Yves Michot.
A memorandum of understanding was due to be signed by the end of this year setting out the main lines of the new company, but the industry executive said the talks are due to last through the winter, up to March 31.
U.S. broker Lehman Brothers has estimated Airbus could be worth between $15-18 billion after its conversion, based on historical and prospective financial data.  
Previous major consolidation moves in the United States between fierce rivals such as Lockheed and Martin Marietta, and now Boeing and McDonnell Douglas, showed all that was needed was the ability to look ahead and for the political will to exist.
The internal debate over the shape and scope of the future Airbus has run on for years, with managing director Jean Pierson a fervent enthusiast of an integrated company. The new Airbus company is supposed to be formed by the end of 1999.
Airbus expects to notch up firm orders for more than 300 aircraft in 1996, worth around $20 billion, compared to 106 sales last year, worth $7 billion. Boeing said it has received orders for 621 planes at the end of November.
The irony is that Airbus held merger talks with McDonnell Douglas in 1988, but the U.S. firm was stronger in those days and Airbus had not consolidated its position in the world market. The European company has historically held around a 30 percent share of the market, with Boeing around 60 percent and McDonnell 10 percent.
",38
"Air France is linking up with two major U.S. carriers, Delta Air Lines and Continental, in a transatlantic alliance crucial to its ability to keep up with its major European rivals.
The French state airline said on Wednesday it had signed separate letters of intent for cooperation with Delta and Continental after a lengthy search for a U.S. partner.
The long-awaited agreements mark a strategic step in Air France's development and tap the huge U.S. travel market to feed its global network while the U.S. companies will carry the French airline's passengers on their domestic routes.
""These agreements crystallise the company's wish to forge a network of global alliances,"" Air France said in a statement.
The alliances allow so-called code-sharing arrangements between Air France and the U.S. companies, which is a low-cost way of gaining more customers without direct investment.
It means passengers can be issued with a through-ticket by one carrier to be used on its partner airline -- making it possible for airlines to feed passengers to each other without setting up their own routes.
The companies will also harmonise their flight schedules, share a common frequent flyer scheme, and provide ground facilities.
Delta operates from its hub at Atlanta, Georgia, while Continental works from Houston, Texas and Air France uses Paris Roissy-Charles De Gaulle airport.
Air France gave no financial details of the link-ups but a spokeswoman said they were expected to bring the loss-making airline an extra $100 million a year in gross revenues.
The French airline racked up a net loss of more than two billion francs last year after heavy provisions for restructuring, but has said it hopes to be in profit this financial year.
Air France chairman Christian Blanc search for U.S. partners only became possible this year as Air France showed signs of financial recovery and reorganised its global network around a central ""hub"" operation at Roissy Charles De Gaulle airport, giving it a key asset.
This year marks the end of a three-year productivity drive by Blanc to return Air France to break even by 1997 and match the competiveness of its European rivals.
German airline Deutsche Lufthansa AG started code-sharing flights with United Airlines in 1994, paving the way for several other high-profile cooperation deals.
French executives fear Washington could hold up any alliance by Air France as a lever to push Paris into opening up the domestic market as part of a bilateral aviation pact.
American Airlines this year agreed a controversial alliance with British Airways Plc but regulatory approval has been held up by a row between the British and U.S. governments over an ""open skies"" agreement.
The planned BA-American alliance has been attacked by rivals as anti-competitive.
Air France cautioned the through-ticketing accords with Continental and Delta were subject to government approvals.
Washington and Paris clashed earlier this year when the United States wanted to open bilateral talks on market access and held up U.S. approval of Air France's summer schedule until the French agreed to start negotiations.
Air France and Continental signed a commercial accord back in 1993 but it has never been implemented due to changes in top management at both companies. Continental, among the U.S. majors, does not have a European partner.
",38
"Partners in European aircraft consortium Airbus must speed up plans to convert the partnership into a single company after news of a merger between its two U.S. competitors, an aerospace executive said on Sunday.
Boeing Co and McDonnell Douglas announced a $13.3 billion merger plan which would create the world's largest aerospace firm, with 1997 sales of about $48 billion and employing 200,000 people, dwarfing rival Airbus.
The merger meant Airbus shareholders had ""to get their act together quickly"", said the executive, who asked not to be identified.
Airbus is a consortium made up of France's Ste Nationale Industrielle Aerospatiale, British Aerospace Plc (BAe), Daimler-Benz Aerospace, a unit of Germany's Daimler-Benz AG, and Construcciones Aeronauticas SA (CASA) of Spain.
An Airbus spokesman said the U.S. merger would not alter the competitive threat to Airbus: ""(McDonnell) Douglas hasn't been a competitor in the civilian aircraft business for a number of years,"" the spokesman said. ""So it hasn't altered the equation in the commercial field at all for Airbus.""
Boeing is effectively swallowing up McDonnell Douglas, he said. ""It was expected Douglas would have to look in the civil field for its fortunes elsewhere, or merge, or opt out of the business altogether,"" he said. Boeing was the obvious merger candidate.
MD decided in October to drop plans to build the MD-XX wide body passenger jet, which would have doomed it to niche player status with its two current products, the MD-11 and MD-80/90.
Airbus, which has historically held around a 30 percent market share, with Boeing some 60 percent and McDonnell 10 percent, wants at least half the market by the end of the decade.
Airbus expects to notch up firm orders for more than 300 aircraft in 1996, worth around $20 billion, compared to 106 sales last year, worth $7 billion. Boeing said it has received orders for 621 planes at the end of November.
The Airbus partners, who are also Airbus subcontractors, are in talks on how to change the grouping into a joint stock company from the present ""groupement d'interet economique"" (economic interest group) partnership. The aim is to create a more competitive and responsive organisation.
""The need for the Europeans to integrate becomes more urgent,"" said the executive who spoke on condityion of anonymity. The merger move showed ""the arguments (between partners) are trivial"".
BAe's group managing director John Weston has said the future Airbus should be a large, integrated company with design offices and manufacturing and sales functions, and have a solid balance sheet to finance aircraft sales, to better rival Boeing.
But Aerospatiale's chairman Yves Michot has said he sees the new Airbus as essentially a large prime contractor, directing its suppliers' work but retaining its design offices.
Some executives see the design office as the heart of the business, with the ability to create new aircraft. Aerospatiale's design offices are in the southwestern French city of Toulouse, next to Airbus headquarters.
Eventually, BAe wants Airbus to be the civilian arm of a huge pan-European aerospace grouping, with a military wing to build future generations of combat planes, built from the national companies.
But for the time being, the partners also need to resolve differences over the valuation and transfer of assets.
The Airbus negotiations slowed over the summer, when the French government moved the then chairman, Louis Gallois, to the helm of troubled state railway operator SNCF and promoted his number two, Yves Michot.
An agreement was due to be signed by the end of 1996 setting out the main lines of the new Airbus but the industry executive said the talks are due to last up to March 31.
U.S. broker Lehman Brothers has estimated Airbus could be worth between $15-18 billion after its conversion, based on historical and prospective financial data.
The internal debate over the shape and scope of the future Airbus has run on for years, with managing director Jean Pierson a fervent enthusiast for an integrated company. The new Airbus company is supposed to be formed by the end of 1999.
",38
"A longstanding row over market share between rival plane makers Boeing of the U.S. and Europe's Airbus consortium resurfaced on Tuesday, when Airbus claimed to have overtaken the U.S. giant.
Airbus senior vice president for strategy John Leahy told reporters at the Farnborough air show that if 117 cancellations of previous orders at Boeing were taken into account, the U.S firm had added 216 net new orders this year rather than the gross orders of 333 planes announced.
""You have to be very careful when people are running around at air shows talking about gross order books because gross orders aren't what you can bill,"" he said. ""Essentially a third of the Boeing order book has been cancelled this year.""
Airbus, with 13 cancellations, has so far had 221 net orders this year, putting it ahead of the Seattle-based firm, he said.
Based on planes seating between 125-350 passengers in which Airbus fields a competitor product to Boeing -- Airbus does not have a 100- or 400-seater -- the European grouping claims a 52 percent share, crediting Boeing with 43 percent and McDonnell Douglas with five percent.
Leahy said since 1976, Boeing's share had shown a slow but noticeable decline while Airbus showed a strong increase. McDonnell Douglas had seen a steep loss.
But Boeing vice-president for marketing Bruce Dennis told Reuters, even with cancellations, the company was exceeding targets for this year of around 63-64 percent market share.
""Orders are exceeding our targets and are doing very well,"" he said. ""We just don't agree with their numbers.""
Although Airbus has increased its share over the years, this had not been at Boeing's expense but came out of McDonnell Douglas's sales. ""It's not coming out of Boeing's hide.""
Production figures gave a clearer view of the company's advance, he said. Boeing had recently increased production of its 777 giant twinjet to seven per month from five and would be turning out the 737 narrow-body at a rate of 17.5 planes per month late next year. He gave no figure for present output.
Airbus' Leahy reaffirmed the group's aim to develop the 3XX, a plane seating over 500, for $8 billion, or perhaps less, thanks to industry restructuring efforts.
The four-nation partnership aims to deliver the first 3XX in 2003, he said. He also defended the company's market forecast for the plane, which showed there was demand for the aircraft.
Airbus executive Volker Von Tein said of the 3XX, which is seen as key to attacking Boeing's lucrative monoploy at the top end of the market, ""We are not in a race with Boeing on this programme. If Boeing were to launch a stretched derivative of their veteran, 34-year-old 747, it will come as no surprise to us."" That would allow Airbus to ""fine tune"" the 3XX, he said.
He added that Boeing had said that there was not enough room in the market for two makers of large planes. ""In that case I would suggest that they opt out of the competition because once the A3XX is on the market maybe they will be proven right -- there will be no room for old derivatives.""
Boeing's Dennis said he could not see how Airbus could build the 3XX for the estimated $8 billion, ""unless they see something that we can't.""
Boeing Commercial Airplane Group president Ron Woodward said on Monday its studies showed it would cost over $5 billion to build large planes seating 460 and 560 derived from the existing 747 jumbo jet, which would be cheaper than creating a new plane like the 3XX.
The Airbus consortium comprises French Aerospatiale, British Aerospace Plc, Germany's Daimler-Benz Aerospace AG and CASA of Spain.
",38
"Shares in debt-mired Channel Tunnel operator Eurotunnel SA fell on Tuesday after they were requoted following a week's suspension amid disappointment over terms of its restructuring with creditor banks.
The troubled Anglo-French company unveiled on Monday details of the refinancing its 69.6 billion francs ($13.50 billion) of junior-ranked bank debt after a year of complex negotiations with bank lenders.
The shares closed down 8.74 percent at 8.35 francs on heavy volume of 20 million shares. They were at 9.15 francs when they were suspended on September 30 in the runup to the debt deal.
Analyst Jean Borgeix at broker Pinatton said the stock market was disappointed with the 10.40 franc price that banks will be getting new Eurotunnel shares at as part of an eight billion franc equity-for-debt deal.
The market had been looking for a conversion price of between 12-15 francs per share, he said.
Current shareholders also stand to effectively ""lose"" 30 percent of Eurotunnel's future cashflow, as this is the percentage earmarked for paying the ""stabilisation notes"" it would issue to banks in return for an interest-free credit line.
The company negotiated the right to issue the stabilisation notes in case it fell short of cash to meet interest payments. It can issue up to 14.8 billion francs of the notes.
Factoring in that loss of future cashflow gave the shares a present value of around 8.5 francs a share.
Another French analyst said: ""The restructuring assures the industrial viability of the project, even though the shares remain a risky investment.""
The debt deal looked good on paper and the zero-interest stabilisation notes provided Eurotunnel with a last line of defence if its cash failed to meet interest payments, he said.
A trader at a major U.S. brokerage in Paris said the share price suffered from the dilution of equity due to the debt pact.
The restructuring will dilute the holdings of current shareholders to 54.5 percent of the capital after the debt swap.
The complex agreement also includes issuing eight billion francs of bonds redeemable in shares, which could further dilute the equity holders to 39.4 percent if the banks exercised their conversion rights at 12.40 francs per share.
But shareholders will also get share warrants at the same price to bring them back to owning 51.3 percent of the capital. ($1=5.156 French Franc)
",38
"A two-stage privatisation France's Thomson SA electronics group would allow an early sale of its defence arm and make better economic sense than packaging defence with the loss-making consumer goods unit, stock market analysts said on Monday.
Conservative Prime Minister Alain Juppe said in an interview in the London Financial Times on Monday that the military electronics subsidiary Thomson-CSFcould be separated from Thomson Multimedia to allow for a speedy privatisation.
The government was forced last week to drop its preferred choice of selling the whole Thomson group to the Lagardere Groupeconglomerate for a symbolic one franc after the independent Privatisation Commission rejected that option.
A break-up of Thomson runs directly against President Jacques Chirac's initial policy announced on February 22 on restructuring the French defence industry and selling Thomson as one unit.
But analysts said the two-part sale made good sense.
""We should have started with that...get on immediately with restructuring the defence industry,"" said an analyst at a French brokerage. ""We can leave Thomson Multimedia (TMM) until 1998.""
A second analyst said, ""It's the privatisation of the Multimedia unit which poses the problem. The industrial logic of the merger between Thomson-CSF and Lagardere has not been criticised by anyone.""
It was Lagardere's plan to sell TMM to South Korea's Daewoo Electronics, while keeping Thomson-CSF, which led the Privatisation Commission to rule out its bid. The Commission objected to planned technology transfers to Daewoo and the lack of binding commitments by Daewoo to retain jobs in France.
Privatising Thomson-CSF separately would meet the state's main aim of creating a defence electronics national champion, and shelve the problems of Thomson Multimedia. CSF is profitable, virtually clean of debt and 42 percent of the capital is quoted on the Paris bourse.
A source close to Thomson-CSF said the firm has not lost any contracts due to the privatisation uncertainty but it has had to run a corporate advertising campaing in countries where it feels its image has suffered.
Lagardere's Matra missile company still looks the favoured candidate for taking over Thomson's defence unit ahead of a rival offer from engineering group Alcatel Alsthom.
""We get the impression that the government wants Lagardere to get Thomson-CSF,"" said one analyst at a brokerage.
An analyst at a French bank said, ""Insofar as the government has made its preference known and is sticking by it, Lagardere seems to be well placed.""
Lagardere has the means to buy Thomson-CSF, without recourse to significant borrowing, one analyst said.
Taking a range of Thomson-CSF share price of between 156 and 200 francs per share, the company has a market capitalisation of between 18 and 24 billion francs ($3.4-4.6 billion), he said.
At the end of 1995 Lagardere had 10 billion francs in tradeable securities, 1.3 billion in free cash and is due to receive three billion in the first half of 1997 when share warrants are due to be exercised. Financial debt was around 8.4 billion.
Lagardere would bring some eight billion francs of Matra's assets in merging with Thomson-CSF, which would reduce the cash it would have to pay. It would however be expected to pay large amounts for goodwill.
Speculation that a vertical integration of missiles, electronics and airframe makers could now be tackled by merging Thomson, Matra, Dassault Aviationand Aerospatiale did not stand up to scrutiny, analysts said.
Combat plane maker Dassault is expected to be absorbed by the larger, civilian-aircraft manufacturer Aerospatiale as part of the defence industry consolidation. But as Aerospatiale is state-owned and the government still wants to privatise Thomson, that course seemed to be excluded, an industry executive said.
Economy ministry officials were not immediately available for comment. ($1=5.244 French Franc)
",38
"Construction group Bouygues has emerged as the latest contender in the French telecommunications arena with its joint bid with Italy's STET to run the telephone network of rail operator SNCF
Bouygues follows the larger Cie Generale des Eaux, which last month announced blue chip partners for its Cegetel telecoms unit, and the state-owned RATP Paris Metro operator which set up a unit to exploit its 300 kilometres of track.
The stock market cheered Bouygues' alliance with STET and marked its shares up 4.62 percent to 510 francs on Friday.
The new entrants are seizing on the opportunity presented by the breakup of France Telecom's domestic monopoly from the start of 1998, under European Union competition rules.
Although both Bouygues and Generale des Eaux currently run mobile telephone businesses, their ambitions run higher. They want a major slice of the profitable long-distance call market and the high-value business networks.
Generale des Eaux chairman Jean-Marie Messier wooed analysts recently with bullish growth forecasts for the telecoms sector and said he expected Cegetel to contribute 15 percent of group sales and 25 percent of cashflow by 2003.
Which leaves Lyonnaise des Eaux of the three French major utilities and services company firmly wedded to pursuing communications rather than telecommunications.
""Our strategy is communications, not telecommunications,"" said a Lyonnaise executive.
Analyst Annick Santer at broker Ferri said, ""Communications is not at all in the same league as telecommunications. It does not have the same scope but it can be profitable.""
Communications, if it offers less spectacular potential, also holds less scope for risk, she added.
The group's communications interests, grouped around its Lyonnaise Communications unit and M6 television stake, had 1995 sales of 1.4 billion francs and contributed 69 million in net profit.
The profit came from its 34 percent stake in the Metropole Television M6 unit, which reported a first half net profit of 215 million francs, up 2.3 percent from a year ago.
But Lyonnaise Communications, which runs its cable television operations, made a 1995 loss of 45 million francs.
The cable business, with 400,000 subscribers, is close to breaking even this year and depends on getting a few thousand more customers, a source close to the company said.
Lyonnaise owns 70 percent of Lyonnaise Communications, with France Telecom holding 17 and US West with six percent.
Lyonnaise executives declined to give sales or cashflow forecasts for its communications business but said most of the investment had already been made and it was adding services to the existing infrastructure.
-- Paris newsroom +33 1 4221 5452 pnt/cct
",38
"A planned sale of French television maker Thomson Multimedia to South Korea's Daewoo Electronics for a symbolic one franc has sparked a political backlash against the government's privatisation plans.
The government wants to sell electronics group Thomson SA to the Lagardere conglomerate, which would sell the loss-making Thomson Multimedia to Daewoo while keeping Thomson-CSF, the defence electronics subsidiary.
The leader of the French Socialist Party, Lionel Jospin, told France 3 state-owned television on Sunday he was ""shocked"" by the Thomson privatisation.
""This was a public sector firm and concerned the national interest. It has been privatised for ideological reasons"", he said.
""I was shocked by the method, which was despicable and perhaps even illegal as the 1986 (privatisation) law specifically called for the parliamentary privatisation committee to give a supporting opinion,"" he said.
Jacques Delors, former president of the European Commission, told a conference in Paris on Sunday, ""I would have preferred to maintain a European pole in consumer electronics.""
On Monday, French business newspaper La Tribune Desfosses added to the controversy by reporting that a French businessman, whom it did not identify, was preparing a bid for Thomson Multimedia to keep the company French.
The report said it was only after the government declared its preference last Wednesday for Lagardere's bid over a rival offer from Alcatel Alsthom that authorities realised ""the value of the gift it (the state) was making to Daewoo.""
A Thomson-CSF spokesman declined to comment on the report of a ""white knight"" bidder.
A Lagardere spokesman said bids had closed in September and if investors were interested in Multimedia, they would have to negotiate with Daewoo after it had bought the firm.
Jospin said French President Jacques Chirac and Prime Minister Alain Juppe were allowing the sale of Thomson Multimedia to Daewoo, which would reap the benefits of French state financing for the group's digital technology.
""Thanks to state finances, it will be able to take up a strong position in the digital (television) market and be profitable from 1999,"" Jospin said.
Thomson Multimedia is set to make big profits in 1999, when revenues from technology licences will contribute at least one billion francs ($192.3 million) a year. The licences were acquired when Thomson bought RCA of the United States from General Electric in 1987 but only revert to Thomson after 1998.
""We are not hostile to a foreign company taking control of Thomson Multimedia as it follows an industrial and economic logic,"" a spokesman for the Thomson-CSF association of employee shareholders said.
But, he added, it was a pity the state had not played its part as a shareholder to recapitalise the group earlier.
A source close to Thomson said the group's financial situation was untenable as its share capital was insufficient to sustain its debt and that it was in dire need of fresh funds.
But the government is tightening its belt as it cuts public spending to meet tough requirements to join the single European currency by 1999. The Thomson privatisation was also launched as part of the government's consolidation of the defence industry.
The Thomson Multimedia unit, the world's fourth-largest TV maker, reported a loss of three billion francs in the first half of 1996. It has invested heavily in digitial television technology and is a leader in television decoders, as well as a being a member of the Digital Video Disc consortium.
The chairman of the South Korean company, Bae Soon-Hoon, has said he is ready to invest $1.5 billion in France and create 5,000 new jobs if he wins Multimedia.
($1=5.199 French Franc)
",38
"France's national audit office on Monday criticised a lack of clarity and insufficient competition in the water supply market, dominated by two giant companies Cie Generale des Eaux and Lyonnaise des Eaux.
""There is a high degree of concentration. That is not to say competition is absent, but it is organised competition,"" said Francois Logerot, author of the Cour des Comptes (court of auditors) report.
""It may be that concentration in this sector is accentuated by agreements between these companies...sometimes by creating joint subsidiaries at the request of local councils.""
Logerot cited as an example the Saint-Etienne city council, where the water company Societe Stephanoise des Eaux is jointly owned by Lyonnaise des Eaux Dumez and Generale des Eaux (CGE).
The report, presented at a news conference, said the private sector held 75 percent of the supply of drinking water in France in 1991, up from 60 percent in 1980 and 31 percent in 1954.
The price of water rose by a national average 47.7 percent from 1990 to 1994, it said.
Significant price rises occurred where contracts were awarded to the private sector, Logerot said.
""Sometimes there was a catch-up effect but there were also excesses and abnormal situations.""
Lyonnaise officials were not available for comment. But CGE noted in a statement that the report said the main reason for rising water prices was higher quality and increasing investment needs.
It said the official audit pointed to a near doubling of the cost of water treatment between 1990 and 1995, while the price to the consumer rose by 30 percent.
Logerot said local authorities often awarded contracts to the water companies in exchange for payments which the companies then recovered in the price charged to customers.
The study followed a 1995 law which banned ""right of entry"" payments that water companies paid to win an operating licence.
The report cited the Alpine city of Grenoble, where a contract with Lyonnaise des Eaux resulted in the conviction for bribery of the mayor, former Gaullist minister Alain Carignon.
Grenoble used the proceeds of the water contract to finance its general expenditure, while accounting principles call for water expenses to be kept separate from the general budget.
The CGE statement said much of the criticism in the report related to the past, when payment for contracts was legal. It added that the company was pleased such payments were banned and the duration of those contracts was limited.
CGE said the water market was highly competitive and 1996 had shown that when contracts expired, there was competition to win new licences. The sector was also subject to strict controls by a number of public bodies, including competition and quality experts.
The audit office called for tighter water management and said higher water quality standards contained in a 1992 law would require annual investment of around 14 billion francs.
",38
"The four partners of the Airbus consortium on Monday signed an agreement aimed at making the European plane maker a unified company better able to compete with Boeing Co.
In a statement, Airbus Industrie said its four European partners had signed a memorandum of understanding to restructure Airbus into a limited liability company by 1999.
""The establishment of Airbus Industrie as a single corporate entity (SCE) is an important initial step in the consolidation of the aerospace industry within Europe,"" Airbus said.
Toulouse-based Airbus is currently a partnership between French state-owned Ste Nationale Industrielle Aerospatiale, British Aerospace Plc, Daimler-Benz Aerospace(DASA), and Construcciones Aeronauticas SA(CASA) of Spain.
The French and Germans both have 37.9 percent, the British 20 percent and Spanish company 4.2 percent.
The new entity will have a single management structure which should add control of engineering, testing, production, procurement and customer service to Airbus's current responsibilities for marketing, sales and product support, it said in a statement.
""Transfer of assets associated with these functions... will depend on how far the assets are essential for the described functions and their detailed valuation, to be completed by the end of 1997,"" it said.
""The ultimate objective is the restructring of the entire European (aerospace) industry, of which Airbus in one element and not the integrating entity,"" Aerospatiale chairman Yves Michot told the Le Monde newspaper.
""Airbus will be made a single company before the end of 1999 with a shareholding strictly the same as now,"" he added
Currently Airbus is mainly a sales and marketing organisation with the four partners manufacturing the planes.
Airbus first announced a preliminary agreement in early January. The four partners decided last July to turn Airbus into a corporation to streamline decision-making and production.
These restructuring plans took on a more urgent tone after Boeing and McDonnell Douglas said in December they would merge and form a civil and military giant with nearly $50 billion in annual sales.
Airbus said in its statement that the restructured company would facilitate continuing improvement in overall operational efficiency, the introduction of new international strategic partnerships and the longer term opportunity for ""external participation"" in Airbus.
Airbus spokesman Robert Alizart said that these options included a future stock market listing of Airbus.
Airbus said that the restructured company ""presented a great opportunity for business growth both for its existing shareholders and its future partners.""
It said Airbus was studying expansion of its product range with an aircraft in the 100 seat category, with Alenia  ALEI.RO of Itlay in co-operartion with AVIC of China and Singapore Aerospace.
It is also mulling derivatives of the four-engined A340, the A340-500 with a range of 8,300 nautical miles and the A340-600 with seating capacity of close to 400 seats.
In the high-capacity long haul market it is planning to launch the A3XX, which would break the stranglehold on the lucrative top-end of the market now held by Boeing's 747 jumbo jet.
Airbus is also pondering work on the Future Large Aircraft (FLA), a military transport aircraft to match the future needs of Europe, next to its civil work.
British Aerospace said it expected its wing development and production operations, employing more than 4,000 people, to be transferred to Airbus.
",38
"The French government said on Friday it would reveal early in the New Year how it plans to sell the Thomson-CSF state defence electronics firm and that the sale would be covered by a 1986 privatisation law.
The decision, announced by the finance ministry, makes the sale process slower than if it had been carried out under another 1991 privatisation decree.
The independent Privatisation Commission earlier this month forced the state to rethink its plan to sell the Thomson SA electronics group in a private deal to the Lagardere Groupe conglomerate, when it objected to a key element in the disposal.
Following that setback, the state decided to privatise Thomson SA in two parts, with a sale of Thomson-CSF first, followed by Thomson Multimedia, the loss-making consumer electronics unit, to speed up the process.
But the complex sale details mean any decision will only be made in the beginning of 1997, government officials said.
The Council of State, France's highest administrative court, ruled that the Thomson-CSF sale is covered under the 1986 act, after the government asked it to rule on the legal framework.
The court said that as Thomson-CSF constitutes an essential part of the assets of Thomson SA, the sale should be seen as a means of privatising the parent company, the finance ministry said in a statement.
""The privatisation of Thomson-CSF is covered, just as that of Thomson SA, by chapter II of the law of 6 August 1986 on privatisations,"" it said.
A number of possibilities have emerged for Thomson-CSF since the Privatisation Commission derailed the sale process.
Thomson-CSF's chairman Marcel Roulet and its executive committee have lobbied the Prime Minister Alain Juppe for a stock market flotation instead of selling it to an industrial company such as Lagardere.
A flotation would preserve Thomson-CSF's independence and would be faster than a ""trade sale"", a source close to the firm said. The company has all the financial details to hand and 42 percent of its capital is already traded on the stock market.
Floating Thomson-CSF would allow a faster restructuring of the defence industry, which was the aim of the privatisation move. It could still form alliances with other groups, such as the planned merger between aircraft companies Dassault Aviation and Aerospatiale.
Thomson-CSF wants a ""clean"" flotation, without the traditional cross-shareholding pact which protects companies from hostile takeovers. A flotation would also ensure clarity in the sale terms, a senior source close to Thomson said.
But Lagardere chairman Noel Forgeard argues a flotation could lead to a break up of Thomson-CSF as members of any shareholders pact would want to buy up parts of the business.
",38
"The French government sold a nine percent stake in oil major Elf-Aquitaine on Wednesday, raising around 10 billion francs ($2 billion) and allowing the energy group to buy back a big chunk of its own shares.
The disposal follows a sharp rise in the Paris bourse in recent weeks and, specifically of oil stocks which have benefited from high world oil prices.
""Finance minister Jean Arthuis has decided to sell 24.9 million shares in Elf-Aquitaine held by the ERAP company, which will reduce the stake held by this public sector firm in Elf-Aquitaine to 0.75 percent,"" the ministry said in a statement.
The sale involved the placement of 12.5 million Elf shares, or 4.6 percent of the capital, at 417.50 francs per share to French and international institutions.
Elf said in a separate statement it had bought a 4.5 percent stake through its indirectly-owned financial Fingestval company as a long-term investment, accounting for the remainder of the shares sold by the state.
Elf shares slipped 2.5 francs to 423 by 1300 GMT.
The 10 billion francs will go into a government special account held for share sale proceeds, which is reserved for injecting into other state-owned companies, the ministry said.
Government spokesman Alain Lamassoure said the money would be used to recapitalise state-owned companies which needed it, particularly those being privatised.  It will not be used to help reduce the government's budget deficit.
France plans to recapitalise Thomson SA to the tune of 11 billion francs before selling the state-owned electronics group to Lagardere Groupe and Daewoo Electronics Corp.
The Elf share sale leaves a rump 0.75 percent of Elf stock in government hands, which covers free shares due to Elf employees and non-voting petroleum certificates held by the state.
Elf was among the early privatisations in the previous conservative government of Edouard Balladur in February 1994 (Corrects timing of Elf privatisation), when it was floated at 385 francs per share to private investors.
The group has wide-ranging interests in oil exploration, production and refining, as well as health and beauty products through its Sanofi unit.
It is a major constitutuent in the Paris CAC-40 share index.
The group's stock purchase would boost earnings per share, chairman Philippe Jaffre said: ""This removes the uncertainty surrounding the French state's interest in the company which has weighed on the share price.""
""The acquisition will automatically improve earnings per share,"" he said in a company statement.
The sale to institutions was handled by Paribas and SBC Warburg, after a tender with various banks. ABN Amro Rothschild acted as adviser to the government.
Fingestval is a wholly-owned subsidiary of Socap, which itself is wholly-owned by Sofaxbanque. Sofaxbanque is 100-percent owned by Elf. Socap manages assets and financial interests and has substantial cash holdings, Fingestval said. ($1=5.088 French Franc)
",38
"French utilities giant Compagnie Generale des Eaux posted on Monday higher first half profits and unveiled plans to reorganise its loss-making construction business, hammered by a depressed French market.
Chairman Jean-Marie Messier told a news conference the company made first half net profit of 808 million francs, after payment to minorities, up from 224 million a year ago.
He also forecast net profit for the full year 1996 would be about 1.8 billion francs, compared with a net loss of 3.69 billion francs a year ago. The results would be ""strongly marked by exceptional items, notably capital gains from asset sales,"" he added.
For 1997, Messier expected profits to be ""much higher"" than those of 1996 and should be ""without doubt higher than the best profits the company has had in its history."" The company made 3.4 billion francs net profit in 1994.
Messier also announced Generale des Eaux had made a formal bid on Monday with its German partner Mannesmann AG to run the telecommunications operations of French state railways SNCF. The two companies want to bring British Telecom to join the bid.
Messier, who came from an investment bank, was brought in last year to clear out the group's balance sheet which had put on more than 50 billion francs of debt and been savaged by a crisis in the property market and construction business.
His first step last year was to reorganise the property arm, which he said on Monday had cost the group a total 15 billion francs since 1994.
The group expects to lose 4.6 billion francs this year due to poor property assets but that includes three billion francs of exceptional charges which should wipe out any uncertainty for the next three years, he said.
""At the end of 1996, Generale des Eaux will not face any questions, even in pessimistic scenarios for the next three years, on any exceptional charges which may arise from its property activities,"" he said.
The group's George V property development arm aims to be profitable from 1997, he said.
The group's average level of property provisioning was around 55-56 percent, of which assets in the south of France were provisioned at 65-70 percent and 85 percent at Cannes.
This time round, Messier attacked the group's building and public works businesses which have suffered from the downturn in France and Germany. He has made its SGE subsidiary the centre of its construction activity.
The GTIE and Santerne electrical installations units and roadbuilders Cochery, Viafrance and SGE-VBU will be brought into SGE. And there will be a consolidation of building activity with SGE buying 40 percent of Compagnie Generale de Batiment et de Construction (CBC), currently wholly owned by CGE.
The new SGE, which will be ""radically different and attractive,"" will have annual sales of 52 billion francs and will return to a ""significant level"" of profit in 1997, Messier said.
Generale des Eaux also expects to cut its debt by about 10 to 15 billion francs in 1997. It said it expected its net financial debt to stand at 53 billion francs at the end of 1996, down from 54 billion in 1995.
Messier said the company's operating profit would be close to the 3.7 billion franc profit recorded in 1994.
Turnover in 1996 should be up three percent to 164 billion francs, he added.
France is deregulating the telecommunications regime in 1998, breaking the domestic monopoly of state-owned France Telecom to comply with European Union rules.
",38
"France's national audit office criticised on Monday a lack of clarity and insufficient competition in the water supply market, dominated by two giant companies Cie Generale des Eaux and Lyonnaise des Eaux.
""There is a high degree of concentration. That is not to say competition is absent, but it is organised competition,"" said Francois Logerot, author of the Cour des Comptes (court of auditors') report.
""It may be that concentration in this sector is accentuated by agreements between these companies...sometimes by creating joint subsidiaries at the request of local councils.""
Logerot cited as an example the Saint-Etienne city council, where the water company Societe Stephanoise des Eaux is jointly owned by Lyonnaise des Eaux Dumez and Generale des Eaux (CGE).
The report, presented at a news conference, said the private sector held 75 percent of the supply of drinking water in France in 1991, up from 60 percent in 1980 and 31 percent in 1954.
The price of water rose by a national average 47.7 percent from 1990 to 1994, it said.
Significant price rises occurred where contracts were awarded to the private sector, Logerot said.
""Sometimes there was a catch-up effect but there were also excesses and abnormal situations.""
But CGE noted in a statement that the report said the main reason for rising water prices was higher quality and increasing investment needs.
It said the official audit pointed to a near doubling of the cost of water treatment between 1990 and 1995, while the price to the consumer rose by 30 percent.
Logerot said local authorities often awarded contracts to the water companies in exchange for payments which the companies then recovered in the price charged to customers.
The study followed a 1995 law which banned ""right of entry"" payments that water companies paid to win an operating licence.
The report cited the Alpine city of Grenoble, where a contract with Lyonnaise des Eaux resulted in the conviction for bribery of the mayor, former Gaullist minister Alain Carignon.
Grenoble used the proceeds of the water contract to finance its general expenditure, while accounting principles call for water expenses to be kept separate from the general budget.
Lyonnaise said in a statement that each water company had given details of its contracts to the audit office and, of the 12,000 in France, only about 20 had drawn explicit comment. And these had been agreed under conditions prevailing before the 1995 law.
The CGE statement said much of the criticism in the report related to the past, when payment for contracts was legal. It added that the company was pleased such payments had been banned and the duration of those contracts was limited.
CGE said the water market was highly competitive and 1996 had shown that, when contracts expired, there was competition to win new licences. The sector was also subject to strict controls by a number of public bodies, including competition and quality experts.
",38
"Just as the submarine changed the face of naval warfare in World War Two, Europe's shipbuilders are hoping a new breed of ""stealth"" warships will do the same in the 21st century.
At a trade fair at Le Bourget airport, north of Paris, three shipbuilders presented their own version of combat ships with the ability to hide and deceive the enemy.
Britain's Vosper Thornycroft on Tuesday unveiled its design for the futuristic Sea Wraith corvette.
""We believe it has the potential to make other vessels of its class obsolete,"" Brian Spilman, Vosper's manager of future projects shipbuilding, told a news conference at the Euronaval exhibition, which gathers the world's navies.
BAeSema, a joint venture between British Aerospace and France's Sema Group, presented its Cougar corvette on Monday.
And French state-owned DCN shipyard presented its La Fayette frigate which it boasted was the first operational warship fully to use stealth features in its design.
Unlike the first two, designed for patrolling regional waters, the French ship is a full-scale deep-water frigate.
Stealth warships use similar principles to the radar-beating technology developed by the U.S. aircraft industry and used in the 1991 Gulf War against Iraq. The diamond-shaped F117 and batwing B2 bombers were designed to absorb or deflect radar.
Built in flat, angular shapes, stealth warships are ""platforms"" for weapons and detection systems.
The La Fayette uses a slab-sided superstructure and non-metallic materials to confuse radar. The second of eight La Fayette-class ships ordered by Taiwan entered service last week, while Saudi Arabia has also ordered the French ship.
The British are in hot pursuit with their own designs for a new generation of stealth vessels.
""We believe this is the warship of the future and all warships will need to use these techniques,"" Vosper's Spilman said. ""We have made it difficult to detect, classify and engage with a missile,"" he told the news conference.
The Sea Wraith design puts the distinctive clutter of mast, radar dishes and aerials inside flat-sided towers and has shaped topsides, rather like diamond facets, to make it hard for radar to lock on. It also uses non-reflective composites.
Sea Wraith can alter its ""radar signature"" by lowering or raising the mast, making it difficult to recognise the craft. Two asymetrically-located masts are meant to confuse radar-guided missiles.
To counter new infra-red, or heat-seeking, missiles, the ship sprays a fine mist of water to conceal itself.
BAeSema is showcasing its low angular Cougar patrol vessel, which uses low-acoustic waterjet propulsion instead of traditional noisy engines which are easily picked up by sonar.
The basic Cougar ""hull-in-the-water"", excluding weapons and other systems, costs around 30 million sterling ($37.56 million), according to Keith Figg, the craft's designer.
BAe last week announced it was merging its naval systems activities into BAeSema, to boost its prime contractor role.
Prime contractors bid for contracts in which integration of radar, communications and defence provide the added value.
BAeSema would act as prime contractor while the ship would typically be built in the customers' own shipyards.
""We're going for indigenous building and procurement, which would be a more cost-effective solution and involve ownership at an earlier stage"" Figg said.
South East Asian delegations have shown interest in both the Cougar and Sea Wraith, company executives said. ""We view that part of the world as a very important market,"" Spilman said.
Strong economic growth and regional rivalries particularly over natural resources and territorial waters have fuelled an arms race in South-East Asia.
French defence electronics group Thomson-CSF is the prime contractor for the La Fayette under Sawari 1 and 2 contracts signed with Saudi Arabia.
($1=.7986 Sterling)
",38
"Air France said Wednesday it was linking up with two major U.S. carriers, Delta Air Lines and Continental Airlines, in a trans-Atlantic alliance crucial to its ability to keep up with its major European rivals.
The French state airline said it signed separate letters of intent to coordinate ticket booking and feed passengers back and forth with Delta and Continental after a lengthy search for an American partner.
The long-awaited agreements mark a strategic step in Air France's development and tap the huge U.S. travel market to feed its global network while the U.S. companies will carry the French airline's passengers on their domestic routes.
Air France and Continental signed a commercial accord back in 1993 but it has never been implemented due to changes in top management at both companies. Continental, among the U.S. majors, does not have a European partner.
""These agreements crystallise the company's wish to forge a network of global alliances,"" Air France said in a statement.
The alliances allow so-called code-sharing arrangements between Air France and the U.S. companies, which is a low-cost way of gaining more customers without direct investment.
It means passengers can be issued a ticket by one carrier to be used on its partner airline -- making it possible for airlines to feed passengers to each other without setting up their own routes.
The companies will also harmonise flight schedules, share a common frequent flyer scheme, and provide ground facilities.
Delta operates from its hub at Atlanta while Continental works from Houston. Air France uses Paris Roissy-Charles De Gaulle airport.
Air France gave no financial details of the alliances but a spokeswoman said they were expected to bring the loss-making airline an extra $100 million a year in gross revenues.
The French airline racked up a net loss of more than 2 billion francs ($385 million) last year after heavy charges for restructuring, but has said it hopes to earn a profit this fiscal year.
Air France Chairman Christian Blanc said a search for U.S. partners only became possible this year as Air France showed signs of financial recovery and reorganized its global network around a central hub at De Gaulle airport.
German carrier Deutsche Lufthansa AG started code-sharing flights with United Airlines in 1994, paving the way for several other high-profile cooperation deals.
French executives fear Washington could hold up any alliance by Air France as a lever to push Paris into opening up the domestic market as part of a bilateral aviation pact.
American Airlines this year set a controversial alliance with British Airways Plc but regulatory approval has been held up because of a dispute between London and Washington over an ""open skies"" agreement. The planned alliance has been attacked by rivals as anti-competitive.
Air France noted that the ticketing accords with Continental and Delta were subject to government approvals.
Washington and Paris clashed earlier this year when the United States wanted to open bilateral talks on market access and held up U.S. approval of Air France's summer schedule until the French agreed to start negotiations.
",38
"Shareholder democracy will grab the spotlight when investors in the troubled Channel Tunnel operator Eurotunnel SA/Plc vote on a complex debt deal aimed at keeping the company afloat.
The restructuring agreement with its bank lenders requires a two-thirds majority at an extraordinary meeting of shareholders expected to be held by March.
Potentially, two French shareholder groups could muster a blocking minority but the associations hold distinct positions and styles. Of Eurotunnel's estimated 750,000 small investors, around 600,000 are French.
Albert Jauffret heads the newer and smaller Association de Defence des Actionnaires d'Eurotunnel (Adacte), considered by some as the more ""extremist"" -- but possessing clear and strongly-held views on the restructuring and what he wants.
""Whether one agrees with his views or not he represents a group of shareholders and shareholder democracy requires each shareholder has a voice,"" said lawyer Sophie L'Helias, who acted as proxy agent for more than 20,000 Eurotunnel shareholders.
Jauffret, a retired headmaster, believes the restructuring gives too much to the banks. ""We are very unhappy the debt is being treated at face value,"" he said.
In London's secondary debt market, Eurotunnel's 70 billion francs ($13.40 billion) of junior-ranked loans have been marked down to about 40 percent of face value, on a view they are distressed assets.
CALL FOR SOME DEBT CANCELLATION
The 225 lending banks should cancel at least a third of the debt, taking their lead from the market's valuation, instead of keeping most of the debt intact, Jauffret argues.
The restructuring takes out eight billion francs of loans to be swapped for shares at 10.40 francs per share.
The loans outstanding should be converted into Eurotunnel shares at 24 francs per share, the average level of the last three rights issues by Eurotunnel, Jauffret believes.
Adacte is highly critical of Eurotunnel's managers, whom Jauffret believes are cowed by its bankers. At the annual general meeting in June, he moved a resolution, which was easily defeated, to sack co-chairman Patrick Ponsolle along with six other executives, considered too close to the banks.
Adacte, which held proxies for about four percent of the votes at the AGM, was founded in September 1995 as a breakaway from the Eurotunnel shareholders association.
Christian Cambier, who runs the Prigest portfolio management company, heads the Eurotunnel shareholders association which was set up in 1992 and has around 3,000 members, most of whom are professional workers rather than the retired folk who make up Adacte.
DIFFERENT APPROACHES
The difference in constituencies partly explains the divergent approaches. Adacte members are angered by the loss of life savings, while Cambier's have limited losses to spare investment income, said one observer.
The contrasting styles was shown clearly after Eurotunnel announced the restructuring agreement with its bankers.
Adacte denounced it as a ""declaration of war"", because it did not cancel any debt. In contrast, the Eurotunnel shareholders association said it would seek a meeting with management to get more details.
""We support the management,"" Cambier says, adding that he does not want to change the board. He spends perhaps five percent of his time on Eurotunnel and the rest managing client funds.
Cambier does not fundamentally object to the restructuring but says the operating licence needs to be extended to 99 years from 65, to allow the company extra time to make money.
His clients hold around 1.5 million Eurotunnel shares and lend them in stock-lending operations, which he says poses no conflict of interest. They gain a running yield each month, even though the shares have fallen sharply in value.
However, both Cambier and Jauffret share common ground when they accuse some of Eurotunnel's banks and brokers of conflicts of interest.
They accuse some of the underwriters for the 1994 rights issue of short selling the shares in the months before the May capital increase.
Cambier garnered a near blocking minority of around 32 percent of the votes at the AGM, after a ground-breaking proxy solicitation, and wants to improve on that for the crucial EGM.
He says he will base his voting on the share price. If Eurotunnel trades below five francs, he will take that as the market's no-confidence in the restructuring, but if it is between 10 and 15 francs, he will approve the deal. ($1=5.225 French Franc)
",38
"European aircraft maker Airbus looks set to soar higher in 1996 following a bumper order from airline USAir on Wednesday, but tough decisions still need to be made on its products and ownership to secure the long-term future.
Airbus Industrie announced on Wednesday one of the biggest orders in aviation history with the Pittsburgh-based airline's command for 120 planes in the A320 narrow-body family of passenger jets and options for a further 280. List price for the orders was estimated at $5.3 billion.
The USAir victory follows Monday's order by Emirates, a Gulf-based airline, for 16 Airbus A330-200s worth $2 billion, which beat out a rival offer of Boeing Co's 767.
""The order backlog is really healthy,"" Emmanuel Dubois Pelerin, analyst at ratings agency S&P Adef said. The order book would sustain or even increase production rates for 1997 and 1998, he added.
An Airbus spokesman confidently forecast the consortium would rack up firm orders this year exceeding 300 planes, compared to 106 last year.
While there are no worries on products and profitability for the next two or three years there are uncertainties further ahead stemming from Airbus' change in legal status and implications for projects, particularly the A3XX large plane and stretched A340 long-range jet.
Airbus is a partnership made up of 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.
In the interests of increasing market responsiveness and competitiveness, Airbus wants to change into a joint stock company by 1999. Discussions are being held among the partners to decide the shape of the future company.
It also has to find external financing for the 3XX plane.
Airbus has said it wants to find between 30-40 percent of external risk sharing for the 3XX, which it estimates will cost $8 billion to develop.
Dubois Pelerin said he believed Airbus would have to choose to build either the stretched A340-600 or the 3XX, as running both at the same time would overload its finances,
But the Airbus spokesman said the consortium would be able to finance development of both the 340-600 and the 3XX, with the stretched 340 a top priority in the near term.
Airbus is under severe time pressure to come up with a rival to Boeing's monopoly at the large-capacity segment with its 777 and 747 combination which hit Airbus hard in 1995.
Boeing is studying the 747-500X and 747-600X derivatives of its Jumbo jet, which has been a cashcow since it entered service in the 1970s, but which nearly broke the company in development.
The new jumbos are expected to cost around $200 million a piece, which industry sources said prompted Airbus' senior vice-president commercial John Leahy to announce earlier this week that the 3XX would cost $198 million.
The Airbus supervisory board last month asked for the business case for the 340-600 to be presented in mid-December to allow an early decision on whether to launch the product. If it were launched, the 376-seater could be in service in late 2000 and head off competition from the early versions of the 747.
If the 555-seater 3XX goes ahead, it would fly in 2003 and tackle the 747 derivatives.
A signature earlier this week with Rolls-Royce Plc on using its Trent engine for the 3XX will allow Airbus to supply important performance data such as fuel burn, range and take-off and landing weight to the airlines it is talking to for its marketing studies.
",38
"The French government has cleared the way for state-owned Air France to buy Boeing long-haul passenger jets from the United states, as well as similar planes from French-based Airbus, an official source said on Tuesday.
The source told Reuters the clearance would come when the airline's board members meet on Wednesday to decide on its fleet acquisition after reports that the government would insist that the French flag carrier should get all its long-haul needs from French-based Airbus.
""We are inclined to a balanced solution between Airbus and Boeing,"" said the source on Tuesday, speaking on condition of anonymity. ""There should an agreement tomorrow.""
The business newspaper Les Echos reported earlier on Tuesday that a committee of the Air France board was expected on Wednesday to recommend purchase of 10 Airbus A340-300 and 10 Boeing 777-200 jets for its long-range fleet,
Two other sources close to the talks said the split purchase was expected to be approved.
Transport minister Bernard Pons had so far been pushing airline chairman Christian Blanc into buying exclusively from French-based Airbus Industrie, rather than mixing the purchase with archrival Boeing, industry and union sources have said.
Apart from the symbolic value of the French flag carrier, which has received 20 billion francs ($4 billion) in state funds, buying a French-made product, the Boeing 777 and Airbus 340 are considered by some in the aerospace industry to be competing products.
But a crucial factor in Blanc's decision to press ahead with the Boeing buy was a previous order for seven 767-300 and eight 737-500 aircraft due for delivery between 1999 and 2001. Les Echos said a clause in the sale contract allowed conversion of these planes to other types.
That order was worth around $874 million and Air France would now like to use the option to convert to Boeing 777s. Otherwise it stood to lose its deposit if it reneged on the deal to buy the smaller planes, a second source familiar with the talks said.
A Transport Ministry spokeswoman said Blanc had met Pons on Monday to explain the company's position.
Air France and Airbus declined to comment.
An aerospace executive said the cost of introducing to the fleet a new plane such as the giant 777 twinjet would be an estimated $40 million and mean a broader range of aircraft to maintain, and therefore increasing costs.
The industry will look carefully to see whether Air France will place orders or options on its aircraft, as the airline could use a conversion option for a planned ""stretched"" version of the Airbus A340, termed the A340-600, and thus become a launch customer for the programme.
Airbus has made studies of the A340-600 a top priority, as it would boost capacity to 375 passengers in three classes from 295 in the current A340-300 version. The new plane would rival the Boeing 777-300, which seats between 368 amd 394, and older models of Boeing's cashcow, the 747 jumbo.
Boeing currently enjoys a monopoly in the large capacity segment, which Airbus is determined to rival with its own products.
Air France already flies the A340, which is a long-range, wide-body aircraft. ($1=5.086 French Franc)
",38
"French electrical equipment company Schneider aims to almost double its return on equity capital to 15 percent in the next three years, executive vice president Michel Staib told Reuters.
""Our objective is to have a net return on capital, before amortisation of goodwill, of 15 percent...in three years,"" he said in an interview. ""It's a reasonable plan.""
That compared to just over eight percent in 1995, he said. The improvement will come from pruning down Schneider to core electrical activities and an internal re-engineering programme.
Schneider shares have risen strongly in the past few weeks as analysts considered the stock undervalued and welcomed the pending sale of the Spie Batignolles unit, which has dragged on the group's results.
The stock has risen around 10 percent since mid-December when news of its Spie sale hit the market. The shares closed on Wednesday at 255.70 francs. About a third of the capital is in non-domestic hands.
All the group companies are profitable and with the sale of construction company Spie Batignolles, Schneider is at a ""diamond point,"" Staib said.
Staib did not rule out further disposals depending on market and technology changes but Schneider is now well-focused.
Schneider will seek growth in emerging markets, in South America and Asia, including India. It wants Asia to contribute at least 20 percent of group turnover before the end of the decade compared to 11 percent in 1995.
Schneider has expanded its operations in China, increasing the number of employees to 2,500 from 200 five years ago.
The company also wants to increase its share in Germany from a tiny three to four percent of a market which Staib says is the world's third largest. Germany accounted for 2.5 percent of turnover in 1995, or three billion francs.
It will seek alliances with other industrial companies rather than acquire firms, as the Germany market is tightly held. Expansion in emerging markets will also be done through local alliances and joint ventures.
Schneider last year bought out Daimler-Benz AG's 50 percent share in AEG Schneider Automation unit.
Schneider posted 1995 sales of 59.42 billion francs and net attributable profit of 817 million. It reported 1996 first half net profit of 503 million francs, at the low end of market expectations.
Schneider is selling Spie to Amec Plc and to Spie employees for one billion francs, subject to regulatory approvals. Amec will gain between 40-48.6 percent of Spie for an injection of 40 million stg.
-- Pierre Tran, Paris newsroom +33 1 4221 5452
",38
"The French government, belatedly attempting to consolidate a fragmented aerospace industry, on Wednesday gave the green light for aero-engine maker Snecma to buy up rocket engine manufacturer SEP.
State-owned Snecma already owns 51 percent of Societe Europeene de Propulsion (SEP) and wants to buy out minority shareholders to make it a wholly-owned subsidiary. The enlarged group would have annual sales of around 15 billion francs ($2.9 billion).
""The government has been advised of Snecma's wish to raise its holding in the capital of SEP from 51 percent to 100 percent and has given its approval so Snecma's board can make a public offer for SEP shares, followed by, if the 95 percent threshold is reached, a mandatory buy-in,"" the Finance Ministry said in a statement.
The deal has a strong industrial logic and would ensure Snecma's future in space programmes and its position as France's centre for engine manufacture, it said.
SEP makes engines and boosters for Ariane rockets, used by the European Arianespace consortium.
Snecma makes civilian and military aero engines including those for passenger jets of the Airbus Industrie consortium and Dassault Aviation combat planes.
The buy-in, for which no financial details were available, reverses a policy drawn up by Snecma's previous chairman, Bernard Dufour, who wanted to dispose of SEP and Messier Bugatti, Snecma's aircraft brakes unit, to raise cash.
""Previously envisaged, the sale of SEP is no longer on the agenda"", said a Snecma staff note made available to Reuters.
Although the SEP sale would have brought in fresh cash, it also risked weakening the Snecma group by losing know-how essential for future transports such as a second generation supersonic plane and hypersonic aircraft, the note said.
It would also have meant the loss for SEP of Snecma's technical support, which has helped it in the past.
Snecma's new chairman, Jean Paul Bechat, has said asset sales should not be used to make up operating losses and that the company's deficits would only be tackled by meeting a targeted 1.5 billion francs in cost cuts in a restructuring plan.
In addition, the government has adopted an industrial policy for the defence sector which relies on consolidating each sector on a business basis. Snecma was thus the natural centre for SEP, to build a propulsion group in aeronautics and space, it said.
The move would also consolidate Snecma's brakes activities by bringing together SEP's Carbone-Industrie subsidiary with Snecma's Messier Bugatti to create a bigger entity.
Brakes make up around eight percent of Snecma's sales, with potential to grow into areas such as cars and trains.
The buyout will help SEP through a difficult period in the next few years as its order book falls when the Arianespace space consortium transfers launches to the new Ariane 5 rocket from the existing Ariane 4.
SEP makes the rocket motors for the Ariane 5, which has one huge Vulcain engine instead of the up to 10 Viking and HM 7 motors in Ariane 4. Competition from the United States, Russia, Ukraine, China and Japan is also expected to put severe price pressure on rocket launchers.
SEP also makes ballistic missiles and its proposed M5 replacement for the M45 was only adopted in the six-year defence budget on condition that there would be big cost reductions and reorganisations among the industrial partners.
The takeover will create a group with synergies in aeronautical and space engines, making it virtually unique in Europe, a Snecma spokesman said.
Snecma made a 1995 net loss of 1.24 billion francs and expects to make a loss in 1996 and next year before returning to profit in 1998. Turnover for 1996 is expected to total 9.2 billion francs, up from 8.6 billion in 1995 but still lower than 1994's 10.39 billion.
SEP had 1995 turnover of 5.4 billion francs, up 10 percent from 1994, and made a net attributable profit of 133 million. ($1=5.157 French Franc)
",38
"European aircraft consortium Airbus said on Friday it had no evidence that archrival Boeing was putting pressure on U.S. suppliers to prevent them from working on Airbus' planned A3XX large plane.
Daimler-Benz Aerospace (Dasa) chairman, Manfred Bischoff, said on Thursday he was concerned Boeing and merger partner McDonnell Douglas were signalling to a big U.S. subcontractor, understood to be Northrop Grumman, not to work on the Airbus project, newspapers reported.
""We have no evidence of any kind of pressure,"" an Airbus spokesman said.
But an industry source close to Airbus said Boeing had put pressure on Northrop to stay out of the A3XX project, which threatens Boeing's lucrative monopoly of the high-capacity segment with its 747 jumbo. ""It is a fact,"" he said.
Dasa is a partner in Airbus Industrie, alongside France's Aerospatiale, British Aerospace Plc, and Casa of Spain.
Boeing was not immediately available for comment.
Airbus had been in exploratory talks with Northrop over supplying engine housing sections for the A3XX but those negotiations had ended, the industry source said.
Airbus has been looking for risk-sharing partners to supply up to 40 percent of the targeted $8 billion in the A3XX development costs. The plane would seat 550 passengers in the basic version, which it wants to enter service in 2003.
Airbus managing director Jean Pierson told journalists on Thursday at the Toulouse headquarters that he would lay out Airbus' competition concerns on the Boeing merger when he gives evidence to the U.S. Federal Trade Commission and the European Commission, as expected.
In the long term, the Boeing merger ""will pose a problem for Europe's civil aviation industry,"" he said, adding there would effects in military markets, particularly helicopters.
The industry source said the merged Boeing/McDonnell company would have bigger clout on suppliers, have a wider technology base though its portfolio of patents and gain larger access to indirect state funds for research and development through military programmes.
But Pierson said the merger was inevitable. ""The Boeing-McDonnell merger will go ahead,"" he said.
Airbus is determined to fight back and is holding to its aim of securing a half share of the world passenger plane market by the early part of the next decade. A niche player strategy was doomed to failure, as McDonnell Douglas and Fokker found out, he said.
The consortium needs to field products at the top and bottom end of the range, with respectively the A3XX and a 100-seater plane to be built with China and Singapore, as well as extend the A340 family of long-range jets to compete against Boeing.
",38
"French holding company CGIP said on Tuesday it was buying 20 percent of car parts manufacturer Valeo, solving a problem which has occupied the government, France's car makers and Italian businessman Carlo de Benedetti.
Cerus, a French investment firm controlled by de Benedetti, sold the 20 percent stake to Compagnie Generale d'Industrie et de Participations (CGIP), for a sum which could total 6.7 billion francs, if Valeo hits 1997 profit targets.
The Valeo stake has been on the market for a year, as Cerus sought to raise cash to reduce debts, and sparked U.S. interest which set off alarms among European car makers. French industry minister, Franck Borotra, said he wanted a ""French solution"" for the Valeo holding.
But the Valeo purchase was made because ""it is good for our group, our shareholders and for Valeo,"" CGIP chairman Ernest-Antoine Seilliere told a news conference, explaining why his company chose to become the lead shareholder in Valeo.
The Valeo purchase was driven by CGIP's desire to rebalance its portfolio away from the packaging business, in which CGIP had 49 percent of assets following the acquisition of U.S. Crown Cork & Seal shares last year in exchange for its interest in CarnaudMetalbox.
CGIP halved its stake in Crown Cork to 9.9 percent last month and with the 3.2 billion franc proceeds, helped pay for the holding in Valeo, which has significant growth potential, Seilliere said. These were ""parallel operations"" he said.
The question of keeping Valeo in French hands did not figure in its calculations. ""It's not our problem,"" he said.
CGIP wants Valeo to adopt a more generous dividend policy, pursue acquisitions more aggresively and use debt financing to leverage its financial results.
""We will ask for a payout of a third of the net,"" Seilliere said. Valeo has historically paid out 15 to 18 percent of net profit, while the average on the Paris stock exchange is 35 to 40 percent.
The CGIP move seemed to have borne fruit as Valeo said as part of the acquisition announcement it will make an exceptional 10 franc dividend later this month, for which Cerus would still be the beneficiary.
But Valeo's chairman Noel Goutard emphasised ""There is no change in direction,"" he told a separate news conference. The priority will be a ""strong and healthy balance sheet,"" and the company will pay particular attention to pursuing ""controlled and profitable growth,"" he said.
He added that Valeo had relied on its own resources in the past as Cerus did not want to see its 28 percent stake diluted in any capital raising in the markets.
With the new ownership structure, Valeo would be free to tap the markets for funds when it saw acquisition opportunities.
French car industry analysts said the deal was good news for all involved. Valeo had a solid partner in CGIP to develop on its own, even if this would not rule out a merger with another car parts firm in several years as the industry changed.
In the deal, Valeo, Europe's second largest car parts maker and a leading supplier of French and German carmakers, said it would make a 1996 dividend downpayment of 10 francs. Another payout of 10 francs per share would be made to Cerus if Valeo's 1997 net attributable profit hits 1.45 billion francs.
Shares in CGIP closed 3.93 percent higher at 1,190 francs while Valeo ended 2.64 percent. Cerus was down 7.29 percent at 127.10 francs.
",38
"Some 120 Eurotunnel SA /Plc employees are working round the clock to clear wreckage from the Channel Tunnel, devastated by a fire two weeks ago which has halted passenger services on the undersea link between Britain and France .
Reporters visiting the tunnel on Tuesday viewed a nightmarish scene of flame-scarred concrete where intense heat had blown apart the surface cladding to expose steel reinforcing cables embedded in slabs.
A blaze on a truck-carrying wagon on December 18 forced Eurotunnel to close the tunnel to Eurostar high-speed passenger trains and tourist vehicle Shuttle services just before the Christmas season. Partial freight traffic has been resumed.
Eurotunnel hopes to run two thirds of normal passenger and freight traffic in the estimated three to six months necessary for repairs to be completed, Eurotunnel spokesman Francois Borel said.
""We are going to make a new tunnel,"" he said.
But before repairs can begin, the wreckage must be cleared.
With scorched rubble underfoot and ghostly streams of melted grey fibre glass filaments overhead, maintenance workers in four shifts of six hours are shovelling out ashes and debris, all that is left of 28 trucks caught in the fire.
The Eurotunnel official coordinating the clearance, Dominique Dorso, said three wagons remained where the fire started, in section five of the tunnel. One was being removed Tuesday evening and the other two should be taken out next week.
The fire was so intense in one 30-metre stretch that no visible traces of the trucks themselves remained in the Shuttle wagons, which were themselves reduced to blackened and twisted steel lattice frames.
Chunks exploded off the first 40-cm thick concrete layer which makes up the the Tunnel wall but the fire did not penetrate to the underlying 20-30 cm of injected concrete which lines the link. Behind that second layer is chalk.
Two weeks on, the smell of burnt plastic and metal still permeates the air and protective masks are obligatory.
Once the debris is cleared , the Anglo-French consortium which built the Tunnel, Transmanche Link (TML), can start repairs to the five or six affected kilometres of the link, putting in new cladding, cabling and conductor rails.
Eurotunnel hopes to use intersections linking the two tunnel bores to bypass the damaged section and allow trains to run between Britain and France during repairs, he said.
Tight security surrounds the entry points to the tunnel bores. There are three separate checkpoints before workers can even enter the narrow central service tunnel, which was used for the evacuation on the night of the fire, and is routinely used by maintenance crews.
Specially-built Mercedes vehicles, high and narrow, are used to transport personnel along the service tunnel. It is not a trip for claustrophobics. Once the overhead lights are out, the grey strip of tunnel extends into the darkness ahead, with only the headlights for illumination. Overhead are tonnes of rock and the Channel waters.
",38
"State-owned Air France is under pressure from the French government to drop any thought of buying Boeing long-haul jets from the U.S. and stick with the French-based Airbus equivalent, industry sources said on Friday.
They said that Air France chairman Christian Blanc flew into a political storm after saying on Thursday that the French flag carrier might use a mix of Boeing and Airbus planes in its planned new long-haul fleet, expected to cost some $1 billion.
One industry source said the pressure on Blanc had come from Transport Minister Bernard Pons.
""It's clear there is extremely strong political pressure,"" head of the SNPL pilots union Geoffrey Bouvet said on Friday.
Blanc on Thursday told the business newspaper Les Echos there was no conflict in flying both the Airbus 340 and Boeing 777 aircraft.
""They are complementary...Today like yesterday, we need both Airbus and Boeing."" He added that he did not expect government opposition if the company bought from both European Airbus Industrie consortium and arch-rival Boeing.
""The minister, having talked to Airbus, has been told that there will be an equivalent Airbus product. It is perfectly natural that he ask the national company to invest in Airbus,"" a transport ministry spokeswoman said.
Any decision will go to Prime Minister Alain Juppe for ratification, the transport ministry spokeswoman said.
France's state-owned Aerospatiale is a senior partner in Airbus. The others are British Aerospace Plc, Daimler-Benz Aerospace, a unit of Daimler-Benz AG and Construcciones Aeronauticas SA (CASA) of Spain.
At the heart of the debate, apart from technical merits of the fleet, is Blanc's desire to run the airline as a ""normal"" company along commercial lines, free of political intervention.
Blanc's mandate is to turn round the airline, prepare it for privatisation and deregulation of European air travel from 1997. He has forecast the group was on track to break even this year.
Because of the political sensitivity, a committee of Air France board members was formed to evaluate the products and will submit its conclusion on December 20.
The union's Bouvet said Air France should be left to choose the right planes for particular routes rather than have a fleet imposed by the government. A mixed fleet could make economic sense, if a world class airline such as Singapore Airlines could fly both Airbus and Boeing, he said.
Air France is expected to order between five and 10 planes.
The official list price for the A340-300 is around $120 million. The plane seats 295 passengers in a typical three-class layout and can fly up to 7,300 nautical miles or 13,500 km.
The Boeing 777 flies in two basic versions. The 777-200 seats between 305 to 328 in three classes and has a catalogue price of $128-146 million, and has a range of 3,780 nautical miles, or 7,000 km.
The 777-300, officially priced at $151 million-170 million, seats between 368 and 394, flies 5,380 miles or 9,970 km.
A Boeing spokesman said the company has made a number of offers to Air France using different product mixes.
Airbus itself declined to comment.
The Air France operating company in June reported a first-half operating profit of 413 million francs compared with a loss of 902 million in the first half of 1995.
",38
"A restructuring agreed between Channel Tunnel operator Eurotunnel SA /Plc and bank negotiators on its 69.6 billion francs of debt was a ""robust"" deal, French co-chairman Patrick Ponsolle said on Monday.
He told a news conference the restructuring was robust as it would eliminate a total 16 billion francs of debt by swapping eight billion of loans into equity and a further eight billion for equity notes.
The plan secured the company's future until 2003, when the London-Folkestone high-speed rail link would be built, he said.
""After 2003 we will see an explosion of revenues from the railways,"" Ponsolle said.
The restructuring meant the interest bill would be fixed at 5.2 percent or 3.21 billion francs for the seven-year period. That rate was much lower than market rates, the company said.
If there is a cashflow shortage to repay interest, it will be able to draw down on stabilisation notes, which are effectively a credit line, free of interest until January 2006.
The plan also pushed back the debt repayment periods by a significant period, Ponsolle said. The resettable bonds mature in 2050, the participating loan notes in 2040, the remaining junior debt in 2025 and stabilisation notes in 2026.
Eurotunnel has also negotiated the right to refinance all its debt after 2004, free of penalties, to benefit from any improvement in market conditions. Previously, that refinancing incurred heavy financial penalties.
The deal had been worked out using a wide range of scenarios and sought to preserve the company's future and independence, Ponsolle said. ""It is the best compromise under the circumstances. The sacrifices for shareholders and banks are equal and equitable.""
The two chief aims of the deal were ""to preserve a clear majority for the shareholders and to ensure long-term financial stability,"" he said.
Although the company planned to pay a first dividend in around 10 years, if it performed very well it could make a payment at the date envisaged in the 1994 rights issue -- 2004.
Asked what would happen if shareholders rejected the deal, Ponsolle said, ""I think we would go back to the choices at the starting point. The starting point was either we come to a friendly agreement or insolvency.""
""I think, contrary to some, an insolvency could only be a catastrophe for the small shareholders.""
Prices should rise ""to a reasonable level"" following the merger announcement last week of P&O and Stena of their cross-Channel operations, Ponsolle said.
The merger news had come as a surprise to Eurotunnel, which had not expected such a move until later, perhaps in 1997, he said.
The earliest Eurotunnel could hold a shareholders' meeting to vote on the deal would be late March or early April, he said.
-- Paris newsroom +33 1 4221 5452 pnt
",38
"The European Airbus consortium must resolve deep differences over the future shape of the aircraft-maker to meet the challenge posed by the merger of its U.S. rivals, industry executives said on Monday.
Boeing and McDonnell Douglas shook the aerospace world on Sunday by announcing they were joining to create a company with annual sales of $48 billion.
The strengthening of Boeing, which already outpaces Airbus in sales of civilian aircraft, puts further pressure on the four-nation Airbus Industrie consortium to agree a status change that might sharpen its commercial muscle.
But the four member companies from France, Germany, Britain and Spain are stuck over differing ambitions for changing their present partnership into an integrated company that could rival the new U.S. titan.
Historically Boeing has held around 60 percent of the world civilian aircraft market, Airbus 30 percent and McDonnell Douglas 10 percent.
Airbus, which had set a target of 50 percent by the end of decade, is a partnership made up of 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.
The partners said on July 8 they aimed to reach an agreement by the end of 1996 on the timetable for setting up a new Airbus company, which could be formed by 1999. But an industry source in London said a pact looked likely to slip into the new year.
""The discussions go on. The partners are still working on negotiations for the Airbus Industrie restructuring,"" said an Airbus spokesman, speaking from its headquarters in Toulouse, southwestern France.
""I think this will clearly introduce a massive sense of urgency,"" aerospace analyst Sash Tusa, at broker UBS told Reuters Financial Television (RFTV).
A senior executive said the partners have three different positions on the future Airbus. Aerospatiale wants a ""minimal"" Airbus, Dasa seeks a ""maximum"", while BAe wants a transfer of ""core assets"" from the partners to the new company, he said.
Aerospatiale's chairman Yves Michot said in September he wanted Airbus to act as a prime contractor with enlarged powers to direct subcontractors. Aerospatiale does not think Airbus can take on more than its current marketing operations.
""You cannot go from one thing to the next overnight. Marketing is a business in its own right. Managing factories, manufacturing, people is something else,"" a French industry executive said.
That pits the French firm against Dasa which wants to deepen Airbus' integration to include the design and engineering of sub-assemblies as well as making the major systems such as wings and fuselages. The ""maximum Airbus"" would also handle procurement, final assembly and product support.
BAe would like to transfer design and manufacturing facilities and provide Airbus with a strong balance sheet to finance aircraft sales.
But Aerospatiale would stand to lose its industrial and intellectual crown jewels if it transferred its design office and manufacturing plant in Toulouse to Airbus.
Aerospatiale gains some 70 percent of annual sales from the civilian sector, more than BAe and Dasa which have military and motor vehicle sales respectively to boost their revenue streams.
Although Aerospatiale would receive Airbus dividends, it would lose key operations --  galling for a company which set up Airbus jointly with the Germans. It is joint senior partner with Dasa with 38 percent ownership.
Stripping out Airbus would leave Aerospatiale with missiles and satellites, both of which are being eyed by the acquisitive Lagardere Groupe, and helicopters -- a business under severe pressure.
Apart from the status change, Airbus also needs to develop a fuller product range.
""We have to enlarge the product line at the upper and lower end,"" a Dasa spokesman told RFTV. Airbus is studying a large plane seating between 500-600, dubbed the A3XX, and is planning a 100-seater with China and Singapore.
BAe chairman Richard Evans told the Wall Street Journal on Monday that while the A3XX large aircraft was important, it needed to be a sound business decision.
""I recognise that to be successful and compete with Boeing, we in Airbus need as wide a product mix as possible but not at any price, not at the cost of busting the business,"" he said.
BAe owns 20 percent of Airbus, while Casa owns four percent.
",38
"Channel Tunnel operator Eurotunnel SA/Plc sought to reassure the public Wednesday about the safety of the rail link between France and Britain following last week's fire that halted most services.
But its public relations effort was marred by a minor fire that broke out near the site of last week's blaze.
""There is no doubt the tunnel is at least as safe as other Channel transport systems,"" French Co-Chairman Patrick Ponsolle of the Anglo-French company told a news conference.
A fire in a truck on a freight train seriously damaged a section of the tunnel on Monday last week, injuring 34 people and raising doubts over the safety of the cross-Channel service.
The Eurostar high-speed passenger train and Le Shuttle car and passenger services have been halted, although a limited freight service has resumed.
Wednesday's fire was apparently sparked by welding work during repairs, but it was quickly extinguished, British police said.
""Safety is our first consideration, ahead of commercial considerations,"" British Co-Chairman Robert Malpas said. ""The emergency evacuation procedure which forms the backbone of the safety system worked after two other measures failed.""
The cause of the fire remains a mystery, although sabotage is seen as one possibility by the French magistrate investigating the fire.
""The judge has not ruled out the theory of foul play,"" said a Eurotunnel spokeswoman.
But legal sources said the idea that the fire was started deliberately was regarded as a remote possibility and not the most likely cause.
Ponsolle said Eurotunnel's maximum potential loss from the fire was five to seven million pounds ($8.40 million to $11.75 million).
""The ultimate maximum loss for the company after receiving insurance indemnities could be of the order of five or six or seven million pounds,"" he said.
Eurotunnel's monthly revenue before the fire was between 350 million and 400 million francs ($67.75 million and $77.43 million). Loss of revenues would depend on the re-establishment of a partial service, he said.
If passenger and freight services resumed to 50-60 percent of previous capacity, this would mean a maximum monthly loss of 200 million francs ($38.7 million), Ponsolle said.
Eurotunnel's maximum insurance coverage is 1.5 billion francs ($290.4 million) for equipment and 4.5 billion ($871.1 million) for earnings losses, Ponsolle said.
Eurotunnel hopes to resume partial passenger service early next week, if the safety commission that oversees the tunnel approves a new set of temporary evacuation measures, Ponsolle said.
Because a 1.243 mile section of one of the tunnel bores cannot be used for evacuation, the company is laying on special fire-fighting and ambulance crews on 24-hour alert, with two cars for extricating passengers.
The train that was destroyed in the fire was worth nearly 100 million francs ($19.4 million) and repairs to the tunnel and related equipment would cost between 200 million and 500 million ($38.7 million to $96.8 million). But Eurotunnel is awaiting the results of insurance investigations into the costs of the fire.
Ponsolle said the blaze should not affect a complex plan to restructure the company's 70 billion francs ($13.6 billion) of junior bank debt, which took a year to negotiate. ""There is no reason for us to put into question the restructuring,"" he told reporters.
""We do not see at this stage there needs to be any delay in the rescheduling of the debt,"" Malpas told Reuters Financial Television when asked whether the banks had asked for new clauses to be added to its restructuring because of the fire.
""The creditor banks have been very understanding; they wish us well ... they see it as an incident which we will get over and which will be contained in insurance arrangements and the financial arrangements we have set up,"" Malpas said.
Ponsolle said the company did not face any problems with cash flow. Eurotunnel had 100 million pounds ($167.7 million) in cash holdings and ""it is not under financial pressure to reopen services.""
",38
"French state-owned aerospace group Aerospatiale, in the throes of merger talks, faces key questions on its strategic operations as Europe's aircraft industry gears up for competition with a new U.S. giant.
Aerospatiale is due to merge with combat plane maker Dassault Aviation as part of France's consolidation of its fragmented defence industry.
It is also fighting what executives see as a rearguard action to preserve its hold on building passenger jets for Airbus Industrie, in which it is a senior partner.
""France and Europe have no choice but to restructure,"" Jean-Marc Baron, aerospace specialist at consultancy KPMG Peat Marwick, said. ""The Boeing-McDonnell Douglas merger is excellent because it confronts the Europeans with reality.""
Sunday's surprise merger announcement by U.S. giant Boeing and McDonnell Douglas put the spotlight on speeding up European consolidation and a shakeup of the Airbus structure, in which Aerospatiale is expected to play a key role.
Airbus partners British Aerospace Plc (BAe) and Daimler-Benz Aerospace AG (Dasa) are pushing for a version of a future Airbus which could effectively take commercial aircraft production out of Aerospatiale's hands.
The Airbus shareholders, which also include Construcciones Aeronauticas SA of Spain (Casa), are negotiating the future shape of the Airbus group as part of a move to convert it to a joint stock company from a cumbersome partnership structure.
If, as the British and Germans want, the partners transfer key design and manufacturing assets to Airbus, Aerospatiale would be left with an uncertain future in missiles, satellites, helicopters and combat aircraft after taking over Dassault, a senior industry executive said.
""Aerospatiale wants to accelerate the merger with Dassault to give it more weight vis-a-vis Dasa in Airbus,"" Baron said.
Aerospatiale derives 70 percent of annual sales from the civilian sector, of which half comes from Airbus products, an Aerospatiale spokeswoman said.
Airbus contributed a 1995 operating profit of 1.06 billion francs ($203 million) to Aerospatiale and that figure is sure to rise for this year with Airbus deliveries at 111 at the end of November. Airbus delivered 102 planes in 1995.
Although Aerospatiale, which had 1995 turnover of 49.23 billion francs, would absorb Dassault in the merger, chairman Serge Dassault has said he wants to keep its identity distinct.
Dassault, smaller than Aerospatiale with 1995 sales of 11.6 billion francs, has consistently made profits and cultivates its own strong corporate culture as maker of the Mirage combat plane and Falcon small business jet.
The merged company would have annual turnover of around 60 billion francs and is expected to have a common purchasing centre. Purchasing makes up around 60 percent of turnover so if it made annual savings of around five percent, it could benefit to the tune of one to two billion francs a year.
The Aerospatiale spokeswoman said merger terms had not yet been agreed.
Aerospatiale wants Airbus eventually to have a military wing, similar to U.S. giants such as Lockheed Martin and Boeing and McDonnell Douglas, a source close to the company said.
The U.S. giants have defence businesses to balance out the business cycles and receive state research contracts for military projects which are viewed as indirect industry aid.
After merging with Dassault and breaking even, Aerospatiale can be privatised. This is expected to be a sale of capital to industrial partners rather than a stock market flotation, because of the strategic nature of Aerospatiale's business.
But so far, no timetable or partners have emerged.
On missiles and satellites, Aerospatiale executives are frustrated that they have been unable to close a deal to merge these activities with Dasa, despite years of negotiations.
The two activities, grouped under a space and defence heading, contributed 412 million francs operating profit in 1995, after a loss of 32 million in 1994.
Meanwhile, it feels the French conglomerate Lagardere Groupe breathing down its neck. Lagardere recently completed a merger of its Matra missiles unit with BAe to create the Matra BAe Dynamics joint venture, with annual sales of $1.5 billion.
Lagardere argues that by virtue of its British merger it should be the focus for the next consolidation between France and Germany in missiles, while its Matra Marconi Space satellites joint venture with Britain's GEC Plc should be the centre of a European space business.
Aerospatiale also has a Eurocopter joint venture with Dasa, which makes military and civilian helicopters. Eurocopter made an operating loss of 817 million francs last year, after a 45 million loss in the previous year.
Eurocopter faces a difficult medium-term outlook with an orders gap after the next two years until first deliveries in 2002 of the Tiger combat helicopter to the French army.
Aerospatiale made its first surplus since 1991 with a first-half 1996 net profit of 273 million francs and expects to break even in 1997 if the dollar stays at five francs.
It made a 1995 net attributable loss of 981 million, due to a 1.5 billion restructuring charge to cover 3,000 job losses. ($1=5.224 French Franc)
",38
"The four partners of the Airbus consortium Monday signed an agreement aimed at making the European planemaker a unified company better able to compete with U.S. rival Boeing Co.
Airbus Industrie said in a statement its four European partners had signed a memorandum of understanding to restructure Airbus into a limited liability company by 1999.
""The establishment of Airbus Industrie as a single corporate entity (SCE) is an important initial step in the consolidation of the aerospace industry within Europe,"" Airbus said.
Toulouse, France-based Airbus is currently a partnership between French state-owned Ste Nationale Industrielle Aerospatiale, British Aerospace Plc, Daimler-Benz Aerospace (DASA) and Construcciones Aeronauticas SA (Casa) of Spain.
The new Airbus will have a single management structure which would add engineering, testing, production, procurement and customer service to Airbus's current marketing, sales and product support activities, the statement said.
DASA Chairman Manfred Bischoff told reporters in Munich that differences remained among the partners in the consortium despite the signing of the deal on Monday.
He said there were still different views over the amount of productive assets that should be brought in to the limited liability company which is to replace the existing partnership.
An industry executive said what follows now would be ""horse-trading"" as the partners discuss what assets are deemed necessary now that the functions for the new Airbus have been decided. ""Is this plant an essential part of the function of the future Airbus,"" will be the question to be asked, he said.
The Airbus statement said ""Transfer of assets associated with these functions... will depend on how far the assets are essential for the described functions and their detailed valuation, to be completed by the end of 1997.""
The British and Germans had argued for a high degree of integration in the new Airbus, while Aerospatiale wanted a more cautious approach, based on a largely static view of Airbus.
Airbus is mainly a sales and marketing organisation with the four partners making the planes. But the task of reorganizing Airbus took on an urgent note after Boeing and McDonnell Douglas said in December they would merge and form a civil and military giant with $50 billion in annual sales.
Airbus said the restructured company would help improvement in overall operational efficiency, the introduction of new international strategic partnerships and the longer term opportunity for ""external participation"" in Airbus.
Airbus spokesman Robert Alizart said that these options included a future stock market listing of Airbus.
In London, a British Aerospace spokesman said a share flotation for Airbus was a ""long-term possibility.""
Airbus said it was studying a launch of the A3XX, which would break the stranglehold on the lucrative high-capacity end of the market now held by Boeing's 747 jumbo jet.
Aerospatiale Chairman Yves Michot told journalists that he had met the chairman of U.S. giant Lockheed Martin, Norman Augustine, for cooperation talks and did not exclude a role in the A3XX project for the U.S. company.
""You cannot get enough of the right kind of partners in this sort of project..."" Michot said, citing Lockheed Martin as a potential partner.
But Dasa's Bischoff told the Stern magazine that no decision was expected this year on the A3XX project as talks with airlines had shown detailed consultations were still needed, in view of the huge financial effort needed.
The goal of the new Airbus company must be to achieve a return on equity of at least 12 percent for its shareholders, Bischoff said. That meant that Aerospatiale must match cost cuts of 30 percent already made by DASA and BAe, he said.
Bischoff told reporters in Munich that Lockheed and Russian plane companies could become Airbus partners, as well as Saab of Sweden and Italy's Alenia.
",38
"Air France on Wednesday ordered 10 Boeing jetliners and 10 Airbus jets, and the government-owned airline reported dramatically improved profits of 802 million francs ($158 million) in the first half.
The profit estimate for the six months ending Sept. 30, disclosed in an Air France board statement, compared with a loss of 335 million francs ($66 million) a year ago.
The improved results and Air France's aim to break even in 1996/97 was underlined by the orders for 10 Boeing 777 twinjets and options for 10 more. The airline also ordered five Airbus A340s, confirmed five orders made in June and took options for an additional five.
Air France Chairman Christian Blanc won vital support from French Prime Minister Alain Juppe to buy from Seattle-based Boeing instead of ordering solely from its archrival Airbus Industrie, the European consortium based in southwest France.
At list prices, which are rarely paid, the orders and options for the Boeing 777-200 version ordered could be worth around $2.7 billion. Airbus would stand to gain $1.75 billion.
List prices for the B777-200 range between $128 million and $146 million, while the Airbus A340-300 costs $110 million to $120 million.
""In the reorganization of its fleet, Air France is obliged to buy Boeing,"" Transport Minister Bernard Pons told parliament.
""It is obliged to meet commitments made in 1989 unless it accepts losing deposits and taking legal action, which risks being much more expensive than making this decision.""
The French airline had outstanding Boeing orders worth $994 million and $2 billion in options, Pons said, adding that the airline had skilfully negotiated the latest order to respect the initial commitment.
The three government representatives on the Air France board approved the Boeing 777 purchase ""not because they are the best or the most profitable but because they best meet the company's needs,"" Pons said.
Air France had also accepted to be a launch customer for the planned A340-600, a ""stretched"" version of the A340, he said.
Airbus hopes to build the 375-seater to smash Boeing's monopoly in the large-capacity aircraft segment.
Air France said that, due to financial problems, it froze at the end of 1994 all aircraft orders, including the 1989 Boeing order, and opened talks with the two plane makers.
Air France has since reorganized its fleet, restructured its network around a centralized ""hub"" at Paris Charles De Gaulle airport and optimised aircraft use. It has over the past two years increased the number of flying hours by 14 percent.
Pons welcomed Air France's financial results, saying: ""The results are very encouraging.""
",38
"State-owned Air France on Wednesday reported dramatically improved earnings of 802 million francs ($158 million) in the first half and placed a bumper order for 20 Boeing and Airbus aircraft, plus options.
The profit estimate for the six months to September 30, which emerged in an Air France board statement, compared with a loss of 335 million francs a year ago.
The improved results and Air France's aim to break even in 1996/97 was underlined with orders for 10 Boeing 777  twinjets, and options for 10 more. The airline also ordered five Airbus A340s, confirmed five orders made in June and options for a further five.
Air France chairman Christian Blanc won vital support from Prime Minister Alain Juppe to buy from Seattle-based Boeing instead of ordering solely from its archrival Airbus Industrie, the European consortium based in southwest France.
At catalogue prices, which are rarely paid, the orders and options for the Boeing 777-200 version ordered could be worth around $2.7 billion. Airbus would stand to gain $1.75 billion.
List prices for the B777-200 range between $128 and $146 million, while the Airbus A340-300 costs $110 to $120 million.
""In the reorganisation of its fleet, Air France is obliged to buy Boeing,"" Transport Minister Bernard Pons told parliament.
""It is obliged to meet commitments made in 1989, unless it accepts losing deposits and taking legal action which risks being much more expensive than taking this decision.""
The French airline had orders outstanding with Boeing worth $994 million and $2 billion of options, Pons said, adding that the airline had skillfully negotiated the latest order to respect the initial undertaking.
The three state representatives on the Air France board approved the Boeing 777 purchase ""not because they are the best or the most profitable but because they best meet the company's needs,"" Pons said.
Air France had also accepted to be a launch customer for the planned A340-600, a ""stretched"" version of the A340, he said.
Airbus hopes to build the 375-seater to smash Boeing's monopoly at the large capacity aircraft segment.
Air France said that due to financial problems, it froze at the end of 1994 all aircraft orders, including the 1989 Boeing order, and opened talks with the two plane-makers.
Air France has since rationalised its fleet, restructured its network around a centralised ""hub"" at Paris Charles De Gaulle airport and optimised aircraft use. It has over the past two years increased the number of flying hours by 14 percent.
Pons welcomed Air France's financial results, saying: ""The results are very encouraging.""
The company said it made its profit despite a rise in spending on fuel of nearly 500 million francs for the period.
Turnover was up nearly five percent to 21.3 billion francs due to a 14.8 percent increase in passenger traffic and a 6.7 percent rise in freight.
Operating profit rose nearly 30 percent to 1.1 billion francs, compared with 849 million in the year-earlier period. The pretax, pre-exceptional result tripled to 660 million francs.
Air France was ahead by ""a little more than 250 million francs of its budget"" at the six months stage, the company said. The first half is traditionally better for seasonal reasons and should not be used to extrapolate for the full year, it added.
Debt stood at 12.9 billion francs at September 30, versus 19.2 billion at March 31, 1996. The repayment of 6.3 billion francs significantly exceeded the last tranche of its state recapitalisation paid in September.
The Boeing order consists of the heavier ""Increased Gross Weight"" version of the basic 777-200, equipped with GE90 engines built by General Electric and France's Snecma. The B777-200 will seat 288 passengers in three-classes.
The Airbus order is for the A340-200E version equipped with CFM56-5C4 engines. ($1=5.075 French Franc)
",38
"French utilities giant Compagnie Generale des Eaux on Monday posted higher first half profits and unveiled plans to reorganise its loss-making construction business, hammered by a depressed French market.
Chairman Jean-Marie Messier told a news conference the company made a first half net profit of 808 million French francs ($155.9 million), after payment to minorities, up from 224 million a year ago.
He also forecast net profit for the full year 1996 would be about 1.8 billion francs after a net loss the year before of 3.69 billion francs. The results would be ""strongly marked by exceptional items, notably capital gains from asset sales.""
For 1997, Messier expected profits to be ""much higher"" than those of 1996 and should be ""without doubt higher than the best profits the company has had in its history."" The company made 3.4 billion francs net profit in 1994.
Messier also announced Generale des Eaux said it had made a formal bid on Monday with its German partner Mannesmann to run the telecommunications operations of French state railways SNCF. The two companies want to bring British Telecom to join the bid.
Messier, who came from an investment bank, was brought in last year to clear out the group's balance sheet which had put on more than 50 billion francs of debt and been savaged by a crisis in the property market and construction business.
His first step last year was to reorganise the property arm, which he said on Monday had cost the group a total 15 billion francs since 1994.
The group expects to lose 4.6 billion francs this year due to poor property assets but that includes three billion francs of exceptional charges which should wipe out any uncertainty for the next three years, he said.
""At the end of 1996, Generale des Eaux will not face any questions, even in pessimistic scenarios for the next three years, on any exceptional charges which may arise from its property activities,"" he said.
The group's George V property development arm aims to be profitable from 1997, he said.
The group's average level of property provisioning was around 55-56 percent, of which assets in the South of France were provisioned at 65-70 percent and 85 percent at Cannes.
This time round, Messier attacked the group's building and public works businesses which have suffered from the downturn in France and Germany. He has made its SGE subsidiary the centre of its construction activity.
Into SGE will go the GTIE and Santerne electrical installations units and roadbuilders Cochery, Viafrance and SGE-VBU. And there will be a consolidation of building activity with SGE buying 40 percent of Compagnie Generale de Batiment et de Construction (CBC), currently wholly owned by CGE.
The new SGE, which will be ""radically different and attractive,"" have annual sales of 52 billion francs and will return to a significant level of profit in 1997, Messier said.
Generale des Eaux also expects to cut its debt by about 10 to 15 billion francs in 1997. It said it expected its net financial debt to stand at 53 billion francs at the end of 1996, down from 54 billion in 1995.
He said the company's operating profit would be close to the 3.7 billion franc profit recorded in 1994.
Turnover in 1996 should be up three percent to 164 billion francs, he added.
France is deregulating its telecommunications in 1998, breaking the domestic monopoly of state-owned France Telecom to comply with European Union rules. ($1=5.182 French Franc)
",38
"French President Jacques Chirac looked set on Wednesday to achieve his ambition of creating a national defence giant to rival huge U.S. conglomerates through the planned merger of Lagardere's Matra with Thomson- CSF.
The government announced on Wednesday it preferred a bid by missile-maker Lagardere Groupe for electronics firm Thomson SA over a rival one by civilian engineering group Alcatel Alsthom. Both offers have been referred to the independent Privatisation Commission.
The preference for Lagardere seems to vindicates the integration sought by Noel Forgeard, chairman of Lagardere's Matra unit, who has fought a highly-public campaign for Thomson, in order to win its Thomson-CSF defence arm.
The deal will ""indisputably strengthen the missiles activity in France and particularly Europe,"" said Jean-Marc Baron, a partner specialising in defence at consultants KPMG Peat Marwick. ""The merger wil create a critical mass,"" he added.
Matra specialises in air-to-air missiles with the Magic and Mica weapons, while Thomson-CSF has ground-to-air missiles including the Crotale NG (New Generation) and Starstreak very- short-range missile built with Shorts Brothers Plc, a unit of Canada's Bombardier.
The addition of Thomson-CSF reinforces a vital joint venture between Matra and British Aerospace Plc to create Matra BAe Dynamics, which Lagardere wants to be the pole for future European industrial concentration.
Besides the missile synergy, Baron pointed to the benefits of marrying Thomson-CSF's radar and communications expertise with Matra's space satellites, which will give Thomson access to a new market.
Lagardere has major space interests with its Matra Marconi Space (MMS) joint venture with GEC Plc of Britain and also wants to use this a platform for building a single European satellite giant, to make the most of scarce funds.
This vertical integration of detection, communications and weapons makes the future Thomson Matra a powerful ""systems"" player rather than a seller of separate products. Each of these segments has annual turnover of about $1-$2 billion, Baron said.
In the United States, the defence industry has quickly consolidated through $40 billion of mergers and acquisitions to create giants such as Lockheed Martin. Integration is seen as key, with firms such as Hughes, a unit of General Motors, not only building missiles and satellites but also operating the satellites.
European and U.S. defence firms have had to adapt to shrinking military spending since the end of the Cold War and soaring research and development costs. But Europe has lagged in that restructuring due to differing national interests.
With the aid of Matra's links with BAe and GEC and through overtures to Daimler-Benz Aerospace (Dasa), Forgeard wants to forge a European grouping which would have world class status in terms of turnover and product range.
Chirac launched the privatisation of Thomson SA in February as part of a restructuring of France's fragmented defence industry, widely seen by analysts as a vital step toward a badly needed consolidation of European capacity.
",38
"The European Airbus consortium said on Tuesday it was confidently pressing ahead with studies on a 555-seat passenger plane despite a decision by archrival Boeing to scale back work on a larger jumbo jet.
Boeing on Monday said market conditions did not justify the risk and expense of building a new version of its 747 jumbo jet, the 747-X, and it was diverting half the 1,000 staff on that project to smaller planes.
""We are confident the A3XX will meet market needs,"" an Airbus spokesman said. ""The signs from major airlines working with us on shaping the A3XX are definitely encouraging.""
Airbus, ever quick to seize on any perceived gaps in Boeing's armour, says airlines want an all-new plane rather than Boeing's 747-X, which the Airbus spokesman said was the ""end of the line for a product developed in the late 1960s"".
""Airlines want to fly into the 21st century facing forward, not backwards,"" the spokesman added.
Airbus must attack Boeing's monopoly on the large-capacity segment and is studying designs for an A3XX product family which it hopes to launch in 1998 for service in 2003.
It wants to grab at least half of the aircraft market by the end of the decade, up from its estimated historic share of 35 percent. But it lacks large planes to compete with Boeing's 777 giant twinjet and the best-selling 747 jumbo.
The four-nation consortium differs with Boeing over the potential market and development costs for a new large plane.
Airbus forecasts a market of 1,383 planes seating more than 400 passengers over the next 20 years, while Boeing believes demand would only stretch to 470 planes seating 500 or more, which would not allow it to get a return on its money.
A basic A3XX would cost around $200 million, giving potential sales worth more than $275 billion on the Airbus forecast.
""A split market would have been a big challenge for two manufacturers but now Boeing is opting out, that enhances our prospects,"" the Airbus spokesman said.
Airbus accepts the view that the market will fragment further as people want to fly more frequently, non-stop, long distance between city pairs.
The ""fragmentation"" effect was one of the factors cited by Boeing for cutting demand for larger planes and reducing the importance of big airport hubs.
But Airbus believes it will meet that market change with its A340 long-haul plane and that the A3XX will co-exist.
Saturation of air routes and airport landing slots calls for higher capacity planes, it argues. Countering critics who point to already lengthy waits at airports, it says its A3XX designs would allow a quicker passenger turnaround than the jumbo.
Airbus is talking to 14 leading airlines on what the plane should offer and is confident that it can match or better the airlines' operating demands. These include fitting within an 80 metre ""box"" at the airport terminal.
It is officially sticking to its estimated $8 billion development cost for the A3XX, despite scepticism among some experts that it cannot be done for less than $15 billion.
Airbus is a consortium made up of French state-owned Ste Nationale Industrielle Aerospatiale, British Aerospace, Daimler-Benz Aerospace (part of Daimler-Benz) and Construcciones Aeronauticas SA of Spain.
",38
"A two-stage privatisation France's Thomson SA electronics group would allow an early sale of its defence arm and make better economic sense than packaging defence with the loss-making consumer goods unit, stock market analysts said on Monday.
Conservative Prime Minister Alain Juppe said in an interview in the London Financial Times on Monday that the military electronics subsidiary Thomson-CSF could be separated from Thomson Multimedia to allow for a speedy privatisation.
The government was forced last week to drop its preferred choice of selling the whole Thomson group to the Lagardere Groupe conglomerate for a symbolic one franc after the independent Privatisation Commission rejected that option.
A break-up of Thomson runs directly against President Jacques Chirac's initial policy announced on February 22 on restructuring the French defence industry and selling Thomson as one unit.
But analysts said the two-part sale made good sense.
""We should have started with that...get on immediately with restructuring the defence industry,"" said an analyst at a French brokerage. ""We can leave Thomson Multimedia (TMM) until 1998.""
A second analyst said, ""It's the privatisation of the Multimedia unit which poses the problem. The industrial logic of the merger between Thomson-CSF and Lagardere has not been criticised by anyone.""
It was Lagardere's plan to sell TMM to South Korea's Daewoo Electronics, while keeping Thomson-CSF, which led the Privatisation Commission to rule out its bid. The Commission objected to planned technology transfers to Daewoo and the lack of binding commitments by Daewoo to retain jobs in France.
Privatising Thomson-CSF separately would meet the state's main aim of creating a defence electronics national champion, and shelve the problems of Thomson Multimedia. CSF is profitable, virtually clean of debt and 42 percent of the capital is quoted on the Paris bourse.
A source close to Thomson-CSF said the firm has not lost any contracts due to the privatisation uncertainty but it has had to run a corporate advertising campaing in countries where it feels its image has suffered.
Lagardere's Matra missile company still looks the favoured candidate for taking over Thomson's defence unit ahead of a rival offer from engineering group Alcatel Alsthom.
""We get the impression that the government wants Lagardere to get Thomson-CSF,"" said one analyst at a brokerage.
An analyst at a French bank said, ""Insofar as the government has made its preference known and is sticking by it, Lagardere seems to be well placed.""
Lagardere has the means to buy Thomson-CSF, without recourse to significant borrowing, one analyst said.
Taking a range of Thomson-CSF share price of between 156 and 200 francs per share, the company has a market capitalisation of between 18 and 24 billion francs ($3.4-4.6 billion), he said.
At the end of 1995 Lagardere had 10 billion francs in tradeable securities, 1.3 billion in free cash and is due to receive three billion in the first half of 1997 when share warrants are due to be exercised. Financial debt was around 8.4 billion.
Lagardere would bring some eight billion francs of Matra's assets in merging with Thomson-CSF, which would reduce the cash it would have to pay. It would however be expected to pay large amounts for goodwill.
Speculation that a vertical integration of missiles, electronics and airframe makers could now be tackled by merging Thomson, Matra, Dassault Aviation and Aerospatiale did not stand up to scrutiny, analysts said.
Combat plane maker Dassault is expected to be absorbed by the larger, civilian-aircraft manufacturer Aerospatiale as part of the defence industry consolidation. But as Aerospatiale is state-owned and the government still wants to privatise Thomson, that course seemed to be excluded, an industry executive said.
Economy ministry officials were not immediately available for comment. ($1=5.244 French Franc)
",38
"Troubled Channel Tunnel operator Eurotunnel SA/Plc is due to release first-half results on Monday but analysts said any attempt to forecast the figures was futile, given the uncertainties over 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.
Eurotunnel needs to agree a refinancing of its $12.3 billion 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.
Machou said it was hard to forecast results due to ""dumping"" in the price war between Eurotunnel and ferry companies as they battle for a share of cross-Channel traffic between Britain and France.
""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,"" one analyst said.
However, one analyst at a large French brokerage said he had a rough forecast of a 2.5 billion franc ($492 million) net loss and an operating loss of around 100 million.
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 the full year last year 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 pound ($34.45 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 sterling before interest and capital expenditure, compared with 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 sterling 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.
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. ($1=5.077 French Franc) ($1=.6385 Pound)
",38
"French subscriber television company Canal Plus said on Friday it was merging with Nethold, a Dutch satellite television company, to create one of the world's largest pay-TV groups.
Nethold is jointly held by Richemont SA, which is quoted on the Zurich and Johannesburg stock exchanges, and MIH Holdings Ltd, a listed holding company.
""This merger is a major strategic move, resulting in the creation of one of the largest television groups in the world...particularly in the field of pay-TV with over 8.5 million subscribers,"" Canal Plus said in a statement.
The new group will have significant positions in France, Italy, Spain, Scandinavia, the Benelux countries and Germany as well as a presence in several growing markets in central Europe.
The Paris stockmarket authorities had suspended trading in Canal Plus shares on Friday morning, sparking speculation of a link up between the French firm and Nethold.
Its stock closed at 1,169 francs on Thursday.
Utilities group Cie Generale des Eaux, a key shareholder in Canal Plus, said in a separate statement it was delighted with the merger plan, which marked big step in Canal Plus's international development.
The pact would give the French company access to the fast-growing Italian market, Generale des Eaux said.
It would also give the new group greater weight in negotiating purchases of copyrights and open opportunities for the launch of European theme channels.
Generale des Eaux said it was comfortable with its investment in Canal Plus. It said that in agreement with other Canal Plus shareholders, it would seek to maintain the same scale of investment in the new company.
Under the terms of the deal, Canal Plus will buy 100 percent of Nethold from Richemont and MIH, paying with 6.1 million new Canal Plus shares and $45 million in cash.
Following the issue of new Canal Plus shares, Richemont and MIH will respectively own 15 and five percent of Canal Plus.
Cie Financiere Richemont has interests in luxury goods and tobacco and owns such famous brandnames as Cartier, Mont Blanc, Rothmans and Dunhill.
Canal Plus said the deal had the backing of its main shareholders, media group Havas, Generale des Eaux, bank Societe Generale, and state bank Caisse des Depots et Consignations.
It is subject to regulatory and shareholder approval.
",38
"Shares in debt-mired Channel Tunnel operator Eurotunnel SA fell on Tuesday after they were requoted following a week's suspension, amid disappointment over terms of its restructuring with creditor banks.
The troubled Anglo-French company unveiled on Monday details of the refinancing its 69.6 billion francs ($13.50 billion) of junior-ranked bank debt after a year of complex negotiations with bank lenders.
The shares were trading at 8.50 francs at 1052 GMT, on heavy volume of 16 million. They were 9.15 francs when they were suspended on September 30.
Analyst Jean Borgeix at broker Pinatton said the stock market was disappointed with the 10.40 francs for which the banks will getting new Eurotunnel shares in an eight billion franc equity for debt deal.
The market had been looking for a conversion price of between 12-15 francs per share, he said.
The current shareholders also stand to effectively ""lose"" 30 percent of Eurotunnel's future cashflow, as this is the percentage earmarked for paying the ""stabilisation notes"" it would issue to banks in return for an interest-free credit line.
The company negotiated the right to issue the stabilisation notes in case it fell short of cash to meet interest payments. It can issue up to 14.8 billion francs of the notes.
Factoring in that loss of future cashflow gave the shares a present value of around 8.5 francs per share.
Another French analyst said, ""The restructuring assures the industrial viability of the project, even though the shares remain a risky investment.""
The debt deal looked good on paper and the zero-interest stabilisation notes provided Eurotunnel with a last line of defence if its cash failed to meet interest payments, he said.
A trader at a major U.S. brokerage in Paris said the share price suffered from the dilution of equity due to the debt pact.
The restructuring will dilute the holdings of current shareholders to 54.5 percent of the capital after the debt swap.
The complex agreement also includes issuing eight billion francs of bonds redeemable in shares, which could further dilute the equity holders to 39.4 percent if the banks exercised their conversion rights at 12.40 francs per share.
But shareholders will also get share warrants at the same price to bring them back to owning 51.3 percent of the capital.
($1=5.156 French Franc)
",38
"Europe's aircraft industry flew closer to strengthening its industrial base with announcements on Friday that a 100-seater jet to be built with China will form part of the Airbus family and Italy's Alenia will enter new Airbus programmes.
The news follows statements earlier this week from archrival Boeing and the smaller McDonnell Douglas that the two U.S. firms are cooperating on future wide-body jets, particularly two ""stretched"" versions of the Boeing 747 jumbo.
""A specific agreement has been reached on the new 100 seat jet family in which all the European partners involved have agreed that it will be part of the Airbus product range,"" a statement from British Aerospace Plc (BAe) said.
BAe is a partner in the European Airbus Industrie consortium, as well as the separate AIA joint venture which is partnering China to build the Asian Express 100 passenger plane.
Airbus, together with Alenia, a unit of the Finmeccanica holding company, will set up a new company to lead the European participation with China and Singapore, the joint statement said.
Singapore's Singapore Technologies Aerospace is also a partner in the project.
""This completes the bottom end of the Airbus range with a brand new offering and consolidates Airbus' position in the growing Asian market,"" an Airbus spokesman said.
The Airbus partners are also bringing Alenia closer to the consortium by involving it in derivatives of current products, such as the A340-600, a stretched version of the four-engine, long-range A340, as well as a likely role in the A3XX large aircraft under study.
""Alenia will probably be a risk-sharing partner in the A3XX,"" the spokesman added. ""It means a broadening in equity and funds for both programmes.""
Airbus has marked out the A340-600 as its top priority as it needs to increase capacity to rival the Boeing 777 twinjet and older 747 models. It also wants to be able to launch the A3XX, expected to cost $8 billion, by 1998 for service in 2003.
But while Alenia is moving in at the programme level, it is not entering the consortium as an equity partner. Alenia is already present in a special Airbus subsidiary, Airbus Military Company, set up to manage the Future Large Aircraft (FLA), a tactical transporter planned for eight European forces.
The other Airbus partners are French state-owned Ste Nationale Industrielle Aerospatiale, Daimler-Benz Aerospace, a unit of Daimler-Benz AG and Construcciones Aeronauticas SA (CASA) of Spain.
The 100-seater plane for China will share common features with the Airbus A320 family, which includes the A321 and A319, seating between 124 and 186 passengers. It will bring Airbus into a new segment fought over by Boeing and McDonnell Douglas.
News that McDonnell Douglas will act as a subcontractor for Boeing, announced on December 3, ""didn't take us by surprise,"" said the Airbus spokesman. ""It doesn't alter our agenda.""
The aerospace industry had been expecting some of realignment by McDonnell Douglas after it announced at the end of October it was dropping studies of its MDXX wide-body plane. It also lost its place for a vital U.S. competition for the Joint Strike Fighter (JSF) last month.
",38
"Intense haggling among the world's trade ministers has brought within grasp a lucrative deal to free the global information technology market, officials said Tuesday, and some said they saw movement on the contentious issue of labour standards.
Big powers, notably the United States and the European Union, said a flurry of talks during the second day of the World Trade Organisation ministerial conference had inched toward a global pact to eliminate tariffs on the $600 billion market for information technology.
Differences appeared to narrow on standards to regulate cheap labour and child workers.
WTO officials want a final declaration at the close of the first ministerial meeting of the fledgling trade body on Friday that would point the WTO down the free trade path into the 21st century.
The EU, along with the United States, Canada and Japan, was making progress to reach consensus on an Information Technology Agreement that would be the crowning achievement of the meeting, EU Trade Commissioner Sir Leon Brittan told reporters.
""We are making a lot of progress,"" Brittan said after a lunchtime meeting of the four major trading partners to discuss types of products to be covered and timing of tariff reductions.
Acting U.S. Trade Representative Charlene Barshefksy said she concurred with Brittan's comments, but declined to say anything more on the proposed pact to remove tariffs on computer products by 2000.
""There is no question that what the industrialised countries now hope for most here is a deal on information technology products and agreement to work hard for a basic telecommunications pact by February,"" said one key negotiator.
Signals from negotiators left little doubt the major traders were aiming for agreement as quickly as possible -- perhaps by Wednesday -- to convince Asian trading partners to sign on to the agreement by the end of the meeting on Friday.
Japan's Foreign Minister Yukihiko Ikeda told the conference he hoped ""ardently .... that we will have an agreement as the most significant achievement of this ministerial conference in the area of trade liberalisation.""
However, several Asian nations voiced reservations, with Malaysia saying the goal of free commerce in infotechnology by the turn of the century was too ambitious.
""We did not come here to discuss the Information Technology Agreement,"" International Trade and Industry Minister Rafidah Aziz said. ""All negotiations should be done in Geneva.""
The 128 full delegations from WTO member countries and ministers and officials from nearly 30 others waiting to be admitted heard ringing appeals for progress toward a telecommunications liberalisation pact with a deadline set for mid-February.
Another late-night meeting was called on the issue of labour standards, which has emerged as the most divisive at the meeting.
A Japanese foreign ministry official told reporters that some developing countries that had opposed any mention of the labour issue in the final declaration were taking a more positive position. ""A possibility of an agreement has emerged,"" he said, but addded that some hard-core emerging economies were holding out.
India, Malaysia and Indonesia, for example, have been insisting on no mention at all, arguing that even a neutral phrasing would suggest work conditions were a subject for the WTO.
Aiming to counter lobbying by sceptical Western-based aid groups, the WTO insisted that the poorest nations stood to reap major benefit from the freeing of global commerce.
But WTO officials admitted that Director-General Renato Ruggiero had failed to convince richer members, both industrialised and emerging economies, to remove all tariffs and other barriers affecting goods from the laggard states.
The European Union made little headway in efforts to persuade its main trading partners to jump-start stalled talks on China's bid for WTO admission. But Russia, another major member-in-waiting, expected to win entry by the end of 1997, Russian Deputy Prime Minister Oleg Davydov said.
",14
"Officials in a central Chinese region have issued an action plan to stamp out worship by the underground Catholic church loyal to Rome, a U.S.-based church group said on Saturday.
The Communist Party document issued by officials of Chongren county in central Jiangxi province warns against infiltration by overseas religious forces and threats to political stability, said the Cardinal Kung Foundation, which obtained a copy of the document.
The seven-point plan, titled Procedures to Legally Implement the Eradication of Illegal Activities of the Underground Catholic Church, spells out action to be taken from November 25, 1996 to March 31, 1997 to wipe out underground congregations.
Measures include laying good public relations, registering and setting up a file for each religious believer for local and transient Catholics, forcing each undergound Catholic to write a letter denying their faith and to join the official church.
The document blames the growing number of illegal religious believers on ""the intensified infiltration of overseas religious enemy and opposition forces, and due to the influence of the illegal activities of the undergound religious force"".
Underground believers ""used religion to commit criminal activities, seriously disturbing the social order and affecting political stability"", it said.
It urges local authorities to employ ""resolute, decisive and organised"" measures to stamp out the underground church.
A local official reached by telephone in Chongren county refused to comment, saying the issue could arouse widespread international controversy.
China allows Catholics to worship under the auspices of the officially sanctioned, state-sponsored Patriotic Association but forbids allegiance to Rome or the Pope and maintains no diplomatic relations with the Vatican.
Authorities view underground congregations as a threat to party rule.
Aims of what the document called its ""glorious assignment"" include to ""destroy the organisation of the Catholic underground forces"" and to ""destroy the Church's illegal assembly place"".
Teachers engaged in illegal religious studies will be sacked and students are forbidden to carry any religious items.
The document called specifically for large-scale assemblies on Christmas Day to be stopped and exits of villages to be blocked to ensure no one leaves on December 25, 1996.
The plan defined the struggle against underground Catholics as a long-term political goal beyond April 1, 1997.
The Cardinal Kung Foundation is a Roman Catholic group that monitors religious persecution in China and wants recognition of those faithful to Rome.
It listed a string of recent examples of persecution of underground Catholics in China, including the disappearance of Bishop Su Zhimin of Baoding in northern Hebei province, and the jailing of two other bishops.
Bishop Su vanished after some 5,000 troops sealed off the Hebei village of Donglu in May, destroyed a shrine to the Virgin Mary that had drawn tens of thousands of underground Catholics in 1995, and detained two bishops and several priests and lay people, the foundation said.
Bishop Zeng Jingmu, 75, was ordered in March, 1995 to serve three years of re-education through labour after celebrating an undergound mass and a third bishop was jailed after he refused a bribe to join the Patriotic Association, it said.
About 80 underground Catholics were arrested in Chongren county on November 20, it said but gave no more details.
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 has jailed a Tibetan music expert touring the Himalayan region on a U.S. scholarship for 18 years for spying in one of the harshest sentences ever meted out in the restive region, local radio reported on Friday.
Ngawang Choephel, 30, who was travelling in Tibet as a Fulbright scholar to produce an amateur documentary about traditional music and dance, was detained by the authorities in Tibet in August, 1995, said the broadcast monitored by the British Broadcasting Corp.
The young scholar confessed to having been sent to Tibet by ""the Dalai (Lama) clique"" on behalf of an unnamed foreign country to conduct espionage activities, the report said in a thinly veiled reference to the United States.
U.S. officials had no immediate comment on the case.
He was visiting ""under the pretext of collecting information on Tibetan folk songs and dances"", the radio broadcast said.
""In accordance with the Criminal Law of the People's Republic of China... The Intermediate People's Court of Xigaze Prefecture sentenced Ngawang Choephel to an 18-year prison term for committing espionage crime,"" the radio said.
He was deprived of his political rights for four years.
China has been swift to crack down on any sign of anti-Chinese unrest in the Himalayan region.
Beijing has been especially nervous about anyone with possible links to the exiled Dalai Lama, Tibet's god-king, since he announced in 1995 his own candidate as the reincarnation of the region's second holiest monk, the Panchen Lama. China later presided over the discovery of an alternative reincarnation.
""The striking thing is the length of the sentence,"" Robbie Barnett of the London-based group Tibet Information Network said in a telephone interview. ""It is quite extraordinary.""
Ngawang Choephol's sentence was the most severe handed down in a political case since Tibetan monk Ngawang Phulchung was jailed for 19 years in 1989 for subversion after publishing political leaflets, including a manifesto for a democratic Tibet.
Another monk, Jampel Changchup, was also sentenced in 1989 to 19 years in prison for subversion and espionage.
""It does seem to be a provocative decision in political terms because it names three times 'a certain foreign government',"" Barnett said.
""It appears to mean the end of any sense that China is susceptible to the international community on human rights issues,"" he said. ""They now feel confident to use counter-espionage laws against political offenders.""
Ngawang Choephol left Tibet as a child shortly after the Chinese takeover in 1950 and grew up in India before going to Middlebury College in Vermont in 1993 as a Fulbright scholar in ethnomusicology.
The young man, who once worked as a dance teacher in India, travelled to Tibet in 1995 to make his amateur documentary.
To gain permission to travel to his birthplace, Ngawang Choephol renounced his Indian refugee status and entered Tibet as a Chinese citizen, Barnett said.
He was last reported to have been seen in Nyari prison in Xigaze, Tibet's second largest city in the west of the Himalayan region, in September 1995, shortly after his arrest in the local market.
""It is very unlikely that he was a spy,"" said Barnett. ""He was genuinely making the film he said he was making. No one wold have entrusted him to do this because he was not competent to carry out any hidden activities.
""He is a rather distracted, emotional artist,"" he said.
",14
"China charged on Thursday that politics was holding up its application for entry to the world trade body, the World Trade Organisation (WTO), and said it wanted to join as soon as possible,
""The accession of the applicants to the WTO has been slowed down due to political consideration and the excessive demand for immediate commercial benefits,"" China's Deputy Minister of Foreign Trade and Economic Cooperation Long Yongtu told the WTO ministerial meeting in Singapore.
In a thinly veiled attack on the United States, Long accused some members of taking advantage of the negotiation process to resolve bilateral trade disputes not relevant to WTO rules.
""As a result, some accession negotiations have encountered undue delay, which has slowed down the process of economic globalisation,"" he said.
China was bitterly disappointed when it failed in its decade-long bid to join the General Agreement on Tariffs and Trade by becoming a founding member of the WTO at its inception two years ago.
Beijing has met particularly stiff resistance from the United States, which disputes Beijing's demand it join as a developing country and says the size of China's economy means it should enter as a developed nation.
The United States also says Beijing must comply with a ""road map"" to open its markets and eliminate trade and non-trade barriers before it can win U.S. support for its entry.
Beijing maintains the price of the road map is too high, and talks continue at a snail's pace at WTO headquarters in Geneva.
""The Chinese government has consistently held a positive attitude towards joining the WTO not because we believe the membership will bring out miracles to our economy and foreign trade,"" he said.
He welcomed an initiative by the European Union to support phased accession for China.
""We...hope the positive attitude will be translated into actions in resolving specific actions in the negotation,"" Long said.
""On our part, we shall take a flexible, pragmatic and forward-looking attitude and in the hope that other members will do likewise,"" Long said.
Long said China was keen to join the world trade body as soon as possible and repeated Beijing's official stand that exclusion of the world's fastest-growing economy from the WTO would benefit no one.
Asked when Beijing hoped to see accesion, Long said Beijing had never specified a timetable, but added: ""We hope it can be rather quickly.""
Senior Chinese analyst Pei Changhong said in an interview last week that China was unlikely to concede on its demand to enter the WTO as a developing country and had the patience to hunker down for a long wait to win accession on its terms.
A goal of 1997 entry seemed an ambitious target given the distance between the United States and China on so many issues, but Pei said he hoped to see entry by 1999.
China's Foreign Minister Qian Qichen said last month that talks with the United States on entry could be wrapped up by mid-1997.
",14
"China has moved a step further from its recent radical past with a decision to scrap the crime of ""counter-revolution"" and replace it with the offence of jeopardising state security, officials said on Wednesday.
The maximum penalty of death for a charge that is most commonly used against political dissidents accused of subversion would remain unchanged.
The proposal to rename the crime of counter-revolution as jeopardising state security was tabled in a draft amendment to the Criminal Law submitted to the Standing Committee of the National People's Congress, or parliament, on Tuesday.
Following approval by the standing committee, the amendment that reduces the scope of the crime to 10 offences from 15 would be sent to the annual session of parliament next March for final ratification, a parliament official said by telephone.
The proposal to change the name of the crime ""was made in consideration of changed circumstances and the overall interests of the country"", the Xinhua news agency quoted Wang Hanbin, vice-chairman of the Standing Committee, as telling parliament.
The crime of counter-revolution was placed on China's books after Chairman Mao Zedong swept the communists to power in 1949 and launched three decades of radical rule when to be revolutionary were marks of a correct political attitude.
The crime of counter-revolution has for decades been a catch-all to imprison anyone of whose opinions the state disapproved or whose opinions disapproved of the state.
Its victims have ranged from writers condemned as rightists in the late 1950s and those who criticised Mao during the ultra-leftist 1966-76 Cultural Revolution, to teenage students who took to the streets in 1989 to demand more democracy.
Among the most prominent dissidents serving lengthy jail terms for counter-revolutionary crimes is Wei Jingsheng, regarded as the father of China's struggling pro-democracy movement and sentenced late last year to 14 years for plotting to subvert the state.
Wei was previously sentenced to 15 years in prison for counter-revolutionary crimes after he wrote an essay during the 1979 Democracy Wall movement calling for the Fourth Modernisation -- or democracy.
Parliament's Wang praised the use of counter-revolutionary crime to safeguard state security, but said times had changed.
""Political, economic and social development in recent years has given birth to a series of new problems,"" Wang said, referring to the shift away from revolution to define political correctness that has been generated by the pragmatic reform policies of paramount leader Deng Xiaoping.
Under the draft amendments, counter-revolutionary activities as now stipulated will remain a crime -- with the exception that offences such as murder, manufacturing firearms and stealing guns will be excluded and handled as ordinary criminal acts.
Activities that aim to overthrow the dictatorship of the proletariat -- or subversion -- remain covered by the new crime of jeopardising state security, the parliament official said.
Under other amendments to the criminal law, an act not specifically covered cannot lead to a criminal conviction. Currently, people can be convicted based on a similar crime.
New offences will be added including organised crime, computer crime and manipulating stock markets.
Police acting in the line of duty will no longer bear criminal responsibility for causing death or injury.
",14
"China's economic growth is likely to accelerate in 1997 as Beijing pumps up its economy before a crucial Communist Party congress that may tackle nagging reform problems, state media said.
Political factors were likely to be a significant factor in a possible renewed boom next year in one of the world's fastest growing economies, the China Daily Business Weekly quoted Xu Hongyuan of the State Information Centre as saying on Sunday.
However, Xu also warned that the higher growth could see the spin-off of a renewed burst of inflation and warned of rising joblessness, giving one of the most pessimistic unemployment forecasts to be published openly in China.
Gross Domestic Product (GDP) in 1997 could reach 8,178 billion yuan ($985 billion), growing by 10.5 percent compared with an anticipated 9.6-9.7 percent increase this year, the newspaper quoted Xu as saying.
GDP grew by 10.2 percent in 1995 and Beijing's communist rulers have been trying to cool the rate slightly amid signs the economy was threatening to overheat. China has set a goal of eight percent average growth for the 1996-2000 Ninth Five-Year Plan.
Xu linked his higher growth forecast to the five-yearly Communist Party congress, set for late in 1997, which he said was expected to take some difficult decisions to eradicate the low economic efficiency and operational losses plaguing thousands of lumbering state enterprises.
""These political factors, if the government makes use of them smoothly, will provide strong backing to national economic performance in 1997,"" the newspaper said, quoting Xu.
Diplomats and western economists have said Beijing may try to revive an economic boom in 1997 in the run-up to the party congress as part of a push to bolster the standing of the current leadership before a meeting when personnel reshuffles are a key issue.
Xu forecast retail price inflation to speed up slightly in 1997 to about eight percent from an expected seven percent this year. Inflation was 14.8 percent last year, down from a communist-era high of 21.7 percent in 1994.
Official media have been rife with speculation that China may again trim interest rates after two cuts already this year but central bank officials insist Beijing has no plans to do anything more than ""appropriately"" adjust a three-year-old tight monetary policy.
Xu said foreign trade was expected to make a strong recovery after exports slumped in the first few months of this year, especially as the government completes repayment of billions of dollars of export rebates to exporters.
He forecast exports to reach $171.5 billion in 1997, up 14.1 percent from 1996.
Xu urged a further cut in import tariffs next year, a move that Beijing has promised and which could lubricate China's bid to gain entry to the World Trade Organisation.
However, Xu forecast a sharp increase in unemployment.
In 1997, the number of people out of work in the urban area could be as many as eight million, including workers left idle because of suspension of factory production, he said.
The urban jobless rate could reach eight percent next year if both surplus workers at factories and registered unemployed were included, Xu said.
China's official registered urban jobless rate was 2.98 percent at the end of September.
",14
"Draft amendments to China's criminal law have sparked fierce debate among usually tame lawmakers, with controversy surrounding the scope of the death penalty and whether corrupt state managers should be executed.
The Workers Daily newspaper on Saturday published a rare insight into controversies troubling a string of amendments to the Criminal Law, currently under debate by the Standing Committee of the National People's Congress, or parliament, that meets behind closed doors.
""Looking at the last few days of debate by the standing committee of the draft criminal law amendments, argument on specific clauses has been very fierce,"" the newspaper said in an unusual expose of controversy in the usually rubber-stamp body.
The criminal law amendments along with a new anti-corruption law were two main items on the agenda of a week-long meeting of the standing committee that began on Tuesday to debate bills to be passed by the full annual session of parliament next March.
""Are there too many death penalties?"" was one of the top controversies this week, the Workers Daily said.
""Some people think that, with the international tide moving toward eliminating or reducing the use of the death penalty, even though the current amendments do not increase the number of death penalty clauses, however the current criminal law with more than 30 capital crimes should be reduced,"" it said.
China executes several thousand people each year and international human rights group 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. Hundreds, if not thousands more, go unreported.
From January 1, when a new criminal procedures law takes effect, China will add lethal injection as well as execution by firing squad as a new means of capital punishment.
The Workers Daily said another body of legislative opinion held that the death penalty should neither be reduced or eliminated because it served as a deterrent and answered a popular demand for harsher punishments to prevent crime.
Debate also swirled around amendments to combat corruption, including more than 60 clauses that would specifically define graft and dereliction of duty, while increasing to 32 from seven the types of officials subject to the law, the newspaper said.
Heated argument surrounded the designation of managers of state firms as government employees, who are subject to a maximum penalty of death for corruption, it said.
One body of opinion held that government factory managers be defined as public servants since 75 percent of all official cases of corruption involved state enterprise managers.
Others argued this was unfair since managers of non-state firms faced a maximum of only 15 years in jail for graft.
""On this issue, the Supreme People's Procuratorate and the Supreme People's Court hold very different opinions,"" the newspaper said.
All should be equal before the law, the newspaper quoted the criminal law as saying regarding the need to tackle corruption, which is regarded as the chief threat to Communist rule.
It made no mention of a former Beijing city party boss who was sacked in early 1995 after a vice-mayor committed suicide in a $37 million corruption scandal, but has yet to face charges.
Another source of contention among legislators was a proposal that police acting in the line of duty should bear no criminal responsibility for killing or injuring a suspect.
This proposal had won strong support from the Ministry of Public Security, especially after the deaths of 100 police in the first half of this year, it said.
""Those opposed believe that this regulation could be used as an excuse in cases when casualties result from improper use of weapons,"" the Workers Daily said.
",14
"China hopes for a breakthrough to launch manned space flights early next century and planns to land a spacecraft on the moon in the 21st century, the Xinhua news agency said on Thursday.
Senior Chinese space officials had unveiled an ambitious, multi-million dollar and wide-ranging programme that was aimed at giving the country a competitive edge in international space development, Xinhua said, quoting senior officials.
China is known to be eager to push ahead with its space programme to expand its role in the commercial satellite business while winning international prestige through trumpeting its technological advances, industry analysts have said.
Manned space flights were being given top priority in China's space programme, which includes building a heavy solar satellite in partnership with Germany as well as developing a new generation of lightweight spacecraft to 'bus' satellites into orbit, Xinhua said.
""The country is expected to make a breakthrough in manned space technology at the beginning of the next century,"" Xinhua said, quoting Wang Liheng, vice-administrator of the China National Space Administration.
Wang gave no more details of the manned space flight programme, which has been rumoured for some time.
However, Li Jianzhong, president of the China Academy of Launch Vehicle Technology, told Xinhua that China was pushing ahead with its goal to boost launch vehicle technology in the 21st century. He said the goal was to build rockets that could carry 20-tonne payloads -- more than twice the current capacity of the nation's most powerful launch vehicles.
China, which put its first satellite into orbit in 1970, has been trying to expand its role in the commercial space market, despite a series of recent setbacks.
In August a Long March 3 rocket, considered one of China's most reliable launch vehicles, failed to put a U.S.-built satellite into orbit. In February, technical flaws had even more disastrous results when a new generation Long March 3B rocket exploded shortly after take-off, killing six people.
Li said China also planned to develop a reuseable space transport system and vehicle re-entry and landing systems.
Cheng Fangyun of the Chinese Academy of Sciences (CAS) said a small spacecraft with low operating costs would be designed.
""China has reliable technology for space tracking, telemetry and control to do this,"" Xinhua quoted Cheng as saying.
In terms of moon exploration, China planned to provide cheap transport systems for lunar-landing spacecraft to explore the moon and developing lunar resources, Xinhua said.
Xu Fuxiang, president of the Chinese Academy of Space Technology, said items under development included a scientific satellite, the Shijian-5, which was light and cheap and would become a 'bus' for small satellites.
In solar observation, China and Germany were cooperating to produce a two-tonne lunar satellite equipped with a solar telescope. The $100 million satellite was expected to be sent into orbit around 2002, said CAS member Ai Guoxiang.
China has also decided to invest 170 million yuan to build the world's most advanced sky survey telescope that could observe at least 100 million galaxies, he said.
China was working on its own space station, Xinhua said.
It is cooperating with the United States and Russia to build a magnetic spectrograph aboard the Alfa station -- scheduled to be launched early next century -- that was expected to detect anti-matter and dark matter in the universe, Xinhua said.
",14
"Jailed, sentenced to labour camps, cowed or exiled, China's pro-democracy activists have virtually vanished.
The latest dissident to be swallowed by China's gulag was prominent literary critic Liu Xiaobo, sentenced on Tuesday to three years in a labour camp. Veteran democracy activist Wang Xizhe has simply disappeared.
Any hopes among Chinese dissidents of a revival of their beleaguered movement may lie with the Nobel Committee in Oslo and whether it decides on Friday to select Nobel Peace Prize nominee and veteran democracy activist Wei Jingsheng.
However, few in China expect Wei, regarded as the father of China's struggling democracy movement and serving the first year of a 14-year jail term, to win the Nobel Peace Prize and thus halt the slow demise of Chinese dissent.
Members of Wei's family said they did not consider him a serious contender because of the strength of competition from front runners such as Richard Holbrooke, the U.S. architect of Bosnia's peace treaty, and former U.S. president Jimmy Carter.
Chinese Foreign Ministry spokesman Shen Guofang voiced outrage at the suggestion on Thursday.
""I have already stressed many times that Wei Jingsheng is a criminal who has broken Chinese law. This kind of criminal basically has no qualifications to win any prize,"" he said.
Wei was jailed for 15 years for his role in the 1979 Democracy Wall movement when he wrote an article that called for democracy as China's ""Fifth Modernisation"" and attacked paramount leader Deng Xiaoping as a dictator.
He was released on parole in September 1993 after serving 14-1/2 years and re-arrested the following April. He was sentenced to 14 years last December for plotting to subvert the government.
""Would it make a great deal of difference?"" said one Western diplomat when asked about the impact if Wei were to win the Nobel Peace Prize. ""It wouldn't get him out any quicker. It would turn the international spotlight on China for a little while but that of itself would not be enough to get the (democracy) movement going again.""
Diplomats have expressed surprise at the rash of arrests and convictions of dissidents -- many of them sentenced to the administrative punishment of ""re-education through labour"" that avoids a complicated trial process.
""My feeling had been that the whole business was under control,"" the diplomat said. ""There are a few who pop up and engage in experiments to annoy the authorities but they are nothing serious or threatening to the regime.""
He attributed the new crackdown to a secret plenum of the Communist Party, expected to finish later on Thursday with a statement on the importance of ""spiritual civilisation"" -- or conformity to orthodox Marxist values.
""Everyone will be expected to think properly and so they may need to tidy up a remaining few loose ends,"" the diplomat said.
Liu Xiaobo, who gained fame during the 1989 student-led pro-democracy movement, was ordered to serve three years in a labour camp, a term imposed just hours after police detained him during a raid on his Beijing home.
Veteran pro-democracy activist Wang Xizhe, who recently joined Liu in a statement calling for the impeachment of President and party chief Jiang Zemin, had disappeared from his home in southern Guangzhou, his wife said.
On Thursday court officials told the family of Wang Dan, a detained dissident and leader of the 1989 student protests, to hire a lawyer on his behalf, his mother said. The Beijing People's Intermediate Court informed her that she had until Friday to find a lawyer, in a sign that his trial was imminent.
""They have had so many crackdowns in the past that most figures are under lock and key or safely out of the way abroad, and in either case pretty harmless,"" the diplomat said.
",14
"China must tackle the thorny task of state enterprise reform this year, forcing through unpopular layoffs and bankruptcies to halt haemorrhaging losses, economic tsar Vice Premier Zhu Rongji said on Thursday.
Zhu hailed such achievements in 1996 as a high economic growth rate of 9.7 percent, a fall in inflation to 6.0 percent and the swelling of foreign exchange reserves to a record $105 billion at the year-end.
However, he cited two urgent tasks that must be tackled in 1997 -- increasing grain reserves and ensuring incentives to farmers and halting rapidly mounting losses among the state enterprises that form the backbone of China's economy.
About 75 percent of China's more than 100,000 state firms lost money last year and total losses in the government sector soared to 69 billion yuan ($8.3 billion) between January and October, a year-on-year rise of 45 percent.
Zhu blamed the losses on two increases in state prices for farm products, hikes in costs of transport and power, tighter accounting mechanisms, high interest rate payments despite two cuts last year and arbitrary fees by local governments.
However, these were secondary reasons, Zhu told a meeting in Beijing on re-employment in state enterprises.
The three main reasons were duplication of products, the impact of widespread smuggling and the burden of huge numbers of surplus workers employed in state firms, Zhu said.
Many state firms, 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 unsaleable goods.
Tackling these problems must be a priority in 1997, he said, if China is to turn around inefficient state enterprises that recorded their first net loss in the first quarter of last year as they struggled in an economy racing to abandon the cushion of central planning in favour of a sink-or-swim marketplace.
Zhu called for reorganising management in state enterprises this year, citing bad management as a major factor in growing losses, and urged active promotion of re-employment projects to help surplus workers or those laid off through streamlining.
He also urged standardisation of the bankruptcy system, which has been used mainly on an experimental basis for the past few years, along with encouragement of mergers.
While proposing the use of mergers rather than bankruptcy to eliminate loss-making state firms, he advised against the sale of an entire company and favoured enterprises taking on a portion of the ailing firm's debt.
The government would write off up to 30 billion yuan ($3.6 billion) of bad debt this year, and this figure could rise gradually in the next few years, Zhu said.
On agriculture, Zhu revealed for the first time the size of China's state grain reserves, which totalled a record 148.5 million tonnes at the end of 1996. That marked an increase of 34.4 million tonnes compared with the end of 1995, he said.
China has estimated its 1996 grain harvest at a record 480 million tonnes, up from a record 466 million tonnes in 1995.
Market prices for grain would not fall and Zhu urged farmers not to sell their grain at low prices to private traders.
Beijing is anxious that farmers continue to grow grain and not turn to more lucrative cash crops and wants to insure that farm incomes do not drop with the record harvests.
",14
"Wang Dan's name cards describe him as ""Free Man"" and ""World Citizen"", but for the next 11 years the democracy activist's world will be a prison.
The disappearance of the 27-year-old into the Chinese gulag on Wednesday signalled a tightening of the Communist Party's grip on all aspects of life -- from religion to crime, from where people may speak to where they may spit.
The sentencing of the former leader of the 1989 Tiananmen Square pro-democracy demonstrations left only a handful of the country's dissidents free.
The Beijing Number One Intermediate People's Court took less than four hours to convict Wang Dan of plotting to subvert the government.
""What do they really think they have to be afraid of from people like me?"" said one prominent dissident after learning that Wang Dan had been jailed.
""Of course, they don't really believe that a kid in his 20s poses a threat,"" said the dissident, who like others interviewed recently, declined to be identified.
""But by putting him in jail they create a hostage who they can release whenever they feel they need to make a gesture on human rights to the West,"" said the dissident, who spent the day of Wang's trial with a policeman posted in his living room.
The dissident is one of a rapidly dwindling band still at liberty in China.
Most are either sentenced to lengthy jail terms, serving in labour camps, living in voluntary exile or enforced banishment overseas or just keeping their heads down while the security apparatus seeks pretexts to lock them up and remove what it sees as a potential threat to party rule.
""Don't think for a moment that the aim of sending Wang Dan to jail is just to frighten people like me,"" said the dissident.
""This is a warning to the United States that says 'We can be tough to our own people and we can be tough to you, too',"" he said.
This week, a U.S. State Department official underlined the tensions in the Sino-U.S. relationship by describing China's current leadership as the most difficult that Washington has had to deal with in 25 years.
When U.S. Secretary of State Warren Christopher comes to China in late November he will find few dissidents to add to his cocktail party guest list.
Historian Bao Zunxin, a veteran of the ill-fated 1989 pro-democracy demonstrations who wrote a letter to the government this year calling for a crackdown on corruption, lives quietly in Beijing.
Outspoken environmental champion and author Dai Qing -- who spent months in prison after the June 4, 1989, military crackdown in Tiananmen Square -- writes, campaigns against the huge Three Gorges dam on the Yangtze river and often gives interviews in Beijing to foreign reporters.
Veteran democracy activist Xu Wenli this year completed a 15-year prison term for subversion but has kept silent since a police ban on meeting foreigners and publishing his writings.
Ren Wanding, like Xu a veteran of the 1979 Democracy Wall movement, was released this year from a seven-year term for his role in the 1989 student movement and has kept a low profile, unable to meet foreigners or to vent his opinions.
",14
"For 36 years Tibet's biggest leather factory gushed pollution into one of the world's cleanest rivers and haemorrhaged losses.
But help was at hand when Tibet's scenic beauty and devout Buddhist people enchanted visiting German Chancellor Helmut Kohl in 1988.
German aid has since poured in, along with German technicians, transforming the plant into a rare model of environmental awareness on the roof of the world. It has also made its first net profit.
Manager Li Jishan glowed with pride as he described the modernisation wrought at his plant over the last few years.
""When I first came here in 1961 things were really backward. We lived in tents. Can you imagine?"" he said in an interview with Reuters.
The leather factory was moved to Lhasa in 1959 from Golmud in neighbouring Qinghai province to provide footleather for thousands of soldiers sent to garrison Tibet after an abortive uprising by Tibetans seeking independence in 1958.
As a state-owned firm that processes yak skins into shoes and handbags it had little incentive to turn a profit. That is slowly changing.
Last year, the China-Germany Joint Venture Lhasa Leather Factory of Tibet reported a profit of 200,000 yuan ($24,000) -- a modest sum but the first in its history.
""We have a good future, our efficiency is good...and with German assistance we are placing great emphasis on environmental protection,"" said Li, adding that he expected another profit this year.
""The German side is very strict, especially on environmental protection,"" he noted. ""But we get along with them very well.""
One problem identified by the German side is one common to most of China's state-owned firms -- the huge surplus labour that is the legacy of jobs-for-life socialism.
""We have had arguments with the German experts who want to fire someone, for example,"" said Li. ""But they have come to understand our point of view and our system.""
However, German officials still warn that keeping on a couple of hundred extra staff is bound to affect profits.
German officials said the plant had been an environmental disaster when they arrived, with its tannery spouting stinking waste into the nearby rushing Tolungchu river.
""It was in really bad shape with terrible environmental problems,"" said Niels von Keyserlingk, director of the office of the German Development Corporation in Beijing that oversees aid to the plant.
""Before, the water was untreated and flowed into the river causing many problems,"" he said. ""But things have been very nicely done. There is no pollution.""
All chemicals are recycled now and a German-manufactured system cleans the water, separating waste that is dried for use by local farmers as fertiliser.
""The water that flows into the river is absolutely clean,"" said von Keyserlingk, who visited the plant last May.
A cement factory on the opposite bank belching dust into the clear mountain area could pose a new environmental hazard.
Germany has given 15 million deutschemarks ($9.8 million) in aid to the plant, which has been allowed to register as a joint venture and thus qualifies for the generous tax breaks and holidays that Tibet offers to foreign investors.
German money has helped to buy the latest in leather processing machinery as well as sewing machines, waste elimination plants and even new solar energy panels that are heating water for the factory.
Sales have soared. The factory held an eight percent share of the Tibet shoe market for years, but in 1994 that jumped to 20 percent and nearly doubled again in 1995 to a 36 percent market share.
""Our products are really popular because they are all leather, and people want that kind of quality,"" Li said.
The factory is trying to boost sales to the rest of China as well as overseas exports, particularly to neighbouring Nepal.
But it faces awesome transport handicaps in shipping goods from a city that has no rail links and must send merchandise more than 1,000 km (600 miles) over some of China's most difficult roads to the nearest railway station.
""We still need to raise quality and produce more different styles of shoes to compete in the market,"" said Li, who has clearly picked up some tips from his German market-savvy experts.
""Either you learn to swim in the market or you drown.""
",14
"The U.S. government's top Asia official, Winston Lord, was to hold talks with Chinese Deputy Foreign Minister Liu Huaqiu in Beijing on a range of issues including human rights, diplomats said on Wednesday.
Lord, Assistant Secretary of State for East Asian and Pacific Affairs, arrived on Tuesday for the unannounced visit and was keeping a low profile while in Beijing, a U.S. embassy official said.
However he was due to hold talks with Deputy Foreign Minister Liu and a possible meeting with Foreign Minister Qian Qichen was on the agenda before Lord left on Thursday for Japan, diplomats said.
In Washington, State Department spokesman Nicholas Burns said on Tuesday that Lord was preparing for a visit next month by Secretary of State Warren Christopher, but officials said a wide range of other issues would almost certainly be raised.
""Human rights will come up,"" one diplomat said.
Washington last week sharply criticised the sentencing of dissident Liu Xiaobo to three years in a labour camp, as well as apparent plans to try another pro-democracy activist, Wang Dan, on the capital charge of plotting to subvert the government.
U.S. officials say relations with China have generally improved in recent months, but there have been frictions in the past two weeks over its treatment of dissidents and over fresh reports of Chinese nuclear sales to Pakistan.
""I think all issues are on the table in (Lord's) discussions with the Chinese. It wouldn't surprise me at all if that issue of the alleged sale of items between China and Pakistan came up,"" Burns said.
Nevertheless, he said Washington continued to maintain that China had not violated past pledges with the sale, which the Washington Times said last week consisted of a special industrial furnace and high-tech diagnostic equipment.
Burns also said human rights issues were likely to be raised.
Diplomats said Beijing would almost certainly be angered by reports that Chinese dissident Wang Xizhe had arrived in San Francisco for asylum in the United States.
A row over human rights scarred Christopher's last visit to China in 1993.
Christopher is due to visit China on November 21-22 on a trip originally announced in July.
The visit would mark the highest point in relations since ties plunged after Taiwan's President Lee Teng-hui paid a private visit to the United States in June, 1995 -- a trip that enraged Beijing.
Both sides have said they are moving towards a possible exchange of presidential visits during 1997.
Among outstanding issues that could spark U.S. anger are the alleged nuclear sales and China's human rights record, while Beijing blames Washington for holding up its application for membership of the World Trade Organisation.
U.S. officials said Lord had considered the possibility of extending his trip beyond South Korea when he left Washington last week, but did not finally decide to do so until he was already in Asia.
Lord came to China after a visit to South Korea to discuss tensions over the beaching of a North Korean submarine on the South Korean coast last month.  
""With more and more (listed) firms involving in such takeovers, regulation and supervision has become a tough task,"" said one analyst with China Guotai Securities.
""The central government should not wait until there are too many headaches before taking measures to sort things out,"" he said.
But the analyst said that despite the problems, takeovers would be a focus of the stock market over the next few years because of restrictions in other areas, including a ban on mergers between listed firms and unlisted firms.
In the six-year history of modern China's stock markets, there has been no case of a takeover of one listed firm by another.
",14
"China is unlikely to concede on its demand to enter the World Trade Organisation as a developing country and has the patience to hunker down for a long wait to win accession on its terms, a senior Chinese analyst said.
""Both sides need to make concessions, but there is one issue of principle on which China will not change,"" Pei Changhong, head of the department of Foreign Economy and Trade under the leading think-tank, the Chinese Academy of Social Sciences, told Reuters in an interview at the weekend.
""China will only enter as a developing country,"" Pei said, referring to one stumbling block -- that of Beijing's entry status. The United States insists that the size of China's economy ranks it as a developed country.
""This is a matter of principle,"" Pei said.
China was deeply disappointed when its application to join the world trade body as a founding member two years ago failed, and talks since in Geneva have proceeded at a snail's pace.
He said he expected little progress when ministers of the WTO's 125 member states meet in Singapore this week, with China attending under observer status, but said China would seize the opportunity to explain its stand in meetings on the sidelines.
""After we gain recognition of our status then the talks could more easily proceed,"" Pei said. ""There may be the possibility of concessions (by China) on some concrete issues.""
Pei declined to say where China might be prepared to offer concessions in line with a ""road map"" presented to Beijing by Washington outlining liberalisations it wants before it will support Chinese membership.
He said China's economy was already remarkably open compared with some of its neighbours such as Japan and South Korea.
""When you go shopping in Beijing you see goods from all over the world on every shelf,"" he said. ""You don't see nearly so many Chinese products on foreign shelves.""
Chinese President Jiang Zemin announced at the Asian-Pacific Economic Cooperation forum last month in the Philippines that China would slash average import tariffs to 15 percent by 2000 from the current 23 percent.
Pei said non-tariff barriers still existed in China, citing the service sector as one area to which foreign firms were eager to gain admittance, but insisted Beijing was gradualling pulling down these barriers.
""Opening up requires a process,"" he said. ""It is a fact that China is a backward country and must protect some parts of its economy. The demands on us must not be too harsh.""
Pei offered a less optimistic view than China's Foreign Minister Qian Qichen who has said talks with the United States on entry could be wrapped up by mid-1997 as well as WTO chief Renato Ruggiero who has said next year could see a solution to the exclusion of the world's most populous nation from the world trade body.
Pei said 1997 seemed a rather ambitious target given the distance between the United States and China on many issues, but said he hoped to see entry by 1999.
""There are both advantages and disadvantages to China from entry to the WTO,"" Pei said, setting off the access to worldwide markets for Chinese goods against the cost and competition its domestic industry would face.
""China's stand now is that it is up to the other side,"" Pei said.
""China actively wants membership but it can wait. It will be good for China to enter but it won't be a catastrophe if we have to wait,"" he said.
""It is in no one's interests to keep China out.""
",14
"China's economic growth is likely to accelerate in 1997 as Beijing pumps up its economy before a crucial Communist Party congress that may tackle nagging reform problems, state media said on Sunday.
Political factors were likely to be a significant factor in a possible renewed boom next year in one of the world's fastest growing economies, the China Daily Business Weekly quoted Xu Hongyuan of the State Information Centre as saying.
However, Xu also warned that the higher growth could see the spin-off of a renewed burst of inflation and warned of rising joblessness, giving one of the most pessimistic unemployment forecasts to be published openly in China.
Gross Domestic Product (GDP) in 1997 could reach 8,178 billion yuan ($985.3 billion), growing by 10.5 percent compared with an anticipated 9.6-9.7 percent increase this year, the newspaper quoted Xu as saying.
GDP grew by 10.2 percent in 1995 and Beijing's communist rulers have been trying to cool the rate slightly amid signs the economy was threatening to overheat. China has set a goal of eight percent average growth for the 1996-2000 Ninth Five-Year Plan.
Xu linked his higher growth forecast to the five-yearly Communist Party congress, set for late in 1997, which he said was expected to take some difficult decisions to eradicate the low economic efficiency and operational losses plaguing thousands of lumbering state enterprises.
""These political factors, if the government makes use of them smoothly, will provide strong backing to national economic performance in 1997,"" the newspaper said, quoting Xu.
Diplomats and western economists have said Beijing may try to revive an economic boom in 1997 in the run-up to the party congress as part of a push to bolster the standing of the current leadership before a meeting when personnel reshuffles are a key issue.
Xu forecast retail price inflation to speed up slightly in 1997 to about eight percent from an expected seven percent this year. Inflation was 14.8 percent last year, down from a communist-era high of 21.7 percent in 1994.
Official media have been rife with speculation that China may again trim interest rates after two cuts already this year but central bank officials insist Beijing has no plans to do anything more than ""appropriately"" adjust a three-year-old tight monetary policy.
Xu said foreign trade was expected to make a strong recovery after exports slumped in the first few months of this year, especially as the government completes repayment of billions of dollars of export rebates to exporters.
He forecast exports to reach $171.5 billion in 1997, up 14.1 percent from 1996.
Xu urged a further cut in import tariffs next year, a move that Beijing has promised and which could lubricate China's bid to gain entry to the World Trade Organisation.
However, Xu forecast a sharp increase in unemployment.
In 1997, the number of people out of work in the urban area could be as many as eight million, including workers left idle because of suspension of factory production, he said.
The urban jobless rate could reach eight percent next year if both surplus workers at factories and registered unemployed were included, Xu said.
China's official registered urban jobless rate was 2.98 percent at the end of September.
",14
"China will accelerate listings of new firms on its two stock markets next year to meet demand and curb speculation, a senior securities official said.
His remarks, published on Sunday, came a week after an official statement warned investors away from excessive speculation, triggering a steep sell-off on the Shanghai and southern Shenzhen stock exchanges.
However, an official of the top securities watchdog, the China Securities Regulatory Commission, sounded another note of caution, saying that the markets needed even tighter regulation because of insider trading, excessive speculation and trading on margin.
""It will remain at the top of our work agenda for a fairly long period of time to further supervise the stock market, and curb over-speculation and irregularities ... to better protect the interests of the smaller investors,"" Xinhua quoted the unidentified official as saying.
Since the People's Daily editorial one week ago, Shanghai's domestic A share index has tumbled 20.07 percent, standing at 922.34 points last Friday compared with 1,163.05 at the close a week before.
The foreign currency B index fell 3.84 percent to 63.743 points from 66.291 points a week ago after a roller-coaster five days of trading.
China would move more swiftly to list additional firms on the markets, in line with the recent market upswings, Xinhua quoted Zhang Dongsheng, a deputy director of the Finance and Banking Department of the State Planning Commission, as saying.
""This is part of the nation's effort to balance supply and demand in the stock market and curb excessive speculation,"" Zhang said.
Last week China announced a share quota of 10 billion yuan ($1.2 billion) for 1996 and to be carried over into 1997, almost double the 5.5 billion yuan approved for the previous year.
Analysts said one aim of the decision to flood the fledgling stock markets with new issues was to soak up excess funds that have fuelled a flurry of speculation in recent months.
At its height just a few days ago, Shanghai's domestic A share index had surged more than 100 percent and its Shenzhen counterpart over 300 percent since April, when Beijing announced that it supported development of the stock markets.
In a sign of soaring interest in securities, official figures show 21 million Chinese have now opened trading accounts, up from just 12 million at the start of the year and rocketing from 14 million in September, Xinhua said.
The rapidly growing number of stock investors had caused the market to overheat on a shortage of supply, resulting in runaway price rises and excessive speculation, Xinhua said.
""The current market size allows some institutional investors to manipulate the stock prices and drive them up to ridiculous highs,"" it quoted Cao Fengqi, a financial expert at prestigious Beijing University, as saying.
""An accelerated expansion of the Chinese stock market will boost the capital market and help pool more funds for capital-strapped enterprises,"" he said.
Speculation could be curbed only if the market was big enough to handle demand, he added.
Beijing, which says its stock exchanges and futures markets are experiments, was committed to the markets, Xinhua said.
Current market capitalisation of more than 1.33 trillion yuan, almost triple the 1995 figure, accounts for 18 percent of China's gross domestic product, compared with six percent at the end of last year, Xinhua added. ($1 = 8.3 yuan)
",14
"Tibet's toilets offer some of the most spectacular views in the world -- if you can hold your nose long enough to enjoy the scenery.
Many tourists on the roof of the world are so overwhelmed by the breathtaking beauty of the Himalayan plateau that such niceties as stinking lavatories are the least of their concerns.
Given the altitude -- 3,680 metres (12,000 feet) in the Tibetan capital Lhasa -- many visitors stifled by the rarefied air scarcely have time to breathe the noxious odours from public toilets with unglazed windows that open on to views of mountains and temples. And most really don't care.
""It's pretty much indescribable. It's vast, overwhelming, awesome, beautiful, interesting,"" said U.S. tourist Mary Beth Cooper, visiting from Cleveland, Ohio, as she toured the Jokhang temple in Lhasa, holy of holies in a land dotted with Buddhist shrines and sacred sites.
Tourists say they are stunned by the beauty of Tibet's soaring Himalayas, the warmth of its nomadic and deeply devout people and the mysteries of its ancient Buddhist monasteries.
Officials are clearly almost as excited as the tourists as they reel off a list of their achievements in developing Tibet's major industry and the various recreational activities on offer to lure more dollars to one of China's poorest, most backward and inaccessible regions.
Tourism on the roof of the world is a growth sector, officials say. It is the most lucrative source of foreign exchange for this vast, sparsely populated land -- apart from trade -- and is an industry that officials eagerly nurture.
Tibet earned $22 million in tourist dollars last year and is hoping for $30 million this year. It hopes to increase earnings by 8-10 percent a year and to play host to 60,000 visitors a year by the turn of the century.
""We got off to a late start compared with the rest of China,"" Zhou Lizong, vice director of the Tibet Tourism Bureau, said in an interview.
Tibet inched open its doors to foreign tourism in 1980.
However, the route to 1996 when hundreds of awestruck tourists can be seen panting around Tibet's monasteries and mountains has been fraught with difficulties.
Riots by monks protesting against Chinese rule in 1987 -- a record year for tourism with 47,000 foreign visitors -- was followed by two years of unrest, several months of martial law and a tourism nadir.
""However, since 1990 tourism has gradually recovered,"" Zhou said. ""And since 1992 things have really improved with between 30,000 and 40,000 foreign visitors a year.""
Officials acknowledge that Tibet's infrastructure lags, there is a shortage of hotel rooms, especially higher-end accommodation, as well as of transport facilities. The cost of a holiday in Tibet far exceeds a vacation anywhere else in China.
The type of visitor has changed in recent years.
In 1987, only 10,000 foreign tourists came in high-spending organised groups. The rest were low-budget backpackers.
Now, backpackers are few and far between because of a policy imposed from Beijing that requires all visitors to the restive region to obtain a special permit -- and this can only be done through a travel agent and as part of a tour group.
Zhou insists the system has not hampered visitors.
""This does not make it more difficult to come to Tibet, you can, even in a group of just one person.""
Backpackers spent little and damaged the natural resources, he said. Some individual foreign travellers were unfortunate enough to freeze to death on Tibet's wild and rugged plateau, said bureau vice Communist Party secretary Xiao Zhigang.
""We are not saying backpackers can't come,"" he said. ""Everyone is welcome.""
Beijing and Tibetan security officials may be less welcoming. They blame the huge 1987 influx of backpackers, many of them ex-hippies looking for a cause, for helping to stir up pro-independence unrest over the next two years.
Most tourists said they had few problems entering Tibet -- either because officials did not bother to require a permit or because of the efficiency of travel agencies.
""We have had absolutely no difficulties,"" said Cooper.
""The temples are magnificent... unlike anything I have seen anywhere,"" she said. ""People are very friendly. Big, big smiles from people... from all sorts of ethnic backgrounds.""
One American couple said they took three years to find an agent who could realise their dream of a holiday in the land fabled to be Shangri-La. They were not disappointed.
""Everything is as beautiful as we thought it would be. We are very glad we came,"" said the husband, who declined to be identified.
Officials say tourists are drawn by three main attractions -- Tibet's natural beauty and towering mountains, its monasteries and temples and its unique and mysterious culture.
That's not all. Tibet offers adventure tours to Everest, the world's highest mountain at 8,848 metres (29,028 ft), to the nature reserve at its foot, trekking with yaks and camping in yak-hair tents and mountain biking.
Not all tourists are bewitched, and several said the highly publicised campaign of Tibet's exiled god-king, the Dalai Lama, for autonomy for his homeland had sparked their curiosity.
""There are positive points such as better sanitation and roads, but the Tibetans have paid a high price,"" said one French woman tourist. ""The Chinese could give them more autonomy.
""When we see the ugly Chinese buildings, the little Tibetan houses seem more beautiful.""
Others said they were curious about the politics.
""Our impression is overwhelming,"" said Norwegian Bodil Borchgrevink Grindal.
""I do not want to say too much about the political situation for several reasons, but as Norwegians we gave the Nobel Peace Prize to (the) Dalai Lama and if we say we supported very much that decision I think we have said what we need to say.""
Others just couldn't breathe.
""The altitude makes it very difficult for me,"" said one Austrian man. ""But I am just so glad that I have been able to see something.""
",14
"China has placed one of its largest investment trusts, stung by real estate losses, under administrative custody, and officials said on Thursday that more such financial firms may suffer a similar fate.
The People's Bank of China, the central bank, ordered the China Agribusiness Development Trust and Investment Corp (CADTIC) placed under the administration of two state banks in early January, local bank officials said.
CADTIC's domestic business had been taken over by the China Construction Bank while its overseas business had become the responsibility of the Bank of China, a construction bank official said.
Bankers said the financial firm that was China's biggest investment trust company after the China International Trust and Investment Corp (CITIC) had overextended itself due to serious mismanagement.
""CADTIC grew too big, it set up too many local branches and its scope of business was too wide,"" one banker said.
It had extended its business beyond its officially sanctioned scope -- agriculture -- and suffered large losses from real estate investments and had also invested in securities, a banker in Hong Kong said. The huge investment entity was owned by the Ministry of Agriculture.
""This underlines what we suspect -- that irregularities involving firms supposed to be engaged in agriculture business are fairly widespread,"" said a Hong Kong banker who declined to be identified.
""They are all fairly overexposed to property,"" he said.
Bank officials said there were no plans yet to close the trust company, but did not rule out that it might be sold off in the future.
A Construction Bank official declined to say whether the bank had plans to buy any or all of the trust company's assets.
The trust firm was still engaged in business as usual, said one CADTIC official who declined to be identified.
The Construction Bank had taken over management of CADTIC's domestic debts while the Bank of China was handling its overseas commitments.
Officials of the central bank declined to comment.
The ministries of Agriculture and Finance began an investigation into the financial situation of the company a year ago, an official of the investment company said earlier.
""It is not possible to shut down CADTIC immediately because the knock-on effects would be very large, there would be a series of problems,"" said one local banker. ""It should be taken over by the banks.""
Unlike China's state-owned banks, which can easily attract deposits but face tight restrictions on loans, the financial institutions can operate without any loan limitations, he said.
China was stepping up supervision of financial institutions, and new, tighter rules and more frequent checks were expected to result in several more such actions against firms engaged in irregular business, he said.
Financial institutions could be taken over, ordered to stop business or to merge, he said. Many that had little business, large debts and large losses were expected to close, he said, but declined to give details of the irregularities.
CADTIC has reported assets of about 30 billion yuan ($3.6 billion) and outstanding loans from such international financial institutions as the World Bank.
The Asian Development Bank just last month arranged a $70 million loan through CADTIC to a $185 million fish protection project in the Bohai and Yellow Seas.
",14
"Intense haggling among the world's trade ministers brought within grasp a lucrative deal to free the global information technology market and some officials saw movement on the contentious issue of labour standards.
Big powers, notably the United States and the European Union (EU), said on Tuesday a flurry of talks throughout the second day of the World Trade Organisation (WTO) ministerial conference had inched toward a global pact to eliminate tariffs on a $600 billion market for information technology.
Storm-clouds over whether to discuss monopolistic business practices began to disperse. Differences appeared to narrow between North and South as well as North and North on standards to regulate cheap labour and child workers.
WTO officials want a final declaration at the close of the first ministerial meeting of the fledgling trade body on Friday that would point the WTO down the free trade path into the 21st century.
The EU, along with the United States, Canada and Japan, were making progress to reach consensus on an Information Technology Agreement (ITA) that would be the crowning achievement of the meeting, EU Trade Commissioner Sir Leon Brittan told reporters.
""We are making a lot of progress,"" Brittan said after a lunchtime meeting of the four major trading partners to discuss types of products to be covered and timing of tariff reductions.
Acting U.S. Trade Representative Charlene Barshefksy said she concurred with Brittan's comments, but declined to say anything more on the proposed pact to remove tariffs on computer products by 2000.
Late night talks focused on details, officials said.
""There is no question that what the industrialised countries now hope for most here is a deal on information technology products and agreement to work hard for a basic telecommunications pact by February,"" said one key negotiator.
Signals from negotiators left little doubt the major traders were aiming for agreement as quickly as possible -- perhaps by Wednesday -- to convince Asian trading partners to sign on to the agreement by the end of the meeting on Friday.
Japan's Foreign Minister Yukihiko Ikeda told the conference he hoped ""ardently....that we will have an agreement as the most significant achievement of this ministerial conference in the area of trade liberalisation.""
However, several Asian nations voiced reservations, with Malaysia saying the goal of free commerce in infotech by the turn of the century was too ambitious.
""We did not come here to discuss the Information Technology Agreement,"" international trade and industry minister Rafidah Aziz said. ""All negotiations should be done in Geneva.""
The 128 full delegations from WTO member countries and ministers and officials from nearly 30 others waiting to be admitted heard ringing appeals for progress to a telecoms liberalisation pact with a deadline set for mid-February.
Another late night meeting was called on the ""new issue"" of labour standards that has emerged as the most divisive in Singapore.
A Japanese foreign ministry official told reporters that some developing countries who had opposed any mention of the labour issue in the final declaration were taking a more positive position.
""A possibility of an agreement has emerged,"" he said, but addded that some hard-core emerging economies were holding out.
India, Malaysia and Indonesia, for example, have been insisting on no mention at all, arguing that even a neutral phrasing would suggest work conditions were a subject for the WTO.
Accord was also closer on whether to study competition policy.
""No one was totally opposed to taking up the issue,"" a Japanese official sid. ""We are moving towards a compromise.""
Aiming to counter lobbying by sceptical Western-based aid groups, the WTO insisted that the poorest nations stood to reap major benefit from the freeing of global commerce.
But WTO officials admitted that Director-General Renato Ruggiero had failed to convince richer members, both industrialised and emerging economies, to remove all tariffs and other barriers affecting goods from the laggard states.
The European Union made little headway in efforts to persuade its main trading partners to jump-start stalled talks on China's bid for WTO admission.
But Russia, another major member-in-waiting, expected to win entry by the end of 1997, Russia's Deputy Prime Minister Oleg Davydov said.
",14
"The watchdogs of China's ruling Communist Party have ordered members to obey a call from party chief Jiang Zemin for ideological orthodoxy -- or face disciplinary punishment, state media said on Saturday.
""The work style of the ruling party is a matter of life and death,"" the People's Daily quoted a decision by the Central Commission for Discipline Inspection of the Communist Party of China as saying after a meeting this week.
The commission also issued a call for clean government, warning of the threat of corruption to continued party rule.
""Party organisations and members should conscientiously carry on the party's fine traditions and work style,"" it said.
The statement was issued two days after the party wound up its annual policy-making plenum with a pledge to boost orthodox socialist values that have been eroded by nearly two decades of economic reforms.
""Anyone who violates the sixth plenum's decisions, or who disobeys orders, or engages in harmful activities against socialist ethical and cultural progress, should be strictly disciplined,"" the discipline commission said.
The party plenum had said spiritual civilisation -- Chinese communist jargon for ideological orthodoxy and toeing the party line -- could not be sacrificed in the name of the economic reforms spearheaded by paramount leader Deng Xiaoping.
The commission echoed the plenum's call for a return to the communist puritanism espoused by the late Chairman Mao Zedong.
""The work style of close links to the masses, criticism and self-criticism, hard work, and building a clean and honest government should also be continued,"" the commission said.
The ruling party has seen its credibility undermined in recent years after the chaos of the ultra-leftist 1966-76 Cultural Revolution and as loopholes for corruption opened up by economic reform have tempted many senior party officials.
""The crackdown on corruption is one of the important tasks of improving the party's work style and clean government and for promoting ethical and cultural progress,"" the commission said.
It called on party committees throughout China to intensify their battle against corruption and to severely punish those found guilty of corruption.
Jiang, who is also state president, has warned repeatedly that corruption is a virus that threatens to topple the party.
Jiang had been expected to seize on the plenum as the last chance before a crucial congress in 1997 to underline his role as anointed heir to Deng Xiaoping, who has been fading gradually from the scene, diplomats and Chinese sources said.
He has made clear that he wants to place his stamp on ideology in China.
The party mouthpiece, the People's Daily, has filled its front page for several days with examples of model workers whose socialist values the populace at large should strive to emulate.
Among these is Beijing bus conductress Li Suli, who is said to rise at 4.00 a.m. to make sure she is familiar with major sites along the route so that she can help disoriented passengers. She then washes the bus windows.
Diplomats said Jiang was using the campaign -- coupled with a tough line on the media and ideology -- to boost his position.
",14
"Top Hollywood film stars, including screen idols Harrison Ford and Brad Pitt, have been placed on a blacklist of 50 people barred from visiting the restive region of Tibet, Chinese officials said on Friday.
News that some of Hollywood's biggest box office draws were on a blacklist comes just weeks after Beijing clashed with U.S. entertainment giant Walt Disney Co over its film on the life of Tibet's exiled god-king, the Dalai Lama.
Brad Pitt, Harrison Ford and his wife Melissa Mathison Ford as well as directors Martin Scorsese and Jean-Jaques Annaud were among a group of movie personalities on a blacklist held by the Tibet Tourism Bureau, a tourist official said by telephone from the regional capital, Lhasa.
""Last October, we were verbally informed by the Tibet state security office that those foreigners should not be given an entry permit if they applied to visit Tibet,"" he said.
""At the end of April or in early May, we received the formal documents,"" he said, when asked if the Hollywood stars were barred from the Himalayan region that has been rocked by sporadic anti-Chinese unrest in recent years.
""They are banned from coming here for any reason,"" the official said, adding that none of those named on the list had yet applied to visit.
Brad Pitt stars as an escaped Austrian prisoner of war, who fled India in World War Two and found refuge in Lhasa where he befriended the young Dalai Lama, in the film ""Seven Years in Tibet"" that is directed by Annaud. China has not formally objected to the film.
However, it has apparently tried to halt production by California-based Walt Disney of the film ""Kundun"" that tells of the Dalai Lama's early life and is directed by Scorsese. Mathison Ford is a scriptwriter for the movie.
Disney has said it will go ahead with the release of ""Kundun"" despite China's objections. Beijing has denied putting pressure on Disney to withdraw backing for the film.
Beijing has been reported to have warned Walt Disney last month that its ambitious business plans in China were at risk if it went ahead with the release of the movie.
A Foreign Ministry spokesman said Disney would be wrong to sing the praises of the exiled spiritual leader.
The Dalai Lama fled Tibet to India in 1959 after an abortive uprising against Chinese rule and has since waged a non-violent campaign for autonomy for his homeland.
However, the blacklist did not include actor Richard Gere, who has long backed the Tibetan spiritual movement and is an active supporter of the Dalai Lama, the tourism official said.
Gere was among a group of movie luminaries who this month wrote to China's ambassador in Washington protesting against what they called Beijing's ""attempt to impose worldwide censorship"".
Officials had begun to compile a blacklist of foreigners barred from visiting the restive area in 1993, and the list had now reached more than 50 names, he said.
All foreign visitors to Tibet are required first to obtain an entry permit issued by local authorities who are anxious to keep out Westerners who may support the underground pro-independence movement spearheaded by the region's monks.
",14
"An inaccessible, romantic and mystic Shangri-la where Chinese police torture Buddhist monks is a common Western view of Tibet.
A mysterious, terrifying land where lanterns are made from human skin, skulls are used for goblets and slavery is a recent memory is a widespread Chinese view of this far-flung outpost of Beijing's rule.
Somewhere in between may lie the truth.
""Tibet is constantly used as a Cold War icon by anti-Chinese opportunists,"" said Robbie Barnett, who runs the London-based Tibet Information Network that specialises in providing data on the human rights situation in Tibet.
For Tibetans prostrating themselves before their beloved Buddhist shrines, buying chunks of yak meat in the Lhasa market or cycling to a disco in the evening, such issues seem far removed from their daily lives.
Tibet's capital Lhasa, one of the world's highest cities at 3,684 metres (12,087 ft), has the air almost of a Wild West town that is rushing to catch up with the rest of the world.
The tap of hammers and roar of drills signal a construction boom that is transforming meadows and wasteland on the edges of the ancient city into a Chinese town like any other.
Many Western human rights groups and pro-Tibet activists cry foul. They speak of the sinicisation, the Han Chinese invasion of a land that belongs to Tibetans. They say that wealth is being concentrated in the hands of a few Han Chinese at the expense of the indigenous people and Tibetan culture is being annihilated.
Beijing says Tibetans in the region number 2.3 million while Han Chinese total fewer than 100,000. No figure is given for the military presence in the strategic region that borders India, with which Chinese troops have fought numerous skirmishes in the past 40-odd years and last went to war in 1962.
Official figures show an economy growing by about 10 percent a year, with rural per capita incomes around 600 yuan ($72) while urban incomes are about 2,000 yuan ($240). Both are still about half the national average but are increasing rapidly.
China chooses to compare the present standard of living with the traditional feudal system of serfs, many now officials, that persisted until well after People's Liberation Army troops marched into Tibet in 1950.
One Tibetan bus driver boasted of earning 100 yuan ($12) a day, a princely sum even for a Beijing cab driver.
Western activists prefer to heed the cause of the exiled Dalai Lama, spiritual leader of Tibet and winner of the 1989 Nobel Peace Prize for his peaceful struggle for autonomy for his homeland since he fled after an abortive uprising in 1959.
""There are a lot of former hippies getting into something they think is an easy ride,"" Barnett said.
""I do think things are enormously oversimplified,"" he said. ""But fundamental disdain in Tibet for Chinese rule is so prevalent and of such long standing that in many cases it constitutes the basic context or tone within which other events have to be placed.""
Tibetan exiles report a revival of traditional Tibetan ways in rural areas, pilgrims come freely to worship in Lhasa and commerce involving Tibetans apparently thrives on almost every Lhasa street corner.
In the main square in front of Lhasa's Jokhang temple, the Tibetan holy of holies, ragged pilgrims with matted hair prostrate themselves in medieval religious fervour and warrior merchants from the eastern Chamdo region mingle easily and chat in the marketplace with plainclothes Tibetan police.
To the visitor, there is little immediate sense of the anti-Chinese tension that prompted angry monks to riot against Chinese rule in the late 1980s.
There is little doubt Beijing would move swiftly to crush political opposition, as it does elsewhere in China. Officials say they are determined not to permit any infringement of Chinese sovereignty and warn repeatedly of the threat from what they call the ""Dalai Lama splittist clique"".
""Tibetans are resigned to it and accept the way things are,"" said one foreign resident who declined to be identified.
""They put up with the situation,"" he said. ""There's enough control here that it would cut off anything before it got started.""
But any military presence is not overt. Few soldiers are visible in the streets, apparently keeping to their barracks on the city outskirts, as in other Chinese towns, where they can be seen planting trees and whitewashing walls.
While photographs of the exiled Dalai Lama are nowhere to be seen following a ban earlier this year, pictures of Tibet's second holiest monk, the late 10th Panchen Lama, and his seven-year-old official reincarnation are everywhere.
Rural Tibetan homes that in the late 1980s were required to fly the red Chinese national flag now appear free to fly just their own colourful prayer pennants.
Human rights groups say dissidents and monks languish in jail for demanding independence. Many Tibetans appear to have more immediate concerns, such as making enough money from new business opportunities to buy a colour television, build their own home or send their children to school.
Pro-Tibet activists in the West paint a much harsher picture of life in Shangri-la under Chinese rule, and a MiG fighter on display at the foot of the legendary Potala Palace, towering over the capital, could be seen as a symbol of what they would call Chinese occupation.
But shades of grey exist.
""One of the great misfortunes of the Tibetans has been that they have attracted a number of westerners or exiles who have simplified the issues and given the impression that Tibetans are averse to development,"" Barnett said.
""Most people in Tibet want modernisation but feel they are under foreign rule.""
",14
"China's usually rubber stamp parliament failed on Monday to pass an anti-corruption bill after the proposed law fell victim to fierce debate over whether it should specifically target government officials.
State media had reported heated discussion at the week-long session of the standing committee of the National People's Congress, or parliament, that closed on Monday.
Disputes among China's usually tame lawmakers ranged from controversy surrounding the scope of the death penalty as contained in proposed amendments of the criminal law to whether corrupt state managers should be executed.
The draft law on administrative supervision, which would target corruption and had been due to be adopted this week, was eventually withdrawn from voting, the Xinhua news agency said.
The law was withdrawn ""because legislators sharply disagreed with the name of the law"", it said, quoting parliament chairman Qiao Shi.
Some lawmakers believed the bill should be named the Law On Administrative Supervision in line with its regulation of the government.
However, they ran into opposition on constitutional grounds from legislators who argued it should be called simply the Law on Supervision, without reference to the administration, Xinhua said, but did not elaborate.
Qiao suggested the issue be put forward for a vote at the next standing committee session in February, 1997.
Beijing has launched repeated 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.
Debate had swirled around amendments to combat corruption, including more than 60 clauses that would specifically define draft and dereliction of duty, while increasing to 32 from seven the types of officials subject to the law, state media said.
One source of contention was the designation of managers of state firms as government employees, who are subject to a maximum penalty of death for corruption, it said.
One body of opinion held that government factory managers be defined as public servants since 75 percent of all official cases of corruption involved state enterprise managers.
Others argued this was unfair since managers of non-state firms faced a maximum of only 15 years in jail for graft.
All should be equal before the law, the newspaper quoted the criminal law as saying regarding the need to tackle corruption
The failure of the anti-corruption law to pass came as senior leaders considered whether to punish scandal-hit former Beijing Party boss Chen Xitong -- the highest-ranking victim of China's anti-corruption campaign -- for dereliction of duty.
Under the law, prosecutors would have the powers to investigate a suspect's bank account and ask the courts to freeze bank accounts of those suspected of graft, bribery and embezzlement.
In the first 11 months of 1996, Chinese prosecutors had begun action in 77,611 cases of corruption, bribery and economic crime and had dealt with 33,879 cases, up year-on-year 9.4 percent, the media said.
Corruption was virtually wiped out in the years after the communists took over in 1949 but has staged a comeback after economic reforms were introduced 17 years ago.
",14
"China announced a major reform of its huge agricultural system on Wednesday, saying it would take the ambitious step of unifying the price the state pays for grain with the market rate to boost output next year.
In a speech outlining some of Beijing's plans for reform in 1997 to drag China's economy away from Stalinist-style central planning and toward stronger market forces, Politburo member Li Tieying cited reform of lumbering state enterprises and agriculture as two primary objectives.
China would unify the grain purchasing price with market prices next year, Li, the minister in charge of the State Commission for Restructuring the Economy, told a national conference on reform in the southern city of Shenzhen.
The system of cotton purchasing would also be reformed.
He gave no more details of how prices would be unified, but the move appeared to herald the effective liberalisation of grain prices.
Since paramount leader Deng Xiaoping launched economic reform in 1978, Beijing's communist leaders have tried -- and failed -- to free grain prices, falling foul of fears that spiralling prices would make food unaffordable for many of China's 1.2 billion people and spark social unrest.
China's central authorities still buy a certain amount of grain from farmers at set prices below the market rates to ensure ample stores in state granaries.
With a record harvest of 480 million tonnes forecast for this year and with market prices falling closer to the state level, analysts said the time was ripe to unify the system.
Officials said last week grain supply was expected to exceed demand in 1997, with planting and weather conditions indicating a good summer crop next year.
Officials have said difficulties in selling grain would sap farmers' incentive to plant, placing in jeopardy China's ability to feed itself without resorting to huge imports.
Li said the state would separate national grain reserves from regional ones and would divide the responsibilities of the central government from local governments, but gave no details.
Next year the government would also separate losses incurred by state grain enterprises in 1996 from those expected next year and thereafter, he said. He did not give further details.
This year China raised by 20 percent the purchase price it pays to farmers for their grain after holding down increases in 1995 because soaring prices the year before had helped to push inflation to a communist-era high.
Li did not say whether the government would also take the opportunity to force urban consumers to pay market prices for grain, thus extricating state coffers from the burden of huge subsidies when plentiful supplies could curb price rises.
On state enterprises, Li said China would reorganise assets of ailing factories and establish a new system of supervision, while pushing social security and housing reforms.
In 1997, the number of pilot cities chosen for experimental reform of capital structure of state firms would be increased to 100 from 58, Li said. Enterprise groups selected as pilots of reform would almost double to 100 from 57.
The number of key enterprises linked with a sponsoring bank, and thus given easier access to loans during a continuing credit squeeze, would rise to 500 from 300, he added.
More than 45 percent of China's 68,800 state industrial firms registered losses in January-September, a rise of 17.6 percent from the same period last year, latest figures show.
The combined deficit of loss-making state firms hit 65.12 billion yuan ($7.8 billion) in the first nine months of this year, a rise of 45.7 percent from a year ago.
",14
"China on Sunday hailed a brief visit by Premier Li Peng to Russia as 43 hours packed with political and business achievements and trumpeted the growth of a power centre to offset the influence of the United States.
Diplomats said the rapid warming of ties between China and Russia was unlikely to signal a major strategic alliance or a return to the close political and military alliance that existed between Beijing and Moscow in the early 1950s.
China's effusive rhetoric to describe Li's Russia trip was meant as a gesture to the West that Beijing could turn to friends other than the United States, diplomats said.
It did not appear to signal a major new power axis between the former bitter rivals for leadership of the communist world, they said.
""The visit... was brief indeed. However, it scored fruitful achievements and had great significance,"" the People's Daily, mouthpiece of the Communist Party, said in a front-page editorial.
""It is bitingly cold in Moscow in late December, but Li and his entourage felt the warmth of the Russian leaders and people everywhere,"" the People's Daily purred.
The achievements of Li's 43-hour visit included an agreement for the prime ministers to meet twice a year to monitor progress on building trade and diplomatic relations and a decision that Chinese President Jiang Zemin visit Moscow in April for talks to set the seal on a new level of relations.
The two sides also signed several deals including the supply of Russian Sukhoi Su-27 warplanes and building a nuclear power plant in China's eastern Jiangsu province.
Officials gave no details of the fighter deal, but sources said it involved sale of a complete production line to be built in northeast China. The deal was held up by financing problems and complications from the break-up of the Soviet Union that left Su-27 engine manufacturing lines in Ukraine, they said.
However, the Chinese commentary focused on the political significance of the visit, and a joint communique on strategic cooperation into the 21st century, as important signs of the global importance of the Sino-Russian partnership.
""The world is moving towards multi-polarisation,"" the People's Daily said.
""Both Russia and China well deserve to be two important and independent poles in the multi-polar world. The establishment and development of strategic partnership between Russia and China is conducive to the multi-polarisation of the world,"" it said.
""Leaders of both countries made it clear that they do not favour a world dominated by one power,"" it said, in a scarcely veiled reference to the United States.
Russia's desire to develop close links with China has followed NATO's plans to expand eastwards by admitting Moscow's Cold War allies in Eastern Europe as members of the alliance.
Li, whose meeting with Boris Yeltsin was the Russian president's first with a foreign leader since returning to work after a heart bypass operation on November 5, stressed that China saw the partnership as long-term and not as expediency.
The strategic partnership was directed at no other parties, the People's Daily stressed.
""May Sino-Russian friendship be passed on from generation to generation,"" it said.
Moscow and Beijing, once bitter rivals for leadership of the communist world, have been building steadily warmer and closer ties since Soviet communism began to unravel a decade ago.
For Russia, democracy has been accompanied by poverty and Moscow sees China as a huge market for its struggling industry.
",14
"Days and nights of intense talks on ways to liberalise global trade brought ministers to the brink of agreement on Wednesday although the stormy issue of labour rights cast a shadow on a final deal.
Despite sleepless nights and three days of intense negotiations, World Trade Organisation (WTO) Director-General Renato Ruggiero was buoyant at the inaugural Ministerial Conference of the two-year-old watchdog body.
""I am very encouraged. The sense of achievement is very clear,"" he told Reuters as he emerged at the half-way stage of the gathering from the latest of several sessions aimed at finalising a declaration for the ministers to sign.
""The road is open to something important, something big,"" declared Ruggiero, whose horizon has been set on the Singapore meeting since he took up the post 18 months ago just after the body was launched.
""We are deep in negotiation, and I do not want to prejudice anything,"" he said. ""But there have been some very interesting proposals to get over some of the differences. People are ready for compromise to reach agreement.""
Haggling in Singapore focuses on a multi-billion dollar Information Technology Agreement (ITA) and wording of the last few contentious clauses in a final declaration to try to include the concerns of all of the organisation's 128 members.
The document is intended as a blueprint consolidating agreements already reached in the 1986-93 Uruguay Round of world trade talks -- in areas ranging from goods tariffs and services to farm produce and textiles.
It will also set the course and the tone for discussions between now and the end of the century on topics not yet fully under the WTO purview such as basic telecommunications, financial and maritime services, and many others.
The big battle has been over whether to include a reference to core labour standards in the document and whether it should include provision for some discussion in the WTO on investment rules, competition policies and the way national authorities award contracts -- or government procurement.
Several countries, mostly Asian, are resisting what they see as a U.S.-driven push to get labour rights on to the WTO agenda and to use the organisation's disputes court to erode the developing world's low-cost labour edge.
When asked if Malaysia would permit a WTO study on labour rights, International Trade and Industry Minister Rafidah Aziz told reporters: ""No, no, no way. There is no place for labour issues at the WTO.""
The United States, backed by France, Norway and the International Confederation of Free Trades Unions (ICFTU), has been pressing hard for inclusion of the issue in the final text.
Delegates say Washington has insisted the issue be included if it is to back the declaration when the conference ends.
The United States, digging in its heels, says the labour issue involves human rights, eliminating developing world sweat shops, child and forced labour and other forms of worker abuse.
Faster progress was expected on ITA, with delegates scrambling for an accord to free trade in the $600 billion market for computers, software chips and other high-technology products by the year 2000.
Negotiators from the Big Four powers, the United States, Japan, the European Union and Canada haggled in meetings on the sidelines to try to settle differences as early as late on Wednesday on such touchy questions as what products would be covered and the extent of tariff reductions.
""There is not an agreement yet,"" European Union Trade Commissioner Sir Leon Brittan said after meeting Acting U.S. Trade Representative Charlene Barshefsky.
""There is agreement on many points. There are some outstanding ones. We are trying to resolve those.""
A Japanese government source told Reuters earlier that gaps still remained among the Big Four powers, particularly over which products to include.
""We are continuing to work with our Quad (Big Four) partners and with many other delegates to find a formula that will succeed,"" a U.S. official told reporters.
Washington hopes that in addition to a broad infotech pact by as many countries as possible, the WTO will endorse the ITA deal in its Ministerial Declaration on Friday.
That would allow WTO members unable to sign on now to do so at a later date by presenting revised tariff schedules at the WTO in Geneva, the U.S. official said.
",14
"A bomb exploded outside a government office in the Tibetan capital, Lhasa, and Chinese authorities on Sunday described the blast that shattered windows for 100 metres as ""an appalling act of terrorism"".
The Christmas Day bomb, the largest so far set off by anti-Chinese activists in the restive Himalayan region of Tibet, resulted in no casualties but caused widespread damage, local officials said by telephone from Lhasa.
""It was a huge explosion that could be heard a long way off,"" said a government official, who refused to be identified.
""This was the biggest bomb blast by counterrevolutionary elements in Lhasa,"" a party official said. ""None of the terrorists has been arrested, but one thing is certain -- this was done by plotters of the Dalai (Lama) clique.""
The bomb exploded on the doorstep of the Lhasa City Chengguan District Government Office in the early hours of December 25, ripping apart the gateway to the buildings that house the main city government offices, the government official said.
""Windows for at least 100 metres (yards) around suffered some degree of damage,"" he said. ""But because the explosion was in the middle of the night, no one was wounded.""
He declined to give further details.
""The bombing... was an organised, planned, and targeted counterrevolutionary bombing incident staged by the Dalai (Lama) clique,"" local radio said on Friday quoting a circular issued by the regional Communist Party committee and government.
It was ""a serious counterrevolutionary political incident and an appalling act of terrorism"", the circular said according to the radio report monitored by the British Broadcasting Corp and made available on Sunday.
The London-based Tibet Information Network (TIN) said five people were wounded, some seriously. They included two nightwatchmen at the office and shopkeepers living nearby.
A nearby branch of the Bank of China was also reported to have been damaged along with two hotels, TIN said.
""The act of terrorism staged by the Dalai (Lama) clique is opposed by the people of Lhasa City, as well as by people all over the world,"" the party broadcast said.
""It fully demonstrates that the Dalai clique has cast off its previously so-called peaceful disguise to openly oppose the people of Tibet and has reached a point when it puts up a last-ditch struggle,"" it said.
China regularly blames followers of Tibet's exiled god-king, the Dalai Lama, for anti-Chinese unrest that erupts sporadically in the strategic mountainous region that straddles the Himalayas and runs along China's sensitive border with India.
The Dalai Lama, who won the Nobel Peace Prize in 1989 for this non-violent campaign to win autonomy for his homeland, says he wants self-government and freedom of worship in the deeply religious Buddhist region. He fled China in 1959 after an abortive uprising against Beijing rule.
Speaking at a meeting of party officials in Lhasa on Friday, the vice chairman of the autonomous regional government, Gyamco, called for a campaign of retaliation.
""We should wage a tit-for-tat struggle against the Dalai clique's sabotage,"" he said.
""We should, once again, stage another campaign across Tibet to thoroughly expose and criticise the Dalai clique, heighten our alertness and strengthen preventive measures so as to keep the situation stable,"" the radio quoted him as saying.
Several much smaller bombs have been been set off in Lhasa over the last two years, including one in 1995 that caused slight damage to a plaque donated by Beijing and another last March outside the headquarters of the Tibet regional government.
",14
"China defended on Saturday its decision to exercise its veto at the United Nations for the first time in nearly a quarter of a century, killing a U.N. plan to monitor disarmament and a ceasefire in Guatemala.
""We had no choice but to vote against the draft decision on peacekeeping,"" the Xinhua news agency quoted Foreign Ministry spokesman Shen Guofang as saying.
""Clearly, the government of Guatemala must be wholly responsible,"" he said and made clear that China had no objection to the dispatch of U.N. peacekeepers to oversee a peace that ended a brutal 36-year-old civil war.
Shen accused Guatemala of forcing China to exercise its veto because the Central American country had maintained ties with Taiwan, which Beijing regards as a renegade province not entitled to international diplomatic links.
At a late Friday night meeting, all Security Council members except China voted in favour of a resolution that would have sent 155 peacekeepers to Guatemala for three months under a U.N.-brokered peace accord signed on December 29 between the government and leftist rebels.
In Beijing, the Foreign Ministry spokesman said Guatemala was to blame not only for recognising Taiwan but for joining a number of other small countries since 1993 to sponsor a General Assembly resolution aimed at securing U.N. membership for the Asian economic powerhouse.
Shen also lashed out at Guatemala's decision to invite Taiwan Foreign Minister John Chang to last month's peace signing ceremony in Guatemala City.
China had offered solutions to the impasse but Guatemala had remained resolute, Shen charged.
""Guatemala cannot expect on the one hand to do something that harms the sovereignty and territorial integrity of China while on the other hand requesting China to cooperate on peacekeeping,"" Shen said.
The negative vote on Friday by China, which along with the United States, Britain, France and Russia, has veto power in the 15-member council, meant that Council President Hisashi Owada of Japan had to announce that the resolution had failed.
It was China's first U.N. Security Council veto in nearly 24 years.
Taiwan has given generous economic aid to several small, impoverished states around the world in its bid to break out of a diplomatic isolation imposed by China. Taiwan was expelled from the U.N. in 1971 and replaced by Beijing as the rightful representative of China.
Under the peace accord, Guatemala's army would redeploy units to specified locations, after which troops from the rebel Guatemalan National Revolutionary Unit (URNG) would move to eight assembly points and disarm. The U.N. observers were to verify the process.
The drafters of the resolution -- the United States, Mexico, Colombia, Venezuela, Spain and Norway --  decided to push ahead with the vote, despite China's threat of a veto, saying that further talks could not overcome the differences.
China had 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
"China's restive Tibet region appeared certain on Sunday to fall under the shadow of a renewed campaign of intimidation after a music student was jailed for 18 years for spying and a bomb rocked the capital.
""The bomb attack, especially such a big explosion, is a real slap in the face,"" said one Tibet observer who declined to be identified. ""The authorities really don't know any other way but the knee-jerk crackdown response.""
A senior local government leader signalled that a new round of intimidation in the deeply Buddhist Himalayan region was essential to tackle such challenges to Beijing's sovereignty.
""We should wage a tit-for-tat struggle against the Dalai (Lama) clique's sabotage,"" Gyamco, vice chairman of the regional government, was quoted by local radio as telling a Friday meeting of party government officials in Lhasa after the December 25 blast.
""We should, once again, stage another campaign across Tibet to thoroughly expose and criticise the Dalai clique, heighten our alertness and strengthen preventive measures so as to keep the situation stable,"" the radio quoted him as saying.
The explosion was certain to trigger further official rhetoric against the Dalai Lama, Tibet's exiled god-king, whom Beijing accuses of fomenting anti-Chinese unrest in the strategic mountainous region that borders India, analysts said.
The Dalai Lama, who won the Nobel Peace Prize in 1989 for his non-violent campaign to win autonomy for Tibet, says he wants self-government and freedom of worship in the region.
He fled China in 1959 after an abortive uprising against Beijing rule.
Police had set up new checkpoints on the road west from Lhasa, visited hotels to question Tibetan guests, particularly exiles from India, and begun house-to-house questioning of young Tibetan men, the London-based Tibet Information Network said.
Diplomats said the extraordinarily harsh prison sentence meted out to music scholar Ngawang Choephol underlined the determination of authorities in the region to stamp out even the smallest activity that lacked an official sanction.
Ngawang Choephel, 30, was jailed last Friday by a court in Tibet's second city, Xigaze, for 18 years for spying, in one of the harshest sentences ever meted out in the region.
The student, a former Fulbright scholar in the United States, disappeared into China's security limbo in August 1995 while travelling in Tibet to produce an amateur documentary film about traditional music and dance.
The young scholar confessed to having been sent to Tibet by ""the Dalai (Lama) clique"" on behalf of an unnamed foreign country to conduct espionage, local radio said in a thinly veiled reference to the United States.
Washington voiced concern at the sentence, and said it knew nothing of his activities other than making a documentary.
""It appears to mean the end of any sense that China is susceptible to the international community on human rights issues,"" Robbie Barnett of the Tibet Information Network said after hearing of the sentence.
""They now feel confident to use counterespionage laws against political offenders,"" he said late on Friday.
But with the largest bomb explosion yet reported in Tibet rocking Lhasa before dawn on December 25, a renewed crackdown on anti-Chinese unrest appeared inevitable.
One Tibetan government official reached by telephone in Lhasa on Sunday said he could not comment on the bomb blast because he was too busy conducting a rectification and discipline drive in Lhasa's temples and monasteries.
The bomb exploded outside the main city government office in Lhasa, shattering windows in a 100-metre (yard) radius and prompting officials to condemn the blast as ""an appalling act of terrorism"". They said no one was wounded in the explosion.
""The act of terrorism...fully demonstrates that the Dalai (Lama) clique has cast off its previously so-called peaceful disguise to openly oppose the people of Tibet and has reached a point when it puts up a last-ditch struggle,"" local radio said.
",14
"China is unlikely to concede on its demand to enter the World Trade Organisation as a developing country and has the patience to hunker down for a long wait to win agreement to its terms, a senior Chinese analyst said.
""Both sides need to make concessions, but there is one issue  of principle on which China will not change,"" Pei Changhong, head of the department of Foreign Economy and Trade under the leading think tank, the Chinese Academy of Social Sciences, told Reuters in an interview over the weekend.
""China will only enter as a developing country,"" Pei said, referring to one stumbling block -- that of Beijing's entry status. The United States insists that the size of China's economy ranks it as a developed country.
""This is a matter of principle,"" Pei said.
China was deeply disappointed when its application to join the world trade body as a founding member two years ago failed, and talks since in Geneva have proceeded at a snail's pace.
Pei said he expected little progress when ministers of the WTO's 125 member states meet in Singapore this week, with China attending under observer status, but said China would seize the opportunity to explain its stand in meetings on the sidelines.
""After we gain recognition of our status then the talks could more easily proceed,"" Pei said. ""There may be the possibility of concessions (by China) on some concrete issues.""
Pei declined to say where China might be prepared to offer concessions in line with a ""road map"" presented to Beijing by Washington outlining liberalisations it wants before it will support Chinese membership.
He said China's economy was already remarkably open compared with some of its neighbours, such as Japan and South Korea.
""When you go shopping in Beijing, you see goods from all over the world on every shelf,"" he said. ""You don't see nearly so many Chinese products on foreign shelves.""
Chinese President Jiang Zemin announced at the Asian-Pacific Economic Cooperation forum last month in the Philippines that China would slash average import tariffs to 15 percent by the year 2000 from the current 23 percent.
Pei said non-tariff barriers still existed in China, citing the service sector as one area to which foreign firms were eager to gain admittance, but insisted Beijing was gradually pulling down these barriers.
""Opening up requires a process,"" he said. ""It is a fact that China is a backward country and must protect some parts of its economy. The demands on us must not be too harsh.""
Pei offered a less optimistic view than China's Foreign Minister Qian Qichen, who has said talks with the United States on entry could be wrapped up by mid-1997 as well as WTO chief Renato Ruggiero, who has said next year could see a solution to the exclusion of the world's most populous nation from the world trade body.
Pei said 1997 seemed a rather ambitious target given the distance between the United States and China on many issues, but said he hoped to see entry by 1999.
""There are both advantages and disadvantages to China from entry to the WTO,"" Pei said, setting off the access to worldwide markets for Chinese goods against the cost and competition its domestic industry would face.
""China's stand now is that it is up to the other side,"" Pei said.
""China actively wants membership but it can wait. It will be good for China to enter but it won't be a catastrophe if we have to wait,"" he said.
""It is in no one's interests to keep China out.""
",14
"Leading Chinese dissident Liu Xiaobo has been ordered to serve three years in a labour camp in a term imposed just hours after police detained him and a second pro-democracy activist was missing, relatives said on Wednesday.
Veteran pro-democracy activist Wang Xizhe, who recently issued a joint statement with Liu, appeared to be missing from his home in southern Guangzhou, his wife said by telephone.
Police had notified Liu Xiaobo's wife early on Wednesday of the administrative three-year sentence, which does not need a court trial, but gave her no reason for the punishment.
""They have still had no formal contact with me or given me a reason,"" Liu Xia said in a telephone interview late in the day.
""I am very angry. How can they do this?,"" she said. ""He did not do anything illegal. All he did was exercise his freedom of speech... Citizens have freedom of speech...""
She said she had not yet decided whether to appeal on his behalf.
The administrative punishment was passed against Liu just hours after he was taken from his Beijing home early on Tuesday by a group of uniformed and plainclothes police, with a search warrant, who also confiscated books, papers and photographs.
""Re-education through labour is the personal power of the public security bureau, it doesn't have to go through judicial departments,"" Liu Xia said. ""The public security can just do as they wish.""
Police officials declined to comment.
The administrative punishment of re-education through labour has been increasingly used against dissidents in recent months as a means of removing activists from circulation while avoiding the more complicated trial process, diplomats say.
Police gave no reason for the detention of Liu, a renowned literary critic who gained fame as a dissident in the 1989 student-led pro-democracy movement that was crushed by the military with heavy loss of life.
Liu has been active in recent months, sending several daring, open letters to the government.
On September 30, Liu and Wang issued a statement urging China's communist authorities to honour a promise in 1945 to give people freedom of the press and speech and to form political parties and stage demonstrations.
In a bold move, the two demanded Communist Party chief Jiang Zemin be indicted, impeached and step down for violating the constitution for saying the People's Liberation Army was under the ""absolute leadership"" of the party instead of the state.
Wang did not return home on Tuesday and his wife said she was very worried because he had not responded to his pager.
Wang was paroled in 1993 after serving 12 years of a 14-year term for sedition and remains deprived of his political rights. He is one of China's most outspoken proponents of democracy.
Liu was last detained by police in 1995 after orchestrating several daring petitions to parliament by dissidents and intellectuals in the early months of the year. He was held for seven months without charges until being released in January.
His sentence comes shortly after Chinese sources said dissident and former student leader Wang Dan faced a second jail term after prosecutors charged him recently with subversion.
Wang, 26, faces up to seven years in jail on charges of counter-revolutionary incitement -- or subversion.
Wang, who is believed to have worked with Liu on several daring petitions, was detained in May, 1995 in the run-up to the sixth anniversary of the June 1989 military crackdown.
",14
"If foreign governments thought Beijing listened to pleas on human rights, they may have to think of new means of persuasion after a Beijing court jailed one of China's few dissidents still at liberty for 11 years on Wednesday.
In a trial lasting less than four hours, the Beijing Number One Intermediate People's Court ensured that Wang Dan, the pale, thin student leader who topped China's most wanted list after the 1989 demonstrations for more democracy, would spend most of his young adult life behind bars.
The conviction of the 27-year-old democracy activist on the capital charge of plotting to overthrow the government marked the disappearance of one China's few remaining dissidents into the Chinese gulag.
""It's really a slap in the face to those Western governments that have repeatedly asked China to improve its human rights record,"" said one Western diplomat.
He noted that the sentencing came just a week after a visit by German Foreign Minister Klaus Kinkel and amid preparations for a trip by U.S. Secretary of State Warren Christopher in late November.
Another Western diplomat said China was not impervious to concerns about its human rights record raised by foreign governments, adding that it was possible that without foreign pressure such jail terms could be even longer.
Western diplomats said the swiftness of the trial and the severity of the sentence were part of a nationwide tightening of controls by the Communist Party.
""They may see deterrent value in a stiff sentence,"" said one Asian diplomat. ""It dissuades other would-be Wang Dans from taking a similar course of action.""
Diplomats said the sentence was remarkably light given the severity of the charges, which carried a maximum punishment of death and a minimum of 10 years in jail -- although the penalty was tough if the evidence was taken into consideration.
""This is not seriously heavy by the standards of the charges and the potential that existed,"" the second Western diplomat said. ""But in the light of what we understand him to have done, yes, it's heavy... A sledgehammer to crack a walnut.""
The verdict against the former most-wanted leader of the 1989 demonstrations for more democracy charged he received funds from overseas hostile forces, gave financial aid to families of jailed dissidents and tried to set up an ""opposition force"" by uniting illegal organisations.
""It's sort of difficult to see why they should be so frightened of this,"" the second Western diplomat said in a reference to China's communist rulers.
However, he said that in recent months Beijing had moved to virtually eradicate any remnants of China's struggling democracy movement.
""In the last few weeks the few remaining (dissidents) have either run away or been dealt with,"" he said referring to the sentencing of dissident Liu Xiaobo to three years in a labour camp and the escape to the United States of Wang Xizhe, his co-author of a call to impeach President Jiang Zemin.
""There is not very much left. The Chinese do have pretty tight control and they are making sure that they maintain it that way,"" he said.
""You can see a general sort of tightening up -- dissidents, religion, the Dalai Lama, crime, ideology -- you can just tick them off.""
",14
"The family of detained Chinese dissident Wang Dan said on Sunday the former student leader could stand trial this week for the capital offence of plotting to overthrow the government. They said the charge was unfounded.
""Not one point in the bill of indictment broke the law, even less to speak of plotting to overthrow the government,"" his mother Wang Lingyun said in a telephone interview.
The 26-year-old former leader of the 1989 pro-democracy demonstrations has been charged with the capital offence of plotting to subvert the government, based on evidence such as writings critical of the state and accepting funds from abroad.
""All he did was to say a few things,"" Wang Lingyun said. ""He is unjustly accused.""
""He has always advocated peace and non-violence,"" she said. ""There must be action or plans to constitute ""overthrowing the government'.""
She said the family had yet to be notified of when her son's trial would take place, but she said it could come this week.
Relatives said on Friday they had found a lawyer willing to defend Wang. The lawyer had already visited the court dealing with Wang's case to begin legal formalities, they said.
The Beijing People's Intermediate Court had informed Wang Lingyun on Thursday that she had one day in which to find her son a lawyer, a signal that a trial was imminent.
Wang was detained by police in a raid on his home in May 1995 but was not formally arrested or charged until last week.
On Friday the family obtained a copy of the court indictment, which accused Wang Dan of plotting to subvert the government, a crime that carries a maximum penalty of death. The minimum sentence is 10 years, although the court can show leniency if it finds extenuating circumstances.
Wang has already served four years in prison for counter-revolutionary crimes, or subversion, for his role in the 1989 demonstrations centred in Beijing's Tiananmen Square, which were crushed by the army with heavy loss of life..
The indictment cited four major areas of evidence against Wang, the New York-based Human Rights in China said.
The first was the writing of articles published in overseas magazines and newspapers, including some that criticised the government, in the three years since his release from jail.
Other evidence against the former Beijing University student included taking part in studies at home organised by the University of California, Berkeley, in the United States, Human Rights in China said.
The charges accused Wang and other dissidents of joining forces to collect funds and donations to help other dissidents facing difficulties and failure to find work after their release from prison, the group said.
Wang was also accused of accepting donations and economic aid from overseas organisations, it said.
Wang had been expected to face new charges since last December, when the court that convicted veteran democracy activist Wei Jingsheng -- a nominee for this year's Nobel Peace Prize -- of plotting to overthrow the government also implicated the former student leader.
The court's verdict said Wei, who was jailed for 14 years, had links with people ""convicted of counter-revolutionary crimes, including Wang Dan"". It also referred to a tape-recorded conversation between Wang and Wei, but gave no details.
Wang had been active since his release from jail, defying persistent police surveillance and harassment to join in a daring appeal to communist leaders for the release of all those still in prison for their part in the 1989 protests.
",14
"Detained Chinese dissident Wang Dan faces the capital charge of plotting to subvert the government based on evidence such as writings critical of the state and accepting funds from abroad, a human rights group said on Saturday.
Wang Dan's case was expected to come to trial next week, the New York-based Human Rights in China said in a statement.
Relatives said on Friday they had succeeded in finding a lawyer willing to defend Wang, the former leader of the 1989 student demonstrations for more democracy centred in Beijing's Tiananmen Square.
The Beijing People's Intermediate Court on Thursday informed Wang's mother, Wang Lingyun, that she had one day to find her son a lawyer, a signal that the dissident had been indicted and a trial was imminent.
The family on Friday obtained a copy of the court chargesheet, which formally accused the 26-year-old of plotting to subvert the government, a crime that carries a maximum penalty of death.
The indictment cited four major areas of evidence against Wang, Human Rights in China said.
The first was the writing of articles published in overseas magazines and newspapers, including some that criticised the government, in the three years since his release from jail.
Wang served four years in prison for counter-revolutionary crimes, or subversion, for his role in the 1989 demonstrations, which were crushed by the army on June 3-4 with heavy loss of life.
Other evidence against the former student at prestigious Beijing University included taking part in studies at home organised by the University of California, Berkeley, in the United States, Human Rights in China said.
The charges accused Wang and other dissidents of joining forces to collect funds and donations to help other dissidents facing difficulties and the lack of work after their release from prison, the group said.
Wang was also accused of accepting donations and economic aid from overseas organisations, it said.
Wang's lawyer had already visited the court dealing with Wang's case to begin legal formalities, but there was still no news of when the trial of the former student leader, who has been in detention since May 1995, would begin, a close relative said.
""We feel pretty anxious. We are just waiting for new developments,"" the relative told Reuters.
The outspoken activist attracted the ire of China's communist authorities in 1989 when he shot to prominence as a leader of student protests for more democracy centred on Tiananmen Square in the heart of the Chinese capital.
Wang had been expected to face new charges since last December, when the court that convicted veteran democracy activist Wei Jingsheng -- a nominee for this year's Nobel Peace Prize -- of plotting to overthrow the government also implicated the former student leader.
The court's verdict said Wei, who was jailed for 14 years, had links with people ""convicted of counter-revolutionary crimes, including Wang Dan"". It also referred to a tape-recorded conversation between Wang and Wei, but gave no details.
Wang had been active since his release from jail, defying persistent police surveillance and harassment to join in a daring appeal to communist leaders for the release of those still in prison for their part in the 1989 protests.
",14
"China has launched a manhunt across the restive region of Tibet, tightened airport security and offered a reward of $120,000 for the arrest of culprits who exploded a bomb in Lhasa last week, officials said on Monday.
The government had announced a reward of one million yuan ($120,000) for information leading to the arrest of those responsible for the bomb that exploded in the early hours of Christmas Day outside city government offices in the Tibetan capital, Lhasa, a senior official said.
""No one has yet been arrested and we are now mobilising and deploying our forces,"" Lhasa Vice Mayor Ou Yangxiang said in a telephone interview.
Notice of the reward had been published in the Lhasa Evening News on December 27 and it was being issued in other newspapers in the strategic Himalayan region, government officials said.
The Christmas Day bomb, the largest so far set off by anti-Chinese activists in restive Tibet, had resulted in no casualties but caused widespread damage, shattering windows for a radius of 100 metres (yards), officials said.
""Almost the whole of Lhasa heard it,"" said one Lhasa government official. ""It was a muffled sound, like -- whoong.""
Officials insisted there was little doubt that the blast was politically motivated and carried out by followers of the region's exiled god-king, the Dalai Lama.
""This was done by the Dalai separatist camp,"" the government official said, adding that the attack bore the hallmarks of previous similar ""terrorist acts"". He declined to give details although several smaller bombings have been reported in Lhasa.
""This is a terrorist act, aimed at destroying peace in our area,"" he said. ""This was a brazen act.""
Police had set up a special task force to search for the culprits and customs and immigration officials had stepped up security searches at Tibet's airport, he said.
A senior Tibet police official said the bomb was a home-made device made from ammonium nitrate, a fertiliser.
""We are targeting Tibetan exiles returning from abroad and who have political connections,"" he said when asked about the focus of the manhunt.
China regularly blames followers of Tibet's exiled god-king, the Dalai Lama, for anti-Chinese unrest that erupts sporadically in the strategic mountainous region that straddles the Himalayas and runs along China's sensitive border with 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 self-government and freedom of worship in the deeply religious Buddhist region. He fled China in 1959 after an abortive uprising against Beijing rule.
Monks in the deeply devout Buddhist region who have spearheaded anti-Chinese demonstrations and riots in the past were not regarded as suspects, the police official said.
Officials have vowed to retaliate, signalling a possible renewed crackdown on anti-Chinese unrest in the region.
""We should wage a tit-for-tat struggle against the Dalai clique's sabotage,"" local radio quoted Gyamco, vice chairman of the regional government as saying last week.
""We should, once again, stage another campaign across Tibet to thoroughly expose and criticise the Dalai clique, heighten our alertness and strengthen preventive measures so as to keep the situation stable,"" the radio quoted him as saying.
Several much smaller bombs have been been set off in Lhasa over the last two years, including one in 1995 that caused slight damage to a plaque donated by Beijing and another last March outside the headquarters of the Tibet regional government.
",14
"Chinese police detained leading dissident Liu Xiaobo on Tuesday after searching his home and confiscating documents in the latest sign of a hardening attitude to the few dissidents still at liberty.
About seven or eight plainclothes and uniformed police, equipped with a search warrant, entered Liu's Beijing home at about 8.00 a.m. (0000 GMT), a relative said.
""They turned the whole place upside-down,"" she said.
After searching the house and taking books, photographs and documents and articles that Liu had written, police took him away, the relative said. ""They took everything.""
They gave no reason for the detention of Liu, a renowned literary critic who gained fame as a dissident during the 1989 student-led pro-democracy movement that was crushed by the military with heavy loss of life.
Police did not say when Liu might be released. ""They gave no reason,"" the relative said. ""They said to wait for notification.""
Liu has been active in recent months, sending open letters to the government to demand press freedom and talks with the Dalai Lama on Tibet.
On September 30, Liu and veteran pro-democracy activist Wang Xizhe issued a statement urging China's communist authorities to honour a promise in 1945 to give people religious freedom, freedom of the press and speech and to form political parties and stage demonstrations.
In a bold move, the two demanded Communist Party chief Jiang Zemin be indicted, impeached and step down for violating the constitution for saying the People's Liberation Army was under the ""absolute leadership"" of the party instead of the state.
Wang Xizhe was still at liberty in southern Guangzhou on Tuesday.
Liu was last detained by police in 1995 after orchestrating several daring petitions to parliament by groups of dissidents and intellectuals in the early months of the year. He was held for more than seven months without formal charges until being released last January.
His detention comes a day after Chinese sources said another dissident, former student leader Wang Dan, faced a second jail term after prosecutors charged him recently with subversion.
Wang, 26, faces up to seven years in jail on charges of counter-revolutionary incitement -- or subversion. A court in Beijing was expected to deliver a verdict on Wang's case as early as this week, said one source.
Wang, who is believed to have worked with Liu on several daring petitions, was detained in May 1995 in the run-up to the sixth anniversary of the June 1989 military crackdown.
A former student of Beijing University, Wang served four years in jail for counter-revolutionary activities for his role as a leader of the 1989 demonstrations.
He had been expected to face charges since the court that sentenced veteran democracy activist Wei Jingsheng last December to 14 years for plotting to overthrow the government also implicated Wang in its verdict.
Liu and Wang are among a very few dissidents who are not serving jail terms or re-education through labour penalties.
A court in central Henan province last month sentenced student leader-turned-dissident Guo Haifeng to seven years in prison for hooliganism. Police had initially accused Guo of fraud but the prosecutor did not file charges against him, a human rights group said.
",14
"China's senior leader Deng Xiaoping is spending his twilight years as an effective recluse, leaving an opportunity for power-hungry, would-be heirs fighting for his title to use his name to strengthen their hand, analysts said on Thursday.
The most blatant sign of the exploitation of the reputation of the 92-year-old elder statesman was the New Year's Day launch of a 12-hour documentary on Deng's life that showed him larger than life, glowing against a background of golden clouds radiating across the sky.
""This was done, written and arranged by those around him who would benefit from having his image... burnished up a bit,"" said one Western diplomat.
""All those who owe their fortunes to him want to make him appear in as good a light as possible,"" he said. ""The fact that they are starting the year with this shows that the pro-Deng camp seems to have the upper hand.""
The clearest immediate beneficiary was the narrator of the introduction to Wednesday's inaugural episode of the 12-part series -- Deng's own anointed heir-apparent President, Communist Party chief and army commander-in-chief Jiang Zemin.
""Jiang will be better off if Deng is able to linger for about another year and a half -- until about mid-1998,"" the diplomat said.
""It would be inconvenient for (Jiang) if Deng went now,"" he said, adding that Jiang needed the clout of the man who succeeded Chairman Mao Zedong as China's most powerful man to consolidate his position at a crucial party meeting this year.
Deng has not been seen in public for nearly three years -- a result of his own desire to retire to a behind-the-scenes role as well as his failing health, analysts say. In his last appearance he looked weak and faltering.
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 with fading lucidity.
""There is no doubt that the perception is... that he is to all intents and purposes no longer consistently lucid,"" the diplomat said, adding that the adulatory documentary was proof of Deng's waning control.
""This is the kind of thing he always avoided,"" he said, quoting from Deng himself who always openly abhorred the cult of personality that deified Mao.
Chinese analysts said the series was reminiscent of the power struggles that gripped the inner ranks of the party in Mao's last years.
""You can see that people are now using Deng just as (Mao's wife) Jiang Qing and the Gang of Four used Mao to boost their position in the years before he died,"" said one Chinese writer.
Jiang and his opponents were already lining up their pieces in the months before the high-profile handover of Hong Kong to Beijing on July 1 this year and the crucial 15th Party Congress late in the year, diplomats and analysts said.
""The transition is pretty much done now, but Jiang still needs Deng's clout behind him until everything is wrapped up with the congress and the change of government at the 1998 National People's Congress (parliament),"" the diplomat said.
The primetime documentary, carefully timed to start the year, is expected to define Deng's legacy to the current party leadership and thus future policies, political analysts said.
The main theme of the first one-hour show was reform, underlining China's commitment to Deng's pragmatic market policies that turned a backward Stalinist state into an economic powerhouse.
",14
"One of China's most prominent dissidents, Wang Dan, is expected to receive a harsh sentence on the charge of plotting to overthrow the government, his mother said on Tuesday.
Wang, 27, would plead not guilty to the capital charge when his trial at the Beijing Intermediate People's Court begins on Wednesday, said the dissident's mother, Wang Lingyun.
""The court...giving my son a harsh sentence even though he is innocent is very likely to happen,"" Wang Lingyun told Reuters. ""I dare not rule it out.""
She said court officials told her the verdict could be delivered as early as Wednesday or in two days. Family members had been under surveillance for several weeks, she added.
The former student leader, who vanished into detention in May 1995, faces a minimum 10-year sentence and a maximum penalty of death.
The court has refused to give details of Wang's trial except to say he has been charged with plotting to overthrow the government.
The New York-based Human Rights Watch said last week the chances of acquittal were slim because Wang has not had adequate time to prepare a defence.
His family found a lawyer willing to defend the dissident after being given just one day in which to do so.
Wang's mother, a 61-year old museum researcher who has no background in law, would attend the trial as one of two defence lawyers. His father and a sister would be allowed to sit in.
The mother has said the dissident was calm and mentally prepared for a harsh sentence, although she has said his health had deteriorated during his detention.
Human Rights Watch attacked the trial on Tuesday as a sign of the Chinese leadership's increasing intolerance of dissent.
""The fact is that China's urban dissident movement... has in effect been comprehensively smashed,"" it said in a statement.
""At least where political dissidents are concerned, all the judicial signs thus far point... to intensified repression by the country's state security forces,"" it said, calling for a freeze on trade missions from the United States, Europe, Japan and Australia.
The human rights group said Chinese criminal trials seldom respect the presumption of innocence, and defence lawyers were generally restricted to arguing mitigating circumstances for a reduced sentence.
Wang's court appearance would likely be held out of the public eye, as was last year's trial of Wei Jingsheng, regarded as the father of China's tiny, struggling democracy movement.
Officials have been silent on a request by the U.S. embassy in Beijing to send observers to Wang's trial, diplomats said.
French senator Robert Badinter, former U.S. attorneys general Nicholas Katzenback and Richard Thornburgh, and former Canadian solicitor-general Warren Allmand have also said they want to observe Wang's trial.
Foreign Ministry spokesman Shen Guofang on Tuesday shrugged off questions from reporters about the status of the requests, saying Wang's trial was China's internal affair.
Beijing has repeatedly come under fire from the West for human rights abuses. It says foreign intervention in China's internal affairs is not welcome.
Wang has already served four years in prison for counter-revolutionary crimes, or subversion, for his role in pro-democracy demonstrations in Beijing's Tiananmen Square that were crushed by the army in June 1989 with heavy loss of life.
He was politically active again after his parole in 1993, defying police surveillance to join a daring appeal to communist leaders for the release of those still jailed for their part in the 1989 protests.
China has recently cracked down on the few remaining dissidents who have not fled into exile or been jailed.
",14
"China's new hardline dictum to its people to battle hostile Western influences with puritan Marxist values underlines a poverty of ideas among an ageing leadership with declining credibility in a fast-changing society, analysts said on Monday.
""They don't seem to grasp that people have changed since the days when they had nothing else to do but to listen to lengthy party documents being broadcast on the radio,"" said one China analyst.
""Nowadays people have so many other activities they may just skim over the headlines and not bother to read something like this,"" he said, referring to a 15,000-character Communist Party document issued in official newspapers on Monday.
""Do the leaders not realise people can channelsurf because it's not just one television station any more?"" he said.
China's ruling Communist Party, in what it hailed as one of its greatest documents ever, warned against hostile Western ideas such as capitalism and parliamentary democracy, urged vigilance against pornography and profit and vowed to fight back with puritan Marxist values.
""If they are seeking to change the average Chinese in the street then this is not the answer,"" said one Western diplomat, describing the newest demand for ideological conformity as a rehash of communist methods practiced for years.
Chinese political analysts have warned that the inability of the communist leadership to move with the times and experiment with new ideas and methods to stir up popular support in a society rapidly being transformed by market-oriented economic reforms could have dangerous repercussions.
""A lot of people just aren't listening any more,"" one analyst said, adding that a consequence of this breakdown of communication would create even more distance between the populace and a leadership that is already remote and secretive.
To recapture popular attention, China's leaders might try to use more extreme propaganda tools, such as whipping up a potentially destabilising nationalist and anti-Western campaign, analysts said.
""We are looking at an ageing leadership -- many of the Politburo are in their 70s -- who are set in their ways and don't seem able to accept younger advisers trying to package acceptable ideology in new wrapping paper,"" one diplomat said.
Paramount leader Deng Xiaoping had missed an opportunity to appoint a younger leadership when he purged the upper echelons after the 1989 student demonstrations for more democracy, analysts and diplomats said.
Analysts said that while the latest communist creed tried to present itself as a balanced dictum, it was clearly intended to achieve the goal of conformity of thought.
""It's pretty much a blueprint for censors to do what they want,"" said one diplomat.
Even conservative newspaper editors appointed in recent years as replacements to more liberal writers have been purged in recent weeks, a succession of books have been ordered off the shelves and popular author Wang Shuo has been effectively banned.
""Things are only going to get worse,"" said one analyst.
However, some doubted how effective a new purge would be.
""It's part and parcel of an attempt to take control of the way people think and the kind of cultural afairs that are conducted,"" the western diplomat said.
""But people don't always take as much notice as they once did,"" he said. ""It may not last much longer than the time it takes to read the thing.""
",14
"China's Communist Party, in what it called one of its greatest ever documents, warned on Sunday against hostile Western ideas such as parliamentary democracy and capitalism and vowed to fight back with puritan Marxist values.
The 15,000-character document -- adopted at last week's annual secret plenum of the ruling party elite -- marked the latest volley by party chief Jiang Zemin to boost his position by battling corruption, pornography and worship of money while promoting nationalism and hardline communist ideology.
Diplomats said a strong tone of opposition to the West and particularly the United States, which Beijing fears is pursuing a policy of containment toward China, also suffused the document, unveiled by the official Xinhua news agency.
They said Jiang was striving to placate leftwing party hardliners angered by what they see as an erosion of puritan communist values by nearly two decades of profit-based economic reform.
""The standard of moral conduct has been lowered in some spheres, and the practice of worshipping money, seeking pleasure and individualism has grown,"" the document said.
It railed against corruption, warning senior party officials not to be tempted by the lures of power, profit and sex.
Jiang has warned repeatedly that corruption is a virus that could topple the party which has ruled China since 1949, and public opinion surveys show graft as the top popular gripe.
In a sign that Jiang needs to consolidate his power base even after amassing China's three most important posts -- general secretary of the party, state president and chairman of the party's powerful Central Military Commission -- the document paid extravagant homage to paramount leader Deng Xiaoping, 92.
The text was littered with 14 mentions of Deng's name, against just three for Jiang and four for the late Chairman Mao Zedong.
Analysts say Jiang remains overshadowed by Deng, architect of the market-oriented reforms and influential even without an official post and despite increasingly fragile health.
However, a recurring theme of the document was a warning to the nation to be on guard against the West, taking up one of the main platforms of Jiang's rule -- the importance of patriotism.
It urged self-sufficiency, saying people should ""fear no pressure, safeguard national sovereignty and surmount sanctions imposed by Western countries"" -- a clear reference to the United States.
""Because socialism has suffered serious setbacks on a worldwide scale, pressure from the superiority of developed capitalist countries in economy...as well as the infiltrations of Western ideology will remain for a long time,"" it warned.
It advocated ""how to...prevent and eliminate the spread of cultural garbage, resist the conspiracy by hostile forces to westernise and split our country,"" -- and suggested more flag-raising ceremonies and singing of the national anthem.
However, despite the lip-service to Deng Xiaoping, the document cast doubt over one of his most far-reaching reforms -- the lifting of a ban on private enterprise -- while repeating his opposition to western-style democracy.
""It is necessary to distinguish right from wrong on such major issues as...common development of various economic sectors with socialist public ownership as the mainstay versus privatisation...socialist democracy versus parliamentary democracy practised in Western countries,"" it said.
""Liberalism will precisely lead China to the capitalist road and undermine the political situation,"" the document thundered.
",14
"China hailed on Tuesday its war on bourgeois decadence as the top news event of 1996 along with missile tests off Taiwan, but ignored improved ties with the United States and the jailing of a dozen dissidents.
The line-up of the top 10 news events in China in 1996 as selected by senior editors of the major Communist Party-linked newspapers closely reflected the party line on news -- or propaganda.
The list issued by the Xinhua news agency differed sharply from events in China that have focused international eyes on the world's most populous country in the last 12 months.
Heading the list selected by 12 Beijing editors was the annual plenum of China's ruling Communist Party in October that adopted a 15,000-word document exhorting China's 1.2 billion people to adhere to socialist ethics and abhor bourgeois Western liberalism.
On Christmas Eve, it was unclear how far socialist values extended, but Santa Claus appeared to be exempt as he smiled and waved from dozens of Beijing and Shanghai department stores.
Politics, not only news value, may have coloured the views of many of the editors, who would have remembered that the plenum was trumpeted as one of the major achievements of Communist Party chief, state President and army boss Jiang Zemin -- anointed heir to paramount leader Deng Xiaoping.
Newspaper editors elsewhere in the world would probably have chosen Beijing's campaign to intimidate Taiwan in the run-up the island's first popular elections of a Chinese president on Chinese soil as the top story of 1996.
However, for Chinese editors the decision to conduct missile tests and live-fire war games in waters near the island last March, and which sent U.S. aircraft carriers steaming into neighbouring seas, ranked only fourth in their top 10.
The news item in second place related to China's resumption of sovereignty over the British colony of Hong Kong in mid-1997, or Premier Li Peng's decision to sign off on the appointment of shipping tycoon Tung Chee-hwa as Hong Kong's first post-colonial chief executive.
Other editors might have focused less on the role of a single Chinese leader in Tung's elevation and more on his selection by a Beijing-sponsored committee of his peers.
Four of the top 10 Chinese news stories were linked to economic achievements and one to sports -- the Atlanta Olympic Games in which China ranked fourth overall in the medals' tally. Just two involved international affairs.
President Jiang's visit to the Asia-Pacific Economic Cooperation (APEC) forum in the Philippines last month edged into fifth place.
Jiang's APEC meeting with U.S. President Bill Clinton set the seal on a warming of frosty Sino-U.S. ties and resulted in a decision on an exchange of the first presidential state visits in nearly eight years. But for China's news commissars, that merited only a brief aside.
""Chinese President Jiang Zemin... met with leaders of other APEC members, including U.S. President Clinton,"" Xinhua said.
China's renewed crackdown on dissent, such as its decision to sentence Wang Dan, a former leader of the 1989 student demonstrations for more democracy, to 11 years in jail for conspiring to subvert the government, went unmentioned.
",14
"The U.S. government's top Asian official, Winston Lord, left China on Thursday, wrapping up a low-profile visit after talks that focused on human rights in China and problems on the Korean peninsula.
Diplomats described the meetings as frank and cordial overall, even though Lord raised the thorny issue of China's treatment of its dissidents amid signs of a renewed crackdown by Beijing's communist rulers on their critics.
Lord, Assistant Secretary of State for East Asian and Pacific Affairs, arrived on Tuesday for the previously unannounced visit and kept a low-profile while in Beijing, a U.S. embassy official said. He left for Japan on Thursday.
Lord held substantive discussions with Deputy Foreign Minister Liu Huaqiu on Wednesday and also had a brief meeting with Foreign Minister Qian Qichen, diplomats said.
""They discussed a wide range of issues,"" one Western diplomat said.
The issue of Korea was one focus of the talks and although diplomats said there was little sign of concrete progress, the tone of discussion was positive.
""Both sides want to maintain stability on the peninsula,"" one diplomat said.
South Korea and the United States in April called for four-nation peace talks with North Korea and China to replace a truce that ended the Korean conflict but left Seoul and Pyongyang technically still at war.
Pyongyang has insisted on bilateral talks with Washington to seek an accord, saying Seoul was not a party to the 1953 truce. China has yet to take a clear stance on the four-way talks.
Frosty relations between Seoul and Pyongyang have been in crisis since last month, when 26 North Koreans landed in the South from a stranded submarine.
Diplomats said Lord's talks did not focus on any single issue, and a major aim of his trip was to prepare for a visit next month by Secretary of State Warren Christopher.
""Generally speaking relations are on the upturn,"" said one diplomat. Christopher is due to visit Beijing on November 21-22 on a trip originally announced in July.
A row over human rights scarred Christopher's last visit to China in 1993.
The visit would mark the highest point in relations since ties plunged after Taiwan President Lee Teng-hui paid a private visit to the United States in June 1995, a trip that enraged Beijing.
In Washington, State Department spokesman Nicholas Burns said Lord had raised Chinese treatment of dissidents.
""Human rights have been on our agenda quite importantly over the last couple of days, because of recent arrests of some of the political dissidents, and the recent travel to the United States of a noted champion of human rights. So, that issue for us is front and centre on our agenda with them.""
Washington last week sharply criticised the sentencing of dissident Liu Xiaobo to three years in a labour camp, as well as apparent plans to try another pro-democracy activist, Wang Dan, on the capital charge of plotting to subvert the government.
Diplomats in Beijing said China would almost certainly be angered by the arrival of a third dissident, Wang Xizhe, in San Francisco this week after escaping from China.
Both sides have said they were moving toward a possible exchange of presidential visits during 1997.
Among outstanding issues that could spark U.S. anger are China's alleged nuclear sales and human rights record while Beijing blames Washington for holding up its application for membership in the World Trade Organisation.
",14
"Are you a businessman looking for generous tax breaks, lengthy tax holidays, easy loans, clean air and spectacular scenery?
Then Tibet may be your answer -- that is, if you don't mind high transport costs, frequent power outages and temperamental telephone lines.
Beijing has given unparalleled privileges to try to attract foreign investors to this remote, rugged, restive and poverty-stricken region. Those policies are starting to pay off, albeit slowly, officials said.
""This year circumstances are rather improved as a result of our new policies to foreign investors,"" Wang Yaju, vice director of the Department of Foreign Trade and Economic Cooperation of the Tibet Autonomous Region, said in an interview.
He said the new, preferential policies unveiled last year had already paid off with 14 new foreign investment projects approved this year. That compared with the establishment of just 61 joint ventures between 1988 and 1995.
Wang said he was optimistic that a planned $48 million 50-50 venture between Taiwan's Kwang Yang Motors and Tibet's Summit Motor to produce motorcycle engines in neighbouring Sichuan province would be successful.
The plant would be registered in Tibet, pay taxes to that region and enjoy its tax breaks.
Most members of Tibet's tiny community of foreign investors seem attracted both by the tax holidays and the scenic beauty.
For example, John McKay of Santa Cruz, Calif., set up the Tibet Plateau Cashmere Co. with a U.S. company and a private Tibetan partner. The three-way partnership will process cashmere with the goal of producing finished knitwear.
The joint venture is exempt from income tax for the first five years after it makes a profit, and then pays only half the national rate of tax for the following five years.
Wading through the Chinese bureaucracy for the necessary permits was a frustrating and time-consuming process, McKay said, echoing the experiences of other investors in the region as well as throughout much of China.
Red tape appeared to be less entangling than in other regions, however.
Also, investors said they had considered the risks from possible anti-Chinese violence, but believed the profits outweighed potential losses.
""I don't think this (unrest) is very likely,"" said McKay.
""There's enough control here that it would cut off anything before it got started,"" said another businessman who declined to be identified. ""Tibetans are resigned to it and accept the way things are.""
Kesang Rigdol, a Nepali Tibetan who set up his Tibet Snowland Restaurant in the centre of Lhasa last year, did not dodge the difficulties of setting up a business in a land supposed to be the fabled Shangri-La.
Rigdol owns 63 percent and invested $40,000 in the restaurant, which many say is the best eatery in Lhasa, while his Tibetan partner, who provided the site, holds 37 percent.
""Everything we were able to do was because of the policy on joint ventures,"" he said.
Despite the long, bitter winter that keeps away most of the tourists who are his main customers, Rigdol is already considering setting up a second joint venture, a dairy farm.
""We can't get good quality milk and cream here,"" he said, adding that skilled labour was also a serious problem.
Rigdol employs Nepali cooks and had hoped to teach Tibetans culinary skills. ""But Tibetans don't seem to want to learn,"" he said. ""They are not interested at all.""
Foreign trade officials said they welcomed such small ventures, but were also eager to lure bigger investments, while recognising that the lack of a railroad, power shortages and limited flights hampered their bargaining power.
As part of a move to publicise opportunities in the vast, resource-rich but inaccessible region and escape their communications difficulties, Tibet authorities are preparing to launch a site on the Internet, the worldwide computer network.
Wang said investors in power plants, mineral resources and infrastructure were more than welcome.
Officials of the Tibet Department of Geology and Minerals said they were hoping the regional government would soon issue special regulations covering foreign investment in the region's underground resources.
Tibet wanted foreign firms to join forces in exploration for mineral resources, particularly copper, chromite, antimony and borax, said Wang Baosheng of the Department of Foreign Trade.
""This could lead to good opportunities for them to take part in exploitation of these resources,"" he said. ""This place has great potential, if you invest here you will have very good returns.""
",14
"China has launched a manhunt across the restive region of Tibet, tightened airport security and offered a reward of $120,000 for the arrest of culprits who exploded a bomb in Lhasa last week, officials said on Monday.
The government had announced a reward of one million yuan ($120,000) for information leading to the arrest of those responsible for the bomb blast early on Christmas Day outside city government offices in the Tibetan capital, Lhasa, a senior official said.
""No one has yet been arrested and we are now mobilising and deploying our forces,"" Lhasa Vice Mayor Ou Yangxiang said in a telephone interview.
Notice of the reward had been published in the Lhasa Evening News on December 27 and it was being issued in other newspapers in the strategic Himalayan region, government officials said.
The Christmas Day bomb, the largest so far set off by anti-Chinese activists in restive Tibet, had resulted in no casualties but caused widespread damage, shattering windows within a radius of 100 metres (yards), officials said.
""Almost the whole of Lhasa heard it,"" said one Lhasa government official. ""It was a muffled sound, like -- whoong.""
Officials insisted there was little doubt that the blast was politically motivated and carried out by followers of the region's exiled god-king, the Dalai Lama.
The bomb exploded at night outside a government building and was therefore clearly political, said Zhou Kaifu, deputy director of the Tibet Public Security Bureau.
""This was done by the Dalai separatist camp,"" the government official said, adding that the attack bore the hallmarks of previous similar ""terrorist acts"". He declined to give details although several smaller bombings have been reported in Lhasa.
""This is a terrorist act, aimed at destroying peace in our area,"" he said. ""This was a brazen act.""
Police had set up a special task force to search for the culprits and customs and immigration officials had stepped up security searches at Tibet's airport, he said.
The senior police official said the bomb was a home-made device made mainly from ammonium nitrate, a fertiliser.
""We are targeting Tibetan exiles returning from abroad and who have political connections,"" he said when asked about the focus of the manhunt.
""The bomb was made at a farm,"" he said. ""We are searching mainly in Lhasa, but are cooperating with other areas.""
China regularly blames followers of Tibet's exiled god-king, the Dalai Lama, for anti-Chinese unrest that erupts sporadically in the strategic 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 self-government and freedom of worship in the deeply religious Buddhist region. He fled China in 1959 after an abortive uprising against Beijing rule.
Monks in the devout Buddhist region who have spearheaded anti-Chinese demonstrations and riots in the past were not regarded as suspects, the police official said.
Officials have vowed to retaliate, signalling a possible renewed crackdown on anti-Chinese unrest in the region.
""We should wage a tit-for-tat struggle against the Dalai clique's sabotage,"" local radio quoted Gyamco, vice chairman of the regional government as saying last week.
Several much smaller bombs have been been set off in Lhasa in the last two years, including one in 1995 that caused slight damage to a plaque donated by Beijing and another last March outside the headquarters of the Tibet regional government.
",14
"Leading Chinese dissident Liu Xiaobo has been ordered to serve three years in a labour camp just hours after police detained him in an early morning raid on his Beijing home, his wife said on Wednesday.
Police had notified her early on Wednesday of the administrative sentence, which does not need a court trial, but gave her no reason for the punishment.
""I am very angry. How can they do this?,"" Liu Xia said in a telephone interview.
""I feel he hasn't done anything (illegal). Citizens have freedom of speech, to write articles and say things.""
She said she had not decided whether to appeal.
The administrative punishment was passed against Liu after he was taken from his Beijing home early on Tuesday by a group of uniformed and plainclothes police who also confiscated books, papers and photographs.
""Re-education through labour is the personal power of the public security bureau, it doesn't have to go through judicial departments,"" Liu Xia said. ""The public security can just do as they wish.""
Liu Xiaobo might be sent to a labour camp near his hometown of Dalian in the northeast, she said.
Police officials declined to comment.
The administrative punishment of re-education through labour has been increasingly used against dissidents in recent months as a means of removing activists from circulation while avoiding the more complicated trial process, diplomats say.
Police gave no reason for the detention of Liu, a renowned literary critic who gained fame as a dissident in the 1989 student-led pro-democracy movement that was crushed by the military with heavy loss of life.
Liu has been active in recent months, sending several daring, open letters to the government.
On September 30, Liu and veteran pro-democracy activist Wang Xizhe issued a statement urging China's communist authorities to honour a promise in 1945 to give people freedom of the press and speech and to form political parties and stage demonstrations.
In a bold move, the two demanded Communist Party chief Jiang Zemin be indicted, impeached and step down for violating the constitution for saying the People's Liberation Army was under the ""absolute leadership"" of the party instead of the state.
Wang could not be reached in southern Guangzhou and a human rights group said he did not return home on Tuesday.
Liu was last detained by police in 1995 after orchestrating several petitions to parliament by groups of dissidents and intellectuals in the early months of the year.
He was held for more than seven months without formal charges until being released last January.
His sentence comes shortly after Chinese sources said dissident and former student leader Wang Dan faced a second jail term after prosecutors charged him recently with subversion.
Wang, 26, faces up to seven years in jail on charges of counter-revolutionary incitement -- or subversion.
Wang, who is believed to have worked with Liu on several petitions, was detained in May 1995 in the run-up to the sixth anniversary of the June 1989 military crackdown.
A former student of Beijing University, Wang served four years in jail for counter-revolutionary activities for his role as a leader of the 1989 demonstrations that centred on Beijing's Tiananmen Square.
He had been expected to face charges since the court that sentenced veteran democracy activist Wei Jingsheng last December to 14 years for plotting to overthrow the government also implicated Wang in its verdict.
",14
"China's long-delayed bid to enter the World Trade Organisation will fall under the spotlight when the world's richest nations meet to discuss its application this week, European and U.S. officials said on Monday.
Delegates of the Quad -- the United States, Japan, Canada and the European Union -- will meet for lunch on Tuesday on the sidelines of the first ministerial conference of the World Trade Organisation (WTO) in Singapore, the officials said.
The European Union (EU) was trying to bring the United States on board regarding its proposal that China enter the world trade body through a phased accession process, one EU official said.
The United States says Beijing must comply with a ""road map"" to open its markets and eliminate trade and non-trade barriers before it can win U.S. support for its entry.
China had hoped to culminate its decade-long bid to join the General Agreement on Tariffs and Trade by becoming a founding member of the WTO at its inception two years ago.
Its application foundered on opposition over entry terms, with Beijing maintaining that the price of the road map was too high. Talks continue at a snail's pace in Geneva.
One aim of Tuesday's Quad meeting would be to try to narrow differences between the United States and Europe over terms for China's entry, terms used by Beijing to play one side off against the other, one EU source said.
Outlining his key objectives for the week-long ministerial conference in Singapore, EU Commissioner for Trade Sir Leon Brittan, stressed the need to relaunch in earnest negotiations toward Chinese membership.
""We have the remarkable changes going on in China, as well as a continuing process of economic renewal elsewhere in Asia and in Latin America...Hence the urgent need for WTO enlargement,"" Brittan told the conference opening session.
Brittan has visited China several times in recent months and has said he received a warm response from Beijing to the phased accession proposal.
In his opening address to the conference, Singapore Prime Minister Goh Chok Tong also backed China's entry in a reference to pending memberships, although he repeated the United States stand that new applicants must meet the necessary criteria.
""Some of these new entrants are significant economic players, like China and Russia, their entry into the WTO would have a positive impact on the rules-based multilateral trading system,"" Goh said.
Senior Chinese analyst Pei Changhong said last week China was unlikely to concede on its demand to enter the WTO as a developing country and has the patience to hunker down for a long wait to win accession on its terms.
The United States insists that the size of China's economy ranks it as a developed country.
A goal of 1997 entry seemed an ambitious target given the distance between the United States and China on so many issues, but Pei said he hoped to see entry by 1999.
China's Foreign Minister Qian Qichen said last month that talks with the United States on entry could be wrapped up by mid-1997.
",14
"China's private sector has become an important source of jobs for workers laid off by loss-making state enterprises and officials said on Thursday the jobless were able to find work despite fears of rising unemployment.
In 1995, the private sector hired 1.5 million workers made redundant from state- and collectively owned enterprises, an official of the State Administration for Industry and Commerce said in a telephone interview.
The official also noted a shift in the type of staff being employed by private enterprise as China's fastest growing sector expands and modernises.
""Before, employees were mainly peasants and young jobless,"" the administration official said.
""But in the last two years, the number of those employed after leaving state enterprises has increased,"" he said. ""And there will be a bigger increase in employment of this type of worker in the next couple of years.""
The main reason that workers were attracted to the sink-or-swim world of private enterprise from the jobs-for-life system in state firms was high wages, he said.
China's private companies and self-employed accounted for a total of 56 million jobs, or six percent of China's employed workers, at the end of 1995, he said.
China had 654,500 private companies and 25.28 million self-employed workers at the end of 1995 compared with none in 1979, when paramount leader Deng Xiaoping launched his market-oriented economic reforms.
Many had found jobs in Shenyang, at the heart of China's rust-belt and a city groaning with money-losing state firms, the official said. The city had found jobs for 800,000 laid-off workers in the last two years.
In Shanghai, more than 85,000 redundant state workers had created their own businesses or found jobs in private firms.
The administration official said private enterprise had averaged growth of 50 percent to 60 percent a year over the past three years, although that was expected to slow to about 30 percent over the next few years.
An official of the Ministry of Personnel said state enterprises had shed more than 2.0 million workers in recent years, many of them helped to find work by their former employers or through fledgling labour markets.
China's urban unemployment rate was 2.9 percent at the end of June, up by 0.01 percent from the same time last year, official figures show.
However, official media have warned that the actual rate could soar to 7.4 percent by 2000.
Nine out of 10 people entering the job market have found jobs through the new labour markets since 1995, the Xinhua news agency quoted an official of the Ministry of Personnel as saying.
The few who still enjoy the state's ""iron rice bowl"" in terms of assigning jobs include demobilised soldiers and college graduates.
At the start of 1995, China had more than 29,000 employment service organisations, which offered jobs to more than 12 million people last year, the official said.
",14
"The largest bomb blast reported in Tibet marks a new desperation in anti-Chinese sentiment in the restive region and offers a longed-for opportunity to officials to launch a new crackdown, analysts said on Monday.
""I think what we are seeing here is people who tend to say that the path of non-violence is not working and they will now use violence,"" Robbie Barnett of the London-based Tibet Information Network said in a telephone interview.
The Himalayan region that is peopled mainly by deeply devout Buddhists 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 home-made ammonium nitrate blast early on Christmas Day outside a city government office in Lhasa shattered windows in a radius of 100 metres (yards) and was the largest such explosion reported in the region. No casualties were reported.
Barnett described the attack as an act of desperation.
""These people are Buddhists,"" Barnett said. ""But they are Buddhists who do not see anything being achieved by what the Dalai Lama is doing and they are very worried about it.""
Officials said there was little doubt that the Christmas Day blast in Lhasa was politically motivated and carried out by followers of the region's exiled god-king, the Dalai Lama.
""There have been increasing hints that some groups could turn to violence if China did not relax its repression in Tibet,"" Barnett said. ""But this movement seems to have attracted only a very few.""
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 self-government and freedom of worship in Tibet.
He fled China in 1959 after an abortive uprising against Beijing rule and has since lived in India with many followers.
As part of his peaceful campaign, the Dalai has proposed talks with Beijing, suggesting China shoulder defence and foreign policy but allow Tibetans self-rule in internal matters such as religion. His spokesmen say China has not responded.
Beijing has said it cannot negotiate unless the Dalai Lama recognises Chinese sovereignty.
Analysts said the latest bombing had played into the hands of local authorities eager for evidence that would demonstrate to Beijing the need for a stricter crackdown in Tibet.
""This is just the kind of thing the authorities in Tibet have been hoping for,"" Barnett said.
""They have been exaggerating hugely the extent of unrest to justify the need for a crackdown,"" he said, referring to a string of Tibet newspaper articles warning against anti-Chinese forces. ""This can only help them.""
Officials interviewed recently in Tibet played down the extent of anti-Chinese feeling in the region, saying those opposed to Beijing were a tiny minority. Witnesses saw little sign of tight security in the capital, Lhasa.
However, a senior police official in Lhasa hinted on Monday that a stable security situation in Tibet and its temples was a result of careful planning. ""The order in monasteries is good because we have recently regulated them,"" he said.
An ideological campaign in Tibet, as elsewhere in China, to promote socialist ethics and allegiance to the Communist Party could have ignited the new violence in a region where many ordinary Tibetans pledge their first loyalty to religion, Barnett said.
",14
"China is dipping its toe into the freedoms of Hong Kong but is finding the water chilly -- and Beijing's latest pronouncement on freedom of expression under Chinese rule may be giving it cold feet, analysts said on Friday.
China's communist rulers are so accustomed to exercising power that is scarcely checked by law, they may be having difficulty curbing their tongues when it comes to the delicate handover of Hong Kong, diplomats said on Friday.
One example came on Thursday when China tried to backtrack from a warning by Foreign Minister Qian Qichen to Hong Kong people on limits to their freedom of expression after the territory reverts to Beijing rule on July 1, 1997.
""Chinese officials seem to be speaking from the heart when it comes to Hong Kong and then realise that they have put their foot in their mouth where the law is concerned,"" said one Western analyst.
Foreign Ministry spokesman Shen Guofang raced on Thursday to repair damage from his boss's remarks, saying: ""Hong Kong people will have full freedom of expression, but all freedoms must be within the limits allowed by law.""
His statement followed an interview with Foreign Minister Qian by the Asian Wall Street Journal,in which Qian hinted that Hong Kong would no longer be able to mark the anniversary of Beijing's June 4, 1989, crackdown on student-led protests.
Qian's interview stirred an outcry in Hong Kong, where China has pledged a high degree of political freedoms for 50 years after the handover on July 1, 1997, and not to change its capitalist system.
But Shen's damage control may have been too late.
Western diplomats said Qian's remarks gave great cause for concern and were almost certain to stir anxiety in Hong Kong.
""Ordinary Hong Kong people have fairly mixed feelings,"" said one Western diplomat. ""There is an element of patriotism about their return to the mainland but they don't want their basic freedoms to be put in question.""
Chinese officials said Foreign Minister Qian was believed to have shown great interest in the response in Hong Kong to his remarks on the limits on what Hong Kong's people could do after the 1997 handover.
Qian was reported to have showed little surprise at the reaction in Hong Kong, and had paid close attention to the stir in the territory, one official said.
""It looks as if he may have gone a little beyond what he should have said,"" said another Western diplomat. ""But he clearly thought he was safe in saying that and now they are trying to smooth over the rough edges.""
Hong Kong newspaper reports that interpreted Qian's remarks as a ban on activities in the territory to commemorate the 1989 crackdown were wrong, Shen said, adding that Beijing had not altered its pledge to maintain Hong Kong's current political and economic system under Chinese sovereignty.
A transcript of Qian's interview showed he was specifically asked what activities would not be allowed and whether the 1989 commemoration was among them. Qian replied that he was referring to just such activities.
""This isn't the first time this kind of faux pas has happened,"" one diplomat said, referring to similar remarks this year on post-1997 freedom limitations by Lu Ping, director of the Hong Kong and Macau Affairs Office under China's State Council, or cabinet.
""I don't expect that it will be the last.""
",14
"Time in Tibet is a moveable feast.
In this far-flung outpost of Chinese rule, the clocks are synchronised with Beijing more than 2,560 km (1,590 miles) to the northeast, but dawn is two hours behind and everyone goes to work about two hours later than in Beijing.
It is not only Tibetan time that lags the rest of China. The economy in this Himalayan region, still based largely on yaks, goats and Buddhism, also trails.
Beijing says it is doing its utmost to narrow the gap and to make up for destruction wrought on Tibet's monasteries and temples in China's ultra-leftist 1966-76 Cultural Revolution.
It has pumped more than 35 billion yuan (US$4.2 billion) into the inaccessible, remote and backward region long peopled by nomadic herders and barter traders, officials say.
The funds are also useful to buttress control of the restive and strategically important region that borders India.
The investment is slowly paying off.
Economic growth in 1995 reached 10.6 percent, up from 8.6 percent the year before. Rural per capita incomes were about 600 yuan ($72) a year while urban incomes neared 2,000 yuan ($240) -- both still about half the national average but increasing rapidly.
In the capital Lhasa, the swift growth of commerce has taken even local leaders by surprise.
""I thought it would take several years before we could attract any real interest,"" said Chen Ciduan, president of the Tibet Investment and Trust Corporation that in 1994 set up a stocks trading centre in Lhasa.
""But we had to double our space last year and we are already overcrowded and making plans for another expansion,"" he said.
That's the high flying end of economic development in Tibet.
For those at the other end of the scale, Beijing is trying to make things easier with preferential policies to help a people struggling into the late 20th century from a lifestyle that more closely resembles the middle ages.
Income tax holidays, tax breaks and easy loans are just some of the incentives available to businessman in Tibet. The concessions are also attracting numerous entrepreneurs from elsewhere in China where such favourable policies are not available.
In Lhasa, one street specialises in selling the highly-decorated, colourfully-painted furniture favoured by Tibetans. Another sells fake leather sofas that appeal to Han Chinese residents.
Chinese restaurants abound, cheek by jowl with Tibetan-managed shops selling yak butter, computer parts and bolts of brocade and wool.
Tibet offers some of China's oddest employment opportunities.
In a tiny one-room workshop leased from a struggling state-owned factory processing yak horns, seven artisans from neighbouring Yunnan province hammer traditional silver bowls embossed with Buddhist symbols.
""We were already making these Buddhist artifacts in Yunnan anyway,"" said workshop owner Li Wenhan, 26. ""It's only because there is so much demand here that we came. We could easily sell these in Yunnan, but here they need them.""
Li said 40 percent of the goods they make are for export, 20-30 percent are sold to Tibetans and the rest distributed elsewhere in China.
The success of Li's business underscores a problem in Tibet that must be as frustrating for its Chinese masters seeking to lead the region into prosperity as for many educated Tibetans.
""The Tibetans lack education and a mentality of work,"" said one Tibetan-Nepali businessman who was born in Lhasa.
""They don't appreciate the need to work, they just want to make a profit straight away,"" he said. ""It's very sad. They are too impatient to understand that you have to earn a living through steady work.""
While some might dispute that view, no one questions that Tibet is among China's poorest and most inaccessible regions. Out of Tibet's 2.3 million people, about 400,000 live below the official poverty line.
Officials oversee one of China's most innovative anti-poverty policies in the deeply devout Buddhist area where many still donate much of what they earn to monasteries and temples and where education is costly.
""We are determined to bring all Tibetans out of poverty by the end of the century,"" said an official who declined to be identified.
Almost all Tibetan government officials are involved in anti-poverty programmes. Each government department in the Tibet Autonomous Region sends officials into rural areas each year -- both to see where government money and aid are most needed and to teach poverty-stricken nomads how to boost their incomes.
Many of Tibet's worst off are nomads living in remote mountain areas, many with large flocks of yaks, goats and sheep, but with little idea of how to exploit their resources.
The nomads either use their animals to feed themselves or, when their numbers climb, set them free as an offering to Buddha to try to win merit for their next reincarnation, believing that their station in each life is dependent on their behaviour in the previous one.
""Many of these people have assets but they are still poor because they don't know how to use them,"" the official said.
Tibet does not rely on handouts alone. Since last year it has worked at setting up sister relationships with 14 of China's booming eastern cities and provinces.
These wealthy cousins each send between 10 to 20 officials to work for three years in the region over a 10-year period and also provide financial resources.
The provinces are helping Tibet with 43 projects, mostly in infrastructure. Initial investment was 2.3 billion yuan ($277.1 million) but now totals more than 3.0 billion yuan ($361 million).
""Tibet's capacity to develop itself is very low,"" the official said. ""It's hampered by its geological conditions such as lack of infrastructure and its remoteness. And it takes a long time to move away from the previous feudal serf system.
""This is a very beautiful place but we have a very arduous task ahead.""
($1.0=8.3 yuan)
",14
"Chrysler Corp. Wednesday introduced all-new versions of its Chrysler Concorde and Dodge Intrepid family sedans, part of a $2.1 billion revamp of the car line that helped rescue the automaker five years ago.
Detroit's third-largest automaker said the cars, which will reach showrooms in the fall, will stay in the same price range as the cars they replace -- about $20,000-$26,000.
The strategy contrasts with that of Ford Motor Co., which in 1995 introduced a redesigned Taurus sedan with more upscale features that resulted in higher prices. Ford later brought out a lower-priced Taurus when sales failed to meet expectations.
""Our concept is to keep them as affordable as possible and keep them in the same price range of today's"" models, Chrysler Vice Chairman Robert Lutz told reporters following the introduction of the new model at the North American International Auto Show here.
Chrysler introduced the original ""LH"" car line in 1992 at a time when the automaker was emerging from its second brush with bankruptcy in a decade. Dubbed by some analysts as the company's ""Last Hope,"" the cars' acceptance by consumers brought badly needed cash and confidence to the company.
Chrysler did not introduce other LH variants, which include replacements for the Chrysler LHS luxury car and the Eagle Vision.
Improved production processes will help keep prices down, though the cars' features include all new engine technology, Lutz said.
The cars, as well as two other models to be introduced in the fall, were the result of a 31-month development programme that cost Chrysler about $2.1 billion, including two new overhead-cam V-6 engines, Chrysler said.
The automaker expects to sell 250,000 to 260,000 of the cars annually, with the Intrepid accounting for about 50 percent of the sales and the other three models making up the rest.
To follow up on its launch Tuesday of the new Durango sport/utility vehicle, which broke through the floor of a mock-up of Chrysler's new corporate headquarters, Chrysler unveiled the new sedans in a fake thunderstorm, complete with water falling on the Cobo Hall stage. The theme of the presentation was ""Lightning Strikes Twice.""
The programme marks the launch of a new family of V-6 engines for Chrysler, part of a significant revamping of the company's engine line.
The base models of both cars will be powered by an all- aluminum, 2.7-litre 24-valve V-6 engine rated at 200 horsepower. The Concorde LXi and Intrepid ES will have 3.2-litre, 24-valve V-6 engines rated at 220 horsepower.
Chrysler said it engineered the cars to offer a quieter ride and better handling than current models.
The cars also include larger headlights and larger brakes, increased usable cargo room, platinum tipped spark plugs and a ""coil-on-plug"" ignition system to eliminate tuneups before 100,000 miles, Chrysler said.
Chrysler stressed that the two sedans are designed to appeal to different consumers, with Intrepid geared toward slightly younger, less affluent buyers.
The cars will be assembled at Chrysler's Bramalea, Ontario plant.
Lutz admitted that Chrysler was introducing the cars into a declining market for sedans, with typical sedan buyers now opting for other choices, including sport/utility vehicles.
But he said the decline was cyclical and could change with the next generation of car buyers.
""We know each generation rejects what its parents had,"" said Lutz.
",5
"'Twas the day before Christmas and all through the malls, retailers were looking for a last minute push for a merry holiday sales season.
Industry analysts said sales were hovering near or a shade below expectations for the holiday shopping season so far.
After a strong start, sales came in below retailers' own expectations last week, according to a weekly survey of chain store sales by BTM/Schroders, a venture of two investment houses.
Analyst Michael Niemira at Bank of Tokyo-Mitsubishi, which compiles the index with Schroder/Wertheim, said he expected December sales to rise 4 percent to 4.5 percent, compared with earlier expectations for a 4.5 percent to 5.0 percent rise.
But activity picked up Monday and Tuesday as shoppers, pinched by five fewer shopping days between Christmas and Thanksgiving this year or just old-fashioned procrastination, rushed to find gifts at the last minute, retailers said.
""It definitely feels active,"" said Karen Farnham, assistant manager at an Abercrombie & Fitch Co. in Manhattan. ""Yesterday (Monday, I'd say, was probably the busiest,"" she said, noting that Abercrombie customers spend hundreds of dollars apiece, on average.
At the Limited Inc., last-minute shopping has been hectic, store manager Christina Vigo said in Manhattan.
""It's out of control. Yesterday was the busiest day all season. We started sales extremely early to draw business, but everyone's shopping last minute,"" she said, noting the average sale has been about $50.
In New York, lone men, coursing through stores with a clear purpose, accounted for a good portion of store traffic on Christmas Eve. ""I'm just not finished yet. I get lazy, I guess,"" said Eric Gotthard.
Tom Kurpiewski said he, too, fell behind in his holiday shopping, adding that he's spending about the same as he did in 1995.
Saul Yaari, senior retailing analyst at Piper Jaffray Inc., said sales should be about 5 percent above last year's results, measuring on a store-for-store basis.
Yaari said sales at department stores have slowed in the last week after a strong holiday start while discounters have done well.
But people were still spending freely last weekend, reflecting a trend toward later shopping during the season, Yaari said.
Clothing, shoes, jewelry and certain toys, such as Nintendo's new video game system and Tyco Toys Inc.'s Tickle Me Elmo, sold very well, Yaari said.
""Consumer electronics was a very poor category,"" he added, noting retailers were offering free computer accessories and generous financing terms to stir up interest.
Analysts said the holiday shopping season and fourth quarter as a whole should be strong for retailers, boosted by tighter inventories and fewer unplanned promotions, as well as comparisons with a dismal season last year.
Clothing continues to lead the stronger sales.
""My read so far is I don't think it was as promotional as last year in apparel,"" said Harry Ikenson, retailing analyst at Rodman & Renshaw Inc.. He added that electronics sales appeared to be under much more pressure than apparel.
Peter Schaeffer at Dillon Read & Co. Inc., said he expected sales to rise 4 percent to 5 percent overall but only 2 percent to 3 percent at comparable stores open at least a year.
Discounters and off-price retailers such as TJX Cos. Inc. and Ross Stores Inc., as well as some of the big chains, notably J.C. Penney Co. Inc. and Sears, Roebuck and Co., should do better than average, he said.
",5
"Mercury Finance Co is likely to spend a tense weekend with its bankers trying to work out arrangments to solve its liquity crisis, the failure of which could force the company to file for bankrupcty protection, analysts and attorney's said.
The Lake Forest, Illinois-based auto finance company said Friday it could not raise new commercial paper to repay maturing debt and could not pay $17 million in commercial paper due Friday.
A finance company like Mercury makes money on the difference, or spread, between what it pays to borrow money and the higher rates it charges its 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 equity analyst that follows the company said, requesting anonymity.
Some rating agencies, including Standard & Poor's Corp, lowered Mercury's commercial paper to a default rating Friday.
""They're very close to some reorganization, bankruptcy filing, probably a voluntary reorganization,"" said Thomas Kmiotek, analyst at Duff & Phelps Credit Rating Co.
He and other analysts noted the company has another $100 million in commercial paper due Thursday, February 6.
A Mercury  spokesman did not return repeated calls seeking comment on the company's financing Friday afternoon.
Aside from the company's current inability to sell debt, Mercury is also facing a host of shareholder lawsuits, filed after the company said it had to restate its net income over the past four years by a total of about $90 million because of accounting irregularities.
Lawsuits do not become a financial liability for the company unless there is a judgment in favor of the shareholders. However, the company's admission of misstatements makes it easier for the sharheolders to prove their case, leaving only the questions of who would have to pay how much, one securities lawyer said.
""Securities laws are very, very simple,"" said Ted Koenig, a partner with Chicago-based lawfirm Holleb & Coff ""If there is an ommission or misstatement of a material fact... there's liabiltiy.""
Also, the company's market capitalization plunged by about $2.2 billion Friday, based on the 13 point fall of Mercury's shares and the 172 million shares the company said it had outstanding late last year. That reduces the equity cushion the company has available to show its creditors, Koenig said.
But analysts also said the company had about $1 billion in loans receivable on its books at the end of October, 1996 -- an asset to show creditors.
""No one has questioned the validity of the amount of receivables they have on their books or the quality of those receivables,"" Kmiotek said.
Also, Mercury has generally been well regarded in the sub-prime credit quality loan business, which could help it negotiate with its banks and continue as a going concern, said analysts and lawyers familiar with the company.
Mercury said in a statement it is in discussions with its lenders to satisfy working capital needs, but that it could not predict the outcome of those discussions.
((Chicago newsdesk 312 408 8787))
",5
"Dutch bank ABN AMRO Holding NV said Friday it agreed to pay $1.9 billion to acquire Standard Federal Bancorp, which owns the seventh-largest savings bank in the United States and the biggest in Michigan.
ABN AMRO, which already has a U.S. banking arm, the LaSalle group, said it was offering $59 a share for Standard Federal, a bank holding company with $15.5 billion in assets based in Troy, Mich.
SFB owns Standard Federal Bank, a large home mortgage lender in Michigan that operates about 180 bank branches and 11 home lending centres. It also operates a wholesale mortgage banking business.
Despite the offer, SFB stock fell after running up sharply in recent days on takeover speculation. Some investors were disappointed the price was not higher, analysts said.
""All the people were really speculating yesterday that it was a lot higher are selling today because they're disappointed,"" said Tony Howard, analyst at Olde Discount Corp.
SFB stock lost $1.625 to $56.375 in active trading on the New York Stock Exchange.
Standard Federal chief lending officer Garry Carley said at a news conference that ABN AMRO had made the highest bid for the bank among several serious suitors.
""We had others who expressed strong interest in the bank,"" Carley told reporters.
ABN AMRO, the Netherlands' leading bank, said it would issue $750 million in preferred stock to help fund the acquisition, its biggest to date. It said it would issue the shares through a U.S. subsidiary, ABN AMRO North America Inc.
Formed in a 1990 merger, ABN AMRO already is the biggest foreign bank in the United States. Its LaSalle group has 130 branches and 7,750 staff members, mainly in the Chicago area.
The agreement marks ABN AMRO North America Inc.'s sixth acquisition in three years and is likely to be the last for a while, ABN AMRO North America Chief Executive Officer Harrison Tempest said at a news conference.
""We're out of the acquisition business for some time now,"" Tempest said. When asked how long before it might make another deal, he said, ""probably two years.""
The combined banks will also be the eighth largest mortgage originator in the United States, ABN AMRO said.
""It gets us into the league we want to be in mortgage servicing and mortgage origination,"" Tempest said.
SFB employs about 4,000 people and serves 1 million clients in Michigan, Ohio, Illinois and Indiana.
ABN AMRO said Standard Federal's banks will continue to operate under the Standard Federal name and there would be ""significant cost savings"" following the deal.
While saying no jobs would be cut initially, both companies said some job cuts were likely eventually as administrative functions and some branches were consolidated.
With Standard Federal, ABN AMRO North America will have the second largest deposit base in the Chicago market.
Analysts said recent changes in U.S. banking law that will level the playing field between thrifts and banks should help speed other acquisitions of savings and loans.
""I think you're going to see an increased level of activity, both in banks acquiring thrifts and thrifts acquiring thrifts,"" said Jonathon gray, analyst at Sanford Bernstein & Co.
ABN AMRO said it had reached agreement with Standard Federal's board, but the deal still needed the approval of its shareholders and supervisory authorities.
The acquisition was expected to be completed by mid-1997, ABN said, adding that the deal would contribute to its earnings.
",5
"McDonnell Douglas Corp. said Monday it would consider mergers and acquisitions, but not a restructuring, after the Defence Department eliminated the company from the race to build a new generation fighter jet that eventually could be worth $200 billion or more.
""We've always been interested in mergers and acquisitions and we continue to look at them,"" Chief Executive Officer Harry Stonecipher said in an interview with CNBC financial television network.
The Pentagon on Saturday awarded four-year contracts to Boeing and Lockheed Martin Corp. to develop prototype fighter jets for the early 21st century for the U.S. Air Force, Navy, Marine Corps and the British Royal Navy.
The decision was a blow to St. Louis-based McDonnell Douglas, the nation's second-largest defence contractor and a long-time leader in fighter jets, and could force it to restructure, seek a merger or become more acquisition-minded, industry analysts said.
McDonnell Douglas had reportedly had preliminary merger discussions with Boeing Co. earlier this year. Stonecipher would not comment on any specific mergers or acquisitions.
""I don't think Boeing would be on our radar screen,"" he said regarding a possible acquisition. ""We may be on theirs.""
Stonecipher also said he would be interested in trading McDonnell Douglas commercial aircraft assets for Boeing's military aircraft business, but noted there have been no talks in that area. Boeing said it did not comment on rumours or speculation about mergers and acquisitions.
Already the smallest of the three major commercial jet makers, McDonnell said last month it would not continue to compete against Boeing and Europe's Airbus Industrie in the market for the biggest commercial jetliners.
British and U.S. forces have announced plans to buy 3,000 of the new generation fighter jets, with initial delivery scheduled for 2008.
With potential export sales of another 2,000 jets and additional funding for development and support, the programme could be worth $200 billion to $500 billion over the coming decades, industry executives said.
McDonnell Douglas stock lost $4.25 to $51.50 on the New York Stock Exchange, where it was one of the biggest losers of the day. Boeing rose $1.50 to $93.25 and Lockheed Martin rose $1.875 to $95.625, also on the NYSE.
John Modzelewski, an analyst at PaineWebber, said the decision could force St. Louis-based McDonnell Douglas to seek acquisitions more aggressively to help build its business, or into a merger with another defence or aerospace company.
""Everything's back on the table,"" Modzelewski said.
In the past year, McDonnell Douglas has been the subject of rumoured talks with Boeing, Rockwell International Corp. and Raytheon Co.
""This will be something of a wakeup call,"" CS First Boston analyst Peter Aseritis said. ""It's a fairly sharp and dramatic blow to McDonnell Douglas and I would venture to guess one they probably didn't see coming.""
PaineWebber's Modzelewski said, ""Without having the internal growth such as joint strike fighter would give them, they're going to have to grow through acquisition."" That could include Texas Instruments Inc.'s defence electronics business, which is for sale, according to published reports.
""Texas Instruments is a very interesting property if in fact it is for sale,"" Stonecipher said in repsonse to a question about the defence electronics business.
In a statement to employees Monday, Stonecipher noted the company's backlog of aircraft orders to the military at home and abroad and said it was pursuing other orders. The company has a $46 billion order backlog, a spokesman said.
""This decision does not mean we are out of the military aircraft business,"" Stonecipher said.
McDonnell currently builds the Air Force F-15 fighter and the Navy-Marine F-18E/F as well as the C-17 military cargo plane. Both the F-15 and the F-18 are to be replaced by the joint strike fighter in the next century.
",5
"Intuit Inc Wednesday launched its new, streamlined banking system on America Online Inc's online computer system, with some of the largest banks in the United States agreeing to use the product.
Intuit's BankNOW will be offered as part of America Online's Banking Center, along with products by CheckFree Corp, Online Resources and  Visa Interactive.  
BankNOW is geared to customers who wish to conduct banking transactions such as bill paying and fund transfers online, but do not use the personal finance software that is part of Intuit's Quicken banking package, Mountain View, California-based Intuit said in a news release.
So far, 14 U.S. financial institutions, including First Chicago NBD Corp and CoreStates Financial Corp are using BankNOW, with an additional eight committed to use the product, Intuit said.  
Dulles, Virginia-based America Online, said 19 financial institutions provide banking services on the system.
The BankNOW software can be downloaded for free from America Online. Financial institutions charge their customers for using the product.
For example, First Chicago said it will charge $3.95 a month for customers using online-banking and $9.95 a month for online banking and bill paying, though some premium checking account users will be able to do online banking for free.
First Chicago looks at BankNOW as a premium service it can offer customers.
""We think there is a large market for this,"" First Chicago spokesman Thomas Kelly said. ""We also think this is a point of differention in our markets.""
But to some, the scope of online banking still remains in doubt.
""I don't know whether its the wave of the future,"" said James Schutz, banking analyst at Chicago Corp. ""I don't think they (the banks) know either. I just think they're keeping their options open.""
--Reuters Chicago newsdesk, 312-408-8787
",5
"Retailers looking for a post-Christmas rush to boost lukewarm holiday sales may be disappointed as snow in some areas and holiday exhaustion kept many shoppers from bargain-hunting Thursday.
""I think people did their shopping"" before Christmas, said John Konarski, vice president at the International Council of Shopping Centers, a group of retail mall operators that surveys 85 large regional malls across the country.
""You're going to have some people out today (but) you're not going to see the massive crowds some people expected.""
Konarski said he expected that holiday season sales would be up 4 percent to 6 percent from a year ago, which is about what he expected before the season began.
But after strong activity in the weekend following Thanksgiving, retailers' hopes for even better sales ended up being dashed by a slowdown in the week before Christmas.
""I think generally, the overall picture appears to be we had a good, solid holiday sales period, but not a spectacular one,"" said Tracy Mullin, president of the National Retail Federation, which represents major store chains.
She said she expects holiday sales rose about 5 percent from last year, when gains were a weak 2.5 percent to 3 percent.
Store officials and analysts said that while sales were coming in at or just below retailers' expectations, that still beats the dismal results last year.
""They slowed up very moderately, actually, from the input we're getting,"" said Jay Meltzer, managing director of LJR Redbook Research. ""You know, we didn't go over a cliff and a year ago we did go over a cliff.""
In Chicago, snow and cold weather appeared to be keeping crowds down in the Michigan Avenue shopping district the day after Christmas.
""Sales today are relatively slow compared to before Christmas,"" said Julie Towson, manager of the Knot Crazy tie store in Water Tower Place. ""I think a lot of people spent all of their money before the holiday. Also, who wants to come out in this kind of weather?""
In central New York State, where it was also snowing, Konarski said there were lines at malls before stores opened at 7 a.m. EST (1200 GMT), but most shoppers were looking for markdowns on holiday accessories and to return merchandise.
In Cleveland, many workers were on vacation and some offices were closed, and shopper traffic at the Tower City Center mall complex was moderate.
""We've had a good, strong season,"" said the manager of a women's clothing store who has worked in retailing 11 years. ""Business today is pretty good. Volume is moderate.""
At Tower City's AnnTaylor store, sales associate Mary Rogonjich said Thursday morning traffic was slow but she expected things to pick up during lunch hour.
""Things have been steady this morning, and we have not had that many returns,"" she said. ""We've had a very good season -- above plan."" The store was offering up to 50 percent off on silk blouses, pants, jackets, shoes and other items on Thursday.
In Miami, some shops were seeing more traffic.
""The store is very busy. Really everything is marked down,"" said a spokeswoman at Federated Department Stores Inc.'s Macy's store in Miami's Falls mall.
But analysts said that while promotions picked up before Christmas and would accelerate this week, special discounts were fewer and less steep than last year, which should help retailer profits.
""Some retailers did get promotional in the last few days,"" Mullin said. ""I think you'll see it really starting today.""
Wal-Mart Stores Inc., the nation's largest retailer, said in a telephone message for investors on Monday that discount and warehouse sales were at the low end of plan for the holidays in the third week of December.
The company is in line for sales increases of 4 percent to 5 percent for November and December, the company said.
Dayton Hudson Corp. said on Tuesday sales were meeting expectations and that the company had planned its inventories well.
Sears, Roebuck and Co. said overall sales and sales at stores open at least a year were showing upper-single digit increases.
""Overall sales were strong the last three days before Christmas,"" Vice President of Marketing John Costello said, noting that clothing, tools, jewelry, multimedia computers and tires sold well.
",5
"U.S. retailers reported overall sales near plan for the key December holiday shopping month Thursday, but results varied widely by store and sector with department stores appearing to take some market share from specialty stores.
""The major retailers continue to gain market share,"" said Michael Niemira, analyst with Bank of Tokyo/Mitsubishi Ltd. ""Even within the Sears report, they talk about the electronics area being one of the stronger areas"" while that area was weak for retailers overall.""  
Sears, Roebuck and Co was one of the better performers, analysts said. The Hoffman Estates, Ill.-based retailer said domestic same-store sales rose 9.5 percent.
Sears chairman Arthur Martinez told CNBC that gross margins are very favorable for December and the fourth quarter.
Sears stock was up 1-1/8 at 46-3/8 Thursday. Other gainers included Paul Harris Stores Inc, up 1-7/8 at 20-1/2, Kohl's Corp, up 1-1/4 at 37-3/4, Dayton Hudson Corp up one at 37-3/8 and Saks Holdings Inc up 5/8 at 39-5/8.
",5
"Firstar Corp's announcement on Thursday that it expected to fall short of analysts' fourth-quarter earnings estimates for what it believes are temporary factors includes one element -- a continued modest decline in commercial loans outstanding -- that could be a more lasting concern, analysts said.
The Milwaukee-based bank holding company, which has $19.9 billion in assets, said it expects fourth quarter earnings of about $0.95 a share excluding any one-time gains, $0.08 short of the consensus and unchanged from a year ago.  
Firstar is in the midst of a program to trim costs and enhance revenues and said factors including the implementation of that program and assimilation of recent acquisitions would hurt earnings. But the bank also said continued declines in its commercial loans outstanding would also hinder earnings, and was a temporary factor.
""I think while that sounds plausible, it also remains to be proven,"" said Ben Crabtree, banking analyst at Dain Bosworth. Crabtree had forecast earnings of $1.08 a share for the quarter.  
While expenses from the restructuring and acquisitions should eventually be eliminated, analysts were not as sure that the loss of loans would be reversed.
""The question going forward, and that's an unanswerable question, is the long-term impact on the revenue side,"" said Thomas Maier, banking analyst at EVEREN Securities.
Firstar investor relations spokesman Joe Messinger said the decline in loans outstanding is due mostly to the focus on the restructuring during the first two quarters of the year.  
Firstar also said credit card charge-offs will remain higher than the company's historic levels in the quarter, though they will be in line with the industry overall.
""It's something they've indicated in the past,"" Maier said, adding that higher charge-offs were already built into his previous $1.05 a share estimate on fourth quarter earnings and outperform rating on the stock.
In the 10-Q filing with the SEC for the third quarter, Firstar said it expected credit card charge-offs to rise to 4.5-5.0 percent in the fourth and first quarters, before declining to 4-4.5 percent. Charge-offs were 4.06 percent in the third quarter.
If Firstar meets its $0.95 a share estimate for the quarter, 1996 earnings would be $3.34 a share, compared to $3.00 a share a year ago.
Firstar shares fell one to 51 Thursday amid a downturn in banking stocks.
((--Chicago newsdesk 312 408 8787))
",5
"As the world's first Internet bank, Atlanta-based Security First Network Bank has had somewhat of an identity problem with potential customers.
""We get a lot of questions,"" Chief Executive Officer James Mahan III said. ""Are you real? Are you virtual? Where are you really?""
Part consumer bank, part software testing site, Security First opened its virtual doors a year ago this month.
But now Security First plans to add actual doors, opening small offices in Atlanta, Cambridge, Mass., and Silicon Valley in California.
""I think we can more effectively market if we have a physical presence,"" Mahan said in an interview.
Comparing his bank to discount brokerage firm Charles Schwab & Co., Mahan said having the offices may give customers a sense of security, even if they never use an office.
Security First's current location is on the Internet. The bank is one of five in the United States that operates directly on the Internet, according to the Bank Administration Institute.
Federally insured Security First can be accessed at Website (www.sfnb.com), which brings consumers to a home page that looks like a bank lobby.
Customers can reach their account anywhere they have access to the Internet, rather than being tied to a single terminal where they have finance software, like other computer banks.
""Our goal was to have a bank that was fully interactive, where an individual could see all his information,"" Mahan said.
Most Security First customers have a money market account and a demand deposit account. Customers can open a checking account with as little as $100, an amount most choose to start to make sure the bank works, Mahan said.
Customers can pay bills electronically, purchase certificates of deposits or acquire a Visa card. Security First is also hoping to offer brokerage products and first and second mortgage products by the end of the year. Funds can be accessed by automatic teller machine, and Security First absorbs interbank fees for using the machines.
With limited infrastructure, Security First can offer higher yields, Mahan said. The bank was offering a six-month CD with an annaul percentage yield of 5.9 percent.
Security First was spawned as an idea of Mahan, who was chief executive officer at Kentucky-based Cardinal Bancshares Inc., and his sister-in-law's husband, Michael McChesney, who was starting a security software firm.
""He educated me on the Internet for years and years and years,"" Mahan said. Mahan used the charter of one of Cardinal's thrifts, changed its name to Security First and used it to start the Internet bank.
McChesney's, firm, SecureWare Inc. developed software that Mahan said has military-grade security. So far, the bank has not had its security breached, Mahan said.
""That doesn't mean that there haven't been a number of sophisticated attempts,"" he said. ""If you have enough money and enough time you can break into anything.""
Outsiders agree that Security First has shown a record of being secure, avoiding viruses, data theft and other potential dangers of Internet commerce.
""They do use a level of security that the Pentagon reserves for its most secure and sensistive systems,"" said Paul Schmeltzer, executive vice president for network services at Southeast Switch Inc., the corporate organisation for the Honour Network, the fourth largest ATM network in the country. ""Is any security design totally foolproof or totally secure? Probably not.""
That software and others developed for the bank is likely to be the prime money maker for Security First. Mahan admits that Five Paces Inc., Security First's software unit, will be the prime contributor to the company's net income.
""The bank is really a test site to use as a demonstration for potential customers of the software business,"" said Gary Craft, an analyst who follows the bank for Alexandria, Va..-based Friedman, Billings, Ramsey & Co.
Security First's stock is traded on Nasdaq.
Security First has opened about 5,600 accounts. Most of its customers are male, between the ages of 25 and 45, with average income above $63,000 a year. More than 80 percent own their own home, attractive demographics for marketing.
Security First has also attracted competition. This month, Atlanta Internet Bank opened for business.
Unlike Security First, Don Shapleigh, chief executive of Atlanta Internet, says he does not plan to open any customer offices. ""I have the WorldNet. I have other ways to get out."" Federally insured Atlanta Internet currently offers its services to subscribers of AT & T's WorldNet Services.
Shapleigh also argues that Atlanta Internet is the first true Internet only bank, saying that Security First is really a software company.
""I'm not selling software,"" he said. ""I'm a banker.""
Atlanta Internet, which is a service provided by a unit of Carolina First Corp. can be reached on the Internet at (www.atlantabank.com).
",5
"The newly appointed chief executive officer of Meredith Corp said Monday that the company was beginning to see prices for television stations peak and come down.
That could lead to Meredith making an acqusiiton sometime in 1997, said William Kerr, who is currently president and chief operating officer of the media company.
""We are hopeful that certainly in the course of the next calendar year that we would see some action,"" said Kerr, who will become chief executive January 1.  
In the next few years, Meredith, which owns seven television stations could acquire about five more, he said in an interview.
""I think it may be easier in calendar 1997 than in calendar 1996 to make an attractive acquisition,"" he said, describing attractive as a VHF network affiliate in the 10th to 40th largest U.S. markets. ""We'd like a larger market, but we think it's unlikely one will become available,"" he said.
The Des Moines, Iowa-based company also publishes magazines including Better Homes and Gardens and Ladies' Home Journal.  
He said Meredith will not seek publishing acqusitions, he said. Instead, the company plans to launch new titles, including Family Money magazine, which is expected to be launched in the first half of 1997.
Due to consolidation in the magazine business in the 1980s and early 1990s, ""we do not think there are many acquisitions"" to be made on the publishing side, he said.
Kerr said he did not see another major magazine launch by the time the company's fiscal year ends next June, but said one could be launched later in the calendar year.  
He would not say what the next title would be, but said it would be compatable with the publisher's family focus.
Publishing currently makes up about 54 percent of Merideth's earnings, broadcasting about 43 percent, with the rest coming from licensing, Kerr said.
The company currently has two licensing agreements with Wal-Mart Stores Inc, and Kerr said other agreements are possible, both with Wal-Mart and other companies.
But he also said a new deal is not likely to happen for 12 to 18 months.
""I think it is unlikely that we would have a major new deal to announce in this fiscal year,"" Kerr said.
On Monday, Meredith said its board of directors appointed Kerr chief exectuive officer. He had been president and chief operating officer. Kerr, 55, will replace Jack Rehm January 1, though Rehm will remain chairman until December 31, 1997, when he plans to retire, Kerr said.
--Reuters Chicago newsdesk, 312-408-8787
",5
"Mercantile Bancorp Inc's planned $1.07 billion purchase price for Roosevelt Financial Group Inc and an expected merger-related charge of $25-$30 million after tax both appear reasonable for an in-market deal, analysts said Monday.
The St. Louis-based bank holding company said it expects to take the charge in the quarter the deal closes.
""For a deal this size, I think, it's probably relatively modest,"" analyst Steve Schroll at Piper Jaffray said.  
Roosevelt, a $9 billion thrift holding company also located in St. Louis, has 83 branches, 73 of which overlap with Mercantile, Schroll said.
The banks told analysts they expect to eliminate 50 of the overlapping branches by the middle of 1998, he said, adding that Mercantile also expects to cut 37 percent of Roosevelt's pre-tax cost base by 1999.
In a news conference, Mercantile would not specifically say how many branches would be shut.  
The cost reductions help justify the $1.07 billion price tag, which is about 11 times 1997 earnings estimates for Roosevelt, Schroll said.
""It's reasonable,"" Schroll said. ""For an in-market deal, because of the opportunities to save costs, it's reasonable.""
With its recently announced plan to acquire Mark Twain Bancshares Inc for $855 million, Mercantile will be the largest financial institution in Missouri, with $30 billion in assets once both deals close.
That could make Mercantile, often mentioned as a takeover candidate, even more attractive.  
""I'd say Merc was already attractive anyway,"" said Joseph Stieven, a banking analyst at Stifel Nicolaus, which advised Roosevelt on the deal. ""This makes them no less attractive.""
Joseph Roberto, a banking analyst at Keefe Bruyette & Woods, said, ""I think it makes Mercantile more attractive. It gives them the number one market share across the state.""
But the process of closing the two deals, expected in the second quarter, and absorbing the acquisitions could take Mercantile out of play as an acquisition target in the short term, analysts said.
""I would think in the short term, an acquisition of this size, when combined with the acquisition of Mark Twain, probably delays the likelihood of somebody from outside coming in to buy Mercantile,"" Schroll said.
Meanwhile, St. Louis-based Magna Group Inc and Kansas City, Missouri-based Commerce Bancshares Inc could become more attractive for suitors looking to buy in the Missouri market, analysts said.
((--Chicago newsdesk 312 408 8787)).
",5
"The U.S. economy should provide a repeat in 1997 of the steady growth seen in 1996, which should also lead to car and truck sales near 1996 levels, according to economists who work for the Big Three automakers.
Economists for Ford Motor Co and General Motors Corp both forecast vehicle sales between 15 million and 15.5 million in 1997, while Chrysler Corp's economist predicted sales of 15.2 million. Sales were about 15.4 million in 1996. The forecasts were made in a presentation to the Society of Automotive Analysts.  
""We are likely to see more of the same,"" Chrysler's W. Van Bussmann said, echoing the view of the other two analysts.
""We see no significant changes in either direction on fiscal or monetary policy,"" said G. Mustafa Mohatarem of General Motors.
Ford's Martin Zimmerman was even more optimistic. ""I frankly don't see why this growth can't continue into 1998,"" he said.  
But that does not mean the auto industry has no concerns. The one short-term worry all three economists voiced was the weakening of the yen, which fell to about 117 to the dollar Monday from about 106 a year ago. A weaker yen makes Japanese imports, including automobiles, less expensive in the United States.
That, in turn, makes Japanese cars more competitive in the U.S. market, giving Japanese automakers more flexibility in pricing, analysts said.  
But the analysts all expected political or market pressures to cause the yen to stabilize and then strengthen somewhat against the dollar this year.
""We should see the yen start to strengthen,"" Zimmerman said.
Bussmann forecast the yen at 106 to the dollar by the end of 1997.
In western Europe, analysts see continued economic pressure associated with the move to European union in 1999 continuing to weigh on the economy there and keep vehicle sales about flat.  
But Mohatarem argued that there is a possibility for a positive surprise in central Europe, saying Russia could achieve three percent economic growth by 1998.
Mexico was also seen as an area for growth, with that economy recoverying quicker than expected from the recent peso crisis, analysts said.
Meanwhile, Bussmann argued that capacity usage for truck production will remain at about 80 percent through the year 2000 and that truck demand as a percentage of total vehicle market share will continue to rise.
""We see the light truck demand reaching 50 percent (of total vehicle demand) by just past the turn of the century,"" he said.
But other analysts were not as optimistic about demand for light trucks, which generally have higher profit margins than cars.
""I don't think it will reach 50 percent of demand,"" said Thomas Webb, chief economist with the National Automobile Dealers Association.
During his presentation, Webb also said his forecast for 1997 auto sales was on the low end of a range he defined between 14.7 million and 15.1 million autos.
	 ((Chicago newsdesk 312 408-8787))
",5
"Freight hauler Yellow Corp. said Wednesday it could cut 1 percent to 2 percent of its workforce as part of a restructuring of its largest operating unit, Yellow Freight System.
Overland Park, Kan.-based Yellow Corp. said it has offered early retirement to 153 employees who are 55 and older and that it will announce layoffs in the first quarter.
The company also said it will take an unspecified charge to fourth quarter earnings to cover expenses resulting from early retirement, severance and other costs related to a reorganization of Yellow Freight along geographic lines.
Each geographic unit will have a group vice president who reports to Yellow Freight President Bill Zollars, while five officers at the central office will also report to Zollars, the company said.
""We are decentralizing responsibility for the business processes that touch the customer in an effort to be more responsive to their LTL needs,"" Zollars said of the less-than-truckload freight hauling business.
""All members of the leadership and management teams will be focused and incentive-based on four priorities,"" said Zollars. ""Those areas are customer satisfaction, improved profitability, revenue growth and operating safely.""
Employees will have until Jan. 15 to make their decisions on whether to take early retirement, Yellow said.
The number of layoffs will be determined, in part, based on the early retirement decisions, as well as the needs of the company as it reorganizes, a spokesman said. He estimated about 1 percent to 2 percent of Yellow's 24,700 employees could be affected.
Analysts said the moves announced Wednesday were part of a strategy to improve performance at Yellow and help it regain market share.
""I think they need to focus on some labour productivity,"" said Corina Bergschneider, analyst at George K. Baum & Co. ""Obviously, that needs to be done in line with their union contract and what can be allowed.""
Yellow shares fell 12.5 cents to $14.50 on the Nasdaq system.
",5
"Struggling to stay on course away from its troubled past, Trans World Airlines Inc. now must find a new chief executive to take the helm of the troubled carrier.
How quickly it can find an experienced airline executive for the job will determine whether it stays on course or runs into more financial trouble, industry analysts said.
The St. Louis-based airline said on Thursday that Chief Executive Officer Jeffrey Erickson, who has headed the company for the past two years, will leave in January.
""The last thing that the company needs now is more management turmoil,"" said one analyst, who declined to be identified. ""It doesn't have a strong or stable enough footing to deal with this kind of stuff.""
Erickson's departure comes just four months after Chief Financial Officer Robert Peiser left the company. At the time, TWA said Peiser's decision to leave was over differences in management direction.
""They're going to have to regain the confidence of Wall Street,"" said William Fiala, who follows the airline industry for Edward D. Jones & Co., which is based in TWA's hometown. ""The only way they're going to do that is by coming up with a leader that's a proven turnaround (manager), or well-respected in the industry.""
Erickson, who became chief executive officer in August 1994, brought the airline through its second bankruptcy reorganization and back to where it was buying new aircraft. But the turnaround is not finished, and higher fuel costs and the July 17 crash of Paris-bound Flight 800, which hurt confidence in the carrier and therefore its sales, have stalled the company's improvement.
""Erickson was the one who really steered them through the first half of the turnaround, but they still have a way to go,"" Fiala said.
The company on Thursday reported a $14.3 million third-quarter loss and said its yield, a measure of fares, fell in the quarter.
""I don't know specifically the reason he chose to depart now,"" said Don Jacobs, chairman of the TWA Master Executive Council of the Airline Pilots Associaition. ""I think it's probably an impact of the third quarter financials and Flight 800.""
TWA's unions have four seats on the company's board of directors and will play a part in choosing a successor for Erickson, Jacobs said, though he could not suggest possible replacements.
""We would expect that the board would replace Jeff with a top-notch airline manager,"" he said. ""As both employees and the stockholders in the company, we will be concerned and involved in that.""
Industry experts said TWA's board of directors might have become impatient with the pace of the turnaround after seeing the third-quarter results. But they also quickly defended Erickson's record at the company.
""When you see what TWA was three years ago and what it is now, it's a world of difference,"" said Michael Boyd, president of Aviation Systems Research Corp., a research and consulting firm  in Golden, Colo.
Calls to Erickson at TWA's offices Friday were transferred to a public relations office, which said he was unavailable for comment. TWA Chairman Thomas Meagher did not return calls.
Analysts said TWA's board would need to move quickly and that the next chief executive would need a good degree of independence from the board.
""Whatever they do to replace Erickson, they need a hands-on manager, not a messiah,"" Boyd said. ""In a situation like this, you have to have free reign. You can't have people behind you second-guessing every one of your moves.""
Boyd said several managers at United Airlines might be interested in the job. He also suggested that former Alaska Air Group Chief Executive Raymond Vecci could be a candidate.
Earlier this year, Erickson, who was criticized by families of the Flight 800 victims for the company's response to the crash, told students at Washington University in St. Louis that the aftermath of the crash was draining, said Stuart Greenbaum, dean of the university's business school.
""I can't help believing the crash just took a lot out of Jeff,"" said Greenbaum, who said he is a friend of Erickson's. ""That was so difficult for him, as it would be for any human being, to try to represent the company to the world"" after the tragedy, in which 230 died.
",5
"Corporate financing for a downtown Detroit sports stadium complex is in place and land acquisition nearly complete, Mayor Dennis Archer said Friday.
""We believe that we are very, very close in making it happen,"" Archer said at a news conference. ""If property has to be taken, by condemnation or eminent domain, we will move in a timely manner in the manner in which it will be needed.""
Legislation pending in the Michigan Legislature could help facilitate the condemnation process, Archer said.  
Archer also said a deadline of 1700 EST Friday for the Detroit Tigers baseball team and Detroit Lions football team to make a commitment to the $505 million stadium complex was flexible.
Lions President William Clay Ford Jr. said after the news conference that Monday was the true deadline, as Wayne County voters will have to decide Tuesday whether to approve a tax on hotels and rental cars geared at raising $80 million for the complex.  
""We can't go to the voters without this,"" Ford said after the news conference, referring to a complete accounting of land on which the complex would be built.
The owner of a parcel that houses the Gem Theatre appears to be the major holdout, officials indicated.
""The one owner is a big problem at this point,"" said June West, press secretary to the Wayne County executive's office. ""There's a price issue.""
The owner of the parcel, Chuck Forbes, could not be reached for comment Friday. West said stadium negotiators and Forbes were meeting Friday.
",5
"Struggling to stay on course away from its troubled past, Trans World Airlines Inc. now must find a new chief executive to take the helm of the troubled carrier.
How quickly it can find an experienced airline executive for the job will determine whether it stays on course or runs into more financial trouble, industry analysts said.
The St. Louis-based airline said on Thursday that Chief Executive Officer Jeffrey Erickson, who has headed the company for the past two years, will leave in January.
""The last thing that the company needs now is more management turmoil,"" said one analyst, who declined to be identified. ""It doesn't have a strong or stable enough footing to deal with this kind of stuff.""
Erickson's departure comes just four months after Chief Financial Officer Robert Peiser left the company. At the time, TWA said Peiser's decision to leave was over differences in management direction.
""They're going to have to regain the confidence of Wall Street,"" said William Fiala, who follows the airline industry for Edward D. Jones & Co., which is based in TWA's hometown. ""The only way they're going to do that is by coming up with a leader that's a proven turnaround (manager), or well-respected in the industry.""
Erickson, who became chief executive officer in August 1994, brought the airline through a bankruptcy reorganization and back to where it was buying new aircraft. But the turnaround is not finished, and higher fuel costs and the July 17 crash of flight 800, which hurt confidence in the carrier and therefore its sales, have stalled the company's improvement.
""Erickson was the one who really steered them through the first half of the turnaround, but they still have a way to go,"" Fiala said.
The company on Thursday reported a $14.3 million third-quarter loss and said its yield, a measure of fares, fell in the quarter.
Industry experts said TWA's board of directors might have become impatient with the pace of the turnaround after seeing the third-quarter results. But they also quickly defended Erickson's record at the company.
""When you see what TWA was three years ago and what it is now, it's a world of difference,"" said Michael Boyd, president of Aviation Systems Research Corp., a research and consulting firm  in Golden, Colo.
""I do not see anything you can ascribe to Jeffrey Erickson that occurred in the third quarter. I don't see any decision made by Jeffrey Erickson that messed up the airline.""
Calls to Erickson at TWA's offices Friday were transferred to a public relations office, which said he was unavailable for comment. TWA Chairman Thomas Meagher did not return telephone calls.
Analysts said TWA's board would need to move quickly and that the next chief executive would need a good degree of independence from the board.
""Whatever they do to replace Erickson, they need a hands-on manager, not a messiah,"" the consultant Boyd said. ""In a situation like this, you have to have free reign. You can't have people behind you second-guessing every one of your moves.""
Boyd said several managers at United Airlines might be interested in the job. He also suggested that former Alaska Air Group Chief Executive Raymond Vecci could be a candidate.
Earlier this year, Erickson, who was criticised by families of the flight 800 victims for the company's response to the crash, told students at Washington University in St. Louis that the aftermath of the crash was draining, said Stuart Greenbaum, dean of the university's business school.
""I can't help believing the crash just took a lot out of Jeff,"" said Greenbaum, who said he is a friend of Erickson's. ""That was so difficult for him, as it would be for any human being, to try to represent the company to the world"" after the tragedy, in which 230 died.
",5
"Olympic Financial Ltd said Tuesday it could reach a deal to sell the company by October.
""I would expect that the time frame hopefully would be sometime in October,"" said Warren Kantor, chairman of Olympic's executive committee, in an interview. He was referring to the process of its investment banker Donaldson, Lufkin and Jenrette considering strategic alternatives for the Minneapolis-based automobile finance company.  
Olympic said Monday it has received an indication of interest from a potential buyer. Kantor said others have also expressed interest in the company since Monday's announcement.
""Effectively, what I believe is happening is due to the public announcement, those people who would go through a longer time frame... want to be sure (they are) not left out,"" Kantor said.
He would not comment on the identity of any potential suitors, but said the first contact came from a company with investment grade credit.  
A combination with an investment grade company could allow Olympic greater access to capital to expand its business, Kantor said. Olympic's credit is not investment grade.
Olympic needs capital to expand technology as its business expands, Kantor said.
""We think that the circumstances of the company are such that it makes sense to consider offers in order to take advantage of our rapid growth and opportunities,"" he said, noting that access to capital could especially become an issue in the event of a recession.  
While capital may be harder to come by in a recession, demand for loans from Olympic's customers, who essentially need their cars to get to work, would not wane much, Kantor said.
Kantor would not rule out the option of remaining independent and slowing down its growth plans, but added that it was likely the company would receive an acceptable buyout offer. ""While we think it is likely that we will get offers that are acceptable, we're not going to accept (just) anything,"" he said.
Olympic's loans serviced have jumped to $3 billion at the end of June from $1.5 billion a year ago and the company is looking to further expand into a somewhat higher risk loan category it refers to as Classic, Kantor said.
Those loans net 16-18 percent rates, while 80 percent of its portfolio is made up of loans at about a 12 percent rate, Kantor said, adding that Olympic wants Classic loans to make up 50 percent of the portfolio by the end of the year.
Kantor would not comment on analysts' estimates ranging from $25 a share to more than $30 a share as a sale price for the company. Olympic rose 2-1/2 to 26-1/2 Tuesday.
--Reuters Chicago newsdesk, 312-408-8787
",5
"The $9.5 billion proposed acquisition of Boatmen's Bancshares Inc. by NationsBank Corp. could spark a flurry of other mergers involving Missouri banks, which until last year were protected from outside buyers by state regulations.
""NationsBank just strolled into the Midwest and bagged the biggest banking trophy in the landscape,"" said Michael Ancell, banking industry analyst at Edward D. Jones & Co. ""Whoever wants a big market position in the Midwest has to come in and grab Mercantile or Commerce.""
St. Louis-based Mercantile Bancorp Inc., a bank holding company with $18.04 billion in assets, was seen by many analysts as the most attractive Missouri franchise in size after Boatmen's. Kansas City, Mo.-based Commerce Bancshares Inc., with $9.32 billion in assets, also could help a regional bank establish a strong presence in the lower Midwest, analysts added.
""It focuses more attention on Mercantile, Commerce and Roosevelt,"" said James Weber, analyst at A.G. Edwards & Sons. Roosevelt Financial Group Inc is a $9.33 billion asset-St. Louis based thrift.
""Now ... the most coveted bank out there is Mercantile,"" Weber said.
Mercantile and Commerce did not return phone calls seeking comment.
Among those seen as having an interest in buying in Missouri are Minneapolis-based First Bank System Inc. and Norwest Corp., Ohio-based KeyCorp and Banc One Corp., and First Chicago NBD Corp. in Illinois.
Representatives of First Bank, Norwest, Banc One and First Chicago said the banks do not comment on rumors of possible mergers or acquisitions. KeyCorp, contacted by phone, would not comment.    With a presence in nine states and $41 billion in assets,
Boatmen's was the prize in Missouri, where barriers to outside acquirers were brought down last year by a federal banking statute.
""Boatmen's was the plum of Missouri and was the plum of the central Midwest,"" Weber said.
Talk that the Missouri banks were seeking inflated prices from buyers was seen as a reason a deal has not occurred sooner. But NationsBank's bid, representing a premium of 40 percent for Boatmen's stock, was large enough to get the deal done.
""I think Boatmen's was shopping itself, and everybody knew if you wanted to be the winning buyer here, you had to make the bid nobody would beat,"" Ancell said.
But some analysts cautioned that other targets should not expect as large a premium. They also questioned whether NationsBank can recoup shareholder value with such a large bid for Boatmen's.
""I think initially some stocks will trade up on sympathy, but the wild premium NationsBank put on this deal here, I don't see a lot of other deals being done at this premium,"" said Michael Durante, analyst at McDonald & Co.
",5
"A brisk start to holiday shopping should help retailers post solid sales gains for November and make this season merrier than last year for the nation's store chains, industry analysts said Tuesday.
But quirks in the calendar, with a later Thanksgiving this year, and some retailers tallying sales differently than others, could obscure overall results for November.
Industry analysts said they expect sales at stores open at least a year to rise 2.5 percent to 4.0 percent overall in November, with clothing continuing to be a strong contributor, as it was in October.
Most retailers report November sales on Thursday, though Paul Harris Stores Inc., a speciality women's apparel chain, reported November same-store sales up 26 percent from a year ago on Tuesday.
""We think the majority of companies are going to be on or above plan for the month of November, with good inventory levels,"" said Harry Ikenson, retail analyst at Rodman & Renshaw Inc. ""We think the promotional level for Thanksgiving was high, but probably no higher than last year.""
With discounts and markdowns no higher and in some cases lower than last year, and inventories being managed tightly, profit margins should improve, helping to lift fourth quarter earnings, analysts said.
""On balance, good business now is going to translate into decent earnings,"" said Dean Ramos at Dain Bosworth Inc. Ramos said his index of sales could be one to two points higher than the 3.1 percent rise reported last year and that the trend should continue through December.
""Absent some sort of event that shakes the consumer you should see good retail sales"" in December, he said.
Holiday sales are crucial to retailers who typically earn a quarter or more of the year's profits during the season, analysts said. Steady economic growth and low unemployment have helped boost sales so far, and store chains should also benefit from easy comparisons with weak results a year ago.
Consumers got off to a fast start on their holiday shopping after Thanksgiving, analysts said.
Retail consumer spending in the post-Thanksgiving weekend rose 4.3 percent from a year ago, according to TeleCheck Services, which tracks check-writing volume. Overall, same-store sales rose 2.1 percent, TeleCheck said.
Several department store operators were expcted to be among the winners when sales are reported on Thursday.
Rodman & Renshaw's Ikenson said he expected J.C. Penney Co. Inc. and May Department Stores Co. to be above expectations, with Penney's same-store sales up 7.5 percent to 8 percent and May's up 6 percent to 7 percent. Federated Department Stores Inc. should be up 7 percent to 9 percent, with gains in all its segments, he said.
Ikenson said he sees Charming Shoppes Inc. slightly below expectations with a gain of 5 percent.
Dean Witter analyst Patrick McCormack said in a research report he expected sames store sales to be up 3 percent in the month for the firm's index of 44 companies.
He also saw JC Penney, May, and Federated above expectations, as well as Sears, Roebuck and Co.
Sears was forecast by analysts to post a smaller-than-expected decline of 1 percent to 2 percent, which is due to a quirk in the company's sales reporting calendar that should help boost results in December.
Sears Senior Executive Vice President John Costello said on Sunday that post-Thanskgiving sales appeared to be up across the board, from men's and children's clothing to Craftsman tools to fine jewelry.
""Optimism is up and it looks like consumers are responding to the short season by getting an earlier start,"" he said.
Most analyts expect big-ticket consumer electronics to continue to be weak, though one saw some signs of a pickup in sales at the end of the month.
""Sears and Wal-Mart over the last week talked about a pickup in the computer area,"" said Michael Niemira, analyst at Bank of Tokyo-Mitsubishi. He forecast sales overall up 2.5 percent for November at a comparable number of stores.
",5
"Shoppers lined up outside stores Friday, some arriving before dawn to get an early start on the holiday shopping season.
The day after Thanksgiving is traditionally one of the busiest days of the year for retailers and the unofficial start of the holiday shopping season, the make-or-break time for many retailers.
With consumer confidence high and employment strong, analysts are generally expecting sales gains of about 5 percent over last year's weak sales growth. The crunch is especially tight this year, since there are five fewer days between Thanksgiving and Christmas.
""The money's there. The confidence is there. The jobs are there. The goods are there and the pent-up demand is there,"" said Allen Sinai, chief economist at Primark Decision Economics. Sinai forecast sales growth of 4.5 percent for November and December, compared with 2.9 percent gains a year ago.
Shoppers also were there, with many retailers offering early bird sales to entice them.
Roni Campos lined up outside the door of the Wal-Mart at first Colony Mall in Sugarland, Texas, a suburb of Houston, at 6:30 a.m.
""You should have seen Wal-Mart. They had a 13-inch television on sale for $99, and people were fighting for those TVs. Arms were flying, and people were just pulling those things off the shelf,"" she said.
Stephanie Foster, of Richmond, Texas, was shopping for baby gifts in Mervyns California, a Dayton Hudson Corp. store chain.
""They had a line outside Target of at least 200 people,"" said Foster, who began her shop-a-thon this year at 5 a.m., shopping list in hand. ""I started out with a list of what everybody wanted and what time every store opened.""
As one of the first customers through the door at Target, she was handed a bag with treats, juice, coupons and mints.
""I came here for a 64 bit Nintendo (for my granddaughters) and they had 40 in stock, but I ended up with two bags of Christmas presents,"" Rosalee DiGregorio said at the Menlo Park Mall in Edison, N.J.
Other items that were expected to be hot this year are those related to the movies ""101 Dalmatians"" and ""Space Jam,"" said Tracy Mullin, president of the National Retail Federation. Barbie dolls from Mattel Inc. are also expected to be hot sellers, especially Holiday Barbie.
""Believe it or not, Barbie still has legs,"" Mullin said.
The federation is forecasting holiday sales will rise about 6 percent over last year, reaching about $460 billion.
While the the day after Thanksgiving attracts traffic and media attention, actual sales for retailers tend to come later in the holiday season.
""This whole weekend only accounts for 8 percent of purchasing,"" said John Konarski, vice president of research for the International Council of Shopping Centers.
Susan Eich, a spokeswoman for Dayton Hudson, said sales volume the day after Thanksgiving is typically three times the retailer's normal sales. That day and the Saturday before Christmas are typically the company's busiest days.
Filene's Basement Corp.'s flagship store in downtown Boston opened at 7 a.m. and was packed with shoppers by 7:30. Filene's Basement Chief Executive Samuel Gerson said the cold weather and a late Thanksgiving were making for a busy season.
At the Falls, a mall near Miami, a small fire on a utility pole nearby cut off power to the complex for about an hour Friday morning.
""We actually ran registers, but off power. Everyone was doing it by hand, doing it by candle light,"" said a spokeswoman for the Bloomingdale's store at the mall. Bloomingdale's is owned by Federated Department Stores Inc..
Norm Allen, head of customer services at the Glendale Galleria in suburban Los Angeles, said the 280-store complex opened at 8 a.m. with about 100 shoppers in line to enter.
""This is going to be a good year. Our volume sales are already up 8 to 10 percent over last year at this time,"" he said.
Apparel and soft goods were expected to lead sales nationwide, while analysts and retailers expect tough competition and a lack of major new items to pressure sales at elctronics stores.
""We'll provide an array of holiday sales,"" said John Costello senior executive vice president of marketing for Chicago-based Sears, Roebuck and Co.. ""Our sales are comparable to last year.""
",5
"A conservative forecast for 1997, calling for profits near 1996 levels, helped push Caterpillar Inc stock lower despite record earnings reported for 1996 Tuesday.
But the outlook was also causing some analysts to question the conservatism of the Peoria-based heavy equipment maker.
""Caterpillar always looks at the glass being half empty,"" said Thomas Burns Jr., an analyst at NatWest Securities Corp. ""We think it's half full.""  
""We expect a better U.S. economy,"" Burns said. ""We don't expect housing starts to be off."" He noted that Federal Reserve Board Chairman Alan Greenspan made positive comments about the economy Tuesday.
But Caterpillar said in its earnings statement that it expects U.S. gross domestic product growth of about two percent in 1997, slower than in 1996.
Burns is also more optimistic about European growth than Caterpillar.
""Clearly, as far as we're concerned, there's a turn up on the way in Europe,"" he said.  
But in Caterpillar's view, bullish factors will be offset by delays of infrastructure products as countries impose fiscal restraint to meet the entry criteria for the European Monetary Union.
Caterpillar reported earnings of $381 million, or $1.99 a share for the fourth quarter of 1996, above the $1.53 a share reported in 1995 and the consensus estimate of $1.88 a share reported by First Call Corp.  
But the stock was down 1-1/8 at 77-3/8 Tuesday, mostly because of the outlook.
""It's basically '97,"" Lisa Shalett, an analyst at Sanford C. Bernstein, said of the stock's downturn. But she noted that one-time currency factors helped boost the earnings above estimates.
""It comes across as a surprise, but it's not necessarily a surprise from operations,"" Shalett said.
Still, despite Caterpillar's guidance on profits in 1997, Burns and other analysts are sticking by estimates showing earnings per share climbing from the $7.07 reported in 1996.
Burns estimates earnings of $7.70 a share for 1997.
Blair Brumley, an analyst at Dain Bosworth Inc, is even more bullish, forecasting earnings of $8.00 a share.
""It doesn't look like there's anything in the outlook statement that would cause us to be concerned with this year,"" Brumley said, noting that share repurchases, gains in the engine business from a recent acquisition and price gains from new products should boost earnings.
""Even assuming flat unit sales, you're not going to see a flat bottom line,"" he said.
((Chicago newsdesk 312 408 8787))
",5
"First Chicago NBD Corp chief executive Verne Istock expects to see more job cuts at the corporate banking unit as the bank tries to turn around a business that has far underperformed the rest of the company.
""I suspect as part of our restructuring of the corporate bank there'll probably be reduced head count in the corporate bank, and there will be reduced capital allocated to the corporate bank,"" Istock said in an interview.
He would not say how many jobs would be cut.  
The corporate banking unit posted a dismal return on equity of eight percent in the first nine months of the year, compared with nine percent a year ago, with results this year weighed down by a $12 million trading loss. Overall, the bank reported return on equity of 16.9 percent in the first nine months of 1996.
Now the corporate and institutional banking unit is being reshaped, paring back business lines to focus on those central to customer relationships.  
""I firmly believe that something that's chugging along at eight or nine percent can in fact be improved and we fully expect to get it up to that 15 percent or better return"" on equity, Istock said.
Stockholders and analysts appear to accept Istock's argument that the corporate bank's results can only go up.
""You can criticize them, but frankly, it can only improve,"" said Joseph Duwan, analyst at Keefe Bruette & Woods. ""I think they're taking a hard look at the businesses they're in in corproate banking.""  
Istock stressed that increased revenue will come from the corporate bank by focusing on areas that will grow and cutting unprofitable areas.
Already this year, the bank has said it will exit the institutional custody and master trust businesses, two paperwork-intensive lines that would have required major investment to gain significant market share.
Istock also said the bank was trimming its trading operations, again focusing on instruments customers need.  
""I don't think we will have to have the entire (trading) product line or be on the edge of the envelope,"" Istock said. But he added that the types of trading vehicles customers need change.
Istock said he was aware of the corporate bank's troubled performance before First Chicago Corp and NBD Bancorp merged a year ago, forming what is now the ninth largest bank holding company in the United States with assets of $106.7 billion.
Meanwhile, First Chicago's stock hit a post merger high last week, before sliding in a sell off of most bank stocks this week. An aggressive 40 million share stock repurchase plan announced in October has helped boost the stock.
But another area of concern to analysts is credit card chargeoffs, which jumped earlier this year.
Istock said while chargeoffs will likely rise more as the economy slows, the business will continue to be a strong earner for First Chicago.
""It's a business we know, we understand and we plan to stay in,"" Istock said. He added that the bank is beginning to use its 13-million-customer credit card database to sell other products to credit card holders.
First Chicago shares were up 1/8 at 55 Friday.
((--Chicago newsdesk 312 408 8787))
",5
"Wallace Computer Services Inc. said Thursday its directors will unanimously recommend that shareholders reject a bid by Wyser-Pratte & Co. Inc. to gain control of the computer services company's board.
Wyser-Pratte, which holds 2.3 percent of Wallace's outstanding shares, has proposed three candidates as directors for the Lisle, Ill.-based company, as well as a special committee to explore ways to maximize shareholder value.
It seeks to remove Wallace's poison pill takeover defence, which requires an 80 percent vote to approve certain mergers.
Wyser-Pratte filed the proposals with the Securities and Exchange Commission after Moore Corp. Ltd., a huge Canadian business forms manufacturer, abandoned a 13-month campaign to acquire Wallace in a $1.3 billion deal in early August.
Wallace's board said in a letter to Wyser-Pratte that it will recommend that its shareholders vote against the proposals at their annual meeting on Nov. 6, as they are not in the best interests of them or the company.
Wallace said it was aware that Wyser-Pratte tried to contact the three Wallace directors who were nominated by former suitor Moore at last year's annual meeting.
""You should be under no illusion that you or your purported director nominees have three allies on the Wallace board. We want to emphasise that we are unanimous in opposing your actions,"" the letter said.
Guy Wyser-Pratte, president of Wyser-Pratte, responded that he would continue to push his proposals.
He said although Wallace had increased its dividend substantially and reported higher-than-expected earnings Wednesday, the stock was only up slightly. Wallace rose 12.5 cents to close at $27.375 on the New York Stock Exchange.
""They're not delivering value to shareholders,"" he said.
Wallace said its profits jumped to $19.2 million, or 42 cents a share, in the fourth quarter ended July 31, from $15.8 million, or 35 cents a share, in the year-ago period. Sales rose 8.2 percent to $214.5 million from $198.2 million.
Factoring in the company's stock split, the stock is trading at just over $54, compared with Moore's offer last year of $60, Wyser-Pratte said.
""It's been a year and nothing has happened with the stock,"" he said.
However, analysts said that strong business fundamentals and a presumed change in Wallace's shareholder profile should protect it from Wyser-Pratte's proposals.
Many arbitrageurs likely sold their Wallace stock after Moore abandoned its 13-month takeover campaign, resulting in more shareholders interested in long-term gains, analysts said.
",5
"First Chicago NBD Corp, while still open to acquisitions to expand its banking network, expects more retail branches to be cut over time as customers bank electronically or at supermarkets.
""As customers use more and more of those (channels), we've got to take away more of the brick and mortar"" branches, Verne Istock, chief executive, said in an interview Thursday.
But don't expect First Chicago to make drastic cuts like the nearly 280 branches that Ohio-based KeyCorp said last month it would close or sell.  
""I don't think that's the approach we want,"" Istock said. ""I think that's pretty dramatic. I think you're better off to do it on an orderly basis from a customer satisfaction standpoint as well as an employee basis.""
First Chicago has closed about 25 branches since the merger with Detroit-based NBD Bancorp a year ago that created what is now the ninth largest bank holding company in the United States, with $106.7 billion in assets.
But at the same time, First Chicago could be looking to expand its retail customer base through acquisitions of other banks in the greater Midwest.  
""I have publicly said on more occasions than once that this organization does have an interest in expanding through acquisitions where it makes sense for shareholders,"" Istock said.
This means any acquisition First Chicago does could only dilute earnings for a short time, if at all, he added.
But Istock also said First Chicago has not had talks with Milwaukee based Firstar Corp, which has been mentioned as a possible First Chicago target for at least a year.
""We've had no discussions,"" he said of Firstar. He would not comment on other possible acquisition targets.  
Istock also reiterated that an acquisition could be made outside of traditional banking as regulatory lines between banking other financial businesses are erased.
Insurance, investment banking and securities banking are all areas that could be targets of traditional banks, he said.
""We're willing to consider any alternative that we think makes sense for our shareholders first of all and also for enhancing our customer relationships,"" Istock said.
Analysts see First Chicago as having excess capital on its books, which weighs on a bank's performance. EVEREN Securities analyst Thomas Maier said the bank could have more than $2 billion in excess capital, while others estimate a lower amount.
An aggressive 40-million-share stock repurchase plan has helped allay analysts' and investors' concerns about the excess capital. But making a purchase could also put capital to work.
""It's a way of in fact buying your stock back without having to go out in the market to do it,"" Maier said.
First Chicago shares were up 5/8 at 55-1/2 Friday.
((--Chicago newsdesk 312 408 8787))
",5
"Magna Group Inc's planned acquisition of Homeland Bankshares Corp is not likely to alter the St. Louis-based bank holding company's own potential to be acquired, analysts said.
""It certainly doesn't make them any less attractive or likely as a takeover candidate,"" said Steven Schroll, a banking industry analyst at Piper Jaffray.
Magna is among several Missouri-based banks considered by analysts to be likely acquisition targets.  
""I don't think it probably changes the company either way too much"" in terms of takeover prospects, said Joseph Stieven, a banking analyst at Stifel Nicolaus.
Still, with Iowa's limit on how much of the state's total deposits a single banking company can hold, Magna's acquisition of Iowa-based Homeland could prevent some potential buyers from swallowing up Magna, analysts noted.
""It could complicate it, because Iowa does have relatively low state cap,"" Stieven said. ""But it doesn't necessarily mean it was done as a defensive measure.""  
Schroll's initial reading of the proposed deal is that it will add to Magna's earnings in 1997, the year the deal is expected to close.
""We believe it could be 15 cents accretive, maybe more,"" Schroll said, cautioning that this was a preliminary view of the deal.
Magna said in a news release the deal would be accretive within 12 months.
Other analysts noted that Homeland has a relatively high ratio of equity to assets and said paying about 1.65 times book value for Homeland might be a bit expensive. Homeland's ratio of equity to assets was 10.79 percent in the second quarter.
The price of ""165 (percent) of book could be pretty generous if you've got an overcapitalized bank,"" said Ben Crabtree, banking analyst at Dain Bosworth.
""It sounds like a pretty big price,"" agreed Stieven.
Magna was down 1/4 at 24-1/2 Monday afternoon, while Homeland was up 2-1/4 at 36-1/4.
--Reuters Chicago newsdesk, 312-408-8787
",5
"Mercury Finance Co. got hit by a lawsuit charging it violated securities laws after the auto-loan company said phony bookkeeping entries had inflated its earnings and that it fired its chief accountant.
The stock, which remained halted on the New York Stock Exchange, has not traded since it closed at $14.875 on Tuesday.
The exchange would not indicate where the stock might open but traders said it was changing hands at $4.25 overseas, which would mean a loss of more than $1.8 billion in market worth for the company, based in suburban Lake Forest, Ill.
One of the officers named in the lawsuit was James Doyle, the former controller who Mercury said has not been seen since last Thursday. In its statement on Wednesday, Mercury said it fired Doyle.
Filed in federal court in Chicago on Wednesday, the lawsuit alleges the company and some senior officers misrepresented or omitted crucial information about Mercury's earnings for the last three years, lawyers who filed the suit said in a statement.
The lawsuit also said Doyle had sold tens of thousands and Chairman John Brincat hundreds of thousands of shares of Mercury stock at inflated prices, netting millions of dollars in illegal profits.
Brincat was not available for comment. A company spokesman declined to comment. Attempts to locate Doyle were not successful.
The finance company 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 adjusted downward, though not as sharply.
The problems appeared to stem from unauthorised entries in financial records by its chief accounting officer, Doyle, the company said.
It 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.
Analysts were hesitant to talk about Mercury, saying they did not have much information.
But they did say the company's planned acquisition of Fidelity Acceptance from BankBoston Corp. was unlikely to be completed. The deal, announced on Jan. 10, called for Mercury to issue about $458 million in stock to BankBoston. BankBoston said on Wednesday it was awaiting an audit of Mercury.
""I think the odds are very high that the deal will not go through,"" one analyst said, who asked not to be identified.
Analysts also said Mercury has not been as forthcoming as other consumer finance companies when providing detailed financial information.
Mercury helped pioneer the business of lending to consumers whose credit was less than perfect. It started making loans to people in the military and has grown into one of the country's largest lenders in the used-car market.
""They haven't been quite as open as any others in the industry have been,"" one analyst said.
Two brokerage firms cut ratings on Mercury Thursday.
Gruntal & Co. said it suspended its rating, adding, ""We recommend that holders exit positions as soon as possible.""
Piper Jaffray cut its rating to market performer from buy and in a research report said, ""Our guess is most of the over recognised income came from (Mercury's) insurance subsidiary.""
",5
"H&R Block Inc. Thursday reported a big loss for the latest quarter, as its CompuServe online service posted a $58 million loss and became more of a headache to its parent.
H&R Block had a net loss of $74.1 million, or 71 cents a share, in its second quarter ended Oct. 31, compared with a loss of $8.3 million, or 8 cents a share, in the 1995 quarter. Revenues grew to $253.4 million from $221.0 million.
Kansas City-based H&R Block, the nation's largest tax preparation company, blamed the bad news mainly on losses at its CompuServe unit, the world's second-largest online service, which has failed to sign up new subscribers, especially in the United States.
H&R Block still owns 80.1 percent of CompuServe, after selling the rest of the stock in April in an initial step to spin off the unit.
But plans to complete the spin-off were suspended in August after CompuServe reported poor first-quarter earnings and projected second-quarter losses.
Just nine months ago, shareholders and analysts were pushing for a spinoff, arguing that CompuServe's value was being held back by H&R Block's staid tax business.
Now they want a spinoff because the online services provider is weighing on H&R Block's performance.
""The business model changed for CompuServe in a fairly dramatic way and now CompuServe's valuation is clearly holding back H&R Block's valuation,"" said Martin Romm, analyst at CS First Boston.
""How quickly things change,"" said Dennis Hudson, analyst at George K. Baum. ""What happened was a whole lot of competition came in (to the online market.) The market became saturated before people expected.""
Analysts said H&R Block was waiting for CompuServe's new business strategy announced Thursday -- focusing on the corporate market rather than home users -- to push the unit toward profitability before the spinoff is completed.
H&R Block also cut its quarterly dividend to 20 cents a share from 32 cents, a move that it had previously said would occur after the spinoff was completed.
""Even though the separation has not been completed, the board decided such action was prudent at this time because CompuServe is not adding to the company's profitability,"" said Frank Salizzoni, H&R Block's president and chief executive officer and CompuServe's chairman.
""In taking this action today, the board is indicating it anticipates the separation of CompuServe.""
Both Romm and Hudson said they continue to rate H&R Block stock as a buy and stressed that there was nothing wrong with the company's core tax business.
The company said its Tax Services unit reported a pretax loss of $42.2 million in the second quarter, up $6.9 million a year ago.
""This year's deeper second quarter loss in these core businesses is in large part a result of the company's investments to expand its office network and roll out new products,"" Salizzoni said.
""They're making these investments primarily in new stores that are absorbing costs primarily without any commensurate contribution in revenue,"" Romm said, noting that the tax season does not begin until early next year.
H&R Block stock fell 37.5 cents to $28 on the New York Stock Exchange. CompuServe lost 93.75 cents to $10.6875 on Nasdaq.
",5
"Mercantile Bancorp Inc would likely remain a potential target in the Missouri bank merger wave after its planned combination with Mark Twain Bancshares Inc.
""This certainly doesn't mean that Mercantile is no longer a buyout candidate,"" said Michael Ancell, analyst at Edward D. Jones & Co. ""It's clear that the bank merger wave has rolled into St. Louis and it's turning into a tsunami.""  
As the largest bank holding company in Missouri behind Boatmen's Bancshares Inc, Mercantile is seen by analysts as attractive to banks looking to establish a presence in the lower Midwest.
In August, NationsBank Corp agreed to buy Boatmen's Bancshares Inc for $9.5 billion.
That deal valued Boatmen's at a pricey 2.7 times book value, analysts said. Mercantile's deal values Mark Twain at about 2.8 times book value, analysts said. The pooling of interests deal is worth $49.62 a share to Mark Twain shareholders, based on Friday's closing price, the banks said.  
The St. Louis-based bank holding companies would have a combined total of $21.3 billion in assets.
""It's a pretty pricey transaction,"" said James Schutz, banking analyst at Chicago Corp. ""Mark Twain is a very profitable and a very attractive franchise.""
Mark Twain reported return on average assets of 1.82 percent in the third quarter and return on average realized common equity of 18.49 percent, putting it in the upper echelon of Midwest banks, analysts said.  
""It's an in-market deal, which allows for a tremendous ammount of efficiencies, which is good for Mercantile,"" said Joseph Steiven, analyst at Stifel Nicolaus. ""They're paying full-boat prices, but they're getting an excellent company.""
But Schutz noted that Mark Twain already operates efficiently, and questioned how much more in efficiency Mercantile could wring out of Mark Twain.
""The question I would ask is how is Mercantile going to earn back this premium they're paying,"" Schutz said.  
That question appeared to be in the market Monday, with Mercantile shares down 2-3/8 at 49-3/4 and Mark Twain up 3-5/8 to 46.
Mark Twain chief executive John Dubinsky, who is slated to become chief executive of Mercantile's St. Louis bank when the deal is completed, indicated there were not likely to be wholesale job cuts when the two banks combine.
""Between Mercantile and Mark Twain as we sit here today, there are over 200 job openings,"" Dubinsky said in an interview. ""There will be some duplications, there will be some consolidation of job functions.""
But ""quality"" individuals whose jobs are eliminated because of duplication will be able to apply for other jobs, he said, noting ""I would be very surprised if there was a large number of individuals that won't be needed.""
Dubinsky also would not rule out the possibility of the combined Mercantile/Mark Twain being acquired.
""Banking is changing so rapidly,"" he said. ""One couldn't make any comment with certainty about the future.""
--Reuters Chicago newsdesk, 312-408-8787
",5
"Mercury Finance Co. said Wednesday it found problems in its bookkeeping that caused it to overstate earnings by $90 million over four years and that its chief accountant had apparently disappeared.
The Northbrook, Ill.-based finance company said the irregularities appear to have come from unauthorized entries in financial records by its chief accounting officer.
The company said a special committee of the board has been formed to investigate with legal and accounting experts.
The accountant, James Doyle, was last seen at the company on Jan. 23, the day it reported fourth quarter results, Mercury Finance spokesman Joseph Kopec said.
""He called Friday and said he would not be in for personal reasons,"" Kopec said. ""They haven't seen him since.""
Doyle's whereabouts were unknown.
The problems may jeopardize Mercury's planned acquisition of Fidelity Acceptance Corp., a consumer finance company, from BankBoston Corp. in a $393 million deal announced on Jan. 10.
Wednesday's announcement caught the financial community by surprise, with analysts unwilling to comment after Mercury's statement, saying they were still trying to gather information.
As a result of the adjustments, shareholders' equity as of Dec. 31, 1996, would be reduced from $353 million to $263 million, the company said.
As a result of the overstatement of earnings, Mercury said it is in violation of some of its debt agreements and was negotiating with lenders.
It said its financial condition remained strong and would support continuing operations and its expansion plans.
BankBoston said it would await the results of the accounting investigation before proceeding with the sale of Fidelity Acceptance. Mercury said it was optimistic about completing the deal.
Mercury said 1996 net income would be restated to $56.7 million from $120.7 million, 1995 profits would be cut to $76.9 million from $98.9 million and 1994 earnings would be $83 million instead of the $86.5 million originally reported.
In addition, 1993 profits would be trimmed to $64.2 million from $64.9 million.
Mercury stock was halted all day on the New York Stock Exchange. It closed Tuesday at $14.875.
Moody's Investors Service cut its rating on Mercury's short-term borrowings and Standard & Poor's said it may lower its rating.
Mercury Finance suffered another blow last year, when Daniel Terra, chairman of the company since it went public in 1989, died in June.
",5
"Caterpillar Inc chief financial officer Douglas Oberhelman said Tuesday that an increase in U.S. dealer new machine inventories at the end of 1996 was intentional.
""It's higher than it was a year ago and that's by design,"" Olberhelman said in an interview with Reuters. ""As it turned out last year, we didn't have enough inventory in dealer hands and this year we will, we hope,"" he said.
Some analysts expressed concern Tuesday at the increase in inventories.  
The Peoria, Illinois-based heavy equipment maker Tuesday reported record net income of $381 million or $1.99 a share for the fourth quarter, up from $300 million or $1.53 a share a year ago and $0.11 ahead of consensus estimates.
But the company's outlook that the 1997 profit level would ""approximate"" that of 1996 appeared to be pushing the stock lower Tuesday.
Oberhelman defended the company's view of slowing U.S. economic growth in the face of analysts' comments that the view was too conservative.  
""We're trying to call it as we see it,"" he said. ""I will tell you that a year ago, we called for a softer economy in the U.S. and it didn't happen. We were pleasantly surprised.""
He added that the company is prepared to increase production if demand is stronger than expected, as it did in 1996.
After focusing the last several years on improving operations, Oberhelman said the company now thinks it's time to increase spending on research and development and on capital assets to improve shareholder value in the future.  
Total capital expenditures were $642 million in 1996 and are expected to rise 10 to 15 percent in 1997, while research and development is expected to rise 20 percent from the $410 million spent in 1996, Caterpillar said.
""It's going to be a little bit of everything,"" he said when asked if the expenditures would be focused on acquisition or internal development.
He said the company is likely to continue its pace of about 50 new or upgraded product introductions a year through 1999.
One area the company is looking to gain in is power generation equipment, a $5 billion worldwide market Caterpillar sees tripling in the next several years.
""We'll still be building there, both internally and through acquisitions,"" he said.
Caterpillar shares were down 1-3/4 at 76-3/4 Tuesday.
(Chicago newsdesk 312 408 8787)
",5
"Sears, Roebuck and Co. Thursday said earnings jumped 24.6 percent in the fourth quarter, boosted by strong sales and improved profit margins during the Christmas selling season.
""We ended the year with excellent fourth-quarter results, which are even more impressive given the strength of last year's fourth quarter,"" Sears Chairman Arthur Martinez said in a statement.
December included the company's first ever back-to-back billion-dollar sales weeks, he said. The Christmas season is crucial for retailers since store chains typically earn half or more of their annual profit during the period.
""They had a great 1996 capped off by the best Christmas of any department store operator,"" said Alan Rifkin, analyst at Dain Bosworth Inc. He noted that Sears' sales at comparable stores rose 9.5 percent in December.
The nation's second-largest retailer said earnings rose to $567 million, or $1.42 a share, in the quarter, from $455 million,  or $1.13 a share, in the 1995 period. Sales grew 10.8 percent to $12.04 billion from $10.87 billion.
The earnings beat Wall Street forecasts that averaged $1.38 a share, according to First Call, which tracks estimates.
But Sears' stock fell $2 to $49.125 on the New York Stock Exchange, mostly on profit-taking.
""The stock was up strongly early in the week and I think people are just taking profits,"" Rifkin said.
Analysts said Sears gained from its decision to remodel some stores and expand its clothing offerings.
""Clearly they're gaining market share and clearly they're doing the right thing and the consumer likes what she sees when she goes into the store,"" said Karen Sack, analyst at the S&P Equity Group.
Operating income from domestic operations rose 14.8 percent to $531 million in the quarter as revenue rose 11.6 percent to $10.92 billion. Comparable-store sales rose 5.4 percent for the quarter.
Operating income from domestic operations for all of 1996 rose 20.9 percent to $1.28 billion, while revenues increased 10.2 percent to $34.85 billion.
Gross margins as a percent of merchandise sales rose to 27.9 percent from 26.9 percent in the 1995 period.
Rifkin said margins were not likely to rise as much in 1997 as in the fourth quarter, but said cost-cutting should drive earnings growth this year.
He forecast earnings at $3.60 a share in 1997 and $4.25 a share in 1998, up from $3.12 a share in 1996.
International operations, including merchandising and credit operations in Canada and Mexico, earned $36 million in the quarter, compared with a loss of $7 million in the 1995 period.
The increase in earnings was largely attributable to improved performance at both Sears Canada and Sears Mexico, lower selling and administrative expenses at Sears Mexico, and writeoffs of Sears Canada properties in the year-ago quarter, it said.
Sears, based in Hoffman Estates, Ill., operates more than 800 department stores and 2,500 other stores offering clothing, home and automotive products and services.
While earnings rose in the quarter, they fell for the year, in part because 1995 included a gain of $776 million from the former Allstate Corp. subsidiary, which was spun off to Sears' shareholders in June 1995.
For all of 1996, Sears earned $1.27 billion, or $3.12 a share, in net profits, down from $1.80 billion, or $4.50 a share, in 1995. Sales grew 9 percent to $38.22 billion from $35.0 billion.
",5
"From free gift wrapping and valet parking to sweepstakes and private scheduled visits with Santa, retail malls are pulling out the stops to attract customers during the key holiday season.
So far their efforts, as well as a strong economy, appear to be yielding results, as mall operators said they saw double-digit sales increases on Black Friday, the name retailers have given to the day after Thanskgiving.
""I think overall, consistently across the board, we're seeing sales up anywhere from high single digits to low double digits for the day,"" said Robert Michaels, president of General Growth Properties Inc., which owns and operates 120 retail centers across the country.
Traffic patterns varied at different malls, with some reporting traffic up by close to 10 percent, while others saw traffic flat. But unlike last year, when there were many window shoppers, this year, people were buying.
""Everyone was browsing last year,"" said Sarah Liddle, associate marketing director of Newport Centre Mall, in Jersey City, N.J. ""Everyone was a little skeptical about what they were going to buy. Yesterday, it was unbelievable how many (shopping) bags were going through this mall.""
That appeared to be the case throughout the country, according to Billie Scott, spokeswoman for Simon DeBartolo Group Inc, which owns Newport Centre and owns or has an interest in 185 properties, most of them malls and retail centers.
""For the most part, (according to) the people I talked to, traffic was at last year's level or above, but I guess the big difference is people were buying,"" she said.
The publicly traded companies that own many malls -- and are known as real estate investment trusts (REIT) -- do not have as much of their revenue directly generated during the holiday shopping season as retailers. But a portion of rents are based on a percentage of sales, and the season will also help set rents in the future.
""The high sales in the fourth quarter justify the rent the rest of the year,"" said Lee Schalop, an analyst who follows REITs at J.P. Morgan Securities.
To attract shopppers, malls offer features ranging from free gift wrapping to giveaways including $1,000 shopping sprees.
At the Woodfield Mall in Schaumburg, Illinois, a northwest suburb of Chicago, Santa is available for five-minute prescheduled visits during the hour before the shopping center opens. Woodfield is owned by Bloomfield Hills, Michigan-based Taubman Centers Inc., which also said sales appeared strong to kick off the holiday shopping season.
""Everything we're hearing is positive,"" said Taubman spokeswoman Karen Mac Donald. ""Everyone is saying they had a good day yesterday. They were up.""
At the Paramus Park mall in Paramus, N.J., prizes are being given away each week, with a grand prize of a trip to New York and dinner with the Rockettes.
""It's an effort to distinguish ourselves,"" said Kathy Lickteig, spokeswoman for Columbia, Maryland-based Rouse Co., which owns Paramus Park. ""At this time of the year, it is very important to have something special to attract shoppers.""
But while services are a factor in attracting shoppers, mall owners said having the best stores is the key for bringing shoppers in to a mall.
""Number one, it does come down to having the right shops,"" said General Growth's Michaels.
Mall operators said the stronger economy and the fact that there are five fewer days between Thanksgiving and Christmas may have helped prompt more shopping Friday.
In fact, many operators said they have had promotions earlier this season because of the shorter shopping period, with some starting as early as Veteran's Day.
Heidi Holwerda, vice president of marketing for Muskegon, Michigan-based Horizon Group Inc., an outlet mall operator with 36 centers, said her company began coordinated sales Nov. 10.
""As a result, we've seen some pretty significant increases in November in regard to traffic,"" she said, noting that traffic was up 10 percent in centers that the company has owned for at least a year.
",5
"First Chicago NBD Corp said Wednesday rising bankruptcy filings contributed to a rise in credit card charge offs in the fourth quarter.
Charge offs rose to 6.7 percent of managed receivables in the quarter, compared to 5.9 percent a year ago.
""The fourth quarter increase is due to a combination of factors, including a resurgence of bankruptcy filings after a third quarter lull, an increase in contractual charge offs, and average loan volume that was basically flat in the third quarter,"" chief financial officer Robert Rosholt said.  
But in a telephone message to investors, Rosholt also noted that credit card fee revenue rose 28 percent from a year ago to $259 million, adjusting for securitization.
""Clearly this demonstrates bank card's ability to counter some of the effects of deteriorating credit quality,"" he said.
While the credit card business continues to be profitable for the $104.6 billion asset bank holding company, some analysts noted the charge-off rate was high.
""I think that's very clear that that's not as profitable an operation as it is at other places,"" said James Schutz, analyst at Chicago Corp.  
But other analysts said the bank has tightened credit standards in the past year and were less concerned about the charge-off rate.
""That thing has bounced around all over this year (1996) and it's still a very profitable line of business this year,"" said Robert Ollech, analyst at Principal Financial Securities.
Rosholt also said the bank plans to improve its trading operations to restore results in market-driven revenues.  
Market-driven revenues were $83 million in the fourth quarter, up from $40 million in the previous quarter but down from the bank's average of $100 million a quarter, Rosholt said.
Trading profits were $12 million in the quarter, compared to a $12 million loss in the third quarter.
""We plan to get back to our $100 million per quarter average as we improve our execution of trading activities this year,"" Rosholt said.
Return on common equity was 17.5 percent in the quarter, up from 15.4 percent a year ago, while return on assets was 1.46 percent, up from 1.02 percent a year ago.
Earlier Wednesday, the bank reported operating income of $377 million or $1.14 a share in the fourth quarter, compared to $318 million or $0.96 a year ago.
Earnings were $0.01 a share below estimates, according to First Call. First Chicago shares were up 1/8 at 54-3/8.
((--Chicago newsdesk 312 408 8787))
",5
"Mercantile Bancorp Inc said Monday it could still make other acquisitions while it is completing its $855 million merger with Mark Twain Bancshares Inc.
""While this will be an active project for us beginning today, it doesn't mean that we don't have additional capacity to continue,"" John Beirise, Mercantile's group president in charge of mergers and acquisitions, said in an interview.
Beirise noted that not all of Mercantile will be involved in the acquisition of St. Louis-based Mark Twain, so acquisitions in other geographic locations might be possible. He also said Mercantile has been an active acquirer, and so is adept at assimilating mergers.
St. Louis-based Mercantile, with $18.2 billion in assets, currently has four mergers pending.
The Mark Twain deal, announced Monday and expected to close in the second quarter of 1997, is an exchange of shares valued at $49.62 per Mark Twain share, based on Friday's closing price, the banks said.  
That works out to 2.8 times Mark Twain's book value, a price Beirise conceded was lofty for banks in general.
""In general it is, yes, but not many banks earn 1.8 (return) on assets,"" he said. Mark Twain reported return on average assets of 1.82 percent in the third quarter, well above average for Midwest banks.
Beirise said Mercantile was not considering its potential as a takeover target when it made the deal to acquire Mark Twain. Mercantile, the second largest bank holding company in Missouri behind Boatmen's Bancshares Inc, has been mentioned by analysts as an acquisition target for banks trying to expand their Midwest presence. Boatmen's agreed in August to be acquired by NationsBank Corp.
Beirise said as long as the bank delivered value for shareholders, it would be a difficult takeover target.
""Someone would have to make the case that we're not doing the job,"" Beirise said. ""We think as long as we're doing the job, we are the best value for our shareholders.""
--Reuters Chicago newsdesk, 312-408-8787
",5
"McDonnell Douglas Corp. stock tumbled Monday after the Defence Department eliminated the company from the race to build a new generation fighter jet that eventually could be worth $200 billion or more.
The decision was a blow to McDonnell Douglas, the nation's second-largest defence contractor and a long-time leader in fighter jets, and could force it to restructure, seek a merger or become more acquisition-minded, industry analysts said.
The Pentagon on Saturday awarded four-year contracts to Boeing Co. and Lockheed Martin Corp. to develop prototype fighter jets for the early 21st century for the Air Force, Navy, Marine Corps and the British Royal Navy.
British and U.S. forces have announced plans to buy 3,000 of the joint strike fighter jets, with initial delivery scheduled for 2008.
With potential export sales of another 2,000 jets and additional funding for development and support, the programme could be worth $200 billion to $500 billion over the coming decades, industry executives said.
McDonnell Douglas stock lost $4.25 to close at $52.50 on the New York Stock Exchange, where it was one of the biggest losers of the day. Boeing rose $1.50 to $93.25 and Lockheed Martin rose $1.875 to $95.625, also on the NYSE.
John Modzelewski, an analyst at PaineWebber, said the decision could force St. Louis-based McDonnell Douglas to seek acquisitions more aggressively to help build its business, or into a merger with another defence or aerospace company.
""Everything's back on the table,"" Modzelewski said.
In the past year, McDonnell Douglas has been the subject of rumoured talks with Boeing, Rockwell International Corp. and Raytheon Co..
McDonnell Douglas has declined to comment on potential mergers and acquisitions. ""We have said we will look at mergers, acquisitions and partnerships that will grow our business,"" a company spokesman said.
""This will be something of a wakeup call,"" CS First Boston analyst Peter Aseritis said. ""It's a fairly sharp and dramatic blow to McDonnell Douglas and I would venture to guess one they probably didn't see coming.""
PaineWebber's Modzelewski said, ""Without having the internal growth such as joint strike fighter would give them, they're going to have to grow through acquisition."" That could include Texas Instruments Inc.'s defence electronics business, which is for sale, according to published reports.
McDonnell Douglas Chief Executive Harry Stonecipher said on Saturday the loss was a surprise to the company.
""Certainly in terms of the overall future, 10 years and beyond, it is a significant programme to us,"" Stonecipher said.
But in a statement to employees Monday, Stonecipher noted the company's backlog of aircraft orders to the military at home and abroad and said it was pursuing other orders. The company has a $46 billion order backlog, a spokesman said.
""This decision does not mean we are out of the military aircraft business,"" Stonecipher said.
McDonnell currently builds the Air Force F-15 fighter and the Navy-Marine F-18E/F as well as the C-17 military cargo plane. Both the F-15 and the F-18 are to be replaced by the joint strike fighter in the next century.
PaineWebber's Modzelewski said McDonnell Douglas was likely to participate in the new jet fighter programme as a subcontractor, as politics will force the wealth to be spread.
But despite its key role providing fighter jets for decades, the based company has failed to win a major role in any of the next generation of tactical aircraft.
Already the smallest of the three major commercial jet makers, McDonnell said last month it would not continue to compete against Boeing and Europe's Airbus Industrie in the market for the biggest commercial jetliners.
",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 unauthorised 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
"Caterpillar Inc. Tuesday reported record profits of $1.36 billion for 1996, spurred by a 27 percent jump in fourth-quarter earnings, but said it expected near flat results this year.
The world's largest heavy equipment maker said earnings for all of 1996 rose from 1995's $1.14 billion while revenues grew 2.8 percent to $16.52 billion from $16.07 billion.
For the fourth quarter, profits rose to $381 million, or $1.99 a share, from $300 million, or $1.53 a share, in the 1995 period.
Peoria, Ill.-based Caterpillar's fourth-quarter results exceeded Wall Street analysts' average estimate of $1.88 a share, according to First Call Corp., which tracks earnings estimates.
Despite the strong results, investors pushed Caterpillar's stock down $2.125 to $76.375 on the New York Stock Exchange, apparently on concerns about the outlook for 1997.
The company said it expected 1997 profits to be nearly flat with 1996 levels, with revenues from ongoing operations growing only slightly.
Caterpillar said higher demand in developing regions should offset a slightly weaker market for its machines in the United States and Japan this year.
""It's basically '97,"" Lisa Shalett, analyst at Sanford C. Bernstein, said of the stock's fall. But she added that one-time currency factors also helped boost the earnings above estimates.
""It comes across as a surprise, but it's not necessarily a surprise from operations,"" Shalett said of fourth-quarter earnings.
But other analysts suggested Cateprillar was being too conservative in its view for 1997.
""Caterpillar always looks at the glass being half empty,"" said Thomas Burns Jr., analyst at NatWest Securities Corp. ""We think its half full.
""We expect a better U.S. economy,"" he said. ""We don't expect housing starts to be off."" He noted that Federal Reserve Board Chairman Alan Greenspan made positive comments about the economy on Tuesday.
Caterpillar said it stood by its forecast, but was prepared to meet higher demand than expected, as it did in 1996.
""We're trying to call it as we see it,"" Chief Financial Officer Douglas Oberhelman said in a telephone interview. ""I will tell you that a year ago, we called for a softer economy in the U.S. and it didn't happen. We were pleasantly surprised.""
Caterpillar said profit margins as a percent of sales rose to 25.2 percent in 1996 from 22.3 percent in 1995 due to higher prices and the effect of the stronger dollar against the yen and European currencies.
Lower material costs and improvements in the manufacturing process also helped.
Total capital expenditures in 1996 were $642 million and are expected to increase 10 to 15 percent in 1997, Caterpillar said.
""In 1997, we plan to increase spending for capital assets, research and product development to enhance our prospects for long-term growth and profitability,"" Chairman Donald Fites said in a statement accompanying the results. ""In addition, we intend to increase our investments for new business opportunities around the globe.""
Research and development spending is expected to rise 20 percent from $410 million in 1996, the company said.
Major initiatives include electric power generation, agricultural products, mining systems, compact machines and strengthening the company's product support system, Caterpillar said.
",5
"Magna Group Inc. has a definitive agreement to acquire Homeland Bankshares Corp., the second-largest banking company in Iowa, for about $216 million, the companies said Tuesday.
St. Louis-based Magna will issue 5 million shares of its common stock and pay $92 million in cash in exchange for all theoutstanding Homeland common shares. Homeland shareholders may choose to exchange each of their shares for either about 1.55 Magna shares, a comparable amount in cash or a combination.
Magna said it will repurchase about 600,000 shares of the stock, under its current repurchase plan.
""We certainly will consider buy back programmes beyond that, but nothing has been approved beyond that,"" G. Thomas Andes, Magna chairman, said in a news conference.
Waterloo, Iowa-based Homeland, with assets of $1.2 billion as of June 30, owns and operates four commercial banks and one savings bank and provides financial services through a network of 33 locations in Iowa.
Magna, with $5.35 billion in assets, is the third-largest banking institution in the St. Louis metropolitan area and the nation's 95th largest banking company. It has 106 banking locations throughout Illinois and Missouri and a trust and brokerage company.
After the acquisition, Magna would have about 55 percent of its assets in Illinois, 25 percent in Missouri and 20 percent in Iowa, Andes said.
The deal is subject to approval by Homeland shareholders and regulators.
Magna said it expected the acquisition to boost earnings within 12 months, and save about $8 million through centralization of systems and procedures.
Some of the cost savings will come from job cuts, though those cuts could come from attrition, Andes said.
Homeland Chief Executive Erl Schmiesing said during the news conference that cuts were underway at Homeland in any case as it consolidated.
Magna will continue to consider other acqusitions, possibly in Iowa, Andes said.
""We certainly like the state of Iowa,"" he said. ""We would certainly welcome the opportunity to expand in the state of Iowa, as well as Illinois and Missouri.""
Magna is also among several Missouri-based banks considered by analysts to be likely acquisition targets, a perception that did not change with the Homeland acquisition announcment.
""It certainly doesn't make them any less attractive or likely as a takeover candidate,"" said Steven Schroll, a banking industry analyst at Piper Jaffray.
Homeland's stock rose $1.75 to $35.75, while Magna edged down 6.25 cents to $24.81 Tuesday on Nasdaq.
",5
"Rawlings Sporting Goods Inc chief financial officer Paul Martin said on Friday the company is not for sale, although it recognizes its responsibility to shareholders.
""The company is not for sale and the company doesn't comment on takeover rumors,"" Martin said in a telephone interview. ""Obviously, we recognize our fiduciary responsibilities."" Stock of the St. Louis-based sporting goods company has jumped more than 50 percent since early December, with market sources pointing to takeover rumors.  
""We keep hearing takeover, takeover,"" said one analyst, who does not follow the stock directly.
Another analyst said he was skeptical there were any takeover talks currently underway.
""I think it's just pure speculation right now, I don't think there's anything happening,"" said Timothy Conder, analyst at A.G. Edwards. He added that, based on fundamentals, the stock, which closed up 1-1/8 at 12-5/8 Friday, has a fair price of 9-1/2.  
In a research report on Thursday, Conder reiterated a maintain/aggressive rating on the stock, saying in the long term, Rawlings brand name makes it an attractive takeover candidate.
One potential acquirer for Rawlings that is repeatedly mentioned is Beaverton, Oregon-based Nike Inc. A Nike spokesperson could not be reached for comment Friday.
Conder said Friday the case for Nike is that it would round out the company's on-field baseball presence. But the case against Nike is that Rawlings is too small and does not have margins that match Nike's.  
Martin said Rawlings is scheduled to report fiscal 1997 first quarter financial results Tuesday, but added the company in November said it expected to report a modest loss for the quarter.
Rawlings said it expected revenues to decline in the quarter because of lower sales in baseballs and baseball gloves. The company reported net income of $890,000, or $0.12 a share a year ago.
Conder pointed out in his research note that the recent settlement of the Major League Baseball labor situation removes a large risk factor.
Major League Baseball is also considering using commemorative Jackie Robinson and Joe DiMaggio baseballs during the 1997 baseball season, which could boost Rawlings business in 1997, he said.
((--Chicago newsdesk 312 408 8787))
",5
"Just nine months ago, shareholders and analysts were pushing for H&R Block Inc to spin off its CompuServe unit, arguing that the unit's value was being held back by H&R Block's staid tax business.
On April 19, H&R Block began that process with a public offering of about 20 percent of CompuServe Corp.
Analysts are still looking for the spinoff to be completed, but now the focus is on the sagging fortunes of the online service which is weighing on H&R Block's performance.  
""The business model changed for CompuServe in a fairly dramatic way and now CompuServe's valuation is clearly holding back H&R Block's valuation,"" said Martin Romm, analyst at CS First Boston.
On Thursday, H&R Block reported a net loss for the fiscal 1997 second quarter of $74.1 million or $0.71 a share, compared to a loss of $8.3 million or $0.08 a share a year ago. Kansas City-based H&R Block said the larger loss was primarily due to CompuServe's $58 million second quarter loss. H&R Block still owns 80.1 percent of CompuServe.  
""How quickly things change,"" said Dennis Hudson, analyst at George K. Baum. ""What happened was a whole lot of competition came in (to the online market.) The market became saturated before people expected.""
In August, H&R Block suspended the rest of the spinoff, citing CompuServe's performance and market conditions, among other factors.
Analysts said H&R Block is waiting for implementation of CompuServe's newly announced business strategy -- focusing on business and professional users, rather than home users -- to push the company toward profits before completing the spinoff.  
H&R Block also said Thursday it was reducing its quarterly dividend to $0.20 a share from $0.32, a move that it had previously said would occur after the spinoff was completed.
""The timing of (the dividend cut) was a little bit surprising,"" Romm said.
Both Romm and Hudson said they continued to rate H&R Block stock as a buy and stressed that there was nothing wrong with the company's core tax business.
""I believe the company will have a very good tax season this year,"" Romm said, noting H&R Block has made investments to grow the business. The company said its Tax Services unit reported a pre-tax loss of $42.2 million in the second quarter, up $6.9 million from a year ago.
""They're making these investments primarily in new stores that are absorbing costs primarily without any commensurate contribution in revenue,"" Romm said, noting that the tax season does not begin for more than a month.
H&R Block stock was down 1/2 at 27-7/8 Thursday, after falling as low as 26-3/8 earlier in Thursday's session.
--Reuters Chicago newsdesk, 312-408-8787
",5
"Aiming to fill Americans' seemingly insatiable desire for sport utility vehicles, Chrysler Corp.  and Ford Motor Co.  both introduced new models of the go-anywhere vehicles Tuesday at the North American International Auto Show.
The plush Lincoln Navigator and the brawny Dodge Durango were introduced a day after General Motors Corp.'s unit unveiled an upscale version of its popular Yukon sport/utility vehicle and Subaru of America Inc., a unit of Fuji Heavy Industries Ltd  7270T, debuted a new sport/utility based on a passenger car chassis.
Sport/utility vehicles sales climbed to just over two million in the United States in 1996 and are the fastest-growing automotive segment.
The vehicles are so popular that even sportscar maker Porsche AG said Tuesday it also plans to enter the market by the turn of the century.
Although more and more companies are adding more and more models, the market is yet to be saturated, as more drivers foresake cars for the larger vehicles.
""They really are considered substitutes,"" said Diane Swonk, deputy chief economist at First Chicago NBD Corp. ""These are replacing old station wagons. They're also eating very heavily into the luxury car markets.""
Luxury is a key feature of the new Ford and GM models.
Ford's Lincoln Navigator, which is expected to be available in July, includes leather seating surfaces, walnut wood accents and second row bucket seats.
It is expected to be priced in the mid-$40,000 range and will compete at the premium end of the market with vehicles by Lexus and Land Rover. It is aimed at affluent empty nesters or high-profile active families. The target age for Navigator owners is 45-55, said Jim O'Connor, general manager of Ford's Lincoln Mercury division.
The vehicle, which O'Connor expects will sell 20,000 annually, was driven through a mock rock wall and waterfall to make its debut.
The vehicle seats eight, has a 5.4-litre V8 engine with 8,000 pound towing capacity and 116.4 cubic feet of cargo space.
GMC's Yukon Denali, which is scheduled to be in production in  the 1998 calendar year, features four heated seats and a premium sound system, among other accessories.
""We're certainly going upscale,"" Roy Roberts, general manager of GM's Pontiac-GMC division, said when asked about pricing. He declined to comment further.
Chrysler made its typical auto show splash with the introduction of the Dodge Durango, which broke through the floor of a mock-up of the automaker's new headquarters building.
Touting it as a breakthrough vehicle that offers ""more of everything,"" Chrysler said sales could eventually reach 200,000 units. The automaker invested $910 million to bring the vehicle to market.
The Durango, which goes on sale in December, uses the same chassis and beefy front end as the Dodge Dakota pickup truck. It is aimed at a more downscale audience than Chrysler's tony Jeep Grand Cherokee. One unique feature is a rear cargo well sized to fit a hunting rifle.
The vehicle is bigger than Ford's popular Explorer, but smaller than the Yukon, Navigator and Ford Expedition.
Durango features an optional third bench seat, boosting its seating capacity up to eight people.
Despite growing criticism about sport/utilities' poor fuel economy, the Durango offers the biggest engines in its class, including 5.2-litre and 5.9-litre V8s.
Pricing was not announced, but Chrysler Vice Chairman Robert Lutz said the Durango could be made with a four-cylinder engine, if necessary.
With so many new sport/utility vehicles entering the market, it is becoming more competitive, which will eventually lead to pressure on margins.
""We'll get saturation if people can't afford to buy these things, relative to the cars they drive,"" said Joseph Phillippi, analyst at Lehman Brothers.
Demand for more affordable sport/utilities will push manufacturers to build them on car platforms, as Subaru, Toyota and Honda are doing, Phillippi said, adding that few drivers travel far off road and don't need the ruggedness and high ground clearance of a truck-based sport/utility.
Executives at the Big Three automakers stress that their new sport/utility vehicles will not compete with existing lines.
""We don't think this will be a major drag at all on Expedition,"" O'Connor said of Ford's current top-of-the-line sport utility vehicle. Instead, he said the Navigator should attract new customers to Lincoln-Mercury.
""I think it will bring a whole new customer to Lincoln,"" he said.
But the automakers also know that if they don't offer sport/utility vehicles in a variety of niches, others will.
""I'd rather have the alternative be in my dealer"" showroom, said Chrysler's Lutz.
As for Porsche, Chairman Wendelin Wiedeking would not go into specifics on the German automaker's plans in the sector, other than to say it was in discussions with a third party.
",5
"Most banks in the U.S. Midwest are expected to post third quarter earnings gains of 10 percent or more as the strong economy continues to generate loan growth, cost-cutting programs show results and credit quality remains reasonably sound.
""It looks like credit quality trends should hold up very well,"" said Michael Ancell, banking analyst at Edward D. Jones. He expects the banks he follows to have average earnings gains of 11 percent.  
For most of the year, analysts who follow banks have been waiting to see deterioration in credit quality, especially in credit card loans.
But while some banks, like First Chicago NBD, showed a higher charge-off rate in credit card receivables in the second quarter, a wider wave of loan quality problems has yet to appear, analysts said.
""I don't see large increases in (loan loss) provision,"" said James Schutz, banking analyst at Chicago Corp.  
Many banks have also been aggressively cutting costs, which should help third quarter results. Analysts pointed to Milwaukee-based Firstar Corp as one bank that could benefit from an aggressive cost-cutting plan.
Others point to banks that have been generating fee revenue, such as Northern Trust Corp and Norwest Corp, as also primed for strong gains.  
""Most people are working very hard at expense controls,"" said Thomas Maier, banking analyst at EVEREN Securities. ""I'm more in mind at looking more favorably at those banks that are strong revenue growers. Ultimately, you've got to sell product, in any business.""
Another factor helping gains in earnings per share is stock buyback programs, with many banks aggressively repurchasing their stock. First Bank System Inc, which announced a plan earlier this year to repurchase 25 million shares, was seen by analysts as one of the most aggressive on this front.  
Meanwhile, analysts said the 10 percent pace of earnings gains should continue into next year.
""Even though the credit quality cycle is not getting any better, it certainly is not getting any worse at any kind of a rapid pace,"" said Ben Crabtree, analyst at Dain Bosworth.
Following are third quarter earnings estimates and actual earnings reported a year earlier, according to First Call:
BANK				1996		    1995
----			     ----		    ----
Banc One Corp		   $0.82		   $0.75
Boatmen's Bancshares Inc   $0.94		   $0.86
Commerce Bancshares Inc    $0.81		   $0.72
Fifth Third Bancorp	  $0.83		   $0.73
Firstar Corp		    $1.00		   $0.88
First Bank System	     $1.21		   $1.06
First Chicago NBD	     $1.09		   $1.06
KeyCorp			   $0.95		   $0.90
Marshall and Ilsley Corp   $0.52		   $0.48
Mercantile Bancorp Inc	$0.98		   $1.02
Northern Trust		 $1.12		   $0.98
Norwest			   $0.79		   $0.69
--Reuters Chicago newsdesk, 312-408-8787
",5
"Dayton Hudson Corp., the nation's fourth-largest retailer, Tuesday reported higher third-quarter results, giving added credence to analysts' projections of an industrywide strong holiday shopping season.
Women's retail chains Ann Taylor and The Limited also posted higher results.
General merchandise retailers should post decent gains in November and December combined, said Howard Eilenberg, an analyst at Johnson Redbook Service, a unit of Lynch, Jones & Ryan Inc.
""It's going to be overall in the 5-to-5-1/2 percent increase range (over the previous year's sales). More importantly, the gross margins and the profits are going to look better,"" Eilenberg said.
Dayton Hudson said it had a 164 percent increase in operating earnings for its third quarter ended Nov. 2. Results were aided by a strong performance at its Target discount stores.
The Minneapolis-based retailer reported operating earnings of $116 million, or 49 cents a share, several cents above analysts' estimates. A year earlier it earned $44 million, or 18 cents a share.
""The key issue was a very strong performance from Target in all areas,"" said Saul Yaari, retail analyst at Piper Jaffray.
Target's operating profit in the third quarter rose 82 percent to $213 million, and total revenues increased 14 percent while same-store revenues rose 5 percent, Dayton Hudson said.
Meanwhile, Dayton Hudson's Mervyn's unit reported a 98 percent increase in operating profits to $64 million in the quarter, boosted by reductions in marketing costs, store expenses and headquarters costs. The increase came despite a 3 percent drop in revenue and a decrease in gross margins.
""Our third-quarter results reflect continued strong profit performance at Target and Mervyn's,"" Dayton Hudson Chairman Bob Ulrich said in a news release. ""While the holiday calendar is challenging, we believe we are well positioned for a successful finish to 1996.""
The 1996 holiday season includes five fewer selling days between Thanskgiving and Christmas than a year ago.
New York-based AnnTaylor Stores Corp. reported net income of $3.3 million, or 13 cents a share, after a $2 million, or 8-cent-a-share after-tax charge related to obligations under its former chairman's contract. That compared with $666,000, or 3 cents a share, a year ago.
Columbus, Ohio-based Limited Inc. reported operating earnings of $88.4 million, or 15 cents a share, before gains from initial public offerings, compared with $69.1 million, or 10 cents a share, a year ago.
""Our much improved third-quarter results reflect performance gains and continuing momentum in certain of our women's and our emerging businesses"" including the Abercrombie & Fitch business, Limited Chief Executive Leslie Wexner said in a statement.
""Consistent with our sales plan, we enter the holiday period well positioned, with overall inventories up 3 percent per square foot at retail,"" he said.
Analysts agreed The Limited was well positioned for the key holiday shopping season.
""I think they're positioned for a decent Christmas,"" said Elizabeth Pierce, analyst at Stephens Inc. ""Inventories are conservatively managed.""
Dayton Hudson stock rose $1.25 to $37.625, Limited rose 25 cents to $17.75 and AnnTaylor fell 87.5 cents to $20.50, all on the New York Stock Exchange.
",5
"Equity Residential Properties Trust, a real estate investment trust led by Chicago real estate investor Sam Zell, agreed Friday to buy Wellsford Residential Property Trust( in a deal valuing Wellsford at $1 billion.
The deal would make Equity Residential, which is already the largest publicly traded apartment building owner in the country, the second largest real estate investment trust in any category, the company said.
""Consolidation of this industry is critical for its evolution,"" Zell, who is chairman of Equity Residential, said in a statement. ""The size and liquidity of the combined entity reinforces EQR's status as the No. 1 multifamily (real estate investment trust).""
The deal values New York-based Wellsford at about $1 billion, or $29.61 a share, an 18.7 percent premium over its recent stock price, the companies said.
Equity Residential said it expected to trim about $3.1 million in annual general and administrative expenses and $800,000 in property management expenses after the closing of the deal, which is expected to occur by May.
Equity Residential expects the merger to add 10 cents to 13 cents a share in annualized funds from operation -- the measure commonly used to measure real estate investment fund performance.
When the deal closes, Equity Residential will own and operate 317 properties with 90,873 units. It also adds properties in areas like the Pacific Northwest and West Coast, where strong demand allows for higher rents.
""Those markets have higher rental growth than the national average from other markets,"" said Jeff Langbaum, associate analyst at investment firm Alex. Brown & Sons. Equity Residential estimated rent growth in those areas at 5 percent to 6 percent annualy, while Langbaum estimated the national average at about 4 percent.
Each Wellsford share will be exchanged for 0.625 share of Equity Residential, or about $27.11, plus one share of Wellsford Properties Inc., a newly formed company that will continue Wellsford's development activities, the companies said in a joint statement.
The exchange ratio is subject to upward revision if Equity Residential shares fall below $40. If they drop below $37, the parties have the right to terminate the merger agreement.
Equity Residential also will exchange about $158 million in preferred shares. In addition, Equity Residential will assume about $330 million in Wellsford's debt.
The deal continues the consolidation of real estate investment trusts (REIT).
""It's pretty apparent that that's the way the REIT world, especially apartments right now, is heading,"" Langbaum said.
In December, Houston-based Cambden Property Trust said it would acquire Dallas-based Paragon Group Inc., to create an apartment real estate trust with 36,199 units.
Unlike the hostile takeover Zell's Manufactured Home Communites Inc. launched against Chateau Properties Inc., which was rebuffed by the manufactured housing community operator last year, the Equity Residential deal was unanimously approved by both companies' boards of trustees, the companies said.
Wellsford shares were up $1.875 at $27.625, while Equity Residential was down $1.125 at $42.25 on the New York Stock Exchange in late trading.
",5
"Caterpillar Inc., the world's largest construction and mining equipment maker, Tuesday reported record third-quarter profits of $310 million, up 45 percent from $213 million a year ago.
Sales jumped to $4.03 billion from $3.73 billion, while earnings per share rose 50 percent to $1.61 from $1.07.
The results exceeded expectations on Wall Street and Caterpillar stock jumped $2.50 to $76.625 on the New York Stock Exchange. Analysts had forecast profits of $1.34 a share, according to First Call, which tracks earnings estimates.
For the first nine months of 1997, sales were $12.06 billion, up slightly from $11.86 billion a year ago, while profit surged to $980 million from $836 million.
""There really wasn't much of a sales increase but there was a tremendous bottom-line increase,"" Caterpillar Chief Financial Officer Douglas Oberhelman said in a telephone interview. Most of the earnings gain was due to improved operations, though some was currency related, he said.
Profit margins rose to 25 percent in the quarter from 19 percent a year ago, primarily due to higher prices, stronger volume and the effects of a stronger U.S. dollar, Caterpillar said. Price gains were seen equally inside and outside the United States, Oberhelman said.
Continuing improvements in manufacturing and essentially flat material costs also helped boost profits but were partly offset by an unfavourable product sales mix, the heavy equipment maker said.
The sales mix in the quarter shifted more toward lower margin smaller machines, Oberhelman said, but he added that this mix shifts month-to-month and quarter-to-quarter.
""The thing that's encouraging is the gross margins remain strong,"" said Lisa Shalett, analyst at Sanford C. Bernstein & Co., Inc. ""It looks like the productivity gains they talked about in the second quarter are continuing""
Higher machine sales in the United States accounted for most of a 5 percent increase in sales volume in the quarter, Caterpillar said.
But deliveries to U.S. dealer rental fleets fell from a year ago as rental inventories remained high, the company said.
Machine sales in Europe fell due to declines in Germany and France, where the contruction sector remains weak, the company said. Sales in China, Japan, Australia and Latin America were up, while sales in Canada were unchanged and sales fell in the former Soviet Union.
The company also said it expected 1997 sales to be up slightly from an expected record in 1996, while it expects 1996 profits to exceed the $1.14 billion reported in 1995. The current record for sales is $16.07 billion, set in 1995.
""Our preliminary outlook for 1997 is to slightly surpass the record levels achieved in 1996,"" Chairman Donald Fites said in a statement.
""We continue to see opportunities for solid growth in the vast majority of the global markets we serve, particularly in the fast-growing developing nations where infrastructure needs are greatest,"" Fites said.
Higher industrial demand in developing regions, Canada and Australia are expected to offset slightly lower demand in the United States, Europe and Japan, the Peoria, Ill.-based company said.
""The outlook statement surprised me on two levels,"" Shalett said. ""It talked about slightly higher sales but not higher profit. I thought that was deliberate.""
She also said that while sales gains outside the United States, Europe and Japan are expected to offset lower demand in those areas, ""it's not clear to us that it makes up for (those areas) on the profit side.""
",5
"Mercury Finance Co. said Wednesday it found problems in its bookkeeping that caused it to overstate earnings by $90 million over four years and that its chief accountant had apparently disappeared.
The Northbrook, Ill.-based finance company said the irregularities appear to have come from unauthorised entries in financial records by its chief accounting officer.
The company said a special committee of the board has been formed to investigate with legal and accounting experts.
The accountant, James Doyle, was last seen at the company on Jan. 23, the day it reported fourth quarter results, Mercury Finance spokesman Joseph Kopec said.
""He called Friday and said he would not be in for personal reasons,"" Kopec said. ""They haven't seen him since.""
Doyle's whereabouts were unknown.
The problems may jeopardise Mercury's planned acquisition of Fidelity Acceptance Corp., a consumer finance company, from BankBoston Corp. in a $393 million deal announced on Jan. 10.
Wednesday's announcement caught the financial community by surprise, with analysts unwilling to comment after Mercury's statement, saying they were still trying to gather information.
As a result of the adjustments, shareholders' equity as of Dec. 31, 1996, would be reduced from $353 million to $263 million, the company said.
As a result of the overstatement of earnings, Mercury said it is in violation of some of its debt agreements and was negotiating with lenders.
It said its financial condition remained strong and would support continuing operations and its expansion plans.
BankBoston said it would await the results of the accounting investigation before proceeding with the sale of Fidelity Acceptance. Mercury said it was optimistic about completing the deal.
Mercury said 1996 net income would be restated to $56.7 million from $120.7 million, 1995 profits would be cut to $76.9 million from $98.9 million and 1994 earnings would be $83 million instead of the $86.5 million originally reported.
In addition, 1993 profits would be trimmed to $64.2 million from $64.9 million.
Mercury stock was halted all day on the New York Stock Exchange. It closed Tuesday at $14.875.
Moody's Investors Service cut its rating on Mercury's short-term borrowings and Standard & Poor's said it may lower its rating.
Mercury Finance suffered another blow last year, when Daniel Terra, chairman of the company since it went public in 1989, died in June.
",5
"A brisk start to holiday shopping should help retailers post solid sales gains for November and make this season merrier than last year for the nation's store chains.
But quirks in the calendar, with a later Thanksgiving this year, and some retailers tallying sales differently than others, could obscure overall results for November.
Industry analysts said they expect sales at stores open at least a year to rise 2.5 percent to 4.0 percent overall in November, with clothing continuing to be a strong contributor, as it was in October.
Most retailers report November sales on Thursday.
""We think the majority of companies are going to be on or above plan for the month of November, with good inventory levels,"" said Harry Ikenson, retail analyst at Rodman & Renshaw Inc. ""We think the promotional level for Thanksgiving was high, but probably no higher than last year.""
With discounts and markdowns no higher and in some cases lower than last year, and inventories being managed tightly, profit margins should improve, helping to lift fourth quarter earnings, analysts said.
""On balance, good business now is going to translate into decent earnings,"" said Dean Ramos at Dain Bosworth Inc. Ramos said his index of sales could be one to two points higher than the 3.1 percent rise reported last year and that the trend should continue through December.
""Absent some sort of event that shakes the consumer you should see good retail sales"" in December, he said.
Holiday sales are crucial to retailers who typically earn a quarter or more of the year's profits during the season, analysts said. Steady economic growth and low unemployment have helped boost sales so far, and store chains should also benefit from easy comparisons with weak results a year ago.
Consumers got off to a fast start on their holiday shopping after Thanksgiving, analysts said.
Retail consumer spending in the post-Thanksgiving weekend rose 4.3 percent from a year ago, according to TeleCheck Services, which tracks check-writing volume. Overall, same-store sales rose 2.1 percent, TeleCheck said.
Several department store operators were expcted to be among the winners when sales are reported on Thursday.
Rodman & Renshaw's Ikenson said he expected J.C. Penney Co. Inc. and May Department Stores Co. to be above expectations, with Penney's same-store sales up 7.5 percent to 8 percent and May's up 6 percent to 7 percent. Federated Department Stores Inc. should be up 7 percent to 9 percent, with gains in all its segments, he said.
He also sees speciality retailer Paul Harris Stores Inc. up 15 percent to 17 percent, but Charming Shoppes Inc. slightly below expectations with a gain of 5 percent.
Dean Witter analyst Patrick McCormack said in a research report he expected sames store sales to be up 3 percent in the month for the firm's index of 44 companies.
He also saw JC Penney, May, and Federated above expectations, as well as Sears, Roebuck and Co.
Sears was forecast by analysts to post a smaller-than-expected decline of 1 percent to 2 percent, which is due to a quirk in the company's sales reporting calendar that should help boost results in December.
Sears Senior Executive Vice President John Costello said on Sunday that post-Thanskgiving sales appeared to be up across the board, from men's and children's clothing to Craftsman tools to fine jewelry.
""Optimism is up and it looks like consumers are responding to the short season by getting an earlier start,"" he said.
Most analyts expect big-ticket consumer electronics to continue to be weak, though one saw some signs of a pickup in sales at the end of the month.
""Sears and Wal-Mart over the last week talked about a pickup in the computer area,"" said Michael Niemira, analyst at Bank of Tokyo-Mitsubishi. He forecast sales overall up 2.5 percent for November at a comparable number of stores.
",5
"Caterpillar Inc. said Tuesday it is prepared to unilaterally impose employment terms, effective Oct. 1, on employees represented by the United Auto Workers after declaring an impasse in talks with the union.
The impasse revolves around the firings of some union workers before and during the 17-month strike against the Peoria, Ill.-based heavy equipment maker that ended in December without a new contract.
Caterpillar is willing to have firings after the strike sent to arbitration, but not those before and during the walkout.
The terms Caterpillar said it will impose at its eight UAW-represented plants in the United States include a pledge not to close any faciltities except the company's York, Pa., plant through September 2001, and job guarantees through that time period. Caterpillar has 31 manufacturing plants in the United States.
""We are taking this step to provide our employees with an added sense of security about their future, while giving Caterpillar the labor costs and the flexibility we need to keep jobs in the U.S. and keep our U.S.-made products competitive around the world,"" Caterpillar Vice President Wayne Zimmerman said in a statement.
Other terms include a 19 percent increase in Caterpillar's supplement of pensions for retirees until they become eligible for Social Security, an average increase of 7-1/2 percent in pensions and a doubling of potential incentive pay, Caterpillar said.
Caterpillar's UAW workers have been working without a contract since 1991. A 17-month strike against the equipment maker ended in December without a resolution of contract issues.
The UAW said Tuesday it does not agree that it has reached a lawful impasse with the company that makes it necessary for the terms to be put into effect.
""This tactic is yet another attempt to subvert the collective bargaining process,"" UAW Vice President Richard Shoemaker said in a statement.
The union said it will pursue the appropriate legal remedies if the company takes action to implement employment conditions without the existance of an impasse.
One analyst said the impasse declaration by Caterpillar appears to be genuine, not just a bargaining ploy.
""I don't think this is really a bargaining move,"" said Barry Bannister, analyst at S.G. Warburg. ""It's just an obvious impasse.""
He also said he did not expect the move to affect the stock, noting that strikers returned to Caterpillar several months ago without an effect on the company's profit margins.
",5
"Mercantile Bancorp Inc. said Monday it agreed to acquire Roosevelt Financial Group Inc. for about $1 billion in cash and stock, a move that would create the largest bank in Missouri.
The companies said the acquisition will create the largest locally managed and independently owned financial services organisation based in the southern Midwest. It will make Mercantile the largest banking company in Missouri, with more than 23 percent of the state's deposits, Mercantile said.
Mercantile will become the largest bank in St. Louis, where it is headquartered, and in Springfield, Mo., and will strengthen its presence in other major Missouri markets such as Kansas City.
Roosevelt, a savings and loan with $9 billion in assets that is also based in St. Louis, has 81 offices and branches in Missouri, Kansas and Illinois.
The acquisition follows Mercantile's agreement to buy Mark Twain Bancshares Inc., another St. Louis-based bank, for $855 million in stock. That deal was announced on Oct. 28.
""Our combination with Roosevelt will materially enhance our mix of strong retail, middle market lending and other speciality businesses,"" Mercantile Chairman Thomas Jacobsen said in a statement.
Mercantile plans to take a pretax charge of $25 million to $30 million for merger-related costs when the deal closes next year but also expects it to add to earnings in 1997 and 1998, officials said.
The deal would save about $20 million a year in branch costs annually, Jacobsen said but would not elaborate on how many branches would be closed.
""There will be some certainly, but probably fewer than you might think,"" Jacobsen said at a news conference.
Analysts said they were told separately that about 50 overlapping branches were expected to be closed by 1998.
Due to attrition and since the two companies will not be completely merged, layoffs were expected to be minimal, officials said.
""We're not aware of anyone at this time that won't be able to find a role with the ongoing company,"" said Stanley Bradshaw, chief executive at Roosevelt.
Mercantile, which said both the Roosevelt and Mark Twain acquisitions were expected to close in the second quarter of 1997, would not rule out future acquisitions.
""We have continuing interest in Illinois, Iowa and Arkansas,"" said John Beirise, group vice president for emerging markets at Mercantile. ""Oklahoma has interest to us and would also be a logical extension.""
The Mercantile that emerges after the pending takeovers are completed will have $30 billion in assets and could itself become an attractive takeover target, analysts said.
Mercantile, which will have a stock market worth of more than $4 billion, could be even more attractive once the acquisitions have been assimilated.
""I'd say Merc was already attractive anyway,"" said Joseph Stieven, a banking analyst at Stifel Nicolaus, which advised Roosevelt on the deal. ""This makes them no less atttractive.""
Said Joseph Roberto, banking analyst at Keefe Bruyette & Woods, ""I think it makes Mercantile more attractive. It gives them the No. 1 market share across the state.""
Mercantile said it will exchange up to 13 million shares of its stock at a ratio of 0.4211 Mercantile share for each Roosevelt share, and pay $22 cash for each remaining share.
Based on the $50.75 closing price Friday of Mercantile's shares on the New York Stock Exchange, the exchange ratio would value Roosevelt shares at about $21.37 each. Roosevelt's stock closed Friday at $18.125 on Nasdaq.
Roosevelt shares added $2.375 to $20.50 on Nasdaq while Mercantile stock fell $1 to $49.75 on the New York Stock Exchange.
Mercantile also said it planned to repurchase up to 7 million of its own shares in connection with the acquisition.
",5
"Federal officials Sunday confirmed 29 cases of bacterial poisoning linked to fresh apple juice as investigators tested for contamination in samples pulled from Western U.S. and Canadian store shelves.
Bob Howard of the U.S. Centers for Disease Control in Atlanta said the agency had confirmed that 29 children and young adults had been infected with a potentially fatal strain of the E. coli bacterium after drinking Odwalla Inc. fruit juice in California, Washington, Colorado and the Vancouver area of British Columbia.
At least 36 additional cases are suspected or under investigation, state, county and provincial officials said.
State and federal officials continued to test Odwalla juice samples over the weekend but said they had not found any evidence of contamination.
""We're going to have to wait a few days to know for sure whether the samples are negative or positive,"" Arthur Whitmore of the U.S. Food and Drug Administration said. ""It is quite possible we won't actually find anything, but we have a good selection of samples, including those from the company's library of samples.""
Odwalla, a rapidly growing juice company based in Half Moon Bay, California, was able to provide samples from production runs of two weeks ago, when the first cases surfaced in the Seattle area.
Whitmore said he did not know of any cases in which illness set in after Oct. 23, although the disease can incubate for up to two weeks.
At least four children remained hospitalized because of complications caused by the E. coli O57:H7 bacterium, including a 2-year-old girl in critical condition in California. Tara Azizi was in critical condition ""but improving slightly,"" Stephen Texeira of Children's Hospital in Oakland said.
Young children are most susceptible to the bacterium, which causes stomach cramps followed by bloody diarrhea. In severe cases the illness can lead to kidney failure, which is treated through dialysis but may cause brain damage and death.
The bacterium, which normally lives in the digestive system of cattle, can enter the food chain through fecal contamination, because of either improper slaughtering or contact with manure.
Health officials speculated that Odwalla may have used apples that had fallen onto the ground, although company officials say they do not use ""ground apples"" and all produce is thoroughly washed before processing at the company's Dinuba, California, plant.
Odwalla juices are not pasteurized. Heat processing kills bacteria but can also alter flavor.
The outbreak of E. coli O157:H7 is the biggest in the United States since 1993 when more than 500 people fell ill in the Pacific Northwest and three children died after eating tainted meat, mostly at Jack-In-The-Box hamburger restaurants.
The same strain of E. coli sickened 9,500 people and killed 11 in Japan last summer. No source was identified in that outbreak, though raw radish shoots were suspected.
The CDC's Howard said the agency recommended that people boil unpasteurized cider or juice.
",31
"Boeing Co defense and space group President Gerald King said he thought the company had a ""better than 50-50"" chance of surviving to the next round of the military's Joint Strike Fighter program.
He said in an interview he was ""not quite as bullish"" about the company's chances of surviving into the next round of competition to win a contract to develop a so-called Evolved Expendable Launch Vehicle for the U.S. Air Force. (corrects program from ""...develop the next-generation space shuttle launch  vehicle."") 
In the joint strike program, Boeing is competing with McDonnell Douglas Corp and Lockheed Martin Corp to win a contract to build about 3,000 jets in the next century for the U.S. Air Force, Navy, Marine Corps and the British Royal Navy.
The Pentagon will eliminate one of the bidding companies next month in a ""downselect.""
""This is high on our priority, so we put a lot of effort into coming up with what we think is the right solution,"" King said in an interview. 
He said he thought Boeing had a good chance because of the high degree of commonality in its design, which should allow it to come up with a lower price for the single modular aircraft with three different configurations.
""I think our chances our better than 50-50 of going to the next phase because I think we've come forward with a very innovative solution,"" he said.  ""The customer is almost obligated to give us an opportunity to demonstrate that we can in fact deliver what we've committed to."" 
But he said he was concerned the Pentagon might favor the other bidders, particularly McDonnell Douglas, on the theory that a broad national ""industrial base"" needs to be maintained.
He said such an argument would make ""absolutely no sense"" because the United States already has excess capacity to build commercial and military aircraft.
If Boeing were eliminated the company would be ""available"" to partner with the surviving contractors, King said.
On the space shuttle program, the U.S. National Aeronautics and Space Administration is expected to select two finalists in December from among Boeing, McDonnell Douglas, Lockheed Martin and Alliant Techsystems Inc.
""Even though I think we have the best solution, I think the competition is extremely tough, with Lockheed Martin and McDonnell Douglas having present launch systems that they can evolve from,"" King said.
				   -- Seattle bureau 206-386-4848
",31
"Pyramid Breweries Inc.  PMIDO Tuesday warned of lower-than-expected sales and earnings for the fourth quarter, blaming increasing competition in the craft beer industry.
Seattle-based Pyramid said sales would be 20 percent to 25 percent below last year's levels on a wholesale basis and said it expected to just break even for the quarter, compared with analysts' projections it would earn 9 cents a share.
In last year's fourth quarter, the company posted gross sales of $7 million and net income of about $1 million, or 13 cents a share.
Pyramid's warning was the latest to roil the trendy craft beer industry, which has disappointed investors who snapped up stock sold in a spree of offerings over the past two years.
Pyramid stock, which went public at $19 as Hart Brewing Co. in December 1995, fell 12.5 cents after the announcement to $4.125 a share in Nasdaq trading. It ended an abbreviated trading session 25 cents lower at $4.
Pyramid's crosstown rival, Redhook Ale Brewery Inc. , which just last week warned of weak sales, was trading at $10.625 on Nasdaq, compared with its August 1995 offering price of $17 a share and a peak of $35.
Boston Beer Co., maker of Samuel Adams beer, was trading at $10 on the New York Stock Exchange, compared with an offering price of $20 little more than a year ago and a peak of $33.
Brewers have blamed tough competition, particularly in the Northeast and on the West Coast, where the premium-priced beers have caught on most quickly with consumers.
But market share for craft beers may have peaked in many of those initial markets, while an increasing number of varieties crowd grocery store coolers.
""Not a lot of new consumers are trying craft beers any more,"" said analyst Diane Daggatt of Dain Bosworth, referring to more mature markets. ""The people who are going to try them have tried them. They just haven't built any brand loyalty.""
She said about 400 craft brewers nationwide were distributing beer, up from 300 just a year ago. And brewers are adding more specialty beers, increasing competition and confusing consumers.
While breweries have been offering promotional discounts, analyst Scott McAdams of brokerage Ragen MacKenzie said the industry may be ripe for more serious price cuts and consolidation.
""People are going to have to think about addressing the price issue and spending more on marketing,"" he said. ""They're going to have to play the beer game more than they have been playing the beer game.""
But analysts said there was still a lot of room for growth in new markets. Nationally, craft beers account for about 3 percent of sales, compared with 8 percent to 10 percent in markets such as Portland and Seattle, she said.
",31
"A federal appeals court on Wednesday overturned a jury verdict that ordered Nintendo Co. Ltd. to pay $253 million for patent infringement.
With interest, the company could have been forced to pay nearly $300 million to tiny Alpex Computer Corp. for a technology allegedly used in the hugely popular Nintendo Entertainment System game device, Nintendo of America Chairman Howard Lincoln said in an interview.
But in a 16-page decision, the U.S. Court of Appeals in Washington, D.C., overturned the jury's decision that the Alpex patent had been infringed.
""It's a complete victory,"" Lincoln said. ""I think our nightmare with these folks is over.""
Alpex, which Lincoln described as a bankrupt mining concern, filed suit in 1986, charging Nintendo's 8-bit game device used a patented ""bitmapping"" display technology patented by two Alpex engineers in 1977.
In 1994 a U.S. District Court jury agreed and ordered Nintendo to pay a 6 percent royalty on each of the more than 35 million game units sold in the United States.
But a three-judge panel of the appeals court in Washington, which handles patent cases, said in a 16-page decision it found a ""lack of substantial evidence to support a finding of infringement either literally or under the doctrine of equivalents.""
Alpex's technology was used in early generation video games made by Mattel, Atari and Coleco. The company later won patent infringement settlements from Sega Enterprises Ltd. and others.
But with the appeal victory Nintendo preserved what Lincoln said was a perfect record of fighting in court to protect its intellectual property rights.
Lincoln said the case ""cries out for a change"" in the patent litigation system because it required a jury of laymen to sit through an eight-week trial that hinged on complex technical details of data storage and image display.
""The problem is you ask these juries to in effect become electrical engineers, and quite frankly the jury was not composed of electrical engineers,"" Lincoln said.
He also said the case was kept alive by lawyers working on a contingency-fee basis who stood to make huge profits.
While Alpex could appeal to the full appeals court or the Supreme Court, Lincoln said he was confident Nintendo would prevail.
Lawyers for Alpex could not be reached for comment.
",31
"Microsoft Corp is expected to report modest earnings growth for the latest quarter on Friday despite tough comparisons with the year-earlier period and a sales slowdown ahead of an upgrade of a popular software package.
Industry analysts surveyed by First Call on average expect Microsoft to report earnings of 51 cents a share for its second quarter ended December 31, up about 16 percent from the 44 cents a share reported a year earlier. Sales are expected to rise about 14 percent to more than $2.5 billion.
Analysts consider that a strong performance against tough comparisons with the year-earlier period, the first full quarter of availability for the Windows 95 operating system.
In the 1995 second quarter sales soared 54 percent and net income jumped 48 percent.
""These guys are just incredibly strong now,"" said Rob Owens of Pacific Crest Securities in Portland, Ore. ""They'll probably meet or beat (Wall) Street's estimate again.""
Investors will have all weekend to analyse the results, which are due to be released after the close of trading on Friday.
Microsoft executives originally had scheduled the release for Thursday but decided to delay the report until a day after an event publicising the launch of Office 97, its best-selling package of business software.
Analysts estimated that revenues of Office and its component applications account for up to 30 percent of Microsoft's total, but the figure will be lower for the quarter just ended because of the impending upgrade.
For much of the quarter Microsoft offered Office 95 buyers coupons good for a free upgrade, which will result in some revenues being deferred into future reporting periods.
But strong growth in personal computer sales and in acceptance of Microsoft's high-end Windows NT operating system continue to buoy the company's profits.
""The ongoing strength of the NT cycle is what's carrying the day,"" said Chris Galvin of Hambrecht & Quist. ""Countervailing that is the tough comparison last year with the Windows 95 release, so it's a mixed scenario.""
Owen said that while sales of PCs to consumers were sluggish in the latest quarter, declining prices and increased processing power had sparked a new wave of corporate buying.
He said 30 percent or fewer of corporate desktops have made the transition to the Windows 95 or Windows NT systems.
""That's a tremendous opportunity for Microsoft,"" he said.  
The Malaysian Prime Minister said participants had raised concerns about shortages of skilled knowledge workers, and about how to market products in neighbouring countries.
Malaysia's newly formed Multimedia Development Corp is preparing to take formal applications beginning in March from ""world-class companies"" wanting to set up operations in the Multimedia Super Corridor.
McNealy said Sun Microsystems was already planning to put a Java Software Development Competency Center in the new high tech zone, and a senior executive of NTT Corp said the Japanese telecommunications giant was also planning to locate a research and development centre in the multimedia corridor.
NTT also wants to join other participants in forming a Multimedia University which Malaysia envisions for the area.
Some of the executives said the project was ambitious, and would likely face many pressures for the plan to change as it progressed, despite its success in attracting initial support.
""You cannot command creation,"" said Bishop. ""We have an impeccable plan, but execution still has to happen. We know enough in this new digital world that there are a lot of unpredictable discontinuities that occur. No country has a monopoly on these things.""  
Mahathir said individual panel members would continue to meet over the next year, and that a further full meeting would be called in Malaysia a year from now to review progress.
",31
"Underdog Boeing Co., pitted against the nation's top two defence contractors, hopes to emerge as one of the winners next week when the Pentagon narrows the field to two competitors for the biggest weapons project of the early 21st century.
Boeing, Lockheed Martin Corp. and McDonnell Douglas Corp. are each leading teams bidding on a Pentagon contract to build 3,000 new joint strike fighters -- a deal that could be worth more than $170 billion over the next two decades.
Defence officials will announce on Nov. 18 the results of a hotly contested ""down select"" that will eliminate one of the three teams and leave the remaining bidders to build prototypes for a ""flyoff"" and final decision in fiscal year 2001.
""We have identified the joint strike fighter as our No. 1 new business opportunity,"" said Lee Whitney, a spokesman for Lockheed Martin, the nation's biggest defence contractor. ""We have focused resources from throughout the corporation on our configuration and all the effort necessary to emerge as the winner.""
The contract also is regarded as crucial for No. 2 McDonnell Douglas Corp., which recently announced its intention to reduce its commercial aviation efforts.
""Winning is more critical to Lockheed and McDonnell than it is to Boeing,"" said analyst Paul Nisbet of JSA Research.
But, he said, Boeing's entry was aggressive, promising up to 95 percent commonality among the three versions of the jet and a ""flyaway"" cost averaging less than $30 million for each plane, excluding billions in research and development.
""I think they're still viewed as being the dark horse, but if I really had to bet some money, I'd bet that Lockheed Martin is going to be the loser,"" Nisbet said. ""They already have two-thirds of the F-22, and the other two proposals are at least as good or even better.""
The joint strike fighter is aimed at cutting costs by serving the needs of the Air Force, Marines, Navy and the British Royal Navy with a single common airframe.
Some within the Pentagon chafe at the concept of a multi-purpose jet design with three versions -- including advanced air-to-ground strike capability for the Air Force and vertical ""hover"" landing capability for the Marines.
But the project appears to have the momentum to carry it forward into the 21st century, when it would replace four existing fighters after delivery begins in fiscal 2008.
In addition to the 3,000 jets being ordered by the four services -- including more than 2,000 for the Air Force -- industry executives believe another 1,000 could be sold for export to U.S. allies.
While Boeing has major roles in current projects, including the B-2 bomber and F-22 fighter, the Seattle-based company, best known for its commercial airliners, has not been the prime contractor on a tactical military jet since the Army's P-26 ""Peashooter"" of the 1930s.
But analysts say the company's innovative design for the joint strike fighter, which includes one engine type and one wing for all three versions, may well earn it a place among the two finalists.
""Boeing's design became much more credibly viewed because they're leveraging their derivative technologies that they've built up over years of commercial production,"" said Nick Heymann, an analyst at Natwest Securities.
Boeing has signalled its intention to remain a major player in the military arena with its planned purchase of Rockwell International Corp. 's defence and space properties for $3.2 billion.
""We've come forward with a very innovative solution,"" Boeing defence and space President Jerry King said. ""The Pentagon is almost obligated to give us an opportunity to demonstrate that we can in fact deliver what we've committed to.""
",31
"Airbus Industrie's preliminary restructuring agreement may help the consortium become more efficient, but poses no near-term threat to Boeing Co's market dominance, industry analysts said Friday.
Although details of the Airbus agreement were not revealed, it appeared to represent a step forward from last July's announcement that the four-nation consortium would be transformed into a single corporate entity by 1999.  
""I think it's a step in the right direction,"" said Wolfgang Demisch of BT Securities. ""They have a good franchise and they are going to be a contender.""
Pressure on Airbus to act has increased since last month's stunning news that Boeing plans to acquire McDonnell Douglas Corp, its last remaining U.S. rival in commercial jets.
Analysts say Airbus needs to streamline its unwieldy management structure to have any hope of competing with highly centralized and rapidly expanding Boeing, which has access to enormous resources and the ability to subcontract work around the world.  
""If they are much more like a private company than they are now, certainly it would be to their benefit,"" said Paul Nisbet, an analyst at JSA Research.
Officials at Boeing, which controls about 60 percent of the worldwide market for commercial jets, compared with some 35 percent for Airbus, said they welcomed the news.
""We welcome an Airbus reorganization that would make its financial arrangements agree with generally accepted accounting principles and become transparent to public scrutiny, which includes the publication of regular financial statements,"" a Boeing spokesman said.  
He added that Boeing officials expect any reorganization would ""further remove Airbus operating decisions from government control and influence.""
Demisch believed the latest Airbus agreement would enable the consortium to better integrate aircraft development, although manufacturing would still be done by the four member companies.
The consortium members are French state-owned Ste Nationale Industrielle Aerospatiale, British Aerospace Plc, Daimler-Benz AG's aerospace unit and Construcciones Aeronauticas SA (CASA) of Spain.  
He said Airbus's success as a multinational should position it to compete in areas beyond its core commercial jet market such as defense and space.
While the Airbus restructuring is aimed in part at raising the billions of dollars needed to launch its planned A-3XX jumbo jet, Boeing officials have aggressively disputed the market projections put forward by the consortium.
Boeing, which is mulling a possible stretch version of the 747, says the market for a super-jumbo jet is barely big enough for one player, much less two. And Boeing says an all-new jet would cost far more than the $8 billion Airbus projects.
Meanwhile, Airbus recently postponed a decision on a far cheaper plan to stretch its A340 model to compete with the sallest 747 and largest 777 models.
((-- Reuters Seattle bureau 206-386-4848))
",31
"Boeing Co's planned $13 billion acquisition of McDonnell Douglas Corp. will propel it to a leading position as a military contractor, matching its stature as the world leader in commercial aviation.
While Europe's Airbus Industrie is likely to feel competitive pressure because of Boeing's increased resources, industry analysts said the chief benefits for Boeing would be on the military side.
""Historically Boeing's military business was something of an also-ran,"" said Cai von Rumohr, an analyst at Cowen & Co. ""With this transaction in one fell swoop they become a very major player.""
One analyst said the combined company could get nearly 50 percent of its revenues from government contracts, up from Boeing's historical 25 to 30 percent.
The deal follows by little more than a week the completion of Boeing's $3.2 billion acquisition of Rockwell International Corp's defence and space business.
And it comes just a month after McDonnell Douglas was eliminated from consideration to build the military's 21st century joint strike fighter plane.
Instead the Pentagon chose Boeing and Lockheed Martin Corp -- the nation's largest military contractor -- to build prototype versions of the new fighter jet in a contract that could be worth $200 billion or more to the eventual winner.
The addition of McDonnell Douglas' expertise makes Boeing ""the team to beat"" on the crucial programme, said Paul Nisbet of JSA Securities.
Analyst Nick Heymann of Natwest Securities said the loss of the joint strike fighter was the crowning blow for McDonnell Douglas, which already had announced its intention to back away from the commercial aviation market, where it has been only a marginal player in recent years.
""McDonnell Douglas just didn't have the resources to aggressively fund its development programmes,"" he said. ""They got stretched too thin on transports and fighters and commercial, and they underinvested.""
Nevertheless the friendly all-stock deal does not necessarily mean that McDonnell Douglas executives failed in their effort to turn around the company, analysts said.
For one thing the offer price of about $62.89 a share based on Friday's close is well beyond the stock's all-time high and about 10 times its level of the early 1990s, said Wolfgang Demisch of BT Securities.
In addition the merger is being done at the very beginning of an expansion cycle in the industry, meaning layoffs can be minimised and the companies have several years to rationalise their operations before the next expected downturn.
""It isn't a case that you're merging because you're starving to death,"" said Demisch. ""It's a case that there's lots of opportunity. ... That's a much healthier basis on which to consolidate.""
Indeed Boeing chief executive Phil Condit said the combined companies would have revenues of $48 billion next year, up more than 30 percent from a projected $35 billion this year.
""We are going to be going after $1 billion or more of savings a year, but we are going to be doing in it in an environment where the overall growth is occurring,"" Condit said at a news conference. ""That's the advantage we have got right now.""
Condit, who will become chairman and chief executive officer of the combined company, said final merger negotiations began Tuesday, the day after he was elected to become Boeing's chairman effective Feb. 1.
While Boeing does not currently need additional capacity to produce commercial jets, it will benefit from additional engineering strength, which will allow it to produce new models or variations of existing jets more quickly.
Analysts predicted the deal would win clearance from federal antitrust regulators, noting that no protests were raised this month when the two companies struck a deal to work together on engineering new wide-body jets.
And analysts said they thought the deal would win approval from the Pentagon, which has encouraged industry consolidation and backed the deal that created No. 1 defence contractor Lockheed Martin in 1994.
Perhaps the chief concern for federal regulators will be Boeing's overwhelming size, which will be nearly twice that of its nearest rival Lockeheed Martin if the deal goes through.
",31
"Microsoft Corp. is expected to report modest earnings growth for the latest quarter Friday despite tough comparisons with the year-earlier period and a sales slowdown ahead of an upgrade of a popular software package.
Industry analysts surveyed by First Call on average expect Microsoft to report earnings of 51 cents a share for its second quarter ended on Dec. 31, up about 16 percent from the 44 cents a share reported a year earlier. Sales are expected to rise about 14 percent to more than $2.5 billion.
Analysts consider that a strong performance against tough comparisons with the year-earlier period, the first full quarter of availability for the Windows 95 operating system.
In the 1995 second quarter sales soared 54 percent and net income jumped 48 percent.
""These guys are just incredibly strong now,"" said Rob Owens of Pacific Crest Securities in Portland, Ore. ""They'll probably meet or beat (Wall) Street's estimate again.""
Investors will have all weekend to analyse the results, which are due to be released after the close of trading Friday.
Microsoft executives originally had scheduled the release for Thursday but decided to delay the report until a day after an event publicising the launch of Office 97, its best-selling package of business software.
Analysts estimated that revenues of Office and its component applications account for up to 30 percent of Microsoft's total, but the figure will be lower for the quarter just ended because of the impending upgrade.
For much of the quarter Microsoft offered Office 95 buyers coupons good for a free upgrade, which will result in some revenues being deferred into future reporting periods.
But strong growth in personal computer sales and in acceptance of Microsoft's high-end Windows NT operating system continue to buoy the company's profits.
""The ongoing strength of the NT cycle is what's carrying the day,"" said Chris Galvin of Hambrecht & Quist. ""Countervailing that is the tough comparison last year with the Windows 95 release, so it's a mixed scenario.""
Owen said that while sales of PCs to consumers were sluggish in the latest quarter, declining prices and increased processing power had sparked a new wave of corporate buying.
He said 30 percent or fewer of corporate desktops have made the transition to the Windows 95 or Windows NT systems.
""That's a tremendous opportunity for Microsoft,"" he said.
",31
"Microsoft Corp Chief Financial Officer Mike Brown Monday said he expected the company's revenues to rise sequentially in the next two quarters from the $2.3 billion reported for the three months ended September 30.
In an interview, Brown also said he thought the company's cost of goods sold could decline ""a little bit"" in the long term from the 10.9 percent of revenue just reported, already down from 16 percent a year ago.  
""We'll grow a little bit in December and then a little bit more in March, I think,"" Brown said. ""I'm very happy with the general revenue trend, and I was very pleased with the pattern of costs in the quarter.""
Brown said revenue in the December quarter would be driven in part by holiday season cyclicality, while the March quarter would get a boost from the release of the company's Office 97 suite of business applications, an upgrade to one of the software company's core products.  
Brown said cost ratios were falling because of increased use of CD-ROMs for distributing software, rather than more costly diskettes, and because of the growing popularity of enterprise software licenses over sales through the retail and reseller channels.
Brown also said the company's spending on research and development was ""right on target,"" with its announced plans to spend $2.1 billion in the current fiscal year ending June 30.
In addition, he said unearned revenue on the company's balance sheet -- up to $651 million as of September 30 from $560 million three months earlier -- would rise further as a result of growth in the ""subscription"" model of sales, such as licenses and upgrade.
					-- Seattle bureau 206-386-4848
",31
"Louisiana-Pacific Corp. said Monday it will close its Ketchikan pulp mill in southeastern Alaska next year after the failure of negotiations with the Clinton administration over timber supply.
The company said it planned to take a $350 million charge against third-quarter pre-tax earnings -- $215 million or $2 per share after taxes -- to reflect shutdown of the pulp mill and nine smaller plants nationwide as well as settlement of a shareholder lawsuit.
The closing of the controversial 48-year-old pulp plant, which had been expected, will idle about 500 workers in Ketchikan, a city of 15,000 in the heart of the sprawling Tongass National Forest where the mill has long been the biggest employer.
Company executives said the mill would close March 24, 1997, after the existing supply of timber is processed.
Under an agreement worked out by the White House and Alaska Sen. Frank Murkowski, Louisiana-Pacific said it expected to get enough timber to continue operating two sawmills in the region for two more years, employing 400 to 500 workers.
Portland, Ore.-based Louisiana-Pacific blamed the closure of the pulp mill, which lost an estimated $40 million in the first nine months of the year, on ""the Clinton administration's opposition to any compromise that would allow the pulp mill to operate profitably.""
In a conference call with reporters, Louisiana-Pacific Chairman Mark Suwyn spoke of forces outside Alaska who wanted to reverse years of development in the state.
""There clearly is a push by many people who have a significant amount of power to shut down all of Alaska, and I am assuming they're going to turn it into some great big national park whereby only tourists can visit,"" he said.
Environmentalists called Suwyn's charge an exaggeration and said they were satisfied by the closure of a mill they claim has benefited from ""sweetheart"" federal timber contracts while causing significant air and water pollution.
Buck Lindekugel of the Southeast Alaska Conservation Council called the mill closure a ""business decision to jettison a money-losing mill that can't compete in world pulp markets.""
But Suwyn blamed changes imposed by the U.S. Forest Service after passage of the 1990 Tongass Reform Act, aimed at protecting the 17-million-acre reserve of old-growth rainforest that sprawls over islands, mountains and glaciers.
Louisiana-Pacific has filed lawsuits in the U.S. Court of Federal Claims, seeking $200 million for breach of contract, and will be filing ""significant additional claims in the very near future,"" Suwyn said.
He acknowledged what he called ""stupid"" environmental mistakes that resulted in Ketchikan Pulp Co.'s agreement last year to pay $6 million in civil and criminal penalties.
Louisiana-Pacific also said it planned to close or sell several plants that are no longer competitive or essential to its operations, including several structural panel plants being hurt by market overcapacity.
The company also said it has agreed to pay $65 million to settle shareholder lawsuits stemming from a drop in the company's stock price last year after revelations of civil and criminal actions.
Among them were class-action lawsuits over allegedly defective home siding developed by the company. Louisiana-Pacific agreed last year to pay up to $375 million to settle claims by homeowners in Florida, Oregon and Washington, among other states.
Suwyn said the shareholder lawsuits were the last major cloud over a company the he joined this year after the ouster of its longtime Chairman and Chief Executive Harry Merlo.
""We're simply trying to clean up all the things that are not going to contribute to moving this company forward,"" he said.
",31
"Microsoft Corp is expected to report on Friday that it had modest earnings growth in the second quarter, despite tough comparisons with the year-earlier period and a sales slowdown ahead of an upgrade to its top-selling software bundle.
Industry analysts surveyed by First Call on average expect Microsoft to report earnings of $0.51 a share for its second quarter ended December 31, up about 16 percent from the $0.44 a share reported a year earlier. Revenues are expected to rise about 14 percent to more than $2.5 billion.  
Analysts consider that a strong performance against tough comparisons with the year-earlier period, the first full quarter of availability for the Windows 95 operating system.
In last year's second quarter revenues soared 54 percent and net income was up 48 percent.
""These guys are just incredibly strong now,"" said Rob Owens of Pacific Crest Securities in Portland, Ore. ""They'll probably meet or beat the Street's estimate again.""
Investors will have all weekend to analyze the results, which are due to be released after the close of trading Friday.  
Microsoft executives originally had scheduled the release for Thursday but decided to delay the report until a day after an event publicizing the launch of Office 97, its best-selling suite of business software.
Analysts estimate that revenues of Office and its component applications account for 20 to 30 percent of Microsoft's total, but the figure will be lower for the quarter just ended because of the impending upgrade.  
For much of the quarter Microsoft offered Office 95 buyers coupons good for a free upgrade, which will result in some revenues being deferred into future reporting periods.
But strong growth in personal computer sales and in acceptance of Microsoft's high-end Windows NT operating system continue to buoy the company's profits.
""The ongoing strength of the NT cycle is what's carrying the day,"" said Chris Galvin of Hambrecht & Quist. ""Countervailing that is the tough comparison last year with the Windows 95 release, so it's a mixed scenario.""
Owen said that while sales of PCs to consumers were sluggish in the quarter that just ended, declining prices and increasing availability of 32-bit applications are sparking a new wave of corporate buying.
He said 30 percent or fewer of corporate desktops have made the transition to the Windows 95 or Windows NT systems.
""That's a tremendous opportunity for Microsoft,"" he said.
((-- Reuters Seattle bureau 206-386-4848))
",31
"American Airlines is planning to place a long-awaited order for about $6 billion worth of Boeing Co. airplanes, according to reports published Wednesday.
Airline Chairman Robert Crandall was scheduled to make a ""major company announcement"" at a news conference Thursday.
Officials of Boeing and American declined to comment on the order, reported in the Wall Street Journal and New York Times, although an airline spokesman confirmed that directors of its parent company, AMR Corp., were meeting.
According to the reports, American will announce an order for more than 100 new Boeing jets, including 12 wide-body 777s and 75 narrow-body 737s.
Although American officials have said privately they have chosen Boeing for their fleet modernisation programme, the exact size of the initial order has not been revealed.
The orders are expected to be contingent on ratification by pilots of a new six-year contract, which could be put to a vote next month. The board of the pilots union was voting Wednesday on a tentative labour pact reached in September.
Industry analysts saw the order as a signal American could order hundreds of Boeing jets over the next two decades as it updates and expands its fleet, now a mix of planes built by Boeing, McDonnell Douglas Corp., Airbus Industrie and Fokker NV.
""I think basically this is a commitment to the Boeing family,"" analyst Bill Whitlow of Pacific Crest Securities said.
""If you look at their fleet, they (American) have kind of a hodgepodge of things,"" he said. ""I think you can make the case that most of the airplanes they will be buying in the future will be these Boeing models.""
American currently does not operate the 737, which seats from 108 to 189 passengers and initially will be used to replace the 75 older 727 jets used by the airline.
But analysts said that over the next decade American likely will buy more 737s to replace its fleet of 260 ageing McDonnell Douglas MD-80 jets.
American already has announced plans to sell most of its wide-body MD-11 jets to Federal Express Corp. for use as cargo jets, and analysts said Boeing's 777 would be a likely replacement choice suitable for the carrier's potential expansion in the Far East.
Analyst Paul Nisbet of JSA Research said American, the nation's No. 1 airline by revenue, appears to be turning over ""the whole fleet to Boeing aircraft.""
""It's a huge fleet,"" he said. ""Over the next decade there's going to be a lot more than $6 billion in planes delivered.""
For beleaguered McDonnell Douglas Corp., the decision would be yet another blow for a company that has acknowledged it will be only a niche player in the commercial aircraft market and last week was knocked out of contention for the Pentagon's biggest weapons programme of the early 21st century, a jet fighter.
Analysts said they still expect a big fleet-renewal order from No. 3 carrier Delta Air Lines Inc., which could go at least partly to McDonnell Douglas.
""Somewhere along the line this is going to bubble over in McDonell Douglas' favour,"" Nisbet said.
Other major U.S. carriers already have announced their intentions to buy new airplanes now that the industry has returned to financial health after a long downturn.
Earlier this month, USAir Group Inc. chose Europe's Airbus Industrie to supply it with narrow-body jets in an order that could be worth $18 billion over the next 13 years. The carrier is negotiating with Boeing and Airbus for new wide-body jets.
Boeing stock rose $2.375 to $96.375 Wednesday and AMR stock was off 62.5 cents at $91, both on the New York Stock Exchange.
",31
"Boeing Co. took orders for a record 717 jets valued at $53 billion last year for a 64 percent share of the world market, company officials said Tuesday, adding that this year should be as good or better.
Figures compiled by Boeing show the Seattle-based aerospace giant had net orders for 559 airplanes with a ""catalog"" value of $42.8 billion after excluding cancellations and conversion.
That compared with 301 jets worth $21.6 billion for Boeing's European rival Airbus Industrie, which took a 32 percent share of the market.
McDonnell Douglas Corp., which Boeing has agreed to acquire, took net orders for 38 jets valued at $2.2 billion for a 3 percent share of the market for airplanes with 100 seats or more.
""Our customers put us on top again in 1996 because of the superior value of our complete family of airplanes,"" Boeing commercial airplane group President Ron Woodard said. ""Our goal is to remain No. 1.""
Woodard told reporters he expected 1997 to be as strong or stronger and said 1998 could see orders continue to roll in at a strong level as the international airline industry expands after the long downturn of the early 1990s.
""Airplanes are flying extremely full right now,"" Woodard said. ""The orders we've seen to date are still catching up with what is a reasonable level given the demand.... It looks to us to be a pretty sustained, healthy cycle.""
Boeing's order book went far beyond analyst expectations or the previous peak years of the late 1980s.
""It's an unbelievable year,"" said Paul Nisbet, analyst at JSA Research. ""Nobody expected that at the beginning of the year.
Boeing's previous best year for total orders was 1990, the year the 777 was launched, when it took orders for 483 jets valued at $41.4 billion.
Calculating the order book each year is something of a public-relations exercise as airplane orders are frequently revised, canceled or converted.
For example, Boeing's total is comprised mainly of firm orders, but the manufacturer also included its massive $6.5 billion order from AMR Corp.'s American Airlines which was announced but not signed.
An Airbus spokesman said the European consortium did not include such ""commitments"" for an additional 172 airplanes received last year such as USAir Inc.'s stated intention to buy 120 jets worth at least $5 billion.
Nisbet said despite the gamesmanship, it seemed clear Boeing is on the way to its goal of a two-thirds share of the market, up from its historical 60 percent level.
Airbus will have about one-third of the market as virtually the only other player, assuming Boeing wins federal approval for its plan to absorb McDonnell Douglas, including its commercial jet operations.
The Airbus spokesman, David Venz, said the four-nation consortium still hoped to achieve its stated goal of a 50 percent market share around the turn of the century.
Airbus officials confirmed Tuesday they were negotiating with South Korean firms to help finance its planned A3XX jumbo jet, which would break the stranglehold on the lucrative top end of the market now held by Boeing's 747 jumbo jet.
Woodard said the business case for a new large jet was very difficult to make because of predictions the trans-Pacific market will ""fragment"" into less heavily traveled point-to-point routes rather than routes between the largest markets.
He noted that Boeing has not yet been able to drum up sufficient customer interest even to launch a stretch version of its 747, which would presumably be less expensive to develop than an all-new airplane.
Boeing delivered 218 airplanes last year, only slightly higher than the 206 delivered in 1995, when production was hampered by a 10-week strike.
Analyst Bill Whitlow of Pacific Crest Securities said he expected Boeing to deliver some 360 jets this year and 430 in 1998, based on announced increased in the company's production rates.
",31
"Microsoft Corp. reported better-than-expected profits for the latest quarter Monday as strong demand for its Windows 95 and Windows NT computer operating systems helped fuel record sales.
The world's largest software maker said earnings rose 23 percent to a record $614 million, or 95 cents a share, in its fiscal first quarter ended in September, from $499 million, or 78 cents a share, in the 1995 quarter. Revenues jumped 14 percent to $2.30 billion from $2.02 billion.
The profits exceeded Wall Street's expectations of 90 cents a share, and shares of the software giant rose to $136.375 in after-hours trading from the earlier close of $134 on Nasdaq.
Microsoft cited strong acceptance of the company's high end Windows NT operating system.
""We shipped version 4.0 of Windows NT this quarter, and the momentum behind the product is outstanding,"" said Jeff Raikes, Group Vice President, Sales and Marketing.
""Corporate customers made the decision to adopt Windows NT servers and workstations in record numbers, driving 19 percent revenue growth over last quarter in the U.S. and Canada. Sales of Windows NT server grew at nearly double the rate of other operating system environments.""
Microsoft's results were considered a crucial measure of its progress since the year-ago period included the launch of the company's much-hyped Windows 95 operating system.
Industry analysts have said Microsoft's sales and earnings growth would slow from last year's blistering pace of more than 46 percent but noted it should continue to benefit from higher sales of personal computers and the growing use of Windows 95 and Windows NT.
Microsoft Chief Financial Officer Mike Brown said he expected revenues to rise sequentially over the next two quarters from the $2.3 billion reported for the quarter ended on Sept. 30.
In an interview, Brown also said he thought the company's cost of goods sold could decline ""a little bit"" in the long term from the 10.9 percent of revenues just reported, already down from 16 percent a year ago.
""We'll grow a little bit in December and then a little bit more in March, I think,"" Brown said. ""I'm very happy with the general revenue trend, and I was very pleased with the pattern of costs in the quarter.""
Brown said revenues in the December quarter would be driven in part by holiday season sales, while the next quarter would get a boost from the release of the company's Office 97 business applications upgrade to one of its core products.
",31
"Boeing Co, the world leader in commercial aviation, flew into the ranks of the top military contractors as well on Sunday when it announced its planned $13 billion acquisition of McDonnell Douglas Corp.
Boeing's increased resources should put competitive pressure on its commercial rival, Europe's Airbus Industrie. But industry analysts said the chief benefits for Boeing would be on the military side.  
""Historically Boeing's military business was something of an also-ran,"" said Cai von Rumohr, an analyst at Cowen & Co. ""With this transaction in one fell swoop they become a very major player.""
One analyst said the combined company could get nearly 50 percent of its revenues from government contracts, up from Boeing's historical 25 to 30 percent.  
The deal follows by little more than a week the completion of Boeing's $3.2 billion acquisition of Rockwell International Corp's defense and space business and comes just a month after McDonnell Douglas was was eliminated from consideration to build the military's 21st century joint strike fighter plane.
Instead, the Pentagon chose Boeing and Lockheed Martin Corp -- the nation's largest military contractor -- to build prototype versions of the new fighter jet in a contract that could be worth $200 billion or more to the eventual winner.  
The addition of McDonnell Douglas' expertise makes Boeing ""the team to beat"" on that crucial program, said Paul Nisbet of JSA Securities.
Loss of the joint strike fighter was the final blow for McDonnell Douglas, said analyst Nick Heymann of Natwest Securities. McDonnell had already announced its intention to back away from the commercial aviation market, where it has been only a marginal player in recent years.  
""McDonnell Douglas just didn't have the resources to aggressively fund its development programs,"" he said. ""They got stretched too thin on transports and fighters and commercial, and they underinvested.""
Nevertheless the friendly all-stock deal does not necessarily mean that McDonnell Douglas executives failed in their effort to turn around the company, analysts said.
For one thing, the offer price of about $62.89 a share based on Friday's close is well beyond McDonnell's all-time high and about 10 times its level of the early 1990s, said Wolfgang Demisch of BT Securities.  
In addition, the merger is being done at the very beginning of an expansion cycle in the industry, meaning layoffs can be minimized and the companies have several years to rationalize their operations before the next expected downturn.
""It isn't a case that you're merging because you're starving to death,"" said Demisch. ""It's a case that there's lots of opportunity. ... That's a much healthier basis on which to consolidate.""  
Indeed, Boeing Chief Executive Phil Condit said the combined companies would have revenues of $48 billion next year, up more than 30 percent from a projected $35 billion this year.
""We are going to be going after $1 billion or more of savings a year, but we are going to be doing in it in an environment where the overall growth is occurring,"" Condit said at a news conference. ""That's the advantage we have got right now.""  
Company officials said any job losses would likely be minimal. There may be overlaps in some areas, Condit said, but he added: ""I don't think those are going to be significant numbers.""
Executives said the merger would cause ""reassignments,"" and operations were expected to continue at existing major locations, including St Louis, where McDonnell Douglas is based.
Murray Weidenbaum, chairman of the Centre for the Study of American Business at Washington University and former chief economist for Boeing, said the deal could have benefits for St. Louis.  
Boeing has a better chance of landing the $200 billion U.S. fighter-jet contract, which is still up for grabs, with McDonnell Douglas on board, he speculated. That could mean more work for St. Louis.
""It's an opportunity and a threat to the St. Louis economy,"" he said.
Condit, who will become chairman and chief executive officer of the combined company, said final merger negotiations began Tuesday, the day after he was elected to become Boeing's chairman effective Feb. 1.
While Boeing does not currently need additional capacity to produce commercial jets, it will benefit from additional engineering strength, which will allow it to produce new models or variations of existing jets more quickly.
The merger will leave Airbus Industrie as the only other major player in the business of making large commercial aircraft. An Airbus spokesman said McDonnell Douglas has not been a competitor in the civilian aircraft business for a number of years ""so it hasn't altered the equation in the commercial field at all for Airbus.""
Analysts predicted the deal would win clearance from federal antitrust regulators, noting that no protests were raised this month when the two companies struck a deal to work together on engineering new wide-body jets.
They thought the deal would win approval from the Pentagon, which has encouraged industry consolidation and backed the deal that created No. 1 defense contractor Lockheed Martin in 1994.
Perhaps the chief concern for federal regulators will be Boeing's overwhelming size, which will be nearly twice that of its nearest rival Lockeheed Martin.
Major U.S. airlines said it was too soon to forecast the impact of the proposed merger on airliner prices or their airplane-buying strategies. ""It is too early to tell,"" Delta Air Lines Inc spokesman Todd Clay said.
",31
"American Airlines is planning to place a long-awaited order for about $6 billion worth of Boeing Co. airplanes, according to reports published Wednesday.
Airline Chairman Robert Crandall was scheduled to make a ""major company announcement"" at a news conference Thursday.
Officials of Boeing and American declined to comment on the order, reported in the Wall Street Journal and New York Times, although an airline spokesman confirmed that directors of its parent company, AMR Corp., were meeting.
According to the reports, American will announce an order for more than 100 new Boeing jets, including 12 wide-body 777s and 75 narrow-body 737s.
Although American officials have said privately they have chosen Boeing for their fleet modernization program, the exact size of the initial order has not been revealed.
The orders are expected to be contingent on ratification by pilots of a new six-year contract, which could be put to a vote next month. The board of the pilots union was voting Wednesday on a tentative labor pact reached in September.
Industry analysts saw the order as a signal American could order hundreds of Boeing jets over the next two decades as it updates and expands its fleet, now a mix of planes built by Boeing, McDonnell Douglas Corp., Airbus Industrie and Fokker NV.
""I think basically this is a commitment to the Boeing family,"" analyst Bill Whitlow of Pacific Crest Securities said.
""If you look at their fleet, they (American) have kind of a hodgepodge of things,"" he said. ""I think you can make the case that most of the airplanes they will be buying in the future will be these Boeing models.""
American currently does not operate the 737, which seats from 108 to 189 passengers and initially will be used to replace the 75 older 727 jets used by the airline.
But analysts said that over the next decade American likely will buy more 737s to replace its fleet of 260 aging McDonnell Douglas MD-80 jets.
American already has announced plans to sell most of its wide-body MD-11 jets to Federal Express Corp. for use as cargo jets, and analysts said Boeing's 777 would be a likely replacement choice suitable for the carrier's potential expansion in the Far East.
Analyst Paul Nisbet of JSA Research said American, the nation's No. 1 airline by revenue, appears to be turning over ""the whole fleet to Boeing aircraft.""
""It's a huge fleet,"" he said. ""Over the next decade there's going to be a lot more than $6 billion in planes delivered.""
For beleaguered McDonnell Douglas Corp., the decision would be yet another blow for a company that has acknowledged it will be only a niche player in the commercial aircraft market and last week was knocked out of contention for the Pentagon's biggest weapons program of the early 21st century, a jet fighter.
Analysts said they still expect a big fleet-renewal order from No. 3 carrier Delta Air Lines Inc., which could go at least partly to McDonnell Douglas.
""Somewhere along the line this is going to bubble over in McDonell Douglas' favor,"" Nisbet said.
Other major U.S. carriers already have announced their intentions to buy new airplanes now that the industry has returned to financial health after a long downturn.
Earlier this month, USAir Group Inc. chose Europe's Airbus Industrie to supply it with narrow-body jets in an order that could be worth $18 billion over the next 13 years. The carrier is negotiating with Boeing and Airbus for new wide-body jets.
Boeing stock rose $2.375 to $96.375 Wednesday and AMR stock was off 62.5 cents at $91, both on the New York Stock Exchange.
",31
"Microsoft Corp stock is ending 1996 near where it began -- at slightly more than $80 a share.
But after adjusting for a stock split, the value of those shares is up a stunning 91 percent, and company chairman Bill Gates, the richest man in America, has seen his stake rise to about $23.6 billion from $12.4 billion.
While analysts are not predicting Microsoft will repeat that performance in 1997, the computer software giant carries a lot of momentum into the new year.
The company will start the year by launching the latest version of Office -- its biggest revenue producer -- and plans to flesh out its package of computer network software for the red-hot Internet market.
A new Internet browser due by midyear will change the look of the computer desktop, and upgrades to both of Microsoft's core Windows operating systems could be out by the end of the year.
Microsoft's high-end Windows NT system, which failed to catch on when it was launched in 1993, now forms the core of a business that could account for 25 percent of the company's estimated $10.6 billion in revenues in the current fiscal year ending June 30.
""The fundamentals are strong and getting stronger,"" said David Readerman, an analyst with brokerage Montgomery Securities.
On average, analysts expect Microsoft's earnings to rise about 20 percent to $2.06 a share in the current fiscal year from $1.71 last year and then another 20 percent in fiscal 1998 to $2.48 a share, according to the First Call service.
While that falls well short of last year's 51 percent earnings gain, it still represents a hefty increase for a $10 billion company, and Microsoft has a way of pleasantly surprising Wall Street with its earnings growth every quarter.
Analysts say Microsoft shows no signs of growing complacent despite holding a market share of 80 percent or more in its main businesses of personal computer operating systems and productivity applications.
In the past year alone the company virtually has tried to reinvent itself to focus on the rapidly growing Internet marketplace and beat back rivals led by Netscape Communications Corp.
""They've done a fabulous job. They've changed themselves from a company that was threatened by the Internet to one whose future is dependent on the Internet,"" said analyst Scott Winkler of the Gartner Group, a research and consulting company.
Virtually all Microsoft's upcoming products have strong Internet tie-ins: from the Office 97 upgrade, which makes word-processing and spreadsheet applications more compatible with Internet protocols, to server, or computer network, software in its BackOffice line that helps companies do business over the Internet.
Microsoft is spending some $500 million this year on media-related projects, including its relaunched Microsoft Network online service and MSNBC joint news venture with NBC.
While some of the projects could lose money for years to come, analysts say the media efforts represent a classic example of Gates' fondness for making big bets -- in this case, for a chance at a piece of online transaction fees that ultimately could be huge.
""If they are successful in pursuing their vision, this will be their core business five years from now,"" said Scott McAdams, analyst with brokerage Ragen MacKenzie.
""It's analogous to the early work they did with Windows itself,"" he said. ""You start small and you keep chipping away.""
",31
"Declaring their belief that the Internet will be the ""next mass medium,"" Microsoft Corp. executives Thursday unveiled the new version of the company's MSN online service, with a heavy emphasis on entertainment programming.
Despite bandwidth limitations and other technical obstacles that make full-motion video impractical, many of the new MSN programmes resemble daily and weekly television shows, with the service organised into six core ""channels"" aimed at specific demographic groups.
In little more than a year, MSN has become the No. 3 online service, with 1.6 million subscribers. Company executives told a news briefing they expected to double that figure by mid-1997 and take market share from leader America Online Inc., relying in large part on a $100 million marketing campaign.
But the executives, conceding that the older America Online had a deeper and broader selection of content, said they planned to compete for new online customers, especially those under 30, rather than trying to persuade existing AOL customers to switch.
They were eager to heap criticism on the existing MSN service, launched along with the Windows 95 operating system in August 1995 but almost immediately overtaken by the rapid growth of the Internet.
""MSN was probably the worst of the bunch in terms of ease of use,"" said Laura Jennings, Microsoft vice president for the online service.
But she also noted that the service had been gaining 100,000 subscribers a month despite virtually no advertising and problems, including a computer snafu that has delayed bills to most customers for three months or more.
The new ad campaign will begin almost immediately with billboards and print advertisements followed by television commercials beginning in early November, when the service officially launches.
Microsoft also announced a new pricing scheme with an offer of unlimited access for $19.95 a month, instead of 20 hours for the same price under the current service. The minimum monthly fee will rise to $6.95 for five hours, in line with rival services and up from $4.95 for three hours under the current service.
The heart of the relaunched MSN is an uncluttered browser interface dominated by a promotional ""billboard"" in the centre of the screen and the six ""channels"" at the bottom corresponding to broad categories such as news, entertainment, education and children.
Clicking on the channels leads into programming developed by Microsoft and its partners that ranges from the MSNBC news service to new interactive serial programmes. Among the programmes demonstrated were quiz shows, a humorous daily news audiocast and magazine-type presentations such as ""Underwire,"" produced by and for women.
The service also includes electronic mail, ""chat"" and a more traditional menu of online categories that leads users to areas within MSN or out on the Internet.
Most content in the service will be restricted to subscribers using the company's Windows 95 computer operating system and Internet Explorer browser, and executives would not say whether they have plans to produce a version for the older Windows 3.1 system still used by tens of millions of computer owners.
Some features of MSN, including MSNBC news, electronic shopping and the planned Expedia consumer travel service, will be available at no cost to anyone with access to the Internet.
Patty Stonesifer, Microsoft senior vice president for interactive media, said the company's broad involvement in online consumer services was driven by ""our belief that the Internet is the next mass medium.
""We need to provide compelling reasons to go online and stay online,"" she said. ""There aren't enough compelling reasons to do that today.""
By some estimates, only 10 million of the nation's 99 million households are currently online, though others say even that figure is high.
",31
"Sierra Semiconductor Corp jumped 23 percent Thursday on the expectation the company would emerge as a smaller but more profitable operation after its planned exit from the computer modem business.
The San Jose, Calif., company was up 2-1/8 at 11-3/8 after its announcement Wednesday that it planned to pull out of the highly competitive modem-chip business and focus instead on the fast-growing market for computer networking equipment.  
""Certainly the company will be a much smaller company now, but it will be a more profitable business,"" said analyst Elias Moosa of Roberston Stephens & Co.
But analysts noted that Sierra still has much painful work ahead of it, including cutting as many as 150 jobs from its workforce, which currently has 500 people, and building up the business of its PMC-Sierra unit, which makes routing devices and chipsets for high-speed computer networks.
The company has announced plans to take a charge against earnings of $50 million to $80 million to write down the value of assets and inventories and cover severance payments.  
Scott Randall of Soundview Financial Group said the company likely would have difficulty selling its modem-chip business.
""Once you announce your intention to exit a business, it becomes a complete buyer's market,"" he said.
And he said that while the company is focusing on the fastest-growing part of its business, the market for networking chips has begun to attract the attention of much-larger players such as International Business Machines Corp.  
""As the market develops the question is, are they able to make that transition to be a much larger company?"" Randall said.
Other analysts were more bullish, even though the company is expected to shrink to slightly more than half its current size in sales.
""It's a positive strategic move,"" said Miles Kan of Hambrecht & Quist.
""The modem business is a low-margin, commodity business,"" he said.
The company's PMC-Sierra unit generated $33 million of the company's $117 million in sales in the first half of the year, compared with $45 million in sales of modem chips, Kan said. But the PMC unit is far more profitable, he said.
Sierra's stock has fallen from a high of nearly $25 this year as the computer chip sector has been battered by falling prices and concern about slowing demand. -- Seattle bureau 206-386-4848
",31
"Microsoft Corp's share price rose to recored levels Monday despite a warnings by the software giant of slowing growth in fiscal 1998.
Microsoft, which reported ""blowout"" second quarter results on Friday, was up 4-3/4 at 91-7/8 and sparked a broad rally on Nasdaq, where it was the most active issue with nearly 15 million shares changing hands.
After the market closed Friday the company reported second-quarter earnings of $0.57 a share, up from $0.45 a year earlier and easily surpassing a consensus estimate of $0.51.  
""They had a great quarter,"" said Frank Michnoff of Donaldson, Lufkin & Jenrette. ""(And) the outlook for the next two quarters looks very good; they said so themselves -- uncharacteristically.""
More characteristic were comments by Microsoft executives in the earnings statement and a conference call with analysts afterward: They warned of a slowdown in growth in fiscal 1998, which begins July 1.
Microsoft Chief Financial Officer Mike Brown even went so far as to question the high valuation of the company's stock.  
In a comment worthy of Fed Chairman Alan Greenspan, Brown said Microsoft's high price-to-earnings multiple was a ""cause for curiosity.""
But while Piper Jaffray downgraded the stock to hold from buy, based on its 100 percent increase over the past year, few investors heeded the warning.
""They do that every year,"" Michnoff said, referring to Microsoft's conservative forecasts. ""It's a bit like the boy who cried wolf. People are just not believing it.""
Most analysts who follow Microsoft raised their earnings estimates for the company.  
First Call, which tracks estimates, said a consensus of 19 analysts surveyed today was that the Redmond, Wash.-based company would earn $2.33 a share for fiscal 1997, ending June 30, up from a previous consensus was $2.07. The company earned $1.72 a share in fiscal 1996.
For fiscal 1998, analysts now see the company earning $2.71 a share, up from a previous consensus of $2.48.
Analysts say fiscal 1998 will be a year of tough comparisons for Microsoft after the 1995 introduction of the Windows 95 operating system, last year's upgrade of Windows NT, and this year's launch of the Office 97 application upgrade.  
While Microsoft plans an upgrade to Windows 95 more tightly integrated to its Internet browser, it is unlikely to derive the benefits of another price increase or significant further operating cost reductions, analysts said.
""I think that Microsoft does have a lot of hurdles to get over,"" said Rob Owens of Pacific Crest Securities, who calls the stock ""fairly valued"" at its current level of more than 30 times fiscal 1998 earnings.
But analyst Scott McAdams of Ragen MacKenzie said investors are happy to pay a premium for a company that dominates one of the biggest growth industries and consistently surpasses Wall Street expectations.
""They've delivered consistent earnings, and Wall Street hates ugly surprises,"" he said.
Analyst David Readerman of Montgomery Securities said Microsoft would like to slow the meteoric rise in its stock price, if only to meet the challenge of providing enough shares to fulfill employee stock options.
""Yet it's difficult, with such a compelling long-term growth story, to keep a great stock down,"" he said in a published comment.
((-- Seattle Bureau 206-386-4848))
",31
"An outbreak of bacterial food poisoning that sickened at least 13 children and young adults in the Seattle area has been traced to one company's tainted apple juice, health officials said on Wednesday.
Odwalla Inc, a rapidly growing fresh juice and beverage company based in Half Moon Bay, California, issued a nationwide recall of products containing fresh apple juice, and many retailers pulled all Odwalla beverages from their shelves.
State and county health officials said 10 of the 13 confirmed cases of E. coli food poisoning had been conclusively traced to the unpasteurized Odwalla juice and the remaining three were under investigation.
At least eight more suspected cases have been reported, Dr. Mimi Fields, the state's deputy health secretary, said.
""It's difficult to know where we are on the epidenmic curve, although I don't think we are going to see a large influx of masses of new cases,"" Fields told Reuters.
The outbreak was the state's worst since some 500 people became ill in the Seattle area and three children died in 1993 after eating undercooked hamburgers.
While adults may suffer diarrhea, stomach cramps or more mild, flulike symptoms after eating food tainted by the bacterium, young children are more susceptible to the disease and may suffer sudden kidney failure that can lead to permanent brain damage or death.
In the current outbreak, six children have been hospitalized, including two who required dialysis. Officials said all the children had been released except for one 2-year-old boy, who was in satisfactory condition.
The strain of E. coli implicated in the outbreak normally lives in the digestion system of cattle and can spread into the food chain through slaughterhouse contamination or   fertilizer
that includes steer manure.
Health officials said juice can be tainted when fruit falls onto fertilized ground and is not washed properly.
The U.S. Food and Drug Administration has launched an investigation and will be inspecting Odwalla's plant in Dinuba, California, health officials said.
""Our first concern is for the health and safety of those affected,"" Odwalla chief executive officer Stephen Williamson said in a statement. He said the company was cooperating fully with health authorities.
Although so far all the cases have been traced to Odwalla juice, authorities recommended that consumers in the Seattle area boil unpasteurized apple juice or cider for 10 seconds before drinking it until the investigation was complete.
Odwalla, which bills itself as the ""leading branded fresh juice and beverage company,"" distributes its beverages in pint plastic bottles to supermarkets and retail outlets in Washington, Oregon, California, Texas, Colorado, New Mexico, Nevada and British Columbia.
In the fiscal year that ended Aug. 31, the company reported its sales rose 65 percent to $59.2 million from $35.9 million. But net income fell to $633,000, or 12 cents a share, from $997,000, or 22 cents a share.
",31
"Microsoft Corp Chief Financial Officer Mike Brown said he expected earnings and revenues to rise sequentially in the fiscal third and fourth quarters compared with the just-ended second quarter.
Brown said in an interview he expects the recent release of Office 97 to provide a ""nice step"" up in earnings in the third quarter from the $0.57 a share reported for the second quarter, and he sees a ""small sequential step up"" in the fourth quarter.
Brown also said he expected revenues and earnings growth in the 20 percent range for fiscal 1998 beginning July 1, 1997.  
""It doesn't seem wise to get beyond that with data we have today,"" he said.
Brown said he was pleased with the record results of the just-ended second quarter, which he said was strong ""across the board.""
But he said the company thought it was prudent to issue a warning about slower growth in fiscal 1998, when Microsoft will not enjoy the benefit of major revenue-enhancing upgrades such as Windows 95 last year and Office 97 this year.  
While the company does have an opportunity to boost its OEM revenue with the increasing penetration of the high-end Windows NT operating system, which generates more revenue per unit than Windows 95, Brown said he expected that to be more significant in fiscal 1999.
""It's just a good time to be a little bit realistic about '98,"" he said.
Brown said he expected research and development spending to continue to grow faster than revenues in fiscal 1998, although he declined to be specific. He noted that the company's R&D spending now exceeds an annual rate of $2 billion, and he expected that to exceed $3 billion ""at some point"" in the future, putting pressure on profit margins.
He said while the company has reduced its cost of goods sold this year, it is unlikely to be able to reduce them much further next year.
But he said the company could continue to reduce its sales and marketing expenses as a percentage of revenues.
Brown also said the company's cash position spiked up in the second quarter, in part because of a hedging transaction connected with its stock option program. ((-- Reuters Seattle bureau 206-386-4848))
",31
"Boeing Co. is expected to use the biennial Farnborough Air Show in England next week to formally launch the long-awaited stretch version of its 747 jumbo jet, industry analysts say.
While officials of the aerospace giant remain tight-lipped, analysts say it is all but certain executives will make a major announcement on Monday regarding two new members of the 747 family that will be known as the 747-500 and 747-600.
""They're going to announce the airplanes -- there is no doubt,"" said Joe Campbell, an analyst at Lehman Bros.
He said the only question was whether Boeing would announce massive orders of $10 billion or more from launch customers or merely disclose that its board of directors had given authorisation to offer the jet.
The announcement of the new models, which would include a jet with 30 percent more capacity than today's largest commercial airliner, is expected to be the highlight of the air show, frequently the stage for major order announcements and other industry news.
Boeing officials have said they are talking with at least six airlines about the potential new versions of the jumbo jet, including British Airways Plc, Singapore Airlines Ltd. and UAL Corp.'s United Airlines.
Boeing President Phil Condit said the company's board of directors discussed the new plane at a regularly scheduled meeting Monday but had not made a decision on whether to launch it.
""That will depend on airline orders,"" he said in a brief interview Tuesday.
Specifications being circulated within the industry call for the 747-600 to hold 548 passengers in a typical three-class configuration with a range of up to 8,900 miles (14,300 km), compared with 416 passengers and 8,400 miles (13,500 km) for the current-generation 747-400.
The long-range 747-500 would hold 462 passengers in three classes and have a range of up to 10,000 miles (16,000 km).
Analysts say the 747 stretch is essential for Boeing to continue dominating the lucrative top end of the market -- which it has had to itself since the introduction of the four-engine jumbo jet in 1970, which nearly bankrupted the company.
Now Boeing's own new 777 twin-engine jet is replacing older 747s, and possible new versions of jets from rivals Airbus Industrie and McDonnell Douglas Corp. could threaten the lower end of the jumbo market.
""They really do need to be able to move up to again have a position of complete monopoly for the aircraft as they have had for a number of years,"" said analyst Paul Nisbet of JSA Research.
Meanwhile Airbus has signalled that it intends to go ahead with plans for its own all-new 550-seat plane, dubbed the 3XX, although analysts question whether the market for jumbo jets is big enough for two manufacturers.
""From an economic point of view, I don't think there's enough demand to justify the $10 (billion) to $15 billion cost"" of an all-new jet, said Bill Whitlow of Pacific Crest Securities.
He and other analysts said they expect air travel in the fast-growing Pacific region to follow the Atlantic in migrating to pairs of smaller cities rather than routes between world capitals that require the largest jets.
The trend toward such more thinly travelled routes was among the reasons cited by Boeing when it shelved a project to jointly develop with Airbus a double-decker airliner that would hold up to 800 passengers.
But Lehman's Campbell predicted Europe's Airbus, which is transforming itself from a consortium into a single company, would go ahead with its own jumbo jet for commercial delivery in 2003, about three years after Boeing's new 747 models.
""They're not going to leave Boeing alone at the upper end,"" he said.
Campbell estimated that Boeing's 747 revision, which would include a new wing, new engines and possible new cockpit electronics, would cost from $5 billion to $8 billion to develop.
Rolls-Royce Plc has said it plans to offer a variant of its Trent turbofan engine to power the new Boeing craft, while rivals General Electric Co. and United Technologies Corp.'s Pratt & Whitney unit have formed a joint venture to develop an alternative power plant.
",31
"A year after its massively publicized introduction, Microsoft Corp.'s Windows 95 computer operating system has fallen short of the most optimistic expectations for the software giant and the industry.
Even though more than 40 million copies of Windows 95 have been sold, making it the fastest-selling new software ever, it would have been impossible for any product to live up to the unprecedented hype of the Aug. 24, 1995 launch, when stores around the world opened at midnight to greet long lines of customers.
The Redmond, Wash.-based company spent tens of millions of dollars promoting the product with stunts that included buying the entire print run of the Times of London and lighting New York's Empire State building in a Windows color scheme.
But the product, delivered eight months late, has fallen short of its sales potential in part because Microsoft delivered a mixed message to business customers, analysts said.
""It didn't do as well as it could have,"" said Rob Enderle, an analyst with Giga Information Group.
Scores of software and hardware companies that had hoped for a big boost in sales were disappointed when only a brief spike materialized.
""People who were expecting major coat-tails were somewhat disappointed,"" said Scott Winkler, an analyst with Gartner Group.
""It's not as though it hasn't had an impact,"" he said. ""It just hasn't had the huge earth-shattering impact some people were looking for.""
Symantec Corp., which had been among the most bullish of software companies at the time of the Windows 95 launch, ended up posting disappointing financial results when retail sales of the operating system fell short of its projections.
Touchstone Software Corp. had to pay $1.3 million in cash and stock to settle a shareholders lawsuit brought after the company's sales failed to meet expectations tied to the Windows 95 launch.
Many software developers apparently saw their crucial holiday season sales suffer last year because store shelves were jammed with blue-and-white boxes of Windows 95, resulting in a shortage of space for seasonal products, said Ann Stephens, president of PC Data Inc.
To be sure, sales of Windows 95 and the accompanying Office 95 upgrade drove Microsoft sales up 46 percent last year to a record $8.67 billion and cemented the company's status as the industry's dominant company.
Microsoft executives say they are thrilled with the sales figures, and industry analysts estimate that by sometime next year, the installed base of Windows 95 will surpass that of the older version of Windows, now used on about 100 million computers worldwide.
But Enderle said the figure could have been even higher if Microsoft had done a better job of handling the huge demand for technical support from customers who were frustrated trying to install the system.
He and other analysts said corporate America adopted a go-slow approach because Microsoft already was promoting the new version of its high-end Windows NT operating system, expected to be available in stores in the next several weeks.
""Microsoft sent a lot of signals that NT was going to be the answer,"" Winkler said. ""Many people began to believe that Windows 95 was being downplayed.""
But now that Windows NT 4.0 has been launched, Winkler and others believe only a relatively small proportion of corporate users will elect to pay the added software and hardware costs needed to use it instead of Windows 95.
""Windows 95 is going to do great,"" he said. ""The mistake people made was in thinking it was going to be a fast, sweeping change rather than a slow, building change.""
",31
"Sierra Semiconductor Corp.'s stock jumped more than 27 percent Thursday on expectations the company will emerge as a smaller but more profitable operation after it exits the computer modem business.
The San Jose, Calif.-based company's stock gained after its announcement Wednesday that it plans to pull out of the highly competitive modem-chip business and focus instead on the fast-growing market for computer networking equipment.
The stock rose $2.625 to $11.875 in late trading on NASDAQ.
""Certainly the company will be a much smaller company now, but it will be a more profitable business,"" said analyst Elias Moosa of Robertson Stephens & Co.
But analysts noted that Sierra still has much painful work ahead of it, including cutting as many as 150 jobs from its work force, which currently has 500 people, and building up the business of its PMC-Sierra unit, which makes routing devices and chipsets for high-speed computer networks.
The company has announced plans to take a charge against earnings of $50 million to $80 million to write down the value of assets and inventories and cover severance payments.
Scott Randall of Soundview Financial Group said the company likely would have difficulty selling its modem-chip business.
""Once you announce your intention to exit a business, it becomes a complete buyer's market,"" he said.
He said that while the company is focusing on the fastest-growing part of its business, the market for networking chips has begun to attract the attention of much-larger players such as International Business Machines Corp
""As the market develops the question is, are they able to make that transition to be a much larger company?"" Randall said.
Other analysts were more bullish, even though the company is expected to shrink to slightly more than half its current size in sales.
""It's a positive strategic move,"" said Miles Kan of Hambrecht & Quist. ""The modem business is a low-margin, commodity business,"" he said.
Sierra's PMC-Sierra unit generated $33 million of the company's $117 million in sales in the first half of the year, compared with $45 million in sales of modem chips, Kan said. But the PMC unit is far more profitable, he said.
Sierra's stock has fallen from a high of nearly $25 this year as the computer chip sector has been battered by falling prices and concern about slowing demand.
",31
"Boeing Co. said Thursday that profits climbed 13 percent in the third quarter on stronger sales of its commercial jets and higher interest income.
The world's largest aircraft maker said net income for the three months ended on Sept. 30 climbed to $254 million, or 74 cents a share, from $225 million, or 66 cents a share, in the 1995 quarter.
Sales soared to $5.60 billion from $4.38 billion in last year's third quarter as it delivered 54 airliners, up from 51.
The results were in line with Wall Street expectations, but Boeing stock fell $1.50 to $95.25 on the New York Stock Exchange, where blue-chip issues were dragged down by weakness in the bond market.
""It's a good quarter,"" said analyst Cai von Rumohr of Cowen & Co. He and other analysts said they expected Boeing to announce further production rate increases soon, particularly on its narrow-body 737 and jumbo 747 models.
Boeing already has announced plans to raise overall production to 36 airplanes a month by next year's third quarter from 22.5 currently in response to rising orders from the airline industry.
As the airline industry has pulled out of a long tailspin and begun posting healthy profits, Boeing has been scrambling to meet demand, boosting its work force by nearly 15 percent this year after years of deep layoffs.
Boeing Chief Executive Officer Phil Condit said in a statement that ""airline-announced order activity continues to be encouraging.""
As of Sept. 30 the company had orders for 435 planes worth $34.9 billion, compared with 346 planes worth $31.2 billion ordered in all of 1996.
""Based on current trends and barring unexpected disruptions, Boeing should be positioned for several years of sharply increasing earnings,"" said analyst Wolfgang Demisch of BT Securities.
Boeing revenues are expected to rise to about $22 billion this year from $19.5 billion last year and should hit nearly $36 billion next year, one analyst said.
On average, analysts see earnings of $2.94 a share this year compared with $2.57 last year, excluding one-time items, according to First Call, which tracks estimates.
Analysts see earnings rising to $5.36 a share next year and $7.23 in 1998, First Call said.
Boeing said its sales increase for the quarter was slightly offset by higher costs from developing new versions of its 737 airliner and by a higher effective income tax rate.
For the first nine months, net income soared to $841 million, or $2.44 a share, from $175 million, or 51 cents a share, in the 1995 period, when the company took a $600 million charge for an early retirement programme.
Sales grew to $16.17 billion from $14.98 billion, though Boeing delivered only 156 airplanes, down from 170 a year ago.
",31
"Boeing Co.'s stunning agreement to acquire longtime rival McDonnell Douglas Corp. won a ringing endorsement from Wall Street and sent shock waves through the aerospace industry Monday.
Stock in both companies soared on expectations the deal would boost Boeing's operating profits immediately after its completion, targeted for mid-1997.
Boeing rose $4.375 to $101.125 and McDonnell Douglas jumped $10.375 to $62.375, down from earlier highs on the New York Stock Exchange but good enough to give the all-stock transaction an indicated value of nearly $14 billion.
Industry analysts saw few obstacles to the deal, which marks a startling transformation for a company that just a year ago was completing a final round of cutbacks that had slashed its work force by 30 percent in five years.
Since then Boeing has completed the $3.2 billion acquisition of Rockwell International Corp.'s  ROK.N defence and space business, won the right to compete for the richest military contract in Pentagon history and announced orders for a record $45.6 billion in new commercial jets.
""It's an incredible turnaround story,"" said Jon Kutler, president of Quarterdeck Investment Partners, which specialises in aerospace. ""These are very bold, dramatic, uncharacteristic moves for Boeing and I applaud them for it.""
While Boeing had been moving to cut costs and transform its management style under outgoing Chairman Frank Shrontz, the pace has accelerated at the once-sluggish company since Phil Condit was named chief executive officer in April.
Condit began the final round of merger negotiations with McDonnell Douglas last Tuesday, just a day after being formally elected Boeing chairman as of Feb. 1, 1997.
""We're seeing Boeing evolve from kind of a stodgy company to being very aggressive, nimble,"" said Bill Whitlow, a longtime Boeing analyst at Pacific Crest Securities who praised Condit's energy and stamina.
Executives at the two companies said the deal would be additive to operating profits immediately and reiterated their prediction that Boeing could achieve $1 billion in annual savings without any layoffs because of rapid growth.
Analysts said the merger was a good strategy for McDonnell Douglas, which already had announced plans to pull back from commercial aviation when it was eliminated from bidding for the Pentagon's 21st century joint strike fighter.
But Harry Stonecipher, chief executive of McDonnell Douglas, denied that the merger was born of desperation.
""This is the deal we wanted and we are very happy with it,"" Stonecipher told CNBC. ""This is the only deal we considered.""
Boeing executives told analysts they had no immediate plans to make further acquisitions, even though the combined company will generate cash flow of more than $4 billion a year on projected 1997 revenue of $48 billion.
The surprise merger immediately turned up the heat on Europe's Airbus Industrie to move ahead quickly with a restructuring plan. Without such a plan, the consortium would be unable to go ahead with a proposed super-jumbo aircraft to compete with Boeing's 747, which now is unchallenged at the profitable top end of the market, analysts said.
""Airbus Industrie and its partners must agree as soon as possible on an optimal structure that will allow Airbus Industrie to match its American competitors as a powerful, integrated European enterprise,"" German Economics Minister Guenter Rexrodt said in a statement.
Analysts noted that Boeing had ended any chance that Airbus would partner with McDonnell on a new large jet, and some said Boeing's own plans to stretch the 747 might now be deferred.
But both Airbus and Boeing could benefit from stabilised airplane prices with the No. 3 player out of the market.
Despite some overlapping businesses, including helicopters, rockets and missiles, experts saw little possibility the deal would be stopped by the Defence Department, although the combination of the nation's only manufacturers of commercial jets could give pause to federal antitrust regulators.
""It will be interesting to see what the airlines have to say about this,"" said Don Baker, a former antitrust official now with the firm Baker and Miller in Washington.
""It's worth remembering that there would be just two players in the worldwide market for big planes,"" he said. ""But maybe two is enough competition for the airlines.""
On the defence side, analysts said they expected the marriage of Boeing and McDonnell to spur further consolidation, with players such as Raytheon Co. and Northrop Grumman Corp. looking for partners.
Cowen & Co. analyst Cai von Rumohr said the deal gives Raytheon, which supplies missile systems, ""a window of opportunity"" to buy Hughes Electronics Corp..
""It's not a long-term window,"" he said. ""It will probably last until the (Boeing-McDonnell) deal is closed.""
",31
"Declaring their belief that the Internet will be the ""next mass medium,"" Microsoft Corp. executives Thursday unveiled the new version of the company's MSN online service, with a heavy emphasis on entertainment programming.
Despite technical limitations that make true video impractical, many of the new MSN programs resemble daily and weekly television shows, with the service organized into six core ""channels"" aimed at specific demographic groups.
In little more than a year, MSN has become the No. 3 online service, with 1.6 million subscribers.
Company executives told a news briefing they expected to double that figure by mid-1997 and take market share from leader America Online Inc., relying in large part on a $100 million marketing campaign.
But the executives, conceding that the older America Online had a deeper and broader selection of content, said they planned to compete for new online customers, especially those under 30, rather than trying to persuade existing AOL customers to switch.
They were eager to heap criticism on the existing MSN service, launched along with the Windows 95 operating system in August 1995 but almost immediately overtaken by the rapid growth of the Internet.
""MSN was probably the worst of the bunch in terms of ease of use,"" said Laura Jennings, Microsoft vice president for the online service.
She also noted that the service had been gaining 100,000 subscribers a month despite virtually no advertising and problems, including a computer problem that has delayed bills to most customers for three months or more.
The new ad campaign will begin almost immediately with billboards and print advertisements followed by television commercials beginning in early November, when the service officially launches.
Microsoft also announced a new pricing scheme with an offer of unlimited access for $19.95 a month, instead of 20 hours for the same price under the current service. The minimum monthly fee will rise to $6.95 for five hours, in line with rival services and up from $4.95 for three hours under the current service.
Industry analysts said the new pricing probably would force America Online to follow suit and offer a package with unlimited service. Currently AOL offers heavy users 20 hours a month for $19.95.
David Readerman of Montgomery Securities pointed out that Microsoft has the advantage of a hugely profitable business in desktop software and operating systems, while rivals AOL and CompuServe Inc. are dependent on the online business.
""Microsoft has $8 billion in cash,"" he said. ""That gives them the financial strength to make a long-term investment, and that's what they're doing.""
Microsft stock ended down 75 cents at $133.75 and Compuserve lost 25 cents to $12, both on Nasdaq. America Online fell $1 to $25.75 on the New York Stock Exchange.
The heart of the relaunched MSN is an uncluttered browser interface dominated by a promotional ""billboard"" in the center of the screen and the six ""channels"" at the bottom corresponding to categories such as news, entertainment, education and children.
Clicking on the channels leads into programming developed by Microsoft and partners that ranges from the MSNBC news service to new interactive serial programs.
Among the programs demonstrated were quiz shows, a humorous daily news audiocast and magazine-type presentations such as ""Underwire,"" produced by and for women.
The service also includes electronic mail, ""chat"" and a more traditional menu of online categories that leads users to areas within MSN or on the Internet.
Most content in the service will be restricted to subscribers using the company's Windows 95 computer operating system and Internet Explorer browser, and executives would not say whether they have plans to produce a version for the older Windows 3.1 system still used by tens of millions of computer owners.
Some features of MSN, including MSNBC news, electronic shopping and the planned Expedia consumer travel service, will be available at no cost to anyone with access to the Internet.
Patty Stonesifer, Microsoft senior vice president for interactive media, said the company's broad involvement in online consumer services was driven by ""our belief that the Internet is the next mass medium.""
By some estimates, only 10 million of the nation's 99 million households are currently online, though others say even that figure is high.
",31
"A startup Seattle software company Tuesday launched a product aimed at solving one of the Internet's most vexing problems: information overload.
Intermind Corp., formed a little more than a year ago by a software consultant and a former Microsoft Corp. executive, said its Intermind Communicator allowed users to seek customized information from World Wide Web sites that use the program.
For example, a music fan visiting the popular ""Addicted to Noise"" Web site could seek to be notified by a message similar to electronic mail every time new CD reviews were available. A mouse click on the notification message would take the user directly to the information.
Intermind President David Arnold said the software aims to go beyond news dissemination systems from Pointcast Corp. and others to allow more sophisticated ""dialogue"" between consumers and publishers, technology companies and retailers.
Customers who frequent Spiegel Corp.'s web site could choose to be notified of any sales in selected categories and then easily could link up to the site and place an order. High-tech companies like Apple Computer Inc. and Visio Corp. will use the system to send customers technical bulletins or information about new products.
""This is the ultimate in custom publishing and narrowcasting,"" said David Strom, an industry constultant and newsletter publisher.
Company officials said they hoped to distribute 2 million copies of the software, which is free to non-commercial users, by the end of the year. Commercial users will pay a fee based on revenue generated or subscribers reached, Arnold said.
Arnold said the company, with 72 employees in several offices, was ""strong financially."" He declined to identify the investors but confirmed published reports that cellular telephone pioneer Craig McCaw is among the minority holders.
The software, which works from within either of the two major Internet browsers, is available for Microsoft's Windows 95 and Windows NT platforms and will be available within one week for Windows 3.1. Apple Macintosh and Unix versions are expected by year-end.
So far more than 35 Internet and Intranet sites provide Intermind ""Hyperconnectors"" that can be personally customized. Company executives said the software takes only five minutes to set up for customers or 15 minutes for publishers, who do not need separate server software.
",31
"Boeing Co. is expected to use the biennial Farnborough Air Show in England next week to formally launch the long-awaited stretch version of its 747 jumbo jet, industry analysts say.
While officials of the aerospace giant remain tight-lipped, analysts say it is all but certain executives will make a major announcement on Monday regarding two new members of the 747 family that will be known as the 747-500 and 747-600.
""They're going to announce the airplanes -- there is no doubt,"" said Joe Campbell, an analyst at Lehman Bros.
He said the only question was whether Boeing would announce massive orders of $10 billion or more from launch customers or merely disclose that its board of directors had given authorization to offer the jet.
The announcement of the new models, which would include a jet with 30 percent more capacity than today's largest commercial airliner, is expected to be the highlight of the air show, frequently the stage for major order announcements and other industry news.
Boeing officials have said they are talking with at least six airlines about the potential new versions of the jumbo jet, including British Airways Plc, Singapore Airlines Ltd. and UAL Corp.'s United Airlines.
Boeing President Phil Condit said the company's board of directors discussed the new plane at a regularly scheduled meeting Monday but had not made a decision on whether to launch it.
""That will depend on airline orders,"" he said in a brief interview Tuesday.
Specifications being circulated within the industry call for the 747-600 to hold 548 passengers in a typical three-class configuration with a range of up to 8,900 miles (14,300 km), compared with 416 passengers and 8,400 miles (13,500 km) for the current-generation 747-400.
The long-range 747-500 would hold 462 passengers in three classes and have a range of up to 10,000 miles (16,000 km).
Analysts say the 747 stretch is essential for Boeing to continue dominating the lucrative top end of the market -- which it has had to itself since the introduction of the four-engine jumbo jet in 1970, which nearly bankrupted the company.
Now Boeing's own new 777 twin-engine jet is replacing older 747s, and possible new versions of jets from rivals Airbus Industrie and McDonnell Douglas Corp. could threaten the lower end of the jumbo market.
""They really do need to be able to move up to again have a position of complete monopoly for the aircraft as they have had for a number of years,"" said analyst Paul Nisbet of JSA Research.
Meanwhile Airbus has signaled that it intends to go ahead with plans for its own all-new 550-seat plane, dubbed the 3XX, although analysts question whether the market for jumbo jets is big enough for two manufacturers.
""From an economic point of view, I don't think there's enough demand to justify the $10 (billion) to $15 billion cost"" of an all-new jet, said Bill Whitlow of Pacific Crest Securities.
He and other analysts said they expect air travel in the fast-growing Pacific region to follow the Atlantic in migrating to pairs of smaller cities rather than routes between world capitals that require the largest jets.
The trend toward such more thinly traveled routes was among the reasons cited by Boeing when it shelved a project to jointly develop with Airbus a double-decker airliner that would hold up to 800 passengers.
But Lehman's Campbell predicted Europe's Airbus, which is transforming itself from a consortium into a single company, would go ahead with its own jumbo jet for commercial delivery in 2003, about three years after Boeing's new 747 models.
""They're not going to leave Boeing alone at the upper end,"" he said.
Campbell estimated that Boeing's 747 revision, which would include a new wing, new engines and possible new cockpit electronics, would cost from $5 billion to $8 billion to develop.
Rolls-Royce Plc has said it plans to offer a variant of its Trent turbofan engine to power the new Boeing craft, while rivals General Electric Co. and United Technologies Corp.'s Pratt & Whitney unit have formed a joint venture to develop an alternative power plant.
",31
"An outbreak of bacterial food poisoning that sickened at least 13 children and young adults in the Seattle area has been traced to one company's tainted apple juice, health officials said on Wednesday.
Odwalla Inc, a rapidly growing fresh juice and beverage company based in Half Moon Bay, California, issued a nationwide recall of products containing fresh apple juice, and many retailers pulled all Odwalla beverages from their shelves.
State and county health officials said 10 of the 13 confirmed cases of E. coli food poisoning had been conclusively traced to the unpasteurized Odwalla juice and the remaining three were under investigation.
At least eight more suspected cases have been reported, Dr. Mimi Fields, the state's deputy health secretary, said.
""It's difficult to know where we are on the epidenmic curve, although I don't think we are going to see a large influx of masses of new cases,"" Fields told Reuters.
The outbreak was the state's worst since some 500 people became ill in the Seattle area and three children died in 1993 after eating undercooked hamburgers.
While adults may suffer diarrhea, stomach cramps or more mild, flulike symptoms after eating food tainted by the bacterium, young children are more susceptible to the disease and may suffer sudden kidney failure that can lead to permanent brain damage or death.
In the current outbreak, six children have been hospitalized, including two who required dialysis. Officials said all the children had been released except for one 2-year-old boy, who was in satisfactory condition.
The strain of E. coli implicated in the outbreak normally lives in the digestion system of cattle and can spread into the food chain through slaughterhouse contamination or fertilizer that includes steer manure.
Health officials said juice can be tainted when fruit falls onto fertilized ground and is not washed properly.
The U.S. Food and Drug Administration has launched an investigation and will be inspecting Odwalla's plant in Dinuba, California, health officials said.
""Our first concern is for the health and safety of those affected,"" Odwalla chief executive officer Stephen Williamson said in a statement. He said the company was cooperating fully with health authorities.
Although so far all the cases have been traced to Odwalla juice, authorities recommended that consumers in the Seattle area boil unpasteurized apple juice or cider for 10 seconds before drinking it until the investigation was complete.
Odwalla, which bills itself as the ""leading branded fresh juice and beverage company,"" distributes its beverages in pint plastic bottles to supermarkets and retail outlets in Washington, Oregon, California, Texas, Colorado, New Mexico, Nevada and British Columbia.
In the fiscal year that ended Aug. 31, the company reported its sales rose 65 percent to $59.2 million from $35.9 million. But net income fell to $633,000, or 12 cents a share, from $997,000, or 22 cents a share.
",31
"Microsoft Corp is expected to report a sharp slowdown in earnings growth Monday due largely to a sales surge last year when the software giant launched its Windows 95 operating system.
On average, industry analysts expect the company to post earnings of $0.90 a share for its fiscal first quarter, up 15 percent from last year's $0.78, according to First Call.  
""It's a tough comparison because in the September quarter last year was the initial release of Windows 95 and all the sell-in associated with that, so it was a great quarter,"" said Chris Galvin of Hambrecht and Quist.
But he and other analysts said Microsoft's business was continuing to expand steadily, benefiting from rising sales of personal computers and the increasing penetration of Windows 95 and the more lucrative Windows NT system.  
Microsoft's already-high profit margins also are rising as the company sells a growing proportion of its software by preloading it onto new computers or selling licenses to large customers rather than shrink-wrapped boxes at retail stores.
Microsoft's business is expected to gain momentum through the fiscal year as the recently updated Windows NT wins more acceptance and the company rolls out a major new version of its Office application suite beginning in December.
For the fiscal year ending June 30, 1997, analysts on average see earnings of $4.07 a share, up 19 percent from last year's $3.43, First Call said.  
""I think NT will really start ramping in the December quarter and in the first part of '97,"" said analyst Scott McAdams of Ragen MacKenzie. ""It's going to be a very powerful driver of earnings,"" he said.
One cloud on Microsoft's horizon is the imminent arrival of a wave of ""thin client"" products such as the Network Computer championed by Oracle Corp Chairman Larry Ellison.  
Late this month Sun Microsystems Inc is expected to launch a line of products code-named ""Mr. Coffee"" based on the increasingly popular Java language, which is being positioned as an alternative to the ""Wintel"" combination of Microsoft operating systems on Intel Corp processors.
While corporate users are not rushing to desert their personal computer networks, the increasing publicity about alternatives could hurt Microsoft's stock price, which is at near-record levels and up more than 50 percent since its 1995 closing price of $87.75.  
""It's been a bit of a back burner issue, ... but it will move to the front burner,"" said Rick Sherlund of Goldman Sachs.
Microsoft's earnings picture also is becoming blurred by revenue that the company defers to account for delayed costs such as service updates and technical support for its operating systems and business applications.
Microsoft had ""unearned revenue"" of $545 million on its balance sheet as of June 30, a figure that could rise to $1 billion by the end of the current fiscal year, McAdams said.
",31
"Microsoft Corp.'s share price rose to record levels Monday despite a warning by the software giant of slowing growth in fiscal 1998.
Microsoft, which reported ""blowout"" second-quarter results on Friday, closed at $90.75, up $3.625, and sparked a broad rally on Nasdaq, where it was the most active issue, with more than 18 million shares changing hands.
After the market closed Friday,the company reported second-quarter earnings equal to 57 cents a share, up from 45 cents a year earlier and easily surpassing a consensus estimate of 51 cents.
""They had a great quarter,"" said Frank Michnoff of Donaldson, Lufkin & Jenrette. ""(And) the outlook for the next two quarters looks very good; they said so themselves -- uncharacteristically.""
More characteristic were comments by Microsoft executives in the earnings statement and a conference call with analysts afterward; they warned of a slowdown in growth in fiscal 1998, which begins July 1.
Microsoft Chief Financial Officer Mike Brown even went so far as to question the high valuation of the company's stock.
In a comment worthy of Fed Chairman Alan Greenspan, Brown said Microsoft's high price-to-earnings multiple was a ""cause for curiosity.""
But while Piper Jaffray downgraded the stock to hold from buy, based on its 100 percent increase over the past year, few investors heeded the warning.
""They do that every year,"" Michnoff said, referring to Microsoft's conservative forecasts. ""It's a bit like the boy who cried wolf. People are just not believing it.""
Most analysts who follow Microsoft raised their earnings estimates for the company.
First Call, which tracks estimates, said a consensus of 19 analysts was that the Redmond, Wash.-based company would earn $2.33 a share for fiscal 1997, ending June 30, up from a previous consensus was $2.07. The company earned $1.72 a share in fiscal 1996.
For fiscal 1998, analysts see the company earning $2.71 a share, up from a previous consensus of $2.48.
Analysts say fiscal 1998 will be a year of tough comparisons for Microsoft after the 1995 introduction of the Windows 95 operating system, last year's upgrade of Windows NT and this year's launch of the Office 97 application upgrade.
While Microsoft plans an upgrade to Windows 95 more tightly integrated with its Internet browser, it is unlikely to derive the benefits of another price increase or significant further operating cost reductions, analysts said.
""I think that Microsoft does have a lot of hurdles to get over,"" said Rob Owens of Pacific Crest Securities, who calls the stock ""fairly valued"" at its current level of more than 30 times fiscal 1998 earnings.
But analyst Scott McAdams of Ragen MacKenzie said investors are happy to pay a premium for a company that dominates one of the biggest growth industries and consistently surpasses Wall Street expectations.
""They've delivered consistent earnings, and Wall Street hates ugly surprises,"" he said.
David Readerman of Montgomery Securities said Microsoft would like to slow the meteoric rise in its stock price, if only to meet the challenge of providing enough shares to fulfil employee stock options.
""Yet it's difficult, with such a compelling long-term growth story, to keep a great stock down,"" he said.
",31
"Boeing Co defense and space group President Gerald King said the company's planned acquisition of Rockwell International Corp's defense and space business was on track to close in early December.
In an interview, King also said he expected the defense and space group to remain ""a significant part of the Boeing Co"" with 30 to 40 percent of the company's total revenues ""over time.""  
King said he expected federal regulators to complete an antitrust review of the planned Rockwell deal early next month. The proposal also needs to be approved by Rockwell shareholders at a meeting set for Dec. 4 and should close within a few days after that, he said.
""Something could always happen to the merger to keep it from going through, I suppose, even though it looks like a slam dunk in comparison with some of the other things that have been done in this industry,"" King said.  
Last year defense and space revenues of $5.58 billion were 29 percent of the company's $19.52 billion in revenues, with commercial aircraft sales accounting for the rest.
This year defense and space revenues are expected to be nearly flat, while overall company revenues rise to about $22.6 billion, reflecting growth in commercial jet deliveries, said analyst Peter Jacobs of Ragen MacKenzie.
The Rockwell acquisition will add about $2.6 billion in revenue to the defense and space group next year, and King said the company has no immediate plans for further acquisitions.
""We're looking only to make this one work first,"" he said. ""If there's a next step, we'll think about that later.""
King said the defense and space group continues to pursue commercial opportunities, including the Sea Launch program, which he said was on track for initial satellite launch in mid-1998.
King also said the company and its partner, Textron Inc's Bell Helicopter division, are offering a nine-passenger civilian version of their V-22 Osprey tiltrotor aircraft that will be available in 2001.
				 -- Seattle bureau 206-386-4848
",31
"Microsoft Corp. faces increasingly stiff competition and some skeptical corporate customers as it launches the latest version of its hugely profitable Office suite of applications.
Company Chairman Bill Gates has predicted Office 97 will be the biggest upgrade ever in percentage terms for the market-dominating product, which has an installed base approaching 50 million users including component applications such as Word and Excel.
While early reviews of Office 97 have been positive, industry analysts said corporate users in particular will take a hard look before deciding whether the dozens of new features are worth an upgrade investment of $200 per seat or more.
""Corporations are realizing they don't need to upgrade their office suite environment nearly as often as Microsoft would like them to,"" said Michael Pinckney, research director for the Gartner Group.
By most estimates Microsoft dominates the market for desktop productivity suites, capturing more than 90 percent of revenues.
Office and its component applications have been a key driver for the company's earnings, contributing some $1.8 billion of Microsoft's $8.4 billion in sales for the fiscal year that ended June 30, 1996, estimated analyst Scott McAdams of Ragen MacKenzie.
He projected Office would account for nearly $3 billion of a total $10.2 billion in revenues this year.
""There's no question, it's enormous,"" he said.
In addition to its financial importance the new Office is filled with Internet hooks designed to drive broader acceptance of Microsoft's Internet Explorer browser, ""so it's an important product strategically,"" McAdams said.
But Microsoft, which will launch the product Thursday at a glitzy media event featuring Gates on the stage of New York's Alice Tully Hall, faces increasingly aggressive competition from Canada's Corel Corp. and International Business Machines Corp.'s Lotus unit.
Corel, which uses WordPerfect word-processing software as the core of its suite, made a significant dent in Microsoft's retail market share in the second half of last year, according to PC Data.
""Corel has proven that if a competitor has the right offering at the right price point, even Microsoft is vulnerable -- at least temporarily,"" said Liz Buyer of T.Rowe Price in a newsletter.
And Corel has gotten a jump on the market by announcing a new version of its suite based on Java, the Internet-friendly programming language.
Analysts say the emergence of network computers and their ""thin client"" applications pose no immediate threat to Microsoft Office, which demands over 100 megabytes of hard disk space for a standard installation.
""Over time you will move toward a more Internet-intranet driven model, where the basic applications reside inside your Internet structure and you download it as you need it, but that's going to take a few years,"" said Tim Bajarain, president of Creative Strategies consulting.
In the near term, the biggest threat to Office 97 is intertia, analysts said.
Most Office users take advantage of only a small percentage of features as it is.
Analysts are divided on whether significant demand will be driven by Office 97 features including a built-in system to track appointments and phone numbers and animated assistants to guide users through tasks.
More importantly, many large enterprise users have not upgraded to the Windows 95 or Windows NT operating systems, which are required to use Office 97.
",31
"Boeing Co.'s stunning agreement to acquire longtime rival McDonnell Douglas Corp. won a ringing endorsement from Wall Street and sent shock waves through the aerospace industry Monday.
Stock in both companies soared on expectations the deal would boost Boeing's operating profits immediately after its completion, targeted for mid-1997.
Boeing rose $4.375 to $101.125 and McDonnell Douglas jumped $10.375 to $62.375, down from earlier highs on the New York Stock Exchange but good enough to give the all-stock transaction an indicated value of nearly $14 billion.
Industry analysts saw few obstacles to the deal, which marks a startling transformation for a company that just a year ago was completing a final round of cutbacks that had slashed its work force by 30 percent in five years.
Since then Boeing has completed the $3.2 billion acquisition of Rockwell International Corp.'s defense and space business, won the right to compete for the richest military contract in Pentagon history and announced orders for a record $45.6 billion in new commercial jets.
""It's an incredible turnaround story,"" said Jon Kutler, president of Quarterdeck Investment Partners, which specializes in aerospace. ""These are very bold, dramatic, uncharacteristic moves for Boeing and I applaud them for it.""
While Boeing had been moving to cut costs and transform its management style under outgoing Chairman Frank Shrontz, the pace has accelerated at the once-sluggish company since Phil Condit was named chief executive officer in April.
Condit began the final round of merger negotiations with McDonnell Douglas last Tuesday, just a day after being formally elected Boeing chairman as of Feb. 1, 1997.
""We're seeing Boeing evolve from kind of a stodgy company to being very aggressive, nimble,"" said Bill Whitlow, a longtime Boeing analyst at Pacific Crest Securities who praised Condit's energy and stamina.
Executives at the two companies said the deal would be additive to operating profits immediately and reiterated their prediction that Boeing could achieve $1 billion in annual savings without any layoffs because of rapid growth.
Analysts said the merger was a good strategy for McDonnell Douglas, which already had announced plans to pull back from commercial aviation when it was eliminated from bidding for the Pentagon's 21st century joint strike fighter.
But Harry Stonecipher, chief executive of McDonnell Douglas, denied that the merger was born of desperation.
""This is the deal we wanted and we are very happy with it,"" Stonecipher told CNBC. ""This is the only deal we considered.""
Boeing executives told analysts they had no immediate plans to make further acquisitions, even though the combined company will generate cash flow of more than $4 billion a year on projected 1997 revenue of $48 billion.
The surprise merger immediately turned up the heat on Europe's Airbus Industrie to move ahead quickly with a restructuring plan. Without such a plan, the consortium would be unable to go ahead with a proposed super-jumbo aircraft to compete with Boeing's 747, which now is unchallenged at the profitable top end of the market, analysts said.
""Airbus Industrie and its partners must agree as soon as possible on an optimal structure that will allow Airbus Industrie to match its American competitors as a powerful, integrated European enterprise,"" German Economics Minister Guenter Rexrodt said in a statement.
Analysts noted that Boeing had ended any chance that Airbus would partner with McDonnell on a new large jet, and some said Boeing's own plans to stretch the 747 might now be deferred.
But both Airbus and Boeing could benefit from stabilized airplane prices with the No. 3 player out of the market.
Despite some overlapping businesses, including helicopters, rockets and missiles, experts saw little possibility the deal would be stopped by the Defense Department, although the combination of the nation's only manufacturers of commercial jets could give pause to federal antitrust regulators.
""It will be interesting to see what the airlines have to say about this,"" said Don Baker, a former antitrust official now with the firm Baker and Miller in Washington.
""It's worth remembering that there would be just two players in the worldwide market for big planes,"" he said. ""But maybe two is enough competition for the airlines.""
On the defense side, analysts said they expected the marriage of Boeing and McDonnell to spur further consolidation, with players such as Raytheon Co. and Northrop Grumman Corp. looking for partners.
Cowen & Co. analyst Cai von Rumohr said the deal gives Raytheon, which supplies missile systems, ""a window of opportunity"" to buy Hughes Electronics Corp..
""It's not a long-term window,"" he said. ""It will probably last until the (Boeing-McDonnell) deal is closed.""
",31
"Microsoft Corp. reported better-than-expected profits for the latest quarter Monday as strong demand for its Windows operating systems and applications helped fuel record sales.
The computer software giant said earnings rose 23 percent to a record $614 million, or 95 cents a share, in its fiscal first quarter ended Sept. 30, from $499 million, or 78 cents a share, in the 1995 quarter. Revenues jumped 14 percent to $2.30 billion from $2.02 billion.
The profits, announced after the market closed, exceeded the Wall Street consensus expectation of 90 cents a share, and Microsoft shares rose to $136.375 in after-hours trading from the earlier close of $134 on Nasdaq.
Treasurer Greg Maffei said the 14 percent revenue increase was the smallest ever posted in the company's 21-year history, reflecting a surge in sales last year when Microsoft launched its Windows 95 operating system.
But with the high sales, marketing and manufacturing costs of Windows 95 also behind it, the company's operating profit margin surged to a record 39.3 percent of revenues, compared with about 35.1 percent a year earlier, said analyst Scott McAdams of Ragen MacKenzie.
""It looks like it was just a great quarter, and there's more to come,"" he said.
Microsoft executives said in a conference call with analysts that business would continue to be boosted by an expected holiday surge in sales of personal computers and the December release of Office 97, an update to the company's business applications product.
Microsoft Chief Financial Officer Mike Brown said he expected revenues to rise sequentially over the next two quarters and indicated revenue for the current quarter could be in the range of $2.4 billion, about 12 percent over last year's levels.
But he said the company's cost of goods sold should remain at about 11 percent of sales, compared with 15 percent in last year's second quarter.
""I'm very happy with the general revenue trend, and I was very pleased with the pattern of costs in the quarter,"" Brown said in an interview.
Microsoft also cited strong acceptance of the company's high end Windows NT operating system.
Maffei said sales of the NT workstation were up 400 percent over year-ago levels, while revenues from the BackOffice suite of server products doubled. Officials declined to give figures, but the BackOffice line currently generates about $1 billion in annual revenue.
Microsoft's overall revenues are about evenly divided between operating systems -- most of which are shipped loaded on new computers -- and applications.
Excluding sales directly to manufacturers, European revenues were flat in the quarter compared with the year-earlier period, and revenues in the United States and Europe rose 9 percent, reflecting the tough comparison.
But revenues from other markets such as Japan, where Windows 95 was not released until later, were up 32 percent, Microsoft said.
Overall last year Microsoft revenues and profits grew 46 percent, driven largely by the Windows 95 launch.
Brown also said the company was on track to spend $2.1 billion on research and development in the current fiscal year, including such ventures as its MSNBC cable and Internet news venture with NBC.
And the ""unearned revenue"" in the company's balance sheet from cyclical products such as Windows grew to $651 million as of Sept. 30 from $560 million three months earlier.
The company's cash hoard grew slightly to $7.1 billion from $6.94 billion.
",31
"Upscale apparel retailer Nordstrom Inc. Monday posted a 16 percent increase in earnings for its third quarter as it boosted sales and reduced markdowns.
For the fiscal third quarter ending Oct. 31, Nordstrom posted sales of $984 million, up 9 percent over last year's $907 million. Net income rose to $34 million, or 42 cents a share, from $29 million, or 36 cents a share, last year.
When certain one-time gains and costs were excluded, the company earned about 38 cents a share, compared with a Wall Street consensus forecast of 36 cents, said Piper Jaffray analyst Saul Yaari.
He and other analysts said they expected to raise their estimates.
""It was a great quarter,"" said Jennifer Black Groves of Black & Co. in Portland, Ore.
She noted the company had a difficult summer because of an over-reliance on unpopular body-hugging fashions and a merchandise reconfiguration that confused customers and sales executives.
The result was heavy markdowns in July and August that ate into earnings, but company executives said the deepest of the markdowns appear to be behind them.
""They sacrificed the short term for what will be very beenficial for them in the long term,"" Groves said.
She said the merchandise reconfiguration, aimed at bringing the company's clothing selections more into line with its customer base, has ""rejuvenated the company.""
""I think you're going to see some great numbers in the year ahead,"" she said.
Nordstrom said comparable-store sales, a closely watched measure of industry performance, fell 0.3 percent in the latest quarter but were up 1.5 percent for the year to date.
And executives told analysts in a conference call that their plans called for comparable-store sales to rise at least 2 percent in the critical holiday quarter compared with a relatively weak 1995 period.
""We have plenty of ability to respond to sales above that,"" Nordstrom co-Chairman John Whitacre said in the conference call.
Comparable-store sales are adjusted to represent only that retail space that has been open at least a year.
Nordstrom has opened several new stores this year and plans to open three new department stores and several smaller stores next year, adding about 719,000 square feet of store space to its current total of 11.74 million, executives said.
",31
"The Internet browser wars heated up Monday as market leader Netscape Communications Corp launched its latest Navigator software and officials of rival Microsoft Corp. said they saw little new.
Netscape, countering Microsoft's high-profile launch of its Internet Explorer 3.0 last week, said it had linked up with more than 20 content providers, including The New York Times and Sportsline USA, to offer tailored news and information to users.
Microsoft last week made a similar offer, saying that users who download its new browser would get free trial subscriptions to The Wall Street Journal Interactive Edition, ESPN SportsZone and other services.
While Netscape has a commanding lead in the growing browser market, with a share estimated at over 80 percent, industry analysts say Microsoft's latest software poses a threat to that dominance.
""I'd say at the very minimum Microsoft has leveled the playing field, and the real battle can now begin,"" said Adam Schoenfeld of the Jupiter Communications research firm.
Microsoft said more than 1 million users had downloaded its browser off the Internet since it became available last Tuesday.
Microsoft stock fell 75 cents to $123.50 a share, while Netscape dropped $2.375 to $36.50, its lowest close since October.
In launching the latest version of Navigator, Mountain View, Calif.-based Netscape highlighted a new electronic mail feature that will deliver information from selected content providers directly to the user's computer ""in box.""
The new software also offers enhanced audio, video and three-dimensional animation.
In a statement sent to reporters, Redmond, Wash.-based Microsoft called Netscape's new electronic mail feature ""glorified junk mail"" and said its own Internet Explorer offers faster access to multimedia clips.
On its World Wide Web site, Microsoft was less blunt but invited users to try both products and compare.
""We're confident that in this scenario Internet Explorer 3.0 will fare very well,"" Microsoft said in the Web statement.
Schoenfeld agreed, saying, ""To the average user now, the products are probably indistinguishable in terms of quality.""
Microsoft also pointed out that its product is free, while Netscape charges most users a $49 license fee after a free 90-day trial period.
While Navigator is available for a variety of computer platforms, the new version of Internet Explorer so far requires Microsoft's most recent operating systems, Windows 95 or Windows NT.
Microsoft officials said versions for previous versions of Windows and for Apple Computer Inc.'s Macintosh system were forthcoming.
Analysts said while the rapidly expanding Internet market was big enough for both players, Netscape was certain to see its share of the browser market diminish.
They said the browser war was likely to become even more intense when Microsoft unveiled its Internet Explorer version 4.0, expected early next year.
The new browser will be integrated into the Windows operating system, allowing users to ""browse"" through their local computer as well as the Internet.
""Netscape doesn't own the operating system, so it will be very difficult for them to counter that,"" said Michael Wallace of UBS Securities.
",31
"A bankruptcy judge Monday cleared the way for Montana construction mogul Dennis Washington to take over storied engineering giant Morrison Knudsen Corp., rescuing the company from near-insolvency.
U.S. Bankruptcy Judge Peter Walsh, in Wilmington, Dela., approved the prepackaged reorganization plan under which Washington's main operating company will acquire the much-larger Morrison Knudsen for about $283 million in cash, stock and debt assumption.
Washington, 61, a billionaire through his interests in bridge and highway building, copper mining and shipping, will become non-executive chairman of the Boise, Idaho-based company when its merger with Washington Construction Group Inc. becomes effective Sept. 11.
Robert Tinstman, a company veteran appointed to be president and chief executive officer last year after the ouster of its high-flying former chairman, William Agee, will retain those titles in the new company.
The merger requires approval of Washington Construction Group shareholders, but that is a formality because Washington owns 68.5 percent of the shares.
The merged company will retain the Morrison Knudsen name and its Boise heaquarters, but shareholders of the old company -- known for such projects as the Hoover Dam and Alaskan oil pipeline -- will be left with little value.
A distribution of stock in the new company was valued by one analyst at about 15 cents a share, compared with nearly $30 before revelations of losses that stunned Wall Street and led to the ouster of Agee, whose lavish lifestyle had made him a lightning-rod for criticism.
""From a shareholder's point of view it's a pretty bad outcome,"" said the analyst, John Rogers of Jensen Securities.
Shareholders also get warrants to purchase additional shares in the new company at $12 a share, compared with Washington Construction's current price of $9.25. Bondholders will get from 93 to 95 percent of the $365 million they were owed, one banker said.
Executives say the new company will be profitable from the outset, with revenues estimated at $1.59 billion and net income at $31 million for its first full fiscal year beginning Dec. 1, according to bankruptcy court documents.
That compares with revenue of $2.72 billion and net income of $36 million in 1993, before the company reported losses that totalled more than $600 million over two years.
Analysts traced Morrison Knudsen's woes to a disastrous forway into railroads, including huge losses on bids to build new commuter transit cars, a business the company has exited.
Agee's ambitious plan to build new locomotives from the ground up never materialised, and its minority stake in MK Rail Corp. is being distributed to bondholders.
Agee himself, who once used a corporate jet to shuttle between Boise and his company-bought estate in Pebble Beach, Calif., was forced to give up some of his lucrative pension and severance benefits in a $63 million company settlement of class-action shareholder lawsuits.
The new Morrison will get about 90 percent of its revenues from three businesses -- industrial construction for Fortune 100 companies, heavy civil construction, and environmental remediation, mainly for government agencies, Tinstman said in an interview.
""Dennis very much wants this to be a well-balanced, diversified company,"" Tinstman said.
The remaining 10 percent of the company's business is mining.
Washington, who usually stays behind the scenes at his companies, will help set strategy at the new Morrison Knudsen but will not have a day-to-day role, Tinstman said.
Morrison Knudsen Chairman Robert Miller, who was brought in last year and is best known for helping to engineer Chrysler Corp.'s turnaround in the 1980s, will be vice chairman of the new company. The other vice chairman will be Washington aide Dorn Parkinson.
",31
"Boeing Co. chief executive officer Phil Condit did not take long to leave his mark on the company.
Just one day after he was elected to become chairman of Boeing's board of directors Dec. 9, Condit began the final round of on-again, off-again negotiations that resulted in a $13.3 billion deal to acquire McDonnell Douglas Corp.
Condit, 55, an engineer who began his career with Boeing in 1965, will serve as chairman and chief executive of the merged company under the agreement, which requires approval from shareholders and federal regulators.
Condit, credited with spearheading the programme to design and build Boeing's new 777 twin-engine jet, was promoted to chief executive in April after more than three years as president under current Chairman Frank Shrontz, 65.
Condit's promotion to chairman is not even effective until Feb. 1, after Shrontz's retirement.
While Shrontz is a lawyer by training with a somewhat formal demeanor, Condit is known for his habit of changing clothes from a business suit to sweater and slacks for his frequent meetings with workers at all levels of the company.
""I'm real impressed with Phil,"" said Bill Whitlow, a longtime Boeing analyst at Pacific Crest Securities. ""Phil's strength is he's a real communicator.""
Condit shows an almost boyish enthusiasm for his work, exclaiming ""Wow!"" to sum up major business triumphs and declaring he is ""overwhelmed"" by his latest promotion -- no matter that it had been long expected.
Behind that enthusiasm is a drive to cut costs at a company once derided as the ""Lazy B"" and create a military and commercial aerospace giant better able to ride out the deep industry cycles that have whipsawed Boeing in the past.
""We're seeing Boeing evolve from kind of a stodgy company to being very aggressive, nimble,"" Whitlow said.
Over the past several years, as Boeing went through the final years of a long industry downturn, Condit was busy putting into practice the philosophy of ""working together,"" which became a mantra for the 777 programme.
At Boeing the phrase means that engineers, contractors and factory workers, once happy to throw problems ""over the wall"" to the next division, work more closely than before to speed changes and improve processes.
The new philosophy and an overhaul of the company's computer equipment have allowed Boeing to cut the time between an airline order and delivery by as much as 50 percent.
The changes have hardly been accomplished easily. In addition to the layoffs that shrank Boeing's workforce by about one-third over the five years ending in 1995, the company endured a bitter 10-week strike last year by its 32,000 unionized Machinists.
Condit acknowledged last week that the company has ""a long way to go"" to repair relations with its workers.
Condit got his bachelor's degree in mechanical engineering from the University of California in Berkeley and has master's degrees in engineering and management from Princeton University and Massachusetts Institute of Technology.
",31
"Boeing Co. took orders for a record 717 jets valued at $53 billion last year for a 64 percent share of the world market, company officials said Tuesday, adding that this year should be as good or better.
Figures compiled by Boeing show the Seattle-based aerospace giant had net orders for 559 airplanes with a ""catalog"" value of $42.8 billion after excluding cancellations and conversion.
That compared with 301 jets worth $21.6 billion for Boeing's European rival Airbus Industrie, which took a 32 percent share of the market.
McDonnell Douglas Corp., which Boeing has agreed to acquire, took net orders for 38 jets valued at $2.2 billion for a 3 percent share of the market for airplanes with 100 seats or more.
""Our customers put us on top again in 1996 because of the superior value of our complete family of airplanes,"" Boeing commercial airplane group President Ron Woodard said. ""Our goal is to remain No. 1.""
Woodard told reporters he expected 1997 to be as strong or stronger and said 1998 could see orders continue to roll in at a strong level as the international airline industry expands after the long downturn of the early 1990s.
""Airplanes are flying extremely full right now,"" Woodard said. ""The orders we've seen to date are still catching up with what is a reasonable level given the demand.... It looks to us to be a pretty sustained, healthy cycle.""
Boeing's order book went far beyond analyst expectations or the previous peak years of the late 1980s.
""It's an unbelievable year,"" said Paul Nisbet, analyst at JSA Research. ""Nobody expected that at the beginning of the year.
Boeing's previous best year for total orders was 1990, the year the 777 was launched, when it took orders for 483 jets valued at $41.4 billion.
Calculating the order book each year is something of a public-relations exercise as airplane orders are frequently revised, cancelled or converted.
For example, Boeing's total is comprised mainly of firm orders, but the manufacturer also included its massive $6.5 billion order from American Airlines which was announced but not signed.
An Airbus spokesman said the European consortium did not include such ""commitments"" for an additional 172 airplanes received last year such as USAir Inc.'s stated intention to buy 120 jets worth at least $5 billion.
Nisbet said despite the gamesmanship, it seemed clear Boeing is on the way to its goal of a two-thirds share of the market, up from its historical 60 percent level.
Airbus will have about one-third of the market as virtually the only other player, assuming Boeing wins federal approval for its plan to absorb McDonnell Douglas, including its commercial jet operations.
The Airbus spokesman, David Venz, said the four-nation consortium still hoped to achieve its stated goal of a 50 percent market share around the turn of the century.
Airbus officials confirmed Tuesday they were negotiating with South Korean firms to help finance its planned A3XX jumbo jet, which would break the stranglehold on the lucrative top end of the market now held by Boeing's 747 jumbo jet.
Woodard said the business case for a new large jet was very difficult to make because of predictions the trans-Pacific market will ""fragment"" into less heavily travelled point-to-point routes rather than routes between the largest markets.
He noted that Boeing has not yet been able to drum up sufficient customer interest even to launch a stretch version of its 747, which would presumably be less expensive to develop than an all-new airplane.
Boeing delivered 218 airplanes last year, only slightly higher than the 206 delivered in 1995, when production was hampered by a 10-week strike.
Analyst Bill Whitlow of Pacific Crest Securities said he expected Boeing to deliver some 360 jets this year and 430 in 1998, based on announced increased in the company's production rates.
",31
"Software giant Microsoft Corp. MSFT.N  plans to pay dividends to stockholders for the first time through a new issue of preferred shares, according to documents filed Monday.
The hugely profitable company, which has not paid dividends in its 10 years as a public company but has hoarded a cash pile that has grown to more than $7 billion, said it planned to issue $750 million worth of the new class of stock.
""We are responding to the desire of some investors for an income-yielding stock, while still allowing them to participate to a significant degree in the growth potential of our company,"" Chief Financial Officer Mike Brown said in a statement.
The preferred shares will protect investors against risk, guaranteeing they will get back their principal in cash or common stock at the end of three years along with quarterly dividends that will be specified at the time of the offering.
But investors will have only a limited opportunity to enjoy the kind of stock appreciation available to owners of Microsoft common stock, which has risen nearly 80 percent this year.
The value of the preferred shares will be capped at a percentage to be established when the offering is completed. Similar convertible preferred shares have been capped at 25 percent to 30 percent growth.
In the past, Microsoft Chairman Bill Gates and other board members have resisted calls for a common stock dividend, saying the fast-moving computer business required high research spending levels and the flexibility to make large acquisitions if needed.
Treasurer Greg Maffei said the planned issue of preferred shares was consistent with that philosophy, noting that the $750 million would represent less than 1 percent of the company's market capitalization.
""We dont believe the bulk of our investors want a common dividend,"" Maffei said. ""We believe that the best use of (cash) is to reinvest in the business. On the other hand we do understand that some investors want a common dividend, and we created a security that offers them the opportunity to become investors in Microsoft.""
The amount of the offering could rise to $862.5 million if underwriters Goldman Sachs and Morgan Stanley exercise options, Microsoft said in the filing with the Securities and Exchange Commission.
Pending SEC approval the offering could be completed in the next several weeks.
",31
"Boeing Co. chief executive officer Phil Condit did not take long to leave his mark on the company.
Just one day after he was elected to become chairman of Boeing's board of directors Dec. 9, Condit began the final round of on-again, off-again negotiations that resulted in a $13.3 billion deal to acquire McDonnell Douglas Corp.
Condit, 55, an engineer who began his career with Boeing in 1965, will serve as chairman and chief executive of the merged company under the agreement, which requires approval from shareholders and federal regulators.
Condit, credited with spearheading the programme to design and build Boeing's new 777 twin-engine jet, was promoted to chief executive in April after more than three years as president under current Chairman Frank Shrontz, 65.
Condit's promotion to chairman is not even effective until Feb. 1, after Shrontz's retirement.
While Shrontz is a lawyer by training with a somewhat formal demeanor, Condit is known for his habit of changing clothes from a business suit to sweater and slacks for his frequent meetings with workers at all levels of the company.
Condit shows an almost boyish enthusiasm for his work, exclaiming ""Wow!"" to sum up major business triumphs and declaring he is ""overwhelmed"" by his latest promotion -- no matter that it had been long expected.
Behind that enthusiasm is a drive to cut costs at a company once derided as the ""Lazy B"" and create a military and commercial aerospace giant better able to ride out the deep industry cycles that have whipsawed Boeing in the past.
Over the past several years, as Boeing went through the final years of a long industry downturn, Condit was busy putting into practice the philosophy developed with the 777 programme of ""working together.""
At Boeing the phrase means that engineers, contractors and factory workers, once happy to throw problems ""over the wall"" to the next division, work more closely than before to speed changes and improve processes.
The new philosophy and an overhaul of the company's computer equipment have allowed Boeing to cut the time between an airline order and delivery by as much as 50 percent.
The changes have hardly been accomplished easily. In addition to the layoffs that shrank Boeing's workforce by about one-third over the five years ending in 1995, the company endured a bitter 10-week strike last year by its 32,000 unionized Machinists.
Condit acknowledged last week that the company has ""a long way to go"" to repair relations with its workers.
Condit got his bachelor's degree in mechanical engineering from the University of California in Berkeley and has master's degrees in engineering and management from Princeton University and Massachusetts Institute of Technology.
",31
"Pyramid Breweries Inc. Tuesday warned of lower-than-expected sales and earnings for the fourth quarter, blaming increasing competition in the craft beer industry.
Seattle-based Pyramid said sales would be 20 percent to 25 percent below last year's levels on a wholesale basis and said it expected to just break even for the quarter, compared with analysts' projections it would earn 9 cents a share.
In last year's fourth quarter, the company posted gross sales of $7 million and net income of about $1 million, or 13 cents a share.
Pyramid's warning was the latest to roil the trendy craft beer industry, which has disappointed investors who snapped up stock sold in a spree of offerings over the past two years.
Pyramid stock, which went public at $19 as Hart Brewing Co. in December 1995, fell 12.5 cents after the announcement to $4.125 a share in Nasdaq trading. It ended an abbreviated trading session 25 cents lower at $4.
Pyramid's crosstown rival, Redhook Ale Brewery Inc., which just last week warned of weak sales, was trading at $10.625 on Nasdaq, compared with its August 1995 offering price of $17 a share and a peak of $35.
Boston Beer Co., maker of Samuel Adams beer, was trading at $10 on the New York Stock Exchange, compared with an offering price of $20 little more than a year ago and a peak of $33.
Brewers have blamed tough competition, particularly in the Northeast and on the West Coast, where the premium-priced beers have caught on most quickly with consumers.
But market share for craft beers may have peaked in many of those initial markets, while an increasing number of varieties crowd grocery store coolers.
""Not a lot of new consumers are trying craft beers any more,"" said analyst Diane Daggatt of Dain Bosworth, referring to more mature markets. ""The people who are going to try them have tried them. They just haven't built any brand loyalty.""
She said about 400 craft brewers nationwide were distributing beer, up from 300 just a year ago. And brewers are adding more specialty beers, increasing competition and confusing consumers.
While breweries have been offering promotional discounts, analyst Scott McAdams of brokerage Ragen MacKenzie said the industry may be ripe for more serious price cuts and consolidation.
""People are going to have to think about addressing the price issue and spending more on marketing,"" he said. ""They're going to have to play the beer game more than they have been playing the beer game.""
But analysts said there was still a lot of room for growth in new markets. Nationally, craft beers account for about 3 percent of sales, compared with 8 percent to 10 percent in markets such as Portland and Seattle, she said.
",31
"Microsoft Corp expects desktop applications led by its Office suite to bring in about $5 billion in revenues in the current fiscal year ending June 30, an executive said in an interview.
Richard Fade, vice president in charge of the desktop applications division, also said in the interview he expected 35 to 45 percent of users to upgrade to the new Office 97 version, although he declined to project a timeframe.  
Office has an installed base of some 24 million customers, and another 30 million use its component applications such as Word and Excel, which also are being upgraded.
Analysts estimate the software giant will post overall revenues of slightly more than $10 billion this year, up from $8.7 billion in fiscal 1996. With an expected spike in sales driven by Office 97, the productivity applications alone could account for $3 billion, analysts say.
Office 97 is ""a huge release for us,"" Fade said.  
""It's probably the most significant thing aside from the browser work that we've done since the simultaneous introduction of Office 95 and Windows 95 a little more than a year ago,"" he said.
Fade said hundreds of person-years went into the new release, in the works since late 1994. He said virtually the entire Office division of nearly 1,000 people had been working on the product since August 1995.  
In addition to a new information management system called Outlook, the product includes better integration of applications and better compatibility with the Internet.
Fade said Microsoft plans to target different user types through four separate packages of the Office components and other Microsoft applications.
Office standard and professional versions will be available widely Thursday, while versions for small businesses and home users will be out within two months.
Fade expressed skepticism that an alliance of Corel Corp and Netscape Communications Corp announced this week would be able to achieve the tight integration of the Office suite.
But he said the plan by the two companies is an indication of the continuing tough competition in a category Microsoft has dominated for several years.
""It's a very competitive, alive category,"" Fade said.
((-- Reuters Seattle bureau 206-386-4848))
",31
"After months of denying that a $500 Internet appliance would pose a threat to its industry dominance, Microsoft Corp. plans to announce a new push for inexpensive, easy-to-use personal computers.
Microsoft is working with Intel Corp. and major compouter manufacturers such as Hewlett-Packard Co. and Compaq Computer Corp. on the intiative and will announce details at a conference Monday, said a spokesman for the software giant, confirming a published report.
The announcement will come one day before the widely anticipated unveiling of an $800 device from Microsoft rival Sun Microsystems Inc.
The Sun product is among the first of an expected flurry of appliance-like devices dubbed network computers being positioned as Internet-friendly alternatives to PCs based on the ""Wintel"" standard of Microsoft Windows and Intel processors.
While Microsoft Chairman Bill Gates and other executives have downplayed the threat from network computers, they have been scrambling to come up with ways to make personal computers easier to use for home consumers and cheaper to maintain for businesses.
""They and Intel have certainly heard the network computer mantra and have discovered a new religion,"" said Rob Enderle, an industry analyst with Giga Information Group.
""The threat is very real,"" he said. ""Particularly for the (corporate) community, the concern surrounding the cost of managing multiple Wintel systems has been driving them to consider other alternatives.""
At the same time personal computer penetration into the home appears to be hitting a plateau far short of other mass-market electronic devices.
In a report early this year that set off alarm bells throughout the industry, Dataquest forecast sharply slowing growth. The research group predicted PCs would be in 38 percent of U.S. homes by 1999, compared with 29 percent last year.
But since Oracle Corp. Chairman Larry Ellison and other executives began publicizing the network computer a little over a year ago, Microsoft officials routinely have minimized its importance.
""We dont think it's likely that Internet appliances, network computers or whatever you call them are going to displace the PC anytime soon,"" Gates told a Harvard University audience in May.
At the same time Microsoft has been stepping up efforts to make the PC easier to use, acknowledging the machines are dauntingly complex for many consumers.
In April Gates unveiled a set of technologies for what Microsoft called the ""Simply Interactive PC,"" which he said would make the personal computer ""as easy and convenient to use as other home appliances.""
Monday's announcement apparently will go further to bring consumers lower prices, which are being made possible by falling prices of memory and other components.
""They're validating the proposition we've been taking to the market for the last year,"" said Jon Kannegaard, vice president of software products for Sun's JavaSoft unit.
Jesse Berst, executive editor of Windows Watcher, an industry newsletter, agreed that Microsoft was late to acknowledge the importance of network computers.
""They're awful late to respond to what has been a very, very strong message from customers,"" he said.
""If they had been doing what they should have been doing, which is really driving down prices aggressively, they wouldn't have been in the position where someone has the opportunity to come and take their franchise away.""
",31
"Microsoft Corp. is expected to report a sharp slowdown in earnings growth Monday due largely to a sales surge last year when the software giant launched its Windows 95 operating system.
On average, industry analysts expect the company to post earnings of 90 cents a share for its fiscal first quarter, up 15 percent from last year's 78 cents, according to First Call, which tracks earnings predictions. In last year's fiscal first quarter Microsoft reported net income of $499 million.
Analysts generally said the Redmond, Wash.-based company would post revenues in the $2.3 billion range for the period that ended Sept. 30, up from $2.02 billion.
While Microsoft's growth rate is still healthy, and results are expected to be slightly higher than in the quarter ended in June, the company is facing difficult comparisons after last year, when revenues and earnings grew more than 46 percent.
""It's a tough comparison because in the September quarter last year was the initial release of Windows 95 and all the sell-in associated with that, so it was a great quarter,"" said Chris Galvin of Hambrecht and Quist.
But he and other analysts said Microsoft's business was continuing to expand steadily, benefiting from rising sales of personal computers and the increasing penetration of Windows 95 and the more lucrative Windows NT system.
Microsoft's already-high profit margins also are rising as the company sells a growing proportion of its software by preloading it onto new computers or selling licenses to large customers rather than shrink-wrapped boxes at retail stores.
Microsoft's business is expected to gain momentum through the fiscal year as the recently updated Windows NT wins more acceptance and the company rolls out a major new version of its Office software package beginning in December.
For the full fiscal year, analysts see earnings and sales up about 20 percent over last year.
""I think NT will really start ramping in the December quarter and in the first part of '97,"" said Scott McAdams of Ragen MacKenzie. ""It's going to be a very powerful driver of earnings.""
One cloud on Microsoft's horizon is the imminent arrival of a wave of ""thin client"" products such as the Network Computer championed by Oracle Corp. Chairman Larry Ellison.
Late this month, Sun Microsystems Inc. is expected to launch a line of products code-named ""Mr. Coffee"" based on the increasingly popular Java language, which is being positioned as an alternative to the ""Wintel"" combination of Microsoft Windows operating systems on Intel Corp. processors.
While corporate users are not rushing to desert their personal computer networks, the increasing publicity about alternatives could hurt Microsoft's stock price, which was off $1.25 Friday at $134.25 in afteroon trading on Nasdaq but still up more than 50 percent so far this year.
",31
"Microsoft Corp. Friday reported better-than-expected second-quarter profits on broad strength in sales of its personal computer software but warned of slower earnings growth next year.
The Redmond, Wash.-based software giant posted earnings of $741 million or 57 cents a share in the second quarter of fiscal 1997, a 29 percent increase over the $575 million, or 45 cents a share, in the year-ago quarter. Revenues rose 22 percent to $2.68 billion from $2.2 billion a year earlier.
The results, issued after the market had closed, beat analysts' highest forecasts, sending shares of Microsoft as high as $89 in after-hours trading, but the stock later fell to $85.50 due to the warning about slower earnings growth. In regular Nasdaq trading, Microsoft had gained $1.125 to $87.125.
""It was a terrific quarter,"" said Goldman Sachs analyst Rick Sherlund. ""Compared with expectations, revenue was quite a bit stronger than expected, as was the earnings number.""
Wall Street analysts on average had expected Microsoft to report earnings of 51 cents a share, with estimates ranging from 47 to 55 cents, according to First Call.
Microsoft's earnings in the quarter were driven by strong sales in virtually all areas, including its Windows computer operating systems, BackOffice server software and desktop applications such as Office, executives said.
Revenues from ""OEM"" sales through computer manufacturers rose 29 percent to $866 million, while revenues from countries outside the United States, Canada and Europe rose 32 percent to $424 million, with Japan a particularly strong performer.
But in the earnings statement and in a conference call later with reporters and analysts, Microsoft chief financial officer Mike Brown warned that the company's growth is likely to slow in fiscal 1998, which begins July 1.
""We are pleased with the current financial results and growth prospects for the next two quarters, particularly with the outlook for sales of Office 97,"" Brown said in the statement.
""However I do anticipate slower earnings growth in fiscal 1998 (beginning July 1997) due to lower revenue increases in our maturing businesses and margin pressure from continuing aggressive spending on research and development and new business ventures,"" Brown said.
In the conference call he went so far as to wonder aloud about Microsoft's high stock price compared with its anticipated earnings growth.
""It's not my purpose to second-guess the market,"" he said. ""However I will say that our current EPS (earnings per share) multiple is cause for curiosty at least to me.""
Sherlund said such cautionary comments were typical of the company's financially conservative nature.
""Directionally those comments were quite consistent with what we've heard before,"" Sherlund said.
Scott McAdams, an analyst at Ragen MacKenzie, said that while Microsoft's price-earnings multiple is higher than would be expected given its slowing growth, investors pay a premium for its ability to consistently beat earnings estimates.
In a sign of Microsoft's financial strength, the software giant said it ended the quarter with $9.16 billion in cash and short-term investments, up from $7.1 billion just three months earlier.
And the company's ""unearned revenues,"" representing sales deferred to reflect costs incurred over the life of cyclical products such as Windows 95 and Office, rose to $1.013 billion from $651 million at the end of the previous quarter.
",31
"China said on Monday it expected talks with the United States soon on a dispute over U.S. sanctions on its textiles and its own threat to retaliate.
Beijing also said it was still too soon to say which U.S. imports would be banned if Washington failed to withdraw penalties on imported Chinese textiles.
""We expect to see working level talks with the U.S. in the near future,"" an official of the Ministry of Foreign Trade and Economic Cooperation told Reuters.
""The two sides will exchange views,"" he said.
Beijing said on Sunday it would suspend temporarily its imports of some U.S. textiles, farm goods, animal husbandry products, fruits and alcoholic drinks in retaliation for Washington's imposition of punitive charges on American purchases of Chinese textiles.
The temporary import ban would take effect on December 10.
In September, Washington announced punitive charges against import quotas for Chinese textile goods, accusing China of using transshipments to avoid U.S. quota restrictions.
China said the action was taken without consultation and with no clear supporting evidence, adding it had no choice but to impose retaliatory sanctions.
""We are still seeking the views of Chinese enteprises about which products should be included under the ban,"" the Chinese official said.
""That will be determined in another 30 days.""
The total of trade affected by Washington's action was estimated at $19 million -- only a fraction of Sino-U.S. trade, which is now heavily in China's favour. The United States says its trade deficit with China last year was more than $35 billion.
But China's threatened trade ban, made ahead of a planned visit to Beijing this month by U.S. Secretary of State Warren Christopher, meant yet another face-off in the frequently testy Sino-U.S. ties.
Relations have been strained over the last year by a range of issues from Taiwan to arms proliferation to trade and human rights.
China and the United States have said they saw an improvement in relations since they narrowly averted a trade war over copyright piracy and exchanged diplomatic fire over Beijing's political rival Taiwan earlier this year.
The two sides are preparing for high level exchanges next year, including a possible visit to China by U.S. Vice President Al Gore and a summit between Chinese President Jiang Zemin and U.S. President Bill Clinton.
Christopher's visit was expected to pave the way for these meetings.
",49
"The United States would consider some form of peaceful nuclear cooperation with China even before a previously signed accord is fully implemented, U.S. Secretary of State Warren Christopher said on Wednesday.
""As we move forward on nuclear non-proliferation, the U.S. is prepared to consider, as consistent with U.S. laws, further steps in the area of peaceful nuclear cooperation even in advance of our full implementation of the 1985 agreement,"" Christopher told a news conference in Beijing.
Christopher did not specify what types of cooperation might go ahead before implementation of the agreement or give any timetable.
""If they (the Chinese) are making progress towards putting the 1985 agreement into effect, we are prepared to consider other things,"" Christopher said.
Christopher also said the two sides had agreed to establish a regular dialogue on arms control and non-proliferation issues.
""I made clear our strong concern about (China's) nuclear cooperation with Iran,"" Christopher said.
China pledged in May not to provide assistance to any unsafeguarded nuclear facilities.
The United States has held up the full implementation of the 1985 agreement on peaceful nuclear cooperation because of concerns over Beijing's nuclear sales, although the two sides have recently begun talks aimed at allowing the accord to proceed.
Before the 1985 agreement can be implemented, the U.S. president has to certify to Congress that China is not transferring nuclear technology to countries that have nuclear facilities without safeguards.
China is eager to buy billions of dollars worth of nuclear power reactors from U.S. firms.
Christopher arrived on Tuesday for a three-day visit that included meetings with Chinese President Jiang Zemin and Premier Li Peng.
Chinese Foreign Ministry spokesman Cui Tiankai later told reporters the Sino-U.S. agreement on peaceful use of nuclear technology was signed 11 years ago.
""We believe it is high time to put this agreement in practice,"" Cui told reporters.
He said if the U.S. moved ahead with providing nuclear technology to China, U.S. companies would benefit.
""The China market is very big,"" Cui said.
Asked to comment on the agreement on proliferation, Cui said: ""All I can say is the two sides will meet every year and hold a dialogue... to discuss comprehensive issues about global security and non-proliferation.""
",49
"China's foreign debts reached $109.5 billion at the end of June but the governor of the central bank said the country was confident of paying its bills.
Governor of the People's Bank of China Dai Xianglong said the nation's foreign exchange reserves of about $96 billion -- among the biggest in the world -- were comfortable, but not excessive.
""We are very prudent in our borrowing,"" he said, adding that the level of debt measured against exports -- or the debt service ratio -- was well within international warning levels.
""On the whole the repayment situation is good,"" Dai told Reuters in an interview.
""It is hard to say exactly where the debt level will be next year, but every year an additional $10 billion is possible,"" he said.
He said $10 billion had been the average annual addition to the debt level over the past five years.
""For a country of China's size, (the level of foreign exchange reserves) is not a big sum,"" he said. ""We can only say it is comfortable.""
Most of Beijing's debt was long term, but China needed reserves sufficient to maintain repayments as well as to finance four months' worth of imports, he said.
Beijing also had new needs for foreign currency following the recent move to make the renminbi -- China's currency -- convertible on the current account.
He described China's repayment status as good, although he conceded there were repayment problems with enterprises under the direction of local governments.
""There are some local government-run enterprises that are overdue,"" he said.
But Dai also said foreign banks had a responsibility to ensure that credit went to deserving enterprises.
""Foreign creditors of Chinese enterprises must be selective in their lending,"" he said.
The central banker said he expected the renminbi to remain stable though he saw upward pressure on the Chinese currency, partly due to an expected trade surplus of more than $10 billion this year.
That would be down from the $16.7 billion surplus China recorded last year and much better than initial forecasts for 1996.
Economists say faster payments of export tax rebates have encouraged many companies to turn to the export market, thereby helping the trade picture.
The renminbi currently trades at about 8.3 to one dollar.
",49
"China should take advantage of easing inflation and switch its fund raising efforts to longer term bonds, an official newspaper said on Tuesday.
The Financial News, published by the central bank, said that the reduced interest rates meant that Beijing could lock in long-term funds at cheaper rates.
""Now that we are in a period of lower inflation, this is the time to shift to longer term maturities for government funds,"" the newspaper said.
China's retail price inflation rate slipped to 6.9 percent for the first seven months of the year, well below a target of 10 percent for the year and down sharply from the 14.8 percent for all of 1995.
That persuaded the central bank to cut bank interest rates once this year, and many analysts expect another rate reduction by the end of the year.
China also felt confident enough to eliminate a hefty subsidy on new bank deposits and government debt of more than three years as of April.
The subsidy, paid on top of the normal interest rate, was aimed at attracting investors during a period of high inflation.
The subsidy hit a peak of 13.24 percent in December of last year, paid in addition to interest of 12.24 for three-year bank deposits.
In 1995, China issued 151 billion yuan ($18.18 billion) in domestic treasury debt, representing 2.6 pct of its gross domestic product, according to the daily.
""The government had to raise interest rates on bonds and to give a subsidy on top of this. As a result, this increased the the cost of raising funds and the burden of repayment,"" the newspaper said.
In July, Beijing issued its first tranche of 10-year bonds. They paid annual interest of 11.83 percent but with no subsidy, making them a far cheaper way for the central government to raise funds.
""The advantage to the state is that it is simpler to manage,"" said Xu Hongyuan, an economist at the State Information Centre.
""From the investor's standpoint, the bonds are also quite attractive,"" he told Reuters.
The newspaper said in addition that China also had too much of its debt concentrated in three to five-year maturities, bunching up repayments and straining government finances unnecessarily.
""If we can rely on a certain amount of 10-year treasury bonds that will ease the problems,"" the newspaper said.
",49
"China's recent string of satellite launch failures may help Russia's commercial space drive, a senior Russian space official said on Wednesday.
Russia should benefit from its strong space technology, despite lagging behind China in turning technical expertise into commercial success, said Vladimir Oumnikov of the Russian Space Agency.
""We have good prospects,"" Oumnikov told Reuters at an international conference on astronautics in Beijing.
Asked if Chinese setbacks had helped the Russian programme, he said: ""We think so.""
Although China once had a reputation for providing cheap and reliable launch services, it has been stung by a series of launch failures.
China's commercial space drive suffered a setback in August when a communications satellite failed to reach its orbit after launch aboard a Long March 3 rocket.
Last February, an Intelsat satellite was destroyed in a spectacular explosion as a Long March 3B rocket veered wildly seconds after launch from China's Xichang space centre in the western province of Sichuan.
At least six people were killed and 57 injured in the incident, which also destroyed 80 homes near the launch site.
In January 1995, a Long March rocket exploded, destroying the Apstar 2 satellite it was carrying.
Last month, a Russian Proton rocket booster successfully launched a U.S.-built satellite for the international telecommunications organisation Inmarsat and a Proton-K booster rocket launched a satellite for domestic telephone and television use.
""We think we have a good system for ensuring reliability,"" said Oumnikov, who is deputy director for economic issues in the Russian Space Agency's division of space projects.
Failures were common in the space industry and China was not the only supplier of launch services to have such problems, the Russian official said.
He added that Russia needed to catch up with China, which has moved ahead with economic reforms that have reduced the reliance on central planning and expanded the role of the marketplace.
""We do not have enough experience in commercialisation,"" he said. ""China had a head start in this area.""
Russia's parliament was expected to discuss by the end of this year a law that would give a legal basis to the commercial space business, he said.
That would remove some of the legal obstacles to Russia's efforts to make a profit from space technology, he added.
",49
"China said Monday it expected talks with the United States soon on a dispute over U.S. sanctions on its textiles and its own threat to retaliate.
Beijing also said it was still too soon to say which U.S. imports would be banned if Washington failed to withdraw penalties on imported Chinese textiles.
""We expect to see working level talks with the U.S. in the near future,"" an official of the Ministry of Foreign Trade and Economic Cooperation told Reuters. ""The two sides will exchange views,"" he said.
Beijing said Sunday it would suspend temporarily its imports of some U.S. textiles, farm goods, animal husbandry products, fruits and alcoholic drinks in retaliation for Washington's imposition of punitive charges on American purchases of Chinese textiles.
The temporary import ban is to take effect on Dec. 10.
In September, Washington announced punitive charges against import quotas for Chinese textile goods, accusing China of using shipments through other countries to avoid U.S. quota restrictions.
China said the action was taken without consultation and with no clear supporting evidence, adding that it had no choice but to impose retaliatory sanctions.
""We are still seeking the views of Chinese enterprises about which products should be included under the ban,"" the Chinese official said. ""That will be determined in another 30 days.""
The total of trade affected by Washington's action was estimated at $19 million -- only a fraction of Sino-U.S. trade, which is now heavily in China's favour. The United States says its trade deficit with China last year was more than $35 billion.
China's threatened trade ban, made ahead of a planned visit to Beijing this month by U.S. Secretary of State Warren Christopher, meant yet another face-off in the frequently testy Sino-U.S. ties.
Relations have been strained over the last year by a range of issues, from Taiwan to arms proliferation to trade and human rights.
China and the United States have said they saw an improvement in relations since they narrowly averted a trade war over copyright piracy and exchanged diplomatic fire over Beijing's political rival Taiwan earlier this year.
The two sides are preparing for high-level exchanges next year, including a possible visit to China by Vice President Al Gore and a summit between Chinese President Jiang Zemin and President Clinton.
Christopher's visit was expected to pave the way for these meetings.
",49
"The Stone Group, a Chinese high technology company, plans to inject assets into its Stone Electronic unit to boost trading in the Hong Kong-listed firm, a top group official said.
The asset injections could begin next year as the Hong Kong company recovers from its steep slide in profits in 1995, president Duan Yongji told Reuters.
""We want to expand our float,"" Duan said in an interview late on Tuesday.
""We don't have enough stock on the market. Many investors say 'you are not big enough',"" he said, adding that more shares would be sold once the assets were injected into the listed vehicle.
The plan requires a sharp reduction in the price-to-earnings ratio of the company's stock -- now at about 23 -- to about 10.
Duan said a sharp rise in earnings expected this year and in 1997 would help to set the stage for the plan.
The Beijing-based Stone Group Corp listed shares in 1993 with a HK$300 million ($38 million) flotation for Stone Electronic Technology Ltd.
The group still has a controlling 57 percent stake in the Hong Kong company, which makes integrated word processors and printers and distributes a wide range of products, including computers as well as office and lighting equipment.
Stone Group now has 18 joint ventures and it plans to start placing some of those assets into the listed firm.
""We are preparing to inject some of the profitable companies into that vehicle,"" Duan said.
Stone Group probably will inject a large part of its 40 percent stake in a $60 million China-based joint venture with Matsushita of Japan to produce light fixtures. The plant has required heavy start-up costs but should be profitable next year, Duan said.
Stone Group also has a stake in a $1.6 billion semiconductor project with Mitsubishi Electric and Mitsui in China, although that will not begin production until late 1997 or early 1998.
Stone, one of the success stories of China's electronics industry, was started with a loan of 20,000 yuan ($2,400) in 1984.
""We used to compete with just the little guys,"" said Duan.
""That has changed dramatically in recent years,"" he said, adding that all major multi-nationals were now in the domestic market as China has relaxed its once-tight curbs on imports.
""Technology is also changing rapidly so we have to make use of our capital,"" the executive said. ""We can't let it stand still.""
Stone Electronic's profits slumped to HK$17 million in 1995 from HK$63.88 million in 1994. But earnings for the first half of this year were up 44 percent over the year-ago period to HK$10.22 million.
""I can't give a profit figure for all of this year but the full year growth will be better than first-half growth,"" Duan said, adding that 1997 should continue that trend.
Stone sees specialised electronic products for the banking system and tax collection as areas where it has major advantages over its competitors.
The parent company has also diversified into finance, setting up securities and futures trading operations and investing in a bank. Income from financial operations already has exceeded the company's electronics business. ($1= 8.3 yuan) ($1= 7.8 Hong Kong dollars)
",49
"China's oil and chemical trading giant Sinochem hopes to list shares in Singapore as a first step in its plan to become a world-class conglomerate, a top official said on Friday.
""Our objective is to build our company into a transnational conglomerate,"" President Zheng Dunxun said.
""We are looking at big Korean and Japanese conglomerates as models,"" he said.
Zheng, speaking to reporters and security analysts at Sinochem's Beijing headquarters, did not say how many shares would be offered or who much money would be raised.
Timing would depend on the Singapore stock exchange, which was now reviewing Sinochem's plan.
However, company officials said the review period might be longer than usual because the firm was a trading operation and had no production in Singapore.
The company had said last June it was confident of the success of its application and expected to be listed in two months.
Sinochem would retain 60 percent control of the listed company, Zhang said.
Sinochem, whose full name is China National Chemicals Import and Export Corporation, had net assets of more than $1.0 billion at the end of last year. Besides oil and chemical trading, its operations range from oil refining to shipping, warehousing and finance.
Sinochem officials said the company accounted for 40 percent of all of China's oil imports and the remaining 60 percent went through a joint venture in which it had a 50 percent stake.
Company officials said Sinochem had net profits of $75 million last year, down from $100 million in 1994. Turnover rose to $18.21 billion from $14.98 billion in 1994.
Asked why profits slid when revenues rose, officials said market conditions were to blame. They did not elaborate.
The Singapore listed unit would be Sinochem Asia Holdings (Company) Ltd and would include oil and other commodities trading operations in Singapore as well as trading vehicles in Thailand and South Korea.
Sinochem Asia Chairman Fu Yong declined to give the value of the assets of the Singapore listed company, but said they would not include Sinochem's big Hong Kong arm.
""Sinochem Hong Kong would be too big to be put into Sinochem Asia,"" he said.
Asked if this suggested another listing, for the Hong Kong operations, Fu said: ""If the Singarpoe listing goes smoothly we might try other centres.""
If the offer gains clearance form the Singapore stock exchange, Singapore's United Overseas Bank Ltd is expected to be the lead underwriter.
",49
"China on Tuesday announced a ban on poultry and poultry products from two U.S. states affected by what it said was the outbreak of a deadly disease.
The ban is already in effect and covers poultry from the states of Missouri and Oklahoma, an official of the Ministry of Agriculture told Reuters by telephone.
It was aimed at preventing damage from the ""very destructive"" Newcastle disease, the ministry official said.
Official news reports said the ban was slapped on poultry products from the two states because of five cases of the disease discovered between July and September.
A U.S. embassy official in Beijing said he could not immediately confirm that the disease had broken out in the United States this year.
""That is what we are trying to confirm,"" said the diplomat, who asked not to be identified by name.
Beijing has also banned all U.S. poultry brought into the country either by mail or hand-carried by travellers, according to the Ministry of Agriculture official.
""Travellers are barred from bringing in any poultry goods from the United States,"" he said. ""These products also cannot be brought into China through the mail.""
An official of the State Bureau of Animal Plant and Quarantine said the ban went into effect on Monday.
The disease, known as viscerotropic velogenic Newcastle disease, or VVND, is deadly, Phillip Holloway, representative for Hong Kong and China for the Oklahoma state agriculture department, told Reuters on Tuesday.
""It's a very, very dangerous disease -- the most feared of poultry diseases,"" he said. ""The symptoms are like influenza, and once one bird gets the disease, all the poultry will die.""
But Holloway also said he had not heard of any recent cases of VVND in Oklahoma.
The last major outbreak of VVND in the United States occurred in California in the 1970s and led to the eradication of the state's entire poultry population, he said.
The Chinese quarantine official told Reuters that the action was unrelated to other trade disputes with the United States and there were no plans to delay implementation of the decision.
Beijing and Washington are 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.
On Sunday, Beijing announced it was delaying for one month implementation of those curbs, which had been scheduled to take effect on Tuesday, because the two sides were planning to hold further talks on the issue.
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.
China and the United States held talks on the issue and the ban did not go into effect.
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 a total of $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.
",49
"China has captured the big prize in its recognition battle with rival Taiwan after South Africa announced plans to switch formal ties to Beijing.
But the lengthy transition of more than one year signals that much bargaining remains on the shape of future relations between the three governments, diplomats in Beijing said on Thursday.
""We...welcome (South African) President Nelson Mandela's positive statement concerning normalisation of relations between China and South Africa,"" Chinese Foreign Ministry spokesman Cui Tiankai told a news briefing.
""If South Africa can recognise reality at an earlier date it is in its own interests to do so,"" he said.
""This is in keeping with the basic interests of the peoples of the two countries,"" Cui said.
Mandela told reporters in Johannesburg on Wednesday that Pretoria would switch diplomatic recognition from Taipei to Beijing by the end of 1997.
Cui declined to comment on Pretoria's decision to switch only by the end of next year.
""South Africa must recognise there is only one China, recognise that Taiwan is a part of China and sever so-called diplomatic relations with Taiwan,"" Cui said.
""Taiwan is an inseparable part of China. The People's Republic of China government is the sole, legitimate government of all China,"" he said.
""This has been our longstanding stand. It is very clear... Our stand has not changed,"" the spokesman said.
South Africa is the biggest of just 30 states that recognise Taiwan's exiled Republic of China rather than the communist People's Republic on the mainland.
Taiwan and China have been separated since a civil war ended in 1949. China sees Taiwan as a rebel province not entitled to foreign ties while Taiwan insists its 21 million people should have a voice in international affairs.
""The South Africans have been the big fish for China,"" said a Beijing-based diplomat. ""The others are just minnows.""
But in most diplomatic divorces, the break is swift, and diplomats said South Africa was still trying to work out its future relationship with both sides.
""They are trying to gain maximum concessions out of the two sides,"" said a diplomat.
South Africa is probably looking for a package deal that includes investment and trade guarantees under a formal legal framework with Taiwan.
It is also hoping to limit damage.
Mandela, announcing the break wtih Taiwan, pointedly thanked the island for its economic support during his nation's transition from minority, white rule to democracy.
The announcement well ahead of formal recognition would also help South Africa preserve its consulate in the British colony of Hong Kong - which returns to Chinese rule on July 1, 1997.
South Africa had been hoping to maintain official relations with both sides, a goal that proved unrealistic.
Taiwan had also been looking to duplicate a framework with the Pacific states of Fiji, Vanuatu and Papua New Guinea which have formal relations with Beijing but have signed a ""mutual recognition pact"" with Taipei, diplomats said.
""These smaller states may get away with a format such as this but South Africa apparently was not in the same category,"" said a diplomat.
",49
"Officials with Volkswagen-First Automotive Works in northeastern China on Monday dismissed a report that the joint venture faced possible closure.
""This report is incorrect,"" said a spokeswoman of the joint venture, referring to a report by the German news magazine Der Spiegel.
""Production is still continuing,"" she said in a telephone interview from Changchun.
""We have a 25-year agreement. If the German side withdrew unilaterally, they would have to pay compensation,"" she said. She added that the two sides would soon hold a ceremony marking the full implementation of the joint venture project.
A spokesman for Volkswagen AG's Volkswagen Asia-Pacific arm in Hong Kong also said production at the joint venture would continue.
""There is no reason to leave Changchun,"" he said.
Der Spiegel said the Changchun plant was losing money and production of the Jetta car had practically ceased.
The Hong Kong-based official said the factory had produced 14,700 Jetta cars in the first eight months of this year, up 10 percent from a year ago.
The Jetta was not selling as well as the Volkswagen Santana produced at Volkswagen's Shanghai joint venture, but that operation had taken the lion's share of the domestic passenger car market, he said.
However, some changes in the joint venture agreement were being negotiated, including the introduction of new car models as well as the possibility of Volkswagen taking over sales and after-sales service, the official added.
First Automotive Works had been producing Audi 100s at its own production line in Changchun under a seven-year licensing agreement that expired in June. The Audi 200 was now being built at the joint venture, and 400 have been produced since June.
A total of 7,445 Audi 100s were built from January to June this year, the Volkswagen official said.
First Automotive has also sold 4,120 of its Red Flag cars, an Audi-based car that the Chinese company produces separately from the joint venture using a Chrysler Corp engine, according to Volkswagen.
",49
"Russia will push to expand economic ties with China at a top level meeting in Moscow next month as old political hostilities fade in the background, a senior Russian diplomat said on Friday.
""The big task in bilateral relations is to boost economic cooperation to the level of political cooperation,"" said Russian Ambassador Igor Rogachev.
Chinese Premier Li Peng and Russian Prime Minister Viktor Chernomyrdin will meet in Moscow to map out practical economic steps in a relationship described by the two sides as a strategic partnership.
The two former rivals for the leadership of the world communist movement have not seen such smooth relations since 1949 -- when the Chinese communists proclaimed the birth of the People's Republic of China, according to the Russian diplomat.
""Relations have never been on such a healthy and rational basis,"" said Rogachev, one of Russia's top China experts.
The two sides would now push to deliver oil, natural gas and electricity from Siberia to China while Russia wanted a role in China's nuclear power development, he told reporters.
Rogachev said Russia was hoping to see other neighbouring countries participate in the projects, though he gave no indication of how likely that was or what form it might take.
China and Russia have already proposed an oil and natural gas pipeline linking Siberia to China but financing is certain to be a key hurdle for the huge project.
""I don't expect an agreement on these issues at the (December) meeting but perhaps we'll be ready by the spring,"" he said.
That is when China's President Jiang Zemin travels to Moscow for a summit with Russian President Boris Yeltsin, a meeting arranged during the visit to China this week of Russian Foreign Minister Yevgeny Primakov.
China and Russia are expected to sign another accord soon, this one on troop reductions along their 4,300 km (2,580 mile) border, the official Xinhua news agency has said.
Rogachev said Russia was eager to reduce the high cost of stationing troops along the lengthy border, particularly when the strains of the 1960s Sino-Soviet split were so far behind them.
""We don't think that China creates a threat for our country and they (China's leaders) don't see Russia as an enemy,"" Rogachev said.
During Yeltsin's April visit to China the two nations -- along with the three former soviet states of Kazakhstan, Kyrgyzstan and Tajikistan -- signed a treaty agreeing to inform each other of military exercises along the border and not to attack each other.
However, China and Russia been unable to reach agreement on one area of cooperation -- further deliveries of Russia's Sukhoi Su-27 interceptors.
China's armed forces have already put into service a first group of the planes but talks for further sales have long been stalled over payment and technology transfer issues.
""Talks are going on,"" Rogachev told reporters. ""There will be more talks in future.""
",49
"China has vowed to wind up the lengthy probe of the disgraced former boss of Beijing, saying the case had seriously damaged the Communist Party in the nation's capital.
Beijing party chief Chen Xitong stepped down in April last year, only weeks after his protege and vice-mayor Wang Baosen was targeted in a probe of economic crimes and committed suicide.
""The cases of Chen and Wang absolutely will not just fade away,"" the Outlook magazine quoted Beijing's current party chief, Wei Jianxing, as saying.
""These cases have had a very bad effect on municipal affairs.. and have destroyed a number of comrades in the party,"" it quoted Wei -- the Communist Party's top graft fighter -- as saying.
The weekly magazine, published by the official Xinhua news agency, carried the remarks in its latest edition, seen in Beijing on Wednesday.
The 66-year-old Chen has been out of the public eye since his fall from grace, becoming the most prominent victim of a campaign against corruption.
He was deprived of his seat on the party's powerful Politburo and was officially said to be under investigation for ""serious mistakes"".
Unpublished party documents say that Chen, who ran Beijing for 12 years, first as mayor and then as party chief, had abused his office by amassing $24 million in unauthorised funds and lavishing favours on friends, associates and a long-time mistress.
Vice-mayor Wang was found to have used his position to obtain 116 houses illegally and built himself a villa on the outskirts of the city. He also masterminded a $37 million embezzlement and graft scam, officials have said.
The inability of investigators to announce a conclusion to their investigation had triggered much speculation, particularly in the case of Chen who was said to be refusing to cooperate and was threatening to implicate others.
It also contrasted sharply with the speedy trial and sentencing last week of dissident Wang Dan, who was jailed for 11 years on subversion charges after less than four hours in a Beijing courtroom.
The magazine also said that 22 people had been linked to the probe of the late vice-mayor, including Zhou Beifang, the former chairman of Hong Kong listed affiliates of a major Chinese steel company, and Chen Xitong's secretary, Chen Jian.
Earlier this month, prosecutors filed corruption charges against 30 people, including Zhou, who was detained in February last year.
The magazine also said that a former senior member of the Beijing city assembly, Tie Ying, had been arrested and expelled from the party earlier this year for accepting a large bribe from a Hong Kong businessman. It did not give further details.
The city government had been virtually paralysed since the disgrace of Chen and Wang, Chinese sources have said.
The campaign to clean up the Beijing administration was widely believed to have been a factor in the departure last week of Li Qiyan as mayor.
Corruption was virtually eliminated in the years after the communists came to power in 1949, but has staged a comeback along with economic reforms in the past 17 years.
Communist Party chief and state president Jiang Zemin has declared war on corruption, warning that the scourge was a virus that threatened the party.
Courts frequently impose the death penalty in major corruption cases.
",49
"China will avoid bold moves in tackling its ailing state enterprises as it focuses on stability ahead of this year's crucial Communist Party congress, analysts said on Monday.
They said policy makers would err on the side of caution in a year billed by Beijing as one of the most significant of the communist era.
""Reform of state enterprises is the nation's biggest economic problem but it is an extremely difficult one to solve,"" said economist Cheng Xiusheng of the Development Research Centre of the State Council, or cabinet.
""I would not expect any major breakthroughs this year.""
As China sheds the vestiges of a centrally planned economy, it wants state-owned companies, which have grown fat under government nurturing, to be leaner and better able to compete in the marketplace.
About 75 percent of state firms are losing money. Losses surged to about 69 billion yuan ($8.3 billion) in the first 10 months of last year, a rise of 45 percent over the same period of 1995, officials have said.
Halting those losses would mean shedding much of the workforce and in some cases making use of bankruptcy laws to dissolve companies.
China's rulers have vowed to push ahead with reforms of the state sector but analysts are betting that the scale of any changes will be limited.
Analysts note that China has set a target of keeping urban unemployment around three percent this year, little changed from the official figure issued in the recent past.
""The problem is there is no social safety net,"" said a Western diplomat.
China has no real unemployment insurance system and retirement schemes cover only a fraction of the working public.
As most social welfare benefits stem from the employer, the loss of a job could have a huge impact on the individual.
On a wider scale it could mean social unrest.
""The Chinese realise where the problem lies,"" said the diplomat. ""The trick is being able to make tough political decisions.""
That is unlikely this year as China's leaders prepare for the party congress that will set policies over the medium term.
""No one wants to go into that meeting with the threat of social unrest,"" said another diplomat.
Beijing is also loath to take risks as it awaits the recovery of Hong Kong on July 1 after more than 150 years of British rule. It wants a smooth handover.
Some economists had hoped communist leaders would turn their attention to the deep-rooted problems of the state sector this year after Beijing effectively declared victory in its other major campaign -- the battle against inflation.
China wrestled inflation down to six percent last year from 14.8 percent in 1995 and a communist-era high of more than 21 percent in 1994, according to official data.
Economic leaders were confident enough inflation had been licked to allow state-set prices for postal rates and local telephone calls -- long held at subsidised levels -- to rise sharply last month.
But economists said that this year at least, Beijing would prefer to continue with some of its subsidies rather than pay the social cost of putting ailing companies out of business.
",49
"China is planning to issue rules to speed development of its key power sector with an expanded role for foreign companies, a Chinese planning official said on Tuesday.
Beijing was reviewing rules governing build-operate-transfer (BOT) projects, which so far have been off limits for foreign companies on major power projects, said Wang Hong of the State Planning Commission.
""The State Council (cabinet) is considering temporary regulations,"" said Wang, director of the commission's department of foreign finance utilisation.
China has said it needs $20 billion in foreign capital through the year 2000 to meet its targets for power industry development.
Wang said the BOT rules would not be ready in time for the award of the nation's first such power sector project which is expected soon and could cost $600 million to $700 million.
China is now evaluating tenders for the Laibin power project in Guangxi province in southern China, which calls for construction and operation of two 350-megawatt power units.
Beijing says it is using the BOT method on a trial basis.
The winner could be announced within the next month, Wang told Reuters at an energy conference.
Major bidders include industrial giant ABB Asea Brown Boveri AG of Switzerland and a group including Germany's Siemens AG and Hong Kong's China Light & Power Co Ltd.
The winner would construct and operate the plant for a period of time before turning the plant over to China. Its bid would include a plan for domestic electric power rates.
The rules under review would define BOT projects and state when they are acceptable.
They would also specify the approval process, require the use of international tenders and determine the apportioning of risk between China and foreign companies, Wang said.
China generally does not allow foreign entities to hold than a 30 percent stake in key power projects, which are those with a capacity of about 250 megawatts.
Western bankers at the conference said the lack of a clear legal framework for BOT projects coupled with problems in setting domestic electric power rates made it difficult for foreign commercial banks to finance the Laibin project.
",49
"China is preparing to tap overseas capital markets by listing shares of one or two of its chemical companies abroad, a senior Chinese official was quoted as saying on Sunday.
But as Beijing looks for foreign capital to upgrade its technology it plans to tighten foreign access to its own chemicals market by adding new restrictions on joint ventures.
Chemical Industry Minister Gu Xiulian told the Business Weekly that one or two chemical companies were getting ready for share offerings abroad, though she did not name the companies or the exchanges.
She also said that one or two Chinese companies would issue convertible bonds -- bonds convertible into stock -- on a trial basis, though regulatory guidelines were not yet in place.
China securities regulators are known to be preparing another batch of companies for share offers outside the country. It was unclear from Gu's remarks whether the chemical firms would be among those companies.
Tianjin Bohai Chemical Group already has a listing on the Hong Kong stock market as well as on the Shanghai exchange while Jilin Chemical Industrial trades in Hong Kong and New York as well as on China's southern bourse in Shenzhen.
Gu said that China's chemical industry needed to raise funds to make technical upgradings and that stock and bond offerings would help reach these goals.
""We are trying to achieve the shift to a quality, intensive mode (of production) from the quantity, extensive model with the aid of foreign capital,"" she said.
China will bar foreign companies from holding controlling stakes in joint ventures with big state enterprises in priority areas such as in soda ash and ""sensitive materials"".
There was no indication of when the move might go into effect, and the policy ""does not mean we are totally opposed to stock control by foreign businesses"", Gu said.
Gu had previously told reporters that China was planning to review its policies towards joint ventures in the chemical industry.
She had suggested that areas where new technology was vital to the development of domestic industry, foreign companies would be allowed to control joint ventures.
But other areas where China had already developed sufficient expertise would be closed to more than 50 percent foreign ownership.
China is particularly encouraging direct foreign investment in fertilisers, ethylene, synthetic materials as well as fine chemical products -- either as wholly owned or jointly owned operations, Gu told the newspaper.
She also criticised the ""westernisation"" of well known domestic products, saying that China needed an integration of foreign brands and domestic products.
",49
"A Chinese appeals court, in a rare move, sharply reduced on Friday to five years a prison sentence for an International Monetary Fund (IMF) employee accused of corruption.
The court's decision followed a brief suspension of technical assistance by the IMF and a Beijing visit by IMF Managing Director Michel Camdessus to voice concern over what he described as judicial shortcomings in the case.
The Beijing Municipal Higher People's Court sentenced Hong Yang, 44, a Chinese national, to five years in prison for accepting bribes totalling 100,000 yuan ($12,000) in 1993, before he joined the IMF, the Xinhua news agency said.
""The sentence was dealt with leniently... and according to law,"" Xinhua quoting the court as saying on Friday.
Hong, a former employee of the People's Bank of China, or central bank, was arrested in December while on an IMF mission to China. He was found guilty on June 28.
Beijing sources said the original sentence was for 10 years, although statements by the IMF in Washington put it at 11 years. Hong appealed.
Chinese courts rarely cut sentences on appeal, though an admission of guilt may lead to more lenient treatment.
Camdessus has confirmed reports that Chinese authorities pressured the IMF to include Hong, who had been working at the international organisation's headquarters in Washington, on a mission to China.
The Chinese actions created a furore at the IMF and Camdessus said in a letter to the organisation's staff he would closely monitor a second trial.
""I also urged that the second open trial be transparent and complete and remedy the shortcomings of the first trial,"" Camdessus said after he visited Beijing last month.
Xinhua did not mention the original trial but it highlighted the legality and openness of the second.
It said the case was put on open trial on August 9 and that Hong, his two defence lawyers and four witnesses appeared in court and were involved in the proceedings.
It also said that 200 people, including Hong's relatives and IMF officials, were present.
It added that the man accused of offering the bribe, Fan Honggen, and other individuals from the Agricultural Bank would be dealt with in a separate case. It did not give further details.
",49
"China warned on Monday against reinforcing military alliances, saying Cold War ideology lived on.
In an apparent dig at the United States, it also hailed what it called a trend towards a multi-polar political and economic world order.
""The practice of reinforcing military alliances runs counter to the current tide of peace and development, and will have to arouse great concern among the people,"" Vice-Premier Qian Qichen was quoted by the official Xinhua news agency as saying.
""The Cold War has ended but confrontational 'Cold War thinking' still exists,"" said Qian, who is also foreign minister.
Qian did not name specific targets for Beijing's ire but the remarks closely followed a visit by Premier Li Peng to Russia, a trip that prompted China's official news media to trumpet the rise of a power centre to balance the United States.
Chinese political analysts have noted they shared Russian concerns over the planned expansion of the North Atlantic Treaty Organisation to admit Moscow's former Cold War allies in eastern Europe.
China has also vented its anger at closer U.S. military ties with Japan stemming from an agreement this year that enhanced security ties between the two countries.
Beijing has tried to strengthen its own links with the United States and other Western countries, but it is keen to see some check on Washington's power, diplomats said.
Qian said a key trend of the past year was the movement towards economic and political ""multi-polarisation"".
Relations between the world's big powers were undergoing major readjustments, marked by mutual reliance and restraint, which have brought about a complicated and changeable situation, he said.
This was underscored by widespread opposition to the Helms-Burton and D'Amato legislation put into effect by the United States with the aim of tightening economic sanctions against Cuba and Iran, he said.
The two laws had been strongly condemned and extensively boycotted, Qian said.
China sees these laws as U.S. interference in the affairs of other states, a sensitive subject for a country that has come under sharp criticism for its human right policies at home.
Qian said that over the last year, Beijing had moved to counter practices that interfered in its internal affairs, safeguarding the state's sovereignty, territorial integrity and national dignity.
Beijing was willing to work with the United States to improve ties, adding that relations had stabilised after a ""period of turbulence"" earlier this year.
Sino-U.S. relations were badly strained by Beijing's war games and missile tests near Taiwan in March.
Relations between Washington and Beijing were also marred by tensions over trade, human rights and arms proliferation although a series of meetings between senior officials helped to ease strains in recent months.
",49
"China needs to extend bank credits to help boost its flagging export sector, a top trade official was quoted as saying on Sunday.
Minister of Foreign Trade and Economic Cooperation Wu Yi wanted commercial and subsidised bank credits, particularly for machinery and electrical equipment makers, the Financial Daily reported.
""First of all, I believe that the state should expand the size of its export lending,"" Wu said.
""It should maximize its use of domestic credits, finding new sources of credit, and expand use of foreign loans to boost exports of complete plants and equipment.""
China's exports for the first eight months of the year were $90.61 billion, down 4.2 percent over the previous year, according to official figures.
Exports in July and August showed an improvement, however, after the government speeded up long delayed payments of export rebates.
Wu said commercial banks should be encouraged to make policy loans that might not be commercially attractive, and that state subsidies would be required.
""We want to encourage commercial banks to take on policy loans. With the assistance of the Export-Import Bank, the state will implement necessary financial subsidies,"" she said.
The minister said that big, turnkey projects required large amounts of capital and lengthy periods before they were completed.
While the projects were in progress, exporters had to deal with inflationary cost pressures, exchange rate fluctuations and tax rebate delays.
""In order to expand exports of complete plants and equipment we need an overall system to provide financial security for these companies,"" she said.
""This will effectively encourage exports of machinery and complete plants and equipment.""
Wu said she was confident China could reach its total trade goal of $281 billion this year, though she gave no figure for exports.
",49
"Asia gave a cautious welcome on Friday to U.S. President Bill Clinton's appointments for the key posts of secretaries of state and defence, mixing public praise with some private misgivings.
U.N. Ambassador Madeleine Albright, tapped to become the first woman secretary of state, and Senator William Cohen, who would take up the defence post, were seen as able appointees, though both were perceived as short on Asian expertise.
Analysts said Asian nations that had been targets of U.S. pressure on human rights might also have cause for new concerns, particularly with the outspoken Albright in the top foreign policy job.
Clinton named his United Nations envoy and the Republican senator from Maine on Thursday as his choices for the Cabinet posts to succeed Warren Christopher and William Perry. Senate confirmation for both nominees was widely expected.
Japanese Prime Minister Ryutaro Hashimoto said he did not foresee any impact on U.S.-Japan relations.
""I do not expect any changes in U.S.-Japan ties and I hope we can work together to deepen our relations,"" he told reporters.
But government sources said both appointees were unfamilar with Japan and their counterparts in Tokyo would soon begin the task of getting acquainted with them.
China, which has seen an easing of its strains with the United States of late, said it welcomed Albright's appointment and looked forward to a continuation of improving ties.
""We congratulate Ms Albright on her nomination as secretary of state,"" a foreign ministry spokesman said.
""We hope that while she is secretary of state, China and the United States ... will grasp the opportunities and make mutual efforts to improve and develop Sino-U.S. ties.""
Sino-U.S. relations had been buffeted over the past two years by disputes over Taiwan, arms proliferation, trade and human rights. Relations have improved markedly in recent months, most notably with a meeting between Clinton and Chinese President Jiang Zemin in the Philippines last month.
But Chinese specialists in U.S. policy issues said a lack of experience in Asian affairs would prove a handicap for the two new Cabinet members, though they expected this to be overcome.
They said that human rights issues, still a source of friction, had been put aside for the time being, and were unlikely to upset bilateral ties.
Burma could be one Asian state to have misgivings about the new post for Albright, particularly in the sphere of human rights, analysts said.
There was no official comment from the Burmese government but a Western diplomat in Rangoon said Albright's appointment would be viewed negatively as her past statements on human rights and women's issues have not been welcome.
The United States has also been critical on occasion of Indonesia's human rights record though Jakarta's reaction to Albright's appointment was upbeat. Indonesian Foreign Minister Ali Alatas described her as an able and experienced diplomat.
South Korea saw the new U.S. Cabinet appointees as likely to maintain pressure on rival North Korea as both are wary of the potential threat posed by Pyongyang.
""The U.S. policy of trying to guide North Korea to a soft landing and keeping the freeze on Pyongyang's nuclear programme will continue,"" a government official said.
""The new team is also likely to promote dialogue between South and North Korea,"" he added.
North Korea invaded the South in 1950 and the two sides remain technically at war. Hostilities ended in 1953 with an armistice, not a peace treaty.
Albright won an enthusiastic response from some quarters, such as in the Philippines where she was called an inspiration to women worldwide.
""I am glad that the United States showed the way,"" said Katrina Legarda, one of the country's prominent women lawyers.
""This development is so rare,"" she said.
",49
"China said on Thursday the highest-level U.S. visit in two years had produced results and the task now was to push Sino-American ties forward.
Beijing made the upbeat assessment as U.S. Secretary of State Warren Christopher wound up a three-day visit by urging China to seize an historic opportunity to build a new era of cooperation.
""We believe this visit has produced results,"" Foreign Ministry spokesman Cui Tiankai told reporters.
""Both sides believe that Sino-U.S. relations have improved in the last few months,"" he said. ""Both sides believe it is necessary to maintain and develop this improving trend.""
Christopher met Chinese President Jiang Zemin and Premier Li Peng and held lengthy discussions with Foreign Minister Qian Qichen during the visit.
One significant gain for Beijing was Washington's willingness to consider cooperation in nuclear technology despite lingering concerns over possible re-exports.
The United States and China signed an accord in 1985 for cooperation on the peaceful use of nuclear technology. But before the accord can be fully implemented the U.S. president must certify to Congress that Beijing is not providing nuclear assistance to states with unsafeguarded facilities.
Concerns about assistance to countries such as Iran and Pakistan have long blocked China's access to the technology it wants to spur its nuclear power industry.
For its part, China agreed to regular meetings on arms proliferation, though Beijing made clear that as far as it was concerned, the main such issue is U.S. arms sales to Taiwan.
""This is the most important arms proliferation issue,"" Cui told reporters.
China views Taiwan as a renegade province and it used Christopher's visit to make the point it expects to see an eventual end to American arms sales to the island.
Washington insists these are two separate issues and it will continue to sell defensive weapons to Taiwan.
The foreign ministry spokesman also pointed to results on trade issues, particularly a broad agreement that China should join the World Trade Organisation as soon as possible.
But the two sides have different views over how that can be achieved. Beijing wants admission under the more favourable terms of a developing country while Washington insists the Chinese economy is too big for such treatment.
Cui played down other areas of disagreement -- such as human rights -- saying there were major differences between the two sides but these should not become obstacles to improving ties.
More high-level contacts were agreed on, though an announcement on summits was deferred, apparently until U.S. President Bill Clinton meets the Chinese president in Manila on Sunday.
Those talks could touch on possible dates for an exchange of visits by the two leaders.
",49
"China's central bank chief has said that inflation would be a modest seven percent this year and this showed the state's economic policies were working.
But Dai Xianglong, governor of the People's Bank of China, lashed out at companies that had taken advantage of tight money policies used to tackle inflation by lending money at excessively high rates.
""The appropriately tight monetary polices have achieved clear results which have been acknowledged both in China and abroad,"" Dai was quoted as saying in the Financial News on Monday.
""We can now control inflation to about seven percent for the full year,"" he said.
China's retail inflation stood at 6.9 percent year-on-year in the first seven months and at 5.9 percent in July alone.
Beijing has said it wanted to keep inflation within 10 percent for 1996, down from 14.8 percent last year and a communist-era high of 21.7 percent in 1994.
But the central bank chief had harsh words for companies that had taken advantage of the tough austerity programme put in place three years ago to deal with the worst days of inflation.
He did not name any of the offenders but he said that some ""monopoly groups"" and publicly listed companies were lending out money at excessively high rates.
Tsingtao Brewery, which has stock listed in Hong Kong as well as in Shanghai, has run afoul of regulatory authorities in the British colony in the past for lending out funds raised from its public offer.
A senior Chinese economist who asked not to be named said several big ministries were cash-rich and able to earn more than bank deposit rates by lending out their funds.
""The big offenders are some cash-rich ministries,"" said the economist. ""They can earn 16-18 percent on their money.""
That would compare with interest of 7.47 percent earned on one-year bank deposits.
Other economists have said that higher rates were available for even more speculative lending.
Dai gave no indication of whether any measures were being planned to address these problems, although he said that funds in the banking system were unevenly distributed.
He said that China had already taken steps to curb illegal money market trade and that it had taken steps to ensure that other unauthorised financial organisations did not act as commercial banks.
""There are many violations of financial regulations,"" Dai was quoted as saying. ""There must be an expansion of supervision over the financial sector.""
",49
"China gave U.S. President Bill Clinton a signal on Sunday that the election had not cleared away nagging trade disputes, saying it planned tit-for-tat curbs on American imports.
Beijing said it would suspend temporarily its imports of some U.S. textiles, farm goods and alcoholic drinks in retaliation for Washington's imposition of punitive charges on American purchases of Chinese textiles.
The announcement came only days after Clinton's re-election triumph and ahead of a planned visit to Beijing this month by U.S. Secretary of State Warren Christopher.
Sino-U.S. relations have been strained over the last year by a range of issues from Taiwan to arms proliferation to trade and human rights.
China and the U.S. have said they saw an improvement in relations since the two sides narrowly averted a trade war over copyright piracy and exchanged diplomatic fire over Beijing's political rival, Taiwan, earlier this year.
Beijing said last week that it saw Clinton's re-election as a good opportunity for better ties in a ""somewhat improved atmosphere"".
The temporary import ban, which would take effect on December 10, was in retaliation for what China called severe violations by the U.S. of a bilateral textile accord.
""The decision was made in response to the U.S. unilateral cut of import quotas of Chinese textiles, which severely violated the bilateral textile agreement,"" the official Xinhua news agency said.
In September, Washington announced punitive charges against 1996 import quotas for Chinese textile goods, accusing China of using transshipments to avoid U.S. quota restrictions.
The action -- which was expected to cost China about $19 million -- marked the first time Washington had imposed so-called triple charges against repeated violations of a bilateral textile accord.
The U.S. move was made without full consultation and clear supporting evidence, Xinhua said.
Beijing accused Washington of imposing a series of barriers that had seriously affected Chinese textile export to the U.S. as well as China's ability to pay for American imports.
China said it had urged the U.S. to withdraw the penalties but its pleas had been ignored, leaving it no choice but to take action.
China's import suspension would also apply to U.S. fruits and animal husbandry products, though there was no indication of which specific items would be barred within the broad product categories.
The Ministry of Foreign Trade and Economic Cooperation and the General Administration of Customs would have a detailed list ready before December 10, according to Xinhua.
China also said it opposed any attempt to impose the will of one side upon others in trade matters, and called on the U.S. to avoid such measures in future.
""Once again, we wish to urge the United States to handle trade disputes in the spirit of advancing bilateral trade, and refrain from taking any actions harmful to bilateral trade in the future,"" it said.
",49
"China could list more railway companies and is studying a plan to create a fund to boost foreign investment in the sector, a railway official said on Monday.
The moves would be aimed at bringing in cash to help modernise the nation's huge rail system and fend off competition from planes and buses, Ministry of Railways senior engineer Zhang Yanzhao said.
China's first railway stock offer -- the Guangshen Railway Co Ltd -- was being watched for its performance as a possible model for future offerings, Zhang told Reuters in an interview.
""If Guangshen is seen as successful, we could use the same method again,"" said Zhang, assistant director-general of the department for cooperation with foreign countries.
The Guangshen Railway links Guangzhou -- capital of fast growing Guangdong province -- with Shenzhen, which borders Hong Kong.
In May, the company's shares were listed in Hong Kong and in New York as American Depositary Receipts.  
The offer was only a modest success, managing to hold just above its offer price. The Hong Kong shares were now trading at HK$2.925 ($0.38) each compared with an offer price of HK$2.91.
""Any operations listed in the future would have to be making money and would probably be along the east coast,"" Zhang said.
The key was corporatising the regional railway bureaus under the ministry's supervision. So far, only Guangzhou and Dalian in the northeast have taken this step.
Another form of financing under study is the creation of a fund that could offer fixed income to foreign investors.
""This is still far off,"" Zhang said without giving details.
The railways have long been the backbone of China's transport sector, but are now facing new competitive pressure for both freight and passenger markets.
Guangshen Railway had to cut ticket prices as of November to compete with bus traffic. The move was expected to hurt revenue and has already pressured the company's share price.
China's railways carried 448 million passengers in the first half of the year, down 14 percent from a year ago, according to official media reports.  
Zhang said that overall China's railways were profitable, although some routes were losing money. And overall, profits were not keeping up with past performances.
""As of last year, we have not been doing as well,"" he said without giving any figures.
Overstaffing was a key problem because the railway system has 3.3 million workers on its payrolls. But shedding jobs requires tough political decisions because unemployment is seen as a source of potential social unrest.
Government control over rail rates is also a problem. The ministry would like to raise rates but has little room to do so.
""This is a sensitive area,"" said Zhang.
The ministry is trying to speed up its trains, increase capacity and provide more comfortable passenger cars. It plans to expand electrified rail service to 28 percent of its capacity by 2000 from 19 percent now.
New plans for electric locomotive production are under discussion, and Switzerland's ABB AG and Germany's Siemens AG are among the top contenders.
Discussions are under way with Canada's Bombardier for joint production of modern passenger cars, and plans are moving ahead for a computerised, nationwide ticketing service.  
""If we don't compete we will lose market share,"" said Zhang.
(US$1 = HK$7.73)
",49
"China has begun a national drive to test all blood products since the discovery of HIV contamination earlier this year, a health official said on Friday.
""We have requested all local health authorities to inspect blood products and report the results to us,"" said an official at the Ministry of Public Health.
The official, who declined to be named, said the testing followed the discovery in April of some samples of a HIV contaminated product manufactured and sold in the southern province of Guangdong.
The product was known as ""Wolongsong"" brand blood albumin, a protein.
HIV -- Human Immunodeficiency Virus -- is the virus that can lead to Acquired Immune Deficiency Syndrome (AIDS).
""Following the incident we instituted a national inspection of blood products,"" the official told Reuters.
Asked how the tainted product had been uncovered, she said: ""I can't tell you that. This is a very sensitive question.""
Results of the tests from several provinces had been turned over to central authorities, she said without giving any further details.
An official at the Foreign Ministry said public health authorities in Guangdong had called for government agencies around the country to stop the sale and use of the 50- millilitre ""Wolongsong"" albumin.
Guangdong health officials, contacted by telephone, declined to give any information on the manufacturer or say how much of the product had been on the market when the action was taken.
They also declined to say how the item became contaminated, what conditions it was used to treat or how serious the risk was to people who used the product.
Officials in Beijing said that an order had been sent to have the Wolongsong product destroyed.
Official figures show China has 4,305 reported HIV cases and the total is expected to reach 5,000 by the end of this year.
Chinese officials quote health experts as saying they believe the actual number is anywhere from 50,000 to 100,000, as many cases go unreported.
A total of 131 people have been infected with AIDS in China, according to the official media.
China has been grappling with growing drug use and prostitution and experts warn these two problems could increase the number of AIDS cases across the country.
",49
"China plans to develop bigger rockets to carry heavier payloads into space and expand its role in the commercial satellite market, Chinese aerospace officials said on Thursday.
The ambitious, long-term goal was to build rockets that could carry 20-tonne payloads -- more than twice the current capacity of the nation's most powerful launch vehicles, they said.
""This is a long-term goal that could stretch into the second decade of the next century,"" said a spokeswoman for China Aerospace Corp, which coordinates China's satellite launch business.
""China needs rockets to put multiple satellites into orbit -- both for its own domestic use and to help its position in the commercial space market,"" she told Reuters.
China's existing rockets have the capacity to carry payloads of 9.2 tonnes for lower earth orbits and 3.4-5.0 tonnes for geosynchronous orbits.
It has already launched multiple satellites on a single launch but officials say more development is needed.
""We will begin a development programme as soon as possible to lay a firm foundation for the new development of Chinese launch vehicle technology in the 21st century,"" said Li Jianzhong, president of the China Academy of Launch Vehicle Technology.
""We will develop technologies, especially some key technologies for a heavy lift launch vehicle with a payload of 20 tonnes,"" he said in a paper delivered at an international conference on space technology.
He also said China would continue to study reusable space transport systems such as the U.S. space shuttle and manned flights -- although officials said these plans were unlikely to be taken into the development stage anytime soon.
China, which put its first satellite in orbit in 1970, has been trying to expand its role in the commercial space market, despite a series of recent setbacks.
A Chinese Long March 3 rocket, considered one of the nation's more reliable launch vehicles, failed to put a U.S.-built satellite into proper orbit in August.
""It was due to a tiny problem with a valve leakage,"" a scientist who worked on the rocket told Reuters.
""But that small error meant the whole launch was a failure.""
In February, technical flaws had even more disastrous results when a Long March 3B rocket exploded shortly after lift-off, killing at least six people and injuring 57.
China says it still has a high success rate for its satellite launches but the latest setbacks have tarnished its reputation.
Beijing also sees a need to step up its satellite production technology.
""We are behind the West in rocket technology but we are even farther behind in satellites,"" said the China Aerospace spokeswoman. ""We need to be able to build more sophisticated satellites with more transponders.""
The development plans will require a lot of funding, and although senior Communist Party officials are backing the space campaign, there are plenty of other government projects that demand a share of the budget.
Chinese officials declined to say how much money would be committed to the rocket development project or the space sector overall.
""I can say that our space budget is merely a fraction of what the United States spends on its space programme,"" said a senior aerospace official.
",49
"China issued tough new rules on the handling of blood products on Sunday in a move that follows the sale of HIV-tainted blood serum.
The official Xinhua news agency said the rules covered the production and distribution of blood products and set strict supervisory standards throughout the health industry.
It also said the 5,000-word ruling set harsh punishments for violators, though it gave no details of the regulations themselves and made no mention of the discovery last April of tainted blood products manufactured and sold in China.
But the news agency underscored the importance of the order by noting that it had been issued by the State Council, or cabinet, and signed by Premier Li Peng.
In a highly unusual move, China's Foreign Ministry admitted in October last year that some samples of blood product serum albumin made under the ""Wolongsong"" brand name were contaminated with HIV, or Human Immunodeficiency Virus, which can lead to AIDS.
China's Ministry of Public Health began a national drive to test all blood products after the discovery of the contaminated product in the southern province of Guangdong in April last year.
Health officials banned the sale of at least some types of the product and ordered the destruction of stockpiles.
Officials in Guangdong, contacted at the time of the Foreign Ministry announcement, declined to give any information on the manufacturer, explain how the product became tainted or say how much of it was on the market when the action was taken.
The number of reported HIV cases in China stood at 5,157 by the end of October last year.
But Chinese officials have quoted health experts as saying they believe the actual number was anywhere from 50,000 to 100,000 as many cases go unreported.
A total of 133 people have been infected with AIDS in China, according to the official media.
China has been grappling with growing drug abuse and prostitution, and experts warn these two problems could increase the number of AIDS cases.
",49
"China has sent mixed signals to the United States before the visit by Secretary of State Warren Christopher, combining toughness with conciliation on a range of issues that have tangled Sino-American ties.
But diplomats said on Monday the highest level visit by a U.S. official in two years is unlikely to stumble over any of the key hurdles in its path as the two sides focus on repairing past damage.
""Both sides seem to be eager to put the relationship back on track,"" said a Beijing-based diplomat. ""The relationship is just too important.""
China and the United States have seen ties strained by a series of disputes, including human rights, arms proliferation, Taiwan and trade.
Christopher's visit is likely to be the first in a series of top contacts in the months ahead aimed at keeping those conflicts from boiling over.
Clinton will confer with President Jiang Zemin in Manila on the sidelines of the Asia-Pacific Economic Cooperation (APEC) summit this month and plans are under discussion for an exchange of visits between the two leaders over 1997 and possibly 1998.
Vice-President Al Gore may also visit China in the first half of next year.
Both sides' eagerness to get their relationship moving forward again has still left plenty of room to manoeuvre.
""China has sent mixed signals to create an atmosphere of uncertainty,"" said another Beijing-based diplomat. ""That should put some pressure on the U.S. for some concessions.""
A key area of disagreement has been human rights where Beijing has publicly thumbed its nose at Washington by turning down the appeal of dissident Wang Dan and upholding his 11-year sentence for subversion.
But Beijing has also released dissident Chen Ziming, one of the so-called ""black hands"" behind the 1989 student movement for democracy. It made its move just as President Bill Clinton won re-election in what was widely seen as a gesture of goodwill.
Human rights marred Christopher's last visit in 1994. Leading dissident Wei Jingsheng was detained after meeting Assistant Secretary of State John Shattuck, the top U.S. policy maker on human rights.
Shattuck will accompany Christopher on this visit but there are no plans to meet pro-democracy activists this time.
China has tried to keep the United States off balance with other seemingly conflicting policy statements. It lashed out at Washington on Sunday, saying it was trying to contain Beijing by forming a defence chain linking other Asian states, notably Japan.
It also wagged a finger at the United States for blocking China's entry into the World Trade Organisation and called U.S. policy ""self-righteous"" and ""alienating"".
And on Monday, Beijing said it supported the candidacy of United Nations Secretary-General Boutros Boutros-Ghali for a second term, a move publicly opposed by Washington.
These followed largely upbeat statements after Clinton's re-election, suggesting that Beijing was willing to work with the U.S. administration.
Diplomats said that Taiwan would be raised in Christopher's discussions with Chinese leaders, although it would not be the burning issue it was earlier this year. In March, China conducted war games off the island's coast and Washington sent warships there in a show of force.
The United States was also expected to bring up the return of Hong Kong to Chinese rule in mid-1997, making its case that a smooth transfer of power in the British colony was in the interests of all parties concerned.
",49
"China said on Sunday the United States was trying to contain it and that Washington needed to shift policies to improve ties.
In an attack aimed just days before the arrival of U.S. Secretary of State Warren Christopher, China also accused the United States of being ""self-righteous"" and ""alientating"" in its foreign policy.
""Only when the United States drops the idea of (containing China), removes ideological bias against China and stops basing its foreign policies purely on its own economic interests can we expect significant progress in bilateral ties,"" said the Business Weekly.
Contrary to Washington's stated policy of maintaining contact with China, the United States was employing a strategy of containment based on a security defence chain linking South Korea, Japan, the Philippines and Thailand, said the newspaper, published by the official China Daily.
The newspaper was quoting Chen Bingcai, an economist at a think-tank linked to the State Planning Commission.
The U.S. secretary of state is scheduled to arrive in China on Tuesay in the first senior-level contact between the two nations since the re-election of U.S. President Bill Clinton.
It is part of an effort aimed at repairing relations strained by a series of disputes ranging from Taiwan to human rights to trade and arms proliferation.
The most serious damage to ties was inflicted when China held war games and unarmed missile tests off Taiwan early this year, prompting the U.S. to send two aircraft carrier groups near the island in a show of force.
Beijing has accused the U.S. in the past of pursuing a goal of containment, often linking Washington's policies to what it sees as a revival of Japanese militarism.
The newspaper also made the same policy connection, saying that although there had been fewer conflicts with Japan of late, Tokyo still needed to abandon this path.
China and Japan have been at loggerheads most recently over disputed East China Sea islands known in Chinese as the Diaoyus and in Japanese as the Senkakus.
An expanded U.S.-Japan security pact signed this year was in fact a cover for a resurgence of Japanese militarism, according to the newspaper.
Diplomats in Beijing said this was a theme heard most frequently from China's armed forces.
The newspaper quoted Chen as saying the United States, relying on its economic and military might, was becoming increasingly high handed in international affairs -- ""and its own foreign policy has become extremely self-righteous and alienating"".
Without a policy shift, the United States could be expected to continue blocking China's long-stalled entry into the World Trade Organisation and further turbulence was likely in trade and economic relations.
The newspaper said the U.S. needed to take into account cultural diferences in handling a range of disputes from the World Trade Organisation to human rights.
",49
"China's once strained ties with the United States have improved dramatically in recent months with a series of top level visits healing some of the old wounds.
But as the two nations move closer, the United States is sidestepping one of China's most sensitive figures -- Premier Li Peng -- who is still too closely linked to the 1989 crushing of pro-democracy demonstrations in Beijing's Tiananmen Square, diplomats said on Sunday.
They said that Li is one Chinese leader who does not fit into the agenda for a visit to Washington.
""It may be a bit unfair but he is the one leader everyone remembers for his role in the (1989) crackdown,"" said a senior foreign diplomat.
Last month U.S. Secretary of State Warren Christopher made his first visit to China in two years, setting the stage for the series of meetings between other high ranking officials of the two countries.
During Christopher's visit, the two sides reached an understanding that their relationship should not be side-tracked by any one issue. That meant contacts would proceed despite continued disagreements over a range of issues from human rights, to trade and China's political rivalry with Taiwan.
Chinese Minister of Defence Chi Haotian is now in the United States after twice delaying a visit -- both times due to tension over Taiwan. He met President Bill Clinton on Monday last week.
Clinton and Chinese President Jiang Zemin held talks at the Asia-Pacific Economic Cooperation forum in the Philippines last month, and an exchange of visits by the two leaders is planned over 1997 and 1998.
U.S. Vice President Al Gore is expected to visit China some time during the first half of next year.
But there is no talk yet of a return visit to the United States by Premier Li, Gore's counterpart in the Chinese government.
U.S. officials in Beijing played down the lack of an invitation, saying the timing of the Gore visit itself had not been set.
Other foreign analysts said an invitation would be made but there was little chance of a visit before a new premier takes office in 1998.
China is expected to sort out its leadership line-up at the Communist Party congress late next year and then formally install new government figures at the parliament meeting in March 1998.
""They (the Americans) seem to be waiting for the selection of the next premier,"" said another foreign diplomat.
Western leaders, including Americans, have been willing to meet Li in China. But for some of them, hosting him in their own country is another matter, diplomats said.
Li has been tarred with the decision to use military force to crush the pro-democracy protests in Beijing in 1989, though paramount leader Deng Xiaoping was the only man with sufficient clout to order in the army.
President Jiang was also elevated to his role as Communist Party chief because of his tough stance on dissent.
Li has not visited the United States, the United Kingdom or Australia since 1989. He has travelled to Germany, France and Canada since then, though he has been dogged by controversy on each trip.
",49
"China said on Thursday it strongly opposed a visit to Jordan by Taiwan's foreign minister and accused its island rival of trying to disrupt Beijing's ties with other friendly states.
It also accused Taipei's leaders of lacking sincerity towards improving relations with Beijing.
""We deeply regret and express our strong dissatisfaction with Jordan and other states for allowing a visit by (Taiwan Foreign Minister) John Chang,"" said Chinese Foreign Ministry spokesman Shen Guofang.
""We are resolutely opposed to the development of government links or any other form of official contacts with Taiwan by any states that have diplomatic ties with our country,"" he told a news briefing.
Taiwan's foreign minister arrived in Jordan on Wednesday in a visit shrouded in secrecy.
Jordan has diplomatic relations with China but has strong commercial ties with Taiwan.
Chang gave an economics lecture at a northern Jordanian university, sources at the university said. Jordanian government officials declined to comment on the visit.
China has viewed Taiwan as a rebel province since the end of the Chinese civil war in 1949 and has not ruled out the use of force to recover the island.
It has tried to isolate Taiwan by insisting the island was not entitled to formal relations with foreign states.
Taiwanese media said Chang, who left Taiwan earlier this week, was travelling to Abu Dhabi and Jordan, en route to Italy.
The trip is one of four overseas damage-control missions planned by top Taiwan officials since South Africa, Taipei's largest ally, declared last month it would switch ties to Beijing by the end of next year.
""Taiwan authorities are trying to disrupt our friendly relations with other states,"" Shen said, repeating Beijing's frequent accusation that Taiwan was trying to create ""two Chinas"".
""Taiwan's leaders...lacked sincerity towards improving relations between the two sides,"" Shen said.
Taiwan's leaders had taken a negative attitude towards improving economic and trade ties with the mainland and this would not help improve relations, he said.
",49
"The choice of Singapore for the listing of China's big oil and chemicals trader was at least partly a political decision, Chinese officials and foreign securities analysts said.
They said that close ties between China and Singapore helped in the choice of the island state for the proposed offer of Sinochem's shares.
""The decision to list in Singapore was partly due to good relations between China and Singapore,"" said Fu Yong, chairman of Sinochem Asia Holdings, the Sinochem arm which could be listed in Singapore.
""Singapore is also a stable and prosperous environment,"" he told securities analysts and reporters invited to the company's headquarters.
So far, Hong Kong has attracted the bulk of the foreign listings of Chinese companies.
Sinochem, whose full name is China National Chemicals Import and Export Corp, is a major state trading company that has used some of the cash from its lucrative trading operations to expand into numerous new businesses.
Under the proposed stock offer, currently under review by the Singapore bourse, Sinochem would place only some of its Asian trading operations -- including those in Singapore -- into the listed company.
It has not said how many shares would be offered or how much money might be raised.
Securities analysts said they were unsure how much profit could be expected from the operations in the listed company. But they added that the parent firm clearly had the financial clout to list assets on any of a number of foreign stock exchanges.
Sinochem's trading turnover swelled to $18.21 billion last year from $14.98 billion in 1994.
Company officials said the firm controls 40 percent of all of China's crude oil imports and has a 50 percent share of the company that accounts for the remainder.
It owns a share of a big joint venture oil refinery in the northeast city of Dalian, has a newly formed insurance joint venture with Manufacturers Life of Canada and has taken a stake in China's fledgling second telephone network.
It is now a major real estate holder, having splashed out with 700 million yuan ($84 million) to build its Beijing headquarters, and it is part owner of an 88-storey commercial tower being built in Shanghai.
Company officials hinted strongly that further stock offerings were to be expected -- most likely in Hong Kong -- if the Singapore listing went smoothly.
Singapore has become a model of sorts for China's vision of the future, according to Western diplomats.
It has raised living standards through rapid economic development while keeping tight political controls, they said.
Singapore has carefully cultivated political and economic ties with China since diplomatic links were forged in 1990. It has pushed hard to make a success of its flagship project in China -- a big industrial park in the eastern city of Suzhou.
If Sinochem's listing proposal obtains final approval, it would not be the only such Chinese state company to offer shares in Singapore as several China-linked firms have already listed.
Fellow Chinese company Guangzhou Investment -- the Hong Kong-listed investment arm of the southern city of Guangzhou -- is also looking to Singapore.
Sinochem said that Singapore's key role in the Asian oil refining and trading business was also a factor in its choice as the place of listing.
Securities analysts said that Sinochem probably would get a better price for the shares in Singapore than in Hong Kong.
But the analysts noted that strong political ties helped gain support from Beijing.
""In this case, politics clearly played a role,"" said a Singapore-based analyst.
",49
"China ushered in 1997, a year it has hailed as one of the most significant of the communist era for the impending recovery of Hong Kong, with a paean to senior leader Deng Xiaoping, the man who made it all possible.
China Central Television broadcast on Wednesday the first episode of a documentary lauding the 92-year-old political patriarch, a man whose pragmatic policies turned a backward Stalinist state into an economic powerhouse and helped regain capitalist Hong Kong from Britain.
The primetime programme, to be shown over 12 days, would set the tone for a crucial Communist Party congress due later this year, largely by defining Deng's legacy to the current party leadership, Chinese and Western political analysts said.
""This is an extremely important year for the Communist Party with the recovery of Hong Kong and the holding of the 15th party congress,"" a Western diplomat said.
""China's leaders are reminding people that Deng was instrumental in regaining Hong Kong, and they are also using him to define their own policies at the congress and in the post-Deng era.""
Deng has not been seen in public in nearly three years. At his last appearance he looked frail and unsteady.
The documentary showed a vigorous leader, larger than life and portrayed against a background of golden clouds radiating across the sky.
He was seen inspecting factories while donning a hard hat, shaking hands with children and receiving gifts of poppies in Paris in the 1970s.
The main theme of the one-hour show was clearly reform, underlining China's commitment to its course of market-oriented economic change charted by Deng and continued under his chosen successor President Jiang Zemin.
But its use of adulatory tones -- opposed by Deng who abhorred the personality cult of revolutionary leader Mao Zedong -- suggested that the ageing party veteran had little or no control over the documentary's contents.
Speculation about Deng's health surfaces periodically and an unconfirmed report described him as lapsing briefly into unconsciousness this week.
Some Hong Kong newspaper reports said he had been admitted to a top military hospital but there were no unusual movements this week at the Beijing medical centre where senior officials are usually treated.
Deng had vowed to visit Hong Kong to witness the historic transfer of power at midnight on June 30 this year but a Beijing official believed to be close to the Deng family said recently this was unlikely.
On Wednesday, the People's Daily, the Communist Party newspaper, called on China's 1.2 billion people to uphold Deng's credo of pragmatism known as ""socialism with Chinese characteristics"".
In an article published earlier this week the newspaper described the television series on the life of the nation's paramount leader as one that ""showed in their entirety the glorious achievements and greatness of the theories of comrade Deng Xiaoping.""
The documentary had taken four years to complete and included interviews with more than 100 senior officials, according to official media.
Previews from the series showed Deng giving words of encouragement to party officials and reviewing China's military might -- interspersed with glimpses of sleek skyscrapers and modern factories, symbols of the material progress inspired by the party patriarch.
""This is very much linked to the party congress,"" said a Chinese academic. ""It is setting the tone for those taking part in the party congress.""
President and Communist Party chief Jiang narrated parts of the episode seen on television and was shown giving his assessment that Deng had made an important contribution to the building of a modern, socialist China.
Jiang is widely seen as the man who has the most to gain from the adulation for the paramount leader.
""This shows he (Jiang) has the mantle of Deng,"" said another Western diplomat.
""He is building up himself by building up Deng.""
",49
"China on Tuesday announced a ban on poultry and poultry products from two U.S. states hit by an outbreak of a deadly disease.
The ban is already in effect and covers poultry from the states of Missouri and Oklahoma, an official of the Ministry of Agriculture told Reuters by telephone.
It was aimed at preventing damage from a ""very destructive disease"", the ministry official said.
The official said, however, that China had banned all U.S. poultry brought into the country either by mail or hand-carried by travellers.
""Travellers are barred from bringing in any poultry goods from the United States,"" he said. ""These products also cannot be brought into China through the mail.""
An official of the State Bureau of Animal Plant and Quarantine said the ban went into effect on Monday.
Official news reports said the ban was slapped on poultry products from the two states because of five cases of a deadly poultry flu discovered between July and September.
The quarantine official told Reuters that the action was unrelated to other trade disputes with the United States and there was no plan to delay implementation of the decision.
The virus in question, known as viscerotropic velogenic Newcastle disease, or VVND, is deadly, Phillip Holloway, representative in Hong Kong and China for the Oklahoma state agriculture department, told Reuters on Tuesday.
""It's a very, very dangerous disease -- the most feared of poultry diseases,"" he said. ""The symptoms are like influenza, and once one bird gets the disease, all the poultry will die.""
But Holloway said he had not heard of any recent cases of VVND in Oklahoma.
The last major outbreak of VVND in the United States occurred in California in the 1970s and led to the eradication of the state's entire poultry population, he 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.
On Sunday, Beijing announced it was delaying for one month implementation of those restrictions, which had been scheduled to take effect on Tuesday, because the two sides were planning to hold further talks on the issue.
In October, China announced a ban on imports of poultry from 10 U.S. states because of fears the meat carried a virus called highly pathogenic avian influenza (HPAI).
China and the United States held talks averting the ban, worth nearly $500 million a year.
China is the second-biggest market in the world, after Russia, for U.S. poultry products.
U.S. poultry exports to China in 1995 totalled 330,000 tonnes transshipped through Hong Kong and were worth $445 million, 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, according to the council.
",49
"A top Chinese defence official has stepped down in a reshuffle linked to China's string of satellite failures, political sources said on Friday.
General Ding Henggao has been replaced as Minister of the Commission of Science, Technology and Industry for National Defence (COSTIND), a key body charged with overseeing high technology projects related to defence.
Ding, 65, was succeeded at the helm of the ministerial level COSTIND by 61-year-old Cao Gangchuan, a lieutenant-general and deputy chief of general staff of the People's Liberation Army.
""I can confirm that (Ding) stepped down and the change was made in late November or early December,"" said an official of the Defence Ministry.
""I do not know the reason,"" he said.
Sources with close ties to the defence industry told Reuters that Ding had been at the centre of controversy, largely over satellite issues.
""This is partly a matter of age and partly a dispute over satellites,"" said a source.
China successfully launched a satellite in October but that followed a series of failures, the most recent of them last August when a Long March 3 rocket put a U.S.-built satellite into the wrong orbit.
Last February, a Long March 3B rocket exploded shortly after liftoff, killing at least six people and injuring 57 on the ground.
In January 1995, a Long March 2E blew up, killing a family of six on the ground and destroying the Apstar 2 satellite it was carrying.
""There have been bitter disputes over where the responsibility for the failures lies,"" said a source.
COSTIND is responsible for launches while China Aerospace Corporation is in charge of rockets and satellites.
The Soviet-trained Ding, who has a background in missiles and precision engineering, coordinated research and production of strategic missiles as well as satellite launches, according to an official biography.
Ding's departure probably coincided with a reshuffle that replaced the nation's air force and naval commanders, both of whom were also 65 years old.
Ding is the son-in-law of the late Marshal Nie Rongzhen, one of the veteran military leaders of China's communist revolution.
Nie Li, Ding's wife and daughter of Marshal Nie, stepped down from a senior post at COSTIND two years ago.
",49
"Two years ago, China's second telephone network set out to challenge the powerful Ministry of Posts and Telecommunications (MPT) and bring competition into the country's a fast-growing market.
But the fledgling network has found it hard to tackle a seasoned competitor -- one that is also the market regulator.
""Are they (the MPT) supposed to be the referee or one of the athletes on the playing field?"" asks Li Huifen, president of China United Telecommunications Corp, also known as Unicom.
The arrival of Unicom and the end of the MPT monopoly was initially hailed as a boost for China's long-suffering telephone subscribers, who often had to wait up to a year for a telephone line and endure indifferent service afterwards.
But Unicom has captured only a tiny slice of the market as its entrenched competitor has kept a tight grip on the telecommunications sector, using its regulatory clout to slow the upstart network's advance.
""They have delayed interconnections and won't give us telephone numbers for our customers,"" Li said in an interview. ""We need a telecommunications law to give us a legal framework.""
Unicom has 16 shareholders, but the key backers of the project were the ministries of electronics industry (MEI), power and railways.
MANUFACTURING MUSCLE
The MEI has manufacturing muscle with a corps of factories producing telecommunications equipment. But it feared the MPT's equipment-making capacity would eventually squeeze it out of the market unless it had its own captive customers.
The other key partners had private telecommunications networks with spare capacity, while the MPT's public network was heavily overcrowded.
The feud between the rival Chinese government camps was often bitter, sometimes ensnaring foreign companies. Firms that did business with the new network were threatened with blacklisting by the MPT, according to Western industry sources.
Those frictions have eased somewhat in recent months, but it still took an order from the State Council, or cabinet, for promised network interconnections to emerge.
China expects to have more than 60 million telephone lines installed by the end of this year -- adding a breathtaking 10 million in 1996 alone. The total is likely to top 100 million by the turn of the century, still only a small segment of the nation's 1.2 billion people.
MPT says it should not be considered a competitor to Unicom because it has a separate operating arm called China Telecom.
""Since 1993, we have separated policy making from business operations by creating China Telecom,"" said an MPT spokesman. ""The MPT is not both regulating and competing,"" he said, blaming Unicom's slow progress on its own technical problems.
STRUGGLE TO BE IMPARTIAL
But China Telecom officials concede it is hard to say where one entity ends and the other begins. And even if they can draw the line cleanly, the MPT must struggle to remain impartial.
""They always say they are being fair,"" said Unicom's Li. ""But China Telecom is their own child, and parents are always partial to their own children.""
Li took up the Unicom reins in August, becoming the third president in the company's brief history. She was tapped from her job as deputy mayor of the big industrial city of Tianjin to put political clout behind the second network.
The company started with mobile telephone services, first in the big cities of Beijing, Shanghai, Tianjin and Guangzhou, and eventually expanded to 16 cities. It has made its greatest inroads in Shanghai where it has about 20,000 mobile phone customers, Li said.
""In 10 years we will have 10 percent of the fixed line market and 30 percent of the mobile phone market,"" Li said.
One clear success has been in bringing mobile telephone prices down. They now cost 7,000 to 10,000 yuan ($840 - $1,200) compared with 10,000 to 20,000 yuan before Unicom came along.
Li says Unicom is profitable on its operations, but that excludes heavy investments in building network infrastructure. Despite the cost of putting a network in place, Unicom has one advantage. Foreigners are not permitted to operate telecommunications networks in China, and many foreign firms give Unicom capital in return for a share of the income.
That will at least ease the growing pains for the infant network, analysts said.
",49
"China on Thursday tried to play down friction with the United States over a rising trade gap and called on the U.S. to end curbs on technology exports to put trade back in balance.
""The two sides should avoid taking actions that do not help the expansion of trade,"" said a spokesman of the Ministry of Foreign Trade and Economic Cooperation.
""These are two of the biggest markets in the world,"" he said. ""They should be complementary.""
The United States said on Wednesday its trade deficit with China climbed to nearly $29 billion in the first nine months of the year, from $25 billion in the same period last year.
The trade gap, already the second largest for the U.S. after its deficit with Japan, was seen reaching $40 billion by the end of the year, up from $34 billion in 1995.
American economists said the mounting deficit was likely to create new frictions between the two countries.
U.S. Commerce Secretary Mickey Kantor said the growth in the deficit with China had slowed, but he called on Beijing to live up to its international trade obligations.
A group of influential U.S. senators, in a letter to President Bill Clinton, questioned Beijing's trade practices and said China should not be allowed to join the World Trade Organisation on special terms because it would harm American economic interests.
Beijing has been seeking to join the global trade body on favourable terms given to developing nations, but Washington has insisted that China's economy was too big for this treatment.
The Chinese Trade Ministry spokesman said Washington's policy curbs on U.S. exports were part of the bilateral trade problem. ""There are policy rulings that are holding back U.S. exports,"" he said. ""Where there are limits on technology exports, this is a lost export opportunity for the United States.""
The U.S. appeared to be moving to address this matter.
On Wednesday, U.S. Secretary of State Warren Christopher said Washington was considering allowing technical cooperation in peaceful uses of nuclear technology despite concerns about safeguards over re-exports.
Christopher, after meeting with Chinese leaders in Beijing, said the U.S. was looking at taking steps that eventually could allow American companies to sell their technology to China.
A Chinese economist suggested some of the criticism over trade was unfairly directed at China as U.S. imports were mainly labour intensive products that were not manufactured in the United States.
""If the U.S. does not buy these products from China it will buy them elsewhere,"" said Wang Jian, an economist with the State Planning Commission. ""These are goods produced by developing countries.""
But the economist conceded that bilateral trade problems could spill over into broader trade issues.
""The U.S. already is the main obstacle to China's plan to join the World Trade Organisation,"" he said, adding that renewed Sino-U.S. trade friction could further complicate the issue.
",49
"China International Trust and Investment Corp, one of China's major conglomerates, is focusing its domestic operations on the financial sector where it hopes to see 70 percent of its profits, a top executive said.
""We are making money in the financial sector though manufacturing is having a hard time now,"" said Chang Zhenming, group executive director.
""We see finance contributing about 70 percent of our domestic net profit in the near term,"" he said in a recent interview.
Chang chose his words carefully, saying that the finance business would be used ""to serve the conglomerate's commercial and industrial operations"".
But company officials said that CITIC had been disappointed, with some of its early industrial investments -- such as in the machinery and garment sectors -- and it would like to remould itself as a financial services company.
CITIC reported profit of 2.05 billion yuan ($247 million) last year, up from 1.67 billion yuan in 1994.
Most of CITIC's income is from its huge Hong Kong arm, which includes listed CITIC Pacific Ltd.
But for the group's domestic operations, CITIC Industrial Bank is the main contributor, accounting for net profits of about 1.0 billion yuan last year, up 20 percent over 1994.
Profits from the bank were likely to climb another 20 percent this year, despite the impact on interest income from two cuts in interest rates this year, Chang said.
""We have a good base of corporate clients,"" said Chang.
He added that this gave the bank a reliable source of low-cost call-money deposits from major companies.
Chang said the bank had also been able to hold the line on bad debts -- a key problem for many of China's banks -- though no figure was given.
""We are a bit more conservative than some of the other banks so we've had fewer bad loans,"" he said.
The group expected to earn more than 100 million yuan this year from its securities operations, though commodities trading would be break-even at best, the executive said.
CITIC still has diversified domestic interests ranging from power projects and telecommunications to automotive production and real estate.
Finance probably acounts for more than 70 percent of domestic profits at the moment, largely because of poor results from several industrial investments while other more promising projects are still in their early stages.
But Chang said reforms that had created so-called joint stock companies probably would spur the company's development in the financial sector, as more companies would seek loans on commercial terms rather than rely on state funding.
Chang also said the company wanted to expand its financial operations to include property insurance. It was seeking to form a joint venture with other domestic partners though this project still required regulatory approval.
",49
"China has taken its cue from U.S. Federal Reserve chief Alan Greenspan and tried to talk its raging stock markets lower but some investors said Beijing regulators did not need to shout.
China's official People's Daily ran a front-page commentary on Monday calling on investors to behave rationally in investing in the market, warning that what goes up must come down.
The commentary, carried prominently in major financial newspapers as well, also reminded the investing public that the safest place to put its money was in the bank.
Many Chinese officials and stock market brokers noted similarities to Federal Reserve Chairman Greenspan's now famous remarks this month about ""irrational exuberance"" of U.S. markets.
Greenspan's remarks, which did not specifically mention stocks, were clear enough to send share markets around the globe into a steep, if brief, fall. Since then many investors have remained cautious.
""There were definite similarities in approach,"" said a stock market policy official who declined to be identified.
""They (regulators) are looking at the same objectives -- the stock markets were too high and they hoped the markets would move lower,"" he said.
A spokeswoman for the China Securities Regulatory Commission chuckled over the suggestion that Greenspan might have inspired Beijing's action.
""Our objective was to bring some stability to the market,"" she said without elaborating.
Whatever the objective, many brokers and investors were not entirely sympathetic with the result.
""The phrasing (of the commentary) was much too tough,"" said an angry broker in Shenzhen, home of one of the nation's two officially approved stock markets.
""This was over the top,"" he said.
The commentary called up images of Wall Street's 1929 crash while it lashed out at big investors for manipulating the market and blamed brokers for improperly extending overdrafts to finance stock purchases.
The state media also came under criticism for helping to pump up the market by urging investors to buy shares.
Last week, the bourses in Shanghai and Shenzhen in southern China slapped curbs on share movements, limiting them to a daily 10 percent in either direction.
Shenzhen's A share market for domestic investors fell the 10 percent limit on Monday, sliding 46.34 points to 417.2 while Shanghai's A share market lost 9.92 percent, or 115.37 points, to 1,047.68.
The B share indices, which track shares supposedly reserved for foreign investors, closely mirrored the A share falls.
Both Shenzhen and Shanghai had seen huge run-ups in share prices this year, with most of the gains made in recent months. Shenzhen had surged 360 percent from a trough to the peak this month, while Shanghai had climbed about 150 percent.
Some brokers were sympathetic to the plight of regulators.
""The market was clearly very speculative,"" said a Beijing-based broker. ""I disagree with some people over how far ahead of itself the market actually was but there was bound to be a considerable pyschological impact from any action by the regulators.""
Brokers said that part of the reason behind the steep rise was the lack of alternative investments.
Two interest rate cuts this year had played a key role in luring money into the stock market.
",49
"China's Communist leaders may be fretting about the erosion of the ailing state sector at the expense of more nimble private firms.
But for one of the nation's newest banks -- the China Minsheng Banking Corporation -- this is an opportunity.
Formally inaugurated in January, the bank is aiming to lend the bulk of its funds to China's non-state sector, a rapidly expanding area of the economy.
""We are focusing our business on the non-state sector,"" chairman Jing Shuping said in an interview. ""Many banks are not looking at this area or are unwilling to lend to it.""
Much of China's creaking state industry is losing money and unable to compete in domestic or export markets. But for now, Communist leaders are unable to shed an ideological albatross, insisting the state retain the leading role in the economy.
""The state sector will still play the dominant role but there will be a growing non-state sector,"" said Jing. ""This will be good for the economy and good for us.""
China Minsheng is a non-state entity, founded with the backing of the All-China Federation of Industry and Commerce.
It has 59 shareholders, most federation members. Two of the biggest stakes, worth 90 million yuan ($10.8 million) each, are held by diversified Guangzhou Yitong Group and Xiamen Fuxun Group that has interests from real estate to pharmaceuticals.
The bank is relatively small by Chinese standards with total capital of 1.38 billion yuan and assets of 5 billion yuan.
Jing says it may not be profitable in its first year due to start-up costs but it aims for a 50 percent return on shareholder capital by the third year of operation.
By then, it hopes to have assets of over 10 billion yuan.
It differs from many of China's state-run banks that are unable to recover their loans -- made as policy decisions in support of struggling, government-run enterprises.
""We have no policy loans,"" said Jing.
China Minsheng has extended over 1.0 billion yuan in loans this year -- all on commercial terms.
""Most loans are for working capital and not for more than one year,"" he said. ""All have collateral or a guarantee.""
The bank's headquarters are a short walk from the Beijing city government, but Jing said officials do not stroll over to ask for special favours for hard-hit local companies.
""They go to the other banks,"" he said. ""The state banks are trying to become commercial banks but they still have to make some policy loans.""
Besides its headquarters and an office for international business, China Minsheng has three branches in Beijing. One is in the Haidian district where many high-technology, non-state companies have sprung up -- just the type of customer it wants.
The bank cannot lure deposits with higher interest rates since all deposit rates are fixed by the central bank.
Instead, it must compete in terms of service, staying open longer hours and pumping funds into improving technology by installing computer and automated teller equipment.
It has some flexibility on the interest it charges borrowers, though, with a range of 10 percent above or below levels set by the central bank.
In the future, China Minsheng will face more competition from foreign banks -- now barred from taking deposits or making loans in Chinese currency.
""At the moment, they cannot do local currency business,"" said Jing. ""But that will change.""
The bank is already looking at new areas of business, such as home mortgages, to meet expected demand as China develops a real estate market.
It may also want to tap domestic or foreign capital markets to ensure it has the financial muscle to stay competitive.
""There could be a movement in this direction in the future,"" Jing said. ""But first we need a good performance over the next three years.""
($1 = 8.3 yuan)
",49
"China is preparing a lobbying campaign to join the World Trade Organisation (WTO) at the ministerial meeting in Singapore this month, officials said.
It will send a team led by Long Yongtu, assistant minister of Foreign Trade and Economic Cooperation and an experienced trade negotiator, to the meetings that begin next Monday, Chinese officials said.
China, which will be an observer at the meetings, has waged a lengthy battle to join the General Agreement on Tariffs and Trade and its successor body governing global trade, the WTO.
It has pushed to gain entry on the favourable terms of a developing nation but Western countries, particularly the United States, have insisted its economy was too big for such preferential treatment.
""We will be there as an observer,"" said a Chinese trade official of the Singapore meeting. ""That is all we will be doing.""
BEIJING TO PRESS CASE
But foreign diplomats said China would continue to press its case, mainly outside the official meetings in bilateral talks with member countries.
""The real work will be in the corridors around the meeting,"" said a diplomat who monitors international trade issues.
""China wants support from as many countries as possible to put pressure on the United States,"" said another diplomat.
China views gaining entry to the WTO as a symbol of its growing prestige but it also is eyeing the benefits of fixed mechanisms for settling trade disputes.
Beijing has had numerous trade spats with its major trading partners -- from annual review by the United States of its Most Favoured Nation status to copyright protection for textiles and shoes.
By joining the global trade body, China could ensure that any penalties imposed on it conformed with WTO dispute settlement procedures. Diplomats said that could be of considerable value to Beijing as mounting exports increase the prospect of trade disputes.
Western diplomats familiar with the trade issue described China's current position on WTO as ""woefully inadequate"".
MOVING TOWARD COMPROMISE
But diplomats said Beijing was aware that it must put more on the table and there appeared to be some movement toward a compromise.
China's Foreign Minister Qian Qichen said last month at the Asia-Pacific Economic Cooperation (APEC) forum in the Philippines that China expected to conclude talks with the United States on WTO in the first half of next year.
Chinese President Jiang Zemin has also offered to aim for an average 15 percent import duty by the year 2000 compared with 23 percent now.
More important to the United States is ensuring access to the big Chinese domestic market and the removal of a whole range of practices that are seen as discriminating against foreign firms.
Washington would like to see an end to unpublished restrictions on purchases of foreign made goods, changes in agricultural import practices and more relaxed requirements on producing components in China.
China says these restrictions are needed to protect infant domestic industries that are unable to compete with established foreign companies.
",49
"China has tightened safety measures after a fatal rocket explosion early this year and has found the cause of another launch failure in August, Chinese space officials said on Wednesday.
Further testing was needed for the Long March 3 rocket and that could delay China's launch schedule, they said.
""Launch vehicles will now self-destruct if there is a failure,"" said Zhang Qingwei, vice president of the China Academy of Launch Vehicle Technology.
""We will also ensure that people (living in the area of space centres) will be moved away when we conduct a launch,"" he told an international conference on space technology.
A Long March 3B rocket exploded shortly after launch in February, killing six people and injuring 57, according to official reports.
Unofficial sources have put the casualty toll much higher.
China's commercial space drive suffered another setback in August when a communications satellite failed to reach proper orbit after launch aboard a Long March 3 rocket.
""We have determined the cause of the August 18 failure and have taken corrective measures,"" said Zhang, adding that the problem stemmed from a faulty hydrogen valve on the third stage of the booster rocket.
""We are still conducting ground testing,"" he said. ""There will be delays (in the Long March 3) programme this year but this will not affect other Long March vehicles.""
An official of the China Aerospace Corporation, which oversees commercial satellite launches, said a Long March 3 rocket could be launched by the end of the year or early next year.
Two other launches using the Long March 2D and Long March 3A rockets were also expected to be made by the end of the year.
In January 1995, a Long March rocket blew up, killing six people and destroying the Apstar 2 satellite it was carrying.
China once enjoyed a reputation of being a cheap and reliable provider of satellite launch services but the string of failures has shaken its hopes of playing a bigger role in the commercial space business.
",49
"Heavy losses in metals trading by a young employee at big Chinese conglomerate CITIC showed striking similarities to Nick Leeson's deals that humbled Barings Bank, a top CITIC official said.
CITIC -- the China International Trust and Investment Corp -- had learned a bitter lesson from the 1994 losses and had stepped up its internal controls, group executive director Chang Zhenming said in an interview.
""There were a lot of similarities,"" Chang said of the CITIC and Barings episodes.
""We realised the seriousness of risk,"" he said.
CITIC has gained a reputation of being one of China's best run companies, expanding its operations to power, telecommunications, banking and real estate. It is probably best known for its Hong Kong-listed unit, CITIC Pacific.
Its big losses in 1994 were all the more surprising to many foreign businessmen.
The key figure in CITIC's trading was Chen Tongsheng, in his early 30's, who worked at the CITIC Shanghai office.
Like Leeson, who was 28 when his big losses on Singapore's SIMEX exchange emerged, Chen was not a university graduate.
He had worked his way through to his trading position, taking a post as a bank clerk after finishing high school.
Also like Leeson, he is now in jail -- along with his supervisor, the former president of the Shanghai operation.
""Not only was the background of the trader similar (to Leeson) but so were the trading methods as well.""
Chang said that losses stemmed from unauthorised trades on the London Metals Exchange, and that broker credits compounded the problem.
""He didn't have any money. He used LME broker credits,"" said Chang of the Shanghai trader.
Asked if special accounts were used to hide losses -- as in the Barings case - Chang said: ""You could say it was exactly the same.""
Auditors were also unable to make sense of the trading accounts, he added.
But unlike Barings, CITIC managed to survive the losses, which were about $40 million compared to Leeson's, which neared $1.4 billion.
Chang said the losses still nearly bankrupted the CITIC Shanghai operations.
""We have stepped up our internal controls,"" he said, adding that other prominent cases - such as Sumitomo's copper trading losses -- had been instructive in reducing future risk.
CITIC's subsidiaries are no longer allowed to conduct operations unrelated to their core activities.
CITIC has also stopped all commodities trading on foreign markets, in line with a central government directive.
Asked if the company might return to the market, Chang said this was unlikely in the near future.
",49
"China needs $20 billion in foreign investment for its power expansion projects through 2000 and its investment climate is strong enough to attract this amount, Chinese power officials said on Monday.
They also denied that there was a firm cap on investment returns in the power industry though they conceded that the best rate on key projects was slightly below 17 percent.
""We will need about $100 billion in investment in power during the ninth five-year plan (1996-2000),"" said Zhao Xizheng, vice minister of Electric Power.
""About 20 percent of the total will be from foreign investment,"" he told reporters at an energy conference sponsored by China and the European Union, adding that the rest would be shared equally by the central and local governments.
""We think we can reach this goal,"" he said.
Some foreign businessmen have complained that China was setting a ceiling of 15 percent returns on investment and that this was too low.
Asked whether there was a 15 percent ceiling on investment returns for foreigners, Zhao replied: ""We have never said there was a 15 percent cap on investment.""
Foreign businessmen have said that India and Pakistan offered better returns in the power sector.
""You must look at the level of risk,"" said another Chinese official. ""China is more reliable.""
Other Chinese power officials said that the investment return was set on a case by case basis, taking into account financing costs, risk controls and budgetary considerations.
""We don't cap investment returns,"" said Tan Aixing, director general of the Ministry of Electric Power's department of international cooperation.
He told reporters that the highest return on a central government-approved project -- nearly 17 percent -- was for a power station in Zhuhai in south China.
A Hong Kong consortium including Hutchison Whampoa Ltd and Cheung Kong (Holdings) Ltd, has a 45 percent stake in the plant.
Foreign investors can obtain higher returns than this on smaller projects that do not have to be reviewed by central government authorities.
Projects for less than $30 million can be approved by local governments and often offer more attractive terms, officials said.
",49
"China has tried to put new pressure on Taiwan to boost economic ties, courting the island's businessmen with an announcement of rules on direct shipping links, analysts said on Sunday.
But they said Beijing remained far from its goal of securing direct shipping, banned by the rival Nationalist government of Taiwan.
""From what we have seen, this already has put some pressure on the Taiwan authorities,"" said Fan Xizhou, head of the Taiwan Research Institute at Xiamen University.
""This could help stabilise economic ties but more practical steps are needed,"" he said, speaking by telephone from the southeastern port city that would likely benefit from any direct shipping links.
Beijing, which views the island as a renegade province, unilaterally announced last week a series of regulations on direct shipping links, giving its blue print for future trade.
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 over $20 billion into China, are eager for direct transport links, but Taiwanese authorities have been reluctant to lift the ban.
The latest news fuelled hopes among many of Taiwan's businessmen that some of the restrictions might be eased, and it briefly buoyed shipping stocks on the Taipei bourse.
The Nationalists, who say they are committed to eventual reunification with China, see direct transport links as their last bargaining chip in talks with the communists.
China said that direct shipping would be purely a domestic matter, specifying that only Taiwanese or Chinese companies -- or joint ventures including one side or the other -- would be allowed to conduct business on the routes.
""The documents define clearly that direct cargo transport between harbours on the Chinese mainland and Taiwan is regarded as domestic transportation under special management,"" the official Xinhua news agency said.
They also make no mention of the role that Taiwan authorities would play, saying only that all companies engaged in the trade would need Beijing's permission.
Taiwan has set its own formula for future links but it wants to limit the trade to foreign registered companies through a so-called ""offshore"" southern port.
Beijing's tactics echo those applied to the British colony of Hong Kong, where it has tried to lure companies with substantial business interests in China to do its bidding politically while it engages in political arm-wrestling with the British administration.
In Hong Kong, at least, those tactics have been highly successful as many of the same tycoons who once courted the British administration have turned to Beijing to look for economic favours in return for their political support.
Whether that works with Taiwan remains to be seen.
""The new shipping rules were clearly designed to step up the pressure on Taiwan,"" said a Western diplomat.
""But if Taiwan doesn't agree, it's all empty talk.""
",49
"China gave new hints on Monday that its three-year austerity programme was over, pronouncing its anti-inflation fight a success and saying the new task was ensuring stability as the nation prepared to recover Hong Kong.
China's top leaders, after winding up four days of meetings on the economy, also said a key goal next year was to speed reform of ailing state enterprises.
""After three years of strenuous efforts, our national economy has had sustained, rapid and healthy development. The main task of keeping inflation under control has been achieved,"" the official Economic Daily said in its report on the meeting.
""Next year is an important one in our history as it marks the recovery of Hong Kong and the year of the 15th Communist Party congress,"" the official People's Daily said in a commentary that also called for economic progress in the midst of stability.
China slapped tight controls on government spending in 1993 to keep mounting inflation in check.
The credit curbs are likely to bring inflation below 6.5 percent this year, compared with 14.8 percent last year and a Communist-era high of 21.7 percent in 1994.
The fall in inflation has allowed China to cut interest rates twice this year.
Many economists have been expecting a further easing of monetary policies in the coming months as China is expecting a smooth handover of Hong Kong and social stability ahead of the key policy meeting of the Communist Party.
The British colony reverts to Chinese rule on July 1, 1997 and political planners in Beijing have been eager to ensure that there are no social or economic dislocations in the territory or on the China mainland to mar the transfer of power.
The party congress, scheduled for the second half of next year, is widely expected to result in an infusion of cash into the economy to bolster the standing of the current leadership as party personnel matters come up for discussion.
Merchant bank Kleinwort Benson recently forecast credit expansion of 20 to 25 percent next year, compared with 17 percent this year.
""Naturally there will be some easing (of monetary policy) next year,"" said Cheng Xiusheng, an economist with the Development Research Centre under the State Council, or cabinet.
He added that the monetary easing would be limited, and would not trigger a new round of inflation.
""The focus is relatively quick economic development under the premise of stability,"" he said.
Other economists agreed there would not be a return to higher inflation.
""If we have an adjustment, it will be a small one,"" said Zhang Zhuoyuan, director of the economics institute of the Chinese Academy of Social Sciences.
He added that reform of state-owned enterprises was still the key problem facing China's economic planners.
State-owned enterprises have been losing money and massive subsidies have been draining state resources.
Political leaders fear that cutting off these subsidies would lead to layoffs and social unrest though economists have said the strength of the economy gives planners a chance to tackle this problem now.
",49
"China Tuesday announced a ban on poultry and poultry products from Missouri and Oklahoma, citing what it said was the outbreak of a deadly disease.
The ban, which took effect Monday, was aimed at preventing damage from the ""very destructive"" Newcastle disease, an official of the Ministry of Agriculture told Reuters.
Official news reports said the ban was slapped on poultry products from the two states because of five cases of the disease discovered between July and September.
The disease, known as viscerotropic velogenic Newcastle disease, or VVND, is deadly.
However, Phillip Holloway, representative in Hong Kong and China for the Oklahoma state agriculture department, said he had not heard of any recent cases of VVND in Oklahoma.
""It's a very, very dangerous disease -- the most feared of poultry diseases,"" he said. ""The symptoms are like influenza, and once one bird gets the disease, all the poultry will die.""
The poultry industries of Oklahoma and Missouri were far down on the list of top U.S. producers and exporters, Holloway said. ""My estimate is that Oklahoma and Missouri account for less than 5 percent of U.S. poultry exports to China.""
Arkansas is the country's biggest poultry producer and home of industry giant Tyson Foods Inc.
A source at Tyson's Hong Kong office said VVND was known to exist in China, but this could not be confirmed.
Beijing has also banned all U.S. poultry brought into the country either by mail or hand-carried by travelers, according to the Ministry of Agriculture official.
The last major outbreak of VVND in the United States occurred in California in the 1970s and led to the eradication of the state's entire poultry population, Holloway said.
The United States exports around $500 million of poultry and poultry products a year to China, its biggest market after Russia.
The Chinese quarantine official told Reuters that the action was unrelated to other trade disputes with the United States and there were no plans to delay implementation of the decision.
Beijing and Washington are 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.
On Sunday, Beijing announced it was delaying for one month implementation of those curbs, which had been scheduled to take effect on Tuesday, because the two sides were planning to hold further talks on the issue.
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. China and the United States held talks on the issue and the ban did not go into effect.
",49
"China's leaders have agreed on a need to stimulate the economy but the central bank is trying to keep the policy low-key, a senior Chinese economist said on Thursday.
""There is a broad consensus on a need to stimulate the economy,"" said Fan Gang, an economist and director of the China Reform Foundation, an authoritative think-tank.
""But the central bank wants to keep this low-key,"" he told reporters in a broad-ranging discussion of China's economic policy.
China has largely relaxed its three-year programme of economic austerity aimed at wringing inflation out of the economy.
Retail price inflation had reached a worrisome 21.7 percent in 1994 but was brought down to 14.8 percent last year.
In September this year it fell to 5.0 percent, well within the government target of 10 percent for the full year.
At the same time, economic growth has managed to reach about 9.0 percent, though Fan said that a build-up of inventories -- some of that unsaleable -- probably accounted for about 1.5 percentage points of economic growth.
The central bank, the People's Bank of China, has cut interest rates twice this year, partly as a response to the marked gains in bringing inflation under control.
The People's Bank was also trying to lend a helping hand to ailing state industry, which has been saddled with heavy interest payments on its huge debts.
Central bank officials have said that the interest rate cuts did not mean a loosening of monetary policy, and that they would keep policy ""appropriately tight"".
""Central bank officials want to keep the word 'tight' in the policy,"" said Fan, adding that they did not want to see a renewed surge of government spending that would once again pump up inflation.
He said, however, that there still were controls on fixed investment that could be eased somewhat.
""The central government needs to accelerate growth without overheating,"" he said. ""We need the highest growth possible.""
The economist said there was still plenty of idle capacity in the state sector with many of the employees of state industry on leave from their jobs on partial pay because of a lack of orders.
Much of that was concentrated in the nation's ""rust bowl"" in the northeast, a bastion of heavy industry that has relied on central planning and been unable to upgrade its antiquated equipment and shed its huge payrolls of excess workers.
""From the point of view of reform, higher growth makes (reform of state industry) easier,"" he said
Much of China's creaking state industry needed to cut surplus labour to become more efficient, Fan said, although he conceded that this was still a politically sensitive issue.
""Social stability is still a big factor,"" he said.
",49
"European Commission Vice President Sir Leon Brittan suggested on Thursday that China might soon see progress on its plan to join the World Trade Organisation but Beijing played down chances of a breakthrough.
Brittan said he might press the United States to move forward on China's drive to join the WTO if Beijing would give an assurance that it supported the European position.
""I will certainly take up the matter with the Americans with extreme urgency ... urging them that the time has come to adopt the approach that Europe has pioneered,"" he told a business conference in the Chinese capital.
""I hope even before the end of this visit to be able to announce some specific action"" in advancing the process, he said.
Europe has maintained that it would be flexible on requirements for China's full implementation of WTO rules. But Beijing had to make clear its commitment to full compliance and show progress on granting access to its domestic markets.
China's Minister of Foreign Trade and Economic Cooperation Wu Yi on Thursday appeared to be unconvinced that the United States, which has been a key hurdle to Beijing's drive to join the global trade organisation, was ready to change its stance.
""Their intentions are kind-hearted,"" said Wu in a reference to the European effort. ""But the question of China's accession to the World Trade Organisation is not entirely decided by the European Union,"" she told reporters at the same business conference.
Beijing has been pushing to join the WTO under the more lenient terms of developing nation status but Washington has insisted that China's economy is too big for such treatment.
Brittan, who is leading a delegation of 30 European business leaders hoping to tap into the Chinese market, said he would meet senior Chinese officials, including Vice Premier Zhu Rongji and foreign trade minister Wu.
Brittan made it clear that a reaffirmation of Chinese acceptance of the European position would be enough for him to try to take his case to the United States.
""The U.S. was erecting very high hurdles to be surmounted,"" he said of the American position.
But he said the end of the U.S. presidential election campaign could be an opportunity for making progress in the negotiations.
""Recent stirrings in the media...suggest that the U.S. is perhaps readier now than over the past two years to heed European calls for decisive engagement on this negotiation,"" Brittan said.
Brittan praised China for making strides in strengthening intellectual property rights though he said more market access was needed.
He also warned that Europe would not be discriminated against in the Chinese market, and he singled out bilateral shipping agreements as an area of concern.
""Europe cannot accept unequal treatment and will not be discriminated against,"" he said.
On Wednesday, Chinese leaders denounced Beijing's exclusion from the WTO as unjust, saying the world's largest developing nation had made great strides in opening its markets to trade and investment.
Beijing also lashed out on Thursday at European Union investigations into Chinese textile exports, hinting at retaliatory measures if the probes led to anti-dumping measures.
",49
"Communist Party chief Jiang Zemin has put his personal stamp on the legacy of China's paramount leader Deng Xiaoping with a television paean aimed at portraying him as the 92-year-old patriarch's rightful heir, analysts said.
The primetime television series was also carefully crafted to limit the role of those who might challenge Jiang's claim to the Deng mantle or who might disagree with his version of the patriarch's role, they said on Monday.
""This was building up Deng to build up Jiang,"" said a Western diplomat who has long experience with China.
That view was widely shared by China analysts.
""Jiang wants to use the Deng legacy to build up his own public image,"" said another diplomat.
China Central Television spent four years on the series that traced Deng's personal long march from his birthplace in southwestern Sichuan province to the pinnacle of power.
In a breathless tone, it heaped praise on the veteran leader for his pragmatic policies that made his countrymen both proud and prosperous.
State television estimated 224 million people -- 28 percent of the 800 million people who have access to television -- watched the programme broadcast over 12 successive evenings.
Jiang, who is officially referred to as the ""core"" of the third generation of China's leadership, introduced the series and entered the final judgment on Deng's contribution to building a modern Chinese state.
""He is a worthy outstanding Marxist and a stalwart communist,"" Jiang said of the man whose reforms turned a backward Stalinist state into an economic powerhouse.
Deng has not been seen in public in nearly three years and his last appearance showed him looking frail and faltering.
The final episode of the television series showed Deng announcing his retirement from his last official post in 1989 when he stepped down from the party's powerful central military commission.
Seen strolling with Jiang at his side, Deng called on the party to rally round his anointed successor.
Analysts said much of the drama from an otherwise predictable series stemmed from what was omitted.
The series made no mention of Deng's previous anointed successor Zhao Ziyang, the man most closely linked with guiding China's reforms until he was dismissed in the power struggle that accompanied the crackdown on the pro-democracy movement in Beijing in 1989.
Viewers received only a brief glimpse of Zhao, who has been under house arrest since 1989, as he was shown signing the historic Sino-British accord of 1984 that returns Hong Kong to China this year.
The late Hu Yaobang, Deng's other heir apparent who fell from grace, was given a perfunctory mention while former President Yang Shangkun, who was dropped in 1993 amid fears he was building up his own faction to mount a leadership challenge, made only a brief appearance.
Deng's children were shown alongside the elderly leader, holding him steady as he walked on uncertain feet, speaking into his one good ear or buttoning his tunic. They had no opportunity to give their own assessment of the man who is patriarch of their family as well as the Communist Party.
While the series paid homage to Deng's 1992 tour of southern China's special economic zones, which he used to kick-start stalled reforms, viewers saw a sanitised version.
""A key part of the southern tour was Deng's anti-leftist theme,"" said a Chinese academic. ""This made no mention of that.""
Analysts said Jiang was placating the Communist Party's left wing as he prepares for the party congress scheduled for later this year, a pivotal meeting that will set the nation's political and economic course for the next five years.
""By holding tightly to the Deng legacy he is trying to demonstrate that he is the one to interpret Deng,"" said a China analyst. ""And he is the one who will set the tone for the congress.""
",49
"Western oil companies frustrated by Moscow's foot-dragging on foreign investment laws presented a study Tuesday designed to convince officials that Russia will take the lion's share of rewards in oil deals.
The study, outlining the benefits from six flagship production-sharing contracts requiring $129 billion in expenditure, could be the evidence nationalist and conservative parliamentarians need to pass energy and tax laws in 1997 to get the projects off the ground.
Foreign oil firms have to date invested only a tiny fraction of that total, citing high taxes, a flawed production-sharing law and Moscow's inability to ratify a list of reserves open to output-sharing deals.
""No investments are going to happen until there's a firm legal base,"" said a top Western oil executive who declined to be identified, speaking after a conference where the study was presented.
The document, prepared by the Petroleum Advisory Forum, or PAF, and a group of Russian academics, said six major international projects requiring $102 billion in Western funding over 57 years would generate $591 billion in total benefits, with Russia getting 87 percent of the total.
The deals would create up to 550,000 jobs, raise real gross domestic product by $450 billion, boost state revenues by $257 billion and Russian private sector revenues by $258 billion.
The foreign side would reap $76 billion in benefits, including $40 billion in foreign investor profits.
""With the overwhelming majority of benefits accruing to Russia, these projects will make an important contribution towards Russia's future economic growth and to the stability of its emerging market economy,"" a study group statement said.
Russian officials have blocked passage of key energy laws, saying they want to prevent what they call a fire-sale of Russia's natural resources to the West and in effect hampering Western investment in Russia's oil sector.
""Under the current licensing regime regulating the use of subsoil resources and the current gross revenue-based tax system, large-scale investments in the Russian oil industry are not forthcoming,"" the statement said.
Deputy Fuel and Energy Minister Valery Garipov said the study showed the necessity of Western investment in the oil industry, but he said Russian companies would have to have at least a 50 percent stake in production-sharing deals.
""We don't need stop-gap loans -- we need long-term investments,"" he told the same conference.
""Domestic investments are not appearing,"" he said, adding that only Western-financed production-sharing contracts would reverse Russia's steep oil output decline. ""There are Russian banks that bought oil companies, but where are their investments?""
The study said that for each dollar directly invested in the oil sector, an additional 90 cents in revenues would be generated in related domestic industries.
",28
"Russia's metals sectors, key suppliers to world markets, showed varying degrees of concern about President Boris Yeltsin's latest ailment on Thursday, but most said they were no longer hostage to Kremlin health scares.
Aluminium officials were the least worried and said the Russian leader's admission to hospital with pneumonia on Wednesday would not affect production or exports.
""It's business as usual,"" said Galina Stelmakova, deputy director for development and investment at AO Kontsern Alyuminiy, the producers' group.
""Yeltsin hasn't the slightest relationship to the aluminium sector. If anybody has anything to do with us, it's (Prime Minister Viktor) Chernomyrdin.""
Russia supplies 15 percent of the world aluminium market.
London Metal Exchange aluminium prices -- which in the past have swung on Kremlin health dramas -- ignored Yeltsin's pneumonia and hit a seven-month high of $1,602.
London palladium prices rose on Russia's continuing failure to sign 1997 export contracts with Japan, the world's largest consumer of platinum group metals, including palladium.
But a senior precious metals official said Yeltsin's illness would have no effect on the contracts -- despite the fact that Russia's precious metals industries are tightly controlled by the highest government officials.
Alexander Kulichkov, a deputy director in charge of platinum and palladium exports at export agency Almazjuvelirexport, said contracts to supply Japan depended upon the Duma lower house of parliament passing a delayed federal budget and on the government in general, headed by Prime Minister Viktor Chernomyrdin.
Nickel and copper producer Norilsk Nickel which received major support when Yeltsin signed a decree in 1996 promising state aid -- was keeping an eye on the health crisis.
""Indirectly of course we are concerned because Yeltsin did sign a decree promising help,"" said spokesman Sergei Vetchinin.
Norilsk is the world's second largest nickel producer and also produces platinum and platinum group metals.
Russian non-ferrous metals enterprises have not yet released official 1996 output and export figures and forecasts for 1997.
",28
"A multinational group trying to build a $1.5 billion oil pipeline linking Kazakhstan and Russia held frantic, last-minute talks on Friday to try to resolve how much involvent Russia's pipeline firm will have in the deal.
The Caspian Pipeline Consortium, or CPC, which groups eight international oil companies and the states of Russia, Kazakhstan and Oman, hoped to sign off on a new restructuring deal on Friday afternoon after talks.
But Western oil executives and Russian energy officials, speaking hours before they hoped to sign, said it was far from clear what would happen because of a last-minute push by Russia's Transneft oil pipeline monopoly to take potentially the largest equity stake in the scheme.
""Are we going to sign? Well, I hope so, but I cannot say for sure,"" said a Western executive representing a CPC shareholder. ""We're burning the midnight oil to work out the issues.""
State-run Transneft's bid to be not just the operator but also a shareholder and strategic decision-maker in the group has made the Western shareholders very uneasy.
""Transneft could end up being the equity holder representing the Russian government,"" said one senior CPC source.
A breakthrough deal in April 1996 brought on board new equity holders but has yet to produce a share transfer. The companies involved are Chevron, which will own 15 percent of CPC, Russia's LUKoil with 12.5 percent, Mobil and Russia's Rosneft, 7.5 percent each, British Gas Plc and Italy's Agip SpA, two percent each, and Oryx Energy Company and Kazakhstan's Munaigaz 1.75 percent each.
The remaining 50 percent stake would be divided between Russia, 24 percent, Kazakhstan, 19 percent, and Oman, through the Oman Oil Company with seven percent. Transneft, with backing from Moscow, wants the other participants to agree to it taking the Russian government's 24 percent stake.
The proposed 1,580 km (990 mile) pipeline to link Kazakhstan's Tengiz oil field and Russia's Black Sea oil export outlet Novorossiisk would give Chevron and Mobil, partners in Tengiz, a much-needed dedicated export route for output that will peak at around 700,000 barrels per day (bpd) by 2010.
But if Transneft takes all or part of Russia's nearly one-quarter stake, it could use its leverage to raise transit tariffs or insist that some Russian oil flow through the link, which would cut into the economics of Chevron's and Mobil's $20 billion TengizChevroil (TCO) project and other Kazakh oil deals.
""The concern is Transneft's role in the management of the project. Conflict of interest is something very unpalatable to the Western side,"" a CPC source said.
Transneft spokesman Ravil Polyanin said the monopoly wanted the whole 24 percent stake and to be the operator of the pipeline, but that it might settle for a smaller equity share.
""Various states have used Russia's pipeline system in the past without contributions to Transneft,"" he said.
CPC executives are anxious to sign a deal, since the project is already years behind schedule and has stymied development of Caspian oil fields that require export routes before they can be economically tapped.
""There is an awful lot of pressure to sign,"" said one source.
But four senior Western CPC shareholders, including Mobil Oil Kazakstan Inc president Carl Burnett, told Reuters last month that if a deal was signed on Friday, it would probably not be for the crucial share transfer, the key step to getting the project off the ground.
The Caspian pipeline, to be built in phases across southern Russia but bypassing war-torn Chechnya, could eventually carry 1.4 million barrels per day, but other Kazakh projects will take up the extra capacity and leave little room for Russian oil.
",28
"Russia is eyeing its second bad grain harvest in a row and will need imports despite a prediction by Prime Minister Viktor Chernomyrdin that output will be enough to meet demand, industry sources said on Tuesday.
""The sheer volume Russia will produce is enough to meet demand, but the quality is not,"" said specialist Andrei Sizov of the independent consultancy SovEcon Ltd.
""So it is fully possible that Russia will be forced to go to Western markets.""
Chernomyrdin, in a speech to the Federation Council, the upper parliament house, forecast 1996 grain output of 77-78 million tonnes, ""significantly higher"" than last year's harvest of 63.4 million tonnes.
""This will allow us to provide the population with bread and bread products until the new (1997) harvest, to prepare enough concentrated feed grains and to increase grain reserves,"" a copy of Chernomyrdin's speech read.
But grain sources have said private-sector buying would still take place. ""We have a shortage of first-class wheat,"" Georgy Zelinsky, general director of the agricultural trade association Khleboproduktprogress, told an industry seminar.
Sizov said piecemeal Russian imports of grain and flour in grain equivalent from all sources would rise to 5.0-6.0 million tonnes over the 1996/1997 crop year, from 4.5 million in 1995/1996 crop year.
Anatoly Manellya, head of agricultural forecasting at the Centre for Economic Trends, a think-tank set up by the government, said he thought imports could be even higher.
Agriculture Minister Viktor Khlystun has said Russia may import up to 4.5 million tonnes of maize and soymeal plus 500,000 tonnes of food wheat from the United States, Canada and/or Australia.
Zelinsky said domestic feed maize was in short supply, but maize for human consumption was not.
But industry sources said Western markets should not expect sudden announcements of big purchases. Rather, Russia would buy piecemeal in small lots, they said.
Sizov said imports of Western grain could be possible because Ukrainian flour supplies would slip due to very poor harvest outlook there.
""Russia has become the world's largest flour importer,"" he said, referring to imports which increased to one million tonnes in the 1995/1996 crop year, a rise of 25-30 times year-on-year.
Industry sources said the most likely buyers would be the dozen or so Russian commercial banks authorised to use U.S. government commodities credits.
Sources said Inkombank had used GSM-102 credits to buy up to 60,000 tonnes of U.S. wheat through Tradigrain for Russia's Far East for delivery to Vladivostok last spring.
Russia has used nearly all its reserves from the 1995 harvest, the worst in three decades. It survived largely due to carryover stocks from the 1994 harvest. These stocks were 8.8 million tonnes in July 1995 but were nearly zero in July 1996.
Sizov said the Federal Food Corporation, which buys for strategic needs including the army, had bought only 330,000 tonnes of grain by the end of September out of a targeted 4.5 million. September is peak buying time.
",28
"Azerbaijan is proving more successful in attracting foreign oil investment dollars than big brother Russia, but the Caspian state must still deal with Moscow if it wants to become a major world energy player.
In the latest deal underscoring the shift, Azeri oil officials said Amoco Corp, Unocal Corp, Japan's Itochu Corp and Saudi Arabia's Delta Nimir would initial a $1.5 billion agreement with Azeri officials on December 14 to tap unexplored reserves in the Azeri sector of the Caspian.
The deal is the fourth multi-billion-dollar project Baku has won since the breakup of the Soviet Union in 1991 and takes place as a chill settles over Western oil companies struggling to push Russian-based deals through a legal maze.
""I think there's really a question of how much Russia really wants the investment,"" said one Western oil executive in Moscow. ""With the Azeris, it's never really a question.""
Douglas Hill, resident manager of Amoco unit Amoco Caspian Sea Petroleum Ltd in Baku, said the Azeri government had done much to make deals attractive to foreign investors.
""There's a strong realisation here that some assistance is needed and that oil is going to be the primary driver of the economy,"" he said.
Actual foreign oil investment in Russia has all but dried up as Moscow struggles to pass tax and resource laws backing investors' projects and is less than $1 billion out of a planned $60 billion. No deals are close to the production stage.
In contrast, Azerbaijan's flagship $8 billion Azerbaijan International Operating Company (AIOC) project grouping 13 international oil companies is scheduled to start pumping in the third quarter of next year.
Moscow is not indifferent to the change in focus to high-yielding Caspian reserves and has pushed to get Russian oil giant LUKoil involved in the projects -- partly, some analysts say, in exchange for not arguing over who owns Caspian oil.
Azerbaijan, Iran, Kazakhstan, Turkmenistan and Russia all border the sea. Russia says its resources should be shared equally but Azerbaijan follows a sectoral approach and is proceeding with deals in its area.
""Of course, Azerbaijan is now our competitor,"" said Nikolai Bolmasov, deputy head of the Russian Fuel and Energy Ministry's section for cooperation with the Commonwealth of Independent States.
He said Moscow was ""analysing"" Azerbaijan's role in landing foreign oil deals but declined to say if the ministry would produce policy directives on the issue.
Caspian oil projects are next door to the Middle East Gulf region, which contains nearly 70 percent of world oil reserves and produces one quarter of global oil supplies. They will make Azerbaijan and neighbouring Kazakhstan big competitors to Russia.
""Over the next three or four years, production will shift from Siberia to higher yielding Caspian and Sakhalin projects,"" Stephen O'Sullivan, associate director of oil and gas at MC Securities in London, said in a recent interview.
But the deals on Far Eastern Sakhalin island do not have Russian majors as shareholders, and analysts say LUKoil's participation in leading Azeri deals has kept Moscow quiet on the Caspian status issue.
LUKoil could yet join the latest Caspian group, which will tap the unexplored Dan-Ulduzu and Azhrafe reserves.
One hand Moscow has not forced is the question of how the region's oil will be transported to Western markets.
Russia is keen to earn crude oil transit tariffs and control supplies, but knows some new pipelines will probably go through Turkey due to worries over increased tanker traffic through the Bosphorus.
--Moscow Newsroom, +7095 941 8520
",28
"Russia's aluminium industry has roared back to life with strong 1996 output figures and forecasts of small growth, but analysts say no new investments which could fundamentally reshape the sector are on the horizon.
""The situation for the Russian aluminium industry is quite stable and healthy,"" said a London-based spokesman for Trans-World Commodities, which controls major stakes in key Russian smelters.
The Kontsern Alyuminiy producers' group put 1996 Russian primary aluminium output at 2.87 million tonnes, up from earlier estimates of 2.79 million and above 1995's 2.67 million.
It said output in Russia, one of the world's top producers with 15 percent of global output, would rise 1.5-2.0 percent in 1997, but it had not yet compiled export data.
Russia's total primary aluminium capacity -- some still idle after a two-year global output-cutting deal expired in spring 1996 -- is about 3.20 million tonnes.
Russia is one of the least transparent of world producers and sensitive markets are keen to know of plans to increase or improve production.
""There was a generally-held view in early 1996 that output would fall back because of alumina shortages,"" said Nigel Kieser, mining analyst at Paribas Capital Markets in London.
But he said Western trading houses became more active in Russia last year to smoothe out raw materials supply problems and that the 1996 output figure was strong but not surprising.
While output may inch up this year, big infrastructural changes are not yet on the horizon -- in spite of the fact that smelters plan strategic alliances with each other and Western commodities houses are major shareholders in some plants.
""I don't see any serious investments in modernisation in Russiam aluminium in 1997,"" said a senior Alusuisse-Lonza Holding AG source, citing fears over shareholder rights that scare deep-pocketed investors.
Russian smelters spent 1996 complaining about rail tariff and production costs and can still only dream of the integration and long-term energy contracts that Western smelters have.
While these two items are still major factors dividing the Russian industry into the profitable Siberian smelters and loss-making plants in western Russia, other concerns will come to the fore in 1997.
""Companies are going to focus on the raw materials question a lot -- on how to get alumina,"" said the Alusuisse source.
Seventy percent of the region's alumina, the raw material used to make aluminium, is in former Soviet countries like Kazakhstan, Ukraine and Tajikistan, and the old planned-economy Soviet-era links that once guaranteed steady supplies have disintegrated.
Russia has only two functioning alumina plants which meet less than one third of demand, and smelters are hungrily eyeing Kazakhstan's Pavloday and Ukraine's Nikolayevsky alumina plants.
One metals source said smelters were so desperate for alumina that they were extracting it from the mineral nepheline, in a costly and obscure procedure used almost nowhere else in the world, instead of from the more traditional bauxite.
Scarce raw materials are the Achilles heel of Russia's big southern Siberian smelters, which account for about 90 percent of Russian primary aluminium output and are fuelled by vast amounts of electricity generated by Siberia's mighty rivers.
The Bratsk, Irkutsk, Sayansk and Krasnoyarsk smelters are at least 4,000 km (2,500 miles) from the nearest port-based export outlet and functioning alumina sources -- vast distances which carry expensive rail tariffs.
Russia's largest alumina plant, Achinsky, is in the region, but it is bankrupt and barely producing at any of its capacity of 400,000 tonnes a year.
",28
"Russia, dramatically changing its approach to foreign investment in its huge oil sector, said on Monday that new domestic companies, not Western majors, would be given the upper hand in future billion-dollar energy deals.
Vladimir Tumarkin, chief spokesman for Rosneft, the state oil holding company which is being privatised and the state's agent in production-sharing deals, said the days of foreign oil firms winning majority stakes to tap Russian reserves were over.
""We have a new approach,"" Tumarkin said. ""We do not wish to repeat the so-called mistakes of earlier deals, when majority stakes went to foreign companies and Russia was left out.""
He told Reuters he was referring to three, high-profile deals with Western and Japanese oil investors off Russia's Far Eastern island of Sakhalin -- deals in which Russian equity and ownership play a relatively minor role.
As a test of the new approach to Western oil investors, he said Amoco Corp, Exxon and Texaco of the United States, Total SA of France and Norsk Hydro ASA of Norway -- all bidders in a recent tender to develop reserves in Timan-Pechora -- would be asked to form a consortium and to give at least a 50 percent stake to Russian companies.
The companies had bid, some individually, some together, to develop up to 200 million tonnes of crude oil in the Khoreiverskaya Basin in oil-rich northern Timan-Pechora.
""The philosophy behind investing in Russian oil has changed,"" Tumarkin said, adding that Rosneft would hold talks with the companies next week.
Foreign oil investors are already wondering about the extent to which Moscow truly wants outside help in developing reserves in Russia, the world's third largest crude oil producer.
Lots of competitive investment dollars have gone to energy-rich Azerbaijan and Kazakhstan, where deals have got off the ground faster and more smoothly.
But while Russia has said it wants to turn around its flagging oil sector, where output has declined by 46 percent since the mid-1980s, its newly-privatised oil companies may not be able to carry the banner.
""The question is, do the Russian companies have the financing for all this,"" said oil analyst James Bunch at Renaissance Capital in Moscow.
Some of Russia's vertically-integrated oil companies have the makings of future stars, with savvy management and reserves that put them in the world's big league. But many of them are weighed down by non-payments and corporate taxes that leave them little free cash to invest.
""I don't think the size of stakes (in production-sharing contracts) makes that much difference to Western companies -- what is important is the economics of the deal,"" said oil and gas analyst Stuart Amor of CS First Boston in London.
He said it was doubtful whether Russian companies could find the money needed in the near-term to work with foreign investors and that crude oil output levels were, as a result, unlikely to rise significantly.
U.S. energy companies have invested less than $1 billion of the $60 billion they have said they plan to commit to Russian oil deals, complaining of political and legal risk.
Prominent projects -- including the $40 billion international Timan Pechora Company deal, and Amoco's $50 billion plan with Russian oil group YUKOS to tap Priobsk reserves -- are beset by quibbles with the Russians over equity stakes, contributions, and asset valuations.
""They're obviously not going to like it,"" said one Western analyst of Russia's new approach. ""But I don't know if it will drive them out.""
",28
"Aluminium industry sources expressed doubt on Monday over whether producers association Kontsern Alyuminiy would be able to contain output to support sagging world prices.
""I don't believe they'll do it,"" said a Western trade source in Moscow.
A Moscow representative of the Krasnoyarsk smelter and two sources at the giant Bratsk plant said they had no information on plans to contain output.
""This is a very strategic question on which I have no information,"" said Bratsk-based Andrei Toropovsky of the plant's foreign economic relations department.
Kontsern Alyuminiy chief executive Igor Prokopov said Russian smelters had agreed to keep aluminium output at current levels and not to exploit at least 80,000-100,000 tonnes of idle annual capacity.
He and Vladimir Kalchenko, the group's first deputy chief executive, referred to weak world prices and unprofitable domestic smelters.
But the sources said Kontsern Alyuminiy had little leverage and was unlikely to be able to influence producers.
London Metal Exchange (LME) benchmark aluminium prices failed to react seriously and held little changed at $1,330 per tonne in early trade -- a sign that the market may have questions over what the Kontsern Alyuminiy plan means.
""The smelters tend to do what they want individually,"" said a European metals source. ""I don't care what Kontsern Aluminiy says -- it doesn't affect my business.""
Russia, with high electricity and freight costs and low domestic demand, is keen to see higher world metals prices. Aluminium is near 2-1/2 year lows of $1,305 and far below the $1,742 a tonne seen around this time last year.
A Russian industry source said profit margins on metal exported at average LME prices in the third quarter of this year were a negative 20 percent at Russia's Novokuznetsk smelter, negative 15 percent at Kandalaksha and negative 15-18 percent at plants in the Urals region.
Krasnoyarsk was breaking even, he said. Sayansk and Bratsk had profit margins of plus 10 percent. Irkutsk had 11 percent.
It costs Bratsk $1,127 to produce a tonne of aluminium, the source said. Freight charges to European outlets added $160 per tonne, leaving gross profits of about $110 per tonne, assuming LME prices of around $1,400.
""The Siberian smelters have a decent economic situation,"" said Ruslan Fedorovsky of Barclays Physical Trading Limited in London. ""It's profitable for them to let the European smelters (with negative profit margins) die out.""
A Canadian diplomat said last week in Moscow that Russian and Canadian government officials had met to discuss curbing Russian output, rekindling memories of the Memorandum of Understanding (MOU) between major producers Russia, Australia, Canada, the European Union, Norway and the United States.
The MOU, designed to cut output by 10 percent and draw down bloated stocks, began in March 1994 and expired this spring.
Adding to uncertainty was a statement by Oleg Deripaska, chief executive officer of Sayansk Aluminium, who said on Friday that he expected a decision on decreasing output.
But sources said impending Russian purchases of alumina, the raw material for aluminium, would be a better indicator of how much metal Russian smelters plan to produce next year.
""That will be the telling time,"" said one source, referring to buying that should take place by the end of the year.
Trade sources in direct contact with Russian smelters said they would keep an eye on Kontsern Alyuminy, but doubted it could influence the industry.
""They (Kontsern Alyuminiy) don't really represent smelters and do not have a lot of credibility,"" one Western source said.
--Moscow Newsroom +7095 941 8520
",28
"Russia, whose sudden introduction of export curbs each winter can wreak havoc in the world's heavy fuel oil market, is unsure about what to do this season, traders said on Tuesday.
Most traders expected an export duty of up to 80,000 roubles per tonne of mazut, as heavy fuel oil is known in Russian. But Moscow is keeping the industry guessing longer than usual on the timing and size of a possible tariff.
""My crystal ball is broken, so you'll have to ask somebody else,"" said a senior source at a major Western trading house.
Yevgeny Lukashov, adviser to the Federal Energy Commission and close to the government's debate on how to regulate mazut exports, said the cabinet might debate the issue on Tuesday.
But he had no idea what the outcome would be.
Moscow has in recent years raised mazut export tariffs or banned deliveries abroad outright, which has conditioned traders to expect a restriction each winter.
But some industry sources questioned why Russia -- which usually slaps the curbs on in November to ensure cheap heating fuel supplies for factories and power plants -- is already in December with no decision yet on the matter.
Sarah Anderson of Energy Security Analysis Inc in Washington said Russia, which must ship some mazut to domestic users along its waterways before they freeze, was defeating the purpose of bolstering supplies by waiting so long.
""If you don't have a curb in place by October, the purpose is defeated. They really have to start dealing with this in October, because January is too late.""
Other sources said the uncertainty over tariffs reflected not careful planning by Moscow but haphazard and inefficient decision-making based on Soviet-era thinking.
""It's item number 999 on a list of a thousand things to do,"" said Matthew Sagers of PlanEcon in Washington. But he said any curbs would not hit export levels because Russia was oversupplied with mazut in winter.
Others say demand at home is exceptionally difficult to fathom, since there is no domestic market and enterprises using the material are usually verging on bankruptcy.
""They'll in theory use as much as they can and pay as little as they can,"" one trader said, referring to traditional wasteful use of resources at factories and heating plants.
The lack of transparency makes it nearly impossible for traders to estimate how much extra mazut Russia needs during the winter and, correspondingly, what kind of tariff Moscow might slap on to achieve the supply balance it needs at home.
""It ends up going straight to users, so who knows how big the market is,"" a Russian trader said.
Some industry sources said an apparent shift in policy on the part of Russia's domestic oil companies was adding to the murkiness of the situation this year.
A second, senior Russian trader said the old logic of producers seeking to export to free up storage tank space and get cash, even at a net loss, was disappearing.
""The logic now is that it really might be better not to produce at all,"" he said, citing low refinery runs as producers seek to export crude oil instead.
The trader was one of a handful who thought there would be no curbs. ""My gut feeling is there won't be a tariff. It's senseless. It could absolutely stop the trade,"" he said.
Others said a tariff would only dent export volumes.
""Refineries are very short of crude oil these days,"" said a Russian source at a Swiss trader. ""But they'll still try to push something out (on world markets).""
",28
"Russia's Fuel and Energy Ministry, sitting on the remains of the once-great power it wielded over the oil sector, is struggling to redefine itself in the new market economy, energy analysts said on Tuesday.
The body, known as Mintopenergo, could once command that oil wells be drilled, helped to restrict exports with quotas and ensured that billions of dollars in oil export cash from the world's third largest oil producer went into Kremlin coffers.
Today the power to produce, export and plot corporate strategies largely lies in the hands of Russia's newly privatised, vertically integrated oil firms -- leaving the ministry to redefine itself in the new market economy.
""You kind of have to use the word castrated -- it's not what it once was,"" said a European energy consultant in Moscow.
Under new minister Pyotr Rodionov, a gas transport specialist, Mintopenergo may have even less of a say in the daily business of oil firms, which increasingly go about their own business and cut their own deals with foreign investors.
Oil companies say the ministry, as the guardian of big state stakes in them, could become a lobby for their interests in the Kremlin and less the long-arm of politicians seeking oil profits to top up the federal budget.
""Undoubtedly its regulatory influence has waned,"" said Alexei Gorshkov, spokesman for YUKOS, Russia's second largest oil company in terms of reserves. ""We don't see it (their former influence) and, frankly, don't want to see it.
""But the ministry does explain our point of view on taxes to the government, and for that we are grateful.""
Known as the Ministry of the Oil and Gas Industries in the Soviet era, Mintopenergo lost responsibility for what is today Gazprom, the natural gas monopoly, when it was renamed in 1991.
During Mintopenergo's existence, it has seen Russia's state-run oil production associations transformed into privatised companies, some of them with multi-billion dollar arrangements with Western oil majors.
Mintopenergo's brief includes coal and electricity. But many of its oil specialists have fled the ministry's Stalin-era building for lucrative jobs at investment banks and oil firms.
Even former minister Yuri Shafranik left in August to head the board of the Tyumen Oil Company, whose headquarters are in his Siberian power base in the oil-rich Tyumen region.
""The ministry is simply not going to be as important as it once was,"" said Matthew Sagers of PlanEcon in Washington in a recent interview. ""It's going to be left with a policy-making, advisory, overseer role -- and that's a good thing.""
Mintopenergo has a new challenger to the remnants of its power base in the form of the Federal Energy Commission, or FEK.
The brainchild of presidential chief-of-staff Anatoly Chubais, FEK wants to inject a free-market flavour into energy tariff and transport issues, although it is unclear how much leeway it will have. It is seeking to award access to crowded pipeline routes by tender, thus restricting the power of oil pipeline monopoly Transneft in non-operational issues.
Rodionov has said he plans policy changes -- but he has not revealed what he has in mind and has worried some industry players with talk about freezing domestic crude oil prices.
An aide to Rodionov said the ministry was foresaking its broad-brush ""industry-wide approach"" to energy in favour of concentrating on what he said were individual matters important to the Russian economy, like tax breaks for oil companies.
But one Western oil source said he was not so interested in what Rodionov planned, because the ministry had lost its power.
""Power has been devolved by default out to the oil companies and the ministry recognises this, which is why it puts its people on company boards,"" said Stephen O'Sullivan, associate oil and gas director at MC Securities in London.
",28
"Russia is quietly importing some Western grain to offset its second meagre harvest in a row, but traders said on Wednesday that the country was too broke to be a big presence on world grain markets this year.
A senior Russian grains source who declined to be identified said unnamed Russian organisations had quietly bought several 12,000-tonne cargoes of U.S. No. 2 corn (maize) at the end of last year, importing the grain through the Baltic port of Riga.
But other Moscow sources -- eager to preserve secrecy in a market scarce on hard information and anxious about loose talk -- talked down the prospects for imports.
""There's enough grain on the (domestic) market,"" said Andrei Ambartsumyan, a vice-president at big traders Exportkhleb. ""Quality is a different issue. But today I don't see any significant import orders.""
Wildly varying estimates of how much Russia will import after its 69.0 million tonne harvest last year, one of the worst in three decades, have kept Western markets guessing about their chances of selling to the world's former biggest grain buyer.
The Soviet government imported tens of millions of tonnes of grain in the 1970s, staging a ""great grain robbery"" that markets have had trouble forgetting. In 1972 Moscow emptied the U.S. grain larder by buying heavily from all the major grain exporters simultaneously.
While Russia has said markets should forget the past and the Kremlin is no longer a buyer, private companies are combing Western and Central Asian markets for supplies.
""Russia will import this year because otherwise it doesn't get the quality it needs,"" said Vladimir Totsky, vice-president of Russia's Grain Union, referring to the fact that much Russian wheat from the 1996 crop is unfit for human consumption.
Anatoly Manellya of the Centre for Economic Trends, a government-sponsored think-tank, put Russia's total grain imports over 1997 from all sources at 5.0-6.0 million tonnes, repeating a forecast made earlier by farm expert Andrei Sizov.
Russia's 1996 harvest saw maize output slip to 1.5 million tonnes, down more than a third on 1995 levels.
But there is no consensus on Russia's overall import plans.
""I don't think they'll go back to buying large quantities of grain,"" said Tom Wiley, a European Union agriculture adviser, adding that imports of ready-made food were the trend.
One prominent Russian trader estimated Russia's total maize imports over the 1996/1997 crop marketing year at only 120,000 tonnes due to falling livestock numbers.
But Agriculture Minister Viktor Khklystun said in September 1996 that Russia would import 4.0-4.5 million tonnes of maize and soymeal to supplement the 1996 harvest, with maize purchases three times higher than soymeal purchases.
State Customs Committee figures show Russia imported a robust 114,000 tonnes of wheat in December, including 30,000 tonnes from the United States. Maize figures were not available.
Analysts said Russian farmers were worried less by plummeting production levels and more by the fact that domestic customers lacked purchasing power to buy their grain.
Russia's costly and inefficient farm sector, an economic basket-case, accounted for one quarter of gross domestic product in the Soviet era and wasted up to 20 percent of grain output.
Farmers, unable to adjust rapidly to market economy ways, have seen grain output nearly halved from peak levels, and food imports now comprise up to half of the Russian market.
One U.S grains source forecast fewer winterkill losses this year and said a protective blanket of snow had kept winter crops snug and tight. But the source said warm weather and floods in parts of the Northern Caucasus grain-belt could hit output.
Analysts said prospects for higher grain output this year were muted, with the area sown to winter crops last autumn down 10 percent on 1995's level.
""The signs aren't very good,"" Manellya said.
--Moscow Newsroom, +7095 941 8520
",28
"Crude oil output in Russia, the world's third-largest oil producer, is finally ending a decade of dramatic decline, but it is still a long way from switching back into top gear.
""We could see 1997 output stabilise at 1996's level,"" said Vitaly Kamenev of the Economy Ministry's fuel department. ""But we won't see any real pick-up until at least 1998.""
Russian oil output slipped two percent year-on-year to 146 million tonnes in the first half of 1996, after falling three percent in the first half of 1994, according to the State Statistics Committee. Most of the decline came from companies producing over 10 million tonnes a year.
""It is the ministry's opinion that output will fall two or three percent next year,"" said a Fuel and Energy Ministry source who declined to be named, saying that the matter was sensitive.
That would still be one of the lowest declines Russia's beleaguered oil industry has seen in recent years.
It would also be a sign that the era of steep plunges is finally drawing to a close.
Russia's 1995 output of 305 million tonnes, or 6.2 million barrels per day, is stabilising at just over half of 1987's peak of 570 million tonnes (11.4 million bpd).
The numbers matter because they indicate the pace at which Russia, once the world's largest oil producer, may regain that place as its economy and domestic oil prices grow.
But it is still early.
""There are a lot of expectations that the barrier will be broken next year, but it won't -- output will be flat,"" said Tamara Okhundova, energy analyst at the Centre for Economic Trends, a research institute set up by the government.
Moscow is for now committed to subsidising domestic oil prices to help flagging industrial enterprises, and export levels cannot rise significantly until new pipelines are built -- two key factors that do not inspire higher production levels.
""Production next year is going to be pretty flat, and if anything, slightly lower,"" said energy analyst Jeremy Hudson of Salomon Brothers in London.
He said that if parliament soon approved a list of reserves open to production-sharing, an initial, positive impact on output could be felt by the end of 1997.
Russia's joint ventures, which account for less than five percent of production, are showing the biggest increases in output, with their production up 18 percent in the first half 1996 to seven million tonnes.
When the big-ticket joint ventures and production-sharing deals begin producing in several years, total output could soar.
A bull-run in world prices and Moscow's scrapped export duties have inspired Russian producers to put even more oil into already over-strapped export pipelines.
But a tax clampdown on high foreign-exchange earners and a lack of commitment by new shareholders in Russian oil companies to reinvest in production are both sucking up cash.
Julian Leigh, Russia analyst at the Centre for Global Energy Studies in London, said higher export dollars were not necessarily finding their way back into production.
He said domestic commercial banks, some of which are major stockholders in big Russian oil companies, preferred to pump cash into markets with better returns, like equity.
Rehabilitating wells is one of the fastest and cheapest ways to boost output, but most of the easy, less expensive workovers have been completed and average well production rates have not been as high as expected.
Russia has 144,000 oil wells, of which nearly 40,000, or 28 percent, are idle. Hudson said average workover rates -- the cost of bringing these back on stream -- could rise to $100,000 per well from $25,000.
",28
"Russia's untapped gold reserves are unlikely to become the El Dorado of the East soon despite Moscow's promises to liberalise the tightly-controlled sector, precious metals sources said on Wednesday.
Russia's Central Bank said earlier this week it was gearing up to create a domestic gold market via measures that would make it worthwhile for Russian commercial banks to finance mining.
But industry sources said the rules would do little to reform the world's fifth-largest gold producer with the world's third-largest reserves.
""It will take quite a while for commercial banks to take much of that market,"" said analyst Tony Warwick-Ching of CRU International in London.
The Central Bank's new rules would allow banks to trade gold domestically in a limited way through special precious metal accounts and to make and secure limited, gold-backed loans.
""Well, if after two and a half years, the central bank has come up with accounting procedures for gold transactions, then that is very good,"" said Yuri Kotlyar, acting chairman of the State Committee for Precious Metals and Stones (Komdragmet), whose functions are being reorganised.
""But this has nothing to do with creating an actual market, and that is what we need.""
Russia's gold mines, even those run by foreign joint ventures, are required to sell their output to the state at fixed prices and are usually paid many months later.
The government, in a budget crisis and facing a tax revenue shortfall, has even less money this year to finance output and 1996 production will not better 1995's poor 125-132 tonnes.
Commercial banks financed only about five tonnes of output last year. Moscow has promised but done little to let banks with special licences take gold abroad to secure financing.
Analysts said Moscow feared losing control of its gold industry, which would be harder to track than other key sectors.
""The history of the (Russian) industry is partly driven by politics, not economics,"" said analyst Andy Smith of Union Bank of Switzerland in London.
Others said a tug-of-war for control was scaring investors.
The Central Bank, which shares responsibility for gold reserves with the Finance Ministry, wants more control over more gold reserves to support the rouble in the future.
But Interfax news agency quoted Deputy Finance Minister German Kuznetsov as saying the ministry, not the Central Bank, should have first crack at buying output and the state, not the private sector, should finance most mining.
Total, unspecified volume of Russian gold mined over January-September was nine-percent below year-ago levels, the State Statistics Committee said. Mining season ends in October as freezing weather emerges in Siberia and Russia's Far East.
And Russia will literally have to dig deep to tap its reserves. More than three quarters of Russian gold is in below-ground ore deposits.
More than half of all foreign-backed gold projects in the former Soviet Union are in Russia.
But none of the big ones, including the giant Sukhoi Log, the world's largest unmined reserve with a possible 1,800 tonnes, are at the production stage because of tax and royalty quibbles with the government.
-- Moscow Newsroom, +7095 941 8520
",28
"Russia's oil sector has staged its first real comeback by nearly closing the door on a decade of dizzying output declines, but analysts said on Monday that the troubled industry was not yet in the clear.
""The larger declines are over; is that a turnaround? Yes,"" said Dan Lubash, managing director of Emerging Markets Europe at Merrill Lynch, commenting on 1996 oil production figures.
The State Statistics Committee said Russia's 1996 crude oil output fell two percent on 1995 levels to 293 million tonnes (around 5.86 million barrels per day).
That is Russia's lowest crude oil output rate in nearly three decades.
But the decline is the smallest since Russia -- still the world's third-largest oil producer -- discovered its huge West Siberian reserves and pushed oil output to a peak 570 million tonnes (11.4 million bpd) in 1987.
The story has been a downhill one ever since, and double-digit percentage output declines throughout the late 1980s and early 1990s have left Russia's 1996 output at a meagre 51 percent of 1987's record level.
But the picture, as the 1996 data shows, is getting prettier.
""The fall is finally coming to an end,"" said Stephen O'Sullivan, associate director of oil and gas at MC Securities in London. ""It's not just a flash in the pan like LUKoil -- it's clearly more broad-based.""
Analysts say the recovery showed its first real signs in the second quarter of 1996, possibly as Russian producers began to cash in on a world oil price rally and jammed export outlets.
But not all analysts were as sanguine about 1996's results.
""The fact that it almost levelled out this year is significant,"" said a U.S. oil executive involved in the Petroleum Advisory Forum, a Moscow lobby of foreign oil majors.
""But I don't really think it means a whole lot, because there's a problem with domestic demand and with export capacity. It doesn't make sense for producers to produce as much as they can right now.""
Russia's oil firms have limited export options and other domestic industries are recovering more slowly.
Russian gross domestic product fell by six percent in 1996 and industrial output shrank in every sector of the economy to plunge five percent overall, official figures showed.
Declining domestic demand spurred Russian exports outside the Commonwealth of Independent States to rise by five percent in the first 11 months of 1996 to 92.8 million tonnes.
But analysts say Russia's increasingly hungry tax-man has eaten up a large portion of the extra export earnings, leaving Russia's newly-privatised companies with little to reinvest.
Still, the export boom has spurred Russia's 13 or so vertically-integrated oil companies' appetite for growth, and both Lubash and O'Sullivan said domestic crude oil demand might pick up slightly next year.
""Any arrest in decline must be heartening and what we must be looking to see is some growth,"" said Martin Cocker, a partner in Ernst & Young's World Energy Group unit in Moscow.
But Russia's oil companies, most heading into their third or fourth years as restructured, privatised companies, will have problems in breaking completely free of Russia's economic woes.
""It's all a function of when domestic industry turns around,"" said the U.S. executive. ""Producers and refiners both have an incentive to export and will for quite some time.""
",28
"A big diamond deal between Russia and De Beers has been caught up in political manoeuverings in Moscow. Bickering ministries and a shake-up in the leadership of the Russian diamond industry are conspiring to delay a crucial agreement.
Senior officials on both sides declined on Tuesday to predict when the government would sign the long-delayed deal, whose absence has kept world gem markets on edge.
Russian officials said Moscow and De Beers could head into 1997 with no formal contract signed.
Vladimir Piskunov, head of the Industry Ministry's new precious metals and stones section, said the government had been poring over a draft deal for at least a month since it said it was about ready to sign it and said unspecified pricing issues needed more scrutiny.
""Yes, I will admit that this (a final signing) could drag out into 1997,"" Piskunov said after a news conference.
De Beers representatives in Moscow declined to comment, with one saying, ""As we've told you, when we have something to tell you, we'll tell you.""
A spokesman for Almazy Rossii-Sakha, or ARS, De Beers' partner in the deal and Russia's diamond producer and sole legal exporter, said big shake-ups over 1996 in Russia's diamond industry were behind the delay.
""Do you want to know my opinion -- it's that there are some battles going on,"" said ARS spokesman Valentin Logunov.
De Beers controls about three quarters of the world diamond market and Russia accounts for about 25 percent of all the gems De Beers sells, so delays to the deal have worried gem watchers.
ARS produces nearly all of Russia's diamonds and had sales of $1.38 billion last year.
Piskunov said Moscow was committed to working with De Beers and that leaving the cartel was out of the question -- but he admitted negotiations had dragged on for over a year because of power struggles in Moscow.
""Some have said that we don't need this agreement, but time is playing against us,"" he said. ""There are strict rules on this market and you have to play by them.""
Asked if Russia could leave the cartel, he said, ""No, no.""
Piskunov said the Finance Ministry was struggling with the Industry Ministry for influence over diamond production, while federal budget drafters were arguing with the diamond-rich regions over their cut from taxes paid on exported gems.
De Beers has seen Russia's diamond sector go through turmoil this year, when President Boris Yeltsin disbanded one of its former negotiating partners, the State Committee for Precious Metals and Stones, and sacked its head, Yevgeny Bychkov.
Now Piskunov's department is wrangling with Goskhran, the Finance Ministry arm that will store and export precious metals and stones. Adding to the muddle is a formal investigation by Russia's tax police into ARS finances.
But Piskunov said the probe and Bychkov were not the fundamental reasons for the delay -- raising questions over just what Moscow objects to in the February memorandum.
""There are other processes involved,"" Piskunov said. ""It's a battle of opposing sides. Russia's diamond industry has always been in the hands of several people.""
He cast a cloud over an agreement De Beers said on Monday it had signed with Russia's Northern Mining-Geological Company Terra to set up a diamond exploration joint venture.
""We principally insist on the position that foreigners should not mine diamonds in Russia,"" he said, adding that Russian law prohibited the publication or sale of geological information on diamond deposits in the northern Arkhangelsk region.
",28
"Russian Finance Minister Alexander Livshits warned financially-troubled Norilsk Nickel on Friday that it must pay overdue taxes, but analysts said the firm would not be liquidated or that its would assets would be frozen.
""Norilsk  really is a big debtor, both to the federal and regional budgets,"" said Konstantin Chernyshev, equities analyst at Moscow brokerage Rinaco Plus and a Norilsk watcher. ""Livshits's words are an attempt to put pressure on the company.""
The official Itar-Tass news agency quoted Livshits as telling parliamentary deputies that RAO Norilsky Nikel 0#NKEL.RUO had to pay its tax arrears and that bankruptcy procedures applied to the metals group.
""If it was an unsolicited statement and a bolt out of the blue, then it obviously means something,"" said Christopher Granville, chief economist at United City Bank in Moscow.
""But if it was a response to a deputy's question that was essentially loaded, then it was the only answer he could have given.""
Russian tax and cabinet authorities, under pressure from the International Monetary Fund to boost tax revenues as a condition for receiving payments of a $10 billion, three-year loan to Moscow, have been striking fear into the hearts of some of Russia's most prominent industrial firms by saying they must pay up or face liquidation.
""They could freeze metal, but it's not a long-term solution to the problem and wouldn't put money in the budget,"" Chernyshev said. ""I don't think they would do that.""
Entire social infrastructures in the icy Far North where Norilsk is based depend on the company, and Moscow has said it has no finances to resettle hundreds of thousands of people -- an expenditure which could far outstrip Norilsk's debts.
Norilsk officials declined to comment.
Analysts said the government, while anxious about Norilsk's debts, is highly unlikely to bring the nickel, copper, cobalt, platinum and platinum group metals producer to its knees or take measures that could significantly affect output.
But it also wants Norilsk, the world's second-largest nickel producer, to clean up its act.
""The procedure of bankruptcy will be applied,"" Tass quoted Livshits as telling Duma deputies about Norilsk.
It indirectly quoted him as saying Norilsk should first pay salary arrears, which in the past have led to worker strikes.
""It is unlikely that Norilsk will pay these debts in the near-term -- the company will remain a debtor in the near future,"" Chernyshev said.
He estimated the company's regional debts at least one trillion roubles and said 30 percent of the giant Krasnoyarsk regional budget was fuelled by Norilsk money.
Norilsk's new majority shareholder, Russian commerical bank Uneximbank, has said it is reorganising metal exports through Interrosimpex in order to boost revenues.
But the changes have yet to improve significantly Norilsk's situation.
""Uneximbank has inherited a mountain and whether or not they climb out and over it remains to be seen,"" said one metals source.
Norilsk said in September that it total debts, including unpaid salaries to workers, were 13 trillion roubles. The company said last month that it had worked out a tax payment schedule with authorities, after regional tax officials threatened to seize some nickel and copper assets.
--Moscow Newsroom, +7095 941 8520
",28
"President Boris Yeltsin's surgery on Tuesday might be a heart stopper for some volatile commodities and currency markets, but recent history proves Russian oil and gas exports are unfazed by Kremlin dramas.
Traders have seen tanks fire at Russia's White House, cloak-and-dagger power struggles and war in oil-rich Chechnya -- and each time, they say, Russian supplies of oil and natural gas to Europe and the Mediterranean have held steady.
Russia is the world's third-largest crude oil producer and single biggest natural gas producer; its energy heats and powers much of Europe and is a multi-billion dollar cash cow for Russia no matter who sits in the Kremlin hot seat.
This time, with Yeltsin under the knife this morning for a gruelling, hours-long heart bypass, should be no different.
""Politics don't affect us,"" said trader Vladimir Solovyov of Nafta-Moskva, one of Russia's leading oil exporters.
""We are more interested in things like government decrees saying 'export tariff introduced' or 'export tariff scrapped'.
Yeltsin's surgery began against domestic and international worries that if the operation fails, Russia could plunge into political uncertainty that could hit oil and gas exports.
With about one third of Russia's 6.2 million barrels per day output exported outside the former Soviet Union, and with Russian natural gas keeping one third of Europe warm, it is easy to see why traders worry about supply.
But when Russian oil exports do fluctuate, it is on less dramatic events, like storms at the Black Sea export outlet of Novorossiisk, one-off government supply programmes to former Soviet allies and which oil company is flavour of the month with export officials.
Gas exports can fluctuate on occasional explosions in Russia's gas pipeline system, the largest in the world.
Analysts said that with domestic demand flat while the Russian economy recovers, exports will be stable near-term.
Industry sources said there is no danger of conservative officials playing with the taps while Yeltsin was incapacitated, but they said some risk-averse European buyers could insist on contract terms less beneficial to Russian exporters.
""Our partners could get worried and demand terms not as attractive to us,"" said a trade financer at International Economic Cooperation, or MES, another leading oil exporter.
Others said money, not politics, motivated exports -- and with domestic oil prices below world levels, it is not hard to make money exporting the stuff.
""We like good prices on world markets,"" Nafta-Moskva's Solovyov said.
Political tensions in other major oil exporting countries often cause benchmark London and New York oil prices to leap over worries about supply disruptions.
Nervous International Petroleum Exchange traders swung spot prices in London when Yeltsin sacked maverick security tsar General Alexander Lebed last month.
But Moscow oil traders and analysts said that everyone should just calm down.
""This stuff (oil) is scheduled for export months in advance and it's technically very difficult to fiddle with the taps,"" said energy analyst Peter Houlder of CentreInvest consultancy.
Even the conservatives who covet Yeltsin's Kremlin seat remember the good old Soviet oil-boom days, when exports -- not disruptions to them -- were the key to power and wealth and enticed the Soviet Union to crank up output and become the world's largest oil producer.
",28
"Russia's new grain traders, looking for opportunities to make money and feed their vast country, said they were struggling to flourish in an arena now free of the state but lacking basic market structures too.
Preliminary data from the State Statistics Committee on Friday showed this year's gross grain harvest was 74.6 million tonnes, just eight percent up on 1995's disastrous 30-year low.
That could still leave supplies tight and, with no local equivalent of the Chicago Board of Trade or Canadian Wheat Board, traders will again be left to sift through bewildering market rumours and to pound the steppes in search of grain.
It is a Wild East bazaar, where producers prefer cash on delivery and where Soviet collective farming has left a deep suspicion of anything that looks like financial sophistication. But it is also, traders say, a place with golden opportunities.
""The arbitrage opportunities are excellent,"" said independent agriculture analyst Andrei Sizov of SovEcon Ltd consultancy, referring to trade in agricultural commodities from Russia and the former Soviet republics Ukraine and Kazakhstan.
He said Western commodities houses were actively arbitraging everything from sunflower oil in Russia's grain-belt North Caucasus to Ukrainian wheat and Uzbek cotton.
But other senior industry sources were at odds over how to trade in the post-Soviet market, where the state is no longer a major presence but where the new rules of the game are opaque.
Moscow shocked world markets in the 1970s by purchasing tens of millions of tonnes of foreign grain.
But the hard-up Russian government is keeping out of the market and last year relied on private traders to make up for Russia's worst grain harvest in three decades.
Arkady Zlochevsky, president of OGO, one of Russia's largest private commodities houses, said the domestic grain market was tough this year because few domestic traders had ready cash.
""The arbitrage situation is not as good this year because deliveries, especially from Ukraine, are unreliable, and because nobody has any money,"" he said.
Yet other sources said buyers were rushing to fill contracts left over from the last crop marketing year, when poor harvests across the ex-Soviet Union made supplies short.
""It used to be a seller's market only -- now buyers are on an equal footing,"" said a trader at a Western commodities house.
Russian farmers are already demanding prices above world levels and are selling standard, third-class bread-making wheat for 0.97 to 1.00 million roubles per tonne (about $177-$183 at current exchange rates). Delivery from central regions to Moscow or other big cities adds another 200,000 roubles per tonne.
Alexander Yukish, president of Russia's Grain Union industry group, said Ukrainian supplies were cheaper at 850,000 roubles a tonne, but said a 20 percent Russian value added tax and freight costs could quickly make up the difference.
Kazakh wheat before delivery to Russia across thousands of kilometres (miles) cost about one million roubles a tonne.
No one knows what percentage of Russian grain is traded domestically, in spite of the fact that the new private sector has in large part helped the government avoid major imports by selling domestic supplies to far-flung regions in Siberia.
The Russian Exchange, formerly known as the Russian Commodities and Raw Materials Exchange, has a puny turnover in grain contracts and registered no deals last month.
Farmers, burned by the late-paying state in the past, think only of roubles in hand, and not of hedging output with futures.
""For Western commodities houses, this is still a risky market,"" said Vasily Chinkaryov, deputy director at Eximkhleb, adding one could never be sure of receiving contracted supplies.
There are hundreds of so-called grain trading outfits across Russia, buying small lots here and there and wreaking havoc on the market by sometimes failing to pay producers.
Market sophistication is low, and even some top Russian traders do not see what ""arbitrage"" -- which in Russian denotes an arbitration court, not playing with price differences on commodities in different markets -- has to do with making money.
""What does our judicial process have to do with trading grain?"" asked one senior Russian trader in all seriousness.
Still, Russian grain is finding channels through which to move, often abroad.
Russia registered a total of 1.2 million tonnes of wheat and wheat-rye exports since the beginning of the year, with September exports nearly doubling to 62,500 tonnes, according to State Customs Committee figures quoted by Interfax news agency.
--Moscow Newsroom, +7095 941 8520 ($1 = 5,453 roubles)
",28
"Russia's Rosneft oil firm won a new lease of life on Monday after a Moscow court ruled it could keep its crown-jewel asset, a key Siberian oil producer coveted by a major rival.
An arbitration court said prize producer AO Purneftegaz would stay at Rosneft, ending a high-stakes tussle between Rosneft and the big SIDANKO oil company for control over the enterprise.
""The decision is key to Rosneft's survival,"" said Dan Lubash, managing director of Emerging Markets Europe at Merrill Lynch in London.
Rosneft, the state oil holding company which is slowly being privatised, lost most of its assets in recent years when President Boris Yeltsin carved up the once government-owned oil industry into vertically-integrated, privatised companies.
Monday's ruling could help keep Rosneft -- once Russia's number-one producer but now near the bottom of the list -- alive by letting it keep a company sitting on big untapped reserves.
""Purneftegaz is not just a promising producer now -- it has a lot of promising reserves,"" said Rosneft press director Vladimir Tumarkin. ""We consider today's decision an act of legal justice in Russia and a victory for Rosneft.""
Attractive Purneftegaz, a Western Siberian enterprise that pumped over eight million tonnes of crude in 1995, has long been the object of a corporate wrangle between Rosneft and SIDANKO.
Under Yeltsin's sweeping oil industry restructuring, a 1994 government resolution awarded Purneftegaz to SIDANKO (the Siberian-Far Eastern Oil Company) -- but a 1995 executive order shifted ownership back to Rosneft.
Vladimir Vetluzhky, an arbitration court member, told Reuters that the body had ruled against SIDANKO's lawsuit to have the 1995 decision reversed.
Purneftegaz's output accounted for about two-thirds of Rosneft's production of 13 million tonnes last year.
""Purneftegaz is much more important to Rosneft than it is to SIDANKO,"" said Stephen O'Sullivan, associate director of oil and gas at MC Securities in London.
Spokesmen at SIDANKO, one of Russia's top five oil majors in terms of output, were not available for comment.
SIDANKO, which energy analysts said wields little control over its key subsidiary, producer Chernogorneft, badly wanted Purneftegaz and its exports to pay off debts and taxes.
""Purneftegaz is one of Russia's most promising oil firms,"" said petroleum economist Rustem Shagiyev of the government's Academy of Economics. ""The ruling is very positive for Rosneft.""
But other analysts said Rosneft may need more to prosper in Russia's newly-competitive oil industry.
""The decision means Rosneft is still in business as a vertically-integrated oil company -- but it will need more than just one big producer to compete,"" said oil analyst Steve Allen of CentreInvest consultancy in Moscow.
Rosneft's other major asset is Sakhalinmorneftegaz, partner to four giant foreign energy projects in Russia's Far East.
O'Sullivan said the tug-of-war for Purneftegaz may yet continue and that SIDANKO could appeal against Monday's court ruling -- but Tumarkin said the corporate tussle had come to an end.
Purneftegaz shares barely reacted to the decision, nudging down to $2.28 on the Russian Trading System at 1445 GMT from Friday's close of $2.30.
""If the decision had been different, it would have been a major blow to Rosneft,"" Lubash said.
",28
"Russian oil company officials said on Friday that Moscow would not slap a duty on heavy fuel oil exports this winter, leaving traders to breathe a sigh of relief but still wary of secretive government manoeuvres.
The prospect of no restrictions on exports of mazut, as Russian heavy fuel oil is known, soothed traders who had been worried about short supplies of Russian material, which keep much of European and Mediterranean markets warm.
But while traders said they were now almost one hundred percent certain there would be no export duty, they cautioned that anything could happen in the Byzantine world of Russia.
""I am convinced that there will be no duty -- but I also know how all sorts of unexpected nightmares can happen in Russia,"" said a source at a European buyer in Moscow.
State oil holding company Rosneft's chief spokesman Vladimir Tumarkin told Reuters that a Fuel and Energy Ministry plan for a duty had fallen flat on its face with senior cabinet officials.
""They (the government) have decided not to introduce any restrictions,"" he said.
A second official at Rosneft, which ministry employees said was handling the mazut issue, also said there would be no duty.
""It is safe to say there will be no duty. It's too late. We had all expected one, but it has not come,"" Gennady Grigoryev, deputy head of Rosneft's financial-commercial directorate, said.
The Rosneft officials said Fuel and Energy Minister Pyotr Rodionov -- who had reiterated publicly as recently as last month that there would be a duty -- had failed to excite Kremlin officials with the idea.
""Rodionov was insisting on his position, but there are many corridors of power in Russia and he just did not score enough points with government officials to get them to agree to this,"" one of the Rosneft officials said.
One trader likened Rodionov's comments to ""a soldier's talk designed to pump people up and reflect his interests"".
""It's really possible it's true (that there will be no export duty),"" said a senior trader at a European company.
""But it comes a little too late to make me happy. I'm not thinking about mazut until May or so.""
Russian heavy fuel oil exports tail off sharply in the colder winter season from November to around May, as waterways and export outlets freeze and consumption increases at home.
The mazut export issue was a hot item of debate in government halls, with Rodionov's camp arguing for a tariff to bolster domestic supplies, and those against the proposal saying Russia needed fewer restrictions and more of a market economy.
Traders are conditioned to expect a Russian heavy fuel oil export restriction.
Moscow raised the export tariff on mazut to 16 Ecus per tonne from six Ecus during December 1995 to March 1996 to curb deliveries abroad. It banned mazut exports outright from December 1994 to April 1995.
""Russia has grown up,"" said one of the traders, adding that the decision not to levy a tariff was a triumph for Russia's new market-minded leaders over the old generation.
""I think there were a lot of people in the government who realised that such tariffs are just not advantageous.""
-- Moscow Newsroom +7095 941 8520
",28
"Russian parliamentarians, in a stinging blow to foreign oil investors, on Thursday said they would ask lawmakers to reject a bill outlining oil reserves open to production-sharing agreements.
The bill, a list of about 250 oil fields holding 38 percent of proven Russian oil reserves, is a key step towards unlocking billions of dollars in planned and proposed investments in Russian oil, including a huge project by Amoco Corp.
But members of the audit chamber of parliament told a news conference they would ask Duma (lower chamber) deputies to reject the law early next month.
The call for rejection, likely to be accepted, is a slap in the face for Prime Minister Viktor Chernomyrdin, whom foreign oil investors have considered their guardian angel in Russia and who has been instrumental in getting energy deals off the ground.
It is also the latest sign that Moscow, in a quiet change of policy, is getting tough with potential Western oil investors and seeking ways to give its own oil companies, which hold licences to most of the fields, a chance to get on their feet and compete with Western majors.
""It's quite a major setback,"" said a senior European energy consultant who asked not to be named. ""There's a real feeling in Russia of ""why should we give up any of this -- it's ours'.""
Duma Deputy Yuri Boldyrev, who is deputy chairman of the audit chamber, said the chamber had rejected the reserves list because government officials had not presented financial analyses proving that the fields would earn Russia more money faster if developed on a production-sharing basis.
Production-sharing contracts bring Western oil firms into risky countries by allowing them to finance and develop oil production through the sale of some output on world markets to cover costs and generate returns. The rest of the oil goes to the host country, which also get royalties and profit taxes.
Under the scheme, ordinary tax regimes are not applicable, giving the investments an acceptable return.
Boldyrev said foreign investors would not be worried by the chamber's rejection and said Moscow should slash the number of reserves open to output-sharing to 10 or 15 a year.
But senior oil executives are likely to be annoyed.
""We are of course worried about anything that slows the process down,"" said Dan Westbrook, senior vice-president and resident manager of Amoco Eurasia Petroleum Company in Moscow.
While officials recommended that the field Amoco is eyeing, Priobsk, be included eventually in the production-sharing list, they said two prize, giant fields -- Samotlor and Krasnoleninskoye -- would not be tendered to foreign investors.
Amoco and Russian oil firm YUKOS have a preliminary $50 billion production-sharing deal to tap Priobsk, one of Russia's largest oil fields, in western Siberia's Tyumen region.
But negotiations have slowed, partly because parliament has not yet approved the reserves list.
More bureaucratic delays appear to be on the horizon, blocking some $50-$70 billion in planned foreign investments in Russian oil and retarding potential projects.
""We need a host of laws clarifying on what grounds a specific field should be included in the list,"" said parliamentary auditor Mikhail Beskhmelnitsyn.
Boldyrev, complaining that Russia's black gold goes into a black hole when oil firms underpay taxes to state coffers, said the chamber also rejected the reserves list because output-sharing contracts might award too many tax breaks to companies.
Russia, the world's third largest producer of crude oil, last year passed a production-sharing law but only after revising it to meet demands by domestic lobbyists worried about the country's resources being exploited too cheaply by foreigners.
",28
"Western oil firms frustrated by Moscow's foot-dragging on foreign investment laws presented a study on Tuesday designed to convince conservative officials that Russia will take the lion's share of rewards in oil deals.
The study, outlining the benefits from six flagship production-sharing contracts requiring $129 billion in expenditure, could be the evidence nationalist and conservative parliamentarians need to pass energy and tax laws in 1997 to get the projects off the ground.
Foreign oil firms have to date invested only a tiny fraction of that total, citing high taxes, a flawed production-sharing law and Moscow's inability to ratify a list of reserves open to output-sharing deals.
""No investments are going to happen until there's a firm legal base,"" said a top Western oil executive who declined to be named, speaking after a conference where the study was presented.
The document, prepared by the Petroleum Advisory Forum, or PAF, and a group of Russian academics, said six major international projects requiring $102 billion in Western funding over 57 years would generate $591 billion in total benefits, with Russia getting 87 percent of the total.
The deals would at peak create 550,000 jobs, raise real gross domestic product by $450 billion, boost state revenues by $257 billion and Russian private sector revenues by $258 billion.
The foreign side would reap $76 billion in benefits, including $40 billion in foreign investor profits.
""With the overwhelming majority of benefits accruing to Russia, these projects will make an important contribution towards Russia's future economic growth and to the stability of its emerging market economy,"" a study group statement said.
Conservative Russian officials have blocked passage of key energy laws, saying they want to prevent what they call a fire-sale of Russia's natural resources to the West and in effect hampering Western investment in Russia's oil sector.
""Under the current licensing regime regulating the use of subsoil resources and the current gross revenue-based tax system, large-scale investments in the Russian oil industry are not forthcoming,"" the statement said.
Deputy Fuel and Energy Minister Valery Garipov said the study showed the necessity of Western investment in the oil industry, but he said Russian firms would have to have at least a 50 percent stake in production-sharing deals.
""We don't need stop-gap loans -- we need long-term investments,"" he told the same conference.
""Domestic investments are not appearing,"" he said, adding that only Western-financed production-sharing contracts would reverse Russia's steep oil output decline. ""There are Russian banks that bought oil companies, but where are their investments?""
The study said that for each dollar directly invested in the oil sector, an additional $0.90 in revenues would be generated in related domestic industries.
Referring to the study, PAF director Ed Verona said, ""It's a tool to show that this (foreign investment) produces benefits.""
Alexei Mikhailov, a parliamentarian and supporter of Western oil firms, said the six Western-sponsored projects -- Sakhalin I and II, Priobskoye, West Salym, Timan-Pechora and Yuzhnoye Khylchuyu -- could eventually account for two percent of GDP.
Mikhailov said he hoped parliamentarians would pass the revised reserves list and Western-friendly amendments to the production-sharing law in the first half of 1997.
""It is not enough just to provide financing and funds,"" said Dan Westbrook, senior vice-president of Amoco Eurasia Petroleum Company, the partner in Priobskoye. ""The point is, the projects must be economical for anyone (Western or Russian) to do the work.""
",28
"Russia said on Wednesday it would restructure natural gas monopoly Gazprom's operations, but Western analysts and even a junior company official said the move would leave the world's largest gas company intact.
""What Gazprom has suggested for itself is not a restructuring but a commercialisation of their services in Russia,"" said Jonathan Stern, vice-president of Gas Strategies in London and an expert on Russian gas.
Asked if Russia would reshape one of its most powerful companies in the formal sense of the word, Stern said: ""No. But it is corporatisation in the Western sense.""
Economy Minister Yevgeny Yasin told a news conference the goverment would restructure Gazprom's home operations and possibly split its domestic output and transport arms.
He said the changes at Gazprom -- whose American Depositary Receipts (ADRs) keep investors drooling -- would in no way affect foreign shareholders.
""Domestic restructuring, yes. But we will not weaken Gazprom as an international corporation,"" he said.
Carving up Gazprom, whose gas accounts for 60 percent of Europe's gas imports, could deregulate the firm along the lines of British Gas Plc if carried out Western style.
""There's more smoke than fire here,"" said Stephen O'Sullivan, associate oil and gas director at MC Securities in London. ""I don't think there's any serious restructuring here.
""Third-party access is not enshrined in Russia,"" he said, referring to the fact that Gazprom controls 94 percent of Russia's gas production and most of its transmission but has hesitated to allow other companies sell its output.
Lira Rozenova, an economic adviser to Gazprom chairman Rem Vyakhirev, said any changes would keep the company whole.
""An Economy Ministry programme to 2000 assumes that restructuring and state regulation in the gas industry will be carried out while preserving in the medium-term the organisational and production unity of RAO Gazprom,"" she said.
Gazprom accounts for a quarter of world gas output and its 1996 production rose one percent to 575 billion cubic metres (20.31 trillion cu ft). It raised $429 million last year with ADRs and plans a Eurobond issue this year.
""ADR investors should be more worried about other things,"" O'Sullivan said, citing questions over whether Gazprom will ever liberalise trade in its very illiquid shares in Russia.
Stern said Yasin's remarks were essentially about accounting changes rather than structural ones.
""Transport units would pay the producers' units costs,"" he said, adding that the plan aimed to improve Gazprom finances. ""The Russians don't mean what we mean by restructuring.""
A senior British energy consultant said Yasin's remarks were ""kite-flying by the government"".
Gazprom was once an entire ministry run by Prime Minister Viktor Chernomyrdin. Analysts said the firm would owe $7-$8 billion in annual taxes to the government if it could collect 50 trillion roubles in domestic debts.
Gazprom still has friends in high places and plans to sell even more gas to Europe from vast untapped Arctic reserves. But it has come under pressure to contribute more to the federal budget.
But Moscow may lack the will to alter one of Russia's most profitable and powerful firms substantially.
""Periodically, some radical economists in Russia have suggested truly restructuring Gazprom,"" Stern said. ""But they have always failed. The political risk of destroying the Gazprom structure is too great.""
($1 = 5,612 roubles)
",28
"Russian and foreign oil companies signed a $2 billion deal on Friday to build a pipeline bringing oil from energy-rich Kazakhstan to Western markets, but frantic last-minute negotiations left questions unresolved.
In a delayed signing ceremony that saw Russia's leading oil officials huddling for secret consultations, the Caspian Pipeline Consortium inked documents splitting itself into two for tax reasons.
Russia said its oil pipeline monopoly Transneft might still take a stake. The role of Transneft has been a contentious issue among CPC members and a key negotiating point.
But the signing raised questions over how much closer CPC is to resolving differences and getting its pipeline project off the ground.
""We are extremely satisfied with the commercial structure that has been accomplished and we believe it offers a realistic approach to such an important project,"" said Chevron senior Vice-President Jeet Bindra.
""We are anxious now to move it to the next stage and hope that a share acquisition will be accomplished by February 1997 and that construction will begin next year.""
A raft of officials, including LUKoil President Vagit Alekperov, Kazakh Oil and Gas Minister Nurlan Balgimbayev, former Fuel and Energy Minister Yuri Shafranik, Deputy Fuel and Energy Minister Anatoly Shatalov, attended the signing.
Chevron spokesman Edward Chow said the two entities -- CPC Russia and CPC Kazakhstan -- would have an identical management structure.
But Russian Deputy Prime Minister Valery Serov said it had not yet been decided whether Transneft would acquire the Russian government's 24 percent stake in the consortium.
Chevron will own 15 percent in the CPC, Russia's LUKoil 12.5 percent, Mobil and Russia's Rosneft 7.5 percent each, British Gas Plc and Italy's Agip SpA two percent each, and Oryx Energy Company and Kazakhstan's Munaigaz 1.75 percent each.
The remaining 50 percent is divided between Russia (24 percent), Kazakhstan (19 percent) and Oman (seven percent).
Transneft Chief Executive Officer Valery Chernayev told Reuters that the firm wanted Russia's entire 24 percent stake -- a demand that could delay the project even further.
CPC, set up in 1992, is seeking to build a 1,580 km (990 mile) pipeline linking Kazakhstan's Tengiz oil field and Russia's Black Sea oil expot outlet Novorossiisk.
Chevron and Mobil, with a $20 billion oil project in Tengiz, are the main future customers of the CPC pipeline.
Officials signed the deal in a Moscow hotel conference area, but only after breaking out of negotiations repeatedly to run to corners of the room and consult.
""This concludes the first phase of the project,"" Serov said. ""Now a follow-up step, which will be no easier than what we accomplished today, must be made -- project implementation.""
CPC nominated Transneft as operator, but CPC sources said they had a stringent list of conditions Transneft had to agree to and fulfill if it wanted the role.
Serov said Western firms bidding to construct the link would have to do so jointly with Russian or Kazakh partners and said the latter would be given preference as equipment suppliers.
""From our point of view, Transneft has been designated as an operator,"" Chevron's Bindra told Reuters, adding that the group must still negotiate an operating agreement.
""For three years, we failed to find a common language,"" Balgimbayev said, adding that he was pleased with the deal.
The pipeline will initially move 28 million tonnes a year (560,000 barrels per day) of Kazakh and possibly Russian crude and will have a peak capacity of 67 million tonnes a year (1.34 million bpd).
",28
"Russia's Finance Ministry said on Thursday that Moscow was ready to cooperate with De Beers on a deal which a deputy minister said was vital to support the diamond market.
""The Russian Federation is further ready to cooperate with the De Beers company in the matter of continued support of the stability of the world diamond market,"" it said in a statement.
However, the ministry said it had received no official word from the South African group on its announcement on Wednesday that it had given the Russian government until the end of the year to sign a new trade agreement to export Russian rough gems.
The statement said the ministry, which plays a key role in the trade agreement, was studying what it termed De Beers' unilateral cessation of an agreement to sell Russian gems through De Beers' Central Selling Organisation.
De Beers had said not that it was unilaterally halting the agreement, but that if a formal deal were not reached by 1997, it would cancel its interim arrangement with Russia.
De Beers said it had made its announcement on Wednesday because its patience had worn thin over government delays in replying to the long-delayed deal.
First Deputy Economy Minister Vladimir Panskov said an agreement with De Beers was necessary.
""If this agreement is not signed, we will simply destroy the world diamond market. Neither the De Beers company nor Russia will be able to work normally without such an agreement,"" Interfax news agency quoted Panskov as saying.
De Beers controls about three quarters of the world diamond market and Russia accounts for about 25 percent of all rough gems De Beers sells.
A five-year deal expired in December 1995 and was replaced by a memorandum signed in February 1996.
Panskov said that in the course of work on the agreement, differences of opinion between Russian diamond producer Almazy Rossii-Sakha (ARS), domestic gem processing plants and De Beers had become clear.
""But I think that in any circumstances we cannot set off on the road of mutual ultimatums.""
A senior official with ARS said the Russian government had been dragging its feet on the deal with De Beers but he thought a deal would come in 1997.
Interfax quoted Lev Safonov, first vice president of the company, as saying that if an interim agreement were broken off before a new deal was in place, the two sides would conduct trade under ""other conditions"".
",28
"Russia's Gazprom natural gas monopoly plans to double exports to Europe by 2010, mostly via its ambitious $40 billion Yamal pipeline project, but energy analysts said the timing could be wrong.
""There's a market problem (with oversupply in Europe), and the cost of developing the Yamal field will be too high,"" said a senior European energy specialist familiar with the project.
""Europe is at saturation level for the next 10 years or so, so Gazprom is 5-10 years too early.""
The Yamal-Europe project envisions building a gas pipeline network across 4,107 km (2,550 miles) from Russia's vast Arctic Yamal peninsula reserves to Germany via Belarus and Poland.
Gazprom wants to take advantage of rising European demand.
To help raise capital for Yamal, RAO Gazprom is offering American Depositary Shares as part of a plan to sell a total nine percent stake abroad.
""Europe can hardly wait for this project,"" said Alexander Litvinov, Gazprom's chief public relations specialist.
A company statement said: ""The company faces significant requirements for capital expenditures.""
The Yamal system, to be built in stages and linking with existing pipelines in some places, would have an initial capacity of 83 billion cubic metres (bcm) per year, including around 52 bcm to Western Europe.
Gazprom said the Yamal-Europe pipeline would boost Russia's export capacity to 124 billion bcm by 1997 and 154 bcm by 1999. Sales outside the former Soviet Union were 117.4 bcm in 1995.
The company wants annual exports to rise by 50 bcm by 2010.
Gazprom has won big Western credits to build European parts of the Yamal link into Poland's grid and Belarus, but it has not won financing for the main part of the system or to boost output at Yamal itself, which it hopes to begin doing by 2000.
Pierre Bauquis, special adviser to the president of French company Total SA, told an energy conference in the Kazakh capital Almaty last week that Russia had huge gas reserves but big financial constraints.
""Yamal is not needed before 2010,"" he said.
He said netbacks (a key indicator of profitability) on Yamal gas to Germany today were negative, ""so Yamal is not obvious from an economic standpoint.""
Gazprom sees Yamal as the goose that will lay the golden egg, since the area has recoverable reserves of 10,400 bcm, or 20 percent of Russia's total proven reserves.
But Yamal gas, some under permafrost, is in a remote area and is quite expensive to recover.
Some analysts say it may be cheaper to tap and transport Algerian and Norwegian gas to European markets than to extract Yamal gas in the volumes and time-frame Gazprom plans.
Russian gas already accounts for 60 percent of Europe's total gas imports. Russia has more than one-third of world gas reserves and 26 percent of output, and is the world's single largest producer, with output of 556 bcm last year.
Gazprom accounts for 94 percent of Russian gas output and transports nearly all of it. The firm wants output to rise to 820 bcm a year by 2010.
Russia exports only 20 percent of its output, and declining industrial consumption at home has left Russia with an oversupply. Europe is also flush with supplies, though demand is set to rise.
""The fact that Gazprom does not have its own financing for Yamal and that it has not been able to find domestic or foreign financing (for the main part of the project) speaks quite negatively about its economics,"" said the European source.
",28
"Russia's oil industry earned higher export revenues from booming world prices in 1996 but has started 1997 increasingly worried about the slow pace of recovery in demand at home, energy analysts said on Wednesday.
Domestic producers, taking advantage of international oil prices which soared about 30 percent in 1996 to their highest in six years, jammed crude oil export outlets last year.
But analysts said that while companies would continue to try to sell as much as possible abroad, higher demand at home -- Russian oil's main future customer -- was not yet in sight.
Eugene Khartukov of Moscow's independent World Energy Analysis and Forecasting Group and the International Centre for Petroleum Business Studies said 1997 could show either a recovery in output or yet another slide.
""It's possible we will see stabilisation and possibly even some growth but it all depends on what the government does with taxes and the production-sharing law,"" he said.
Russian crude oil output in 1997 could rise to 6.3 million barrels per day (bpd) from the 1996 estimate of 6.1 million bpd and would probably not dip below that level, he added.
That could mean a significant turnaround for the world's third-largest oil producer, which has seen output nearly halved since its 1987 Soviet-era peak of 11.5 million bpd and is still struggling to slow the pace of decline.
The Fuel and Energy Ministry, which has not finished compiling 1996 results, said in December that crude oil and gas condensate output over January-November 1996 had slipped two percent to 275.9 million tonnes.
Exports of about one third of Russia's output jumped 4.7 percent year-on-year over the same period to 92.8 million tonnes, it said.
But producers used the extra cash to pay off debts and wage arrears, not to rehabilitate wells or drill new ones.
Deputy Fuel and Energy Minister Garipov said in December that Russia conducted no exploration for new oilfields last year for the first time since World War Two -- an unsettling sign since most of Russia's ""easy"" oil has already been produced.
""We believe that the general trend is stabilisation but that it will differ from company to company,"" said Maxim Shashenkov, a Russia analyst at Merrill Lynch in London.
""But further growth is constrained by limits in domestic demand and export capacities,"" he said, adding that higher export earnings had not underwritten the giant cost of structural transformation needed in the Russian industry.
Khartukov said bottlenecks in export outlets and flat demand from industrial consumers meant the Russian market was in fact oversupplied with crude oil and oil products for most of 1996.
""To increase output which can't be disposed of on the domestic market or be exported due to bottlenecks is crazy,"" he said, adding that oil companies could have technically produced an additional 70,000 to 100,000 bpd in 1996 but elected not to.
Russian wholesale producer prices for crude oil are a mere 50-55 percent of world levels and reach only 70-75 percent after tariffs and transport costs are tacked on.
Khartukov said crude oil exports would at least equal 1996's 2.5 million bpd this year and possibly hit 2.7 million and refinery throughput would be flat at around 3.4 million bpd.
But he also said Moscow's political and economic uncertainties could wreak havoc in the industry, adding: ""It's a big crazy mixture of unpredictable things.""
- Moscow Newsroom, +7095 941 8520
",28
"Russia's grain crop is proving to be one of its lowest in three decades, prompting trade sources on Monday to speculate that the government could return to world markets for imports to feed the military and remote areas.
The nearly complete 1996 harvest, bucking a trend of increased grain output across the world, weighs in at a gross 74.6 million tonnes, with little high-quality bread wheat and virtually no stocks from last year's disastrous output, which was the worst for more than 30 years.
""The figure is, I think, slightly lower than we expected,"" said a Western agriculture source, commenting on preliminary data published by the State Statistics Committee on Friday.
""It means additional imports.""
The cash-strapped Russian state insisted last year it had long ago left world markets for good.
But Anatoly Manellya, head of agriculture forecasting at the Centre for Economic Trends, a think-tank set up by the Russian government, said the Federal Food Corporation, the state agency responsible for reserves to feed the armed forces and remote towns, might soon be in the international market.
""The Federal Food Corporation is probably going to try to do some deals,"" he said, adding only that it was in preliminary negotiations.
The agency has bought a mere 450,000 tonnes of domestic grain out of the 4.5 million tonnes it plans to buy this year.
""As far as I know, the government is talking about possible imports for us, but I cannot tell you anything more since we merely fulfil government orders and they have not yet told us anything,"" said Corporation deputy director Yuri Lysenko.
Russia's harvest last year was officially 63.4 million tonnes and record-high world grain prices kept traders from importing any significant quantities from beyond the former Soviet Union and Eastern Europe.
This year prices are lower after bumper world harvests, with benchmark Chicago contracts at $3.75 per bushel after a long spell above $5 and a spike to $7.50 in March.
But Russian farmers, mindful of recent high prices, have declined to sell to state reserves -- making government officials jittery over how to feed the soldiers and isolated Arctic cities that cannot depend on the private sector.
""It seems like more and more contracts are being talked, especially in the (Russian) Far East,"" said the Western source, who forecast Russia's total grain imports over the 1996/97 crop marketing year from all sources at five million tonnes.
Andrei Sizov of the private agricultural consultancy SovEcon Ltd recently put the total at six to seven million tonnes.
Allowing for the eight or nine percent that is lost after cleaning, Russia's 1996 net harvest will probably weigh in at a lean 68 to 69 million tonnes -- not much above last year.
Manellya said he had told the cabinet last week that net output would be 69.8 million tonnes.
""This is better than last year, but is still one of the three worst harvests in the last three decades,"" he said.
-- Moscow Newsroom +7095 941 8520
",28
"Russian cocoa importers hope business will be sweeter this year, but increasing competition from Western chocolate bars and a lack of precise data on buying patterns have clouded the market, trade sources said on Monday.
""The general tendency is one of growth -- we'll be buying more cocoa this year,"" said Yuri Granilin, supplies director at the large Babayevsky confectionery plant in Moscow. He declined to give figures.
Domestic producers are competing against a flood of Western ready-made chocolates, with the latter in an upward trend as domestic firms struggle to find recipes for success in a market economy.
The State Statistics Committee said imports of cocoa from outside the Commonwealth of Independent States edged higher to 47,700 tonnes in the first eleven months of 1996 from 47,000 tonnes over the same 1995 period.
The International Cocoa Organisation puts Russian grindings over 1995/96 flat at 75,000 tonnes for the third marketing year in a row.
One Nestle source said Russia's ready-made chocolate products market would grow 15-20 percent this year but that overall growth in cocoa imports was unlikely.
Alexander Pavlov, head of the Agriculture Ministry's food industry department, said Russia's 1996 imports of cocoa and cocoa derivatives slipped eight percent year-on-year.
""I don't think we'll see much growth this year,"" he said, putting imports of cocoa beans, liquor, powder, butter, grated chocolate and semi-fabricated whole cocoa bars at 130,000 tonnes, including about 75,000 tonnes of beans.
But he cautioned that figures were difficult to pin down, since some imports do not show up in the official statistics and producers had stocks left over from 1995.
Pavlov estimated that imported ready-made chocolate products comprise 10-15 percent of the domestic market for such goods.
Companies like Nestle SA, Switzerland's Andre et Cie, Cargill Inc of the United States and E.D. & F. Man International Inc are suppliers to Russian confectionery plants, which now buy direct instead of going through the Soviet-era agencies that bought about 100,000 tonnes of beans a year.
""The Russian market is quite different from the U.S. and European ones,"" said a senior source at a major Western confectionery. ""It's a question of taste,"" the source said, adding that three times as many Russians prefer dark chocolates to those who prefer milk chocolates.
Individual chocolate bars are a relative novelty in Russia and are having to work hard to compete with the traditional large, block chocolates, wafers and biscuits Russians love.
One source guessed the size of the bar market at 100,000 tonnes a year, but cautioned this was a rough estimate.
The market for chocolate-covered wafers and biscuits could be three times higher, while the market for small chocolate candies was possibly four times greater, the source said.
Bars, packaged for on-the-go consumption, are a relative novelty to Russians, who traditionally treat chocolate as a treat to be consumed at home or on special occasions.
""Russians are into plain chocolate; these fillings, nuts and souffles the Europeans love aren't our tradition,"" Pavlov said.
Moscow grocery stores are filled with imported and domestic chocolates, but the abundance does not extend to the rest of this vast country to the same extent.
Trade sources said the Russian market was in such a state of change that Western confectioners were keener to launch new brands rather than increase an existing brand's market share.
""Everything is changing really quickly,"" said one source.
--Moscow Newsroom, +7095 941 8520
",28
"Russia is eyeing its second consecutive bad grain harvest and will need imports despite a prediction by Prime Minister Viktor Chernomyrdin that output will be enough to meet demand, industry sources said Tuesday.
""The sheer volume Russia will produce is enough to meet demand, but the quality is not,"" said specialist Andrei Sizov of the independent consultancy SovEcon Ltd. ""So it is fully possible that Russia will be forced to go to Western markets.""
Chernomyrdin, in a speech to the Federation Council, the upper parliament house, forecast 1996 grain output of 77-78 million metric tons, ""significantly higher"" than last year's harvest of 63.4 million tons.
""This will allow us to provide the population with bread and bread products until the new (1997) harvest, to prepare enough concentrated feed grains and to increase grain reserves,"" a copy of Chernomyrdin's speech read.
But grain sources have said private-sector buying would still take place. ""We have a shortage of first-class wheat,"" Georgy Zelinsky, general director of the agricultural trade association Khleboproduktprogress, told an industry seminar.
Sizov said piecemeal Russian imports of grain and flour in grain equivalent from all sources would rise to 5.0-6.0 million tons over the 1996/1997 crop year, from 4.5 million in 1995/1996 crop year.
Anatoly Manellya, head of agricultural forecasting at the Centre for Economic Trends, a think-tank set up by the government, said he thought imports could be even higher.
Agriculture Minister Viktor Khlystun has said Russia may import up to 4.5 million tons of corn and soymeal, plus 500,000 tons of wheat from the United States, Canada and/or Australia.
Zelinsky said domestic feed corn was in short supply, but corn for human consumption was not.
But industry sources said Western markets should not expect sudden announcements of big purchases. Rather, Russia would buy piecemeal in small lots, they said.
Sizov said imports of Western grain could be possible because Ukrainian flour supplies would slip due to very poor harvest outlook there.
""Russia has become the world's largest flour importer,"" he said, referring to imports which increased to one million tons in the 1995/1996 crop year, a rise of 25-30 times from the previous year.
Industry sources said the most likely buyers would be the dozen or so Russian commercial banks authorised to use U.S. government commodities credits.
Russia has used nearly all its reserves from the 1995 harvest, the worst in three decades. It survived largely due to carryover stocks from the 1994 harvest.
",28
"Russia's state oil holding firm Rosneft said on Friday it would protest against a local decision to award Exxon Corp the right to tap Arctic oilfields, signalling Moscow's tougher line towards Western energy companies.
Rosneft spokesman Vladimir Tumarkin said Exxon, which regional officials declared the winner of a tender to develop the Central Khoreiverskaya oilfields in the northern Timan-Pechora area, would be given too many privileges.
""Exxon's bid violates the terms of the tender in that it would give Exxon the exclusive right to these resources as well as the right to tell the Russian side under what terms it should work,"" he told Reuters.
The protest is the most concrete evidence to date that Moscow, in a significant change of policy, is serious about giving its own oil companies a greater role in developing Russian oilfields.
The legal basis upon which Rosneft -- which bid jointly with a subsidiary and Amoco Corp in the tender -- would protest was not immediately clear.
Exxon officials could not be reached for comment.
""What are you talking about; how can they protest this?"" said Anatoly Kazakov, deputy head of the Arkhangelsk oblast regional administration and a member of the region's Nenets autonomous district tender committee that on Thursday declared Exxon the winner.
""Everything was done absolutely normally.""
Under the tender, Exxon would have a 50 percent stake and conduct negotiations to bring Rosneft, Russian oil firm KomiTEK and exploration body Arkhangelskgeoldobycha in to split the remaining 50 percent in a production-sharing contract.
Rosneft is the state's agent in all production-sharing contracts and has the right to dispose of the state's share of output from such deals.
Tumarkin said that under the original terms of the Central-Khoreiverskaya tender, no foreign firm had the right to tell the Russian side how to work.
""Exxon did not conduct negotiations with us when it bid and its proposal gives it an exclusive right to the reserves,"" he said.
The quarrel over who will develop the fields, which contain about 160 million tonnes of oil and require about $1.5 billion to develop, underscores the ambivalence Russia feels about attracting foreign oil investment.
One the one hand, it desperately needs the money. On the other hand, it is loath to repeat the kind of contracts signed to develop reserves off the Far Eastern island of Sakhalin, contracts in which foreign firms hold nearly 100 percent stakes.
""Fifty-fifty -- what's the problem?"" said Kazakov.""As a Russian, I agree we should support our companies. But if our companies don't have the money or financing, we have to do something else.""
The squabble is the first test of how much more difficult Russia could make it for Western oil companies seeking to tap big reserves.
Tumarkin said Rosneft had wanted Exxon to form a consortium with at least some of the other bidders, including the informal Rosneft/Amoco alliance, Texaco Inc, Total SA of France and Norsk Hydro ASA.
But the idea had received little support, he said.
--Moscow Newsroom, +7095 941 8520
",28
"Russia is trying to shift financing of its tarnished gold sector to commercial banks while keeping control of exports, putting it on a collision course with the banks who say sales abroad are what interest them.
Moscow bullion officials view recent Central Bank decisions outlining new procedures for working with gold as a cautious, experimental step toward opening one of the country's most closed industries, the banks say.
""Administrative measures in Russia always mean something,"" said Dmitry Smirnov, head of precious metals operations at Vneshtorgbank, commenting on whether recent changes detailing accounting procedures for working with gold were Soviet-style bureaucratic paper-shuffling or more significant.
But he said: ""Honestly, I wouldn't expect a sharp rise in output any time soon.""
Russian bullion officials say they want to open up the domestic market, since the federal budget can no longer finance gold output or keep the state's strategic reserves well-stocked.
Canadian industry sources say Russia has the world's third-largest untapped gold reserves but is only the world's fifth-largest producer, a fact that reflects the difficulty it is having in channeling funds to mines.
Output in 1995 fell to about 130 tonnes and will slip in 1996 and 1997. About 130 banks have the right to trade in gold domestically but only five to eight can export gold abroad.
Banks financed only five tonnes of output last year.
Western bullion bankers say bank-financed output makes Russia a potential loose cannon on world markets, since it could quickly send output soaring.
Gold, which struck three-year lows earlier this week but has picked up slightly since, hovered around $368 an ounce on Thursday on the London Metal Exchange.
Domestic banks, some of which bought government gold-backed certificates in 1991 which they cashed in for metal, may already have significant stockpiles of gold which they are unable to export due to strict quota and licensing rules.
Boris Yeltsin's press service said on Thursday the president had decreed that Russia would not issue certificates backed by about 30 tonnes of gold as planned last year.
""I know that there are a lot of banks with a lot of gold that they are just waiting to sell abroad,"" said Dmitry Parmeshin, head of Inkombank's precious metals sales section.
""We all want to take this stuff out if the (domestic) market becomes liberalised enough.""
Bankers declined to put a figure on the number of tonnes of gold held in Russian commercial banks, but one said the figure could be at least in the dozens.
The Central Bank in October introduced new accounting procedures for banks seeking to work on the domestic gold market. But the institution still largely controls exports through quotas and licences.
Interfax news agency quoted Central Bank precious metals director Sergei Kyshtymov as saying the rules would soon be simplified further.
""This can be viewed as the first step toward a more open gold market in Russia,"" said Sergei Brazhenko, deputy head of precious metals department at Rossiisky Kredit, one of the few banks with a licence to export gold abroad.
""The task is to hook up our output with world market demand, given that our domestic consumption is low.""
Bullion bankers said domestic consumers bought 15 tonnes of gold last year, mostly as jewellery -- but they said trade restrictions hid the fact that consumer demand was higher.
""Once things become truly liberalised, the domestic market could really explode,"" Parmeshin said.
",28
"Russia's aluminium industry, in private hands and learning market-savvy moves in ways its former state owners never could, still holds surprise cards but may no longer terrorise world markets with sudden, secret exports.
Metals analysts said on Friday that Russia, which accounts for about 15 percent of world output, would not cut production or exports in 1997 even in the face of rising costs at home, low margins and weak world prices.
Instead, smelters -- now mostly in private hands after years of turbulent shareholder battles -- would do all they could to turn profits.
""What has happened over the last year in particular is that ownership has settled down so that you can be fairly sure of the conduits of the smelters' metal,"" said a senior London metals trader who declined to be identified.
""They will continue to sell the metal, come what may.""
Russia, fresh off a two-year global output cutting agreement that expired this spring, seized the opportunity to restart some idled capacity and increase exports.
The increases laid to rest market talk that Russia wanted to craft a new output cutting deal to boost low London Metal Exchange prices. But analysts still wonder how much Russian aluminium could flood onto sensitive markets.
Asked if Russia had learned anything from the March 1994 memorandum of understanding that reduced global output 10 percent to draw down bloated stocks, the senior London source said, ""It has not learned. I don't think they care.""
Igor Prokopov, director of Kontsern Alyuminiy, the producers' group uniting Russia's aluminium industry, said 1996 primary aluminium output would rise 1.5 percent from 1995 to 2.79 million tonnes.
Production could rise another 1.5 to 2.0 percent in 1997.
The group put Russian 1996 primary aluminium exports at 2.37 million tonnes, against what it said were 2.11 million in 1995.
""Some noise has appeared in the West that Russia has cranked things up, which is not really true,"" Prokopov said.
But two base metals analysts said the figures seemed on the low side and Russian smelters had undoubtedly increased output.
But they have done so while consolidating sales operations to try to make more money on exports, which has introduced more transparency into deliveries abroad.
Shareholders, many of them Western commodities power houses, were having a greater hand in that transparency, since they were increasingly buying direct from smelters.
Pechiney of France, Glencore AG of Switzerland and London-based powerhouse Trans-World Metals and its units already have major stakes in Russian smelters.
Analysts said the Bratsk smelter, the world's largest, with annual capacity of about 850,000 tonnes, had major plans to modernise with the help of a top European industrial firm.
LME three-month aluminium futures are around $1,550 a tonne, clawing back from October's 2-1/2 year low of $1,305 but below a $2,195 in January 1995, the last major peak.
Prices had been even lower before Russia and five other countries -- the United States, Canada, Australia, Norway and the European Union -- signed the 1994 accord. The five said Russia was to blame because it had flooded markets with metal.
Those exports were largely orchestrated by the state, which needed cash to fill its coffers.
Now smelters say they are reining in trade and marketing operations to be closer to markets in a way that Soviet-style ministries in Moscow were not.
""Integration could have a positive affect,"" Prokopov said, citing expense rationalisation and consolidated balances.
Russia is an aluminium powerhouse because its Siberian smelters, which account for 90 percent of output, have endless, cheap hydroelectricity generated by rivers.
",28
"Russia, hoping to boost industrial output, announced plans on Monday for lower electricity and rail transport prices, cheering energy-hungry aluminium plants but worrying Western economists.
President Boris Yeltsin's press service said Yeltsin had signed a decree at the weekend cutting wholesale electricity charges for industrial and residential customers from November 1 by an average 10 percent from their August 1 levels.
The decree also promised to rein in runaway rail transport charges, saying tariffs for transport by rail on electric locomotives would be set by the new electricity pricing rules.
Yeltsin's decree also promised to create a wholesale natural gas market by next year.
By bringing order to unruly pricing structures, the decree also aims to improve tax collection.
Privatised aluminium smelters in Russia, one of the world's largest producers, said the new rules would help them save them money as electricity and transport are two of the major costs in producing and exporting the non-ferrous metal.
But Yeltsin's decree aroused doubt from Western economists, who called it little more than a short-term way of plugging the budget deficit and unsustainable in the long run.
""Of course this makes us happy,"" said a representative in Moscow of the big Krasnoyarsk aluminium smelter.
But he declined to say how it would affect output.
""It's not sustainable in the long term,"" said a top Western economist. ""Over the short term, it will reduce production costs, but it does nothing to solve nonpayments.""
Boris Arlyuk, managing director of St Petersburg-based Alumconsult, said that Russia's average industrial electricity prices were already much higher than world charges.
But Russian smelters rarely pay full price, thus helping to fuel a massive non-payments cycle in which aluminium plants -- a major consumer of electricity -- owe regional utilities for supplies, who in turn owe the state unpaid taxes.
Yeltsin's decree is partly designed to break this cycle.
The decree also said gas and electricity producers would be liable for excise and profits tax on proceeds from collecting debts for their supplies, as long as these proceeds did not fall below the actual cost of producing and transmitting supplies.
That means it could become easier for utilities to collect money from aluminium producers and other industrial customers.
Arlyuk said domestic electricity tariffs vary greatly, with the Kandalaksha aluminium smelter in the European part of Russia charged the rouble equivalent of $25 per megawatt hour, and using 17 megawatt hours to produce each tonne.
But rates at the giant Bratsk smelter in Siberia were the equivalent of $6 per megawatt hour -- the same, Arlyuk said, as in big aluminium producing countries like Canada and Norway.
Bratsk, using 17.7 megawatt hours per tonne of produced aluminium, spent only $106 per tonne on electricity compared to about $425 per tonne for Kandalaksha.
Dmitry Kryukov, a utilities analyst at Renaissance Capital, said that partly privatised national power company Unified Energy System (RAO Yedinaya Energeticheskaya Sistema) would see lower revenues.
But he said its cash flow could improve since it would be taxed only when paid for deliveries, and not before.
Still, Anatoly Gamanov, head of tariffs at the aluminium producers' group Kontsern Alyuminiy, said he doubted regional utilities would be happy to receive less for their supplies.
""This is not the first time we've seen something like this, and some regional utilities may put up a fight.""
UES owns 29 power plants and holds 49 percent stakes in most of the privatised ""energo"" regional utilities.
Electricity and rail tariffs have risen faster than the overall producers price index, prompting Kremlin officials to seek ways to give industrial producers a break.
",28
"The head of war-torn Chechnya's oil company said on Thursday that Russia's rebellious region would guarantee the safety of a major oil pipeline across its land but demanded a cut in foreign deals that will use the link.
Khozhakhmed Yarikhanov, president of the Southern Oil Company, which is based in the devastated capital Grozny, told a news conference that an $8 billion multinational consortium that will use the link to export oil in 1997 should not worry because the pipeline was safe and sound.
""We guarantee the link's safety,"" he said. ""But remember that with pipelines all over the world, things sometimes happen -- sabotage, technical errors, human errors.""
He said Chechnya should get a cut from transit fees via the so-called northern link, which can carry 17 million tonnes of oil a year.
""The Chechen part is approximately in the same condition as the rest of the link,"" he said, referring to the stretch running through Grozny and linking the Azeri capital Baku to Russia's Black Sea oil export outlet of Novorossiisk.
The 13 international oil companies in the Azerbaijan International Operating Company plan to reverse the flow of the pipeline to ship up to 100,000 barrels per day (bpd) of early oil from their Caspian offshore projects near Baku from August 1997.
The consortium is led by an alliance of British Petroleum Plc and Norway's Statoil.
Protracted bloodshed and instability in the 21-month Chechen conflict have given the consortium the jitters ever since Moscow sent troops into Grozny in December 1994 in a bloody bid to rein in the breakaway region.
The oil firms, worried that exports from their big ticket investments could fall prey to a separatist war, have access to a second export route via the former Soviet republic of Georgia.
Underscoring the fragility of the region for oil investors, six foreigners working with the International Committee of the Red Cross were shot dead at a Chechen hospital on Wednesday and six ethnic Russians were killed on Thursday.
Yarikhanov, who said he had faced a cool reception at Russia's Transneft oil pipeline monopoly, which owns and operates the pipeline, and at the Fuel and Energy Ministry, said Moscow was not doing enough to resurrect the region's once-glorious oil sector.
While he said the pipeline was no worse for the war, Chechnya's production and refining facilities had been laid waste.
At least eight trillion roubles ($1.44 billion) were needed to bring the facilities back on line. Yarikhanov said financing could come from a Chechen cut in the transport fees that the Azeri oil consortium will pay to ship oil via Chechnya.
""We want our share of profits from the transport of oil across our country,"" he said, adding the Azeri group would pay $16.57 per tonne to send oil from its Caspian Sea platforms near Baku to Novorossiisk.
The Azeri oil consortium also includes Azeri state firm SOCAR, Amoco Corp, Pennzoil Co, Unocal Corp, Exxon Corp, Ramco Energy Plc, Russia's LUKoil, Turkish TRAO, McDermott International Inc, Itochu Corp and Saudi Arabia's Delta Nimir.
The Southern Oil Company, also called the Chechen Oil Company, had hoped to stabilise output at three to four million tonnes a year before the breakaway region descended into bloodshed.
Chechnya accounted for one-third of Soviet oil production in the 1970s, or around 22 million tonnes a year, before Moscow began tapping its massive Siberian reserves.
Refining capacity in the south Caucasian region is 20-22 million tonnes a year, but operations have ceased.
($1=5549 Rouble)
",28
"Russia's demand for feed grains will outstrip any output increases its agriculture sector manages in coming years, which could turn the country into a big importer, industry officials said on Friday.
Russia, which has just completed its second poor harvest in two years, the third worst in 30 years, is heading into the next crop cycle with few signs that its dismal track-record will soon recover.
""For now, consumption is still low enough to offset the decline in output, but demand is still going to rise faster than production,"" said Alexander Yukish, president of the Grain Union, which groups leading private traders.
Russian farmers have to struggle to get their hands on whatever seeds, tractors and fertilisers they can scrape together.
The agriculture sector, one of the most inefficient and least-reformed in Russia, has not adopted the pro-market changes reshaping some other domestic industries.
""Russia will need at least 120 million tonnes of grain when livestock levels and consumption return to the levels we had in 1990,"" said Yukish. But he said Russian grains output, which has nearly halved in recent years, would not stage a comeback for at least another five or 10 years.
""There is just not enough feed grain in Russia -- we've got to produce more soymeal and maize,"" Alexander Vasyutin, deputy head of the Agriculture Ministry's crops growing section, said.
Russia has been slaughtering livestock because it does not have enough grain to feed it. Bread is a staple in Russia but people are eating less and product quality is patchy.
Russia's just-completed 1996 gross harvest was 74.6 million tonnes, according to preliminary official figures -- just eight percent above 1995's disastrous net 63.4 million tonnes, the worst since about 1965.
About eight percent of the 1996 total will be lost after cleaning -- putting net output at about 68.6 million tonnes.
Some analysts say up to 20 percent of Russia's harvest was lost in the Soviet era due to inefficient, obsolete combines, and that losses now, with even less money for adequate equipment, may still be severe.
""Next year, we'll see the same harvest we had this year, maybe a little more, maybe a little less,"" Yukish said. ""But to expect sharp increases in output next year is not realistic.""
Industry officials said that with the domestic economy showing signs of turning around and a growing middle-class hungry for meat, Russia must act fast if it is to satisfy demand in the future.
Already the signs do not point to big increases next year.
Vasyutin said farmers, afraid of unseasonably warm, dry weather that has lasted into November across Russia's grain belt, had sown 1.2 million fewer hectares, or around 14.5 million hectares, to winter grains for harvesting in 1997.
""Crops are in a satisfactory condition, but moisture levels are not adequate,"" he said, adding government officials had targeted a 1997 harvest of at least 70 million tonnes.""
Winter wheat accounts for about 15 percent of Russian wheat output and can crucially tip the balance.
""Russians want to eat meat -- but this desire has to be preceeded by very serious structural changes in agriculture,"" Yukish said. ""Russia will be a big feed grains importer for quite a while -- of that I am quite sure.""
-- Moscow Newsroom, +7095 941 8520
",28
"The world's biggest aluminium smelter, Russia's Bratsk plant, opposes any output-cutting schemes and wants to boost production and to compete better on world markets, a senior company official said on Thursday.
""Bratsk is an inveterate supporter of market-economy principles and not of schemes that violate such principles or of anti-monopoly laws,"" said Yuri Shlaifshtein, a Bratsk board member based in London who conducts corporate strategy and watches London Metal Exchange prices.
""Each company should choose the strategy best suiting it.""
AOOT Bratsky Aluminievy Zavod (BrAZ), based in southern Siberia close to plentiful hydroelectric power, has already increased output of A7 higher-grade material to 69 percent of total production from 30 percent.
Shlaifshtein declined to provide production figures but said competitiveness abroad and at home were essential to Bratsk's long-term strategy.
An independent metals source who asked not to be named said Bratsk produced 62,800 tonnes of primary aluminium in October after 61,500 tonnes in September and 64,500 tonnes in August.
Bratsk's costs, already some of the lowest among Russian aluminium producers, are an average $1,250 per tonne of aluminium produced and transported to Rotterdam via St Petersburg, said Boris Arlyuk of the Alumconsult consultancy.
""Their production is pretty profitable,"" he said.
But Shlaifshtein said Bratsk was seeking to streamline costs even further and that a new, tough attitude to debtors by Russian tax officials could put flagging competitors in the European part of Russia out of business.
""Each factory should improve its economic situation and cost factors in order to be competitive on the market,"" he said.
Bratsk does not like to talk about a recently-ended global output-cutting deal which required Russian producers to cut back production to boost sagging world prices.
World prices are again flagging --- but Shlaifshtein said that this time, cutting output was not an option.
""The volume of output at the plant should change only on the basis of one's own strategic interests, of the overall economic situation and of the market situtaion,"" Shlaifshtein said.
He said it made economic sense for the plant to use its capacity, but gave no further details.
Bratsk, Russia's flagship aluminium smelter, wants to top its Soviet-era record output of 857,000 tonnes a year after 772,500 tonnes in 1995.
Its total capacity is at least 820,000 tonnes and possibly one million tonnes, according to Western industry sources.
Bratsk had already closed a unit for technological and environmental reasons by the time Russia, Canada, Australia, Norway, the United States and the European Union signed a two-year global output-cutting memorandum of understanding in March 1994. The deal expired this spring.
Bratsk produces most of its metal under tolling arrangements with London-based shareholder Trans-World Group, which has at least a 50 percent stake in the plant. --Moscow Newsroom, +7095 941 8520
",28
"Russia's Norilsk Nickel metals group, a key supplier to world markets, said on Tuesday it was struggling with a shaky financial future despite keeping output steady at its top plant.
""We are undoubtedly in a state of financial crisis,"" said Viktor Feldman, deputy economics director at the Norilsk group.
Feldman singled out the high cost of maintaining social services in the inhospitable Far North of Russia where many of its leading plants are based. ""Our biggest woe is supporting the social sphere, a sphere which, I might add, the government should be supporting,"" he said.
A senior official at the Norilsk combine, the flagship plant of the RAO Norilsk Nickel group, said the facility's output had gone according to plan, with 1996 nickel production at 100,000 tonnes and forecast flat in 1997.
Norilsk is the world's second largest producer of refined nickel, a principal component in stainless steel, and also accounts for about 45 percent of world platinum and palladium production, according to metals analysts.
But First Deputy Prime Minister Vladimir Potanin was quoted by Interfax news agency on Tuesday as saying the plant might have to issue stock to pay off what the agency said was its 1.7 trillion rouble ($300 million) in debts or face bankruptcy.
Potanin is the former head of Uneximbank, the big Russian commercial bank that controls a 38 percent state-owned stake in Norilsk from a 1995 government shares-for-loans auction.
""We are constantly improving Norilsk's financial situation,"" said Alexei Parshikov, director of Interrosimpex, the powerful Russian group that now handles nearly all of Norilsk's exports and is trying to streamline trading operations to boost profits.
""I wouldn't use the word crisis to describe us, because crisis is when production stops, and that is not happening. We are producing according to plan.""
Norilsk officials have for the first time in years declined to provide immediate total group production results for 1996 and 1997 forecasts.
Uneximbank press relations director Yuri Oleinikov said the group had slightly overfulfilled its plan to boost nickel output by three percent and copper output by six percent in 1996, but gave no absolute figures.
The group's 1995 nickel output was 180,100 tonnes, while its refined copper output was 338,700 tonnes.
About one third of Norilsk's profits go to supporting social services in the expensive and vastly remote Far North, where four of the group's six key enterprises, including the flagship combine, are based.
""We want 1997 to be the year we stabilise, and we are doing a lot to make sure that this happens,"" Feldman said. ""But my position does not permit me to say this actually will happen.""
Potanin said Norilsk, if it did not agree to a share issue to raise capital, would be put in the hands of a special tax commission which could institute liquidation proceedings.
Oleinikov said he did not think a share issue would solve Norilsk's cash problems and called on the government to understand the logistics of producing metal in a frozen, inhospitable section of the globe.
""Our sector should have a strong state role because it is a core industry -- it supports people and, through its exports, the federal budget,"" Feldman said. ""Production will undoubtedly continue normally -- we take a lot of measures to ensure that.
Norilsk ordinary shares had fallen 8.95 percent to $6.00 at 4.26 p.m.(1226 GMT) on the Russian Trading System.
""The state should understand that to demand too much is to cut into production,"" Oleinikov said. ""They will not want to kill the goose that lays the golden egg.""
--Moscow Newsroom, +7095 941 8520 ($1 = 5,597 roubles)
",28
"Russia's oil industry earned higher export revenues from booming world prices in 1996 but has started 1997 increasingly worried about the slow pace of recovery in demand at home, energy analysts said on Wednesday.
Domestic producers, taking advantage of international oil prices which soared about 30 percent in 1996 to their highest in six years, jammed crude oil export outlets last year.
But analysts said that while companies would continue to try to sell as much as possible abroad, higher demand at home -- Russian oil's main future customer -- was not yet in sight.
Eugene Khartukov of Moscow's independent World Energy Analysis and Forecasting Group and the International Centre for Petroleum Business Studies said 1997 could show either a recovery in output or yet another slide.
""It's possible we will see stabilisation and possibly even some growth but it all depends on what the government does with taxes and the production-sharing law,"" he said.
Russian crude oil output in 1997 could rise to 6.3 million barrels per day (bpd) from the 1996 estimate of 6.1 million bpd and would probably not dip below that level, he added.
That could mean a significant turnaround for the world's third-largest oil producer, which has seen output nearly halved since its 1987 Soviet-era peak of 11.5 million bpd and is still struggling to slow the pace of decline.
The Fuel and Energy Ministry, which has not finished compiling 1996 results, said in December that crude oil and gas condensate output over January-November 1996 had slipped two percent to 275.9 million tonnes.
Exports of about one third of Russia's output jumped 4.7 percent year-on-year over the same period to 92.8 million tonnes, it said.
But producers used the extra cash to pay off debts and wage arrears, not to rehabilitate wells or drill new ones.
Deputy Fuel and Energy Minister Garipov said in December that Russia conducted no exploration for new oilfields last year for the first time since World War Two.
""We believe that the general trend is stabilisation but that it will differ from company to company,"" said Maxim Shashenkov, a Russia analyst at Merrill Lynch in London.
""But further growth is constrained by limits in domestic demand and export capacities,"" he said, adding that higher export earnings had not underwritten the giant cost of structural transformation needed in the Russian industry.
Russian wholesale producer prices for crude oil are a mere 50-55 percent of world levels and reach only 70-75 percent after tariffs and transport costs are tacked on.
Khartukov said crude oil exports would at least equal 1996's 2.5 million bpd this year and possibly hit 2.7 million and refinery throughput would be flat at around 3.4 million bpd.
But he also said Moscow's political and economic uncertainties could wreak havoc in the industry, adding: ""It's a big crazy mixture of unpredictable things.""
",28
"Russia is finding the return of competitive Iraqi oil to world markets a bitter pill to swallow, but may use the occasion to revamp further its own marketing strategies to compete better, energy analysts said on Wednesday.
Russian Urals sour crude is similar in quality and composition to Iraq's Kirkuk blend and was Iraq's main competitor in the Mediterranean before Gulf War sanctions shut Baghdad out of the market.
""If I was a Russian and had a lot of crude to sell, I'd think about pricing competitively,"" said Sarah Anderson of Energy Security Analysis Inc in Washington.
""When you talk to Med refiners, they say they have a long history of buying Iraqi crude.""
Sour Urals differentials in the Mediterranean -- pressured this week by the first Iraqi exports in six years -- have already begun to tumble.
""In an environment where Russian oil producers were really only making profits on the (world) price rise since July, Russian gains could be effectively wiped with the appearance of Iraqi oil,"" said Gavin Rankin, research head at Troika-Dialog.
Three Russian oil companies have signed contracts with Iraq to buy 1.3 million tonnes of Iraqi oil and are awaiting U.N. approval.
All three firms -- Zarubezhneft, NK LUKoil and Nafta-Moskva -- declined to discuss how they would market the Iraqi barrels.
Some analysts saw more than Russia's Soviet-era political associations with Baghdad and higher world prices behind the Russians' interest in signing the contracts.
""One of the reasons the Russians were keen to get involved was to get some transparent pricing for their own oil,"" said analyst James Bunch of Renaissance Capital.
Urals, a medium-gravity sour oil with a 1.4 percent sulphur content, comprises the bulk of Russia's exports into the Mediterranean.
Analysts said the renewed competition as Baghdad seeks to recapture customers it lost to Russia and other producing countries could spur changes in the way Russia sells oil abroad.
""Their marketing strategies have changed in recent years -- it's no longer a free-for-all,"" said Peter Houlder, managing director of CentreInvest Group consultancy in Moscow.
""Increasingly companies are setting up their own marketing divisions in a bid to cut out the middle man and make more money"" - a trend he said Iraqi competition could fuel further.
Stephen O'Sullivan, associate oil and gas director at MC Securities in London, said producers might seek to move more oil out of the Baltics than out of Russia's Black Sea outlet of Novorossiisk to avoid price pressures from Iraqi supplies.
Russia exports about one third of its 6.2 million barrels per day output, with a third of the total leaving Novorossiisk, mostly for Mediterranean markets.
One analyst said Russian oil companies' marketing outfits abroad had already become ""surprisingly sophisticated"".
""They are very aggressive -- but I don't think they're making Shell nervous that they have these great trading operations.""
Under the U.N. deal Iraq can export $2 billion of its oil over six months to pay for food and medicine after six years of crippling international sanctions following its invasion of Kuwait.
The strictly-monitored scheme allows Baghdad to export only from the Turkish Mediterranean port of Ceyhan and Mina al-Bakr through U.N.-approved contracts.
",28
"Russia's former fuel and energy minister, Yuri Shafranik, tried but failed to create a mega oil corporation by merging four privatised companies, energy sources familiar with the ill-fated proposal said on Thursday.
They said Shafranik's proposal, first aired this summer, to merge the Tyumen Oil Company (Tyumenskaya Neftyanaya Kompaniya), ONAKO (the Orenburg Oil Company, or Orenburgskaya Neftyanaya Kompaniya)  ORNB.RTS, the Eastern Oil Company (Vostochnaya Nefytanaya Kompniya) and Slavneft, found no government support.
Sources said Shafranik, in search of a consolation prize, was now trying to create a financial-industrial group uniting some of the firms he wanted to merge and second-tier players.
Had Shafranik succeeded with his merger plans, he would have created Russia's largest oil producer, a super company whose units collectively produced over 89 million tonnes in 1995 -- far above current leader LUKoil, which produced over 57 million tonnes last year.
""Shafranik had this idea and was excited about it for a while, but then it ran into big problems with government acceptance,"" said one source who asked not be named.
The company, had it been created, would have accounted for nearly one third of Russia's total 1995 oil output of around 305 million tonnes. Russia is the world's third largest oil producer.
The sources said the proposed financial industrial group would consist of the Tyumen Oil Company, SIBUR (the Siberian- Urals Oil and Gas Chemicals Company, or Sibirsko-Uralskaya Neftegazokhimicheskaya Kompaniya), the Eastern Oil Company, Slavneft (a joint venture between Russia's Megionneftegaz MFGS.RTS and Belarus) and the Eastern-Siberian Oil and Gas Company (Vostochno-Sibirskaya Neftegazovaya Kompaniya).
SIBUR and Eastern-Siberian are two independents that do not have crude oil production units.
Sergei Verin, secretary to the board of directors of the Tyumen Oil Company, where Shafranik is chairman of the board, said only that the proposed financial-industrial group would undertake ""joint projects"".
Shafranik had hinted at a news conference in July, when he was still energy minister, that four companies would merge, but refused to say which ones.
""This is a big secret, and I'm not going to name the oil companies,"" he said. ""Somebody will be against it, very against it, because this will be a powerful competitor.""
Fuel and Energy Ministry spokesmen declined to comment on the failed proposal, and earlier prohibited a correspondent from raising the issue with the new minister, Pyotr Rodionov, as one condition of receiving an interview.
""Why don't you ask Shafranik?"" Rodionov said on Thursday after a cabinet meeting, when asked about the failed merger.
Verin said only that a merger was not now being discussed and that the Tyumen Oil Company was the motor behind the financial-industrial group talks.
""Our goal is to undertake joint projects that a single company itself could not take on alone,"" Verin said, adding that all sides were in active negotiations on a development strategy.
Shafranik left the Fuel and Energy Ministry in August for the Tyumen Oil Company. It is based in Siberia's oil-rich Tyumen region, where Shafranik was administration head before taking his ministry post in 1993.
Shafranik saw Russia's state-run, monolithic oil industry transformed into 13 privatised companies, most of them vertically integrated, while he was minister and watched many ministry specialists quit for lucrative jobs at the new firms.
The sources did not say who in the government had rejected Shafranik's proposal. The shake-up of the oil industry was masterminded by Prime Minister Viktor Chernomyrdin and President Boris Yeltsin.
",28
"Russia is trying to make things tougher for exporters of non-ferrous scrap metals, but impending tighter regulations will not keep Russian supplies from finding Western markets, industry sources said on Wednesday.
""There was a big once-and-for-all surge in scrap exports in the early stages of the break-up of the Soviet Union, but that's now over,"" said copper specialist Kevin Norrish of CRU International in London.
""The domestic market is tighter than it used to be, so there is a lot less going to Western Europe.""
But he could not see proposed licensing of exporters hitting sales abroad, and other sources said Russia would still find European markets more attractive than the domestic one.
Moscow wants to license the export of scrap ferrous and non-ferrous metals to help provide steady supplies to domestic metals enterprises for processing and then export.
Russian news agencies said on Wednesday a decree on licensing could be signed by the end of this month.
The Industry Ministry in September sought to limit scrap exports to two million tonnes a year, but compromised by agreeing to a plan to license exporters.
""Maybe this scrap will be processed in Russia and then exported -- but the fact is that this material costs more abroad than it does in Russia,"" said a senior source at Tsvetmetexport, the former state metals export agency, who declined to be named.
Other industry sources said domestic metals firms were short of funds and that barter operations -- the means by which they would buy scrap -- were increasingly unattractive.
Nearly one third of Russian copper is produced from scrap, and officials are seeking ways to ensure steady supplies.
""There's no market for people to supply scrap to domestic enterprises and for them to then export it and get paid,"" said Sergei Bagrov, a non-ferrous export specialist at Promstalsyryo.
""Licensing will increase export of metal through all channels.""
He said enterprises had already found ways to find the raw materials they needed.
Russian scrap copper exports were 54,000 tonnes in the first half of 1996, and Interfax news agency, which reported the data in September, said this was up 70 percent on total 1995 exports.
Western traders have said scrap availability on Western markets is often spotty and even unofficial estimates on scrap non-ferrous exports are hard to come by.
But two trends appear certain.
The exodus of large amounts of scrap copper, aluminium, nickel, steel, lead and iron that took place after the 1991 collapse of the Soviet Union is over, and Russia's scrap metal trade is consolidating as bigger, richer domestic and foreign players move in.
In the immediate post-Soviet years much of the scrap was smuggled from military bases and trade was so brisk that Russian industry sources described the Baltics as the world's largest non-ferrous metals exporters -- even though the three countries produce virtually no metals.
The Russian press is no longer full of tales of smugglers riding the train to the Baltics with copper cable in backpacks.
But the market is still one of the wildest and least transparent in Russia and dealers said licensing may not help.
""Russia is no longer just bleeding metal,"" Bagrov said. ""(But) I would not say the market has become civilised.""
Official export statistics, most of which do not include the scrap trade, were unreliable, he added.
",28
"Russia's second-generation, billion-dollar foreign oil projects are finding out that close ties to top government figures, delicate talks with new partners and careful handling of oil-rich, ambitious regions are vital.
Western oil companies eyeing Arctic reserves need close Kremlin relationships and savvy negotiating skills more than ever, now that Moscow has a cooler, tougher attitude toward Western participation in oil production-sharing deals.
Support from President Boris Yeltsin, who oversaw the transformation of the oil sector into privatised companies and who underwent heart surgery on Tuesday, is crucial.
So is a willingness to get out the pencils and redo budgets after talks with increasingly demanding Russian partners.
The factors -- some old, some new --  will decide whether deals stay on the drawing board or get off the ground.
In one of Russia's most prominent projects, Amoco Corp of the United States and Russian oil giant YUKOS are in tortuous talks that, analysts said, revolve around how to accomodate YUKOS shareholder Bank Menatep.
""Any time you add a new player to the game, you need to re-establish what the ground rules are,"" said Dan Westbrook, senior vice-president and resident manager of Amoco Eurasia Petroleum Company, in a recent telephone interview.
Leading commercial bank Menatep owns a 33 percent stake in YUKOS, Russia's second largest oil producer, and controls a further 45 percent stake formally owned by the government.
The two companies plan to spend $50 billion or so to tap the huge Priobsk oil field, which could hold 610 million recoverable tonnes, in Siberia's Tyumen region.
Russia's first-generation foreign oil deals, all off the Russian Far Eastern island of Sakhalin, took forever to hammer out but largely gave Western partners the leading equity stakes they demanded as insurance for the political risk of investing.
Now, years later, Moscow officials say quietly that Russia should have at least equal status, if not the upper hand.
That makes Kremlin and Fuel and Energy Ministry patronage as important as ever to getting deals to the production stage.
Succesful implementation of projects is still heavily dependent on people at the top, like Yeltsin -- thus showing the enduring power of personalities to moving oil deals forward in Russia, in spite of Moscow's moves to make laws, not people, the framework for investments.
The Timan-Pechora Company, or TPC, which groups Texaco, Amoco, Exxon, Norsk Hydro AS Russia's Rosneft and an exploration outfit in a $40 billion project in the Timan-Pechora basin, saw negotiations temporarily halt over the unexpected death of a key Russian negotiating partner.
TPC President Tom Hazen said he was confident talks to tap up to 360 million tonnes of oil would continue with a special Russian delegation after the Fuel and Energy Ministry selects a replacement for deceased delegation leader Vadim Dvurechensky, who was also a deputy Fuel and Energy minister.
""We are hopeful to continue our negotiations with the special delegation,"" Hazen said.
""There are very few remaining outstanding issues. I certainly wouldn't draw any conclusions that there have been a lack of negotiations or a termination of discussions.""
Both Westbrook and Hazen declined to say when their projects could be finalised.
Western oil companies have a new worry -- the growing demands by oil-rich regions for a bigger cut in deals.
Interfax news agency earlier this week quoted the chairman of the State Duma lower parliament house's Committee on Natural Resources as saying that the Nenets regional Duma had recommended the government break off talks with TPC over regional tax issues.
-- Moscow Newsroom, +7095 941 8520
",28
"Russia's Western oil joint ventures are finding it increasingly difficult to export their output in the amounts needed to stay profitable as Moscow seeks to give domestic producers more pipeline space.
Joint ventures (JVs) produce only a trickle of Russia's crude oil -- but they need to export most, if not all, of their output to make money on their investments.
But Russian energy officials, who once courted Western oil majors and independents with promises of tax breaks and priority access to crowded pipelines, are rethinking the terms on which they want foreign oil firms to work in Russia.
""The pipelines are fairly close to capacity, so any increase (in exports) will be at somebody's expense, and that will be the JVs,"" said Julian Leigh of the Centre for Global Energy Studies in London in a recent interview.
Russia's tightening of access to its export pipelines is a barometer of how willing Moscow will be in coming years to let big-ticket foreign investors with planned, multi-billion dollar production-sharing contracts export the volumes they need.
Most of those projects will require new pipelines -- but in the initial stages, they will probably use existing pipelines.
""It's becoming more and more difficult,"" said Igor Ishkayev, Moscow-based representative for the Tatex joint venture, whose foreign partner is Global Natural Resources of the United States' unit Texneft Inc.
""The big companies, like LUKoil, can send out as much as they want. Nobody cares about a little joint venture.""
About six joint ventures out of the 40 or so producing in Russia and exporting have the right to export 100 percent of their output until September 1997. Others enjoy tax breaks.
Most ventures in theory have priority access.
But in practice, they are often elbowed aside from month to month depending on world oil prices, the amount domestic producers want to export and government export programmes.
When asked about priority access for the ventures, a Transneft official dealing with exports, who declined to be identified, said:
""We don't distinguish between oil produced by our companies and oil produced by joint ventures.""
Transneft, the state oil pipeline monopoly, works with so-called designated coordinators -- Russia's large producers, who are often interested in increasing their own exports -- to allocate pipeline space.
""Access to Transneft pipelines is based on personal relationships with the Transneft people,"" said analyst Zarko Stefanovski of T Hoare & Co in London in a recent interview.
""Russian producers are going to increase the pressure to be given more pipeline capacity -- this will certainly be a problem in the future.""
Joint ventures accounted for 4.8 percent of total Russian output last year, or around 250,000 barrels per day (bpd), according to State Statistics Committee figures, up from four percent in 1994. But they account for about 10 percent of Russia's 2.0 million bpd exports.
""Priority access will hardly be continued next year, which will affect the operations of this joint venture very negatively,"" said Alexander Khrustalov, marketing specialist at KomiArcticOil, whose Western partner is British Gas Plc and which exports about 90 percent of its 25,000 bpd output.
Customs officials, who now make policy as well as implementing it, said in September that some prominent ventures could be liable for millions of dollars in taxes and fines for so-called ""excess"" exports outside their exemptions.
""The issue is not necessarily the length of the tax exemption, it's the intent behind it,"" said one top Western oil executive who asked not to be named.
",28
"Russia is flirting with danger in considering a freeze on domestic energy prices, a move which could prolong the oil sector's recovery and in turn slow economic reforms, energy analysts said on Wednesday.
Fuel and Energy Minister Pyotr Rodionov has called for lower oil, gas and electricity prices to help domestic industry.
Prime Minister Viktor Chernomyrdin, taking up the baton, said on Tuesday that President Boris Yeltsin could soon sign a decree lowering energy prices and freezing others, but made clear he was talking about gas and electricity.
Energy analysts said talk of frozen prices was ominous for the Russian oil industry -- the country's biggest export earner and the motor of the domestic economy -- just as the now privatised sector shows signs of recovering from a long slump.
""We could see a return to the situation we saw over the past 10 years, when low reinvestment rates led to the decline of the oil industry to its present state,"" said Vadim Voronin, an energy specialist at the World Bank's Moscow mission.
Price freezes would also annoy the International Monetary Fund, which wants domestic oil prices to match world levels and made industrial restructuring a condition of its $10 billion, three-year loan to Moscow.
""(A price freeze) would slow down some of the reforms and progress we've made, especially in liberalising oil prices,"" said James Bunch, oil analyst at Renaissance Capital.
Rodionov's predecessor, Yuri Shafranik, had said domestic oil prices should be capped at 75 percent of world levels -- their current level.
Domestic natural gas prices are still a fraction of their real market cost, while electricity is also heavily subsidised.
Artificially low prices inhibit adequate cash-flows, which in turn lowers money available for oil companies to invest, maintain existing wells and drill new ones.
Subsidised prices and low reinvestment were the key factor behind the collapse of the Russian oil industry that began in 1984 and has lasted to this day.
Energy waste in the Soviet era was rife, and Russia's new profit-oriented oil companies have little desire to return to the days of heavily subsidised fuel. In Soviet times, a glass of carbonated water cost more than a litre of gasoline.
With oil production 47 percent below Russia's peak 1987 level of 569.5 million tonnes (11.48 million barrels per day) and two-thirds of output staying in Russia, a price freeze would leave oil companies short of cash just as they need it most.
Russia is the world's third biggest oil producer after Saudi Arabia and the United States, and Moscow wants cheap oil to fuel domestic factories.
Industrial output, already half 1992 levels, fell five percent in January-July after a three percent decline in the first seven months of 1995.
The fact that oil is cheap means the export market is more attractive than the domestic one, but producers are unable to sell more abroad because pipeline capacities are stretched.
The government has promised tax breaks for oil companies, but instead is moving to squeeze them for more cash and force them to deliver more supplies to domestic enterprises.
Peter Houlder, managing director of CentreInvest consultancy in Moscow, said artificially low domestic energy prices would be ""extremely damaging"". ""Companies are making their profit on the small amount of oil they export -- domestic sales now at best break even,"" he said.
",28
"Russian diamond giant Almazy- Rossii Sakha (ARS) said on Wednesday officials were battling for control over Russia's lucrative gem sector but a forthcoming deal with De Beers was in sight.
ARS president Vyacheslav Shtyrov told a news conference that a long-delayed trade agreement with the South African gem giant could be signed by December.
But he said Russian Prime Minister Viktor Chernomyrdin, who could have a chance to sign the deal as soon as this week, would put it off until next month because of a government probe of ARS's finances -- a probe Shtyrov says may be part of manoevres among government officials for influence over the group.
The investigation and struggle for control over ARS come as the diamond company seeks more scope to export independently of De Beers. ARS supplies a quarter of De Beers output, nearly all Russia's diamonds and is Russia's sole authorised exporter.
Shtyrov said that under the trade agreement with De Beers, based on a memorandum initialled in February, ARS would have the right to export $180 million of gems a year independent of De Beers, or 5.8 percent of ARS's $1.38 billion in sales last year.
That could yield a rich trove of influence and power for whichever government ministries succeed in gaining the upper hand in controlling those sales.
ARS, which gave London investment bank NatWest Markets a mandate in July to raise $500 million in capital, wants to increase exploration and mining operations -- giving officials more incentive to grapple for control of the state-owned firm.
""We're very seriously worried about the recent accusations, which come at, and I say this in quotation marks, at an appropriate moment,"" said Mikhail Nikolayev, president of the vast Sakha-Yakutia region in Siberia where ARS is based.
He told the news conference he was referring to the impending De Beers deal and to ARS's plan to raise funds abroad.
The probe, which follows charges from tax officials and the prosecutor-general's office that surfaced last week, revolve around alleged unpaid taxes and breaches of hard currency regulations for which fines could total $379 million.
Nikolayev said ARS had no tax arrears to the federal budget, and that Finance Ministry investigations into ARS finances turned up so-called insufficiencies but no major problems.
""They (the charges) are extremely debatable,"" said Shtyrov, adding that government questions over how to value raw gems supplied to ARS when the company was set up in 1991 were questions for accountants, not for lawyers.
He said ARS would defend itself in Russia's courts if it had to and restore its reputation with partners.
""If the result of all of this is that we lose our investment projects, then we will consider that Russia has lost -- and we will just eat bread and butter,"" he said.
Shtyrov, who is also vice-president of Sakha-Yakutia, said industry officials were struggling for influence over ARS.
Shtyrov said Yevgeny Bychkov, former head of the recently disbanded State Committee for Precious Metals and Stones, or Komdragmet, was still an influential figure in the industry.
Komdragment was broken up by presidential decree in August and the Finance Ministry has assumed its functions.
Shtyrov said Russia's diamond sector would see stability, in spite of plans by some officials to give domestic cutters and polishers a greater cut of gem output.
""There are always rumours of a major shake-up and reorganisation of the Russian diamond industry, but they are not founded,"" he said.
",28
"Russia's diamonds could face a rocky future with tax officials seeking a bigger cut from rough gem exports, but industry sources said on Wednesday they hoped a deal with South Africa's De Beers would proceed.
In the latest shock to hit the Russian diamond sector and relations with De Beers Consolidated Mines Ltd, the prosecutor general's office on Tuesday accused Almazy Rossii-Sakha (ARS), Russia's largest diamond producer, of financial irregularities.
""Maybe it will affect the (De Beers) agreement and maybe it won't -- my personal opinion is that it won't and an agreement will soon be signed,"" said Pavel Kovylin, first deputy director of ARS's Central Selling Organisation, which handles exports.
The export body has the same name as De Beers's own London-based Central Selling Organisation.
Diamonds could provide a windfall for the Russian tax authorities. ARS is the world's second largest diamond producer and its sales of uncut gems rose six percent in 1995 to $1.38 billion.
ARS, which mines nearly all of Russia's diamonds and is its sole official exporter, reached a preliminary agreement with De Beers' to export rough gems under a memorandum in February.
But the text of the agreement, undergoing review in various ministries, is awaiting government approval.
""The final agreement must correspond to the memorandum, since it was signed by the government and we are obliged to fulfil it,"" Kovylin said.
The prosecutor general's press service, which told Russian news agencies on Tuesday of the investigation, said it was investigating ARS' finances but stressed no formal criminal charges had been filed.
""At this point, there are no indictments,"" said press spokesman Natalya Vishnikova, declining to comment on whether formal charges would be pressed. ""We are investigating and the matter has been passed to the Federal Tax Inspectorate.""
The investigations revolve around alleged unpaid taxes and breaches of hard currency regulations for which fines could total $379 million, according to Russian news agencies. The probe has generated further uncertainty over the relationship between Russia and De Beers.
""There's a whole lot of political infighting going on between Moscow and Yakutia,"" said analyst Roger Chaplin at T Hoare & Co in London, referring to the main diamond-producing region in Siberia where ARS is based.
""It could possibly affect the agreement with De Beers -- but then again, it could be somebody in Moscow trying to throw a spanner into the works.""
The diamond world, recovering from the decision of Australian producer Argyle to say goodbye to De Beers, is impatiently waiting for Russia to finalise its relationship with the South African cartel.
Russia has been accused in the past of leaking hundreds of millions of dollars' worth of diamonds on to world markets outside its previous deal with De Beers. The new deal, once approved by Moscow officials, could give De Beers greater control of Russian output.
But it may not give greater comfort to Russia's increasingly ambitious mineral-rich regions -- especially to Yakutia, which wants a greater cut from exports of rough gems.
Russia-De Beers relations were first hit by uncertainty when Russia's Komdragmet, the precious metals and gems agency which participated in talks, was shut down by presidential decree in August.
Under the February memorandum, which replaced an expired five-year deal, De Beers would take about 85 percent of Russian rough diamonds. That is less than 95 percent under the previous deal, leaving Russia more for its own nascent cutting and polishing industry.
",28
"Russia's diamond industry, bogged down by structural chaos and unauthorised exports, cast a shadow over world gem markets on Wednesday by saying that prospects for a trade deal with De Beers by 1997 looked grim.
But a senior spokesman for Russia's diamond company Almazy Rossii-Sakha, or ARS, which is De Beers' negotiating partner and Russia's near-monopoly producer, said Moscow would eventually negotiate a deal and quitting the cartel was not an option.
De Beers, frustrated over Moscow's lack of response on a new trade deal and irritated by gem exports outside an interim scheme, gave Russia until the end of 1996 to sign a trade deal and said it would otherwise terminate the interim arrangement.
ARS spokesman Valentin Logunov, asked if the government would meet the deadline, said, ""You should ask the government, especially the finance minister. This is his question --- and it's hard to say whether he'll find time.""
Russia is a key player in the world diamond trade, supplying De Beers with about 20 percent of its total rough gem sales. De Beers accounts for 75 percent of global rough diamond sales.
But the two sides have gone through 1996 with no formal trade agreement and have functioned via a February memorandum which De Beers said Russia had violated with secret gem exports.
""We have been extremely patient and have respected Russia's current interests,"" Raymond Clark, general director of De Beers' Moscow representation, told a news conference.
""Moreover we would have probably continued (with the interim deal) had the contract been respected,"" he said, citing what he called ""major leakages"" of Russian gems onto world markets.
He declined to say how large the leaks were, adding, ""We only know that the total of the leaks is substantial.""
Logunov slammed the assertion, which is widely supported by international diamond traders.
""Let De Beers figure it out themselves -- if they can't say concretely where they're from, how do they know it's happening?
""Of course this alarming and of course we want an agreement signed. Therefore, De Beers should not push worried colleagues into a corner.""
He said the Sakha republic -- where ARS is based and which has its own draft trade deal with De Beers -- had been buying up to one-fourth of ARS output, last year valued at $1.38 billion, over the past couple of years.
Clark said he did not know where the leaks were coming from but said De Beers was frustrated with the government's lack of response to a draft trade agreement presented in October.
""From that date, we have been continually knocking on their door to get some kind of response,"" he said. ""We have had not one official statement made from the government.""
Finance Minister Alexander Livshits told Russian news agencies on Tuesday that Moscow wanted to rework the agreement before signing it.
Logunov said it was ARS's task to guide the October draft deal through the government.
""We are doing this, maybe not as actively as we should -- but not because we are not interested in the agreement, but because of the situation on the territory where several processes are taking place.""
He was referring to presidential elections set for December 24 in Sakha, which is also known as Yakutia.
""There are a lot of opponents to the company that have the right to sell diamonds, and this of course doesn't make things easier for De Beers,"" Logunov said.
But he said: ""These two companies cannot part -- otherwise, it's chaos. There would be no rules to the game.""
",28
"Russia's state oil pipeline firm Transneft on Tuesday cast a shadow of doubt over the go-ahead for a proposed new pipeline across Russia when it said it had demanded a stronger role in the strategic deal.
Transneft spokesman Ravil Polyanin said the monopoly, which owns and operates Russia's vast, existing oil pipeline network, was not content to play the role of daily operator and wanted an equity stake in the important project.
""We want to be a shareholder,"" he said. ""But the oil firms have not valued our technical expertise highly enough.""
Companies holding a 50 percent stake in the Caspian Pipeline Consortium (CPC) that will build the proposed link are Chevron, Russian LUKoil, Mobil Corp , Rosneft, Oman Oil Company, British Gas Plc, Agip SpA of Italy, Kazakh Munaigaz and Oryx Energy Company.
Kazakhstan, Oman and Russia hold the remaining 50 percent.
A CPC official, speaking after a meeting last week in Moscow to try to push a long-delayed restructuring agreement ahead, said the deal would be signed next month.
But the consortium has not made any formal announcements on what was achieved and shareholders declined to give details.
The CPC consortium, in one of the former Soviet Union's most ambitious and important energy projects, wants to build a $1.5 billion pipeline from Kazakhstan's vast Tengiz oilfield through war-torn Chechnya to Russia's Black Sea port of Novorossiisk.
But a cloak of secrecy around last week's meeting raised questions over whether the group had overcome hurdles that have dogged it in the past, including prickly issues of Transneft's participation and of corporate and international financing.
""The transition committee successfully completed negotiations on restructuring and the final agreement will be signed in Moscow on December 6,"" said the CPC official, who added that he was not allowed to provide any details.
But several shareholders said the deadline was optimistic and stumbling blocks remained. ""The subject is extremely sensitive and I cannot say one single word about CPC,"" said a Western oil executive whose company is a CPC shareholder.
A second similar Western source said: ""I'm reluctant to say the deal is going to be signed on x or y date.""
Polyanin said it was premature to say all outstanding problems had been resolved, adding that Transneft would seek to persuade consortium members to reallocate equity stakes.
He said Transneft was lobbying Deputy Fuel and Energy Minister Anatoly Shatalov to push CPC to give Transneft a share.
Transneft has a big strategic card to play, since it will operate the pipeline and help set and collect transit fees that will fill its coffers. If the fees are too high, it will throw a wrench into the economics of the deal for the Western partners.
CPC's main customers are Chevron and Mobil. Desperate to ship more oil out of their Tengiz project, they are already sending crude to Western markets via unconventional routes through Azerbaijan, Georgia and Finland on trains and barges.
CPC sources said Transneft's role and Russian taxes were the main issues preventing a final agreement for the pipeline which should eventually carry up to 70 million tonnes of oil a year (1.4 million barrels per day).
They also said it was a barometer of the extent to which Caspian onshore and offshore oil and pipeline projects will be able to get off the ground, and of Russia's willingness to see oil-rich former Soviet republics develop their own energy deals.
",28
"Russia's aluminium sector will consolidate more in 1997 as domestic smelters, perplexed by limp world prices, seek to rationalise costs, a top aluminium official said on Friday.
Igor Prokopov, director of Kontsern Alyuminiy, the producers' group uniting Russia's aluminium industry, said in an interview that domestic smelters were worried about low metals prices, and he blamed what he said was speculation.
""We have been concerned by the sharp fall in prices, which is why we set up the statistical body with other major producing nations to exchange information,"" he said.
""But our conclusion is that the market situation is not a catastrophe. We are not going to stop output and will continue next year with at least our 1996 volumes.""
He said Russian primary aluminium output this year would be 2.79 million tonnes, a 1.5 percent increase on 1995's level, and 1997 production could rise by 1.5 to 2.0 percent.
The group sees Russia's 1996 primary aluminium exports at 2.37 million tonnes compared with 2.11 million in 1995. Prokopov declined to forecast 1997 exports.
Kontsern Alyuminiy said exports of primary aluminium, alloys and semi-fabricated items over January-October had already risen seven percent from year-ago levels.
The State Customs Committee puts the rise at 16 percent.
Prokopov said he was confused by low London Metal Exchange prices and said he saw no basis for weak prices in view of supply and demand patterns.
""I can't prove there's speculation going on, but I look at the charts and these are what the facts lead me to think.""
""Some noise has appeared in the West that Russia has cranked things up, which is not really true. There's no reason for the fall in prices,"" he said, citing lower world stocks.
But he said Russia's survival as an aluminium power was not in question, since the Siberian smelters, accounting for 90 percent of output, had captive, plentiful sources of hydroelectricity, a main cost in production.
Depressed prices would be the motor for Russian smelters to consolidate operations as they completed their transition from state-run enterprises to market-nimble corporations.
""The Russian aluminium industry should be consolidated and act as a large transnational company like Alcoa or Pechiney,"" Prokopov said. ""We won't be like Gazprom,"" he said, referring to the natural gas monopoly. ""But there will be three or four teams that will act on world markets.""
The process has already started. Siberian Aluminium, a so-called financial industrial group, includes Bratsk -- the world's biggest smelter -- and Sayansk, Trans-World Group, Zalogbank, and Kazakhstan's Pavlodar alumina plant.
The Krasnoyarsk smelter is in a group with the Achinsk alumina plant and wants to bring Ukraine's Nikolayevskiy alumina plant on board.
""Integration could have a positive affect,"" Prokopov said. ""It will lead to expense rationalisation, lower costs and consolidated balances. Smelters are in a satisfactory state, but we want better -- we want more resources to modernise them.""
-- Moscow Newsroom, +7095 941 8520
",28
"Hong Kong's leader-in-waiting Tung Chee-hwa on Friday invited the territory's top official, Anson Chan, to meet him amid intense speculation over whether she might stay in her post after China takes over next year.
The two would meet over breakfast at Tung's villa on Hong Kong Island on Saturday morning, a government spokesman said. He did not say what they planned to discuss.
Chan, 56, is chief secretary and second-in-command to Governor Chris Patten, whom the 59-year-old Tung will succeed after the change of flag at midnight next June 30, bringing down the curtain on over 150 years of British colonial rule.
An opinion poll this month ranked Chan as the most popular political figure in Hong Kong with 73 percent of people saying they support her, well ahead of Tung himself, who scored a 65 percent approval rating.
Tung was selected by a China-controlled committee on December 11 to be Hong Kong's post colonial chief executive, the first Chinese leader in the territory's history.
With only 186 days left until the handover, Tung is moving quickly to assemble a cabinet and to hammer out his relationship with a provisional legislature that China created last week.
He has called an informal lunch meeting of the 60 legislature members next Monday, likely to discuss the scope of the body's lawmaking activities and possible candidates for speaker of the assembly, although no agenda has yet been set.
Chan was once touted as a possible candidate for the job that has fallen to Tung, but she bowed out from the race and declined to become an official candidate despite her popularity.
Many officials -- in Hong Kong, in Britain and in China -- respect Chan's administrative talent and consider the Tung-Chan ticket as a ""dream team"" scenario likely to promote Hong Kong's smooth transition to Chinese rule.
She has said she would like to see as many as possible of her policy secretaries -- equivalent to government ministers -- stay on, for the sake of stability in the civil service.
However, in the first sign of cracks in the upper echelon of the administration, one top official, Michael Leung, head of the Independent Commission Against Corruption, announced this week he would quit before the mid-1997 handover.
Local media speculated on Friday that Leung's move could be the first in an exodus of top officials unwilling to serve an administration under Beijing's thumb after Britain pulls out.
China has promised that Hong Kong can be a quasi-autonomous territory and keep its capitalist system for another 50 years, but many in the territory fear repressive communist-style rule.
On Friday, Hong Kong's Bar Association, which groups the territory's lawayers, said it had sent a 38-page report to China urging Beijing's communist rulers not to scrap Hong Kong's Bill of Rights.
China has signalled it will roll back the human rights law and a string of other laws and trappings of democracy after it resumes sovereignty.
",37
"Just months ago, shipping magnate Tung Chee-hwa was a retiring man who avoided the limelight, kept his political views secret, and seemed to steer an even keel between his loyalties to China and Britain.
But in a short time, he has emerged as the hot favourite to become Hong Kong's first post-colonial leader and evolved into a tough-talking conservative, loudly singing China's tune on key political issues, under the bright spotlight of the media.
The 59-year-old tycoon with hallmark spiky grey hair has been swapping his pinstripe suits for jeans and sportswear to traipse around local communities to show he not only walks among kings but also has the common touch.
Tung, 59, saw his fortunes almost dashed in the 1980s when the family company met ill winds, but Beijing helped bail him out with a syndicated loan, and now he is poised to be their man in Hong Kong.
On Wednesday, China's carefully screened Selection Committee will choose the chief executive to run Hong Kong after Britain hands its last important colony back to Beijing in mid-1997.
Tung is streets ahead of his rivals, having run away with 206 of the 400 votes in the first round of balloting.
Behind him are retired chief judge Yang Ti Liang, who scored 82, and businessman Peter Woo, who clocked up 54.
A poll last week for the first time made Tung the public's favourite -- 47 percent support versus Yang's 29 -- although the masses are excluded from voting for their future leader.
There is hardly a voice that does not pronounce Tung the predetermined winner. A pointed handshake from President Jiang Zemin in Beijing last January anointed Tung, most people think.
Since he declared his candidacy two months ago Tung has said he would legalise the Communist party, condemned the Democratic Party -- Hong Kong's largest -- for being anti-China, and warned foreign countries not to use Hong Kong to subvert China.
He also said anybody advocating independence for Taiwan or Tibet could not stay.
He has accused colonial Governor Chris Patten of trying to split Hong Kong, called for pro-China patriotism in the schools, and unveiled administrative polices stressing executive-led rule and a slower route to democracy.
Last week Tung rounded on those who use the term ""pro-China"" as a dirty word. ""We have to turn pro-China into a very positive definition. It is a good thing to love our country,"" he said.
""I find him more colonial than the colonial government,"" complained Democratic Party legislator Tsang Kin-shing.
Tung has vowed to give free rein to Hong Kong's capitalist economy and business development. But he has also promised to boost the role of provident funds, guarantee welfare for the poor, and make cheap housing available.
While some fret over his conservatism, most who know him both at home and abroad hail Tung's good character. He has a reputation for modesty, wisdom and caution.
""He is a man, in my view, of great integrity, a strong individual, independent-minded, surely and sincerely promoting the welfare of the people of Hong Kong,"" said U.S. Assistant Secretary of State Winston Lord, a friend of Tung's.
But Lord noted he had failed to sway Tung to reject China's plan to scrap Hong Kong's elected Legislative Council with a provisional legislature next July 1. Britain has condemned the plan as a ""black day for democracy"" in the territory.
Tung has been a senior member of a Preparatory Committee of pro-Beijing Hong Kong notables and mainland China officials crafting the power structures to replace British colonial rule.
He was lauded as an impartial and honest counsellor by Patten when Tung left Patten's advisory cabinet in June.
He resigned in October as head of his firm, Orient Overseas (International) Ltd, to make his leadership bid.
Tung took the helm of Orient after his father died in 1979. He has publicly acknowledged China had helped bail out the firm 11 years ago by backing a US$120 million fund led by tycoon Henry Fok, a kingmaker in today's leadership contest.
Tung is believed to be liked in Britain and by many business leaders who hope he will form a ""dream team"" with incumbent Chief Secretary Anson Chan -- Hong Kong's top civil servant.
Born in Shanghai in 1937, Tung was educated at Liverpool University in Britain.
",37
"A shipping tycoon whose company was bailed out by Beijing when it was sinking years ago is poised to govern Hong Kong when China takes over next year, after a thumping victory in the first round of the ballot.
Tung Chee-hwa swept up 206 of the votes cast on Friday by an exclusive club of 400 Hong Kong's rich and influential, who were selected for the purpose under Beijing's close supervision.
The runner-up, former chief judge Ti Liang Yang scored 82. A third candidate, businessman Peter Woo, came in with 54. The trio were the only candidates to get the minimum 50 votes required to go through to the deciding round on December 11.
If an election were held by universal suffrage, however, Yang would get 35.7 percent and Tung 33.5 percent, an opinion poll by a local university showed after the vote.
Tung, 59, recently revealed for the first time that China had helped salvage his family shipping empire 11 years ago by backing a US$120 million syndicated fund led by pro-Beijing tycoon Henry Fok, a kingmaker in today's leadership contest.
""I know there were mainland funds in it. I'm sure. To Mr Fok and those who have helped me...I am very grateful,"" Tung said.
Fok went to pains after Friday's vote to assure reporters for half an hour that the rescue package was above board and had not entailed any political deal on the future of Hong Kong.
""I don't think he is returning favours to China by running for the Chief Executive,"" Fok said.
""Commercial relations are strictly what we have with those what you call Chinese-funded banks. We deposit our money there or we borrow money from them -- it is strictly normal commercial relations,"" Fok said.
Tung has long been viewed as Beijing's favoured candidate to become Hong Kong's Chief Executive when Britain hands its last Asian colony back to China at midnight next June 30.
Foreign Minister Qian Qichen gave fresh assurances on Friday that the winner had not been preordained by Chinese leaders.
Many in Hong Kong are convinced that a demonstrative personal handshake that Tung received from President Jiang Zemin in January was a deliberate cue.
Tung has tried to shake off the impression that despite the existence of other candidates it is really a one-horse race.
""I dont think it is a foregone conclusion. It's three weeks away to December 11...and I will have to be working very hard to make sure that I win on that day,"" he told Reuters Television after the first round vote.
""The process of nomination today was done in a very transparent manner,"" he said.
Some analysts, noting that Tung had scored more than 50 percent, wondered if a second round was worth the bother and suggested that Yang and Woo might as well bow out.
""For, if the ultimate purpose of running is to win, then there is little point in them carrying on,"" said political commentator C.K. Lau.
Tung, a striking figure with spiky grey hair and a boxer's stance, is noted for his cautious style and modesty.
He and his rivals will be interviewed by the committee members at the end of the month on their policies and attitudes.
So far he has emphasised the importance of the economy and business, and has taken a conservative view on ticklish issues such as human rights and democracy, advocating ""consensus rather than confrontation"" in dealings with China's communist rulers.
Speculation has abounded in Hong Kong that some of its business titans may have been secret card carrying members of the Chinese Communist Party for years. But Tung's name has until now not figured among these rumours.
",37
"Signals from Hong Kong's likely future leader that the Chinese Communist Party might become legal in the territory in 1997 raised concerns in the pro-democracy camp on Wednesday about the party's future power.
Concern was stirred up after the man tipped as the favourite to become Hong Kong's chief executive, shipping tycoon Tung Chee-hwa, said on Tuesday he would accept the Communist Party's legalisation after the British colony reverts to China.
London is handing Hong Kong back at midnight next June 30, and Tung is the frontrunner to lead it after he received 51 percent of the votes in the first round of a ballot last week by the 400-member selection committee organised by China.
Although China is ruled by the Communist Party, Beijing has promised Hong Kong wide-ranging autonomy, leaving its capitalist system intact for 50 years under a policy of ""Hong Kong people running Hong Kong"" and ""one country, two systems"".
""The most important thing is, what will be the role of the Communist Party in Hong Kong after the handover, because whether it's legal or not it is here,"" legislator Emily Lau told Reuters.
Many people in Hong Kong have speculated that the future Chief Executive will be stage-managed by a Communist overlord from Beijing. China has publicly denied this is the plan.
Tung said on Tuesday in response to a reporter's question that he would accept the party's legalisation if asked to do so.
""That's totally unnecessary. It's already there,"" said Martin Lee, leader of the Democratic Party, Hong Kong's largest.
The democracy camp is worried about what power, if any, the Communist Party might wield over Hong Kong, which is supposed to be administratively separate from the rest of China.
""Let's be realistic. China is dominated by the Communist Party and the Communist party already has an office here in the form of the Xinhua News Agency headed by Zhou Nan,"" independent lawmaker Christine Loh told Reuters.
""In the future after 1997 there is no reason to continue to pretend the Communist Party is not here,"" Loh said.
""But the problem is the Communist party isn't just an ordinary political party. In China it dominates the political and governmental institutions. So what we want to know is that its presence here would not represent interference,"" she said.
A Hong Kong security authority spokesman said the Communist Party is not legally registered in Hong Kong and, therefore, does not exist in the eyes of the law.
Hong Kong's colonial authorities outlawed all political parties. Since 1990, however, they have been allowed to register under the societies ordinance. As a result, parties such as Lee's Democrats are registered as societies.
But, ""The Communist Party is not registered under the societies ordinance and we've received no application from them for registration,"" chief government spokesman Kerry McGlynn told Reuters. He declined to comment further.
A government source said the government never talks about the issue in detail. ""When a politician raised the issue last year, the government's spokespersons just looked down and mumbled into their beards.""
""In terms of legalising it, I'm not aware that the Communist Party is actually illegal, but we know it's not legally constituted by being registered,"" Loh said.
In the past, the party was involved in violent conflicts with the colonial government, especially the Hong Kong riots of 1967 inspired by China's radical-left Cultural Revolution.
",37
"The 11-year sentence handed down on Wednesday to Chinese dissident Wang Dan has awakened fears that critics of the Chinese administration in Hong Kong after the 1997 handover could face a similar fate.
Britain hands Hong Kong back to China in 243 days' time after more than 150 years of colonial rule.
The sentence imposed on Wang sparked a flurry of debate in Hong Kong on Thursday over the shape of future laws on subversion in the territory.
Hong Kong has for more than a century been a sanctuary for Chinese dissenters. Some 80 mainland dissidents who fled the communist mainland live in exile in the colony.
The territory also has a large home-grown anti-communist democracy movement, which Beijing officials have often branded as subversive because its adherents backed the 1989 student-led pro-democracy protests in Beijing's Tiananmen Square.
Hong Kong's future constitution, the Basic Law promulgated by China, requires laws to be passed after the handover to ban anti-constitutional activities, including subversion.
There has been intense speculation in Hong Kong over what actions the law will ban and whether or not it should be legislated by a provisional body that China plans to appoint upon the handover, or a new legislature expected to be elected in 1998.
So will Hong Kong ""dissidents"" face the same fate as Wang?
Members of the pro-Beijing political camp said no. ""I would certainly dispute any suggestion that could be the case,"" Eric Li, a legislator and a member of the China-picked Preparatory Committee working out transitional arrangements, told reporters.
""We have our own judicial system and courts, and it will be up to the Hong Kong people to decide what that law is going to be like in the future,"" Li said.
But Martin Lee, head of Hong Kong's Democratic Party, said he believed Hong Kong dissidents would go to jail.
""If we have a similar law in Hong Kong passed under article 23 of the Basic Law, then the Hong Kong people's freedoms will likewise be curtailed,"" Lee said. ""If we then do something which we do today lawfully, then we are liable to be put into prison, no matter how fair the judge is.""
The four leading candidates jockeying to run Hong Kong after 1997 have all refrained from commenting on Wang's sentence.
But one, former chief judge Ti Liang Yang, said he hoped it would be the post-1997 elected legislature which tackles the subversion law and not the provisional body that China plans to install after scrapping the current elected legislature.
""When the time comes for the legislature to legislate under article 23 of the Basic Law they will take into consideration the conditions of Hong Kong, the laws of Hong Kong,"" Yang said.
",37
"Hong Kong's top policeman said on Monday he was confident the territory's police could handle any disturbances after the July 1 handover to China without the help of China's People's Liberation Army.
Police Commissioner Eddie Hui, unveiling crime figures for 1996, told reporters that offences had fallen by 14 percent in the year, reaching a 15-year low and making Hong Kong one of the world's safest cities.
Hui was confident of tackling any crime problem, including mass disturbances, despite an exodus of senior officers, mainly expatriates, from the Royal Hong Kong Police Force.
China resumes sovereignty over Hong Kong on July 1 this year after a century and a half of British colonial rule. Many in Hong Kong have raised fears of a breakdown in law and order, including when the handover takes place at midnight on June 30.
Officers taking early retirement packages privately voice anxiety that Hong Kong's police will become tarnished by China-style corruption after the handover.
Pro-democracy politicians have warned that China could impose repressive laws and use its PLA garrison troops, whose colleagues crushed pro-democracy demonstrations in Beijing's Tiananmen Square in 1989, to keep order and put down protests.
Asked by Reuters if the police might call in the PLA to help deal with disturbances after the handover, Hui said: ""I hope not. I can't foresee any situation which I cannot handle, which would require the assistance of the People's Liberation Army.""
He said the exodus of officers from the service had not dented the force's ability to deal with mass disturbances in this freewheeling city of 6.3 million people.
""The senior officers who are leaving have little to do with crowd control,"" he said, adding that the force had sent many officers abroad for training in recent years and was prepared to deal with any outbreak of unrest.
""The overall manpower situation is very sound,"" he said.
Police Deputy Commissioner for Operations, Peter Wong, dismissed suggestions that the police were being pushed by China to get tough with political demonstrators, after a year of confrontations involving pro-democracy groups hostile to China.
""We're under no pressure from anybody in dealing with demonstrations,"" Wong said, adding that the Hong Kong police respected the population's right to demonstrate peacefully.
The enforcement of Hong Kong laws would remain solely the prerogative of the Hong Kong Police, he said.
Hui said 155 expatriates had asked to retire in the run-up to the handover, representing just five percent of the total of 3,000 senior officers on the force.
Asked to give reasons for the police's success in whittling down crime, Hui said he had sent more police out on the beat.
""We have moved a lot of our officers to the front line, to the streets, to make our presence more visible,"" he said.
He said Beijing's crackdown on crime last year had contributed to a more peaceful Hong Kong, where crime often has mainland links.
He said cooperation with Chinese police would be stepped up after the handover when Hong Kong's Interpol office, now a sub-group of Britain, would become a sub-group of China.
The force is to drop the word ""royal"" from its name and abandon the British insignia on July 1.
But it will continue to work in both English and Chinese and will retain exclusive responsibility to maintain law and order and police the Hong Kong side of the border with China, he said.
",37
"Shipping magnate Tung Chee-hwa saw his fortunes almost dashed on the rocks in the 1980s when the family company met ill winds, but Beijing bailed him out and now he is poised to become Hong Kong's next leader.
Next month, China's carefully screened Selection Committee will choose a Chief Executive to run Hong Kong after Britain hands its last important colony back to Beijing in mid-1997.
Tung appears streets ahead of his rivals, having run away with 206 of the 400 votes in the first round of balloting on Friday.
Behind him were retired Chief Justice Yang Ti Liang, who scored 82 votes, and businessman Peter Woo, who clocked up 54.
In the public's eyes, Yang is slightly more popular than Tung, according to recent opinion polls.
Tung has been a senior member of a Preparatory Committee of pro-Beijing Hong Kong notables and mainland China officials, charged with crafting the power structures which will replace British colonial rule.
Tung was lauded as an impartial and honest counsellor by Governor Chris Patten when he stepped down in June this year from Patten's advisory cabinet, the Executive Council.
The shipping tycoon resigned in October as head of his family firm, Orient Overseas (International) Ltd, to make his leadership bid.
Tung's early campaigning consisted of clearing the decks of speculation that might lead to challenges on his integrity, such as how China had once saved his family from bankruptcy.
Tung took the helm of the business after his father died in 1979. He has publicly acknowledged that China had helped bail out the firm 11 years ago by backing a US$120 million investment fund for the firm, led by tycoon Henry Fok, a kingmaker in today's leadership contest. The family later bought back most of the company's shares and restored its control of the firm.
""In 1985 and '86 we went through a very difficult time when the shipping business was in serious recession. Henry Fok led a syndicate of investment in our company,"" Tung said.
""I know there were mainland funds in it. I'm sure. To Mr Fok and those who have helped me...I am very grateful.""
Tung was spotted as a possible favourite of China when President Jiang Zemin singled him out for a personal handshake at a meeting in Beijing this year.
But Tung is believed to be acceptable also to Britain and to expatriate business leaders who hope he will form a ""dream team"" with incumbent Chief Secretary Anson Chan -- Hong Kong's top civil servant -- if China allows her to stay on after the flag change at midnight next June 30.
Tung has links with the powerful in key capitals -- Beijing, Taipei, London and Washington -- whose influence will be important for Hong Kong's evolution after 1997.
Born in Shanghai in 1937, Tung was educated at Liverpool University in Britain.
The 59-year-old tycoon who has previously dodged the limelight, is said to lead a disciplined life. He was known for arriving at his office at dawn to perform tai chi exercises on the roof before starting work.
Despite a reputation for modesty, wisdom and caution, and strong ties to China, Tung's local power base may ultimately stir some unease in Beijing. ""It is hard to see Beijing favouring someone with a local power base, who really means to run the show,"" said legislator and lawyer Margaret Ng.
Tung has made a point of tapping various views, including those of pro-democracy parties and trade unions.
But he has also made increasingly strident pro-China policy utterances. He accused Patten of splitting Hong Kong's 6.3 million people through a speech that assailed China's plan to replace the elected legislature with an appointed assembly.
He has urged people to forget China's bloody army crackdown on the 1989 democracy movement in Beijing and to leave it to historians to judge the event.
",37
"Chinese dissident Wang Xizhe's flight to the United States via Hong Kong may be the last great escape of its kind, as China is sure to try to shut down the route next year, activists and analysts said on Wednesday.
Since Beijing sent tanks into Tiananmen Square in 1989 to put down a student-led protest movement, hundreds of Chinese dissidents have fled through Hong Kong in a secretive operation codenamed Yellowbird, activists said.
Wang, now in the United States, has not appeared in public yet, and it has not been confirmed that it was Yellowbird that helped him flee from the south China province of Guangdong last Friday.
But the underground escape route is bound to be sealed off when Hong Kong becomes a part of China next July 1, ending a century and a half of British colonial rule.
""China will have sovereignty here and technically it could prevent even a dissident who was given asylum by a foreign consulate here from actually leaving the territory,"" Robin Munro, director of Human Rights Watch Asia, told Reuters.
""So I expect that it's virtually going to come to an end as of July next year.""
China on Tuesday loudly signalled its stance on future dissident tangles with Hong Kong. It branded Wang's escape an illegal frontier crossing and demanded that he and his abettors be punished for breaking the law.
""The judicial authorities are currently pursuing the legal responsibilities of Wang Xizhe and the plotters,"" foreign ministry spokesman Shen Guofang said in Beijing.
Very few in Hong Kong have any illusions that the territory will continue to be a conduit for dissidents to get out, or as a centre of pro-democracy anti-communist activism after 1997.
""Hong Kong will be subject to more pressure from the central government. Therefore it will be more difficult for dissidents to use Hong Kong as an escape route,"" said Peter Lee, a professor at the Chinese University of Hong Kong.
And those who help Chinese dissidents may have a tough time. ""I think they will be liable to some kind of harassment and otherwise legal punishment,"" Lee said.
Lee Wing-tat, a legislator and key figure in the Hong Kong Alliance in Support of Patriotic Democratic Movements in China, an organisation that supports fleeing dissidents, said his group was likely to face trouble from China next year.
""A Chinese official made a statement a few months ago. He said if people participated in helping political dissidents escape from China, China will do something... My guess is some kind of punishment,"" Lee Wing-tat said.
But his group was pressing on with help for dissidents who are now exiled in Hong Kong and seeking asylum in the West.
""We will give them assistance, for example we will arrange some places for them to live, contact the Hong Kong government and foreign consulates, and arrange money for their family.""
China's communist rulers have made clear they will not allow Hong Kong to become a centre of subversion.
China's Hong Kong policy boss Lu Ping said this year Beijing would not tolerate anti-constitutional preaching in Hong Kong.
Munro sees a bleak future for the Chinese dissidents in exile here after the handover and says they should all get out.
The three foremost candidates for Hong Kong's post-colonial leadership, who are now campaigning for support, made clear on Tuesday they would not upset Beijing by defending dissidents.
""There will be laws in Hong Kong and it is up to the chief executive to implement and obey the law... Whatever one does, it must be in the interests of of Hong Kong people,"" said shipping tycoon Tung Chee-hwa, considered China's favourite candidate.
",37
"A Chinese plan for 6,000 People's Liberation Army (PLA) troops to march into Hong Kong the very minute Britain hands the colony back to China in 1997 would send the world a bad signal, diplomats said on Thursday.
The Financial Times of London reported that China had told Britain it intends to march 6,000 troops across the border into Hong Kong when Beijing takes over at midnight next June 30.
Bill Dickson, a spokesman for the Foreign Office mission in Hong Kong, told Reuters that China had announced no such plan to the British side in ongoing handover negotiations.
""Although we've been discussing the transfer of defence responsibilities with the Chinese and are of course discussing arrangements for the handover ceremony itself, the Chinese have not told us of their plans for moving defence forces into Hong Kong after midnight on the first of July,"" Dickson said.
""This is a matter which is entirely for them, but if reports such as that in the Financial Times are true, then the question arises whether this sort of display of military force conveys the right message to the rest of the world,"" he said.
In Beijing, China said it would station troops in Hong Kong after it regained sovereignty next year, but the number would depend on defence requirements.
""The central government will send an appropriate number of troops into Hong Kong"" after the transfer of power next year, Foreign Ministry spokesman Cui Tiankai said.
""The actual number will be based on the defence needs of Hong Kong,"" Cui told reporters, without saying when the troops would be moved into the territory.
Diplomats in Hong Kong, who asked not to be identified, said the plan outlined in the newspaper report seemed very credible given China's hardline stance on many handover-related issues.
""We have made it absolutely clear to the Chinese that it would be far better, if they want to send the right signal, if they would build up their armed forces in Hong Kong in a gradual way, over a period of time,"" one British source said.
""Of course we got no response,"" the source said.
""This would be exactly the kind of thing to send a shiver down Hong Kong's spine, and would raise questions about China's commitment to a smooth transition,"" a Western diplomat said.
Hong Kong is switching back to the Chinese flag after a century and a half as a colony on China's southern doorstep.
The approaching handover has been frought with jitters. Many of the territory's 6.3 million people fear a crackdown against human rights, democracy and press freedom, as well as possible trouble with the PLA soldiers, after the transfer.
For most people in Hong Kong, the PLA conjures up images of the bloody military crackdown that was unleashed, with heavy loss of life, against the student-led pro-democracy movement in Beijing's Tiananmen Square in June 1989.
Britain and China have been sparring lately in handover negotiations over whether or not a PLA advance party in Hong Kong can carry weapons before the handover.
Also disputed is whether PLA garrison soldiers should be put on trial in Hong Kong courts if they commit crimes in the territory.
Under a proposed law drawn up unilaterally by China, the PLA troops would be tried in military courts on the mainland, not civilian courts in Hong Kong.
",37
"China launched the contest to pick Hong Kong's future leader on Friday, hailing the event as the birth of ""real democracy"" in the British-ruled territory which is set to revert to Beijing's control next year.
But pro-democracy protesters disagreed -- they stormed into the building where Hong Kong's rich and mighty had gathered to vote, and, waving imitation black coffins, they denounced the exercise as the death of freedom.
Only 400 of Hong Kong's 6.3 million people are participating in the voting, having joined a special Selection Committee set up under China's close supervision.
Shipping tycoon Tung Chee-hwa and his principal rival, former Chief Justice Ti Liang Yang both scored more than the minimum of 50 votes required to reach the next leg of the contest to select the first post-colonial Chief Executive.
Tung took a commanding lead with 206 votes. Also through to round two is businessman Peter Woo, but five contenders including former appeals court judge Simon Li fell out of the race.
The run-off will be on December 11.
The gathering of the Selection Committee, inaugurated by China's Foreign Minister Qian Qichen, who was visiting the territory for the first time, was marred by scuffles when pro-democracy activists clashed with police.
A dozen demonstrators scrambled into the plush Hong Kong Convention Centre in an unsuccessful bid to disrupt the historic meeting. Police chased protesters up six floors of escalators before they were rounded up and detained.
Outside, a police officer received a bloody nose and three more demonstrators were carted away in scuffles between about 40 activists and 100 police.
In his inauguration speech Qian declared the selection process as the dawn of genuine democracy in Hong Kong.
""For Hong Kong's people to elect their own chief executive, that is something unprecedented in Hong Kong's history,"" he said.
""For some 150 years Britain has appointed 20 or so Hong Kong governors, and when were the views of Hong Kong people ever consulted?"" Qian asked the assembled caucus.
""The establishment of the Hong Kong Special Administrative Region (SAR) is the start of real democracy in Hong Kong, and not the end of democracy in Hong Kong,"" he said.
Hong Kong reverts to China at midnight next June 30.
Tung, 59, Yang, 67, and Woo, 50, are now the only hopefuls left in the race, and Qian was at pains to stress that despite claims by critics that the winner had been chosen in advance by China's communist rulers, the result was not preordained.
The democracy activists brandished posters of jailed Chinese dissidents Wang Dan and Wei Jingsheng and banners condemning China's plan to replace Hong Kong's elected legislature.
""Free Wang Dan, release Wei Jingsheng, oppose the provisional legislature"", they shouted through loudhailers.
The democracy lobby brands the leadership race undemocratic and has campaigned against the provisional legislature.
""The provisional legislature is a great step backwards for democracy,"" one protest banner said on Friday.
British Foreign Secretary Malcolm Rifkind warned China on Thursday its plans for a provisional legislature risked creating ""confusion and uncertainty"" in Hong Kong.
""China would have to explain to Hong Kong and the world why they had chosen to replace a body for which more than a million Hong Kong people voted by one chosen by a handpicked electorate of only 400,"" he told a parliamentary debate in London.
",37
"The leader of Hong Kong's biggest pro-Beijing party said on Thursday the China-appointed interim legislature Beijing plans to set up next month would not clash with existing institutions before the handover.
Tsang Yok-sing, leader of the Democratic Alliance for the Betterment of Hong Kong (DAB), said the possibility that the provisional legislature would meet on the communist-ruled mainland rather than in Hong Kong has not been ruled out.
Britain is handing Hong Kong, its last major colony, back to China as an autonomous Special Administrative Region in 236 days' time, ending a century and a half of colonial rule.
Hong Kong's political establishment, and the governments of Britain and China, are polarised over China's plan to dissolve the elected Legislative Council (Legco) on July 1 and replace it with a provisional body until elections in 1998.
The plan is China's response to an enlargement of the democratic franchise by Governor Chris Patten, which Beijing has said violated the handover agreements.
In an interview with Reuters, Tsang said Hong Kong's constitutional arrangements did not prevent the provisional legislature from becoming Hong Kong's legislative body on July 1, after the sovereignty transfer.
""That is the date from which onwards, the provisional body is supposed to be involved in legislative work,"" Tsang said.
""Before that date, although the body is there, the Preparatory Committee and also some Chinese officials in charge of Hong Kong affairs have made it very clear that this provisional body will not be a legislature of Hong Kong.""
The China-controlled Preparatory Committee has elected a 400-member body that will select both the territory's first post-colonial leader, the chief executive, and the provisional legislature. Both selections will be announced next month.
Critics portray the provisional legislature as a rubber-stamp body appointed by China that will enact repressive laws and eliminate many basic freedoms.
But Tsang told Reuters the committee process to establish the provisional body was just as much an election as the electoral arrangements for Legco, some of whose members are only indirectly elected.
Tsang, whose DAB fared badly against the popular Democratic Party in the September 1995 Legco elections, insisted that China had not breached the 1984 Sino-British treaty on the handover.
""China is abiding by the Joint Declaration. China is not going to set up a parallel legislature in Hong Kong before the actual handover,"" Tsang said.
""The place where the provisional body will work before July 1 next year has not been thoroughly discussed,"" he said.
""If people believe it would be inappropriate for the provisional body to meet in Hong Kong before July 1, 1997, then it can meet somewhere outside the territory,"" he said.
The leader of the Democratic Party, Martin Lee, said the provisional body would be illegal and that if the government did not take it to court, then he would do it himself.
""It's the last ditch battle for Hong Kong,"" Lee said. ""We should fight against it with all our might.""
Lee, who plans to lobby Britain next week to take firmer action, said the provisional legislature would roll back civil liberties and have dissidents jailed as they are in China.
China's crackdown, highlighted by the 11-year jail sentence handed to student leader Wang Dan last week, was a sign of what Hong Kong would be like after 1997, Lee said.
""Today Wang Dan, tomorrow you and me,"" he said.
",37
"As U.S. President Bill Clinton jumped into Asian foreign policy issues with a new enthusiasm on Wednesday, security experts meeting in Hong Kong called on all countries involved to ensure no conflict flared up over Taiwan.
Experts said U.S. policy on China and Asia was maturing, and they called for the status quo in Taiwan to continue in the interests of wider Asia-Pacific security and prosperity.
""Next to Korea, the Taiwan Strait is the second major potential security flashpoint in the region,"" David Shambaugh of the George Washington University in the United States said.
""This is not a back-burner issue. It can quickly ignite and get on to the front burner... It is an issue we have to keep our eye on,"" he said, adding that any flareup over Taiwan would severely damage the region's bustling commerce.
Shambaugh was talking at a discussion panel of security experts at the World Economic Forum's Europe/East Asia meeting.
He said Taiwan President Lee Teng-hui and other Taiwan leaders should restrain themselves and that the time would be riper for dialogue with Beijing after China holds a watershed Communist Party congress next year.
At the same time, China should renounce the use of force and coercive diplomacy towards Taiwan and respect Taiwan's autonomy within a ""one-China"" formula. China should not expect Taipei ""to negotiate with a gun to its head"", Shambaugh said.
China-Taiwan relations have been tense over the past two years as pro-independence sentiment grew in Taiwan and Beijing launched a drive for the reintegration of its lost territories.
Taiwan, historically part of China, has been separated from the mainland for most of the past century, first by 50 years of Japanese occupation, then when China's nationalist government lost a civil war to the communists in 1949 and fled to Taipei.
China regards Taiwan as a rebel province and has threatened to use force if the island seeks formal independence.
In March this year, as Taiwan went to the polls, a major crisis blew up when China launched missile tests and briefly blockaded Taiwan to deter Taipei from declaring independence.
""We should maintain the status quo,"" Yuan Ming, a strategic studies expert from Beijing University, said on Wednesday.
The view was echoed by Masashi Nishihara from Japan's National Defence Academy, who said Taiwan should not provoke China by seeking a United Nations seat.
Another expert, Gerald Segal of the International Institute for Strategic Studies in London, said the United States successfully defended the strategic balance and at the same time managed to stop short of a conflict when it sent two aircraft carriers into seas near Taiwan as a warning to China during the March crisis.
But he warned that the arms race in the region, where many governments were newly democratic but politically very fragile, threatened stability.
Visiting Australia on Wednesday, Clinton said the United States was more determined than ever to be involved in Asia, to help provide stability, that China should not be isolated and that engaging Beijing was a ""big priority"".
At the same time Secretary of State Warren Christopher was in Beijing shoring up relations. Clinton is to meet Chinese President Jiang Zemin at next week's summit of the Asia-Pacific Economic Cooperation forum in the Philippines.
Shambaugh said the flurry of high-level contacts now and in the near future between Beijing and Washington was important for building the Sino-U.S. relationship.
But he said Chinese officials would remain suspicious that the United States had a ""subversion agenda"" for China and that the policy of engagement was actually an attempt at containment.
",37
"Shipping magnate Tung Chee-hwa was to fly to Beijing on Tuesday to be anointed by China's communist leadership as Hong Kong's first Chinese leader when Britain pulls out in mid-1997.
Tung was to head for the Chinese capital in the afternoon after addressing Hong Kong's business community in his first major speech since he was selected as the territory's future chief executive last Wednesday.
In Beijing, he will have his first face-to-face meeting with China's President Jiang Zemin and Premier Li Peng since formally launching his bid for Hong Kong's leadership mantle two months ago.
It was Jiang who signalled in January this year that Tung was Beijing's favourite for the job when he singled out the tycoon for a warm, personal handshake at a reception in Beijing.
Britain is returning its last major colony to its former and future masters in Beijing at midnight next June 30, after a century and a half of colonial rule that turned it into one of Asia's economic marvels with a population of 6.3 million people.
One of Tung's first tasks in the twilight of British rule will be to cobble together an advisory cabinet called the Executive Council and to decide which senior mandarins to keep.
He has said he will start this task after his China visit, reinforcing speculation in Hong Kong that China will call the shots from behind the scenes on the make-up of the future government of the Hong Kong Special Administrative Region.
""If he waits before deciding on his team, there will be lingering doubts as to whether he was acting on instructions received from Beijing,"" the South China Morning Post said in its main editorial on Tuesday.
On Monday, the colonial government said it would set limits on how much it would help Tung to form a government-in-waiting before the transfer of sovereignty.
Constitutional Affairs Secretary Nicholas Ng told the Legislative Council that the government ruled out a mass exodus of senior officials to the government-in-waiting because it would undermine the stability and efficiency of the present administration.
The colonial administration is supposed to cooperate with the incoming government under the handover agreement.
But the transition has been fraught with disputes over issues ranging from human rights and democracy to infrastructure projects, darkening prospects for serious cooperation.
Many senior civil servants, including Chief Secretary Anson Chan, who is Governor Chris Patten's deputy, and Financial Secretary Donald Tsang, stayed away from a business dinner party attended by Tung on Monday night, though they had been invited.
Officials said Chan and Tsang had scheduling conflicts but political analysts said it might have been a sign that the administration's top two civil servants would not keep their jobs.
The 400-member, Beijing-controlled Selection Committee that selected Tung last week is now preparing for the next milestone in the march to Chinese rule -- the selection on Saturday of a 60-member, pro-China ""provisional legislature"" with which China plans to replace the existing, elected legislature on July 1.
Patten again condemned the new legislature in an interview with the French newspaper Liberation on Monday, saying he would never cooperate with it.
""This echo chamber has no place in the political or administrative life of Hong Kong,"" he said.
",37
"China and Britain moved closer on Friday to removing some obstacles to Hong Kong's smooth transfer to Chinese sovereignty next year, but fresh controversies raised new potential hurdles.
Agreements took shape on issues of handover ceremonies and budgets but quarrels brewed over China's moves to appoint new political leaders for Hong Kong.
Hong Kong government radio quoted diplomats saying London and Beijing were closing in on an agreement on a ceremony to mark Hong Kong's handover to China next June 30/July 1 and that the deal might be announced next month.
The sources signalled progress in informal talks and that a basic accord could be forged before foreign ministers of the two nations meet at the United Nations General Assembly in New York next month, the government-run radio said.
Differences over handover ceremonies have posed a stumbling block in negotiations on the sovereignty transfer, especially the question of what role Governor Chris Patten will play.
At the same time concrete progress was announced in talks on Hong Kong's next budget, which will straddle the handover date.
British and Chinese negotiators agreed on ways to allocate resources for the 1997/98 budget, Chinese senior official Chen Zuo'er told reporters after the latest talks.
Chen announced agreement on spending guidelines, maximum spending limits and procedures for dealing with new requests for money from the budget. Hong Kong Treasury Secretary K.C. Kwong was upbeat about the breakthrough.
""We have in the past few days had very positive pragmatic discussions on the preparation of the 1997-98 Budget,"" he said.
""We have for all practical purposes completed the preparatory stage of the resource allocation exercise,"" he said.
""Our next step will be to consider the bids for new resources from branches and departments.""
But prospects of a smooth handover on the political front appear less bright. A Beijing official was quoted as saying a list of names of people being nominated by the public to sit on a caucus that will pick the first post-colonial legislature and governor, the chief executive, would not be made public.
The official was quoted by the South China Morning Post as saying some nominees might not want their names to be publicised and that only the nominees would have the right to see the list.
""This whole fiasco is too much. The whole thing is such a sham,"" pro-democracy legislator Emily Lau told Reuters.
""Perhaps they feel some important people will be embarrassed if they are not picked. The whole process lacks transparency and accountability and credibility.""
The Wen Wei Po newspaper, flagship of Beijing's propaganda machine in Hong Kong, attacked Britain on Friday for trying to amend Hong Kong's laws in order to preserve London's influence after 1997.
The salvo came just a day after the paper criticised Britain's chief handover negotiator, Hugh Davies, accusing him of touting Britain's own favourite for post-1997 leader.
Davies' office dismissed the claim as ludicrous but Chinese spokesman Zhang Junsheng told reporters: ""The British side should not meddle, and has no right to poke its nose in. This is entirely a matter for China.""
",37
"Thumbing its nose at Britain, China brought Hong Kong's elected legislature a step closer to oblivion on Saturday when it founded a new lawmaking body to take over next July when it takes back the colony.
The birth of the Provisional Legislative Council in the frontier city of Shenzhen brought Hong Kong to a crucial turning point in its journey towards Chinese rule at midnight next June 30 and opened the way for a possible clash in the world court.
The body, stuffed with pro-China politicians and tycoons, was attacked by Britain, Washington and local protesters. London challenged China to let the International Court of Justice in The Hague rule on its legality.
The legislative body is a big crease in Sino-British relations that could cause instability in the territory in the run-up to the handover, now less than 200 days away.
The speaker of Hong Kong's Legislative Council and 32 other incumbent lawmakers were among the 60 members chosen by a 400-member China-controlled Selection Committee.
Congratulating the 60, Chinese Foreign Minister Qian Qichen declared the contest had been ""just, fair, open and based on democratic principles"" and had the approval of a wide spectrum of Hong Kong society.
Dominic Chan, recently expelled from the Democratic Party, Hong Kong's largest, also grabbed a seat. The Democratic Party has boycotted the selection as anti-democratic.
The winners included pro-China politicians such as Tsang Yok-sing, Elsie Tu and Peggy Lam, who were routed in 1995 Legco elections when more than a million people went to the polls and voted resoundingly for pro-democracy forces.
Pro-democracy groups staged noisy protests in Hong Kong declaring the Shenzhen meeting a ""fake election"" and a ""black day for democracy"". They launched 50 helium-filled balloons into China with a protest banner attached.
""Today we will have two legislatures...This is a constitutional crisis,"" said the Democratic Party's Andrew Cheng, a current legislator.
Beijing's communist rulers are bent on imposing themselves firmly on Hong Kong and on ending 150 years of national shame over the forced cession of the territory to Britain in 19th century wars over the opium trade.
Governor Chris Patten, who has introduced elements of democracy in this territory of 6.3 million people over the past four years, denounced the Shenzhen vote as a ""bizarre farce"".
""The reality is that over a million people in Hong Kong voted for the present Legislative Council. And up over the border now, 400 people -- 400 -- are voting for a so-called provisional legislature,"" Patten said on Saturday.
Dorothy Liu Yiu-chu, a Hong Kong member of China's parliament -- the National People's Congress -- and the Selection Committee, dissented and stayed away from the vote.
""I am sick. This is the official reason from the point of view of the Selection Committee. But I know, and I don't mind letting the world know, the real reason is that I don't agree to the establishment of the provisional legislature,"" she said.
Earlier this month she took part in the committee's first task, selecting shipping magnate Tung Chee-hwa as Patten's successor.
Tung dismissed Britain's suggestion of world court arbitration on Saturday, saying: ""We cannot have a legal vacuum in 1997. This is a great day for Hong Kong.""
China's official spokesman in Hong Kong, Zhang Junsheng, said Britain's challenge would not undermine the provisional legislature's authority.
""Establishing the provisional legislature is an internal affair of China. If Britain demands international arbitration it is absurd and ignorant,"" Zhang told the Mad Dog Daily.
The U.S. Consul-General in Hong Kong, Richard Boucher, called the legislature vote ""a backward step"".
""We think it's a bad idea and a mistake,"" Boucher said. ""I don't think we would describe it as an open and fair election which is an essential part of Hong Kong's future stability and future business environment.""
Democratic Party leader Martin Lee has vowed to seek a court injunction against the provisional body if it meets in Hong Kong before July 1.
""If this sham legislature is lawful, why not appoint it and have it meet in Hong Kong, where the Supreme Court can decide on its legality,"" Lee said on Friday.
",37
"Two hundred days before its historic handover to China, Hong Kong has adopted a charismatic shipping tycoon as helmsman to lead it into the 21st century.
But the British colony of 6.3 million people is waiting to see if chief executive-designate Tung Chee-hwa can form a ""dream team"" with the territory's most popular public figure, ""iron lady"" Anson Chan, head of the present colonial Civil Service.
The former tycoon, who resigned from his shipping empire to become Hong Kong's first post-colonial leader, takes over from British Governor Chris Patten at midnight next June 30, when a century and a half of colonial rule comes to an end.
""If Tung can keep Anson in her job, we will have a dream team leadership that both Britain and the Hong Kong community will be happy with,"" a senior official said.
Tung, 59, selected by a Beijing-vetted electoral college to run the future Hong Kong Special Administrative Region of China, named Chan on Thursday as favourite to be his deputy, saying he wanted her to stay on as head of the 180,000-member civil service.
""I have said I hope she can remain at her post. She, too, has indicated she is willing to do so. I hope she can be my chief secretary,"" Tung said in the Chinese city of Shenzhen.
""I would like to see a smooth transition. I hope most of the senior officials can remain in office,"" he said.
Chan, 56, has signalled her interest in working for Tung but restated her fervent belief in libertarian values.
She praised Tung for urging Hong Kong to forget political squabbles and ""find common ground to build Hong Kong together"".
But she cautioned that the freedoms and plurality of views that made Hong Kong one of the world's economic marvels must be preserved, and said pragmatism and flexibility were vital to it.
""Its very success has been founded on tolerance of different viewpoints,"" she told the college gathering. ""I believe that the law was made for man, not man for the law, that government is the servant of the people, not their master.""
Of a similar age, Tung and Chan have much in common and have always described their relationship as friendly.
Both their families moved from Shanghai to Hong Kong as the Communists overran China, defeating the Nationalists in a long civil war that ended in 1949.
The contest for Hong Kong's handover leadership has been dominated by the Shanghai connection. The two candidates who lost to Tung -- former Chief Justice Yang Ti Liang and entrepreneur Peter Woo -- were also Shanghai-born.
Chan herself had earlier been touted as a leadership candidate, having emerged in the polls this year as Hong Kong's most popular political personality with more than 60 percent of public support. But she decided not to run against Tung.
The Shanghainese form one the greatest networks within Hong Kong. Tens of thousands of Shanghai people fled the Communist regime and relocated their businesses in Hong Kong after 1949.
The current leadership in China is also heavily dominated by the so-called ""Shanghai faction"" led by President Jiang Zemin, who has been actively promoting officials from his home area.
Tung, a conservative who was once bailed out by Chinese funds and who opposes conflict with Beijing, has evolved from a publicity-shy figure into a charismatic leader-in-waiting who can charm and quip his way through news conferences.
He shifts comfortably from one language to another -- English, Cantonese and Mandarin.
Chan is profoundly respected by civil servants for her no-nonsense, efficient administrative style, which has earned her a reputation for toughness -- tempered by a huge smile, kind heart and balanced political outlook.
""The question is whether it is too balanced. Beijing may reject her for defending democracy too much,"" the official said.
",37
"Britain and China are deadlocked on core issues central to a smooth handover of Hong Kong to Beijing in 1997, ranging from citizenship rights to subversion and troop deployments, officials said on Tuesday.
""With only 210 days to go under the British flag, time is running out fast to sort out these problems,"" a British official said on the eve of Sino-British talks starting on Wednesday.
""China has to decide whether it wants things to go smoothly next year or not.""
British and Chinese chief negotiators meet on Wednesday for three days of talks under the Sino-British Joint Liaison Group (JLG) forum, haggling over handover details.
There have already been signs over the past week that handover talks have soured, blocking progress on major details of the flag change, set for midnight June 30 next year.
Chinese and British experts who met on Monday failed to agree on a formula for China to send an advance party of troops into Hong Kong before the handover, and last week a big quarrel flared over a liberal anti-subversion law proposed by Britain.
""We haven't made as much progress as I would have liked to have seen but we have agreed that this is an important subject,"" British representative Alan Paul said after the talks on troops.
""We must continue our efforts and we must meet more often on this subject,"" Paul said. A source close to the talks said China had yielded ground by abandoning a demand that the advance party bear arms, which Britain has publicly opposed, and that the argument was now over troop numbers.
JLG working-level negotiators were due to meet again on Tuesday to discuss citizenship and right of abode issues.
A British official said Britain was especially worried by the fact that China had come to no agreement on the terms whereby Hong Kong citizens with a domicile abroad can qualify for permanent residence in the territory after 1997.
Chinese officials have previously proposed that citizens must be back in Hong Kong on the day of the handover or lose their right of abode in the territory, which is to become an autonomous Special Administrative Region (SAR) of China.
British officials have warned that unless this problem is solved, there could be a chaotic mad rush by overseas Hong Kong people to the territory on the eve of the handover.
The main negotiations on Wednesday open against a backdrop of tension heightened by a liberal anti-subversion law that the colonial government will put to the legislature on Wednesday.
The legislation aims to set legal standards that would exclude China-style jailings of dissidents.
Britain has said China has blocked efforts to discuss the bill although handover documents require a law to be legislated on the offences of subversion, secession, sedition and treason.
Chinese officials said enactment of the law was not for the colonial government to carry out now, but for the SAR, after 1997, and they accused Governor Chris Patten of lying when he said China had blocked discussions on it.
The Legislative Council plans to launch a new motion of censure on Wednesday opposing its own abolition and China's appointment of a provisional legislature next July 1.
On Thursday, more political drama related to the handover is likely when a legislative inquiry panel summons senior officials to testify under oath about the sudden retirement of Hong Kong's immigration chief Laurence Leung last July.
Finance Secretary Donald Tsang and Leung's successor Regina Yip are both to testify. Leung's early retirement has fuelled a welter of questions among politicians about why he was permitted to depart so abruptly.
",37
"Shipping boss Tung Chee-hwa emerged as the most vocally pro-China contender for Hong Kong's leadership on Friday as a Beijing-controlled body wrapped up a three-day quiz of three men vying to rule Hong Kong after 1997.
The Selection Committee of 400 rich or influential Hong Kong people, who were picked under China's close supervision, will now ponder. But many believe Tung is the preordained winner.
The committee meets again on December 11 to make its choice.
Tung shot off a volley of comments and answers to committee members underlining his loyalty to China, attacked the politics of British Governor Chris Patten, and even threw in a snub about the inauspicious qualities of Patten's official residence.
Hong Kong reverts to Chinese rule at the stroke of midnight next June 30 after more than 150 years as a British colony.
Beijing is turning the territory of 6.3 million people into a Special Administrative Region of communist China, pledging no change to its thriving capitalist system for 50 years.
The committee's choice of a chief executive to succeed Patten was obvious, the pro-business Economic Journal said on Friday. ""We get the feeling that winner and loser in the chief executive contest is already decided,"" it said.
Tung Chee-hwa's answers were all ""politically correct"", showing a ""cautious nature"" that suited the taste of Beijing and many Hong Kong people, the journal said.
In his remarks, Tung jumped to China's defence and attacked an attempt by Britain this week to introduce a pre-emptive soft subversion law before the 1997 handover aimed at ensuring no China-style jailings of dissidents take place after 1997.
""It is up to the future government to draw up its own law on these matters,"" Tung said. ""The Special Administrative Region government will have to review these issues after the handover.""
Tung, 59, who quit as head of the Orient Overseas shipping empire to bid for Hong Kong's leadership, has been tipped as China's favoured son since Chinese President Jiang Zemin singled him out for a handshake in Beijing in January.
In the three days of committee interrogation, much of which was broadcast live, Tung's rivals -- former chief judge Ti Liang Yang and entrepreneur Peter Woo -- also gave voice to patriotism but were glaringly less pro-China in their utterances.
Yang made clear he would not always bend with Beijing's wind or whim, but would follow the letter of Hong Kong law.
""I'm for Yang because he's for justice,"" said a Hong Kong Chinese resident listening to the sessions on the radio.
""He's a fair man. He's not a merchant,"" he said, summing up a widely held view of the contest.
Tung said Hong Kong might have to make sacrifices if China fell victim to political or diplomatic sanctions.
He stressed Chinese cultural values and patriotic education and the need for less red tape, speedier land development approvals, a sell-off of low-price public housing to tenants, and setting an example of Chinese reunification for Taiwan to follow later.
""I found it abominable...I found him more colonial than the colonial government,"" said legislator Tsang Kin-shing.
Tsang, whose Democratic Party is boycotting the leadership contest, said Tung's rivals were no better. ""They are all foul grass growing from a foul jar,"" he said, using a colloquial Chinese insult.
Tung also said he would not like to move into the governor's traditional residence next year. ""I have heard the Government House is crowded and the fung shui is not good.""
Many Hong Kong Chinese cling to fung shui, ""wind and water"", a mixture of science and superstition that people use to chart their lives, birthdays, weddings, business and burials.
",37
"Canadian envoys on Tuesday dismissed reports that thousands of Hong Kong people in Canada may be forced to flock home en masse ahead of Hong Kong's 1997 handover to China in order to protect their residence rights.
Canada's commissioner in Hong Kong, Garrett Lambert, and the country's ambasador to China, Howard Balloch, said they believed China would soon decide on the issue, which has been a stumbling block in Sino-British talks on the territory.
But Lambert said Hong Kong people who had emigrated from the British colony might have to live in Hong Kong as Canadians in future and lose their local voting rights after it becomes a Special Administrative Region (SAR) of China on July 1, 1997.
Lambert told reporters he had been informed by China's envoy in Hong Kong, Zhou Nan, that progress was being made by Chinese and British negotiators on the problem of right of abode.
The question is one of the major unresolved issues facing the Sino-British Joint Liaison Group (JLG), which meets this Wednesday.
""This is a good file. It's one on which progress is being made. Mr Zhou said he expected that we would have a decision announced in the JLG soon -- my guess is probably in early January,"" Lambert said.
""It now seems fairly obvious that you do not have to be physically present in Hong Kong to protect your interests if you are already a permanent resident of Hong Kong before the transition,"" he said.
However, Lambert said questions remained about political and working rights of Hong Kong emigrants who return to live in the territory after 1997.
Of all Western nations, Canada has one of the largest immigration relationships with Hong Kong.
Apart from some 500,000 Hong Kong people who have emigrated to Canada in recent years, some 30,000 Canadian citizens live in Hong Kong, many of them originally Hong Kong citizens.
Press reports in Hong Kong have quoted British officials warning of a chaotic mass return of Hong Kong emigrants if China insists on them being in Hong Kong in person on the July 1 handover day in order to keep their residence rights.
Chinese officials have said in the past that this would be their bottom line, but the JLG has reached no agreement on it.
Canada has delayed a decision on granting visa-free entry to holders of a new Hong Kong passport to be issued after the handover, pending guarantees from China on the repatriation of Chinese who enter Canada illegally.
Replying to a reporter on Tuesday, Lambert denied Canada had any grounds to believe the SAR passport had been compromised from a security viewpoint.
Balloch declined to confirm or deny that significant numbers of Chinese illegal immigrants had entered Canada using Hong Kong documents that were illegally issued or obtained.
The envoys also denied local press reports that Canada had received a comprehensive list of Chinese dissidents living in exile in Hong Kong, and that it planned to grant them refuge after 1997. They said some individual dissidents had come forward but declined to comment further.
",37
"Britain's Prince Andrew has arrived in Hong Kong to inspect his troops in one of the last royal visits to the territory before its return to Chinese rule in the middle of next year.
During the three-day visit the Duke of York will watch jungle training and border patrols by soldiers of the 1st battalion of the Staffordshire regiment, of which he is Colonel-In-Chief.
Prince Andrew made a low-key entry to Hong Kong on Monday night and was entertained at Government House by Governor Chris Patten and his wife Lavender, officials said.
""It was a quiet supper,"" said one official. ""This is a low-key visit. He will spend most of his time with the One Staffords,"" an official said. ""It's quite likely his last visit here before China takes over.""
The prince, who fought in the 1982 Falklands War, will visit Hong Kong battle positions from World War Two, when the colony was occupied for four years by Japanese troops.
He will visit Hong Kong's military base on Stonecutters Island, the scene this year of many a tearful military farewell as the British steadily withdraw their armed forces ahead of 1997.
The garrison will be scaled down from almost 3,000 now to about 1,500 six weeks before the handover. All remaining troops are then to be pulled out by the time Britain hands over to China at midnight on June 30.
Andrew was to attend a cermony at which the colours of the Dragon Company of the Hong Kong Military Service Corps will be handed over to the Staffordshires, who will adopt the dragons as their nickname, a military officer said.
The dragons corps of Chinese servicemen, Britain's only Hong Kong Chinese army unit, lowered its ensign for the last time at a disbandment ceremony last Saturday.
The Staffordshires are one of two battalions that will be stationed in Hong Kong in the final months of British rule.
From July 1, China's People's Liberation Army will take over the garrison with a force of up to 10,000 troops, matching the British at their former peak of troop strength.
Andrew is expected on Wednesday to visit construction sites related to the territory's mammoth new airport now being built at Chek Lap Kok on the outlying Lantau Island, officials said.
He will see the huge Tsing Ma suspension bridge linking Lantau and the mainland part of Hong Kong with an expressway and railway corridor to the airport, they said.
Hong Kong is the last outpost in Asia of the formerly globe-girdling British Empire. The handover next year weighs heavily on the hearts of British patriots, colonials and fans of the royals who sadly regard the event as the sunset of British power and prestige.
Andrew's visit is likely to be one of the last by a member of the royal family before Queen Elizabeth's realm loses the bustling capitalist enclave of 6.3 million people to China.
Princess Anne is expected to visit for a ceremonial opening next month of Britain's Consulate-General building, which will be London's official mission in Hong Kong after the handover.
Although not official yet, it is an open secret that Britain wants heir-to-the-throne Prince Charles to preside over the last farewell on handover night and to sail away with Patten on the royal yacht Brittania after the furling of the Union Jack.
",37
"Hong Kong's post-1997 leadership campaign has begun in earnest with all the top candidates for the job as the territory's chief executive stating their positions on key issues in recent days.
The latest was Sir Ti Liang Yang, who on Monday made several policy statements including support for China's controversial plan to scrap the British colony's elected legislature.
With Britain's withdrawal and Hong Kong's reversion to Chinese rule 245 days away, would-be contenders to succeed Governor Chris Patten as the territory's top executive have sharpened their policy positions and revved up their campaigns.
""I think we have a real race in the sense that there is no chosen candidate in this contest,"" political expert Michael DeGolyer said on Tuesday.
DeGolyer, who heads a study on transition issues at a Hong Kong university, dismissed speculation that China had decided the outcome in advance and said rival Beijing factions were backing different Hong Kong personalities in the race.
""It's pretty clear they are backing different candidates in this contest,"" DeGolyer told a Hong Kong radio talk show.
The four main contenders among 31 nominees are Yang, shipping magnate Tung Chee-hwa, businessman Peter Woo and ex-appeals court judge Simon Li.
Yang, who resigned as the territory's chief justice last month to vie for the chief executive slot, broke with government policy when he ended his silence on China's plans for the legislature, describing them as legal and necessary.
China plans to dissolve Hong Kong's elected Legislative Council (Legco) -- reversing Patten's democratic reforms -- and install an appointed ""provisional legislature"". Britain and Hong Kong's democratic camp hotly oppose the plan.
""In my view the provisional legislature has a legal basis and there is a necessity to establish it,"" Yang told reporters.
He said without it, there was a risk of a legal vacuum arising during the transition to Chinese rule.
But Yang rejected the idea of the new assembly operating in tandem with Legco in the run-up to the handover.
He also said the enactment of new laws on subversion and treason, to reflect the change of sovereignty, should be left to a future permanent legislature to handle.
Despite the campaign atmosphere, the territory's new leader will not be democratically elected but chosen by the secretive, Beijing-appointed Selection Committee, a panel of 400 people from Hong Kong that will make the choice next month.
The Beijing-controlled Hong Kong daily Ta Kung Pao on Tuesday called the process ""a democratic election with Hong Kong characteristics"", a play on China's label for its own political system, ""socialism with Chinese characteristics"".
Yang also said he was shedding his British knighthood and the corresponding title ""Sir"".
Over the past week all four front-runners have made clear they would not challenge China's tough line on key political issues such as the legislature, democracy, human rights and freedom of expression in Hong Kong.
",37
"Hong Kong shipping tycoon Tung Chee-hwa was rated by a poll on Thursday as the best man to deal with China as a Beijing-controlled committee grilled candidates vying to run the territory when Britain pulls out in 215 days.
Britain hands its colony back to Chinese sovereignty at the stroke of midnight next June 30, and the 400-strong Selection Committee is in the midst of a three-day vetting of Tung and two rivals bidding to succeed colonial Governor Chris Patten.
The winner will be announced on December 11.
The opinion poll, conducted among 967 people by the Chinese University of Hong Kong on Monday and Tuesday, showed Tung to be the favourite and indicated 73 percent of the respondents also believe Tung is the candidate who can communicate best with the Chinese government in Beijing.
Only 7.2 percent thought his rival, former chief judge Ti Liang Yang could commmunicate well with Beijing, while another candidate, businessman Peter Woo, scored only two percent.
Yang, however, was seen as being more impartial and as the man most ready to voice his opinion to China, the poll showed.
Asked who was most likely to speak out against Beijing, 31 percent said Yang, 20 percent Tung and 4.8 percent Woo.
After the first day's questioning of the candidates by the committee on Wednesday, Tung emerged as a better communicator than he has appeared on previous occasions, analysts said.
He produced a clearly focused vision for Hong Kong with the main thrust on putting business and economic interests first.
During the quizzing by committee members representing Hong Kong's business community, Tung blasted the Democratic Party, Hong Kong's largest, urging it to drop its anti-China stance and to play a positive role in the transition for the sake of Hong Kong's 6.3 million people.
""At present they are objecting to anything Chinese,"" Tung said. ""This is not good in the long term or for the interests of Hong Kong,"" he said. ""They should not think in this way.""
The Democrats are boycotting the Selection Committee, condemning its mission to pick Hong Kong's post-colonial leader as undemocratic and its activity to assemble a new provisional body to supplant the present elected legislature as a violation of handover pledges made by China.
Tung, delivering his policy platform in a speech to the body, outlined a new era in which he would pack his advisory cabinet with specialists and include legislators -- now excluded from the equivalent colonial body.
He also said he would like to retain all the senior local officials of the civil service in sign that he might keep on the present and highly regarded Chief Secretary Anson Chan.
Among his policy initiatives, Tung listed the revival of manufacturing industries, especially with a high-tech focus.
In recent years manufacturing has shifted out of Hong Kong to cheaper locations in mainland China, and Hong Kong has become a service-based economy.
Tung also said he wanted to boost the role of provident funds and social security. He said he would press for faster approval of construction plans, the sale of public housing to tenants at affordable prices, the release of more government land for housing, and a reduction of red tape.
He said he had a sense of mission to work for Hong Kong's good. ""My father C.Y. Tung had always taught me to do meaningful things and to be proud of being a Chinese,"" he said. ""It is this sense of mission that drives me.""
",37
"The United States' top diplomat on Asia drew flak from leaders of Hong Kong's pro-democracy camp on Wednesday as he met key officials and politicians on the colony's 1997 return to China.
The U.S. Assistant Secretary of State Winston Lord had separate meetings with local political parties and with China's top official in the British colony, Zhou Nan.
Lord was also set to meet colonial Governor Chris Patten and his deputy, Anson Chan, as well as the man tipped as Hong Kong's first post-colonial leader, shipping magnate Tung Chee-hwa.
Pro-democracy parties criticised Lord for planning to see only one of the three candidates in the China-controlled contest to select a post-colonial successor to Patten -- tycoon Tung.
""He has adopted the conventional wisdom that Tung will be chief executive and that the other two have no chance,"" said legislator Emily Lau of the pro-democracy group, Frontier.
Lau said she was not invited to meet Lord. The democracy camp has accused China of preordaining Tung as winner of the contest, which will culminate on December 11, and some critics say Lord's meeting with him is helping to pick the victor.
""What's the point in seeing the others when there's only one who will become the chief executive-designate of Hong Kong,"" one U.S. diplomat admitted to a reporter on Wednesday.
Lau said U.S. politicians no longer followed up remarks supporting human rights and democracy with action, and that they were now interested only in making money out of China.
""If they cared about human rights and democracy they should have cancelled Secretary of State Warren Christopher's recent visit to China, to send Beijing a strong signal,"" Lau said.
But Christopher went there -- just one week after China had jailed leading dissident Wang Dan, she said. The U.S. has said it hopes to see Hong Kong keep its freedoms after 1997, but has stopped short of condemning Chinese plans to crimp democracy.
Legislator Yeung Sum, vice-chairman of the Democratic Party, Hong Kong's largest, said his party had told Lord of its worries about the future of press freedom, the elected legislature and the undemocratic nature of the post-1997 leadership contest.
His party had told Lord that a Chinese plan to dissolve the elected Legislative Council next July 1 and install a new provisional legislature was illegal, Yeung told reporters.
""It's a step back as far as democracy is concerned,"" Yeung said, branding the provisional legislature move a breach of the Sino-British treaty covering the sovereignty transfer.
Lord said Washington would continue to take a keen interest in Hong Kong after the change of flag at midnight next June 30.
""I'm here essentially for two reasons. One, to underline the United States' strong interest in a smooth reversion of Hong Kong to Chinese rule, and secondly I'm here to listen, and I'm listening to a wide spectrum of views,"" Lord told reporters.
Lord was to hold a news conference on Thursday.
On Wednesday, he heard not only the views of the democrats but also politicians who oppose some of Britain's latest moves.
Before meeting Lord, the chairman of the Liberal Party, Allen Lee, said he would stress his opposition to the colonial government's decision last week to put forward a liberal new anti-subversion law without China's agreement.
""Mr Patten, knowing that the chief executive will be selected next week, gazetted last Friday a bill, without the agreement not only from the chief executive-designate, but also from the Chinese government,"" Lee said.
""I think this is totally irresponsible. He is playing politics, and he doesn't deserve to be the governor of Hong Kong,"" he said.
",37
"With China's takeover of Hong Kong rapidly looming, the British colony faces a swirl of politics and diplomatic jousting in the week ahead, the last before China names the territory's first post-colonial governor.
British and Chinese negotiators, often sparring over the details of the sovereignty transfer, will meet on Wednesday for three days in their latest bargaining round.
Chinese sources said China is likely to lash out during the Joint Liaison Group session at a British attempt to foist a soft subversion law on the territory before the mid-1997 handover.
Last Tuesday Britain announced a draft bill that would make crimes such as subversion and sedition a crime only if they entailed violence, making clear mere dissident-style criticism of the authorities was not a crime.
China has denounced the move. ""This will only cause disruption and instability in Hong Kong,"" China's spokesman in Hong Kong Zhang Junsheng said on Friday. Some members of the pro-China lobby predicted the law would be replaced by a more Chinese-style legislation after the handover on July 1.
The territory is also preparing for a visit by U.S. Assistant Secretary of State Winston Lord on Wednesday.
Lord, who is also heading for China amid signs of a thaw in Sino-U.S. ties, plans to meet Governor Chris Patten and his deputy Anson Chan, as well as China's hardline envoy in the territory, Zhou Nan, and shipping tycoon Tung Chee-hwa, the favourite in the contest to be the first post-colonial leader.
Critics said Lord's meeting with Tung would be an undiplomatic signal from the United States tantamount to Washington picking the winner in the contest.
Fresh attacks on China are also expected on Wednesday from democrats in Hong Kong's elected legislature, which is set to be dissolved upon the handover and replaced with a new provisional body assembled under China's supervision.
Last week a Selection Committee of 400 rich or influential Hong Kong people, formed under China's careful control, quizzed Tung and two rivals over their policies and attitude to China.
Tung, 59, emerged as the most vocally pro-China contender, loosing off a volley of remarks that stressed loyalty and patriotism to China, attacked Patten's politics and threw in a snub on the inauspicious quality of the governor's residence.
The tycoon also suggested the Democratic Party, the territory's largest, should stop confronting China if it wanted to participate in post-handover political establishment, which drew an attack from Patten.
""You can't, nobody can, freeze out of the political debate in Hong Kong, out of the dialogue about Hong Kong's future, those who represent majority opinion in Hong Kong,"" Patten told Hong Kong's government-funded radio on Saturday during his visit to Japan.
The 400-member Committee will meet again on December 11 to vote for the new chief executive. Most people now consider Tung's rivals Ti Liang Yang, a former chief judge, and businessman Peter Woo, rank outsiders.
Many Hong Kong people were unimpressed by last week's performances, not least the territory's pro-democracy camp.
""Only empty promises and brief outlines were provided in their platforms,"" said legislator Fred Li of the Democratic Party.
He decried the fact Hong Kong's voters were not involved in choosing among the three contenders. ""All they need is the blessing of these 400 people,"" Li said.
",37
"Hong Kong, wary about upsetting its future Beijing masters when dissenters use it as an escape route, kept silent on Monday about Chinese dissident Wang Xizhe following reports he had fled to the British colony.
Human rights activists in Hong Kong said Wang, 46, fled here from his home in China's neighbouring Guangdong province over the weekend, just days after the communist authorities in Beijing bundled a colleague into a labour camp.
He was expected to leave Hong Kong soon, they said, possibly by Monday night, and probably for the United States.
The U.S. Consulate declined to confirm or deny that Wang had asked for asylum. ""We don't comment on asylum cases,"" consulate spokesman Patrick Corcoran said.
Wang would be the second Chinese dissident known to have fled to the United States via Hong Kong this year. Liu Gang fled last May after months of police harassment following a six-year prison stint for helping to lead the 1989 student protest movement.
""According to our information Wang is safe at the moment,"" Robin Munro, Director of Human Rights Watch Asia, told Reuters.
""I think it's likely he'll probably be going on somewhere else fairly soon,"" Munro said.
Munro said he was unable to say where Wang was heading, but other human rights sources in Hong Kong said he was seeking refuge in the United States.
Washington has been generous in granting asylum to Beijing's political critics since a military crackdown against the student-led democracy movement in Tiananmen Square in June 1989.
Scores, perhaps hundreds, of Chinese dissenters have fled to the West since then through Hong Kong, local activists say.
""I assume he was about to be arrested by the Chinese authorities. I can't think what else would have prompted such a rapid departure,"" Munro said, attributing Wang's move to the three-year sentence passed on dissident Liu Xiaobo last week.
Wang and Liu sparked reprisals against remaining dissidents last month when they wrote a letter demanding the impeachment of President Jiang Zemin for violating the constitution by placing the army under Communist Party, rather than state, control.
Human rights sources said it was unlikely Wang would speak publicly in Hong Kong but that he would explain himself when he reached his destination.
As Hong Kong prepares to revert to Chinese sovereignty next July 1, issues of human rights, and especially help for mainland dissidents, have become acutely sensitive.
""The Hong Kong government asks such people to keep quiet while they are here as the price for facilitating their smooth exit from the territory,"" one human rights source said. ""And the Americans go along with that quiet, too,"" he said.
Munro saw the latest developments in China as a blow.
""It's extremely discouraging and quite deplorable the way the (Chinese) government has intensified its crackdown on the few remaining dissidents in China in recent weeks,"" said Munro.
He said the dissident movement in China had effectively been crushed, with all prominent dissidents either in jail or forced into exile.
""The saddest thing about it is that Wang appears to have concluded there's no way he could continue to struggle for change from within the country,"" Munro said.
Wang's activism dates from 1974 when he co-authored an attack in Guangdong on the radical 1966-76 Cultural Revolution.
He took part in the 1979 Democracy Wall movement in Beijing and produced his own dissident newsletters. He was twice imprisoned and spent some 17 years in jail and labour camps.
He was released on parole in 1993, and before he fled he had been under constant police surveillance.
",37
"A former top judge who is vying to lead Hong Kong after China takes over next year has said the territory needs a neutral and impartial leader rather than a well-connected tycoon, and one who is tolerant towards dissent.
""I'm for tolerance,"" Yang Ti Liang, one of three candidates trying to become Hong Kong's first chief executive after Britain hands the colony back to China at midnight next June 30, told Reuters in an interview.
The 67-year-old Shanghai-born former chief justice, who shed his British knighthood a month ago, came through this month's first round of voting by a 400-strong China-backed Selection Committee with 82 of the votes.
He was well behind frontrunner Tung Chee-hwa, a shipping tycoon with strong China links who scored 206 votes, but ahead of another entrepreneur, Peter Woo, who scraped through with 54.
Tung has often been depicted as Beijing's favourite in the race. But Yang, who has emerged as the people's favourite in some recent opinion polls, and once with a lead of as many as 10 percentage points, is battling on, even though there will be no public vote for the top post.
""Of course the votes indicated that certainly the Selection Committee favours Tung much more than they favour me. It's an uphill battle. It's not easy. But I think there's still hope,"" Yang said.
Over the coming week candidates will be quizzed by committee members on their policies ahead of their final vote on December 11.
Asked if the committee was likely to heed his popularity with the public, Yang said: ""I think to a certain extent it will. I don't think they will follow the poll to the letter. If there's a vast difference shown between candidates in the polls, the committee will have to take note.""
Yang's campaign headquarters is a modest, cramped office rented in a hotel, in marked contrast the plush executive suites occupied by Tung. The ""campaign"" is a crusade to lobby business and interest groups, not the general public.
Yang described his greatest strength in comparison with Tung as his long experience as a fair, unbiased arbiter.
""I have no business connections or political connections ... having been a judge for the past 30 years. I am somebody above politics, above connections, neutral, impartial, as opposed to somebody who is very much in business and whose contact with the Chinese government is very good,"" he said.
""I think anybody who has a huge network with other people does give rise to the problem as to whether, if eventually selected, he might not be perceived to be influenced by these connections when making a decision.""
Yang said Hong Kong's future leader would not face a test of courage in standing up to Beijing's communist rulers to resist pressure for a crackdown on anti-communist dissenters and pro-democracy activists.
""It's not a question of being brave or not brave. It's a question of looking at the letter of the law and seeing what it allows,"" he said. ""I want to be on the side of tolerance.""
He said he hoped a law on sedition, treason and subversion required by Beijing would not be enacted by the controversial interim legislature that China plans to install at the handover, but by a new long-term legislature to be elected in 1998.
Yang also said he believed the Chinese Communist Party, which has long operated underground and behind the scenes in Hong Kong, should register as a party under local law if it planned to be active in the territory after 1997.
",37
"China is poised to take a major step in reversing democratic reform in Hong Kong by creating a new legislature to replace the territory's elected body when Beijing resumes control of the British colony next year.
The die will be cast on Saturday when 400 Hong Kong people, carefully screened by China, meet over the border in the city of Shenzhen to appoint 60 legislators who will make Hong Kong's laws from July 1.
The ""provisional legislature"" will be installed after China disbands the elected Legislative Council (Legco) in a move to roll back political reforms introduced by Beijing's nemesis, departing colonial governor Chris Patten, since 1992.
The body that will choose the new parliamentarians is the Selection Committee, which also elected Tung Chee-hwa, a 59-year-old shipping tycoon with strong pro-Beijing loyalties, to succeed Patten as chief executive of the territory of 6.3 million people.
China resumes control of Hong Kong at midnight on June 30 next year, ending more than 150 years of British rule.
The Hong Kong public, who voted resoundingly for pro-democracy groups in Legco elections last year, have had no vote in the two selection processes organised by China and no say in the decision to remove the elected legislature.
The Sino-British quarrel over the provisional legislature set Tung and Patten on a collision course this week.
""A quarter of those who are lining up for jobs in this institution were beaten in regular elections ... It will be a blot on the first months of Chinese rule,"" Patten told a newspaper. ""This echo chamber has no place in the political or administrative life of Hong Kong ... We will have nothing to do with it any form.""
Tung responded in a speech to the business community by saying Britain must ""face the reality"" of the new legislature. He warned that if its legitimacy was challenged further he would get China's parliament to legislate on its legality.
Hong Kong's biggest pro-democracy group, the Democratic Party, is boycotting the selection process, which it brands as a plot to snuff out democracy and enact repressive laws.
""You won't find five of them who can be called democrats by any stretch of the imagination,"" Democratic Party leader Martin Lee told Reuters, commenting on the candidates.
The Democratic Party has expelled a rebel member, Dominic Chan, because he broke ranks to run for the new assembly.
The party is organising two days of protests against the provisional legislature, and China has beefed up security on the border in case demonstrators try to cross into Shenzhen, local media quoted Chinese sources as saying.
The Selection Committee will choose the 60 members of the provisional legislature from a list of 130 candidates.
Pro-Beijing parties fielding candidates denied critics' allegations this week that they had negotiated the result of the voting in advance in under-the-table horse-trading.
""There is definitely no carve-up of seats,"" said Liberal Party leader Allen Lee.
Each Selection Commitee member will vote by endorsing up to 60 names from among the candidates. The top 60 candidates -- those listed the most times -- will be appointed to the provisional legislature.
Among the candidates are 34 incumbent legislators, raising the prospect that Legco could be crippled well before Chinese rule, because the two legislatures' schedules could clash.
A poll by Hong Kong University indicated on Thursday that one-third of the public support the concept of the new legislature and one-quarter trust the Chinese government.
",37
"On the eve of an historic gathering of the elite assembled by China to pick Hong Kong's future leader, the smart money was on Tung Chee-hwa.
Most observers viewed it as a foregone conclusion that the shipping tycoon would emerge the winner after the 400-strong Selection Committee of Hong Kong business titans and pro-China politicians meets on Wednesday to choose the territory's post-colonial chief executive.
Blessed by a personal public handshake from Chinese President Jiang Zemin last January, Tung ran off with 206 votes in the first round of voting last month by the committee, which was chosen under Beijing's close supervision.
Sovereignty over the territory of 6.3 million people, one of Asia's economic wonders and Britain's last major colony, reverts to China at midnight next June 30 -- 203 days from now.
A poll by Hong Kong's Lingnan College showed on Tuesday that 56 percent believed the winner has probably been picked in advance. Only 18 percent believe there will be a real contest.
""I don't think there was ever any doubt that it would be Mr Tung. I've been calling this selection committee the Tung Chee-hwa selection committee,"" said Martin Lee, head of the Democratic Party, the largest in Hong Kong's legislature.
Lee, whose party is boycotting the selection process, said Tung could not be counted on to preserve Hong Kong's freedoms, human rights and its current moves towards greater democracy.
""The people of Hong Kong cannot trust him to protect our rights, not because he is a bad man, he is a nice guy, but I cannot see how he is in a position to say no to Beijing on any important issue,"" Lee said.
Some Hong Kong newspapers were already putting the finishing touches on Tuesday to a slew of Tung-the-victor profiles for publication on Wednesday, an industry source said.
If he wins on Wednesday, Tung will be greeted soon by a no-confidence debate presented by lawmaker Emily Lau, one of China's loudest critics.
Colonial Governor Chris Patten has promised his support for the chief executive-designate, whoever it turns out to be, in the twilight months of British rule.
Tung has not responded to the pledge but has said he will engage Hong Kong's respected civil service in dialogue on how best to run the territory and ensure a smooth transition.
""Nobody wants the present administration to be turned into a lame duck,"" Tung said on Monday.
Two rival candidates -- former Chief Justice Ti Liang Yang and entrepreneur Peter Woo -- are both ranked as outsiders.
An opinion poll by Hong Kong University last week gave Tung 46.7 percent, Yang 28.8 percent and Woo 5.2 percent public backing.
But Tung only began to gain public support in the past month, after Patten's chief civil servant Anson Chan declared she would not run for the job. Tung has never matched the 60 percent-plus popularity ratings which Chan enjoyed.
Assuming he wins, the 59-year-old tycoon will spend the next six months assembling a cabinet of advisers to guide policy after Hong Kong becomes an autonomous Special Administrative Region of China. His team is expected to be highly pro-business, but he has also promised a role for grassoots bodies.
He will also lay the groundwork for a provisional legislature, soon to be picked by the same Selection Committee, to take over from the present elected Legco next July 1.
The leader-in-waiting will face many challenges before and after the handover, with Britain and China locked in disputes on issues ranging from passports, nationality and troop deployments to an anti-subversion law and the disbanding of Legco.
",37
"Hong Kong's chief executive designate Tung Chee-hwa, fresh from an overwhelming leadership victory, launched a charm offensive on Thursday aimed at winning public confidence in a smooth transition to China.
At a meeting in this Chinese frontier city, the 59-year-old Shanghai-born former shipping magnate was also endorsed as Hong Kong's future leader by the 150-member China-controlled Preparatory Committee, which is crafting the territory's future political institutions.
A beaming, animated Tung appeared at a Shenzhen news conference, vowing to make himself regularly available to the press, and promising to aim for friendly cooperative relations with Hong Kong's Democratic Party and the outgoing colonial administration.
""Have you eaten?"" was his first remark as he entered a gathering of 100 Hong Kong journalists. He fielded his questions skillfully, shifting effortlessly between three languages -- Mandarin, Cantonese and English.
Tung quipped and charmed with great self-confidence and a charismatic style that would be the envy of many Chinese leaders in Beijing, not known for their skillful handling of the media.
He declared he would go on the offensive to persuade Hong Kong's 6.3 million people to trust a controversial 60-member provisional legislature which China plans to install in place of the present elected Legislative Council (Legco) when Britain hands back the colony to Beijing next July 1.
""I think you'll find the provisional legislature will have good credibility,"" the businessman turned politician said.
""The acceptability of the provisional legislature is gaining ground every day. I'm confident we'll find 60 people with credibility among the people of Hong Kong.""
Thursday's Preparatory Committee meeting in the boomtown of Shenzhen was working on a package of procedures for selecting the legislature on December 21, the next milestone in Hong Kong's march to Chinese rule.
Hong Kong's Democratic Party has condemned the move as an attempt to snuff out the territory's embryonic democracy and vowed to challenge the legislature's legality in the courts, forcing China to consider locating the body on the mainland rather than in Hong Kong.
But Tung said he would also like to charm the Democrats by sitting down with them and ""peacefully"" discussing the transition problems.
Tung said he hoped to cooperate with departing governor Chris Patten and the British colonial administration. He recognised there were many difficulties but said: ""Let's do what is best for Hong Kong.""
He also said that Hong Kong would continue its gradual shift towards greater democracy but only at the slower pace laid down in the territory's post-1997 constitution, the Basic Law.
""We will of course move forward on the course of democracy in accordance with the Basic Law,"" he said. ""The process has already begun. It's quite clearly defined in the Basic Law.""
Tung said he had no news yet on who he planned to bring into his kitchen cabinet, the Executive Council, or whether Hong Kong's current chief civil servant Anson Chan would stay on.
""I hope she will stay, I hope she will be my deputy,"" he said, repeating his desire for a through-train civil service and smooth transition.
Tung also said he would go to Beijing for investiture as the Chief Executive-designate of Hong Kong but no date had been set.
",37
"British Governor Chris Patten challenged business on Thursday to defend the rule of law that had made Hong Kong a success, and to destroy fallacies that may harm the territory in the run-up to China's mid-1997 takeover.
""The rule of law is not an optional extra. It is what makes Hong Kong different, it is what makes Hong Kong successful,"" Patten told the Hong Kong General Chamber of Commerce in a speech.
""Without it, a lot of you would not be here,"" he said.
Britain hands back Hong Kong to China in 264 days from now, ending a century and a half of colonial rule over an outpost that has become one of Asia's economic pearls.
China has promised Hong Kong substantial autonomy and the preservation of its capitalist system under a ""one country, two systems"" formula.
Patten and chamber chairman James Tien glossed over an image projected in local newspapers lately that the governor and the business community were at loggerheads over 1997-related issues.
Several times this year Patten chastised businessmen who pandered to Beijing's communist rulers to beg favours and thus invited China to encroach upon Hong Kong's autonomy.
Tien stressed at Thursday's gathering that the key business body backed the government on key policies. Patten thanked them, drawing applause, and said his critics were in a minority.
Tien said the chamber supported the pegging of Hong Kong's currency to the U.S. dollar, the rule of law, the independence of judges and the civil service, and the commitment to good government.
But he did not mention Britain's demand for Hong Kong's fully elected legislature to continue after the 1997 handover, a major plank of Patten's policy, or China's plans to scrap this legislature and replace it with an appointed ""provisional"" body.
Asked by one businessman if there were any conditions under which Patten would cooperate with the ""provisional legislature"", the governor flatly replied ""No"".
Patten stressed the value of a political opposition. He cited a poll in which three-quarters of executives questioned said opposition to government posed no threat to a territory's prospects and that Hong Kong's opposition was in fact too weak.
""I'm very grateful to the chamber for everything they've been doing to redress the balance,"" he said, drawing guffaws of laughter for his ironic reference to barbs that he has received from some local business leaders in recent months.
Patten exhorted business to speak out for Hong Kong's autonomy, opposition to corruption, and for basic freedoms. He also asked it to help destroy four big fallacies that he said harmed Hong Kong's prospects and image.
These were the notions that Hong Kong's economy needed stimulative intervention, that it was over-regulated and was losing its competitive edge, that welfare spending was too high, and that the rule of law was irrelevant to economic success.
""You can give Hong Kong a lead in defending the rule of law, open and accountable government... by helping to nail the fallacies I have described. When you speak up for Hong Kong, it makes a difference,"" Patten said.
The fact that over half the companies listed on the Hong Kong bourse had domiciles in places such as Bermuda or the Cayman Islands, he said, showed the value the business community attached to the rule of law.
In recent years many firms have hedged their 1997 risks by shifting their legal domiciles to overseas jurisdictions.
",37
"Britain entered new talks with China on Hong Kong's future on Wednesday, admitting it could give no consular protection to Hong Kong people holding special British passports after the Chinese flag is hoisted in 1997.
Senior diplomats met to argue over handover details against a backdrop of disputes over a subversion law drafted by Britain and Chinese troop deployments in the British colony.
The agenda for the three-day meeting of the Joint Liaison Group (JLG) was confidential and it was not clear what, if any, agreements would be produced from the latest bargaining round.
But British chief negotiator Hugh Davies said a great effort was needed to surmount a raft of problems before the capitalist territory of 6.3 million people is handed over in 209 days.
""The subjects that we all know about...are questions such as continuity of law in Hong Kong, questions to do with right of abode, questions to to do with the international network of agreements that Hong Kong already has and which will be agreed to continue beyond 1997,"" Davies said.
His Chinese counterpart Zhao Jihua served notice that China, infuriated by the colonial government's liberal anti-subversion law last week, would not brook any more major unilateral changes in Hong Kong's legal set-up by Britain before 1997.
""During the period of the final days, we do not wish to see new troubles or new obstacles, because the remaining issues are more than enough to deal with,"" Zhao said.
""But we are still very confident, so long as the two sides sincerely cooperate with each other...we will solve all issues which are related to the transfer of Hong Kong in a timely and successful manner,"" Zhao said.
Hong Kong is to become an autonomous region of China at midnight next June 30, ending over 150 years of British colonial rule, under a treaty in which Beijing has vowed to let it keep its freewheeling capitalist system for 50 years.
In the latest of many twists in the transition, Britain's Senior Trade Commissioner, Francis Cornish, said on Tuesday London could not give consular protection to the more than 135,000 Hong Kong people holding special British passports.
Britain in 1990 granted 50,000 heads of households in Hong Kong the right to a full British passport in a concession to widespread demands for passports for all residents following Beijing's 1989 crackdown on pro-democracy demonstrators.
Cornish said China regarded these people as holders of dual citizenship and would not recognise British consular protection for them on Chinese soil.
""The Chinese have made it very clear that they regard holders of British Nationality Selection Scheme passports, when in Hong Kong and when in China, as Chinese citizens,"" he said.
British officials have also warned there could be a stampede home in June by Hong Kong people with domiciles abroad if China insists on them being present in person on handover day in order to keep their Hong Kong right of abode.
Britain's liberal bill on subversion, designed to exclude China-style jailings of dissidents, goes to the Hong Kong legislature later on Wednesday, and its fate is unpredictable.
China condemned the move last week and said such a law was the sole prerogative of the post-handover government to enact.
Earlier this week, British experts said they had failed to reach agreement with China in the JLG on Beijing's demand to send an advance party of People's Liberation Army (PLA) troops to Hong Kong before the handover.
The quarrel appears to be over the size of the unit, diplomats say.
Hong Kong people have bitter memories of the PLA's bloody crackdown on pro-democracy students in Beijing in 1989.
",37
"Britain risked China's wrath on Tuesday by proposing new laws on subversion in Hong Kong, laying down legal markers intended to head off Chinese-style jailings of dissidents after Beijing takes over the colony in 1997.
The colonial government unveiled draft amendments to Hong Kong's criminal law, ordered by Governor Chris Patten's cabinet, to cover crimes of subversion and secession. The bill will go to the Legislative Council next Wednesday.
Britain's move, after months of fruitless exchanges with China on the issue, was an effort to set down legal standards for China to follow after Beijing takes control of the territory at midnight next June 30, British officials said.
But the move was promptly attacked by Chinese officials. A spokesman for China's de facto embassy, the Xinhua News Agency office, was quoted by a local Beijing-controlled news agency as saying Britain had ""violated promises on the transition"" and London ""must bear all the consequences of its actions"".
Under a post-1997 Hong Kong constitution promulgated by China, the Basic Law, the territory must add laws against secession and subversion to the statute book after the handover.
Until now China has indicated it will have the law enacted by a new legislature it planned to install after the sovereignty transfer, sparking fears in Hong Kong that it will bring in draconian communist-style laws clamping down on dissent.
Mainland China has always eyed Hong Kong as a potential base of subversion, ever since revolutionaries used it as one of their bases against the imperial Manchu dynasty in the last century.
A Legislative Council motion in January urged the Hong Kong government to introduce pre-emptive laws on the issue to protect the civil rights of Hong Kong's 6.3 million people.
Fears were aggravated by remarks made by senior Chinese officials this year including Foreign Minister Qian Qichen and Beijing's Hong Kong policy chief Lu Ping, who set clear limits on post-1997 freedom of expression in the territory.
Britain's draft bill proposes adding the crimes of secession and subversion to the existing criminal law and clarifies the definition of seditious activity. It removes references to the present sovereign Queen Elizabeth, and refers only to Britain.
""It would not be desirable to leave a legislative gap in this important and sensitive area,"" an official said.
""It is quite clear that it is the view of the community that we should seek to have legislation on these concepts in place before July 1, 1997,"" said Secretary for Security Peter Lai.
The changes take a form that makes them easily adaptable by the future government of the Hong Kong Special Administrative Region (SAR) that China will install, an official said, adding that all that would have to be changed in the law after 1997 would be the name of the sovereign state from Britain to China.
Under the amended law, sedition would carry a maximum jail term of two years, subversion and secession 10 years, and treason life imprisonment. In China these crimes can earn a death sentence. In Hong Kong the death penalty is non-existent.
The draft law makes clear the offences are related to the use of force to attempt to overthrow the government, and not to non-violent criticism of the regime or of the political system as in China, officials said.
""What the British seem to be doing is to set down legal standards that would give space to non-violent critics and dissenters -- a law that wouldn't put people like Wei Jingsheng or Wang Dan in jail,"" a source close to the government said.
Wei, the father of the Chinese democracy movement, and former student leader Wang Dan, were both given lengthy jail terms in China this year for subversion.
Both dissidents had criticised the government orally and in their writings and had called for democratic change in China, but neither man had resorted to violence.
",37
"The Hong Kong government was in a flap on Thursday after a bombshell admission that Britain could not protect Hong Kong holders of British passports after China takes over the colony next July.
Governor Chris Patten called an urgent meeting of the Legislative Council for later on Thursday to make a statement on the controversy, which arose after a British envoy said London could provide no consular protection for the passport holders.
Patten's spokesman said the issue had sparked ""considerable public interest and a good deal of misunderstanding"" as well as demands by legislators to meet him.
Patten would answer their questions at the extraordinary sitting of Legco on Thursday evening.
The uproar is the latest jolt in Hong Kong's often bumpy transition back to Chinese rule 208 days from now, when 150 years of colonial rule will end and the territory will become an autonomous region of China.
Britain's Senior Trade Commissioner, Francis Cornish, said on Tuesday that London could not protect the more than 135,000 Hong Kong people granted full British passports with right of abode in Britain under a special selection scheme in 1990.
In a concession to widespread demands for full British citizenship after Beijing's 1989 Tiananmen Square crackdown, London offered passports to 50,000 Hong Kong households, a privileged fraction of Hong Kong's 6.3 million people.
Cornish said China regarded these people as holders of dual citizenship and would not recognise British consular protection for them on Chinese soil, on the mainland or in Hong Kong.
Cornish's remarks were denounced by local politicians as a sell-out. In the corridors of the Hong Kong government even the most senior officials were privately criticising Britain for what they saw as a concession to China, one source said.
On Wednesday, London and the Hong Kong government rushed to assure affected passport holders that anyone claiming sole British nationality would receive consular protection until it was proven they held dual citizenship.
But a British statement made clear Britain could not give full consular protection for people holding dual Chinese nationality once Hong Kong becomes part of China again.
British officials said the passports issued to these people were indistinguishable from any other full British passport, but many in Hong Kong are concerned that Britain may have learned that China had obtained the names of the passport hodlers.
""The only way to know for sure if one of these passports was issued under the special scheme would be if you had the names,"" a senior government source said.
The transition to Chinese rule has been dogged by disputes since the 1989 Beijing crackdown. China reacted furiously to the special passport scheme, and again when Patten introduced reforms expanding democracy in 1992.
China was infuriated last week when Britain unveiled a liberal anti-subversion bill that would set legal markers against China-style jailings of dissidents in Hong Kong.
British and Chinese senior negotiators are in the midst of a three-day bargaining session on handover details and have signalled they expect to announce accords on several issues on Friday, although the agenda has so far remained confidential.
Hong Kong is supposed to be autonomous and keep its capitalist system intact for another 50 years, but a human rights group said on Wednesday China's crackdown on dissent bode badly for the territory and its autonomy prospects were slim.
""The rule of law and human rights picture is bleak,"" said Human Rights Monitor director Law Yuk-kai on the launch of an annual human rights report.
",37
"Hong Kong has arrived at the brink of history, set to name its first Chinese leader after a century and a half of British colonial rule.
At a gathering to be held under the red flag of communist-ruled China, Hong Kong's rich and mighty will meet on Wednesday to pick the first post-colonial leader -- and the smart money is on shipping tycoon Tung Chee-hwa.
The vote by a 400-member Chinese-controlled Selection Committee, slammed by critics as a travesty of democracy, was viewed by most in Hong Kong as a foregone conclusion.
A survey by Hong Kong University showed 82.2 percent expected Tung to win, while 43.4 percent of respondents would back him if they had the chance to vote. His nearest rival, Ti Liang Yang, would get 27.9 percent of popular support.
Sovereignty over the territory of 6.3 million people, one of Asia's economic wonders and Britain's last major colony, reverts to China at midnight next June 30 -- 203 days from now.
The winner of Wednesday's vote by the committee will become the chief executive-designate of the Special Administrative Region of China, as Hong Kong will be called from next July 1.
On the eve of the vote a small band of pro-democracy protesters camped overnight outside the conference centre.
Some politicians and diplomats fretted about China-style repression. ""The people of Hong Kong cannot trust him (Tung) to protect our rights...I cannot see how he is in a position to say no to Beijing on any important issue,"" said legislator Martin Lee.
""Unless there is a complete change in the attitude of these candidates the outlook for human rights in Hong Kong is very bad,"" said Paul Harris, head of Hong Kong Human Rights Monitor.
But the markets, a barometer of Hong Kong's fortunes, trumpeted bullish optimism. Hong Kong stocks rebounded from recent losses to end 198 points up, the index of China-linked H-shares soared to nine-month highs in the largest one-day gain in history, and forecasters predicted a 1997 property boom.
Publicly espousing ""consensus"" rather than confrontation with China, and collective duties over individual rights, and blessed by a public handshake from President Jiang Zemin in January, 59-year-old Shanghai-born Tung grabbed 206 votes in the first round of voting last month by the committee.
He only needs 201 to win the clincher on Wednesday. Some Hong Kong newspapers were already putting the finishing touches on Tuesday to a slew of Tung-the-victor profiles for Wednesday.
If he wins, he will be greeted by a no-confidence debate presented by lawmaker Emily Lau, one of China's loudest critics, in Hong Kong's Legislative Council (Legco).
Governor Chris Patten has vowed support for the future leader, whoever he is, in the twilight of British rule.
But Tung has not responded to the plege. He has said he will consult Hong Kong's respected civil service on how best to run the territory and ensure a smooth transition.
""Nobody wants the present administration to be turned into a lame duck,"" Tung said on Monday.
If he wins, Tung will spend the next six months assembling a cabinet of advisers to guide policy. His team is expected to be highly pro-business.
He will also lay the groundwork for a provisional legislature, soon to be picked by the same Selection Committee, to take over from the present elected Legco next July 1.
",37
"He once sailed his shipping empire through rough waters, steered an even course between China and Britain for years, but navigating Hong Kong into Chinese rule in 1997 will be the challenge of his lifetime.
Shipping magnate Tung Chee-hwa, chosen as Hong Kong's first Chinese leader on Wednesday after more than 150 years of British colonial rule, will take the helm on July 1.
""He will be charting the course for Hong Kong as it enters a new era. And he will be at the helm of what is at once an economic powerhouse and a dynamic, sophisticated metropolis,"" Governor Chris Patten, Britain's last colonial chief, said in a statement congratulating Tung on his victory.
It is a mission that has no precedent.
The territory that Tung governs will be the first British colony to have matured into a world trading economy and then handed back to a communist-ruled motherland.
China has promised the territory of 6.3 million people a great degree of autonomy and at least 50 more years of untrammeled capitalism but vowed to curb the pace of democratic reform.
The 59-year-old tycoon saw his fortunes almost dashed in the 1980s when the family firm met ill winds, but Beijing helped bail him out with a syndicated loan, and his firm regained its strength.
In his new role, Tung will have to tack between pro-democracy politicians who branded his triumph the death of democracy, the departing colonial British with their sense of lost empire, and a proud Beijing Communist leadership keen to set the stamp ""This is China"" on the map of Hong Kong forever.
The vocal pro-democracy lobby plans to challenge his authority with a no-confidence vote in the current legislature.
""What Hong Kong needs most is a champion for Hong Kong people as we face the unprecedented challenges of the handover -- not a spokesman for China,"" said Democratic Party leader Martin Lee.
Some analysts predicted Hong Kong's own version of China's ""red princelings"" -- sons and daughters of senior Communist Party officials -- would move to centre stage from now.
Members of families closely tied to the Beijing government since the 1950s are favourites for the 60 seats in the new legislature or roles in Tung's inner advisory cabinet.
The new elite will look to people such as legislator Leung Chun-ying, a policeman's son who has emerged as Beijing's trusted lieutenant in the transition process.
The princelings also include figures such as Timothy Fok, eldest son of Beijing's most trusted man in Hong Kong, tycoon Henry Fok, a kingmaker in the contest that Tung won.
Tung must now swiftly lay down a gameplan for the next six months with Beijing, political analysts said.
He must also work closely with the politicians and business titans likely to be brought into the post-1997 provisional legislature and advisory cabinet known as the Executive Council.
""He will start out with a unity of support behind him at least from the more moderate and pro-China in Hong Kong,"" said political analyst Michael DeGolyer of the Baptist University.
""I think he's going to have to move rather rapidly to talk to the people in Beijing. He is going to have to move rather rapidly to meet with Provisional Legco (Legislative Council) members,"" DeGolyer said.
Tung's first bite at his realm will come on Thursday when the China-controlled Hong Kong Preparatory Committee crafting 1997 power structures meets over the border in Shenzhen city.
Very soon, Tung will also have to talk to Hong Kong's popular top civil servant, Chief Secretary Anson Chan.
Tung has said he would like to keep Chan as chief secretary but her past defence of Patten's democratic reforms may have dented her credibility and spoiled her chances of staying on.
Tung is keen not to rock the boat and has said he aims to keep as much of the civil service intact as possible. ""Nobody wants the present administration to be turned into a lame duck,"" Tung said before the vote.
",37
"Just months ago, shipping magnate Tung Chee-hwa was a retiring man who avoided the limelight, kept his political views secret, and seemed to strike a balance between his loyalties to China and Britain.
But he has emerged as Hong Kong's first post-colonial leader and evolved into a conservative, Chinese patriot, loudly singing China's tune on key political issues under the bright spotlight of the media.
A 400-member Selection Committee controlled by China on Wednesday picked Tung as chief executive to govern Hong Kong when it becomes an autonomous region of China in mid-1997.
On the campaign trail, the 59-year-old tycoon with hallmark spiky grey hair had been swapping his pinstripe suits for jeans and sportswear to traipse around local communities to show he not only walks among kings but also has the common touch.
Tung saw his fortunes almost dashed in the 1980s when the family firm met ill winds, but Beijing helped bail him out with a syndicated loan. Now he is their man in Hong Kong.
Tung grabbed a resounding 320 of the committee's 400 votes.
Eve-of-vote polls also showed Tung to be the public's favourite -- 47 percent support versus his nearest rival Yang Ti Liang's 29 percent. The masses, however, had no vote.
Many saw Tung's victory as preordained. A pointed handshake from President Jiang Zemin in Beijing last January anointed him, most people think.
During his campaign, Tung said he would legalise the Communist Party. He condemned the Democratic Party -- Hong Kong's largest -- for being anti-China, and warned foreign countries not to use Hong Kong to subvert China.
He also said anybody advocating independence for Taiwan or Tibet could not stay in Hong Kong.
He has accused colonial Governor Chris Patten of trying to split Hong Kong, called for pro-China patriotism in schools, and unveiled administrative policies stressing executive-led rule and a slower route to democracy.
Tung rounded on those who use the term ""pro-China"" as a dirty word.
""We have to turn pro-China into a very positive definition. It is a good thing to love our country,"" he said.
Complained Democratic Party legislator Tsang Kin-shing: ""I find him more colonial than the colonial government.""
Tung has vowed to give free rein to Hong Kong's capitalist economy and business development. But he has also promised not to ignore the need for social welfare.
While some fret over his conservatism, most who know him both at home and abroad hail Tung's good character. He has a reputation for modesty, wisdom and caution.
""He is a man, in my view, of great integrity, a strong individual, independent-minded, surely and sincerely promoting the welfare of the people of Hong Kong,"" said U.S. Assistant Secretary of State Winston Lord, a friend of Tung's.
But Lord noted he had failed to sway Tung to reject China's plan to scrap Hong Kong's elected Legislative Council with a provisional legislature next July 1. Britain has condemned the plan as a ""black day for democracy"" in the territory.
Tung has been a senior member of the Preparatory Committee of pro-Beijing, Hong Kong notables and mainland China officials crafting the power structures to replace British colonial rule.
He was lauded as an impartial and honest counsellor by Patten when he left the governor's advisory cabinet in June.
He resigned in October as head of his company, Orient Overseas (International) Ltd, to make his leadership bid.
Tung took the helm of Orient after his father died in 1979. He has publicly acknowledged that China helped bail out the company 11 years ago by backing a US$120 million fund led by tycoon Henry Fok, a kingmaker in the leadership contest.
Born in Shanghai in 1937, Tung was educated at Liverpool University in Britain.
",37
"In an exercise dubbed by China as a ""democratic election with Hong Kong characteristics"", this bustling territory goes to the polls on Friday. But only 400 citizens out of 6.3 million people in the colony will be voting.
A 400-member Selection Committee formed under Beijing's tight rein will be inaugurated in Hong Kong with a month-long mission to elect the first post-colonial leader and the 60 members of a replacement legislature.
The committee, to be anointed by Chinese Foreign Minister Qian Qichen on his first official trip to the colony, will set the tone of the government to rule Hong Kong after Britain hands its Asian pearl back to China at midnight next June 30.
Hong Kong, one of Asia's economic wonders, is to become a Special Administrative Region of communist-ruled China. Beijing has pledged to maintain the territory's thriving capitalist system intact for 50 more years under the terms of China's ""one country two systems"" reunification policy.
Pro-democracy legislators attacked the leadership candidates in a debate on Wednesday for failing to address issues of human rights and democracy and called for a real general election.
Trade unionist Lee Cheuk-yan told Hong Kong's existing legislature that a leading contender, shipping tycoon Tung Chee-hwa, was dangerous.
""Mr Tung is the most conservative among them, and he is the most dangerous as he calls on Hong Kong people to be willing to be obedient citizens,"" Lee said.
But a motion critical of the leadership selection was defeated by the pro-Beijing camp. Several democrats were absent on a lobbying mission to London.
""Democratisation is not like instant noodles... It took hundreds of years for Western countries to develop their present democratic systems,"" pro-Beijing legislator Ip Kwok-him said.
The sovereignty transition has been frought with disputes between China and Britain, between colonial governor Chris Patten and Chinese envoys, and between Hong Kong's burgeoning democracy movement and a pro-Beijing political camp.
They have sparred over the future of Hong Kong's human rights, democracy and basic freedoms, over whether or not the commercial ""level playing field"" will continue, and over the survival of Hong Kong's autonomy and the rule of law.
But now, 229 days before the sun finally sets on Britain's empire in Asia, attention is shifting to who will be running the show for China after Patten sails away.
In the first round of the process on Friday, the Selection Committee members will propose candidates for the chief executive who will step into Patten's shoes next year.
To enter the final run-off for the job, a candidate must be nominated by at least 50 members of the committee on Friday. The committee meets again on December 11 to pick the winner.
The leading candidates are all acceptable to China, sources close to the committee say.
In the forefront of the leadership battle are Tung and former chief judge Ti Liang Yang. An opinion poll gave Yang a 10 percentage point lead over Tung in public popularity this week.
Businessman Peter Woo and former appeals judge Simon Li came a remote third and fourth, and four other little known candidates scored less than one percent in the public's ratings.
However, it is not the public who vote, but the committee, and inside that body the real lobbying campaign is unfolding.
""We have a process which is laid down and I think it's clear the polls don't determine the winner,"" said Woo.
The committee was formed in Beijing two weeks ago and is dominated by pro-Beijing political and business groups.
",37
"Hong Kong legislators plan court action and a lobbying mission to Britain in a ""last-ditch battle"" to save the territory's elected legislature from China's axe, pro-democracy leader Martin Lee said on Tuesday.
Britain hands the century-and-a-half-old colony back to China in 238 days, and Beijing is moving full steam ahead with a plan to appoint a new provisional legislature to replace the Legislative Council (Legco) that was fully elected in 1995.
A Chinese-controlled Selection Committee is to name the 60 members of the body at a meeting in Hong Kong next month.
The committee, formed in Beijing last weekend, is opposite to last year's election results in Hong Kong. It gives all the clout to pro-China factions and sidelines democracy groups who won a landslide 70 percent of last year's poll.
Lee, a lawyer and leader of the colony's largest political party, the Democratic Party, told Reuters the government had a duty to stop Beijing's provisional legislature from happening.
""Primarily it should be the responsibility of our attorney general to take them to the courts. But if the government will not act, then I'll certainly take them to the courts,"" he said.
""It's the last-ditch battle for Hong Kong,"" Lee said. ""We should not look at it as a fait accompli. We should fight against it with all our might.""
Britain has condemned China's plan and challenged Beijing to prove its legality under the Joint Declaration and Basic Law -- the documents which cover Hong Kong's sovereignty transfer.
Lee is flying to London on Friday to lobby Prime Minister John Major, opposition Labour Party leader Tony Blair and other British officials and members of parliament ahead of a November 14 House of Commons debate on Hong Kong's future.
""I want them to say the setting up of this legislature will amount to a most blatant breach of the Joint Declaration. So far the British government has refused to say that,"" Lee said.
He plans a similar mission to Australia and New Zealand later this month.
Another group of Hong Kong legislators led by independent Emily Lau is also flying to London to lobby. Colonial Governor Chris Patten, the ruling Conservatives' ex-chairman, also plans to be in London to press Hong Kong's case before the debate.
Reliable sources said Lee has already drawn up a raft of lawsuits to sue members of the provisional body and institutions if the new assembly is set up in breach of laws and treaties.
But Lee declined to reveal details. ""I don't think I should reveal my hand. A lot will depend on what they do,"" he said.
Opponents of the Chinese plan point to findings by Legco's legal adviser, Jonathan Daw, who counselled in July that the provisional body would be illegal on several counts. Hong Kong's Bar Association has also highlighted illegalities.
Only one legislature is allowed to operate in Hong Kong, and no other body is allowed to pass bills under Hong Kong's constitutional set-up, Daw noted in written counsel. Any enactment of laws by a parallel body before the handover would amount to ""usurpation"" and would be unlawful, he said.
Lee said China's crackdown on dissidents, including the recent 11-year jailing of student leader Wang Dan for subversion, was another reason for Hong Kong's 6.3 million people to worry.
""It augurs very badly because what has happened to Wang Dan today can well happen to us tomorrow,"" Lee said.
""Unfortunately, Hong Kong will also have laws against subversion after 1997, because the Basic Law says so,"" he said.
""The provisional legislature, which is going to be a rubber stamp for Beijing appointed by Beijing, will certainly pass a law something like the law under which Wang Dan was convicted.""
",37
"The skyscrapers are decked with fairy lights. Red-cloaked Santas pat children on the head. Christmas carols ring out. It is Christmas in Britain's last major colony, but will it ever be like this again?
The most spectacular Christmas light displays in the world are strung from Hong Kong's skyscrapers, featuring giant illuminated Santas and reindeer covering entire facades, beaming a rainbow of colours along the famed Hong Kong harbour skyline.
Hong Kong -- shopping paradise of the world -- is awash with Christmas. Its glass and marble malls brim with exorbitant festive displays, its shops push the fanciest, most expensive brand names in the world, specially repackaged for the season.
But after Britain pulls out and Communist-ruled china takes over next July, what then?
Will Christmas turkey, Christmas pudding and Christmas cake be allowed to grace the yuletide dinner table? Even if it does, will it taste the same?
Will revellers pull Christmas crackers and drink themselves silly in merriment as many do today?
Will China allow bourgeois extravagance and Western customs? Will charities run their ""Operation Santa Claus"" fundraising drive for the disadvantaged and underprivileged? Will Christians be free to worship at Midnight Mass?
If China lives up to its promises, the answer to all these questions is a resounding ""yes"".
China has promised to allow Hong Kong to retain its freewheeling capitalist system for a further 50 years, as a quasi-autonomous part of the motherland under a ""one country two systems"" policy. This means freedom of religion will stay. And the hybrid cocktail of customs and traditions, too.
However, many of Hong Kong 6.3 million people worried that pro-democracy protests such as a Christmas Eve vigil and the mass dispatch of Christmas cards to mainland dissidents by human rights groups on Tuesday might not be allowed again.
It is also doubtful if Queen Elizabeth's Christmas broadcast will ever again be on Hong Kong public radio and television.""
Christmas is still going to be a holiday next year in Hong Kong, as is the other main Christian festival, Easter.
Only the Queen's official birthday and World War Two victory holidays are to be removed after China takes over.
And, in this overwhelmingly ethnic Chinese territory, there are more non-Chinese than ever, despite the gradual departure of expatriate colonial civil servants and company executives.
There are 37,000 Americans, 33,000 British and 30,000 Canadians, enough to keep a few Christmas parties going. The largest foreign group, 140,000 Filipinos, mostly brought in as servants, are also a strong Christian community.
Nevertheless, there are misgivings how much will remain the same in Hong Kong. And there's a whiff of melancholy and pre-nostalgia among expatriates this festive season.
It's almost like a ""last supper"", their minds tilted towards midnight next June 30, 1997, the moment when the British flag will be furled away here forever.
Hong Kong Governor Chris Patten's annual ""Christmas Song Choice"", which will be aired on local radio, reflects the mood.
His selection starts with Louis Armstrong singing ""Basin Street Blues"", followed by ""As Time Goes By"" by Jimmy Durante.
Patten gathered his family and friends on Wednesday night, Christmas night, for a traditional dinner of roast turkey.
All assembled were aware it could be the last Christmas dinner in the regal Government House overlooking the harbour.
Patten's successor Tung Chee-hwa, who will be Hong Kong's first Chinese leader, has indicated he doesn't want to live in the mansion that symbolises Hong Kong's one and a half centuries of British colonial rule and 150-plus years of China's national shame. He says the residence is cramped and inauspicious.
So no more Christmas there, at least.
Hong Kong's final year as a British colony has seen the balance of power tilt into China's orbit, even before the change of flag arrives. Chinese influence waxed and Britain's waned.
However, just as Christmas has become a commercial success in Japan, the festival will inevitably live on -- Chinese-style.
Hong Kong Chinese vie with each other to lavish expensive presents on their children.
Even over the border in mainland China, Christmas shopping sprees are catching on. There, Santa Claus has taken to riding a rickshaw, instead of a sleigh.
",37
"More than 100 politicians, including half of today's lawmakers, have sought seats on a controversial Beijing-controlled legislature in a move that may cripple Hong Kong's parliament in the twilight of British rule.
Before a registration deadline on Monday, 112 people had applied to join the ""provisional legislature"", among them 33 members of the present elected Legislative Council (Legco).
Hong Kong reverts to China at midnight next June 30, and Beijing is pressing ahead -- despite British objections -- on setting up a provisional interim legislature to replace the elected Legco at the handover.
The provisional legislature will be selected on December 21.
The territory of 6.3 million people now faces a bizarre prospect of having two legislatures for the final six months of British rule -- one elected, legal and active, and a shadow ""selected"" chamber vulnerable to courtroom battles.
The number of seats on Legco and the new body is the same -- 60. An official of the China-controlled committee supervising the three-week registration process said 217 people had requested application forms, so there could be more contenders at the last minute.
Among 33 incumbent lawmakers who have applied are Legco speaker Andrew Wong, whose bid startled the political community last weekend and sparked fears that Legco could disintegrate.
""Cracks which have already emerged within the Legislative Council over the bid by some members for a seat on the provisional legislature will widen in the next six months,"" said political commentator Chris Yeung.
""When you have two bodies from which laws emanate at the same time, there's going to be some confusion and dispute,"" said analyst Michael DeGolyer of Hong Kong's Baptist University.
Those wanting a seat in the new chamber also include 11 ex-lawmakers and 22 former election contestants defeated in 1995 elections in which pro-democracy groups led by the Democratic Party fared strongly.
The 1995 losers applying for a seat include prominent pro-Beijing politicians such as Tsang Yok-sing, Peggy Lam and Elsie Tu.
Applicants also include 47 newcomers to legislative contests, many of whom are members of the hand-picked 150-member Preparatory Committee crafting the post-1997 Hong Kong power structures on behalf of China's communist rulers.
Other newcomers are members of the 400-strong Selection Committee. This is the China-backed panel that will chose the first post-colonial leader on Wednesday, with the winner forecast to be conservative-minded shipping tycoon Tung Chee-hwa. The committee will also be responsible for selecting the provisional legislative body on December 21.
An opinion poll published on Monday by the independent daily Ming Pao showed Hong Kong people split over the legitimacy of the provisional legislature.
The poll showed 32 percent supporting the body, 30 percent against, and 38 percent voicing no opinion. A sample of 983 respondents were surveyed by telephone for the poll.
The Democratic Party, the largest in the Legco with 19 seats, are absent from all China-controlled transition bodies.
They have boycotted the selection process, branding the provisional legislature as undemocratic and illegal, and have vowed to challenge its legitimacy in the courts.
The threat has forced Beijing's representatives in Hong Kong to consider locating the interim legislature in mainland China in the transitional period.
Britain has condemned China's plan as reprehensible and unnecessary and has ruled out all cooperation with the body.
",37
"Chinese communities across the globe will soon have their very own high-society magazine, rivalling the standards of glamour publications such as Cosmopolitan and Vanity Fair.
Imagine a world-class magazine which combines the flair and colour visuals of the U.S. Architectural Digest and the  New York Times magazine. None of it is in English but in Chinese. ""The Chinese"" will hit the newsstands on November 1.
With editorial operations based in Hong Kong, the magazine is owned by Thailand-based M. China International and Manager Media Group, which publish Asia Inc. monthly and the daily Asia Times in English.
The group's chairman, Sondhi Limthongul, a Thai with third generation Chinese ancestry, is extending his reach to rich ethnic Chinese readers and to the regional magazine sector.
The publication, with a launch circulation target of 56,000 copies, comes at a time of ballooning interest, fuelled by the sudden growth of China itself, in the diaspora of overseas Chinese communities, from Southeast Asia to New York and Los Angeles, to London, Paris and Amsterdam.
A rash of books has been published lately on this powerful diaspora of Chinese, many of whom descend from merchants who migrated from China centuries ago and who, together with more recent migrants, form a ""bamboo network"" of almost 60 million people.
""A lot of Chinese today are at the cutting edge of many industries and want a magazine to rediscover ourselves, to tell our own story in our own words, in our own pictures,"" editorial director Liu Heung Shing said.
Hong Kong-born Liu, a Pulitzer prize-winning former wire service photographer acclaimed for his photo coverage of China, Russia, India, is the magazine's driving force.
""I think many people like me feel ashamed when they pick up a Chinese magazine, because it's never quite there,"" said Liu.
""There's nothing really to buy. Just political magazines for dissidents. When you read them it's frustrating. The news is always sandwiched in between lots of half-truths,"" he said.
The publication targets a niche of well-heeled Chinese professionals or company owners, aged 28 to 50, mainly overseas educated, with an annual personal income of at least US$120,000 or a household income of at least $150,000.
""Ethnic Chinese will form the most powerful network of entrepreneurs in the world in the next decade. Fifty-four million ethnic Chinese worldwide, with assets of more than one trillion (dollars) are the most successful entrepreneurs in the world,"" writes John Naisbitt, author of a recent book, Megatrends Asia.
Features on the rich and famous personalities such as high-flying socialite David Tang, actress Gong Li, publisher and entrepreneur Jimmy Lai, as well as up-and-coming Chinese like Shanghai catwalk model Yao Shuyi, will be the magazine's staple diet.
It will be illustrated by bold colour visuals and advertisements for the flashy, expensive brand names for which Chinese around the world have a passion.
The Chinese diaspora forms powerful business networks, bonded by a unique sense of being Chinese even if not citizens of a Chinese state.
Hundreds of of thousands of ethnic Chinese have returned to East Asia from other parts of the world in recent years to take advantage of the unique economic boom powering the region.
The magazine intends to be apolitical. ""The aim is to rediscover ourselves, without any political context,"" said Liu.
But it will spotlight and probe Chinese personalities in politics, be they in China, Taiwan, Hong Kong or in the diaspora overseas. ""There is a Chinese sense and sensibility which has nothing to do with politics -- how they view the notion of the people called 'the Chinese',"" said Liu.
""We want personalities rather than polemics. Be it Singapore's leader Lee Kuan Yew or an American Chinese running for governor in a U.S. state.""
The English title is The Chinese. The Chinese title is the character ""Zhong"" which means ""centre"", the first character of ""Zhong Guo"" or ""Middle Kingdom"", one of China's names. The word derives from an ancient pictogram of an arrow piercing a target.
By using the simple word ""zhong"" for Chinese, the publishers avoid political connotations that would associate Chinese people with a specific territory.
Can the idea make money? Is there really a niche for such a publication in the cut-throat international magazines market?
""It's a competitive environment, but advertisers have now come to the idea that there is this group of people who are high income earners, clearly part of this fast-emerging economic community in Taiwan, Singapore, Malaysia and elsewhere.
""If you look at Vogue, Esquire or others, these are giants with a strong appeal to advertisers. But Chinese language publishing is still a virgin market,"" Liu said.
",37
"Chief Executive candidate Tung Chee-hwa, rated by a poll as the best man to deal with China after Britain leaves Hong Kong next year, said a proposed subversion law faces review by the post-colonial government.
""The Basic Law (Hong Kong's post-handover constitution) clearly states that it is up to the future government to draw up its own law on these matters,"" Tung told about 100 members of the 400-strong Selection Committee that will choose Hong Kong's future leader.
""The Special Administrative Region government will have to review these issues after the handover.""
Britain hands its colony back to Beijing at midnight next June 30. The China-controlled Selection Committee is in the midst of a three-day vetting of Tung and two rivals who are bidding to succeed colonial Governor Chris Patten.
The winner will be announced on December 11.
On Tuesday, Britain began the process of bringing in a law on subversion, laying down legal markers defining the concepts of treason, sedition, subversion and secession in a bid to head off Chinese-style jailings of dissidents after the handover.
China has condemned the move but stopped short of saying whether the law would be scrapped when it takes over the territory.
Tung, a billionaire shipping tycoon, also told the committee that Hong Kong should stand by China if Beijing is under sanction by foreign powers.
""If sanction is for political reasons then we have to consider Hong Kong's position. Maybe Hong Kong has to make some sacrifices,"" he said.
An opinion poll released on Thursday showed Tung to be the favourite among the 967 respondents and indicated 73 percent of them also believed Tung was the candidate best able to communicate with the Chinese government.
The poll, conducted by the Chinese University of Hong Kong, showed that only 7.2 percent thought former chief justice Ti Liang Yang could commmunicate well with Beijing while businessman Peter Woo scored only two percent.
But Yang was seen as being the most impartial of the three and the one most ready to voice his opinion to China.
Asked who was most likely to speak out against Beijing, 31 percent said Yang, 20 percent Tung and 4.8 percent Woo.
After the first day of questioning by the committee on Wednesday, Tung emerged as a better communicator than he had during previous occasions, analysts said.
They said he produced a clearly focused vision for Hong Kong, with the main thrust on putting business and economic interests first.
During the quizzing by committee members representing Hong Kong's business community, Tung blasted the Democratic Party, Hong Kong's largest, urging it to drop its anti-China stance and to play a positive role in the transition for the sake of Hong Kong's 6.3 million people.
""At present they are objecting to anything Chinese,"" Tung said. ""This is not good in the long term or for the interests of Hong Kong.""
The Democrats are boycotting the Selection Committee, condemning its mission to pick the post-colonial leader as undemocratic and its task of assembling a new provisional body to supplant the elected legislature as a violation of handover pledges made by China.
",37
"Hong Kong's Governor Chris Patten on Friday denounced a legislature that Beijing plans to impose on the territory as a ""rubber stamp"" and said Britain and China should fight it out in the World Court.
""The International Court of Justice will, I'm sure, be able to sort things out, and we'd be very happy to put our arguments to them,"" Patten told Reuters in an interview.
His remarks, on the eve of a gathering in China to create the legislature, coincided with a toughly worded statement in London by Foreign Minister Malcolm Rifkind, who urged China to reconsider its plan or face international pressure.
""Clearly this weekend is going to be a very disagreeable one,"" Patten said of Saturday's gathering of 400 of Hong Kong's elite who will meet over the border in the Chinese city of Shenzhen.
They will elect 60 new legislators to take over lawmaking next July 1.
On that day, Hong Kong reverts to Chinese sovereignty, after a century and a half under the British flag, with a treaty pledge from Beijing that it can stay a distinct entity with its laissez faire capitalist system intact for a further 50 years.
The transition has been bumpy since China decided to disband the elected Legislative Council and appoint a new interim body without a mass vote, rolling back the expansion of democracy ushered in by Patten over the past four years.
Democrats in Hong Kong have said they will mount legal challenges if the interim body meets in the territory before July 1.
Calling China's plan a ""sad and bad decision to go ahead with the establishment of a rubber stamp legislative body"", Patten said it was designed to reduce democrats involved in lawmaking and would have serious legal repercussions.
He said that if China insisted the body was in line with Sino-British handover accords, ""let them join Britain in making a joint submission to the World Court, the International Court of Justice, so that we can actually get a ruling from the ICJ.""
But Patten also said he would go ahead with efforts to help Hong Kong's future leader, shipping tycoon Tung Chee-hwa, to prepare his administration. Tung was picked this month by the same 400-strong Selection Committee choosing the legislature.
Patten said he would meet his successor on Monday to explore a framework for pre-handover cooperation.
""We will cooperate in helping him establish an office, in helping him prepare for July 1, 1997. We will do everything to cooperate within the Joint Declaration and the Basic Law. But there is absolutely no requirement whatsoever for a provisional legislature before July 1,"" he said.
He said China might be able to ""trash an institution"" but it could not ""stamp out the spirit of democracy"" in Hong Kong.
",37
"Britain has suggested going to the World Court over China's plan to disband Hong Kong's elected legislature when Beijing takes back the territory next July.
The spectre of the two countries slugging it out in the International Court of Justice in the Hague raised the drama of Hong Kong's transition to Chinese rule to a new level after many months of bitter wrangling on handover arrangements.
British Foreign Secretary Malcolm Rifkind and Hong Kong Governor Chris Patten denounced China's plans on Friday and proposed letting the World Court 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 next June 30, with promises from Beijing's communist leadership that almost nothing will change.
At that moment, a Beijing-appointed legislature will take over from the elected Legislative Council (Legco), reversing democratic reforms introduced by Patten over the past four years.
""There is no justification for China to replace a legislature elected openly and fairly by more than one million Hong Kong people,"" Rifkind said in London.
""China should be prepared to trust Hong Kong people with the measure of democracy we have introduced.""
He summoned Chinese ambassador Jiang Enzhu, the man tipped to be China's envoy in Hong Kong next July, to underline Britain's concern.
Separately, Patten said in a statement and in an interview with Reuters that the body planned by China would be a ""rubber stamp"" chamber that would simply echo Beijing.
The threat of World Court action came on the eve of a vote by 400 wealthy and influential Hong Kong people picked under China's supervision to elect the provisional legislature.
Pro-democracy groups staged scattered protests in Hong Kong and jeered committee members as they left for the Chinese frontier city of Shenzhen where Saturday's meeting takes place.
""The International Court of Justice will, I'm sure, be able to sort things out, and we'd be very happy to put our arguments to them,"" Patten told Reuters.
""Clearly this weekend is going to be a very disagreeable one,"" Patten said, adding that China might ""trash an institution"" but it could not ""stamp out the spirit of democracy"" in Hong Kong.
Protesters mounted small-scale demonstrations outside China's diplomatic mission in the colony and at the Hung Hom railway station where members of the Selection Committee were boarding trains for Shenzhen.
""It is totally unacceptable,"" said lawmaker Emily Lau, who joined in the protests. ""There is no legal and constitutional basis for that body, and also the Chinese government is using that body to kick out people who they do not like.""
Patten said that despite Britain's views on the legislature, he would meet Hong Kong's post-colonial leader-designate, 59-year-old shipping magnate Tung Chee-hwa, to explore ways to cooperate on building the post-handover administration.
The quarrel over the legislature set Tung and Patten on a collision course this week. Tung lashed back in a speech to the business community, saying Britain must ""face the reality"" and warned that if the legislature were challenged he would get China's parliament to pass a resolution making it legal.
Hong Kong's biggest pro-democracy group, the Democratic Party, is boycotting Saturday's selection process, which it brands as a plot to snuff out democracy and enact repressive laws.
""You won't find five of them who can be called democrats by any stretch of the imagination,"" Democratic Party leader Martin Lee told Reuters, commenting on the candidates.
",37
"Hong Kong democracy activists staged a noisy protest on Monday after 134 politicians applied to join a Beijing-controlled assembly to replace the colony's elected legislature in mid-1997.
The rush to join the provisional legislature may cripple the colonial legislature in the twilight of British rule, political analysts said.
As a registration deadline expired on Monday, organisers said 134 people had applied, among them at least 33 members of the present elected Legislative Council (Legco).
Hong Kong reverts to China at midnight next June 30, and Beijing is steaming ahead -- in the face of British objections -- with a plan to replace the elected Legco on handover day with a provisional assembly, to be selected on December 21.
The territory of 6.3 million people now face the prospect of two legislatures during the final six months of British rule -- one elected, legal and active, and one a ""selected"", shadow chamber preparing post-1997 laws.
The number of seats on Legco and the new body is the same -- 60. Among 33 incumbent lawmakers who have applied are Legco speaker Andrew Wong, whose bid startled the political community last weekend and sparked fears that Legco could disintegrate.
Banner-waving pro-democracy activists on Monday caused chaos in the lobby of the building where registration took place, burning documents and scuffling with security men. ""Phoney election"", ""dictatorship in disguise"", protesters shouted.
""Cracks which have already emerged within the Legislative Council over the bid by some members for a seat on the provisional legislature will widen in the next six months,"" said political commentator Chris Yeung.
""When you have two bodies from which laws emanate at the same time, there's going to be some confusion and dispute,"" said analyst Michael DeGolyer of Hong Kong's Baptist University.
Seat seekers for the new chamber include at least 11 former lawmakers and 22 former election contestants defeated in 1995 elections won by pro-democracy groups.
Those who lost 1995 elections include prominent pro-Beijing politicians such as Tsang Yok-sing, Peggy Lam and Elsie Tu.
Applicants include at least 47 newcomers to legislative contests, many of whom are members of the hand-picked 150-member Preparatory Committee crafting the post-1997 Hong Kong power structures on behalf of China's communist rulers.
Other newcomers are members of the 400-strong Selection Committee. This is the China-backed panel that will chose the first post-colonial leader on Wednesday, with the winner forecast to be conservative-minded shipping tycoon Tung Chee-hwa. The committee will also be responsible for selecting the provisional legislative body on December 21.
Poll results issued on Monday by the independent daily Ming Pao showed Hong Kong people split over the body's legitimacy.
The poll showed 32 percent supporting it, 30 percent against, and 38 percent voicing no opinion.
Britain has condemned China's plan as reprehensible and unnecessary and has ruled out all cooperation with the body.
The Democratic Party, the largest in the Legco with 19 seats, is absent from all China-controlled transition bodies.
It has boycotted the selection process, branding the provisional legislature as undemocratic and illegal, and has vowed to challenge its legitimacy in court.
The threat has forced Beijing to consider locating the new legislature in mainland China until the handover.
",37
"The contest for power in Hong Kong heated up at the weekend as the pro-China lobby cast a top judge into the race as the candidate to lead the territory after sovereignty reverts from Britain to China in 1997.
Controversial Chief Justice Sir Ti Liang Yang re-emerged as a rival to existing favourites after influential pro-Beijing publisher Xu Shimin said he would nominate him and that the judge was keen to take up the challenge.
Hong Kong, the last significant outpost of the British empire, reverts to China on July 1, ending a century and a half of colonial rule.
China is setting up a 400-member panel called the Selection Committee, which will nominate the first post-colonial governor, to be known as the Chief Executive, and appoint a provisional legislature to replace the present elected Legislative Council.
Nominations in the month-long process to create the committee close in two weeks' time, and almost 20,000 nomination forms have been requested and issued.
China has ruled out a universal democratic vote by Hong Kong's people to pick their post-handover political leaders.
The committee is expected to pick the chief executive around November.
Yang's return to the contest comes as a surprise after he faded from the picture last year in a row about his remarks on human rights.
Lawyers and pro-democracy politicians attacked him last November after he said the Bill of Rights, which was introduced in Hong Kong by the colonial administration and which China plans to dilute next year, had sown chaos in the judiciary.
The 67-year-old China-born lawyer left his home to study law in London after the Communists took power. He later settled in Hong Kong, where he has worked for 30 years in the judiciary.
A poll last week showed the public's hot favourite for post-colonial leader is Anson Chan, the colony's Chief Secretary and deputy to British-appointed Governor Chris Patten. She scored a stunning 60.1 percent of respondents' support.
Runner-up in the poll was shipping magnate Tung Chee-hwa with 10.4 percent, and the leader of the biggest political party, the Democratic Party's Martin Lee, came third with 10 percent.
But China has kept Lee and his Democrats out of the handover stakes and he has scant chance of being nominated.
Chan is also unlikely to be accepted by the committee because she is closely identified with Britain. Last week a top Chinese official attacked Britain's chief diplomat in Hong Kong for touting London's favoured candidate -- presumed to be Chan.
The poll showed Yang would come into the picture if neither Chan nor Lee were candidates. In that case Yang would get 9.8 percent, but Tung would rise to 21.6 percent.
However, the Selection Commitee is what will count, not public opinion, and China has insisted the nomination list remain secret, arousing suspicions of foul play.
Xu said Yang was happy to be proposed by him and that the judge's independence was a strong factor.
""A judge has no business connections, and there are many against Mr Tung because of his business background,"" Xu said.
Tsang Yok-sing, a senior member of the panel overseeing the entire handover process for China, said Yang was ""unbiased and neutral"".
Political analyst Chris Yeung said the latest move showed Beijing seemed undecided who it wanted in charge in Hong Kong.
""Sir Ti Liang, a judge not known for his business links, might not be the perfect choice, but he might yet win out as a compromise figure,"" Yeung wrote in the South China Morning Post.
The chief justice was out of town on Sunday and unavailable to comment.
",37
"Britain and China clashed over the future of Hong Kong on Wednesday as the colonial power took steps to bring in a pre-emptive new law on subversion ahead of the capitalist territory's 1997 return to communist-ruled China.
The quarrel was ignited when the government on Tuesday laid down legal markers defining the concepts of treason, sedition, subversion and secession in a bid to head off Chinese-style jailings of dissidents after Beijing takes over the colony.
The draft bill would jail only people who plot the violent overthrow of government, not non-violent critics and dissidents.
Chinese officials in Hong Kong immediately attacked the move and pro-China politicians said the law would probably be erased and replaced after China resumes sovereignty at midnight next June 30, when a century and a half of colonial rule expires.
A senior negotiator on the Hong Kong handover, Chen Zuo'er, told reporters Britain should not have acted unilaterally, but declined to say if China would repeal the bill if it became law.
A spokesman for China's de facto embassy in the territory attacked the move more sharply. ""Britain violated its promise that all major issues must be decided through negotiations with China in the latter stage of transition,"" the spokesman said.
""Britain will have to take responsibility for all the consequences of amending this law,"" the spokesman said.
British officials said they were confident the bill could get through the Legislative Council (Legco) next Wednesday. But some pro-China politicians and analysts were sceptical.
""The move itself is bound to be futile. Even if the bill is passed by the present Legco, I don't think there is any chance that it can survive the handover,"" said Tsang Yok-sing, leader of the biggest pro-Beijing political party in the territory.
""This decision will not be useful because the Chinese side will eventually roll back all the reforms undertaken by the Hong Kong government before July 1997,"" said analyst Sunny Lo at the Chinese University of Hong Kong.
""The Hong Kong government is trying to commit suicide by putting this legislation through Legco,"" Lo said.
He said China would want a broader definition of subversion that would include subversion in non-violent forms.
Beijing had previously said it opposed any major changes to Hong Kong's criminal law before the change of flag.
Governor Chris Patten, often vilified by Chinese officials, said the government had taken the step only after 17 months of efforts to clinch agreement with China had failed.
He challenged China to say exactly what it objected to in the proposed new bill.
""We've tried to establish in a very reasonable way what these crimes should actually mean,"" Patten told Hong Kong radio during a visit to Japan. ""On this particular issue we really have been negotiating...with a brick wall,"" he said.
""There's been no response, no give at all,"" he said, adding that the only alternative to the bill would have been to break the government's word to Legco and the community that it would take action on the issue and ensure Hong Kong's ""decent way of life"" would not be ""swept away"" next July.
Independent pro-democracy legislator Emily Lau said she hoped China would not repeal the law, adding that if it did, ""that will definitely cause instability in Hong Kong, and it will be a very high price for both China and Hong Kong to pay.""
Treason and sedition are already on Hong Kong's law books.
The last time somebody was prosecuted for sedition was in 1953, and for treason in 1946. But These offences have since largely fallen.
Subversion and secession however are new concepts in the law required by China in Hong Kong's post-1997 constitution, known as the Basic Law.
",37
"After a week of nervousness over its future freedoms, Hong Kong watched on Friday for the outcome of a Beijing gathering that will set the tone for the post-colonial government that takes over in 1997.
The Preparatory Committee of pro-China figures from Hong Kong and mainland Chinese officials was meeting in Beijing for two days to elect a 400-member caucus that will pick Hong Kong's first post-colonial leader and parliament.
The exercise will quicken the pace of the British colony's transition to Chinese rule in 242 days' time.
In the latest step in Britain's pull-out, Gurkha soldiers who were the backbone of the colonial garrison were set to bid a ceremonial farewell to one of their Hong Kong bases on Friday night.
Hong Kong was jarred this week by fears of a crackdown by China after the handover in view of the jailing in Beijing of prominent dissident Wang Dan.
The colony was also unnerved by remarks this month by Chinese Foreign Minister Qian Qichen, chairman of the Beijing meeting, that freedom of expression in Hong Kong would be limited after the sovereignty transfer at midnight next June 30.
On Thursday, a further jolt came when China barred entry to two Hong Kong politicians who wanted to petition the Beijing meeting against some of China's Hong Kong policies.
On Friday two more Hong Kong activists were expelled from Beijing.
On the eve of the Beijing meeting, a pro-China lobby group published a survey showing that most Hong Kong businessmen expected press freedom, the political system and human rights to deteriorate after the handover.
Some 72 percent expected less press freedom, 64 percent expected the political system to suffer, and 63 percent saw a deterioration in human rights, the survey by the Better Hong Kong Foundation showed.
A leading candidate to become the future leader of Hong Kong, former Chief Justice Ti Liang Yang, sought to allay fears this week that the territory would be forced to accept tough, Chinese-style laws on sedition after 1997.
""If you simply chant a few lines which do not incite any illegal acts, or which you don't expect to cause others to act radically, it should not be a problem,"" Yang said on Thursday.
But Yang and three other leading contenders for the top job were attacked by Hong Kong's leading democracy group for failing to condemn Wang Dan's 11-year jail sentence, saying they were ignoring local people's anger.
""They are not just angry about the fate of Wang Dan, what they are most worried about is whether Article 23 of the Basic Law will become a tool to curb their freedom of speech after the handover,"" said Szeto Wah, deputy head of the Democratic Party.
The Selection Committee make-up is expected to be announced on Saturday. The body will meet in Hong Kong next month to select the Chief Executive who will succeed colonial Governor Chris Patten next July.
",37
"Shipping magnate Tung Chee-hwa saw his fortunes almost dashed on the rocks in the 1980s when the family company met ill winds, but his luck rebounded and now he could be Hong Kong's next leader.
Next month China's carefully screened Selection Committee will choose a chief executive to run Hong Kong after Britain hands the colony back in mid-1997.
Tung topped a recent popularity poll with 30.2 percent. His nearest rivals were former Chief Justice Ti Liang Yang with 27.5 percent, businessman Peter Woo with 8.7 percent and former High Court judge Simon Li with 3.3 percent.
Tung has been a senior member of a preparatory committee of pro-Beijing Hong Kong notables and mainland China officials crafting the power structures to replace British colonial rule.
He was lauded as an impartial and honest counsellor by Governor Chris Patten when Tung stepped down in June this year from Patten's advisory cabinet, the Executive Council.
He resigned in October as head of his family firm, Orient Overseas (International) Ltd, to make his leadership bid.
Tung's early campaigning consisted of clearing the decks of speculation that might lead to challenges on his integrity, such as how China had once saved his family from bankruptcy.
Tung took the helm of the business after his father died in 1979. He recently revealed China had helped bail out the firm 11 years ago by backing a US$120 million fund led by tycoon Henry Fok, a kingmaker in today's leadership contest. The family later bought back most of the shares and restored their majority.
""In 1985 and '86 we went through a very difficult time when the shipping business was in serious recession. Henry Fok led a syndicate of investment in our company,"" Tung said.
""I know there were mainland funds in it. I'm sure. To Mr Fok and those who have helped me...I am very grateful.""
Tung was spotted as a possible favourite of China when President Jiang Zemin singled him out for a personal handshake at a meeting in Beijing this year.
Tung is believed to be acceptable also to Britain and to expatriate business leaders who hope he will form a ""dream team"" with incumbent Chief Secretary Anson Chan -- Hong Kong's top civil servant -- if China allows her to stay on after the flag change on July 1 next year.
Tung has links with the powerful in key capitals -- Beijing, Taipei, London and Washington -- whose influence will be important for Hong Kong's evolution after 1997.
Born in Shanghai in 1937, Tung was educated at Liverpool University in Britain.
The 59-year-old magnate has a patriarchal look, with grey bristly hair, bright eyes and hand-on-heart gestures.
The tycoon, who previously dodged the limelight, is said to lead a disciplined life, arriving at his office at dawn to perform t'ai chi exercises on the roof before starting work.
Despite a reputation for modesty, wisdom and caution, and his strong ties to China, Tung's local power base may ultimately stir some unease in Beijing.
""It is hard to see Beijing favouring someone with a local power base, who really means to run the show,"" said legislator and lawyer Margaret Ng.
Tung has made a point of tapping various views, including those of pro-democracy parties and trade unions.
""I have met with people of different social classes, organisations and political views. I have gained a deeper understanding of Hong Kong's future challenges,"" Tung said.
But he has also made increasingly strident pro-China policy utterances. He accused Patten of splitting Hong Kong's 6.3 million people through a speech that assailed China's plan to replace the elected legislature with an appointed assembly.
He has urged people to forget China's bloody army crackdown on the 1989 democracy movement in Beijing and to leave it to historians to judge the event.
",37
"The head of Hong Kong's main pro-democracy group said on Tuesday that the man likely to be the first post-colonial leader after British rule is a pro-China yes-man, and described preparations for the sovereignty change as a disaster.
Martin Lee, head of the Democratic Party, the largest in Hong Kong's legislature, told Reuters in an interview that shipping tycoon Tung Chee-hwa was indebted to Beijing for a company bail-out years ago and was unlikely to defend democracy.
""The Hong Kong people want and need a defender of the Hong Kong system. What we are getting, it seems, is somebody who is going to be a spokesman of China. That is very unfortunate.
""The people of Hong Kong cannot trust him to protect our rights, not because he is a bad man, he is a nice guy, but I cannot see how he is in a position to say no to Beijing on any important issue,"" he said.
Tung, 59, is the favourite to win when a 400-member selection committee meets on Wednesday to pick the chief executive of the special administrative region (SAR), as Hong Kong will be called after China takes over next July 1.
Britain is handing the colony back to Beijing under a treaty called the Joint Declaration, which promises to keep Hong Kong's freewheeling capitalist system intact for a further 50 years.
Lee said there was never any doubt Tung would win, echoing a widely held view that the future leader was picked in Beijing.
The lawyer and legislator said Tung owed China a big debt for a Chinese-sponsored financial bailout of his family firm, the Oriental Overseas group, in the 1980s.
""How can he say no to Beijing? Beijing will say 'wait a minute, who bailed you out in the early 1980s and who put you in this position?"" Lee said.
But his party would try to work with Tung if he won. ""We are quite prepared to cooperate with the chief executive irrespective of the personality involved...we cannot carry on as a political party without dialogue with the chief executive.""
Lee denied accusations by Tung that the Democratic Party was anti-China. ""That's clearly wrong. We have always supported the return of sovereignty over Hong Kong by the British to the Chinese government on July 1.
""We only criticise China whenever we believe the Joint Declaration has been broken by China...in these circumstances we have a duty to object and to oppose.
""It is far too simplistic and wrong for Mr Tung to say we are anti-China. We are not. China is our country. I have yet to see him side with Hong Kong on any key issue, like the provisional legislature,"" Lee said.
Britain and the Hong Kong democrats have criticised China's plan to scrap the elected Legislative Council and install a provisional legislature next July as an attempt to kill off democracy.
""It's going to be the most disastrous thing. Once you allow China to set up an effectively appointed legislature when under the Joint Declaration we were promised an elected legislature, you are actually accepting that China can break the Joint Declaration at will. So what other provision is safe?"" Lee said.
He said Beijing had made clear the new legislature would pass repressive laws to control the freedom of the press and the freedom of assembly. ""There can be little doubt that the rule of law as we know it will not be there any more. Freedoms can no longer be protected.""
Lee said 134 candidates nominated for the provisional legislature this week would all take orders from Beijing.
""You would not find even five of them who could be called democrats, by any stretch of the imagination.""
",37
"Transport and logistics group TNT Ltd said on Wednesday it was well placed for quite strong profit growth in the current 1996/97 year, but would continue to look at selling its currently unprofitable non-core assets.
""We haven't got any numbers, but it should be quite strong relative to the position we're starting from,"" TNT Managing Director David Mortimer said of prospective profit growth, in an interview with Reuters.  
Mortimer said the non-core activities that slowed down TNT's earnings in 1995/96 were its general freight business in Australia and its Brazilian operations.
""We've dealt with the LCL (Less Than Container Load) business -- that's been closed and we've sold Brazil,"" he said.
""What's the saying...when in doubt shoot it or fix it.""
TNT would also look to sell other unprofitable non-core businesses, Mortimer said.
""We've got other non-core activities and to the extent that they don't perform then they will be vulnerable to sale,"" he said.  
One of those non core activities is TNT's 50 percent interest in airliner leasing firm, Ansett Worldwide. News Corp Ltd owns the other half.
Mortimer said he had consistently said that Ansett Worldwide's capital base needed to be restructured to give it cheaper access to capital so it could compete properly.
""In its present structure, it's difficult for it to be optimised for News and TNT ownership because it needs access to capital at an effective rate,"" he said.
News and TNT continued to look at ways of restructuring Ansett Worldwide's capital base before selling it, he said.  
Ansett's GD Express operation based in Europe had turned around in the last year and was now going well, Mortimer said.
He said the just completed sale plans for Ansett Airlines
Mortimer said in the longer term, TNT aimed to get double digit revenue and earnings growth.
""Overall we'd like to do good double digit (revenue and earnings) growth, but we can't guarantee any of that,"" he said.
TNT's share price closed up three cents at A$1.47.
-- Sydney Newsroom 61-2 373-1800
",4
"Stock-feed producer Ridley Corp Ltd forecast on Wednesday that slow demand and margin pressures would produce a flat first half year profit, but that a grain price slump would help boost profits for the full 1996/97 year.
""All things considered we expect overall company after tax earnings to be in line with those of last year for the first half,"" Ridley Chairman John Keniry told the group's annual meeting.  
Strong pasture growth in some areas which had significantly cut demand for stockfeed, along with margin pressures from high wheat prices earlier the year had combined to push Australian stockfood earnings lower in the first quarter of the year to June 30, 1997.
First quarter earnings from Ridley's AgriProducts division had been below both budget forecast and last year's results, Keniry said.
Keniry said Ridley expected another good result from its Canadian stock food supplier, Feed-rite, to offset the falls from Australia's AgriProducts in the first half.  
""For the first quarter Feed-Rite's earnings before interest and tax have exceeded by a comfortable margin both budget and last year,"" Keniry said.
But he said a sharp slump in grain prices, one of Ridley's key inputs, could boost margins again in Australia later in the year if prices stayed down.
""When we look to the full year, we must recognise a very rapid decline in the past month or so in grain prices, and the somewhat unpredicatble impact on both us and our customers of these changes,"" Keniry said.  
""Nevertheless on a full year basis, a cautious approach would be to say that we presently expect to come in slightly ahead of last year,"" he said.
Ridley said last month it expected continued profit growth and was optimistic of achieving another record performance in the 1996/97 year to June 30.
It reported an operating profit of A$36.27 million million in 1995/96, up 14.3 percent on the previous year and hard on the heels of three to four years of significant profit rises.  
Later, Ridley managing director Gary Busenshut reiterated the flat immediate outlook but more buoyant longer term prospects for the year.
""As we harvest between October and January, we're going to see some improvement in margins,"" he said.
Busenshut said Ridley also continued to focus on further acquisitions both in Australia and in North America, particularly now that its A$98 million takeover bid for Australian malster Joe White Maltings Ltd looked unlikely to succeed.  
The A$5.44 per share offer was rejected by Joe White and Ridley has said it would not increase the offer before it closes on November 8. Ridley now has about 18 percent of Joe White.
Ridley would continue to look at potential malting acquisitions in Australia and stock-feed milling operations in North America, Busenshuts said.
He said Ridley had had discussions with potential feed-milling targets in North America and could carry out an acquisition worth about A$100 million by the end of the March quarter of 1997 if it decided to. Ridley's shares closed up one cent at A$1.70.  -- Sydney Newsroom 61-2 9373-1812
",4
"Almost 300 students and workers from the islands of Kiribati were adrift in the central Pacific on Wednesday aboard a crowded charter ship crippled by a fire, officials said.
The 1,000-tonne MV Maasmond appealed for help on Tuesday night after losing power through the fire in the engine room.
It was found by a Royal New Zealand Airforce Orion rescue plane drifting about 800 kms (500 miles) east of the Kiribati island of Tarawa with 290 passengers on board.
""The Orion located it this afternoon and was told via radio that it's in no immediate distress and has enough food and water for five days,"" Airforce Squadron Leader Ron Irons told Reuters from the RNZAF's base in Nandi, Fiji.
""It has partially restored its electric power, but it has no wasy to start its engine,"" Irons said.
An electrical fire in a switchboard in the engine room shut down the ship's electrical systems late on Tuesday, leaving the converted freighter without power and still two days sailing from the nearest land.
The ship's charterer, Kiribati businessman Waysang Kumkee, said the MV Maasmond's insurers would pay for another ship to tow it back to Tarawa.
The 64.5-metre (210 foot) Maasmond was chartered to carry 290 passengers, mostly Kiribati students and workers, and 400 tonnes of cargo to Christmas Island from Tarawa, Kumkee said.
A tugboat was likely to take two days to reach the stricken ship and another two days to tow it back to Tarawa, he said, adding the passengers had plenty of food and water to last the four days.
""It's not a problem. If they run out they can easily borrow some of the cargo,"" Kumkee told Reuters by telephone from Tarawa, one of a group of coral atolls about 5,000 kms (3,000 miles) north-east of Sydney.
The cargo included rice and tinned food.
None of the passengers or crew had been injured in the fire and the only problem on board was likely to be boredom given the ship's video players were out of action. ""With no videos, they'll be a bit bored,"" Kumkee said.
Most of the passengers were sitting or sleeping under canvas on blankets on the deck, he said.
They would be reduced to playing cards and their guitars until their rescue, he added.
The MV Maasmond is registered in Kingstown in St Vincent and Grenadines, according to the Lloyds List, and has had engine trouble in the past.
In 1992, it underwent engine repairs for ten weeks after encountering cyclones on a cruise through the Pacific.
",4
"Rupert Murdoch's News Corp Ltd is likely to benefit from the planned US$20 billion merger of MCI Communications Corp and British Telecommunications Plc , Australian media analysts said on Monday.
They said News, which already has a wide-ranging partnership with MCI, would strengthen its global media interests on the coat-tails of the creation of the world's second largest telecommunications group.
""It means they'll be in bed with a bigger more powerful global telephony group,"" one senior Sydney media analyst said.  
Analysts also said the BT-MCI merger would stabilise New Corp's partnership with MCI, which had seemed increasingly strained in recent months. ""It seems that MCI and News haven't been getting on lately, whereas News and BT have been getting on a lot better,"" said the senior Sydney analyst.
The prospect of MCI selling its nine percent stake in News Corp over the next year had suppressed News Corp's shares in the last month. ""There was a view that MCI wasn't real happy with it (the partership) and may sell out, but now nothing's going to happen for 12 months at least,"" said another Sydney analyst.  
""The implications for News are quite positive,"" the analyst said.
A Melbourne analyst said some in the market were a bit worried that MCI was preparing to  to sell down their stake over the next 12 months. ""The fact that BT may combine with MCI reduces that risk for now at least,"" the analyst said.
MCI and News Corp announced a broad alliance in May 1995, under which MCI bought a nine percent stake in News for US$1.35 billion and acquired an option to increase that stake up to 13.5 percent. They agreed, amoug other things, to jointly set up an American satelite television operation -- ASkyB.  
But progress with ASkyB has been slow and other smaller joint ventures have failed to fire.
However, the Australian analysts said they would remain somewhat cautious given bearish comments on Sunday by MCI.
MCI announced that it would cut its stake in ASkyB to 20 percent from 50 percent.
Analysts said this was not surprising as News Corp and MCI had said recently they wanted new partners in the venture.  
But MCI Chief Executive Bert Roberts also told Reuters on Sunday that no major new launches were expected from the venture with News Corp and that MCI would sell to News a US$700 million satellite license if it could.
He also said MCI was unlikely to take up its option to increase its stake in News, a comment seen by analysts as symptomatic of Roberts' increasing unhappiness with the deal.
Analysts also said there was the potential for a regulatory block to links between News, its 40 percent owned BSkyB Plc and BT.  
""There's an outside risk that British regulatory bodies could try and block the News-BSkyB-BT side of it,"" said another BT analyst.
Other analysts said the dilution involved, with BT owning nine percent of a 40 percent stake in BSkyB, would assuage regulatory concerns. The likely election of a British Labour government also reduced that risk.
""They're banking on (Labour leader) Tony Blair winning government and deregulating cross media rules in the United Kingdom,"" said another Sydney analyst.  
However another analyst pointed to the recent banning by British regulator Oftel of a joint marketing campaign between BT and BSkyB as a sign of the rocky road ahead for News and BT.
-- Sydney Newsroom 61-2 9373-1812
",4
"An official inquiry into Australia's financial system said on Thursday it would look at recommending a relaxation of rules that currently stop big bank mergers and takeovers by foreign banks.
The inquiry, which was established by the conservative government after its March election, outlined various options for reform in a wide-ranging discussion paper and was careful not to state its own preferences.  
But it noted majority industry support for abolishing the rules stopping mergers and foreign bank takeovers and said it preferred an anti-monopolies system which treated the banking sector the same way as every other sector.
Until now the government has had the final say on bank mergers, rather than just the anti-monopolies watchdog.
Analysts said the tone of the discussion paper reinforced widespread expectations that the inquiry's final report would recommend allowing bank mergers and new foreign investment.  
""It hasn't changed perceptions that ultimately the inquiry will make recommendations that allow the ACCC (Australian Competition and Consumer Commission) to permit bank mergers which haven't been permitted before,"" said ABN AMRO Hoare Govett Banking analyst Michael Pulman.
Shares in the big banks seen vulnerable to takeover have rallied since the beginning of the year in expectation that a conservative government would allow the mergers.
Possible takeover targets include the Australia and New Zealand Banking Group Ltd and Westpac Banking Corp.  
The National Australia Bank Ltd, Australia's largest and most profitable bank, is seen as the main predator.
A policy set by the former Labor government and known as the 'six pillars' policy has stopped mergers or foreign takeovers of Australia's four largest banks and its two largest insurance and superannuation groups.
The conservative coalition government has said this policy would remain in place until it has considered the Wallis inquiry's recommendations, due to be delivered by the end of March 1997.  
The inquiry, headed by prominent businessman Stan Wallis, said in its 415 page paper any reforms should increase the efficiency of Australia's banks to compete globally.
It also said new technology would transform the sector.
Big banks such as the National Australia Bank have used the same reasoning when lobbying for relaxed merger rules.
These banks have said big bank mergers are necessary to compete globally and new technology such as the Internet and global competition meant such mergers would not cut competition.  
""The Inquiry sees as its key goal the identification of means to increase the efficiency of the Australian financial system, without compromising its safety and peformance,"" the paper said.
Increased efficiency was needed to complete globally, to obtain the benefits of new technology and to increase investment returns, the paper said.
It said it would consider, ""better accommodating financial conglomerates,"" and, ""relaxing some of the ownership restrictions on financial institutuions"".  
The inquiry said it was also wanted any reforms to increase competition and asked in that context ""whether there are any public policy grounds for restrictions on foreign acquisitions in the banking or insurance industries?""
-- Sydney Newsroom 61-2 9373-1812
",4
"Australian investment and property group Lend Lease Corp and Thailand's Modern Home Co announced on Tuesday they would build a markets complex in Northern Bangkok that would be Asia's largest.
""The 160 hectare, A$1 billion (US$778 million) project aims to create a new industrial commercial and residential hub in northern Bangkok, anchored around what is currently being established as Asia's largest single agricultural produce and export market,"" Lend Lease and Modern Home said in a joint venture announcement.
""The joint venture brings together the local experience of Modern Home and Lend Lease's international resources and financial strength,"" they said.
Stage one of the project, which was 60 percent complete and projected to cost A$700 million, was already processing 15,000 tonnes of produce a day and had parking for 25,000 vehicles.
The complex, known as the Thai Markets project, would be located on the main northern road from Bangkok and be about 20 km from the airport.
""Located in a key location in North Bangkok, the Thai Market has been conceived to tap into the high growth agricultural and industrial sectors as Thailand emerges as the 'food bowl of Asia',"" the statement said.
The complex would eventually include food processing facilities so produce from surrounding areas could be packaged and processed for export.
The second and third stages, which would cost A$300 million, would include factories, retail outlets and homes to service the complex.
""There will also be a major discount retail and wholesale distribution facilities and shophouses,"" they said.
Lend Lease's Asian unit, based in Singapore, would contribute up to A$100 million to the joint venture for a 10 percent stake initially, with that percentage changing as the stages progressed.
The project is expected to take four years to complete.
A Lend Lease spokeswoman said she could not say how the percentage would change.
Modern Home chief executive Thanom Angkanawatana said the joint venture was a key step for his company.
""Lend Lease brings extensive experience, management skills and capital. Their international perspective will significantly strengthen the project and position future stages for the next upturn in the economy,"" Angkanawatana said in the statement.
""Completion of the adjacent Thammasart University and Asian Games complexes as well as continuing infrastructure investment in the area by the Thai government is expected to further benefit the project,"" the two partners said.
The state-owned Bank for Agriculture and Agricultural Cooperatives (BAAC) is backing the project and the Thai Ministry of Commerce also supports it, the Lend Lease spokeswoman said.
""The current success of the market project show, that it has strong fundamentals and makes it a good opportunity for Lend Lease,"" Lend Lease Asia managing director Richard Clarke said.
The announcement of the Thai joint venture is part of Lend Lease's widespread push into Asian property development.
Lend Lease announced on Monday it had formed a 50-50 joint venture with privately-owned U.S. firm Oakwood International Ltd to manage about 10,000 serviced apartments around Asia, including in Bangkok.
Lend Lease said it would initially contribute US$15 million for the management entity and would then seek additional capital.
(A$1 = US$0.7780)
",4
"Global media group News Corp Ltd must report a sharply higher second quarter profit on Thursday or it will fail to achieve its 20 percent growth target for the 1996/97 year, analysts said.
News Corp is expected to report a second quarter net profit before abnormals of between A$450 million (US$344.25 million) and A$490 million, taking first half net profits to between A$735 million and A$775 million.
This compares with A$285 million in the first quarter and would be up 17 percent from the A$663 million posted in the first half of 1995/96.
Analysts said strong receipts from the box-office hit alien movie ""Independence Day"" and firm U.S. television revenue would be the driving factors in the stronger result.
They said the market was demanding News put out a strong second quarter figure after a series of below-expectation results.
The analysts said the extent of any fall in the price of News Corp shares would depend on how far earnings fell short of expectations but they did not quantify any expected drop.  
News' first half must be around 15 to 20 percent better if Rupert Murdoch's group is to achieve its August 1996 forecast of a 20 percent improvement in profits in 1996/97 from the A$1.26 billion achieved in 1995/96.
""They are going to have to get a move on in this quarter if they're going to achieve that 20 percent,"" said one senior analyst on Tuesday.
""If they can't get a decent rise for the quarter, people are going to panic,"" the analyst told Reuters.
Analysts said they expected revenues from Australian newspapers and magazines and the Ansett airline operation to remain weak in the second quarter.
First Pacific analyst Lachlan Drummond said he expected ""Independence Day"" revenues to be the major factor in the stronger result.
""Television is also one area where there's room for some upside,"" Drummond said. He is forecasting A$474 million for the second quarter.
Analysts also said a good result was likely because News was due to give a big presentation to analysts and investors on February 24 in Los Angeles and would be reluctant to disappoint them before that.  
""That's got everyone believing that they won't have a bad result,"" Drummond said.
The market would also watch the results commentary closely for a repeat of the 20 percent growth forecast.
Executive chairman and founder Rupert Murdoch repeated the forecast in October last year at the group's annual meeting in Adelaide. But analysts said company officials had been reluctant to repeat the forecast since then.  
News Corp shares ended one cent higher at A$6.75 on Tuesday
(A$1=US$0.76)
",4
"Westpac Banking Corp Ltd is expected to report on Tuesday that its net profit growth was reined back to a slower 10 percent in the 1995/96 year by an increasingly competitive home loan sector and a slower economy.
Analysts said the main focus in the results would be on how that increased competition and recent sharp cuts in home lending margins would hit Westpac's profits in 1996/97.
""You're really only going to have a full impact for the year ending September 1997,"" Morgan Stanley banking analyst John Hobson said of the sliding home loan margins.  
""There'll start to be a moderating influence (on profits) which intensifies throughout 1997,"" he said.
""You'll see fairly cautious statements being made at the briefing.""
The median forecast in BZW's BARCEPs analyst survey is for a net profit before abnormals for the year to September 30, 1996 of A$1.12 billion, up about 10 percent from A$1.02 billion in 1994/95.
This compares with a 44 percent rise between 1993/94 and 1994/95.
",4
"Australia's second-largest bank, Westpac Banking Corp Ltd, announced a 19.5 percent rise in net profit for the 1995/96 year on Tuesday, but warned that fierce competition would flatten profits in the year ahead.
""Everywhere you look and in every market we're in there's a lot of margin pressure,"" Westpac managing director Bob Joss told a news conference after the profit announcement.
""It will be tough to make a rise,"" he said when asked if profits for the year to September 30, 1997, would be flat.
Westpac reported net profit of A$1.132 billion (US$890 million) for the year to September 30, 1996, up 19.5 percent on 1994/95.
But this disguised a flat profit in the second half of the year and was boosted by a sharp drop in bad debt charges.
Joss said competition from non-bank mortgage originators in the housing loan sector was a key factor pressuring margins.
Mortgage originators such as Aussie Home Loans and RAMS Home Loans, who have snared 10 percent of the mortgage market from big banks like Westpac over the last two years by offering cut price home loans.
Their entry into the market has dragged the big banks' home loan margins down from over 300 basis points last year to just over 200 points now.
Joss said Westpac would look to boost its own mortgage origination programme to help compete against the non-banks and support its margins.
Westpac has already launched one issue of securitised mortgages worth A$340 million, the first of the major banks to do so.
Joss said Westpac planned to multiply the size of such issues in the current year.
""The real key for us will be to try to manage our balance sheet, have more assets off balance sheets, more securitising of lower margin assets,"" he said.
""We just did one near the tail end of the (1995/96) year, A$340 million, so we would expect to see quite a bit more in the year ahead,"" Joss said.
Even then, Westpac would struggle to maintain its margins and would have to cut costs and increase efficiency to compensate.
The bearish earnings comments and the detail of the result saw Westpac's share price close down 15 cents at A$7.05, despite the result being almost exactly the average of analysts' forecasts.
Westpac is the second major bank to forecast flat profits in the year ahead because of increased competition. The Commonwealth Bank of Australia since May has been forecasting flat profits over the next year.
These more sober forecasts signify the end of two to three years of sharp profit rises for the major banks as they recovered from hefty loan losses in the early 1990s and capitalised on a strong economy.
A smaller New South Wales-based bank, St George Bank Ltd, echoed this new more subdued outlook for profits in its annual results also announced on Tuesday.
St George reported net profit of A$148.3 million for the 1995/96 year, a rise of 9.4 percent.
St George managing director Jim Sweeney said margin pressure meant it would be a challenge to improve profits in the first half of the current year. (A$1 = US$0.7880)
",4
"Rupert Murdoch's global media group News Corp Ltd reported a lower than expected first half profit on Thursday, but later told analysts it remained confident of a 20 percent profit boost for the full year.
News said strong earnings from the hit alien movie Independence Day and buoyant U.K. newspaper sales helped drive up net profits before abnormals 10.3 percent to A$731 million.
But this was below analysts' expectations of a pre-abnormals net profit for the half of A$735 million to A$775 million.  
""Everyone's a bit disappointed,"" said one senior Sydney analyst who asked not to be named.
Andrew Sekely, the head of equities at broker Intersuisse, described the result as moderate.
""It certainly wasn't a startingly good result. The market has made its judgment,"" he said. News' shares fell 16 cents to A$6.60 in the hours after the result.
""It's about A$20 million less than what the market would have liked and to still reach that (20 percent profit growth) outlook, it's got to make up the difference in the second half,"" the Sydney analyst said.  
News had said in August last year when it posted a A$1.26 billion net profit for the year to June 30, 1996 that it expected strong movie and television revenues to increase profits by at least 20 percent in 1996/97.
Murdoch repeated the forecast in October, but the group has been publicly tight-lipped about it since then and its first quarter results were also lower than expected.
However News reassured the analysts in a teleconference briefing after the first half result, saying that it was still on track for the 20 percent profit growth.
The profit forecast was not in the formal release.  
""They did say that they're still on track for the 20 percent growth,"" another Sydney media analyst said after the morning teleconference briefing between company officials and U.S. and Australian analysts.
Analysts said News Corp officials were bullish about catching up in the second half and had pointed to the continued strong outlook for movies, U.S. television and newspapers.
Operating income from News' Fox Filmed Entertainment unit surged to A$202 million for the first half from A$84 million a year earlier, due largely to Independence Day.  
""U.S. results were led by Fox Filmed Entertainment which posted a 154 percent gain in operating profits reflecting the continued success of Independence Day,"" News Corp said.
Analysts said the re-release of Star Wars, among others, would help further boost movie revenues in the second half.
""It's pure profit in the second half, whereas they had costs to write off in the first half,"" said another analyst.
Strong revenues from News' Fox television network and its Fox stations would also help second half profits.
""They did very well over the Super Bowl and they've got a new hit with King of the Hill,"" said an analyst.  
U.K. newspapers would again perform well in the second half, analysts said. British newspaper profits rose 18 percent in the first half, with gains in circulation revenues at The Sun, the Times and The Sunday Times.
""All of the company's newspapers have maintained their dominant position in each of their respective markets, despite cover price increases instituted during the quarter at both The Sun and The Times,"" News said.
News said losses at its burgeoning Asian satellite broadcaster Star TV were in line with expectations but no figures were released. -- Sydney Newsroom 61-2 373-1800
",4
"News Corp Ltd chairman and chief executive Rupert Murdoch, visiting Australia for News' annual meeting next week, says his global media group remains on track to boost profits by 20 percent in 1996/97.
Murdoch, in a newspaper interview published on Friday, also ruled out any potential News Corp bid for Australian newspaper publisher John Fairfax Holdings Ltd and said Kerry Packer's Publishing and Broadcasting Ltd had repeatedly tried to sell its 15 percent Fairfax stake in the last year.
News Corp owns about five percent of Fairfax.  
Rejoining his recent feud with CNN owner Ted Turner and Time Warner, Murdoch also said he was confident his law suit against the two would succeed.
Turner said on Thursday that Murdoch's lawsuit to block the merger of Turner Broadcasting System Inc and Time Warner was a ""frivolous piece of junk.""
Murdoch said he was confident he would win the legal action launched last week to block the Turner merger with Time Warner.
""We've got a good stoush (fight) there,"" Murdoch said.
""We'll win through there. How or where I don't know but we'll just keep the pressure on,"" he said.  
Murdoch repeated News' bullish outlook for profits.
""If the American economy holds where it is and the British one does, yes certainly (the 20 percent rise is attainable),"" he told News Corp's Courier Mail newspaper in Brisbane.
""But it is still early days to be saying that,"" the newspaper quoted Murdoch as saying.
News Corp said after its 1995/96 results in late August that a 20 percent profit rise in the year to June 30, 1997 was very attainable. News posted a A$1.02 billion net profit in 1995/96.  
Murdoch then said the government's investigation of the current cross-media rules, which stop the dual ownership of newspapers and television stations in the same city, would benefit Packer. Murdoch predicted the cross-media restrictions would be removed, but that foreign ownership rules would stay.
""So it will leave things open for him (Packer) and not for us,"" Murdoch said.
The rules currently stop Packer's Publishing and Broadcasting Ltd from increasing its 15 percent holding in Fairfax while it owns the top-rating Nine Network.  
They also stop Murdoch's News from increasing its 15 percent stake in the Seven Network Ltd while it owns News Ltd newspaper publishing change. Foreign ownership rules stop News from increasing its five percent stake in Fairfax.
Asked what he expected to emerge from the government's investigation into the cross-media rules, Murdoch said: ""I think whatever Mr Packer wants. He seems to have very close influence with certain ministers in this government.""
Murdoch would not name the ministers.
However Packer was unlikely to push for a higher Fairfax stake at the moment, Murdoch said.  
""I don't want to buy Fairfax. I don't believe Mr (Kerry) Packer wants to buy Fairfax,"" he said.
""To my knowledge he (Packer) has three times tried to sell his shares within the last 12 months. He'd like to influence and have the power of Fairfax but he's too shrewd to be paying for Fairfax at today's price.""
Fairfax is 25 percent owned by Conrad Black's Hollinger International Inc, which is majority owned by Hollinger Inc.  
Murdoch also criticised the conservative government of Australian prime minister John Howard for not implementing decisive changes to boost the economy.
""If you're going to make radical changes, you'd better make them in the first year,"" Murdoch said of the government, which defeated the Labor government in the election on March 2.
""I think they've been slow to do that and not appearing as radical a government as I would have hoped,"" he said.
-- Sydney Newsroom 61-2 373-1800
",4
"Electronic payment systems company Intellect Holdings Ltd said on Tuesday its bid for Internet software firm Techway Ltd would allow it to launch a product for making secure payments on the Internet.
Intellect, which helped pioneer EFTPOS (Electronic Funds Transfer Point of Sale) technology and systems in Australia, wanted to export Techway's software in conjunction with its own secure electronic payments systems, Intellect executive chairman Ross Leighton told Reuters.  
Intellect already sold its EFTPOS hardware and software to 20 banks outside Australia and to five or six large banks in Europe, all of whom were investigating its use with the Internet.
""All banks are looking for greater service and lower costs and the internet is the way to do that,"" Leighton said in an interview.
Finding a user-friendly and secure way of making payments and money transfers on the internet has become something of a holy grail for programmers.  
Secure payments systems are seen dramatically increasing the volume of financial transactions made on the net, which are already growing strongly.
Techway's Web Australia unit built the software currently being used for internet banking by Advance Bank Ltd, which is merging with St George Bank Ltd.
Intellect announced late on Monday it would make a takeover offer for Techway Ltd in a counter-bid to a previous offer by Nova Pacific Capital Ltd.
Intellect said it will offer one of its shares for every 2-1/2 Techway shares. The bid values Techway at A$4.9 million.  
Techway, who had already signed a distribution agreement with Intellect, has recommended shareholders accept the bid.
Leighton said the success of Techway's software on the Advance Bank site was a key factor in Intellect's decision to launch a takeover bid.
Advance's Internet banking site is Australia's most successful and has been consistently rated amoung the world's top ten internet banking sites by The Money Pages, an Internet magazine that rates internet sites.  
Advance Bank spokesman David Brown said the Techway-designed site had 10,000 regular customers who used the site for about 10,000 transactions a week.
The site was picking up 150 new customers a week and each internet transaction cost the bank less than 10 cents, while an over the counter transaction cost about A$2.50, he said.
""The collaboration between Techway and Advance was a key for Advance getting the jump on our competitors,"" Brown said.
Intellect's Leighton said Techway's headstart in Australia meant it had a good chance of becoming the industry standard for Internet transactions in Australia.  
""It has the ability to become a defacto standard in Australia,"" Leighton said.
The marriage of Techway's secure transaction software and Intellect's EFTPOS hardware and systems would help accelerate the trend of convergence evident in recent years between debit cards, credit cards and EFTPOS, he said.
""As these different payments come together, you'll then see they'll be able to be more economically utilised over the Internet.""  
Intellect's share price closed down three cents at 95 cents on Tuesday, giving it a market capitalisation of A$48.19 million.
Techway's shares closed up 5.5 cents at 37 cents.
-- Sydney Newsroom 61-2 9373-1800
",4
"Australia-based transport, logistics and security group Brambles Industries Ltd said it was actively considering acquisitions in United States, Europe and Asia in the current year.
Brambles chief executive John Fletcher told Reuters in an interview that Brambles would only look at acquisitions in areas where it had Australian experience.
""You should anticipate some acquisition work in the Northern Hemisphere, but in businesses we already operate in here,"" he said.  
""Anything new we'll do on home turf,"" he said.
Fletcher repeated that Brambles was looking at participating in the privatisation of Australia's airports being carried out before June next year.
Fletcher said the vehicle for airport investment would be Bramble's joint venture company, Australian Airport Services, formed with property and financial services company, Lend Lease Corp Ltd.
Brambles would look at acquisitions in the Northern Hemisphere in the industrial services, waste management, equipment rentals and records management areas.  
Earlier Brambles reported a 120.2 percent jump in net profit to A$215.1 million for the year to June 30, 1996. Before abnormals, the net profit rose 15.8 percent to A$214.8 million, at the upper end of analysts' expectations of A$208 million to A$214 million.
Fletcher said the result would have been a bit ahead of brokers' expectations.
""It's a marginally pleasant result rather than a huge shock,"" he said.
Strong growth in earnings from Brambles CHEP pallet business in the United States helped boost the results.  
Fletcher said the Australian economy, which provides the bulk of Bramble's earnings, remained flat and was expected to remain so for some time.
""We haven't got an expectation that we will get too much help from this economy ... for at least another six months,"" he said.
The U.S. economy remained strong while Europe and Britain were flat, he said.
""But all in all we've got enough things going to see another (profit) increase for this year,"" he said.  
Profits from Brambles overseas operations grew at twice the rate of those from local economies and this trend was likely to continue.
This continued overseas growth would however affect the allocation of franking credits on dividends.
""The continuing growth expected in overseas earnings meant that the company would need to reduce moderately the level of franking of dividends declared on 1996/97 earnings,"" Fletcher said in an earlier statement.
Recipients of franked dividends receive tax credits for Australian company tax already paid by the companies involved.  
Brambles posted a 35 cents per share fully franked final dividend for 1995/96, up from a 33 cents per share final dividend in 1994/95.
The total dividend rose to 69 cents per share from 65 cents.
Earnings per share rose to 97.6 cents from 84.8 cents.
Brambles' shares were down five cents at A$18.80 at 3.40 p.m. (0540 GMT).
-- Sydney Newsroom 61-2 373-1800
",4
"News Corp Ltd's unveiling on Tuesday of plans to run its finances more conservatively were welcomed by analysts who have sometimes been critical of News' previous big debt and equity issues.
Rupert Murdoch, the chief executive and chairman of the global media group, told the company's annual meeting in Adelaide that News now had over US$2.5 billion of cash in the bank after a bond issue last week and planned to keep it there.
""We know that we have to be not only viable and profitable, but also that we should stay strong and liquid,"" Murdoch said.  
Murdoch then said News Corp's multi-billion dollar plans to create huge pay television networks in the United States, Asia, Japan, Latin America and Australia would be financed from cash flow. He also said News Corp needed to keep its liquidity up to finance new acquisitions.
""We have outlined these plans to show you where we are and where we plan to go. As far as possible, we will finance them out of current cash flow to maintain liquidity so that we will be ready to take new opportunities as they arise,"" he said.  
Analysts said the comments indicated a more conservative financial strategy, constrasting with the big acquisitions, investments and big debt and equity issues of the past.
The analysts said the market, which has sometimes been critical of the big deals and the big calls on the market, would welcome the comments.
News Corp's issue of preference shares earlier this year to fund the US$2.48 billion buy out of New World Communications upset many and triggered a slump in the price of the preference shares.  
""It's slightly more conservative and the market will like it,"" said Macquarie Equities media analyst Alex Pollak of Murdoch's latest approach.
""The market is absolutely paranoid that they'll go out and spend A$1.5 billion on something that they will not like,"" Pollak said.
""Anything with more money spent on the big picture stuff, they're not going to like much,"" he said, adding the market wanted News to concentrate on ploughing money into its existing pay television networks in the United States.  
Analysts said Murdoch's comments about keeping the US$2.5 billion in the bank and financing projects from cashflows indicated any acquisitions would be small by Murdoch standards.
""That imposes a huge financial discipline on the company which would hearten the market immensely,"" said a Sydney media analyst. ""If he can keep to those comments then it's most certainly a big plus,"" he said.
News Corp shares closed 14 cents or 1.9 percent lower at A$7.20 after Murdoch said the first quarter was not up to earlier expectations of a 20 percent profit rise in 1996/97. But he said News remained on track for that 20 percent rise.  
""If they can't meet their expectations in the first quarter when the strong revenues from 'Independence Day' are coming, then what hope do they have for the full year,"" one analyst said.
The hit movie was made by News Corp's Twentieth Century Fox subsidiary.
""His comments about the first quarter were weaker than what people were anticipating and it looks like U.S. television was one are of disappointment,"" another analyst said.
-- Sydney Newsroom 61-2 373-1800
",4
"Dairy and fruit juice group National Foods Ltd said on Tuesday its reforms announced in July were now almost fully completed and the group was poised for above-budget profit growth in the next six to nine months.
""It's almost fully implemented,"" outgoing National Foods managing director Graham Reaney told Reuters in an interview.
""The real benefits start to emerge as people become more familiar with the new structures and clearly there'll be gains over the next six to nine months,"" Reaney said.  
Earlier on Tuesday National Foods posted a 17.3 percent higher operating profit before tax of A$37.6 million for the year to June 30.
Its net profit rose to A$15.05 million from A$10.77 million after an abnormal loss of A$7.89 million.
Net profit before abnormals rose to A$22.7 million from A$19.2 million, against analysts' expectations of about A$23 million.
National Foods said in announcing its results, earnings for July and August were ahead of budget and comfortably ahead of last year.  
Reaney repeated that this meant that 1996/97 profits were likely to be higher than in 1995/96, but he would not say how much higher. ""But its clearly going in the right direction.""
The reforms had created a more efficient distribution system for chilled foods, increasing sales coverage for National Foods' products, Reaney said.
""It's a combination of cost reduction and enhanced distribution, and looking at our beverage division, our flavoured milks are performing particularly strongly,"" he said.
""There are a number of areas that starting to perform a lot better for us.""  
Reaney said the sale of non-core assets had also been completed and the company was now focused on extracting profit growth from existing assets.
""We would consider all businesses that we have today as core businesses,"" he said, adding, however, that he could not rule out future acquisitions.
""But the first objective to make those assets that we currently own work better, produce more profit, more cash flow.""
Singapore's Camerlin Pte Ltd has about eight percent of National Foods and Hong Kong's Mingly Corp has about 10.4 percent of the company.  
Reaney said he would not comment on shareholders' intentions or actions or whether either of the Asian-based investors planned any takeover or had brought on any board room reshuffle.
He said he had resigned the managing director's position having worked for the company for five years. ""Five to seven years is a normal period for a chief executive and quite genuinely I do have other things to do,"" he said.
""I'm quite relaxed and if it wasn't an amicable arrangement I wouldn't be staying on as a non-executive director,"" he said on his last day in the job.  
Reaney's replacement, Max Ould, was chief executive of Peters Foods until April and presided over the transfer of operations from Pacific Dunlop Ltd to Nestle Australia.
National Foods' shares closed up three cents at A$1.41.
-- Sydney Newsroom 61-2 373-1800
",4
"National Mutual Holdings Ltd managing director Geoff Tomlinson said on Thursday that strong investment markets meant group earnings for the 1996/97 year were likely to be in line with the July prospectus forecasts.
""It's been a very kind year. I can't think of when the markets have been more conducive to our type of business,"" Tomlinson told Reuters in an interview.  
He said he could not give a formal forecast of the profit result for the just completed year to September 30 but an examination of the assumptions in National Mutual's share offer document would show the forecasts were likely to be met.
""You can go back and look at the investment assumptions in the share offer document and compare them with where we were at the end of September and we were in the fortunate position where most of the markets finished in line with predictions,"" he said.
""That would give you some underlying view that it's likely that our performance will be in line with that projection.""  
National Mutual forecast in its offer document a consolidated net profit after tax of A$198 million for the year ending September 30, up from A$115.5 million in 1994/95.
The assumptions underlying the forecast included an Australian 90 day bill rate of 7.5 percent as at September 30, a 10-year bond rate of 8.75 percent at September 30 and a U.S. 10 year bond rate of 6.50 percent as at September 30.
The offer document, issued before National Mutual demutualised and listed on the Australian Stock Exchange last month, said its profit was not significantly sensitive to its stock market assumptions.
",4
"Water filtration company Memtec Ltd is confident the failure of its planned US$280 million takeover bid for U.S. medical filtration company Gelman Sciences Inc will not affect earnings or its U.S. expansion plans.
Memtec chairman Denis Hanley told Reuters in a telephone interview from the United States that a compensation clause in the original takeover deal negotiated with Gelman meant it would not affect Memtec's earnings in the year to June 30, 1997.  
""There were clauses in the contract that compensated us for our effort,"" Hanley said.
""It will have no impact on our normal earnings,"" he said.
In July, Gelman said it had agreed to be taken over by the NASDAQ-listed Memtec, which offered 1.05 Memtec American Depositary Receipts (ADRS) for each Gelman share.
The offer than valued each Gelman share at about US$35 a share, but Memtec's share price fell after the July announcement and the agreement included a clause allowing Gelman to renegotiate or terminate the deal if Memtec's share price fell below US$30.  
On Monday, Gelman agreed to a takeover bid by fellow filtration company Pall Corp, which valued Gelman's shares at US$33 per share and effectively trumped Memtec's bid.
Memtec then said on Tuesday it would not increase its bid and that the original merger agreement had been terminated.
Hanley said he and Memtec's management had spent months preparing for the Gelman takeover and organising a roadshow promoting the bid, but that Memtec had been compensated for the costs involved.
He said Memtec's likely growth in the United States this year would not be affected by failure of the deal.  
""This year the growth we'll probably see will still be better than 50 percent without this deal,"" he said.
Memtec remained on the lookout for expansion opportunities in the United States, particularly in the medical filtration sector.
""We see many ways of getting into the medical market there,"" he said, adding however that he could not be specific about how Memtec would increase its presence.
Gelman makes microfiltration products for laboratories, healthcare, environmental monitoring, high-technology process industries and other uses.  
The end of the Gelman deal has pleased shareholders however, with Memtec's shares jumping A$3.50 to A$41.50 by Wednesday's close from its A$35 level on Monday.
Memtec had been around A$42.50 in mid-July.
-- Sydney Newsroom 61-2 9373-1812
",4
"World-wide Australian transport group TNT Ltd reported another annual profit slump on Wednesday, but promised the sale of its troubled airline and other reforms would produce strong profit growth in current year.
""We haven't got any numbers, but it should be quite strong relative to the position we're starting from,"" TNT managing director David Mortimer said of prospective profit growth, in an interview with Reuters.  
TNT's net profit for the year to June 30 fell to A$9.84 million (US$7.79 million) from A$40.01 million in 1994/95 and A$105.05 million in 1993/94.
Mortimer said a sharp drop profits from Australia's Ansett Airlines, 50 percent owned by TNT, and losses from its Brazilian operations and local general freight business offset good revenue growth in TNT's core operations.
He said profits from these core activities of domestic and international time sensitive freight and logistics had grown 48.7 percent to A$165.3 million in 1995/96.  
TNT had moved to excise these loss-making units and focus on profitable core activities, he said.
""We've dealt with the (Australian) LCL (Less Than Container Load) business -- that's been closed, and we've sold Brazil,"" he said.
""What's the saying ... when in doubt shoot it or fix it.""
TNT would also look to sell other unprofitable non-core businesses, Mortimer said.
""We've got other non-core activities and to the extent that they don't perform then they will be vulnerable to sale,"" he said.  
""The inconsistency in our results has come from these fringe activities ... it's that volatility around the earnings base that says we have to concentrate on core activities and get out of the non-core 'riff-raff' if you like,"" he said.
TNT announced earlier this week the finalisation of plans to sell its stake in Ansett to Air New Zealand Ltd for cash receipts of A$325 million. The other 50 percent of Ansett is owned by Rupert Murdoch's News Corp Ltd.  
TNT's remaining non-core activities include an airline leasing company jointly owned with News Corp, some shipping operations between New Zealand and Australia, a mono-rail in Sydney and some information technology assets.
Mortimer would not single out any as potential immediate sale prospects, but said they were vulnerable while they were not making profits.
He said the airline leasing firm, Ansett Worldwide, needed to have its capital base restructured before it could be sold.  
Shareholders however took the profit slump in their stride, having actually forecast a slight loss, rather than a slight profit.
Net profit before abnormals, but after preference dividends, fell to A$0.6 million from A$38.48 million in 1994/95.
Analysts had expected a pre-abnormal, post preferences loss of between A$4 million and A$22 million.
TNT's shares closed up three cents at A$1.47.
-- Sydney Newsroom 61-2 373-1800
",4
"Media magnate Rupert Murdoch said on Tuesday the first quarter performance of his global media group, The News Corp Ltd, had been below expectations, but that he was still confident of a 20 percent profit rise in 1996/97.
""I am on record as saying that we expect a 20 percent increase in profit for the year,"" Murdoch told a packed News Corp annual meeting in Adelaide.  
""We still expect that and are still aiming for that during the coming year. However, I should say that the first quarter may not be quite up to those expectatations, but we will certainly be striving to make up any shortfall,"" he said.
In the 1995/96 year ended June 30, News Corp's net profit slipped to A$1.02 billion from A$1.37 billion in 1994/95.
He said revenues at the Fox U.S. television business had begun 1996/97 slowly because of of the Atlanta Olympic Games, the rights to which were held by a rival network.
Australian newspaper revenues would be flat in 1996/97, he said.  
However, News Corp's British newspapers were doing extremely well, with circulation at The Sunday Times climbing with little promotion while advertising in Britain was booming.
Murdoch, News Corp's chief executive and chairman, also announced the group now had US$2.5 billion in cash in the bank after recent U.S. bond issues and would leave it there.
He also said that News now planned to fund future expansion from cash flow where possible.
""We know that we have to be not only viable and profitable, but also that we should stay strong and liquid,"" Murdoch said.  
""As far as possible, we will finance them (News' expansion plans) out of current cash flow to maintain liquidity so that we will be ready to take new opportunities as they arise,"" he said.
News has often funded its aggressive growth in pay television and other media through either hefty debt or equity issues, which have sometimes met shareholder resistance.
Murdoch also announced that News planned to float its British based digital media technology company, Digital Media Services, within the next two to three weeks and would sell 20 percent of the company.  
Digital Media Services, a combination of News Data Comm and Digi-Media Vision Ltd, would operate in Britain and Israel and produce technology for digital television.
He also later said News' Asian satellite pay television operation, STAR TV, was performing well.
-- Sydney newsroom 61-2 9373-1800
",4
"Gaming and electronics group AWA Ltd said on Wednesday it wanted to buy up to 75 percent of the New South Wales government-owned betting agency, the Totalisator Agency Board (TAB), later this year.
AWA managing director John Rouse told Reuters in an interview that the company was looking at the option of a major recapitalisation to fund such an acquisition, which has been estimated to be worth around A$750 million.
""It's clear that AWA has a strong interest in participating in the privatisation of the TAB,"" Rouse said.  
He said the racing industry and AWA were looking closely at the model used to privatise the Victorian TAB, where the industry bought a 25 percent stake and 75 percent was privatised through Tabcorp Holdings Ltd.
AWA was considering the option of a major capital raising to fund the outright purchase of a 75 percent stake through a government trade sale, with an offer of a portion of the stake to the public later on.  
""You could have a situation where initially the capital raising is funded by financial institutions and maybe AWA's existing shareholder base, but within a period a portion of what has been acquired would be floated on a broader basis to the public,"" Rouse said.
The Labor government in New South Wales has yet to say publicly whether it would privatise the TAB, but is expected to announce within several months a plan to sell it either through a public float or a trade sale.  
Bidders however wanted the government to give some concrete assurances about the tax and licensing regime a privatisated TAB would face.
""It's important that the parameters in terms of tax and licensing are cast in concrete for some reasonable time,"" Rouse said.
AWA was aware of a desire within government and the wider public that the public be offered shares in any privatised NSW TAB at some stage, he added.
""We would be prepared to make commitments to the government that we would float it later on,"" he said.  
Rouse said there was a feeling within government and the racing industry that a trade sale would be preferable to a float.
""There are those that are close to this issue in government saying if New South Wales wants to deal with this matter quickly, if the racing industry wants to establish its financial arrangements sooner rather than later and the government doesn't want the costs of a public float, than a tender needs to be the preferred approach,"" he said.  
AWA's share price closed down two cents at 91 cents on Wednesday.
-- Sydney Newsroom 61-2 373-1800
",4
"Australia's largest retailer, Coles Myer Ltd, forecast a rejuvenation in its profit outlook at its annual meeting on Tuesday but failed to stop shareholders launching into a six-hour tirade aimed at Coles' directors.
The prime target was former executive chairman Solomon Lew, who was re-elected as a director with the help of proxy votes after the floor of the meeting overwhelmingly rejected his re-election. Coles Chairman Nobby Clark, who was jeered when he tried to cut short debate on Lew's re-election, said Coles was seeing something of a rejuvenation in its businesses.  
""We're on the edge of something pretty good,"" Clark told the annual meeting. ""We do have an upside and I'm confident we can do better for you,"" he said.
""First quarter performance is running above expectations and we hope that can continue,"" he said, adding that provided Christmas trading was reasonable, Coles Myer's bottom line results should improve in 1996/97.
",4
"Media magnate Rupert Murdoch said on Tuesday that the first quarter performance of his global media group, The News Corp Ltd, had been below expectations, but that he was still confident of a 20 percent profit rise in 1996/97.
""I am on record as saying that we expect a 20 percent increase in profit for the year,"" Murdoch told a packed News Corp annual meeting in Adelaide.
""We still expect that and are still aiming for that during the coming year. However, I should say that the first quarter may not be quite up to those expectatations, but we will certainly be striving to make up any shortfall,"" he said.
In the 1995/96 year ended June 30, News Corp's net profit slipped to A$1.02 billion (US$806 million) from A$1.37 billion in 1994/95.
He said revenues at the Fox U.S. television business had begun 1996/97 slowly because of of the Atlanta Olympic Games, the rights to which were held by a rival network.
Australian newspaper revenues would be flat in 1996/97, he said.
However, News Corp's British newspapers were doing extremely well, with circulation at The Sunday Times climbing with little promotion while advertising in Britain was booming.
Murdoch, News Corp's chief executive and chairman, also announced the group now had US$2.5 billion in cash in the bank after recent U.S. bond issues and would leave it there.
He also said that News now planned to fund future expansion from cash flow where possible.
""We know that we have to be not only viable and profitable, but also that we should stay strong and liquid,"" Murdoch said.
""As far as possible, we will finance them (News' expansion plans) out of current cash flow to maintain liquidity so that we will be ready to take new opportunities as they arise,"" he said.
News has often funded its aggressive growth in pay television and other media through either hefty debt or equity issues, which have sometimes met shareholder resistance.
Murdoch also announced that News planned to float its British based digital media technology company, Digital Media Services, within the next two to three weeks and would sell 20 percent of the company.
Digital Media Services, a combination of News Data Comm and Digi-Media Vision Ltd, would operate in Britain and Israel and produce technology for digital television.
He also later said News' Asian satellite pay television operation, STAR TV, was performing well.
A$1 = US$0.79
",4
"Australian investment and property group Lend Lease Corp and Thailand's Modern Home Co announced on Tuesday they would build a markets complex in Northern Bangkok that would be Asia's largest.
""The 160 hectare, A$1 billion (US$778 million) project aims to create a new industrial commercial and residential hub in northern Bangkok, anchored around what is currently being established as Asia's largest single agricultural produce and export market,"" Lend Lease and Modern Home said in a joint venture announcement.
""The joint venture brings together the local experience of Modern Home and Lend Lease's international resources and financial strength,"" they said.
Stage one of the project, which was 60 percent complete and projected to cost A$700 million, was already processing 15,000 tonnes of produce a day and had parking for 25,000 vehicles.
The complex, known as the Thai Markets project, would be located on the main northern road from Bangkok and be about 20 km from the airport.
""Located in a key location in North Bangkok, the Thai Market has been conceived to tap into the high growth agricultural and industrial sectors as Thailand emerges as the 'food bowl of Asia',"" the said.
The complex would eventually include food processing facilities so produce from surrounding areas could be packaged and processed for export.
The second and third stages, which would cost A$300 million, would include factories, retail outlets and homes to service the complex.
""There will also be a major discount retail and wholesale distribution facilities and shophouses,"" they said.
Lend Lease's Asian unit, based in Singapore, would contribute up to A$100 million to the joint venture for a 10 percent stake initially, with that percentage changing as the stages progressed.
The project is expected to take four years to complete.
A Lend Lease spokeswoman said she could not say how the percentage would change.
Modern Home chief executive Thanom Angkanawatana said the joint venture was a key step for his company.
""Lend Lease brings extensive experience, management skills and capital. Their international perspective will significantly strengthen the project and position future stages for the next upturn in the economy,"" Angkanawatana said in the joint statement.
""Completion of the adjacent Thammasart University and Asian Games complexes as well as continuing infrastructure investment in the area by the Thai government is expected to further benefit the project,"" the two partners said.
The state-owned Bank for Agriculture and Agricultural Cooperatives (BAAC) is backing the project and the Thai Ministry of Commerce also supports it, the Lend Lease spokeswoman said.
""The current success of the market project show, that it has strong fundamentals and makes it a good opportunity for Lend Lease,"" Lend Lease Asia managing director Richard Clarke said.
The announcement of the Thai joint venture is part of Lend Lease's widespread push into Asian property development.
Lend Lease announced on Monday it had formed a 50/50 joint venture with privately-owned U.S. firm Oakwood International Ltd to manage about 10,000 serviced apartments around Asia, including in Bangkok.
Lend Lease said it would initially contribute US$15 million for the management entity and would then seek additional capital.
-- Sydney Newsroom 61-2 9373-1800
",4
"World-wide Australian transport group TNT Ltd reported another annual profit slump on Wednesday, but promised the sale of its troubled airline and other reforms would produce strong profit growth in current year.
""We haven't got any numbers, but it should be quite strong relative to the position we're starting from,"" TNT managing director David Mortimer said of prospective profit growth, in an interview with Reuters.
TNT's net profit for the year to June 30 fell to A$9.84 million (US$7.79 million) from A$40.01 million in 1994/95 and A$105.05 million in 1993/94.
Mortimer said a sharp drop profits from Australia's Ansett Airlines, 50 percent owned by TNT, and losses from its Brazilian operations and local general freight business offset good revenue growth in TNT's core operations.
He said profits from these core activities of domestic and international time-sensitive freight and logistics had grown 48.7 percent to A$165.3 million in 1995/96.
TNT had moved to excise these loss-making units and focus on profitable core activities, he said.
""We've dealt with the (Australian) LCL (Less Than Container Load) business -- that's been closed, and we've sold Brazil,"" he said.
""What's the saying ... when in doubt shoot it or fix it.""
TNT would also look to sell other unprofitable, non-core businesses, Mortimer said. ""We've got other non-core activities and to the extent that they don't perform, then they will be vulnerable to sale
""The inconsistency in our results has come from these fringe activities...it's that volatility around the earnings base that says we have to concentrate on core activities and get out of the non-core 'riff-raff,' if you like,"" he said.
Earlier this week TNT announced the finalisation of plans to sell its stake in Ansett to Air New Zealand Ltd for cash receipts of A$325 million. The other 50 percent of Ansett is owned by Rupert Murdoch's News Corp Ltd.
TNT's remaining non-core activities include an airline leasing company jointly owned with News Corp, some shipping operations between New Zealand and Australia, a mono-rail in Sydney and some information technology assets.
Mortimer would not single out any of these as potential immediate sale prospects, but said they were vulnerable while they were not making profits.
He said the airline leasing firm, Ansett Worldwide, needed to have its capital base restructured before it could be sold.
Shareholders, however, took the profit slump in their stride, having actually forecast a slight loss rather than a slight profit.
Net profit before abnormals, but after preference dividends, fell to A$0.6 million from A$38.48 million in 1994/95.
Analysts had expected a pre-abnormal, post preferences loss of between A$4 million and A$22 million.
TNT's shares closed up three cents at A$1.47.
(A$1 = US$0.7920)
",4
"Australia-based transport equipment hire and logistics firm, Brambles Industries Ltd, reported a 15.8 percent profit lift for the 1995/96 year on Friday despite flat Australian and European economies.
Surging profits from Brambles' U.S. and European CHEP pallet hire joint venture with Britain's GKN Plc compensated for otherwise slow growth from Australia, the company said.  
""The continuing improvement in our performance reflects, in part, the successful retionalisation of our wholly owned businesses and strong growth from our CHEP joint ventures,"" Brambles Chief Executive John Fletcher said.
""CHEP USA, in particular, continues to justify our confidence in its long term growth prospects in the region,"" he said in Bramble's profit statements.
Brambles' net profit rose to A$215.1 million (US$169.9 million) for the year to June 30, 1997 from A$97.7 million in 1994/95, but the previous year's result was undermined by a large abnormal loss.  
Pre-abnormal profits for 1995/96 rose 15.8 percent to A$214.8 million, at the top end of analysts' expectations.
Pre-tax profits rose 13 percent and 30 percent from Europe and the United States respectively, while Australian profits rose eight percent.
""Overseas profits grew at twice the rate in Australia and the trend is likely to continue,"" Fletcher said.
""In particular we expect further contributions from CHEP in Europe and North America,"" he said.  
Fletcher later told Reuters this strong peformance from Bramble's non-Australian operations had encouraged it to actively look at further acquisitions outside Australia.
""You should anticipate some acquisition work in the Northern Hemisphere, but in businesses we already operate in here,"" he said, referring to areas like transport equipment rentals and records managements.
Looking ahead, he said strong contributions from the United States and Europe should continue to offset soft Australian conditions and help produce profit growth.  
""We haven't got an expectation that we will get too much help from this economy ... for at least another six months,"" he said. ""But all in all we've got enough things going to see another (profit) increase for this year,"" he added.
The result generally pleased analysts, who also pointed to the strong U.S. pallet operations as the main bullish note.
""CHEP USA is the outstanding area,"" said Macquarie Equities analyst Ian Myles.
""As long as they're saying positive things about CHEP in the USA then they'll be alright and there's a reasonable amount of momentum there,"" another Sydney transport analyst said.  
Brambles' shares closed up five cents at A$18.90 against a soft market overall.
-- Sydney Newsroom 61-2 373-1800
",4
"Global media group News Corp Ltd must report a sharply stronger second quarter profit this Thursday or it will fail to achieve its 20 percent growth target for the 1996/97 year, analysts said.
News Corp is expected to report a second quarter net profit before abnormals of between A$450 million and A$490 million, taking first half net profits to between A$735 million and A$775 million.  
This compares with A$285 million in the first quarter and would be up 17 percent from the A$663 million posted in the first half of 1995/96.
Analysts said strong receipts from the box-office hit ""Independence Day"" and firm U.S. television revenue would be the driving factors in the stronger result.
They said the market was demanding that News put out a strong second quarter figure after a series of below-expectation results.  
News' first half must be around 15 to 20 percent better if Rupert Murdoch's group is to achieve its August 1996 forecast of a 20 percent improvement in profits in 1996/97 from the A$1.26 billion achieved in 1995/96.
""They are going to have to get a move on in this quarter if they're going to achieve that 20 percent,"" said one senior News Corp analyst.
""If they can't get a decent rise for the quarter, people are going to panic,"" the analyst said.  
Analysts said they expected revenues from Australian newspapers and magazines and the Ansett airline operation to remain weak in the second quarter.
First Pacific analyst Lachlan Drummond said he expected Independence Day revenues to be the major factor in the stronger result.
""Television is also one area where there's room for some upside,"" Drummond said. He is forecasting A$474 million for the second quarter.  
Analysts also said a good result was likely because News was due to give a big presentation to analysts and investors on February 24 in Los Angeles and would be reluctant to disappoint them immediately before that.
""That's got everyone believing that they won't have a bad result,"" Drummond said.
The market would also watch the results commentary closely for a repeat of the 20 percent growth forecast.
Executive chairman and founder Rupert Murdoch repeated the forecast in October last year at the group's annual meeting in Adelaide.  
But analysts said company officials had been reluctant to repeat the forecast since then.
-- Sydney Newsroom 61-2 373-1800
",4
"Australia's second largest bank, Westpac Banking Corp Ltd, announced a 19.5 percent rise in net profit for the 1995/96 year on Tuesday, but warned that fierce competition would flatten profits in the year ahead.
""Everywhere you look and in every market we're in there's a lot of margin pressure,"" Westpac Managing Director Bob Joss told a news conference after the profit announcement.
""It will be tough to make a rise,"" he said when asked if profits for the year to September 30, 1997 would be flat.  
Westpac reported a net profit of A$1.132 billion for the year to September 30, 1996, up 19.5 percent on 1994/95, but this disguised a flat profit in the second half and was boosted by a sharp drop in bad debt charges for year.
Bad debt charges fell to A$121 million in 1995/96, down sharply from A$330 million in 1994/95, a fall which Westpac said contributed about A$200 million to the 12 percent rise in pre-tax and abnormals profit to A$1.389 billion.
Joss said competition from non-bank mortgage originators in the housing loan sector was a key factor pressuring margins.  
Mortgage originators such as Aussie Home Loans and RAMS have taken over 10 percent of the mortgage market from the big banks including Westpac over the last two years, dragging home loan margins down from over 300 basis points to just over 200 points. Joss said Westpac would look to boost its own mortgage origination programme to help compete against the non-banks and support its margins.
Westpac has already launched one issue of securitised mortgages worth A$340 million, the first of the major banks to do so.  
Joss said Westpac planned to multiply the size of such issues in the current year.
""The real key for us will be to try to manage our balance sheet, have more assets off balance sheets, more securitising of lower margin assets,"" he said.
""We just did one near the tail end of the (1995/96) year, A$340 million, so we would expect to see quite a bit more in the year ahead,"" Joss said.
When asked how much more than A$340 million, he said: ""Multiples of A$340 million.""
Even then, Westpac would struggle to maintain its margin.  
Westpac reported in its accounts for the year that the group's net margin had fallen to 370 basis points over the whole 1995/96 year, down from 380 basis points over 1994/95.
Joss said the fall was already apparent towards the end of the year to September.
""At the tail end of the year, it's actually less than what you would have seen for the year,"" Joss said.
He acknowledged Westpac would find it difficult to keep that margin from falling from 370 points.
Given the margin pressure, Westpac would continue to focus on increasing transaction and other fees to compensate.  
""In such an environment, maintenance of overall net earnings growth will depend increasingly on attaining improvements in fee income generation, particularly non lending-related fees and on improved efficiency of operations,"" Joss said in an earlier statement.
He told the news conference he would like to see Westpac's efficiency ratio, which measures expenses to income, fall below 60 percent from the 62.6 percent evident in 1995/96.  
This ratio worsened during the year from 60.6 percent in 1994/95, due largely to the costs of acquiring and restructuring the Western Australian-based Challenge Bank and Trust Bank of New Zealand.
Joss said rationalisations throughout Westpac over the next two years would help to lower costs, improve efficiency and therefore compensate somewhat for the slimmer margins.
The bearish comments from Joss helped Westpac close 15 cents lower at A$7.05.
-- Bernard Hickey -- Sydney Newsroom 61-2 9373-1812
",4
"The Commmonwealth Bank of Australia (CBA) warned again on Tuesday of a subdued profit outlook for the current 1996/97 year and beyond, citing a competitive housing market, falling margins and higher wage costs.
CBA chairman Tim Besley told shareholders at the bank's annual meeting that nothing in the first three months of the year had changed earlier forecasts of flat profits in the current year to June 30, 1997.  
""We are now three months into the financial year and nothing has changed to prompt the bank to revise this assessment,"" Besley said in his chairman's address.
""1996/97 is shaping up to be every bit as challenging as we envisaged,"" he said.
""The home loan market remains intensely competitive.""
Commonwealth Bank reported a net profit of A$1.12 billion in 1995/96, up from A$983 million in 1994/95, and said when it released its results in August that it expected earnings to be flat in 1996/97.  
Besley said CBA's directors aimed to maintain the ratio of dividends per share to earnings per share at around 80 percent in 1996/97.
However, Besley also said later at the meeting that banking industry profits could fall over the long run and that CBA would have to work hard to ensure its profit falls were less than those of other banks.
""We have to be sure that ours (profits) come down by as little as any of the others,"" Besley said in answer to a shareholder's question.  
Besley later told reporters banking industry profits would be under pressure in the future.
""The industry will be under pressure of falling profits unless, just like in any other industry, it pays great attention to its costs and gets very efficient,"" he said.
""There's no suggestion that (the CBA's) profits would fall off this year,"" he said, adding that it was the bank's objective to increase profits in 1997/98.
CBA Managing Director David Murray also played down Besley's earlier comments. ""I read that comment to mean a fall in the growth rate in profits,"" he said.  
When asked if he too aimed for a rebound from the flat 1996/97 to profit growth in 1997/98, Murray said: ""Yes. It means marketing better and containing our costs.""
But he said it was too early to be specific about a possible profit rise in 1997/98. Murray however also told the annual meeting that cost control would be difficult.
He said CBA had restricted wages growth to four percent in the two years before the most recently negotiated enterprise bargaining agreements.  
""That (four percent over two years) is clearly not sustainable with the inflation rate and wage expectations where they are but we continue to bargain hard on that front.""
CBA's share price closed down 11 cents at A$11.90, having earlier fallen to A$11.80 on the bearish comments from the annual meeting. ""It's all on this talk of no earnings growth and wages pressure,"" one Melbourne broker said before the late session bounce.
Murray and Besley also repeated their view that official interest rates were more likely to be cut than raised before the end of the year.  
-- Sydney Newsroom 61-2 373-1800
",4
"Australia and New Zealand Banking Group Ltd (ANZ) took the unusual step on Monday of categorically denying a newspaper report which said it was investigating a A$24 billion merger with Britain's Standard Chartered Plc.
""ANZ advises that it is not investigating or discussing a merger with Standard Chartered Bank,"" ANZ said in a statement to the Australian Stock Exchange just before the start of trade.
""Whilst we do not normally comment on rumours and speculation regarding mergers and acquisitions the very specific nature of the article requires this definite denial,"" the ANZ said in a statement.
Earlier, an ANZ spokesman had told Reuters that the report was in the category of market speculation and would not be commented on.
In its Monday edition, the Australian Financial Review reported that the two banks had engaged Goldman Sachs and Swiss Bank Corp to conduct a feasibility study into a merger ""along the lines of the RTZ-CRA stock stapling"".  
RTZ Corp Plc and CRA Ltd merged to become a dual-listed company and the world's biggest mining group in December last year.
""Such an alliance would make ANZ almost takeover-proof in Australia, preserving the relative independence of one of the two major banks considered most likely takeover targets after the Wallis inquiry into the financial system,"" the Financial Review said.  
""There are no cross-shareholdings between ANZ and Standard Chartered and the issue of 'senior partner' in a stock stapling would be expected to be significant as would government and regulatory approval of the deal,"" the paper said, adding that KPMG had been employed to carry out due diligence on the deal.
The bank's surprisingly specific denial came after analysts said ANZ's share price could drop sharply on the report.
The analysts said the merger as outlined in the report was unlikely to include much if any takeover premium for shareholders, meaning the premium of up to 10 percent built into the current share price would be stripped out.  
""People are saying 'What's in it for shareholders?',"" BNP Equities banking analyst Linda Lyon said.
""If a merger like that looks like coming off, then the price will come off,"" Lyon said.
""The sort of deal we're talking about doesn't include any sort of takeover premium for shareholders,"" said a senior Sydney banking analyst.
""People have been buying ANZ above its true value in expectation NAB (National Australia Bank Ltd ) will launch a takeover post-Wallis,"" the analyst said.  
""My guess is that the immediate reaction would be negative,"" he said, adding he saw ANZ's true price at around A$6.50.
But after the denial, ANZ's share price rose with the rest of the market. It was up two cents at A$7.18 at 12.50 p.m. (0150 GMT).
Analysts said such a merger could however also bring out a potential rival takeover bidder such as HSBC Holdings Plc.
-- Sydney Newsroom 61-2 9373-1812
",4
"Rupert Murdoch predicted he would win his legal battle with Ted Turner and Time Warner Inc. and said his global media company, News Corp. Ltd., was on track to boost profits 20 percent this year.
In remarks published in News Corp.'s Courier Mail newspaper in Brisbane, Murdoch also was quoted as saying that he did not want to buy out Australia's other major newspaper publisher, John Fairfax Holdings Ltd.
News Corp. publishes major tabloid newspapers in Sydney and Melbourne, the Courier Mail and The Australian, also owns about 5 percent of Fairfax.
Discussing his recent feud with CNN founder Ted Turner and Time Warner, Murdoch said he was confident News Corp. would win its lawsuit against the $6.7 billion merger of Turner Broadcasting System Inc. and New York-based Time Warner, which was completed on Thursday after shareholders of both companies approved the deal.
""We've got a good stoush (fight) there,"" Murdoch said. ""We'll win through there. How or where I don't know but we'll just keep the pressure on,"" he said.
Turner said on Thursday that Murdoch's lawsuit to block the merger of Turner Broadcasting and Time Warner, which creates the world's biggest media company, was a ""frivolous piece of junk.""
Murdoch and Turner have fought a pitched battle in recent months over the merger. At issue is whether Time Warner, the United States' second-largest cable operator, will carry Murdoch's new all-news channel that will compete with CNN.
News Corp. is seeking $1 billion in damages from Time Warner and Turner, saying their decision not to carry News Corp.'s 24-hour Fox News Service showed they were stifling competition.
""They promised me very firmly we'd have 9 million subscribers and when the day came to sign the document, they weren't there,"" Murdoch said in the interview, referring to Time Warner's decision not to carry the new channel.
Turner was forced to apologise last week for comparing Murdoch to Adolf Hitler, while Murdoch has described CNN as liberal and his executives have said Turner was monopolistic.
Murdoch also confirmed his bullish outlook for News Corp.'s profits.
""If the American economy holds where it is and the British one does, yes certainly,"" a 20 percent rise in profits is attainable, he told the Courier Mail. ""But it is still early days to be saying that.""
News Corp. said after releasing its results in late August that a 20 percent profit rise in the year to June 30, 1997 was attainable. News earned A$1.02 billion ($790 million) net profit in fiscal 1996.
Murdoch also said he had no plans to buy out John Fairfax Holdings, which publishes broadsheet newspapers in Sydney and Melbourne and is News Corp.'s major competitor in newspaper market.
He said Australian-based rival media owner Kerry Packer was also unlikely to bid for Fairfax any time soon.
""I don't want to buy Fairfax. I don't believe Mr. (Kerry) Packer wants to buy Fairfax,"" he was quoted as saying.
""To my knowledge he (Packer) has three times tried to sell his shares within the last 12 months. He'd like to influence and have the power of Fairfax but he's too shrewd to be paying for Fairfax at today's price.""
Canada's Conrad Black, whose Hollinger International Inc. owns 25 percent of Fairfax and who has expressed a desire to take control of the group, expressed surprise at Murdoch's comments.
""(Murdoch's statement) is fairly humorous. It's a bit rich given the fact that he never stops telling me how much he would like to own Fairfax,"" Black said by telephone Friday.
""I cannot obviously comment on what the others are doing or what Rupert's motives are. The fact is that he regularly expresses to me considerable hypothetical interest in Fairfax,"" he said.
Hollinger International owns the Chicago Sun-Times, daily and weekly publications in the United States and the Jerusalem Post.
",4
"Australian-based insurer QBE Insurance Group Ltd said on Tuesday that profit growth was likely to surge into the high teens for the full 1996/97 year after only a slight increase in its first quarter profit.
""I'm confident that it will be in the teens, and with a bit of luck it will probably be in the high teens,"" QBE managing director John Cloney told reporters after the group's annual meeting when asked about profit growth for the full year.
Earlier QBE reported a first quarter net profit of A$28.5 million, up just slightly from A$28.0 million a year earlier.  
QBE's full year net profit rose 15.1 percent to A$123.3 million in 1995/96 ended June 30.
Analysts said the first quarter result may have been disappointing, partly due to costs linked to the installation of a new computer system, but the bullish comments were a welcome tonic.
""We're still very happy to see around 15 percent profit growth per annum,"" said First Pacific insurance analyst Greg Galton.
QBE's share price responded in kind, rising 15 cents to A$6.70 in early Tuesday afternoon trade after Cloney's comments.  
Cloney also said that QBE expected reduced expense ratios over 1996/97 because of improved productivity linked to the new computer systems.
QBE should also achieve its target of double digit premium growth from existing lines and lower acquisition costs, he said.
He also said he saw a continuation of the trend of previous years of increased dividends, but that the franking rate was likely to be reduced to about 50 percent as previously foreshadowed.  
Cloney said QBE's A$70 million acquisition of the British reinsurance assets of Allstate Insurance Co announced in September would also boost profits in 1996/97.
""That will give us in excess of 15 percent return (on equity invested) in this fiscal year,"" he said.
Referring to this strong rate of return from this latest acquisition, Cloney said QBE continued to be on the look-out for similarly profitable acquisitions.
""We are on the lookout all the time, and there are a couple of things that may come to pass,"" Cloney said, adding however that he could not be more specific.  
But he said Australia was less likely to be a happy hunting ground for QBE because other competitors and banks were prepared to bid high prices and push down rates of return.
""They're the sort of hurdle rates we set,"" he said, referring to the 15 percent-plus return likely from Allstate.
""Because we're already earning 17 percent (return on shareholders funds) we're not in the position to spend up large and say we'll get a pay back in three or four years, because it will dilute our overall earnings,"" he said.  
""So far as Australia is concerned, to acquire at the sort of hurdle rates of return we're looking for is a little difficult because I think there are more people interested in what's available here than overseas.""
Cloney also ruled out any bank acquisitions.
""QBE ought to be allowed to buy a bank if it wishes to do so but it is my own personal view and, I believe the view of the board, that we will not be doing that,"" he said.
-- Bernard Hickey -- Sydney Newsroom 61-2 9373-1812
",4
"Airline giant British Airways Plc (BA) is unlikely to hike its airfares by the full three percent agreed to last week by the world's airlines, BA chairman Sir Colin Marshall said on Monday.
The world's airlines, desperate to hold up their profits in the face of a 40-percent surge in fuel prices this year, said in Geneva last week through the International Air Transport Association (IATA) that they proposed to raise passenger fares by three percent.
Marshall told reporters after a luncheon address in Sydney that BA was not as badly affected as some other airlines because of the strength of sterling against the U.S. dollar.
""You also have to bear in mind that the impact for individual carriers does depend on exchange rates in that all aviation fuel is priced in U.S. dollar terms,"" he said.
""So one has to watch what is happening to your own currency versus the U.S. dollar to see what the overall impact will be for a company,"" he said.
When asked if the recent strength in sterling meant BA would therefore not pass on the full three percent agreed to in Geneva, he said: ""I think that's quite likely.""
He said BA had increased its prices by only about one percent before the Geneva resolution because of the strong currency.
""The pound has been relatively strong against the dollar and that's why we only applied about a one-percent increase in price.""
IATA, which has 251 member airlines, said in Geneva the proposed increase, which is subject to government approvals, would apply to fares from December 15.
Marshall said the extent to which the three percent increase was applied depended on each individual carrier and how fuel prices changed through the northern hemisphere's winter.
Many European carriers are pushing for a concerted move to lift ticket prices by up to three per cent, but Asian and North American carriers were believed to be reluctant to do so.
BA reported earlier this month that despite strong traffic growth and greater productivity its first half operating profits were down 2.1 per cent compared with last year.
Part of the drop, it said, was due to the extra US$84 million it had had to pay for fuel.
Meanwhile, Marshall said he was confident the European Union would not thwart BA's plan to form an alliance with American Airlines, although he acknowleged it would take the two a long time to jump the various regulatory hurdles in front of them.
""I'm not worried about it because I don't think that that is likely to happen,"" Marshall said of a possible EU block.
On Friday the European Commission (EC) said it had formally asked BA for details of the planned alliance.
A report that the EC had said the alliance did not appear to be in the best interests of consumers pushed BA's shares lower earlier on Friday.
""There are so many precedents for similar events that have been allowed to go into effect, that to me it would be quite wrong if the European Union reached that conclusion,"" he said.
""I think things are all moving in the right direction, but it's just very slow,"" Marshall said of the regulatory process.
",4
"Australian-based metals recycler Simsmetal Ltd on Friday painted a bleak picture for world scrap metal prices over the year ahead and said this meant the group's net profit for 1996/97 would be lower than in 1995/96.
But it said it remained confident it could take advantage of a recovery in world markets when it came and was currently in talks to buy a large British scrap metal business.
Simsmetal managing director John Crabb told the annual meeting that scrap prices had softened dramatically to their lowest levels in almost four years over the last two months.  
""Until there is an improvement in the major economies of Europe and Asia and the resulting increase in demand for metals, we expect trading conditions to remain very difficult with volumes, margins and earnings below our expectations,"" Crabb said.
He later told reporters profits for the year to June 30, 1997 would be below the A$46.7 million posted in 1995/96 -- a result that was itself 23 percent down on a year ago.
""It will be lower for the full year,"" Crabb said.  
Simsmetal had previously only said it saw difficult conditions prevalent in the first quarter of 1996/97 continuing into the second quarter, with second quarter profits falling.
In mid-October, Simsmetal announced its net profit for the first quarter of 1996/97 fell 34 percent to A$8.28 million.
Crabb said the world construction markets which used the long steel produced by electric furnaces supplied by Simsmetal remained weak and had no immediate prospect of improvement.
""Our view is that we should start to see some improvement (in ferrous metals prices) towards the end of calendar 1997, we may see it in the middle (of calendar 1997),"" he said.  
""We can't see too much on the horizon at this time,"" he said.
Crabb also said Simsmetal was in talks to buy a large British business in the same area as Simsmetal, but he said he could not give any more details as he was bound by confidentiality agreements.
""It's in the U.K. For us it will be quite large,"" he said.
""We still need to balance our portfolio there, so that we've got a good broad coverage,"" he said.
""We'll use either some cash or our unusued borrowing lines. We've got no problems funding it.""  
He said Simsmetal had ended the first quarter with about A$62 million cash on hand.
""I guess we'd only be using 55-60 percent of our borrowing capacity at the moment.""
Simsmetal had total non-current borrowings of A$54.11 million as at June 30, 1996, giving a total warchest for possible acquisitions of about A$115 million.
Earlier in the annual meeting, Crabb said that any closure of the Broken Hill Pty Co Pty Ltd's Newcastle steel plant would not affect Simsmetals operations.  
Crabb said Simsmetal supplies most of its products to BHP's Sydney mini-mill and its Port Kembla plant, south of Sydney.
""Maybe it will make life easier for us because we will be able to buy more scrap,"" Crabb said, responding to a shareholders question.
Simsmetal's shares were up one cent at A$6.89 at 2.40 p.m. (0340 GMT).
-- Sydney Newsroom 61-2 9373-1812
",4
"An official inquiry into Australia's financial system said on Thursday it would look at recommending a relaxation of rules that currently stop big bank mergers and local bank takeovers by foreign banks.
The inquiry, which was established by the conservative government after its March election, outlined various options for reform in a wide-ranging discussion paper and was careful not to state its own preferences.
But it noted majority industry support for abolishing the rules stopping mergers and foreign bank takeovers and said it preferred an anti-monopolies system which treated the banking sector the same way as every other sector.
Until now the government has had the final say on bank mergers, rather than just the anti-monopolies watchdog.
Analysts said the tone of the discussion paper reinforced widespread expectations that the inquiry's final report would recommend allowing bank mergers and new foreign investment.
""It hasn't changed perceptions that ultimately the inquiry will make recommendations that allow the ACCC (Australian Competition and Consumer Commission) to permit bank mergers which haven't been permitted before,"" said ABN AMRO Hoare Govett Banking analyst Michael Pulman.
Shares in the big banks seen vulnerable to takeover have rallied since the beginning of the year in expectation that a conservative Australian government would allow the mergers.
Those seen as possible takeover targets include the Australia and New Zealand Banking Group Ltd and Westpac Banking Corp Ltd.
The National Australia Bank Ltd, Australia's largest and most profitable bank, is seen as the main predator.
A policy set by the former Labor government and known as the ""six pillars"" policy has stopped mergers or foreign takeovers of Australia's four largest banks and its two largest insurance and superannuation groups.
The current conservative Liberal-National coalition government has said this policy would remain in place until it has considered the Wallis inquiry's recommendations, due to be delivered by the end of March 1997.
The inquiry, headed by prominent businessman Stan Wallis, said in its 415-page paper that any reforms should increase the efficiency of Australia's banks to compete globally.
It also said new technology would transform the sector.
Big banks such as the National Australia Bank have used the same reasoning when lobbying for relaxed merger rules.
These banks have said big bank mergers are necessary to compete globally and new technology such as the Internet and global competition meant such mergers would not cut competition.
""The inquiry sees as its key goal the identification of means to increase the efficiency of the Australian financial system, without compromising its safety and peformance,"" the paper said.
Increased efficiency was needed to compete globally, to obtain the benefits of new technology and to increase investment returns, the paper said.
It said it would consider, ""better accomodating financial conglomerates"" and ""relaxing some of the ownership restrictions on financial institutuions?""
The inquiry said it also wanted any reforms to increase competition and asked in that context ""whether there are any public policy grounds for restrictions on foreign acquisitions in the banking or insurance industries?""
",4
"Australia-based transport equipment hire and logistics firm, Brambles Industries Ltd, reported a 15.8 percent profit lift for the 1995/96 year on Friday, despite flat Australian and European economies.
Surging profits from Brambles' U.S. and European CHEP pallet hire joint venture with Britain's GKN Plc compensated for otherwise slow growth from Australia, the company said.
""The continuing improvement in our performance reflects, in part, the successful rationalisation of our wholly owned businesses and strong growth from our CHEP joint ventures,"" Brambles Chief Executive John Fletcher said.
""CHEP USA, in particular, continues to justify our confidence in its long-term growth prospects in the region,"" he said in Brambles' profit statement.
Brambles' net profit rose 120.2 percent to A$215.1 million (US$169.9 million) for the year to June 30 from A$97.7 million in 1994/95. The previous year's result was undermined by an abnormal loss of $112.3 million.
Stripping away abnormals, profit for 1995/96 rose 15.8 percent to A$214.8 million, at the top end of analysts' expectations.
Pre-tax profits rose 13 percent and 30 percent from Europe and the United States respectively, while Australian profits rose eight percent.
""Overseas profits grew at twice the rate in Australia and the trend is likely to continue,"" Fletcher said.
""In particular we expect further contributions from CHEP in Europe and North America,"" he said.
Fletcher later told Reuters this strong performance from Brambles' non-Australian operations had encouraged it to actively look at further acquisitions outside Australia.
""You should anticipate some acquisition work in the Northern Hemisphere, but in businesses we already operate in here,"" he said, referring to areas like transport equipment rentals and records managements.
Looking ahead, he said strong contributions from the United States and Europe should continue to offset soft Australian conditions and help produce profit growth.
""We haven't got an expectation that we will get too much help from this economy...for at least another six months,"" he said. ""But all in all we've got enough things going to see another (profit) increase for this year,"" he said.
The result generally pleased analysts, who also pointed to the strong U.S. pallet operations as the main bullish note.
""CHEP USA is the outstanding area,"" said Macquarie Equities analyst Ian Myles.
""As long as they're saying positive things about CHEP in the USA then they'll be alright and there's a reasonable amount of momentum there,"" another Sydney transport analyst said.
Brambles' shares closed up five cents at A$18.90 against a soft market overall.
(A$=US$0.79)
",4
"Rupert Murdoch's News Corp Ltd is likely to benefit from the planned US$20 billion merger of MCI Communications Corp and British Telecommunications Plc, Australian media analysts said on Monday.
News Corp, which already has a wide-ranging partnership with MCI, would strengthen its global media interests on the coat-tails of the creation of the world's second largest telecommunications group, the analysts said.
""It means they'll be in bed with a bigger, more powerful global telephony group,"" one senior Sydney media analyst said.
Analysts also said the BT-MCI merger would stabilise New Corp's partnership with MCI, which had seemed increasingly strained in recent months.
""It seems that MCI and News haven't been getting on lately, whereas News and BT have been getting on a lot better,"" said the Sydney analyst.
The prospect of MCI selling its nine percent stake in News Corp over the next year had suppressed News Corp's shares last month.
""There was a view that MCI wasn't real happy with it (the partnership) and may sell out, but now nothing's going to happen for 12 months at least,"" said another Sydney analyst.
""The implications for News are quite positive.""
A Melbourne analyst said some in the market were a bit worried that MCI was preparing to sell down its stake over the next 12 months. ""The fact that BT may combine with MCI reduces that risk for now at least,"" one analyst said.
MCI and News Corp announced a broad alliance in May 1995, under which MCI bought a nine percent stake in News for US$1.35 billion and acquired an option to increase that stake to 13.5 percent. They agreed, among other things, to jointly set up an American satellite television operation -- ASkyB.
But progress with ASkyB has been slow and other smaller joint ventures have failed to fire. Australian analysts said they would remain cautious towards ASkyB, given bearish comments on Sunday by MCI. MCI announced that it would cut its stake in ASkyB to 20 percent from 50 percent.
Analysts said this was not surprising as News Corp and MCI had said recently they wanted new partners in the venture.
MCI Chief Executive Bert Roberts told Reuters on Sunday that no major new launches were expected from the venture with News Corp and that MCI wanted to sell a US$700 million satellite license to News.
He also said MCI was unlikely to take up its option to increase its stake in News, a comment seen by analysts as symptomatic of Roberts' increasing unhappiness with the deal.
Analysts also warned there was a potential regulatory block to links between News, its 40 percent owned BSkyB Plc, and BT.
""There's an outside risk that British regulatory bodies could try and block the News-BSkyB-BT side of it,"" said a BT analyst.
Other analysts said the dilution involved, with BT owning nine percent of a 40 percent stake in BSkyB, would assuage regulatory concerns. The likely election of a British Labour government also reduced that risk.
""They're banking on (Labour leader) Tony Blair winning government and deregulating cross media rules in the United Kingdom,"" said another Sydney analyst.
However, another analyst pointed to the recent banning by British regulator Oftel of a joint marketing campaign between BT and BSkyB as a sign of the rocky road ahead for News and BT.
-- Sydney Newsroom 61-2 9373-1812
",4
"Rupert Murdoch on Tuesday reported that News Corp Ltd had performed below expectations in the first quarter, but he said the global media group was still on track for a 20-percent profit rise this year.
Murdoch, the chairman and chief executive of News Corp, also unveiled a more conservative approach to financing new acquisitions.
""I am on record as saying that we expect a 20-percent increase in profit for the year,"" Murdoch told a packed News Corp annual meeting in Adelaide.
""We still expect that and are still aiming for that during the coming year. However, I should say that the first quarter may not be quite up to those expectatations, but we will certainly be striving to make up any shortfall,"" Murdoch said.
Analysts viewed the comments as disappointing and said they were now more sceptical about the 20-percent profit pledge.
""If they can't meet expectations in the first quarter, when they have those strong revenues from Independence Day, then what hope do they have of getting 20 percent in the full year?"" asked one Sydney-based media analyst referring to a hit Hollywood movie made by News Corp's Fox studio.
Traders on the Australian share market did not like the first quarter comment either, selling the shares 14 cents or almost two percent lower to close at A$7.20, while the broader Australian equity market closed at a new record high.
In the 1995/96 year ended June 30, News Corp's net profit slipped to A$1.02 billion ($806 million) from A$1.37 billion in 1994/95.
Murdoch said revenues at the Fox U.S. television business had begun 1996/97 slowly because of of the Atlanta Olympic Games, the rights to which were held by a rival network.
Australian newspaper revenues would be flat in 1996/97, said Murdoch.
But he remained buoyant about News' British operations, saying the advertising market there was booming and the partly-owned BSkyB pay television operators was growing strongly.
Murdoch then unveiled a more cautious strategy for financing future expansion.
""As far as possible, we will finance them (News' expansion plans) out of current cash flow to maintain liquidity so that we will be ready to take new opportunities as they arise,"" he said.
News has often funded its aggressive growth in pay television and other media through either hefty debt or equity issues, which have sometimes met shareholder resistance. It almost collapsed under a debt mountain in the early 1990s.
Analysts said the comments indicated a more conservative approach towards acquisitions and their financing and would be welcomed by the market.
""It imposes a huge financial discipline on the company which would hearten people immensely,"" said another analyst.
Murdoch also announced that News planned to float its British-based digital media technology company, Digital Media Services, within the next two to three weeks and would sell 20 percent of the company.
Digital Media Services, a combination of News Data Comm and Digi-Media Vision Ltd, would operate in Britain and Israel and produce technology for digital television.
News Corp traditionally holds its annual meetings here in Adelaide, the South Australia city where Rupert Murdoch's father Keith founded the beginnings of the News Corp empire.
(A$1 = $0.79)
",4
"Australasian food group Goodman Fielder Ltd is expected to report a slightly higher annual net profit before abnormals early on Thursday, as firmer margins in some areas are seen largely offset by higher grain costs.
""I'll be looking for some margin growth, but also there's been some strong raw materials cost increases,"" one Sydney analyst said, adding he was forecasting a pre-abnormals net profit of just under A$100 million.  
The median forecast in BZW Australia's Barceps survey of analysts was for a A$100.0 million pre-abnormals net profit for the year to June 30, 1996.
Forecasts ranged from A$97.0 million to A$102.3 million, compared with the A$97.3 million profit posted in 1994/95.
""There'll be a big impact from the grain prices in the second half and going into the first half of this (1996/97 year),"" another Sydney analyst said, estimating extra grain costs of about A$60 million.  
But analysts expected the cost of grain, a major input in Goodman's breadmaking and chicken operations, would ease back later in calendar 1996.
The higher grain costs were likely to have been offset somewhat in the second half of 1995/96 by lower packaging and palm oil costs, some analysts said.
Profit expectations are in a tight band in part because of Goodman's own comments about the result in early August.
Goodman chief executive David Hearn said then that the pre-abnormal profit would be around A$100 million.  
""We're saying that there will be a small increase in pre-abnormal profit in the 0-5 percent range from last year and since we made A$97 million last year, zero to five means somewhere between A$97 and A$102 million,"" Hearn said.
Goodman then also announced it would post abnormal losses of up to A$75 million in 1995/96, including a revaluation of its loss-making poultry operations.
This would produce a net profit after abnormals of around A$25 million, Hearn said then.  
Analysts said however most of the interest would be centred on Goodman's strategic plans for recovery from its profit slump of recent years.
Goodman Fielder shares closed down a cent at A$1.31 on Wednesday.
-- Sydney Newsroom 61-2 373-1800
",4
"Rupert Murdoch's News Corp on Thursday reported a lower than expected profit for the first half of 1996/97, but later told analysts it remained confident of a 20 percent profit boost for the full year.
Strong earnings from the hit movie Independence Day and buoyant British newspaper sales helped drive net profits before abnormals 10.3 percent higher to A$731 million (US$555 million).
But the result was below analyst forecasts of a pre-abnormals profit of A$735 million to A$775 million.
""Everyone's a bit disappointed,"" said a Sydney analyst.
Andrew Sekely, the head of equities at broker Intersuisse, said: ""It certainly wasn't a startingly good result. The market has made its judgement"". News' shares fell 16 cents to A$6.60 after the result, but closed in Australia at A$6.76.
""It's about A$20 million less than what the market would have liked and to still reach that (20 percent profit growth) outlook, it's got to make up the difference in the second half,"" the Sydney analyst said.
News Corp had said in August last year when it posted a A$1.26 billion net profit for the year to June 30, 1996 that it expected strong movie and television revenues to increase profits by at least 20 percent in 1996/97.
News Corp told analysts in a teleconference briefing on Thursday after the first half result that it still expected 20 percent profit growth for 1996/97.
""They did say that they're still on track for the 20 percent growth,"" another Sydney media analyst said after the briefing between company officials and U.S. and Australian analysts.
Analysts said News Corp officials were bullish about catching up in the second half and had pointed to a strong outlook for movies and U.S. television and newspapers.
Operating income from News' Fox Filmed Entertainment unit surged to A$202 million for the first half of 1996/97 from A$84 million a year earlier, due largely to Independence Day.
Analysts said the re-release of Star Wars and other films would help further boost movie revenues in the second half.
British newspaper profits rose 18 percent in the first half, with gains in circulation revenues at The Sun, The Times and The Sunday Times, News Corp said.
""All of the company's newspapers have maintained their dominant position in each of their respective markets, despite cover price increases instituted during the quarter at both The Sun and The Times,"" the company said. Analysts said British newspapers would again perform well in the second half.
In contrast, Australian newspapers posted only a slight increase in profit in the first half reflecting a slow economy.
While News Corp said losses at its burgeoning Asian satellite broadcaster Star TV in the first half were in line with expectations. (A$=US$0.76)
",4
"The Reserve Bank of Australia's (RBA) rate cut on Wednesday is expected to further squeeze bank margins as competition has forced them to pass this cut on to their mortgage customers sooner than usual.
The major banks have previously delayed passing on the effect of official rate cuts to their variable rate home loan customers by around seven weeks.
They would, however, often begin lowering variable and fixed deposit rates immediately, providing a temporary widening of their margins.  
Wednesday's rate cut has seen the major banks shorten this delay in passing on the rate cut to about five and half weeks.
Analysts and some of the banks said increasing competition from non-bank mortgage lenders and the regional banks had been the major factor in this contraction.
They also said they expected this gap to narrow further when further official rate cuts are made next year.
""The implication is a bit more pressure on margins,"" said ABN AMRO Hoare Govett banking analyst Michael Pulman.
""This all about competition,"" he said.  
""These competitive forces will end up contracting it down further, possibly down to 30 days,"" said Aussie Home Loans managing director John Symond.
Aussie, the biggest of the non-bank lenders funded by mortgage origination, said on Wednesday it would cut its variable rate to 7.49 percent from 7.99 percent from January 28 for existing customers, a gap of 48 days after December 11.
At the time of the last official rate cut on November 6, Aussie planned a gap of 46 days, which was lower than most of the banks.  
In response to Aussie and competition from regional banks like St George Bank Ltd, the large banks have cut back this delay.
National Australia Bank Ltd said it would cut its variable mortgage rate to 8.25 percent from 8.75 percent from January 23 for existing borrowers, a gap of 43 days.
After the last official rate cut NAB's gap was 54 days.
In line with this trend, Westpac Banking Corp's gap has dropped to 37 days from 41 days and Commonwealth Bank of Australia's gap has dropped to 48 days from 54.  
The Australia and New Zealand Banking Group Ltd has yet to announce any cut in variable mortage rates in response to the RBA's cut in the official cash rate to 6.0 percent from 6.5 percent.
The biggest move in the gap came from St George, which reduced the time it would pass on the rate cut for its major variable rate product to 20 days from 55 days.
St George has even said existing customers of its no frills variable rate product would receive the cut from December 18, a week away. This product provides 20 percent of its portfolio.  
Overall the average gap for the banks who have cut their mortgage rates has dropped to 40 days after this rate cut from 49 after the November 6 cut, which was also by 50 basis points.
There may, however,be a limit to how much further this gap can fall, analysts and the banks said.
A new regulatory code on credit specifies customers must be given 30 days notice whenever their interest rates are changed, creating an artificial barrier both up and down.
""I think 30 days will about see it out,"" said Aussie's Symond.  
Analysts said the banks may try other tactics to cushion the effect of this reduction in the gap, but that it would still further reduce already-bruised margins.
""It will have an effect on margins,"" said BNP Equities' banking analyst Linda Lyon.
""They'll do all sorts of other things to cushion the effect. They'll be trying to reduce their deposit rates as far and as fast as they can,"" said ABN AMRO's Mike Pulman.
""But there's obviously a bit of a squeeze there, particularly for those banks most exposed to the housing sector,"" Pulman said.  
CBA is seen as the most exposed with about 34 percent of its assets in home loans, with Westpac next on 25 percent and NAB and ANZ on about 17 percent.
The big bank's margins on home loans have already declined this year from about three percent in June to about 2.25 percent now.
-- Sydney Newsroom 61-2 9373-1812
",4
"Australia's wealthy baby-boomers are disillusioned with service provided by banks and believe loyalty is not rewarded, a survey released on Monday found.
Those approaching retirement were also unhappy with the performance of their superannuation funds and were looking to move elsewhere wherever possible, the survey by forecaster BIS Shrapnel has found.  
""Australia's affuent boomers -- the demographic group owning the largest share of private wealth -- are distrustful of the performance and motivations of financial institutions, and yearn for a return to the days when customer loyalty was rewarded,"" BIS Shrapnel said in the survey titled ""Financial Services for the Affluent Boomers.""
Those surveyed had assets worth over A$150,000, excluding the family home.
The survey of 128 people aged over 45 in 14 seperate focus groups around Australia found they sought more individual treatment by knowledgable staff.  
""In particular those approaching retirement are more likely to equate good service with personal service and contact,"" BIS Shrapnel survey project leader Geoff Ludowyke said.
""They want to develop a relationship with one particular person within their banking branch,"" he said.
The survey found that Commonwealth Bank of Australia (CBA) was the least liked of all the banks, Ludowyke said.
Respondents found the CBA slower, more unfriendly, more impersonal and less modern than the other banks, he said.  
Westpac Banking Corp Ltd was seen as the next least-liked bank while the ANZ Banking Group Ltd and the National Bank Ltd were seen in another group in-between CBA and the credit unions, which were the most favourably received.
Former building societies like St George Bank Ltd and Advance Bank Ltd, which are in the process of merging, were seen as similar to the credit unions.
""Among the major banks with the most negative comments were the Commonwealth and Westpac,"" Ludowyke told Reuters.  
""ANZ and NAB were in the next group while the credit unions were in another group out front,"" he said.
The survey also found that rich baby-boomers did not believe that swapping pension funds would improve their returns.
""They intend to move away from superannuation,"" Ludowyke said.
Law changes were also generating anxiety about superannuation, he said. ""Affluent boomers expect governments to continue to change the rules in a way that will benefit governments rather than contributors,"" he said.
The survey also found that banks were perceived as greedy.  
""Reports of huge profits compound the resentment to bank fees and banks are believed to be primarily concerned with looking after their shareholders rather than their customers,"" the report said. ""Affluent boomers are particularly annoyed by new charges for ATM and EFTPOS usage.""
Ludowyke said BIS Schrapnel would approach the big financial institutions for funding for a more comprehensive survey of 800 people face to face on attitudes towards the financial institutions.
-- Sydney Newsroom 61-2 373-1800
",4
"Gold miner Niugini Mining Ltd, which owns 17.15 percent of the shares in Papua New Guinea's Lihir Gold Ltd, said on Monday it was looking at ways of giving those Lihir shares back to its shareholders.
""We're looking at the possibility of returning the Lihir shareholding to shareholders and when that can be done,"" Nuigini Mining chief executive Ian Goudie told Reuters.
Goudie said a straight forward return of the shares to shareholders could not approved until late 1998 given the Lihir mine's current debt arrangements.  
But Nuigini was also looking at other structures through which the shares could be returned before then, he said.
He said the Lihir share return was just one of several possible ways of unlocking the true value of the Lihir stake, which was not reflected in Niugini's current share price.
""The whole purpose is to unlock this mismatch,"" he said.
Niugini's assets could viewed in two parts -- the Lihir stake and other smaller mining assets, he said.
""If the two parts were to be separated they would appear to have more value to shareholders.""
",4
"The Brunei Investment Agency (BIA) on Tuesday bought a 13.4 percent stake in Macquarie Bank Ltd, removing the links between one of Australia's top four investment banks and its British founder.
Macquarie said in a stock exchange statement just after the start of morning trading that the Brunei government-owned agency paid Lloyds TSB Plc A$151.7 million (US$122.8 million) for the stake.
The purchase by the agency's Brunei Investment and Commercial Bank (BICB) from Lloyds' Hill Samuel & Co unit makes it the largest individual shareholder in Macquarie.
Macquarie Bank managing director Allan Moss said the bank had developed a good relationship with BIA and its senior management over the months it had taken to arrange the deal.
""We are delighted that they have become associated with the bank as a major shareholder, and we are confident that BICB will prove to be a constructive and long term investor in Macquarie,"" Moss said.
The purchase ends Hill Samuel's 27-year direct involvement in the Australian investment banking sector.
Hill Samuel set up what is now known as Macquarie Bank in 1969 before selling down its stake to 30 percent in 1985 and then down to 15 percent in 1993.
Since then Macquarie, which now has 1,800 staff, has listed on the Australian Stock Exchange and is now one of Australia's top 100 companies.
It has offices throughout Australasia and in China, Singapore, Malaysia, London, Munich, New York, Hong Kong, Indonesia and South Africa. Its asset base stood at A$5.17 billion on March 31, the end of its financial year.
Macquarie also has more than A$20 billion in assets under management and has operations in corporate finance, sharebroking and in commodities, debt and foreign exchange trading.
It posted net profits of A$93.2 million in 1995/96.
Macquarie Equities ranks amoung the top four brokers in terms of turnover on the Australian Stock Exchange and had the biggest inflow of retail funds for management in the year to June 30, 1996.
Macquarie chairman David Clarke told a news conference he was confident that BICB was a stable shareholder.
""By and large you only read announcements of them buying things and investing in things you don't read about them selling out of things,"" Clarke said.
The sale of the Hill Samuel stake appears to remove from the market a convenient bridgehead for a takeover bid from another Australian bank.
Australia's conservative government is currently reconsidering financial regulations governing bank takeovers.
A report by the government-sponsored Wallis inquiry due in March next year is widely expected to trigger a series of bank takeovers.
($A = US0.81 cents)
",4
"Appliance and building products manufacturer Email Ltd reported a lower half year net profit and dividend on Monday but forecast that recent restructuring and a seasonal lift would boost profits in the second half.
Email said the environment for industrial activities remained difficult and recent economic forecasts had deferred the timing of an upturn in building sector.  
""Nevertheless, the significant improvements in the company's pre-tax operating profits flowing from restructuring across the past 12 months, are expected to continue in the second half,"" the company said in a statement accompanying half year results.
""As well there should be the normal seasonal lift in sales and margins, leading to a second half profit well ahead of the first half,"" it said.
Earlier Email reported a pre-abnormal net profit of A$27.26 million for the first half to September 30, up from A$24.83 million the previous corresponding half a year earlier.  
Net profit however fell to A$23.85 million from A$26.61 million the previous year, due largely to abnormal losses of A$3.41 million incurred in restructuring and reducing overheads. Email also cut its interim dividend to eight cents from 11.5 a year earlier, saying it had realigned dividends to reflect the stronger second half year in the light of continuing uncertainty about the economy.
Email Managing Director John Hanna later told Reuters Email expected pre-tax profits for the second half of the 1996/97 year would also be above those in the second half of 1995/96.  
""We are expecting in the second half that we would have pre-tax operating profits higher than last year,"" Hanna said.
""We should also have the second half seasonal lift.""
He said Email was pleased that it achieved profit growth in its building products and major appliances divisions despite lower sales.
Analysts said the result was within expectations and was largely unsurprising, even with the dividend cut.
""It's still a high payout ratio,"" said one Sydney analyst said of the dividend, noting that the final dividend was likely to be maintained.  
Email's share price was unchanged at A$3.55 at 1.10 p.m. (0210 GMT) on light volumes.
Hanna said there could begin to be an upturn in the housing industry at the beginning of 1997, but that this would take some time to flow through to Email's business because its products were installed late in the building process.
""If it (the upturn) was early 1997, then it (the resulting flow-on) would be in mid-1997,"" he said.
But this flow-on effect would then have an immediate effect on Email's bottom line because of the recent restructuring which had reduced overheads.  
""As there's an upturn, we should get that immediately and a lot of that will go to the bottom line immediately,"" Hanna said.
He also said Email may increase its 20 percent stake in British electricity meter maker Ampy Automation Digilog Ltd.
""There may be an opportunity to lift that stake in the future,"" Hanna said. He said Email remained on the lookout for further acquisitions.
""They (any further acquisitions) would have to be in existing core areas ... but I don't think we have anything directly in line at the moment,"" he said.
-- Bernard Hickey 61-2 9373-1812
",4
"An inquiry into Australia's financial system has left open the option of mergers among Australia's big banks and takeovers of local banks by foreign banks in an interim discussion paper released on Wednesday.
The inquiry, established by the government and headed by prominent businessman Stan Wallis, outlined various options for reform and was careful not to state its own preferences.
But it said the key aim of any reforms should be increasing the efficiency of Australia's banks to compete globally and that new technology would transform the sector. Big banks such as the National Australia Bank Ltd have used the same reasoning lobbying for relaxed merger rules.
The banks have said big bank mergers are necessary to compete globally and new technology such as the Internet and global competition meant such mergers would not cut competition.
Policy set by the former Labor government has stopped mergers or foreign takeovers of Australia's four largest banks and its two largest insurance and superannuation groups.
The current conservative coalition government has said this so-called ""six pillars"" policy will remain in place until it has considered the Wallis inquiry's recommendations, due to be delivered by the end of March 1997.
""The Inquiry sees as its key goal the identification of means to increase the efficiency of the Australian financial system, without compromising its safety and peformance,"" the paper said. Increased efficiency was needed to complete globally, to obtain the benefits of new technology and to increase investment returns, the paper said. It asked if competition and innovation could be stimulated by widening access to traditional banking activities through:
* ""Allowing direct non-bank access to the payments settlement system""
* Better accomodating financial conglomerates
* Allowing an increased range of institutions to provide a wider array of financial services, or
* relaxing some of the ownership restrictions on financial institutuions ?""
The inquiry said it was also wanted any reforms to increase competition and asked in that context ""whether there are any public policy grounds for restrictions on foreign acquisitions in the banking or insurance industries?""
In discussing the details of how bank mergers might be approved, the inquiry said there was widespread consensus that banks should be subject to the same competition rules as other industries. Currently any bank merger must be approved by the government through the Treasurer and by the Australian Competition and Consumer Commission (ACCC). This dual approval process does not apply in other industries.  
""In undertaking its assessment, the Inquiry notes its preference...for all sectors of the economy to be subject to a uniform set of competitionpolicy laws unless there is something sepcial which justifies different treatment,"" the paper said.
The Inquiry said it would consider the following options for merger approvals, including;
* keeping the current system of dual approval
* having the Treasurer accept the ACCC's decision, or * narrowing powers over mergers in banking and insurance law It said there would be no need for a 'six pillars' policy if the Treasurers powers were removed or if he agreed not to excercise them. ""There was almost unanimous support that the 'six pillars' policy should be abolished,"" the paper said.
-- Sydney Newsroom 61-2 9373-1812
",4
"Rupert Murdoch's News Corp on Thursday reported a lower than expected profit for the first half of 1996/97, but later told analysts it remained confident of a 20 percent profit boost for the full year.
Strong earnings from the hit movie Independence Day and buoyant British newspaper sales helped drive net profits before abnormals 10.3 percent higher to A$731 million (US$561 million).
Abnormal losses of A$41 million cut final first half profits down to A$690 million from A$702 million a year earlier.
But the result was below analyst forecasts of a pre-abnormals profit of A$735 million to A$775 million.
""Everyone's a bit disappointed,"" said a Sydney analyst.
Andrew Sekely, the head of equities at broker Intersuisse, described the result as moderate.
""It certainly wasn't a startingly good result. The market has made its judgement,"" Sekely said. News' shares fell 16 cents to A$6.60 after the result, but closed in Australia at A$6.76.
""It's about A$20 million less than what the market would have liked and to still reach that (20 percent profit growth) outlook, it's got to make up the difference in the second half,"" the Sydney analyst said.
News Corp had said in August last year when it posted a A$1.26 billion net profit for the year to June 30, 1996 that it expected strong movie and television revenues to increase profits by at least 20 percent in 1996/97.
Murdoch repeated the forecast in October, but the group has been publicly tight-lipped about it since then and its first quarter results were also lower than expected.
However, News Corp reassured the analysts in a teleconference briefing after the first half result, saying that it still expected 20 percent profit growth for 1996/97.
""They did say that they're still on track for the 20 percent growth,"" another Sydney media analyst said after the briefing between company officials and U.S. and Australian analysts.
Analysts said News Corp officials were bullish about catching up in the second half and had pointed to a strong outlook for movies and U.S. television and newspapers.
Operating income from News' Fox Filmed Entertainment unit surged to A$202 million for the first half of 1996/97 from A$84 million a year earlier, due largely to Independence Day.
Analysts said the re-release of Star Wars and other films would help further boost movie revenues in the second half.
Sharply lower television profits in the first half because of lower ratings from News' Fox television network and higher programming costs surprised analysts.
But analysts expect a rebound in revenues from Fox television in the second half due to a successful Super Bowl broadcast and the new hit animated comedy King of the Hill.
British newspaper profits rose 18 percent in the first half, with gains in circulation revenues at The Sun, the Times and The Sunday Times, News Corp said.
""All of the company's newspapers have maintained their dominant position in each of their respective markets, despite cover price increases instituted during the quarter at both The Sun and The Times,"" the company said.
Analysts said British newspapers would again perform well in the second half. ""Regardless of what's happening with volumes and prices, which are looking quite good, the relative position on paper prices is improving,"" said First Pacific media analyst Lachlan Drummond.
In contrast, Australian newspapers posted only a slight increase in prodit in the first half reflecting a slow economy.
While News Corp said losses at its burgeoning Asian satellite broadcaster Star TV in the first half were in line with expectations. (A$=US$0.76)
",4
"World yeast and spices giant Burns Philp & Co Ltd announced a hefty loss for the 1995/96 year on Wednesday after taking some heavy hits in a vicious U.S. price war and Asian expansion.
Burns Philp, the western world's largest fresh bakers' yeast maker and second largest spice maker, posted a net loss of A$61.8 million (US$48.8 million) for the year to June 30.
This came after abnormal losses of A$136.6 million, due largely to rationalisation of its U.S. operations and other costs linked to a spice price war with the world's largest spice maker, McCormick & Co Inc of the United States.
Burns Philp managing director Ian Clack said the tussle for market share in the United States appeared to have abated, but the cost of paying supermarkets for premium shelf space during the two-year war had to be written off.
The writing off of these costs, known as slotting contracts, made up A$33.9 million of the abnormal losses.
""Recent slotting contracts have been negotiated with improved margins, indicating that market conditions are returning to a more acceptable level,"" Clack said.
He said Burns Philp had increased its U.S. spices market share by one percentage point to 16 percent after the war while McCormick's share had risen 1.5 points to 34 percent. Other U.S. spice makers lost market share, he said.
Burns Philp has 16 percent of the western world's yeast market and seven percent of its spice market.
Costs incurred during an Asian expansion also boosted Burns Philp's losses.
""The result was also affected by the cost of expanding our presence in Asia together with plant upgrade costs in China and India,"" Clack said.
The result surprised brokers and analysts, who had expected large abnormal losses but were disappointed by a lower pre-abnormals net profit as well.
Net profit before abnormal items fell to A$74.8 million, down from the A$104.1 million posted in 1994/95 and down on most analysts' forecasts of about A$80 million.
Burns Philp's decision not to post a final dividend also upset investors.
""A woeful result and passing their dividend hasn't helped,"" said Jim Tredenick, senior dealer at broking house Nevitts Ltd.
Burns Philp's share price closed down 10 cents at A$1.95.
Analysts also said there may be more abnormal losses to come, particularly in the value of intangibles like goodwill.
""It was a bad result...the issue is whether or not they've completely taken the knife to intangible valuations, that's the area where there could be some further writedowns,"" one Sydney analyst said.
""They didn't take much off the intangibles. That (the A$30.7 million of intangible writedowns) hardly made a dent in it,"" another Sydney analyst said.
Clack said the company had taken the most conservative measure of intangible values it could and did not expect any more abnormal losses in the current year.
He said an earnings turnaround was possible in 1996/97. ""In most markets we are seeing some improvement in the first two months of the year. There's been an improvement in demand, particularly in the North American markets."" (A$1 = 79 U.S. cents)
",4
"Rupert Murdoch on Tuesday reported that News Corp Ltd had performed below expectations in the first quarter, but he said the global media group was still on track for a 20-percent profit rise this year.
Murdoch, the chairman and chief executive of News Corp, also unveiled a more conservative approach to financing new acquisitions.
""I am on record as saying that we expect a 20-percent increase in profit for the year,"" Murdoch told a packed News Corp annual meeting in Adelaide.
""We still expect that and are still aiming for that during the coming year. However, I should say that the first quarter may not be quite up to those expectatations, but we will certainly be striving to make up any shortfall,"" Murdoch said.
Analysts viewed the comments as disappointing and said they were now more sceptical about the 20-percent profit pledge.
""If they can't meet expectations in the first quarter, when they have those strong revenues from Independence Day, then what hope do they have of getting 20 percent in the full year?"" asked one Sydney-based media analyst referring to a hit Hollywood movie made by News Corp's Fox studio.
Traders on the Australian share market did not like the first quarter comment either, selling the shares 14 cents or almost two percent lower to close at A$7.20, while the broader Australian equity market closed at a new record high.
In the 1995/96 year ended June 30, News Corp's net profit slipped to A$1.02 billion ($806 million) from A$1.37 billion in 1994/95.
Murdoch said revenues at the Fox U.S. television business had begun 1996/97 slowly because of of the Atlanta Olympic Games, the rights to which were held by a rival network.
Australian newspaper revenues would be flat in 1996/97, said Murdoch.
But he remained buoyant about News' British operations, saying the advertising market there was booming and the partly-owned BSkyB pay television operators was growing strongly.
Murdoch then unveiled a more cautious strategy for financing future expansion.
""As far as possible, we will finance them (News' expansion plans) out of current cash flow to maintain liquidity so that we will be ready to take new opportunities as they arise,"" he said.
News has often funded its aggressive growth in pay television and other media through either hefty debt or equity issues, which have sometimes met shareholder resistance. It almost collapsed under a debt mountain in the early 1990s.
Analysts said the comments indicated a more conservative approach towards acquisitions and their financing and would be welcomed by the market.
""It imposes a huge financial discipline on the company which would hearten people immensely,"" said another analyst.
(A$1 = $0.79)
",4
"Rupert Murdoch on Tuesday reported that News Corp. Ltd. had performed below expectations in the first quarter, but he said the global media group was still on track for a 20 percent profit rise this year.
Murdoch, the chairman and chief executive of News Corp., also unveiled a more conservative approach to financing new acquisitions.
""I am on record as saying that we expect a 20 percent increase in profit for the year,"" Murdoch told a packed News Corp. annual meeting in Adelaide.
""We still expect that and are still aiming for that during the coming year. However, I should say that the first quarter may not be quite up to those expectatations, but we will certainly be striving to make up any shortfall,"" Murdoch said.
Analysts viewed the comments as disappointing and said they were now more sceptical about the 20 percent profit pledge.
""If they can't meet expectations in the first quarter, when they have those strong revenues from 'Independence Day,"" then what hope do they have of getting 20 percent in the full year?"" asked one Sydney-based media analyst referring to a hit Hollywood movie made by News Corp's Fox studio.
Traders on the Australian share market did not like the first quarter comment either, selling the shares 14 cents or almost two percent lower to close at A$7.20 ($5.69), while the broader Australian stock market closed at a record high.
In the 1995/96 year ended June 30, News Corp's net profit slipped to A$1.02 billion ($806 million) from A$1.37 billion in 1994/95 ($1.08 billion).
Murdoch said revenues at the Fox U.S. television business had begun 1996/97 slowly because of of the Atlanta Olympic Games, the rights to which were held by a rival network.
Australian newspaper revenues would be flat in 1996/97, said Murdoch.
But he remained buoyant about News' British operations, saying the advertising market there was booming and the partly-owned BSkyB pay television operation was growing strongly.
Murdoch then unveiled a more cautious strategy for financing future expansion.
""As far as possible, we will finance them (News' expansion plans) out of current cash flow to maintain liquidity so that we will be ready to take new opportunities as they arise,"" he said.
News has often funded its aggressive growth in pay television and other media through either hefty debt or equity issues, which have sometimes met shareholder resistance. It almost collapsed under a debt mountain in the early 1990s.
",4
"Rupert Murdoch predicted in a newspaper interview on Friday that his global media group News Corp Ltd was on track to boost profits 20 percent this year and would win its legal battle with Ted Turner and Time Warner.
Murdoch, visiting Australia for News' annual meeting next Tuesday, also told News' Courier Mail newspaper in Brisbane that he did not want to buy out Australia's other major newspaper publisher, John Fairfax Holdings Ltd.
News, which publishes the major tabloid newspapers in Sydney and Melbourne as well as the Courier Mail and The Australian, also owns about five percent of Fairfax.
Rejoining his recent feud with CNN owner Ted Turner and Time Warner, Murdoch said he was confident News would win its law suit launched last week against Turner and Time Warner over their proposed merger.
""We've got a good stoush (fight) there,"" Murdoch said.
""We'll win through there. How or where I don't know but we'll just keep the pressure on,"" he said.
Turner said on Thursday that Murdoch's lawsuit to block the merger of Turner Broadcasting System Inc and Time Warner was a ""frivolous piece of junk.""
Murdoch and Turner have fought a pitched business battle in recent months over Turner's plans to merge his Cable News Network (CNN) with Time Warner, creating the world's largest media group.
At issue is whether Time Warner, the United States' second largest cable operator, will carry Murdoch's soon-to-be launched competitor to CNN.
News Corp is claiming US$1 billion in damages from Time Warner and Turner, saying their decision not to carry News' 24-hour Fox News Service showed they were stifling competition.
""They promised me very firmly we'd have nine million subscribers and when the day came to sign the document, they weren't there,"" Murdoch said of the Time Warner decision.
Turner was forced to apologise last week for comparing Murdoch to Adolf Hitler, while Murdoch has described CNN as liberal and his executives have said Turner was monopolistic.
Murdoch also reaffirmed News' bullish outlook for profits.
""If the American economy holds where it is and the British one does, yes certainly (the 20 percent rise is attainable),"" he told the Courier Mail.
""But it is still early days to be saying that,"" the newspaper quoted Murdoch as saying.
News said after its 1995/96 results in late August that a 20-percent profit rise in the year to June 30, 1997 was very attainable. News posted a A$1.02 billion (US$790 million) net profit in 1995/96.
But it did not repeat the 20-percent forecast in its annual report last month, creating some doubt about the outlook.
Murdoch also said he had no plans to buy out John Fairfax Holdings, which publishes the major broadsheet newspapers in Sydney and Melbourne and is News' major competitor in newspapers.
But he said Australian-based rival mogul Kerry Packer was also unlikely to bid for Fairfax any time soon if current goverment restrictions were lifted.
""I don't want to buy Fairfax. I don't believe Mr (Kerry) Packer wants to buy Fairfax,"" he said.
""To my knowledge he (Packer) has three times tried to sell his shares within the last 12 months. He'd like to influence and have the power of Fairfax but he's too shrewd to be paying for Fairfax at today's price.""
Murdoch also criticised the conservative government of Australian prime minister John Howard for not implementing radical economic reforms immediately.
(A$1 = US$0.79)
",4
"Shares in Canadian brewing and sports firm Molson Cos. Ltd. sank on Monday after its Molson Breweries unit lost the rights to brew Coors Light, Canada's top-selling light beer, in a dispute with Adolph Coors Co..
Investors pounded Molson's stock after an arbitration panel ruled late Friday that Molson reliquished its right to brew and sell Coors products in April 1993 when Miller Brewing Co. acquired a stake in the Canadian brewer.
Molson class A stock closed down C$0.75 at C$20.15 on the Toronto Stock Exchange after earlier sinking to C$19.50, just shy of its 52-week low.
""It was a pretty severe ruling and I think it surprised Molson, surprised Coors and, frankly, surprised the street,"" said Mike Palmer, an analyst with Loewen, Ondaatje, McCutcheon Ltd.
The panel said Molson breached its licensing agreement with Coors by allowing Miller, a unit of Philip Morris Cos. Inc., to buy a 20 percent stake without Coors' consent.
Molson Breweries is also owned 40 percent each by Molson Cos and Australia's Foster's Brewing Group Ltd..
The panel ordered Molson to pay Coors all the profits it earned from selling Coors beer since 1993, an amount that has yet to be determined.
Coors brands produced by Molson -- Coors Light and Original Coors -- account for 8 percent of its sales volume. Coors Light is the dominant light beer in Canada, commanding a 5 to 5.5 percent share of the beer market.
Analysts said Molson can ill afford to lose a profitable brand as it battles rival Labatt Brewing Co. Ltd. in a domestic beer market that has been flat for several years.
""You start losing volume and it has a significant impact on your profits. It's very important to Molson to negotiate a deal with Coors,"" said Palmer.
While Molson officials said they are willing to negotiate a new licensing agreement, Coors was keeping its options open.
""What we need to do is go through the panel's ruling and understand all of the aspects of the ruling and then analyze what our options are,"" said Coors spokesman Jon Goldman.
He declined to outline Coors' options for the Canadian market. But analysts speculated that Coors could cut a richer deal with Molson, ship product directly to Canada or buy a local brewer to produce Coors in Canada.
""The easiest option is to negotiate a deal with Molson. They've had a big win here so it's time to kiss and make up,"" said Palmer.
If there is a new deal, Coors will likely seek more control over its brands and higher royalties from Molson, said Barry Joslin, Molson's vice-president of corporate affairs.
If Molson cannot negotiate a new licensing agreement, Joslin said the brewer would consider its options, including launching a new light brand.
",6
"Royal Bank of Canada, the country's largest bank, rolled up a record annual profit Wednesday and surprised shareholders with a dividend hike.
The Toronto-based bank said net income jumped to C$1.43 billion ($1.05 billion) in the year ended Oct. 31, from C$1.26 billion ($931 million) in 1995.
Royal Bank also boosted its quarterly dividend by C3 cents (2 cents) to C37 cents (27 cents) a share, the third increase in the past 15 months. It was the third Canadian bank to raise its dividend recently.
Royal Bank was the fourth of Canada's Big Six banks to post a third straight year of record profits.
Results from Canadian Imperial Bank of Commerce and National Bank of Canada, which are due on Thursday, were expected to push the group's earnings past the C$6 billion level ($4.4 billion), up from last year's record C$5.2 billion ($3.8 billion).
""We're announcing strong results ... and this dividend increase is evidence of our commitment to rewarding shareholders and enhancing shareholder value,"" Royal Bank Chairman John Cleghorn said in a statement.
Higher asset volumes, lower credit losses and strong performances from wealth management and investment banking fattened Royal Bank's bottom line.
The bank's brokerage arm, RBC Dominion Securities Ltd., turned in a record year due to strong financial markets.
Royal Bank's credit quality also continued to improve. The provision for credit losses fell C$140 million ($103 million) to C$440 million ($325 million) in 1996 and was expected to fall more in 1997.
Royal Bank continues to seek an acquisition in the United States, but soaring stock prices have made it very expensive.
""Indeed in some sectors of wealth management, some of the asking prices have gone right out of sight,"" Cleghorn told reporters during a conference call.
Royal Bank's fourth-quarter earnings were slightly better than analysts' estimates.
Earnings rose to C$1.09 (80 cents) a share in the quarter from C90 cents (66 cents) in the same period in 1995. The consensus forecast from analysts was about C$1.04 (77 cents) a share.
Royal Bank's dividend increase surprised some analysts who expected the bank to wait until early next year.
The bank is in the middle of a massive share buyback that analysts said had become expensive due to the recent surge in Canadian bank stocks.
""It (the dividend hike) is rather surprising. Maybe they won't be going as far with the buyback and this is compensation,"" said Roy Palmer, a banking analyst with investment dealer TD Securities Inc.
But Cleghorn said the bank will continue with its buyback of up to 10 percent of its common stock.
""We have not indicated any upside price to analysts or the press and we are continuing with our buyback programme,"" he told reporters.
Despite the strong results, Royal Bank's stock fell along with a sagging Toronto Stock Exchange Wednesday. The bank's shares closed down C65 cents (48 cents) to C$48.25 ($35.68).
In New York, Royal Bank's stock fell 62.5 cents to close at $35.625.
",6
"Veronika Hirsch, the flamboyant Canadian stock picker hired recently to spearhead Fidelity Investments' drive to dominate the Canadian market, has been removed from her fund as she is probed by Canadian regulators.
The dramatic move -- just three months after Canada's so-called ""Fund Diva"" joined the mutual fund giant -- is a blow to Fidelity's expansion efforts in Canada, analysts said.
Hirsch, who was unavailable to comment, is embroiled in a controversy over personal trades she made before joining Fidelity, the world's biggest mutual fund company.
Her investments earlier this year in a small Vancouver company, Oliver Gold Corp., grabbed headlines and attracted the attention of the British Columbia Securities Commission.
Late Wednesday, Fidelity ousted Hirsch from her portfolio and said her status was ""under discussion."" Fidelity also took the unprecedented step of offering clients their money back without penalty.
The fund has grown to C$190 million ($143 million) in assets since it was launched amid much fanfare on Sept. 23.
Fidelity's head office in Boston declined to comment and referred all calls to its Canadian subsidiary.
""We acknowledge that it is highly unusual for a fund to change portfolio managers so quickly after its launch. This fee recovery programme is a proactive and voluntary response on our part to maintain investors' goodwill,"" Fidelity Canada spokesman Chethan Lakshman told Reuters.
Fidelity vigorously defended Hirsch when the controversy first broke several weeks ago. But it cancelled a 27-city road show last week when regulators contacted Hirsch.
At issue is her purchase of 65,000 special warrants of Oliver Gold through a private placement while she was a fund manager with AGF Management Ltd. in Toronto.
Hirsch paid C$1.53 ($1.15) per warrant, according to filings with the British Columbia Securities Commission and reported by Stockwatch, a Canadian investment publication.
Shortly afterward, Hirsch's AGF Growth & Income Fund bought 295,000 special warrants at more than double that price.
Analysts said regulators are expected to review whether the trades constitute ""front running"", a practice whereby a fund manager tries to profit personally by buying securities he or she intends to buy later for the fund.
Another related issue is whether Hirsch, a resident of Ontario, used an address in British Columbia to buy the Oliver Gold shares, which were only offered to B.C. residents.
Lakshman contended the controversy has not damaged Fidelity's reputation or expansion plans in Canada. But analysts saw the publicity as damaging as Fidelity gears up for the critical year-end sale of retirement savings plans.
""They look kind of foolish being the ones associated with this situation. I don't think it helps their bid to become the dominant player in Canada by any stretch of the imagination,"" one industry analyst said.
The Hirsch case comes as Canadians are pouring billions of dollars into mutual funds. Over the last six years, investment has jumped seven-fold to C$180 billion ($136 billion).
Fidelity wants a bigger share of the Canadian market, where it ranks ninth with C$7 billion ($5.2 billion) in assets, behind leader Investors Group, with C$22 billion ($16 million).
To quarterback its effort in Canada, Fidelity poached Hirsch, a high-profile stock picker with AGF, for a rumoured C$2 million ($1.5 million) signing bonus in August.
Her meteoric rise to celebrity status began when she joined AGF in October 1995 after a successful but low-profile stint at Prudential Insurance Co. of America.
A multi-million advertising campaign put Hirsch's face on television screens across the country. She soon rivalled celebrity stock guru Frank Mersch at Altamira Management Ltd. as the country's best-known fund manager.
When Hirsch jumped to Fidelity, her blood-red nails and leather outfits appeared an uncomfortable fit with Fidelity's ultra-conservative culture, but the hiring was considered a major coup within the industry.
At the time, Fidelity Canada President Kevin Kelly said: ""Veronika is one of the country's top equity managers with an outstanding track record and reputation.""
Kelly was unavailable for comment on Thursday.
Industry critics argue that the Hirsch case raises key questions about the fiduciary responsibility of fund managers to their clients. It also highlights the jumble of standards governing the personal investing of Canadian money managers.
Altamira has tough rules restricting managers from investing in open-ended mutual funds, short-term government bonds and treasury bills after a controversy involving one of its fund managers.
But some industry observers say the entire industry should adopt tougher U.S. guidelines.
",6
"Canada's big six banks, which have long ruled the country's street corners with their vast branch networks, face a challenge to their dominance by the Internet and the rise of new ""virtual banks.""
Telephone and computer banking, debit cards and automated teller machines (ATMs) are rapidly transforming Canada's old-style bricks-and-mortar banking system.
New technology has eliminated the need for costly branch networks and lured offshore rivals to jump into Canada's $66.5 billion consumer banking market.
""Virtual banks have the potential to send our branch networks the way of the passenger train -- much loved, but seldom used,"" said Bank of Montreal chairman Matthew Barrett in a speech to Toronto's business community.
BIG BANKS PREPARE TO MEET THE CHALLENGE
The big banks, which dominate regular banking, trust and brokerages in Canada, are marshalling their forces against this cyber-onslaught.
Royal Bank of Canada, Canadian Imperial Bank of Commerce, Bank of Montreal, Bank of Nova Scotia, Toronto-Dominion Bank and National Bank of Canada are spending millions of dollars to develop new distribution channels and upgrade branches.
ING Groep N.V., with nearly $260 billion in assets, is by far the biggest electronic challenger. The Dutch financial services giant dwarfs Royal Bank, the country's biggest financial institution with assets of $147 billion.
ING, already a player in Canada's insurance market, plans to offer a wide range of electronic banking services through a new subsidiary, ING Trust Co. of Canada, based in Toronto.
ING is keeping a low profile until its application for a trust licence is approved, but bank officials are confident of success where others have failed.
In recent years, several foreign banks abandoned Canada because of its restrictive banking laws and stiffer than expected competition from the big domestic banks.
""It would be fair to say that we will be competing on several fronts. It won't be hard to offer better service,"" said Jim Kelly, vice-president of marketing for ING's Canadian operations.
ING WILL DRAW ON ITS EUROPEAN EXPERIENCE
He said ING will draw on its extensive experience in electronic banking in Europe.
Analysts have said ING can use Canada to fine tune its virtual bank before offering similar services in the larger U.S. market. But Kelly said there are no plans yet to take ING's virtual bank south of the border.
""To say we're definitely going to the U.S. would be wrong. To say that we would look at it and see if there is a market opportunity, yes, of course we would,"" he said.
Also eyeing Canada's consumer banking market is Citibank Canada, a unit of U.S. giant Citicorp, which is joining with Canadian fund manager AGF Management Ltd., to create a virtual trust company.
The venture is Citibank's second foray into Canadian consumer banking after abandoning a bid to establish a traditional branch system in the 1980s.
Charles Stuart, country manager of Citibank's consumer banking operations in Canada, said the joint venture gives the bank access to AGF's customer base. Citibank plans to offer customers a full-service banking package, including credit cards, access to ATM service and telephone banking.
""We're not locked into the costs of a bricks-and-mortar structure. So we can serve them through technology and that enables us to price ourselves very competitively,"" he said.
The Citibank/AGF venture could set a pattern for other foreign banks seeking to enter Canada with an established customer base, Stuart said.
BIG BANKS UNDER PRESSURE FROM LOCAL RIVALS
The Big Six banks are pressured by local rivals as well.
Last month, Vancouver City Savings Credit Union, the country's biggest credit union with $3.6 billion in assets, applied to open a nationwide branchless bank early next year.
While cyber competitors are poised to invade the retail market, Canada's major banks are also on the move.
The banks spent a record $1.7 billion on new technology in 1995 and that is expected to reach $1.9 billion by 1998, according to a report by accounting firm Ernst & Young.
Much of the money is being poured into alternative delivery channels such as point-of-sale credit and debit cards, ATMs, telephone and computer banking.
Cards account for more than a third of all payment transactions in Canada, up from 25 percent a year ago.
Telephone and computer transactions are climbing as well. Traditional bank transactions are seen falling to 21 percent in 1998 from 38 percent last year.
Among Canadian banks, Royal Bank is the top player in telephone banking with more than 800,000 subscribers. Bank officials expect 40 percent of their eight million customers to be using alternative channels in five years.
Last month, Royal Bank joined 14 other North American banks to set up a computer banking network with computer giant IBM in early 1997.
All the banks are struggling to decide the future of their branch networks, but CIBC has taken the first steps to overhaul its 1,400 branches.
In a recent pilot project, CIBC employed greeters to guide customers to ATMs for their basic banking needs. Bank tellers were retrained to advise customers on such products as mutual funds, loans and mortgages.
Billing it as the bank branch of the future, CIBC said transaction costs had fallen dramatically, while customer lineups were much thinner.
But by using these low-cost channels, customers will expect a break on service fees, which many consumers complain are too high, Ernst & Young said.
Bank of Nova Scotia has taken the acquisition route to boost its Internet services. It recently bought a 10 percent stake in iSTAR Internet Inc., an Internet solutions firm, to help develop new channels and services for the bank.
",6
"The Montreal Canadiens, the most storied franchise in the National Hockey League, were engulfed in sale rumours Friday, which drew a fierce denial from its owner, Molson Cos. Ltd.
Canadian newspapers reported that a consortium led by former Canadiens general manager and Hall of Famer Serge Savard was assembling a bid for the team, winner of a record 24 Stanley Cup championships since 1916.
Citing unidentified sources, Toronto's Globe and Mail newspaper reported that talks with Molson had been under way for several days.
""Don't take this story lightly. There's a very good chance that it could happen,"" wrote sports columnist Marty York, quoting a source at Molson.
Rejean Tremblay, a columnist for the Montreal newspaper La Presse, reported similar rumours.
Molson is the sole owner of the Canadiens and their new arena, the $150 million Molson Centre. It also owns 40 percent of Canada's biggest brewer, Molson Breweries.
""The company has not approached anyone on this subject and no one has approached us. Neither the hockey club nor the Molson Centre are for sale,"" Molson Chief Executive Norman Seagram said in a statement.
Analysts speculated that the Canadiens and the arena could fetch up to $300 million.
Savard, who played for Montreal from 1967-1981 and was fired last season after 13 years as the team's general manager, was unavailable for comment on Friday.
Selling the Canadiens would be a dramatic about-face for Molson. The company said four months ago the club was a key part of its heritage.
""At the Molson companies, we have two legacy assets, Molson Breweries and the Montreal Canadiens,"" Seagram told shareholders at the annual meeting in June.
Sports plays a huge role in selling beer in Canada and the Molson name is intertwined with Canadiens hockey. Aside from putting its name on a new arena, Molson Breweries is a major sponsor of NHL television broadcasts in Canada.
The Molson family sold the club in 1971 to Peter Bronfman, whose cousins control the Seagram beverage empire. Molson Cos. reacquired the team in 1978.
Analysts said there had been no hint from Molson that it was interested in selling the club or arena.
",6
"Three Canadian financial institutions on Tuesday launched North America's first city-wide, reusable ""smart"" card designed to replace cash in retail transactions.
The Exact card will be tested under a pilot programme operated by Bank of Montreal, Toronto-Dominion Bank and Canada Trust, a unit of CT Financial Services Inc.
The project will be in Kingston, Ontario, city of about 100,000 people located 168 miles (270 km) northeast of Toronto.
About 600 Kingston merchants -- including convenience stores, gas stations and fast food outlets -- signed up with the test project.
The consortium is advertising Exact as an alternative to cash, credit and debit cards. Canadians currently spend between C$40 billion ($29 billion) and C$60 billion ($44 billion) using small coins and bills.
""With Exact you don't have to carry as many small bills and coins, and you'll always have the exact change required to make fast, convenient purchases,"" said Ron Hodge, vice president of card and direct services for TD Bank.
Canadians are among the biggest users of plastic cards in the world. They carry an estimated 46.2 million debt and credit cards, while use of these cards has jumped 43 percent in the past year, according to a recent industry survey.
""Technology is rapidly changing the face of money, providing faster, easier and more secure transactions. This is only the beginning,"" said Tim Hockey, vice president of core banking services for Canada Trust.
Exact will be followed in early 1997 by a community-wide test of Mondex, a rival ""smart"" card system developed in Britain. Exact is based on smart card technology developed by Belgium-based Banksys.
Royal Bank of Canada and Canadian Imperial Bank of Commerce will roll out their Mondex system in Guelph, a city of about 100,000 people 50 miles (80 kms) west of Toronto.
Both systems are similar in that they involve storing money on a computer chip embedded within a card. When a customer uses the card to make a purchase, the value is subtracted from the card.
Customers simply insert their card in the merchant's special, hand-held purchase terminal. The merchant enters the purchase price and the customer presses the ""OK"" button.
The electronic value of the sale is collected in the purchase terminal and transferred via telephone modem to the merchant's bank account at the end of the day.
Exact users can load, or electronically transfer cash from bank account to the card, up to C$200 ($147) from terminals in the Kingston branches of Bank of Montreal, TD Bank and Canada Trust. Load terminals will also be located in shopping malls, student campuses and selected stores.
The card will initally be offered at no charge. But after an introductory period, each financial institution will set a fee for its own customers.
",6
"Profits at Canada's six big banks topped C$6 billion ($4.4 billion) in 1996, smashing last year's C$5.2 billion ($3.8 billion) record as Canadian Imperial Bank of Commerce and National Bank of Canada wrapped up the earnings season on Thursday.
The six banks each reported a double-digit jump in net income for a combined profit of C$6.26 billion ($4.6 billion) in fiscal 1996 ended Oct. 31.
But a third straight year of record profits came amid growing public anger over perceived high service charges and credit card rates, and tight lending policies.
Bank officials defended the group's performance, saying that millions of Canadians owned bank shares through mutual funds and pension plans.
Shareholders of four of the six banks were rewarded with healthy dividend hikes this year.
""Our activities mean jobs, investment, tax revenue, dividend payments and foreign income for Canada's economy,"" CIBC chairman Al Flood said after the bank reported a 35 percent jump in net income on Thursday.
CIBC, Canada's second-largest bank, said net income climbed to C$1.36 billion ($1 billion) in fiscal 1996 from C$1.01 billion ($743 million) in 1995.
CIBC also boosted its quarterly dividend by C5 cents (3.6 cents) to C50 cents (37 cents), the second increase in 1996.
Bank of Nova Scotia, Toronto-Dominion Bank and Royal Bank of Canada previously raised their payouts as well.
Royal Bank, Canada's largest bank, reported the highest corporate profit in Canadian history on Wednesday, with 1996 net income rising 13 percent to C$1.43 billion ($1.05 billion).
Bank of Nova Scotia and Bank of Montreal cracked the billion-dollar barrier this year, joining CIBC and Royal Bank, which crossed the threshold in 1995 and 1994 respectively.
National Bank, the smallest of the big six, posted a 30 percent jump in net income to C$318 million ($234 million) this year.
The banks attributed their performances to lower credit losses and healthy commercial and personal banking. Investment banking, brokerage and mutual fund businesses also enjoyed a banner year as financial markets soared in 1996.
Earnings at CIBC's Wood Gundy Inc. investment arm skyrocketed 122 percent to C$528 million ($389 million) in 1996.
The group's earnings and dividend hikes were in line or slightly better than analysts' forecasts.
""It was good news and a fairly good outlook for 1997 in terms of earnings and dividends,"" said Hugh Brown, a banking analyst with investment dealer Nesbitt Burns Inc.
Brown said he now had a more positive outlook for bank earnings in 1997, saying Big Six profits may grow between 9 and 10 percent next year, up from previous growth forecasts of about 7 percent.
Bank stocks, which have led the Toronto Stock Exchange to new heights since September, fell on Thursday in tandem with the rest of the market. CIBC led the decline, dropping C$2.25 ($1.65) to C$57.25 ($42) in late trading.
",6
"U.S. mutual fund giant Fidelity Investments said on Saturday that Canadian regulators were investigating trades made by Veronika Hirsch, the star manager of their new Canadian equity fund.
Hirsch's 27-city road show to promote Fidelity's True North fund has been postponed as a result of the regulatory review, said a spokesman for the Boston-based mutual fund company.
The tour was scheduled to begin on Monday.
""Veronika Hirsch ... was recently contacted by a regulatory agency about her personal investments before she joined Fidelity,"" Chethan Lakshman, a spokesman for Fidelity's Canadian subsidiary, Fidelity Investments Canada Ltd., said in a telephone interview.
""At this time it is appropriate to postpone the tour and we're hopeful that the regulatory review of her trading activity will result in a favourable conclusion,"" Lakshman said.
He did not identify the regulator, but Canadian newspapers reported on Saturday that the British Columbia Securities Commission was looking into the matter.
Lakshman said Hirsch was not available for interviews and he was unsure of her whereabouts.
The controversy is over Hirsch's investments in a Vancouver-based exploration firm, Oliver Gold Corp., earlier this year while she was a high-profile fund manager with AGF Management Ltd. in Toronto.
Hirsch, a flamboyant stock picker compared to her sedate peers in Canada's mutual fund industry, was hired by Fidelity with much fanfare in August after only 10 months at AGF.
Fidelity is conducting its own review of Hirsch's actions before she joined the company.
During her brief stint at AGF, Hirsch bought 65,000 special warrants of Oliver Gold for herself through a private placement in April, according to statements filed with the British Columbia Securities Commission and reported by Vancouver-based Canada Stockwatch, a newsletter which tracks Canadian stocks.
Hirsch paid C$1.53 ($1.14) per warrant.
A short time later, the AGF Growth & Income Fund managed by Hirsch bought 295,000 special warrants, according to the filings with the B.C. commission.
The AGF fund paid over double the price, C$3.60 ($2.69) per warrant, paid by Hirsch.
Another related issue is whether Hirsch used a false address in British Columbia to buy the Oliver Gold shares. Canadian newspapers have reported that the home address of a Vancouver stock analyst and institutional salesman was used.
Hirsch is a resident of Ontario and the Oliver Gold stock was only available to British Columbia residents.
AGF chief executive officer Warren Goldring has said Hirsch broke company rules by failing to report her personal investment in Oliver Gold. He added Hirsch could have been fired if AGF had known about the trades.
The controversy swirling around Hirsch has dominated the business pages of Canadian newspapers, but Lakshman said the publicity has not hurt Fidelity's efforts to build a higher profile in Canadian equities management.
""We have had a lot of great responses to the (True North) fund. It has been well-received and has grown to more than C$150 million ($112 million),"" Lakshman said.
",6
"Shivering icewine enthusiasts, battered by icy winds, headed into a snow-covered vineyard on a recent night to harvest one of the world's rarest wines.
Although Germany discovered the luscious dessert wine in the late 18th century, Canada is the world's largest producer of icewine -- capturing many international awards and helping shed an industry reputation for screw-top plonk that neither amuses nor has any pretentions.
If you can find it, this ""liquid gold"" can cost up to C$200 ($150) a bottle in icewine-crazy Japan -- four times the price in Canada. Japan is by far the biggest export market, but China and South Korea are also developing a taste for it.
But on this cold winter night a cup of piping hot coffee could fetch a better price than any chilled wine. ""It's cold, hard work. You're outside in the dark picking frozen grapes and wondering why you're not asleep like normal people,"" Greg Berti, general manager of Hillebrand Estates Winery, said on a recent midnight tour of Hillebrand's icewine fields.
Most of the Canadian vintage comes from the Niagara wine region where 24 wineries produced 29,700 gallons (112,500 liters) in 1995. That is up 57 percent from 1994 but paltry compared to the eight million gallons (30 million liters) of regular wine produced yearly in Ontario, Canada's most populous province.
Some California wineries produce sweet wines but they are shunned by icewine purists because the grapes are artificially frozen. ""Their wine is interesting, but it's not in the same league as icewine,"" Berti said.
IT MAY BE RARE BUT IT TASTES LIKE PEACHES
Although Niagara wineries say their products are unique in taste, icewine is generally amber or golden in colour with a full-flavored taste similar to honey, apricots or peaches. It is thicker than regular wine, with an alcohol content of about 10 percent, compared to 40 percent for a cognac or brandy.
Canada exports icewine to Germany, Denmark, Hong Kong, Switzerland, Taiwan, the United Kingdom and the United States. China and Korea are also emerging markets. But the biggest buyers are Japanese tourists who flock to the Niagara region by the busload -- snapping up several bottles of icewine after a visit to nearby Niagara Falls.
Hillebrand sells about 75 percent of its icewine to Japanese who tour its winery. ""Their image of Canada is Banff, Anne of Green Gables and Niagara Falls, and icewine fits in with that image,"" Berti said.
Last summer, a group of 74 Japanese race horse owners descended on another Niagara winery and drove off with more than $10,000 worth of icewine. ""They came into the winery, sampled, bought and were back in their bus in 45 minutes,"" recalled Debi Pratt, director of public relations for Inniskillin Wines Inc.
ALMOST AS HARD TO PRODUCE AS GOLD
It takes every grape from an entire vine to yield enough juice to make one bottle of icewine -- 10 times the amount used to make regular wines. Many grapes are lost to hungry birds, hail or harsh winter winds before they are picked.
But Canada has plenty of what is needed most to make icewine -- consistently cold weather.
The grapes -- hardy Vidal or Riesling varieties -- must be picked off the vine when temperatures are well below freezing.
Most wineries set aside part of their vineyards in October when the regular wine harvest ends. By mid-December or early January the shriveled grapes have turned a brownish hue and pickers are on call, waiting for the right weather.
Berti said Mother Nature has sometimes forced crews to pick on Christmas Eve or New Year's Eve -- although that did not happen this year.
""The wind is the biggest problem. Every hour or half hour we take a break for hot coffee and donuts,"" Gregory Synos, a six-year veteran of the icewine harvest, said.
The grapes are sorted and rushed to the winery where presses work into the night. The juice then goes through several weeks of fermentation, followed by a few months of ageing in oak barrels to smooth out the acidity and tanins in immature icewine.
Although Hillebrand has tried to modernise the process by using special presses and protective netting for the grapes, Berti conceded: ""There is nothing efficent about it. You have to get into the fields when the getting is good.""
",6
"Bank of Nova Scotia, Canada's fourth largest bank, joined a once exclusive club on Wednesday, reporting its first C$1 billion annual profit.
The Toronto-based bank said net income jumped 22 percent to C$1.069 billion in the year ended October 31. It also rewarded shareholders with a C$0.03 increase in its quarterly dividend to C$0.37 a share, its second dividend hike of 1996.
""Scotiabank's financial results exceeded our targets once again in 1996,"" chairman and chief executive Peter Godsoe said in a statement.  
Scotiabank was the fourth of Canada's Big Six banks to break the C$1 billion threshold.
Bank of Montreal posted a record C$1.17 billion profit on Tuesday when it kicked off the Canadian banking group's year-end reporting season.
Canadian Imperial Bank of Commerce joined the club last year, following Royal Bank of Canada in 1994.
Godsoe said all of Scotiabank's main business lines contributed to its record performance, including personal, corporate and investment banking. Improved credit quality also contributed to the bank's bottom line.  
Return on equity, a key measure of profitability, rose to 15.8 percent in 1996 from 14.2 percent last year.
The bank's fourth-quarter earnings were slightly better than the average of analysts' estimates.
Earnings rose to C$1.08 a share in the three months ended October 31 from C$0.88 in the same period in 1995.
The consensus forecast from analysts was C$1.05 or C$1.06 a share. ""They are strong and probably surprising,"" one industry analyst said.
Other analysts said the results were in line with their expectations.  
Susan Cohen, an analyst with Deacon Capital Corp, had forecast C$1.08 per share in the fourth quarter.
""They were right in line,"" Cohen said, adding that the bank's loan losses and the dividend increase were expected.
Scotiabank stock rose 0.30 to 46.15 in mid-afternoon turnover of 402,000 shares on the Toronto Stock Exchange.
Among other financial highlights:
* Net interest income rose 15 percent to C$3.58 billion in 1996, due mostly to strong growth in earning assets across all business lines. The bank also posted securities gains of C$129 million in 1996, versus gains of C$38 million in 1995.  
The cost of funding impaired loans also fell due to lower interest rates and a drop in the level of impaired loans.
* Other income jumped 14 percent to C$1.78 billion in 1996. The bank attributed the increase to stronger revenues from electronic and card services and higher loan fees.
With financial markets enjoying a prolonged rally in 1996, the bank's full service and discount brokerage operations posted a 50 percent jump in revenues.
* Non-interest expenses grew by 13 percent to C$3.22 billion, due mostly to performance related compensation and higher business volumes.  
* Net impaired loans fell 49 percent to C$743 million in 1996. Net impaired loans as a percentage of total loans and acceptances improved to 0.7 percent, their lowest since 1989.
* Provision for credit losses dropped to C$380 million in 1996, down from C$560 million last year. The bank's general provision remained at C$325 million.
-- Reuters Toronto Bureau (416) 941-8100
",6
"Stock in Canada's big banks tumbled on the Toronto Stock Exchange on Tuesday after a Canadian brokerage cut its recommendations on the high-flying bank group.
CIBC Wood Gundy, a unit of Canadian Imperial Bank of Commerce, cut its ratings on four of the so-called Big Six banks. Montreal-based National Bank of Canada, the smallest of the six major banks, received the only buy recommendation.
""We are lowering our recommendations on the group of Canadian bank stocks, moving from three buys to only one buy,"" said CIBC Wood Gundy analyst Mark Maxwell.
Canadian bank stocks have soared to all-time highs in recent months, with Toronto's bank index up 46 percent in 1996.
But the group's valuation multiples are now averaging 1.7 times book value -- closing the gap between Canadian bank stocks and their U.S. counterparts, Maxwell said in a report to institutional investors.
Toronto's financial services group plummeted 145 points, or 2.7 percent, in heavy trading on Tuesday.
Bank of Montreal, which Maxwell reduced to hold from accumulate, fell C$1.55 ($1.16) to C$42.15 ($31.63) on 1.5 million shares.
Bank of Nova Scotia dropped C$1.85 ($1.38) to C$44.50 ($33.39) on 995,000 shares after Maxwell recommended investors reduce their Scotiabank holdings.
Royal Bank of Canada, which was cut to accumulate from buy, surrendered C$1.30 ($0.75) to C$46 ($34.52) on 2.9 million shares. Canada's biggest bank is the group's valuation leader with a multiple of 2.0 times book value, Maxwell said.
CIBC dropped C$1.70 ($1.27) to C$57.25 ($43) on 700,000 shares. Maxwell did not assign a ranking to CIBC.
Toronto-Dominion Bank sank C$1.15 (86 cents) to C$33.40 ($25) on volume of 1.3 million shares after it was lowered to accumulate from buy.
""Of the five largest banks, our top pick would remain TD (Toronto-Dominion), since it is most likely to continue to exercise its share repurchase programme, even at current multiples, reflecting its superior capital strength,"" Maxwell said.
National Bank of Canada fell 55 cents Canadian (41 cents) to C$13.35 ($10) on 1.05 million shares despite having the only buy recommendation of the group.
But some stock strategists remained bullish on Canadian banks. They said the group was still popular among foreign investors seeking to jump into the Canadian market, lured by interest rates at 40-year lows and a recovering economy.
""Foreigners are attracted to Canadian investments and one of the best areas they can participate in is the banking sector,"" said Ira Katzin, an investment advisor with RBC Dominion Securities.
",6
"The Montreal Canadiens, the most storied franchise in the National Hockey League, were engulfed in sale rumors on Friday, which drew a fierce denial from its owner, Molson Cos. Ltd..
Canadian newspapers reported that a consortium led by former Canadiens all-star defenseman Serge Savard was assembling a bid for the Canadiens, who have won 24 Stanley Cup championships since 1916.
Citing unidentified sources, Toronto's Globe and Mail newspaper reported that Savard headed the group and that talks with Molson had been under way for several days.
""Don't take this story lightly. There's a very good chance that it could happen,"" wrote sports columnist Marty York, quoting a source at Molson.
Rejean Tremblay, a columnist for the Montreal newspaper La Presse, reported similar rumors.
Molson is the sole owner of the Canadiens and the new C$200 million ($150 million) Molson Centre arena in which the club plays. It also owns 40 percent of Canada's biggest brewer Molson Breweries.
""The company has not approached anyone on this subject and no one has approached us. Neither the hockey club nor the Molson Centre are for sale,"" Molson Chief Executive Norman Seagram said in a statement.
Analysts speculated that the Canadiens and the arena could fetch up to C$400 million ($300 million).
Savard, a Hall of Famer who played with Montreal from 1967-1981, was fired by the Canadiens last year after 13 years as general manager.
Now a wealthy real estate executive in Montreal, Savard was unavailable for comment on Friday.
""I would think that if anything is going on there, the initiative is being taken by the potential buyer rather than the seller,"" Bill Chisholm, an analyst with Deacon Capital Corp. said in a telephone interview.
Selling the Canadiens would be a dramatic about-face for Molson. The company said four months ago the club was a key part of its heritage.
""At the Molson companies, we have two legacy assets, Molson Breweries and the Montreal Canadiens,"" Seagram told shareholders at the annual meeting in June.
Sports plays a huge role in selling beer in Canada and the Molson name is intertwined with Canadiens hockey. Aside from putting its name on a new arena, Molson Breweries is a major sponsor of NHL television broadcasts in Canada.
The Molson family sold the club in 1971 to Peter Bronfman, whose cousins control the Seagram beverage empire. Molson Cos. reacquired the team in 1978.
Analysts said here had been no hint from Molson that it was interested in selling the club or arena.
",6
"Profits at Canada's six big banks topped C$6 billion ($4.4 billion) in 1996, smashing last year's C$5.2 billion ($3.8 billion) record as Canadian Imperial Bank of Commerce and National Bank of Canada wrapped up the earnings season on Thursday.
The six banks each reported a double-digit jump in net income for a combined profit of C$6.26 billion ($4.6 billion) in fiscal 1996 ended Oct. 31.
But a third straight year of record profits came amid growing public anger over perceived high service charges and credit card rates, and tight lending policies.
Bank officials defended the group's performance, saying that millions of Canadians owned bank shares through mutual funds and pension plans.
Shareholders of four of the six banks were rewarded with healthy dividend hikes this year.
""Our activities mean jobs, investment, tax revenue, dividend payments and foreign income for Canada's economy,"" CIBC chairman Al Flood said after the bank reported a 35 percent jump in net income on Thursday.
CIBC, Canada's second-largest bank, said net income climbed to C$1.36 billion ($1 billion) in fiscal 1996 from C$1.01 billion ($743 million) in 1995.
CIBC also boosted its quarterly dividend by C5 cents (3.6 cents) to C50 cents (37 cents), the second increase in 1996.
Bank of Nova Scotia, Toronto-Dominion Bank and Royal Bank of Canada previously raised their payouts as well.
Royal Bank, Canada's largest bank, reported the highest corporate profit in Canadian history on Wednesday, with 1996 net income rising 13 percent to C$1.43 billion ($1.05 billion).
Bank of Nova Scotia and Bank of Montreal cracked the billion-dollar barrier this year, joining CIBC and Royal Bank, which crossed the threshold in 1995 and 1994 respectively.
National Bank, the smallest of the big six, posted a 30 percent jump in net income to C$318 million ($234 million) this year.
The banks attributed their performances to lower credit losses and healthy commercial and personal banking. Investment banking, brokerage and mutual fund businesses also enjoyed a banner year as financial markets soared in 1996.
Earnings at CIBC's Wood Gundy Inc. investment arm skyrocketed 122 percent to C$528 million ($389 million) in 1996.
The group's earnings and dividend hikes were in line or slightly better than analysts' forecasts.
""It was good news and a fairly good outlook for 1997 in terms of earnings and dividends,"" said Hugh Brown, a banking analyst with investment dealer Nesbitt Burns Inc.
Brown said he now had a more positive outlook for bank earnings in 1997, saying Big Six profits may grow between 9 and 10 percent next year, up from previous growth forecasts of about 7 percent.
Bank stocks, which have led the Toronto Stock Exchange to new heights since September, fell on Thursday in tandem with the rest of the market. CIBC led the decline, dropping C$2.50 ($1.84) to close at C$57 ($42) in brisk trading.
",6
"Toronto-Dominion Bank extended the run of record Canadian bank profits on Thursday with a 15 percent jump in 1996 earnings and a dividend hike for its shareholders.
Canada's fifth largest bank said net income climbed to C$914 million in the year ended October 31 from C$794 million in 1995. Bank of Montreal and Bank of Nova Scotia earlier this week posted record full-year earnings.
The strong results prompted TD Bank to boost its quarterly dividend by C$0.03 to C$0.28 a share.  
Bank of Nova Scotia raised its dividend by C$0.03 a share to C$0.37 a share on Wednesday.
TD Bank said its performance reflected strong growth in other income, with significant gains in investment banking, brokerage and mutual fund businesses.
The bank's loan loss provision also sank to its lowest level in more than a decade.
""With a solid financial performance and progress in developing our businesses, TD had a positive impact on the Canadian economy in 1996,"" chairman and chief executive Richard Thomson said in a statement.  
Return on equity, a key measure of profitability, rose to 15.4 percent in 1996 from 14.3 percent last year.
The bank's fourth-quarter earnings were in line with analysts' estimates.
Earnings rose to C$0.79 a share in the fourth quarter ended October 31 from C$0.71 a share in the same period in 1995.
The consensus analysts' forecast was for C$0.79 a share in the fourth quarter.
""They were dead on expectations. The dividend increase was also expected,"" said Hugh Brown, an analyst with Nesbitt Burns Inc.  
Analysts said the revised loan loss provision was a surprise. The bank cut its 1996 provision to C$152 million from a previous third-quarter estimate of C$170 million and from C$180 million in 1995.
Net impaired loans in the fourth quarter fell C$95 million to C$344 million. ""This decline was largely due to improvement in real estate loans to corporate borrowers,"" the bank said.
Net impaired loans as a percentage of total loans and acceptances dropped to 0.4 percent at year end. TD stock was up 0.80 to 37.65 on turnover of 821,000 shares on the Toronto Stock Exchange.  
TD  hit a 52-week high of 38.10 earlier in the session.
TD president Charles Baillie said Canada's low interest rates should boost consumer confidence and economic activity in 1997. That in turn was expected to increase demand for the bank's investment products.
""With the acceleration of growth in investment banking, brokerage, mutual funds, investment management and electronic banking services, TD is positioned to perform well in this environment,"" said Baillie.
-- Reuters Toronto Bureau (416) 941-8100
",6
"Royal Bank of Canada and Canadian Imperial Bank of Commerce, Canada's two largest banks, wrapped up the industry's third-quarter profit parade on Thursday with sharply higher earnings.
Royal Bank of Canada, the country's biggest bank, said income climbed 12 percent to C$358 million ($261 million) in the three months ended July 31.
CIBC, Canada's second largest bank, reported a 24 percent jump in income to C$336 million ($245 million).
CIBC's earnings per share of C$1.50 ($1.09) beat analysts' forecasts of around C$1.43 ($1.04) a share. Royal Bank reported a C$1.02 ($0.74) per share profit, in line with analysts' expectations.
The results capped a strong quarter for the six major banks and put them on track for a third straight year of record annual profits.
The group rang up a combined profit of C$5.17 billion ($3.7 billion) in the fiscal year ended Oct. 31.
Soaring bank profits have sparked hostility from Canadian consumers who complain about high service fees and tight lending policies.
In a bid to soften that criticism, the banks have taken to highlighting their tax bills and job creation efforts.
For example, CIBC said it paid out more than C$0.50 ($0.36) in taxes for every dollar earned so far this year.
The group's public relations efforts may get easier next year when analysts predict earnings growth will start to tail off.
In the third quarter, CIBC and Royal Bank gained from stronger loan volumes, higher brokerage and fee revenues and improving credit quality.
""Our solid performance this quarter reflects the continued strong contribution from our core businesses,"" CIBC chairman and chief executive officer Al Flood said in a statement.
The bank's return on equity, a key measure of profitability, was 16.6 percent in the third quarter, up from 13.7 in the same quarter last year.
Flood said CIBC's personal and commercial bank continued its strong performance this year.
Recent strategic moves at CIBC's brokerage unit, CIBC Wood Gundy, are also paying off wth new financial products and high-yield debt adding to the bank's bottom line.
Stronger revenues from underwriting, capital markets and foreign exchange pushed non-interest income up 17 percent to C$691 million ($504 million) in the third quarter.
Net interest income was up slightly to C$1.1 billion ($800 million) in the third quarter.
At Royal Bank, higher revenues from capital market, mutual fund and trading businesses pushed other income up 13 percent to C$757 million ($552 million).
Net interest income climbed three percent to C$1.1 billion ($800 million), due mostly to higher asset volumes, lower impaired loans and proceeds from the sale of bonds.
""This quarter was marked by higher growth in residential mortgages and other loans, continued improvement in credit quality and stronger performances from a number of fee-based businesses,"" said Royal Bank chairman John Cleghorn.
Royal Bank's return on equity was 17.2 percent compared to 16.4 percent in the third quarter of 1995.
Despite the strong performance, shares in both banks finished weaker on the Toronto Stock Exchange.
Canadian Imperial Bank of Commerce fell C$0.30 ($0.22) to C$45.15 ($32.80), while Royal Bank lost C$0.20 ($0.14) to close at C$34.20 ($25).
",6
"Canada unveiled plans on Friday to lift restrictions on foreign banks in a bid to spur competition in a sector dominated by six big domestic banks.
Draft legislation allowing foreign banks to open branches in Canada will be ready before the end of 1997. But a possible federal election may delay the passage of the bill in Canada's parliament until next year, said Doug Peters, secretary of state for financial institutions.
""Branching will encourage new banks to enter the Canadian marketplace and allow existing foreign banks greater opportunity to compete,"" Peters said in a statement.
He told reporters that the government needed time to develop branching rules, including a tax regime.
Foreign bankers have complained that Canada lagged behind its Group of Seven trading partners in opening up its banking sector to foreign competition.
Current rules require foreign banks to operate separately capitalized subsidiaries in Canada. The higher cost of operating a subsidiary, rather than a branch, has driven several foreign banks out of the country.
Last year a federal ""white paper"" on financial reforms introduced only minor changes to foreign bank rules, but parliament subsequently issued reports urging freer access to Canada's markets for foreign banks.
The number of foreign banks operating in Canada has dropped to 43 from a peak of about 60 in the 1980s. The legislation has not been written yet, but a freer market would make Canada more attractive, said Alfred Buhler, chairman of Bank of America Canada, a unit of BankAmerica Corp.
""It will slow the erosion and may reverse that trend. I think a number of banks who are not currently operating in Canada will take another hard look,"" Buhler said.
Canada's big six domestic banks already dominate regular banking, trusts and brokerages. But they are being challenged by the Internet and the rise of new ""virtual banks.""
Dutch financial services giant ING Groep N.V. is set to launch a telephone banking operation in Canada early next year and has earmarked an initial investment of $50 million for direct marketing of a range of savings and loans products.
Citicorp and Wells Fargo and Co. are also planning banking services aimed at Canadian consumers and small businesses.
Canadian bankers have said they would welcome more foreign competition as long as it is on a level playing field.
""We have absolutely no concerns about being able to compete successfully. There is a need to ensure that regulations -- tax, capital adequacy, corporate governance policies and so on -- are reasonably balanced,"" Bank of Nova Scotia chairman Peter Godsoe said recently.
Canadian bankers complained that their foreign rivals did not pay the same capital taxes in Canada as domestic banks. They also argued that virtual banks would not create new jobs in Canada, although critics noted that Canadian banks had shed staff recently in a move to electronic banking services.
Royal Bank of Canada, the country's biggest bank with more than $150 billion in assets, supports granting more access to foreign banks if rules barring Canadian banks from getting bigger are lifted.
Royal Bank and its counterparts have seen their international rankings slip sharply in recent years. They argue domestic bank mergers may be necessary if Canada is to remain competitive internationally.
Federal laws discourage bank mergers by limiting investors to a minimum 10 percent stake in a Canadian bank. A government task force plans to study these and other competition issues this year.
",6
"A furry hedgehog, idyllic sunsets and the meaner streets of Budapest seem unlikely moneyspinners, but such images are crowding Canada's airwaves as the annual mutual fund season kicks into gear.
Armed with high-powered ad campaigns, eager fund sellers are vying for the billions of dollars Canadians will pour into registered retirement savings plans (RRSPs).
With interest rates at 40-year lows and stocks at stratospheric heights, investors are expected to shun interest-bearing investments for higher yielding mutual funds before the March 1 deadline for RRSP contributions.
""We're in the thick of it right now and it's going to get busier and busier toward the end of the (RRSP) season,"" said John Wiltshire, vice-president of marketing for Investors Group, Canada's top fund company with C$25 billion ($18 billion) in assets.
TAX BENEFIT IS A DRAW
Canada introduced RRSPs in the late 1950s to allow people without registered pension plans to save for retirement. Investors can deduct the amount from their taxes for the previous year's income.
Besides being a tax benefit, RRSPs have become more popular as traditional pension benefits are scaled back.
Canadians have more than C$211 billion ($156 billion) stashed in mutual funds, an eight-fold increase from 1990. An estimated C$23 billion ($17 billion) will be added to the pot this year.
Fund companies also expect a big chunk of the C$250 billion ($186 billion) currently invested in guaranteed investment certificates and term deposits to shift into funds.
In what has become an annual rite of the Canadian winter, fund sellers flood the airwaves with promotions, hype and gimmicks to lure RRSP dollars. But, unlike the United States, Canadian broadcast rules prohibit companies from making performance claims on television or radio.
""That's why you get fuzzy advertising. They talk about lifestyle and emphasise branding,"" said John Kaszel, director of research for Investment Funds Institute of Canada, a lobby group representing 40 fund companies.
Soft-sell ads feature happy people in tranquil settings with simple messages such as ""We're here to get you there,"" or ""quietly creating wealth.""
NEXT GENERATION THE TARGET
Some firms are targeting the next generation of investors. GT Global, a member of Liechtenstein Global Trust, launched a Kid's Kit in December to teach youngsters about mutual funds.
When a parent opens a minimum C$500 ($370) account, his child gets a stuffed ""Henry the Hedgehog"" toy, a certificate and a colourful book explaining ""Henry's Mysterious Gift.""
""This is a chance to give a gift to your kids that is tangible and gets them into the habit of investing,"" said CT Global President Joe Canavan.
Other ads feature smartly tailored people using words such as ""discipline"" and ""performance"" to trumpet their firm's investment strategy.
Spectrum United Mutual Funds' gritty commercials highlight its team of tough global fund managers, including one who scored a big success investing in a Budapest security company.
To add levity to the RRSP season, Bank of Montreal's campaign pricked the balloons of so-called ""experts"", but there was little information on the bank's own funds.
Critics complain that Canada's advertising rules insult investors' intelligence.
""Mutual fund regulators are convinced that mutual fund investors are ignorant dolts who need to be protected from themselves and the industry. The result, as far as radio and television are concerned, is a multimillion dollar river of non-information,"" Toronto Globe and Mail columnist Terence Corcoran wrote recently.
SCANDALS MAY MEAN TIGHTER CONTROLS
But regulators are unlikely to relax their grip on the industry. In fact, the rules could tighten after recent scandals such as the Veronika Hirsch affair.
Hirsch was a star stock picker hired last summer to spearhead Boston-based Fidelity Investments' drive to dominate the Canadian market. But she was removed from her portfolio in November amid a controversy over personal trades she made before joining the world's biggest mutual fund company.
Fidelity also offered clients their money back without penalty. ""We were pleased that the number of people who did take advantage of it was less than our expectation,"" said spokesman Chethan Lakshman, but he did not give any numbers.
Hirsch's True North Equity Fund is now under a less flamboyant manager and has accumulated C$211 million ($156 million) in assets since its launch last September.
Hirsch's status was under discussion, Lakshman said, but a separation package was rumoured to be under negotiation.
FALLOUT PROMPTS GUIDELINES REVIEW
The fallout from the Hirsch affair prompted a review of the industry's guidlines for fund managers. ""It has opened up some concerns, but those are being addressed. Now we are seeing whether more should be done,"" Kaszel said.
While analysts said it was difficult to assess the damage to the industry's credibility, the Hirsch affair changed how companies sell their product.
Brash campaigns built around high-profile stock pickers are out and the ""team"" is in, analysts said.
Canada's Big Six banks are also heavy advertisers this year as they strive to become bigger players in a industry dominated by independents.
Three banks are now among the top 10 firms, with Royal Bank of Canada number three behind Investors Group amd Trimark Investment Management Inc.
The banks were allowed to enter the mutual fund business in 1987 and now account for 29 percent of the industry's assets. Fund management fees have helped propel bank profits to record highs in recent years.
",6
"Canada's six biggest banks are poised for a further round of buoyant profits when they begin reporting third-quarter earnings on Tuesday.
An improved interest rate picture, higher investment banking and dealing revenues and better loan quality are expected to drive profits in the third quarter ended July 31.
On average, earnings for the so-called Big Six are expected to be 15 percent to 20 percent higher than the third quarter of last year, analysts said.  
""I would expect more sectors of the banks to be more profitable than they were in the corresponding quarter of last year,"" Roy Palmer, an analyst with TD Securities, said in a telephone interview.
Bank of Montreal and Bank of Nova Scotia, Canada's third and fourth largest banks respectively, kick off the earnings parade on Tuesday.
Canada's fifth-biggest bank, Toronto-Dominion Bank, and the smallest, National Bank of Canada, report on Thursday.  
The country's top two banks, Royal Bank of Canada and Canadian Imperial Bank of Commerce, are scheduled to deliver their results on Thursday, September 5.
Despite a recent downturn in financial markets, analysts said securities earnings should be stronger than last year. Canada's brokerage industry is dominated by subsidiaries of the countries major banks.
The banks are also expected to benefit from lower loan losses as the industry continues to rebound from disastrous loans in commercial real estate, which collapsed in the late 1980s.  
Despite the correction in stocks earlier this summer, bank stocks have remained strong performers. Lower Canadian interest rates have helped push bank stock prices to all-time highs on the Toronto Stock Exchange.
""I think that if the combination of strong profitability couples up with lower interest rates, then it probably will set the backdrop for higher share prices,"" said Susan Cohen, an analyst with Deacon Capital Corp.
Analysts said they do not expect any of the banks to raise their dividends during the reporting period.  
But the string of record bank profits are expected to yield dividend hikes at the end of the fiscal year.
The big banks are on track for a third straight year if record annual profits. The group rang up a combined profit of C$5.17 billion in fiscal 1995 ended October 31, up from C$4.25 billion a year earlier.
As for 1997, Palmer said he expects a modest increase in profits.  
""Investment banking is a cyclical business. It may tail off a bit, but there is no sign of a recession yet, so I would think we could get modestly higher earnings next year,"" he said.
Bank of Montreal is expected to report a third-quarter profit of C$0.97 per share, up from C$0.93 per share a year ago, according to figures supplied by the International Brokers Estimates Service.
Scotiabank's earnings are seen climbing to C$1 per share in the third quarter, up from C$0.86 a share.  
Toronto-Dominion Bank is expected to post a C$0.72 per share profit, up slightly from C$0.71 per share in the third quarter of 1995.
National Bank's third quarter earnings are forecast to rise to C$0.41 per share from C$0.33 a share a year earlier.
CIBC's third quarter results are pegged at C$1.42 a share compared to last year's C$1.13 per share.
Royal Bank of Canada is seen improving to C$0.96 a share in the third quarter, up from C$0.88 per share a year earlier.
-- Reuters Toronto Bureau (416) 941-8100
",6
"Protesters hit Toronto streets on Friday, paralysing rush-hour subway trains and closing businesses in Canada's biggest city to protest deep budget cuts by Ontario's Conservative government.
Underground subway and bus service ground to a halt in this city of 2.2 million people, forcing about one million commuters to walk, drive or cycle to work or stay home.
""They're picketing all over the place, so we've postponed service,"" said Marilyn Bolton, a spokeswoman for the Toronto Transit Commission.
Unionized workers, civil servants and social activists also descended on government offices and factories on this first day of the so-called ""Days of Protest.""
But picketers failed to disrupt commuter trains from Toronto's bedroom communities or interrupt service at Pearson Airport, the country's busiest.
The Toronto Stock Exchange had expected protesters to disrupt trading, but Canada's biggest stock market opened as usual.
At least one brokerage firm flew traders to its Montreal office to work, while other brokers slept in hotel rooms or in their offices overnight.
The stock exchange has been targeted for a major rally later in the day.
The protesters are furious with Premier Mike Harris' plans to cut spending by C$8 billion ($5.9 billion) to wipe out a huge deficit by the turn of the century.
Since sweeping to power in 1995 promising a right-wing revolution in Canada's most populous province, the Conservatives have revamped labour laws, slashed welfare payments, introduced workfare and announced plans to close hospitals and trim education budgets.
""These cuts that Harris made are hurting the workers. This is part of the polarisation that is happening in Ontario. The anger is going to grow and grow,"" Sid Ryan, president of the Ontario division of the Canadian Union of Public Employees, told picketers outside a government building.
But Harris, who has been dubbed ""Newt of the North"" in reference to Republican U.S. House Speaker Newt Gingrich, has vowed the protests will not stall his ""Common Sense Revolution.""
Despite the opposition to his government, the Conservatives' popularity continues to hold around 50 percent in opinion polls.
Protesters waved placards and temporarily blocked cars from entering government parking lots, but Toronto police said there were no major incidents of violence.
One man was charged with a weapons offence after allegedly threatening pickets with a baseball bat outside a bus garage. There also were skirmishes outside a postal station.
Many commuters took the delays in stride.
""I see the protesters have a point, but I think it's going to inconvenience a lot of people who don't have any other choice,"" said John Ivarey.
Several major manufacturers cancelled day shifts. De Havilland Inc., a unit of transportation firm  Bombardier Inc., said 6,200 employees at its Toronto aircraft plant will be off the job Friday.
The protest will not affect General Motors Corp.'s Canadian unit, which is getting back to work after a nearly three-week strike ended earlier this week.
",6
"Canada's six biggest banks are poised for a further round of buoyant profits when they begin reporting third-quarter earnings Tuesday, setting the stage for a third consecutive record year, analysts said.
An improved interest rate picture, higher investment banking and dealing revenues and better loan quality are expected to drive profits in the third quarter ended July 31.
On average, earnings for the so-called Big Six are expected to be 15 percent to 20 percent higher than the third quarter of last year, analysts said.
""I would expect more sectors of the banks to be more profitable than they were in the corresponding quarter of last year,"" said Roy Palmer, an analyst with TD Securities.
Bank of Montreal and Bank of Nova Scotia, Canada's third- and fourth-largest banks, respectively, kick off the earnings parade on Tuesday.
Canada's fifth-biggest bank, Toronto-Dominion Bank, and the smallest, National Bank of Canada, report on Thursday.
The country's top two banks, Royal Bank of Canada and Canadian Imperial Bank of Commerce, are scheduled to deliver their results Sept. 5.
Despite a recent downturn in financial markets, analysts said securities earnings should be stronger than last year. Canada's brokerage industry is dominated by subsidiaries of the countries major banks.
The banks are also expected to benefit from lower loan losses as the industry continues to rebound from disastrous loans in commercial real estate, which collapsed in the late 1980's.
Despite the correction in stocks earlier this summer, bank stocks have remained strong performers. Lower Canadian interest rates have helped push bank stock prices to all-time highs on the Toronto Stock Exchange.
""I think that if the combination of strong profitability couples up with lower interest rates, then it probably will set the backdrop for higher share prices,"" said Susan Cohen, an analyst with Deacon Capital Corp.
Analysts said they do not expect any of the banks to raise their dividends during the reporting period.
But the string of record bank profits are expected to yield dividend hikes at the end of the fiscal year.
The big banks are on track for a third straight year of record annual profits. The group rang up a combined profit of C$5.17 billion in fiscal 1995 ended Oct. 31, up from C$4.25 billion a year earlier.
As for 1997, Palmer said he expects a modest increase in profits.
""Investment banking is a cyclical business. It may tail off a bit, but there is no sign of a recession yet, so I would think we could get modestly higher earnings next year,"" he said.
Bank of Montreal is expected to report a third-quarter profit of 97 cents Canadian (70.8 cents) per share, up from 93 cents Canadian (67.9 cents) per share a year ago, according to figures supplied by the International Brokers Estimates Service.
Scotiabank's earnings are seen climbing to C$1 (73 cents) per share in the third quarter, up from 86 cents Canadian (62.8 cents) a share.
Toronto-Dominion Bank is expected to post a 72 cents Canadian (52.5 cents) per share profit, up slightly from 71 cents Canadian (51.8 cents) per share in the third quarter of 1995.
National Bank's third quarter earnings are forecast to rise to 41 cents Canadian (29.9 cents) per share from 33 cents (24.1 cents) Canadian a share a year earlier.
CIBC's third quarter results are pegged at C$1.42 ($1.04) a share compared to last year's C$1.13 ($82 cents) per share.
Royal Bank of Canada is seen improving to 96 cents Canadian (70 cents) a share in the third quarter, up from 88 cents Canadian (64.2 cents) per share a year earlier.
",6
"U.S. mutual fund giant Fidelity Investments said on Saturday that Canadian regulators were investigating trades made by Veronika Hirsch, the star manager of their new Canadian equity fund.
Hirsch's 27-city road show to promote Fidelity's True North fund has been postponed as a result of the regulatory review, said a spokesman for the Boston-based mutual fund company.
The tour was scheduled to begin on Monday.
""Veronika Hirsch ... was recently contacted by a regulatory agency about her personal investments before she joined Fidelity,"" Chethan Lakshman, a spokesman for Fidelity's Canadian subsidiary, Fidelity Investments Canada Ltd., said in a telephone interview.
""At this time it is appropriate to postpone the tour and we're hopeful that the regulatory review of her trading activity will result in a favorable conclusion,"" Lakshman said.
He did not identify the regulator, but Canadian newspapers reported on Saturday that the British Columbia Securities Commission was looking into the matter.
Lakshman said Hirsch was not available for interviews and he was unsure of her whereabouts.
The controversy is over Hirsch's investments in a Vancouver-based exploration firm, Oliver Gold Corp., earlier this year while she was a high-profile fund manager with AGF Management Ltd. in Toronto.
Hirsch, a flamboyant stock picker compared to her sedate peers in Canada's mutual fund industry, was hired by Fidelity with much fanfare in August after only 10 months at AGF.
Fidelity is conducting its own review of Hirsch's actions before she joined the company.
During her brief stint at AGF, Hirsch bought 65,000 special warrants of Oliver Gold for herself through a private placement in April, according to statements filed with the British Columbia Securities Commission and reported by Vancouver-based Canada Stockwatch, a newsletter which tracks Canadian stocks.
Hirsch paid C$1.53 ($1.14) per warrant.
A short time later, the AGF Growth & Income Fund managed by Hirsch bought 295,000 special warrants, according to the filings with the B.C. commission.
The AGF fund paid over double the price, C$3.60 ($2.69) per warrant, paid by Hirsch.
Another related issue is whether Hirsch used a false address in British Columbia to buy the Oliver Gold shares. Canadian newspapers have reported that the home address of a Vancouver stock analyst and institutional salesman was used.
Hirsch is a resident of Ontario and the Oliver Gold stock was only available to British Columbia residents.
AGF chief executive officer Warren Goldring has said Hirsch broke company rules by failing to report her personal investment in Oliver Gold. He added Hirsch could have been fired if AGF had known about the trades.
The controversy swirling around Hirsch has dominated the business pages of Canadian newspapers, but Lakshman said the publicity has not hurt Fidelity's efforts to build a higher profile in Canadian equities management.
""We have had a lot of great responses to the (True North) fund. It has been well-received and has grown to more than C$150 million ($112 million),"" Lakshman said.
",6
"Far from the hoopla of the U.S. presidential race, Jack Kemp's youngest son, Jimmy, has been tossing footballs on Canada's windswept prairie and relishing his relative anonymity.
To football fans in this small western Canada city, Kemp is better known as the quarterback of their beloved Saskatchewan Roughriders than the son of the American Republican vice-presidential candidate.
""It's nice to have your own identity. Up here I'm a Roughriders quarterback and not Jack Kemp's son. I'm proud of my dad, but it's great to be in Canada,"" Kemp, 25, told Reuters during a recent interview at a local sports pub.
The well-mannered, cherub-faced Kemp is finishing his third year in the Canadian Football League. He was traded to the Regina team last August after stints with the Montreal Alouettes and the now-defunct San Antonio Texans and Sacramento Gold Miners.
As the Nov. 5 election nears, Kemp said he does not get too bothered about his high-profile father. The local press has pretty much left that part of his life private.
""Kemp Just a Normal Guy,"" the Regina Leader-Post newspaper said in a story about the young quarterback when he arrived in town.
Before going to Saskatchewan, Kemp joined his family at the Republican convention in San Diego and pondered quitting football to work on his dad's campaign. But the elder Kemp, a former American Football League quarterback who tried out for the CFL's Calgary Stampeders in 1958, urged his son to continue playing.
""We prayed and talked about it and my dad wanted me to take this opportunity that has been given to me,"" said Kemp, who has since enjoyed some success with Saskatchewan.
A back-up when he arrived in Regina, Kemp was forced into the spotlight after the club's other quarterbacks fell to injuries.
Kemp had the best game of his career this month, passing for three touchdowns in a come-from-behind win against Hamilton. But the team struggled this year and failed to make the playoffs.
""I think I'm good enough to start in this league. I don't think I'm a great quarterback right now, but I need to play more and go through a training camp,"" he said.
Jack Kemp has kept a close eye on his son's football career. He flew to Canada three times this season when Jimmy played for Montreal and they talk frequently about football over the telephone.
""He's incredibly encouraging. Even to the point that it gets on my nerves sometimes because he is a very proud father and he thinks anything that I do is great,"" the younger Kemp said.
Despite living on the Canadian prairies, Kemp keeps tabs on his father's campaign. He watched the vice presdential debate on CNN and catches the programme ""This Week With David Brinkley"" before a Sunday game.
He said he did not have much faith in opinion polls that show the Bob Dole/Jack Kemp ticket lagging far behind the Democratic team of President Bill Clinton and Vice President Al Gore.
""I think people can change their minds easily and I think the support for Clinton is soft. I guess it doesn't look good, but I think they've got a chance,"" Kemp said.
Kemp does not plan to follow his father into politics, but he does not rule out getting involved at the local level.
""I'm not sure my dad was interested in politics when he was 25. My brother (Jeff) is probably more of a politican than I am, but I do care about the issues,"" he said.
",6
"Ontario Finance Minister Ernie Eves, buoyed by a stronger economy and an improving deficit outlook, said on Thursday his budget-paring knife would not cut as deep this year.
""I would say that the majority of the cost-cutting exercise this government has to do is behind us,"" Eves told reporters after delivering a fiscal update for the third quarter ended December 31.
Ontario's 1996/97 deficit is now pegged at C$7.67 billion for the year ending March 31, down C$508 million from Eves' original budget forecast. Ontario is Canada's most populous province and industrial powerhouse.
Barely four months ago, Ontario's ruling Conservatives said a further C$3 billion in spending cuts would be needed to balance the budget by the turn of the century.
Since sweeping to power in 1995 promising a ""Common Sense Revolution"", the Conservatives have identified about C$8 billion in cuts through the end of the decade.
With the economy now improving, Eves said: ""I don't feel that I am now driven to find C$3 billion in more savings.""
Canadian Imperial Bank of Commerce has predicted Ontario's economy would pick up steam this year despite government cutbacks. The economy was forecast to grow 3.1 percent this year and 2.3 percent in 1998, compared to 1.7 percent in 1996.
But Eves said the province's deficit fight was far from over and he was still seeking ""cost efficiencies"" for the upcoming 1997/98 budget this spring.
""I don't want anybody to think we don't have a problem. We still have a C$7.7 billion problem on annualized basis in the province of Ontario,"" he said.
Government revenues grew faster than projected in the third quarter, up almost C$1.2 billion to C$47.8 billion for the year. Most of the increase was due to higher than expected personal, corporate and retail sales tax revenues resulting from a stronger economy, Eves said.
He said the government's controversial 30 percent tax cut had helped boost consumer confidence in Ontario. About half of the tax reduction has been implemented, with the remaining 15 percent due by 1999.
Eves said he had not ruled out speeding up that timetable, but that the government had a lot on its plate.
Last month, the Conservatives unveiled sweeping reforms that would fundamentally alter the roles of provincial and local governments in everything from health care and social spending to road maintenance and sewage.
The most controversial move is a proposed merger of Toronto, Canada's biggest city, and five surrounding municipalities, which has drawn fierce opposition from some local politicians and businesses.
CIBC said the provincial government would better its fiscal targets after downloading services such as welfare and transit to municipalities. Toronto is a potential loser under the plan because it has a large share of the province's welfare cases.
Eves said the government would push forward with its plans and on Thursday he doubled the government's restructuring fund to C$1.8 billion.
""I think people realize we can't operate in 1997 the way we operated in 1957 in the province of Ontario. There is a transition and that transition costs money,"" he said.
",6
"Canada's financial markets gave an approving nod to Finance Minister Paul Martin's stay-the-course 1997/98 budget on Tuesday, with some analysts expecting a modest rally on Wednesday.
In what is expected to be an election year, the Liberal government said it will maintain pressure on the deficit while offering minor tax cuts and new spending.
Economists said Martin's assumptions on interest rates and economic growth were prudent and should enable the government to beat its fiscal targets.
""What you're going to see tomorrow? A flow of funds into the Canadian dollar briefly, quite possibly the bond market, quite possibly the stock market,"" said Bob Boaz, director of research for HSBC James Capel Canada Inc.
But analysts predicted the markets would settle down quickly as most of the budget details were widely expected.
""There was no big news in this budget. But he (Martin) didn't relax his fiscal resolve and that will be well received by the markets,"" said John Anania, an economist at Royal Bank of Canada, the country's biggest bank.
The budget had little immediate impact on the Canadian dollar, but currency traders said they expect the unit to strengthen overnight on Martin's favorable deficit targets.
Martin predicted the deficit for 1996/97 would be no more that C$19 billion, compared to a projected C$24.3 billion. The deficit is seen falling to C$17 billion in 1997/98.
In early evening trading, the Canadian dollar firmed slightly to C$1.3534 (US$0.7388) from closing levels at C$1.3546 (US$0.7382).
""We expect the Canadian dollar to appreciate overnight as a result of the positive budget,"" said John Nicholson, managing director of Scotia Capital Markets.
Canadian bonds strengthened shortly after the budget's release as the market welcomed news of only modest new spending initatives.
Some bond analysts expressed concern that Martin did not set a target for balancing the country's books, but overall they expected a neutral reaction to the budget on Wednesday.
""He's made some extremely conservative assumptions, we believe, with interest rates and growth that lead us to conclude he will continue to outperform his own targets,"" said Hank Cunningham, director of fixed income with First Marathon Securities.
The budget is expected to be well received on Canada's biggest stock market on Wednesday, after the Toronto Stock Exchange enjoyed record gains on Tuesday, analysts said.
Before the budget's release, the TSE's key 300 index posted its ninth record close of 1997, up 20 points to 6238.22. Trading was heavy with turnover of 138.4 million shares worth C$2.52 billion, the TSE's second highest value ever.
Martin did not impose new corporate, personal or excise tax increases, but the government did extend a special capital tax on Canada's big banks for another year.
",6
"Canada's cash-strapped public broadcaster, the CBC, cut almost 1,000 jobs on Wednesday in an overhaul that might eventually include on-air fund-raising drives and corporate sponsorships.
The Canadian Broadcasting Corp. -- faced with a C$414 million ($304 million) reduction in government subsidies -- told 996 employees that they would be laid off.
The layoff notices were part of a plan announced in September to scrap 2,400 jobs through layoffs, voluntary departures and the elimination of vacant positions.
The CBC also set a target of 800 job cuts in 1998.
""Without doubt, the next few months will be tough. However, we have some sense that on the financial front the worst may be over,"" Jim Byrd, vice-president of CBC English television, said in a letter to employees.
The CBC, which provides television and radio services in English and French, previously announced other measures to pare more than a third from its C$1.4 billion ($1.02 billion) budget by 1998.
The Canadian government contributed almost two-thirds of the CBC budget in the past, but the government's huge budget deficit forced deep cuts in funding for the CBC.
CBC unions said the job cuts would result in an inferior product for Canadian taxpayers.
""There's shock. There's anger. These are people with hundreds of years of experience who will walk out the door and never come back again,"" said Dan Oldfield, a spokesman for the Canadian Media Guild, which represents 3,000 CBC workers.
On Monday, the CBC said Radio Canada International -- Canada's voice to the world -- would close next March due to a lack of government funding.
To offset shrinking federal subsidies, CBC President Perrin Beatty said earlier this week that the broadcaster may use on-air fund-raising drives and corporate sponsorships.
Beatty recently visited the New York-based U.S. public television network PBS, which holds fund-raising campaigns and receives millions of dollars from Canadian viewers.
""It's something that is under discussion as we speak,"" said CBC spoksman Tom Curzon, adding that the CBC board had not made a final decision.
To boost revenues and ratings, the CBC relied on popular U.S. television shows and major sporting events in recent years. But some CBC purists complained that the broadcaster had forsaken its mandate to promote and protect Canada's identity from the U.S. cultural behemoth.
In September, Beatty said CBC would return to its Canadian roots by eliminating U.S. shows from prime time and day-time schedules by 1998.
Canadians will also see more advertisements on the CBC, including commercials for the first time on its flagship evening news show, the National.
",6
"The Toronto Stock Exchange's key 300 Index reached its 50th record close of 1996 on Thursday and broke the 5600 barrier for the first time.
The TSE 300 Composite Index rose 8.01 points to close at 5598.82, surpassing a streak of 45 record finishes in 1987.
The Index also breached the 5600 barrier, setting an intraday high of 5601.88.
""It's just another record in a string of more to come. This won't be the last,"" said Fred Ketchen, senior vice-president and director of equity trading for ScotiaMcLeod Inc, a unit of Bank of Nova Scotia.
Toronto's record-setting run was led by banking, communications, conglomerates and technology issues. Of the TSE's 14 sub-groups, 10 finished higher.
The rally was restrained by 162-point loss in golds.
Trading was brisk with 113.8 million shares exchanging hands for a value of C$1.6 billion ($1.2 billion).
Advancing stocks outnumbered declines 538 to 434 with 294 issues unchanged.
Traditionally, October has been a scary month for investors who remember the massive crash of 1987.
""This is the time when everything is supposed to fall apart, but it has been a rather strong month,"" Ketchen said.
* Bank of Nova Scotia and Royal Bank of Canada set all-time highs as the bank group continued their climb since summer. Scotiabank closed up 0.45 at 42.25 after reaching a 52-week high of 42.40. Royal Bank added 0.60 to close at 44.30 after hitting a 52-week peak of 44.40.
* Among weak gold issues, Barrick Gold Corp fell 0.50 to 35.10 on 1.5 million shares. COMEX gold futures slumped for a second straight session on Thursday.
* Molson Cos Ltd jumped 0.40 to 20.50 after its brewing unit, Molson Breweries, reached an interim deal with U.S. beermaker Adolph Coors Co on the sale of Coors beer in Canada.
An arbitration panel two weeks ago ruled that Molson Breweries breached its licensing deal by allowing Miller Brewing Co., a unit of Philip Morris Cos Inc, to buy a 20 percent stake without Coors' consent in 1993.
",6
"The Canadian Football League is set to hold what many fear may be its last Grey Cup championship on Sunday after a chaotic, money-losing season.
The championship between the Toronto Argonauts -- led by former Boston College star quarterback Doug Flutie -- and the Edmonton Eskimos, is the 84th league title game.
But some wonder if there will be a Grey Cup next year.
Despite returning to its Canadian roots this year after a failed U.S. expansion, the CFL is dripping red ink. All but one of its nine clubs will lose money, due to small crowds and cash bailouts to keep teams in Ottawa, Montreal and Vancouver afloat during the 1996 season.
The 120-year-old Ottawa Rough Riders franchise folded earlier this month at the end of the regular season.
So precarious are the league's finances that the cash-strapped Eskimos could not afford to fly players' wives to the Grey Cup game in Hamilton, Ontario, 42 miles (68 km) southwest of Toronto.
""The LAST Grey Cup?"" asked the Toronto Star, Canada's biggest newspaper, in a front page story on Friday.
Some say the CFL needs the bigger and richer National Football League to survive.
CFL Commissioner Larry Smith said he is interested in ""building a relationship"" with the NFL, but that the CFL will not become a Triple A minor league.
""I have no interest in a farm system. If we could have some developmental relationships like we've done in the past with guys like Warren Moon and Joe Theismann, then that would be great,"" Smith said in a telephone interview.
Moon and Theismann were star CFL quarterbacks in the 1970s and 1980s before jumping to the NFL.
""What we have been doing is exploring some ideas on ways we could possibly work together. But we have not reached an agreement on anything at this point,"" said Greg Aiello, director of communications for the NFL.
CFL purists fear closer ties with the NFL would threaten the distinctiveness of Canadian-style football.
Canada's game closely resembles the U.S. brand, but there are a few key differences. The playing field is longer and wider. Canadian teams get only three downs instead of four to gain 10 yards and keep possession of the ball.
There are 12 players a side compared to 11, and single points are awarded for missed field goals not run out of the end zone.
Football writer and former CFL player Frank Cosentino said the NFL could help pay the salaries of developing players, but that closer ties could alienate the CFL's remaining followers.
But fans already appear to have turned off the CFL.
Average attendance slipped to 22,095 this year from 24,400 in 1995, despite a slick new ""Radically Canadian"" marketing campaign trumpeting the league's Canadian heritage.
In major markets such as Toronto and Vancouver, the league is considered second-rate.
A 1995 pre-season NFL game between the Dallas Cowboys and Buffalo Bills in Toronto drew about 60,000 fans. This year, the Argonauts, despite the league's best record of 15-3, averaged just 20,400 fans.
Unless there is a late surge in ticket sales, the Grey Cup game will fall short of a sell-out. ""The way it looks now we may have about 36,000. We have capacity for about 40,000,"" organiser Matthew Moreland said on Friday.
It is a far cry from the 1950s and 1960s when the CFL attracted huge crowds and players such as Ron Lancaster, Joe Kapp, Angelo Mosca and Sam Etcheverry were household names.
Players now rarely stay long enough to become known by fans. Poor marketing has also left the CFL far behind other sports in the race for the public's entertainment dollars.
In a bid to save the league, Smith has proposed a restructuring plan to cut costs. All clubs have until January to secure enough season-ticket sales to operate next year.
Smith is confident there will be eight teams next year, but he said the CFL was prepared to operate with fewer.
There will likely be no football in Ottawa, next year after the league revoked the franchise in Canada's capital from Chicago businessman Horn Chen.
The future is also cloudy for the Montreal Alouettes -- who won the Grey Cup last year as the Baltimore Stallions, but lured few fans this season -- and the British Columbia Lions, who are in receivership.
",6
"Veronika Hirsch, a flamboyant Canadian stock picker whose high-profile move to Fidelity Investments was marred by controversy, parted with the Boston-based fund company on Tuesday.
""We've concluded the discussions and Fidelity wishes Ms. Hirsch well in her future endeavours,"" Fidelity spokesman Chethan Lakshman said in a telephone interview.
Hirsch was a star fund manager hired last summer to spearhead Fidelity's drive to dominate the Canadian market.
But Canada's so-called ""Fund Diva"" was removed from her portfolio in November amid a controversy over personal trades she made before joining the world's biggest mutual fund company.
Lakshman did not give details of the agreement with Hirsch, who has kept a low profile since her investments in a small Vancouver company, Oliver Gold Corp., grabbed headlines and the attention of regulators last November.
Hirsch's lawyer, Tom Lockwood, said on Tuesday that she is weighing her options, including offers to go on the lecture circuit or write a book.
""There's private money management prospects and there are mutual fund prospects. There have been a number of approaches made and she's considering what she will do next,"" he said.
At issue was Hirsch's purchase of 65,000 special warrants of Oliver Gold through a private placement while she was a fund manager with AGF Management Ltd. in Toronto.
Shortly after the warrant purchase, Hirsch's AGF Growth & Income Fund bought 295,000 special warrants of Oliver Gold at more than double the price paid by Hirsch, according to filings with the British Columbia Securities Commission and reported by Stockwatch, a Canadian investment publication.
Fidelity removed Hirsch from her True North Equity Fund last November after Canadian securities regulators confirmed her personal investments were under investigation.
The dramatic move came barely three months after Fidelity poached Hirsch from AGF to lead its expansion drive in Canada where it ranks ninth with C$8.2 billion ($6.1 billion) in assets.
Canadians have more than C$211 billion ($156 billion) stashed in mutual funds, an eight-fold increase from 1990. An estimated C$23 billion ($17 billion) will be added to the pot this year, analysts forecast.
While at AGF, Hirch was the focus of a multi-million dollar advertising campaign which made her Canada's top celebrity fund manager.
When Hirsch jumped to Fidelity, her leather outfits and blood-red nails appeared an uncomfortable fit with Fidelity's ultra-conservative culture, but the hiring was considered a major coup within the industry.
Hirsch's old True North fund is now under a less flamboyant manager and has accumulated C$280 million ($208 million) in assets since its launch last September.
While analysts have said it is difficult to assess the damage to Fidelity's expansion drive, the Hirsch affair has changed how fund companies sell their product.
Brash campaigns built around high-profile stock pickers are out and the ""team"" is in, analysts said.
",6
"Shares in Canadian brewing and sports firm Molson Cos. Ltd. sank on Monday after its Molson Breweries unit lost the rights to brew Coors Light, Canada's top-selling light beer, in a dispute with Adolph Coors Co..
Investors pounded Molson's stock after an arbitration panel ruled late Friday that Molson reliquished its right to brew and sell Coors products in April 1993 when Miller Brewing Co. acquired a stake in the Canadian brewer.
Molson class A stock closed down C$0.75 at C$20.15 on the Toronto Stock Exchange after earlier sinking to C$19.50, just shy of its 52-week low.
""It was a pretty severe ruling and I think it surprised Molson, surprised Coors and, frankly, surprised the street,"" said Mike Palmer, an analyst with Loewen, Ondaatje, McCutcheon Ltd.
The panel said Molson breached its licensing agreement with Coors by allowing Miller, a unit of Philip Morris Cos. Inc., to buy a 20 percent stake without Coors' consent.
Molson Breweries is also owned 40 percent each by Molson Cos and Australia's Foster's Brewing Group Ltd..
The panel ordered Molson to pay Coors all the profits it earned from selling Coors beer since 1993, an amount that has yet to be determined.
Coors brands produced by Molson -- Coors Light and Original Coors -- account for 8 percent of its sales volume. Coors Light is the dominant light beer in Canada, commanding a 5 to 5.5 percent share of the beer market.
Analysts said Molson can ill afford to lose a profitable brand as it battles rival Labatt Brewing Co. Ltd. in a domestic beer market that has been flat for several years.
""You start losing volume and it has a significant impact on your profits. It's very important to Molson to negotiate a deal with Coors,"" said Palmer.
While Molson officials said they are willing to negotiate a new licensing agreement, Coors was keeping its options open.
""What we need to do is go through the panel's ruling and understand all of the aspects of the ruling and then analyse what our options are,"" said Coors spokesman Jon Goldman.
He declined to outline Coors' options for the Canadian market. But analysts speculated that Coors could cut a richer deal with Molson, ship product directly to Canada or buy a local brewer to produce Coors in Canada.
""The easiest option is to negotiate a deal with Molson. They've had a big win here so it's time to kiss and make up,"" said Palmer.
If there is a new deal, Coors will likely seek more control over its brands and higher royalties from Molson, said Barry Joslin, Molson's vice-president of corporate affairs.
If Molson cannot negotiate a new licensing agreement, Joslin said the brewer would consider its options, including launching a new light brand.
",6
"Two major shareholders in Canada's Altamira Management Ltd. have set a mid-December deadline to resume their court action to block a C$660 million takeover bid by Manufacturers Life Insurance Co. Ltd. if negotiations to settle the dispute fail.
""The preference is to resolve this as quickly as possible,"" said Rick Leckner, a spokesman for Almiria Capital Corp. which owns 30.5 percent of Altamira.
""If it has to come to that (a court battle) -- sad as it may be -- it still has to be considered. But the ideal solution is a negotiated one,"" he said in a telephone interview.
Toronto-based Manulife, Canada's biggest insurance company, has offered C$32 a share for Altamira, the country's 12-largest mutual fund company.
The battle for Altamira took a surprising twist on Wednesday when U.S. investment firm T.A. Associates Inc. launched a rival C$38 a share, or C$767 million, bid for the Canadian mutual fund company.
Manulife already owns 30.5 percent of Altamira and has the support of a group of 40 Altamira fund managers who are shareholders of Altamira.
But the bid is opposed as too low by Montreal-based Almiria and a group led by Altamira Chairman Ron Meade which holds about 11 percent of Altamira.
The lawsuit launched by Almiria and Meade's group Tuesday was scheduled to proceed Wednesday in an Ontario court. But the feuding parties agreed to try and negotiate a settlement.
Leckner said on Thursday that those talks have not yet begun. The court action is set to resume on December 18.
T.A. Associates is one of the largest private equity investors in the United States.
""We believe that our proposed transaction serves the purposes of all of the parties, and, more importantly, is in the long-term best interests of the unitholders of the Altamira funds,"" Andrews McLane, T.A. Associates' manager director, said in a letter to Altamira shareholders on Wednesday.
He said the offer was made on behalf of private equity partnerships managed by the Boston firm and other institutional investors.
Under the terms of the offer, Manulife would have to agree to release the group of employee shareholders from a promise to tender their shares to its offer.
""We do not believe that this highly tentative proposal justifies any delay in implementation of the transaction we have agreed upon,"" Manulife said in a statement on Wednesday.
Altamira manages Canada's biggest no-load mutual fund with about C$6.2 billion in mutual fund assets.
Manulife is the country's largest insurance company with about C$50 billion in assets.
-- Reuters Toronto Bureau (416) 941-8100
",6
"Bank of Montreal, Canada's third biggest bank, said Tuesday annual profits soared past C$1 billion ($750 million) as it kicked off the fourth-quarter earnings reporting season for the country's largest banks.
The Toronto-based bank, which has operations in Canada, the United States and Mexico, said net income jumped 18.4 percent to C$1.17 billion ($873 million) in the year ended Oct. 31. The bank's return on equity, a key measure of profitability, rose to 17 percent from 15.4 percent last year.
""These results represent the seventh consecutive year of record earnings and the seventh consecutive year return on equity was over 14 percent,"" Chairman Matthew Barrett said in a statement.
Bank of Montreal is the third bank to break through the C$1 billion threshold in recent years, following the Royal Bank of Canada and Canadian Imperial Bank of Commerce.
The bank attributed the record earnings to higher fees, volume growth in Canada and the United States and the impact of acquiring a 16 percent stake in Mexico's Grupo Financiero Bancomer SA de CV.
About 47 percent of the Bank of Montreal's total income came from operations outside of Canada in fiscal 1996.
Net income from its U.S. operations, where the bank owns Chicago-based Harris Bankcorp Inc., rose 6 percent to C$390 million ($291 million).
Earnings from Mexico rose 4 percent to C$57 million ($42 million). Other international businesses contributed C$102 million ($76 million) to the bank's bottom line, up 1 percent from 1995.
Speaking to reporters, Barrett said the bank should meet or exceed 10 percent growth in annual earnings per share going forward.
""There is sufficient counter cyclicality built into the range of businesses and range of geographies that we're operating in now that we continue to feel that we would be able to maintain that 10 percent EPS growth or better in the years ahead,"" Barrett said.
The bank's earnings were generally in line with estimates.
Fourth quarter earnings rose to C$1.04 (77 cents) a share from 93 cents (69 cents) in the same period in 1995.
""They were a little weaker than what I was looking for, but pretty much in line for intents and purposes,"" said Kevin Choquette, an analyst with Levesque Beaubien Geoffrion Inc.
Choquette had forecast fourth quarter earnings of C$1.06 (79 cents) a share.
Improved credit quality also contributed to the bank's strong performance. It's provision for credit losses fell to C$225 million ($168 million) in 1996 from C$275 million ($205 million) in 1995.
Barrett told reporters that the bank will plan for a credit loss provision of C$275 million in 1997.
""We'll stick with that until we are six months into the year and see how the credit cycle shakes out,"" he said.
Bank of Montreal's stock closed down C$0.45 (33 cents) to C$44.20 (33 cents) in heavy turnover of 1.5 million shares on the Toronto Stock Exchange.
The recent rally in Canadian bank stocks pushed Bank of Montreal's return on investment up 42.4 percent in 1996, compared to a 24-percent gain last year.
Despite today's weakness in Bank of Montreal shares, the TSE's banks and trusts index climbed 14 points to a new high of 6164.60.
",6
"Royal Bank of Canada, Canada's biggest bank, rolled up a record annual profit Wednesday and surprised shareholders with a dividend hike.
The Toronto-based bank said net income jumped to C$1.43 billion ($1.05 billion) in the year ended Oct. 31, up from C$1.26 billion ($931 million) in 1995.
Royal Bank also boosted its quarterly dividend by C3 cents (2 cents) to C37 cents (27 cents) a share -- the third increase in the past 15 months. It was the third Canadian bank to raise its dividend in the current earnings reporting season.
Royal Bank was the fourth of Canada's Big Six banks to post a third straight year of record profits.
Results from Canadian Imperial Bank of Commerce and National Bank of Canada, which are due Thursday, were expected to push the group's earnings past the C$6 billion level ($4.4 billion), up from last year's record C$5.2 billion ($3.8 billion).
""We're announcing strong results ... and this dividend increase is evidence of our commitment to rewarding shareholders and enhancing shareholder value,"" Royal Bank Chairman John Cleghorn said in a statement.
Higher asset volumes, lower credit losses and strong performances from wealth management and investment banking fattened Royal Bank's bottom line.
The bank's brokerage arm, RBC Dominion Securities Ltd., turned in a record year due to strong financial markets.
Royal Bank's credit quality also continued to improve. The provision for credit losses fell C$140 million ($103 million) to C$440 million ($325 million) in 1996 and was expected to fall more in 1997.
Return on equity, a key measure of profitability, rose 1 percentage point to 17.6 percent in 1996.
Royal Bank's fourth-quarter earnings were slightly better than the average of analysts' estimates.
Earnings rose to C$1.09 (80 cents) a share in the fourth quarter from C90 cents (66 cents) in the same period in 1995. The consensus forecast from analysts was about C$1.04 (77 cents) a share.
Royal Bank's dividend increase surprised some analysts who expected the bank to wait until early next year.
The bank is in the middle of a massive share buyback that analysts said had become expensive due to the recent surge in Canadian bank stocks.
""It (the dividend hike) is rather surprising. Maybe they won't be going as far with the buyback and this is compensation,"" said Roy Palmer, a banking analyst with investment dealer TD Securities Inc.
Despite the buoyant results, Royal Bank's stock fell along with a sagging Toronto Stock Exchange Wednesday. The bank's shares were off C65 cents (48 cents) at C$48.25 ($35.68) in late trading.
",6
"Protesters hit Toronto streets on Friday, paralyzing rush-hour subway trains and closing businesses in Canada's biggest city to protest deep budget cuts by Ontario's Conservative government.
Underground subway and bus service ground to a halt in this city of 2.2 million people, forcing about one million commuters to walk, drive or cycle to work or stay home.
""They're picketing all over the place, so we've postponed service,"" Marilyn Bolton, a spokesperson for the Toronto Transit Commission said in a telephone interview.
Unionized workers, civil servants and social activists also descended on government offices and factories on this first day of the so-called ""Days of Protest.""
But picketers failed to disrupt commuter trains from Toronto's bedroom communities or interrupt service at Pearson Airport, the country's busiest airport.
The Toronto Stock Exchange had expected protesters to disrupt trading, but Canada's biggest stock market opened as usual.
At least one brokerage firm flew traders to its Montreal office to work today, while other brokers slept in hotel rooms or in their offices overnight.
The stock exchange has been targeted for a major rally later today.
The protesters are furious with Premier Mike Harris' plans to cut spending by C$8 billion ($5.9 billion) to wipe out a huge deficit by the turn of the century.
Since sweeping to power in 1995 promising a right-wing revolution in Canada's most populous province, the Conservatives have revamped labor laws, slashed welfare payments, introduced workfare and announced plans to close hospitals and trim education budgets.
""These cuts that Harris made are hurting the workers. This is part of the polarization that is happening in Ontario. The anger is going to grow and grow,"" Sid Ryan, president of the Ontario division of the Canadian Union of Public Employees, told picketers outside a government building.
But Harris, who has been dubbed ""Newt of the North"" in reference to Republican U.S. House Speaker Newt Gingrich, has vowed the protests will not stall his ""Common Sense Revolution.""
Despite the opposition to his government, the Conservatives' popularity continues to hold around 50 percent in opinion polls.
Protesters waved placards and temporarily blocked cars from entering government parking lots, but Toronto police said there were no major incidents of violence.
One man was charged with a weapons offence after allegedly threatening pickets with a baseball bat outside a bus garage. There also were skirmishes outside a postal station.
Many commuters took the delays in stride.
""I see the protesters have a point, but I think it's going to inconvenience a lot of people who don't have any other choice,"" said John Ivarey.
Meanwhile, several major manufacturers canceled day shifts. De Havilland Inc., a unit of transportation firm  Bombardier Inc., said 6,200 employees at its Toronto aircraft plant will be off the job Friday.
The protest will not affect General Motors Corp.'s Canadian unit, which is getting back to work after a nearly three-week strike ended earlier this week.
",6
"The battle for Canada's Altamira Management Ltd. took a surprising twist on Wednesday when U.S. investment firm T.A. Associates Inc. launched a rival C$767 million ($572 million) bid for Canada's 12th-largest mutual fund company.
Boston-based T.A. Associates said it is offering C$38 ($28) per share for Altamira, which is also the target of a C$32 ($24) a share bid from Manufacturers Life Insurance Co. Ltd. of Toronto.
The competing offer came as two major Altamira shareholders prepared to go to court to block Manulife's C$660 million ($492 million) takeover bid for Altamira. The legal action was postponed on Wednesday after the feuding parties agreed to try to negotiate a settlement.
The shareholders, who together control 41.5 percent of Altamira, have said Manufacturers Life's offer is too low and that they were negotiating with another potential bidder.
T.A. Associates, which emerged as the mystery bidder Wednesday, is one of the largest private equity investors in the United States.
""We believe that our proposed transaction serves the purposes of all of the parties, and, more importantly, is in the long-term best interests of the unitholders of the Altamira funds,"" Andrews McLane, T.A. Associates' manager director, said in a letter to Altamira shareholders.
He said the offer was made on behalf of private equity partnerships managed by the Boston firm and other institutional investors.
Under the terms of the offer, Manulife would have to agree to release a group of employee shareholders from a promise to tender their shares to its offer.
Manulife already owns 30.5 percent of Altamira and has the support of a group of 40 Altamira fund managers and employees.
""We do not believe that this highly tentative proposal justifies any delay in implementation of the transaction we have agreed upon,"" Manulife said in a statement.
The bid is fiercely opposed by Montreal-based Almiria Capital Corp., which owns another 30.5 percent slice of Altamira, and a group led by Altamira Chairman Ron Meade.
The lawsuit launched by Almiria and the management group Tuesday was scheduled to proceed Wednesday in an Ontario court. But the court action was postponed after a last-minute accord by all parties to try to negotiate a settlement.
""The parties reached an agreement to proceed as quickly as possible to a final determination of the issues and all parties intend that Altamira will continue its business in the ordinary course,"" a joint statement said.
Manulife spokesperson Nancy Evans said there was no connection between the agreement and the appearance of T.A. Associates' rival offer for Altamira.
Altamira manages Canada's biggest no-load mutual fund with about C$6.2 billion ($4.6 billion) in mutual fund assets.
Manulife is the country's largest insurance company with about C$50 billion ($37 billion) in assets.
",6
"Toronto stocks soared to new heights on Wednesday, powered by a rally in bank shares as foreign investors stampeded into Canada's financial markets, lured by falling interest rates and a recovering Canadian economy.
Shares in Canada's big six banks hit 52-week highs on the Toronto Stock Exchange, propelling the country's biggest stock market to its 53rd record close of 1996.
The Canadian dollar has also surged this week, hitting its strongest level since October 30, 1995.
Declining interest rates, low inflation and falling budget deficits have combined to make Canada the flavor of the month, economists said.
""Overall, foreign investors have just become enamored with Canada as a place for investment,"" Michael Gregory, an economist with Lehman Brothers, said in a telephone interview.
The Toronto Stock Exchange jumped 85 points to close around 5749, fueled by brisk action in interest-rate sensitive issues such as banks and utilities.
The key 300 Index has gained more than 20 percent this year, compared to about 19 percent for the Dow Jones Average and 16 percent for the Standard & Poors 500.
The Bank of Canada is expected to ease interest rates again as early as this week. The central bank has cut rates 19 times since May 1995 in a bid to revive a sluggish economy.
Bank of Canada Governor Gordon Thiessen said on Wednesday that Canada's improving economy gives the central bank more latitude to set Canadian rates independent of U.S. rates.
He added Canada is now in a better position to withstand a hike in U.S. rates than it has been in recent years.
""The economic outlook is favorable. We will soon see signs of the payoff for the difficult restructuring decisions taken in both the private and public sectors,"" Thiessen said.
After several years of belt tightening, Canadian governments have either balanced their budgets or are on track to wipe out huge deficits.
Canada's 1.2 percent inflation rate is one of the lowest in the world and less than half the U.S. rate.
Several Canadian banks cut residential mortgage rates on Wednesday to levels not seen in about three decades.
Gregory said he expected Canada to continue to outperform the United States on the rate front and that offshore investors recognized that. ""I think investors are coming to terms with the fact that Canadian interest rates -- because of low inflation and improving currency prospects -- should be below U.S. rates,"" he said.
""Many investors are jumping on that and the Canadian dollar is undervalued. It's cheap,"" Gregory said.
The Canadian currency closed around C$1.3312 (US$0.7512) on Wednesday after trading around C$1.3300 earlier in the session. The dollar broke through C$1.3300 on Tuesday, its strongest level since October 1995.
In stocks, the country's big six banks have been big beneficiaries of favorable interest rates and the overseas scramble to buy Canadian stocks.
The TSE's financial services group jumped 2.5 percent on Wednesday after soaring three percent on Tuesday. The sector has gained nearly 1,400 points since September.
Declining interest rates make bank lending more profitable and bank dividends more attractive for investors.
Soaring bank profits have also lured investors. The major banks report their year-end results in a few weeks and are on track for a third straight year of record profits.
Recent listings on the New York Stock Exchange have given Canadian banks a higher profile in the United States where they are considered cheap compared to U.S. bank stocks.
New York-based Morgan Stanley issued a bullish recommendation on two Canadian banks on Tuesday and predicted a strong fourth quarter for the entire group.
",6
"Anti-government protests swept across Canada's biggest city Friday as demonstrators in Toronto shut down the transit system, disrupted businesses and tried to break into the Toronto Stock Exchange.
Thousands of union workers, civil servants and other citizens descended on government offices, transit stations and factories across the city, organisers said.
Over 1 million commuters stayed at home, walked, drove or cycled to work after the city's subway and bus services were shutdown, officials estimated. City officials said transit services would resume early Saturday.
But picketers did not disrupt commuter trains from Toronto's bedroom communities or interrupt service at Pearson Airport, the country's busiest. Instead of the traffic jams on the city expressways which had been expected, ""It was like a Sunday afternoon,"" one city official said.
Toronto police said there were no major acts of violence, though a few people were arrested, mostly for misconduct.
The so-called Days of Protest was organised by labour unions to protest deep budget cuts by Ontario's Conservative government affecting many of this city of 2.2 million people.
Some critics said the protest did not succeed.
""Today's protest was a flop. Yes. They inconvenienced a lot of people, but they failed to shut down the city,"" said Colin Brown of Ontarians for Responsible Government, a right-wing lobby group.
""Hundreds of thousands of people didn't come to work and that is what counts,"" said Aleda O'Connor, a spokeswoman for the organisers.
Ironically, the labour unrest came after Fortune magazine called Toronto the city with the world's best quality of life.
Most of the protests were peaceful, but hundreds of demonstrators tried to smash into the Toronto Stock Exchange, a symbol of the business community that has supported the government's tough fiscal policies.
Protesters chanted, ""Shut it down, shut it down,"" as they pounded on the glass doors of Canada's biggest stock market. One man wearing a mask and combat fatigues was seen hurling himself against the doors.
Riot police were moved into the vicinity of stock exchange, but did not intervene. Rally organisers later moved the raucous group away from the doors of the exchange.
""We've come to the place where the real power is ... They get their power and strength from inside this building,"" Jim Stanford, an economist for the Canadian Auto Workers, told hundreds of protesters outside the exchange.
In the days leading up to the protest, a siege mentality gripped Toronto's Bay Street, the heart of Canada's financial community.
At least one brokerage firm flew traders to its offices in New York and Montreal, while other brokers slept in hotel rooms or in their offices overnight.
Other companies, including the Globe and Mail newspaper, hired boats to ferry employees across Lake Ontario from nearby communities.
The demonstrators expressed fury at Ontario Premier Mike Harris' plans to cut spending by C$8 billion ($5.9 billion) to wipe out a big budget deficit by the turn of the century.
Since coming to power in 1995 on the promise of a right-wing revolution in Canada's most populous province, the Conservatives have revamped labour laws, slashed welfare payments and required recipients to work, and announced plans to close hospitals and cut education budgets.
""These cuts that Harris made are hurting the workers. This is part of the polarisation that is happening in Ontario. The anger is going to grow and grow,"" Syd Ryan, president of the Ontario division of the Canadian Union of Public Employees, told picketers outside a government building.
Harris, who has been dubbed ""Newt of the North"" in reference to Republican U.S. House Speaker Newt Gingrich, has vowed the protests will not stall his ""Common Sense Revolution.""
""Will they discourage us from creating more jobs? No. Discourage us from workfare? No. That's what we were elected to do and I don't expect that most of the public want us to change from that agenda,"" Harris told reporters.
The Conservatives, who hold their annual convention in Toronto this weekend, have seen their popularity hold at about 50 percent in recent opinion polls.
Many commuters took the delays in stride.
""I see the protesters have a point, but I think it's going to inconvenience a lot of people who don't have any other choice,"" said John Ivarey.
Police said one man was charged with a weapons offence after allegedly threatening picketers with a baseball bat and five protesters were charged with public mischief.
Several major manufacturers cancelled day shifts. De Havilland Inc., a unit of transportation firm Bombardier Inc., said 6,200 employees at its Toronto aircraft plant would be off the job Friday.
Other companies that closed Toronto operations included school bus operator Laidlaw Transit Inc., auto parts firm A.G. Simpson Co. Ltd., and candy maker Nestle Canada Inc.
",6
"Canada's major banks, still smarting from last year's bank-bashing budget, are hoping for no major surprises and perhaps some tax relief from Finance Minister Paul Martin next week.
Last year, Martin stunned the banks when he rejected their bid for expanded powers in insurance. He also extended a controversial capital tax on the banks for another year.
In the run up to next Tuesday's 1997/98 budget, bankers have lobbied for a lighter tax burden which, they argue, is among the heaviest in corporate Canada.
""We feel the banks are paying more than their fair share of taxes. Particularly our concern is capital taxes,"" said Mark Weseluck, vice-president of banking operations for the Canadian Bankers Association.
The Big Six banks -- Royal Bank of Canada, Canadian Imperial Bank of Commerce, Bank of Montreal, Bank of Nova Scotia, Toronto-Dominion Bank and National Bank of Canada -- have rung up record profits in the past three years.
The group earned a combined C$6.26 billion in 1996, up 21 percent from the previous year. The banks are expected to report strong first-quarter results later this month.
At their annual meetings this year, bankers stressed they paid record taxes of more than C$5.5 billion in 1996.
But social activists argue the banks should pay more tax on what they call ""excessive"" profits.
In its ""alternative"" budget released this week, the Canadian Centre for Policy Alternatives urged Martin to impose an ""excess profits"" tax on the banks and other financial institutions totaling C$496 million in 1997/98.
Other groups want Martin to use the existing 12 percent capital tax to encourage small business lending -- an area in which the banks have been criticized for not doing enough.
In Ontario -- where five of the six major banks are based -- the Conservative government hit the banks with a 10 percent capital tax surcharge in last spring's budget.
The banks can eliminate some or all of the tax if they invest more in small business between now and the end of 1999. Ontario Finance officials said it was too early to measure the program's performance, but several major banks unveiled small business loan programs in recent months.
Weseluck said the Ontario tax had little to do with those announcements. ""The problem when you do this is that taxation gets less efficient the more they are used to boost investment in a certain part of the market which the banks are doing extensively anyway,"" he said.
Analysts doubted Martin would do any major tinkering on bank taxes next week.
""I don't expect any new additional taxes and I doubt if there is any tax relief. The only possible source of tax relief is that the government would not extend this capital tax,"" said Nesbitt Burns analyst Hugh Brown.
With bank bashing a popular sport among Canadian voters, Martin may be loathe to give the banks a tax break in what is shaping up to be an election year, analysts said.
Adding to this year's budget boredom is the absence of last year's noisy battle between the banks and insurers.
Martin shocked the banks when he slammed the door on their bid for broader insurance powers and pre-empted a government white paper on financial reforms, which was several months away from being released.
Martin has set up a task force to study those and other competition issues, including whether major banks should be allowed to merge. But reforms recommended by the task force are not expected to take effect until 2000.
((Reuters Toronto Bureau 416-941-8100))
",6
"The Canadian Football League began searching for a new leader on Wednesday after CFL commissioner Larry Smith resigned following a chaotic, money-losing season.
Smith, 45, said he will not seek a second term as commissioner when his five-year contract expires on April 1, 1997.
""I am proud to have had the opportunity to work with the CFL, but feel it's time that someone with new ideas and energy be given the opportunity of taking this league into the next millennium,"" Smith said in a statement released by the league.
His departure comes as many fans wonder if the embattled league will survive at all.
Despite an exciting Grey Cup championship game won by the Toronto Argonauts last month, the CFL is dripping red ink.
All but one of its nine clubs lost money this year, due to small crowds and cash bailouts to keep teams in Ottawa, Montreal and Vancouver afloat during the 1996 season.
The 120-year-old Ottawa Rough Riders franchise folded last month at the end of the regular season. The future is also cloudy for the Montreal Alouettes -- who won the Grey Cup last year as the Baltimore Stallions, but lured few fans this season.
The Vancouver-based British Columbia Lions are also in receivership.
Smith, a former running back with the Alouettes, was hired with much fanfare in 1992 after serving as an executive with a Canadian food company.
Observers said at the time that the struggling league desperately needed a solid businessman at the helm. But five years later, the league's survival is still in doubt.
His most ambitious plan was an ill-fated expansion into the United States which lasted only three seasons.
Canadian-style football failed to catch on in cities like Sacramento, San Antonio, Memphis, Las Vegas and Birmingham.
Baltimore was the only successful U.S.-based CFL club. It drew decent crowds and became the first American team to win the Grey Cup championship in 1995. But the Stallions were forced to move to Montreal when the National Football League returned to Baltimore this year.
Although Smith's expansion dream was sharply criticised by CFL purists, his supporters argued the league would have collapsed without the millions of dollars in expansion fees from U.S. teams.
Smith said he will devote the rest of his mandate to implement a cost-cutting plan to save the league. Under the plan, all clubs have until January to secure enough season-ticket sales to operate next year.
",6
"Stock in Canadian waste and transportation firm Laidlaw Inc. soared on Tuesday as investors and analysts applauded major moves in ambulance services and waste management worth over $2 billion.
While Laidlaw's stock hit new heights on the Toronto Stock Exchange, Chief Executive Officer James Bullock said the company was poised for strong growth with two huge deals announced after the market closed on Monday.
In a bid to become North America's top ambulance operator, Laidlaw plans to acquire Colorado-based American Medical Response Inc. in a $1.12 billion cash deal and merge it with its California-based MedTrans ambulance services unit.
In the other transaction, Laidlaw has signed a letter of intent to sell its South Carolina-based Environmental Services unit for $1 billion in cash, shares and debt to Rollins Environmental Services Inc. of Delaware.
After that deal, Laidlaw will own 66 percent of a new combined company, Laidlaw Environmental Services Inc., which will be the dominant player in North American hazardous waste management.
The moves came a few weeks after Burlington, Ontario-based Laidlaw completed the $1.65 billion sale of its solid waste management business to Allied Waste Industries Inc. of Arizona.
Laidlaw's class B stock closed up C$1.80 ($1.33) at a 52-week high of C$18 ($13) in heavy turnover of 9.3 million shares on the Toronto Stock Exchange.
Laidlaw's class A stock rose C$1.45 ($1.06) to a new high of C$17.95 ($13.23).
""We've got a (share price) target level of around C$19 ($14) and C$20 ($15) for the year and it will probably go higher when the dust settles,"" said Ira Katzin, an investment advisor with RBC Dominion Securities.
American Medical Response jumped $6.375 to close at $39.375 on the New York Stock Exchange, while Rollins Environmental rose 37.5 cents to $2.375, also on the NYSE.
Analysts said the Rollins deal will further consolidate a fragmented industry and may improve prices for hazardous waste companies, which have been depressed in the past four to five years.
The American Medical Response acquisition will also boost Laidlaw's presence in the fast-growing health-care transportation area.
""Strategically, it is quite wise,"" Bunting Warburg Inc. analyst Ted Larkin said in a telephone interview.
""The highest growth potential is with their transportation companies. They are also able to partially spin off the hazardous waste operations and also allow that company to regain a profile by listing on the New York Stock Exchange,"" Larkin said.
With combined annual revenues of about $1.3 billion, the new American Medical will hold a 14 percent share of the $10 billion ambulance industry. It also gives Laidlaw access to related medical transport services, a $30 billion market.
Laidlaw CEO Bullock said American Medical will immediately boost Laidlaw's earnings, but he declined to give a specific forecast.
Some analysts raised concerns that antitrust issues may hamper the American Medical deal, but Bullock said he did not foresee any problems with regulators.
The transaction with Rollins Environmental will be neutral to Laidlaw's earnings in the near term while operations are consolidated.
Bullock said staff levels may be reduced by 15 percent to20 percent and 20 facilities may be closed, leaving about 100 facilities in the merged firm. The transition is expected to result in more efficient operations and savings of $75 million annually.
",6
"Toronto stocks soared to new highs on Wednesday as foreign investors jumped into Canada's financial markets, lured by falling interest rates and the recovering economy.
Shares in Canada's big six banks hit 52-week highs on the Toronto Stock Exchange, propelling the country's biggest stock market to its 53rd record close of 1996.
The Canadian dollar has also surged this week, hitting its strongest level in a year.
Declining interest rates, low inflation and falling budget deficits have combined to make Canada the flavor of the month, economists said.
""Overall, foreign investors have just become enamoured with Canada as a place for investment,"" Michael Gregory, an economist with Lehman Brothers, said in a telephone interview.
The Toronto Stock Exchange index of 300 stocks jumped 85.45 points to close at 5,749.92, fuelled by brisk action in interest-rate sensitive issues such as banks and utilities.
The index has gained more than 20 percent this year, compared to 20.7 percent for the Dow Jones industrial average and 17.6 percent for the Standard & Poor's 500 index.
The Bank of Canada is expected to cut interest rates again as early as this week. The central bank has cut rates 19 times since May 1995 in a bid to revive a sluggish economy.
Bank of Canada Governor Gordon Thiessen said on Wednesday that Canada's improving economy gives the central bank more latitude to set Canadian rates independent of U.S. rates.
He added Canada is now in a better position to withstand a hike in U.S. rates than it has been in recent years.
""The economic outlook is favourable. We will soon see signs of the payoff for the difficult restructuring decisions taken in both the private and public sectors,"" Thiessen said.
After several years of belt tightening, Canadian governments have either balanced their budgets or are on track to wipe out huge deficits.
Canada's 1.2 percent inflation rate is one of the lowest in the world and less than half the U.S. rate.
Several Canadian banks cut residential mortgage rates on Wednesday to levels not seen in about three decades.
Gregory said he expected Canada to continue to outperform the United States on the rate front and that offshore investors recognised that.
""I think investors are coming to terms with the fact that Canadian interest rates -- because of low inflation and improving currency prospects -- should be below U.S. rates,"" he said. ""Many investors are jumping on that and the Canadian dollar is undervalued. It's cheap.""
The Canadian currency closed around C$1.3312 (75 cents) Wednesday after trading around C$1.3300 earlier in the session.
In stock trading, TSE's financial services group jumped 2.5 percent after soaring 3 percent Tuesday. Declining interest rates make bank lending more profitable and bank dividends more attractive for investors.
Soaring bank profits have also lured investors. The major banks report their year-end results in a few weeks and are on track for a third straight year of record profits.
Recent listings on the New York Stock Exchange have given Canadian banks a higher profile in the United States where they are considered cheap compared with U.S. bank stocks.
New York-based Morgan Stanley issued a recommendation on two Canadian banks on Tuesday and predicted a strong fourth quarter for the entire group.
",6
"Toronto stocks ended weaker amid profit taking on Friday, but not before Canada's biggest stock market had struggled to a new intraday high.
The TSE 300 Composite Index fell 7.51 points to close at 5591.31 in brisk turnover of 90.4 million shares valued at C$1.47 billion ($1.1 billion).
Declining stocks outpaced advances 473 to 435 with 289 issues unchanged.
""The story today was profit-taking,"" said Ira Katzin, an investment adviser with RBC Dominion Securities. The TSE posted its 50th record close on Thursday and also broke through the key 5600 barrier.
The TSE managed to hit an intraday high of 5606 before turning lower on the day.
Toronto's nine weak sectors included sharp losses in consumer products, base metals, communications and pipelines.
The five strong groups were led by financial services. Bank stocks rallied along with firmer North American bond markets and on expectations for another Bank of Canada rate cut next weak.
Analysts said the strong Canadian dollar has given the central bank enough leeway to lower rates.
The Canadian currency closed stronger at C$1.3335 (US$0.7499) on Friday, the strongest the unit has been since October, 1995.
--- HOT STOCKS ---
* Bre-X Minerals Ltd. led active stocks, sinking 1.25 to 21.15 on 4.25 million shares. The stock fell on profit taking and continued investor jitters about Bre-X's alliance with a firm controlled by Indonesian president Suharto's son.
* Among bank stocks, Canadian Imperial Bank of Commerce rose 0.90 to end at 56.60 after earlier hitting a 52-week high of 56.75.
Bank of Montreal jumped 1.05 to close at 41.60 after hitting a 52-week peak of 41.65.
* Canadian Airlines fell 0.14 to 1.61 after the struggling airline unveiled a survival plan amid heavy financial losses. Rival Air Canada gained 0.25 to 5.35 on 1.6 million shares.
* Luxury hotel operator Four Seasons Hotels Inc jumped 1.75 to 26.50 after announcing plans to sell its stake in its Toronto hotel for C$13 million ($9.7 million). Four Seasons said it will continue to manage the hotel.
",6
"Quarterback Doug Flutie led the Toronto Argonauts to a 43-37 victory over the Edmonton Eskimos and the championship of the endangered Canadian Football League on Sunday.
In what may have been the last Grey Cup game, the Argonauts overcame a driving snowstorm and a gritty Eskimo club to capture their first CFL championship since 1991.
Flutie, named the Grey Cup's most valuable player, silenced critics who labelled him a fair-weather quarterback after the Argonauts lost last year's bitterly cold championship game to the Baltimore Stallions.
The former Boston College star and Heisman Trophy winner as U.S. college player of the year also won the CFL's most outstanding player award this week after leading the Argonauts to a 15-3 season, the league's best record.
""That's the full package. That's what has been missing the last few years,"" Flutie said after winning his second Grey Cup since 1992 when he was with the Calgary Stampeders.
Flutie completed 22 of 35 passes for 302 yards and made a 10-yard scramble for a touchdown.
Canadian newspapers have reported that the CFL's new salary cap may prevent Toronto from paying Flutie's annual salary of $1 million Canadian (about $750,000 U.S.) -- the highest in the league.
The snowy, slippery contest was a typical Grey Cup in which weather played a critical role. The steady snowfall blanketed Hamilton's Ivor Wynne Stadium for most of the game and kept field crews busy.
Despite the conditions, it was the second-highest scoring Grey Cup game. The highlights included a 91-yard kick return by the Eskimos' Henry ""Gizmo"" Williams which set a new Grey Cup record.
The championship capped a chaotic, money-losing season which left many fans wondering if they will see the venerable Grey Cup next year.
""After a game like this, it would be a real shame if the CFL folded,"" said parka-clad Bob Forbes, one of 38,595 spectators who huddled against the weather.
Despite returning to its Canadian roots this year after a failed expansion into the United States, the CFL is dripping red ink.
The Grey Cup was not a sell-out, and all but one of the CFL's nine clubs will lose money, due to dwindling crowds and cash bailouts to keep teams in Ottawa, Montreal and Vancouver afloat during the 1996 season.
The 120-year-old Ottawa Rough Riders franchise folded in Canada's capital at the end of the regular season.
The cash-strapped Eskimos could not afford to fly players' wives to the game.
Average CFL attendance slipped to around 22,000 fans a game from 24,400 in 1995, despite a slick ""Radically Canadian"" marketing campaign trumpeting the league's national heritage.
",6
"Canada's Big Six banks are cruising toward a record C$6 billion ($4.4 billion) annual profit with strong earnings from three banks and buoyant profits expected from Canada's two other largest banks next week.
Bank of Montreal and Bank of Nova Scotia -- the number three and four banks respectively -- cracked the C$1 billion ($740 million) mark this week.
Toronto-Dominion Bank fell short of the billion dollar club, but Canada's fifth largest bank still turned in a record year.
The profit parade continues when Royal Bank of Canada and Canadian Imperial Bank of Commerce deliver their results on Wednesday and Thursday respectively.
""They will have whopping earnings. They will be record earnings, rest assured,"" Roy Palmer, a banking analyst with TD Sercurities Inc., said on Friday.
National Bank of Canada, the smallest of the Big Six, also reports its earnings next Thursday.
Bank of Montreal, Scotiabank and TD posted double-digit increases in net income this week -- with strong growth in personal, corporate and investment banking. The earnings so far have been in line with analysts' forecasts.
""There were no surprises. Just really solid quarters from everybody,"" said CIBC Wood Gundy analyst Mark Maxwell.
The banks' investment, brokerage and mutual fund businesses enjoyed a banner year as financial markets soared in 1996.
Royal Bank's investment arm. RBC Dominion Securities Ltd, has already posted a record profit. RBC said on Thursday its earnings jumped to C$154.3 million ($114 million) in the 12 months ended Sept. 30, up from C$77 million ($57 million) a year ago.
""In addition to two major mergers...each of our four global businesses turned in strong performances contributing to record results for the year,"" said RBC president Reay Mackay.
RBC recently completed its C$480 million ($355 million) purchase of brokerage firm Richardson Greenshields of Canada Ltd., and merged some operations with parent Royal Bank.
CIBC's investment unit is also expected to post bullish earnings when the bank reports its results next week.
Analysts said earnings growth for the Big Six is expected slow in 1997, particularly if bond and stock markets cool off.
However, TD Bank expects the boom to continue. ""The current low level of interest rates should result in increased economic activity in Canada in 1997 and the gradual return of consumer confidence,"" said TD president Charles Baillie.
More dividend hikes are possible next week following increases at Scotiabank and TD.
Scotiabank raised its payout by C3 cents (2 cents) to C37 cents (27 cents) a share, its second increase of 1996. TD boosted its dividend by C3 cents (2 cents) to C28 cents (21 cents) a share.
""I would be astonished if CIBC did not increase its dividend at this time,"" said Palmer. CIBC last raised its dividend by C5 cents (4 cents) to C45 cents (33 cents) last June.
Maxwell said there is less pressure on Royal Bank and National Bank to raise their dividends now, but an increase may come in early 1997.
Improved credit quality also contributed to bottom lines of Scotiabank, Bank of Montreal and TD.
All three banks reported lower loan loss provisions for 1996. TD surprising analysts with a deeper-than-expected drop in its provision to C$152 million ($112 million) from C$180 million ($133 million) in 1995.
Analysts said loan losses for the Big Six appear to have touched bottom and are expected to creep higher next year.
",6
"Canada's Big Six banks are poised for a third straight year of record profits when they begin reporting year-end earnings on Tuesday, but analysts expect earnings growth to slow in 1997.
The group's combined profit is expected to top C$6 billion ($4.5 billion) for the year ended Oct. 31, eclipsing a record C$5.2 billion ($3.8 billion) in 1995, analysts said.
Most of the increase was due to higher investment banking and fee revenues and lower loan losses.
""It's going to be a very good quarter again, but we may be getting toward the end of very strong quarter-over-quarter growth,"" said Roy Palmer, an analyst with TD Securities Inc.
High-flying bank stocks may get a further boost if the group beats analysts' estimates for fourth-quarter profit gains of between 15 percent and 17 percent.
""If we get good news and they come in at or higher than analysts' estimates, I think you will see some significant strength,"" said Fred Ketchen, director of equity trading for ScotiaMcLeod Inc.
The Toronto Stock Exchange's financial services group jumped 176 points to close at a 52-week high of 5541.40 on Monday as analysts predicted several banks would reward shareholders with dividend hikes.
Bank shares have soared this autumn as foreign investors stampeded into Canada's financial markets, lured by declining interest rates, low inflation and a recovering economy.
The sector has added about 1,400 points since early September and powered the TSE to record heights.
Listings on the New York Stock Exchange have given Canadian banks a higher profile south of the border. Some U.S. brokers have issued buy ratings on Canadian bank stocks, which are considered cheap compared to U.S. issues.
But earlier this month, Canadian brokerage CIBC Wood Gundy lowered its recommendations on most of the group.
CIBC Wood Gundy analyst Mark Maxwell said the group's valuation multiples were averaging 1.7 times book value -- narrowing the gap between Canadian bank shares and their U.S. counterparts.
Maxwell said in a report that bank officials warned analysts that their estimates for average earnings growth of 14 percent in 1997 were too optimistic and that 8 percent was The earnings parade will kick off with Bank of Montreal on Tuesday and wrap up with National Bank of Canada on Dec. 5.
Bank of Montreal is expected to post a fourth-quarter profit of C$1.06 (79 cents) a share, up from C$0.93 (69 cents) a share a year ago, according to figures provided by the International Brokerage Estimates Service.
Bank of Nova Scotia's earnings on Wednesday are seen climbing to C$1.01 (75 cents) a share from 88 cents Canadian (65 cents) a share.
Toronto-Dominion Bank's earnings are forecast to rise to 74 cents Canadian (55 cents) a share on Thursday, up from 72 cents Canadian (54 cents) a share last year.
Royal Bank of Canada and Canadian Imperial Bank of Commerce -- the country's two biggest banks -- report next week.
Royal Bank's fourth-quarter results are forecast to be C$1.02 (76 cents) a share, compared to last year's 90 cents Canadian (67 cents) per share.
CIBC is seen improving to C$1.51 ($1.12) a share in the fourth quarter from C$1.26 (94 cents) per share a year earlier.
National Bank of Canada, the smallest of the big six banks, is expected to post a 42 cents Canadian (31 cents) per share profit, up from 33 cents Canadian (25 cents) a year earlier.
",6
"""The Times They Are a-Changin"" -- Bob Dylan's counter-culture anthem of the 1960's  -- is being used in a commericial for a Canadian bank and some fans are up in arms.
The Bank of Montreal is running a television commercial using the American singer's 1964 folk classic to lure baby boomers into the country's third biggest bank. The TV spot shows children running down country roads and across lush fields as a choir sings Dylan's song.
The commercial ends with a Bank of Montreal logo and the promise of a big announcement on Oct. 16.
The new campaign has drawn fire from Dylan fans angry that a big institution has co-opted this protest song from their youth. But a senior bank official said Dylan's lyrics reflect the bank's desire to change in the 1990s.
""Our view is a bank has to change because the times are changing. We thought the lyrics caught rather nicely the imperative for large institutions, like banks, that they face having to change,"" George Bothwell, senior vice-president of public affairs, said in a telephone interview.
Some callers to a morning radio show in Toronto were outraged at the ad campaign. The Canadian Broadcasting Corp. played the commercial and Dylan's version, then asked listeners for their reaction.
""I was appalled. The bank failed to understand the spirit of the song. It has so many associations for people our age. I hope they reconsider. They went over the line with this one,"" one female caller said.
Another listener said: ""Bob Dylan, I can only say, shame on you.""
Dylan still owns the copyright to the song but was unavailable for comment.
Some younger callers said aging baby boomers have only themselves to blame.
""I don't know why you're surprised. You had high ideals when you grew up. Then you started making money and buying cars. And all the ideals are no longer convenient so you sold out. Every single one of you. Dylan is just doing what everyone is doing,"" a young listener said.
Another caller scoffed at the controversy: ""Baby boomers spare us the crocodile tears. A lot of people have sold out.""
One listener found it ironic that in these tough economic times a bank would use a song that warned: ""You better start swimming or you'll sink like a stone.""
Canada's big banks, which are on track for a third straight year of record profits, have been criticized for high service fees and tight lending policies.
",6
"Veronika Hirsch, the flamboyant Canadian stock picker hired recently to spearhead Fidelity Investments' drive to dominate the Canadian market, has been removed from her fund as she is probed by Canadian regulators.
The dramatic move -- just three months after Canada's so-called ""Fund Diva"" joined the mutual fund giant -- is a blow to Fidelity's expansion efforts in Canada, analysts said.
Hirsch, who was unavailable to comment, is embroiled in a controversy over personal trades she made before joining Fidelity, the world's biggest mutual fund company.
Her investments earlier this year in a small Vancouver company, Oliver Gold Corp., grabbed headlines and attracted the attention of the British Columbia Securities Commission.
Late Wednesday, Fidelity ousted Hirsch from her portfolio and said her status was ""under discussion."" Fidelity also took the unprecedented step of offering clients their money back without penalty.
The fund has grown to C$190 million ($143 million) in assets since it was launched amid much fanfare on Sept. 23.
Fidelity's head office in Boston declined to comment and referred all calls to its Canadian subsidiary.
""We acknowledge that it is highly unusual for a fund to change portfolio managers so quickly after its launch. This fee recovery program is a proactive and voluntary response on our part to maintain investors' goodwill,"" Fidelity Canada spokesman Chethan Lakshman told Reuters.
Fidelity vigorously defended Hirsch when the controversy first broke several weeks ago. But it canceled a 27-city road show last week when regulators contacted Hirsch.
At issue is her purchase of 65,000 special warrants of Oliver Gold through a private placement while she was a fund manager with AGF Management Ltd. in Toronto.
Hirsch paid C$1.53 ($1.15) per warrant, according to filings with the British Columbia Securities Commission and reported by Stockwatch, a Canadian investment publication.
Shortly afterward, Hirsch's AGF Growth & Income Fund bought 295,000 special warrants at more than double that price.
Analysts said regulators are expected to review whether the trades constitute ""front running"", a practice whereby a fund manager tries to profit personally by buying securities he or she intends to buy later for the fund.
Another related issue is whether Hirsch, a resident of Ontario, used an address in British Columbia to buy the Oliver Gold shares, which were only offered to B.C. residents.
Lakshman contended the controversy has not damaged Fidelity's reputation or expansion plans in Canada. But analysts saw the publicity as damaging as Fidelity gears up for the critical year-end sale of retirement savings plans.
""They look kind of foolish being the ones associated with this situation. I don't think it helps their bid to become the dominant player in Canada by any stretch of the imagination,"" one industry analyst said.
The Hirsch case comes as Canadians are pouring billions of dollars into mutual funds. Over the last six years, investment has jumped seven-fold to C$180 billion ($136 billion).
Fidelity wants a bigger share of the Canadian market, where it ranks ninth with C$7 billion ($5.2 billion) in assets, behind leader Investors Group, with C$22 billion ($16 million).
To quarterback its effort in Canada, Fidelity poached Hirsch, a high-profile stock picker with AGF, for a rumored C$2 million ($1.5 million) signing bonus in August.
Her meteoric rise to celebrity status began when she joined AGF in October 1995 after a successful but low-profile stint at Prudential Insurance Co. of America.
A multi-million advertising campaign put Hirsch's face on television screens across the country. She soon rivalled celebrity stock guru Frank Mersch at Altamira Management Ltd. as the country's best-known fund manager.
When Hirsch jumped to Fidelity, her blood-red nails and leather outfits appeared an uncomfortable fit with Fidelity's ultra-conservative culture, but the hiring was considered a major coup within the industry.
At the time, Fidelity Canada President Kevin Kelly said: ""Veronika is one of the country's top equity managers with an outstanding track record and reputation.""
Kelly was unavailable for comment on Thursday.
Industry critics argue that the Hirsch case raises key questions about the fiduciary responsibility of fund managers to their clients. It also highlights the jumble of standards governing the personal investing of Canadian money managers.
Altamira has tough rules restricting managers from investing in open-ended mutual funds, short-term government bonds and treasury bills after a controversy involving one of its fund managers.
But some industry observers say the entire industry should adopt tougher U.S. guidelines.
",6
"Toronto, Canada's biggest city and financial capital, is bracing for a near shutdown Friday when protesters hit the streets against deep budget cuts by Ontario's Conservative government.
The so-called ""Days of Protest"" on Friday and Saturday are shaping up to be the biggest labour protest in Canada since the Winnipeg General Strike in 1919 in which one person died and 30 were injured after a confrontation with police and the army.
In a bid to paralyse this city of 2.2 million people, organisers hope to close businesses and disrupt services, including underground trains and Toronto's Pearson Airport, the country's busiest airport.
Thousands of unionized workers, civil servants and activists will picket outside the Toronto Stock Exchange, government offices, corporate headquarters and factories.
""I must tell you to prepare for days of inconvenience and frustration Friday and Saturday,"" Alan Tonks, chairman of Metro Toronto, said in a letter to residents on Thursday.
Ironically, the labour chaos comes as Toronto basks in the glow of being chosen by Fortune magazine as the world's best city for quality of life.
The protesters are furious with the government's plans to cut spending by C$8 billion ($5.9 billion) to wipe out a huge deficit by the turn of the century.
Since sweeping to power in 1995 promising a right-wing revolution in Canada's most populous province, the Conservatives have revamped labour laws, slashed welfare payments, introduced workfare and announced plans to close hospitals and trim education budgets.
""We want to put pressure on the government and its corporate supporters that we're not going to accept this anymore,"" Linda Torney, co-chairwoman of the ""Days of Protest"", said in a telephone interview.
Premier Mike Harris, who has been dubbed ""Newt of the North"" in reference to Republican U.S. House Speaker Newt Gingrich, vowed the protests will not stall his ""Common Sense Revolution.""
City officials were bracing for a disruption of Toronto's bus and subway services, which handle about 1 million commuters a day. Transit officials on Thursday won a partial injunction against picketing at subway stations.
GO Transit, the train service that links suburban communities to Toronto, warned commuters that ""service may be delayed, adjusted, interrupted or even cancelled.""
Air travellers can also expect delays at Pearson Airport, which handles about 65,000 passengers a day, said airport spokesman Bruce Reid.
A Canadian court ruled Wednesday that picketers cannot interfere with essential airport workers, but can set up informational pickets. Airlines have promised to re-schedule flights if there are significant delays.
Meanwhile, several major manufacturers have cancelled day shifts. De Havilland Inc., a unit of transportation firm Bombardier Inc., said 6,200 employees at its Toronto aircraft plant will be off the job Friday.
The protest will not affect General Motors Corp.'s Canadian unit, which is getting back to work after a nearly three-week strike ended earlier this week.
The Breeders' Cup, a major international horse-racing event on Saturday, will not be affected by the protest.
On Toronto's Bay Street, the heart of Canada's financial community, traders not lucky enough to get a scarce hotel room are planning to sleep in their offices.
""Some essential people will be in the office. They might grab a couch or a sleeping bag,"" one broker said.
Other firms are sending their employees to offices outside Toronto or telling them to work from home. Many workers are expected to take the day off.
The Toronto Stock Exchange, Canada's biggest stock exchange, is planning a ""business-as-usual day,"" despite a large rally planned outside the exchange.
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"Shares in Canadian waste and transportation firm Laidlaw Inc soared on Tuesday as investors and analysts applauded major moves in ambulance services and waste management worth over $2 billion.
While Laidlaw's stock hit new heights on the Toronto Stock Exchange, chief executive officer James Bullock said the company is poised for strong growth with two huge deals announced after the market closed on Monday.
In a bid to become North America's top ambulance operator, Laidlaw plans to acquire Colorado-based American Medical Response Inc in a $1.12 billion cash deal and merge it with its California-based MedTrans ambulance services unit.
In the other transaction, Laidlaw has signed a letter of intent to sell its South Carolina-based Environmental Services unit for $1 billion in cash, shares and debt to Rollins Environmental Services Inc of Delaware.
Laidlaw will own 66-percent of a new combined company, Laidlaw Environmental Services Inc., which will be the dominant player in North American hazardous waste management.
The moves came a few weeks after Burlington, Ontario-based Laidlaw completed the $1.65 billion sale of its solid waste management business to Allied Waste Industries Inc of Arizona.
Laidlaw's class B stock closed up C$1.80 ($1.33) at a 52-week high of C$18 ($13) in heavy turnover of 9.3 million shares on the Toronto Stock Exchange.
Laidlaw's class A stock improved C$1.45 ($1.06) to a new high of C$17.95 ($13.23).
""We've got a (share price) target level of around C$19 ($14) and C$20 ($15) for the year and it will probably go higher when the dust settles,"" said Ira Katzin, an investment advisor with RBC Dominion Securities.
AMR jumped 6-3/8 to close at 39-3/8 on the New York exchange, while Rollins Environmental added 1/2 at 2-1/2.
Analysts said the Rollins deal will further consolidate a fragmented industry and may improve hazardous waste prices which have been depressed in the past four to five years.
The AMR acquisition will also boost Laidlaw's presence in the fast-growing healthcare transportation area.
""Strategically it is quite wise,"" Bunting Warburg Inc. analyst Ted Larkin said in a telephone interview.
""The highest growth potential is with their transportation companies. They are also able to partially spinoff the hazardous waste operations and also allow that company to regain a profile by listing on the New York Stock Exchange,"" Larkin said.
In a note to clients, Lehman Brothers analyst Jeff Kessler said the $40 a share offer for AMR is fair and he recommended investors tender their shares.
With combined annual revenues of about $1.3 billion, the new AMR will hold a 14 percent share of the $10 billion ambulance industry. It also gives Laidlaw access to related medical transport services which are a $30 billion market.
Bullock said AMR will immediately boost Laidlaw's earnings, but he declined to give a specific forecast.
Larkin bumped his profit forecast for Laidlaw in the 1997 fiscal year ended August to $0.71 a share from $0.70 per share. He also revised his 1998 forecast up to $0.88 per share from the low eighties.
Some analysts raised concerns that anti-trust issues may hamper the AMR deal, but Bullock said he does not foresee any problems with regulators.
The transaction with Rollins Environmental will be neutral to Laidlaw's earnings in the near term while operations are consolidated.
Bullock said staff levels may be reduced by between 15-20 percent and 20 facilities may be closed, leaving about 100 facilities in the merged firm. The integration will yield more efficient operations and savings of US$75 million annually.
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"Anti-government protests swept across Canada's biggest city on Friday as demonstrators in Toronto shut down the transit system, disrupted businesses and tried to break into the Toronto Stock Exchange.
""We've come to the place where the real power is ... They get their power and strength from inside this building,"" Jim Stanford, an economist for the Canadian Auto Workers, told hundreds of protesters outside the exchange.
Demonstrators chanted ""Shut it down, shut it down,"" as they pounded on the glass doors of Canada's biggest stock market. One man wearing a mask and combat fatigues was seen hurling himself against the doors.
Protest organisers later moved the rally away from the doors of the exchange.
In another part of the city, Ontario Finance Minister Ernie Eves said it was ironic that some of the groups that are protesting have huge pension funds that invest in stocks.
Protesters hit Toronto streets, paralysing rush-hour subway trains and closing businesses in Canada's biggest city to protest deep budget cuts by Ontario's Conservative government.
Subway and bus service ground to a halt in this city of 2.2 million people, forcing about one million commuters to walk, drive or cycle to work or just stay home.
Unionized workers, civil servants and social activists also descended on government offices and factories in the first day of the so-called ""Days of Protest"" against budget cutbacks.
But picketers failed to disrupt commuter trains from Toronto's bedroom communities or interrupt service at Pearson Airport, the country's busiest. Expected traffic jams on the city expressways also did not materialise.
In the days leading up to the protest, a siege mentality gripped Toronto's Bay Street, the heart of Canada's financial community.
At least one brokerage firm flew traders to its offices in New York and Montreal, while other brokers slept in hotel rooms or in their offices overnight.
Other companies hired boats to ferry employees across Lake Ontario from nearby communities.
The protesters are furious with Premier Mike Harris' plans to cut spending by C$8 billion ($5.9 billion) to wipe out a huge deficit by the turn of the century.
Since sweeping to power in 1995 promising a right-wing revolution in Canada's most populous province, the Conservatives have revamped labour laws, slashed welfare payments, introduced workfare and announced plans to close hospitals and trim education budgets.
""These cuts that Harris made are hurting the workers. This is part of the polarisation that is happening in Ontario. The anger is going to grow and grow,"" Syd Ryan, president of the Ontario division of the Canadian Union of Public Employees, told picketers outside a government building.
But Harris, who has been dubbed ""Newt of the North"" in reference to Republican U.S. House Speaker Newt Gingrich, has vowed the protests will not stall his ""Common Sense Revolution.""
""Will they discourage us from creating more jobs? No. Discourage us from workfare? No. That's what we were elected to do and I don't expect that most of the public want us to change from that agenda,"" Harris told reporters.
The Conservatives' popularity has held at around 50 percent in recent opinion polls.
Many commuters took the delays in stride.
""I see the protesters have a point, but I think it's going to inconvenience a lot of people who don't have any other choice,"" said John Ivarey.
A poll taken this week found that 67 percent of Toronto residents opposed the ""Days of Action"" rallies.
Protesters waved placards and temporarily blocked cars from entering government parking lots, but Toronto police said there were no major incidents of violence.
One man was charged with a weapons offence after allegedly threatening picketers with a baseball bat outside a bus garage. There also were skirmishes outside a postal station.
Several major manufacturers cancelled day shifts. De Havilland Inc., a unit of transportation firm Bombardier Inc. , said 6,200 employees at its Toronto aircraft plant would be off the job Friday.
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"Ontario Hydro, North America's biggest power utility, said Tuesday that it would take a huge C$2.5 billion ($1.8 billion) charge in 1996 to strengthen its financial structure.
The debt-laden, Ontario government-owned utility said its board of directors also approved a C$600 million ($440 million) charge against 1997 earnings.
The charges, related to accounting and operational changes, come as the ruling Conservative government of Canada's most-populous province ponders the privatisation of the massive utility.
The heavy writedowns add up to an estimated 1996 net loss of C$1.9 billion ($1.4 billion), Ontario Hydro said in a statement. The utility previously forecast net income of between C$600 million ($440 million) and C$625 million ($460 million).
""These decisions are driven by our determination to improve nuclear performance and to make capital and policy decisions that enable us to succeed in the business environment we face,"" said Ontario Hydro Chief Executive Officer Allan Kupcis.
He said the move will not affect Hydro's ability to pay down its debt, estimated at more than C$30 billion ($22 billion) due to overexpansion.
Ontario Hydro is the continent's largest electricity producer based on installed generating capacity and one of the world's biggest non-sovereign borrowers.
It operates 96 hydro-electric stations, five nuclear plants and six fossil-fuel stations.
But competitive pressures from within and outside Ontario have forced changes on Hydro in recent years.
Last June, a government commission recommended that Ontario Hydro lose its 90-year power monopoly and face competition from private Canadian power suppliers and U.S.-based competitors.
Among the operating decisions made Tuesday, the utility said it will scale back or cancel some projects. The biggest single charge was a C$1.2 billion ($882 million) writedown reflecting the costs of surplus heavy water at its nuclear operations.
The decisions will not affect employee staffing levels at the utility.
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